The current state of the American economy continues to trouble small business owners.
This week, the National Federation of Independent Business (NFIB) released its latest Small Business Optimism Index, showing a drop of a half point during the month of September. The index now stands at 90.8, and it has not risen above the average mark of 98 for 21 consecutive months.
OUT TODAY: @NFIBResearch Released its September #SmallBusiness Economic Trends survey. The Optimism Index fell to 90.8, which marks the September reading as the 21st consecutive month below the 49-year average of 98.
NFIB Arizona State Director Chad Heinrich commented on the latest issuance of the index, saying, “It’s clear that small business owners remain deeply concerned about the economy. The pressure of inflation and the labor shortage are continuing to take a toll on our job creators, with little relief in sight.”
Bill Dunkelberg, NFIB’s Chief Economist, also weighed in on the recent numbers from his organization, writing, “Owners remain pessimistic about future business conditions, which has contributed to the low optimism they have regarding the economy. Sales growth among small businesses have slowed and the bottom line is being squeezed, leaving owners few options beyond raising selling prices for financial relief.”
The announcement from the Arizona arm of the influential business group stated that “twenty-three percent of owners reported that inflation was their single most important problem in operating their business, unchanged from last month and tied with labor quality as the top concern.”
NFIB highlighted some of the areas of emphasis from their index, including:
Small business owners expecting better business conditions over the next six months deteriorated six points from August to a net negative 43% seasonally adjusted, however, 18 percentage points better than last June’s reading of net negative 61% and definitely at recession levels.
Forty-three percent (seasonally adjusted) of owners reported job openings that were hard to fill, up three points from August and remaining historically high as owners can’t hire enough workers due to few qualified applicants.
Seasonally adjusted, a net 23% plan to raise compensation in the next three months, down three points from August.
The net percent of owners raising average selling prices increased two points to a net 29% seasonally adjusted, still a very inflationary level.
The net percent of owners who expect real sales to be higher increased one point from August to a net negative 13% (seasonally adjusted), still a very dismal posture.
Just last week, the Biden Administration boasted of a “record-breaking economy,” noting the increase of jobs, an unemployment rate below 4%, a low unemployment rate for women, and low unemployment for African Americans, Hispanic Americans, and Americans with disabilities.
Others see the economy in an entirely different light. Alfredo Ortiz, the president and CEO of Job Creators Network, recently said, “This accelerating inflation, which is nearly twice the Federal Reserve’s target rate, is another Bidenomics blow to ordinary Americans and small businesses dealing with rapidly rising prices that are lowering their real wages and living standards for two and a half years.”
"The Biden administration’s ongoing pattern of 'reckless spending and anti-energy policy' represents, in Alfredo Ortiz’s view, 'another Bidenomics blow to ordinary Americans and small businesses' grappling with persistently soaring prices." @Gingrich360https://t.co/wxFa9kUj19
On September 19, I testified before a House subcommittee on the impacts of Bidenomics – yet it was clear that half the committee members weren’t even listening. That’s disturbing because our lawmakers have played a huge role in making the typical American family about $7,000 poorer in just two and a half years.
Instead of acknowledging the data I presented, the Democrats on the subcommittee only regurgitated their talking points and resorted to espousing falsehoods about the state of the economy. Even if half our leaders won’t listen to the facts, hopefully the American people will, so here’s the truth about Bidenomics.
Under President Joe Biden, the government has spent, borrowed, and created trillions of dollars, and that caused the highest inflation in four decades. This inflation is a real tax on the American people because it transfers wealth from the people to the government. And the size of that transfer has been staggering.
The average American worker today loses more of his hourly earnings through the hidden tax of inflation than in federal income taxes. That means inflation under Mr. Biden has effectively doubled the average American’s federal income tax liability. Nominal pay keeps going up, but real (inflation-adjusted) pay has gone down.
The typical American family with two parents working and with average weekly earnings has seen their weekly pay increase $230 under Biden, but those larger paychecks buy about $100 less. The result is an annual decrease in purchasing power of about $5,100.
Similarly, net household wealth is at a record high today, but only before adjusting for inflation. In real terms, net household wealth is roughly flat since the end of 2020. That means nearly all the trillions of dollars in additional net household wealth have been confiscated by the government under this president through the hidden tax of inflation.
