President Biden, whose approval rating has fallen amid high inflation, is beginning to pressure major grocery chains to lower food prices for American consumers, accusing the stores of raking in excessive profits and ripping off shoppers.
“There are still too many companies in America ripping people off: price gouging, junk fees, greed inflation, shrink inflation,” Mr. Biden said in South Carolina last week. Consultants say the comments are a harbinger of increasing pressure on grocery chains and other companies that are posting higher-than-usual profit margins after a period of rapid price increases.
Mr. Biden’s public offensive reflects the political reality that even as inflation eases, voters are slacking off because they are upset about how much they pay at the supermarket, and that this is weighing on Mr. Biden’s approval rating ahead of the 2024 election.
Economic studies suggest that the cost of eggs, milk and other staples — which consumers buy far more often than expensive items like furniture or electronics — plays an outsized role in shaping Americans’ views on inflation. Those prices rose more than 11 percent in 2022 and 5 percent last year, amid a post-pandemic inflation surge that marked the country’s fastest price rise in four decades.
The rate of increase is slowing rapidly: In December, prices for food eaten at home rose a little more than 1 percent, according to the Labor Department. But administration officials say Mr. Biden is keenly aware that prices remain too high for many families, even as essential items like gasoline and household items are cheaper now than at their post-pandemic peak.
Still, there is a general belief among administration officials and their allies that there is little else Mr. Biden could do to quickly reduce food prices unilaterally.
“It’s hard to figure out what the short-term policy response will be in this situation,” said Bharat Ramamurti, a former economic adviser to Mr. Biden and author of a report on food price inflation to be released Friday by the progressive Groundwork Collaborative in Washington.
“If there is something that is partly due to supply disruptions, what can you actually do to put downward pressure on prices?” he said.
The Federal Trade Commission is currently reviewing a merger between two major grocery chains, Kroger and Albertsons – and is widely expected to block it. Opponents of the merger say it would reduce competition and allow the combined company to charge its customers higher prices. However, blocking this deal would do little to combat the current price rise.
A new analysis from the White House Council of Economic Advisers suggests that increased profit margins at major food retailers could be contributing to the stubbornly high prices of food on shelves. The analysis, based on data from the Census Quarterly Financial Reports, found that food and beverage stores have increased their margins by about 2 percentage points since the eve of the pandemic, reaching their highest level in two decades.
Much of this increase occurred in 2021 and 2022, around the time other retailers – such as clothing and sporting goods stores – also saw profit margins increase. The analysis shows that grocery store margins remain strong, even as other retailers’ margins have returned to more normal levels based on recent history.
“President Biden has made clear that as input prices fall, companies should pass these savings on to consumers,” Michael Kikukawa, a White House spokesman, said this week.
Mr. Biden made a similar point in a post on the social media platform X last fall.
But the White House analysis also suggests that the increased profit margins do not come close to explaining the price increases that grocery shoppers have experienced under Mr. Biden’s administration.
Other research suggests that additional forces – such as consumer demand and supply chain disruptions – are a much larger factor in the price increases. For example, a bout of bird flu led to a spike in egg prices last year. And food producers, like soft drink makers, have continued to raise prices even as their costs have fallen, leading to high profit margins.
Researchers at the Federal Reserve Bank of Kansas City found last year that strong job growth in the U.S. economy and wage increases associated with a tight labor market were the main drivers of the rise in food prices. The researchers found that processed foods like candy bars are responsible for three-quarters of recent food price increases.
The tight labor market led to higher costs of producing and distributing these foods, “which were passed on to consumers.”
Mr Biden’s administration has made several efforts to ease food price pressures, particularly on the supply side. The Agriculture Department has spent hundreds of millions of dollars to help companies expand in the meatpacking industry, which is dominated by a handful of large companies.
The department also changed its calculations of federal food aid benefits and adjusted them for inflation, effectively increasing the value of food stamps for many low-income Americans. Mr. Ramamurti and his co-authors Elizabeth Pancotti and Clara Wilson estimate that these increases have more than offset increased food costs for 40 million families in recent years.
In an interview, Ms. Pancotti said those suffering most from high food prices were consumers who made just enough money not to qualify for the SNAP food stamp program.
“In the middle, you have a large portion of people who are low-income but not impoverished enough to receive SNAP benefits and who pay 25 percent more for food,” she said. “Ultimately, it just doesn’t reach enough people.”
The commission is also considering enforcement action under a nearly 90-year-old law, the Robinson-Patman Act, which requires suppliers of retail goods to offer the same terms and conditions to every retailer to which they sell. Supporters of these enforcement measures say they would drive down prices at smaller grocers by ensuring they could purchase items at the same price as large retailers.
Politically, however, large grocers are the most attractive target for Mr. Biden. Advisers are discussing how he can increase pressure on large chains in the coming weeks and months.
“Americans, we are tired of being played for idiots,” the president said in South Carolina. “And that’s why we’re going to keep these people – go ahead and lower the prices.”
Source link
2024-02-01 20:51:00
www.nytimes.com
