As the theme of the 2022 FEDA Annual Conference states, the foodservice equipment and supplies industry is ready for a great comeback. But the policies and regulations being considered by government leaders will determine the strength of that comeback – or whether it falls short. Keynote speaker Steve Forbes, chairman and editor-in-chief of Forbes Media, will describe how the industry can support economic recovery by encouraging congress and the Biden administration to address the causes of inflation, stabilize the value of money, cut taxes and pull back regulatory overreach, especially related to recent antitrust initiatives. Here is an overview of the issues he’ll discuss.
Monetary vs. Non-Monetary Inflation
With inflation rising 8.6 percent year-over-year in May, businesses are concerned how higher prices will impact their bottom line. The economy is now seeing the highest annual rate of inflation since the end of 1981, and Forbes has attributed that alarming increase to the harmful and unnecessary consequences of monetary inflation, or inflation that was caused when the government pumped too much money into the U.S. market during the pandemic, which allowed consumers to buy more things. This money was intended to address severe household shortages, but the cash exceeded minimum needs and artificially inflated demand, leading to cost increases. Monetary inflation is like a computer virus – it distorts the value of products and services and leads to a reduction in the value of currency, Forbes said at a Manhattan Institute event presented by the Adam Smith Society. “Fixed weights and measurements make markets work best. The same with money – money measures value. So, when money fluctuates, bad things happen.” Forbes has advocated moving the United States’ monetary system to the “gold standard” to avoid future monetary value distortions. The change would align the standard unit of currency with the price of gold, and, as Forbes has pointed out, the gold standard has never been a contributor to inflation.
When non-monetary inflation occurs, it is caused by free market incidents such as a drought that makes the price of wheat rise or, as recently seen in the foodservice equipment industry, when global supply chain shortages led to higher equipment prices. Non-monetary inflation can work itself out, but undisrupted monetary inflation can wreak havoc on our overall economy year after year, causing consumer and business costs to keep rising beyond manageability.
Forbes warned the Federal Reserve’s approach to addressing inflation, which is to slow the economy and create more unemployment, will not work. “(The Federal Reserve) does not focus on keeping the stable money value … they want to depress the economy – they want to slow it down,” Forbes said at the Manhattan Institute event. “When they say soft landing, that’s Fed speak for ‘perhaps a recession.’”
Forbes said that’s not how to do it. “You fix the value of the dollar, the government stops trashing the economy, and it would be amazing how things would quickly come back.”
Taxes
Inflation is a “stealth” tax that government creates by overspending and “creating money out of thin air,” Forbes said in his What’s Ahead webcast. Consumers must reduce purchasing as prices go up. Forbes asserted Congress can address inflation by creating a comprehensive tax cut plan, simplifying the federal income tax code and instituting a flat tax. As Forbes has explained, “Low tax rates positively change incentives: Entrepreneurs, venture capitalists and investors are induced to take more risks; businesses become more expansion-minded; and individuals positively adjust their own behavior, knowing that they can keep more of what they earn and that success will not be punished.”
Regulations and Antitrust
The Biden administration’s stated goal of protecting America’s most vulnerable citizens is enabling new regulatory burdens that are dismantling private enterprise and driving inflation, Forbes said on an episode of What’s Ahead. “Today’s neosocialists are smarter than their ancestors,” Forbes has observed. “Instead of outright takeovers, they are achieving much the same goal through rigid regulations.”
There are signs that Biden’s approach to improving quality of life through overregulation are failing. The Mercatus Center at George Mason University found that a 15 percent increase in the volume of federal regulations hikes the cost of consumer goods by a full percentage point, an increase that is difficult for America’s poorest families to absorb. According to Mercatus, “Regulators and policymakers often claim that regulations are intended to protect the poorest and most vulnerable consumers … unfortunately, the goods and services to which the poor devote much of their limited budgets, such as energy and food, are also the most heavily regulated.”
Forbes has addressed this regulatory overreach in What’s Ahead and other publications, noting that some of these new rules are intended to punish Big Tech companies and are being emboldened by individual concerns for data privacy and the right to online free speech. While this sounds noble in principle, Forbes has cautioned that proposed Big Tech regulations will kill innovation.
Even worse for business growth and development, the Biden administration is also trying to exert a high level of control over how companies operate by expanding antitrust regulations, which will have devastating long-term consequences for businesses. “For years the controlling criteria for an antitrust action was supposed to be maximizing benefit for consumers,” Forbes said on What’s Ahead. “Now, all other sorts of criteria are to be applied to antitrust, such as not reducing the number of competitors, even if they’re not profitable.” He noted that the Biden administration also wants subsidies for smaller competitors and to require some larger industries to give money to smaller competitors. Forbes predicted antitrust actions will also address price gouging, “which would allow the government to determine if a price or a product or service is fair … and such actions always lead to more shortages.” That possibility will only lead to more hardships for business and consumers. “When it comes to antitrust,” Forbes said, “less would be more.”