According to the Bureau of Labor Statistics, the Producer Price Index, which gauges firm wholesale expenses, increased 10% over the last year. This substantial increase in input costs is rapidly creating a dilemma for small business owners in the United States that operate on razor-thin profit margins. Regrettably, a Congressional hearing last week on small company health proved that congressional Democrats are completely disconnected from this critical issue.
Speaking To Congress
Dina Rubio, the owner of West Palm Beach, Fla.’s Don Ramon restaurant, spoke before the House Committee on the Economy on the inflation challenges her small business faces. She detailed how, in her restaurant’s perspective, prices are increasing even more rapidly than government reports indicate. For instance, a box of limes that she used to purchase for $30 has increased in price to $90. Prices for wholesale steaks have increased from roughly $7 to $12 per pound.
Rubio has been forced to increase menu pricing in order to remain viable, offending some loyal clients on fixed incomes who do not understand her plight. Additionally, she had to remove some items from the menu due to their decreased profitability. She has been forced to make product substitutes, such as creating mojitos with lemons rather than limes, despite the fact that the flavor is diminished. Entrepreneurs throughout the country are being pressed to find similar innovative solutions to the growing cost of goods.
To make matters worse, customers are becoming poorer as a result of the greatest consumer inflation in 40 years, which includes record-high fuel prices. When prices outpace salaries and a tank of petrol reaches $75, people are less likely to make discretionary purchases such as dining out. Because small businesses lack the economies of scale and preferential purchasing agreements enjoyed by larger competitors, they are disproportionately affected by inflation.
Rubio testified before the committee that policymakers bear some of the blame for this excruciating inflation, owing to trillions of dollars in government spending, their opposition to domestic energy production, and social welfare policies that have rewarded people for staying out of the labor force. She urged the government to do less – not more – to empower small companies in the United States to expand the supply of products and services and rein in inflation.
Committee Chair Not Listening
Regrettably, the chairman of the committee, Rep. Jim Himes (D-Conn.), did not look receptive to this message. He expressed disappointment that Rubio brought up this real-world issue, stating that he would prefer to focus on alleged “structural” hurdles to racial justice faced by businesses. Despite the fact that inflation is by far the most serious issue confronting small businesses in the United States, committee member Rep. Alexandra Ocasio-Cortez (D-New York) made no mention of it in her remarks.
Himes exhibited his apparent lack of economic knowledge by blaming growing inflation on business owners and suppliers who increased their pricing voluntarily. Indeed, small firms often despise raising prices because it means losing consumers, and they do it only when compelled to do so to cover their margins. Republicans on the committee underlined that inflation is not the fault of businesses, but rather the outcome of an excess of money chasing an excess of goods and services.
Himes argued that Rubio was disingenuous in opposing inflationary government expenditure as a result of her Paycheck Protection Program loan during the COVID-19 issue. This is an erroneous analogy. The PPP provided a lifeline for small enterprises that had been forced to close due to the pandemic’s severity. The funds were immediately used to cover payroll costs. Subsequent expenditure, most recently the needless $1.9 trillion American Rescue Plan last year, was reckless and unnecessary.
Inflation Hurts Small Business
This session validates the greatest suspicions of American small business owners that Democratic leaders within the Washington beltway do not grasp how painful inflation is in the real world. They appear to have forgotten that not everyone receives the automatic annual cost-of-living increases granted to members of Congress.
The first step toward resolving this inflation crisis is for Congress to acknowledge that its policies are to blame. By removing government interference and letting the free enterprise system to function, the American small business economy can be strengthened and expanded, restoring the country to its pre-pandemic level.