President Joe Biden recently highlighted the achievements of his economic strategy, stating he lowered the deficit by $1.7 trillion in his first two years in office.
"No one has ever done that," he said from the White House earlier this month. "That's Bidenomics in action."
But Biden's policy has drawn criticism from some quarters, including "Shark Tank" star Kevin O'Leary, who said the problem with it is multiple bills, including the Creating Helpful Incentives to Produce Semiconductors and Science (CHIPS) Act.
"It's just massive spending, but it's the target of where that spending went," O'Leary said on the Fox News show "Outnumbered."
He explained that most of the spending is going to S&P 500 companies. And while those giant corporations are big employers in the U.S., they only comprise 40% of the economy. The unintended consequence of Biden's policy is that America's small businesses are starving, O'Leary said.
It doesn't help that the Federal Reserve has increased interest rates significantly over the past year. Because of the aggressive rate hikes, the cost of capital for some small businesses has gone from 6% or 7% to 20%, O'Leary said.
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‘This Will Show Up In The Polls'
As an investor in numerous businesses, O'Leary is feeling the impact first-hand.
"I was on the Hill yesterday. I was banging the drum up and down the halls saying, ‘Everybody, let's wake up to what's happening to my small companies.' I got 34-plus companies. They can't raise a dime. There's no Bidenomics for them. They have no capital," he said.
Meanwhile, the increase in price levels poses an additional challenge for ordinary Americans.
In June, the consumer price index (CPI) rose 3% from a year ago, marking the smallest 12-month increase since March 2021. Core CPI, which excludes food and energy, increased 4.8% year over year.
"Core inflation is not down. CPI, yes, but core inflation, the real inflation that hurts a small individual that's trying to live off $58,000. They're getting killed. And this will show up in the polls. This will become political," O'Leary said.
A recent Bloomberg report said American consumers are cutting back on personal hygiene products such as toothpaste and toilet paper.
The change in consumer behavior has also been observed by the warehouse chain Costco Wholesale Corp. In Costco's latest earnings conference call, Chief Financial Officer Richard Galanti said shoppers are shifting from beef to cheaper meats like chicken and pork. Some are switching to canned products because they tend to cost less and have a longer shelf life.
Inflation chips away at the value of your hard-earned money. New companies have innovated ways to help retail investors tap into inflation-resistant assets, such as investing in rental properties with as little as $100 while staying completely hands-off.
According to O'Leary, saving America's small businesses is of utmost importance right now.
"We have to do everything in our power to make sure they get access to capital. This is a problem that's only 6 to 8 weeks old. You talk to anybody running a small business with between five and 500 employees, they cannot raise any money. That's bad economic policy. And that's because Biden's focused only on the big guys," he said.
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