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      ‘What am I going to do?’: soaring prices fuel calls for US government to step in

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      ‘What am I going to do?’: soaring prices fuel calls for US government to step inLarge corporations are passing on higher-than-needed price increases to customers under the cover of inflation, war and supply chain squeezes, experts say Outside a Dollar Tree in Detroit, Latasha Holmes lamented the rising cost of toilet paper, beverages, food and other items she had just purchased. The price increases, she said, were forcing her to choose among necessities for her and four kids.“What am I going to do? Prices are up everywhere, all over town,” she said. “I can’t afford everything.”But while Holmes struggles, Dollar Tree thrives. The retailer increased its prices by 25% as profits jumped 269% between 2019 and 2021, and its profit margins widened. Shareholders won too. The company also announced a stock buyback program worth $1bn that will deliver cash from those price increases to its investors.Dollar Tree and other large corporations are juicing profits by passing on higher-than-needed price increases to customers like Holmes under the cover of inflation, war and supply chain squeezes, consumer advocates and economists say. They are calling for the federal government to take bold steps to rein in the companies.Revealed: top US corporations raising prices on Americans even as profits surgeRead moreAmong proposed prescriptions are price controls, improved price fixing rules, commodity market intervention, stock buyback regulation and antitrust enforcement. Ranged against those proposals are a powerful business lobby and a divided Congress that seems unable to pass major legislation.“There are reasons to have a profit incentive, but there are also reasons to have an overall regulatory body that can say, ‘This is actually profiteering … while everyone is hurting,’” said Krista Brown, a policy analyst with the American Economic Liberties Project.A Guardian analysis of 100 top corporations’ Securities Exchange Commission filings found a median increase of 49% in profits between the most recent quarter and the same quarter two years ago, pre-pandemic. It shows companies have largely shielded themselves from inflationary pain by passing most or all of their increased costs on to customers via price hikes.So far, the federal government’s most visible attempt to address inflation has been to increase interest rates, rates look set to rise again this week. But the Guardian’s data suggests such a measure may miss an important mark. Raising rates effectively takes money out of consumers’ pockets to cool the economy.If corporate profits are contributing in a meaningful way, then raising rates would only reduce the amount of money people have to spend on products and services for which prices are still going up.“That would mean you’re exacerbating this dynamic instead of doing anything to help it,” said Isabella Weber, University of Massachusetts Amherst economist.Instead, limited and targeted price controls could work for essentials like bread, she said, but stressed those would have to be coupled with a bailout plan for negatively affected companies.“Increased prices for basic items like bread can exert enormous pressure on wages” and send inflationary ripples throughout the economy, Weber added. Though price controls are controversial and generally regarded as a leftist idea, the last president to enact them was Richard Nixon, who imposed a 90-day freeze on wages and prices to address inflation in 1970. Price controls were also enacted during and following the second world war, when, again, supply chain issues and pent up demand led to soaring prices.Table of 100 US companies’ profit growthBut price rises are not the only issue critics would like to see the Biden administration address. Others, like Groundwork Collective’s executive director, Lindsay Owens, have called for a ban or new restrictions on stock buyback programs. Joe Biden’s 2023 budget proposes prohibiting executives from selling their stock three to five years after enacting a buyback program.“The other big winner besides the shareholders in excess cash that’s going to buybacks are the executives,” Owens said. “They announce the buybacks, their stock prices soar, then they sell their shares and there are a number of ways to make this work better.”The Guardian’s analysis found companies’ buyback programs over the last 15 months totaled $544bn. That cash could have been reinvested to keep prices down, or increase workers’ wages, consumer advocates say.Others levelled accusations of price fixing and gouging. The American Economic Liberties Project is helping draft legislation that would make it easier for businesses to sue companies for price fixing by making private corporate communications more accessible. As of now, only 3% of price fixing cases make it to trial, Brown said.“Reinvigorating price fixing laws and going after price gouging in moments like this, where a war or Covid are used as excuses for companies to raise rates just because they can, could help a lot,” she added.Fixing is especially a problem in highly consolidated industries, consumer advocates say. Companies have benefited from “decades long under-enforcement of consolidation laws”, added Martin Schmalz, an Oxford University economist.Just four companies control most of the US beef industry, four airlines control about 80% of domestic passenger traffic, Walmart accounts for the majority of grocery sales in the majority of US states, the list goes on and on.And it’s not just the companies that have outsized control. Large investors also a role to play.Schmalz pointed to the Investment Company Act, which limits investment funds to holding no more than 10% of a corporation’s securities. Vanguard on average holds 10% of all S&P 500 companies, Schmalz research has found, but it is not violating the law because companies within its fund family own the shares, not Vanguard itself. But Vanguard still executes the voting rights of more than 10% of shareholders.