The Customers Have No Money

This doesn't look like a government regulation.

Via Suzy Khimm, The Hartford Financial Services Group released a small business survey that asked 2,000 respondents about their largest barrier to success. Much like the NFIB’s small business economic trend surveys, government regulations don’t top the list.

For the 75 percent of businesses that are still struggling to succeed, the two biggest barriers are the economy and customers who “have no money or are cautious to spend money.”

That also pretty much matches the NFIB’s surveys, where the number one problem reported by small business is poor sales.

Where it gets interesting is when these organizations talk about their own results, they intentionally include regulations and taxes as a main contributing factor. On a recent episode of the Diane Rehm show,  Brad Close of the NFIB failed to list poor sales as the number one problem listed in his organization’s surveys. Instead, he insisted their main problem was this:

So when we look at why small businesses aren’t creating jobs, why they don’t want to — because, traditionally, when we come out of recession, it is small businesses that start hiring first. That hasn’t happened this time for the first time, and it is because they look at the financial situation. They look at, what are my costs as a small business owner going to be going forward over the next two, three, four years? And it is impossible for them to predict it.
The political environment right now is in flux. There is really no way for them to say in four or five years that I know where my costs are going to be, and that I can afford to create a new job.

 

Quite dire indeed. From this statement you wouldn’t think small business was having any problems with poor sales. Apparently they’re doing just fine except for that darn political uncertainty coming from Washington. I would also love to hear how many small business owners wouldn’t hire someone to help fulfill customer demand for their goods and services today because they don’t know what their expenses will be four years from now.

Now here we have part of the press release statement from the Hartford Financial Group:

Small businesses are also challenged by government regulations, which result in greater administrative and accounting burdens. According to the study, small business owners identify economic constraints, such as government rules, regulations and taxes, as the single biggest factor holding them back (37 percent). And, they say that uncertainty about how public policy could potentially stunt the future growth of business is hindering their ability to plan ahead.

Which is funny, because as Suzy dutifully points out, the Hartford’s own survey says something else entirely:

In fact, only 9 percent overall cited government regulations and rules as a major barrier, and only 2 percent overall cited taxes. The remaining 26 percent cited the other economic and demand-side factors mentioned above.

Which is to say that the main problem referenced by the press release of The Hartford Financial Group is not actually the most cited main problem reported by the businesses they represent. Are they in the ‘business’ of misrepresenting their members? Perhaps this new survey gives us a more nuanced glance into why small business advocacy groups consistently go after taxes and regulations. Again, Suzy (my emphasis in bold):

Interestingly, the more successful a business is, the more likely it is that it will believe that government regulations are a problem.

So based on this Hartford Study, when industry lobbyists, anti-regulation conservatives and others fault government regulations for slowing growth, they’re actually representing some of the most successful businesses in the country – not the ones who are struggling the most.

This strikes me as a textbook case of narrow interests dominating a broad conversation, to the detriment of the majority.

(updated 11/23 to reflect coherency and include a missing block quote)

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