Fighting Inflationary Pressure: Why is Congress Getting this Wrong?

By SBE Council at 29 August, 2022, 9:39 am

“Inflation” continues to be the number one concern of small business owners.  Higher costs are eating into small business profits, which prevents them from paying bills, making investments, and raising wages to compete for employees. Several recent surveys point to the pain that inflation is causing small businesses:

● In a CNBC survey, 43% of small business owners cite inflation as the biggest risk to their business – 77% expect inflation to rise.

● According to an Alignable survey, 40% of small business owners reported they could not pay rent in August. (Forty-five percent of small business owners surveyed by Alignable say they’re paying at least 50% more in rent than they did prior to Covid.)

● A Job Creator’s Network (JCN) survey reports that 56% of businesses are concerned that current economic conditions could force them to close. That number jumps to 73% for minority-owned businesses, and 76% for female-owned businesses.

● JCN also notes that inflation continues to be the number one concern among small business owners – 48% call it their first or second biggest problem. “No other issue has rated this high in the history” of JCN’s poll.

“Big Tech” Legislation is Pro-Inflationary

No one actually believes the “Inflation Reduction Act” will lower inflation. In fact, it will likely keep inflation elevated with its massive spending and tax increases, which disincentivize investment – the very thing we need to help us emerge from the supply chain mess.

One of the only tools small businesses have at their disposal to limit the burden of inflation is technology, and access to tech platforms, which provide choices and efficiencies in helping entrepreneurs more affordably operate their businesses and drive revenues through the door. But Congress may mess that up too with “big tech” legislation such as the “American Innovation and Choice Online Act” (AICOA).

The Progressive Policy Institute (PPI) reports “that digital companies are helping hold down inflation at a time when prices are soaring in many other parts of the economy.” PPI has urged Democrats and President Biden to “build on” this positive effect, but unfortunately – through AICOA and other regulatory initiatives – they are working to wreck a digital ecosystem that has been a savior for small businesses throughout the pandemic and during this historical inflationary period.

The small business community is rightly concerned about the effects of legislation such as AICOA, as it would disrupt communication with customers, raise costs for small businesses, and make it harder for customers and potential customers to find local businesses in the digital sphere. A recent SBE Council survey of startups underscored these concerns, with 61% of startup entrepreneurs expressing worry that that these anti-trust/regulatory actions would negatively affect their businesses.

Moreover, according to the findings of a “Small Business and the Economy” survey, 55% of small business owners expressed worry that legislation and regulatory efforts targeting “big tech” would negatively impact business sales and operations, and the broader economy.

Small business owners know that sweeping government regulation will have downstream impacts on their business such as higher costs, higher prices for consumers, and less innovation and choice. Incredibly, 24% of small businesses say they may be forced to close if legislation such as AICOA were advanced into law.

In survey after survey, small business owners want policies that provide relief and support. They need policy certainty and an economic environment that enables them to not only survive, but to compete and grow. Sadly, Washington has gotten this woefully wrong as the only thing tempering inflation is the economic downturn, which is slowing demand.

Our message to Congress is this: Please, please do not mess with one of the only tools at the disposal of small businesses that is helping them navigate higher costs and the shifting economy.  Focus on providing relief, not burdening small businesses with higher costs and disruptive actions such as the pro-inflationary “American Innovation and Choice Online Act.”

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.