SBE Council expressed little surprise regarding the results of second quarter GDP data released today by the U.S. Bureau of Economic Analysis (BEA). The dismal performance of the economy is a reflection of the low confidence and ballooning uncertainty among small business owners. SBE Council's recent "Entrepreneurs and the Economy" survey reflected the dour mood among small business owners -- they remained stressed about their firms' financial condition, and expressed widespread dissatisfaction with the direction of federal economic policies. Higher business costs - including gas prices - have been eating into their bottom lines and stunting growth.
The BEA reported a real GDP growth rate of 1.3 percent in the second quarter, and announced a downward revision in growth during the first quarter of 2011 and the fourth quarter of 2010.
"Despite all the great speeches about making the U.S. the best country in the world to do business and helping entrepreneur's access capital and create jobs, there have been no substantive policy initiatives from the White House to back up the rhetoric. The trend continues in the direction of more regulation and the threat of higher taxes. Instead of boosting business confidence, Washington continues to instill worry. This is what you get when you heap regulatory costs on business and threaten the economy with tax increases. Unless pro-growth policies are pursued, the grim numbers will continue," said SBE Council President & CEO Karen Kerrigan.
Raymond J. Keating, chief economist for SBE Council added: "Why is anyone surprised by the pathetic real GDP growth rate? This so-called economic recovery continues to grossly under-perform. Since the recovery began, we have not had one quarter that has even come close to matching where real GDP growth should be, and has averaged since 1950, during recovery/growth periods"
Keating said that none of the data is surprising given the direction of government policymaking for over three-and-a-half years now. What the U.S. needs, according to Keating, is tax reform and regulatory relief, more global trade opportunities, and sound money. He said we are getting the opposite.
"As for how federal debt and the debt ceiling debate fit in, that's more a signal or a symptom. The underlying trouble lies with out-of-control federal spending, and poor economic growth translating into lower government revenues. Given that the debt ceiling debate has moved beyond tax increases, and focused on some degree of spending restraint is a tiny positive. But policymaking in the U.S. will have to move in a dramatically different direction if we are to see a solid return to robust economic and employment growth."