That’s how the government has been financing its massive deficits for the last three years.
To combat the inflation that it helped cause, the Federal Reserve has increased interest rates which have compounded the pain for Americans. Borrowing costs have risen dramatically and are now about $1,800 higher annually for the typical American family. Coupled with their loss in purchasing power, this leaves a family about $7,000 poorer than when Mr. Biden took office.
Yet many people are even worse off than that. If you’re trying to buy a home today, the monthly mortgage payment on a median price home has more than doubled under Mr. Biden. Homeownership affordability is at one of its lowest levels on record, and less than half of American households can qualify for a mortgage. And many who qualify still can’t afford the payments.
The impact of Bidenomics on federal finances has been just as bad, with interest on the federal debt rising at the fastest pace on record. In less than a decade, interest payments will crowd out more than half of existing government spending.
While the Democrats on the subcommittee refused to listen to any facts I presented, nothing I said was about politics, but policy. President Bill Clinton, a Democrat, signed welfare reform and multiple balanced budgets. And the 12 years of low inflation that preceded Mr. Biden were overseen by both a Republican and a Democrat.
The laws of supply and demand are purely apolitical, with both Democrats and Republicans being subjected to them. The sooner today’s Democrats—and some Republicans—realize this, the sooner they can acknowledge the factual outcomes of Bidenomics and hopefully change course.
But if the conduct of the Democrats on the subcommittee before which I testified is any indication, we shouldn’t hold our breath.
E.J. Antoni is a contributor to The Daily Caller News Foundation, a public finance economist at The Heritage Foundation, and a senior fellow at Committee to Unleash Prosperity.
In boasting about Bidenomics two weeks ago in Milwaukee, President Joe Biden declared that his policies are “restoring the American dream.” Then he went into his creepy whispering mode and assured us “it’s working.”
Huh?
Isn’t a big aspiration of the American dream owning a home? Biden keeps making first-time homeownership harder for young families for two reasons. One is that the overall jump in inflation and the slower increase in wages and salaries means that homes are more expensive. High home prices benefit those who already own their homes, but much of the increased value is due to general inflation, which reached a high of 9% last year and hurts everyone.
A bigger killer for first-time homebuyers has been the steady rise in mortgage rates under Biden. When he came into office, the mortgage rate was 2.9% nationally. Now it is 7.1%, thanks in no small part to the Federal Reserve’s 11 interest rate increases prompted by the $6 trillion Biden spending and borrowing spree in 2021 and 2022.
So now, according to the mortgage company Redfin, just the increase in interest rates on a 30-year mortgage from 5% to 7% means that a middle-income family that could once afford a median-value home of $500,000 can only afford a home worth $429,000. Great, spend more and you get less house. Or instead of a single-family home, you can only afford a three-room condo or a townhouse. If we compare the rates today versus when Donald Trump was president, the typical homebuyer can only afford a house with a price tag more than $100,000 less than three years ago.
What a deal? Maybe this is one reason the size of a new home is smaller than in the past.
Here’s another way to think about the damage done by Biden policies: If you want to buy a $500,000 home today, which is close to the median price in many desirable locations, your total interest payments will be at least $800 more per month. That means over three decades of payments totaling at least $250,000.
Of course, rents are up nearly 20% as well, so for many 20-somethings, this means sleeping in the parents’ basement.
Biden talks a lot about bridging gaps between rich and poor and blacks and whites. But the group that is most handicapped by these interest rate shocks is minorities. Black homeownership is still less than 50% for black households. The Washington Post calls this “heartbreaking,” but they blame racism, not bad government policies.
There’s one other impediment to homeownership for Generation X and millennials. Many 30- and 40-somethings are hamstrung by their existing and expanding debt. Credit card debt is now $1.03 trillion. Half of all families are expected to have problems paying off this debt each month. Delinquencies are rising, which can mean penalty rates of 20% to 25%.
So, if families can’t afford their existing debt, how will they get a bank to approve a $400,000 or more mortgage loan?
An even bigger question is how in the world can Biden call his economic policies a success?
