[Senate Hearing 118-469]
[From the U.S. Government Publishing Office]
S. Hrg. 118-469
EVERYDAY EXPENSES AND EVERYDAY
AMERICANS: HOW HIGH COSTS
IMPACT CHILDREN AND FAMILIES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CHILDREN AND FAMILIES
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING EVERYDAY EXPENSES AND EVERYDAY AMERICANS, FOCUSING ON HOW
HIGH COSTS IMPACT CHILDREN AND FAMILIES
__________
JULY 9, 2024
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
57-245 PDF WASHINGTON : 2025
-----------------------------------------------------------------------------------
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
BERNIE SANDERS (I), Vermont, Chairman
PATTY MURRAY, Washington BILL CASSIDY, M.D., Louisiana,
ROBERT P. CASEY, JR., Pennsylvania Ranking Member
TAMMY BALDWIN, Wisconsin RAND PAUL, Kentucky
CHRISTOPHER S. MURPHY, Connecticut SUSAN M. COLLINS, Maine
TIM KAINE, Virginia LISA MURKOWSKI, Alaska
MAGGIE HASSAN, New Hampshire MIKE BRAUN, Indiana
TINA SMITH, Minnesota ROGER MARSHALL, M.D., Kansas
BEN RAY LUJAN, New Mexico MITT ROMNEY, Utah
JOHN HICKENLOOPER, Colorado TOMMY TUBERVILLE, Alabama
ED MARKEY, Massachusetts MARKWAYNE MULLIN, Oklahoma
TED BUDD, North Carolina
Warren Gunnels, Majority Staff Director
Bill Dauster, Majority Deputy Staff Director
Amanda Lincoln, Minority Staff Director
Danielle Janowski, Minority Deputy Staff Director
------
SUBCOMMITTEE ON CHILDREN AND FAMILIES
ROBERT P. CASEY, JR., Pennsylvania, Chairman
PATTY MURRAY, Washington TOMMY TUBERVILLE, Alabama
CHRISTOPHER S. MURPHY, Connecticut RAND PAUL, Kentucky
TIM KAINE, Virginia LISA MURKOWSKI, Alaska
MAGGIE HASSAN, New Hampshire MITT ROMNEY, Utah
TINA SMITH, Minnesota MARKWAYNE MULLIN, Oklahoma
BERNIE SANDERS (I), Vermont, (ex BILL CASSIDY, M.D., Louisiana, (ex
officio) officio)
C O N T E N T S
----------
STATEMENTS
TUESDAY, JULY 9, 2024
Page
Committee Members
Casey, Hon. Robert P. Jr., Chairman, Subcommittee on Children and
Families, Opening statement.................................... 1
Tuberville, Hon. Tommy, Ranking Member, U.S. Senator from the
State of Alabama, Opening statement............................ 3
Witnesses
Wiggle, Erin, Consumer, Worcester Township, PA................... 5
Prepared statement........................................... 6
Lee, Daniel, Owner, Farina Noodle and Pasta, Philadelphia, PA.... 7
Prepared statement........................................... 9
Gee, Emily, Dr., Senior Vice President, Center for American
Progress, Washington, DC....................................... 10
Prepared statement........................................... 13
Malpass, Hon. David, Former President of the World Bank Group,
Washington, DC................................................. 21
Prepared statement........................................... 23
Summary statement............................................ 27
EVERYDAY EXPENSES AND EVERYDAY
AMERICANS: HOW HIGH COSTS
IMPACT CHILDREN AND FAMILIES
----------
Tuesday, July 9, 2024
U.S. Senate,
Subcommittee on Children and Families,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The Subcommittee met, pursuant to notice, at 9:59 a.m., in
room 562, Dirksen Senate Office Building, Hon. Bob Casey,
Chairman of the Subcommittee, presiding.
Present: Senators Casey [presiding], Murray, Murphy,
Hassan, Tuberville, Cassidy, and Murkowski.
OPENING STATEMENT OF SENATOR CASEY
Senator Casey. The Health, Education, Labor, and Pensions
Subcommittee on Children and Families will come to order. Good
morning, and welcome to today's Subcommittee hearing, Everyday
Expenses and Everyday Americans, How High Costs Impact Children
and Families. I want to thank our witnesses for being with us
today and for their testimony.
I also want to thank Ranking Member Tuberville for
convening this hearing with me and to have this important
conversation. We know that over the last few years, so many of
us, we have--go back home to our states, and I certainly have
experiences in Pennsylvania, whether it is a city like
Pittsburgh or Lancaster in the middle of our state or the
communities in the Southeastern corner or Northeastern corner
of our state, I have heard a lot about how challenging it is to
make ends meet, especially families with children.
Moms and dads are struggling to afford food and basic
household necessities like diapers and laundry detergent.
Students are choosing between tuition, books, and food. Small
businesses, from independent grocery stores to restaurants, are
struggling to cover their costs and earn a profit. These
challenges exist not just across Pennsylvania, but across the
nation.
I wanted to better understand why our communities are
feeling this pressure, so I dug into the research. Here is what
the research indicated, and it was startling. From July 2020 to
July 2022, corporate profits in the United States of America
rose 75 percent, 5 times the rate of inflation.
Let me say that again, corporate profits rose five times
the rate of inflation in that time period. In that period from
2020 to 2022, corporate profits accounted for 41 percent of the
inflation overall, according to the Kansas City Federal
Reserve. That is the reality in terms of what was happening at
that time.
It is true that the pandemic and the war on Ukraine took a
toll on costs. Supply chains were disrupted, and our economy
was shaken. But that has passed. What has remained in many ways
reveals how corporations have sought to profit off of economic
uncertainty, undermining and deceiving consumers while they do
so.
To be blunt about it, they have been ripping people off.
Using inflation as a cover, corporations have artificially
raised their prices, leading their profits to soar--record
profits and exploding prices all at the same time.
Now, my colleagues on the other side of the aisle have
tried to blame congressional spending on programs that helped
Americans recover from the post pandemic--to blame that for the
drivers of inflation, but I think the data is clear. While
families struggled, corporations took in record profits.
In the second quarter of 2022, inflation for families and
consumers reached its peak. At the same time, the Commerce
Department reported that corporate profits reached an all-time
high as corporations raked in over $3 trillion in the second
quarter of 2022 alone--$3 trillion.
I have been calling it greed-flation. I have got a report
issued back in November of last year and have issued other
reports that speak to this issue and amplify it. I have also
sponsored a bill--two bills actually, but one in particular
that will crackdown on corporate price gouging. Corporations
that are not engaged in price gouging, they should have nothing
to worry about.
But if they are engaged in corporate price gouging, there
should be a penalty for that, plain and simple. They should be
held accountable, just like all of us are held accountable.
From shirking products to adding new fees on goods and
services, corporations have many levers to increase their
prices and gouge consumers.
Today, we will hear from two Pennsylvanians about how those
price increases and deceptive practices, from junk fees to
shrinkflation, have impacted their families and businesses.
Pennsylvanians and all Americans deserve to pay fair prices,
fair prices, and we must hold corporations accountable for all
the ways in which they take advantage of consumers.
As I have made reference, I have led legislation in the
Senate, one on corporate price gouging and the other on
shrinkflation, the Shrinkflation Prevention Act, that will do
just that. So, I look forward to having this conversation
today.
It is critically important that we shine a light on how
corporations are fleecing Americans and what we can do to
protect our Nation's children and families. Now, I will turn
next to the Ranking Member.
OPENING STATEMENT OF SENATOR TUBERVILLE
Senator Tuberville. Thank you, Mr. Chairman. Thank and
appreciate you calling this hearing on the impact of rising
prices and what effect they are having on American families.
Inflation has been out of control for the past 3 years and it
is having a devastating impact on our Country and my State of
Alabama.
We have got to rein in inflation, or we are not going to
have a middle class left in this country. I want to welcome the
Chairman's three witnesses. Thank you for coming today and I
look forward to visiting with you. I am honored to have been
able to invite a brilliant economist, an incredible record of
public service, to today's panel, former World Bank President
and Senior Trump Treasury official, David Malpass.
I look forward to introducing David after sharing some
brief observations on the inflation crisis. During President
Donald Trump's administration, annual inflation averaged 2.1
percent. Under President Joe Biden, the annual inflation level
has skyrocketed to 5.6 percent, and inflation has hit a 40 year
high.
Under President Trump, real wages increased by $4,000.
Under President Biden, real wages have decreased $4,200.
Gasoline under President Trump's pro-American energy policy
averaged $2.58 per gallon. Gas under President Biden has
averaged nearly $1 a gallon higher, at $3.49. Unlike
politicians trying to get reelected, the numbers don't lie.
Americans of all backgrounds are struggling, and their
struggles show in the data.
Credit card debt has soared to a near all-time high of over
$1 trillion. American families just can't afford to keep up
with skyrocketing prices. Overall, prices have increased 20
percent under President Biden's leadership. Even if inflation
normalizes, those are baked in price increases that aren't
going away.
Every American has suffered as a result of the inflation
crisis. People of color, single moms, and young folks just
starting out have had an especially difficult time in this
economic environment.
For the average American to afford the same lifestyle they
have had at the end of President Trump's presidency, they would
need an additional $11,400 per year today just to maintain what
they had 3 years ago--$11,000. Two-thirds of the Americans are
currently living paycheck to paycheck.
Who is to blame for the situation we are in? President Joe
Biden and a Congress obsessed with spending money our Country
doesn't have. The Biden administration has successfully pushed
for trillions of dollars in irresponsible deficit spending and
dumped fuel on the inflation fire sweeping our Country.
Clinton Treasury Secretary and Obama Chief Economic Adviser
Larry Summers called it right when he said in 2021 that the
Biden administration's economic agenda was the least
responsible microeconomic policy in decades. The good news for
Americans is that it doesn't have to be this way.
There is a game plan that can turn the American economy
around and it has worked before. We are desperately in need of
supply side growth along the lines of what President Reagan
brought about in the 1980's, by growing the size of the economy
and increasing production of goods and services.
President Reagan was successful at turning out of control
inflation. The key to igniting the supply side market response
was a tax and regulatory agenda that encourage economic growth
by unleashing the power of the free market system and made
America the greatest, most prosperous nation in the world.
President Trump built on the Reagan playbook in 2017, when
his tax cut package and aggressive deregulatory agenda--as a
result of President Trump's pro-growth policies, American
prosperity reached new heights, and for the first time in
history, blue collar wages rose faster than white collar wages.
Americans of all colors, creeds, and classes thrived. I
look forward to hearing the perspectives of all the witness on
the economic challenges facing American children and family. I
am hopeful our discussion today can be the start of something
meaningful and a change to turn things around. Thank you, Mr.
Chairman.
Senator Casey. Thank you, Ranking Member Tuberville. I will
start our witness introductions, and I will start with Mrs.
Erin Wiggle. Mrs. Wiggle lives in Montgomery County,
Pennsylvania, in the Southeastern corner of our state. And with
her husband and 11 children, six of whom were adopted, Mrs.
Wiggle will share how rapidly rising costs have impacted her,
her business, and her community.
