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BEHIND THE NUMBERS:

Inflation

The rising cost of living: what can a Governor do about it?

What's going on?

 

Prices are up on so many things: heating oil and gas, groceries, housing — products and services we use every day. And not just here. It’s happening in every state and all over the world. 1, 2

Inflation is global

Inflation chart.png

Why is this happening and what can a governor do about it?

 

Rising prices are a global problem triggered by the pandemic, Russia’s attack on Ukraine, corporate profiteering, and a mismatch between supply and demand for goods and services. While Maine’s governor has little power to fix these problems, they can help protect families hit hardest by rising prices and take steps to address some underlying causes of inflation in the future. 

Which gubernatorial candidate is more likely to support Mainers during a period of rising costs?

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Based on policies enacted in office and positions staked out on the campaign trail, here’s what we know about what Governors Mills and LePage have done or are likely to do to help Mainers cope with rising costs:

Side by side

What’s the bigger picture and what more can Maine’s next governor and federal officials do?

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As indicated above, rising prices are a global problem triggered by the pandemic, Russia’s attack on Ukraine, corporate profiteering, and a mismatch between supply and demand for goods and services. There are limited actions policymakers can take to change things in the short-term, but they can take steps to help restore balance to the economy over the long-term, reduce future vulnerability to the causes of our current challenges, and help those hardest hit by rising prices now. What follows is a deeper dive on the underlying causes of current price increases and what has been done or can be done about them at the state level, nationally, and globally.

The pandemic

The pandemic

COVID-19 caused enormous disruption when people got sick and couldn’t go to work. Or when workers had to stay home because their kids’ schools closed. Spending patterns changed dramatically. Some businesses were so hard hit they never recovered. Many workers have decided not to return to low-paying, low-quality, or inflexible jobs. The ongoing disruptions impact all sectors of the workforce, resulting in shortages, bottlenecks, and imbalances around the world. 3, 4

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WHAT CAN BE DONE ABOUT IT?

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State

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National

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Global

War in Ukraine

Putin’s invasion of Ukraine impacts gas, oil, and grain supply on a global scale. To strangle Russia’s military capabilities, countries allied with Ukraine are avoiding buying Russian oil and gas. While effective, cutting Putin’s funding source comes with a high price. Allies must pay more for less available fuel. In Europe the average gasoline price is currently $6.26/gal. To make matters worse, the oil export cartel OPEC, which is led by Saudi Arabia and includes Russia, recently slashed oil production to prop up Russian profits. That move will cause oil prices to rise everywhere, and the cost of producing and transporting goods will rise, too. 5, 6, 7, 8

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WHAT CAN BE DONE ABOUT IT?

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State

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National

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Global

Corporate power and greed

When a handful of corporations control entire sectors of the economy, they get away with charging higher prices, and disruptions are magnified on a national and even global scale. This is particularly noticeable in the US food sector, where three corporations produce 73 percent of all breakfast cereals, four firms control half of all meat processing, and four corporations sell 61 percent of all bread. In each of those sectors, both prices and profits are at historic highs. And as consumers face higher prices at the pump and on heating bills, oil companies are celebrating their highest profits in years if not decades. Last year corporate profits accounted for more than half of the higher prices people paid. And when rich executives hoard profits instead of investing in workers through better pay and benefits, workforce shortages and supply disruptions worsen. 9, 10
 

WHAT CAN BE DONE ABOUT IT?

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State

  • Protect Mainers against price gouging ✅

  • Prosecute corporations that violate antitrust laws

  • Make profiteers pay a state windfall tax (especially if Congress fails to pass a federal windfall tax)

  • Reject excessive rate increases by health insurance providers and energy utilities

  • Pass pro-worker and pro-union laws that improve job quality  

  • Reform subsidies & tax incentives to prioritize small businesses 

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National

  • Make wealthy corporations pay their share of taxes ✅

  • Make profiteers pay a windfall tax

  • Enforce antitrust laws and crack down on mergers

  • Implement the global corporate minimum tax

  • Tax income from wealth the same as income from work

  • Pass pro-worker and pro-union reforms to boost worker power

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Global

Supply and demand are out of whack

Whenever supply can’t keep up with demand, prices go up. Economic rescue and stimulus efforts that prevented wide-ranging economic disaster may have contributed to increased demand for goods at a time when fewer goods could be supplied. But other factors also played key roles. There is a shift from globalization to regionalization in goods production which will increase costs. Years of drought and extreme weather caused by climate change are resulting in far lower crop yields. This year they may be down by as much as a third. Adding to that, a deadly new strain of bird flu has infected poultry flocks in 42 states and resulted in losses of 47 million birds. It’s estimated that this year’s poultry losses will be the worst on record. Furthermore, barriers to full workforce participation remain, with people switching jobs at unprecedented rates, large numbers of workers excluded from employment, and a widespread mismatch between opportunities and skillsets.

11, 12, 13, 14, 15, 16

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WHAT CAN BE DONE ABOUT IT?

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State

 

National

  • Expand Child Tax Credit for families with low income

  • Subsidize workforce supports like child care and affordable housing

  • Subsidize community college and specialized workforce development

  • Make it easier for foreign farm workers & asylum seekers to work legally in the US

War in Ukraine
Corporate power
Supply and demand
Notes

Notes 

[1] US Bureau of Labor Statistics Consumer Price Index Summary - 2022 M09 Results

[2] Trading Economics Inflation Rate - Countries - List 

[3] National Bureau of Economic Research Inflation with Covid Consumption Baskets 

[4] Maine Center for Economic Policy State of Working Maine 2022 

[5] World Bank Commodity prices surge due to the war in Ukraine

[6] PBS How will OPEC+ cutbacks affect oil prices, inflation? 

[7] New York Times Ukraine Invasion Threatens Global Wheat Supply

[8] NASDAQ: What Is OPEC+? An Overview of Key Members

[9] Maine Center for Economic Policy Feeling the Pinch: Inflation and corporate consolidation 

[10] Institute on Taxation & Economic Policy Four Tax Policy Wins in the Inflation Reduction Act and Four More That Can Build on This Progress 

[11] Center on Budget and Policy Priorities Chart Book: Tracking the Recovery From the Pandemic Recession 

[12] PBS How the supply chain caused current inflation, and why it might be here to stay 

[13] Peterson Institute for International Economics China bought none of the extra $200 billion of US exports in Trump's trade deal

[14] Reuters California's drought withers tomatoes, pushing grocery prices higher

[15] Washington Post The summer drought took a toll on corn, wheat, tomatoes and a lot of other American crops

[16] Reuters Bird flu kills close to a record number of poultry in the U.S. 

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