“The law is written at the fund level so technically speaking they don’t violate the law, but they are violating the spirit of the law,” Schmalz said.Economists and attorneys working on US antitrust law have proposed prosecuting mutual funds like BlackRock or Vanguard that own large stakes in multiple companies in the same sector. Such shareholders can exert an outsize influence on companies’ pricing decisions, Schmalz said, and he noted Investment Company Act language that specifically targets this scenario: “The national public interest … is adversely affected … when investment companies [have] great size [and] excessive influence on the national economy.”Schmalz said there’s little discussion among policymakers to address that specific issue.Biden’s budget includes over $220m for antitrust enforcement, and bills that would break up large tech companies have bipartisan Senate and House support.The Guardian’s analysis highlighted the commodity market boom as companies trading in grain, steel, mining, wood, rubber, meat, oil, homes and other materials generally recorded higher profit increases than companies across the rest of the economy.However, many commodity companies operate in what analysts characterize as “feast and famine” cycles in which they’re unprofitable for years before cashing in. The pendulum has swung for many commodity companies in the day’s economic climate.“When there’s a chance to raise prices when markets are tight, companies are going to do so,” said Skanda Amarnath, executive director of the Employ America thinktank. “It’s some part opportunistic, some part greed, some part rationality, some part a response to uncertainty.”The oil industry highlights the dynamic. After seven years of low returns, it’s restricting supply to boost profits regardless of how that hits Americans at the pump. Earnings calls transcripts reveal executives eagerly “putting shareholders first” and an investor who described industry-wide supply suppression “one of the delights of this earnings season”.Bar chart of the monthly change in US wages since January 2019Bringing volatile commodity prices under control would require curtailing uncertainty and building supply chain resiliency, analysts who spoke with the Guardian say. That could involve some degree of government intervention to cut down on risk by establishing a floor on commodity prices. The government could do that by effectively becoming the “buyer of last resort” when material prices dip below a certain level.But the government should also set a ceiling above which it collects profits, said commodities analyst Alex Turnbull. He suggested the federal government set up what’s effectively a state reserve board.Turnbull pointed to lithium, which, amid increased demand for EV batteries and supply chain squeezes, jumped from $5,000 a ton to $45,000 a ton last year. Higher prices impact the pace of the clean energy transition, and the government could hypothetically set a $10,000 a ton floor price and $25,000 a ton ceiling that would limit the volatility, Turnbull said.The federal government could also increase stockpile reserves of products like grain or oil that are released when prices spike.“That sends the message ‘You should plant more wheat because if it goes really bad, you might have a lean year or two, but we will buy your wheat. But on the other hand don’t expect to buy a Lamborghini if you’re a farmer in Iowa because when prices get too high we’ll be out there selling the shit out of our stockpiles,’” Turnbull said.Stabilization may also spur investment in raw material production that’s risky, which would further bolster markets against future supply shortages. Few companies have built steel plants in recent years because the prices have been so low, Turnbull noted, and now the world is short on steel.Though price caps are “not politically palatable” Bespoke Investment analyst George Pearkes said, the government could take a number of measures to steer futures curves and markets for raw commodities like oil and wheat.“Something in between where there are strategic efforts to smooth volatility, and provide the private sector with enough certainty that they can make decisions is a lot more compelling,” he said.Spikes in investment for some commodities, like nickel, that are essential to the clean energy transition, can be a positive development, Turnbull said. Mining companies limped through the several years leading up to the pandemic, but reaped windfalls over the last year.“People say ‘Nickel producers are making too much money’, well, they didn’t make money for a decade,” Turnbull said. “At some point, somebody has to put money down to dig holes because people aren’t going to drive to the middle of fucking nowhere with a truck and work for free.”Another force in some commodity price spikes: Wall Street speculation. Commodity markets were once heavily regulated because they deal in raw materials that underpin the economy. An influx of investment capital followed the commodity markets’ deregulation about 20 years ago, and some are now treated like speculative assets similar to bitcoin, said Rupert Russell, who authored a book on the topic.The consequences of economy-addling commodity price spikes are real, he adds, pointing to the 2010 grain prices that helped trigger the Arab spring uprising in Tunisia.Supply chain back ups, inflation and war have generated “radical uncertainty” in which no one knows how much commodities are worth, because the prices are no longer anchored, Russell told the Guardian. He echoed others’ calls for stronger government intervention to tamp down the casino-like mentality.“Once there’s not just radical uncertainty but markets dominated by speculators, algorithmically driven speculation that is just kind of responding to headlines, then you’re going to get that kind of Bitcoin-esque volatility,” he said.But experts say there are few viable short-term solutions, and long-term measures don’t help Holmes. That’s forcing her to think about getting another job to survive as she feels the pressure of an economic system stacked against her.“I don’t want to. I’ve got four kids to take care of, but what am I supposed to do?” she asked.TopicsUS economyInflationEconomicsUS politicsUS income inequalityInequalityfeaturesReuse this content More

