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Dunkelberg: Improving the State of the Union?

President Obama noted in his January WSJ articleon regulatory burdens that "Small firms drive growth and create most new jobs in this country. We need to make sure nothing stands in their way."

He then appointed Jeff Immelt, CEO of General Electric to head up the President's Council on Jobs and Competitiveness?

Now there’s a guy with a small firm focus!

Hello! Immelt noted that he felt the key to growth was more manufacturing jobs and exporting, just what small businesses do (right!). What a surprise that Immelt would see the world that way! If GE (* Disclosure:General Electric is in the process of selling both CNBC and NBC Universal to Comcast*) and its ilk were responsible for the 8 million job losses in the recession, this might make some sense.

But of course this is not the case.

These large firms don’t employ many people, they are capital intensive (this is good), not labor intensive. Focusing on manufacturing and exporting isn’t going to get these people re-employed. It might be a great appointment to start fund raising for the 2012 election but, as has been the case, this approach is off the mark.

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When the problem is not understood, bad policy is made, and we’ve seen plenty of that.

Last year, 4,225 proposed new rules were posted on the government’s web site. It’s mind boggling. And the administration has made it clear that it intends to pursue its objectives through the regulatory framework, especially when it can’t have its way in Congress.

How about the Construction Contractor Affirmative Action Requirements which aims to have more women working in construction? Then there’s the gender quotas in the financial regulation bill. It sets up 29 Offices of Minority and Women Inclusion to make sure that financial firms and their subcontractors practice "fair inclusion" of minorities and women.

The 1099 reporting requirement in the health care bill yet another example, with hundreds of other regs under development. The EPA is working on over 300 major new regulations. Attempting to manage the private sector this way squanders valuable entrepreneurial time and capital, but this regulatory assault by Congress has gone on for decades. Once Congress passes a bill, it rarely looks back to see what impact the legislation really has once the regulations to implement it are done.

Saying nice things about small business sounds good (and the State of the Union Address will pile on even more), but the disconnect between what is said and what is done is massive and does not bode well for our recovery.

William Dunkelberg is an Economic Strategist, Boenning & Scattergood and Chief Economist, National Federation of Independent Business.