The decline in college graduates becoming entrepreneurs and small business owners is partially to blame for the meteoric demise of small businesses in America today.
On Sunday, President Obama gave the commencement address to the 2013 graduates of The Ohio State University.
He spoke to the graduates about the voices of cynicism surrounding America today, and urged them to reject that cynicism, challenging them to tackle the issues of today with strength and determination.
Obama then closed his remarks by saying, “I dare you, Class of 2013, to do better. I dare you to dream bigger.”
It’s easy to say to someone, “Don’t be too cynical.”
But, just look at the environment that these graduates are stepping out into.
Students graduating this year from college will be the most indebted class in history.
Their college loan debt will haunt them for much of their adult lives.
And that’s not just bad news for them.
It’s bad news for our entire economy.
According to the Young Entrepreneur Council, the piles of student loan debt that graduates find themselves buried under are preventing them from becoming entrepreneurs and starting small businesses, the backbone of the American economy.
The decline in college graduates becoming entrepreneurs and small business owners is partially to blame for the meteoric demise of small businesses in America today.
According to statistics from the U.S Department of Labor’s Bureau of Labor Statistics, the percentage of self-employed Americans, or entrepreneurs, is at an all-time low.
Since Ronald Reagan departed the White House, having set up decades of Reaganomics, the number of startup jobs per 1000 Americans has decreased by nearly 30%.
As a share of the population, the percentage of Americans who are self-employed fell by more than 20 percent between 1991 and 2010, and according to the U.S. Census Bureau, our economy lost more than 220,000 small businesses during the Bush Great Recession.
In addition to student loan debt, there are numerous other parts of Reaganomics and Clintonomics that help explain the decline of small businesses in America.
Over on The Economic Collapse Blog, Michael T. Snyder, a political commentator and Drudge Report favorite, gives his take on why small business has experienced such a decline in America.
He points to things like “ridiculous regulations” and “Obamacare” as the main culprits behind the death of small business.
Snyder argues that corporate taxes are hindering business creation, but our effective (collected) corporate tax rates in America are the second lowest in the developed world, and corporate tax collections are the lowest they have been in decades, even in the face of the highest corporate profits in the history of our republic.
In reality, the demise of small businesses in America can be attributed to one man: Reagan.
On June 16, 1998, then-Chairman of the Federal Trade Commission Robert Pitofsky testified before Congress about “Mergers and Corporate Consolidation in the New Economy.” These mergers, of course, made it harder and harder for small businesses to start or compete in America.
In his testimony, Pitofsky discussed a variety of reasons why America was witnessing so many big business mergers and consolidations.
Pitofsky pointed to globalization of competition as one driving factor behind the mergers in the 1990’s. Small businesspeople couldn’t compete with cheap labor overseas after Reagan began the changes in our trade policies, and big business could afford to ship their factories to low-wage high-pollution countries..
He then talked about the role that deregulation has in influencing mergers and consolidations. Pitofsky argued that, “Many mergers are taking place in industries undergoing or anticipating deregulation. In the 1980’s, the Commission reviewed a substantial number of mergers in the natural gas industry, which was then undergoing deregulation. Now, deregulatory changes are taking place in electricity, telecommunications, and banking and financial services.”
Pitofsky went on to make the point that mergers can hurt competition, saying that, “Some mergers can harm competition. The harm to competition, in turn, can harm consumers in many ways — higher prices, restricted supply of products, lower quality goods and services, less variety from which to choose, and less innovation for the future.”
Reagan ushered in the age of mergers and consolidation when he stopped enforcing the Sherman Anti-Trust law.
His abandonment of that and subsequent antitrust laws allowed corporations to grow to unprecedented sizes, all the while crushing small businesses in America.
Most American jobs are created by small businesses and through individual entrepreneurship, but Reagan allowed small businesses to be eaten up by giant transnational corporations through hostile takeovers and leveraged buyouts.
He changed the rules so that corporate predators, like Mitt Romney’s Bain Capital, could quash small business on Main Street USA, sucking the wealth and prosperity out of communities across our country.
Before Reagan stepped foot inside of the White House, Mom and Pop businesses drove our economy. Main streets were bustling with locally-owned stores. Strip malls were packed with locally-owned shops.
Today, all across America, both main streets and malls are nothing more than the same giant corporate clothing stores, restaurants, jewelry stores and electronics shops. The days of the locally-owned business are dead.
One part of the American Dream used to be about coming up with an idea and starting your own business. It was about hiring local members of the community to build that business. It was about making good money, saving up for retirement, and being able to a vacation every now and then, and offering the same to your employees.
But, thanks to Reagonomics, that vision of the American Dream is no more, and small business in America is on life-support.
So, Conservatives can try to blame Obama, smokestack regulations, and Obamacare for the death of small business in America all they want, but anybody who knows history knows otherwise.
Reaganomics killed small business.
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