Mrs. Wiggle, we thank you for testifying today. Our second
witness is Mr. Daniel Lee. Mr. Lee is a retired Army veteran
who owns a small business in Philadelphia, Farina Pasta and
Noodle. Mr. Lee will share how rising costs have impacted his
business's growth and will discuss how ``junk fees'' imposed on
his business impact expansion. Mr. Lee, we thank you for
testifying.
Our third witness is Dr. Emily Gee. Dr. Gee is the Senior
Vice President for Inclusive Growth at the center for American
Progress, where she oversees economic policy and health policy.
She leads research initiatives and policy development that aim
to support equitable economic growth, our topic of focus today.
Doctor, we thank you for testifying. And I will turn now to
the Ranking Member for his introduction.
Senator Tuberville. Thank you, Mr. Chairman. My witness
today have both President Reagan and President Trump craft
their winning supply side economic growth struggles and
strategies. He is one of the best economists out there and
respected far and wide, David Malpass.
Most recently served as the 13th President of the World
Bank where he focused on increasing economic growth to reduce
global poverty. Just prior to this role, Mr. Malpass was
nominated by President Trump and confirmed by the Senate as
Undersecretary of the Treasury for International Affairs where
he represented the United States at global meetings such as the
G7 and G20. In addition to these positions, he spent years at
the chief economics of Wall Street giant Bear Stearns.
Mr. Malpass also served as Deputy Assistant Secretary of
the Treasury under President Ronald Reagan, Deputy Assistant
Secretary of State under President George H.W. Bush, and as
Staff Director of the Joint Economic Committee here on Capitol
Hill. He earned a bachelor's degree from Colorado College and
an MBA from the University of Denver, and he undertook
extensive graduate work in economics in Georgetown University.
Currently, Mr. Malpass serves as Distinguished Fellow of
International Finance at Purdue University. David joined here
today by his wife, Adele, and has a distinguished career on
Capitol Hill service herself, and now runs the Daily Caller
news organization. I am honored to have David here today as a
witness and look forward to his testimony. Thank you, Mr.
Chairman.
Senator Casey. Thank you, Ranking Member Tuberville.
We will turn first to Mrs. Erin Wiggle.
STATEMENT OF ERIN WIGGLE, CONSUMER, WORCESTER TOWNSHIP, PA
Mrs. Wiggle. Chairman Casey, Ranking Member Tuberville, and
Members of the Subcommittee, thank you for the opportunity to
testify before you today. My name is Erin Wiggle. I currently
live in Worcester Township, Pennsylvania, along with my husband
and children. I am testifying before you today to share my
family's experience with rising costs. First, I want to share a
bit about my family.
My husband and I are both retired Army veterans serving
together from 1991 till 2010. Today, we own a nonprofit, Go and
Farm Animal Rescue, that grew out of our community's tremendous
need for farm animals rescued during the COVID-19 pandemic.
In addition to this, my husband and I are proud parents to
11 children from ages 3 to 27, 6 of whom were adopted. After
having five children around, we chose to expand our family
through foster care and adoption.
Over the course of 12 years in the foster care system, we
have cared for an upward of 50 children. Many of these children
we have fostered and since adopted have special needs,
including down syndrome, Dandy-Walker syndrome, Tourette
syndrome, and a genetic disorder that is currently unnamed.
Between our businesses and our children, we incurred many
expenses from diapers and food to gas and their costs. This is
particularly true given the medical needs of some of our
children with special needs.
Some require special diets, while others require frequent
trips to specialists. These capped costs add up. They have
become more burdensome since the pandemic. For example, yogurt
used to be four for $1.
Now, they are $1 each. American cheese went from $4.99 to
$9.99. I used to be able to buy a bale of hay for under $5, now
they are at least $10. Dairy products have increased
tremendously. We have also seen products we use every day, like
laundry detergent, shrink while we are stuck paying the same
prices.
This means while I used to buy laundry detergent every
month, I am now buying it more frequently. Similarly, paper
products have gone up in price as well and shrinking in size.
And at one time I could buy all of our paper products, paper
towels, paper plates, toilet paper for the month.
Now, I find we are needing to restock in 3 weeks' time. Our
oldest children are now beginning to live on their own and make
financial decisions of their own. Oldest son has joined the
military and is currently stationed in Arizona. Three of these
children have tried to stay local, but I have found it is not
possible to stay in the area as housing prices are far too high
for the typical 20 something.
They struggle to afford things like groceries, utilities,
and health care, things that my generation took for granted.
High costs have impacted every generation of our family. My
family and community have wondered why cost will continue to
stay high, even continue to rise following the pandemic.
My husband works and logistics, so we were very aware and
understanding of the supply chain challenges and--that the
market faced during the pandemic, but they have continued to
increase in cost. It is making no sense. Starting wages have
remained the same, yet the price of nearly everything has gone
up.
The average employee will work for an hour and can still
not afford a block of Velveeta cheese. Senator Casey's work on
greed-flation exposing large corporations who have continued to
increase their prices beyond what is necessary during the
pandemic to inflate their own profits has resonated with my
family.
From street price increase to junk fees, to what Senator
Casey has called shrinkflation, it is not fair to consumers.
Companies should be able to make a product and make a profit,
but not take advantage of the average family.
I want to be able to continue to give my children the life
that they deserve and to continue to operate our rescue, but
these costs have strained our family, and our companies should
be aware of the impact and the actions may have on consumers.
Thank you for the opportunity to testify and share my
experiences today.
[The prepared statement of Mrs. Wiggle follows.]
prepared statement of erin wiggle
Chairman Casey, Ranking Member Tuberville, and Members of the
Subcommittee, thank you for the opportunity to testify before you
today. My name is Erin Wiggle and I currently live in Worcester
Township, Pennsylvania along with my husband and children.
I am testifying before you today to share my families' experience
with rising costs. First, I want to share a bit about my family. My
husband and I are both retired Army Veterans, serving together from
1995-2010. Today, we own a non-profit goat and farm animal rescue that
grew out of our community's tremendous need for farm animal rescue
during the COVID-19 pandemic.
In addition to this, my husband and I are the proud parents of 11
children from ages three to 27, six of whom are adopted. After having
five children of our own, we chose to expand our family through foster
care and adoption. Over the course of 12 years in the foster care
system, we have cared for upwards of 50 children. Many of the children
we have fostered and since adopted have special needs, including Down
Syndrome, Dandy-Walker Syndrome, Tourette syndrome, and a genetic
disorder that is currently unnamed.
Between our business and children, we incur many expenses, from
diapers and food to gas and vet costs. This is particularly true given
the medical needs of some of our children with special needs. Some
require special diets, while others require frequent trips to
specialists.
These costs add up--and have become more burdensome since the
pandemic. For example, yogurt used to be 4 for $1, now they are $1
each. American cheese went from $4.99 to $9.99. I used to be able to
buy a bale of hay for under $5, now they are at least $10. Dairy
products have increased tremendously. We have also seen products we use
every day, like laundry detergent, shrink, while we are stuck paying
the same price. This means that while I used to buy laundry detergent
every month, I am now buying it more frequently. Similarly, paper
products have gone up in price while also shrinking in size. At one
time I could buy paper plates, paper towels and toilet paper for the
month. Now I find we are needing to restock in 3 weeks' time.
Our older children are also now beginning to live on their own and
make financial decisions of their own. Our oldest son joined the
military and is currently stationed in Arizona. Three of our other
children have tried to stay local but have found it's not a possibility
to stay in the area, as housing prices are far too high for the typical
20-something. They struggle to afford things, like groceries, utilities
and health insurance--things that our generation took for granted.
High costs have impacted every generation of our family.
My family and community have wondered why costs have continued to
stay high--and even continue to rise following the pandemic. My husband
works in logistics, so we are very aware and understanding of the
supply chain challenges that the market faced during the pandemic--but
the continued increases in cost make no sense. Starting wages have
remained the same, yet the price of nearly everything has gone up. The
average employee will work an hour, and still cannot afford a block of
Velveeta cheese.
Senator Casey's work on greedflation--exposing large corporations
who have continued to increase their prices beyond what was necessary
during the pandemic to inflate their own profits--has resonated with my
family. From straight price increases to junk fees to what Senator
Casey is calling ``shrinkflation,'' it is not fair to consumers.
Companies should be able to make a profit, but not by taking
advantage of the average family. I want to be able to continue to give
my children the life they deserve, and continue to operate our rescue,
but these costs have strained our family and companies should be aware
of the impact their actions have on consumers.
Thank you for the opportunity to testify and share my experience
today.
______
Senator Casey. Thank you, Mrs. Wiggle.
We will turn next to Mr. Lee.
STATEMENT OF DANIEL LEE, OWNER, FARINA NOODLE AND PASTA,
PHILADELPHIA, PA
Mr. Lee. Thank you. Chairman Casey, Ranking Member
Tuberville, and Members of the Subcommittee, thank you for
inviting me to participate in today's hearing and thank you for
your attention on a topic that is of critical importance. My
name is Daniel Lee. I own and operate Farina Pasta and Noodle.
We are a fast casual restaurant located in Center City,
Philadelphia. I am a member, or veteran of the Army, and I was
doing explosive ordnance disposal work for about four or 5
years. I started fresh--a fresh pasta focused restaurant
concept and a ghost kitchen in 2020. It evolved into a brick
and mortar location in 2021.
I love what I do, and I thrive in the trusting
relationships that I have built with my local community, but I
am challenged every day with how to keep my doors open, my
staff compensated, and my customers happy and eager to return.
Today, I would like to share a few of these macro challenges
with you all.
Challenge one, the pre-pandemic prices have now come back.
As a small business, everything I buy has gone up significantly
in price. When prices rose during the pandemic, we accepted the
general pricing hikes on everything from produce to packaging,
plates, silverware, everything.
Those price increases were passed on to small business
owners, and however, there is now no longer a shortage of
produce and drivers and general things to bring those prices
back down. We still see a higher price in gas, and we still see
higher pricing in our packaging. Why haven't we seen these
prices come down? As you are likely aware, fast casual
corporate chains, many backed by private equity investors, are
open all around me.
I am not afraid of a competition. I will stand by my
products and services, but it is not a level playing field. We
don't have the buying power that they do. We can't purchase in
bulk. We can't buy tons and tons of packages to reduce our
pricing.
We don't have the negotiating power. We also don't have the
large marketing budgets to bring in the customers that they do.
Challenge No. 2, the junk service fees. When customers order
delivery from a restaurant many times are finding us through
some of the third delivery apps like Grubhub, DoorDash, Uber
Eats, and they charge fees as a part of being on their
platform.
Sometimes those fees are as high as 30 percent, plus
marketing fees, which can be like sponsoring a post or
something like that. All told, that can take as much as 50
percent from each order. To offset these fees, we charge a
higher price on their platforms than what we are charging in-
store. That alienates a lot of our customers.
When these delivery apps find out that you have a higher
price on the third party apps versus what you have on an in-
store, what they will do is they will throttle your company.
So, they will basically take your company and move it down in
the search rankings.
I have an email from one of these companies saying that
they did just that to my company because I have lower fees,
lower prices in my in-store. Most of these stores, most of
these small businesses are not easy to find as it is on these
third party apps.
Companies like Wendy's, McDonald's, sometimes you will find
them under their local eats section under Uber Eats. As far as
I know, McDonald's is not local anywhere. It is a vicious
cycle. We raise our prices to maintain revenue. Higher prices
cause me to lose business and lose money.
