Fed: Lack of demand, not red tape & taxes, is the problem

Here's some interesting research from the Fed, based on National Federation of Independent Businesses monthly surveys of small business, that disproves what conservative pundits and economists have been saying about "burdensome regulations" and "uncertainty" holding back the U.S. economic recovery.

Read their executive summary and weep, teabaggers!

What explains the sharp decline in U.S. employment from 2007 to 2009? Why has employment remained stubbornly low? Survey data from the National Federation of Independent Businesses show that the decline in state-level employment is strongly correlated with the increase in the percentage of businesses complaining about lack of demand. While business concerns about government regulation and taxes also rose steadily from 2008 to 2011, there is no evidence that job losses were larger in states where businesses were more worried about these factors.

These findings support what Paul Krugman, et al have been saying all along.  Don't get me wrong, it's good to be a liberal, it's great to be right most of the time, but it's really sad and frustrating that the truth is so easily dismissed. Getting this stuff right affects the lives of millions!

UPDATE: Just to be fair & balanced, here's a link to an article by economist Jeffrey Sachs on why Paul Krugman is wrong, why he is a "crude Keynsian." Maybe later I'll refute Sachs in a separate post, although I will say that the major points he offers are special pleading, not backed up by data.

Aggregate Demand and State-Level Employment

By Atif Mian and Amir Sufi

February 11, 2013 | FRBSF Economic Letter

URL: http://www.frbsf.org/publications/economics/letter/2013/el2013-04.html

Murdoch: Paid sick leave for Aussies and Brits, not Americans

Why does this eavesdropping old vampire think New York or anybody in America should listen to him?  He doesn't want American workers to have any paid sick leave. Meanwhile, guaranteed paid sick leave is good enough for his home country, Australia, and the center of his media empire, Great Britain.

Murdoch thinks his adopted country's citizens should work like dogs while the rest of the world lives a civilized life.  How kind.

Rupert Murdoch: Paid Sick Leave Rules Will Kill Small Businesses

By Nate C. Hindman

August 6, 2012 | Huffington Post

URL: http://huff.to/NY9bNU

For job creation, size still matters

Looking at a sample of [U.S.] companies created from 2004 to 2008 ... only 3 percent added more than 10 employees during that time. An even smaller proportion had applied or were in the process of applying for patents. (So much for being seedbeds of innovation.) Many small businesses simply go bust after a few years.

Indeed, according to data compiled by the U.S. Census/SBA, the "churn" of small businesses in most years is more than 85 percent.

Moreover, jobs at larger companies offer more stable employment, and better wages & benefits. This is true in the rest of the world, too.

According to one study, the higher a country's national wealth, the fewer small enterprises it has. Why? Because larger companies are more productive (perhaps because they attract better managers) and add more value.

Perhaps one take-away from this, as BB suggests, is if quality job creation is the goal, then U.S. policy should seek to woo more large businesses away from other countries, instead of giving yet more tax giveaways and loan guarantees to U.S. small businesses. It also causes us to re-consider (I can't believe I'm saying this) the efficacy of so-called "corporate welfare."

Political candidates' promises to provide even more government help for small business may be smart populist politics, since about 90 percent of U.S. firms employe fewer than 20 people, but it is not necessarily good policy.

Concludes the article's author Charles Kenny:

In the developing world, support for small businesses through tools such as microfinance is part of a safety net to help those who lack better employment opportunities. But in the U.S. and Europe it is far more often a subsidy to people making a lifestyle choice that reduces national productivity, which doesn't help the economy or promote job creation. Extolling small business might be a good way for politicians to win elections. But when it comes to creating jobs, size still matters.

Rethinking the Boosterism About Small Business

Politicians may love to extol the virtues of small business, but big companies are still the key to growth

By Charles Kenny

September 28, 2011 | Bloomberg Businessweek

URL: http://www.businessweek.com/magazine/rethinking-the-boosterism-about-small-business-09282011.html

Tax holiday won't create jobs, won't cut deficit

A nonpartisan congressional committee found that this tax repatriation plan would actually cost the government $78.7 billion over ten years, as companies scored a great deal on cash they planned to bring back to the country eventually anyway.

"What's more, an April analysis from the Center on Budget and Policy Priorities found that 10 of the biggest players in the WinAmerica Coalition are sitting on a combined $47 billion in domestic cash. If the companies aren't using their excess U.S. cash to create jobs, they aren't very likely to spend any money they bring in from overseas on jobs, either."

"According to a 2008 report by the Government Accountability Office, 83 of the 100 largest American companies operate subsidiaries in nations identified by the GAO as tax havens. Of the 10 companies currently lobbying hardest for the tax holiday, four -- Apple, Cisco, Microsoft and Pfizer -- were noted in the GAO report. Those four companies operated a combined 572 sub-companies in tax shelter countries at the time the report was published."

So why does this bad idea have legs? Because the so-called WinAmerica Coalition has spent $13.7 million lobbying for it.

Small Businesses Bash 'Tax Holiday' Plan For Corporate Titans

By Zach Carter and Paul Blumenthal

June 22, 2011 | Huffington Post

URL: http://www.huffingtonpost.com/2011/06/22/small-business-tax-holiday_n_881597.html

Guaranteed health care will unlock entrepreneurship

Conservatives often warn that Obamacare will hurt small business. But they forget that the small-business owner needs healthcare, too!

Before Obamacare and its tax credits for small business, many small businesses with only a few employees could not afford to buy health insurance.

But what about businesses still in the go/no-go stage? Indeed, the prospect of losing one's health insurance keeps would-be entrepreneurs -- especially those with families, or who would like to have children -- locked into corporate jobs instead of taking the risk to start up a new business.

(Meanwhile, FOX Business's answer to health costs is barter.)

As I've noted before, guaranteed, affordable health coverage for every American will take some of the personal fear and financial risk out of starting up a new business venture.

New Healthcare Rules Could Unlock Entrepreneurship

By John Arensmeyer, Founder and CEO, Small Business Majority

June 2, 2011 | Huffington Post

URL: http://www.huffingtonpost.com/john-arensmeyer/new-healthcare-regs-unloc_b_870245.html

Memo to Obama: Help the small biz little guy

Large companies are sitting on $ billions in cash, and how much of that is thanks to extending their payment terms from 30 days to 60, 90, or even 120 days to their small-business suppliers?

Big businesses are tying up small business's cash because they can, and its hurting job creation.

Jeffrey Leonard, CEO of the Global Environment Fund and chairman of the Washington Monthly, has a simple solution:

"[President Obama] can take a simple but meaningful unilateral action: issue an executive order mandating that all companies with federal contracts pay their suppliers within thirty days of invoice. Net 30 has long been the policy of the federal government itself in paying contractors. Virtually all major corporations today are in some way federal contractors, and they should be held to the same terms that they enjoy in their dealings with the federal government. Such an order would cost the government no money. But it would make cash flow faster down the value chain to small business suppliers across the economy, and this could free up more capital for job creation. And the symbolism of a president willing to stand up for the little guy being squeezed by big corporate America would be worth its weight in political gold!"

Memo to Obama: Do small business a simple favor

By Jeffrey Leonard

January-February 2011 | Washington Monthly

URL: http://www.washingtonmonthly.com/features/2011/1101.leonard.html