    [House Hearing, 117 Congress]
    [From the U.S. Government Publishing Office]

                     REVIVING COMPETITION, PART 6: REBUILD-
                      ING AMERICA'S ECONOMIC LEADERSHIP AND
                        COMBATTING CORPORATE PROFITEERING

    =======================================================================

                                    HEARING

                                   BEFORE THE

                     SUBCOMMITTEE ON ANTITRUST, COMMERCIAL,
                             AND ADMINISTRATIVE LAW

                                     OF THE

                           COMMITTEE ON THE JUDICIARY

                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                             TUESDAY, MAY 17, 2022

                                   __________

                               Serial No. 117-67

                                   __________

             Printed for the use of the Committee on the Judiciary

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                   Available via: http://judiciary.house.gov

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    48-832                    WASHINGTON : 2022

    -----------------------------------------------------------------------------------

                           COMMITTEE ON THE JUDICIARY

                        JERROLD NADLER, New York, Chair
                    MADELEINE DEAN, Pennsylvania, Vice-Chair

    ZOE LOFGREN, California              JIM JORDAN, Ohio, Ranking Member
    SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
    STEVE COHEN, Tennessee               LOUIE GOHMERT, Texas
    HENRY C. ``HANK'' JOHNSON, Jr,       DARREL ISSA, California
        Georgia                          KEN BUCK, Colorado
    THEODORE E. DEUTCH, Florida          MATT GAETZ, Florida
    KAREN BASS, California               MIKE JOHNSON, Louisiana
    HAKEEM S. JEFFRIES, New York         ANDY BIGGS, Arizona
    DAVID N. CICILLINE, Rhode Island     TOM McCLINTOCK, California
    ERIC SWALWELL, California            W. GREGORY STEUBE, Florida
    TED LIEU, California                 TOM TIFFANY, Wisconsin
    JAMIE RASKIN, Maryland               THOMAS MASSIE, Kentucky
    PRAMILA JAYAPAL, Washington          CHIP ROY, Texas
    VAL BUTLER DEMINGS, Florida          DAN BISHOP, North Carolina
    J. LUIS CORREA, California           MICHELLE FISCHBACH, Minnesota
    MARY GAY SCANLON, Pennsylvania,      VICTORIA SPARTZ, Indiana
    SYLVIA R. GARCIA, Texas              SCOTT FITZGERALD, Wisconsin
    JOE NEGUSE, Colorado                 CLIFF BENTZ, Oregon
    LUCY McBATH, Georgia                 BURGESS OWENS, Utah
    GREG STANTON, Arizona
    VERONICA ESCOBAR, Texas
    MONDAIRE JONES, New York
    DEBORAH ROSS, North Carolina
    CORI BUSH, Missouri

             AMY RUTKIN, Majority Staff Director and Chief of Staff
                   CHRISTOPHER HIXON, Minority Staff Director

                                  ------

                     SUBCOMMITTEE ON ANTITRUST, COMMERCIAL,
                             AND ADMINISTRATIVE LAW

                    DAVID N. CICILLINE, Rhode Island, Chair
                    PRAMILIA JAYAPAL, Washington, Vice-Chair

    JOE NEGUSE, Colorado                 KEN BUCK, Colorado, Ranking Member
    ERIC SWALWELL, California            DARREL ISSA, California
    MONDAIRE JONES, New York             MATT GAETZ, Florida
    THEODORE E. DEUTCH, Florida          MIKE JOHNSON, Louisiana
    HAKEEM S. JEFFRIES, New York         W. GREGORY STEUBE, Florida
    JAMIE RASKIN, Maryland               MICHELLE FISCHBACH, Minnesota
    VAL BUTLER DEMINGS, Florida          VICTORIA SPARTZ, Indiana
    MARY GAY SCANLON, Pennsylvania       SCOTT FITZGERALD, Wisconsin
    LUCY McBATH, Georgia                 CLIFF BENTZ, Oregon
    MADELINE DEAN, Pennsylvania          BURGESS OWENS, Utah
    HENRY C. ``HANK'' JOHNSON, Jr.,
        Georgia

                           SLADE BOND, Chief Counsel
                          DOUG GEHO, Minority Counsel

                                C O N T E N T S

                                  ----------

                             Tuesday, May 17, 2022

                                                                       Page

                               OPENING STATEMENTS

    The Honorable David N. Cicilline, Chair of the Subcommittee on
      Antitrust, Commercial and Administrative Law from the State of
      Rhode Island...................................................     2
    The Honorable Ken Buck, Ranking Member of the Subcommittee on
      Antitrust, Commercial and Administrative Law from the State of
      Colorado.......................................................     3

                                   WITNESSES

    The Honorable Robert Reich, Carmel P. Friesen Professor of Public
      Policy, Goldman School of Public Policy, University of
      California, Berkeley
      Oral Testimony.................................................     6
      Prepared Testimony.............................................     8
    Dr. Rakeen Mabud, Chief Economist and Managing Director of Policy
      and Research, The Groundwork Collaborative
      Oral Testimony.................................................    21
      Prepared Testimony.............................................    23
    Mr. Barry C. Lynn, Executive Director, Open Markets Institute
      Oral Testimony.................................................    37
      Prepared Testimony.............................................    39
    Ms. Patrice Onwuka, Director, Center for Economic Opportunity,
      Independent Women's Forum
      Oral Testimony.................................................    61
      Prepared Testimony.............................................    63

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Statement from David French, Senior Vice President, Government
      Relations, National Retail Foundation, submitted by the
      Honorable David N. Cicilline, Chair of the Subcommittee on
      Antitrust, Commercial and Administrative Law from the State of
      Rhode Island, for the record...................................    98

                     REVIVING COMPETITION, PART 6: REBUILD-.
                ING AMERICA'S ECONOMIC LEADERSHIP AND COMBATTING
                             CORPORATE PROFITEERING

                                  ----------

                             Tuesday, May 17, 2022

                            House of Representatives

                     Subcommittee on Antitrust, Commercial,

                             and Administrative Law

                           Committee on the Judiciary

                                 Washington, DC

        The Committee met, pursuant to call, at 1:00 p.m., in Room
    2141, Rayburn House Office Building, Hon. David N. Cicilline
    [Chair of the Subcommittee] presiding.
        Members present: Representatives Cicilline, Neguse,
    Swalwell, Jones, Jeffries, Raskin, Jayapal, Demings, Scanlon,
    Dean, Johnson of Georgia, Jordan, Buck, Issa, Johnson of
    Louisiana, Steube, Bishop, Fitzgerald, Bentz, and Owens.
        Staff present: John Doty, Senior Advisor and Deputy Staff
    Director; David Greengrass, Senior Counsel;Cierra Fontenot,
    Chief Clerk; John Williams, Parliamentarian and Senior Counsel;
    Keenan Keller, Senior Counsel; Slade Bond, Chief Counsel for
    Antitrust, Commercial, and Administrative Law; Phillip
    Berenbroick, Counsel for Antitrust, Commercial, and
    Administrative Law; Mary Helen Wimberly, Detailee for
    Antitrust, Commercial, and Administrative Law; Joseph Van Wye,
    Professional Staff Member/Legislative Aide for Antitrust,
    Commercial, and Administrative Law; Douglas Geho, Minority
    Chief Counsel for Administrative Law; Andrea Woodard, Minority
    Professional Staff Member; Kiley Bidelman, Minority Clerk; and
    Bradley Craigmyle, Minority DOJ Detailee.
        Mr. Cicilline. The Subcommittee will come to order. Without
    objection, the Chair is authorized to declare recesses of the
    Committee at any time.
        Good morning and welcome to today's hearing examining how
    corporate consolidation and profiteering have led to supply
    shortages and high prices across the country.
        I'd like to remind Members that we've established an email
    address and distribution list to circulate exhibits, motions,
    or other written materials that Members might want to offer as
    part of today's hearing.
        If you would like to submit materials, please send them to
    the email address that has been previously distributed to your
    offices, and we will circulate the materials to Members and
    staff as quickly as we can.
        I would ask all Members to please mute your microphones
    when you are not speaking. This will help prevent feedback and
    other technical issues. You may unmute yourself any time you
    seek recognition.
        I now recognize myself for an opening statement.
        As a country, we're all fed up with crisis after crisis
    caused by giant corporations lining their pockets while the
    rest of America struggles to make ends meet. The latest crisis
    is a crippling shortage of baby formula. Over 40 percent of the
    most popular baby formula products are out of stock.
        Parents of infants with allergies are desperate find the
    specialty formulas that their children need to survive. When
    parents can find formulas in stores, the price is up almost 20
    percent over what it was a year ago. This is completely
    unacceptable.
        We know why it's happening. Just two companies control 80
    percent of baby formula production in the United States. When
    something goes wrong with one of them, the entire country feels
    the consequences. We're seeing this today.
        The largest U.S. formula producer, Abbott, shut down one of
    its plants in February due to bacterial contamination. Because
    of the loss of one plant of one company, formula shelves are
    empty. We do not have the diversity of other, smaller companies
    capable of picking up the slack. Our supply chain is not
    resilient or nimble enough.
        We understand how grave problem this is. Baby formula
    shortage is a case study of the market concentration problems
    plaguing the U.S. economy. When we allow corporations to
    concentrate their control, we allow them to concentrate all
    production capacity, and that concentrates a risk.
        It's a system designed to maximize short-term profits at
    the expense of safety and resiliency, and we're now suffering
    because of it. While hardworking Americans are feeling the
    pinch, big corporations are not. Gas prices provide the perfect
    example. They have hit record highs, over four dollars a gallon
    in nearly every State.
        Here is what is telling: Big Oil's profits are also at
    record highs. Last year, major oil companies posted their
    highest profits in nearly a decade. This year, Chevron's first
    quarter profits quadrupled over last year. Exxon Mobile and BP
    at least doubled their first quarter profits, and Shell's
    profits hit a new record high.
        American families are hurting, workers have been furloughed
    due to supply chain disruptions, paychecks are stretched,
    consumers are paying more and getting less. Meanwhile,
    corporate executives are doing better than ever.
        According to the Wall Street Journal, the total
    compensation for most executives rose by 12 percent, while the
    median pay for CEOs at the biggest U.S. companies reached $15
    million last year, a record for the sixth consecutive year.
        Certainly, part of what has caused high consumer prices
    include crises that are largely beyond our control, such as the
    COVID-19 pandemic and Putin's war on Ukraine. These events also
    laid bare the deeper and more systemic diseases that have been
    plaguing our country for decades now.
        American economic leadership has been undermined by years
    of consolidation, under-investment, and focus on short-terms
    profits at the expense of everything else. As Professor Reich
    has written, and I quote,

            There's a deeper structural reason for inflation, one that
            appears to be growing worse: The economic concentration of the
            American economy in the hands of relatively few corporate
            giants with the power to raise prices.

        As my colleague and friend, Senator Amy Klobuchar, said,
    and I quote,

            America's market power problem cuts across our entire economy.
            We see it in everything from cat food to caskets.

