Challenging Obama's Agenda
Since taking office President Obama and his liberal allies in Congress have promised to create jobs, even as their destructive policies are killing jobs and stifling economic growth, particularly with America's small businesses.
In the 10 year period from 1996 to 2006, small businesses accounted for nearly 40 percent of total U.S. employment, according to a survey conducted by American Solutions, an advocacy group based in Washington, D.C., that we co-founded. Workers employed by small businesses increased by 4.2 million or approximately 11 percent.
But small firms are bearing the brunt of the current recession. David Altig and Melinda Pitts of the Federal Reserve Bank of Atlanta report that job losses for American businesses with fewer than 50 employees reflect 45 percent of total job loss in the current recession compared to just 9 percent in the 2001 recession.
Small business owners are voicing their concerns. Respondents in American Solutions' monthly small business survey in July cited high compliance costs related to OSHA, EPA and IRS reporting regulations as "a significant strain." One in five small business owners estimated that reducing these restrictions by half could save their company as much as $50,000 annually.
Making matters worse, consumer confidence and orders for durable goods both dropped last month. Along with the Obama administration's spending spree and a $13 trillion national debt, consumers are clearly heading for the exits. Meanwhile, small business owners have stopped hiring, according to American Solutions' research, as they worry about possible tax increases.
The survey also found that Obamacare continues to be a main source of heartburn. The small business owners in the sample said they never believed a government takeover of health care would reduce costs, and they are holding on to the limited extra capital they have for fear that the cost curve will bend upward in the future, not downward as the administration promised.
To this group, at least, the $862 billion stimulus, Obamacare, and the prospect of a new national energy tax have only weakened American job creators.
In fact, the Small Business and Entrepreneurship Council's Small Business Survival index in 2009 says the biggest hurdle for investment and entrepreneurship is 'public policy gone awry.' The index continues: 'While most politicians talk a good game about entrepreneurs and small business, public policy too frequently raises costs, creates uncertainty, and diminishes incentives for starting up, investing in, and building a business.'
While politicians in Washington, D.C., consider new taxes and new regulations on America's job creators, states like North Dakota and Texas stand out as examples of how leaders can actually create jobs and attract businesses.
North Dakota has the lowest jobless rate in America, thanks to a significant reduction in the state's corporate income tax and a two-year tax exemption to encourage natural gas drilling. Its credit rating was recently upgraded and the state government in Bismarck has no general obligation debt.
Texas ranks as the third friendliest state for small business and entrepreneurship according to Small Business and Entrepreneurship Council, in part because it has no personal income tax, no state capital gains tax, and no state corporate income tax. According to the Bureau of Labor Statistics, Texas employers added nearly 400,000 jobs between 2006 and 2008, while states with high taxes such as Michigan and California were shedding hundreds of thousands of jobs. Between 2004 and 2009, Michigan alone lost more than half a million jobs.
Small business owners deserve relief, but our country's current economic policies are likely to result in more taxes, more regulations, and more obstacles to growth.
Going forward, there are several steps Congress must take if they are serious about helping America's small businesses.
First and most important, Congress should not raise taxes on small businesses. If President Obama and Congress follow through with their plan to allow the Bush tax cuts to expire at the end of this year, small businesses will face dramatically higher costs and have even less of an incentive to start hiring. Every member of Congress should pledge to his or her constituents not to raise taxes on America's job creators.
Second, Congress should embrace meaningful reform that will actually encourage economic growth. The Economic Freedom Act introduced by Representative Jim Jordan of Ohio would provide a temporary 50 percent reduction in payroll taxes and a 100 percent expensing provision for new equipment purchases. If passed, this bill would immediately offer hope and optimism to small business owners across the country.
It's time for politicians in Washington, D.C., to stop threatening job creators with new taxes and higher costs.
It's time to stop putting the screws to small businesses.
Newt Gingrich served as speaker of the House of Representatives from 1995 to 1999. Dan Varroney is the chief operating officer of American Solutions, an advocacy group based in Washington, D.C.