PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Small Business Group: Inflation Must Be Taken Seriously, Urges Smart Policy Response

By at 12 May, 2021, 1:16 pm

NEWS

For Immediate Release

Washington, D.C. – Today, the Small Business & Entrepreneurship Council (SBE Council) made clear that while we can all hope for the best on inflation, policymakers must take the current inflation threat seriously. Unfortunately, on the fiscal and monetary fronts, policymakers are pushing policies in the exact wrong direction.

SBE Council chief economist Raymond J. Keating said, “With three months in a row of deeply troubling numbers, we can all hope that this bout of inflation will be temporary, as the recovering economy struggles to get production, supply chains and employees back to something close to normal. But given how hard it is to get inflation under control once it is ignited, and the many grave ills generated by inflation, such as price uncertainty, reduced value of the dollar, higher interest rates and diminished incentives for investment, we cannot afford to have policymakers blissfully working under best-case, all-will-be-well assumptions.”

In a blog post “Inflation Ignites: Best-Case, Worse-Case Scenarios and Policy,” Keating explained:

“And it must be understood that fighting inflation does not mean fighting economic growth. Quite the contrary, economic growth works against inflation. After all, if inflation is about ‘too much money chasing too few goods,’ then producing more goods is anti-inflationary. In fact, the reality about the dramatic decline in inflation in the 1980s was that it was just as much about pro-growth tax, regulatory and trade policies established under the leadership of President Reagan as it was about then-Federal Reserve Chairman Paul Volker’s tightening monetary policy.”

“Therefore,” Keating continued, “the historically loose monetary policy that the Fed has been running since 2008 and the Biden administration’s anti-growth tax, regulatory and spending agenda must be jettisoned. Rather, the Fed should be working to rein in loose money, as it had started to do from roughly November 2017 to September 2019. And Congress and the White House should be working together to move tax, regulatory and trade policies in a pro-growth direction. That means substantive and permanent tax and regulatory relief, and working to reduce governmental barriers to trade. This growth agenda will support and advance economic recovery and expansion, while working against inflation.”

CONTACT:

Karen Kerrigan, kkerrigan@sbecouncil.org

Raymond Keating, rkeating@sbecouncil.org

SBE Council is nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For 25 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth. Visit www.sbecouncil.org for additional information. Twitter: @SBECouncil

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