Eventually, restaurants like mine shut down. Challenge No.
3, employee acquisition and retention gets more and more
challenging. Inflation also impacts my labor costs. Employees
are struggling with the same inflated cost of groceries, gas,
and rent.
Currently, I pay a base salary of $14 an hour plus tips,
which puts them over $15 an hour and that is to retain the
qualified labor and committed, well-paid employees, which also
results in later on better customer experience.
But as I have experienced, if you cannot pay $14 an hour or
$15 an hour in some cases, plus tips, you will find that your
customer service suffers so customers don't return and then
they leave you bad reviews.
In conclusion, I can say that I care very much about my
business and the small business community and the culture
around me. When consumers shop local, $0.68 of each S1.00 spent
is recirculated within the local economy.
This ripple effect is powerful and significant to our local
economies, and it is also at risk. As small businesses fail,
our neighborhoods lose what makes them unique and vibrant, from
the food they serve, to the goods they provide, and to the
cultures and communities that they--represent.
This isn't just true from Philadelphia, but this is true
for all large cities and small towns across the country. As an
advocate for these communities, I thank you for listening and I
look forward to help you in moving forward.
[The prepared statement of Mr. Lee follows.]
prepared statement of dan lee
Chairman Casey, Ranking Member Tuberville and Members of the
Subcommittee--thank you for inviting me to participate in today's
hearing and thank you for your attention to a topic that is of critical
importance.
My name is Dan Lee. I own and operate a small, fast-casual
restaurant--Farina Pasta and Noodle--which I opened in Philadelphia,
Pennsylvania in 2021 after proudly serving our Country in the Army as a
bomb squad team member.
I started our fresh pasta-focused restaurant concept in a ghost
kitchen in 2020, soon evolving to a brick-and-mortar location in 2021.
I love what I do and I thrive on the trusting relationships I've built
with my local community, but I'm challenged every single day with how
to keep my doors open, my staff compensated, and my customers happy and
eager to return.
Today, I'd like to share a few of these macro-challenges with all
of you.
Challenge 1: Pre-pandemic Prices Have not Come Back
As a small business, everything I buy has gone up significantly in
price. When prices rose during the pandemic, we accepted the general
pricing spikes on everything from produce to packaging to fuel. These
price increases were passed on to small business owners. However, now
there's no longer a shortage of produce and gas prices have fallen from
their peak, and the logistical challenges for shipping have come and
gone. Why aren't we--the shop owners--seeing a difference?
As you are likely aware, fast-casual corporate chains--many backed
by Wall Street investors--are opening all around me. I'm not afraid of
competition and will stand by my product and services, but it's not a
level playing field for myself and small businesses like mine. I'm
paying $1 per box for the pizza boxes I need for take-out for just one
of my menu items. I don't have the buying or negotiating power of a
chain restaurant that benefits from economies of scale. We don't have
large--if any--marketing budgets to drive sales and acquire new
customers. It's hard to compete.
Challenge 2: The Junk (Service) Fees From Food Delivery Apps are
Constantly Inflated, With no end in Sight
When a customer orders delivery from my restaurant, many times
they're finding us through a food delivery service like Grubhub,
DoorDash, or Uber Eats. The fees that these apps charge the consumer
are significant-and strain the consumers' ability to shop at my store.
They can be as high as 30 percent plus marketing fees which means you
can see as much as 50 percent being taken from the total order.
To offset the fee these companies, charge, we raise our prices for
the apps and run the risk of alienating our customers--even our loyal
ones--because they can't afford the higher price in addition to the
extra fees. The delivery apps do not like when a business owner charges
a higher price on their platforms versus what is charged for an instore
purchase. With one of the delivery platforms, if they find out you
charge a different price, they will not show your store as high in the
search rankings until you change the prices to make them the same. Most
small restaurants are not as easily searchable and are buried deep in
their list of food providers. In fact, I have seen large chain
businesses, like Wendy's or McDonald's, recommended as a ``local''
favorite by these apps-this is because these larger restaurants are
able to develop a relationship, at the corporate level, with the apps.
It's a vicious cycle--we raise prices to maintain revenue, higher
prices cause me to lose business and lose money--and eventually
restaurants like mine must shut down.
Challenge 3: Employee Acquisition and Retention Gets More and More
Challenging
Inflation also impacts my labor costs--my employees are struggling
with the same inflated costs for groceries, gas, and rent. I pay a base
of $14 per hour plus tips to recruit and retain qualified labor.
Committed and well-paid employees also result in an all-around better
customer experience. Not to mention that turnover, often resulting from
low pay, is expensive and time-consuming.
Conclusion
I care about my business and about the small business community
culture around me. When consumers shop local, $0.68 of every dollar
spent is recirculated in the local economy. This ripple effect is
powerful and significant to our local economies, and it is also at
risk. As small businesses fail, our neighborhoods lose what makes them
unique and vibrant, from the food they serve, to the goods they
provide, to the cultures and communities they represent. This isn't
just true for Philadelphia, but for other large cities to small towns
across the country. As an advocate for these communities, I thank you
for listening and I look forward to your help in moving us forward.
______
Senator Casey. Mr. Lee, thank you for your testimony.
Dr. Gee.
STATEMENT OF DR. EMILY GEE, SENIOR VICE PRESIDENT, CENTER FOR
AMERICAN PROGRESS, WASHINGTON, DC
Dr. Gee. Good morning, Chairman Casey, Senator Tuberville,
and Members of the Subcommittee. Thank you for inviting me to
testify today about the high costs that American families face
for everyday expenses and what can be done to improve
affordability.
I am an Economist and Senior Vice President for Inclusive
Growth at the Center for American Progress, an independent,
nonpartisan policy institute dedicated to improving the lives
of all Americans.
Today, I want to stress that the trajectory of the economy
is not simply the result of an invisible hand, of the markets,
but the result of deliberate policy choices. Rising corporate
power and growing inequality come from decades of overly
permissive antitrust policy, labor laws hostile toward workers,
and a tax system that lets corporations get away without paying
their fair share.
This morning, I will discuss the ways in which high costs
for these expenses can undermine families' economic security,
the role of corporate concentration in rising prices, and last,
recommendations for Federal policies that have provided
families relief and could further restore the balance of power
in the economy.
First, allow me to mark that the state of the overall U.S.
economy is strong. In the past 40 months, United States has
added over 15 million jobs. The unemployment rate has held
steady at around 4 percent since late 2021, and inflation is
now below 3 percent.
Nevertheless, the global economic shock brought by the
COVID-19 recession looms large in our collective memory. It
rocked families' financial security, fractured fragile supply
chains, and placed small businesses at a disadvantage.
The pandemic's unstable economic environment also generated
an opening for firms to exercise their market power by hiking
prices above cost. Researchers at the Federal Reserve Bank of
Kansas City found that markups could account for more than half
of 2021 inflation. Higher markups translate in higher profits,
and both markups and corporate profits rose in 2021 to the
highest levels in 50 years.
Where inflation has moderated, the high level prices are
still giving Americans sticker shock at the checkout counter
and in the grocery aisle. When surveyed, Americans rank the
high cost of living and inflation as one of the top concerns
facing this country. In particular, childcare and health care
are two of the biggest costs in families' budgets.
Many families spend well above the Federal affordability
benchmark, that is 7 percent of annual household income, for
basic childcare, including 95 percent of low income working
families. And the burden of rising healthcare costs only adds
to this financial strain.
One contributor toward higher prices throughout the economy
is rising consolidation. This is the result of 40 years of
policy tilted in favor of large corporations, fueling the
growth of private equity at the expense of workers, families,
and small businesses. Corporate profits increasingly are
concentrated in a declining number of firms.
Americans should be concerned about dominant corporations
using their increased market power not only to increase prices
but also to limit choice, to conceal information necessary to
make informed decisions, to build greater control over our
personal data, and to remove workers' job mobility.
By one estimate, the increase in corporate power over the
past 20 years cost the average American household $5,000
annually through higher prices and lower wages. Federal
policymakers have an opportunity to shape markets to lower
costs for American families and empower businesses--small
businesses and workers.
With everyday costs in mind, I want to highlight three
areas of policy to address corporate power. First, greater
transparency is essential for robust competition. Transparency
for consumers including offering full information upfront about
pricing and product characteristics facilitates comparison
shopping and budgeting.
It also enables honest firms and efficient firms to
distinguish themselves by offering lower costs in the
marketplace. Second, if Congress wants to improve competition,
it should back that up with funding for expanded authority--and
expanded authority for antitrust enforcement.
The FTC and DOJ are charged with overseeing a growing
economy marked by diminished competition but are not being
given the resources to keep up. And third, as we consider the
toll of high costs, we should keep in mind the other side of
the ledger on family budgets that is wages.
Going forward, policies such as overtime protections, bans
on non-compete clauses, and raising the minimum wage are
essential to ensuring that workers have a fair shot. In
conclusion, the growth of corporate profits stands in contrast
to the still shaken confidence that American families have in
the economy and the stress that they feel from high prices.
To grow the middle class and ensure that families are able
to afford the things they need, Congress should take action to
ensure that high costs are not a barrier to growing the middle
class and for American families. Thank you.
[The prepared statement of Dr. Gee follows.]
prepared statement of emily gee
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Casey. Dr. Gee, thanks very much for your
testimony.
Mr. Malpass.
STATEMENT OF HON. DAVID MALPASS, FORMER PRESIDENT OF THE WORLD
BANK GROUP, WASHINGTON, DC
Mr. Malpass. Thank you, Chairman Casey, and Senator
Tuberville, and Members of the Subcommittee. Thank you for the
invitation to testify.
My remarks today are focused on the cause and impact of
high prices. They are continuing to put strain on children and
families in the U.S. and around the world. I focused my work as
President of the World Bank on higher incomes, clean water, and
sufficient energy for people in developing countries.
Fast, market-based growth, non-inflationary growth is the
critical underpinning of higher living standards. U.S. first
quarter real GDP growth was only 1.4 percent. This is
disappointingly slow, especially considering the huge injection
of demand through Government spending and debt. The non-
Government portion of the economy is barely growing.
The explosion of Government debt is costly not only because
of debt service. Even more costly is the inter-generational
transfer that supports the current Government and its policies
but uses up future resources. The Congressional Budget Office
economic projections show only 2 percent real growth in 2024,
and the same or less in the subsequent 10 years.
The generation of Americans coming of age, then, will be
repaying trillions of dollars of debt without having benefited
much from it. Reversing the current stagflation will require a
complete upheaval in economic policy to allow faster growth,
greater private sector investment, more production, a conscious
shift in regulation from excessive to effective regulation,
much slower growth in Government spending, revised Federal
Reserve models and tools, and a recovery in education.
None of these is forthcoming in the current Administration.
I would like to mention education briefly, given the
Committee's important remit on that. Children in the U.S.
suffered a severe setback in learning during COVID, as they did
everywhere in the world, with remote learning proving
ineffective.
The focus on literacy and numeracy is urgently needed if we
are to recover some of the ground lost during the school
closures and enable the generation that is expected to repay
the explosion of Government debt underway. High prices are
closely related to production shortfalls. In a market system,
prices are a response to supply and demand.
