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President Biden’s ever-changing explanation for rising inflation has shifted to the dual villains of corporate greed and “shrinkflation,” but economists say he is missing the real problems: government spending and the high federal deficit.
Inflation remains a major political problem for Mr. Biden with the election looming. An angry public blames the president for soaring prices, and eye-popping food costs have hit several key Democratic constituencies, including minority voters and low-income and lower-middle-class families.
An NBC News poll last month found that Mr. Biden trails the presumptive Republican nominee, former President Donald Trump, by 22 percentage points on which candidate would better handle the economy.
Mr. Biden received more bad news last week about inflation rising again in February, according to Labor Department data. The Consumer Price Index, a key measure of goods and services costs, increased 3.2% from last year and 0.4% from January.
Excluding volatile food and energy prices, core CPI was up at an annual rate of 3.8%.
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All of the gains were slightly above Wall Street forecasts.
It was the second month in a row that inflation came in hotter than expected. In January, prices were up by 3.1% from a year earlier.
“The last two months’ uptick has come as a bit of a surprise,” said Alexander Salter, an economics professor at Texas Tech University. “A lot of consumers are going to be angry because the problem isn’t under control.”
The Federal Reserve’s target for inflation is an annual 2% rate.
Desperately needing an explanation, Mr. Biden has doubled down on corporate greed. He accuses big business of price gouging and engaging in “shrinkflation.” That’s the term for a reduction in the size of a product, such as a candy bar, cereal box or cookie package, while prices either rise or hold steady.
“Too many corporations raise their prices to pad their profits, charging you more and more for less and less,” Mr. Biden said last month during his State of the Union remarks. “That’s why we’re cracking down on corporations that engage in price gouging or deceptive pricing from food to health care to housing.”
Under Mr. Biden’s watch, inflation has eased to a 3.2% annual rate since peaking at 9.1% in the summer of 2022. Still, it remains 21% higher than before he took office, data from the Federal Reserve Bank revealed.
The problem, many economists say, is that Mr. Biden isn’t addressing the key culprit for soaring prices: government spending. Instead, they argue, he is too focused on corporate price increases — a symptom, not a cause, of inflation.
“Businesses are not raising prices beyond the prices they are paying for production,” said Richard Stern, an economist at The Heritage Foundation. “They are being put between a rock and a hard place with inflation because their suppliers are charging more and their workers are demanding more pay.”
Mr. Stern said the Biden administration and Congress need to rein in spending to get serious about inflation. A 2022 study by the Federal Reserve Bank of San Francisco found that government spending had contributed to the inflation increase, though how much was up for debate.
Mr. Biden has approved several massive spending bills, causing the national debt to jump by $6.25 trillion during his first three years in office. Spending under President Trump increased the debt by $3.3 trillion during his first three years.
Mr. Biden’s fiscal year 2025 budget proposes $3 trillion more in expenditures and tax cuts as part of an overall $7.3 trillion spending spree.
“The long story short is you need to cut government spending and you need to cut the deficit,” Mr. Stern said. “The government runs a deficit, and the Fed prints money to cover it. When the government creates a deficit and prints cash, you have more dollars chasing the same number of goods, which is inflation.”
Mr. Biden has repeatedly bragged about cutting $1.7 trillion from the annual deficit. Although the deficit did decrease under Mr. Biden, it was because the emergency pandemic spending expired and not the result of his economic policies.
Regardless, the inflation data shows that Mr. Biden’s most persistent political problem isn’t going away anytime soon. The past two months might spook the Fed into taking longer to cut rates, which the central bank had planned to do at some point this year. It has been unclear about timing.
Fed Chair Jerome Powell has indicated that rates won’t be cut in March, meaning it might be May or June before consumers get interest rate relief.
It also gives a talking point to Mr. Trump and other Republicans, who have argued that the Biden administration has been too slow to respond to inflation and hasn’t been sympathetic toward consumers’ pain.
Economists typically target inflation for about 2% per year, but the current rate of roughly 3% means consumers should be prepared to wait before prices come down.
“Americans are going to have to acquiesce to higher prices for a while,” Mr. Salter said.
• Jeff Mordock can be reached at jmordock@washingtontimes.com.
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