Perhaps Biden has a secret plan to “forgive” trillions of dollars of mortgage debt, as he has already attempted to do with student loans. But that just shifts the debt burden to taxpayers — hardly a solution.
The Biden administration’s assault on homeownership isn’t just harmful to the families that are being priced out of the market. It’s bad for communities and cities around the country. When families become homeowners and set roots in a town, they are much more prone to care about not just improving their own house and maintaining the upkeep and mowing the lawn and trimming the hedges, but it gives them a stake in the schools and children in the neighborhood and the quality of the public services. In other words, homeownership gives Americans a sense of Tocquevillian civic pride.
Crime is lower, neighbors are friendlier and everyone’s property values rise when they live in a community of owners, not renters.
There is one reason to feel today’s downward spiral can be reversed. Back in 1980 when Jimmy Carter was president, mortgage rates weren’t 7%; they reached above 17%. Voters rebelled against the economic mayhem and chased Carter out of office. Ronald Reagan came into the White House, and with wiser economic fiscal policies, mortgage rates quickly fell in half and then lower still. It can happen again.
Stephen Moore is a contributor to The Daily Caller News Foundation, senior fellow at the Heritage Foundation, and chief economist at FreedomWorks. He is the co-author of the “Trumponomics: Inside the America First Plan to Revive Our Economy.”
While the White House touts the success of “Bidenomics,” American families are drowning in debt, especially on credit cards. The latest data from the Federal Reserve Bank of New York show Americans ended the first half of this year with over a trillion dollars of credit card debt for the first time ever. At the same time, credit card interest rates are at record highs, pushing many Americans to the financial brink.
How we got here is a lesson in basic economics, something the Biden administration has willfully ignored.
Contrary to the White House talking points, President Joe Biden did not inherit a “reeling” economy and inflation was not “already there.” When he entered the Oval Office, the economy was growing at a $1.5 trillion annualized rate and inflation was 1.4 percent, comfortably below the Federal Reserve’s target inflation rate. But Bidenomics changed all that.
In just a year and a half, Mr. Biden managed to deliver two consecutive quarters of negative economic growth (a recession). Moreover, inflation reached 40-year highs, with prices rising in a single month about as fast as they rose in the entire year before Biden took office.
This is the bitter fruit of the Bidenomics tree. The seed was trillions of dollars in excessive government spending; it was watered with trillions of borrowed dollars and fertilized by the Fed’s printing trillions of dollars. The results are fast-growing prices, a sluggish economy, and family budgets getting squeezed.
Since Mr. Biden took office, prices have risen about 16 percent, but average hourly wages have risen less than 13 percent, and average weekly hours have been cut back. That has left the average American with an effective pay cut of about 5 percent, and families have been using credit cards to make up for that lost purchasing power.
In just two and a half years, outstanding credit card balances have exploded 34 percent, but it gets worse—much worse. The Fed has been steadily raising interest rates to combat the very inflation which it helped cause. That has pushed up borrowing costs, especially on credit cards; their average interest rate is now at an all-time high.
The combination of large balances and high interest rates is a financial death spiral for many American families. When the financing charges on your credit card bill are equal to or greater than what you can afford to pay each month, it becomes impossible to pay down your balance. You are effectively trapped in debt. On top of the higher cost of living, you’re now paying higher financing charges too.
And it’s not just credit card debt that has exploded during Bidenomics. Consumer spending during the last two years has been partly fueled by higher balances for auto loans and mortgages, the latter of which has grown almost $2 trillion in just two and a half years.
Mr. Biden’s false promises of a student loan bailout along with a moratorium on student loan payments have also encouraged young people to take on additional debt for schooling and not pay those loans back. In fact, instead of using the savings from the moratorium to responsibly pay down their debt, most borrowers have been further increasing consumer spending.
American families going deeper into debt is a hallmark of Bidenomics, so much so that even members of Mr. Biden’s administration are beginning to say the quiet part out loud. Vice President Kamala Harris recently claimed that most Americans would go “bankrupt” if they had a $400 emergency expense.
While there is no evidence to support Ms. Harris’ claim, her statement is an indictment of the administration’s economic agenda. For most Americans, a much more likely scenario than bankruptcy is that they would have to put that emergency expense on a credit card—which many families have already had to do.
