Why We Can’t Trust Phil Knight and His Gang About Complex Political and Economic Issues

One of the most overwhelming problems with our electoral system is the need to stoop to the lowest common denominator: oversimplifying complicated matters to the point of irresponsibility in order to fit a 30-second sound bite. Equally, that sound bite costs money to produce and much more to buy air time. In other words: Money can define issues and alter elections.

Major contributors to this ugly assault are Phil Knight and other Oregon uber-billionaires. They’ve bought the airwaves in an effort to scare workers and the middle-class into voting Republican. As my mother used to say, they fudge a lot.

Their most recent message is a lie worthy of Donald Trump. They say inflation is at historic levels because Joe Biden is President, that his Democratic policies have caused inflation. So vote against Democrats. Following this false logic, more Democrats mean more ugly inflationary problems. So let’s look at some facts.

What causes worldwide inflation? (Emphasis on worldwide.) Here’s a hint—not Joe Biden or Democrats. Average inflation in developed countries in 2022 will be about 8.3%. Could German inflation be caused by Biden’s infrastructure bill? What?

How about fossil-fuel costs around the globe? Saudi-driven oil shortages and a Russian-caused European war come into play, too. When energy prices go up in Europe (thanks, Mr. Putin), the impact is felt here.

When 40% of the world’s wheat shipments from Ukraine are halted by Russia, do you think that raises the price of wheat everywhere? Is Biden’s Build Back Better bill hiking the price of wheat, a commodity needed worldwide? Hardly.

Inflation occurs when supply and demand are out of balance in market-based economies. Contrary to Republican misinformation, Biden’s legislative successes put downward pressure on inflation by enhancing productivity and reducing supply costs. Yet, inflation continues to be higher in the U.S. than in many other developed countries.

But there’s more. (Remember, this is not simple.) When Trump passed his tax cut, the national media said such a huge tax cut in a recovering economy would be inflationary, since it would flood financial markets with free cash but not create additional production.

Hold it! Who didn’t want more cash?

Unfortunately, the 2017 prediction is happening. Trump gave trillions to the rich and a few bucks to the rest of us.

Trump didn’t create more food production or widget production; no, all that money created stock buybacks, huge CEO compensation packages and made the rich richer. (Phil Knight and his pals are downright drooling.) Too, it promotes industrial sector concentration and continues to be an inflationary driver every year it remains in effect.

But wait! There’s more that Biden has nothing to do with. A major unreported contributor to U.S. inflation is industrial concentration, which has increased dramatically under Republican presidents. During Obama’s presidency that concentration declined slightly. Under Trump, market concentration drove huge increases in corporate profits, some jumping up 200-400%.

The graph produced by the Federal Reserve Bank of Boston shows industry concentration 50% higher today than in 2005. While increased concentration started its current run up during the economic recovery at the very end of the Obama Administration, it didn’t reach staggering increases until after the election of President Trump.

And here’s the kicker. The bank, an independent fiscal institution, estimates the current level of concentration is responsible for about a 25% increase in inflation here in the U.S. That amount closes the inflation gap between the U.S. and other developed countries.

Phil Knight and his jillionaire buddies know this factual economic reality makes for a lousy political message; it would harm their cause. So they just turn it upside-down and blame Biden and the Democrats. Bad Trump policies are coming home to roost. In fact, the fiscal impact of Biden bill’s has actually yet to be fully felt. When they are, and the projects are completed, inflation pressures will be reduced.

But there’s a lot more. Consider the gap between raw-material cost increases and retail prices. Here it starts hitting with the big Republican advertising spenders.

The price of a barrel of crude oil has dropped by $1.77 from last October to this week. Yet the price of gas (per barrel) has increased by $4.44. Whoa! That’s an additional $6.21 per barrel profit for producers.

What about windfall profits? Chevron, Exxon, UK-based Shell and France's TotalEnergies businesses, combined to earn nearly $51 billion in the most recent quarter, almost double what the group brought in for the year-ago period. Did they sell more product? Hardly. Main Street loses money while Wall Street drags it in by the trainload. And that puts families right here closer to poverty.

Both GM and Ford sold fewer cars in 2021 than they did in 2020, yet both saw record profits: GM made $14.3 billion and Ford $17.9 billion. The global chip shortage (another inflation contributor which is not Joe Biden’s fault), enabled these U.S. manufacturers to produce less and make more money as dollars here in Clackamas County went to Wall Street and gazillionaire pockets. Industrial concentration in these two different industries is many times higher than others.

The HHI, the Herfindahl–Hirschman Index is a statistical measure of market influence based on the size of the firm relative to the sector they are in. The higher the number the higher the level of corporate concentration.

We know inflation has many drivers: the pandemic, excessive corporate power, failure of government to restrain corporate profit schemes, bad tax policy and no effective windfall-profits tax. (Which could lower taxes on the rest of us.)

Biden’s programs are not significant contributors to inflation, especially when one realizes that federal debt as a percentage of the GDP has declined by 15% since Biden took office.

When faced with a similar Republican public-relations and advertising onslaught, Franklin Roosevelt declared war on phony economic patriotism. In fact, he told American voters, “Don’t just vote your self-interest. Vote your enlightened self-interest.” To be enlightened is to know more.

That means not learning economic lessons from anyone spending millions of dollars to buy advertising that “teaches” voters that Biden is the problem. Trust the hard facts. Phil Knight and his ilk are the problem.