Thursday, August 26, 2010

The Left's War on Small Business

Investor's Business Daily has a great comment on the left wing's war on small business in their ongoing effort to trash the U.S. economy and install socialism.
We try not to comment on opinions expressed on our own op-ed page, but Wednesday's On The Left column asserting that small businesses are not major job-creators mustn't go unanswered.

'The myth of small business as the engine of job creation is largely that — a myth," Ruth Marcus wrote in support of higher taxes on those earning more than $250,000 a year. "Small businesses create new jobs when they start and take off; they also lose jobs when they crash and burn.

With all due respect to Marcus, who is syndicated through the Washington Post Writers Group, we're in deeper trouble than we thought if this is what passes for conventional wisdom in our nation's capital.

It's bad enough that President Obama, and even the U.S. Small Business Administration, low-ball the number of new jobs created by small businesses. Both put it at around two-thirds, when the real number, we believe, is around 85%.

Our work — and we maintain a huge database on all public companies — shows that big businesses created no net new jobs over the last 25 years. Zero. Zip. When big businesses buy other companies, thereby padding their payrolls, they don't create new jobs. In fact, they usually consolidate and lay off people in duplicative positions. Many also downsize over time.

It is smaller businesses, and especially new entrepreneurial businesses, that drive each new business cycle. And the government — including the politicians who set tax policy — should recognize what these innovative companies do in their first 10 or 15 years.

The SBA defines a small business as one with fewer than 500 people. And yes, when Sam Walton started Wal-Mart and Bill Gates started Microsoft, each had maybe 30 or 40 employees. A year later they had maybe 75, the next year 120, then 320, then 501.

From that point on, they were no longer considered small businesses. But over the next 10 to 15 years, one of them created more than 1 million jobs and the other 500,000.

Yes, many small companies "crash and burn," as Marcus puts it (though we fail to see how raising taxes on them makes that less the case). But those that do succeed turn out to be America's real "engines of job creation.

Creating the conditions that allow them to prosper should be the nation's top domestic priority. Instead, this White House and Congress seem hell-bent on increasing their costs and weighing them down with all sorts of new mandates.
You see, the far left has always assumed that economic growth comes from government spending and not from private commerce. In fact, the left tends to see business as an evil entity that needs to be controlled and punished, not encouraged.

As the commentary points out, large businesses create little actual job growth over time. They tend more to buy out existing businesses and then combine duplicate functions and eliminate redundant positions by layoffs and retirement buyouts.

The future hope for economic growth in the U.S. is not from government or big business, but rather the growth of small businesses. With over 15 million unemployed, there is no way that existing businesses will be able to create that many jobs for the foreseeable future even if the economy were healthy.

No, many of these unemployed will have to make their own jobs by starting up small home businesses and becoming entrepreneurs in their own right. Some will fail, but some will succeed and become thriving businesses providing rapid job growth in years to come.

And yet the far left MSM types like Ruth Marcus demean small business at the very time we need them to be growing. Again, it goes back to their assumption that economic growth comes from government spending.

The left understands very little about business and economics. All they seem to know is "from each according to their ability, to each according to their needs."

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