This episode is pretty overrated in my book. I see a lot of people praising this one and some who say this is the absolute best. I like this episode, but it is NOT my favorite of the original five. It's actually not even my second or third favorite.
I tend to like stories quite a bit. I like an episode with a nice story to keep me interested. I like a sense of adventure, I like a good plot that keeps me coming back. This episode's "conflict" is one of the worst yet. It starts off with him getting the belt, and I'm going to say this, the entire episode's story began on a gag. Mermaid Man simply said something to Barnacle Boy about saving room for seconds for almost no reason, he just did, and his belt stayed off. It's not the biggest deal, but it kind of shows that they knew this plot would be pretty flimsy. Then, SpongeBob messes around with the belt, which makes sense, but the fact that he won't even return it, after Squidward has been shrunk makes him look pretty petty. I don't really like how he acts here. Not Party Pooper Pants levels, but still not naive, just ill-founded for the sake of the story.
Then the plot just says screw it, and has SpongeBob just go around shrinking everyone for NO REASON, he just does it because "he's scared" yeah after the 20th shrinkage you'd think he'd catch on. Also, the belt's never been proven to shrink people in other episodes. Why not take one of their gloves and he gets the whirlpool? That would've been cool, but yeah it's really dumb. The small people beating up SpongeBob is also kinda stupid, but not really after what just happened, and then he shrinks everything as the solution, which is kinda clever, but I would've preferred it if there was an actual resolution to this plot.
In the end, this episode's plot is a giant mess with no sense whatsoever. I do find it very funny, which saves it from being mediocre, but I'm going to just call it GOOD 7.2/10