        Because of corporate consolidation, wages have stagnated
    and consumer prices across the board are climbing higher and
    higher. All the while, corporations are reporting windfall
    profit margins in one sector after another, taking advantage of
    the current crises to raise prices even higher.
        As the Economic Policy Institute recently reported, ``Since
    the onset of the pandemic, nearly 54 of the spike in the costs
    of goods and services is attributable to higher profits margins
    by corporations.''
        Over the past several decades, the largest corporations
    have chronically under-invested in research and development and
    in their workforce. In fact, instead of investing in more
    resilient supply chains, innovation, new facilities, or
    workers, the firms in the S&P 500 spent 91 percent of their
    income on share buybacks or dividends between 2009-2018.
        Meanwhile, they have shipped jobs and manufacturing
    overseas and become strategic partners with America's
    adversaries. While this system is working great for wealthy
    CEOs and Wall Street, it's a disaster for working Americans,
    who are struggling with high prices, empty shelves, and few
    competitive alternatives in the marketplace. It's unsustainable
    in the long-term because it threatens our economic prosperity
    and our national security.
        Americans are angry, they're fed up with CEOs boasting that
    record profits are being fueled by the pain being inflicted on
    working families. Americans are overwhelmingly demanding that
    Congress end the corporate greed and runaway consolidation that
    are at the heart of this crisis.
        Today's hearing is an opportunity for us to explore the
    root causes of these concerns and to hear about solutions. I
    thank our panel of esteemed Witnesses for appearing before us.
        I now recognize the distinguished gentleman from the State
    of Colorado, the Ranking Member of the Antitrust Subcommittee,
    Mr. Buck, for his opening statement.
        Mr. Buck. Thank you, Mr. Chair.
        This is the second hearing in this Subcommittee entitled
    Reviving Competition. How tragic it is that an economy that
    should be growing and recovering from government-mandated
    lockdowns is instead stagnating in uncertainty over record-
    setting inflation, labor shortages, and a crippled supply
    chain.
        Americans face disastrous economic headwinds, and the Biden
    Administration has doubled down on its failed policies. At our
    last hearing on this subject, inflation was seven percent, now
    it's 8.3 percent. A gallon of gas was $3.31, now it's $4.33.
    Beef went from $4.55-4.92. I suggest we stop holding hearings.
        Perhaps most concerning, however, is the shortage in baby
    formula. Young mothers in my district are driving hours to find
    formula and feed their babies. The most vulnerable population
    in America doesn't have a stable source of food, and Congress
    hasn't done a thing about it.
        Of course, we just passed a $40 billion Ukraine aid package
    that included funds for global food security. Working families
    in the United States cannot feed their children, yet we're
    sending billions of dollars to countries that aren't even
    impacted by the war in Eastern Europe. To make matters worse,
    there wasn't even a requirement that the food in these programs
    come from U.S. producers.
        CNN, no friend to Republican talking points, recently
    tasked a reporter with tracking down baby formula. They used
    the Biden Administration's new highly touted tools. The result:
    Hours on hold and no clear direction for parents in need to
    purchase formula.
        We can have a philosophical debate over the concentration
    of power in different sectors of our economy. I welcome a
    discussion of Amazon's quick acquisition of Whole Foods and its
    anticompetitive pricing and delivery practices that force
    small, independent grocers out of business.
        To suggest that changes to competition policy will put
    formula back on the shelves for consumers is disconnected from
    reality, especially when the Biden Administration is busy
    shipping pallets of formula to the southern border for illegal
    immigrants.
        The Biden Administration and congressional Democrats need
    to stop hiding behind scapegoats and finally address the root
    causes of skyrocketing inflation. Between profligate spending,
    unabashed union protectionism, and radical environmentalism,
    it's no wonder how we got here.
        Since January, the price and availability of goods has gone
    from an expensive headache to a potentially disastrous shortage
    of critical products. If this is not addressed, I fear the
    statistics I'll be reading at the next hearing on this subject
    will be far worse.
        Mr. Chair, I yield back.
        Mr. Cicilline. I thank the gentleman. Now, I will introduce
    today's Witnesses. Again, I thank our Witnesses for joining us
    today.
        Our first Witness, the Honorable Robert Reich, is the
    Carmel P. Friesen Professor of Public Policy at the University
    of California Berkeley's Goldman School of Public Policy.
        During the Clinton Administration, Professor Reich served
    as the Secretary of Labor. Time Magazine named him one of the
    ten most effective cabinet secretaries of the 20th century. He
    has written and published 18 books, including bestsellers
    ``Aftershock'' and ``The Common Good.''
        Professor Reich is a founding editor of the American
    Prospect, a founder of Inequality Media, co-creator of the
    documentary series Inequality for All, and a member of the
    American Academy of Arts and Sciences. Additionally, he
    currently serves as a Senior Fellow at the Blum Center.
        Professor Reich received his bachelor's degree from
    Dartmouth University, his master's degree from Oxford
    University, and his JD from Yale Law School.
        Today's second Witness is Dr. Rakeen Mabud, the Chief
    Economist and Managing Director of Policy and Research at the
    Groundwork Collaborative. At Groundwork, Dr. Mabud has led
    their efforts to explain how economic trends impact people's
    lives, with a focus on serious structural disparities and on
    investigating how corporate profiteering exacerbates inflation.
        Before joining the Groundwork Collaborative, Dr. Mabud
    helped develop economic policy as a Special Assistant in the
    Office of Economic Policy at the Treasury Department. Dr. Mabud
    also serves as a board member for the National Employment Law
    Project.
        She has been widely published in some of the nation's most
    prominent publications, including the New York Times, The
    Washington Post, and NPR. Dr. Mabud received her bachelor's
    degree from Wellesley College and her Ph.D. in Government from
    Harvard University.
        Our third Witness is Barry C. Lynn, the Executive Director
    at Open Markets Institute. Mr. Lynn is a leading expert on the
    threat monopolies pose to our democracy, economy, security, and
    individual liberties. He's written three books and has been
    published widely by national publications, including The
    Economist, Rolling Stone, The New Yorker, and The Wall Street
    Journal. Prior to the helming the Open Markets Institute, Mr.
    Lynn was the Executive Editor of Global Business Magazine and a
    correspondent for the Associated Press, and Agence France-
    Presse in South America.
        Mr. Lynn received his bachelor's degree from Columbia
    University.
        Today's last Witness is Patrice Onwuka the Director of the
    Center for Economic Opportunity at the Independent Women's
    Forum. Ms. Onwuka Has worked in policy and advocacy in DC for
    more than a decade. Additionally, Ms. Onwuka is a Senior
    Adjutant Fellow with the Philanthropy Roundtable and Tony
    Blankley Fellow at the Steamboat Institute.
        She's a frequent guest on Fox News and a co-host of
    O'Connor and Company, a show on DC's leading talk radio
    station. She also hosts a column called The New Agenda for
    Black Women on Newsmax.com and is a contributor to the
    Washington Examiner.
        Ms. Onwuka received her bachelor's degree from Tufts
    University and her master's degree from Boston College.
        We welcome all our distinguished Witnesses and thank them
    for their participation. I will begin by swearing in our
    Witnesses and ask the Witnesses to turn on their audio if you
    are appearing virtually. Make sure that we can see you. Please
    raise your right hand while I administer the oath.
        Do you swear or affirm under penalty of perjury that the
    testimony you are about to give is true and correct to the best
    of your knowledge, information, and belief, so help you God?
        Let the record reflect that the Witnesses answered in the
    affirmative, and I thank you. I would remind the Witnesses that
    your written testimony will be entered into the record in its
    entirety. Accordingly, I ask that you summarize your testimony
    in five minutes.
        To help you stay within that timeframe, there's a timing
    light on your screen. When the light switches from green to
    yellow, you have one minute to conclude your testimony. When
    the light turns red, it signals that your five minutes have
    expired.
        I'll begin by recognizing Professor Reich for five minutes.

                STATEMENT OF THE HONORABLE ROBERT REICH

        Mr. Reich. Thank you, Mr. Chair and Members of the
    Committee.
        The Commerce Department recently reported that corporate
    profits are at a 70-year high. Now, this raises an obvious
    question: When corporate and corporations are so flush with
    cash, why are they raising prices?
        Now, it's not solely because of the increasing costs of
    supplies and components and labor. Corporations enjoying record
    profits in a competitive economy would absorb these costs,
    keeping their prices down to prevent competitors from grabbing
    away customers.
        The underlying problem is large American corporations have
    so much market power, they can raise prices with impunity.
    Since the 1980s, two-thirds of all American industries have
    become more concentrated, making it easy for corporations to
    informally coordinate price increases with a handful of other
    companies in their same industry without risking the
    possibility of losing customers who have no other choice.
        Airlines, for example, have merged from 12 carriers in 1980
    to four today, which now control 80 percent of domestic seating
    capacity. Three giant cable companies dominate broadband. A
    handful of drug companies control the pharmaceutical industry.
    Two giant firms dominate consumer staples.
        Three global alliances now control 80 percent of global
    container ship capacity. Four giants control over 80 percent of
    meat processing. The biggest U.S. oil companies, headed by
    Chevron and Exxon Mobile, boasted near-record profits last
    year, but they're raising prices at the pump nonetheless
    because they don't worry about losing market share to
    competitors.
        Meat prices are soaring because the four giant meat
    processing corporations that dominate the industry are using
    their market power to extract even bigger profit margins for
    themselves, according to the White House National Economic
    Council.
        Corporate executives brag about their pricing power on
    their earnings calls with Wall Street. The CEO of Tyson Foods
    credits his company's profits with its ``successful pricing
    strategies.'' The head of 3M boasts of a ``marvelous job in
    driving price.'' The CFO of Hormel says, ``We've done a great
    job with our pricing.'' So on and so forth.
        One reason baby formula is out of stock is lack of
    competition. The largest producer, with more than 40 percent of
    the market, is Abbott. After four babies were hospitalized and
    two died from bacterial infections, the FDA appropriately
    recalled Abbott's baby formula products, leaving families that
    depend on infant formula in the lurch.
        Now, it would be one thing if corporations were using their
    profits to invest in higher productivity, better product
    quality, and so on. They're using them to buy back their own
    shares of stock to deliver higher returns to shareholders.
        Stock buybacks hit a record last year. This year is on
    track to exceed that record. The oil giants are planning to buy
    back even more than last year. Abbott, instead of investing in
    safety of its factory, bought back billions of dollars of
    shares.
        Big corporations doing what their shareholders want them to
    do, maximize profits and share values. Unless or until there
    are laws preventing them from doing this, they will continue to
    do this.
        So, I recommend that the Congress and the Administration:

            (1)  Strengthen antitrust laws and enforcement.
            (2)  Prevent price-gouging. The Federal Trade Commission has
            the power to carry out investigations and impose penalties
            under existing law.
            (3)  Tax windfall profits, profits of large corporations that
            exceed their average profit level from 2015-2019.
            (4)  Finally, tax buybacks.

        This would make companies think twice before putting
    shareholders ahead of American families.
        Congress and the Administration have the power to stop
    corporations enjoying the highest profits in seven years from
    raising their prices, thereby requiring American workers and
    consumers to subsidize wealthy investors.
        Thank you.
        [The prepared statement of Mr. Reich follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Cicilline. Thank you, Professor Reich. I now recognize
    Dr. Mabud for five minutes.

                     STATEMENT OF DR. RAKEEN MABUD

        Ms. Mabud. Chair Cicilline, Ranking Member Buck, thank you
    for inviting me to testify today. My name is Rakeen Mabud, and
    I'm the Chief Economist and Managing Director of Policy and
    Research at the Groundwork Collaborative.
        Groundwork is an economic policy think tank dedicated to
    advancing a coherent economic world view that produces broadly
    shared prosperity and abundance for all.
        My testimony today will focus on three key points. First,
    mega-corporations are seeing the highest profit margins in 70
    years.
        Second, entrenched concentration has facilitated high
    levels of pricing power by corporate actors for decades. The
    pandemic, the cover of inflation, and geopolitics has given
    these companies new opportunities to exercise that pricing
    power, and investors are egging them on.
        Finally, the brunt of these price hikes does not fall
    evenly across our economy. Small businesses, low-income people,
    and people on fixed incomes are paying the highest price.
        Recent data and research lays bare the role of plain old
    profiteering in recent price hikes. The Bureau of Economic
    Analysis corporate profit data released in April revealed that
    corporate profits of non-financial firms surged 35 percent in
    2021, and overall profit margins reached their highest level
    since 1950.
        Recent analysis from the Economic Policy Institute finds
    that approximately 54 percent of the price increases that
    consumers are experiencing come from an increase in corporate
    profits. By contrast, labor costs, primarily wages, and non-
    labor costs, such as input costs, have only contributed 8
    percent and 38 percent, respectively.
        Groundwork has combed through hundreds and hundreds of
    earnings calls where executives tell investors about last
    quarter's performance and what they can expect going forward.
    Over and over, the message from corporate America is clear.
    They aren't just asking consumers to pay for the rising costs,
    they're going for more.
        Some of the most egregious cases are corporations like Visa
    and Mastercard, a duopoly that controls over 70 percent of the
    payment network market, which cannot even blame supply chain
    disruptions for their profiteering. Since credit card companies
    make their money on a fixed percentage fee off each
    transaction, inflation means they will automatically see higher
    returns.
        Of course, these companies are not content to stop there.
    Both Visa and Mastercard also reported that they will be
    raising fees themselves, that even more in an environment
    already difficult for small businesses. In short, Visa and
    Mastercard are using the power afforded through their duopoly
    control of the market to raise fee on small businesses and
    consumers who have nowhere else to go.
        Wall Street's influence in every corner of our economy
    makes this period of inflation unique and puts us at risk for a
    profit-price spiral. As price hikes drive up profits, investor
    demands for those profits also goes up.
        Take oil and gas companies, an industry dominated by seven
    ``super major'' companies. Despite the significant hardship
    that higher gas prices have incurred on families around the
    country, producers resolutely refuse to increase supply and
    respond to the increasing price of gas.
        As the CEO of Pioneer Oil replied when asked to explain, he
    said,

            It's all about the shareholders. Our shareholders own this
            company, they want a return of cash.

        In fact, 59 percent of oil and gas executives recently told
    the Dallas Fed that investor pressure is the primary reason
    publicly traded oil companies are throttling supply despite
    high prices. Investors have cashed in across the board. In
    2021, S&P 500 firms spent nearly $900 billion on stock
    buybacks, and U.S. companies paid out nearly $1.5 trillion in
    dividends to shareholders, both record highs.
        Small businesses in particular face unique challenges as
    they fight to survive in deeply consolidated markets. Small
    businesses have a harder time navigating global supply chains
    and large corporations throw their weight around to jump to the
    front of the line with shipping companies. Meanwhile, small
    businesses owners sit and wait with empty shelves.
        Big business has also strong-armed suppliers into deals
    that raise prices for small businesses and leave them waiting
    longer for goods and products. Giants like Walmart and Amazon
    have the buying power to negotiate more favorable contracts
    with suppliers in the first place, leaving small businesses
    struggling to keep up.
        Giant corporations' control over supply chains and economy
    more broadly has supplanted the functioning and resilient
    system we could have built through robust public investment and
    free and fair competition. It's not too late, we have many
    policy tools at our disposal.
        Congress can strengthen antitrust laws already on the
    books, better enforce them when anti-competitive behavior
    reaches the threshold for price-fixing and collusion, and enact
    a Federal price-gouging statute to curtail exploitative pricing
    during emergencies.
        Congress can also ensure corporations are paying their fair
    share of taxes and implement an excess profit tax on mega-
    corporations when appropriate.
        Finally, Congress can make long-overdue investments in our
    supply chain infrastructure to ensure that large corporations
    can't game the system and use their market power to rig the
    playing field further in their favor.
        Thank you, and I look forward to your questions.
        [The prepared statement of Dr. Mabud follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Cicilline. Thank you, Dr. Mabud.
        I now recognize Mr. Lynn for five minutes.

