Ask Us Anything: Inflation Edition
In this ongoing Q&A series, Paul Constant answers questions from top supporters like you.


Hi – it’s Paul. A few weeks ago, our team invited top supporters like you to send us your burning questions about the economy – and I’m so thankful to everyone who sent in thoughtful responses. This week, I decided to answer questions about a topic that’s top of mind for many of you: inflation.

Q: Are higher gas and energy costs caused by Big Oil’s corporate greed? Can we blame inflation on price gouging?

While it’s impossible to account for exactly how much of the record $50 billion-plus ([link removed]) of Big Oil’s profits in the last quarter are due to price gouging, experts believe ([link removed]) that a significant portion of those record profits are derived from the exorbitant price increases we were all paying earlier this summer. Likewise, dozens of CEOs have bragged on the record ([link removed]) about using inflation as a cover to artificially spike prices in order to pump up corporate profits. While price gouging isn’t the sole cause of inflation, corporate greed has played a leading role in the higher prices you’re paying at grocery stores. 

Q: Why is our country currently facing record-high levels of inflation? And what can the federal government do in response?

The inflation we’re seeing right now definitely doesn’t have the same causes as the inflation crisis of the 1970s and early 1980s. The higher prices we’re paying in grocery stores and at other retailers are caused by a blend of pandemic supply chain issues and corporate greed powered by a lack of competition in the marketplace. The Federal Reserve believes it can combat inflation the same way it did in the 1980s: by raising interest rates to make money more expensive to borrow, thereby slowing down the economy and driving down consumer demand. The problem is that consumer demand is what’s holding the economy aloft right now: it’s your spending that’s creating jobs and raising wages. So in addition to working to keep employment high, our leaders should be figuring out how to raise wages and lower costs (especially housing costs) for ordinary Americans, so we can ride out the rest of this inflationary wave without forcing the economy to shudder to a halt.

Q: In an effort to fight inflation, the Federal Reserve is raising interest rates. Can you explain why this is a trickle-down policy and how it will hurt ordinary Americans?

The causes of this inflation crisis are completely different from the causes of the crisis that ended in the early 1980s – so why should we think the solution that worked last time would work this time? The Fed’s continued raising of interest rates will slow down the economy and put millions out of work ([link removed]), possibly for years. Meanwhile, recessions economically benefit the very wealthiest Americans ([link removed]). Harming the majority of Americans in order to transfer wealth to the top 1% is the very definition of trickle-down economics. 

Q: Are we currently in a recession, and what does that mean for everyday Americans?

If we’re in a recession right now, with record-low unemployment and rising wages for the average American worker, then I wish every recession was like this one. That’s not to say that things are great for everyone: High prices are absolutely causing pain for ordinary Americans, and a lack of quality affordable childcare is keeping a lot of women from rejoining the workforce. And those are just a couple of our biggest economic issues. But I’d rather have a “recession” with higher prices and a strong labor market than a traditional recession with low inflation and millions out of work.

Q: Is it true that lowering taxes will increase inflation?

I don’t think there’s a one-to-one connection between taxes and inflation. Really, it depends on the taxes: I don’t think we should be raising taxes on the bottom three-quarters of the economy, for instance, because many Americans are living paycheck to paycheck right now and a big tax bill would add more pressure to their already-strained budgets. And as I mentioned above, your consumer spending is holding up the economy, so we don’t want to slow that down. But I’m a big fan of the 1% excise tax on stock buybacks ([link removed]) that President Biden just signed into law in the Inflation Reduction Act. Buybacks, which were illegal until the Reagan administration, are a no-strings-attached way for CEOs and corporate executives – including the same CEOs who proposed and okayed the buybacks – to hand over corporate profits to shareholders. Taxing buybacks will add a little bit of friction to the process, causing corporate boards to think twice before letting those profits go. So without a tax-free escape hatch for all those buybacks, we could see fewer of the malicious methods for jacking up corporate profits that companies have resorted to lately – including shameless price gouging and merciless cost cutting of benefits and wages. This is a tax that could have positive benefits for almost all of us, bringing down costs and raising wages for ordinary Americans.

Thanks for reading this special Q&A. Thanks again to everyone who submitted a question. If you don’t see your question listed here, please stay tuned! I’ll address more economic topics in future emails.

– Paul Constant, Team Civic Action



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