Small Businesses Power America

Small business creation key for a dynamic economy, full employment, and rising GDP
July 22, 2019 Updated: July 22, 2019

The constant criticism against Donald Trump from the left in Congress, the democratic presidential candidates, and the talking heads on cable TV is that his economic policies only benefit the rich. Nothing could be further from the truth. But it’s a narrative almost never challenged and yet begging for to be challenged.

Sure, record stock prices are nice for the tens of millions of Americans who have money in the market, not to mention for the CEOs and management of those big multinational companies. While that’s true, it’s not the whole story of Trump’s economy. In fact, it’s not even close to the most important aspect of the resurgent American economy.

Small Business Is Booming

The record setting growth and employment levels we’re enjoying today are due, in large measure, to the formation of new small businesses across the country. Even while much of the rest of the industrialized world teeters on recession, small business is booming in America. And although it’s not publicized much in these charged political times, small business activity is the key factor between a healthy economy—or a weak one.

How big of a factor are small businesses for the U.S. economy?

Small businesses employ about half of the nation’s workforce. That’s around 60 million people. And, as of last year, according to the Bureau of Labor Statistics, small businesses have provided over 61 percent of net new jobs outside of the public sector.

Small Business Formation Key For Employment

But it’s not just the existence of small business that’s so essential for a sound economy. The rate of small business formation is what drives new job creation. That’s because the growth rates of new businesses will typically outpace those of established businesses. Even in an expansive economic era, relatively speaking, small businesses over five years old don’t move the needle on employment numbers.

Why is Small Business Formation Booming?

There are several reasons for the boom in small business creation. After the Great Recession, many people were laid off and formed small businesses out of necessity. Job creation did follow, but was also hampered by the message of social justice Barack Obama telegraphed to the country. Remember, Obama was a half-term senator and former community organizer. He never had a real job, never had to meet a payroll. People expected and got higher taxes, more regulation, lower expectations among business people, and of course, the Obamacare taxes and mandates.

The Obama healthcare mandate was one of the most harmful regulations to small businesses. The law required employers with 50 or more employees to provided healthcare for their employees. As a result, it led to small businesses shedding hundreds of thousands of employees to avoid having to pay for the costly mandate.

On the flip side, Trump understands business people and what it takes to succeed in that world. From the moment he won the election, Trump’s business-friendly tone led business people to expect a business-friendly administration. Their expectations have been fulfilled. Under Trump, both consumer and corporate tax rates have been cut and anti-business regulations reduced.

These policies have creative a favorable environment to create new businesses. It’s a story that doesn’t get told much in the media these days because it’s a direct result of Donald Trump’s – not Barack Obama’s – policies.

Trump Speaks the Boomers’ Language

There is another very interesting, generational, and demographic impact of Trump’s business-friendly policies. Almost 55 percent of small business owners in America today are over the age of 50. And of those, men make up about 75 percent. Of the over-50 entrepreneurs, more than 40 percent started their business to fulfill their passion, while 33 percent did it because they had the opportunity to do it.

Intuitively, one may have thought that Millennials would be leading the way down the entrepreneurial pathway. But not so much. Millennials only make up about 16 percent of the entrepreneurs in the country. There may be a few reasons for these surprising statistics.

For one, Boomers have certain advantages that evade most Millennials. More life experience, for example, may mean more confidence and skills out in the real world. Many are also taking advantage of financial resources at their disposal, like 401ks to tap as startup capital, which Millennials will typically lack. Also, more developed networks among Boomers also means more opportunity.

Another factor may be a different generational mindset. There’s no question that Barack Obama’s was most popular among Millennials, who view him as the best president. Their sense of top-down government involvement in the economy is one reason for their lack of entrepreneurial spirit.

On the other hand, Boomers typically view Reagan as the best president. Of course, Donald Trump is no Ronald Reagan, in political tone or rhetoric, but from a policy perspective, there are many more similarities than there are differences. They remember the economic expansion of the Reagan years and know that the same policies today mean opportunity. The statistics support that viewpoint; two-thirds of entrepreneurs over 50 report their businesses are profitable.

The bottom line is that economic policies and political messaging do matter. The Trump economy is growing where it counts most – with the average small business owners providing real jobs, not the phony “shovel ready jobs” of Obama government programs.

The jobs provided by small businesses provide workers with more money, the government with more taxes and, before you know it, the economy grows. When it comes to economic growth, competition and innovation, small business is really big business.

James Gorrie is a writer based in Texas. He is the author of “The China Crisis.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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