I gave a talk yesterday at William Paterson University in Wayne, NJ about the economy and stock markets. Many of the participants were small business owners and were very concerned about how the dismal economic climate will affect small businesses in particular.
Small business is the backbone of the U.S. economy. It accounts for about half of all private sector employment, but it also accounts for most of the job growth. At least it did during the last decade. These days, of course, there is no job growth. The economy has shed almost 1.2 million jobs over the past 10 months--more than half a million in the last two months alone.
While the failure rate for new businesses is high, the fact is that owning your own business is one of the best ways to achieve economic prosperity. The new Obama administration should consider ways to make it easier for individuals to start and run businesses. One good idea is to exempt all new businesses from taxes for the first five years. Let them build up some steam before you slow them down. Besides, they will employ more people as they grow and the government will get its due from payroll taxes.