Obama Should Listen to Small Businesses, Not Conservatives

Obama's economic policies are failing because he's listening to conservatives - not small businesses.

It will pain a lot of folks to understand this, but I don’t think you can understand Barack Obama’s economic policies without coming to the realization that they are traditional pro-business conservative economic policies. Obama and Congress have worked to cut taxes to the point where federal revenues are at all time lows – in particular, by focusing on tax breaks for the wealthy and upper-middle class. As a result of the ACA, Medicare spending growth has slowed down significantly. He’s agreed, as part of the debt deal, to cut spending. He’s frozen federal salaries. He’s embarked on a huge regulatory review to cut regulations and has fast tracked federal permitting for construction and infrastructure projects. Since he took office, the United States has lost almost 600,000 state, local, and federal jobs.

Less spending. Low taxes. Fast tracking permitting. Reviewing and cutting regulations. Cutting government spending. Firing government employees and freezing the salaries of others. All of these are popular pro-business conservative ideas.

And yet, the economy still flounders. Why? Because these policy prescriptions don’t address the root problems in our economy. (That doesn’t mean they’re all bad, by the way.) The economy right now is not struggling because of uncertainty over what the government’s going to do next. It is not struggling because of high taxes or regulatory burdens. It is struggling because there is a lack of demand for goods and services. Don’t believe me? Ask small businessmen:

Other small firms say their problem is simply a lack of customers.

“I think the business climate is so shaky that I would not want to undergo any expansion or outlay capital,” said Andy Weingarten, who owns Almar Auto Repair in Charlotte. He’s thinking about hiring one more mechanic.

Added Barry Grant, the regional president of Meritage Homes Corp., in California, “It starts with jobs. … There’s an awful lot of people sitting on the fence; they’re waiting for a sign.”

The government should be pursuing policies that boost demand for goods and services, whether that demand comes from the public or private sector. Inflation is below targets right now, so if we’re careful that shouldn’t be a concern. Debt isn’t a concern because right now borrowing is cheaper than cash. The Fed should pursue QE3. And the Federal government should commit a strong amount of spending to time-limited projects, particularly fixing up our aging infrastructure. Tax cuts could be part of the mix, too – but they need to be targeted at lower and middle class. A payroll tax holiday could do the trick. Or we could just send every household that files an income tax a $2000 check. It doesn’t matter.

The point is that while interest rates for federal borrowing are in the negative, there’s no downside to increasing short-term debt. As long as tax cuts and spending have a defined time period where the window closes when the economy picks up, the long-term budget impact should be nil.

In short, we need to stop paying attention to the politicians who claim that government is slowing down business growth, and start listening to the business folks – who say that what they need are customers.

FILED UNDER: Deficit and Debt, Economics and Business, US Politics
Alex Knapp
About Alex Knapp
Alex Knapp is Associate Editor at Forbes for science and games. He was a longtime blogger elsewhere before joining the OTB team in June 2005 and contributed some 700 posts through January 2013. Follow him on Twitter @TheAlexKnapp.

Comments

  1. Wow, this piece couldn’t be farther from the truth.

    Obama has done FEW of the things you claim in this fantasy piece. Cut regulations? Not by any stretch of the imagination. Less spending? What planet are you on?

    In fact, the only thing he’s does is indulge crony capitalism by giving government largesse to his closest supporters in those certain big businesses that have bent to his will. That is the closest thing he’s done to being “capitalist.”

    What Obama HAS done is create policies with a veneer of “capitalism-like” aspects while using his power to regulate to destroy every business that doesn’t toe his ideological line. There is nothing “conservative” or capitalist about his policies.

    Finally, your focus on “federal salaries” as part of a discussion of business and the economy is a non sequitur. Federal jobs ARE NOT BUSINESS. They are also not “the economy.” When discussing the economy there is no place for talking federal jobs except as a drag on the economy. “Holding salaries” is meaningless.

    The only way Obama would get some sort of credit for helping the economy with federal jobs is if he were to ELIMINATE thousands and thousands of them. Firing these unnecessary workers and getting them out of the costs to the federal gov’t would be a plus. But he’s not only NOT done this, he intends to make MORE federal jobs.

    And he should get no credit for the loss of state jobs. He has precisely nothing to do with that. They are called state jobs because, well, gosh, they are jobs in control of the states, not the federal govt.

