Get PolitiFact in your inbox.
Sen. Bob Casey said ‘prices are up’ because of ‘scheming’ corporations, but many economists disagree
If Your Time is short
-
Since 2019, corporate profits have increased faster than inflation. But that doesn’t mean that they caused inflation, or that corporate "scheming" was the primary reason.
-
Some analyses, including a March Federal Trade Commission report, said that corporate price hikes to increase profits were one factor behind rising consumer prices.
-
However, most economists PolitiFact interviewed said that rising costs for goods and labor have been inflation’s primary drivers. Studies by Federal Reserve regional banks also cast doubt on the role of corporate greed in driving inflation.
During his Aug. 23 speech at the Democratic National Convention, Sen. Bob Casey, D-Pa., blamed corporations for rising consumer goods prices.
"The corporations say your prices are up only because their costs are up. They’re selling you a lie," he said. "Prices are up because these corporations are scheming to drive them up."
He said that although "most companies are good companies," the wholesalers and "food conglomerates that sit behind the supermarkets … are extorting families at the checkout counter. This is greedflation."
There is evidence that corporate profits are rising faster than inflation. But this does not mean that corporate profits are inflation’s sole cause, economists say. And although corporations are contributing to inflation, experts said they do not see proof that widespread "scheming" is driving up consumer prices across the economy.
When we asked for evidence to support Casey’s claim, his campaign pointed us to data showing that corporate profits from 2020 to 2022 outpaced inflation.
During 2024’s first quarter, corporate profits were nearly 1.4 times their level in 2019’s first quarter. By comparison, the consumer price index, which is calculated monthly, was about 1.2 times higher in January 2024 than it was in January 2019.
The campaign also pointed to news articles about two 2024 reports.
The first was a January report by the left-leaning think tank Groundwork Collaborative. That report found that although rising costs for labor and other materials contributed to rising prices, "corporate profits drove 53 percent of inflation during the second and third quarters of 2023" and about 34% of price increases since the start of the pandemic.
(The Groundwork Collaborative said it analyzed November 2023 data from the U.S. Bureau of Economic Analysis using the same approach that economist Josh Bivens at the Economic Policy Institute, a liberal think tank, used for his 2022 corporate profit and inflation analysis.)
The second was a March Federal Trade Commission report on the COVID-19 pandemic’s impact on the U.S. grocery supply chain. It said COVID-19 pandemic supply chain disruptions increased costs. However, it also noted that food and beverage retailers’ annual profits — or the amount they make above total costs — remain high, which the report said "casts doubt on assertions that rising prices at the grocery store" are because of retailers’ rising costs.
"Some firms seem to have used rising costs as an opportunity to further hike prices to increase their profits, and profits remain elevated even as supply chain pressures have eased," it said.
Finally, the campaign shared news reports documenting examples of corporate executives talking about pricing actions during 2023 earnings calls.
That corporate profits have risen faster than inflation since early 2019 doesn’t mean that they caused inflation, or that corporate "scheming" was the primary reason.
Rather, economists told PolitiFact that rising production costs — including rising wages, raw input costs and real estate prices — are high consumer prices’ primary causes.
"Roughly half of what consumers pay for food goes back to workers in the value chain — at the grocery store or restaurant, at the manufacturing plant, on the farm," said Chris Barrett, agricultural and development economist at Cornell University. In other words, rising labor costs affect what consumers ultimately pay.
Joseph Balagtas, agricultural economics professor at Purdue University, said the COVID-19 pandemic caused supply-chain disruptions in 2020 that sparked high inflation through the summer of 2022. These snags increased production costs and the pandemic also altered consumer behavior. Another factor was fiscal and monetary policy that increased consumer demand.
This aligns with PolitiFact’s previous reporting. In 2022, we reported that prices rose during the COVID-19 pandemic because of supply chain disruptions and, later, because Russia invaded Ukraine.
For companies, higher prices, combined with initially steady labor costs, yielded higher profits in 2022. At the time, many Americans, who had received government pandemic stimulus payments, could pay higher prices, which discouraged companies from lowering them.
Since then, the supply chain disruptions have resolved and stimulus payments have stopped, Balagtas said. "And as the causes of higher inflation have gone away, inflation has eased."
The year-over-year inflation rate has fallen from a peak of around 9% in summer 2022 to about 3% today.
