Myth 4: Regulatory Uncertainty is Clogging the Economy
In its most recent quarterly survey (PDF) of small-business trends, the National Federation of Independent Business reports that sales—i.e., lack of demand—is the No. 1 concern, beating out taxes, regulations, inflation, and everything else. This is backed up by another survey by the Small Business Majority, in which nearly half of respondents said economic uncertainty was one of their business’ top problems; 13 percent said regulation.
There are two problems with this ‘debunking’, the first is, according to the BEA, aggregate demand has returned to pre-recession levels.
People, please look at the data. They are conveniently available to one and all at the website maintained by the Commerce Department’s Bureau of Economic Analysis, the outfit that generates the national income and product accounts for the United States.
According to these data, real personal consumption expenditure recovered from its recession decline by the fourth quarter of 2010. Continuing to grow, it now stands (as of the most recent data, for the second quarter of 2011) even farther above its pre-recession peak.
The second problem is the survey has its own inherent selection bias. Two parties have not been included in this survey. The first group represents those small business owners who are no longer in business; the second those people who intended to create a business and couldn’t, for whatever reason.
The problem with only asking existing businesses about their current problems is they are almost always going to say “low sales” whether the economy is good or not. The pressure to make sales is constant in business. Also, existing businesses have successfully navigated the regulatory barriers start-ups often encounter and existing businesses have yet to be put out of business by either government taxes and regulation or lack of sales (among many other reasons businesses fail).
And look at the survey results:
Government, either through taxes or regulation, represents the #1 problem for 36% of respondents, which is higher than the 23% worried about their sales. In fact, inflation and cost of labor could also be tacked on to the “government is a big problem” list.
This survey does nothing to help the Mother Jones point of view that more stimulus spending is needed to help small businesses. At best, the results are mixed. Government is still a big problem to small businesses, more so than their larger corporate competitors or even a lack of sales.
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