In the wake of the frankly lousy monthly jobs report. I’ll add my contribution (which I’ve rescued from a comment I made to this post at OTB).
The NFIB, the largest organization of small businesses, conducts a regular survey of its members. The top three concerns of its members IIRC are (in this order) slow business (demand), the cost healthcare insurance, and the cost of compliance (regulations). Sure, slow business is a factor. But it’s not the only factor.
Notably, the guy that Alex quoted in his post at OTB is in the home construction business. Okay, let’s focus on that. What should the federal government do to promote demand for new homes? My answer: sweet fanny adams. There was a bubble. It collapsed. It will be a decade or more before home construction recovers, if ever. More than three hundred years later tulip bulb prices still haven’t returned to the heights they reached during the Tulip Craze.
The evidence that federal infrastructure spending promotes increasing hiring and spending on the part of small businesses is slim to none. The contracts tend to go to a small number of pretty good-sized businesses that don’t staff up to execute them. That’s the experience.
One last point. Small businesses per se aren’t responsible for most of the new job creation. New businesses are and most new businesses start small. The rate of creation of new businesses has been falling for decades. Why? I think that part of the answer is a decline in entrepeneurial spirit but I think that the other two answers are big businesses and big government. Big Government prefers to do business with Big Business and subsidizes it. Just look at the banking industry. Over the last four years the federal government has subsidized big banks to the tune of well over $1 trillion while closing thousands of small banks (thereby making the big banks bigger). Making big businesses bigger doesn’t create jobs.
Its funny, I can see how a Leftist/Liberal/Democrat could look at that and say, “Hell yeah!” But instead you get a rebuke for it, generally speaking. For what its worth I agree. A competitive economy is not one comprised, IMO, of large ossified dinosaurs lumbering alone at least partially, sometimes entirely, due to government support of one type or another.
Now when a big company gets in trouble politicians (of both parties) panic and try to save the large company. After all, all those workers and customers are voters. So better save them, right? When you are a small start up, that is a big hurdle to overcome. And the demise of a big business probably clears out quite a bit of room for younger, more aggressive competitors. Bailing out the old and decrepit firm on the other hand would likely make it all the harder for those smaller more aggressive companies.
I’ve been arguing against corporatism in the comments for sometime and shockingly very few of the Leftist/Liberal/Democrat types seem to go for it. They are starting to look more and more like Republicans when it comes to the issue.