President Biden, whose approval ratings are low amid high inflation, has accused major grocery chains of ripping off shoppers with excessive profits and is pressuring them to lower food prices for U.S. consumers. It’s starting.
“There are still too many companies in America that defraud people through price gouging, junk fees, greed flation, shrinkflation,” Biden said. last week in south carolina. Aides said the comments portended more pressure on grocery chains and other companies that have maintained higher-than-usual profit margins after a period of rapid price increases. There is.
Mr. Biden’s public onslaught comes as voters are angry about the amount they pay at the grocery store, even though inflation is slowing, which could weigh on his approval rating heading into the 2024 election. This reflects the political reality of the current situation.
According to the economic survey, The prices of eggs, milk and other necessities, which consumers buy far more often than big-ticket items like furniture and electronics, play a big role in shaping Americans’ views on inflation. Those prices rose more than 11% in 2022 and 5% last year amid a post-pandemic inflation spike. This inflation marked the fastest price increase in the country in 40 years.
The rate of increase is slowing rapidly. In December, the price of food for household consumption rose by just over 1%. According to the Ministry of Labor. But administration officials say Biden is acutely aware that prices remain too high for many families, even though key items like gasoline and household goods are now cheaper than at their post-pandemic peak. It is said that they are doing so.
Nevertheless, there is a general belief among administration officials and their allies that there is little else Biden can do unilaterally to bring food prices down quickly.
“It’s hard to see what the short-term policy response is in this situation,” said Bharat Ramamurti, a former Biden economic aide and author of a report on food price inflation to be published Friday. said. Progressive Groundwork Collaboration in Washington.
“If you have a commodity that is contributing to supply disruptions, what can you actually do to put downward pressure on prices?” he said.
The Federal Trade Commission is currently considering a merger between two major grocery store chains, Kroger and Albertsons, and is widely expected to block it. Opponents of mergers argue that a merger would reduce competition and allow the combined companies to charge higher prices to shoppers. But blocking this trade will do little to address the current price surge.
A new analysis from the White House Council of Economic Advisers suggests that rising profit margins at major grocery retailers may be contributing to the continued high prices of food on store shelves. The analysis, based on data from the Census Quarterly Financial Report, found that food and beverage store profit margins have increased by about 2 percentage points since the eve of the pandemic, reaching the highest level in 20 years.
Much of that increase occurred in 2021 and 2022, when other retailers such as clothing stores and sporting goods stores also saw their profit margins rise. The analysis found that grocery store profit margins remain high even as other retailers’ profit margins have returned to more normal levels based on recent history.
“President Biden has made clear that as raw material prices fall, companies should pass on the savings to consumers,” White House press secretary Michael Kikukawa said this week.
Biden made a similar point last fall in a post on social media platform X.
But the White House analysis also suggests that increased grocery margins fall short of explaining the price increases experienced by grocery shoppers during Biden’s term.
Other research suggests that additional factors such as consumer demand and supply chain disruptions are larger contributors to price increases. Due to the avian influenza epidemic, Egg prices rise For example, last year. And like soft drink makers, food producers continue to raise prices even as costs fall, resulting in significantly higher profit margins.
Researcher at the Federal Reserve Bank of Kansas City I found it last year Robust employment growth in the U.S. economy and rising wages due to a tightening labor market contributed significantly to the rise in food prices. Researchers found that processed foods, such as candy bars, accounted for three-quarters of the recent increase in food prices.
Tight labor markets have increased production and distribution costs for these foods, which are “passed on to consumers,” they said.
Mr. Biden’s administration has tried several initiatives to ease pressure on food prices, particularly on the supply side. The Department of Agriculture has spent hundreds of millions of dollars to help companies expand in the meat packaging industry, which is dominated by a few large companies.
The department also changed the calculation of federal food assistance benefits, adjusting them for inflation, effectively increasing the value of food stamps for many low-income Americans. Ramamurti and his co-authors, Elizabeth Pancotti and Clara Wilson, calculate that these increases exceed the increase in grocery costs for 40 million households in recent years.
Pancotti said in an interview that the consumers who are feeling the most pain from rising food prices are those whose incomes are low enough to qualify for the food stamp program, known as SNAP.
“There are a lot of low-income people in the middle class, but they’re not poor enough to receive SNAP benefits and they’re paying 25 percent more for groceries,” she says. “At the end of the day, we just can’t reach enough people.”
The committee will also consider enforcement actions under the Robinson-Patman Act, a nearly 90-year-old law that requires suppliers of retail goods to offer the same terms and conditions to all retailers to which they sell. ing. Supporters of these mandates say they lower prices by allowing small grocers to buy products at the same cost as large retailers.
But politically, big grocery stores are Biden’s most attractive target. Aides are discussing how he can ramp up pressure on major chains in the coming weeks and months.
“The American people, we are tired of being played for,” the president said in South Carolina. “That’s why we’re going to continue to maintain these products. We’re going to continue to bring the prices down.”