Why the U.S. Can't WORK!

Memo To Entrepreneurs: Obama's Just Not That Into You

Posted 06/08/2012 06:21 PM ET

Regulation: Two studies suggest the "head winds" that President Obama says are holding back employers are of his own making. His policies have sidelined a key job creator: the entrepreneur.

Historically, young startup firms have been a major job engine for the economy, particularly as the nation has emerged from recessions. But new federal data show the rate of business startups continues to fall in this recovery.

According to the Census Bureau, the startup rate, measured as a share of all firms, has plunged to 7% from 9% in 2008 and from 11% in 2006. The pace, moreover, is almost half the 1980s' peak of 13%.

Of all the negative trends tracking this administration, this may be the most disturbing.

As startups have hit an all-time low, we've seen an accompanying decline in job creation from startups, which explains the jobless recovery.

The data, which go back to the early '80s, show that the share of new job creation from startups has fallen from over 40% in that decade, when business formation exploded and the economy saw huge gains in payroll employment, to under 30% today.

The difference is incentives: President Reagan slashed taxes and unshackled entrepreneurs from burdensome government rules, while Obama strangles them with new red tape and threats of tax hikes.

Obama cynically invokes the memory of Reagan, but he doesn't get what Reagan got — that small private businesses, not government, create jobs and household wealth.

And they do so through incentives, not browbeating.

Under the low-tax, low-regulation climate created by Reaganomics, the rate of business formations hit an all-time high of 13.02% in 1987 — nearly double today's clip, the Census Bureau found. Entrepreneurs started 544,109 new firms in 1987 compared with 394,632 in 2010 — a drop of 28%.

Almost 50% of companies back then were young — in business five or fewer years — vs. only 35% today.

And in the 1980s, these young entrepreneurial firms accounted for 20% of total private-sector U.S. employment vs. just 12% now. Entrepreneurs created two-fifths of all new jobs during the 1980s recovery compared with under a third during this recovery.

As a result, the Reagan recovery churned out 8 million jobs. In just one month — September 1983 — more jobs were created than in the past six months under Obama.

A separate study, prepared by the OECD, reveals that the U.S. has fallen behind most of its global competitors in promoting entrepreneurship.

Based on a ranking of regulations, it's now easier to start a business in Slovenia, Estonia and Hungary — three former Iron Curtain countries — than in America.

Canada, our liberal northern neighbor, is now head and shoulders above America in entrepreneurial friendliness. It requires the least number of procedures to start a business of any of the OECD nations.

The OECD also measured cultural attitudes toward entrepreneurship and found that far more Chinese think starting their own firm is "a good career option" than Americans. The Chinese also think they have more "opportunity" to start their own companies and have less "fear of failure" than Americans.

What does it say about America under Obama when people living under communism are more jazzed about opening a business?

Black entrepreneurs are especially sour on their prospects under Obama.

"When Obama became president, we were all happy about the symbolism—America's first black president," said National Black Chamber of Commerce President Harry Alford. "We didn't really care about his position or views on anything. We just wanted a black president no matter what."

But "we should have been more careful," he added, "as his views on small business are counter to ours."

Complained Alford, as quoted in the new best-seller "The Amateur: Barack Obama in the White House": "His view of business is that it should be a few major corporations which are totally unionized and working with the government, which should also be massive and reaching every level of American society."

In short, Obama has little use for entrepreneurs.

The OECD urged member nations to "promote entrepreneurship to exit the crisis," since "startups are an important source of job creation." It singled out pre-socialist France for doing an especially good job.

With new health care mandates and the heaviest bank regulations since the 1930s, the U.S. is going the wrong way. One author of the census study, published last month with the Kauffman Foundation, told us regulations are a factor in the recent drop in startups.

It's plain from federal data that startups are critical to job creation. And their alarming dearth under Obama helps explain why this recovery is so anemic.

If the president really wants to get America working again, he'd stop blaming state budget cuts and congressional Republicans and adopt Reagan's pro-entrepreneurial policies.

Unfortunately, he's a rigid leftist ideologue who'd rather stand in the way of new business formation and jobs.