Biden’s pathetic price-gouging ploy won’t work 

Joe Biden is up to his usual tricks, spinning false narratives and blaming others for the damage done by his wrong-headed policies.  

People are angry that the cost of everyday food items like potato chips (up 29 percent) and ice cream (up 20 percent) have gone through the roof since Biden took office. The president’s response? Accusing food companies of price gouging, which, as I show below, is simply not true. 

Food prices, as measured by the Consumer Price Index, are up about 21 percent since Joe Biden became president; in 2022, Americans spent 11.2 percent of their disposable income on food, the most in 30 years. The cost of feeding a family, especially for low-income Americans, is a struggle — which could explain why in a recent poll more than two-thirds of voters with incomes below $50,000 disapproved of Biden’s handling of the economy.      

The White House is panicked that high food prices will jeopardize Biden’s reelection (it’s still the economy, stupid), so they’ve launched a new pitch.  

During the Super Bowl, the president, rather than appearing in the traditional softball interview, featured in an ad in which he moaned about “shrinkflation.” He lamented that “sports drinks bottles are smaller, bag of chips have fewer chips, but they’re still charging us just as much.” What makes him really angry, though (naturally) is that “ice cream cartons have actually shrunk in size, but not in price.”  

His message to Americans: Food companies are trying to pull a “fast one” on you. He reiterated the charge recently as he convened his competition forum, saying to the assembled group that he “wants to get corporations to stop cheating consumers by providing less product for the same price,” according to the pool reporter covering the event. He also said, “The American people are tired for being played for suckers.”  

See how that works? Inflation wasn’t caused by Democrats passing the totally unnecessary $1.9 trillion American Rescue Act in early 2021 just as the economy was roaring back from the COVID shutdowns, and then the trillion-dollar Inflation Reduction Act, adding even more fiscal accelerant. 

No, inflation was caused by mean corporations playing dirty tricks. Biden vows to fix this problem by setting up a “Strike Force on Unfair and Illegal Pricing,” which will investigate companies that he blames for high food prices (but, really, his dreadful approval ratings).   

It’s easy to dismiss this absurd new venture as merely political posturing from a desperate president. Which it is. But the “task force” is being headed by the Federal Trade Commission (FTC) and the Department of Justice, which is like asking twin Rottweilers to escort baby chicks across a road. 

FTC director Leena Khan means business. Tell her to stomp out business mergers and she turns a firehose on acquisitions and combinations, whether or not they actually prove beneficial to consumers and the economy. Bloomberg has described her as the “most aggressive trustbuster the US has had in decades.” The anti-tech wunderkind (all of 32 years old when appointed) has upended regulatory norms and, according to the Wall Street Journal, breeched ethics standards as she has run roughshod over the agency she masterminds. She has operated without transparency and pursued a single-minded effort to break up America’s great tech firms. She is feared because she is reckless and relentless.  

The good news for those who admire pragmatic regulators as opposed to ideologues on a mission is that Khan has racked up an extraordinary losing streak and done substantial damage to the reputation of her agency. House Republicans recently issued a report titled “Abuse of Power, Waste of Resources, and Fear: What Internal Documents and Testimony from Career Employees Show about the FTC under Chair Lina Khan” which sums up critics’ assessment of her reign. It’s not pretty.  

Coupling the Department of Justice with the FTC is even more heavy-handed. The Biden administration is not above weaponizing the DOJ against political rivals; it will not shrink from deploying law enforcement against companies that are, in fact, trying to survive Biden’s crushing inflation. 

Biden’s accusation that food companies are ripping off consumers will be proven in courts to be another fake narrative. The giant food companies that he accuses of profiteering took a substantial hit to profit margins when costs soared in 2021 as raw materials, shipping, electricity and labor costs went through the roof. To offset the damage, these firms started passing along their increased costs in price hikes. Even as they have scrambled to restore their profitability, the food majors have barely recovered the margins they earned before inflation knocked them silly. 

Take Kraft Heinz, best known as a major supplier of processed cheese and pickles. That firm’s gross profit margin in the first quarter of 2021, when Joe Biden was elected president and inflation was well below 2 percent, stood at 36 percent. After two years of rising costs, that gap between revenues and the direct costs of making products shrank to 30.8 percent. By the end of last year, after what Biden would describe as price-gouging, Heinz’s margin had recovered only to 33.5 percent; progress, yes, but not fully recovered.  

Or look at Pepsi, the maker of soft drinks and Fritos. That company’s gross margin pre-inflation was 54.7 percent; it sank to 53.3 percent as costs rose over the next two years. After raising prices, margins had recovered to 54.2 percent at the end of last year, well below the 55.3 percent gross margin the company earned in mid-2022.  

General Mills, Campbell Soup, Coca-Cola — they all follow the same pattern. What about grocers like Albertsons, Walmart or Krogers? Same story. Meat producers like Hormel or Conagra? Ditto. 

To push back against Biden’s unfair accusations, industry CEOs should boldly tell Americans the truth: Yes, we raised prices, because Democrats’ reckless spending drove costs through the roof. Nip this latest lie in the bud.  

Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.