Small business losing hard-fought optimism

Even before the last couple of weeks of ups and downs in the market, small business was showing signs of a gloomy outlook

By , Guest blogger

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    Quilting store Bella Fabrics owner Lisa Steele is seen in her store in Carrollton, Va., in this July 26, 2011 file photo. Small business owners are worried about the direction of the economy, a survey from the National Federation of Independent Business shows.
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Small business owners on Main Street are joining investors on Wall Street in worrying where the economy is headed, according to the latest survey from the NFIB.

For the fifth consecutive month, NFIB's monthly Small-Business Optimism Index fell, dropping 0.9 points in July--a larger decline than in each of the previous three months--and bringing the Index down to 89.9. This is below the average Index reading of 90.2 for the last two-year period. Put simply, they are losing what little optimism they had been building during what had been hyped as the beginning of a recovery. They now fear that there really was no recovery after all and more bad times are likely ahead.

Expectations for future real sales growth and improved business conditions were the major contributors to the decline in optimism. Remember that this survey was completed before the events of the last two weeks.

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"Given the current political climate, the protracted debate over how to handle the nation's debt and spending, and the now this latest development of the debt downgrade, expectations for growth are low and uncertainty is great," said NFIB Chief Economist Bill Dunkelberg. "And considering the confidence-draining performance of policy makers, there is little hope that Washington will stop hemorrhaging money and put spending back on a sustainable course. Perhaps we might begin referring to the 'Small-Business Pessimism Index' from now on."

Indeed.

I am hearing economists who had been hopeful for our economy to muddle along and grow ever so slightly changing their tune. More and more are talking "double dip". Since I do not agree that a true recovery has ever really taken root, I prefer to call it a "second plunge."
"And what should the government do now?"

That is the wrong question to frame the debate. It is what the government has done over the past two administrations that has magnified the problems in our economy.

Governments cannot create a sustained economic expansion through spending and monetary policy.
Businesses and their customers do that. Stop bleeding them of their money and get out of their way.

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