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      in World Politics

      The Unholy Alliance Between the US Security Apparatus and Big Tech

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More

    • 138 Shares189 Views

      in US Politics

      US inflation climbed to 8.5% in March, highest rate since 1981

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      US inflation climbed to 8.5% in March, highest rate since 1981War in Ukraine drives up energy costs as figures strengthen expectations Federal Reserve will raise interest rates next month Prices in the US climbed at their highest rates since 1981, rising 8.5% over the year to the end of March as the war in Ukraine drove up energy costs for Americans, the labor department announced on Tuesday.The latest Consumer Price Index (CPI) – which measures the prices of a basket of goods and services – comes after the index rose by 7.9% in the year through February, the fastest pace of annual inflation in 40 years.Driven up by continuing supply chain problems, soaring demand and rising energy prices, inflation is now at levels unseen in the US since Ronald Reagan took the White House from Jimmy Carter.Biden heads to Iowa to unveil plan to reduce gas prices as inflation soars – liveRead moreThe price increases are broad – with the cost of rent, gas and food causing particular hardship for lower income Americans and represent a major blow to the Biden administration, already facing tough odds of retaining control of Congress in November’s midterm elections.Soaring gas prices were the main driver of the rise. The gasoline index rose 18.3% in March and accounted for over half of all the items’ monthly increase. Gas prices have begun to fall, in a sign that some economists have argued may suggest inflation has reached its peak.The food index rose 1% in March compared with February, and is up 8.8% compared with the prior 12 months. Canned fruit and vegetable prices rose 3.8% from February to March, rice prices rose 3.2%, potatoes 3.2% and ground beef 2.1%.Andrew Hunter, senior US economist at Capital Economics, said energy prices would come down in the months ahead and there were signs that price pressures appear to be moderating.But, he added, the figures were likely to strengthen the Federal Reserve’s plan to increase interest rates as it struggles to tamp down inflation.“With Fed officials sounding more hawkish by the day, the March data won’t change their plans to up the pace of rate-hikes to 50 basis points per meeting from next month. Even so, it does support our view that, having been slow to realize that the initial surge wasn’t transitory, Fed officials are now being a bit too pessimistic about how quickly inflation will drop back,” he wrote in a note to investors.The White House warned ahead of the report it was expecting a bad set of figures. On Monday White House press secretary Jen Psaki told reporters that the labor department’s previous report had not included the majority of the jump in oil and gas costs caused by the Kremlin’s invasion of Ukraine.“We expect March CPI headline inflation to be extraordinarily elevated due to Putin’s price hike,” Psaki said.There are two versions of the CPI, one that includes all the prices consumers face and another – core CPI – which excludes food and energy prices, which tend to be more volatile. Core prices climbed 6.5% in the year through March, up from 6.4% in the year through February.The core index did suggest the pace of inflation was slowing, rising 0.3% from February, compared with 0.5% the prior month.Psaki said the administration expected a wide disparity between the two measures because of the soaring price of gas. Nationally the average price of a gallon of gas is now $4.11, compared with $2.86 a year ago, according to AAA.“At times, gas prices were more than one dollar above pre-invasion levels, so that roughly 25% increase in gas prices will drive tomorrow’s inflation reading,” Psaki said.Joe Biden addressed the latest inflation figures at a speech in Des Moines, Iowa, where he announced plans to use more ethanol in US fuel during the summer in an attempt to tackle high gas prices. “I am doing everything in within my executive power to bring down the Putin price hike,” he said. TopicsUS economyInflationEconomicsUS politicsnewsReuse this content More

