Saving the Golden Goose

There’s quite a furor over the President’s statement during a recent speech, “you didn’t build that, somebody else made that happen.”  The Liberal Left has been defending him, arguing that the statement was taken out of context and the speech was pro-American worker.  The Conservative Right is saying the statement sums up the President’s socialist ideology.  Whether it’s a “gaffe” or an ideological statement, the statement and the speech, has a lot of people talking about who deserves credit for their accomplishments.

A friend of mine sent me an email comparing the President’s statement to a passage in the book, Atlas Shrugged, by Ayn Rand.  In Atlas Shrugged, the character Rearden creates a new metal.  In one scene, two characters debate his contribution:

"He didn't invent iron ore and blast furnaces, did he?"

"Who?"

"Rearden.  He didn't invent smelting and chemistry and air compression.  He couldn't have invented his Metal but for thousands of other people.  His Metal!

Why does he think it's his?  Why does he think it's his invention?

Everybody uses the work of everybody else.  Nobody ever invents anything."

She said, puzzled, "But the iron ore and all those other things were there all the time.  Why didn't anybody else make that Metal, but Mr. Rearden did?"

While trying to find the passage on the Internet, I ran across a September 2011 speech by Elizabeth Warren, a candidate for the U.S. Senate seat in Massachusetts.  In the speech, she stated, “There is nobody in this country who got rich on his own. Nobody.”  Like the President, she argues that business owners utilize the infrastructure financed with local, state, and federal income taxes.  She specifically points out that a business owner brings his goods to market over roads paid for by others.  She enumerates several other areas where business owners are “helped” by others. 

I don’t know if she doesn’t understand taxation or if she is ignoring the obvious, but the business owner pays federal, state, and local taxes that build and maintain this country’s infrastructure.  Some of the business owner’s taxes likely paid for the roads she mentioned.  To complete her story, she should have mentioned that businesses pay vehicle taxes, fuel taxes, registrations, payroll taxes and many, many others.  But that isn't the point she wanted to make.  For now, taxation isn’t the point I want to make here; I want to talk about the importance of small business in our country and who bears the risk. 

According to the Small Business Administration (SBA), small businesses in this country (less than 500 employees) account for 99.7% of all employer firms, employ nearly 50% of U.S. workers, pay 43% of total private payroll in the U.S., and are responsible for 65% of the new jobs created between 1993 and 2009.  Looking at the data, it’s pretty obvious that small businesses are the backbone of the U.S economy.

The annual cost per employee to comply with federal regulations is $7,755 for large businesses (500 or more employees), but the cost is $10,585 for firms with 20 employees or less.  The smallest firms pay four and a half times more per employee for environmental compliance and three times more per employee for tax compliance than large businesses. 

But what Ms. Warren and the President didn’t acknowledge in their speeches is this; the business owners who started those businesses took a gamble.  It is by their initiative that the business exists.  They risked their life savings, their credit rating, their mortgage, and often their family life to start the business.  Not all small businesses are successful.  The SBA indicates that in 2009, (latest year for which data is available) almost 553,000 new small businesses were started, but over 660,000 closed.  The SBA also estimates that almost 70% of new businesses survive two years, but only half survive five years.  With only a 50-50 chance of being in business more than five years, why would anyone take the risk to start a new business?

In today’s depressed economy, shouldn’t the country thank the small business owners for taking the risk of starting or owning a business?  Shouldn’t the politicians, whose regulations impact small businesses more than the large ones, at least allow the small business owners to take credit for their accomplishments?  Instead, some politicians tell us that small businesses owe their success to the government.  Yet, in spite of tax and regulation burdens, successes and failures, small businesses are the backbone of the U. S. economy.

 Ronald Reagan once said, “We must not look to government to solve our problems. Government is the problem.” Politicians who refuse to acknowledge, or worse, don’t understand the contributions of the small business owners, are slowly strangling one of the geese that lay golden eggs.  This summer, dine at a “mom and pop” diner, get your car fixed at a local garage, visit a local farmer’s vegetable stand or buy lemonade from the neighbor kid’s lemonade stand and take advantage of the ingenuity and initiative that make this country great.  Before you vote in November, do the research and learn where the candidates stand on the economy, regulations, and taxation.  Don’t help them strangle the goose.