Complex regulations discourage investment and production,
boosting prices and putting key infrastructure such as canals,
locks, pipelines, and the electricity grid at risk. Many
sectors of energy production are constrained either by existing
regulations or the fear of new regulations, such as the
attempted ban on liquefied natural gas exports.
The regulatory freeze is particularly problematic for U.S.
mining and energy production, which are key drivers of economic
growth. To compete effectively, the U.S. needs more energy, not
less. Production of nuclear power and other non-intermittent
sources of electricity need to be accelerated dramatically to
add to baseload as we work to strengthen and protect the
electricity grid.
Combined with costly regulations, the explosion in
Government spending causes inflation. It is hard sometimes to
fully comprehend the size of the expansion of Government in
recent years. I have called it uncharted territory, but that
doesn't go far enough. It is truly out of control. Outlays were
running roughly $4.2 trillion per year prior to COVID.
They jumped to $6.7 trillion in Fiscal Year 2020 and 2021
and are now expected to be maintained at roughly $7 trillion
per year, and then rise to $8 trillion later this decade. This
sustained surge in spending causes businesses to invest and
hire less. It crowds out small businesses.
It is the epitome of irresponsible microeconomic policy.
CBO's June baseline showed $85 trillion in 10 year outlays in
the Fiscal Year 2024 to 2030--2034--Fiscal Year 2025 to Fiscal
Year 2034 time period, and $63 trillion in revenues. This adds
$22 trillion to the national debt. That is the CBO baseline
under the current policies of the Biden administration.
The rapid escalation of national debt is creating huge
problems globally. I have written extensively on this. The U.S.
Government is materially slowing global growth by absorbing a
huge portion of global capital and allocating the funds to
Government consumption, rather than global investment.
The short maturities of U.S. debt add materially to that
particular problem. Solutions exist. You can change policy. The
Government can rethink the way it interacts with inflation. The
risk under current policies is continuation of the status quo
as the economy weakens. That is in the CBO forecasts.
The economy is digesting years of high real interest rates
and a deeply inverted yield curve. That is a scenario that is
antithetical to private sector growth. Manufacturing data has
been weak. Commercial and industrial loans have been weak.
There needs to be greater production, of energy, which is
critical for sustaining the electricity grid and the growth in
electricity that is needed. A supply side approach would--based
on increased production, would bring inflation down and also
allow interest rate cuts while defending the dollar. The Biden
administration has argued against such changes. At first, it
said inflation will be transitory.
That idea was supported by the Federal Reserve. But like so
many of the Fed's models, inflation models, it didn't pan out.
The Administration didn't blame the supply chain, it blamed
shrinkflation. It blamed corporate greed and Donald Trump.
Shrinkflation didn't work because the CPI takes smaller package
size into account.
The corporate greed complaint wasn't supported by the data.
An exhaustive Fed study last month disproved it. Aggregate
markups have stayed essentially flat since the start of the
recovery. So, in conclusion, the election cycle has made clear
that there is another path.
There is positive change by reducing harmful regulations,
taxing much less than President Biden's proposals, encouraging
private sector growth, and defending the dollar. Markets are
forward looking, so the benefits would spread quickly through
the economy. Prices and interest rates could decline relatively
quickly, helping consumers make a comeback. Thank you, Mr.
Chairman.
[The prepared statement of Mr. Malpass follows.]
prepared statement of david malpass
Chairman Casey, Senator Tuberville, Members of the Subcommittee,
thank you for the invitation to testify. People across the country and
around the world have been hit hard by inflation. Children and families
are particularly at risk due to high food, medical and energy prices
and the generational setback in education from prolonged school
closures during COVID.
As background, my career has been focused on economics, finance and
development. My first job in Washington was in 1984 as a tax and trade
economist with the Senate Budget Committee chaired by Senator Pete
Domenici. From 1986-1993, I was an economic official at the Treasury
and State Departments with Secretary James Baker and then worked on
Wall Street from 1993-2016. From 2017-2023, I was privileged to serve
as Treasury Undersecretary and then World Bank president.
My remarks today are focused on the cause and impact of high
prices. They are continuing to put strain on children and families in
the U.S. and around the world. Reversing the current stagflation will
require a complete upheaval in economic policy to allow faster growth,
greater private sector investment, more production, a conscious shift
from excessive regulation to effective, much slower growth in
government spending, a smaller, more focused Federal Reserve with
revised models and tools, and a recovery in education, none of which is
forthcoming in the current Administration. The election choice has made
clear that there is another path: positive change by reducing harmful
regulations, taxing much less than President Biden's proposals,
shrinking the oversized government and Washington establishment,
encouraging private sector growth, and defending the dollar. Markets
are forward-looking, so the benefits would spread quickly through the
economy. Prices and interest rates could decline relatively quickly,
helping consumers make a comeback.
Stagflation and Reversal in Education
During my recent 6 years in public service, I participated actively
in the G7, G20 and IMF discussions on economic policies and the outlook
for inflation and interest rates. I focused my work as president of the
World Bank on higher incomes, clean water and sufficient energy for
people in developing countries. By 2021, the Covid lockdowns and school
closures were causing severe reversals in living standards, especially
for children and families. World Bank statistics on poverty, child
nutrition, and literacy showed devastating declines in developing
countries, reflecting deep trauma for poorer families.
Russia's February 24, 2022 invasion of Ukraine came immediately
after the weak U.S. and NATO message I heard at the Munich Security
Conference on February 18-20, 2022. Russia' invasion, on the heels of
the abrupt U.S. withdrawal from Afghanistan in 2021, added major new
obstacles to global growth. Among them, the invasion triggered an
energy crisis in western Europe, which was heavily dependent on Russian
gas and oil despite harsh Reagan and Trump sanctions. Europe's leaders
began buying up natural gas supplies worldwide that would otherwise
have gone to developing countries. The resulting shortages of natural
gas caused disruption of fertilizer, agriculture and electricity
production. Government spending surged and inflation worsened. The
prolonged war in Ukraine has strengthened Russia and China across the
developing world.
By the World Bank's June 2022 Global Economic Prospects report, I
warned of stagflation and an extended period of slow global growth. \1\
I urged added production. ``With inflation now running at multidecade
highs in many countries and supply expected to grow slowly, there is a
risk that inflation will remain higher for longer than currently
anticipated. . . It's essential to boost the supply of key food and
energy commodities. Markets look forward, so even mere announcements of
future supply would help reduce prices and inflation expectations.''
---------------------------------------------------------------------------
\1\ World Bank Global-Economic-Prospects-June-2022-Foreword.
In remarks at the Brookings Institution on July 13, 2022, \2\ I
noted that much of the supply increase needed to come from the U.S.
because it has the capital and resources to make rapid additions to
world supplies:
---------------------------------------------------------------------------
\2\ Brookings Instute July 2022 wbg president-david-malpass-on-
the-state-of-the-global-economy/.
``If the anti-inflationary policies that are now getting
underway are primarily achieved through interest rate
increases, it risks deepening the inequality that is so
problematic in the world. Stagflation could worsen. It's
exacerbated by shortages of the working capital needed for
small businesses and supply chains. We have a system patently
set up that diverts capital to the big players and not to the
small players that provide this solution to the current
inflation problem. . . The United States has the biggest
ability in the world to expand production to counteract the
global inflation underway. Not enough steps are being taken to
dramatically increase U.S. production of supplies that are in
shortage.''
Slow Growth, Explosion of Debt
Fast market-based non-inflationary growth is the critical
underpinning of higher living standards. U.S. first quarter real GDP
growth was only 1.4 percent. This is disappointingly slow, especially
considering the huge injection of demand through government spending
and debt. The non-government portion of the economy is barely growing.
The explosion of government debt is costly not only because of debt
service. Even more costly is the intergenerational transfer that
supports the current government and its policies but uses up future
resources.
The Congressional Budget Office economic projections shows only 2
percent real growth in 2024 and the same or less in the subsequent 10
years. The generation of Americans coming of age then will be repaying
trillions of dollars of debt without having benefited much from it.
Reversing the current stagflation will require a complete upheaval in
economic policy to allow faster growth, greater private sector
investment, more production, a conscious shift in regulation from
excessive to effective, much slower growth in government spending,
revised Federal Reserve models and tools, and a recovery in education,
none of which is forthcoming in the current Administration.
I'd like to mention education briefly given this Committee's
important remit. Children in the U.S. suffered a severe setback in
learning during Covid, as they did many countries. The World Bank is
deeply involved in education worldwide. This led to a major coordinated
global call to action to overcome the Covid losses in education. I co-
hosted and spoke at the September 2022 summit on Transforming Education
to urge leaders to make changes in educational systems, among them to
reopen more schools and focus on literacy and numeracy. \3\ This focus
is urgently needed if we are to recover some of the ground lost during
the school closures and enable the generation that is expected to repay
the explosion of government debt underway.
---------------------------------------------------------------------------
\3\ Wbg-president-at-unga-77, Sept. 2022, the-global-challenge-of-
addressing-the-learning-crisis.
Inflation/Production Crisis
I'm also deeply concerned by high prices and regulatory obstacles.
They are closely connected to the explosion of government debt and
production shortfalls. In a market system, prices are a response to
supply and demand. Complex regulations discourage investment and
production, boosting prices and putting key infrastructure such as
canals, locks, pipelines and the electricity grid at risk. Many sectors
of energy production are constrained either by existing regulations or
the fear of new regulations such as the attempted ban on liquified
natural gas (LNG) exports. The regulatory freeze is particularly
problematic for U.S. mining and energy production, key drivers of
economic growth. To compete effectively, the U.S. needs more energy,
not less. Production of nuclear power and other non-intermittent
sources of electricity need to be accelerated dramatically to add to
baseload as we work to strengthen and protect the electricity grid.
At the end of 2020, U.S. CPI inflation was 1.4 percent year-over-
year. It rose sharply during the year due mostly to supply chain
problems and a huge expansion of government spending. If the spending
had been one-time, I think markets would have adjusted, and the Federal
Reserve would have been on firmer ground in treating inflation as
transitory. However, during 2021-2022, a multitude of large spending
bills combined with regulatory constraints on production made clear to
markets that demand would remain above supply. Inflation expectations
rose, demand increased more than supply, and prices rose. CPI-U
inflation reached 7 percent by the end of 2021 and peaked at 9.1
percent in June 2022.
From the standpoint of children and families, this result is
devastating. Inflation and the policies causing it chew up anyone with
limited disposable income. It is making housing unaffordable,
especially for the young, via rent increases, high mortgage rates and
the Administration's war on appliances. It will take years of better
policies to reverse the damage to discretionary income.
Out of Control Spending Misallocation of Capital
It is hard to fully comprehend the size of the expansion of the
government in recent years. I've called it ``uncharted territory'' but
that doesn't go far enough. Spending growth is out of control. Combined
with costly regulations, it causes inflation. I've advocated strongly
for new checks and balances that make spending increases harder when
debt levels are too high. Outlays were running roughly $4.2 trillion
per year prior to Covid. They jumped to $6.7 trillion in fiscal year
2020 and fiscal year 2021 and are now expected to be maintained at
roughly $7 trillion per year, then rise to $8 trillion yearly later in
the decade. \4\ This sustained surge in spending causes businesses to
invest and hire less. It is the epitome of irresponsible macroeconomic
policy.