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      in US Politics

      ‘I know how much it hurts’: Biden to release US oil in bid to lower gas prices – as it happened

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      Key events

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      ‘Incontrovertible evidence that this [war] has been a strategic disaster for Russia’ – White House

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      Biden: Putin may be in ‘self-isolation’

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      Romney: $10bn ‘agreement in principle’ over Covid relief

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      Pelosi wants inquiry on Russia’s ‘crimes against children’

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      Biden confirms draw on oil reserves to lower gas prices

      Joe Biden says his plan to release 1m barrels daily from the US strategic oil reserves will: “Ease the pain families are feeling right now, end this era of dependence and uncertainty and lay a new and new foundation for true and lasting American energy independence.”
      The president is speaking live at the White House to announce the move, which he said would last up to six months and which will represent the largest ever draw ever on the country’s emergency supplies.
      “I know how much it hurts,” he said of rising gas prices that have followed the decision by the Russian president Vladimir Putin to invade Ukraine.
      “Putin’s price hike is hitting Americans at the pump.” More

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      Biden targets America’s wealthiest with proposed minimum tax on billionaires

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      Biden targets America’s wealthiest with proposed minimum tax on billionairesTax on households over $100m aims to ensure wealthiest Americans no longer pay lower rate than teachers and firefighters Joe Biden proposed a new tax on America’s richest households when he unveiled his latest budget on Monday.The Biden administration wants to impose a 20% minimum tax on households worth more than $100m. The proposal would raise more than $360bn over the next decade and “would make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters”, according to a factsheet released by the White House.‘I make no apologies’: Biden stands by ‘Putin cannot remain in power’ remarkRead moreThe plan – called the “billionaire minimum income tax” – is the administration’s most aggressive move to date to tax the very wealthiest Americans.The tax is part of Biden’s $5.8tn budget proposal for 2023, which also sets aside billions for the police and military as well as investments in affordable housing, plans to tackle the US’s supply chain issues and gun violence.“Budgets are statements of values, and the budget I am releasing today sends a clear message that we value fiscal responsibility, safety and security at home and around the world, and the investments needed to continue our equitable growth and build a better America,” Biden said in a statement.Billionaire wealth grew significantly during the coronavirus pandemic, helped by soaring share prices and a tax regime that charges investors less on their gains than those taxed on their income.“In 2021 alone, America’s more than 700 billionaires saw their wealth increase by $1tn, yet in a typical year, billionaires like these would pay just 8% of their total realized and unrealized income in taxes. A firefighter or teacher can pay double that tax rate,” the White House factsheet notes.Under the plan households worth more than $100m would have to give detailed accounts to the Internal Revenue Service of how their assets had fared over the year. Those who pay less than 20% on those gains would then be subject to an additional tax that would take their rate up to 20%.The Biden administration calculates that the tax would affect only the top 0.01% of American households, those worth over $100m, and that more than half the revenue would come from households worth more than $1bn.The budget also looks set to tackle another issue that some economists have argued contributes to widening income inequality: share buybacks.In recent years cash-rich companies including Apple, Alphabet, Meta and Microsoft, have used their funds to buy back huge quantities of their own shares, boosting their share price. Last year companies in the S&P 500 bought back a record $882bn of their own shares and Goldman Sachs estimates that figure will rise to $1tn this year.Critics say that the purchases divert money from hiring new staff, raising wages and research and development.Research by the Securities and Exchange Commission (SEC) shows that there is “clear evidence that a substantial number of corporate executives today use buybacks as a chance to cash out”.The Biden proposal would stop executives from selling their shares for three years after a buyback is announced.Biden attempted to impose a 1% tax on share buybacks last year but the proposal failed in Congress. Both Biden’s billionaire tax and the share buyback proposal will also face tough opposition in Congress.TopicsUS taxationBiden administrationUS politicsUS economyJoe BidenUS domestic policynewsReuse this content More

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      Biden’s State of the Union address: a perfect summation of his presidency | Moira Donegan