    Additionally, your idea that the lower and middle class should get tax cuts… the bulk of these people already don’t pay federal income taxes! How much more than zero are you expecting them to be cut to?

    So, while the rest of the civilized world is lowering corporate tax rates you are suggesting that ours rise soon? What sense does that make when this country can’t compete now??

    Now, I do agree with you that business is not expanding because of “uncertainty” fostered by government unpredictability. It is regulations that are the problem. And, quite contrary to your clam that Obama wants to cut them (I know he’s lied many times saying this) his entire regulatory edifice from the EPA to the NLRB to every niche and cranny of his powers to regulate have rapidly increased their reach and added so many new regulations that no business can cope. So, you are just wrong in every way possible that Obama is somehow cutting regulations.

  2. CB says:

    where did this obsession with regulations come from? it seems like it came out of the blue once the debt ceiling and tax debates were ‘done’. there seems to be a concerted effort to convince people that regulations, of all things, are the driving force behind the stagnating economy, which should obviously be derided as nonsense, but…

  3. WR says:

    @CB: Republican economic “ideas” are destroying the country, so the Rs keep having to find new things to blame for their swath of destruction. It can be debt or regulations or uncertainty, it really doesn’t matter. The sole purpose is to say “look over there!”

  4. Dave Schuler says:

    Alex, this is a strange question but did you read the first part of the article you cited? Previous to the quote you extracted other small business owners listed factors other than low demand as their greatest problem including taxes and the high cost of insurance which is highly regulated.

    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 you quoted in your post 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.

  5. john personna says:

    @Warner Todd Huston:

    Your post is long on feelings and short on examples. I’m left to read between the lines. Is GM your example of crony capitalism? If so, I think you are wrong. GM was about jobs, and the Democrats’ relationship with factory workers.

  6. CB says:

    well, i dont totally agree. i think they have alot of valid and relevant points, especially with regard to long term spending and entitlement reform.

    what drives me crazy is the method of latching onto one or two rhetorical ideas that may be political winners (red meat and all that) but are substantially irrelevant. it disrupts actual progress and debases the discussion, until all we have is the stupid horserace politics that weve all grown so fond of on the cable news channels. its counterproductive and a waste of time.

    and yes, both sides do it!

  7. john personna says:

    @Dave Schuler:

    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.

    Everybody loves to skip #1 and move on to what they hate.

    But of course #1 is most important. Saying it is not the only factor does not change that.

  8. OzarkHillbilly says:

    More tax cuts NOW NOW NOW!!!!

    Because it has worked so well in the past.

  9. john personna says:

    Oh, to tie my comment to Todd together with my comment to Dave,

    It is very suspicious when the “things we hate,” the things we move on to, are intangible, emotional, and difficult to document.

    “Changes to health care law lead to regulatory uncertainty and reduced job growth.”

    There is an example of a perfectly unscientific claim. It is not falsifiable. It is just an assertion based on the way the speaker feels.

  10. michael reynolds says:

    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.

    In other words, Big Business dictates Big Government policy, which goes to Alex’s point that:

    It will pain a lot of folks to understand this, but I don’t think you can understand Barack Obama’s economic policies without coming to the realization that they are traditional pro-business conservative economic policies.

  11. OzarkHillbilly says:

    Also (off topic) here is another great American Thinker.

    Those pesky working poor are holding us back.

  12. Dave Schuler says:

    @john personna:

    You missed the point, jp. So far the efforts to create demand haven’t been successful enough, at least not creating demand that in turn creates new jobs here in the U.S. I’m not skipping it. I just don’t know what to do about it.

  13. john personna says:

    @CB:

    what drives me crazy is the method of latching onto one or two rhetorical ideas that may be political winners (red meat and all that) but are substantially irrelevant.

    Exactly, and what I’m seeing is people claiming causality between their two favorite things, just because they want to. As in that example, hating health care, and so blaming unemployment on it.

  14. john personna says:

    @Dave Schuler:

    I’ve still got a bee in my bonnet about the “uncertainty” claims and etc., but in terms of what to do, I think the rational plan would be to identify (jobs intensive) work the nation needs and do it. We might even be able to do that while reducing overall spending, say by ending the wars.

  15. Dave Schuler says:

    @michael reynolds:

    I don’t care much whether Republicans or Democrats, liberals or conservatives subsidize big businesses. Whoevere does it, it doesn’t create jobs.

  16. OzarkHillbilly says:

    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.