                       STATEMENT OF BARRY C. LYNN

        Mr. Lynn. Chair Cicilline, Ranking Member Buck, Members of
    the Committee, thank you for inviting me to speak on this set
    of grave, even existential threats to the American people.
        I am Barry Lynn. I direct the Open Markets Institute. It's
    good to see you all.
        Over the last year, the American people have learned that
    extreme concentration of industrial capacity and control has
    empowered corporations across the economy to engage in the
    greatest bout of price-gouging in more than half a century. The
    resulting surge in prices has severely harmed every wage earner
    and small business owner, indeed, almost every person and
    family in America.
        Yes, other factors--COVID, war--play a role in driving
    prices higher, but it's the choke pointing of capacity that
    embeds inflation deep into the structure of the economy. This
    chokeflation, or stranguflation as we might call it, as harmful
    as it may be, is also merely a symptom of an even more
    dangerous set of threats to the security and wellbeing of
    America as a whole, and every American individual.
        That's because the same concentration of capacity and
    control that corporations pursue to boost their pricing power
    also radically increases many forms of physical risk. This
    includes the risks of severe shortages of food, drugs, fuel,
    and housing, even, as we now know, baby formula.
        Severe shortages of the capacity to build weapons, think
    Stinger missiles. Political coercion of individual corporations
    or the U.S. government itself by antagonistic foreign powers,
    China, Russia. Even cascading catastrophic collapses of entire
    industrial and financial systems.
        So, my first main point is that inflation and shortages are
    two sides of the same coin. The corporate master breaks the
    factory, the machine, the skilled worker, the technology, so
    that he may take more for less. It's a swell way to do
    business, to profit from your own failure.
        This breaking can go way too far. Indeed, the breaking in
    the last 40 years now threatens the security of every American
    in new and terrifying ways.
        My second point, the concentration of capacity behind all
    these threats is the direct result of antidemocratic
    competition policies designed precisely to concentrate wealth,
    power, control, and capacity in the hands of the few.
        The process began with Ronald Regan's embrace of Robert
    Bork's efficiency theory of antitrust. It continued with Bill
    Clinton's embrace of Larry Summers' efficiency theory for
    trade. Many understood at the time that it was unwise to put
    all our eggs in one basket and then to put that basket inside
    the borders of China.
        It was 20 years ago this month that I first detailed these
    immense political dangers and economic dangers in this cover
    story for Harper's. It's called ``Unmade in America, The True
    Costs of a Global Assembly Line,'' 20 years ago.
        It was 17 years ago this summer that I published an entire
    book on the issue, ``End of the Line,'' 17 years ago. Others
    warned as well. In 2002, the first annual report of the U.S.
    China Security Review Commission fully embraced the warning of
    supply chain fragility and danger of coercion, 2002, the U.S.
    government documents.
        In 2005, the epidemiologist Michael Osterholm warned of how
    concentration threatened our supply of N95 masks. That was in
    2005.
        The warnings were ignored, dismissed, suppressed by
    executives, economists, antitrust officials, and the financiers
    who back them. Time and again, year after year, because if the
    master cannot break, the master cannot take quite so much. So,
    despite all the warnings, it was the master's right to break
    that was kept intact.
        Third, the good news. This crisis provides a clear and
    historic imperative to rebuild America's industrial systems in
    ways that boost both our security and our prosperity, including
    by fostering the sorts of competition that drive down prices,
    drive up wages, and jump start true innovation.
        Our task is technically simple. Enforce our antimonopoly
    laws as intended. Update the laws where necessary. Most
    important, however, is to always remember the main reason to
    stop corporations from trying to take America is to stop them
    from breaking America.
        Thank you.
        [The prepared statement of Mr. Lynn follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Cicilline. Thank you, Mr. Lynn.
        Ms. Onwuka, you are now recognized for five minutes.