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      Biden’s State of the Union address: a perfect summation of his presidencyMoira DoneganThe US president has good intentions, with only halting, sporadic, uncreative, and trepidatious efforts to actually enact them There’s always something a bit grim about the State of the Union. A setpiece of American political theater, the annual speech by the president to a joint session of Congress is choreographed to eliminate any chance of accidental sincerity. The president speaks in carefully calibrated spin; every word sounds like it has been focus-grouped. Members of the opposition party make a show of their animosity, vamping for the cameras with either staid, dignified displeasure or ravenous hatred, depending on where they are running for re-election. No one’s mind is changed and little new information is delivered. By its nature, the speech is meant to describe the status quo. It is not meant to change it.State of the Union: Joe Biden pledges to make Putin pay for Ukraine invasionRead moreThis year, President Biden had a particularly grim task. After months and months of negotiations with Senator Joe Manchin, of West Virginia, proved fruitless, his sweeping economic agenda, the Build Back Better Plan, appears to be dead. The two voting rights bills that would have helped secure the franchise for Black Americans and protect the integrity of future elections were killed when Manchin and Senator Kyrsten Sinema, of Arizona, declined to support an exemption to the filibuster, meaning that the erosion of voting rights in Republican-controlled states is likely to advance unchallenged. Many economic indicators are strong, but with inflation running rampant, this means little to working families, who see their paychecks covering less and less of what they need. This spring, the US supreme court will hand down opinions that will drastically reshape American government and American lives, including the case from Mississippi, Dobbs v Jackson Women’s Health, that will overturn Roe v Wade. The midterms are coming, and in Europe, a pointless and brutal war of self-aggrandizement has been launched by an erratic and mendacious dictator with a massive stockpile of nuclear weapons.Perhaps it was to be expected, then, that Biden’s speech was wide-ranging in tone, frenziedly ambitious in its agenda, and light on specifics. He opened with the Russian invasion of Ukraine, condemning the murderous ambitions of Vladimir Putin and praising the courage of the unexpectedly resilient Ukrainian military and civilian volunteer forces to rapturous applause. The Ukrainian ambassador to the United States, Oksana Markarova, was in attendance as a guest of the first lady, and she received the night’s first standing ovation, her hand placed over her heart from her balcony seat, as lawmakers below fluttered her country’s blue and yellow flag. Homages to the Ukrainian struggle were everywhere in the House chamber, with a number of women lawmakers dressed in blue and yellow ensembles, men and women alike wearing stickers of the Ukrainian flag on their lapels, and others fielding subtler signals of solidarity: when the camera lingered on Senator Elizabeth Warren, of Massachusetts, she had a cloth sunflower, the Ukrainian national symbol, pinned to her collar.Biden boasted of the devastating impact of western economic sanctions on the Russian economy, reaffirmed his support for Nato, and vowed to deploy the justice department to seize yachts belonging to Putin’s friends. Promisingly, it seems as if concerns over growing Russian aggression might spark a renewed interest in energy independence that could help the US and Europe break their addiction to Russian oil and gas. Speaking of the recent return of significant numbers of American troops to Central Europe for the first time in years, Biden reaffirmed his commitment to