[cross-posted at my blog, Freedom’s Fire, Brightly Burning.]
NPR’s Marketplace Morning Report this morning (6:50 EDT rendition) reported a recent study that found entrepreneurship is down significantly in the U.S. from 2003 – 2004. The study found the number of persons starting new businesses in America dropped by 4 million in 2004, to about 18 million from about 22 million in 2003.
The study, Entrepreneurship in the U.S.: 2004 Assessment, was conducted by Paul Reynolds of Florida International University and can be downloaded from the Entrepreneurship Research Institute website.
An excerpt from the Executive Overview of the report:
- Evidence of a substantial rise in U.S. activity from 1993-2000, and a subsequent decline through 2004.
- In the year 2000, about 23 million between 18-74 years of age were actively engaged in a start-up or new firm management; this declined to about 18 million in 2004.
- There has been a statistically significant drop in activity of 20% from 2003 to 2004; representing a one-year reduction of 4 million involved in the entrepreneurial process.
- This decline in participation is concentrated among young adult men and women, 18-34 years of age, and mid-career men, 35-54 years of age.
- This decline is associated with a less positive personal context for entrepreneurship among these gender-age specific groups.
Section B of the report, “Changes over time”, includes the following observations:
Key points:
- a doubling in business start-ups from 1993-1998/1999
- a further 80% increase in start-ups from 1999-2001
- a decline – possibly as much as 28% – in start-ups from 2001-2004
Who says the Bush administration is good for business? Didn’t the Bush Administration try to blame the recession of 2001 on Clinton; then say that the recession was over rather quickly? If the recession ended so quickly, why such a dampening of entrepreneurship?
The graphs in the report also show that while the overall trend from 2001-2004 has been down, there was a small spike in activity in 2003, but that was followed by a dive from 2003 – 2004. I am not an economist, but I am not thrilled by the picture these numbers paint.
The “Changes Over Time” section of the report further noted, in analysis of surveying potential causes for the decline, that
Given the importance of small businesses and entrepreneurship to the U.S. economy, and the American values of opportunity, independence, and self-determination, one might think that the President would express deep concern and take serious action to address the decline in entrepreneurship shown by this study. However, during his administration, George W. Bush has shown himself to be anything but a friend to small business. For example, refer to the statement (pdf) by Senator John Kerry, ranking member of the Senate Small Business Committee, on the Bush Administration’s proposed 2006 budget for the Small Business Administration. Senator Kerry notes that
- The proposed 2006 budget of 593 million for the SBA is 12.5% less than the amount requested in the FY2005 budget; and 20% less than the actual FY2005 appropriations.
- “According to the President’s FY2005 budget, over four years, the cumulative reduction in SBA’s resources amounted to a 25-percent cut, the most of all 26 agencies. The next most cut were the Corps of Engineers at 15 percent and the Department of Transportation at 8.3 percent.”
- The next paragraph explains that Senator Kerry had to dig for that comparison data, because in the FY2006 budget’s comparison of impacts on major agencies, the SBA was merged into the category “Other Agencies” – as Sen. Kerry concludes, “essentially downgraded from the staus of a ‘major Agency’.”
In a press release regarding the removal in conference committee of an amendment to the FY2006 budget that would have restored much of the SBA funding, Sen. Kerry noted “Since 2001, the SBA’s budget has been cut by 36 percent, more than any other federal agency.” Other recent Bush Administration assaults on small business include gutting the LowDoc program, a program that streamlines the loan process and is particularly helpful for rural loan-seekers.
It is clear from this record that the Bush Administration and the Republicans in Congress are not particularly interested in encouraging small business and entrepreneurship. In fact, if the study reported by NPR this morning and detailed above is correct that “those at the ‘entrepreneurially predisposed’ stages of their work career are very sensitive to slight shifts in the opportunity structures in their immediate personal environment”, then cuts to the SBA which reduce opportunities will further reduce entrepreneurship in America. And as Paul Reynolds, the study’s author, stated on the NPR program this morning, “if it declines that much in 2005 [as it did from 2003-3004], I think the country has a problem.”
On the other hand – and I can’t say it enough – John Kerry “gets it” that enabling small business and entrepreneurship is essential to core American values of independence and self-determination. John Kerry “gets it” that small businesses protect and care for their people and community better than large corporations. John Kerry “gets it” that entrepreneurship is the linchpin of our economy.
