If you have a heart problem would you go to a foot doctor?
That was my thought this week after the latest yuck report on the economy. Last quarter it grew at half the speed needed to employ the people who want to work. (Who is dying to escape Washington? The Obama guys who have to pretend for the cameras that this is encouraging news.)
Here is what led to the foot doctor thought.
Yes, the economy is incredibly complicated. But it is also simple. To understand it, imagine a town. Yourtown has a big bank and a big company. And several big box retail stores.
These employ half the people in town. They create no net new jobs. About the time the bank adds staff the company lays off.
Yourtown also has a bunch of small businesses. Restaurants and stores. Consultants and engineering shops. Small manufacturers and accountants and geeky upstarts, etc. Oh, and a small community bank.
These businesses employ half the people in town. They normally add a lot of jobs. Some of these enterprises die. But more new ones start up than die. So there is regular growth among these small businesses.
Now let us inflict new burdens and costs upon all these businesses. In the form of Obamacare. And higher taxes. And the Dodd-Frank bill which does a knee-job on small banks. And a raft of punitive regulations from EPA and other agencies.
How do you suppose the businesses of Yourtown react to these new burdens? Basically, the big guys shrug. The small guys snuff it. Our economy is no more complicated than that.
All these burdens have been heaped upon American businesses. Big companies have adapted. They don’t like the new costs and red tape. But their lobbyists worked closely with politicians to write the new laws. And they have huge staffs to handle this stuff.
Small companies have suffered. The new costs are too much for them. The new regulations too onerous.
Thousands of small banks have disappeared. Thousands. Only three new ones have been chartered since Dodd-Frank came about. Three. Small banks used to lend to small businesses. With more understanding and sympathy than big banks possess. Dodd-Frank has smothered them. The guys who wrote it should be in jail.
Bottom line is fewer jobs than we should have. Fewer jobs than small business used to create. Less investment and expansion by small business. More small businesses dying than being born. For several years now. An ominous symptom.
How could our politicians and bureaucrats be soooo stupid to do this to our new-jobs machine? The answer is full of complications. The answer is also simple.
Suppose we gather all of Congress and its staff. The guys who write these laws. And all the White House crew. The guys who propose the grand ideas that end up in laws. And all the top bureaucrats. The guys who create the red tape. The guys who write and enforce the regulations.
“All of you who have owned a business, raise your hand. All of you who have worked as adults in small business, raise your hand. All of you who prepare your own tax returns, raise your hand. Now…anyone who does NOT have a hand in the air, please clap.”
The applause would be thunderous. The guys who create and inflict these burdens on our jobs machine don’t know squat about that machine. Or about its working parts. From the President on down, they are ignorant about the small businesses of this country. And their ignorance shows.
When they try to fix the problems in the economy they are like foot doctors working on a heart problem. It is an appropriate analogy. Because small enterprises are the very heart of our economy.
To paraphrase Ronald Reagan: Government is the problem, not the solution.
From Tom...as in Morgan.