Iowa caucus marks voters’ first chance to begin kicking Bidenomics to the curb
The Iowa Caucus marks Americans’ first opportunity to begin replacing President Joe Biden’s failed economy. Sadly, voter pushback won’t come soon enough for many small business casualties such as the Jerald Sulky Company, a Waterloo, Iowa-based manufacturer of performance horse-drawn vehicles owned by Erik Lee that is closing after 125 years in business.
Over the past three years, small businesses have faced numerous hurdles, including COVID-19 shutdowns, historic inflation, high borrowing costs, tax increases and over-regulation. Arguably, the biggest challenge facing small businesses is the beleaguered American consumer.
The pressure on household budgets, including at higher income levels not historically impacted by inflation, has caused underlying changes in spending patterns that are not yet reflected in overall economic figures.
Since President Joe Biden took office, prices of goods and services have increased by nearly 20%, far outpacing wage growth over the same period. Talk to ordinary consumers and many will tell you prices have increased even faster than the topline figures suggest.
According to a recent study by the U.S. Senate Joint Economic Committee, ordinary households are spending nearly $11,500 more per year to maintain the same standard of living as in January 2021.
These new costs cannibalize consumers’ discretionary income — their fun money that many businesses like Erik’s rely on to keep their doors open. When money is tight, consumers cut back spending on non-necessities like sports, hobbies, and tourism.
Equestrian isn’t spared. The problem is especially severe for small businesses like Erik’s that face competition from their own used products that become available in the secondary market as participation decreases.
Middle-class consumer spending drives the economy, and most discretionary businesses cannot make it by relying only on the wealthy. As consumers continue to trade their extra income for more expensive groceries, rent and debt interest payments, expect many more enterprises to follow the Jerald Sulky Company out of business.
A recent viral video of one ordinary worker in Arizona complaining about how she can’t make ends meet even though she works three jobs illuminates the plight of many ordinary consumers in today’s economy. “I have three jobs. And I’m still f—ing struggling,” says Jourdan Bourdain. “I’m just getting myself farther and farther into credit card debt, because I don’t have enough after the first of the month to avoid using it. It just isn’t working.”
And she’s not alone. National credit card debt has risen to a record $1.2 trillion. A Financial Times poll finds only 14% of Americans say they are better off financially than when Biden took office.
While inflation increases have moderated in recent months due to the Federal Reserve’s aggressive interest rates, it’s important to remember that even moderate inflation figures still mean increasing sticker prices that stack on top of the historic inflation of recent years. Prices aren’t going down. They are just going up more slowly. Wages are still growing at about the same pace as core inflation.
Trillions of dollars in deficit spending over the past three years have bid up prices and distorted the economy. Last year’s federal deficit was a near-record $1.7 trillion. Productive small businesses can’t compete for resources against nearly unlimited government funds.
The next administration must rein in reckless spending to finally slay inflation and restore America’s vibrant small-business economy. It can rebalance the economy and prices by balancing the budget and squeezing unproductive, government-supported activity and cronyism out of the economy.
According to Job Creators Network’s recent SBIQ poll of small businesses located in Iowa and other early-primary voting states, 8 in 10 respondents said they’re more likely to vote for a candidate who commits to reducing inflationary spending. It’s too late for businesses like Erik’s, but to the extent ordinary voters understand this small business dynamic, they can begin a much-needed national turnaround on Monday.