Rising Inflation and the Struggle to Maintain Living Standards
Introduction:
In recent years, Americans have faced increasing challenges in maintaining their standard of living. According to the Congressional Joint Economic Committee, households are now spending nearly $11,500 more annually to maintain the same living standards as in January 2021. This surge in spending can be attributed to the record-breaking 40-year high inflation rate. While average hourly pay for workers has increased by 13.6 percent since January 2021, it has failed to keep up with the 17 percent increase in inflation during the same period.
The Impact of Inflation on Essential Expenditures:
To stay afloat in this inflationary environment, consumers are forced to spend more on essential categories such as food, transportation, housing, and energy. These areas collectively account for almost 80 cents of every additional dollar spent, according to government data. This increased expenditure puts a significant strain on households and small businesses alike.
Thriving Amidst Inflation: The Case of EZ Bombs:
Despite the challenges posed by inflation, some small businesses have managed to thrive through strategic adjustments and resilience. One such success story is that of Tina Castaneda, the founder of EZ Bombs spice. She revolutionized the preparation of authentic birria Mexican tacos by creating a product that simplifies the process without compromising on flavor. Through effective social media marketing on platforms like TikTok and Instagram, EZ Bombs gained rapid success. What started as a humble endeavor to make some extra money quickly turned into a booming business. In June alone, EZ Bombs received a staggering 90,000 orders, thanks to its viral social media videos and positive user feedback.
Relocation to Offset Inflation Costs: Your American Flag Store:
Another business owner who has navigated the challenges of inflation is James Staake, founder of Your American Flag Store. Since launching in 2018, he has witnessed a doubling and, in some cases, nearly tripling of costs due to inflation. To offset these rising expenses, Staake made the decision to relocate his family and business from California to Tennessee. The absence of an income tax in Tennessee, combined with the involvement of family members in labor, has helped keep costs down. This move has allowed Staake to absorb the losses caused by inflation without compromising on the quality of his handcrafted wooden American flags.
Challenges Faced by Small Businesses: Tech Companies and Cancel Culture:
In addition to the financial strain caused by inflation, small business owners like James Staake have faced challenges from big tech companies. Staake’s business experienced a decline in website traffic and sales due to restrictions imposed by platforms such as Facebook, Shopify, and PayPal. These companies suspended his advertising privileges and froze his PayPal account, citing vague violations of “community standards.” Staake believes that his business, which focuses on patriotic products like American flags, faces increased censorship due to its nature. This “cancel culture” further hampers small businesses’ ability to fight inflation.
The Federal Reserve’s Role in Inflation Management:
The federal government’s approach to managing inflation directly affects small businesses like EZ Bombs and Your American Flag Store. When inflation reaches unsustainable levels, banks often raise interest rates to curb spending. However, at their June meeting, Federal Reserve officials decided to keep interest rates unchanged, despite disagreement among central bankers. This decision reflects the need for more data to ensure sustainable movement towards the 2 percent annual inflation target set by the Fed. Economists like Bryan Cutsinger argue that the Fed’s failure to adjust the target rate has destabilized the economy and monetized debt issuance.
The Uncertain Future for Small Businesses:
The government’s indecision on how to curb inflation poses significant challenges for small business owners. It creates uncertainty about the future and forces businesses to work harder while earning less. The Castaneda family, for example, is considering relocating from California to Texas or Florida to combat high labor costs and taxes. As inflation continues to impact individuals and businesses alike, the need for a clear and decisive strategy from the government becomes increasingly urgent. By addressing these challenges head-on and supporting small businesses, the economy can regain stability and ensure a brighter future for all.
