President Biden used his State of the Union address Thursday night to bash greedy corporations for their recent embrace of “shrinkflation,” avoiding the role his fiscal policies have played in driving down the value of the dollar.
Shrinkflation is the practice of reducing the amount of product delivered to the consumer while keeping its price the same, or as Biden put it, there are now “fewer chips” in each bag while “you get charged the same amount.” Blaming businesses for financially misleading customers, Biden called on Congress to put an end to it.
“Too many corporations raise prices to pad the profits, charging more and more for less and less. That’s why we’re cracking down on corporations that engage in price gouging and deceptive pricing from food to health care to housing,” he said Thursday night.
Biden went on to endorse Senator Bob Casey’s (D., Pa.) legislation to combat the phenomenon.
“Pass Bobby Casey’s bill and stop this,” Biden declared, receiving applause from the Democratic side of the chamber. He then went off-script by making a joke about Snickers, saying customers pay the same amount for the chocolate bar but get less in return.
In February, Casey introduced the Shrinkflation Prevention Act and Price Gouging Prevention Act to penalize corporations for shrinking products without reducing prices and prohibit excessive price increases, respectively. Both bills, if passed and signed into law, would authorize the Federal Trade Commission to regulate shrinkflation and price gouging and sue any corporations that engage in either practice.
“I’m glad the President shares my concerns about greedflation, shrinkflation, and other ways that big corporations are squeezing hardworking Americans,” Casey said in a statement following the national address. “Solving these problems shouldn’t be partisan, and I call on Congress to work together and take action in the weeks and months to come.”
Fighting “shrinkflation” has become a favorite hobby horse of Biden’s in recent months and he frequently complains about companies “ripping off” consumers in private conversations with aides, the New York Times reported.
Confident they had landed on a political winner, the White House released aired a video message complaining about the phenomenon during the Super Bowl last month.
While they may be politically advantageous, Biden’s attacks on corporations are misleading, Ryan Bourne, an economist at the Cato Institute, told National Review.
It’s “remarkable” that the president endorsed anti-shrinkflation legislation and laid the blame on greedy businesses when, in reality, his own economic policies are at fault, Bourne said.
Shrinkflation, Bourne said, “has been a standard business practice to adjust to changing consumer tastes and cost pressures for decades, and there’s little evidence it’s happening much more now than in previous periods.”
He explained how food companies reduced their product sizes rather than pass higher prices onto customers in 2022, when inflation peaked in the U.S. before steadily decreasing. These companies “had to account for customers’ sensitivity to quantity changes as against price changes,” Bourne said, making the case against federal legislation that aims to ban reductions in quantity.
“Outlawing this option would have meant higher package prices, which would have been felt more acutely by poorer consumers, and all sorts of cat-and-mouse gameplaying as firms introduced new versions of packages to circumvent the law,” the economist added. “If anything, Biden should be grateful to the shrinkflation firms: the alternative was observable package prices for food being higher still, raising the salience of an inflation largely driven by too much macroeconomic stimulus from the federal government.”
In a Cato blog post published Tuesday ahead of the State of the Union, Bourne concisely reiterated his argument.
“Democratic politicians, including President Biden, are keen to suggest that companies are to blame for the high cost of groceries and shrinking package sizes. Both, however, are symptoms of higher inflation between 2021 and 2023, caused by too much macroeconomic stimulus relative to the economy’s propensity to produce goods and services,” he wrote.
While conservatives and Republicans are the ones largely critical of Biden’s claims that corporations are the reason for shrinkflation, economists on the other end of the political spectrum also see the flaw in that argument. Rather, record inflation due to macroeconomic-policy failures is the cause.
“Costs have gone up — wages are 20 percent higher than they were in 2019,” Dean Baker, a senior economist at the progressive and left-leaning Center for Economic and Policy Research, told Politico. “We’re not going to have a world where people get to keep their 20 percent pay increases and pay what they did four years ago for food.”