Clay Johnson: Officials Forgetting Foundational Importance of Hum of Running Economy

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I applaud the decision makers, at all levels of government, that quickly responded to the medical crisis. But health issues only represent one component of the challenges in front of us. We all hunkered down for weeks to ‘flatten the curve.’ Our common goal was to ensure that, as a community, we had enough hospital beds for those most vulnerable. Well, we’ve flattened the curve.  (And we know now that the survival rate of COVID-19 in the United States is almost 95%.)  Why then are governments having a hard time moving to the next stage during this time of testing? I can only believe that most people were more familiar with the fears and responses to the medical side of the crisis.

Let’s explore the impact on small businesses. Almost half of all employees in the United States work for a small business. In fact, 96% of Rhode Island  businesses are small businesses. They are the engine of our economy. Business owners can feel in their bones, the impact of this shutdown on Rhode Island. We owe it to the rest of the citizens of Rhode Island to communicate this feeling. Government needs to understand, as they did with the medical component of this crisis, the impact on employers. If they did, the Governor would hold a daily press briefing on businesses impacted, businesses stressed, and businesses failed.

Let’s look at the local gas station, in good times. When a ne’er-do-well drives off with a full tank of gas, it would be easy to assume that this loss would be made up by a sale to the next customer. But that $30 dollars in gas only represents about 25 cents in profit to the local gas station. That means, they need to sell to 120 more customers just to get back to not losing money.

What happens to a business during this pandemic? When they are closed by order of the Governor, it is easy to assume that the business profit drops to zero. However, many expenses are required to be paid anyway. Things like business loans, rent, property taxes, utilities, and insurance drive profit negative – to the tune of thousands of dollars per month. Even if the business owner figures out how to defer some payments and finance others, the end result is an outflow of money. The business owner is literally paying to keep the business viable in the hopes that the Governor reopens the economy quickly enough for them to start making a profit again. And, like the gas station, they have lost the profit during this closure. So, recovery will take many more months than the length of the original closure itself. And on re-opening day, the business owner will have the additional, unforgiven portion, of the Paycheck Protection Loan as well as any increased balances on credit cards.

So, just because you don’t see buildings crumbling or signs being removed from structures does not mean that there isn’t a second painful component of this pandemic that is taking place all around us. Many businesses will not re-open. Every day that passes increases these numbers. There is no flattening this curve unless the government mandates are lifted. This concern should also be measured and reported in the Governor’s daily briefing. But, alas, Governor Raimondo is too busy auditioning to become Joe Biden’s running mate.

And as we turn our attention to government, there is a similar story. Just because all of those government departments still exist does not mean that they are funded. The main funding source was the hum of the running economy. Hotel taxes. Gambling taxes. Income taxes. Sales taxes. All of these funding sources are evaporating with the business shut down. As we all know, there is nothing more permanent than a temporary government solution. And the permanent bueauracratic-governmental complex, housing the well-connected political class will seek to remain fully funded. All funding sources eventually dry up unless the economic engine begins turning. And, like businesses across the state, the government is burning through their reserves, and papering over catastrophe with funny numbers. A reckoning is coming. And, as you can imagine, their go-to move will be to raise taxes, increase fees. Every tax, and every fee. They will talk about finding sustainable funding sources while floating revenue anticipation bonds.

It is our job, yours and mine, to remind them that they were myopically focused on the medical crisis, and, in their single-minded focus, they forgot about everything else. It is now time for the political class to ratchet down the size of government. They have already asked enough of the business community.

Every business and every job is essential to our state’s economic recovery.  Take action; click here to sign the Gaspee Project’s petition to #ReOpenRI.

Clay Johnson is Chairman of the Gaspee Project.



  • Mario

    The shutdown is not the cause of the economic problems, it’s the virus. Ending the shutdown will not make the economy better, it will probably do more long-term harm than holding it back.

  • Monique Chartier

    Great job laying this out, Clay. Just heard the stat that HALF THE COUNTRY is now not working. Poof, all those salaries and wages and corresponding ability of people to feed themselves and keep a roof over their head up in smoke. All of this economic devastation being inflicted — supposedly due to a disease WHICH HAS A 94% (and probably 99%) SURVIVAL RATE??? None of this makes ANY SENSE.