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Is inflation cause for budgetary woes?


The economy has been unstable since the pandemic began, and today, inflation and supply chain issues have heightened the community’s concerns. But economists and other experts explained in a recent webinar that while the economic growth has slowed, it is not near a collapse of any kind.

“There is a different reason for the inflation crisis, including the increase of shipping demand and supply chain disruptions, that have resulted in supply shortages,” said Rakeen Mabud, chief economist of Groundwork Collective. “Mega corporations have used this as an excuse to pad their prices, but studies have shown that corporations are increasing their prices higher than justified.”

The Groundwork Collective keeps track of information and calls which investors make with corporations and finds out what advice they are being given.

“My organization has combed through hundreds of hours of earning calls between executives and their investors to understand why profit margins are at a record high,” Mabud said. “We have learned that CEOs have told their investors that the current inflation problem has created an opportunity to extract from consumers by raising prices.”

Mabud also highlighted how credit card companies are taking advantage of customers.

“Both Visa and Mastercard have announced they will raise their fees this year, which is egregious,” he said. “In short, both credit card companies are using their influence in the marketplace to raise fees for small business owners and consumers, who have a limited amount of liquid cash and rely on credit cards.”

Mabud suggested a few things to limit corporations from padding their profits during the inflation crisis.

“The good news is there are a lot of tools we can use in our toolbox, like Congress can reinstate a tax on excess profits, which will discourage profit padding. Regulators, like the Federal Trade Commission and Department of Justice, can impose restrictions reducing illegal activities such as price-fixing and price gouging.”

Chad Stone, chief economist at The Center of Budget and Policy Priority, spoke about whether the USA is in a recession or recovery and if one is coming soon.

“It is not a simple yes or no because many things play a factor in a recession, and our current economy shows traits of one but is not completely red hot,” he said. “You have to take into account the supply chain issue, and the pandemic has an impact on the economy, but compared to previous recessions, we are still doing better numbers-wise. We have slowed down, but we are not having a collapse like some people think we are having.”

Stone added that while the unemployment rate seems high, it is still the lowest since the 1990s. He also made it known that while the number as a whole is low when broken down, our unemployment rate between different groups is surprising.

“While the Black unemployment has come down since the 2020 recession, it is still at 6.8 percent, which is high for the current unemployment rate. The Hispanic and Latino unemployment rate is also at a high percentage but is still lower compared to the Black unemployment.”

“The risk of a recession is heightened because of the inflation that is happening right now, but with our short-term policies the government has in place, we are going to be fine in the short term once again,” Stone said. “We need to get the inflation down and solve our supply chain issues to avoid long-term problems, but for now, we are not in a recession.”