Resolving our political stalemate and adopting a plan that would get our spending under control and reduce the size of our debt and deficit relative to gross domestic product (GDP) could be a major source of stimulus. A significant share of the small-business population would move forward with expansion if political uncertainty was resolved.
Unfortunately, 36 percent of the owners see uncertainty on the rise; 16 percent of them see uncertainty "rapidly increasing"; 30 percent see no change in the current level of political uncertainty, a major impediment to spending and hiring.
So, impediment No. 1 is uncertainty about the future and No. 2 is poor sales. The third most-cited impediment was "lack of finance," according to 30 percent of respondents.
Only a quarter of the owners depend on bank loans, most - 53 percent - use internal cash flow to finance investments in their business. Profits were badly damaged by the recession, and the weak recovery has not restored profitability, leaving the pool of funds to support business spending depleted. To a significant degree, this explains why capital spending is at near record-low levels.
If the so-called Bush tax cuts that we have lived with for a decade expire, taxes on the incomes of most of these small firms will go up, leaving even less to reinvest in the business.
Legal and regulatory issues were assigned the two most severe rankings by 25 percent of the owners. Eighty-two percent of those reported that government regulations were the major obstacle to growth. Thirteen percent reported canceling a project as a result of the regulations; 19 percent postponed spending; 11 percent suspended planning;and 20 percent proceeded with their investment, but incurred higher costs due to the regulations.