---------------------------------------------------------------------------
\4\ https://www.cbo.gov/system/files/2024-06/60039-Outlook-
2024.pdf.
CBO's June baseline showed $85 trillion 10-year outlays in fiscal
year 2025-34 and $63 trillion in revenues, adding $22 trillion to the
national debt. These are incredibly large numbers, and it is worth
noting that actual spending is often well above the baseline due to
add-ons, over-runs and new spending priorities. One example: The peace
dividend that the U.S. enjoyed in the 1990's ended due to U.S. weakness
abroad and needs to be replaced by stronger and more effective growth
---------------------------------------------------------------------------
in defense spending not included in the baseline.
The rapid escalation of U.S. national debt is creating huge
problems globally. I described these in detail while at the World Bank.
In a speech at the Churchill Symposium in Zurich, \5\ I described the
problem:
---------------------------------------------------------------------------
\5\ Churchill symposium remarks-May 2022 by-wbg-president-malpass-
to-the-europe-instute-at-university-of-zurich.
``On the fiscal side, governments borrowed heavily from savers
around the world to support consumption, leaving shortages of
capital for growth and investment, especially in developing
countries. Almost all the fiscal stimulus went to benefit
people in advanced economies, often people with incomes well
above the median. On the monetary side, the major central banks
moved further away from monetarism. Some entirely removed the
reserve requirement on banks, adopting a post-monetarist
framework in which central banks both regulate and allocate
capital, rather than controlling the money supply through bank
reserves. . . From an inequality standpoint, this framework
misallocates capital, favoring those with higher net worth at
---------------------------------------------------------------------------
the expense of broad-based growth.''
In an October 2022 speech \6\ at Stanford's Stanford Institute for
Economic Policy Research (SIEPR), I explained:
---------------------------------------------------------------------------
\6\ The-crisis-facing-development-SIEPR speech-by-wbg-president-
malpass-Sept 2022.
``The increase in fiscal and monetary policy accommodation has
fed primarily into asset prices in advanced economies. This
supports the wealthy who hold these assets, rather than the
bulk of the population, at a moment of nearly unprecedented
inequality. Growth in median income has lagged with only a few
exceptions; for developing countries, capital inflows mostly
supported government spending and asset portfolios, with little
showing up in foreign direct investment or gross fixed capital
---------------------------------------------------------------------------
formation. . .
``To unwind this imbalance would require clear communication
that increased production is a policy goal as is a market-
oriented flow of capital to development. With inflation high,
several tools are available beyond interest rate hikes: first,
create the conditions for supply to increase in response to
price increases; markets are forward looking, so even the
announcement of future supply by private investors and
governments would help; second, in the advanced economies,
reduce the size of government current spending and improve
efficiency by targeting it more on the poor and vulnerable;
this would reduce non-productive demand and leave more space
for global capital markets to fund investment, taking pressure
off inflation; and third, reduce the maturity of the central
banks' current and future bond holdings; this would send a
signal to markets that capital can flow to other assets such as
the short-term floating rate capital needed by smaller
businesses to increase global output.''
In a Wall Street Journal article in May 2023, \7\ I focused
attention on the problem that the U.S. Government is materially slowing
global growth by absorbing a huge portion of global capital and
allocating the funds to government consumption rather than global
investment. The short maturities of U.S. debt add materially to the
problem.
---------------------------------------------------------------------------
\7\ https://www.wsj.com/arcles/the-world-economy-needs-to-get-its-
growth-back-group-of-seven-developing-countries-debt-.nancing-yield-
curve-private-sector-innovaon-4113e720.
``As I near the end of my term as World Bank president, I'm
discouraged by the lack of resolve and action. I worry that
slow growth may persist for years. The world is digesting the
huge buildup of government debt relative to gross domestic
product, normalization of artificially low interest rates, and
a system allocating capital away from small businesses and
toward bond issuers, especially governments and the largest
businesses. The result is reduced dynamism at home and
---------------------------------------------------------------------------
fragility abroad. . .
``Solutions exist. First, markets are forward-looking, so
credible government spending restraint would provide immediate
encouragement to growth-oriented investment. Restraint that
forces debt-to-GDP ratios to stabilize and then decline
(without threatening default) would allow market-based capital
flows to resume. Second, central banks should put more focus on
policies that encourage currency stability and supply creation,
not only demand destruction. They should give up their bond
holdings and reduce their massive short-term debt. Combined
with distortive credit regulation, current policies concentrate
capital in narrow segments of the advanced economies and slow
growth elsewhere. These policies need to be replaced to restart
growth. This is discussed in international meetings but
rejected in favor of the status quo. The world needs a range of
strong policies that spur production to combat inflation. With
no change, the likelihood is a long period of slow global
growth and downward asset repricing. Capital will continue
moving in the wrong direction, toward a narrow group of
``sinks''--governments, big corporate borrowers, excess
consumption--rather than to small businesses, working capital
and forward moving developing countries that could add to long-
term global growth.''
Risk of Slowdown and ``More of the Same''
The outlook is no less concerning now. The most recent data showed
CPI inflation of 3.3 percent over the 12 months through May. That's
still well above the Federal Reserve's 2 percent target. Gasoline is
averaging $3.50 per gallon, with the risk to the upside given the
rising price of oil.
The government has so much short-term debt that high interest rates
haven't been effective. The theory is that high rates will constrain
credit, slowing the economy and allowing supply to catch up to demand.
The reality is that Treasury and Federal Reserve interest payments are
levitating the upper end of the economy, leaving prices high and
millions of people, especially non-wealthy families with children,
under heavy shortfalls in discretionary income.
The risk under current policies is continuation of the status quo
as the economy weakens. It is digesting the prospect of years of high
real interest rates and a deeply inverted yield curve, a scenario
antithetical to private sector growth. Manufacturing data has been weak
despite massive government injections. The May data showed an uptick in
the unemployment rate and downward revisions to March and April job
growth.
Commercial and industrial loans--the lifeblood that small
businesses use to finance inventory and equipment growth--should have
increased by more than $175 billion in 2023 to keep up with inflation
and rising GDP. Instead they fell by $38 billion. Government hiring and
subsidies have been one of the few supports for consumption growth in
recent years, but that creates an unsustainable debt path.
Greater energy production would be especially valuable because it
is a critical economic building block and a resource the U.S. has in
abundance. If U.S. production had been encouraged in 2021 and 2022
instead of discouraged, I think inflation and interest rates could have
peaked at substantially lower levels, allowing higher current living
standards and a better growth outlook.
A supply side approach based on increased production would bring
inflation down and allow interest rate cuts while defending the dollar.
That in turn would help homebuilding, infrastructure, small businesses
and indebted consumers, all of which are struggling due to high short-
term interest rates. This is the core of supply side economics and my
fervor to see average people doing better around the world. Looking
abroad, global growth needs to run at 5 percent to lift poorer families
but has fallen to half that rate. Low investment rates spell continued
weakness in growth and increasing pressure to migrate. Of course,
conditions and challenges are different in the United States, but the
common theme is for governments to allow markets to function and people
to have the freedom, basic skills and opportunities to advance.
My June 26, 2024 Wall Street Journal article \8\ addressed the
election choice:
---------------------------------------------------------------------------
\8\ https://www.wsj.com/arcles/for-trump-as-for-clinton-its-sll-
the-economy-stupid-debate-spending-in.aon-0a4a4afc.
``The Biden administration has argued against change. At first,
it said inflation would be transitory. That idea was supported
by the Federal Reserve, but like so many of the Fed's inflation
models, it didn't pan out. The Administration then blamed the
supply chain, ``shrinkflation,'' corporate greed and Donald
Trump. Shrinkflation didn't work because the CPI takes smaller
package size into account. The corporate-greed complaint wasn't
supported by the data. An exhaustive Fed study last month
disproved it: ``Aggregate markups have stayed essentially flat
---------------------------------------------------------------------------
since the start of the recovery.''
The election cycle has made clear that there is another path:
positive change by reducing harmful regulations, taxing much less than
President Biden's proposals, encouraging private sector growth, and
defending the dollar. Markets are forward-looking, so the benefits
would spread quickly through the economy. Prices and interest rates
could decline relatively quickly, helping consumers make a comeback.
Thank you for the opportunity to present a statement on these all-
important topics. I look forward to your questions.
______
[summary statement of david malpass]
David R. Malpass will highlight several key points in his testimony
today:
1. Impact of Inflation on Families: Inflation has severely
affected children and families, particularly through high food,
medical, and energy prices, compounded by setbacks in education
due to prolonged school closures during COVID-19.
2. Causes and Impact of High Prices: High prices can be
attributed to inadequate economic policies. Significant policy
changes could spur faster growth, increase private sector
investment, boost production, and reform regulatory frameworks.
3. Stagflation and Economic Policy: Stagflation is a huge
issue. Malpass advocates for policies to enhance production,
reduce government spending growth, reform the Federal Reserve's
approach, and revive education to counter long-term economic
stagnation.
4. Education and COVID-19 Impact: The global setback in
education due to COVID-19 is a huge issue. He advocates for
urgent reforms to recover lost educational ground, particularly
emphasizing literacy and numeracy.
5. Government Spending and Debt: The rapid expansion of
government spending is largely at blame for inflation, and
Malpass urges fiscal discipline to prevent intergenerational
economic burdens.
6. Energy Production and Regulations: Malpass argues for
increased energy production and criticized regulatory barriers
hindering U.S. energy independence and economic growth.
7. Global Economic Challenges: Global economic challenges are
exacerbated by geopolitical tensions, particularly Russia's
invasion of Ukraine has negatively impacted energy markets and
inflation.
8. Policy Recommendations: Policies supporting increased
production, reduced government spending, and market-oriented
approaches will stimulate economic growth and reduce inflation.
9. Election Choice and Economic Outlook: Malpass will contrast
current policies with alternative approaches, advocating for
reduced regulations, lower taxes, and a stronger defense of the
dollar to stimulate economic recovery.
Overall, Malpass will stress the need for comprehensive economic
reforms to address inflation, support families, and promote sustainable
economic growth domestically and globally. His testimony focuses on the
urgency of policy changes to mitigate economic challenges and support
future generations' prosperity.
______
Senator Casey. We are just way over, so we want to move on.
We will start with our questions. I will start with Mrs. Wiggle
for my round of questions. I wanted to discuss a few of the
products you spoke about in your testimony. You mentioned how
now that you are buying paper plates and paper towels and
toilet paper every 3 weeks instead of once a month. Is that
correct?
Mrs. Wiggle. Yes.
Senator Casey. These products are shrinking, and yet the
price is remaining the same. That--meaning that you and other
consumers are paying a higher price per unit for each price. In
the report that I issued in January, the shrinkflation report,
which was, I guess, a third of my series of reports, I detailed
some of the shrinking products.
For example, Charmin toilet paper reduced the size of a
roll by 7 percent but continued to charge the same. Gatorade
reduced the size of their bottles by 12 percent without
changing the price.
What I found is that shrinkflation is easier for companies
to get away with, and the data has shown that consumers are
less sensitive to size changes compared to price increases.