Featured Fact-check
A customer checks prices while shopping at a grocery store in Wheeling, Ill., Jan. 19, 2024. (AP)
Economic studies have cast doubt on corporate greed’s role in driving inflation.
A 2024 study by the Federal Reserve Bank of San Francisco found that corporations’ price markups — how much a product’s sale price exceeds its cost to the company — were not the recent inflation surge’s main driver.
A 2023 paper from the Federal Reserve Bank of Kansas City, however, found that markup growth contributed over 50% to inflation in 2021. Nevertheless, researchers concluded that the markups could be explained as ones taken "in anticipation of future cost pressures" rather than purely to extract profits.
Most economists PolitiFact consulted were skeptical that corporate "scheming" or arbitrary price increases were inflation’s main driver, though they said corporate profit-taking could be contributing.
Timothy Richards, an economist and agribusiness professor at Arizona State University, said that industry in the U.S. is "too competitive for greedflation" to factor into rising prices.
Companies set prices according to demand. So, if demand rises, companies will raise prices, Richards said. If higher prices generate profit, then competition is sufficiently robust that new companies will enter and begin serving the market, driving prices down.
"All firms are currently experiencing declining willingness to pay as households come under cost-of-living pressures, so price increases are moderating across the board," he said. "Maximizing profit is not against the law, nor would we want it to be against the law as it would mean firms would start making bad decisions."
Balagtas said blaming corporate greed for rising food prices, which he studies, was misguided. Food manufacturers and retailers "did not become more greedy in 2020-22 when inflation was higher, and they are not less greedy now that inflation has subsided," he said.
Daniel Sumner, an agricultural and resource economics professor at the University of California, Davis, added that the bar is high for an allegation of "scheming" such as Casey’s. He said the senator’s claim would carry more weight if he cited specific details about the prices along with evidence such as "wiretaps, secret recordings or emails about the schemes and who is involved."
To that point, Casey’s campaign pointed to the Justice Department’s 2023 civil antitrust lawsuit against Agri Stats Inc. The department said Agri Stats harmed grocery stores and consumers by illegally "collecting, integrating and distributing competitively sensitive information related to price, cost and output among competing meat processors." Agri Stats also occasionally, "encouraged meat processors to raise prices and reduce supply," the Justice Department said.
The campaign also pointed to the Washington state attorney general’s successful price-fixing lawsuits against tuna companies and broiler chicken producers.
Dean Baker, co-founder of the liberal Center for Economic and Policy Research, said corporate profit-seeking is a portion of the rising prices, but not all of it. Profit margins have been "uneven across sectors," he said, with the overall rise around 2% but some sectors seeing 30% to 40% increases. In some of those outlier industries, the argument for blaming corporate action may be stronger, he said.
Still, Baker said the bulk of rising prices were because of rising wages and supply chain problems related to the pandemic and Russia’s invasion of Ukraine.
Barrett, of Cornell University, said evidence that corporate price markups are causing rising prices has "grown over time."
For example, his current research, which awaits peer review, suggests that "when counties or states enact grocery sales taxes, retail food prices go up by more than the tax increment," he said. "(Companies) seize the opportunity to raise prices by a bit more than the tax requires, padding their profits."
Nevertheless, he said, corporations’ actions are often "not the main explanation" for rising prices, he said.
Casey said, "Prices are up because these corporations are scheming to drive them up."
This exaggerates what economists say is happening.
Corporate profits have increased faster than inflation since 2019, and some analyses point to a role for corporate greed. But most economists PolitiFact interviewed said that rising costs for goods and labor have been the primary drivers of inflation, which aligns with findings from studies by Federal Reserve regional banks.
Although there are examples of some price-fixing lawsuits in recent years, broad "scheming" is hard to prove, especially the notion that anticompetitive behavior is widespread enough to explain economy-wide patterns.
Casey’s claim includes an element of truth but ignores other factors that would give a different impression. We rate the statement Mostly False.
PolitiFact Chief Correspondent Louis Jacobson and Researcher Caryn Baird contributed to this report.
