EXCLUSIVE: Carol Roth Slams Washington For Its 'War On Small Business'

Carol Roth is one of the more articulate commentators on the state of the economy.

The self-described “recovering investment banker” and creator of the legacy planning system Future File, she topped the best-seller lists her 2010 book “The Entrepreneur Equation,” hosts the influential podcast “The Roth Effect” and has been a frequent guest on major cable television business programs.

Her latest book is “The War on Small Business: How the Government Used the Pandemic to Crush the Backbone of America,” published by HarperCollins, a subsidiary of News Corp NWS. In her book, Roth details what she describes as a federal government that continuously kowtows to Wall Street while heaping abuses on small business — a situation that became increasingly acute during the COVID-19 pandemic.

In this exclusive interview with Benzinga, Roth speaks frankly about how small business needs to find its strength to stand up not only for its rights under the law, but for its very survival.

Benzinga: In your book, you describe government as being the number one risk to today’s small business sector. Why is that?

Carol Roth: It used to be that if you were a business owner, you would be thinking about things like, 'How am I going to find customers? How am I going to find employees?’ and so forth. But never in United States history have we had a situation where the government would come in, shut you down for months on end “for the public good” and not give you appropriate compensation. So, that is now a factor that sits on top of all of these other issues that makes it very difficult to run a small business.

The U.S. government has inserted itself into the process of the “free market.” And now, the small business owners have to compete with government pay in order to find workers. Today, we're seeing 9.3 million jobs that were left unfilled, many of those affecting small business owners.

[The] government’s interruption of the market by trying to switch on and switch off and then switch back on large swathes of the economy has also disrupted the supply chain. That has caused issues related to inflation of goods — not being able to access raw materials, shipping disruptions, everything.

All of the issues that the small business owner has been contending with over the last 15 months is directly related to the government's reaction to the pandemic, and that makes it the top risk.

Benzinga: The U.S. is a bit different from other countries in dealing with the pandemic because not only did we have the federal reaction, we also had state governments and, in many cases, city governments reacting as well.

In your book, you cite several governors like New York's Gov. Andrew Cuomo, California’s Gov. Gavin Newsom and Michigan’s Gov. Gretchen Whitmer as having the most negative impact on small business. What did governors do that was so very wrong?

Carol Roth: We just had a tournament on Twitter TWTR where we let people vote for the absolute worst governor for small business. Gavin Newsom of California came out on top, just beating Andrew Cuomo on that one.

Basically, they were incredibly tyrannical in their approach. But they were also picking winners and losers not based on data and science, but based on who had political clout and connections. In some cases, a hair salon or a nail salon would be shut down as a small business, but down the street you would have a big box retailer that was able to groom dogs. At the same time, you had weed and liquor stores that were able to be open in some jurisdictions, even though in many cases of marijuana had been illegal for sale up until just a couple of years ago.

In California, we had the scenario where this one particular venue had their indoor seating shut down and they built outdoor seating, spending around $80,000 to do so. And then a mandate came out that you couldn't sit outdoors anymore. But a film company who was somehow deemed essential was able to set up food service and catering for their staff.

Gavin Newsom photo courtesy of the Office of the California Governor.

At the end of 2020 when there was another shutdown in New York for restaurants, the state’s own contact tracing data showed that only 1.4% of all COVID cases had been tied back to eating and drinking establishments, yet they had the shutdown.

When you looked at the scenario of who was shut down and who was “deemed essential,” that was done on political clout. But the biggest issue is that it was done on political clout without appropriate compensation. Under the Constitution, it is eminent domain and you can take somebody's property for the public good if you give them the just compensation. But that didn’t happen and it was really clear that the small businesses were either too small to matter or too hard to control.

Benzinga: On the flip side, which governors are the ones who were cognizant of the needs of small businesses?

Carol Roth: I think that there were governors like Kristie Noem in South Dakota and Ron DeSantis in Florida who took a much lighter touch approach. And that’s not to say that there was no fallout, but they definitely took a more liberty-minded approach.

And in terms of their outcomes, they were not shown worse outcomes in terms of bigger death pools or more deaths per thousand then some of the governors that took the heavy-handed approach.

