By Chris Powell
Democratic politicians keep trying to blame inflation on manufacturers, landlords, insurance companies, and nearly everyone else in business. Most fervent in his scapegoating is Connecticut Attorney General William Tong.
Last week Tong, a Democrat, proposed legislation requiring food producers and supermarkets to put special labels on products whose packaging shrinks without an equivalent reduction in price — that is, products afflicted by “shrinkflation.” Tong calls “shrinkflation” a deceptive practice.
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He underestimates the public’s intelligence. Few people may understand where inflation comes from, but most keenly notice its effects at supermarkets and in many other financial transactions. Inflation was a major issue in last November’s election. Smaller packaging isn’t fooling many people.
Maybe some food producers intend “shrinkflation” as deception, but it’s mostly something else — realism in marketing. Producers may have realized that their customers can’t afford as much as they used to buy and so may not always buy if the old, larger packaging carries a higher price. People don’t have to look too closely to see “shrinkflation” in many other places where they also get less for their money. With government, they often have paid more in taxes without getting more in services — another form of “shrinkflation.”
Since they have to do their own purchasing of raw materials and labor, producers are victims of inflation too.
At the producer level the U.S. economy isn’t as competitive as it should be. There has been too much consolidation and too little enforcement of antitrust law, and this has pushed up prices. But the big cause of inflation is the explosion in the money supply following the worldwide virus epidemic, particularly the explosion of the supply of U.S. dollars that has been caused by unprecedented borrowing by the federal government.
Growth in the money supply and government spending has far outpaced production of goods and services. Today the federal government bestows all sorts of goodies on people without a thought as to how they should be financed. It is just assumed that everything new can be financed by borrowing, which is money creation since the bonds are purchased by the Federal Reserve and foreign governments.
It’s not quite as bad on the state level, but bad enough, since so much state government spending is financed not by state taxes but by federal inflation money.
Debt and inflation have soared during both Democratic and Republican national administrations. President Trump is making a spectacle of trying to reduce federal spending, but while the federal government is indeed full of patronage, graft, and waste, Trump’s own budget will keep federal debt soaring. Despite their party’s old reputation for financial responsibility, Republicans are now as addicted to inflation financing as Democrats long have been.
But last week with his choice of scapegoats — food producers and supermarkets — Attorney General Tong seemed to have forgotten that Republicans now are in control of the federal government and thus more responsible for inflation than Democrats. Additionally, last week inflation was reported to be rising substantially again.
So as a political matter Tong is now free to put the blame for inflation where it belongs — on the federal government and the other political party. Or is Tong worried that, if he stops scapegoating and tells the truth about inflation, some people might remember when the Democrats are back in power?
The attorney general could do much more to reduce consumer prices in Connecticut if he examined the state’s liquor industry.
The industry enjoys a huge “barrier to entry” — limits on retailing licenses, which defeat competition. Supermarkets are allowed to sell beer but not wine and liquor, though most people would like the convenience of one-stop shopping.
The liquor industry also enjoys state-mandated minimum prices on alcoholic beverages, defeating competition again.
Opposing the desire of supermarkets to sell wine, a lobbyist for the liquor stores says, “We just want to be left alone.” Nonsense — the liquor stores desperately want state government to keep enforcing their exemptions from competition. These exemptions would be fat targets for a populist politician. Tong’s bluster doesn’t make him one.
Chris Powell has written about Connecticut government and politics for many years. (CPowell@cox.net)
Chris Powell column 
This article presents a compelling argument against Attorney General William Tong’s scapegoating of local supermarkets in relation to inflation and “shrinkflation.” Inflation is a far more complex issue than simply blaming businesses. The article notes that while some food producers reduce package sizes as a response to customer purchasing power, this isn’t necessarily an act of deception but a business response to inflationary pressures.
Powell is correct that the real culprit behind inflation is the explosive growth of the money supply, largely driven by government policies, particularly the unprecedented borrowing following the COVID-19 pandemic. Both Democrats and Republicans have contributed to this problem by using inflation financing, diminishing the purchasing power of consumers and leading to higher prices.
In addition, the essay critiques the state’s liquor industry, which is heavily regulated and protected from competition, pointing out that these protections increase consumer prices and reduce market efficiency. The essay challenges Tong’s focus on food producers when there are more direct and immediate ways to reduce consumer costs, such as addressing the monopolistic practices in the state liquor industry.
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