    Wrong Dave. I am a union Carpenter with 30 years in the business. Every time I get hired on a big project like the govt does, I know I am working my way out of a job. No company can keep 300 carpenters, 200 ironworkers, 200 laborers, etc busy all the time. It just is not possible. (and yes, I have worked on jobs where the numbers fluctuated as high as those above.

    That is the experience. That is the job.

    Also, that money gets spread out to various parts of the economy, which is why it is stimulative..

  17. Dave Schuler says:

    @OzarkHillbilly:

    It must work differently where you are. Here in Illinois it works exactly as I’ve outlined. Ask PD Shaw who comments here pretty frequently. His family’s in the construction business.

  18. john personna says:

    @Dave Schuler:

    If we visualize the logistics behind the big contracts surely we see the small businesses behind the scenes. There are both supply chains, and service chains. There are engine overhauls and donut runs.

    It’s bizarre to think that anything could be done “all big business.”

  19. jan says:

    When I started reading this thread I thought it was taken from The Onion, it was so out of sync with reality.

    Just today we have seen the new jobs report —> zero net jobs produced, something that has not happened since February of 1945! If it is this bad why would you want to step on the accelerator and go faster in the same direction we’ve been headed?

    Even Obama seems to be getting a clue and suddenly did a reversal on his muscular EPA, putting a stop to one of it’s pending regulations.

    The announcement came shortly after a new government report on private sector employment report showed that businesses essentially added no new jobs last month — and that the jobless rate remained stuck at a historically high 9.1 percent.

    The withdrawal of the proposed EPA rule comes three days after the White House identified seven such regulations that it said would cost private business at least $1 billion each. The proposed smog standard was estimated to cost anywhere between $19 billion and $90 billion, depending on how strict it would be.

    One of your articles highlighted the service industry. However, what has been especially impacted by the EPA regulations created under Obama’s oppressive administration has been manufacturing. And, as a poster stated above the NLRB has been obnoxious in attempting to rule with an iron hand, in order to keep unions alive and starve out non-union shops (Gibson Guitar) or RTW states where Boeing is planning to relocate.

    Countering your examples about small business not being impacted is a Forbes article discussing Obamas empty plan for small business. Here’s another piece concerning a small businessman’s plea to obama: you’re killing us. And then you have this piece saying:

    The small business owners I’ve spoken to—like most of the public—generally don’t seem convinced about the effectiveness of the stimulus, even if the administration claims it helped us avert an economic “catastrophe.” Barely one fourth of voters, according to a recent Rasmussen poll, think it helped the economy.

  20. Steve Verdon says:

    Or this part,

    “My biggest problem is the current status of the banking system and how it’s being over-regulated,” Dennis Sweeney, a co-owner of Summit Sportswear Inc., told The Kansas City Star. “I want to grow this business, and I’m using the same credit line that I’ve been using for five years.”

    Kansas City-based Summit, 20 years old, supplies college-licensed clothing to university bookstores in four Midwestern states. Sweeney hired his fourth employee in August. He’s adding licenses to sell apparel to colleges in the Southeast and Atlantic region, but his company doesn’t have inventory or other collateral that bankers usually want to secure loans.

    And the small local banks Summit deals with frown on the red tape required for SBA loans, after a loan he got in 2008 took three months of nightmarish documentation.

    “It was only $35,000,” Sweeney said. “Our bank basically said it would never do that again.”

    Sounds like regulation to me.

    Or this part,

    “I think the rich have to be taxed, sorry,” Douglas said. He added that he isn’t facing a sea of new regulations but that he does struggle with an old issue, workers’ compensation claims.

    Douglas told The Charlotte Observer that he’s hired more workers this year, citing pent-up demand from customers.

    Going by the anecdotes they cite I don’t get the same image you get. Granted lack of demand is an issue, but it doesn’t strike me as the only issue.

    Everybody loves to skip #1 and move on to what they hate.

    We aren’t skipping number 1 John, we just are letting our focus become monomaniacal.

    More tax cuts NOW NOW NOW!!!!

    Because it has worked so well in the past.

    Yeah, because so many are clamoring for it in this post. And never mind that when it came to our fiscal situation Obama has rolled over not once, but twice on taxes. Maybe you guys should put up a candidate with a wee bit more spine when it comes to dealing with Republicans.

