Obama’s Unnerving View on Entrepreneurship

Politicians on a bipartisan basis love to talk glowingly about entrepreneurs and the businesses they build and work to grow. Unfortunately, that rhetoric too often hides a fundamental misunderstanding towards the process of entrepreneurship, or towards the economic risk takers themselves.

Those misunderstandings or hostilities usually become evident via policymaking. That is, while saying nice things about business owners, policies are imposed that raise costs for businesses, and create disincentives for entrepreneurship and investment.

Such misguided policymaking include higher taxes that diminish incentives and resources for starting up, investing in and expanding businesses; excessive regulation, which falls far more heavily on smaller businesses; high levels of government spending that drain resources from the private sector and threaten higher taxes down the road; and a lack of leadership in trying to lower the barriers to trade that reduce opportunity.

If that agenda sounds familiar, it’s because this is what entrepreneurs, businesses, their employees and investors have labored under for several years now. It’s the agenda of President Barack Obama.

Interestingly, the President let his guard down regarding his philosophy, bias and assumptions when it comes to entrepreneurship in remarks delivered on July 13.

Mr. Obama declared, “If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business -- you didn’t build that. Somebody else made that happen.”

Let’s break this down. Obviously, few entrepreneurs succeed without help from others. For example, they might have gotten a loan from an individual or a bank, or received capital from investors. And of course, no one succeeds in the marketplace without serving others, by creating or better serving various demands. But it is the entrepreneur who offers the new or improved good or service upon which a loan or investment is made, and who finds customers.

This certainly is not what the President is talking about here.

Then Mr. Obama talks of having a great teacher somewhere in your life. Well, maybe or maybe not on that one. And as for making a direct link between having some great teacher along the way to starting up and building a business is a tough one to make. After all, there are countless people who had a good teacher along the way, but had no inclination towards entrepreneurship.

The next lines reveal what the President is getting at: “Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges.” Obama is talking about government.

Now, government certainly has a critical role to play in the free enterprise system, especially establishing the rule of law, enforcing and protecting property rights, running a fair system of justice, enforcing contracts, protecting against fraud, and so on. But the President’s liberal philosophy rejects the idea that the individual and private, voluntary groups and associations come first (including private and parochial schools, by the way, with many very good teachers), with government in service to and supporting individuals and such institutions. Instead, in the leftist or Progressive view, government spurs and lays first claims on what is produced in our economy, since it’s government that “allowed you to thrive” and “invested in roads and bridges.” He misses the fundamental point that government derives its powers from the people. For good measure, the Soviet Union, for example, was excellent at spending money on building roads and bridges. But since it was a communist/socialist system, whereby government controlled all, they were roads and bridges to nowhere.

And then came the kicker from Mr. Obama: “If you’ve got a business -- you didn’t build that. Somebody else made that happen.”

In rather stunning fashion, the President takes his views to their natural conclusion, revealing his true take on entrepreneurship and the economy. It is all about government being the spark and the engine. He does not understand that economic growth and wealth creation thrive most in the freest economies on Earth. Economic growth is driven by private risk taking, i.e., entrepreneurship and investment, not by resources being taken from the private sector and spent by politicians. In the economies that thrive, such as the United States, private entrepreneurs and businesses innovate, produce and compete, with consumers, in the end, deciding what works and what does not.

Mr. Obama’s ignorance on the basics of how the economy works is not surprising. But there still is something unnerving and frightening to hear such economic obliviousness stated so plainly by the President of the United States.

Make no mistake, if you own a business, you did make that happen. It’s you that take the incredible risks, and work to serve others. That is an endeavor worthy of praise and thanks, certainly not denigration or diminishment by the President.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

U.S. Needs More Spectrum to Accomodate Explosive Growth in Small Business Apps Use

SBE Council's landmark study, "Saving Time and Money with Mobile Apps: A Small Business 'App'ortunity," continues to receive widespread media coverage. Recent pieces focus on the explosive growth of mobile app usage by small businesses, and how these practical and innovative tools are saving firms time and money while improving productivity.

See the recent articles here:
DIY Apps Save Small Business Time and Money, BusinessWeek
Mobile Apps Fuel Small Businesses, McClatcy/Tribune

The explosive growth in apps (and their rapid adoption by consumers) also demonstrates why the U.S. needs more spectrum to accomodate and encourage this growth. This would start with a sound and common sense approach toward spectrum auctions. Unfortunately, the FCC seems to be doing all it can to mess them up. Similar to what the Administration is doing in other sectors (i.e.: energy), the FCC wants to pick winners and losers. In this case, choosing what companies will be able to participate in the auctions. It wants to "manage the outcome" of the auctions to ensure competition. That means it could exclude the biggest players that actually have the resources to purchase this valuable spectrum. Oh, and they need the spectrum too.

The current FCC is only impeding progress, something it has been doing quite well over the past several years. It has become the single greatest barrier to building out our nation's broadband and wireless infrastructure. The FCC is hamstringing investment, innovation, job growth, U.S. competitiveness, and in the case of spectrum auctions, an inflow of revenue to the federal government. It's time for Congress to start asking questions about what purpose such a government agency serves, particularly if it believes its main job is to micromanage a successful industry whose growth and vibrancy is so critical to the entire U.S. economy.

