WASHINGTON – Dozens of analysts tell TV viewers that, whatever may be happening in China, things look good in America. Employment is up. Second quarter GDP growth has been revised up to 3.7%. Consumer spending is steady. So, if you are watching CNBC, Fox Business or Bloomberg TV, you are told not to worry. The stock market may suffer a bit because of inordinate volatility. But the US economy, while not roaring, is on solid ground.
The importance of small businesses
Well, not so. And we hear this from a former Bill Clinton senior adviser. Thomas McLarty, former White House Chief of Staff, just wrote in the WSJ, (Small Business and the Secret of Big Growth, September 3, 2015), that Americans are no longer creating new small businesses at the rate they used to. And this is really alarming.
Indeed, contrary to what some may believe, most Americans do not work for Coca-Cola, Procter & Gamble, Monsanto, Google, General Electric, Boeing, United Technologies, Ford or Microsoft. Most Americans are employed by small or medium-sized firms whose names you never heard.
Put it differently, small firms are the true grass-roots innovators and jobs creators. They are the backbone of the US economy. Indeed, the secret of America’s (past) economic success is (was?) the willingness of average people to take a chance and start their own business. Granted, because of poor planning, lack of capital and other reasons, many new ventures failed. But many more succeeded, this way creating new companies that employed people who then became consumers, this way expanding the economy.
Small companies are choked to death
Well, this worked reasonably well –until not too long ago. But now it is a different story. First of all, notwithstanding the unprecedented zero interest rate policy decreed by the US Fed in the aftermath of the 2008 recession, it is much harder for small businesses to obtain loans. No credit often means death by suffocation.
And then we have high and difficult to understand taxes, and excessive regulations that require spending an inordinate amount of time on compliance related matters.
Finally, there is a clear disconnect between the existing education system (especially at the Community College level) and the skills required by many businesses. This means that small companies that would like to expand operations cannot find the skilled workers they need.
Lower taxes, deregulation
A recent survey (quoted by McLarty in his piece) conducted by the National Small Business Association indicates that small businesses want a simplification of the tax code and lower taxes, a reduction of the national deficit, and an end to the partisan gridlock in Washington.
These are clear, (albeit not simple), common sense demands. And yet there is no bipartisan effort, let alone action, on any of these fronts in Washington.
In this at times bizarre political campaign, as we debate “anchor babies”, and the daily allegations of police brutality, the American economic engine is stalled.
And nobody cares.