2022: A Year in Economics

The Pitch: Economic Update for December 29th, 2022

Friends,

When the New Year rolls around, I like to take a day or two to reflect over the year that was — celebrate the victories, consider what can be learned from the losses, and meditate on the paths not taken. I recently looked over the last year of this newsletter and found that four major economic stories persisted throughout the year.

2022 Was the Year of the American Worker

This year started off auspiciously, with the strongest labor market of our lifetimes. January added a half-million new jobs to the economy, much to the chagrin of economists who were eager to predict recessionary doom for the economy in 2022. March really saw the job market heating up, with people quitting their jobs and getting paid better at their new jobs. Notably, those gains were shared across race and gender lines, unlike many recoveries in the past. Factory jobs started to come home to America, reversing decades of losses. Some 4.5 million workers switched jobs in April, and workers who switched jobs saw their wages increase markedly higher than workers who did not.

Of course, unions were on the march. Striking grocery workers won huge raises in April while lower-wage workers across the nation saw a “blistering” increase in paychecks. Starbucks baristas across the country voted to unionize, and Amazon warehouse unionizers went to the White House. Because of those high-profile victories and the strong labor market, union popularity exploded this year.

All of these gains produced significant results in the real world. The $15 minimum wage was found to decrease income inequality in Seattle. And nationally, inequality between the super-rich and low-wage Americans dipped for the first time in decades because worker wages rose so much.It’s hard to overstate how big a deal this is in the American economy — for the first time since Ronald Reagan, working Americans in 2021 finally earned enough money to slightly tighten the prosperity gap that has been yawning larger with each passing year.

Inflation Plagued the Global Economy

Even though worker wages increased significantly this year, inflation ate away at all those wage gains, ultimately leaving workers at a deficit in 2022. Former Obama Treasury Secretary Larry Summers tried (and failed) to blame inflation on rising worker wages. Summers also called for 16 million American workers to lose their jobs to get inflation in line, which would have done absolutely nothing to resolve the two biggest contributors to inflation — pandemic-related fractures in the supply chain and runaway corporate greed.

Though many economists kept predicting that inflation would subside or grow worse, it remained steady for most of the year. We saw zero inflation in July, but that wasn’t the end of high prices — inflation ticked back up in September, but has been on a steady downward slope in the last few months of the year.

Housing prices were a huge issue all year long for aspiring homeowners and renters alike. Housing is a trailing indicator for the inflation rate, meaning that high housing prices keep the inflation rate aloft for months after other indicators, including food and car prices, subside. Those housing prices ate away at the middle class, and other high prices hurt consumers around the country.

As prices stayed high, the Federal Reserve began to raise interest rates at an unprecedented clip. Their goal was to make it more expensive for people and businesses to borrow money, thereby slowing the economy down, killing consumer demand, and forcing producers to slash prices. That philosophy seemed to have worked in the 1980s, but it doesn’t really reflect the causes behind the current inflationary wave, for reasons we will get into momentarily.

Not to brag, but we here at the Pitch were way out in front of a wide array of voices who were critical of the Fed’s aggressive rate-raising campaign. But that chorus against the Fed only became louder as we entered the autumn. At no time has such a wide array of economic voices been so vocal in its protestation of Fed policy in modern American history .

Corporate Greed Ran Amok

In January of 2022, The Pitch warned that corporate greed was contributing to inflationary price increases. We received some reader pushback for making that claim — how dare we blame honest American capitalism for inflation? — but at the time, the connection seemed glaringly obvious. Even as Americans spent more and more to buy less and less at grocery stores, corporations were bragging about record profits in their quarterly earnings calls. By the middle of 2021, many of those same CEOs were even openly stating that they were using inflation as an excuse to bring home profits.

Let’s be clear that sky-high corporate profits like this aren’t normal. April saw the release of a new report showing how much corporations are giving away to shareholders at the expense of workers. Anti-monopoly journalist Matt Stoller helped dimensionalize the cost of those profits by pointing out that in 2021 if we pooled all the profits reported by every American corporation and then divided them equally among 335,000,000 American citizens, we would each take home a check for $5,207. “That’s an increase of $2,126 per person” when compared to corporate profits before the pandemic, Stoller wrote.

The American people understood this connection before many experts did. A February poll showed that Americans clearly understood the starring role corporate greed and price-gouging played in rising prices. Finally, politicians started to take a stand against corporate greed and discuss policies to fight price-gouging in March. It wasn’t until September that the Federal Reserve finally acknowledged the role of greedflation in raising prices.