The squeeze on Americans’ family budgets will continue until we clean up the federal budget. If Washington doesn’t cut trillions of dollars in spending, the bills will keep piling up, both at the Treasury, and in your mailbox.
E.J. Antoni is a contributor to The Daily Caller News Foundation, a public finance economist at The Heritage Foundation, and a senior fellow at Committee to Unleash Prosperity.
American school children are instructed that the late 19th century, the Gilded Age, was dominated by “robber barons” who made great fortunes creating monopolies that exploited the poor and middle classes.
Howard Zinn‘s best-selling textbook, which introduced generations of Americans to their own history, informed them that “ordinary people who lived through the Gilded Age… experienced tremendous hardships and losses… While they got poor, the rich were getting richer.” Another noted economist concurred that “the poor grew helpless, the middle class got swept away.”
But let’s look again. In fact, by the numbers, it was a golden age for American workers.
As Phil Gramm and Amity Shlaes documented in the Wall Street Journal, between 1870 and 1900, the national GNP rose 233%, per capita GNP surged by 90%, and wages increased 53%, all inflation adjusted. Meanwhile, food costs and other necessities fell by 70%. Better yet, the illiteracy rate fell by 46%, life expectancy rose12.5%, and infant mortality declined by 17%. The people did OK when government stayed on the sidelines.
But Americans, then as now, misread their history and so were doomed to repeat it. Modern progressivism was born in response to the purported outrages of the plutocrats. Government controls stifled economic growth and innovation. Later, big government was credited by many with pulling us out of the depression.
By the 1970s, the damaging effects of the dead hand of government were so obvious that Ted Kennedy and Jimmy Carter led a massive deregulation movement – airlines, communications, energy, and other sectors – that ushered in the tech revolution and renewed prosperity.
But the tendency to regard socialistic policies as inherently good is so ingrained in human nature that once again we have already forgotten the lessons learned. Now the Biden administration is creating a new industrial policy in which government handouts are lavishly dispensed but conditioned on compliance with progressive mandates.
For example, America’s semiconductor chip producers scored a $280 billion subsidy recently, on the grounds that their sector was ailing financially, and its health was so important to the economy generally, that it was, you know, too big to fail. Commerce secretary Gina Raimondo was very explicit about the strings attached, “if Congress wasn’t going to do what they should’ve done [in the Build Back Better bill], we’re going to do it in the implementation.”
She meant it. For starters, chipmakers receiving $150 million or more in federal aid will be required to provide childcare to their employees and construction workers that has been crafted in “tandem with community stakeholders including…local groups with expertise in administering childcare” (i.e., lefty nonprofits).
Chipmakers will also have to pay construction workers prevailing wages set by unions and abide by “project labor agreements” which allow unions to mandate conditions and benefits for all workers, union members or not.
That’s not all. The “lucky” chipmakers must also provide “paid leave and caregiving support” to employees as well as wraparound services such as adult care, transportation, and housing assistance to the disadvantaged or underserved.
Centralized economic planning is once again butting up against economic reality. Chip manufacturers have already been transferring production overseas because costs are 40% higher stateside. Any benefit from the subsidies will be so offset by the increased costs that the net profit may be questionable.
Still, other industries are eagerly lining up for their government handouts. In their ceaseless efforts to socialize their losses while retaining profits to themselves, banks lobbied the FDIC to guarantee uninsured deposits without limit after the recent midsize bank collapses. Broadband providers received tens of billions in grants from states to build high-speed broadband to subsidize low-income purchases of Internet service plans.
Years ago, EV producers received temporary subsidies as start-up inducers, which, of course, aren’t going away at all. They just keep expanding, like $523 billion over 10 years for vehicle consumer and battery production tax credits.
As the chipmakers are discovering, the effect of all this free stuff from government is to make big businesses the compliant wards of the state. Thus, the administration imposes a cradle-to- grave welfare system through centralized industrial policy, while unconstitutionally usurping congressional authority in the bargain.
It’s the path to nowhere – again.
Dr. Thomas Patterson, former Chairman of the Goldwater Institute, is a retired emergency physician. He served as an Arizona State senator for 10 years in the 1990s, and as Majority Leader from 93-96. He is the author of Arizona’s original charter schools bill.