In regard to spectrum auctions, a bill has been introduced in the House to limit the damage that the FCC can do -- thank goodness. All players should be able to bid on spectrum, and the FCC must not be allowed to discriminate against specific companies. We all know what happens when government picks winners and losers in the marketplace. Time and again, industrial policy has proven itself a failure. The economic stakes are much too high to allow the FCC to pursue and prove (yet again) the failure of such misguided policy.

The FCC is overreaching. It is putting U.S. economic and innovative strength at risk, and Congress must hold it accountable.

Karen Kerrigan, President & CEO

The State of the Union and Small Business

On Tuesday, January 24, President Obama will deliver the annual State of the Union address. Small business owners will quickly decode whether the speech is an official kick-off to the president's reelection campaign, or whether he intends to pursue pro-growth policies that will help entrepreneurs grow their firms and create jobs.

Here are some of the key issues that small business owners want policy details on:

Tax code stability, and no tax increases. What is the President's plan for bringing some certainty and stability to the array of tax incentives, tax rates and various provisions that either expired at the end of 2011, or are set to expire in 2012? If the president continues to call for tax increases on entrepreneurs and investors, he will continue to get the same gloomy performance from the economy. Our economy needs capital and certainty, and calling for tax increases works against both.

Health coverage affordability. The President said he would look at provisions of ObamaCare that are not working, so he needs to focus on repealing provisions that are driving cost (and will drive costs) higher, including: the health insurance tax, employer and individual mandates, the medical device manufacturers' tax, the essential benefits package, the grandfather rule and much more. Health insurance costs continue to go up, not down as promised.

Affordable energy. Fuel prices remain high, and the President needs to explain himself on the lack of progress regarding domestic energy development and production. Please explain the Keystone XL decision?

Jobs, jobs, jobs and economic growth. Small business revenues remain depressed. Consumer and business confidence remains low. Jobs will not be created given such an outlook. What is the game plan on jobs? And, again, what was the rationale for killing Keystone XL?

Access to capital. Will the President use the power of his office to push through crowd fund investing legislation? What is his plan to bolster investor confidence, and improve the economy so that capital is flowing more abundantly again?

Regulatory relief and restraint. New regulations continue to cascade out of federal government agencies and departments. Is there any plan to rein in the out-of-control central planners in the Administration?

Global trade. Are there any new deals in the works? Will the President expedite action on existing efforts to strike agreements and accords?

Government spending. What, specifically, does the President plan to cut? How, specifically, will his Administration begin to act on entitlement reforms?

Small business owners and entrepreneurs will be listening on these issues, and many more. But more than talk, they want action on pro-growth policies. They want Washington to get out of the way. Please follow SBE Council President & CEO Karen Kerrigan on twitter @KarenKerrigan during the State of the Union address. SBE Council will also post updates on Facebook.

Karen Kerrigan, President & CEO

Kerrigan Urges Rapid Action on Spectrum Legislation

SBE Council President & CEO Karen Kerrigan issued the following statement regarding a House subcommittee's passage of spectrum legislation. Kerrigan noted its importance to investment, innovation, job creation and the competitiveness of U.S. entrepreneurs:

"Advancing spectrum legislation that authorizes voluntary incentive auctions is a no-brainer when it comes to addressing America's looming spectrum crunch. There is broad consensus that bringing more spectrum to market is a win for the economy as it will lead to deficit reduction, job creation, and investment in wireless technologies. It is also a win for America's small business owners and entrepreneurs as investment will spur innovation - leading to the new products and services that will be critical to their competitiveness and cost-cutting strategies. The House Subcommittee on Communications and Technology took a step in the right direction. Now it is time for the House Energy and Commerce Committee to maintain the positive policy momentum and quickly take action."

The auction will also provide needed revenues for the federal government to help stem the deficit.

Small Business Not Important to Economic Recovery, according to former White House Staffer

So, is this what they REALLY think about small business inside the Obama White House? A former Obama staffer authored this New York Times Op-Ed, where discounts the importance of America’s small businesses and their policy priorities.

In the Op-Ed, “Small Isn’t Always Beautiful,” Jared Bernstein conveniently uses a new and skewed U.S. Treasury department "definition" of small business to make his arguments. The piece is riddled with errors, and incoherent logic.

I will point out that he gets one thing right – that the growth of new firms is way down (in fact at a 25-year low). He can’t explain this dynamic, but if you ask entrepreneurs and investors about why this is happening, they will tell you it’s all about currently misguided policies from Washington.

Karen Kerrigan, President & CEO

Obama Administration: Regulatory Uncertainty Not a Problem?

At a congressional hearing last week Treasury Secretary Geithner said he doesn’t think “there's good evidence in support of the proposition that it's regulatory burden or uncertainty that's causing the economy to grow more slowly than any of us would like.” A new analysis by Treasury attempts to support that view. What’s missing are the facts about what's actually happening on the ground with small to mid-size business owners.

