Obamanomics Strikes Out with Small Business Owners

Townhall.com ^ | December 19, 2012 | Bob Beauprez

[Kaslin]

"Uncertainty in the private sector over taxes and government policy clearly is having an impact on business' ability to invest in the United States. Business investment is lagging – bad news for growth next year."

–Steve Forbes, December 13, 2012, The Washington Times

Small business accounts for half of all the private sector jobs in America, but over the last two decades has created 2 of every 3 new jobs according to the SBA. Small businesses are a font of invention producing 16.5 times more patents per employee than large corporations. Being nimble in the market place, small businesses make up 97.5 percent of all identified U.S. exporters and produce nearly one-third of all export value for our economy.

In America, small business is a big deal.

President Obama was right when he said that "small businesses are the backbone of our economy," but his words are hollow. Entrepreneurs feel more like Obama's economic policies are breaking their back.

This week three important updated economic reports specific to small business were released. Obamanomics went 0-for-3, striking out.

Strike One: Gallup and Wells-Fargo released the results of their Small Business Index Survey and found "net capital spending intentions for the next 12 months plunged to -14 in November, the lowest level in more than two years." Dennis Jacobe, Chief Economist at Gallup, says this "suggests the nation's small-business owners are likely to pull back on their business investments even more, given their negative expectations for the next 12 months."

Jacobe said the survey found small business owners "the most pessimistic they have been since the third quarter of 2010." Why wouldn't they be? The full impact of ObamaCare is about to kick in, and if the President gets his big tax rate increase 24% of the high-income earners - or 923,000 of them – will be small business owners according to U.S. Treasury Department economists.

The following graph documenting more than nine years clearly displays the increasing pessimism of which Jacobe speaks including a pronounced downward trend over the last year.

 

Strike Two: The Institute for Supply Management has been tracking the manufacturing economy for 50 years issuing continually updated information. Since many manufacturers are small business owners, it is not surprising that ISM's newly released report was not encouraging. The Purchasing Managers Index (PMI) "registered 49.5 percent, a decrease of 2.2 percentage points from October's reading of 51.7 percent, indicating contraction in manufacturing for the fourth time in the last six months...the lowest level since July 2009 when the PMI registered 49.2 percent." As the following chart indicates, the PMI has been trending sharply downward for two years. 

 
Click here to view full size

Also foreboding was ISM's Employment Index that trended sharply downward after several months of modest encouragement. "ISM's Employment Index registered 48.4 in November, which is 3.7 percentage points lower than the 52.1 percent reported in October, and the lowest reading since September 2009," according to the newly released data.

Strike Three: The National Federation of Independent Business, NFIB, has been tracking small business owner optimism for 26 years. With the exception of during the bottom of the last recession, the November index is the "lowest optimism reading in survey history," according to the December 11, 2012 report.

As the chart below indicates, small business optimism plunged 5.6 points in the month of November. "The two major events in November were the national elections and Hurricane Sandy, which devastated parts of the East Coast. To disentangle these, the results for the states impacted by Sandy were excluded from the computation for comparison," according to a NFIB press release. However, after separating the hurricane-impacted states from the remainder, NFIB found that the data indicated that the election was the primary cause of the decline in small business owner optimism. 

 

"Something bad happened in November – and based on the NFIB survey data, it wasn't merely Hurricane Sandy. The storm had a significant impact on the economy, no doubt, but it is very clear that a stunning number of owners who expect worse business conditions in six months had far more to do with the decline in small-business confidence," said NFIB chief economist, Bill Dunkleberg.

"Nearly half of owners are now certain that things will be worse next year than they are now. Washington does not have the needs of small business in mind," asserted Dunkleberg. "Between the looming 'fiscal cliff,' the promise of higher healthcare costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism. We are forced to ask: is this the new normal?"

For more than three years Barack Obama has claimed that the economy "is headed in the right direction." Unfortunately, his claim is based more on wishful thinking than on fact. The problems used to be all George W. Bush's fault. More recently, though, he's targeted John Boehner and the Republicans on Capitol Hill. Obama would have us believe that if only the GOP lawmakers would agree to his $1.6 trillion tax increase plan and yet another spending stimulus, surely happy days would be here again. 

Last week I wrote about the continuing trend of dismal Labor Department jobs reports. Three and a half years into a supposed recovery, job growth is barely sufficient to keep pace with population increases. The percentage of the workforce even looking for a job is at historic low levels. In November twice as many people walked away from the work force as the number of new jobs created. That's hardly an indication of a real economic recovery.

Perhaps feeling a little ignored in recent weeks as all eyes are on Capitol Hill and the fiscal cliff negotiations, Federal Reserve Chairman Ben Bernanke announced that next year the Fed will more than double the printing of new money to "buy $45 billion in Treasurys (debt) each month, in addition to the $40 billion in mortgage-backed securities it purchases each month."

