Inflationary pressures were occurring well before the Russian invasion of Ukraine or Chinese lockdowns.
Prices were already rising thanks to COVID-19-related supply chain issues and warnings as far back as 2020 from noted economists like Larry Summers that further stimulus spending would exacerbate inflation was ignored by the president and his economic advisers.
My business clients also saw this problem looming back then too. They understand inflation. They knew that adding more than $6 trillion in government spending and liquidity to the nation’s money supply would have inflationary effects. To them, as business people, it’s just supply and demand. When such an extraordinary amount of products (in this case cash) over-supplies a market (in this case the financial system) the value of those products declines unless there’s sufficient demand, which there wasn’t in a slowing economy. That’s a simple explanation of inflation that any of my clients understand.
But President Biden never understood this. He — and his key economic advisers — ignored these obvious signs and insisted that inflation was transitory and would soon pass. He blamed COVID-19 (again). He blamed the war in Ukraine.
Were you surprised when Russia invaded Ukraine? Most people I know weren’t. And yet the president and his economic advisers were taken off-guard when Vladimir Putin started this war. This, despite the Russian leader’s public pronouncements of these intentions for years before the actual invasion and countless intelligence reports warning of the same.
Regardless of what happened, isn’t it a leader’s job to look ahead, evaluate risks and have a plan? That’s what my best clients are always doing. So considering the very strong probability that Mr. Putin would follow through on his long-stated threats, we’re baffled as to why there seemed to be no planning for the consequences of such an action? Was there no analysis of the economic effect of this war on energy and food markets? Could more oil have been purchased beforehand and put in reserve? Could regulations that have stifled the oil and gas industry have been delayed? Could trade agreements with other producers around the world have been nailed down? Any competent business leader would have prepared for these economic consequences in advance. Mr. Biden did not.
What makes things worse is his reaction to these events. Take, for example, his tweet over the July Fourth weekend where he ordered companies running gas stations and setting prices to “Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.”
Do it now? Do it how?
This isn’t the first time that the president has blamed businesses — and the wealthy — for problems that could’ve been addressed well in advance by his own administration. And of course, Mr. Biden’s tweet elicited an angry response from the oil and gas industry, rage from his right-wing opponents, exasperation from many media outlets and an “ouch” from that evil-wealthy guy Jeff Bezos. It was called ignorant, naive, uneducated and uninformed. His supporters scrambled to defend his position. But even they had few answers to give, other than to say he’s just your ordinary Joe expressing his opinion.
“Anybody that knows President Biden knows he’s plain-spoken and he tells exactly what he’s thinking in terms that everybody can understand,” John Kirby, the president’s National Security Council coordinator for strategic communications said. “So, I think, we obviously take great exception of the idea that this is somehow misdirection.”
How does the president’s lack of economic understanding impact the business community? All you have to do is look at the National Federation of Independent Business’s most recent Small Business Optimism Index. Unfortunately, it’s now at a 48-year low. Small businesses, which make up half of the country’s GDP and employ more than half of our workers, have lost confidence in him. And that has a big effect.
Confidence is the reason why people splurge on a nice vacation, overpay for a house and buy a few extra items online, even when they don’t need to. It is why businesses risk their capital, invest in real estate, gamble on talent and buy inventory.
If you’re running a business, what’s your view about this administration and how it’s handling the economy? Is your confidence strong? Are you comfortable spending your money? Taking risks? When business and consumer sentiment is strong, economies grow.
But confidence is not strong. And Mr. Biden’s actions show why. Instead of planning in advance, he blames others. He “orders” businesses to reduce their prices. This isn’t leadership. This is ignorance. You can’t order a gas station to lower their prices. Who’s next? The corner grocery? The dress shop? The landscaping firm? The president is desperate. He doesn’t know what else to do about inflation and the slowing economy. He’s out of choices. So he points his figure at the true culprit of all of his problems: the business person.
Because it is the business person who is gouging the public, is it not? It is the business person who doesn’t pair a fair wage. It is the business person who puts profit over and above what’s best for the nation.
So how do business people respond when a president acts like this? They warily withdraw. They lose their appetite to hire, invest and take risks. They cover themselves and protect their families. Given that the administration is out of answers and blaming them for the country’s problems, they play defense. They are like the Jews in Hitler’s Germany, the Blacks in post-Civil War America and the pagans in medieval England. Outcasts. Enemies. Culprits. This is not a time for them to grow. It is a time for them to survive until (hopefully) better times.
The good news is that there will be better times. America’s businesses are resilient. They’ve seen weak presidents before. They’ve weathered the economic impacts of misguided administrations. Rest assured, they will survive, until a friendlier and more astute leader arrives that understands — and more importantly appreciates — their critical importance.
• Gene Marks is a CPA and owner of The Marks Group, a technology and financial management consulting firm specializing in small- and medium-sized companies.
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