Washington, DC – Today, the House Committee on Financial Services held a hearing titled, “The Inflation Equation: Corporate Profiteering, Supply Chain Bottlenecks, and COVID-19.” Congressman Frank Lucas (OK-03) spoke at the hearing on the impact inflation is having on America’s agriculture producers:

“Being an old ag-econ guy from Oklahoma State, I was very pleased to hear you discuss the unique concept of the inelasticity of demand because that’s really difficult for a lot of people to get a grip on- the concept that you either have enough or you have too much and that price dramatically shifts from one perspective to the other.

Click here to watch Lucas Q&A

Excerpts

On inflation impacting rural America

Lucas: Farmers across the country are experiencing higher costs for chemicals, seeds, fertilizer, equipment, fuel, and labor, among other increased input costs. The squeeze and uncertainty felt by farmers and ranchers right now will be felt for years to come. This means the high food prices we see now may be with us for some time. Dr. Goodspeed, can you discuss how persistent inflation isn’t simply a supply-chain, logistics, or pandemic recovery issue, but spreads much deeper into the economy?

Dr. Goodspeed: That’s right. Sometimes we see relative price increases where prices are increasing in one sector or another. But what we’ve seen in the past year is broad-based inflation that crosses multiple sectors and it hurts working people very hard because they don’t have the same bargaining power that other workers have. Things like rent, food, energy, utilities are much bigger shares of their disposable personal income. And many lower income households don’t have hedges against inflation, the principle of which is housing.

On historical impact of inflation

Lucas: I started out farming, Doctor, in 1977 as we slid into the inflationary period of the Carter years, and we went through Mr. Volker’s dramatic tightening of the money supply and we saw the old 1930s interest rate caps come off. I borrowed cow feed money at 17% in 1981 and was so happy to get it. So happy to get it. But I also watched a generation of young farmers and ranchers who’d come home from the Vietnam War, who were absolutely exposed economically, be destroyed and the last of those Sheriff’s sales were still taking place in the 1980s. So I carry a few scars of watching my neighbors. We need to try to avoid that, don’t we, Doctor?

Dr. Goodspeed: I think that’s right. When one looks at past episodes of the Federal Reserve having to play catch up with inflation they have to respond even more aggressively than had they responded earlier in order to ring that inflationary pressure out of all sectors and that was what we saw in the early 1980s.

Lucas: So, the longer the binge, the harder the hangover.

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