Biden targets a new economic villain: shrinking inflation

Biden targets a new economic villain: shrinking inflation

Biden targets a new economic villain: shrinking inflation

On Super Bowl Sunday, the White House released a short video in which a smiling President Biden, sitting next to a table filled with chips, cookies and sports drinks, criticized companies for reducing package sizes and portions of popular foods without a corresponding price reduction.

“I’m tired of what they call shrinking inflation,” Mr. Biden said.

The video lit up social media and delighted a consumer advocate named Edgar Dworsky, who has been studying “shrink and inflation” trends for more than a decade. He briefed Mr. Biden’s economic advisers twice, first in early 2023 and again days before the video was released. The first briefing didn’t seem to go anywhere. The second clearly illuminates Mr. Biden’s new favorite economic argument: that companies have taken advantage of rapidly rising prices to line their pockets by keeping those prices high while offering less to consumers.

The products featured in the president’s video, like Oreos and Wheat Thins, were all examples of the inflation contraction that Mr. Dworsky had documented on his Consumer World website.

As inflation moderates, shoppers remain angry about the high price of groceries. Mr. Biden, who has seen his approval ratings suffer due to rising prices, has found a blame-shifting message he loves in the midst of his re-election campaign: confusing businesses into reducing size of candy bars, ice cream cartons and other foods. products, while increasing prices or keeping them stable, even if company profit margins remain high.

The president has begun accusing companies of “ripping off” Americans with these tactics and is considering new executive actions to crack down on the practice, administration officials and other allies say, without specifying what measures he could take. He is also likely to criticize falling inflation during his State of the Union address next week.

Mr. Biden could also pass new legislation to empower the Federal Trade Commission to more aggressively investigate and punish corporate price gouging, including in grocery items.

White House officials credit Sen. Bob Casey, Democrat of Pennsylvania, with listening to the president on the issue. Mr. Casey’s office issued a scathing report on contraction and inflation last year, calculating that about a tenth of recent price increases for snacks and toilet paper were attributable to companies reducing the number of cookies in a bag or sheets on a roll.

Mr. Casey focused on the issue during his re-election campaign, blaming big companies for price increases that left consumers struggling to afford sufficient quantities of essential goods. “Some things are really pernicious,” he said in an interview. “You can’t wait a year to buy paper towels, boneless chicken, groceries or Huggies diapers.”

Liberal senators and some progressive think tanks in Washington pushed Mr. Biden early in his term to blame the biggest rise in consumer prices in four decades on corporate greed. Senator Elizabeth Warren, Democrat of Massachusetts, accused companies of ripping off consumers as prices began to rise in 2021.

Some Democratic economists, including veterans of previous administrations like Harvard’s Jason Furman, have rejected claims that price gouging was to blame for inflation. Mr. Biden only partially embraced that argument, selectively calling out meat processors and oil companies and talking extensively about other drivers of inflation, including supply chains ensnared by the pandemic.

“It wasn’t as broad as some people would have liked,” said Bharat Ramamurti, Mr. Biden’s former economic adviser, who nonetheless fielded angry calls from businesses Mr. Biden had called out in 2021 and 2022. .

Since then, Mr. Ramamurti noted, polls have shown that Americans are angry at companies that raise their prices, including those of groceries. Part of Mr. Biden’s contraction-and-inflation strategy, Mr. Ramamurti said, “is trying to meet the public where they are and talking about issues that they really care about.”

White House officials acknowledge the political nature of the issue, but say other factors are also motivating Mr. Biden’s speech. Administrative economists have been struck by the persistence of high corporate profit margins, even as inflation slows; food production costs failed much faster over the past year than the price of food on store shelves.

Mr. Biden discussed food prices at length with voters. And, as he noted in his Super Bowl Sunday video, he’s an unapologetic ice cream fanatic.

Progressives who pushed Mr. Biden to target companies earlier and more aggressively on price increases have welcomed its new direction. Lindsay Owens, executive director of the liberal think tank Groundwork Collaborative in Washington, said in an interview that Mr. Biden’s comments were timely in helping voters understand why, even amid falling inflation, prices for groceries and other key prices remain stubbornly high.

“The supply chain piece doesn’t resonate with people anymore,” she said. “The shelves are stocked. When you’re trying to explain the last mile, that’s an important part.”

Mr. Dworsky said he was glad that Mr. Biden realized the importance of focusing on reducing inflation.

“I found a good spokesperson,” he said in an interview. “I can’t think of many consumer education issues that have reached this level.”