Small-business owners across America are watching the policymaking in Washington in disbelief. Congress is still moving ahead with a slimmed-down version of the Biden administration’s Build Back Better legislation, which threatens to worsen the inflationary spiral creaming workers and their employers alike.
Americans are already struggling with rising food and gas prices, and record inflationary pressure in general energized by the massive round of government spending last year. Some 92% of small business owners are worried about the impact of inflation, according to a recent Small Business and Entrepreneurship Council survey. It is the top issue of concern they believe President Biden and Congress must address.
Interest rates are climbing too, making it harder for businesses to finance expansion and new purchases.
More than eight in 10 small business owners expect a recession this year, a CNBC poll found — 88% said the same in the SBE Council survey. In fact, we may already be in a recession, with the Atlanta Fed’s GDP tracker showing two consecutive quarters of negative growth.
All these factors pose challenges for small businesses — which together account for about 44% of U.S. economic activity. Many have struggled to emerge from the pandemic, only to face higher costs for supplies, labor, and financing, and now cash-strapped customers. Already, 62% of small businesses are slashing business spending, according to SBE Council’s survey.
So, what is Congress planning to do? Make matters worse — by adding more inflationary pressure through deficit spending.
For example, if Congress passes the remnants of BBB, Washington would dole out significant money, including more than $40 billion in extended Obamacare subsidies through 2024 with only about $10 billion in offsetting revenues. It almost seems like President Biden and Congress want to make it more difficult for the Fed to get a grip on inflation.
And it could mean that Congress will back with more of its proposed tax hikes on small businesses. While these tax hikes have been pushed to the side for the moment, they regrettably remain on the wish list of Democrat leaders, even though such tax hikes would fuel inflation and rob small businesses of the capital they need to weather higher costs and an economic downturn.
Beyond the extension of Obamacare subsidies, the central policy reform in the new BBB focuses on Medicare drug pricing. The bill would authorize government officials to impose price controls on drug makers.
This measure will gut industry revenue across the board. Not to mention incentives to invest and innovate. The hardest hit will be small companies — especially the startups with big ideas about new cures and treatments — that make up the bulk of the bio-pharmaceutical industry. In order to successfully pursue their medical breakthroughs, these small companies need venture investors to take on the risk of funding early-stage innovation.
With price controls looming, investors will disappear — as will 135 new treatments that would otherwise benefit patients over the next 15 years or more, as one University of Chicago study found. The biotech industry, a global leader in innovation, will be gutted.
The most productive thing President Biden and Congress can do for consumers and the American economy this summer and beyond is to move on from Build Back Better. Each iteration of the bill wanted to tear down productive sectors of our economy in order to push more government spending and radical government intervention. This mini-me BBB version is no different.
Karen Kerrigan is president and CEO of the Small Business & Entrepreneurship Council.