If you ever want to force yourself to stop wasting time online,
go to a transcript from one of the recent presidential debates.
Press Control + F, and type in “small business.” If your computer
is as antiquated as mine, your browser will either freeze or
crash.
Much of the economic discussion between Barack Obama and Mitt
Romney centers on small businesses. This makes political sense. It
allows the candidates to discuss the economy and their plans for
growth without uttering the toxic C-word: corporations.
But it’s become grating to hear President Obama talking about
how his tax credits have helped small companies or lecturing Romney
on business development in Massachusetts. On Obama’s watch, small
businesses haven’t just been hurting. Thanks to his policies, the
entire economy has shifted in favor of corporations and the
government, leaving the small-town entrepreneur shaking his
head.
Salim Furth recently published a brief showing just how sticky
things have become for new businesses. Employment at start-up
companies, as Furth shows, is at an all-time low. In Obama’s
economy, hiring by start-ups fell from 15 of every thousand
working-age adults to 10 of every thousand. And since most new jobs
come from the rough-and-tumble world of small-business risk-takers,
the effect on employment is devastating. Furth quotes economist Tim
Kane who shows that stalled start-up companies cost the economy 2
million net jobs in 2010 and 2011.
And it’s not just that new firms aren’t hiring. Even starting a
business is becoming rarer. In 2011, a measly 3.3% of unemployed
Americans started a company. That’s down from 4.7% in 2010 and 8.6%
in 2009, according to a
study by Challenger, Gray & Christmas. And it’s far removed
from the 9.6% of job-seekers starting businesses in 2002 that
helped pull us out of the early-2000s economic dip.
Part of this is a natural consequence of the recession. Small
businesses, lacking the insulation of massive infrastructure or
huge money reserves, always get hit harder.
But most recessions run their course, winding through low points
on the growth graph before the economy mends and entrepreneurs go
back to work. Not this time. As the overall economy improves
slightly, small business startups are withering. The
entrepreneurial fire at the heart of the economy is being
extinguished.
Why? Because the entry costs of starting a business — to say
nothing of hiring on top of that — are too high. Government
regulations, on top of the sluggish economy, are making the risk
just not worth it.
Take health care. The president’s Obamacare law, on top of a
whirlwind of other regulations, is driving up the cost of health
insurance, which employers must provide. Premiums continue to shoot
up. And worse are the compliance costs. Obamacare is expected to
cost a total of
80 million man hours every year. That means more work,
more employees… none of which generates any growth for a
company.
As Charles Hugh Smith wrote, “The healthcare insurance for an
employee with a family can easily exceed $1,000 per month, and more
if the worker is over 50. Add in workers comp insurance, disability
and unemployment insurance, and the employer’s share of Social
Security and Medicare (7.65%) and the ‘overhead’ costs for hiring a
new worker can equal or exceed the employee’s salary.” Why hire
anyone when you pay out more than you get back?
It’s not just health care. The president’s other signature
accomplishment, the Dodd-Frank financial regulation-palooza, will
cost businesses another 24 million man
hours every year. State and local governments are using small
companies as piggy banks to pay down their debts. And of course the
president’s threat of a tax increase on the wealthiest Americans,
which includes many businesses filed as individuals, swings
menacingly over everything.
To save money, companies are increasingly using independent
contractors and freelancers rather than take the risk of hiring a
full-time employee. They pay a flat salary for a temporary job
without having to wrangle with crushing employment costs.
This is quite the recovery Obama’s got here, isn’t it? Lethargic
small businesses, independent contractors, and strangling red
tape.
The left loves to bang the class warfare cymbal, pitting the
middle-class against blackhearted corporations. But under President
Obama, it’s the corporations that are cleaning up. Big business is
flush with record profits right now. Corporations can afford the
fixed costs of the Obama economy and trim them further by
outsourcing work to more competitive countries.
They’re also reaping the rewards of the president’s policies.
The Pharmaceutical Research and Manufacturers of America (PhRMA),
the lobbying group of the big drug companies, not only supported
Obamacare but worked
hand-in-glove with the White House to sell it to the public.
Why? Big Pharma can handle the compliance costs and knew it could
work the bill to its benefit.
It’s why so many corporate CEOs initially tried to work with the
White House. If there’s a regulatory wave coming, you’d better get
out front and ride it.
In Jonathan Swift’s masterpiece Gulliver’s Travels,
Gulliver discovers an island that floats above the earth called
Laputa populated by an educated class and their servants. Barack
Obama is presiding over a Laputan economy, where corporate
businessmen and government bureaucrats levitate above everything,
living high and enjoying each other’s enlightened company, shielded
from the little guy who can’t climb up. (“La puta,” fittingly
enough, means “the whore” in Spanish.)
President Obama talks a big game about helping the average
American. But his policies have effectively stalled small
businesses, the engine of growth for the middle class. These days
it’s not the thrifty entrepreneur who gets ahead. It’s the
corporate businessman with the deep pockets, the sprawling
investments, and the “Washington man,” as Ayn Rand derisively
called lobbyists.
That’s a dangerous shift for a country built on the average
man’s enterprise. And it’s one that a President Romney must
stop.
