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Biden’s Response to Inflation Could Impair Small Businesses and the U.S. Economy

Inflation is causing a myriad of issues in the U.S. economy, but measures to reduce historically high prices are putting consumers and small businesses on edge.

To make matters worse, a push in Congress and by the Administration to erect new antitrust regulations would upend the robust retail economy, further eroding economic stability. Nearly 70% of the American economy is based on consumer spending, and retail sector spending accounts for 6% of U.S. GDP. To keep the economy afloat, policymakers must abstain from passing obscure, one-size-fits-all antitrust policies that would further destabilize the market. This especially applies to retailers. 

The recent Consumer Price Index (CPI) report has already impacted investor confidence and sent markets plummeting after inflation reached levels not seen since 1982. During the second quarter of 2022, GDP shrank by 0.6%, following a 1.6% decline in the first quarter. 

Small and medium-sized businesses in retail are especially vulnerable. In 2021, retail was a top industry driving small business creation. According to the Small Business & Entrepreneurship Council, new small and medium-sized business owners consider President Biden’s regulatory policies to be one of the biggest impediments to their businesses. Additionally, 59% said Congress’s regulatory policies are hurting the economy. 

Simply put, the approach to antitrust being pushed by progressives in Congress undermines competitive pricing at a time when consumers are already feeling the pinch.

Retail sales in August were sluggish, decreasing 0.3% for the month (excluding auto sales), which was notably below estimates for a 0.1% increase. Major retailers such as Walmart, Macy’s and Target have used markdowns to clear out excess stock after overestimating customer demand earlier in the year. Hackett Group reports that general and specialty retailers saw their days of inventory outstanding—or how long a company holds its stock before converting it into sales—increase to an average of 63.7 days in the second quarter of 2022, up from 57.4 days the year before. Retailers have also reduced the number of seasonal jobs compared with 2021 in preparation for what’s expected to be a “lackluster” holiday shopping season.

With consumer confidence still low, Americans will likely be thinking twice about spending on non-essential items. Consumers are increasingly making trade-offs to navigate higher prices, including opting for cheaper brands, putting purchases on credit cards and taking longer to pay those cards off. Our recent poll conducted by Echelon Insights showed that 61% of Americans consider the economy to be the biggest issue facing the country today. And a Morning Consult analysis reveals that 85% of U.S. adults say rising prices have had an impact on the way they shop, forcing them to look for deals and reduce their spending. 

All of this is tough news for small and medium-sized business owners, who must attempt to offer competitive discounts while facing arbitrary government regulation efforts and higher inventory costs. According to research from Alignable, 59% of small business retailers say they are at risk of closing this fall, citing interest rate hikes, changes in consumer spending and recession fears. Hence, proposing and enacting laws that would restrict the growth of small and medium-sized businesses is a recipe for disaster.

In the current environment of rampant inflation, record-high interest rates and the progressive push for new antitrust laws, the retail sector is being threatened on all fronts. To avoid further economic decline, there must be a balanced approach to tackling inflation—one that doesn’t wreak havoc across financial markets. With ongoing uncertainty, Congress and the Biden administration must look toward policies that will stem the tide of rising costs while also allowing markets and small and medium-sized businesses to thrive.