Small Business Is Getting A Rude Awakening

The following is just a small part of a post by economist Paul Krugman: 

One odd feature of U.S. politics is that businesspeople, especially small business owners, always seems to believe that they will do better under Republicans, even though history shows that business does better under Democrats. Small business owners supported Trump in the last election, despite ample evidence that he would be very bad for business.

And now they’re getting a rude awakening.

Trump to follow in Orban’s footsteps is that Trump, like Orban, clearly doesn’t have any fixed principles other than power and self-aggrandizement. Under Trump, policy won’t reflect any consistent ideology. It will, instead, change with his perception of personal advantage, his temper tantrums, his whims and his malignant narcisissim. If he doesn’t like rising prices, he’ll try to stop inflation through bullying.

In short, MAGA will be very bad for business.

This was, of course, predictable and predicted. Tariffs don’t just make foreign goods more expensive to consumers. In a world where many of the goods we import are productive inputs like screws — or auto parts — tariffs directly raise the cost of manufacturing in the United States. Yet Trump’s threats against automakers suggests that he thinks he can control inflation through intimidation.

Trump may impose further tariffs, or slash them as suddenly as he raised them, depending on who spoke to him last. L’Etat, c’est Trump.

This kind of uncertainty is paralyzing for businesses, who are realizing that any kind of long-term commitment can turn out to have been a disastrous mistake. Build a plant that depends on imported parts, and Trump may cut you off at the knees with new tariffs. Build a plant that’s only profitable if tariffs stay in place, and Trump may cut you off at the knees by backing down.

Again, the point is that there really isn’t a MAGA economic philosophy, just whatever suits Trump’s fragile ego.

All of this was predictable and predicted. Before the election many economists warned that Trump’s policies would be destructive, although the models didn’t really take the sheer craziness into account.

The remarkable thing is how many supposedly hard-headed businesspeople didn’t see the obvious. Small business owners, in particular, clearly favored Trump, and as the chart at the top shows, their optimism soared when he won. Now it’s crashing.

So business owners allowed themselves to be deluded, as usual, but with even less excuse than normal. What they should have realized is that Trump’s lack of concern for ordinary Americans’ lives doesn’t mean that he’s pro-business, and that the election wasn’t about left versus right — it was about rule of law versus autocracy. Now we’re getting a first taste of what life under autocracy is like, and it’s bad for everyone, including businesspeople.