Democrats have an inflation problem with voters. And they’ve been pointing in a range of directions to deflect the blame for consumer prices that have increased at the highest rate in 40 years.
Targets include supply chain woes, the stalled Build Back Better plan, the gas tax, and lower immigration rates. Some Democrats also contend that across the economy, big corporations have spurred skyrocketing inflation — and that means you could hear the phrase "price gouging" a lot between now and November.
"What we see is across sectors, across companies, CEOs are just crowing about how they can raise prices on consumers, all while bringing in record profits," Dr. Rakeen Mabud, chief economist at the left-leaning Groundwork Collaborative, said during a Yahoo Finance Live interview.
Earlier this month, Congress held an entire hearing on "pandemic profiteers." Meanwhile, Senators Elizabeth Warren and Bernie Sanders frequently talk about corporate price gouging as do 2022 candidates like Sen. Raphael Warnock (D-Ga.). In a recent Yahoo Finance interview, Rep. Alexandria Ocasio-Cortez attributed many price hikes not to inflation but to just "straight price gouging by corporations."
“There's a real distinction to be made between inflation and price gouging,” she said.
While experts say inflation has multiple causes, Republicans typically blame government overspending. “It’s the biggest issue in the country, and I think their biggest liability going into the fall,” Senate Minority Leader Mitch McConnell told Punchbowl News recently about Democrats.
And so far at least, Republicans appear to have a clear upper hand, with a recent AP-NORC poll finding voters care more about inflation than the coronavirus these days. And, in more bad news for Democrats, another poll finds three in five voters blame inflation on President Biden's policies.
'The root of a lot of the price increases'
This month, Congress held a hearing to consider “The COVID-19 Price Gouging Prevention Act," which would give regulators more latitude to go after companies they see charging excessive prices.
“Some businesses are simply price gouging consumers,” House Energy and Commerce Chairman Frank Pallone argued in his opening statement on Feb. 2.
One of the witnesses in that hearing was Dr. Mabud, who called price gouging “a broad-based problem that is unfortunately not limited to a specific sector of the economy.”
During her Yahoo Finance interview this week, she pointed to the actions of businesses like Chipotle (CMG) as "really the root of a lot of the price increases that we have been seeing over recent periods.”
The fast-casual Mexican chain has indeed raised its prices, saying in an earnings call this month that prices were roughly 10% higher than they were last year. Chipotle's sales hit $2 billion in the fourth quarter of 2021, beating analysts' expectations.
"We’ve never had resistance when we raise prices," Chipotle CFO Jack Hartung told Yahoo Finance last week. But, he added, “We'd like to have that as more of our last resort, we'd like to find efficiencies, we'd like to find leverage in our margins as we grow sales.”
‘That is not OK with this president’
For their part, Biden and his aides have highlighted specific instances of price hikes, citing industries including meatpackers, energy firms, and companies involved in the supply chain. However, the administration has so far declined to make the charge of widespread price-gouging.
During a recent Yahoo Finance Live interview, Biden economic adviser Jared Bernstein said in a discussion regarding the oil industry that Biden doesn't condone price gouging. “To the extent that any firms are exploiting any volatility to extract profits from consumers," he said, "that is not OK with this president, and he will continue to press on that option as well."
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.
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