The State of the Union On Main Street

Jan 27 2014, 9:20am CST | by

The State of the Union On Main Street

President Obama will mention “small  business” in his State of The Union address many times, a popular pastime for politicians since owning a small business is one of the most respected occupations in the U.S. (we will not mention where politicians rank).  He’ll point to the stock market at record high levels and note the millions of new jobs added since the recession ended.  But there are very few indicators that suggest the real economy is really doing well.  A record high stock market reflects government policy as much as underlying strength in the real economy where consumer spending and unemployment are more typical of a recession than of a recovering economy.  The economy has grown every quarter since the official end of the recession in June, 2009, but that growth has left employment over a million short of its peak in January, 2008.  Much of that growth has been accounted for by the brute force of population growth which adds about 3 million more people to the population each year (more haircuts produces new barber shops and jobs etc.)..

According to government statistics, small business produces about half of the private GDP (government excluded) and employs about half of the private workforce.  Most new jobs are created by small businesses, a sector that is the R&D for the economy.  Many firms start, many fail, providing tens of millions of jobs and on-the-job training in the process.  It is in this primordial stew where giants like WalMart, Microsoft, Apple and so many other large companies get their start (while many attempting to succeed will fail).  Thus, both in it dynamics and its aggregate size, small business is “big business” in the U.S.

But in this “recovery”, the small business sector has lagged.  The “stimulus” money was mostly squandered by transferring money to states to support public sector employees.  Monetary policy contributed to asset price inflation (a record stock market), but this left out the majority of people who don’t own large amounts of stocks and bonds.  New taxes sent negative signals to new entrepreneurs and drained consumer spending power. Record numbers of new regulations drained valuable capital from firms and the owners’ valuable time and threw up barriers to new starts.  Crises and scandals shook confidence in government, with record numbers of owners blaming “political conditions” as the main reason not to expand their businesses.  Uncertainty about economic policy ranked in the top 5 “Most Important Problem Facing Your Business Today”. In short, the economy became “bifurcated”, with large firms doing well, exports rising, while the small business sector was left treading water.

For many reasons, owners are not very optimistic about the future for the economy or their own prospects.  As a consequence,  record high percentage of the owners have no interest in a loan because there are few profitable uses for the funds (a record low 4 percent complain their credit needs are not met).  Few owners think it is a good time to expand their firms, and this view has persisited through the entire expansion.  Washington policies are not supportive of business and job growth, punishing those who create jobs with higher taxes and regulations and threats.  All the President talks about is redistributing income and wealth, taking from those who create and earn and giving it to those who not.  There is no meaningful talk about policies that will restore confidence and energize the private sector to grow and create jobs, the best way to address inequality and poverty.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Women in majority in Brazil universities yet earn less
Rio de Janeiro, Nov 1 (IANS/EFE) Women are in majority at Brazilian universities but still earn less than men in the job market, according to a study.
 
 
US praises Cuba's contribution in fight against Ebola
New York, Nov 1 (IANS/EFE) US Ambassador to the UN, Samantha Power, praised Cuba's contribution to the fight against Ebola in West Africa, and said that her country is very grateful.
 
 
UN warns of worsening food crisis in Somalia
United Nations, Nov 1 (IANS) A UN food agency Friday warned that poor rains in Somalia may worsen the country's food crisis, a spokesperson said.
 
 
Canada suspends issuance of visas to Ebola-hit African countries
Ottawa, Nov 1 (IANS) Canada has suspended issuance of visas to residents of West African countries with "widespread and persistent-intense transmission" of Ebola virus disease, a media report said Friday.
 
 
 

Latest from the Network

One dies as spacecraft explodes in US
San Francisco, Nov 1 (IANS/EFE) One person was killed and another badly injured when Virgin Galactic's SpaceShipTwo exploded over southern California's Mojave Desert after takeoff on a test flight, the California...
Read more on Politics Balla
 
J.K. Rowling reveals details about story characters
London, Nov 1 (IANS/EFE) British author Joanne Kathleen Rowling, the author of the "Harry Potter" series, has revealed previously undisclosed background details of the saga's characters on her website, Pottermore,...
Read more on Celebrity Balla
 
Ethiopia pull out of hosting Senior Challenge Cup
Nairobi, Nov 1 (IANS) The Council of East and Central Africa Football Association (Cecafa) announced that Ethiopia had pulled out as hosts of regional football showpiece, Senior Challenge Cup. Cecafa general secretary...
Read more on Sport Balla
 
Benfica beat Rio Ave in Portuguese league
Lisbon, Nov 1 (IANS) Benfica beat Rio Ave 1-0 in the ninth round of the Portuguese football league at the Estadio da Luz here. Attacking midfielder Talisca scored the only goal of the match in the 60th minute Friday,...
Read more on Sport Balla
 
Lions hoping Gayle can solve top order problems
Johannesburg, Nov 1 (IANS/CMC) Highveld Lions are hoping Chris Gayle's explosive batting at the top of the order can be the catalyst to their success in the upcoming Ram Slam Twenty20 League which bowls off here Sunday...
Read more on Sport Balla
 
BCCI demands multi-million dollar settlement from WICB
Bridgetown (Barbados), Nov 1 (IANS/CMC) The West Indies Cricket Board (WICB) will have to cough up nearly $42 million in order to stave off a lawsuit from the Board Of Control For Cricket In India (BCCI), stemming from...
Read more on Sport Balla
 
Garth Brooks feels like 'arm candy'
Garth Brooks feels like Trisha Yearwood's ''arm candy.'' The country singer, who has been married to the 'Woman Before Me' hitmaker for 19 years, claims she is much more popular with their fans. The 52-year-old star,...
Read more on Celebrity Balla
 
Kourtney Kardashian is so proud of Kendall Jenner
Kourtney Kardashian says Kendall Jenner is her ''favorite family member.'' The 35-year-old reality TV star, who is set to give birth to her third child with Scott Disick in December, is extremely proud of her 18-year-...
Read more on Celebrity Balla
 
German Bundesliga standings
Berlin, Nov 1 (IANS) Following are the German Bundesliga standings after Friday's match (tabulated under matches played, won, drawn, lost, goals for, goals against, points), according to Xinhua. Bayern Munich...
Read more on Sport Balla
 
Indian appointed to UN peacekeeping panel
United Nations, Nov 1 (IANS) UN Secretary General Ban Ki-Moon has appointed Abhijit Guha, a retired Indian Army Lieutenant General, to a high-level panel to assess UN peace operations. Announcing the formation of the...
Read more on Politics Balla