John Kerry GETS IT. Will the Republicans running Washington, and the people who voted for them, GET IT before it’s too late?
While I don’t give the references here – sorry, I ran out of steam – there is plenty to back up my claim that JK gets it on small biz. The importance of small business has been a central tenet of my own economic philosophy for years, long before I knew much of anything about Kerry. His leadership role on small biz legislation is one of the things I found out about him only after the 2004 campaign, that I sure wish I’d understood before. Given that many politicians seem to NOT “get it” about the importance of small business, this is one of the things that gives JK huge cred in my book.
Its funny around election time there was talk that the next demographic that the Republicans were “going after” were small business owners. It’s going to be tough to sell that ajenda now!
Not only that but wait until the change in the Bankrupcy Laws hits. At that point the risk of starting a small business will be beyond anyone other than the super rich.
It might not be a tough sell. Beyond the obvious, that Republicans have been able to successfully market themselves with campaigns that bear no resemblance to the truth of their records, I believe there is a problem with many Dems either not sufficiently understanding the impacts of some proposals on small businesses, or not doing a good job of selling the mitigations. For example, small business owners probably don’t want to see the minimum wage raised, because it will increase their costs and therefore (they believe) automatically reduce their profits. What does the current minimum wage bill include to offset or mitigate these effects on small businesses, who cannot easily absorb increased labor costs?
Don’t get me wrong – I want to see the minimum wage raised just as much as any progressive – but I think we have to be smart about it. And to be fair, I think Kennedy’s bill does have something in it for small biz – but I can’t remember what that was.
I see what you mean. If we offered health care though, that would be a big load off, don’t you think? It would certainly help level the playing field. Another thing Dems could offer is stricter laws on import Patent infringements. I think that would be very attractive to Engineers whose jobs are now being threatened by outsourcing…ooh and that’s another one. Guaranteed minimum wage for ALL employees of US companies…that could be good for small business.
All the items you mention seem to me probably good ideas. Especially the health care – that would take a huge load off. But I think, sadly, this country isn’t ready for any worthwhile proposal to resolve our health insurance woes. Small biz will continue to be hammered by health insurance and health care costs. And I was wondering if that is one reason for the decline in entrpreneurship over the last 3 years. The study didn’t seem to look at factors like that in detail (although I confess I didn’t read the entire study).
But I think it’s not necessarily a lack of provisions in legislation to make things easier for small biz. I think often the republicans just lie and spread fear about the effects of a bill. (Gee, wonder where I’d get an idea like that, huh?) Dems need to come up with some way to effectively communicate with people that they have covered the bases and protected them. Something we haven’t done well recently, IMO.
I agree. The insurance is tough. I’m in California where workmans comp is crazy. It has gone up 4x in the five years that I’ve been at this company, Craziness. Of course the press is employee abuse, but I haven’t had any of that, so I’m not buying it. I believe that the Department of Insurance has become so insestuously infected with people from the Insurance Industry that it can no longer function….well, for businesses at least. Its doing a great job for the Insurance Companies….and Arnold was all tough talk and all we’ve gotten was more paperwork…crazy.
Totally by accident. I haven’t had time to review any of it but I thought you might be interested.
Small Biz Committee hearing on 4/20/05: Solving the Small Business Health Care Crisis
and more info (including video and other statements) here
Very Cool that Kerry is involved, but I don’t understand threatening the streamlining process. What function does that serve?
If you mean gutting the LowDoc program, what I gather is that the R’s want to reduce SBA admin costs by combining several loan programs into a single “one-size-fits-all” program. Doing that would take away some of the features that make LowDoc useful for rural loan-seekers.
I don’t think streamlining is the issue on the health insurance question. The R’s are proposing a program using “Assoication Health Plans” (AHPs). Kerry’s position, and that of several organizations backing him up such as Families USA, is that AHPs are an inefficient way to address the issue, and may cause even more problems because they will allow insurers to “cherry-pick” who they’ll insure – thus leaving higher risk clients out in the cold. In this case I didn’t find Kerry’s own statements (at his SBC site anyway) particularly helpful, but here are some links to more info on why AHPs are the wrong answer: