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**FEBRUARY 7, 2022**
Kuttner on TAP
Inflation and Price-Gouging
The case for an excess profits tax
The
**Prospect**'s special issue on the supply chain debacle
should demolish the fable that the
current inflation reflects too much stimulus. As we report, most supply
and price pressure is the delayed result of deregulation and
concentration of the global logistics system combined with far too much
offshoring. It took only a crisis like COVID to expose the system's
fragility.
Want more evidence? Have a look at Europe. Inflation in the EU
,
which has nothing like the stimulus program of the U.S., clocked in at 5
percent for 2021, the highest in decades.
This statistic understates Europe's true consumer inflation because
Germany, the EU's largest economy, cut value-added taxes for six
months in July 2021, lowering net prices to consumers. Without that cut,
the increase in consumer prices would have been even higher.
In 2020, the U.S. deficit was 15.2 percent of GDP. Europe's was less
than half that, at 7.2 percent. In 2021, as the recovery kicked in, the
U.S. deficit fell to 12.4 percent. Europe's budget deficit slightly
increased, because its recovery was weaker.
In short, despite very different stimulus policies, Europe and the U.S.
are experiencing similar price pressures due to supply shocks. And one
result that adds to the inflation is opportunistic price hikes and
excess profits.
The big investment banks booked record profits in 2021. Likewise the
platform monopolies. Amazon just reported profits of $14.3 billion on
the fourth quarter alone, double its fourth-quarter profits of 2020.
On an earnings call with Wall Street analysts this morning, the meat
giant Tyson
reported earnings per share up by 50 percent over last year, driven by
price increases of 32 percent in beef, 20 percent in chicken, and 13
percent in pork. These price hikes to consumers go neither to farmers
nor to supermarkets but to giant monopoly middlemen like Tyson.
Ocean shippers have quintupled their rates, and booked astronomical
returns of $150 billion
in 2021, up from $25 billion in 2020. This price-gouging reflects the
extreme economic concentration that has resulted from deregulation
coupled with a four-decade failure to enforce the antitrust laws. All of
this comes at the expense of consumers and of workers whose nominal pay
is up but in most cases lags behind price hikes.
So COVID has been a grotesque bonanza for America's most concentrated
industries. The long-term cure for the supply crunch is drastic
re-regulation of the global logistics system, as well as rebuilding
domestic manufacturing and supply. The Biden administration's
antitrust crackdown will also help reduce pricing power.
In the meantime, we need an excess profits tax
,
to tax away the opportunistic price hikes, just as we did in World War
II. Profits that exceeded a normal rate of return, based on several
pre-pandemic years, would be subject to a much higher rate of tax.
This idea will both spotlight the real source of the inflation and help
pay for the domestic industrial policy that we need to prevent future
supply shocks. Even if it's not enacted, Biden should propose it.
****
~ ROBERT KUTTNER
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Follow Robert Kuttner on Twitter
**Robert Kuttner's latest book is**
The Stakes: 2020 and the Survival of American Democracy
.
[link removed]
Why Trucking Can't Deliver the Goods
The
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wonder why you're not getting your orders on time? BY HAROLD
MEYERSON
To Combat Labor Shortages, Extend Prevailing Wage Beyond Construction
Workers
Studies show that prevailing-wage laws uplift workers without
increasing project costs. They should be expanded to state and local
service contracts. BY ROBERT BRUNO
Rollups: The Big Tech Monopoly Down on the Farm
John Deere refuses to allow farmers to repair their own equipment.
That's because it wants to control farm technology and data, critics
contend. BY DAVID DAYEN
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