I have been relatively quiet about this past election. Why? I really did not believe that the outcome would be that different on its impact on small business no matter which of the two parties won.
While there may have been some differences in the pace of policy change and in how it is implemented, both major parties in this country fundamentally believe that an activist approach to the economy is the proper approach. Both parties talk about “managing” and “fixing” the economy, and “helping” business owners.
A free market works when investors and consumers — both individuals and businesses — are allowed to make choices that are not constrained by heavy regulation and influenced by differential tax policy. Economic freedom does not need “managing”, “fixing”, nor “helping.”
That being said, now what can entrepreneurs expect?
Higher Taxes – Both parties had planned to increase taxes. Since they both favor a large and active government, no matter which party won, higher taxes are on the way. This means higher income taxes and quite possibly an additional new tax system that is based on a value added tax (VAT). That means entrepreneurs will be keeping less of the wealth they create. It also means that the cost of compliance with increase, possibly dramatically.
Inflation – Inflation is not coming, it is here. Neither party seems to have the courage to address this silent beast. Prepare for more inflation and higher interest rates.
Healthcare — ObamaCare will hit small business owners hard over the coming years. It will hit hard in terms of costs and in terms of the uncertainty it creates in terms of what it all will really means. Remember that most of the details are not in the legislation, but will be put into law over the coming years by unelected bureaucrats. Even if Romney had won, he would only have tweaked ObamaCare. And this would only have happened if he had the legislative support to do so, which is questionable.
Regulation — We will see a continued increase in regulation of businesses and the economy. Again — the cost of business is going up.
The rate of new business formation will continue to suffer over the coming years, and the scale of those started will be diminished due to the increasing cost of doing business and continued uncertainty. Without new businesses and without existing entrepreneurs ready and willing to lead the way to a recovery, we are in for a long, difficult economic future.