220405 Inflation Hearing Senate Budget
April 05, 2022
Dear Chairman Sanders:
We appreciate your Committee’s attention to the inflation that is hitting American businesses and consumers, but it is difficult to think of a focus for a hearing that is more misinformed and misguided as this blatant attempt to, for political purposes, place the blame for rising prices on American businesses. This attempt to shift blame only increases the likelihood that policymakers will misdiagnose the real causes of inflation, prolonging and exacerbating higher prices for families, and risking a recession.
Economics teaches us that when supply is constrained and/or demand rises, prices rise in order to achieve a greater equilibrium between the available supply and demand (see the Encyclopedia Britannica’s entry on supply and demand for a quick summary). Pandemic related shocks combined with a tight labor market, and loose monetary and fiscal policy have limited the supply of many goods and at the very same time boosted demand with an obvious result: broad based price increases.
The premise of your hearing has been roundly refuted by economists. As the Washington Post’s Editorial Board recently explained in a piece entitled, “The White House once again offers a bizarre message on inflation”:
Perhaps the one group cheering your efforts are Democratic political strategists. On January 10, 2022, the Washington Post reported:
Yet, this message was not grounded in economics. The same article noted:
If this were just another example of Congressional hearing driven by politics rather than facts, it would be sad, but perhaps unremarkable. But this effort could in fact contribute to prolonged inflation and a recession.
Larry Summers, who served as Secretary of the Treasury under President Clinton, head of the National Economic Council under President Obama, and who has testified numerous times before your committee, said the following earlier this year:
Rather than blame the business community, policymakers should be working on solutions that address the real root causes. For example, former Secretary Summers has suggested that policymakers should work to reduce tariffs, raise supplies of fossil fuels, and relax regulations. Of course, monetary policy remains the best tool for fighting inflation. Here’s what won’t lower prices for families and small businesses: a Congressional hearing based on politics rather than economics and designed to shift blame onto American businesses.
Neil L. Bradley
Executive Vice President, Chief Policy Officer,
and Head of Strategic Advocacy
U.S. Chamber of Commerce
cc: Members of the Senate Committee on the Budget