Failing businesses a sign of weak economy | Don Brunell

For the first time in American history, entrepreneurship is in decline.

According to the U.S. Census Bureau, businesses are dying faster than they’re being formed.

Each year, 400,000 new businesses start up nationwide; 470,000 close their doors.

Gallup reports that in the 1980s, business startups outpaced business failures by about 100,000 per year, a trend that continued until the 2008 recession. Now, after six years of sluggish economic recovery, the entrepreneurial death rate in the U.S. is outpacing its birth rate.

In fact, the U.S. now ranks 12th among developed nations in terms of business startups, behind nations such as Hungary and New Zealand.

This matters because small and medium-sized businesses create two-thirds of the 100 million jobs in our nation.

But isn’t the economy improving? Barely.

One quarter of decent growth is followed by a quarter of slow growth.  While the national unemployment rate has dropped to 5.6 percent, part of that drop is because millions of people have simply given up trying to find work and are no longer counted as unemployed.

Middle-income families are losing ground and a record 47 million Americans – one-sixth of our population – are on food stamps.

While welfare and social spending provide a safety net in a weak economy, the only real solution to unemployment is to create more jobs.  But those jobs will be harder to come by if entrepreneurs stop opening the businesses that employ people.

Jim Clifton, Chairman and CEO of Gallup, writes, “[Wall Street and the White House] both tell us, ‘The economy is coming back.’ Let’s get one thing clear: This economy is never truly coming back unless we reverse the birth and death trends of American businesses.”

Two of the most formidable obstacles facing entrepreneurs are high taxes and excessive regulation especially for cash-strapped startups.  Unfortunately, the Obama Administration has aggressively pursued both.

The U.S. has the highest corporate tax rate in the world, yet President Obama’s 2015 budget includes $2 trillion in new taxes over the next decade.  While the president says he’s taxing only the wealthy, the taxes will hit many small business owners who file taxes as individuals.

Then, there are the regulations.

The Competitive Enterprise Institute (CEI) says federal regulations cost Americans $1.9 trillion a year and notes that regulators imposed 3,541 new regulations in 2014 alone.

Continuing the juggernaut, the administration unveiled 300 new regulations in the first seven days of 2015.

A CEI study released in January reported, “If federal regulations were a country, their cost would amount to the world’s 10th largest economy.”

While reasonable regulations are necessary, unnecessary bureaucratic red tape needlessly increase consumer prices and sap money that could otherwise be used to expand businesses and hire more people.  Added to that are the costs to comply with hundreds of state and local regulations.

The House of Representatives recently passed the Regulatory Accountability Act of 2015 which requires regulatory agencies to clearly document the cost of proposed regulations and consider less costly alternatives.

President Obama has vowed to veto the legislation.

Here in Washington, Gov. Inslee is taking a page directly from President Obama’s playbook.  Inslee wants to increases taxes, impose costly new cap and trade legislation that would cost Washington employers $1 billion a year, and start taxing investment income.

That’s a bad idea.

While our state’s economy might look good from the governor’s window and from the skyscrapers in downtown Seattle, 90 percent of Washington counties have unemploymen rates above the national average.

As with President Obama, Gov. Inslee’s top priority must be creating jobs – not piling more taxes and costly regulations on the very people who create those jobs.