06.16.2011 0

America’s Job Creators Face Uphill Battle

By Rebekah Rast – President Obama recently commented, “I am concerned about the fact that the recovery that we’re on is not producing jobs as fast as I want it to happen.”

His promise, made in 2009, that if Congress passed the “stimulus” package unemployment would not rise above 8 percent, has yet to be fulfilled.  In fact, it has been 28 straight months now that the unemployment rate has been at or above 8 percent.

This is bad news for Americans, but also for America’s small businesses.

On top of high unemployment, the housing industry also continues to flounder as prices fall and foreclosures rise.   And the No. 1 asset many entrepreneurs need to get their business off the ground is their home equity.

“Before the financial mess hit, people would use their home equity to get a small business loan,” says Raymond Keating, chief economist for the Small Business & Entrepreneurship (SBE) Council.

Since almost one in four homes is underwater — more is owed on their homes than what it’s worth — the reality of being unable to start a small business has hit a lot of homeowners hard.

“The biggest hurdle to getting a small business off the ground is getting capital,” Keating says.  “Capital can be hard to get even in good economic times.”  But now, he says, it’s especially hard.  “If you’re underwater, you’re not approved for a loan so you have to use your own cash.”

The housing crisis has hit some areas harder than others.  Alyson Austin, spokeswoman for CoreLogic, a real estate data firm, says that the Northeast part of the country is doing much better because housing didn’t increase as rapidly as in the “sand states such as Nevada, Florida and California.”

And she’s right.  New CoreLogic data shows that in the first quarter of this year Nevada had the highest negative equity percentage in the nation with 63 percent of all mortgaged properties underwater.

But Keating says the economic impact facing small businesses spreads farther than a homeowner’s inability to acquire a loan.  “Lots of small businesses are nervous about what is going on,” he says.  “They are holding off.”  Holding off on hiring, investing and growing.

In a poll conducted by the National Federation of Independent Business (NFIB), almost two-thirds of business owners view the current period as a bad time to expand, and 71 percent of those blamed the weak economy.

“So many things are pointed in the wrong direction right now,” Keating explains, “the cost of energy, the huge questions on the policy front, spending and the nation’s debt and the issues on the regulatory front like ObamaCare.  We need to get back to something that gives confidence back to small businesses and entrepreneurs.”

The supposed recovery period is in its second year, yet small businesses have seen no relief and continue to struggle.

“President Obama and his team have not given America’s job creators — small businesses — any legs to stand on during this recession,” says Bill Wilson, president of Americans for Limited Government (ALG).  “Every part of this economy is a mess from high inflation and questionable monetary policy to Obama threatening to raise the tax rates.  No small business can grow and produce jobs in this uncertain economy.”

America’s small businesses are not in a recovery period at all.  And as long as they struggle to survive, the rest of the economy will as well.

“Everything feeds off each other,” Keating says.  “When you give proper incentives to job creators, you will see a flow of new jobs and then people can better afford houses and prices will once again rise.”

Rebekah Rast is a contributing editor at Americans for Limited Government (ALG).  You can follow her on Twitter at @RebekahRast.

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