Liberal Study Finds Entrepreneurs Dying Under Obama

 

IBDEditorials.com

Regulation: Mitt Romney was right. In 2012, he said President Obama's policies were costing a record 100,000 business start-ups a year. Now a liberal think tank backs him up. Only it's worse.

The Brookings Institution found that for the first time on record U.S. businesses are being destroyed faster than they're being created. In fact, the American economy is less entrepreneurial now than at any point in the last three decades.

It's certainly not uncommon for businesses to fail, but normally startups replace them. That's no longer the case. Businesses are now dying at a faster clip, despite the end of the recession. The rate of business births has plunged since Obama took the reins of the economy in 2009.

The study doesn't answer why — "the reasons explaining this decline are still unknown" — but the reason is obvious. According to other studies, Obama's massive top-down regulations are making it too costly to start a new business or too uncertain to risk capital.

A 2013 Gallup poll found that ObamaCare caused nearly half of small businesses to freeze hiring and a fifth of them to cut jobs. Another 38% of entrepreneurs said they "have pulled back on their plans to grow their business" because of ObamaCare.

Meanwhile, small-business owners complain that new financial regulations mandated under the Dodd-Frank Act have dried up startup capital.

"This has not been a good time to start new enterprises," Romney warned during the 2012 campaign. "This president's policies are responsible for the fact that this recovery has been postponed."

In contrast, entrepreneurial activity exploded during the '80s and '00s, when Washington incentivized Americans to create new businesses.

Brookings data show new firms entering the market spiked during the 1983-88 period, the heyday of Reaganomics and deregulation, and again during the 2001-06 period, when President Bush, like Reagan before him, cut personal marginal income-tax rates across the board.

The Obama economy lacks business dynamism, a healthy process also known as "creative destruction," where productive firms enter the market and drive out laggards. The process is healthy because new competition constantly forces labor and capital to be put to better use, spinning off innovative products and services while lowering prices for consumers.

But that feature of the American economy is dying. "If it persists," the study warns, "it implies a continuation of slow growth for the indefinite future."

More than 20% of new job creation comes from business startups. So if Obama wants to know why he has a jobless recovery — and an annual job growth rate that stubbornly refuses to budge above 2% — he should look at the report put out by one of his favorite think tanks.