(NewsNation) — President Joe Biden and other Democratic lawmakers have often blamed corporate greed for fueling inflation, but new research suggests “greedflation” isn’t the main cause.
Economists at the Federal Reserve Bank of San Francisco looked at price markups during the 2021-2022 inflation surge and found that, across the economy, they’ve stayed “essentially flat” since the recovery.
“Overall, our analysis suggests that fluctuations in markups were not a main driver of the post-pandemic surge in inflation, nor of the recent disinflation that started in mid-2022,” the researchers concluded.
That doesn’t mean companies didn’t raise prices, instead, markups refer to the gap between what a company charges and their production costs. In other words, the cost of doing business also went up.
But even though markups were relatively flat overall, the analysis found companies did hike prices substantially in a few key sectors like gasoline and cars in 2021.
After peaking at 9.1% in June 2022, annual inflation has slowed to 3.4% but the once-rapid cooldown has plateaued in recent months.
President Biden has blamed corporate greed for persistent inflation and continues to call out “shrinkflation,” which is when companies downsize products without lowering prices.
“Too many corporations raise prices to pad their profits, charging more and more for less and less,” Biden said in his recent State of the Union address.
While it’s true corporate profits rose after the pandemic, the San Francisco Fed researchers said that growth tends to be “volatile” and not uncommon early on in economic recoveries. They determined the recent increase was “not particularly pronounced” compared to previous recoveries.
Profits are also an imperfect measure of pricing power because of other factors that can drive up profitability. The researchers cited a separate 2023 analysis that found much of the recent rise in corporate profits can be attributed to pandemic-related government support and lower net interest expenses “due to accommodative monetary policy.”
Nevertheless, Americans continue to feel the pressure of rising prices and polling suggests Biden’s message has resonated.
In a February survey, three in five people said corporate greed was a “major cause” of inflation, including 72% of Democrats, 62% of independents and 45% of Republicans.
Although corporate markups haven’t been a main inflation driver broadly, per the report, consumers have undoubtedly noticed price differences at specific businesses. For example, a recent analysis found McDonald’s has raised menu prices faster than other chains over the past decade.
As for the main drivers of sky-high inflation in recent years, economists have pointed to several factors, including pandemic-era supply chain disruptions and strong consumer demand brought on, in part, by government stimulus.