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Looking toward November, Biden targets ‘shrinkflation’ in State of the Union speech

President Joe Biden delivers the State of the Union address during a joint meeting of Congress in the House chamber at the U.S. Capitol on Thursday, March 7, 2024, in Washington, DC. This is Biden’s last State of the Union address before the general election this coming November. Biden was joined by Vice President Kamala Harris and Speaker of the House Mike Johnson (R-LA). (Credit: Chip Somodevilla/Getty Images)

Casey Quinlan, News From The States
March 8, 2024

The White House retweeted Cookie Monster about it. The president made his own Super Bowl video about it.   

And then President Joe Biden made it a point in his State of the Union speech: “Shrinkflation” must be stopped.  

Biden said Thursday during his annual address that he is taking on corporations that are making more money by selling reduced amounts of their products but not lowering the price — giving consumers less bang for their buck. He’s also focusing more on practices of so-called price gouging that are weighing on American families’ budgets.

“Too many corporations raise their prices to pad their profits, charging you more and more for less and less,” Biden said. “That’s why we’re cracking down on corporations that engage in price gouging or deceptive pricing from food to health care to housing.” 

The “less and less” Biden referred to is shrinkflation. “In fact, the snack companies think you won’t notice if they change the size of the bag and put a hell of a lot fewer — same size bag — and put fewer chips in it,” Biden added. 

Heading into the general election after Biden and former President Donald Trump both racked up needed delegates to secure their parties’ nominations on Super Tuesday, Biden used part of his speech to focus voters on their pocketbooks. A recent Pew Research survey says Americans rank the economy as their No. 1 policy issue for 2024.

The Biden administration recently launched a joint task force of the U.S Department of Justice and Federal Trade Commission to focus on corporate pricing.

Some economists have argued that despite some of the labor and nonlabor costs easing, corporate profit remains high, suggesting that corporations are keeping prices much higher than necessary to make juicy profits. Corporate profits as a share of national income rose 29% since 2020 and drove 53% of inflation in the second and third quarter of 2023, according to Groundwork Collaborative’s analysis of Federal Reserve and Bureau of Economic Analysis data. 

“What they’re doing during this period of high inflation is actually expanding their profit margins above and beyond historical averages,” said Lindsay Owens, executive director of Groundwork Collaborative, an economic policy think tank. “Companies have really been using the kind of cover of inflation and the fact that Americans expect prices to increase to go a little further than they needed to. And they’ve brought in really considerable profits as a result.”

The personal consumption expenditures index, a measure the Federal Reserve focuses on more in its fight to reduce inflation, moved up 0.3% in January and 2.4% in the past 12 months. Wages were up 4.3% over the past year, according to the February jobs report, outpacing inflation. 

But slowing inflation doesn’t mean that prices are affordable for most Americans and research has shown that factors other than supply chain issues, the war in Ukraine, and climate change – such as a corporate drive for profits – may play a role. 

This is having an effect on common household products many families have no choice but to purchase. In the highly concentrated diaper market, Procter & Gamble and Kimberly Clark have helped keep diaper prices elevated for parents despite the cost of a major component of diapers falling, the Groundwork Collaborative report explained. The cost of disposable diapers in 2019 was 16.54 compared to $22.17 as of Feb. 24, according to NIQ’s consumer data. NIQ determines the cost by the average cost of a diaper package not by a specific package size of diapers.

Some economists have pointed out that these high profits during the economic recovery are nothing like the profits businesses have made in past economic cycles. Chief economist at the Economic Policy Institute, Josh Bivens, explained in 2022 that, “Evidence from the past 40 years suggests strongly that profit margins should shrink…”

During his speech, Biden shouted out a bill introduced by U.S. Sen. Bob Casey (D-PA) that he said would help address the problem. The legislation, which he introduced in February, allows the Federal Trade Commission to pursue regulations that establish it as a deceptive or unfair practice. Casey is also a cosponsor of the Price Gouging Prevention Act, which was reintroduced in February and would establish price gouging as an unfair or deceptive practice as well. 

Edgar Dworsky,founder of Consumer World, a consumer resource guide, said companies use all kinds of tricks to deceive customers about the size of what they’re buying,  from deep indentations on the bottom of peanut butter jars and large cereal boxes with much smaller bags of cereal inside than packaging would suggest. Paper goods, candy, chips, orange juice, and specialty milks are some of the products that tend to be most subject to “shrinkflation,” he said, although corporations have broadly implemented the practice across product types. 

As a consumer advocate who has been focusing on shrinkflation for many years, Dworsky said it was encouraging to see the president use his State of the Union speech to draw attention to the issue.

“I’ve been warning people about the downsizing of products and trying to raise awareness of it,” he said. “And to have the likes of the president and Cookie Monster come out and help raise public awareness about it, I just think it’s sensational.”

News From The States is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. News From The States maintains editorial independence.

This article is republished from News From The States under a Creative Commons license. Read the original article.