Is the Sky Falling Down on Small Business?

Chicken Little famously said, "The sky is falling!  The sky is falling!" Well, for small business it may be true.

Small business is much more troubled than is being acknowledged. Small business is also not being sufficiently covered in the national press. It is the canary in the coal mine, despite 3 1/2 quarters of continuing real growth in G.D.P.  I can tell you categorically that small business is not recovering like the macro-economy supposedly is. While my own firm is chugging along okay, the bulk of the clientele my small company serves is other small businesses, and the fear and uncertainty I encounter every day in my clients and colleague entrepreneurs is palpable. No one wants to take risk. No one wants to substantially invest in the future.

You may say I am one small business guy at a little pip-squeak company spreading counter intuitive anecdote and calumny. One of my friends calls me the "the Nouriel Roubini of small business"  because of my bleak outlook. I prefer to think of myself as a cold-eyed realist. I do not enjoy writing jeremiads or screeds. Nevertheless, I fear small business is entering a permarecession.

Here is why:

• No one wants to lend money to risk-taking entrepreneurs. Despite the so-called rebound of the economy, entrepreneurial accommodation from banks and venture capital ain't happenin'
• Health care mandates will keep small business small and profit diminished. I don't know a single entrepreneur who evinces a full-voice enthusiasm to expand his workforce in this environment
• Federal taxes is acomin' in. This is on two levels. The new statist fiats by Washington on healthcare will have to be paid for. But other increases in taxation will fall hard on small businesses and, also, individually on small businessmen. Why invest in your company? Investment is disincentives. So entrepreneurial passion and creativity becomes muted
• State taxes will also increase. A lot. This includes property, sales and income taxes, plus continuing fee augments. This is particularly true for the Greece of America called California. And, unfortunately, it will soon be true of my beloved New York (Greece, Jr.). Business, of course, will migrate to seven or eight tax friendly states that I don't live in. (See my previous blog)
• Bureaucracy will increase exponentially. I can assure you small business is already groaning under the demands of governmental paperwork. I see no option but for this to augment vastly
• Unemployment, now between 9.7 and 10 percent, must eventually be felt by business as loss in demand
• The present "recovery" is a government financed phenomenon. Keynesian to the max. When it stops, as it inevitably must, either a double-dip recession will ensue or a Jimmy Carter, Japan-style stagflation will appear. Small business (or big business for that matter) will not be robust enough to buttress employment when government ceases goosing the public sector and union jobs. Apres moi, le deluge, mon amis: the piper will be paid
• The Fed has shot its wad. It cannot save us again
• Because both Republicans and Democrats lack the political will to honestly exercise fiscal sanity, a huge new tax called inflation will sooner or later monetize the debt. I guarantee it. We will not become the Weimar Republic or Zimbabwe, but it will not be good

Oh, dear. I seem to have gone on a bit. Mercifully, I will stop. There must be an end to such mordancy. I don't like being a small business Paul Revere of the dour. But this is my view from the street. Our country will not recover if small business does not do better.