preventing a direct military confrontation with Russia, and emphasized that the troops would be there not to attack the Russians, but to protect Nato allies. One suspects that Putin will not appreciate the distinction.When Biden moved on to domestic policy, the crowd quickly became divided. As he touted his American Rescue Plan, last year’s Covid relief package, boos erupted from the Republican side when Biden noted that the 2017 Republican tax cuts had primarily benefitted the very rich. It was a theme he maintained as he turned to his bipartisan infrastructure law, the $1tn legislative achievement that provides funds for the maintenance and repair of the nation’s physical infrastructure – roads, bridges, airports, commuter trains, and internet. Biden touted a series of shovel-ready projects he claims will go into effect this year and emphasized the bill’s ability to encourage the return of the American manufacturing sector.Domestic manufacturing was largely his prescription for fighting inflation, too. Biden introduced his broader economic agenda with a call to make more stuff in the US, and to use the federal government’s purchasing power to support those American-made goods. This segue led into a litany of briefly visited agenda items, such as allowing Medicare to negotiate prescription drug prices; cutting the cost of childcare for working class families so that more women could return to the paid workforce; establishing a 15% minimum corporate tax rate; and supporting the labor-strengthening Pro Act.Many of these proposals seemed less like Biden was putting forward achievable goals for the next year of his presidency and more like he was shifting through the wreckage of his disastrous Build Back Better negotiations with Manchin, searching for some workable leftovers. Most of the items he proposed had already been presented to Congress; none of them had been able to get through the obstructionism of the Republican party and the Manchin-Sinema block. These things would substantially improve the lives of Americans, but it was clear he had no plan for how to implement any of them.This was true especially for abortion rights. Though reproductive choice advocates had long urged Biden to say the word “abortion” in public – he has never done so as president – he referred tonight only offhandedly to the importance of reproductive rights. There was no mention of the fact that Roe v Wade has been nullified in the state of Texas for six months, as of Tuesday. There was no mention of the fact that the Reproductive Health Act, an attempt to legislatively secure the federal right to an abortion, failed in the Senate this week. There was no mention of the fact that of the five supreme court justices present at the speech, three of them – John Roberts, Brett Kavanagh, and Amy Coney Barrett – will vote to eliminate that right in a few short months. “We have to protect a woman’s right to choose,” said Biden, not offering any ideas as to just how that right might be protected. The camera cut momentarily to Amy Coney Barrett, who pursed her lips as thin as paper.In this way, the speech was a perfect summation of Biden’s presidency: good intentions, with only halting, sporadic, uncreative, and trepidatious pursuit of actually enacting them. Unlike his predecessor, Biden tends to stay on script, but the State of the Union speech featured several ad libs – a product, some suspected, of the multiple revisions the speech was subjected to at the last minute, as Russia’s invasion of Ukraine placed new demands on the broadcast. The last of these was probably the most apropos: “Go get him,” Biden told the nation. Him who? Get him how? It didn’t make sense, but so little of this does.
      Moira Donegan is a Guardian US columnist
      TopicsJoe BidenOpinionUS politicsAbortionUS economyUS domestic policyUS foreign policyUkrainecommentReuse this content More