Remarks by National Economic Advisor Lael Brainard on Lowering Costs for American Consumers

Hosted by the Urban Institute and the Consumer Federation of America

As Prepared for Delivery

Thank you all for the important work you do on behalf of American consumers every day.

President Biden sees our economy through the eyes of middle-class families like the ones he grew up with in Scranton, Pennsylvania. He knows that a lot of families are feeling squeezed by the cost of living. That’s why the President’s top economic priority is lowering costs. 

The President has directed his Administration to use every available tool to lower costs for families in each important area of their budgets. We have more work to do, but this plan is already putting thousands of dollars back in many families’ pockets on everything from insulin, to inhalers, to home heating, to credit card fees, to lower gas prices. That may not sound like much to the wealthy, but those savings add up for hardworking Americans.  And the President is fighting to extend these savings to more Americans who stand to save thousands of dollars more each year.

The question now is: Do we want to continue fighting to build an economy that gives families more breathing room by lowering costs? Or do we want an economy that gives big corporations and the ultra-wealthy special breaks and raises costs for everyone else?

Many Republicans in Congress take every opportunity to call attention to inflation, but they haven’t offered a single solution to bring costs down. Instead, they want to take us backwards—including by imposing broad tariffs on all imports that would raise families’ costs by thousands of dollars per year. 

The President has a comprehensive plan to continue lowering costs across the economy, from groceries and gas to healthcare and housing to transportation and ticketing. Today, we are sharing a summary of these actions that shows in detail the cost savings in every area of the family budget from the President’s initiatives. I want to spend a few minutes talking about what’s at stake in this debate—and some of the core pillars of the President’s lowering costs agenda.

Why Did Prices Increase?

We know from the data that the pandemic drove the rise in inflation that has squeezed Americans over the past few years.  In fact, every country saw a similar surge in inflation as a result of the global economy shutting down and supply chains breaking. The surge in inflation was exacerbated by Russia’s invasion of Ukraine, which caused a sharp increase in gasoline and food prices.

The President took action in partnership with the private sector to address supply chain bottlenecks and mitigate the impact of these disruptions. Today, supply chains are largely back to normal, and inflation has fallen by about two-thirds, and some areas, input costs have come down. Yet some companies have been slow in passing these savings on to consumers. 

I have talked about a price-price spiral where companies capitalize on their pricing power to expand their margins when input prices go up. Now, we are seeing some companies with pricing power keep their margins high rather than pass along savings to consumers when input prices go down.
In fact, 2023 saw the highest after-tax profit rate for corporations outside of the financial sector since at least 1947. 

Although we are beginning to see some signs of price reductions, there is room for further disinflation as margins compress further.  

Where pricing power is high, in some industries, it reflects weak market competition. When competitive pressures are strong, businesses must pass along cost savings to consumers in order to keep or win their business. The evidence suggests three quarters of U.S. industries grew more concentrated in the decades before President Biden took office, which may have contributed to weaker price competition in some sectors. That is why the President’s efforts to lower costs for families have gone hand in hand with his actions to strengthen market competition. 

Bringing Grocery Costs Down
 
The President is focused on lowering the costs that are most important to families, like groceries, which Americans purchase every week. Grocery prices rose during the pandemic as deliveries piled up at ports, and increased another 11.8 percent in 2022 due to Russia’s invasion of Ukraine, which spiked food commodity prices. We worked with farmers, grocery stores and shippers to improve supply chains and restore global grain markets. 

But even though shipping costs and global food commodity prices have declined sharply, grocery prices have been slow to come down, and grocery store margins remain elevated relative to pre-pandemic levels.

President Biden has called on large grocery chains to pass along their savings to consumers and used his State of the Union Address to spotlight the high prices set by many packaged food companies. 

Some grocery stores are answering the President’s call and lowering prices on thousands of items, and we are seeing signs that grocery prices may be turning a corner. Grocery prices have been down for each of the past 4 months, and have increased only 1% over the past year. In fact, prices are down over the past year for categories like fish and seafood, dairy products, and fresh fruit.   

This is a start, but corporations have to do more to bring their prices down, and the President will keep up the pressure on this issue.

For low-income families that are struggling to pay grocery bills, the Administration has provided $2,000 more for groceries for a family of four by improving SNAP—lifting 3 million people out of poverty—and launching Summer EBT grocery assistance for nearly 21 million children. 

And yet against this backdrop, some Congressional Republicans actually support putting tariffs on all food imports—raising prices by 10 percent on everyday purchases like coffee, chocolate, berries, fish, bananas and grapes.

Bringing Health Care Costs and Drug Prices Down

The President has also been fighting to bring down health care costs.

Americans pay two to three times more than people in other countries for the same prescription drugs. So it was a big victory for the American people when President Biden secured passage of the Inflation Reduction Act (IRA) that has brought down the price of insulin to $35 a month for seniors on Medicare—saving some as much as $365 per month—and got the three largest insulin producers to cap insulin prices for other Americans. And the President has proposed making these savings available for the millions of younger Americans that use insulin.

Starting next year, as a result of this law, out of pocket prescription drug costs will also be capped at $2,000 for seniors—saving 19 million people $400 per year on average—and many thousands of dollars a year for some. And the President is fighting to extend this cap for all Americans.

