Biggest Government Offence to Small Business Yet?

President Obama’s speech last weekend has created such a ruckus. Everyone is weighing in with their opinions and attacking the President, who certainly used a poor choice of words:

“If you’ve got a business, you didn’t build that. Somebody else made that happen… Government research created the Internet so that all the companies could make money off the Internet.” (Source: Office of the Press Secretary, July 13, 2012.)

I’m not here to argue the sentiment or the intention or take political sides regarding the debate. There is no question that the blood and sweat of most business owners created the businesses they built and the jobs growth and economic growth that came with them.

It is also true that these owners had the infrastructure around them to allow them to achieve their goals: from the capital system to get loans, to basic contract law that allowed them to engage in agreements with others, to roads and buildings that allowed them to focus on their business. The infrastructure also allowed them to find qualified candidates to fill the positions they needed to run their businesses: jobs growth and economic growth ensued.

I can only share my personal experience. As an owner of multiple businesses, the government has been more of a hindrance for me than a benefit.

The issue of the Internet brings to light government’s role in the economic system today. The government created the Internet. However, the government is very inefficient at making the Internet easy to use and accessible to everyone.

That is where private enterprise came in to make the Internet a useful tool for the public and to allow the public access to it in a more efficient manner than government would have been unable to accomplish. Private enterprise also created strong jobs growth and strong economic growth as a consequence of the Internet.

The government provides the infrastructure, programs and rule of law—the oil—so that businesses can focus on what they do best, which is running their business so that jobs growth and economic growth can take place—the engine.

President Obama, in the same speech, declared that “…we’re in this together,” and that is absolutely true. But as government has gotten bigger, and more government agencies and rules created, it has created uncertainty for a small business owner like me.

And government indecisiveness is another problem. The “fiscal cliff” that I’ve talked about often in these pages is creating such uncertainty that businesses don’t want to invest in capital projects, which is holding back jobs growth and economic growth.

Real discretionary incomes in this country have not risen for so long that consumer spending has no chance of reviving. The lack of jobs growth is not helping either. If consumer spending can’t be revived, then businesses don’t want to invest, because they don’t see where demand is going to come from, which prevents jobs growth.

The real estate market has not come back to life despite various programs that the government has tried to institute, putting more pressure on the average citizen in this country. This has reduced jobs growth in this country.

Yes, we are all in this together; but government needs to understand its role in reducing the red tape in this country for workers and business owners, and in creating initiatives to improve jobs growth.

As long as the government remains on its current path, there will be little jobs growth or economic growth, which means companies are going to struggle, which means the free-market capitalism this country has been founded on is no longer a lure for the business risk-takers who create jobs.

More Michael’s Personal Notes:

Yesterday, I watched Ron Paul lecture Ben Bernanke as Bernanke testified in front of the Senate Banking Committee.

It was classic Paul at work. His question to the Fed Chairman (paraphrased): To help the economy, when will the Fed stop printing money out of thin air (because it hasn’t helped) and look at another way to improve the economy?

From what I could understand, Bernanke was putting the blame back on Congress, saying Congress gave the Fed the power to print money. In Bernanke’s words, “Congress is in charge here, not the Federal Reserve.”

During his testimony, Bernanke said if Congress doesn’t get its act together on the budget crisis and the fiscal cliff, “it would probably knock the recovery back into a recession and cost a lot of jobs…”

Let’s face the facts, dear reader. No major changes will happen at the government in respect to the Bush-era tax cuts or the budget crisis until the November election. By that time, the U.S. will likely already be back in a recession. Too late, again. (Also see: Moving Closer and Closer to a U.S. Recession.)

Where the Market Stands:

The stock market, as measured by the Dow Jones Industrial Average, has been stuck in a narrow trading range between 12,500 and 13,000 for the past month.

Fed Chairman keeps telling us that, if the economy gets worse, the Fed will take action. So we wait…we wait for the economy to get worse (which it is) and for the Fed to do something (which it will).

But in the end, record-low interest rates, money printing, and more government debt will not save the economy or the stock market. It’s just a matter of time now before the stock market starts to trend lower, ending that bear market rally that started in March of 2009.

What He Said:

“The U.S. lowered interest rates in 2004 to their lowest level in 46 years. And what did Americans do with their access to easy money? They borrowed and borrowed some more, investing the borrowed money into real estate. Looking ahead, perhaps the Fed’s actions (of bringing interest rates so low as to entice consumers to borrow more than they can afford) will one day be regarded as one of the most costly errors committed by it or any other banking system in the last 75 years.” Michael Lombardi in Profit Confidential, July 21, 2005. Long before anyone was thinking of a banking crisis, Michael was warning that the coming real estate bust would wreak havoc with the banking system.