                      STATEMENT OF PATRICE ONWUKA

        Ms. Onwuka. Thank you, Chair Cicilline, Ranking Member
    Buck, and Members of this Committee. Thank you for having me
    appear today.
        My name is Patrice Onwuka, and I'm the Director of the
    Center for Economic Opportunity at the Independent Women's
    Forum. We are a nonprofit organization committed to increasing
    the number of women who value free markets and personal
    liberty. My work focuses on the economy as well as expanding
    opportunities for women.
        Now, as we emerge from this pandemic, it's been encouraging
    to see the recovery of women's participation in the labor
    force. The tight labor market has rewarded them with rising
    wages and increased flexible work. Rapid inflation has placed
    these gains at risk.
        As we know, inflation rose 8.3 percent in April over the
    past 12 months, and prices are rising in every major category,
    with significant increases in energy, food, and shelter. For
    another month in a row, women have watched inflation erode
    their purchasing power, and households have been forced to do
    more with less.
        The hardest hit, as we've heard, are the low-income
    households and those on fixed budgets, such as the elderly.
    Women know what this means. We drive 70-80 percent of consumer
    purchasing power, and so we're attentive to what inflation--
    what choices our families have to make because of it.
        Gasoline hit another record today at $4.52 a gallon. A year
    ago, it was $3.04, and two years ago $1.96. So, and even worse,
    parents of newborns and babies face the dual hardship of rising
    prices on baby formula as well as its unprecedented baby
    formula shortage.
        Americans are right to worry about inflation and to see it
    as the top issue facing them. Congress and the Biden
    Administration are wrong to scapegoat a few specific industries
    for this kitchen-table problem. This is an attempt to deflect
    attention for how failed policies and massive Federal spending
    are at the root of inflation.
        Arguments about today's spiking inflation due to price-
    gouging are disingenuous. Furthermore, solutions could raise,
    not lower, prices for American households. Price-gouging
    usually occurs in a narrow market over a short period of time.
    However, prices have been rising for over a year and have
    spiked on items in every sector. Are large and small companies
    colluding to raise their prices?
        Now, sure, we've heard a lot about corporate profits today
    rising. Profits do rise with inflation. They also did plummet
    during the beginning of the pandemic. Profit is not a bad
    thing. Economists are skeptical of the price-gouging allegation
    against large companies.
        A survey of two out of three--two out of three economists
    from America's top universities, including MIT, Harvard, Yale,
    Stanford, disagree with the quote--the question, ``Is dominant
    corporations in uncompetitive markets taking advantage of their
    market power to raise prices to increase the profit margins
    lead to today's inflation?'' Again, two out of three said no.
        In fact, some industries with the largest price increases
    are highly competitive. We've heard a little bit about
    gasoline. Well, the top five companies providing gasoline in
    this country, not one of them owns more than 12\1/2\ percent of
    the market share. The top five, about 36 percent of the market
    share in total.
        So, new legislation that cracks down on mergers and
    acquisitions or attempts to control prices will not lower them
    but lead to higher prices and stifle the innovation that leads
    to more options for consumers.
        No doubt, supply chain issues and disruptions, labor market
    shortages are at play and increase the cost of production.
    Demand has been extraordinary, and, unfortunately, we haven't
    heard enough about demand here today.
        From March 2020-March 2021, the U.S. Government made
    massive direct payments to American households through
    stimulus, expanded unemployment insurance, mortgage, and
    student loan forbearance. That kept demand humming along.
        The American Rescue Plan in 2021 added significant cash
    payments, including the expanded child tax credit at a time
    when millions of worker--of jobs had been recovered, at a time
    when vaccines were being distributed, and the economy was
    experiencing a tremendous rebound.
        The Federal Reserve also engaged in hyperexpansionary
    monetary policy. Quote, ``There is a chance that microeconomic
    stimulus on a scale closer to World War II levels than normal
    recession levels will set off inflationary pressures of a kind
    we have not seen in a generation.'' Former Obama Administration
    Treasury Secretary Larry Summers in early 2021.
        He was right. The Federal Reserve Bank of San Francisco
    estimates that the American Rescue Plan added three percentage
    points to inflation. So, driving down inflation ought to be a
    key area to reduce inflation. That includes not passing new
    stimulus or increased fiscal spending on new entitlement and
    student loan forgiveness.
        Maybe Congress could spend some time ramping--figuring out
    how to ramp up supply by raising labor force participating,
    reducing import restrictions, reducing regulations, keeping
    corporate tax rates low, and encouraging oil drilling, and then
    going after price-gouging. American households truly are
    hurting. Thank you.
        [The prepared statement of Ms. Onwuka follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Cicilline. Thank you very much. The Committee will
    stand in recess briefly votes have been called. There are only
    two votes, and we'll come back as soon as those votes are
    concluded.
        I beg the indulgence of our Witnesses, and we'll return.
    We'll stand in recess.
        [Whereupon, the above-entitled matter went off the record
    at 1:32 p.m.]
        Mr. Cicilline. The Committee will come to order, and I want
    to thank, again, the Witnesses for the indulgence and the
    Members of the Subcommittee.
        We will now proceed under the five-minute rule, and I will
    recognize first the gentlelady from Florida, Ms. Demings, for
    five minutes.
        Ms. Demings. Thank you so much, Mr. Chair, and again, thank
    you to our Witnesses for your indulgence and for being with us
    today.
        We all know that prices are rising, and Americans are
    feeling it, especially at the gas pump where prices are spiking
    to their highest point ever.
        Instead of increasing production to meet demand, major oil
    companies are spending on buy backs and dividends, bragging of
    record profits. I'm sure we all heard the audio.
        Exxon Mobil, Shell, Chevron, and BP each reported their
    largest profits in eight years with the four companies totaling
    profits approximately $71.5 billion in 2021.
        Again, of course, we're not here today to talk about
    profits necessarily. God bless them. We are here to make sure
    that they are not taking advantage of a tough time and
    continuing to work in the best interests of the American
    people.
        These oil and gas companies are able to keep prices high
    and bank record profits because they have very little
    competition. The lack of meaningful competition means there are
    no competitive checks on bad behavior such as profiteering by
    dominant corporations.
        We do need stronger enforcement and successful execution of
    existing antitrust laws and policies. I think we say that in
    just about every hearing.
        So, my first question is for Dr. Mabud. Can you give us
    some examples of companies that have used inflation and,
    unfortunately, the pandemic as cover to raise prices and
    increase profits?
        Ms. Mabud. Absolutely. Thank you for that question.
        What we hear in these earnings calls is that in sector
    after sector CEOs are blaming inflation, supply chain snarls,
    basically, everything but their own need to profiteer for
    higher prices.
        This is especially the case for companies like Kimberly-
    Clark, which produces what economists called price inelastic
    goods, essentially, essentials that parents who need diapers
    are going to pay whatever they need for diapers. So, Kimberly-
    Clark has the market power and the ability to jack up prices
    because they know they're not going to lose consumers if they
    do so.
        Ms. Demings. Thank you so much.
        Professor, what are the consequences of the reduced
    successful enforcement of antitrust laws?
        Mr. Reich. Well, Congresswoman, what we've seen over,
    really, the past decades are that the courts have reduced the
    scope and effectiveness of antitrust as a means of maintaining
    the competition and the competitive process.
        The result of that is that more and more corporations
    dominate their industries. They have the power to set prices.
        They have the power to, basically, generate profits that
    are not being poured back into production or going into higher
    wages. Their profits are going more and more into stock buy
    backs that reward their shareholders but don't really help the
    overall economy.
        The bottom-line consequence for all of this is not only
    higher prices that are necessary but also lower quality goods,
    as we see with regard to Abbott nutrition and the baby formula
    problem--crisis, really--that's gripping America.
        That would not have been a crisis if that particular
    industry, like many other industries, was not so concentrated
    in the hands of a handful of producers, and Abbott is the
    largest producer.
        So, you see how vulnerable this degree of concentration
    makes all of us.
        Ms. Demings. Thank you so much, Professor.
        Mr. Lynn, the Department of Energy has reported that global
    clean energy markets are expected to reach $23 trillion by the
    end of this decade. However, the United States currently likes
    the manufacturing capabilities necessary to actively
    participate in many of these markets.
        As I was walking in the door, you were saying when we put
    all our eggs into one basket the problems that can result from
    that. What are some of the causes of the loss of domestic
    manufacturing capacity and how can we reverse these trends and
    bring back more manufacturing back to the USA?
        Mr. Lynn. I will answer that with one word--silicon. North
    of 95 percent of all silicon ingots come out of China. These
    are the ingots that are used to manufacture photovoltaic panels
    around the world. It didn't used to be that way.
        These ingots used to be made in United States, used to be
    made in many places around the United States. The Chinese
    concentrated that power in ways that would give them the
    ability to choke off and control the manufacture of panels at
    their desire.
        What do we do about it? We open new silicon refining and
    ingot manufacturing facilities in the United States. There are
    mines all over that could be opened. There's one in West
    Virginia on the Ohio River. We could do that tomorrow.
        Ms. Demings. Thank you so much. Thank you to all our
    Witnesses again, and Mr. Chair, I yield back.
        Mr. Cicilline. The gentlelady yields back.
        I would now normally recognize the Ranking Member, but he's
    asked that I recognize the gentleman from Wisconsin, Mr.
    Fitzgerald, for five minutes.
        Mr. Fitzgerald. Thank you, Mr. Chair.
        To Ms. Onwuka, the root causes of inflation, I think, were
    not driven by private sector. The inflation that we're feeling
    now is the result of government intervention and probably some
    reckless spending.
        Coronavirus didn't cause our supply chain issues. Shutting
    down the economy did, and I think now what we're seeing is some
    of my colleagues on the other side of the aisle are trying to
    convince the American people that the only solution would be
    more government and it's not going to work.
        Just last week, Congresswoman Schakowsky introduced the so-
    called Price Gouging Prevention Act. This bill, supported by
    some of my colleagues, again, on the other aisle would make the
    FTC the arbiter of what constitutes unreasonable price
    increases.
        If this were to become law, companies--there would be no
    incentive for them to raise wages because they would be taken
    to court and be loaded up with many legal bills.
        So, when prices are fixed too low and companies stop
    producing, which is what we saw during the '70s with the Arab
    oil embargo, can you just give us your thoughts or elaborate a
    little bit on policies such as price fixing that, in this bill
    or in President Biden's recent, quote, ``plan to fight
    inflation'' unquote, how it's not going to work or how it's
    poorly thought out?
        Ms. Onwuka. Thank you, sir. It's so interesting that we're
    talking about price controls because they don't work on many
    levels.
        On a theoretical level, the idea of setting prices, which
    is likely to happen for the government to set prices below the
    market level, would, obviously, increase the demand and supply
    would not keep up with it.
        That is exactly what we have now in terms of shortages when
    we look at baby formula. We don't have--that's not what we want
    across the entire economy. You referenced it just now.
        Historically, we have seen price controls not work. We look
    back to President Nixon trying to control oil and gas prices.
    It's not economic. It's the idea that we can use--that
    technocrats, for example, can somehow determine the best prices
    across the country, across millions of products in our entire
    economy across our entire nation is a recipe for failure.
        So, when I see things like price controls showing up in
    pieces of legislation, they may be well intended we have
    already seen historically the consequence that happens. So, as
    I mentioned, when we talk about what's driving inflation, we
    have not heard enough about demand, and demand--certainly,
    supply has been shortened for many different reasons but demand
    was inflated because Congress decided to give American
    households quite a lot of stimulus in lots of different forms,
    regardless of whether or not the realities really warranted
    that, particularly, back in 2001.
        So, we are now living with the consequences of that.
        Mr. Fitzgerald. Very good. Just one other kind of secondary
    effect, I guess, is the way I would describe it, we have just
    saw double digit increase in the price of farmland in my home
    State of Wisconsin and, obviously, it's tied directly to the
    price of production, crops, and the yields that are affected by
    the cost of land.
        Can you talk a little bit about kind of that bigger picture
    on not only just farmland in Wisconsin, but automobiles and
    other major purchases that consumers may be looking at in the
    future?
        Ms. Onwuka. Absolutely. So, at Independent Women's Forum we
    actually put together a price tracker that looks at some of the
    cost increases every month on things that American households
    are looking at and purchasing. Obviously, used cars are
    increasing, everything from shoes to, boy, the milk and I buy
    lots of milk because I have two toddlers right now.
        When you think about things like what goes into the
    production of those goods that get onto our shelves, the cost
    of fertilizer that feeds that leads to produce or feeds cattle,
    for example, there's so many increases on the production side
    and the producer price index, certainly, has hit a new--almost
    a new high last month.
        Those costs are being--some of them are being borne by
    large companies and small companies, and they pass that on to
    consumers in the form of higher prices.
        So, when we--I worry when I hear about price gouging being
    the only reason why things like farmland or the cost of meat is
    rising because there's so many other costs that I think a lot
    of companies are actually eating that don't get passed on, and
    some that get passed on.
        Labor costs are rising, and when we look at goods-producing
    companies as well as service-producing companies, we didn't see
    labor costs substantially rising in 2020. We did see them
    rising substantially in 2021 because of worker shortages.
        Well, why did we have worker shortages? Well, there's
    plenty of stimulus going into American households that
    discouraged work. So, lots of these factors are going into
    what's driving inflation--demand and supply.
        Mr. Fitzgerald. Thank you, Mr. Chair. I yield back.
        Mr. Cicilline. Thank you. I thank the gentleman for
    yielding back.
        I would just note that the bill you're referring to I'm
    proud to be a co-sponsor of. It's not a price control bill.
    It's an anti-gouging bill, and as you know, Mr. Fitzgerald,
    there's an anti-gouging bill in the State of Wisconsin that I
    know you in the past supported.
        So, I just want to be clear it's not a price control bill.
    So, I want the record to be clear on that.
        I now recognize the gentlelady from Pennsylvania, Ms.
    Scanlon, for five minutes.
        Ms. Scanlon. Thank you, Chair Cicilline, and thank you to
    our expert Witnesses for joining us here today.
        This hearing to address how we need to update our antitrust
    laws to combat market consolidation, anti-competitive behavior,
    and corporate profiteering could not be more timely.
        In recent weeks, families in my district and across America
    have been struggling to find infant formula after a plant
    closure created a national infant formula shortage. There
    couldn't be a stronger example of how market consolidation in
    our economy can hurt everyday Americans.
        Critical supply chains for things like food and energy
    production have become increasingly fragile as past
    Administrations failed to do adequate oversight. The
    consolidation has put the U.S. on a dangerous path towards more
    frequent and severe supply chain disruptions and the infant
    formula is just one of the ones we have been examining.
    Meatpacking is another good example.
        So, when we have these disruptions, they halt vital supply
    chains and have really devastating consequences for Americans.
    Earlier today, my colleagues and I sent a letter urging the
    Administration and its constituent agencies to take corrective
    measures to increase the supply of baby formula in the short
    term but also to examine long-term solutions and restore
    competition and resilience in the market to prevent future
    disruptions.
        So, I know that Congress and the Administration can solve
    this problem together so I'm really looking forward to hearing
    what our experts have to say by way of some suggestions.
        So, Secretary Reich, I know you've tweeted some opinions on
    this subject already today. I would like to look at what kind
    of things should Congress do to update our antitrust laws to
    fix the problems created by decades of anti-enforcement
    philosophy?
        Mr. Reich. Congresswoman, there are a number of specific
    steps that Congress can take. One area that has caused a great
    deal of confusion and the courts have constricted antitrust
    authority has to do with section 2 of the Sherman Act.
        Now, I understand the confusion. I understand what the
    courts have been doing. I understand why they've been doing it.
        The net effect is, basically, to enable more and more
