What McDonald’s $5 Meal Deal says about Americans’ views on inflation

McDonald’s new $5 Meal Deal debuts Tuesday. For the next month, customers can get a McChicken or a McBurger, four chicken nuggets, a side of fries and a small drink for less than the price of a single Big Mac. The highly publicized, limited-time promotion seems to mark a change in the battle over inflation — and it’s a sign that, finally, people — and the government — are successfully fighting back against rising prices. 

Yes, the inflation rate in the U.S. is slowing. In May, prices were up 3.3% from a year earlier, down from 4% from May 2022 to May 2023 and a steep drop from the 8.6% jump from May 2021 to May 2022. But many people still tell pollsters the cost of living is much too high. Consumers continue to cut back where they can. Overall retail sales are increasingly lackluster, and — crucially for McDonald’s — visits to restaurants are in decline.

Both Walmart and Target announced they would drop prices on thousands of items, from eggs to diapers.

Enter the $5 Meal Deal. The fast-food giant is hoping the deal will restore its less-than-sizzling fortunes. After years of squeezing Americans’ wallets — the average price of McDonald’s menu items increased roughly 40% from 2019 to 2024 — flagging sales made the company realize its customers had reached a breaking point.

Other companies are recognizing this, as well. Both Walmart and Target announced they would drop prices on thousands of items, from eggs to diapers. Even Starbucks — which rarely offers promotional deals — began promoting discounts designed to drive traffic via email and its app.

Corporate America, to be clear, didn’t start the Covid-era wave of inflation. Blame for that can mostly be assigned to the sudden nature of the lockdown, which led to long-lasting supply chain snafus around the globe at the same time shoppers, suddenly trapped at home, had little to do but shop till they dropped online.

But it’s also true many companies eagerly took advantage of the inflationary situation on the ground to push through long-desired price increases and fatten their bottom lines. “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,” says Lindsay Owens, executive director of the Groundwork Collaborative. This is no exaggeration. Last fall, McDonald’s attributed an unexpectedly large bump in sales to “strong average check growth driven by strategic menu price increases.” The strategy paid off: After-tax profits for many corporations hit record highs in 2023.

Inflation also gave corporations cover for a variety of other practices to push consumers to the brink. There was the practice of offering less for more, known as “shrinkflation” and “skimpflation.” (That’s when the snack bag contains fewer potato chips or the hotel no longer offers daily housekeeping.) Corporate America also came up with more and more “junk fees” — tacking on deceptive and hard-to-avoid surcharges everywhere from entertainment ticket sales and delivery apps to banking transactions.

The financial hardship they caused many households didn’t much concern these companies. All that mattered was their own bottom lines.

Working-class people increasingly have found even a McDonald’s visit is enough to break the bank.

Over time this epic wave of greedflation contributed to our tale-of-two-cities economy. The wealthiest consumers, flush with stock market and real estate gains, could afford to splurge not just on the latest hot Michelin-rated restaurants but also to hand over hundreds of dollars to online middlemen who could score them a reservation. Working-class people, on the other hand, increasingly have found even a McDonald’s visit is enough to break the bank. The resulting pullback has finally caught corporate America’s attention.

The Biden administration is also taking note. Its campaign against the junk fees riddling American life — including the Justice Department’s lawsuit against Ticketmaster parent company Live Nation — is among the most popular items on its agenda. The Federal Trade Commission is cracking down on all-but-impossible-to-cancel subscription services. The Consumer Financial Protection Bureau is going after the excessive credit card late fees and junk fees charged by the big banks. And the Justice Department is investigating allegations that housing-pricing software RealPage has facilitated price-fixing by giving landlords a backdoor way to learn what their competitors are charging.

From both customers and the government, corporate America is finally getting the message. The bill for years of hiked prices and record profits is coming due. It can’t happen soon enough.

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