By John Ubaldi
Contributor, In Homeland Security
The 2016 presidential election is one for the ages, with public sentiment firmly focused on the economy. Last week, President Obama traveled to Elkhart, Indiana, to tout his administration’s economic accomplishments.
In a speech at Concord Community High School, Obama said, “By almost every economic measure, America is better off than when I came here at the beginning of my presidency. That’s the truth. That’s true. It’s true. Over the past six years, our businesses have created more than 14 million new jobs — that’s the longest stretch of consecutive private sector job growth in our history.”
Unfortunately, the numbers say something entirely different.
U.S. Job Growth Slows Considerably
On Friday, the Labor Department painted a far different look at the U.S. economy when the unemployment report was released for May, showing only 38,000 jobs being created and the unemployment rate dropping to 4.7 percent. The reason for the decline was not because of jobs being created, but mainly due to a sharp drop in the labor participation rate, which is now at a four-decade low.
The unfortunate aspect is that the president is correct with respect to the longest private sector job growth. But what is missing is that most of these jobs have been low-wage and part-time employment, hardly the signs of a robust economy.
With Friday’s unemployment report, the Bureau of Labor Statistics stated almost 95 million Americans are not in the labor force, contrasting this with the 80 million when the president assumed the presidency in 2009. Since then, over 14 million have left the labor force. Some of these numbers are due to retirement, but a vast amount have left because they are unable to find viable employment.
The dismal number of jobs created comes on the heels of the Commerce Department’s reporting of first-quarter GDP of a partly .08 percent, with the U.S. not having seen 3 percent GDP growth since 2005. Economists don’t expect any improvement of the U.S. economy this year, and are waiting to see who will succeed President Obama and what changes will be made to economic policy.
Small Businesses Leave Economy at Alarming Rate
One of the greatest impediments to economic growth the president fails to mention is the sorry state of entrepreneurial expansion in the U.S., which translates into more small businesses leaving the economy than entering.
A recent report by the Economic Innovation Group has found that while the years 1992 to 1996 saw a net increase in the U.S of 421,000 new businesses, and in 2002 to 2006 (despite a major recession) 405,000 new companies, the comparable interval from 2010 to 2014 saw just 166,500 new enterprises.
Many attribute the slow growth of the economy to a burdensome regulatory environment imposed by Washington in the past few years. Passage of the Affordable Care Act, the Dodd–Frank Wall Street Reform and Consumer Protection Act and other regulations have crippled small business.
Burdensome Regulations Hamper Small Business Growth
Last month, the Heritage Foundation reported the number and cost of federal regulations increased substantially in 2015, as regulators continued to tighten restrictions on American businesses and individuals. The addition of 43 new major rules last year increased annual regulatory costs by more than $22 billion, bringing the total annual costs of Obama Administration rules to an astonishing $100 billon-plus in just seven years.
This astonishing amount of regulation places an undue burden on entrepreneurs and small businesses stifling growth and preventing entry into the economy.
On Friday, Marie-Joseé Kravis wrote in the Wall Street Journal that it is not clear to what degree these laws affect business formation. But in a 2010 report for the Office of Advocacy of the U.S. Small Business Administration, researchers at Lafayette University found that the per-employee cost of federal regulatory compliance was $10,585 for businesses with 19 or fewer employees, compared with $7,755 for companies of 500 employees or more. Large and established businesses navigate through rules and compliance requirements. Small and new businesses often find them prohibitive.
Back in 2011, Home Depot co-founder Bernie Marcus stated that under the current economic situation he would not be able to start the Home Depot Company, as there is a pervasive anti-business climate permeating in the White House and in Washington.
The situation has become more toxic, as the economic numbers indicate. On the campaign trail, the candidates miss the nexus of what has made the U.S. economy the envy of the world, which is the entrepreneurial dynamism of U.S. small business.
Both Bernie Sanders and Hillary Clinton have campaigned on expanding regulation and going further then what President Obama has accomplished while in office. They believe this is the way to hamstring corporate America, but it often boomerangs and cripples small businesses as the economic policies of the Obama administration attest to.
One only has to look at President Obama’s economic stewardship. He has presided over the slowest economic expansion following a severe economic downturn in the modern era.
Now setting Republican candidate and business owner Donald Trump rhetoric aside, he has given few if any solutions how he would expand small businesses. If his past business dealings are any indicator, the small business community is in for a wild ride.
States Restrict Small Business Growth
We can’t just blame the president and Washington for the slow growth of the economy. The states are equally culpable.
As the candidates speak of the decline in the rust belt states, one only has to look at the business climates in each of these states, as almost all are consistently ranked as the worst states for businesses. This is why many are moving to the more business-friendly areas of the American south, with many corporations moving overseas.
Marie-Joseé Kravis continues in her article, “State and local regulators have also hampered new business initiatives, notably through the growth of occupational licensing. In 1950, 5% of workers required a license or certificate. Today, that number is close to 30 percent. Fortunetellers, party planners, florists, shampoo assistants, cosmetologists, manicurists, beekeepers, librarians and many others have joined the ranks of licensed workers. As the rate of private-sector unionization has fallen, occupational licensing has become a new barrier to entry into the workplace and a tool to protect incumbents from competition.”
The question which needs to be asked…if the economy is doing as well as the president states it is, why is there such angst across America about the fate of the U.S. economy? Why are more Americans on public assistance than there were at the height of the 2008-2009 economic recession?
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