They often don't notice a slightly smaller bottle of dish soap
or less full bag of chips.
This comes in addition to price increases that you have
seen across product categories. You flagged both yogurt and
cheese in your opening statement. I would ask you this, how
much would you say your grocery bill has gone up per month
since the pandemic?
Mrs. Wiggle. Well, obviously we have a large grocery bill
to start with, but it has easily doubled. Sometimes it has
tripled if you are buying fresh fruits and other products like
that. But with the paper products and dairies and meats going
through the roof, we easily blow through our grocery budget
within the first 2 weeks of the month.
Senator Casey. You are seeing a big increase. And when you
realized that prices are going up, did you also realize that
the product you had come to regularly purchase was being made
smaller--that kind of the product is shrinking but the price is
not shrinking?
Mrs. Wiggle. Not right away. It took a little bit, probably
two or 3 months. And me being the mom that I am saying, where
is this stuff going? And asking my kids, are you using this?
Are you using that? And kind of bringing the hammer down on
everybody, and nothing had changed except for the size of our
products.
Senator Casey. Well, I think in your testimony, among other
things you related to us, I think you said it pretty well.
Probably better--certainly better than I did. You said high
costs have impacted every generation of our family. You also
said toward the end, the last full paragraph, ``companies
should be able to make a profit, but not by taking advantage of
the average family.''
I think you said it as well as anyone could say it. I
wanted to move to Mr. Lee for a question. I wanted to highlight
one of your statements from DoorDash, the statement that you
provided to us. I guess it is an August 2022 statement. August
2022. Farina, your small business, made nearly $8,500 in sales
over DoorDash. However, DoorDash charged you a commission in
addition to fees.
You had both a commission and fees. In the statement you
provided, the commission is defined as, ``amount in commission
charged per order collected by DoorDash.'' Fees are defined as,
``the sum of all fees associated with services you use on
DoorDash.'' These descriptions seem, at least to me, vague, and
yet DoorDash charged you approximately $2,300, roughly 26
percent of your sales total.
Using a delivery service like DoorDash takes significant
revenue away from your business. Can you walk me through the
various charges you have incurred from DoorDash and other
delivery apps, and how this has changed over time?
Mr. Lee. Yes. So, the first fee that you normally get is
just the top line fee that they charge for just using their
service. So that could be anywhere from 15 percent. That could
be 25 percent. Or it could go right now, as I said, 30 percent.
That is just automatically what they take off for just
using their service. Some of the other fees that they have on
there are marketing fees. So, in order to stay competitive with
a lot of the other larger companies, you have to run ads. You
have to give out sales. So, buy one, get one $5 off a $20, that
sort of type of thing.
All of those things we pay for. So, a lot of those
associated fees that seem, that they don't have a name to them
because it is just kind of all-encompassing of all of their--
the things that they offer for you to sell. At the end of the
day though, when you do use a lot of those services, you lose
money.
I mean, if you take 40 percent off of top line revenue, and
historically 15 percent is great for profit margin for
restaurants, you are in the negative.
Senator Casey. Thanks very much. I am a little bit over
time. I will turn next to the Ranking Member.
Senator Tuberville. Thank you. Mr. Malpass, can a Trump,
Reagan style supply side economic approach of tax cuts and
deregulation ease the current inflation crisis facing our
Country?
Mr. Malpass. I think the answer is yes. And as we look at
the regulatory policy, and I addressed this in my remarks, it
really matters to the economy how the regulations work and what
burdens they put on.
What does it cost to comply with the regulations? What do
they allow you to do and stop you from doing? One of the
examples is this--the natural gas export ban. It changes the
world.
Do you know what has happened in Europe, is it causes them
to buy Russian gas under the table so that the ban on the U.S.
export of natural gas helps Russia and it hurts the job
creation in the U.S. On the tax side, the issue--economists
think about it as a tax wedge.
If you think of an employer, they employ a worker and pay
the worker the gross wages. The worker only receives the net
wages. That is the tax wedge. And so, as that goes up, then the
incentive for the worker is less and the cost of the burden on
the employer is more, so the employer employs fewer people.
As we look out into 2025, really 2026, as the Trump tax
cuts expire, there is a bigger wedge and that slows down the
economy. So, you can fix that by thinking about what do you
want to do on tax policy that allows incentives and what do you
want to do on regulatory policy to actually permit businesses
around the country to produce more.
Senator Tuberville. Talk about the war on fossil fuels. How
is that affecting our small businesses and prices, a rise in
prices across the country?
Mr. Malpass. In our current system, whether you like it or
not, it is the mainstay of how the system operates. It powers
the electricity grid, which is so important for manufacturing,
for people's homes, and the cost matters a lot. So, as you wage
a war on fossil fuels, you drive up the prices and that filters
through the whole supply chain.
As we look at it, the U.S. is an energy rich country and I
think needs to really take advantage of that. We have enough
energy in the country, stored in the ground and in the nuclear
power potential of the country, to pay down the national debt,
not keep making it larger.
These are key issues for the Government to think about and
for the private sector, of course, to be thinking about in
whether you want to invest more in the United States or are you
going to go to other parts of the world that are more friendly
toward, growth in energy supplies.
That is--we see it in the--especially in the electricity
projections with artificial intelligence growing, the internet
growing, and the uses for Bitcoin mining, for example, growing.
These are energy intensive. And manufacturing, of course. It is
clear the country just simply needs a lot more energy and a
pathway to get there.
Senator Tuberville. A good friend of mine, Boone Pickens,
who I got to know very well through my coaching days at in West
Texas, once told me that we had a 300 year supply of natural
gas that we knew of just in this country. We can--we will never
run out of it. Do you agree with that?
Mr. Malpass. I think the data--remember the U.S.--well, I
can recall one. It used to be that the U.S. was thinking about
importing natural gas, and there were hubs being set up in the
Caribbean to offload natural gas brought from the Persian Gulf
because it is so valuable to people in the U.S. to make
fertilizer, to make plastic products.
Remember, it is much cleaner on electricity than the
alternative, which would clear a lower carbon intensity than
oil and coal. And so, it is this giant, valuable resource for
the U.S. Then when new discoveries were made on how to tap into
U.S. natural gas, all of a sudden the U.S. became a giant world
exporter.
It improves the value of the resources inside the U.S., and
also the value from the climate change standpoint of greenhouse
gas emission reduction, it is the way the U.S. has been able to
lower. One of the things I saw at the World Bank is on the
global stage, people keep having conferences, and what they are
looking at is how the rest of the world is going to keep
increasing its greenhouse gas emissions.
Only the U.S. really has been able to control it. That is
largely due to the natural gas resource, which is hugely
valuable. One other point is the fertilizer cost. When Russia
invaded Ukraine, it cutoff natural gas supplies and that
destroyed--it really changed the fertilizer industry.
As we are looking at the famines--the children and families
in Africa, they are suffering massively because specifically of
the lack of availability of natural gas for making fertilizer.
It is the critical input for that. So, as the U.S. thinks about
what it wants to do, specifically on natural gas, just
recognize that it is also the raw material for feeding the
world's children.
That is a giant capability of the United States, and it is
one that I have talked about a lot internationally.
Senator Tuberville. Thank you.
Senator Casey. Thank you very much.
I will turn next to Senator Hassan.
Senator Hassan. Thank you very much, Mr. Chairman. Thanks
to you and the Ranking Member for holding this hearing. And to
our witnesses, thank you for being here and for your testimony.
Dr. Gee, I am going to start with a question to you. More
and more Americans are seeing higher medical bills because of
unfair fees from hospitals, something that the hospitals call
facility fees, which are charged by hospital systems that own a
regular doctor's office.
For example, I just recently heard from a constituent,
Raymond, from Concord, New Hampshire, who had a quick office
visit with a specialist and then received a bill with a $1,000
fee for using a so-called hospital facility, even though the
hospital itself was across town. This happened because his
doctor's office was owned by a hospital.
Doctor, can you talk more about the impact that these
unfair costs can have on families? And what can we do to
protect families from this kind of unfair health care fee?
Dr. Gee. Senator, thank you for that question. Health care
costs are indeed one of the biggest items of family budgets,
and it is also an area where we are seeing high inflation and
recent increases of high costs.
Let me back up for a second. First, I think one reason that
we are seeing high prices and consolidation in the industry,
part of that is because indeed when hospitals acquire offsite
facilities where there is an ambulatory surgery center or a
clinic, they can then charge facility fees.
They can also get higher rates under the Medicare program
because hospitals and their off campus properties can receive
higher rates than would a non-hospital facility. This
incentivizes consolidation in the healthcare sector. We are
seeing bigger and bigger healthcare systems dominate markets.
The share of physicians working in private practice is now
below half, 47 percent. We are also seeing increasing vertical
consolidation throughout healthcare. So, things like insurance
companies joining with PBMs, the middlemen for prescription
drugs. We are seeing more and more ownership of clinics by
hospital systems.
This is worrying because, first of all, antitrust has
historically treated vertical consolidation as pro-competitive,
when in fact we are seeing both vertical and horizontal
competition increasing prices. It gives patients less choice
and raises prices, and it also makes it harder for employees,
particularly those who are subject to non-compete agreements,
to earn better wages in the medical profession.
Senator Hassan. Thank you.
Dr. Gee. Some solutions I would raise include better
transparency for patients being able to, in their limited cases
where they can, be able to compare prices and interim medical
bills. We should hold hospital systems, particular those who
are nonprofit, accountable for ensuring that patients
understand financial systems plans.
Then some payment policies even include some neutrality in
Medicare. So, if you can get the same service--if you can have
the same service outside the hospital setting performed at the
same price or the same cost with similar health outcomes, then
we should not be paying more for that when it occurs at the
hospital.
Senator Hassan. Thank you very much. I appreciate that. And
for my colleagues' information, we have a bill onsite
neutrality working its way through the Senate. You have
constituents right now who on a Friday when their physician's
office is independently owned were paying a couple hundred
dollars for a treatment. And on Monday, after the hospital buys
it, it can go up to $1,000. So--or more.
I appreciate that answer very much and look forward to
working with people on both sides of the aisle on this issue.
Mrs. Wiggle, good morning. And first of all, I have been
informed that in addition to being a mom of a large and
thriving family, you are also a veteran. Is that correct?
Mrs. Wiggle. Correct.
Senator Hassan. Thank you very much for your service.
Mrs. Wiggle. Thank you.
Senator Hassan. In the Inflation Reduction Act, we took on
big pharma by finally allowing Medicare to negotiate
prescription drug prices, which will bring down the cost of
prescription drugs for seniors and help drive down medication
prices all across the board. As a mother of 11 children, how
does the high cost of prescription drugs and other health care
expenses impact your family?
Mrs. Wiggle. Health care is a hot topic in our house. We
have a lot of trips to and from doctor's offices, specialists,
and wherever we are getting our medication from. Sometimes one
medication isn't available at our local pharmacy, and we have
to go get it from another pharmacy.
That is a hassle because I have to call the doctor's
office, have the prescription transferred. Medication and
health care needs to be a top priority. Especially for growing
families, it is difficult.
Even for my adult children, they have to make the choice,
do I get the better health care package that cost more, or do I
take the lower standard health care package and then pay out
the nose if something happens.
