The cost of living in the U.S. is unquestionably higher than ever, and Americans are becoming increasingly frustrated. While some blame the government and inflation, others say it’s really more corporate greed than anything else.
The truth is that it’s a little of both, but companies such as McDonald’s are waving the white flag. They have finally realized that if they don’t bring their prices back down, they will lose money this year as Americans simply aren’t buying it anymore.
Let’s Talk Numbers: U.S. Inflation Rates
Understanding the details of the U.S. economy, especially the pesky inflation rate, can be extremely challenging. The inflation rate is the annual percentage increase of the cost of living, i.e., how much more expensive goods and services have become over the course of the year.
As of June 2024, the U.S. inflation rate is 3.3%. The U.S. Federal Reserve usually tries to keep the inflation rate under 2%, but 3.3% isn’t technically that bad, so why is everything still so expensive?
Stagnant Inflation vs. Deflation
Essentially, any inflation means products are still more expensive than they were a year ago. So, over the course of a decade, costs have been steadily rising to the ridiculous price points they’re at now.
In fact, grocery prices in the U.S. are 30% higher than they were just four years ago. Therefore, what Americans really need is not stagnant inflation but deflation, where prices actually decrease.
Inflation and Corporate Greed
Although inflation is undoubtedly playing a big role in the ever-increasing cost of living for Americans, it’s not the only factor at play.
Several big-name companies have taken advantage of the growing consumer price index over the past four years since the COVID-19 pandemic and raised their prices even higher than they “need” to be.
Corporate Executives Wanted to See How Far They Can Take Their Pricing
It’s no secret that giant corporations make billions upon billions of dollars from American consumers every year. The majority of people attribute these excessive profits to corporate greed, and it turns out they’re right.
Lindsey Owens, the executive director of Groundwork Collaborative, explained, “When you listen in on earnings calls, you hear CEOs, CMOs, CTOs, chief executives talking about the fact that during this period of high inflation, they’ve been curious and interested to see just how far they can take their pricing.“
McDonald’s Raised Its Prices Like Everyone Else
For example, McDonald’s, one of the largest corporations on the planet, has raised its prices by more than 40% over the past five years. While inflation would have accounted for a percentage of that increase, it doesn’t cover it all.
In the Fall of 2023, McDonald’s noted that its substantial increase in sales that quarter was due in large part to the “strong average check growth driven by strategic menu price increases.”
Other Companies Used Different Tactics to Make More Money
To capitalize on the rising inflation, many companies, like McDonald’s, simply increased their price tags, but other businesses took a different approach. Instead of increasing the price points, many companies kept them virtually the same but started adding fees to every bill.
These fees, now known as “junk fees,” charge customers for “service,” “convenience” or any other vague additional cost they can think of. So when the bill finally came, Americans were paying far more than they thought they would be, according to the price tags.
Shrinkflation Has Become Another Popular Tactic
Alongside raising prices and adding unnecessary fees, many companies have also used shrinkflation to increase profits over the past several years.
“Shrinkflation” is when businesses keep the price tag the same but decrease the amount of product the consumer receives, such as when a bag of chips or McDonald’s fries container is only filled halfway. The companies technically make the same amount of money, but they’re spending far less on the product, so their net earnings increase.
Americans Can No Longer Afford Fast Food
These tactics have ensured corporations continue to make billions while the American people struggle to get by. And Americans have finally had enough.
Millions of Americans have reported cutting back on superfluous spending, specifically fast food. In fact, 27% of Americans are now “skipping” fast food altogether because it’s too expensive, and a whopping 80% say fast food is now a luxury.
McDonald’s Is Waving the White Flag
In response to this reality, it seems that companies like McDonald’s are waving the white flag of surrender and are finally lowering their prices again after years of constant increase.
McDonald’s recently announced its $5 Meal Deal, which includes a four-piece chicken nugget, small fry, small drink, and either a McChicken or a McBurger. These menu items would have previously cost customers an average of $13, so it really is quite a bargain.
Walmart, Starbucks and Target Are Lowering Prices Too
But McDonald’s is not alone. Many other companies, such as Walmart, Target and Starbucks, have recently announced they will be slashing prices and offering extreme discounts this summer to improve customer satisfaction.
It seems that these companies have realized that Americans are finally at their breaking point, and if they don’t lower their prices this year, they will see disappointing sales over the next six months.
The U.S. Government Is Also Getting Involved
The bottom line is that if Americans are too broke to spend money, the economy will struggle. Therefore, the U.S. government is also trying to curb the ever-increasing cost of living, inflation and junk fees to ensure that doesn’t happen.
Hopefully, this change means that Americans will once again be able to afford a hamburger, iced coffee and new clothes on a regular basis. However, whether the nation will actually see significant deflation across the board remains to be seen.