    monopolization and to require a very high threshold with regard
    to the courts need to find and what prosecutors need to show to
    prove monopolization, and that's one area that I would zero in
    on.
        Another area that is extremely important has to do with the
    Federal Trade Commission's authority under section 5 to go
    after various mergers, and it used to be that they could go
    after mergers even before those mergers occurred. I think
    Congress ought to restore and strengthen that authority as
    well.
        Ms. Scanlon. Thank you. So, we find ourselves in a position
    where there have already been multiple mergers within the
    infant formula sector.
        Mr. Lynn, do you see any way to get us out of this
    situation? One thing that's been suggested is possibly using
    the WIC program to try to be empowered through increased
    funding and resources to be part of the solution. Can you help
    us out there?
        Mr. Lynn. Yes. Thank you. Government purchasing is one--is
    actually a power that can be used to concentrate the market, or
    it can be used to deconcentrate and create more competition
    within the market.
        Procurement is one of our most important tools. It has--for
    most of our history it was used to promote competition.
        So, absolutely, government procurement through the WIC
    program can be used to establish more providers and to ensure
    that there is resiliency in the system such as by ensuring that
    there's sort of extra capacity that is available in case of a
    crisis. We should never be running a system like this at 100
    percent of capacity ever.
        Ms. Scanlon. Yeah. I think that goes to something Dr. Mabud
    may have discussed, which is the sort of knife-edge supply
    chains that can't really handle fluctuation. Can you comment on
    that, Doctor?
        Ms. Mabud. Absolutely. Over the last 50 years, mega
    corporations have shaped our supply chains into the brittle
    system that we have today so that when we experience shocks,
    whether that's a plant shutting down that produces baby formula
    or a pandemic, we experience bottlenecks and shortages that
    drive up prices, and big corporations can use their dominance
    in markets to hike up those prices, especially when they have
    the cover of inflation.
        I think we can build an economy that can handle additional
    demand without breaking, and I look forward to Congress making
    those critical investments.
        Ms. Scanlon. Thank you. I see my time has expired. I yield
    back.
        Mr. Cicilline. The gentlelady yields back.
        I now recognize the gentleman from Oregon, Mr. Bentz, for
    five minutes.
        Mr. Bentz. Thank you, Mr. Chair.
        This is a question eventually for Ms. Onwuka. Here's the
    background for it.
        State Street, BlackRock, and Vanguard currently control
    about 20 percent of the S&P 500. Now, they're not using that
    control for the benefit of the investors. They're using it for
    carrying out a political agenda. Yet, today, we have not heard
    a peep about that huge accumulation of capital. Not a peep. We
    have heard about the companies that they own.
        Now, what I understand from reading, of course, they're
    doing is making it almost impossible for gas companies--natural
    gas companies--to get the financing to put in pipelines, and
    assuming they could get the financing, we find that there are
    huge barriers being constructed at the bureaucratic level to
    prevent those pipelines from ever being built.
        Yet, Europe is facing an existential crisis when it comes
    to energy, which could only be solved with natural gas making
    its way across the ocean. Yet, we don't seem to have the
    ability because of this huge accumulation of capital by State
    Street, Blackrock, Vanguard, because they're bringing that
    leverage against banks that they happen to control not to lend
    the money.
        Can you comment?
        Ms. Onwuka. I think you've hit on some of the hypocrisy
    that we're seeing here when it comes to what companies are--
    it's okay for them to aggregate wealth and power and how they
    leverage them for different reasons.
        I think you've, certainly, laid out a compelling argument
    there. I don't really have anything else to add to it.
        Mr. Bentz. Thank you.
        Mr. Lynn, you mentioned that we should be opening mines all
    over the United States. I happen to agree with you. In fact, in
    my Natural Resource Committee we have heard over and over and
    over again about why we shouldn't open mines.
        We have heard examples of water being interfered with, with
    cultural values being upset, you name it, any number of reasons
    why we shouldn't mine copper, why we shouldn't mine lithium,
    why we shouldn't mine uranium, why we shouldn't mine nickel,
    why we shouldn't mine, in other words, anything.
        My question to you is how do we tell the American people
    about the damage the crazy position we have put ourselves in,
    not unlike Europe relying upon Russia for all that oil and gas,
    and here we are in the United States the same exact position.
        Yet, we can't seem to touch any of these minerals right
    under our feet. Can you comment?
        Mr. Lynn. Thank you, Congressman. It's a fundamentally
    important issue. I certainly understand why there is concerns
    about certain types of mining practices and I, also, I feel the
    pain for people who have love for the land, but I also
    understand that this is a fundamental issue of national
    security.
        When we depend 100 percent on foreign powers for anything,
    whether it's a component in our computers, whether it's a
    component in our drugs, or whether it is a mineral that goes
    into the supply chains, that puts us at risk. That gives the
    people who we cannot trust power over us.
        So, we must find a way to actually open up more mines and
    open up more production, not just in the United States but
    within the confines of the G-7 nations with whom we are
    integrated.
        Mr. Bentz. Thank you.
        Ms. Onwuka, back to you for my last question. It happens
    that three years ago the price of natural gas per MMBtu was $3.
    A few minutes ago, I checked just while I was waiting to ask my
    questions. It's at $8.31. So, it's gone from $3-8.31, and this
    is, of course, for natural gas.
        We get a lot of talk about people going to the pump. We
    don't have as much talk about people trying to heat their
    homes. Here we have an increase of almost 300 percent.
        So, can you comment on the challenges that a family is
    going to face this winter when their natural gas heating
    prices, not to mention businesses across all the United States
    that use natural gas? Can you comment on that?
        Ms. Onwuka. Absolutely. I actually wanted to read a quote
    from--we receive stories from regular Americans, from your
    constituents every day looking at the rising costs that they
    are experiencing, and home heating bills are one of those areas
    that we continue to track, one of those areas where we are
    seeing so many families struggling.
        I do think it's one of those areas where it's going to
    continue to be an issue this fall. We, certainly, heard many
    stories from people who--families who could not afford to heat
    their homes or they were making very tough decisions, choices
    when it came to how their family budget, which was, obviously,
    decreasing--their real wages were actually decreasing because
    of inflation.
        They were making some tough choices and I think that is
    going to continue to be an issue until we figure out how to get
    back to a place where we recognize our energy sources should
    be--our energy policy should respect all different types of
    energy sources, including natural gas.
        Mr. Bentz. Thank you so much. I yield back.
        Mr. Cicilline. Before I recognize the next speaker, it
    looked like the Ranking Member wanted to say something about--
    no? Okay.
        I now recognize the distinguished gentleman from
    California, Mr. Swalwell, for five minutes.
        Mr. Swalwell. Thank you, Chair, for this important hearing.
        I have to say top of mind for me with a six-month-old who
    eats like a horse. His baby formula and this issue is touching
    households across the country, and it needs a solution, and it
    needs a solution yesterday.
        Unfortunately, a lot of moms across America see finger
    pointing in Washington. They hear that this is Joe Biden's
    fault. I didn't know maybe Joe Biden had a baby formula factory
    behind the White House, I didn't know about that he's not
    operating. I don't think that's the case.
        They're hearing solutions that we should take the baby
    formula that's at the border for children who are detained with
    their parents and take their baby formula and let them starve
    and then put that baby formula in America.
        They're not really hearing solutions that are realistic or
    that don't kill a baby at the border to have political theater
    in the United States.
        So, Mr. Lynn, my first question for you is, is it realistic
    that President Biden could invoke the Defense Production Act to
    increase production of baby formula?
        Mr. Lynn. It's realistic. (Inaudible) it's actually
    necessary. I think that the fundamental point here is that this
    is not a zero-sum situation.
        We don't have to be moving formula from the border to
    Chicago, it's like we need to be treating everybody the same.
    We need to be increasing production immediately.
        I think there was a major move yesterday to get the plant
    reopened. There's a major move to sort of bring production in
    from Ireland and elsewhere. So, I think the Biden
    Administration is taking ample actions immediately to improve
    the situation across the United States.
        What we need to be doing now is actually focusing in this
    room on how to ensure that this never happens again. How do we
    ensure that there is sufficient competition within this system,
    so that the corporations are not able to run their capacity at
    100 percent?
        When a corporation is running their capacity as 100
    percent, that is usually an indication of market power.
        Mr. Swalwell. Mr. Lynn, is there any reason that EU-
    regulated baby formula isn't good enough to import in the
    United States?
        Mr. Lynn. I don't believe so. I was just in Europe last
    week and there's a lot of things we can learn from Europe. I
    doubt that there's anything wrong with the EU baby formula.
        Mr. Swalwell. We want to have the highest standards for
    baby formula, right. This is our most precious citizens of our
    population. It would seem to me that if it's good enough for
    European babies it would be good enough for the FDA.
        Also, the last Administration discouraged imports of baby
    formula from Canada in the reauthorized North American trade
    agreement and, again, I would offer that Canadian standards are
    probably just as good if not tougher than in the United States.
        I guess one last thought on baby formula. When you say we
    want to make sure this doesn't happen again, going back to what
    you said as it relates to market power, what could you do to
    diversify the production of baby formula in the United States,
    so it didn't happen again?
        Mr. Lynn. It's sort of a two-tier problem. You got
    concentration in retail, and you got concentration in
    production. So, you actually have to attack it at both the
    level of retail and the level of production.
        The extreme concentration of power in the retailers
    actually has driven a lot of the concentration within
    production.
        So, there's simple rules that can be imposed immediately
    that reduce the power of the retailers and those are generally
    anti-discrimination laws that restrict their ability to engage
    in monop-sonistic manipulation of suppliers, and then you sort
    of deal with the concentration within the suppliers.
        Mr. Swalwell. Mr. Lynn, your solutions are common sense.
    They're doable and, as a Democratic Member of Congress, it
    doesn't reek of any partisanship and I think that's what most
    moms in America want, right.
        Most moms and dads in America want right now. They just
    want solutions, and I thank the Chair for a solution-driven
    hearing on what we can do with this crisis.
        I yield back.
        Mr. Cicilline. I thank the gentleman.
        I now recognize the Ranking Member of the Full Committee,
    Mr. Jordan from Ohio, for five minutes.
        Mr. Jordan. Thank you, Mr. Chair.
        Mr. Lynn, three weeks ago, you issued a press statement
    following my statement on Elon Musk and Twitter, byline
    Washington. In response to Elon Musk buying Twitter, Open
    Markets Institute Director Barry Lynn issues the following
    statement, and I quote from there the second sentence.``The
    Open Markets Institute believes that the deal poses a direct
    threat to American democracy and free speech.''
    Do you remember that statement you issued?
        Mr. Lynn. I do, Congressman.
        Mr. Jordan. I was just curious. Nineteen months ago, when
    Twitter locked out the New York Post out of their account
    because of the Hunter Biden story, was that a threat to free
    speech?
        Mr. Lynn. I'd go back further, Congressman. Actually, in
    the summer of 2018, I made the case that when Facebook and
    Twitter were cutting off Alex Jones, I said that was a threat
    to democracy and free speech.
        Mr. Jordan. So, when they banned the story in the--October
    of 2020, would you call that a direct threat to democracy? I
    mean, I look at the day's running up to the most important
    election we have, the Presidential election, and they keep a
    story from the American people.
        So, you would agree with me that was a threat to democracy?
        Mr. Lynn. I think that the threat to democracy is to have
    allowed so much of our media to be captured--the control over
    so much of our media to be captured by a few people in Silicon
    Valley.
        Mr. Jordan. That's not what I asked you. I asked you was
    that--the fact that they blocked that story, was that a threat
    to free speech and democracy?
        Mr. Lynn. I think we see threats to free speech and
    democracy every day in this country and they're opposed by the
    power [inaudible].
        Mr. Jordan. Again, you're not answering the question I
    asked you. I asked you specifically about that example. In the
    run up to our most important election we have a story about
    Hunter Biden's laptop that 51 former intelligence agents told
    us was Russian disinformation.
        We know that was false because the Washington Post told us
    two months ago that it was true. I'm just saying, was that a
    direct threat to democracy and free speech, as you just said in
    your press release from three weeks ago?
        Mr. Lynn. I don't think my press release from three weeks
    ago had anything to do with what you're talking about. I do
    believe that, as I said before, the concentration of power in
    the hands of Mark Zuckerberg and the junta at Google--
        Mr. Jordan. Did you issue a press release last--
        Mr. Lynn. --is a fundamental danger to our democracy and I
    am--actually have been thrilled by the ability of this
    Committee to address the problem at the bottom of this to deal
    with this threat to our democracy.
        Mr. Jordan. I just want to ask you a question. Did you
    issue a press release in October of 2020 when that story came
    out and the New York Post was locked out of their account? Did
    you issue a press release then saying this was a direct threat
    to democracy and free speech?
        Mr. Lynn. No, I did not, sir.
        Mr. Jordan. How about two months ago when The Washington
    Post told us that story was actually true, that the Hunter
    Biden laptop was actually real, the eyewitness, Mr. Bobulinski,
    was real?
        The Washington Post did two stories within, like, four
    minutes. Did you issue a press release then saying that what
    happened before was a direct attack on democracy?
        Mr. Lynn. No. What we have been doing, Congressman, is
    focusing on the larger structural problems of our
    communications system, which also I know that this Committee--
    Subcommittee has done a wonderful job of actually highlighting
    those problems and working to solve them, and I believe that's
    the way to deal with this.
        It's not to focus on individual problems, but to focus on
    the fundamental structures that pose direct threats to our
    democracy.
        Mr. Jordan. Have you talked to anyone at the FTC about Elon
    Musk's attempt to buy Twitter?
        Mr. Lynn. I have not, Congressman.
        Mr. Jordan. You've not talked to anyone?
        Mr. Lynn. I have not spoken to anyone at the FTC about Elon
    Musk trying to buy Twitter.
        Mr. Jordan. You just issued the press release.
        Mr. Lynn. I just want to--if there's any doubt about this,
    I'm a huge fan of Elon Musk. I think he's done wonderful things
    for the world. So, I think what he's done with Tesla is
    fantastic.
        I think what he's done with SpaceX is fantastic. I just
    think you can't have too much power concentrated in the hands
    of one person and that is pretty much the theme of everything
    that we do at the Open Markets Institute.
        Mr. Jordan. Do you think--do you agree--it's been announced
    a few weeks ago that the Biden Administration and the
    Department of Homeland Security has formed a Disinformation
    Governance Board? Do you agree with the formation of that
    board?
        Mr. Lynn. I think that there is a problem of disinformation
    in this country that is, largely, due to the structure of
    regulation over the platforms that control our communications
    in this country.
        Mr. Jordan. Do you think it's okay for a government to
    decide what kind of information, which is exactly what this
    Disinfor-mation Governance Board--you think that's okay?
        Mr. Lynn. I did not say that. I said it is important for
    the people of the United States--
        Mr. Jordan. Well, let me just ask you really simple. Do you
    support the formation of the board or not?
        Mr. Cicilline. The time of the gentleman has expired but
    the Witness may answer the question.
        Mr. Lynn. I don't know enough about that particular issue
    to say yes or no.
        Mr. Jordan. Come on, Mr. Lynn. You can give an answer to
    that question. Do you support it or not?
        Mr. Cicilline. The time of the gentleman has expired.
        I now recognize the gentleman--
        Mr. Jordan. You said he could answer the question. I'm just
    trying to get him to answer.
        Mr. Cicilline. He answered it already, Mr. --
        Mr. Jordan. I'm just trying to get a yes or no answer, Mr.
    Chair.
        Mr. Cicilline. I accommodated you as much as I could. I now
    recognize the gentleman from New York, Mr. Jones, for five
    minutes.
        Mr. Jones. Good afternoon, everyone, and thank you, Mr.
    Chair, and all our Witnesses. I'm grateful for this opportunity
    to work with you to improve our economy and lower costs for the
    American people.
        Secretary Reich, it's an honor to speak with you this
    afternoon and I'm very grateful for your testimony. I want to
    ask you about some unsolicited testimony that we have received
    over the last week from one of the richest human beings who has
    ever lived, Jeff Bezos, Executive Chair of Amazon.
        It all started when President Biden tweeted,

            You want to bring down inflation? Let's make sure the
            wealthiest corporations pay their fair share.

        Jeff Bezos, who's enormous corporation paid nothing,
    nothing, in Federal taxes during the first two years of the
    Trump Administration and which still pays a lower rate than the
    average American, thought that he knew better.
        He tweeted, quote,

            Raising corporate taxes is fine to discuss. Taming inflation is
            critical to discuss. Mushing them together is just
            misdirection.

        Mr. Secretary, let me ask you directly, how would making
    the wealthiest corporations pay their fair share help bring
    down inflation?
        You got to unmute yourself, sir.
        Mr. Reich. Congressman, the answer is very direct and
    easily understood. If corporations pay their fair share, that
    means that other Americans don't have to pay as much. They can
    afford such things as childcare, which enables them to be more
    productive. It enables most of America, therefore, to generate
    more output, which brings down inflation.
        When you have the second richest man in America saying that
    the President ought to do this or this and presides--that
    particular man, presides over a corporation that paid zero
    taxes in 2018 and over the last four years has paid, as far as
    I understand, a rate of about 13 percent on one of the largest
    sort of incomes--corporate incomes--in the United States, if
    not the world, whereas most Americans are paying a much, much
    higher rate, you've just got to say to yourself, this is rich,
    in all senses of that term.
        Mr. Jones. Well, thank you. A few days later, we heard from
    Mr. Bozos. We heard more from Mr. Bezos, who has so much money,
    by the way, that he could give every Amazon employee a $100,000
    bonus and still have as much in the bank as he had when the
    pandemic began. Can you believe that?
        Mr. Bezos continued,

            Well, in fact, the Administration tried hard to inject even
            more stimulus into an already overheated inflationary economy
            and only Manchin saved them from themselves. Inflation is a
            regressive tax that most hurts the least affluent. Misdirection
            doesn't help the country.

        I had no idea that Jeff Bezos, who could singlehandedly
    fund pre-K for every child in America, but would rather spend
    his money on vanity trips to space and cowboy hats cared so
    much about the, quote, ``least affluent.''
        Mr. Secretary, in your written testimony you noted that
    investing in care would help reduce inflationary pressures.
    Would you explain for us how the provisions of Build Back
    Better would help the American people deal with inflation?
        Mr. Reich. Absolutely, Congressman.
        First, if we had and every American family had access to
    good high quality childcare, that would enable so many more
    people in the United States to work, to be productive, because
    they are productive, therefore, the entire economy would be
    larger. Therefore, we would have less inflationary pressure.
        There are many other provisions in the Build Back Better
    bill that will also improve overall productivity. It's also the
    case with regard to the bipartisan infrastructure bill.
    Infrastructure is another public investment.
        All these public investments are investments in the future
    productivity of the United States and, as such, they improve
    the capacity of American workers to do better and
    simultaneously enlarge the capacity and output of the United
    States, all anti-inflationary steps.
        Mr. Jones. Thank you, Mr. Secretary.
        Build Back Better and the bipartisan infrastructure law
    sound like great pieces of legislation to lower crisis for
    Americans and to lower inflation in this country.
        I yield back, Mr. Chair.
        Mr. Cicilline. The gentleman yields back.
        I now recognize the gentleman from Louisiana, Mr. Johnson,
    for five minutes.
        Mr. Johnson of Louisiana. Thank you, Mr. Chair.
        When Joe Biden was sworn in as President, the average
    retail price of gasoline was $2.38 a gallon. On Monday,
    according to AAA, it was $4.48. Many parts of the country have
    seen much higher prices, and this is not an accident. These are
    policy choices that led us here.
        Nor is it primarily due to Russia's war on Ukraine, as
    President Biden would like everybody to believe, because gas
    prices had already risen 48 percent since he took office.
        The rise in price is the direct result of this
    Administration's assault on the oil and gas industry. On his
    first day in office, he canceled the Keystone XL pipeline. That
    was expected to bring more than 800,000 barrels of oil from
    Canada to the U.S. every single day.
        Not even a week later, President Biden signed his Executive
    Order to put a moratorium on oil and gas leasing on Federal
    lands, and just last week, the Administration cancelled three
    lease sales in the Gulf of Mexico and Alaska. Why? Because
    they're pursuing a radical environmental agenda for the Green
    New Deal.
        It's destroying our economy. It's killing American
    consumers and they seem not to care.
        Ms. Onwuka, it seems to me that the Biden Administration
    spends a lot of time blaming oil companies for prices, but
    isn't that a little bit hypocritical since they want to make it
    harder to produce fossil fuels?
        Ms. Onwuka. Well, absolutely. I think what we're seeing is
    a war on energy right now, particularly fossil fuels. Let me
    read you an interesting quote from someone. I meant to get to
    it earlier and I couldn't find it. This person said--this
    gentleman, actually Paul Lamier,

            The price of home heating oil under Trump was about $2.25 per
            gallon. Under Biden, now I have to pay $5.09 per gallon. To
            fill up my gas tank with Trump and his energy independence
            policies I was paying $2 per gallon. Under Biden I spend $4.45
            per gallon. This is insane and has to stop.