RELATED: Corporate profits do not drive inflation, but inflation boosts company profits
Our Sources
Sen. Bob Casey’s remarks at Democratic National Convention, Aug. 22, 2024
Email and phone exchange with a spokesperson from Sen. Bob Casey’s office, Aug. 22, 2024
Phone interview with Lauren Chenarides, assistant professor at Colorado State University in the department of agricultural and resource economics, Aug. 26, 2024
Email interview with Dean Baker, co-founder of the liberal Center for Economic and Policy Research, Aug. 22-26, 2024
Email interview with Joseph Balagtas, professor of agricultural economics at Purdue University, Aug. 23-26, 2024
Email interview with Timothy Richards, the Marvin and June Morrison Chair of Agribusiness in the W. P. Carey School of Business at Arizona State University, Aug. 26, 2024
Email interview with Daniel Sumner, Frank H. Buck, Jr. Distinguished Professor of Agricultural and Resource Economics at UC Davis, Aug. 26, 2024
Email interview with Christopher Barrett, an agricultural and development economist at Cornell University, Aug. 27, 2024
Email exchange with the Groundwork Collaborative, Aug. 28, 2024
Fortune, ‘Greedflation’ caused more than half of last year’s inflation surge, study finds, as corporate profits remain at all-time highs, Jan. 20, 2024
News4Jax, FTC report suggests high grocery bills likely due to ‘greedflation’ caused by big corporations, March 22, 2024
Verify, Verifying Casey's corporate profit claims in latest ad, April 4, 2024
NewsNation, Corporate greed not the main driver of inflation: Fed study, May 22, 2024
Reuters, Corporate greed not to blame for price pressures, Fed study shows, May 13, 2024
Federal Reserve Bank of San Francisco, Are Markups Driving the Ups and Downs of Inflation? May 13, 2024
PolitiFact, Corporate profits do not drive inflation, but inflation boosts company profits, Dec. 10, 2024
CNN, Fact Check: Pennsylvania Sen. Bob Casey overstates the role corporations have played in driving inflation, Aug. 22, 2024
Kansas City Fed, How Much Have Record Corporate Profits Contributed to Recent Inflation? First Quarter 2023
Northeastern Global News, What is greedflation – and is it driving higher prices? Aug. 2, 2022
Applied Economics Perspectives and Policy, Factors affecting recent food price inflation in the United States, June 23, 2023
FRED Economic Data, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL), accessed Aug. 26, 2024
FRED Economic Data, National income: Corporate profits before tax (without IVA and CCAdj), accessed Aug. 26, 2024
Federal Trade Commission, Feeding America in a Time of Crisis: The United States Grocery Supply Chain and the COVID-19 Pandemic, March 21, 2024
Forbes, How Corporate ‘Greedflation’ Contributes To Higher Consumer Costs And Job Losses, Aug. 10, 2023
Accountable, S&P 500 Companies Continue To Increase Prices Much To The Benefit Of Their Profits And Shareholders, June 1, 2023
The Guardian, Half of recent US inflation due to high corporate profits, report finds, Jan. 19, 2024
The New York Times, Harris Plans to Ban Grocery ‘Price Gouging.’ What Does the Evidence Say? Aug. 15, 2024
The New York Times, Companies Push Prices Higher, Protecting Profits but Adding to Inflation, May 30, 2024
The New York Times, I Listened In on Big Business. It’s Profiting From Inflation, and You’re Paying for It, May 5, 2022
Yahoo Finance, Kellogg Company (NYSE:K) Q4 2022 Earnings Call Transcript, Feb. 10, 2023
The Motley Fool, Kimberly Clark (KMB) Q4 2022 Earnings Call Transcript, Jan. 25, 2023
Seeking Alpha Transcripts, Kimberly-Clark Corporation (KMB) Q1 2023 Earnings Call Transcript, April 25, 2023
Economic Policy Institute, Corporate profits have contributed disproportionately to inflation. How should policymakers respond? April 21, 2022
U.S. Department of Justice, Justice Department Sues Agri Stats for Operating Extensive Information Exchanges Among Meat Processors, Sept. 28, 2023
U.S. Department of Justice, Four States Join Justice Department’s Suit Against Agri Stats for Organizing and Managing Unlawful Information Exchanges Among Chicken, Pork, and Turkey Processors, Nov. 6 2023
Washington State, $40.6 million on the way to low-income Washingtonians as a result of AG Ferguson lawsuits, Dec. 6, 2023
Browse the Truth-O-Meter
More by Madison Czopek
Sen. Bob Casey said ‘prices are up’ because of ‘scheming’ corporations, but many economists disagree
Support independent fact-checking.
Become a member!
In a world of wild talk and fake news, help us stand up for the facts.