Yes, of course demand is a key issue, but Treasury discounts the role that new and forthcoming regulations (and uncertainty about taxes) is playing in investment and hiring decisions. Such spin by the President’s top economic policy advisor simply means policy conditions will continue, which means more weak results for job creation and our economy.

We don’t know why the Administration doesn’t take at face value what small business owners are saying.

Kerrigan in The Washington Times: “Apps for an Edge”

In a July 19 Washington Times oped, SBE Council President & CEO Karen Kerrigan covers the ways that wireless technologies are helping the economy, and specifically small business owners.

Kerrigan reports on SBE Council's recent study, “Saving Time and Money With Mobile Apps”, which shows that entrepreneurs are turning to mobile apps to operate their businesses and stay competitive. Mobile devices and apps are helping small businesses operate more productively, cut costs and find new revenue streams.

The growing use of mobile apps and wireless devices means we will need more capacity and greater investment in the nation’s wireless infrastructure. Kerrigan lays out how government should fundamentally respond to this need: “Regulators and Congress can spur wireless growth through smart policy, but mostly by staying out of the way. They should avoid the temptation to dictate business models to this rapidly changing industry, which is thriving on private investment. Now is not the time to stunt such needed activity.”

Read “Apps for an Edge” by clicking here.

SBE Council Staff

Small Business in the Crosshairs of Budget/Debt Limit Battles

Since the late 1980s, the general direction on federal individual income taxes has been higher. That's been a negative for the economy in general, including for entrepreneurs and their businesses.

Unfortunately, since the start of his administration, including during the current debate over what to do about ever-mounting federal debt, President Barack Obama has exhibited a relentless desire to continue this counterproductive upward trend on income taxes.

Keep in mind that most businesses - about 92 percent - pay the personal income tax (for example, as sole proprietorships, partnerships, S-Corps, etc.), rather than the corporate income tax. That means higher personal income taxes hit the bottom line of entrepreneurs and their businesses. Quite simply, that results in diminished incentives and resources for risk taking and job creation, and additional resources in the hands of the political class.

Does anyone really think that's good for the economy? Well, that is, other than the President and various misguided members of Congress...

Read the rest of the SBE Council Cybercolumn by chief economist Ray Keating here.

Message to President Obama: Your policies are not creating jobs

Small business owners have led the U.S. out of previous economic downturns, but it’s not working out that way this time around. An August 19 Wall Street Journal article, which reported on jobs data released the previous day, wrote “Businesses with fewer than 50 employees accounted for 61.8% of all job cuts in the private sector in the fourth quarter, the Labor Department reported Wednesday, while they created 54.1% of new jobs.”

Business of all sizes slashed a net 200,000 jobs in the fourth quarter (adding 6.6 million jobs and shedding 6.8 million.)

The piece continued:

“Companies with 50 to 249 workers made 17.8% of all job cuts in the fourth quarter, and nearly the same percentage of job gains. Midsize companies, with 250 to 999 employees, added 9.9% of new jobs and accounted for 10% of job losses.

The largest companies, those with 1,000 or more employees, hired a larger share of workers than they let go. These firms, which employ about 38% of all workers, accounted for 18.3% of all job gains versus 17.7% of job losses.”

As I said in a media release last week in response to the hike in jobless claims, which was the basis for a story in The Hill newspaper about the failure of the President’s economic policies:

"There is little to no confidence among small business owners that Washington knows what it is doing, or understands how business functions. The relentless push for higher taxes and intrusive regulation in every sector of our economy is the reason why this recession will be prolonged. On top of a host of misguided policies that are punishing job creation and investment, we have a dangerous spending mentality that threatens U.S. competitiveness and mid to long-term economic growth. The size and scope of government is becoming a major drag on our economy."

Congressional leaders and the Obama Administration had an opportunity to implement the policy ideas and needs of small business owners. They did the exact opposite. Unfortunately, the bad news will keep pouring in and may get worse if their tax hikes, cap-and-trade bill and additional spending programs are enacted. Washington needs to stop burdening small businesses and the private sector. Congressional leaders and the President are crushing the resourcefulness of our entrepreneurs.

Karen Kerrigan, President & CEO

Government vs. Small Business

On November 1, the Jacksonville (NC) Daily News ran an editorial titled “Small Businesses Bear Brunt of Government.” It is one of those rare occurrences where a newspaper editorial hits economic reality perfectly.

The editorial, in part, said:

Small businesses often work on the tiniest of profit margins. They must constantly invest back into the business to stay viable, leaving very little profit — especially during the early, startup years. Most strive to be the best of neighbors, giving back many times over to people and events in their local areas. They support their communities not just with taxes and fees, but also through charitable giving as well as providing jobs, purchasing materials and equipment and providing a reason for people to come to the community in the first place.

Governments control, tax and regulate small businesses at every level, from the city to the county to the state to the federal government. Just as with individual and families all across this country, small businesses are being squeezed, not simply by the economy’s failures, but also by governments hungry for more money and control. This not only is unfair, it is also dangerous — perhaps even lethal — when it comes to the preservation of a growing and thriving middle class.

Absolutely correct!

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council