Benzinga: Donald Trump worked his whole career in the private sector and had no experience in politics before being elected president and Joe Biden had his career in elected office with no experience in the private sector before he became president. Which one of the two is more sensitive to the needs of small businesses?

Carol Roth: My take in the book is very nonpartisan and I think that the issues stem from systemic issues in the system — too much government, government being in charge of too many different things. I'm trying to stay away from saying this person is the good person and this person is the bad person, because at the end of the day it's about the size of the government.

I have my own opinions on who may be better and who may be worse. And I think you can look at the policies from Donald Trump's policy perspective — and this is not talking about his personality — he had some good things that he did in terms of reducing regulations and not doing things that would hurt the small business community.

But from a financial wealth transfer standpoint, he also was very hard and pushing the Fed to minimize interest rates, which obviously doesn't help the little guy but it helps Wall Street. And even though it came from Congress, he signed off on an almost a trillion-dollar deficit before COVID.

Joe Biden has his own set of issues. He's pushing very anti-small business legislation in terms of trying to raise the minimum wage, and trying to push the PRO Act, which threatens the gig economy and small business owners.

So, it's not a question of if we just get the right person in there that, all of a sudden, this is going to fix everything for small business. The more important messaging is that if the system doesn't change, we're going to just continue to see this consolidation of power. We've seen it under both parties.

Joe Biden photo courtesy of Gage Skidmore / Flickr Creative Commons. Donald Trump photo courtesy of Shealah Craighead / White House.

Benzinga: In your book, you state that cryptocurrency can create a path to economic freedom and the ultimate block to central planning and consolidated powder power. How is that possible?

Carol Roth: This goes back to the issues around the Fed and what they've been doing to both destroy the value of the dollar and to aid and abet the transfer of wealth. Keeping the interest rates down the way that they have disrupted risk in the market — if you're somebody who is a saver or a retiree, you haven't been able to earn a return on your investment without going out and seeking additional risk.

People who are getting into the markets have to take crazy risks. And big companies have basically access to free capital to get bigger. Now we're seeing the outcomes of that in areas like BlackRock going and buying up housing.

Cryptocurrency, leading with Bitcoin BTC/USD and going into some of the others, has been a direct pushback against that centralized power by trying to create more opportunities so that we don't have an entity that is messing with those opportunities and trying to push that wealth creation and consolidate it in a certain area.

I think the overarching theme of the book that wealth creation has to do with ownership. If you're taking away the opportunity to own small businesses, if you're taking away the opportunity to own homes, if you're devaluing the dollar. That is killing wealth opportunities.

At the same time, in 2020 you had seven tech companies that gained $3.4 trillion in value, you had a record year for initial public offerings, you had record value raised through SPACs. If you're in the club, it was a great year for you. But for the rest of America, it wasn’t.

Benzinga: Your book highlights the problems facing the small business sector and the wider economy. What is the solution to fixing it?

Carol Roth: This is the multi-trillion-dollar question, right? I think that if you're pushing for decentralization and supporting small businesses, gig workers and a creator economy, all these kinds of things help to keep that balance of power. And that's something that we can actually really control because we vote with our dollars and we can decide whether or not we want to support a small business or support one of the big companies.

From a structural standpoint, I really think we need to start challenging some of these laws and some of these actions that have been done by government to usurp power and to overstep their bounds.

And I think we need to push back in certain areas — certainly reining in the Federal Reserve would be a huge one. I'm not necessarily saying you have to abolish it, but given the fact that they're so far outside their mandate at this point in time, given the level of the amount of money they have on their balance sheet and the duration of time that they've interfered in the market, I think it's time for Congress to step up and put some more parameters around that. It's clear that they're not doing the right thing.

If was a small business owner right now and my jurisdiction had shut me down and did not properly compensate, I would sue under eminent domain. think that we need to have a more active structure that pushes back against this.

And then, I think people need to get out of the party system and really focus on principles and get back to a place where we can get more people into government to help tear it down, based on principles. What we have today, in terms of size and scope, is only leading us down the wrong path.

(Photos: Carol Roth photo courtesy of the author)