Data from the U.S. Census Bureau suggests 90% of all new jobs from 1989-2008 (last available data) were created by small businesses. In fact, since 1989, there has only been two years when small businesses had a negative job growth compared to eight years for businesses with more than 500 employees.
Where are those jobs today? What obstacles are preventing or inhibiting our nation’s job creators from growing their business? There is anecdotal evidence that America’s business leaders are putting what little capital they may have into savings rather than investing in research and development and expanding goods. According to a story in the Wall Street Journal, uncertainty is the main reason why small-business owners aren’t spending. “I’m still not really optimistic with the way things are,” says one such business owner. “I’m gauging comfortability by sales, month to month, but we don’t know what will happen with taxes and health care.”
And the news may be getting worse. The 2011-2012 Global Competitive Report published by the World Economic Forum reports that the United States continued its decline in global competitiveness for the third year in a row, falling to fifth position. The U.S. ranked in the top position in 2008. These rankings are calculated from publicly available data and the Executive Opinion Survey, designed to capture a broad range of factors affecting an economy’s business climate.
In addition to the macroeconomic vulnerabilities that continue to build, business leaders raised concerns over low public trust in politicians and government inefficiency.
“The United States continues the decline that began three years ago, falling one more position to 5th place. While many structural features continue to make its economy extremely productive, a number of escalating weaknesses have lowered the US ranking in recent years. US companies are highly sophisticated and innovative, supported by an excellent university system that collaborates admirably with the business sector in R&D. Combined with flexible labor markets and the scale opportunities afforded by the sheer size of its domestic economy—the largest in the world by far—these qualities continue to make the United States very competitive. On the other hand, there are some weaknesses in particular areas that have deepened since past assessments. The business community continues to be critical toward public and private institutions (39th). In particular, its trust in politicians is not strong (50th), it remains concerned about the government’s ability to maintain arms-length relationships with the private sector (50th), and it considers that the government spends its resources relatively wastefully (66th). In comparison with last year, policymaking is assessed as less transparent (50th) and regulation as more burdensome (58th).
A lack of macroeconomic stability continues to be the United States’ greatest area of weakness (90th). Over the past decade, the country has been running repeated fiscal deficits, leading to burgeoning levels of public indebtedness that are likely to weigh heavily on the country’s future growth.”
From a list of 15 factors, respondents were asked to select the most problematic factors for doing business in their country. Listed as the most problematic in the U.S. were:
- Tax rates
- Inefficient government bureaucracy
- Access to financing
- Tax regulations
The factors listed above clearly indicate a very important fact. Policy matters. The policies set forth by the federal government directly affect the business environment. Uncertainty in those policies leads to less competitiveness globally and less investing locally.
Do our elected officials know what to do to get the economy going? Do they know what it takes to create an environment where business can thrive and jobs are created? Many of the nation’s job creators don’t think so.
Dr. Jeffrey Cornwall of The Entrepreneurial Mind has written that too many politicians assume that the business of government is to create jobs. And without their efforts, no economic growth will be possible.
“What we need is a fundamental paradigm shift. Government does not create real, sustainable job growth. Their policies can inhibit the actions of entrepreneurs to do so, but that is all. Government can hold us back, but it cannot do anything to move us forward other than leave us alone.”
So what can the federal government do? What should they do? Should they do anything?
This is what YG Policy Network aims to answer. What policies create the most efficient environment for American businesses to begin hiring again?
“I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender…We intuitively know that to create job opportunities we need entrepreneurs who will risk their capital against an expected payoff. Too often, however, public policy does not consider whether we are choking off those opportunities.” Former U.S. Senator and Presidential candidate George McGovern