Everyone loves small businesses. Or at least, politicians like to talk about how they love small businesses, and claim that their policies will help small businesses in one way or another.
This recent survey by the National Federation of Independent Business considers how small businesses are doing, measuring their plans for expansion, hiring prospects, profitability, and general outlook and level of optimism. You can tell just by a quick flip through the charts that things are still very bad for small businesses. Few are considering expansion, looking to hire, or even very optimistic about the year ahead. That’s bad news for the economy and everyone who is looking for work, since the country counts on small business to be an engine of growth and job creation.
It’s no surprise that small businesses are struggling: consumer spending is way down, which means that they have to compete for the fewer dollars that newly frugal Americans are willing to spend. Yet as economists argue in the Wall Street Journal, the uncertain political environment, and the threat of major policy changes coming from Washington, are also contributing to the bleak picture for small businesses. They write:
Liberal Democrats won a major victory in the 2008 elections, winning the presidency and large majorities in both the House and Senate. They interpreted this as evidence that a large majority of Americans want major reforms in the economy, health-care and many other areas. So in addition to continuing and extending the Bush-initiated bailout of banks, AIG, General Motors, Chrysler and other companies, Congress and President Obama signaled their intentions to introduce major changes in taxes, government spending and regulations-changes that could radically transform the American economy. …
In terms of discouraging a rapid recovery, other government proposals created greater uncertainty and risk for businesses and investors. These include plans to increase greatly marginal tax rates for higher incomes. In addition, discussions at the Copenhagen conference and by the president to impose high taxes on carbon dioxide emissions must surely discourage investments in refineries, power plants, factories and other businesses that are big emitters of greenhouse gases.
Congressional “reforms” of the American health delivery system have gone through dozens of versions. The separate bills passed by the House and Senate worry small businesses, in particular. They fear their labor costs will increase because of mandates to spend much more on health insurance for their employees. The resulting reluctance of small businesses to invest, expand and hire harms households as well, because it slows the creation of new jobs and the growth of labor incomes. …
These facts suggest that it was a serious economic mistake to press for a hasty, major transformation of the U.S. economy on the heels of the worst financial crisis in decades. A more effective approach would have been to concentrate first on fighting the recession and laying solid foundations for growth. They should have put plans to re-engineer the economy on the backburner, and kept them there until the economy emerged fully from the recession and returned to robust growth. By failing to adopt a measured approach to economic policy, Congress and the president may be slowing the economic recovery, and thereby prolonging the distress from the recession.
President Obama and Congressional Leaders increasingly realize that their political fortunes rest on whether or not the economy will turn around under their watch. They are once again considering different proposals that are supposed to encourage hiring and business investment, but it’s tough when the federal government is awash in record debt.
Here’s an idea for Washington’s leaders: instead of trying to come up with a new list of proposals and legislation to advance in the name “job creation,” how about announcing that you are going to stop pushing the economy-crushing bills that dominated the agenda during your first year? Say “let’s forget the trillion dollar health care boondoggle,” and “there’s really no reason to push a tax on carbon when it’s becoming increasingly clear that no one has any idea of man is causing the Earth to warm.”
It might be harder for their PR machines to write press releases claiming that they are offering small business relief, but it might actually help, which would be nice for a change.