To Boost Family Budgets, Tackle Corporate Concentration and Reinvigorate Public Investments
November 5, 2021
By Niko Lusiani
In checkout lines across the country, families are feeling firsthand the crunch of price increases.
Today’s price hikes stem from a number of discrete causes: a result of millions of everyday decisions by families, government authorities and, in particular, dominant corporations with increasingly decisive control over large swathes of our economy. Misguided suggestions to cut federal investments and raise interest rates miss the point. The right way to address today’s price changes is policies that target the specific, underlying reasons for them.
To lower families’ bills in lasting ways, policymakers must address two of those less-explored but long-standing problems that predate the pandemic: concentrated market power and chronic public underinvestment in our care, housing, and renewable energy infrastructure.
How corporate consolidation breaks the family budget
Let’s take the budget of an emblematic young American family to illustrate this.
The Bryants are both working parents with beautiful two-year-old twins. Like most families, the Bryants’ biggest expenditures are housing, transportation, food, childcare, and health care, including prescription drugs.
Both parents have seen the price of their prescription drugs jump. Diapers—a necessity if ever there was one—have gotten so expensive they are cutting into food costs. Speaking of meals, meat prices have skyrocketed to the highest level in 13 years. Meanwhile, childcare continues to take up an increasing portion of the family budget; so much so that one of the Bryant parents may need to swap their paid job with an at-home, unpaid care job. Staying at home would help defray the rising gas costs of driving to work, but it may lead the Bryants to spend more on heating as the days turn cooler and natural gas prices increase.
What can be done to give American families like the Bryants relief from higher bills?
One long-standing factor leaving our economy vulnerable to price markups leads to one important solution to tackling prices: reducing the excessive and harmful market power of a small number of large elite corporations in key sectors of our economy. After decades spent acquiring monopoly or oligopoly power, dominant firms face little competition and thus are increasingly able to get away with increasing prices well above the costs of production. In a less concentrated economy, excessive pandemic profits might have been competed away as new entrants emerge with lower prices and better products. Instead, today, Americans are stuck with fewer choices in a marketplace increasingly dominated by a small number of supersized firms profiting more and investing less.
The Bryant family’s soaring prescription drug costs, for example, are the product of government-authorized monopolies driving annual average price increases of 4 to 5 percent.
Their higher grocery bills—for beef, pork, and poultry, in particular—have a number of causes, but central to them all: Four large conglomerates overwhelmingly control the processing of our meat. These companies’ chokehold in the food supply chain allows them to hike prices for consumers and lower earnings for ranchers, while showering shareholders with dividends and share repurchases.
The lion’s share of the market for diapers meanwhile is controlled by just two companies (Kimberly-Clark and P&G), limiting competition for cheaper options. COVID-driven commodity and freight costs are part of the story behind diaper markups, as Pampers producer P&G has argued, but instead of passing on its increased earnings to families through lowered prices, the company found enough cash lying around to set aside $16 billion for shareholders next year.
All together, tackling excessive market power could increase the purchasing power of the average family by $5,000 per year. President Biden’s executive order on corporate consolidation, the focus on troublesome sectors like meat-packing, and his appointments at key antitrust agencies, and his administration’s overall approach to put families first all bode well for bringing prices down.
How the Build Back Better public investments boost a family’s purchasing power
As for the Bryants’ housing, childcare, and energy bills, significant public investment would go a long way. The Build Back Better Act would cover universal pre-K and make childcare more affordable; it would increase the supply of affordable housing and might just bring down the most expensive prescription drug prices. Together, these investments would in time increase the supply and bring down the costs of childcare, healthcare and housing, while creating new jobs and allowing many people, especially women, to engage in the economy again.
The BBB Act’s approach to energy costs, meanwhile, would quicken our transition away from fossil fuels, making the types of big investments in electric heat pumps and electric vehicles (both charged by solar) that will over time drastically bring down energy prices for the Bryants and so many real American families currently vulnerable to energy price volatility.
As negotiations over Build Back Better continue, it’s important to remember: Price changes are the result of choices we make as a society about how we structure markets—about who in our economy has the power to be a price-maker, and who must be relegated to the role of price-taker. By tackling the twin troubles of concentrated market power and chronic underinvestment in housing, childcare and energy infrastructure, President Biden and Congress would be meeting the moment by restoring purchasing power back to American working families.