“I think I have a better idea on how to fight inflation. Lower your costs, not your wages.” If the American people needed a reminder of just how disconnected from reality career politicians are, President Joe Biden put a magnifying glass over the permanent Washington political class during his sixty-two-minute State of The Union address Tuesday evening.
President Biden’s baseless assertion that American businesses—large and small—are indiscriminately cutting wages is far from reality on main street. In fact, Biden’s assertion was a direct insult to small business owners across the country who are fighting tooth-and-nail to remain open as we emerge from the senseless lockdowns during the COVID-19 pandemic.
I am a small business owner. I own and operate a number of children's swim schools. Prior to the pandemic, we were voluntarily paying our entry level team members 65% more than the required minimum wage as starting pay. We did this—not because we were forced to—we did it because we value every member of our team and the contributions each person brings to the table in order to run a successful business. In the process, we’ve created 50 jobs, overwhelmingly occupied by women, and have seen hourly team members work their way from the bottom up into full-time, salaried management positions with room to grow.
In the face of restrictive and senseless lockdowns, many businesses, including startup firms like ours, found themselves struggling to survive. Sadly, many did not. As of late 2021, an estimated additional 200,000 businesses closed for good as a result of lockdowns and restrictions. Furthermore, a survey from the National Federation of Independent Business showed that an estimated 23% of small businesses would close if economic conditions do not improve. For context, small businesses make up 99.7% of U.S. employer firms, account for 49.2% of private sector employment, and are responsible for nearly two thirds of new jobs created each year. While government relief programs tied to the pandemic bought some time for a number of businesses, they won’t be enough for many of our most important job creators if economic conditions do not change.
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While it may be politically popular for those who have never held a private sector job to make false claims about real value creators in our economy, Mr. Biden’s claims are further proof of how detached Washington is from the reality on main street. One doesn’t have to own a business, nor have a business degree, to understand that a business can’t just cut costs. A business certainly can’t just cut fixed costs. That is the nature of what they are – fixed. Nor can a business simply cut variable costs, particularly in this environment, as wages are rising and material costs are up across the board. These costs continue to go up, largely due to foolish energy policy decisions and a thirty-year trend of outsourcing control of our supply chains.
As the largely preventable spike in inflation continues to impact business, it is hitting hardworking American families the hardest. According to the Joint Economic Committee, Americans are paying, on average, an extra $385 per month on gas and basic goods. They, much like American businesses, can’t simply flip a switch and cut their costs.
After decades of selling out the American middle class, it remains painfully clear that Biden and the permanent Washington political class remains clueless on what it takes to start, run and grow a business. I’m from Michigan, the birthplace of the American middle class and home to the automotive industry. Over the past thirty years, I’ve watched as Washington politicians sold out the working man and woman in the name of “globalization.” I watched as career politicians put Washington special interests ahead of their constituents, which led to the hollowing out of great American cities.
It's more important now than ever, that Americans elect leaders who understand what it means to sign the front of a paycheck and grow a private business. Biden’s reckless statement is just further evidence of this need.
Those who live in glass houses shouldn’t cast stones. In this particular case, perhaps President Joe Biden and the permanent Washington political class should perform its own cost cutting measures on reckless spending rather than falsely claiming it is American business owners who are the problem.
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