Senator Hassan. Right. Well, I appreciate that. I am
running out of time. My third question was going to be one to
Mrs. Wiggle about the impact of childcare costs. I will hold
because we have another member here, but I will follow-up with
you in writing. Thank you.
Senator Casey. Thank you, Senator Hassan.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman and to the
Ranking Member. Thank you for this conversation this morning.
And Senator Hassan, I will follow-up on your childcare cost
because that is a critical one for all of us. But before I do
that, I would like to direct a question to you, Dr. Gee. I am
the Vice Chair of the Senate Indian Affairs committee, and we
have been focused and concerned about the socio-economic
conditions of American Indian, Alaska Natives, Native Hawaiian
children and families.
When Senator Heidi Heitkamp was here in the Senate, we
worked together to form a commission on native children. And
then in May, we were able to have a roundtable discussion on
the report that was generated from that commission. Years of
work focused on what limited access to education, economic
opportunities, health care resources, higher rates of poverty--
what that means for so many of our indigenous peoples and the
children as they are growing up.
One of the things that I think we know without even the
benefits of a report like that is that, unfortunately, the
median income of American Indian Alaska Native families is
around $48,000. 26 percent of American Indian Alaska Native
people make less than $500 a week.
When we think about these high inflationary costs and then
that disproportionate socioeconomic impact, can you speak to
how the inflationary trend that we are seeing now, really
devastating in so many parts of the country, how it impacts the
well-being of our native peoples compared to other demographic
groups. Have you done any reviewer analysis of this?
Dr. Gee. Thank you for that question, Senator. I can talk
about, what I do know, which is sort of appreciation for what
you identify as some very deep disparities in both health
access as well as health outcomes between the native population
and the U.S. overall.
Some of that also overlays with rural health in general,
where rural communities tend to live far from an emergency room
or from, say, an obstetrician. Native claims have much higher
rates of maternal mortality than the rest nine states.
I think as we see more entry of private equity and also
more consolidation of health care systems, we are seeing
increasingly rural communities being further from tertiary
medical care and being able to access hospital and emergency
care.
I think a couple places where I point out that the United
States has been able to lower health care costs in the past few
years are for those who do not have either access to Medicaid
or have access to health care through an employer across the
United States, is the expansion of the enhanced subsidies for
marketplace coverage in the Inflation Reduction Act, which on
average, lower costs for families and relative to that type of
coverage by $800 per year.
There are also subsidies available to--you have subsidies
available to low income, Native American populations, tribal
members.
Senator Murkowski. I am going to interrupt you there and
move to the question that was raised earlier about childcare,
because I think we recognize that when it comes to families and
their ability to go to work, if there is not affordable
childcare or if there is no childcare whatsoever, it makes it
pretty darn hard.
We recognize that childcare is one of the two biggest items
in a family's budget, with 7 percent of a family's annual
household income going into it in Alaska. It is much worse than
that. Families pay an average of just about $1,000 a month for
childcare, which is roughly 16 percent of the average Alaskan
family's annual household income. And then it is not just about
the affordability. It is about the availability. 61 percent of
Alaskans live in what is known as a childcare desert, and it is
not just related to very rural places like Alaska.
What I have been trying to focus on are ways that we can
develop childcare more as a career than just kind of a job
until you get ``the real job.'' And we have been working with
those in our military community in Alaska to try to identify
that.
But this is something where I feel pretty strongly that we
have to have a better strategy. It has to be a long term
strategy that we need to consider developing childcare as a
career to ensure that we have--we have trained, credible,
available, and hopefully affordable childcare providers for our
kids so that families can go out and access these jobs.
I have not allowed you time for a response there, but maybe
if the Chairman would entertain that, if somebody wants to just
speak quickly to childcare access.
Senator Casey. Sure.
Dr. Gee. I am happy to go. As you mentioned--large swaths
of the United States are indeed childcare deserts. Roughly one
half of all Americans live in a place where that is considered
a childcare desert.
Meaning that there are fewer than one licensed childcare
providers available for every three children who need
childcare. So, I think there is--so two main pieces of this I
would highlight is one, is improving the affordability,
ensuring that families can, do not owe more than the
affordability threshold, 7 percent of their income, toward
childcare.
This is crucial not only because it is expensive, but it's
also an expense that families face early in their children's
life cycle, in their own life cycle, when their earnings power
is less than it would be later in life. It is also important to
look at the workforce side of this, as you said, making sure
that these are good jobs. Childcare workers is work that
supports other work in the economy.
Many childcare providers are themselves mothers. And so, it
is important that childcare workers earn a fair wage. That
childcare providers are able to meet the costs of providing
that care as small businesses, in particular. And also, that,
people who are in the care workforce, receive benefits that we
would want Americans to have, including paid leave.
Senator Casey. Thank you, Senator Murkowski.
I will turn next to Senator Murray.
Senator Murray. Well, Chairman Casey, thank you so much for
holding this hearing and really putting a spotlight on how
companies are hiding behind inflation as they jack up prices
beyond all reason and hide behind junk fees to charge consumers
more, and hiding behind those smaller sizes so families get
less and pay more.
That is why I am a very proud co-sponsor of your bill
Senator Casey, Shrinkflation Prevention Act. I think that is
really important. When I talk to people back in Washington
State, the grocery store were all seeing the same thing.
Companies are shrinking sizes, hoping that we won't notice,
raising prices well beyond inflation, and hoping we just won't
ask them why. So, we just can't stand for that, so I really
appreciate your leadership on this.
One of the things, and Senator Murkowski talked about it, I
know others have mentioned it, is essential to this and I am
glad we are having this conversation about it, is childcare. It
is a full-fledged crisis.
Providers are really struggling to keep their doors open.
Workers are struggling to make ends meet on poverty wages, and
parents are struggling everywhere to find any quality,
affordable options that work for their families.
Certainly, as Senator Murkowski talked about, having
providers is absolutely essential. But I think one of the
things we have to recognize is that corporate greed is actually
adding fuel to this fire, making it harder for childcare
providers to stay in business and harder for families to fit
childcare in their budget. When you can't get affordable
childcare, you can't work. It is that simple.
When you can't work, that makes your family budget even
tighter, and it hurts our whole entire economy. So, I really
believe we have to take very bold action to save our Nation's
childcare system and all the families who really depend on it.
That is actually why I wrote the Childcare for Working Families
Act.
I am going to keep pressing on it, because what my bill
does for working parents is that the typical family in America
would pay about $10 per day for childcare. No working family
would pay more than 7 percent of their income on childcare.
That would make a huge change for parents across the country.
This is such a huge cost to families, and it is one we can
absolutely bring to this conversation and need to have this
conversation. And it is how we build a fair economy that works
for families, for childcare that is affordable, and companies
don't profiteer off inflation, and wealthy pay their fair
share. And that is, I think, what all of us are working to move
toward.
Let me go right to childcare. In my home State of
Washington, couples pay on average 15 percent of their income
on childcare. Single parents pay almost 30 percent. Programs
like Childcare and Development Block Grant and Headstart are
really a lifeline for working parents. And it is why I was very
proud in the last Appropriations bill to secure $1 billion
increase for childcare initiatives.
But, as I said, the childcare for working families focuses
on all of it. And one of the things we do is a 7 percent cap on
the cost of childcare. Dr. Gee, can you comment on what that
would mean for families?
Ms. Gee. A cap on the cost of childcare is crucial to
making it affordable for families. As--said earlier, I think
one of the problems with the cost of childcare is that unlike
other major purchases in life, higher ed tuition, home
mortgages, car payments, there is no good option for financing
that upfront cost of childcare.
Just to underscore how childcare costs relative to other
things folks might encounter life, in 32 states and here in
Washington, DC, the cost of childcare exceeds in-state college
tuition. This is also a cost that is actually decreasing over a
child's life. The most labor intensive period of childcare is
for infants and toddlers.
But that coincides, that is the opposite of the trajectory
of parental earnings that we would expect to see where people
tend to get promoted and earn more of their lifetimes, which
means that families are facing a very high cost early in that
life cycle.
I think that, this is a classic example of, where markets
are going to fail us because we can't expect families to--
invest in their children and in the economy without some
support and some ability to just smooth those costs over the
life cycle. I would also say that the--childcare is important
for the economy overall.
It enables parents, particularly women, to participate in
the labor force, which is important for families' overall
economic security and for employers being able to hire the
workers they need.
Senator Murray. Thank you. And Mrs. Wiggle, I see by your
resume that you are the mom of 11 children. Talk to us about
what childcare means to you.
Mrs. Wiggle. Childcare for us is not an option. I have to
stay home with the children while my husband goes out and work.
And on the flip side of things, being a foster parent, you can
see the divide of parents that are able to work.
You either qualify for benefits for childcare or you don't.
And if you don't, you struggle for the rest of that child's
life until they get to school. And if you are lucky enough to
be in a public school that will have affordable before care and
after care.
It is just not even an option for most families, including
my family, which I would consider us upper middle class. And it
is not an option. It is just not even obtainable.
Senator Murray. Well, Mr. Chairman, I know you feel
strongly about this too. We have to deal with this issue, so I
appreciate it. Thank you.
Senator Casey. Thank you, Senator Murray. We will do a
second--second round of questions starting now. We may have
other Members that come in for their first round, but I want to
start with Dr. Gee. As for most Americans, the inflation our
Country has experienced, especially in the period 2020 to 2022
was a terribly difficult time for families.
These families had to make really, horrifically challenging
choices as costs for their favorite holiday foods or child's
diapers or gasoline rose even higher. At the same time, big
corporations weren't facing the same difficult choices. On page
two of your testimony, you say, and I am quoting,
``corporations raise prices for consumer goods beyond levels
justified by present costs.
In other words, increase their markups. Markups were also a
major contributor to inflation.'' So, while families costs
rose, corporations just hiked prices--just hiked prices up and
were raking in record profits. Doctor, what are some of the
tactics corporations have used to squeeze American families and
American workers?
Dr. Gee. Thank you for that question, Mr. Chairman. I will
highlight a few ways that corporations are squeezing workers.
One is junk fees, as we have been talking about previously. Mr.
Lee mentioned the food delivery apps and the way they stack
prices for service fees on top of the posted price for food.
Another is in the banking sector. We see fees that
consumers might not notice in the reams and reams of fine print
that they got for overdraft fees, for late fees. And the
Consumer Financial Protection Bureau is working on capping
those so that consumers don't face unexpectedly high costs.
Another is airline fees, which I know the Department of
Transportation is working on. Families may face fees for being
able to sit with their children, which adds to vacation costs
and travel costs to visit family. These are all things that
make it hard for consumers to compare prices upfront, and
therefore make competition difficult.
Another is one that you were tackling in your Shrinkflation
Act, which was that--consumer value by not only raising prices
for the same product, but also by shrinking a product size, say
offering a smaller volume of soda or a smaller package of
crackers for the same price. And I think this is worrying not
because only it--makes it harder for families to afford what
they need, but it also makes families--it makes it harder for
families to budget for the future.
A survey by the U.S. Census shows that people find these
recent price changes stressful. In terms of workers when--one
thing I would highlight is non-compete clauses is a way that
corporations exercise their power. These are contract clauses
that prevent a worker from moving to a competitor.
