Sen. Bob Casey said ‘prices are up’ because of ‘scheming’ corporations, but many economists disagree

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.

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. 

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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.

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