Consumer prices are soaring at their highest annual pace in almost 40 years. Some progressives such as Sen. Elizabeth Warren blame corporate profiteering, but most economists scoff.



Government price-checkers released their latest report on inflation this morning, and it shows the biggest hit to consumers' pocketbooks in nearly 40 years. Many people are asking who or what is to blame for soaring prices, which were 7% higher in December than a year ago. Massachusetts Senator Elizabeth Warren suggested this week that greedy corporations are trying to fatten their bottom line.


ELIZABETH WARREN: We can't overlook the role that concentrated corporate power has played in creating the conditions for price gouging.

MARTIN: Other progressives are also pointing to profiteering as a factor in today's high prices.

NPR's Scott Horsley has more.

SCOTT HORSLEY, BYLINE: To Jason Furman, who served as a top economist in the Obama White House, there's no big mystery behind the rising inflation rates. Ever since the pandemic struck, people have been buying an awful lot of stuff. And with both workers and materials in short supply, companies are having a hard time keeping up.

JASON FURMAN: When more people want to buy things than companies are capable of making, prices go up. That's just the law of supply and demand.

HORSLEY: Furman dismisses the idea that greedy corporations are to blame. He says companies are no greedier now than they were before the pandemic, when inflation generally hovered below 2%.

FURMAN: Companies always want to maximize their profits. I don't think they're doing it any more this year than any other year.

HORSLEY: But whatever the economic merits, corporate profiteering is a convenient political target, especially for Democrats, who are on the defensive.

Democratic pollster Margie Omero says it resonates with people who are feeling the pinch of pricey gas and groceries.

MARGIE OMERO: People are approaching this not as economists, but what they're observing. A lot of voters feel that companies and the wealthy are getting wealthier while other folks are struggling and having a harder time keeping up.

HORSLEY: And economist Isabella Weber of the University of Massachusetts says the pandemic has created opportunities for some companies to pad their bottom line - not just covering higher costs but expanding their profit margins as well. Ordinarily, businesses that raise prices run the risk of losing customers to the competition. But when demand is strong and competition hamstrung by supply shortages, that ceiling on prices comes off.

ISABELLA WEBER: It's a little bit like the guy who sells water at $20 a bottle after a hurricane, which is only possible because everybody wants to buy water. But the local supply is fixed.

HORSLEY: Weber likens today's situation to the period during and just after World War II, when Americans enjoyed rising incomes but a shortage of civilian goods. During the war, she notes, the federal government imposed strict price controls in an effort to keep inflation in check. There's no sign the Biden administration is considering price controls. The White House has focused much of its inflation-fighting effort on supply chain problems. But the president has complained about big corporate profits in some highly concentrated industries, such as meatpacking.


PRESIDENT JOE BIDEN: Too often they use their power to squeeze out smaller competitors, stifle new entrepreneurs and raise the prices.

HORSLEY: Biden has promised to crack down on what he calls anticompetitive behavior. Jason Furman, the former Obama economist, says that's sound policy, but he doesn't think it will do much to lower today's high prices.

FURMAN: I do think the president's right to want to turn the crank on antitrust enforcement and to do more in that area. I just don't think that's the cause of inflation. I don't think that's going to solve inflation.

HORSLEY: Ultimately, Furman says, that's the job of the Federal Reserve. The central bank is expected to start tapping the brakes on inflation by raising interest rates later this year.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.