Point one: Small to medium sized firms are the drivers of job growth in the United States. Point two: The government needs policies that encourage these companies to take risks. Point three: The government needs to reduce burdens on these firms that discourage investment or increase their costs of doing business. To create employment, we hold the above to be self-evident and to be true.
If we review the last two years, we see variations of assistance provided by the government that not only miss the mark, but also break the legislative Hippocratic Oath of doing no harm. This is the dilemma facing Democrats as they head into the fall elections. They were successful in achieving their legislative goals of a massive stimulus program, a massive re-write of finance and a massive re-write of health care.
The stimulus plan did not achieve its goals. The financial regulatory law needs over 70 studies before regulators can implement the changes. The health care law will take years to fully implement and is already raising costs for consumers and small business.
Aetna Co.,BlueCross Blue Shield plans and other smaller carriers have asked for premium increases between 1% and 9% to pay for extra benefits required under the (health care) law, according to the WSJ. "The rate increases largely apply to policies for individuals and small businesses and don't include people covered by a big employer or Medicare."
This is the opposite of what small firms need during a period of slow growth. Small firms' costs are going up for existing employees and this takes away funds available for new employees. While there are many challenges and costs for small business, health care is the fastest rising expense when it comes to employees. The health care law is accelerating these costs.
Steve Forbes writes, "Government policy mistakes bring on crises: the correction of those mistakes will cure them." The correction to these policy mistakes began yesterday.
While it was encouraging to hear President Obama's new proposals to help small business, it is unlikely they will be made into law soon. Even if these were implemented tomorrow, they would not likely change hiring in time for the election. However, the hope is that this change of tactic towards helping the job creators will continue in 2011.
For the unemployed, for the economy, for the markets, this would be the best outcome possible.
Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.