Bernanke's announced plan means the Fed will flood the market with $1.02 trillion in 2013. That will be on top of the more than $2 trillion in assets already purchased by the Fed since the recession began.

So, one year hence, the Fed's balance sheet will have swollen 440% in just five years. "The Fed has to hope the economy gets health soon, and that Washington, fiscally speaking, gets religion. Then it can push interest rates and its balance sheet back to a normal range without a crisis," opined the editors at Investor's Business Daily. "But if these good things don't happen, the U.S. could be headed over a monetary cliff – hyperinflation or a brutal hike in interest rates – that makes the present 'fiscal cliff' look tame in comparison."

The number of realists who are betting that both the "economy gets healthy soon" and this government gets spending under control is a tiny group, indeed.

None of these ominous threats are lost on the people trying to figure out how to survive and assess future risks in the real world. After several trillion dollars of stimulation by the Obama Administration and the Fed, one might think the economy would be chugging along at a pretty good clip. But, it just isn't so, and the light at the end of the tunnel is pretty dim. Just ask a small business owner.

[mykroar]

Regardless of one the talking heads are saying - I am still seeing this being a very slow Christmas shopping season. (It's gotten a little busy this week, but the few times I've been out grabbing something - I've been able to walk right up to check out with no wait). Combine that with the coming Obama tsunami - and I'm thinking there's going to be a lot of small businesses closing shop come Jan/Feb.

[Texas resident]

Something bad happened in November.
The marxist got reelected.

cause
effect.

here we go.

[Mr. Jeeves]

President Obama was right when he said that "small businesses are the backbone of our economy," but his words are hollow.

When you want to destroy something, aim for the backbone. Obama just had something completely different in mind when he made that statement.

To him and his minions, we are kulaks - and it's time to liquidate us as a class.

[Mr. Jeeves]

I am still seeing this being a very slow Christmas shopping season.

You're not wrong. Lots of people driving to the mall and parking and walking around and...just looking.

[jsanders2001]

Yep. Kill the small businesses and they can’t hire anyone; can’t extract FICA / Medicare, Social Security, or income taxes to pay to the Beast. They lose big time on income tax, sales tax, and franchise taxes. Way to go 0dumbo. Might want to take an economics class unless this is all intentional to cause the collapse or weaken the stability of the U.S. So the Muslim Brotherhood or Russia can take over without firing one shot. I hope that every dumba$$ that voted for him gets laid off and they run out of entitlement funds so they get to starve and be homeless for a little while while their savior lives high and mighty like a king in the Pink House.

[citizen]

Let’s each start a shoe shining buisness. I shine your shoes and you shine mine.

If we can convince a third person to start a shoe shining buisness, we will have doubled our customer base. And then a fourth shoe shining business opens...

I don’t see how this business model can fail.

[jsanders2001]

> Regardless of one the talking heads are saying - I am still seeing this being a very slow Christmas shopping season.

Our funds have dipped so low we’re having to really pinch our pennies and make banana nut bread and candies to give out as gifts. Not that that’s bad but something we haven’t had to do before. I have a feeling a lot of kids are not going to get what they asked for this year but I’m pretty sure the MSM celebs and 0 will be having a blockbuster Christmas. I wis Jesus would show up as a Christmas gift to the whole world and unseat this imposter...I know wishful thinking...lol

[E. Pluribus Unum]

The big-government/big-corporate criminal complex considers small business to be a competitive annoyance that must be eliminated.

Eventually, all property will be owned by the big-government/big-corporate criminal complex, and we will be their sharecroppers.

[The Working Man]

Obama loves big businesses because they can be more easily regulated and “threatened”. Big business as a whole loves big government because they can “buy” politicians through campaign donations and insider stock tips. Both don’t like small businesses for various reasons. For politicians it comes down to control for big business it comes down to competition for the all-mighty buck.

What neither realizes is that although big business employs large amounts of people, usually over 1000 but some go as high as a couple of million. Small businesses as an aggregate employ many, many times those amount and spend many more times than big business does.

If they succeed and put small businesses out of business they will soon find themselves out of business too. With no Tax monies coming in, politicians biggest carrot will finish rotting away. For big business their customer base will disappear, for who will have the extra money to buy their stuff or their services when the workers who remain either don’t need/want their offerings. Or the People on “assistance” can’t afford their stuff.

[mo]

http://business.financialpost.com/2012/11/05/u-s-slips-out-of-top-10-most-prosperous-countries-while-canada-keeps-no-6-ranking/

We spend too much...tax too much...and regulate too much...my 15 yr old understands this....and Obama either can’t...or WON’T

[scooby321]

The Crash is coming while Buffett, Soros getting out of the market

[Vaduz]

Obamanomics his seventh grad math skills are showing up all over the place.And his sheep keep taking the bait.