In the face of persistently high inflation and a decline in approval ratings, President Biden is taking aim at major grocery chains, urging them to reduce food prices for American consumers. Accusing these establishments of reaping excessive profits at the expense of shoppers, the President voiced his concerns last week in South Carolina, marking a potential escalation in his efforts to address the rising cost of living.
Mr. Biden’s public stance highlights the political reality that, despite a moderation in inflation rates, voters remain disgruntled about grocery prices, impacting the President’s approval ahead of the 2024 election. Economic research indicates that staple items such as eggs and milk, which consumers purchase frequently, play a substantial role in shaping Americans’ perceptions of inflation. In 2022, these prices surged by over 11%, followed by a 5% increase last year, marking the nation’s fastest inflationary burst in four decades.
While the rate of increase is decelerating, with December showing a modest 1% rise in prices for food consumed at home, administration officials acknowledge that elevated prices persist for many families. Despite the availability of cheaper gasoline and household furnishings, the President is keenly aware of the ongoing strain on household budgets.
Administration officials and their allies believe that, given the situation, there is limited unilateral action Mr. Biden can take to rapidly lower grocery prices. Bharat Ramamurti, a former economic aide to the President, acknowledges the challenge of devising short-term policy responses in this context, especially when driven by supply disruptions.
The Federal Trade Commission’s ongoing review of a proposed merger between Kroger and Albertsons, two major grocery chains, is expected to be blocked due to concerns about reduced competition and potential price hikes. However, critics argue that blocking the merger may not address the current price inflation issue.
A recent analysis from the White House Council of Economic Advisers points to elevated profit margins among large grocery retailers as potential contributors to high food prices. The analysis, based on Census Quarterly Financial Reports data, reveals that food and beverage stores have increased their profit margins by about 2 percentage points since the onset of the pandemic, reaching a two-decade high.
Kroger, one of the grocery chains under scrutiny, maintains its commitment to lowering prices through a merger with Albertsons. The White House emphasizes President Biden’s stance that corporations should pass on savings to consumers as input prices fall.
While the analysis indicates an increase in grocery profit margins, it suggests that these margins alone do not account for the substantial price spikes experienced during Mr. Biden’s tenure. The Federal Trade Commission is also considering enforcement actions under the Robinson-Patman Act, a nearly 90-year-old law, to ensure fair terms for retailers.
Politically, large grocery chains present an appealing target for the President, with discussions ongoing on how to intensify pressure on them in the coming weeks and months. President Biden’s recent statements emphasize a commitment to holding corporations accountable and working to lower prices for American consumers.