The Biggest Issue in the Midterm Elections

The earnings of America’s largest corporations — the S&P 500 — surged by an astounding 53% over the past year.

But most Americans are losing ground . Wages have barely risen — yet a tomato today costs 40% more than it did just a year ago. Gas now costs an average of more than $4.50 a gallon . Renting an apartment is 54% more expensive than it was in 2017. Housing prices are up 60% since 2019 . Families will spend $120 more on electricity this year than last year. Credit card debt is up 63% since just 2021. Add in so-called “convenience fees” popping up everywhere, along with “ shrinkflation ,” where companies deceptively shrink product sizes while charging the same or even more, and what do you get? An economy that’s clearly, wildly, unambiguously unaffordable.

A widely watched measure of consumer confidence slipped in August as consumers fretted about future economic conditions, the Conference Board said this past week.

Why the widening gap between how well big corporations are doing and how poorly average Americans are doing? Three reasons:

1. Big corporations are monopolizing their markets, raising prices as they pocket bigger profits.

A major part of the affordability crisis is directly related to monopoly power. As big corporations raise prices, the typical working family has to struggle even harder.

A good rule of thumb is that when four or fewer giant corporations dominate a market, it’s relatively easy for them to informally coordinate their prices so they all make bigger profits while leaving consumers with less choice. This is now the case across much of the American economy.

Walmart now controls almost a quarter of the nation’s grocery market and dominates retail sales. Walmart sells more than half of all groceries in close to 40 metropolitan areas across America.

Amazon, meanwhile, dominates e-commerce in general and many specific lines of business. The corporation sells about 80% of all e-books and 71% of all print books sold online .

A major part of the affordability crisis is directly related to monopoly power.

It’s the same for more specialized retail. One company, Luxxotica , dominates the manufacture and retail of eyeglasses. Two companies control 60% of the entire U.S. mattress market.

Four major companies — Tyson Foods, Cargill, JBS USA and the National Beef Packing Co. — now control about 85% of U.S. meat processing.

Four major carriers control around 70% to 80% of domestic flights and the overall airline market.

Four corporations control roughly 85% of U.S. corn seed sales and 75% of soybean seed sales.

Three primary providers control approximately 80% of the mobile telecom market.

And then there are Apple, Amazon, Google (Alphabet), Facebook (Meta), Nvidia, and Microsoft — which are taking over everything. In a few years, their AI may own, do and profit from the entire economy.

Appropriate response: Antitrust enforcement! Plus new and more comprehensive antitrust legislation that enables regulators to break up the biggest corporations and make it harder for them to merge or acquire others.

2. High corporate profits are reflected in record stock market values, but only the richest are benefiting from the soaring stock market. That’s because the richest 1% of Americans own about half of the value of all shares of stock; the richest 10% own over 90%.

As a result, the richest 10% are feeling wealthier and spending more. But the bottom 90% are not.

In fact, a growing portion of the American workforce is sinking. It’s not just that their wages aren’t keeping up with prices. A quarter of them don’t even have jobs that pay enough to keep them out of poverty.

An old friend, Gene Ludwig, has been measuring the true rate of unemployment — defined not only people who are unemployed, but also those who are working part time who’d rather have a full-time job, people too discouraged even to look for work and those not earning enough to keep them out of poverty.

This true rate of unemployment grew 0.2 percentage points in July, from 24.7% to 24.9% of the working-age population of the United States — the fourth consecutive month of these negative increases, which are up 0.8 percentage points since the start of the year.

Think about it. Almost a quarter of everyone in the U.S. who’s able to work and wants to work cannot find a job that pays them enough to keep them out of poverty.

Appropriate response: A minimum wage of $20 an hour, a universal basic income and a universal job guarantee.

3. Tariff refunds are providing a big, temporary subsidy to large corporations. They had passed the costs of those tariffs on to their consumers in the form of higher prices, but consumers aren’t receiving the refunds.

This isn’t nearly as large an issue as the first two, but it’s not nothing. The Wall Street Journal reports that tariff refunds are likely to account for more than 4% of third-quarter economic growth. Apollo Global Management estimates that the refunds to corporations will add about 0.2 percentage point to the Atlanta Fed’s growth forecast of between 4% and 5%.

Appropriate response: Require that corporations pass on the refunds to consumers in the form of lower prices.

The increasing wealth and power of big corporations and the increasing financial distress of most American families will be the biggest issue in the upcoming midterms.

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