President Joe Biden wants to remind us that Super Bowl parties are more expensive than they used to be. The reason, he argues, is corporate greed and ‘shrinking’. In a social media video before Sunday night's game, he spoke of the company selling “smaller products than usual with the prices staying the same.” He opposes this behavior and is “calling on the big consumer brands to stop doing it.”
What an amazing move. There is a straight line between deflation, inflation, and the fiscal irresponsibility of the Biden administration.
Shrinkage is real. This occurs when a company reduces the size or quantity of a product while maintaining the same sticker price, effectively raising the real price. In this case, Biden points to the snack food and sports drink industries as the two main culprits. Have you noticed that your Gatorade bottle has gotten a little smaller? Does your bag of potato chips seem more full of air than ever? Maybe it's not your imagination.
Still, Biden's complaint would be funny if it weren't so sad. Like Dominic Pino national review They explain that shrink expansion is legal if the packaging accurately reflects the contents of the product. Additionally, the Food and Drug Administration (FDA) regulates packaging practices such as “loose fill,” which has the primary purpose of being a food preservation practice rather than ensuring small portions, as Biden claims. And yes, it's true that some sellers have reduced package contents without changing the price. However, this adjustment took place in 2022.
Why 2022? That's the most important part.
The wave of contraction came in response to the rise in inflation that our country has experienced since 2021. I'm embarrassed that the president would make such a big deal about it now. The administration has been trying to trick voters into confusing the fact that inflation has eased with the idea that prices are basically back to normal. It's not like that. Although inflation has declined, food prices have risen by an average of 20% since February 2021. Chicken and bread prices are up 25% and rents are still rising significantly.
These high prices explain why voters continue to express so much dissatisfaction with the economy despite low unemployment, positive economic growth, and rising wages.
Ultimately, the president's rant against business is a weak attempt to distract us from the fact that the president's (and his predecessor's) excessive spending policies during the pandemic have caused inflation. My former colleague William Beach, former director of the Bureau of Labor Statistics, takes a closer look at this question in a new Center for Economic Policy Innovation briefing titled “Is Inflation the Result of Excessive Deficit Spending?”
As Beach reminds us, from 2020 to 2023, the total federal deficit reached $8.8 trillion. This is the largest peacetime deficit in U.S. history, both in nominal terms and as a percentage of gross domestic product, and it includes much of the spending Biden passed after most of the pandemic crisis was avoided and the economy recovered.
This influx of deficit dollars has led to a 25.4% increase in Americans' bank assets between 2020 and 2021, driving a significant increase in lending. Household loans increased by 19.2%, real estate loans by 12.1%, and total loans by 13.7%. This was the largest surge in lending since the pre-Great Recession period. Additionally, a broad measure of the money supply increased by $5.4 trillion between March 2020 and April 2022, equivalent to about a third of U.S. GDP at that time.
Beach rightly points out that alternative explanations for inflation (such as Modern Monetary Theory claims involving supply chain disruptions, price gouging, and wishful thinking that government spending should not concern us) are unreliable. The same goes for blaming the contraction on corporate greed rather than on the government, which injected excessive purchasing power into the economy, creating an inflationary crisis and leaving us all to find ways to adapt.
The most important part of Beach's report is that it reminds us that while politicians are responsible for sparking recent inflation, they also have the means to stop it. While prices may not return to 2020 levels, Congress can improve economic efficiency and productivity by reforming the tax code, rolling back regulations, and shifting to more liberal policies, potentially increasing incomes and easing pressure on household budgets.
Congress may finally get serious about spending cuts. This would go a long way in helping the Fed completely curb inflation. Blaming corporations for rising prices is wrong and cowardly.
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