    John (again),

    I’ve still got a bee in my bonnet about the “uncertainty” claims and etc., but in terms of what to do, I think the rational plan would be to identify (jobs intensive) work the nation needs and do it.

    We’ve tried that already and it didn’t work. Shovel ready turned out to be a lie by and large. Further, as Dave points out the notion that you see an upsurge in hiring just isn’t in the data. What we do see is firms moving from job-to-job. He described some infrastructure work near his house. How it took weeks and the most likely reason is that the same guys are working different projects on different days. It fits also with the infrastructure work I see out in front of the building I work at. For 1-3 days I see guys working. Then nothing for several days, then they are back for another 1-3 days, gone again for several days, then back again. Are they getting furloughed, everyone calling in sick or is that same group of guys working on several different infrastructure projects. We could have it done much quicker if they hired more people, no?

    And it makes sense. To the extent that a firm can take on new projects by extending the time to completion and keep approximately the same number of workers the labor costs stay relatively fixed while they have increased revenues. Sure it provides longer term employment for those people already working, but it does not really help employ those who are not working.

  21. Steve Verdon says:

    @john personna:

    Speculation…weren’t you one of the people clamoring for evidence…and we get speculation, that surely things must work just like you think they do. Meh.

  22. Wayne says:

    Re “Debt isn’t a concern”

    That statement is a prime example of how out of touch this article is. Obama will run up more than $4 trillion dollars of debt his first four years. Bush ran up $4 trillion in 8 years. We are running over a trillion dollars worth of deficit spending per year now. Debt isn’t a concern! What planet are you from? Sorry for being snarky but that statement is outrageous.

    If regulations are less under Obama then why has there been a big boom in growth of Regulatory agencies not to mention the number of regulations on the books?

  23. PD Shaw says:

    @Dave Schuler: Family in highway construction; a completely different beast than building construction. As I’ve been told, very few workers from the trade halls were hired for highway work, the road work was pretty much performed by the same two or three companies with the same faces on the jobs. A lot of overtime.

    Recent mergers have reduced the number of businesses that can perform this type of work, which I take as a sign that people in the business see declining work in the future, and the need to position better for competive bids.

  24. john personna says:

    @Steve Verdon:

    You didn’t like “visualize supply chains?” That’s just an appeal to common sense. And of course it doesn’t require an imagination of mental state. We know some guy in a blue collar rebuilds an engine. We don’t have to imagine if he was fearing the Obama as he did it.

  25. Dave Schuler says:

    @PD Shaw:

    Thank you. That was the point I was making. When people talk about infrastructure spending they’re generally talking about roads and bridges more than schools and post offices.

  26. john personna says:

    @PD Shaw:

    As I’ve been told, very few workers from the trade halls were hired for highway work, the road work was pretty much performed by the same two or three companies with the same faces on the jobs. A lot of overtime.

    That also illustrates the difference in “jobs intensity.” It turns out that road work is now highly mechanized, and you are hiring a machine more than people. On the other hand, the building trades are much more hands-on, with current technology.

    Going forward, we should be aware of the “job intensity” in proposed projectws

  27. Steve Verdon says:

    @john personna:

    Vertical integration?

    Yeah I know, its theoretical, but then again your “common sense” has little empirical support. Bigger firms are more likely to vertically integrate to minimize transaction costs. That kind of advantage could help a larger firm land government contracts over a a smaller firm. Yeah, again, no evidence, just tossing it out there for you to keep in mind during this discussion.

  28. Steve Verdon says:

    BTW PD, how long to get a highway approved when you are going through a chunk of land nobody wants and has no environmental issues? I’ve heard three years. Any idea on the validity of that number?

    The point being that shovel ready is severely constrained by the existing regulatory structure even for government. They can’t just say, “We’ll build a road here,” and then do it. They’ll often have to go through much of the same nonsense a private firm would in doing other types of large scale construction (citing, licensing, public hearings, blah, blah, blah). At least that is what it is like for power plants. And even if you are building a geothermal plant you’ll have the nuke nuts show up asking all sorts of crazy questions about nuclear power. No really.

  29. Pug says:

    @Warner Todd Huston:

    What a long-winded chain of completely unsubstantiated claims. Your assertions don’t amount to facts.

    If you make a claim, you have to prove it with evidence and you present exactly zero, just a long litany of talk radio talking points.

    Take a JC class in critical thinking some time. It will help you.