And let’s flash back to one of the first Pitches from January of this year for a clear example of corporate price-gouging: “USA Today notes that while both the Kroger chain of grocery stores and Walmart were selling Covid tests for $14 apiece before Christmas, Walmart this week raised prices on tests to $19.88, and Kroger’s prices skyrocketed to $23.99 per test. Businesses, it turns out, had an agreement with the Biden Administration to sell the tests at cost for 100 days, and that agreement ended this week.”

By the end of the year, Kroger cemented its reputation as the poster child of runaway corporate greed for 2022 by announcing a merger with competing grocery chain Albertsons that would raise prices, slash worker pay, and close stores. Next year, all eyes are on the Biden administration. Will they follow the lead of state attorneys general and fight this competition-killing merger? Such a lawsuit would undoubtedly be popular with the American people.

Welcome to Year One of the Middle-Out Era

A leading contender for the worst prediction of the year came in a January piece by Jeff Stein in the Washington Post with the headline “The left dreamed of remaking America. Now, it stares into the abyss as Biden’s plans wither.”

Stein’s assessment was just one of a chorus of naysayers who spent the early part of 2022 declaring the Biden presidency DOA. But those pundits weren’t operating in a vacuum: Economists spent most of the year trying to explain that good economic news is bad and bad economic news is good. Leading economists argued with a straight face (and presumably a clean conscience) that widespread low unemployment and high wages were somehow damaging the economy, and that millions of Americans needed to be put out of work in order for things to get back to normal.

Meanwhile, all year long, President Biden was telling a different economic story. In February’s State of the Union, Biden announced his economic philosophy: “Invest in America. Educate Americans. Grow the workforce. Build the economy from the bottom up and the middle out, not from the top down. Because we know that when the middle class grows, the poor have a ladder up, and the wealthy do very well.”

The CHIPS act in July and the Inflation Reduction Act in August were a direct result of Biden’s middle-out economic thinking, and so was student loan forgiveness. As middle-out economics ascended as an economic ideal, trickle-down economics became the subject of international ridicule when British PM Liz Truss was quickly pushed out of power when she proposed a huge slate of tax cuts for the wealthy.

Still, experts predicted through the fall that Biden was in for choppy waters during the midterm elections. Instead, voters rewarded Biden with a nearly unprecedented strong showing in the midterms, holding the Senate and pushing back against a “red wave” in the House, along with major gains in states around the country. The American people understand middle-out economics, and they rewarded Biden for keeping them, and not wealthy CEOs and corporations, at the center of his economic agenda.

What’s next?

As I’ve said throughout the year, anyone who confidently claims to predict where the economy is going with absolute certainty is either a fool or a liar — or both. There are no precedents for these economic times — we’ve never shut off the global economy to combat a pandemic and turned it back on again — and our situation is unique.

That said, three middle-out principles seem to be holding solid in this turbulent economy, and they should serve as meaningful guideposts for our economic leaders:

1. Keep the American worker at the center of everything you do. If paychecks are increasing and people are employed, their spending power keeps the economy aloft. Policies that invest in workers are policies that create a better economy for everyone.
2. Cutting spending only prolongs the economic hurt. America’s recovery from Covid lockdowns ran circles around the rest of the world because we invested deeply in our people and ensured that they didn’t have to start from zero to reenter the economy. On the contrary, in response to the Great Recession of 2008, our leaders slashed the social safety net and pushed people out of the economy, which slowed the nation’s economic recovery to a crawl.
3. Trickle-down is economic poison. Anytime a politician suggests tax cuts for the wealthy, deregulation for the powerful, or wage suppression for workers as a tool to create economic growth, they deserve to be laughed out of power. Now that the American people have gotten a taste of economic policy that doesn’t favor the wealthiest one percent, their tolerance for policies like the Trump tax cuts has likely plummeted.

It’s been quite a year — if I never hear the word “unprecedented” again, it will be too soon — and I wanted to take this opportunity to thank you for spending 2022 with me here at The Pitch. In this day and age attention is a hyper-limited resource, and I am so grateful that you’ve chosen to share some of your attention with me. It’s a responsibility that I never want to take for granted. I’m honored to close out the year with gratitude for your time, your attention, and your support. It means the world to me.

Be kind. Be brave. Take good care of yourself and your loved ones.

Zach