WASHINGTON—With the Federal Reserve Board poised to “fight inflation” by raising prime interest rates again—driving up the interest costs consumers pay on everything from credit cards to kids’ college loans—AFL-CIO President Liz Shuler and a panel of pro-worker economists warned policymakers to blame corporate greed, not workers, for inflation.
“Today’s inflation really is rooted in some of the same long-standing policy choices and long-standing power imbalances” between labor and capital, with capital on top, that hurt workers in past decades, declared the bluntest of the group, Economic Policy Institute Senior Analyst Elise Gould.
“Corporate power is really at the root of many of these price hikes,” she continued. On earnings calls with Wall Street, whose financiers always seek higher returns, “Corporate executives are not shy about how inflation and other recent factors have been very, very good for business.”
“There are some bad ideas floating around out there” to bring down inflation, “like the idea that working people, who have kept the country running” during the coronavirus pandemic, “are to blame for inflation,” currently running at an 8% annual rate, Shuler said.
“Nothing could be further from the truth.”
Whether the Federal Reserve Board listened to Shuler and the panel was unlikely.
The board opened two days of meetings on September 20 amid expectations it would again raise basic rates by three-fourths of a percentage point. That move, the panel said, could slow job growth at best and produce increasing unemployment, at worst.
And, though it was left unsaid in the September 15 discussion, right-wing and Trumpite Republicans are making political hay out of inflation In the runup to this fall’s mid-term election.
The Republican playbook is to divert voters from the party’s own sorry record of 2017-21: A $1.7 trillion tax cut for corporations and the rich, failure to combat the coronavirus pan-demic and the double-digit joblessness it produced, and the Jan. 6, 2021, Trump coup d’état try, including invasion of the Capitol, plus continual undermining of democracy since then.
The Federal Reserve and right-wing economists contend the way to cool an overheating economy is to make borrowing more difficult. That would slow investment in machinery and people, too. If tighter credit and higher interest rates result in higher unemployment, well, the Fed says, that’s a price the nation must pay.
By contrast, there is still unfinished business on a workers’ agenda, Shuler and the others said. It includes restoration of the expanded child tax credit—which cut childhood poverty by 30%-40% during the pandemic, and further measures to create green good union jobs, as well as passing the Protect The Right To Organize Act, labor’s #1 legislative priority.
Measures that boost worker power
Those measures, they said, are not inflationary, and boost worker power, and wallets.
One idea the panel did not take up was reconsidering the whole basis of the economy, which puts capitalist profits first while oppressing workers, and promotes interest rate hikes to cut inflation at the cost of jobs, just to cite two examples.
Nevertheless, Shuler, AFL-CIO chief economist William Spriggs, and both Gould and Josh Bivens of the Economic Policy Institute say the Fed has it all wrong. Workers are the victims, not the perpetrators, of inflation, they stated—and data back them up.
But if the idea that workers’ raises cause inflation takes hold, “the real danger” is it will sway policymakers, including in the Democratic Biden administration, Shuler warned. The result is less hiring, less credit for firms to expand and workers scared to shift jobs as unemployment increases.
Yet that’s what “mainstream” economists advocate. One she cited—whom a later speaker identified as corporate Democrat Larry Summers—even proposed increasing jobless rates to up to 10%. A 10% rate means “another ten million people are out of work and families struggle to put food on the table or pay the rent,” said Shuler.
One big culprit for the current 8% inflation, Spriggs and the others said, is corporate greed. That’s where Gould took the lead. As one panelist put it: “Executives have not been shy about using (supply) shortages to justify price increases.”
Inflation “allowed them (corporations) to jack up prices far beyond” their costs for labor and parts, said Gould. “This continues to be true even as supply chains cave in. And in the second quarter of this year, non-financial profits rose to their highest points in 70 years.”
Though Gould did not say so, the nation’s railroads are a prime example of what she talked about—and that’s one reason for the current struggle between freight railroads and their 115,000 unionized workers.
Cut 29 percent of their workers
In the eight years before the pandemic hit, the big Class I freight railroads cut 29% of their workers, forcing the remaining workers into going weeks without days off, being on call for sudden returns to work, and penalizing workers forced to miss assignments for doctors’ appointments and family funerals.
More freight and fewer workers equal record railroad profits: $146 billion since 2014, more than the carriers made even during the Gilded Age of the 1890s, adjusted for inflation.
Spriggs pointed out an obvious fact: Inflation “is a global phenomenon” driven by company greed, food shortages due to the war in Ukraine, and supply chain breakdowns due to the lingering impact of the ongoing coronavirus pandemic.
The Organization for Economic Cooperation and Development reports worldwide inflation is running at 10.23% at an annual rate. Among the 20 richest nations, the United Kingdom is first (8.6%) and the U.S. is third (8.26%) with Italy in between. Food inflation is highest in Germany (15.7%) with the U.S. (13.5%) edging Britain for second.
“To blame this (inflation) crisis on rising wages for American workers is irresponsible and dangerous,” Spriggs declared. “The wages of the American working class have been shocked by these rising costs, just as the American system has been shocked,” he explained.
“Real wages for American workers have been falling, so a war on workers, like the Fed has declared”—like the war on workers of the 1979-80 Paul Volcker-led Fed—“is trying to keep the American workers from rising. It means you’re making it more difficult for American families to put food on the table.”
“Given the deep costs of this crisis, further rate hikes by the Fed would be ineffective, misguided, and bad for our economy,” Gould said. Added another panelist: “We can’t ignore the very human costs of rising interest rates.”
View the entire session here.
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