Small Business Optimism is Non-Existent….When Will People Get It?

More government regulation is deadly to small business.  So is ObamaCare….

First quarter growth is looking quite weak, due in part to weather (reduced shopping, construction etc.), the sharp decline in energy prices (lower employment and capital investment), weakness among our trading partners (lower exports) and dock strikes in the western part of the country. It is surprising that job markets have looked as good as they have given that GDP growth continued to slow from Q4 2014 rates.

The Federal Reserve did all it could to improve the markets’ view of existing cash flows by lowering interest rates and supporting asset prices but did little to contribute to better cash flows for most of America’s firms. The Federal Reserve and other central banks are hoarding risk free assets while the demand for these assets is rising. This keeps long term interest rates artificially low and creates longer term financial problems (like how to fund future pension liabilities) while denying savers a decent return on their savings. Thinking that their policies significantly impact the real economy,in spite of evidence to the contrary, the Fed persists in holding rates down and is probably not inclined to raise rates until GDP and employment growth rates pick up substantially. The fact that the Fed doesn’t raise rates signals that they don’t expect the economy to improve.

Meanwhile, the government continues to extend its control over the private sector, taking actions to restrict the growth in the energy sector, promulgating policies to support union growth in the small business sector, supporting climate change policies that will crush economic growth, unleashing the EPA to regulate every aspect of business activity and ignoring the issues that are important to small business growth such as tax reform and the regulatory avalanche that diverts the use of capital and owner time to unproductive activities.

So it is no surprise that optimism is muted and that owners’ expectations about the future are less than exuberant. Government policies increasingly impinge on the private sector, diverting resources to unproductive uses like 9,000 IRS employees to exact ACA penalties on taxpayers. When new business owners were asked to characterize difficulties encountered and whether or not they were more difficult or less difficult than expected, 60 percent said that government regulations and red tape were much worse than expected, far more than any other factor. That survey was taken in 1990 – it has only worsened.

please see the complete article at Global Economic Intersection…Great Stuff!


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