Kelly Bullis
From time to time, I manage to deliberately step in it. My general rule is to avoid politics.
In this year’s election, one major candidate keeps vaguely stating that they will get prices lowered back to two or three years ago.
Let’s take a look at what causes inflation. Somewhere way back in the bottom of the food chain, somebody either voluntarily, by economic realities beyond their control, or by government dictate, must raise their prices.
The problem is that the price increase is now passed along to a large swath of the economy, which, because a key part of their costs being tied to that price increase, they must raise their prices in order to avoid going out of business. (If a business’ costs to do business exceed what they charge, the simple eventual outcome is bankruptcy. How many large corporations are actually declaring bankruptcy just this year? 346 through June 2024 is the highest since 2010. How about name brand companies like Big Lots; Red Lobster; Family Dollar; Rite Aid; Domino’s Pizza; Yellow Trucking; Jenny Craig; Bed, Bath & Beyond; David’s Bridal; etc.)
What kind of examples of costs going up at the bottom of the food chain that can impact so many businesses? An obvious one is fuel costs. That impacts just about everything you can think of. Trucking costs, employee commuting costs, etc. Another example? Minimum wage. That really impacts the restaurant industry. See a couple of prior articles about the cascading effect of raising the hourly rate of beginning level employees in a restaurant and how everybody has to get a raise, in effect raising labor costs in the restaurant by as much as 25% overnight. When labor costs are a large percentage of the cost of running a restaurant, they must raise their prices.
The long-term effects (two to three years or more) of inflation cause all businesses to have to raise their prices multiple times because everything they buy has raised theirs. Add on top of all that, employees demanded huge raises just to help them keep up with personal inflation.
So, this politician is faced with a multi-layered challenge. To lower prices, they would have to lower everybody’s prices at the same time, including lowering everybody’s wages, minimum wage rates, etc. Simple, eh? Would you be willing to take a 20% cut in pay so your groceries, etc., will go down to prices three years ago? (Food prices have gone up at least 20%, sometimes almost up to 50%.) Is it possible to force the world to lower the price of oil? Will they roll back green energy initiatives to lower prices on appliances, cars, etc.?
My conclusion to the question “Is there really a way to roll back prices?” Absolutely not. Simply put, it is impossible. So why would you believe somebody who claims (without giving any details) that they will roll back prices?
Have you heard? Psalms 119:104 says, “Through your precepts I get understanding; therefore I hate every false way.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.