Biden is targeting a new economic villain: contraction-flation

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

“I’m fed up with what they call shrinkflation,” Mr. Biden declared.

The video set social media ablaze and delighted consumer advocate Edgar Dworsky, who has been studying “shrinkflation” trends for more than a decade. He briefed Biden’s economic aides twice, first in early 2023 and again a few days before the video aired. The first briefing seemed to go nowhere. The second clearly formed the basis for Mr. Biden’s new favorite economic argument — that companies have used a rapid rise in prices to line their pockets by keeping those prices high and giving consumers less.

The products featured in the president’s video, such as Oreos and Wheat Thins, were all examples of the shrinkflation that Dworsky documented on his Consumer World website.

As inflation slows, consumers remain outraged by the high price of groceries. Mr. Biden, who has seen his approval ratings suffer as prices rise, has found a blame-shifting message in the midst of his re-election campaign that he loves: calling out companies for shrinking the size of candy bars, ice cream cartons and other foods while prices rise or remain stable even though companies’ 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, although they would not specify what steps he might take. He will likely also criticize contraction during his State of the Union address next week.

Mr. Biden could also embrace new legislation that would give the Federal Trade Commission the power to more aggressively investigate and punish price gouging by companies, including in grocery stories.

White House officials credit Senator Bob Casey, Democrat of Pennsylvania, for bending the president’s ear on the issue. Mr. Casey’s office released a notice damning shrinkflation report Last year it was calculated that around a tenth of recent price increases for snacks and toilet paper were due to companies reducing the number of biscuits in a bag or sheets on a roll.

Mr Casey has made the issue central to his re-election campaign, blaming big companies for price rises that are leaving consumers struggling to afford enough essential items. “Some of this is really pernicious,” he said in an interview. “You can’t wait a year to buy paper towels or buy boneless chicken or buy groceries or buy Huggies diapers.”

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

Some Democratic economists, including veterans of previous administrations such as Harvard’s Jason Furman, have rejected claims that price gouging is causing inflation. Mr. Biden embraced the argument only partially, selectively focusing on meatpackers and oil companies and speaking extensively about other drivers of inflation, including supply chains hit by the pandemic.

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

Since then, Mr. Ramamurti noted, polls have shown that Americans are angry at companies over price hikes — including on groceries. Part of Mr. Biden’s shrinkage strategy, Mr. Ramamurti said, “is trying to meet the public where they are and talk about issues that are really top of mind.”

White House officials acknowledge the politics of the issue but say other factors are also driving Biden’s rhetoric. Government economists have been struck by persistently high corporate profit margins even as inflation cools; food production costs fell much faster in the past year than the price of food on store shelves.

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

Progressives who have pushed Biden to target companies for price increases earlier and more aggressively have done so, too welcomed his new focus. Lindsay Owens, executive director of the liberal think tank Groundwork Collaborative in Washington, said in an interview that Biden’s comments were well timed to help voters understand why groceries and other key prices remain stubbornly high even as inflation falls.

“The supply chain part doesn’t appeal to people anymore,” she said. “The shelves are stocked. When you’re trying to explain the last mile, this is an important part of it.”

Mr. Dworsky said he was pleased that Mr. Biden had recognized the power of focusing on contraction-flation.

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