The consumer price index’s 7.9 percent increase over the past year “is excessive inflation” and “primarily the result of unnecessary fiscal stimulus ($1.9 trillion American Rescue Plan Act)” that has been “bolstered by excessively accommodative monetary policy by the Federal Reserve,” said Maryland Smith’s Michael Faulkender in opening remarks to lawmakers in an April 5, 2022, Senate Budget Committee hearing titled “Corporate Profits are Soaring as Prices Rise: Are Corporate Greed and Profiteering Fueling Inflation?”
“Due to a fundamentally strong economy with rising wages and decreasing unemployment prior to the pandemic, Americans had aggregate balances in their checking and savings accounts of just under $11 trillion. Following ARPA disbursements, that amount had risen to over $14.2 trillion—nearly a thirty percent increase,” added Faulkender, dean's professor of finance at the University of Maryland’s Robert H. Smith School of Business. “The entirely predictable result was inflation, running the highest we have seen in 40 years.”
Faulkender, who served from 2019-2021 as the Assistant Secretary for Economic Policy and Chief Economist of the U.S. Department of the Treasury, also addressed a proposal to apply a 95 percent tax rate on any profits realized by large companies above their pre-pandemic five-year average profit level, adjusted for inflation.
“Any company that created new products, successfully entered new markets, or shifted their offerings in response to changes in consumer preferences following the pandemic would be punished,” he said. “Companies whose product prices rose with inflation, but who served more of their fellow Americans, would have their increased results deemed excess profits and taxed at 95 percent. If enacted, this proposal would nearly eliminate domestic economic growth.”
In his Treasury role, Faulkender advised the secretary on domestic and international issues that impacted the economy. During the COVID-19 pandemic, he assisted in negotiating the CARES Act and led the implementation of the Paycheck Protection Program. He testified to lawmakers yesterday alongside former Labor Secretary Robert Reich and interim Executive Director of the Groundwork Collaborative Lindsay Owens.
To view the hearing, in addition to Faulkender’s prepared, full testimony, go to the Senate Budget Committee website.
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