    I think this represents a lot--the perspective of many
    Americans who recognize when you are pursuing an agenda,
    whether it's clean energy or whatever you'd like to call it,
    there is going to be tradeoffs that has to be made, and when
    you continue to make one particular or two particular
    industries your target--your enemy--making it difficult for
    companies to be able to produce more oil now and in the future,
    obviously, it's going to have some negative impacts and that
    shows up in the prices.
        You laid out some of those examples--the cancellation of
    the Keystone XL pipeline, the freezing of new gas drilling
    leases on Federal land. There's so many more.
        It's so interesting, when you look at the totality of all
    these policies, it bears out at the gas pump, frankly.
        Mr. Johnson of Louisiana. It does, and the great irony--the
    tragedy of all of it is that if you turn down domestic supply,
    if you make it impossible for us to meet the demand for fossil
    fuels here--oil and gas--it means that we got to go hat in hand
    to OPEC, Russia, and Saudi Arabia to get our demand met with
    the supply from overseas.
        Guess what? The supply overseas is produced in a much less
    clean and efficient manner. So, ironically, they're doing more
    harm to the environment with these crazy policies. It makes no
    sense.
        Last week, the Administration released the Biden/Harris
    inflation plan to deal with inflation, right. It includes
    increasing fuel economy regulations for cars and a pie in the
    sky goal of ensuring, quote, ``one of every two cars sold in
    2030 burns no fossil fuels.''
        It's odd to me that our President and Vice President really
    think that imposing more regulations on our auto industry is
    actually going to somehow lower the costs.
        What's your reaction to this plan? How ridiculous is this?
    Does it look--is it as ridiculous as it looks on its face?
        Ms. Onwuka. I think it is. I think when reading through the
    plan, I didn't see anything that's not the--any policies that
    are going to actually reduce costs today or in the future,
    frankly, and whether you're talking about energy policies or
    some of the other things that are included as well as some of
    the ideas, including Build Back Better that we have heard
    today, are supposed to be anti-inflationary.
        Well, they're the definition of inflationary when we
    consider what the American Rescue Plan did in adding points to
    the inflation rate right now. So, I don't see that the
    inflation policy that the White House has put out is going to
    make anything better.
        I think it's going to make things worse.
        Mr. Johnson of Louisiana. This so-called anti-inflation
    plan also mentions fuel economy regulations for trucks. So,
    imposing new requirements on the trucking industry seems to be
    a drag on our economy, given the important role that truckers
    play in the supply chain.
        So, do you think we should be fighting rising prices by
    making it harder for trucks to deliver the goods that we use
    every day?
        Ms. Onwuka. Absolutely not. When I spoke to a trucker in
    Missouri--he actually owns a trucking business and he trains
    new truckers--and he said one of the challenges right now that
    they're facing in the trucking industry, they can't get
    manpower, in part, because of wages, but also because of the
    Federal regulations when it comes to what truck drivers can do,
    how they have to work, how their compensation is tied to stops
    and the amount of driving that they can do.
        So, when we're in the middle of a pandemic with shortages,
    with difficulties getting goods from our ports to our store
    shelves, the last thing we need to do is increase regulations
    on the brave people who are out there every day getting our
    goods to our store shelves, and this is from a trucker in
    Missouri, someone who knows the industry quite well.
        Mr. Johnson of Louisiana. The pain is felt across the
    board. We need to reverse these policies. I yield back.
        Mr. Cicilline. The gentleman yields back.
        I know that we had Mr. Jeffries and Mr. Raskin on the
    screen, but I want to go next to Mr. Raskin. He is back. I
    recognize the very distinguished gentleman from Maryland,
    Professor Raskin, for five minutes.
        Mr. Raskin. Thank you very much.
        The biggest producer of baby formula domestically is Abbott
    Labs, which controls 40 percent of the market. In February,
    they recalled formula produced at their Michigan plant in
    Sturgis because of bacterial contamination. That plant has been
    shut down ever since. At the end of March, instead of investing
    in making its manufacturing plant safer, Abbott Labs bought
    back $2.3 billion in an effort to boost share prices.
        So, Mr. Lynn, what are the circumstances that would
    incentivize Abbott to spend money on enriching investors
    instead of innovating or increasing production at a time of
    crisis?
        Mr. Lynn. Thank you, Congressman.
        I mean, the incentives that would lead a corporation to
    favor payouts to its investors, rather than the building out of
    new capacity at a time of crisis, is simple. They control the
    marketplace. They have no fear. No one is challenging them.
        So, if you have no fear--
        Mr. Raskin. You are attributing this to a lack of
    competition, then, to concentration in the market, is that
    right?
        Mr. Lynn. Absolutely. Actually, I think these numbers, what
    you will see often when we look at numbers that show certain
    corporations 40 percent, another one has 35 percent, often
    those numbers are much higher within certain regions. In
    agriculture markets, you often see 100 percent consolidation in
    particular regions when a single corporation buys all the
    production of chicken or milk, or whatever. So, yes,
    consolidation is at the heart of all of this.
        Mr. Raskin. Thank you.
        Professor Reich, do you agree that is a structural problem,
    that a company like Abbott would not be investing in its plant
    to expand production and capacity, but would be doing a
    buyback. Is that a problem related to concentration in the
    field? If so, what can Congress do to eliminate these kinds of
    perverse incentives for companies to buy back stock, rather
    than invest in industry?
        Mr. Reich. Congressman, there are two problems, and they
    are related. One has to do with concentration. As we have been
    talking about, in the baby formula industry you have a very,
    very few companies, and Abbott is the largest. So, that it
    makes the entire system and American consumers very vulnerable
    when you have only one major producer, and that one major
    producer is shut down for a good reason, because it was not
    investing in quality control.
        Which gets to the second point having to do with buybacks.
    Before 1984, the Securities and Exchange Commission did not
    allow buybacks. This was considered to be market manipulation.
    Ronald Reagan, President Reagan's Securities and Exchange
    Commission decided that it was not market manipulation, allowed
    corporate buybacks. What we see now is a record amount of
    buybacks. Adjusted for inflation, last year was record; it
    looks like this year, according to Citibank, it is going to be
    even a larger amount of buybacks.
        Well, instead of making investments in their plant, making
    sure that their plant was safe, what we saw with regard to this
    Abbott Nutrition is that they simply wanted to make their
    investors richer by buying back shares of stock. We are seeing
    this across the country.
        These two problems are, indeed, structural problems. What
    Congress can do is not only enforce and strengthen the
    antitrust laws, but also can make buybacks either illegal or
    tax buybacks.
        Mr. Raskin. Well, let me pursue that for a second, because
    I feel like my eyes are opening here. So, there is testimony
    that, between 2009-2018, in that decade, firms in the S&P 500
    distributed 91 percent of their net income back to shareholders
    in the form of stock buybacks and dividends. So, there was
    paltry sums going into research and development, new
    facilities, training new workers, and so on.
        So, this, in fact, is, I think you are suggesting, a
    central problem, not some kind of peripheral issue. Is that
    right?
        Mr. Reich. Yes, this is a central problem; it is a growing
    problem.
        Mr. Raskin. Well, I appreciate your testimony very much.
        Mr. Chair, thank you for calling this really urgently
    important hearing that goes right to the question of what we
    are dealing with in the baby formula crisis.
        I yield back.
        Mr. Cicilline. The gentleman yields back.
        I now recognize the gentleman from California, the
    distinguished Mr. Issa, for five minutes.
        Mr. Issa. Thank you, Mr. Chair.
        Ms. Onwuka, I am confused. A little while ago, I understood
    some of my Democrat colleagues, your other panelists, to say
    that, if you put money back in the consumers' hands, they will
    spend it in a way that will reduce inflation. Did you hear
    that?
        Ms. Onwuka. I think I did, yes, sir.
        Mr. Issa. So, this is interesting. A stock buyback and
    dividend payouts, that puts money in the consumers' hands,
    sometimes directly, sometimes through pensions, and so on. A
    tax cut puts money back into the individual's hands. All these
    things to put money in individual hands do seem to be well
    worthwhile, and we certainly encourage it.
        Let's go through this. Isn't one of the two problems right
    now we have in inflation, one is excess demand by lots of money
    being printed out of the government, too much money, if you
    will, being out there, and supply chain interruptions? Those
    are the two biggest reasons, right?
        Ms. Onwuka. Yes.
        Mr. Issa. The third being the tremendous price increase of
    petrochemicals because of supply being limited by the policies
    of this Administration.
        Ms. Onwuka. Yes.
        Mr. Issa. So, I am trying to understand. We are having a
    hearing on antitrust, and I have heard no testimony so far
    about these companies making dramatically excess profits.
    Amazon has been bashed constantly, when, in fact, most of its
    divisions don't make any profits. The one that makes a lot of
    profits, which is the one that right now is running the servers
    probably for this hearing, its biggest customer is the
    government.
        So, am I missing something or are we having an antitrust
    hearing so we can bash corporate profits, even if they are
    distributed to the consumer?
        Ms. Onwuka. From what I have heard, yes, I have heard quite
    a lot about profits today. I have not heard a lot about demand,
    excessive demand, and the source of that being the Federal
    government in generous stimulus, probably unnecessary stimulus,
    at different times over the past couple of years.
        Mr. Issa. Well, I would like to go back to supply chain.
    Supply chain disruption, some of it is outside of our control.
    What is going on in China, what is going on in Russia and
    Ukraine somewhat is out of our control.
        If you would comment on the rising fuel prices of all sorts
    in the United States, how much of that is within our control
    and could be changed? Oh, by the way, those are very large
    companies. They have large market share. We will just have a
    given of why we are asking.
        Ms. Onwuka. Well, it is certainly, as I mentioned earlier,
    the top five largest companies, oil-producing companies in this
    country only control about 36 percent of the market share. So,
    there is still a lot of competition in the oil industry. That
    is number 1.
        Number 2, yes, rising prices, oil prices certainly go into
    everything from transportation costs, rising costs there, to
    just heating your home, as we talked about before. So, those
    are all going to be underpinning a lot of the inflation.
        When we talk about why there are supply chain disruptions,
    we also have to talk about the labor cost and the fact that
    labor has been--people have been sitting on the sidelines of
    the economy. Why have they done that? Again, that goes back to
    demand. When you pay people to stay at home, when you forgive
    their or put on hold their student loan payments, you are
    putting a lot of money in the hands of regular people. That is
    fine, but that is going to drive demand. I haven't heard a lot
    of solutions on how we address that.
        Mr. Issa. No hearing in Congress these days is complete if
    you don't talk about climate change. So, let me bring the
    subject up.
        Currently, Germany and other countries, because of the
    situation in Europe, are turning back on coal-fired plants.
    Huge amounts of additional coal are being burned as a result of
    current disruptions. The United States is unable to answer with
    additional clean natural gas or other fuels because of
    policies. How much of what would drive down the global price of
    oil and natural gas, and eliminate the need for relatively high
    carbon coal, would occur if the policies of this Administration
    were at least favorable to the finance of those types of
    enterprises?
        Ms. Onwuka. Well, I think we can look back at President
    Trump's Administration, when we were a net exporter, right, of
    natural gas. So, to put us back in a position where we are not
    vulnerable to the whims of other countries, even dictators, but
    in a position where we can actually help the world not be
    vulnerable to those same geopolitical issues, I think that is
    where we need to get back to. Policies that take us away from
    there that we have seen over the past year, unfortunately, put
    us in that vulnerable position.
        Mr. Issa. Mr. Lynn, there won't be time to ask you the
    question you didn't answer for the Ranking Member--
        Mr. Cicilline. The time of the gentleman has expired, but I
    will let you--
        Mr. Issa. I hope in the future that we would answer a
    question yes or no when it can be answered yes or no, and then,
    go on to the rest of it. I was deeply disappointed. I know you
    are better than that.
        Mr. Cicilline. I will say, Mr. Lynn, I was gratified to see
    that you are a man of integrity, you answered the question
    truthfully, and despite the fact that the Member of Congress
    didn't like the answer, you pressed. I admire you for that.
        So, with that, I now recognize the gentlelady from
    Washington, Ms. Jayapal, for five minutes.
        Ms. Jayapal. Thank you, Mr. Chair.
        The pandemic has hemorrhaged the global supply chain.
    Corporate monopolies have worsened conditions. This past year,
    corporate monopolies in various industries made record profits,
    and we are going to keep talking about these profits because
    they are crucial to this discussion. At the same time,
    essential products like meat, toilet paper, and baby formula
    flew off the shelves and rose to outrageous prices.
        My home State of Washington currently has the fourth
    highest gas prices, with prices in King County, where I live,
    currently at $5.07 per gallon. Oil and gas companies, as you
    have heard my colleagues on the other side talk about, want to
    try to attribute these prices to pandemic delays and wartime
    sanctions, or to the Biden Administration itself, instead of to
    profiteering. Let's look at the facts.
        First, Shell made $9.1 billion in profit from January-
    March, almost three times what it made in the same period last
    year, while Exxon raked in $8.8 billion, a near threefold
    increase over 2021.
        Second, even before the pandemic, U.S. producers lowered
    production and raised prices to increase profits for investors.
    Even though demand has increased, production of oil remains
    slowed. One CEO even stated that, even if the price goes to
    $200 a barrel, they are not going to step up production.
        Dr. Mabud, why is oil production still experiencing these
    delays? What's going on?
        Ms. Mabud. Yes, thank you for this really important
    question.
        Oil and gas companies, as you note, are making record
    profits, all while families around the country are struggling
    to get their kids to school and pay for their drive to work. As
    gasoline prices increased almost 50 percent in 2021, the three
    biggest U.S. oil companies benefitted from those higher profits
    and prices. They saw their previously negative profits jump
    nearly $87.5 billion, while boosting shareholder handouts by
    $4.5 billion in 2021, and that trend has only continued in
    2022.
        Let's be clear. This is not about rising input costs. Even
    as the price of crude has started to come down in recent weeks,
    the gas prices have stayed sky-high, and consumers are really
    paying the price. Large oil companies are simply choosing to
    keep oil prices high, despite lower crude prices, to pad their
    bottom line and to pay out to their shareholders.
        Ms. Jayapal. Thank you.
        Dr. Reich, big oil has achieved its highest profits in a
    decade, as many people have pointed out. Twenty-eight major
    fossil fuel businesses made a combined $93.3 billion in the
    first three months of 2022, a 127 percent increase from the
    same period in 2021. What have corporations done with these
    profits and why don't we see them reflected in the average
    American's price at the pump?
        Mr. Reich. Well, the simple answer, Congresswoman, is that
    they have bought back their shares of stock in an effort to
    raise their stock prices. This is not a new phenomenon, but it
    is new in the sense of how much they are doing right now. They
    are not pouring these profits back into production. They are
    not pouring the profits back into higher wages. They are not
    pouring the profits back into research and development. They
    are pouring the profits into raising share prices.
        In terms of the United States economy overall, that is not
    a plus. In fact, the question that all of you, this hearing is
    really focusing on is quite simple and direct. When
    corporations are so flush--that is, they are enjoying the
    largest profits in 70 years--why are they raising prices? They
    should not be raising prices, particularly when they are just
    those profits to turn around and buy back shares of stock.
    American consumers are paying the price.
        Ms. Jayapal. Exactly the right question.
        Mr. Lynn, gasoline is not a regulated commodity, which
    means that producers and retailers are free to charge whatever
    price they choose. Big oil blames pandemic delays, the Russian
    invasion of Ukraine, but prices were rising long before
    Russia's invasion. How has the freedom of big oil to set their
    own prices impacted the middle-class and lower-income earners?
        Mr. Lynn. Thank you, Congresswoman. You cut to the heart of
    the issue here.
        What we see is a remarkably weirdly structured system with
    oil. You see a series of bottlenecks, starting with OPEC, and
    you see it with the majors who actually have control over most
    of the big wells around the world. Then, you see a power at the
    concentrated level of refining. There has not been a new
    refinery open in the United States since 1978. It is the same
    footprint it was in 1978.
        Then, you have the commodities markets in which, on top of
    this deeply industrialized system in which the amount of oil
    can be guaranteed pretty much week after week, month after
    month, year after year, it is industrialized. Yet, then, we
    have the prices jumping up and down.
        Ms. Jayapal. Thank you.
        Mr. Lynn. So, the market itself, the market structure is
    actually one of the places we want to be looking at because the
    market doesn't make sense.
        Ms. Jayapal. Well, thank you.
        Dr. Mabud, despite the suggestion--
        Mr. Cicilline. The time of the gentlelady has long expired.
        Ms. Jayapal. Okay. Thank you. I couldn't see the time
    clock. Thank you, Mr. Chair. I yield back.
        Mr. Cicilline. The gentlelady yields back.
        I now recognize the gentleman from Utah, Mr. Owens, for
    five minutes.
        Mr. Owens. Thank you. Thank you so much.
        Utah is one of the most vibrant and fastest-growing
    economies in the nation, thanks to a strong, well-educated,
    trained workforce, booming tech industry, and innovative
    collaboration between business and government. So, it is
    especially crushing to see the inflated cost of living in Utah
    at 10.2 percent, which is two percent above the national
    average.
        Unfortunately, we have returned to the 1960 days of Carter,
    a time when our government forgot the basic 101 of economics
    and the impact of hyper-spending and Federal price controls on
    a recovering economy. As it was with my generation in the
    1970s, today's generation of young Americans will see in real
    time the impact of Democrats' failed economy and economic
    policies. Everything costs more--rent, food, gas, clothes, and
    vacations as loss of income. They will never forget this
    moment, and their bank accounts won't, either.
        As it was with President Carter, history will not treat
    kindly the Biden Administration and a Democratic-controlled
    Congress' policies of 2021-2022. They are robbing hardworking
    American men and women of their wages and hurting their
    families.
        The constituents I hear from on a daily basis consider the
    increased cost of living a very serious problem. The buck stops
    at President Biden and his Administration, who has had missteps
    from day one. He destroyed America's energy independence by
    closing the Keystone Pipeline, pulling our own petroleum
    reserves, and then, selling the oil to China--until last week,
    stopping oil leasing in Alaska and the Gulf of Mexico, and
    then, blaming the oil industry and the local service stations
    for price gouging.
        It is worth taking note that this week gas prices hit
    another record high. You can't make this stuff up. At the end
    of the day, President Biden and his policies did this. I love
    the title of this hearing, ``Rebuilding America's Economic
    Leadership.'' If we are to rebuild America's leadership, it is
    up to our President and the Democratic Party to own up to their
    own disastrous decisions and change their ways.
        Mr. President, it is time to show true leadership and stop
    the blame game. Pointing the fingers at everybody else for
    every chaos, a self-created chaos, is not working.
        Ms. Onwuka, it seems like, first, in Utah we had prices of
    gas down to $2, a little bit more. In California, it has always
    been high, $4-5 more. Is it because they are price gouging in
    California, and they are not doing it in Utah? I am trying to
    figure out what the difference is there. Is it policies or just
    because these bad oil companies are doing in the California
    people?
        Ms. Onwuka. I think, at the State level, policies around
    taxes on gas, on gasoline, come into play. Regulations, when it
    comes to the gas and oil industries, also come into play. So, I
    suspect that is what is going on in the different locations.
        Mr. Owens. Do you have anything else you want to add to the
    fact that it appears that those who were taking risks,
    providing services, and doing it at a much cheaper price just
    about two or three years ago, why they are now the enemy of the
    other side of the aisle here? Any comments? Any thoughts?
        Ms. Onwuka. I think that it is sad that we are at the point
    where our Federal policy seems to do a disservice to those
    people who are risk-takers, who are willing to invest, to start
    companies. We are talking about antitrust. So, when small
    companies that provide great value build itself up to a point
    where it can be bought, acquired by another larger company, and
    then, create added new value to the consumers, who raise higher
    prices and new kind of products. So, I do think it is a
    disservice that we are doing to these companies.
        Mr. Owens. I look forward to the day that we educate our
    young people again the way the free market works.
        Ms. Onwuka. Yes.
        Mr. Owens. The more competition, the lower the price, the
    better the product--that is the way that has been the American
    way. Envy has never worked for building a nation.
        I just want to let the other side of the aisle know that
    Robin Hood is a good movie, but it doesn't work. It never has.
    You look to the Robin Hood attitude of taking from the rich and