  30. michael reynolds says:

    @Dave Schuler:

    I don’t care much whether Republicans or Democrats, liberals or conservatives subsidize big businesses. Whoevere does it, it doesn’t create jobs.

    Yep. It does however create big paychecks and big bonuses for big business CEO’s which is obviously the point for them.

  31. john personna says:

    @Steve Verdon:

    Yes I know what vertical integration is. And I know that some construction firms do their own engine overhauls. I think I [could] leave this here, for the reader, and his experience. It’s just a lot simpler than the claim “business isn’t hiring because their secondary concerns, the ones they list later, are heaviest on their minds.”

    But what the heck, I can look for data. Ah, the SBA’s Small Business Scorecard shows that as prime contractors small businesses receive 22% of funds (2009). As sub-contractors they receive 32% of funds (2009).

    That difference, between the direct 22% and the indirect 32% is what I asked you to visualize.

    Feel free to get numbers on “Obama fear.”

  32. AA says:

    “Obama should listen to small businesses”

    Small businesses want Obamacare repealed. Are you suggesting that Obama work to repeal Obamacare? Hmmm.

  33. Rick Almeida says:

    @Warner Todd Huston:

    TL;dr

    If you make everything up, the world is different.

  34. OzarkHillbilly says:

    Yeah, because so many are clamoring for it in this post. And never mind that when it came to our fiscal situation Obama has rolled over not once, but twice on taxes. Maybe you guys should put up a candidate with a wee bit more spine when it comes to dealing with Republicans.

    Steve, do you automatically go into attack mode whenever someone makes fun of the Republicans favorite mantra?

  35. Andy says:

    Construction is a pretty diverse business. My family has been in that business since just after WWII. My brother now runs things and specializes in office interiors, but when my dad ran things he mainly did home and light commercial construction. My brother’s specialty is essentially this: a business leases office space and either the business or the building manager will hire my brother’s company to build-out the space for them. I’m not sure how government can stimulate that particular piece of the construction business. You either need firms that are growing (and hence need more office space) or new firms. Many office building managers are hanging on by the skin of their teeth at the moment (at least in the areas I’m familiar with) and businesses related to that, including my brother’s, are not doing well.

  36. OzarkHillbilly says:

    Thank you. That was the point I was making. When people talk about infrastructure spending they’re generally talking about roads and bridges more than schools and post offices.

    Highway resurfacing is one thing. Bridge building is another beast entirely, if the bridge is big enuf.

  37. john personna says:

    The SF Bay Bridge sure has had jobs.

  38. samwide says:

    @Steve Verdon:

    And the small local banks Summit deals with frown on the red tape required for SBA loans, after a loan he got in 2008 took three months of nightmarish documentation.

    “It was only $35,000,” Sweeney said. “Our bank basically said it would never do that again.”

    Sounds like regulation to me.

    Sounds like deficit-increasing, market-interfering-with federal handouts to some people.

  39. WR says:

    @john personna: And would have had even more if they hadn’t outsourced so much of the construction to China.

  40. george says:

    The only way Obama would get some sort of credit for helping the economy with federal jobs is if he were to ELIMINATE thousands and thousands of them.

    Well, if he does pull troops back from Iraq and Afghanistan, and thereby make the military smaller he’d have eliminated thousands of federal jobs – soldiers are federal employees last I looked. Would this do?

    That aside, does anyone really think that helping big business is good for the economy? Even serious conservatives admit that most growth comes from small businesses. Not so sure that small businesses are that much for Obama, but I don’t think they were particularly fond of Bush before him, or Clinton before that – presidents tend to be in bed with big business and only give lip service to small businesses.

  41. PD Shaw says:

    PD, how long to get a highway approved when you are going through a chunk of land nobody wants and has no environmental issues? I’ve heard three years. Any idea on the validity of that number?

    I have no idea; that sounds like an empty set. My state’s environmental agency takes 3-4 years to aprove a “new” facility for Clean Air Act permits. That’s true when its actually an existing, operating pre-approved facility that lost its pre-existing status due to a technicality.

  42. Steve Verdon says:

    @michael reynolds:

    Who are you and what have you done with Michael? :p

  43. Steve Verdon says:

    @OzarkHillbilly:

    Nice dodge there Ozark, nice dodge.

    @john personna:

    Good find, I would have hoped for it to be higher myself. Assuming those two percentages are additive I’d have hoped for a number closer to 65%.