Each month the National
Federation of Independent Business conducts a survey of small business
owners to gauge key economic trends.
The
September survey shows a slight improvement in owners' optimism.
Granted, the index is still very near its all-time low, but
small-business owners see some hope over the longer term.
"The
gain in the index clearly signals that the worst is likely over, but so
far there has been no surge in sentiment as many components still
remain at historically low levels," said William Dunkelberg, NFIB's
chief economist.
"The
small-business sector has taken a real beating over the last year, but
owners are seeing some upward movement in both sales and earnings."
The
anecdotal evidence I can add to this from my own interactions with
small-business people is that since they have "made it through the
worst and survived," they see hope for the future.
One
thing that should give us pause when we read surveys like this, though,
is that entrepreneurs are by their very nature an optimistic lot. My
father always told me, "When you look at an entrepreneur's forecast,
double the costs and triple the time, and you will probably be closer
to the truth."
And
remember the old story of how we can spot a budding young entrepreneur
-- he is the one who on Christmas morning can be found digging in a pile
of manure in his backyard exclaiming, "I just know that pony I asked
Santa for is in here, if I just dig deep enough."
So, how can policymakers help entrepreneurs realize their goals?
Here is a three-part plan that would help turn the optimism of American entrepreneurs into real economic growth and create jobs:
Cut
tax rates. Entrepreneurs need to see that their risk-taking can lead to
the opportunity for income and wealth down the road. But with talk of
higher marginal tax rates, entrepreneurs are growing concerned that
they will keep much less of the fruits of their labors and personal
investments in their businesses. Increasing income tax rates has been
shown in studies around the globe to put a damper on new business
formation and growth.
Decrease
regulation. The Small Business Administration estimates that when
compared with large businesses, small operations must spend four and a
half times more per employee to comply with environmental regulations
and 67 percent more to comply with tax regulations. Governments all
around the world are cutting the red tape that affects small businesses
to help spur entrepreneurial activity. But in the U.S., small employers
are beginning to feel the effects of expanding government regulations.
This increases costs, making earning a profit that much more of a
challenge.
Stop
trying to steer the economy. Markets have proven to be pretty good at
picking economic winners. Rather than trying to use tax policy and
other forms of government incentives to support one industry over
another, now is the time to let markets work. For example, there is
evidence that investors are not sold on the prospects of green
technology as a true growth sector in our economy even with strong
government support. Instead, angel investors and venture capitalists
are steering more of their investments toward other technology sectors
that they believe show greater long-term promise.
Taking
these three steps would help turn the entrepreneurial optimism still
abundant in America into more entrepreneurial economic activity at a
time when the nation needs it most.