Finally, thanks to the IRA, for the first time ever, Medicare is able to negotiate lower prices for prescription drugs, starting with 10 this year and far more in the years to come. The President is fighting to extend these benefits to even more drugs.

I want to be clear: this doesn’t just help family budgets—it helps the federal budget too by lowering the deficit by $160 billion over the next ten years. Here again, Congressional Republicans opposed these drug price reductions—even though they reduce deficits, which means that, if they prevailed, they would raise the cost of prescription drugs and insulin for tens of millions of Americans.

And it is not only drug prices. The President’s health insurance premium tax credits enacted in the American Rescue Plan and extended by the IRA are saving millions of Americans an average of about $800 per year on their health care premiums. Republicans in Congress uniformly voted against this law and are working to repeal the Affordable Care Act, which would raise health insurance premiums for millions of Americans.

In addition, in response to administrative actions, some of the largest inhaler producers have given eligible Americans access to inhalers costing $35 a month—saving around $1,200 per year—and the Biden Administration enacted rules that can help millions of Americans save as much as $3,000 on their hearing aids.

The President will continue to use every tool he has to lower health care costs.

Bringing Transportation Costs Down

As we enter the summer travel season, prices at the pump are perhaps the most visible price that Americans see every week.  National average gas prices are below $3.50 amid continued record high domestic production.

This isn’t an accident. When gas prices spiked globally after Russia’s invasion of Ukraine, the President took extraordinary action to bring gas prices down. And additional actions by the Administration are helping to keep gas prices in this lower range today. We are in the process of releasing 1 million barrels of gas from the Northeast Gasoline Supply Reserve, in time for the July 4^th holiday.

The President believes consumers should have choices about what type of vehicle they want to drive. Thanks to Inflation Reduction Act tax credits, we are lowering the price of a new clean vehicle by up to $7,500, and a used clean vehicle by up to $4,000.  These clean vehicles are projected to lower fuel costs by an average of $700 a year and maintenance costs by $500 per year. For the first time ever, these tax credits are available up front at the dealer, as “cash on the hood.” We’ve seen strong uptake of this provision, with $1 billion in upfront consumer savings in the first five months of 2024 across more than 150,000 clean vehicle sales.

In addition, we are lowering the costs of flights for many Americans. In signing the bipartisan Federal Aviation Administration Reauthorization Act, the President delivered on his commitment to address family seating fees that are costly and frustrating for many families with young children.  Eliminating family seating fees can save a family with two children $200 for a round trip itinerary. And this law also provides passengers with the right to automatic cash refunds for cancelled or delayed flights and lost luggage.

Bringing Housing and Utility Costs Down

The President knows that housing costs are a critical part of every family’s budget. He has a comprehensive plan to lower housing costs for families. He has called on Congress to bring rent down by funding the construction of 2 million affordable homes, and to provide mortgage relief of up to $10,000 for millions of first-time homebuyers and homeowners seeking to trade up or downsize.

Congress should move on that proposal immediately. A bipartisan bill that would provide tax credits on the construction of 200,000 additional affordable units passed the House overwhelmingly in January, but is opposed by some Senate Republicans. Instead, some Congressional Republicans seem intent on protecting special tax breaks for corporate landlords and reducing rental assistance programs.

We urge Congress to act, but we cannot simply wait. We recently announced a cap on annual rent increases for the 2 million households in Low-Income Housing Tax Credit units, reducing the maximum that landlords can increase rent by an average of about $480 annually. We are going after rental junk fees that aren’t disclosed up front and that can add hundreds of extra dollars on top of rent every month. 

Already, nearly 700,000 homeowners are saving roughly $900 annually as a result of the Administration’s reduction in mortgage interest premiums for FHA-backed loans. A title insurance pilot could soon save thousands of Americans an average of $750 when they refinance their homes.

In addition, the President has signed historic legislation that helps families save on their utility bills. Thanks to the IRA, households that install a heat pump receive a $2,000 tax credit and save $500 each year on energy bills. Households that install energy efficient doors, windows and insulation can save up to $1,200 per year in tax credits. 

Moreover, under the Affordable Connectivity Plan, 23 million families have been able to save approximately $360 each year on highspeed internet and the President is fighting hard to keep this program in place.

Fighting to Lower the Cost of Living

The Biden Administration is taking action in numerous other areas where Americans are facing high costs—from banking overdraft fees and credit card late fees to filing taxes and attending live events.

On childcare, the Administration is saving lower-income families $2,400 per year, and the President has a plan to help families afford high-quality child care for 16 million children, with the average family saving $7,200 a year.

And thanks to the President’s Saving on a Valuable Education program, or SAVE, the typical student borrower will save $1,000 a year on their loan payments compared to other income-driven repayment plans.

The President has called out big corporations to pass along savings to consumers, secured historic cost-lowering legislation, directed his Cabinet to use every tool to lower costs, and eliminated hidden junk fees in nearly every area of a family’s budget. Think about what these savings mean to millions of hardworking families across the country.  That’s what this work is ultimately about: more breathing room for hardworking families. And that’s why this President is going to continue fighting to lower costs for the American people every single day.

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