What it does, in effect, is locks people onto their job. It
prevents a worker from, say, going to a job where they might
have better benefits, they might have higher wages, and it
helps suppress wages. This is particularly worrying in rural
areas where there are not a lot of choices of employers.
We see this often happening in the health care sector
where, say, a nurse or a physician's assistant has to sign a
clause that promises they will not work for a competitor. And
in order to find a job, that person may need to leave town,
thus reducing the supply of providers in order to find a new
job.
Senator Casey. Thanks very much. I will turn next to Mr.
Lee. You, as you--when we heard in your testimony, price
increases in recent years have strained your restaurant. And
you said that you are challenged each day to keep your doors
open, to compensate your staff, and to satisfy your customers.
You have had challenges kind of making ends meet. In order
to keep your restaurant afloat and maintain some profit margin,
you have had to take steps to increase revenue. This looks very
different for each business.
We know that just as corporate price increases have
affected you, changes in the local economy constrain consumers.
So here is the first question, how would you--how have you
responded to both price increases on your supplies and your
materials?
Mr. Lee. What we tend to do is we try to take a step back
and look at what we are serving. If there. is a way for us to
source our products differently, from somewhere else.
Unfortunately, sometimes it does mean that you have to cut back
on the portion size or whatever you serve. But a lot of times
it is trying to find a different vendor.
Senator Casey. You have noticed, has this had an effect on
your patrons or how do you assess--?
Mr. Lee. Absolutely. A lot of them get very upset when
their portion sizes are shrunk or when the prices are
increased, and they tend not to return. They also tend to leave
bad reviews onsites like Google and Yelp and things like that.
Senator Casey. I am a little over, and I don't know if we
have any other Members that are on their way. The answer is no.
Okay. I will conclude my questions here, but to the Ranking
Member, any questions you have?
Senator Tuberville. Yes, I got a few.
Senator Casey. Okay. Thank you very much.
Senator Tuberville. Thank you, Mr. Lee. Mrs. Wiggle, thank
you for your service by the way. Mr. Lee, you lost your mind
when you went in the restaurant business. I did that while I
was coaching. I thought coaching was hard.
My gosh, restaurant business is really rough and getting
worse. Just a little information, it is going to be harder and
harder for food in this country. I am on the Ag committee. Last
3 years, we have lost 150,000 farms in this country and we have
lost 25,000 farmers. Regulations, food costs are going to be
enormous. It is going to get worse, not going to get better.
Mr. Malpass, first quarter growth under the Biden
administration was a pitiful 1.4 percent.
As Congress thinks about tax reform next year, which we
will have tax reform after election, what is the most effective
tax cut to get growth moving in the right direction? And why
don't we give cuts to people who have kids for childcare? I am
all for that. What is your thoughts on that?
Mr. Malpass. There are lots of sectors--thank you, Senator.
Across the economy, people are always looking to have their tax
rate lowered. That is the old adage of tax the guy behind the
tree. Don't tax me. Don't tax thee. Tax the guy behind the
tree.
I want my taxes lower. So, as you think about childcare,
there needs to be considerations of that and that is part of, I
think, the public debate. For me, economics is pretty clear
that one function of the tax system is to raise revenue for the
Government, but to do it in a way that is less distortive.
That comes back to this idea of low rate on a broad base.
So, try, try to have taxation not be specified--not be narrowed
down to certain groups because it distorts the activity that
you end up having on that.
As we look into 2026, you want to have a tax structure that
allows small businesses to invest, for example, and that is one
of the ideas behind expensing of--for small businesses of
equipment, so that they do buy the new machine that will make
their workers more productive and that way they pay the workers
more.
That is an idea. I think also very important is simply on
the income tax side, that the brackets stay where they are, and
the rates stay where they are. That is an extension. And it
looks to me like President Biden has included that in his
budget proposal for workers below a certain level to keep the
rates, knowing that actually affects their livelihoods, their
incentives to work.
We look, historically, the best way to have your tax system
is to try to keep away--to keep the rates down on as broad a
base as you can. One example of that, if I can turn to
international is foreign countries struggling with the value
added tax. We saw, over the last month, this catastrophe in
Kenya where people were actually killed over the proposal of
the government to raise taxes.
It goes to this core that what when you raise the tax rate
to a certain level, people simply won't and can't pay that tax
rate, and that was the core of the uprising that occurred in
Kenya. The government, I think, correctly decided to pull back
from that. It was an IMF inspired high tax rate regime meant to
pay off creditors.
You were having the government take money from poor people
to pay to creditors. So, they backed off on that, which I was
pleased to see, but you ended up with people dead because of
this tax policy that was being put in.
Senator Tuberville. I only got about a minute left here.
Just one more question, you, Mr. Malpass. You mentioned
defending the dollar. What would be the consequences of us
losing the dollar, world currency?
Mr. Malpass. We are already seeing some of that. The U.S.
doesn't say enough about the importance of the dollar. You
don't hear that from the Administration and of it being--and
the dollar being the mainstay of the world system.
China looks at that and looks to create its own central
bank digital currency. So, what I mean by defending the dollar
is simply having it be stated by the Treasuary Department, by
the Federal Reserve as they are considering what to do with
their policies, that a core part of the U.S. success is having
the dollar be a currency that is used around the world, and it
keeps its value over time.
If you lose that, you end up with inflation for one, which
is harmful to children and families, but you also lose the
desire to invest into that country. So, it is when--the U.S. is
in an Okay position right now because we are chewing through
the worst part of this inflation surge.
It is as devastating as we have been discussing, but I
think there will be an opportunity in 2025 and 2026, if you can
increase the production in the economy, inflation will come
down, and then interest rates can fall in the context of
defending the dollar.
Senator Tuberville. Thank you.
Senator Casey. Thank you, Ranking Member Tuberville. Just--
now that the tax debate for next year has been raised, I want
to ask Dr. Gee, what is your assessment for extending all of
the tax provisions for both individuals and corporations going
forward?
Dr. Gee. Mr. Chairman, I think some of the points that Ms.
Malpass just raised about tax cuts were some of the things that
we heard ahead of the Tax Cuts and Jobs Act passage in 2017.
Major provisions of that tax expire at the end of next
year, 2025. And I think it is important that we reassess what
those claims were at the time, and because so many of them have
not come to pass. For example, the tax changes that law were
overwhelmingly skewed toward the wealthy.
Extending those tax cuts will not go very far to helping--I
think that those are those tax cuts could be better be used as
revenue to support things like childcare, to support lower
health care costs. And one thing that would be more helpful to
American families would be to extend the child tax credit.
We saw from the Rescue Plan Act, enhancement of the child
tax credit, including its full refundability, that is an
incredibly powerful tool to reducing child poverty. In fact, it
cut child poverty in half. The TCJ's corporate tax cuts failed
to trickle down to ordinary workers. We did see that--an
increase in compensation for workers in the top 10 percent by
income.
But within the firms, we didn't see an increase for the
bottom 90 percent. We also did not see the level of corporate
investment that many predicted. Studies show that corporate for
some people slowed.
This wasn't as high as expected. And these tax cuts also
have not paid for themselves. They are responsible for a large
part of the growth of deficits over the past decade.
Senator Casey. Well, thanks very much. I know we are a
little bit over time. I just wanted to thank everyone. I will
do a closing statement and turn to the Ranking Member, but I
want to start by thanking our witnesses for being here today,
Mrs. Wiggle, Mr. Lee, Dr. Gee, and Mr. Malpass for taking the
time to be with us for your testimony and your insights that we
all benefit from.
As we heard from both Erin Wiggle and Dan Lee, every dollar
adds up when you are managing a family budget or the budget of
a small business. A smaller package of paper plates on top of a
higher priced yogurt can eat into a family's budget. A fee
imposed on a restaurant by a delivery service that they are
forced to rely upon hurts not only the business owner, but also
the local economy.
Dr. Gee painted a bigger picture for us, demonstrating just
how the economy has been shaped by the actions of and the
interests of corporations, whether it is through industry
collusion, market concentration, price increases, junk fees,
shrinkflation, greed-flation, or the like.
We have seen it play out in the last few months. This I
believe at least has backfired on a lot of corporations, or
they have become desperate to cover themselves and get
consumers back into their stores. So, guess what? They are
lowering prices a little bit. I welcome these moves.
We all should. But these actions make clear that prices, in
fact, were artificially inflated and we will see what happens
the next time they have an opening to jack up prices. It is now
evident that corporations saw the pandemic and related economic
shocks as an opportunity, an opening not to support Americans
with reasonable price increases, but to bolster their profits
and keep their prices very high.
That meant that corporate profits rose in that period of
July 2020 to July of 2022, 5 times faster than inflation. At
this moment in time, corporations feel they have a right to
take advantage of a crisis and gouge Americans out of their
paychecks. As the CEO of Coca Cola said the company felt it
had, ``earned the right,'' to push price hikes.
While corporations, just like small businesses, should be
able to make a profit, they should not be able to make a profit
at the expense and on the backs of struggling American
families. As Erin Wiggle said, ``companies should be able to
make a profit, but not by taking advantage of the average
family.''
Certainly, they should not be able to take advantage
through deceptive practices. Congress can and should take
action to hold corporations accountable and fight back against
greed-flation, when corporations jack up their prices way
beyond their costs.
I look forward to working with my colleagues to make this
happen, to pass my price gouging bill and my shrinkflation
bill. I will now turn to the Ranking Member for his closing
remarks.
Senator Tuberville. Yes. Just quick. I went July 4th from
cooking steak to chicken this year, as a lot of people did
because it is a lot less priced. American people are suffering.
our Country's in trouble when it comes to inflation. It all
starts with the common folks. People that actually raise the
food or that actually run the businesses.
Small business is in trouble. In my State of Alabama, we
are struggling big time with the cost of everything. And it
starts with fuel, the input cost for farmers, inputs costs for
truckers. The fuel cost of hauling something has almost tripled
in cost and inflation is not going to go down unless we get
back to depending on our fuel and our oil and gas in this
country. It is not going to happen, we can trick ourself.
It is just not going to happen, but regulation, regulation,
regulation. That is all you have to know. Every time I go to a
farmer, to a small business, the regulations put on from city,
to state, to county, all the way to Federal is unbelievable.
We need to let people live and make a living. We need to
let people do what they need to do to help our Country become
stronger and stronger. And until we lift these regulations,
until we get the Federal Government out of people's lives, we
are not going to have the same country that most of us had a
chance to grow up in.
Inflation is growing, and it is not going to go anywhere.
And I hate it for the American people, and I just hope the
people up here on Capitol Hill will get out of the dang way and
let people live. Put more money back in their pockets so they
can take care of their families, and that is all they want.
Thank you, Mr. Chairman.
Senator Casey. Thank you, Ranking Member Tuberville. We
will conclude now, but I did want to again reiterate our thanks
to our witnesses for being here. I know it is not easy to
travel to Capitol Hill to give testimony and to be here, but we
are grateful.
If any Senators have additional questions for the record,
or I should say questions for witnesses, or the hearing record,
the record will be kept open until July 23rd. Thank you all for
participating today. We are adjourned.
[Whereupon, at 11:23 a.m., the hearing was adjourned.]
[all]