The NFIB (National Federation of Independent Business) reports that the Optimism Index is at its third lowest point since the survey began 35 years ago. Why, after a strong second half of 2009, is the confidence of small business owners so low? By many standards we have worked our way out of a recession and small business confidence should be growing.
Past indicators point out that after the economy recovers from a recession, small business owners have an increase in confidence and start expanding. In 1980, following a devastating recession, the Index hit 100 and went on to hit 107 a few quarters later, a record high. Today the index is 88 and has been below 90 for almost 2 years.
Interest rates are at a historical low and inflation nonexistent. Small business confidence should be on the rise. Could fluctuations in the economy and constant changes in government policies have created an environment of uncertainty for small business owners. New programs from Washington have been rolling out on what seems like a weekly basis. Let’s review some of the issues that small business owners are concerned about?
- Health Care Reform. Owners do not know how this will affect them and their business.
- Federal deficits have increased and government spending shows no sign of stopping.
- Government sponsored projects costing the country billions of tax dollars.
- More bail outs to come, like the looming commercial mortgage meltdown.
- Higher taxes.
- More regulations, fines, and fees.
- No access to capital, SBA Financing, or commercial loans.
These are likely a few of the issues that are holding back a small business surge in confidence.
Uncertainty is the enemy of small business. After the 1970′s recession, lower taxes for small business and a stable administration help trigger an amazing growth period. Small business owners view government as the problem and not the solution, a view President Reagan held as a governing principal.
The Obama Administration has made small business a focus in recent months. The President has proposed tax breaks for hiring new employees, raising SBA loan guarantees, and $30 billion to go to community banks for the purpose of lending to small businesses. Although this may not help all businesses, it could help increase optimism for small business owners.
Read more about the National Federation of Independent Business and the Optimism Index.
