Who's to blame for inflation? We fact check some common claims

CLAIM: Oil companies have taken advantage of inflation to jack up their prices and boost profits

In a recent speech that addressed record gas prices, President Joe Biden said that Exxon had, “Made more money than God this year.”

Bivens said profit margins for most of the major oil companies showed this wasn’t such a far-fetched idea.

“Especially for the first year of the inflationary shock, basically from very early 2021 to the end of 2021, if you track profit margins, those profit margins got much fatter,” he said. “And they actually reached historically high levels by the end of 2021. So the rise of profits definitely is a big part of why prices jumped in 2021.”

He added that it wasn’t just a case of production costs and scarcity expenses being passed down to consumers.

“They’re not just passing them on, they’re also increasing their profit margins,” he said. “So they’re taking whatever increase in costs they’re experiencing, they’re adding to it, and it turns out they’re adding enough.”

CLAIM: Wage increases have driven inflation because employers are being forced to pay more

Amid a more competitive job market and the great resignation, minimum wage employers are struggling to recruit like they used to.

Many have had to give more lucrative offers in order to fill roles, and some have said that this has contributed to inflation as well.

Bivens said this claim wasn’t really feasible. While it is true that wages staying the same over the past 15 months would have made inflation lower today, wage growth in the U.S. always lagged behind overall inflation, he said.

“So it means, on the one hand, workers’ real wages, their inflation-adjusted wages, they’re actually going down,” he said. “And also every time wage growth comes in beneath overall inflation, it’s actually serving as an anchor on inflation. It’s actually trying to drag it back down to a more normal level.”

Over the past 15 months, wage growth has been much slower and smaller than overall inflation. That disconnect means there’s little correlation between inflation and raised wages.

CLAIM: Federal spending on pandemic relief like stimulus payments, small business loans and childcare credits gave consumers too much spending money, and raised demand and prices for everyone

Opponents to relief payments have long said that giving this kind of aid to consumers would eventually make goods more expensive for everyone.

Bivens said it’s not that simple.

“Inflation is global. There’s been an acceleration of core inflation across every advanced economy, even the ones that did very, very little fiscal relief,” he said. “And so I think the evidence linking specific Biden-era policies to the surge in inflation is just really, really weak.”

CLAIM: The Russian invasion of Ukraine has had a huge impact on the global economy and inflation

It’s no secret that the war in Ukraine disrupted the supply chain for many other countries that relied on goods from that region of the world.

Bivens said this impact had been felt by just about everyone.

“I mean, when oil and food prices just go through the roof, there is a scramble among other people in the economy to try to protect themselves,” he said, adding that workers try to get higher wages in response. “They’re not fully successful, but wages do go up a bit. And so I think it’s mostly the shocks, the pandemic, and war shocks, and some ripple effects.”

He added that the solution was pretty straightforward.

“I don’t think it’s just a consistent set of policy mistakes that we need to unwind,” he said. “I think what we need to have happen is the shocks need to stop.”