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The Other Spending Cliff

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For any number of reasons, not the least of which is the inability for news outlets to focus on more than one simultaneous crisis, as public attention turned to the Fiscal Cliff telenovela, many are missing another serious economic threat: the small business spending cliff.


In the to and fro of election-season coverage, little attention was paid to Gallup polling figures that showed small business owner confidence has cratered.

The numbers are ugly, indeed: One in three small business owners expect their company's capital spending to decrease over the next 12 months (the highest recorded since July 2010); Three out of ten expect "poor" cash flow over the next 12 months (the highest Gallup has measured to date); and, worse yet, more than one in five small-business owners expect the number of jobs at their company to decrease over the next 12 months (the highest percentage Gallup has measured to date).

In short, small business thinks the outlook is bad and they’re not going to spend money on people or equipment.

How can this be, even as we read about some large corporations pulling in record profits?

There are myriad answers, but here’s one: profits and future spending are not married. Imagine the proverbial lemonade stand owner who has had a successful, profitable venture running for three straight summers. She is not required to continue on if the economic conditions or rules and regulations make going forward impossible (hey, she could retire to play at an American Girls store, after all!).


We’ve seen this same decision presented in my family’s own construction business. As one might imagine, it costs a fair amount of money to purchase large items such as cranes and the trucks to get them to sites. Given the continued soft economy, we may push off large purchases or forego them altogether if conditions don’t improve. We’re not asking for sympathy, but it’s worth pondering the downstream effect on the thousands of people we employ directly and indirectly through our suppliers.

Another reason news of large corporate profits and small business confidence do not necessarily go hand-in-hand is that the Obama administration simply plays favorites with large companies at the expense of small business.

President Obama and his administration push for ever-more rules and regulations, which tend to benefit large firms as small firms become unable to internalize the costs. From impractical, unfair, and unwise EPA regulations to the downright unacceptable Obamacare mandate and penalty to purchase insurance, small business simply finds it costlier each day to keep the doors open. And it’s not like a lone entrepreneur can count on getting a government bailout or “green” tech subsidy to make up for the strangling red tape.


So, as the Fiscal Cliff story passes into the next crisis, it may be easy to forget what’s not happening—small businesses like mine aren’t terribly excited about pulling out our checkbooks to invest in an uncertain (or certainly bleak) future. That means many will not be interested in hiring you, may not want to buy your company’s shiny new widget, and may not even show up in the morning to flip around the “Open” sign.

If small business truly is the engine of job growth, we’re going to need to see more positive signs that our elected officials actually get what it’s like to sign the front side of a paycheck if they want to see us continue signing the front side of our tax checks.

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