    give it to the poor. It is what has happened in Cuba. It is
    what happened to Venezuela. It is what happened to Russia. Any
    place there is tyranny, you have this idea: You take away from
    the risk-takers, the builders--by the way, by people who have
    never built a thing. Those who have never built a business
    never understand the risk that it takes and how it is to
    reinvest. Those who reinvest and look for a vision and a
    future, they will do it in a very smart way. Unfortunately,
    those who have never done it will never get it.
        So, I look forward to being in a position, as we get into
    this new Congress, that we are going to start teaching our
    young people the free market once again, be proud of who we
    are, and to applaud the risk-takers and the builders in our
    country that make our country great.
        Thank you so much, and I yield back.
        Mr. Cicilline. The gentleman yields back.
        I now recognize the distinguished Chair of the Democratic
    Caucus, the gentleman from New York, Mr. Jeffries, for five
    minutes.
        Mr. Jeffries. I thank you, Chair Cicilline, for your
    continued leadership with respect to making sure that we can
    right-size our economy, free market economy, well-regulated,
    but one that works for everyday Americans, not against them,
    and appreciate your continued leadership in the context of
    these hearings.
        I think what we hope to accomplish, generally--certainly,
    my perspective--is not to take from the rich to give to the
    poor, but to stop the rich from taking the productivity gains
    from everyday Americans, particularly, over the last four
    decades, and basically, hoarding it for themselves in a manner
    that has undermined the great American middle class and those
    who aspire to be part of it.
        Secretary Reich, thank you for your service over the years.
        Would it be fair to say that, effectively, while the
    productivity of the American people has increased dramatically
    over the last four decades--I think in excess of 275 percent--
    basically, less than 10 percent of those productivity gains
    have actually been received by everyday Americans, by working-
    class folks, and by the middle class or those who aspire to be
    part of it? The overwhelming majority of those productivity
    gains have gone to the privileged few?
        Mr. Reich. Yes, in the short answer, Congressman. I think
    that what we are talking about here in terms of markets that
    are rigged, that are, essentially, noncompetitive, in which a
    handful of companies can easily coordinate, and do coordinate,
    to raise prices, and are doing it even more under the cover of
    inflation, is another way, another symptom, of the underlying
    problem that you are pointing out.
        We have not seen this degree of inequality in terms of
    concentrated income and wealth at the top of America in over
    100 years. The result is that, although the country is much
    more productive than it used to be five, or 10, or 40 years
    ago, the typical American is not doing that much better,
    adjusted for inflation.
        To make this a partisan issue, to blame one party or
    another, does a disservice to the United States. We have got to
    get and adapt the structure of our economy, and the laws and
    regulations governing the economy, particularly antitrust, to a
    new era in which we have a record degree of corporate profits,
    corporate concentration, and corporate buybacks.
        Mr. Jeffries. Well, thank you for that clarification. I
    think, foundationally, we shouldn't have this particular
    discussion at this moment in isolation as it relates to the
    profit-taking that is occurring and clear evidence that certain
    corporations are taking advantage of an inflationary moment
    that may exist for a variety of reasons, and they will be
    connected to supply chain dynamics emanating from the pandemic,
    to continue to pad their profits, to the detriment of the
    American consumer. So, there is not an isolated situation. We
    have actually seen a march in this regard for 40 years.
        No one is suggesting that the American people should
    somehow have a windfall. The American people's productivity has
    earned them a raise; they just haven't gotten it. Instead, what
    they have actually gotten in this moment are higher prices by
    individuals seeking to take advantage of the moment.
        Dr. Mabud, corporations are seeing record profits,
    including oil companies and some of the meat processors, and
    others. These savings, these profits, aren't being passed along
    in any way toward the consumer. Can that be explained?
        Ms. Mabud. Absolutely. Groundwork has been listening to
    hundreds of earnings calls. I believe that we should listen to
    what the CEOs are telling us, right, which is that they are
    really eager to jack up prices on consumers, all while bringing
    in record profits and issuing stock buybacks for their
    shareholders.
        I mean, EPI has done some great analysis here that shows
    that 54 percent of the price hikes that consumers are seeing
    are due to corporate profits, whereas, only 38 percent and
    eight percent, respectively, are due to input costs rising and
    wages. So, the delta here, the difference between prices and
    profits is going straight into the pockets of CEOs and
    shareholders.
        Mr. Jeffries. Thank you very much to all the Witnesses.
        I yield back my time.
        Mr. Cicilline. The gentleman yields back.
        I now recognize the gentleman from Georgia, Mr. Johnson,
    for five minutes.
        Mr. Johnson of Georgia. Thank you, Mr. Chair.
        In the beef-processing industry, four dominant companies
    control 85 percent of the market. Wall Street has consolidated
    into five banks, and airlines have merged into just four major
    airlines. We have three major cable companies controlling
    broadband and three dominant baby formula companies controlling
    95 percent of the market.
        This widespread consolidation throughout the marketplace
    has allowed these dominant firms to set the rules of the game,
    and this has created an interconnected and very inefficient
    supply chain that has endangered the lives and strained
    America's wallets during this pandemic--all in the name of
    profit.
        So, I want to thank you, Mr. Chair, for holding this
    hearing, and I look forward to an answer to this question from
    Ms. Onwuka. Ms. Onwuka, you would not disagree with me that
    there is a correlation between rising gas prices and rising oil
    company profits, correct?
        Ms. Onwuka. Thank you, Congressman.
        When inflation happens--
        Mr. Johnson of Georgia. Is that correct? Is that correct--
        Ms. Onwuka. Sorry, I was just going to--
        Mr. Johnson of Georgia. --that there is a correlation
    between rising gas prices and rising oil company profits?
        Ms. Onwuka. Profits and inflation go hand-in-hand.
        Mr. Johnson of Georgia. Well, profits and rising costs go
    hand-in-hand, too, do they not?
        Ms. Onwuka. Profits and inflation can go hand-in-hand, and
    when the prices fall, sir, also, you see profits fall. Thank
    you.
        Mr. Johnson of Georgia. Well, Ms. Onwuka, let me ask, since
    you don't want to answer that question, let me see if you will
    answer this question. To what degree has oil company price
    gouging contributed to the spike in gas prices?
        Ms. Onwuka. I don't think that there is evidence that you
    can point to, or anyone can point to, to say that it is price
    gouging that is leading to--
        Mr. Johnson of Georgia. Well, let me ask Mr. Reich the same
    question. What do you think, sir?
        Mr. Reich. I am sorry, Congressman, could you repeat that
    question?
        Mr. Johnson of Georgia. To what degree has oil company
    price gouging contributed to the spike in gas prices?
        Mr. Reich. Well, it has contributed substantially in the
    sense that, if we define gouging, price gouging, as using your
    market power, your power to raise prices when you don't have to
    raise prices, when you are, basically, having enough profits
    that you could easily absorb the increase in cost of inputs,
    which in the oil company we are talking about crude oil prices
    going up, that is price gouging--taking advantage of an
    inflationary environment to hide the fact that you are raising
    your prices and costing consumers more, when, otherwise, you
    would not; you certainly, in a competitive system, you would
    not be doing that. That would be my definition of gouging,
    absolutely.
        Mr. Johnson of Georgia. Thank you.
        The Economic Policy Institute recently observed that, since
    the onset of the pandemic, nearly 54 percent of the spike in
    the cost of goods and services can be attributed to increased
    corporate profit margins. Mr. Reich, if our markets were truly
    competitive, it stands to reason that companies would keep
    their prices down to prevent competitors from stealing
    customers, correct?
        Mr. Reich. Absolutely. That is kind of a principle that I
    think is easily understood. If you are in a competitive market,
    you are going to do everything you possibly can do to keep your
    prices down. Otherwise, competitors are going to grab market
    share away from you.
        That is what we see in the competitive parts of our
    economy. Too much of our economy right now, though, is
    uncompetitive, dominated by big companies that don't have to
    worry about raising prices and losing market share.
        Mr. Johnson of Georgia. Thank you.
        My colleagues on the other side of the aisle have said that
    these price hikes are due to inflation, but, Mr. Reich, you
    have written extensively on this, and you disagree. Why do the
    increases that we see have less to do with inflation and more
    to do with corporate power to raise prices?
        Mr. Reich. Well, they have to do with corporate power to
    raise prices in the sense that corporations now--and we know
    this--have a higher degree of profitability than they have had
    in 70 years. Now, where are those profits coming from? The
    profits are coming partly from an increase in pent-up demand
    after the pandemic, but also from the fact that they don't have
    adequate competition.
        If they had adequate competition, they would keep their
    prices down. They have the power to raise their prices. They
    have been saying on earnings calls, again and again, they have
    been crowing about it; they have been boasting about their
    ability to increase, maintain and increase their profit margins
    using the cover of inflation. I think that is the critical
    point here. They don't want to be seen as raising their prices
    to increase their profitability, but they are using inflation
    as an excuse for raising prices and increasing their
    profitability.
        Mr. Johnson of Georgia. Thank you, and I yield back.
        Mr. Cicilline. The time of the gentleman has expired.
        I will now recognize the distinguished Ranking Member of
    this Subcommittee, Mr. Buck from Colorado, for five minutes.
        Mr. Buck. Thank you, Mr. Chair.
        Mr. Lynn, first, thank you for talking about mining--a
    difficult subject for folks on one side of the aisle to talk
    about and a little bit easier on my side of the aisle, and
    really a head-scratcher sometimes when we think about rare
    earth metals and the fact that many of those are no longer
    mined here in the United States. Most of those have been
    transferred--and I think you mentioned this with silicon--have
    been transferred to China. Most of the production has been
    taken up in China.
        Any guess whether we do a better job of mining in a clean
    way here in this country or whether China does a better job of
    mining in an earth-friendly way?
        Mr. Lynn. This is pure speculation, but I actually would
    assume that mining in the United States will be more highly
    regulated and will result in a cleaner outcome.
        Mr. Buck. I would make the same assumption. I am not a
    miner, and so, I am not sure, but that would be my assumption.
        The baby formula plant, the Abbott plant, was closed on
    February 17th. You have mentioned that Abbott has a 40 percent
    market share, and I think that we can all agree that that plant
    produces substantial amount for Abbott Labs. I don't think
    anybody is disagreeing with closing the plant, given what
    happened. Was it foreseeable that, if you close a major
    producer like that, we would have a shortage at some point in
    the future, whether it is a month or three months?
        Mr. Lynn. Yes, it was absolutely foreseeable. We have seen
    this many times in the past. I mean, actually, in my book
    Cornered, I spent a long time looking at what happens with the
    shutdown of a single cat food facility. This was 2007, and it,
    basically, stripped out all the cat food across the entire
    nation. It was a shutdown of a single facility, but almost
    every single brand was purchasing out of that one facility.
        Mr. Buck. Ms. Onwuka, I want to ask you a question. You
    mentioned--and I am hoping, I wrote this down, and I hope I got
    it right--you don't hear a lot about solutions for demand. I
    think that is what you said. I have got one, and I am just
    wondering if you would comment on it.
        Ms. Onwuka. Yes, Ranking Member. I mean, I think if--
        Mr. Buck. Well, let me ask you the solution that I have,
    and then, ask you to comment on it. My solution is that the
    Federal government stop spending so much darn money.
        Ms. Onwuka. I think that is a great solution.
        Mr. Buck. There you go. We agree. Why?
        Ms. Onwuka. Because we have a track record, and we can look
    back over the past year, in particular, to see that, when the
    economic conditions of the country are improving, that is not
    the time for excessive stimulus--whether that is expanding
    entitlements, whether that is in expanding direct payments to
    American families--because it becomes a disincentive to work,
    particularly if it is unattached to work requirements.
        So, that is what we saw driving the labor shortages, but we
    also saw a demand, not just return to pre-pandemic levels, but
    exceed that. So, demand is driving, is chasing after too few
    goods being supplied by the country.
        Mr. Buck. I want to get to another line here. My daughter,
    son-in-law, and daughter-in-law are all in the oil and gas
    industry. If I don't come to their defense, Thanksgiving dinner
    will be a very quiet, quiet dinner.
        An oil and gas company, from the time they apply for a
    permit to the time they put a drill bit in the ground is about
    one year. Once that drill bit is in the ground and they start
    producing, they have a life--and it varies--but the lifetime of
    a well, the production actually starts decreasing dramatically
    after the one-year point.
        So, to say that oil and gas companies have some control
    over the profit, when the oil is flowing, a certain amount of
    oil is flowing, and the price is more determined on a world
    market, especially by OPEC and other countries, I think is
    unfair. I just wanted to give you the opportunity to comment on
    that, understanding my Thanksgiving dinner dilemma.
        [Laughter.]
        Ms. Onwuka. Thank you, Ranking Member. I don't want you to
    get into any trouble with your children.
        I think it is very interesting when we talk about signals.
    Federal policy can send signals to industries about the
    intentions when it comes to, in this instance, energy, and what
    the approach should be to treating different types of companies
    within industries differently than others. I think the signal
    has been sent when it comes to oil and gas and natural gas,
    that this is not going to be a friendly environment for them to
    continue to produce.
        So, when you talk about cancelling leases to be able to
    drill, when you talk about cancelling pipelines, when you
    increase the regulations to make it so onerous to go into
    production, then, obviously, that is going to have a negative
    impact, both in the short term, but also in the long term.
        As I mentioned earlier, we should be in a position of
    energy strength, not of energy vulnerability, particularly to
    other countries.
        Mr. Buck. I thank you.
        I yield back.
        Mr. Cicilline. The gentleman yields back. Thank you.
        Secretary Reich, critics of the Biden Administration have
    tried to use inflation and supply chain disruptions, and even
    Russia's attack on Ukraine, to score some political advantage.
    Sadly, I think you saw some of that during this hearing.
        So, I am going to ask you very directly, because of your
    extraordinary experience and scholarly work, are government
    spending, taxes, regulation, and workers causing the inflation
    and supply chain fragility that we are facing? If not, what
    factors are contributing to the current crisis?
        Mr. Reich. Mr. Chair, the largest factors have to do with
    the pandemic, the end of the pandemic, and the sudden increase
    in pent-up demand for goods, and second, with the end of the
    pandemic, all sorts of supply chain issues, both domestically
    and internationally, because it is very difficult to crank up
    an economy relatively suddenly. Maybe not, it doesn't feel like
    relatively suddenly. When you look at the complexity of those
    supply chains, it is relatively sudden.
        Now, where does that leave the issue of concentration?
    Undoubtedly, concentration in terms of corporations that are
    not competitive is adding to the problem. It is not, in my
    judgment, the core problem or the first or only problem, but it
    is a large and growing problem. It is a large and growing
    problem for the economy overall.
        As we see with the baby formula problem, it is not just
    with regard to increasing prices; it is also with regard to
    vulnerability to plants that have to be shut down or supplies
    that have to be in some way constrained. If we are dependent on
    fewer and fewer big corporations, we are more and more
    vulnerable.
        So, realistically--and putting the politics aside--this
    Committee, and also the Senate Antitrust Subcommittee--really
    does have a lot of work to do to bring antitrust laws up-to-
    date and make sure that we have bold and strong antitrust
    enforcement and laws that enable our antitrust enforcers to
    break up the big monopolies that now dominate the American
    economy.
        Mr. Cicilline. Thank you very much, Mr. Secretary.
        Dr. Mabud, I want to respond very directly to the claim
    that was made by Ms. Onwuka about there being a lot of
    competition in the oil industry. Over half of the world's oil
    supply and 90 percent of the world's oil reserves are
    controlled by a cartel of nationalized oil companies known as
    OPEC--OPEC Plus, actually--which is led by Russia and Saudi
    Arabia.
        In the private sector, super-major oil companies are
    vertically integrated at every level of the supply chain; thus,
    exerting influence far beyond what their market share in any
    single market might suggest. The oil and gas industry are
    hardly, in my view, a model of competition, as demonstrated by
    the fact that big oil has seen its highest profits in decades.
        So, I would like you to respond directly to that claim that
    there is lots of competition in the oil industry, and what is
    the principal cause of the increase at the gas pump?
        Ms. Mabud. What you point out is exactly correct. This is a
    deeply, deeply concentrated industry, and each of these
    companies have enormous amounts of market power that they are
    using in this moment, right?
        I mentioned before crude prices are starting to come down;
    prices at the pump are still high. What we are seeing is that,
    in Q1, BP posted its highest quarterly profit in a decade.
    ExxonMobil doubled its profits from last year to $5.48 billion,
    and Chevron reported a quarterly profit of $6.26 billion, which
    is over four times its earnings of $1.4 billion over the first
    quarter of last year. So, keeping gas prices sky-high is easy
    for these companies because they have such market dominance and
    are able to assert that market dominance.
        Mr. Cicilline. Thank you so much.
        Mr. Lynn, you testified that just a generation ago the
    United States boasted the most advanced, robust, and thriving
    industrial system in the world, thanks to antimonopoly policy
    and other competition tools. In my home State of Rhode Island,
    manufacturing is really written into our DNA--the birthplace of
    the Industrial Revolution, where good-paying manufacturing jobs
    helped build our middle class, but over the years we have lost
    these jobs to other countries.
        So, beyond reviving our competition system, what reforms do
    you recommend for reclaiming America's identity as leaders in
    manufacturing and innovation?
        Mr. Lynn. The use of trade policy to break all
    concentrations of power and control and capacity in places like
    China that do two things. They threaten us because we become
    dependent on an antagonistic nation for fundamental supplies.
    It also allows them to jack up prices. There is a vitamin C
    antitrust case which focuses on the way that the Chinese
    vitamin cartel has jacked up this fundamental supply.
        So, trade has always been one of the most important tools
    that we have used to deal with concentration of power and
    create opportunity for manufacturers here in the United States
    to compete. We should have a robust protectionist trade policy
    that protects the American people from concentrations of power
    and protects the international system on which we depend for
    promoting a peaceful international set of democracies.
        Second is corporate governance. We need to use corporate
    governance to, basically, ensure that the corporations work for
    us.
        Mr. Cicilline. Great. Thank you so much.
        I want to thank the Witnesses for their testimony today and
    my colleagues on both sides of the aisle.
        This hearing has made clear that with concentrated power
    comes concentrated risk, whether it is America's energy supply
    or the availability of baby formula. We have heard this story
    over and over again.
        Earlier this year, this Subcommittee examined the harms
    caused by high levels of economic concentration in America's
    food supply chain. We heard compelling testimony from Witnesses
    that monopoly power was leading to high prices and food
    shortages for consumers. Supply chains are brittle or broken.
    Farmers and ranchers are struggling to survive, but the largest
    meat packers and distributors have raked in record profits.
        All options must be on the table. We need to update and
    modernize our antitrust laws, and then, give enforcers the
    resources they need to stop anticompetitive conduct and ensure
    the marketplace is competitive.
        We need to pursue criminal charges for corporate executives
    who engage in cartel activities, such as price fixing, and we
    need to prohibit price gouging and explore whether tools like
    price controls can be used to address inflation and corporate
    profiteering.
        We must bring other policy tools to bear as well. We need
    to incentivize investment in the United States and discourage
    outsourcing. We need to reorient our tax policies towards long-
    term economic growth and sustainability, not short-term profits
    and share buybacks. Most importantly, we need to strengthen
    worker protections and protect the rights of workers to
    organize.
        Finally, we should utilize the Defense Production Act to
    ensure that we have sufficient supplies of essential goods and
    to crack down on bad-faith hoarding of scarce products to
    resell at exorbitant prices.
        Again, thank you to the Witnesses.
        This concludes today's hearing.
        Without objection, all Members will have five legislative
    days to submit additional written materials, additional written
    questions for the Witnesses, or additional materials for the
    record.
        I believe I have a unanimous consent request to include
    into the record a letter from the National Retail Federation.
    Without objection.
        [The information follows:]

                        MR. CICILLINE FOR THE RECORD

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        Mr. Cicilline. With that, this hearing is adjourned.
        [Whereupon, at 3:46 p.m., the Subcommittee was adjourned.]

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