In the new issue of Forbes, David Malpass summarizes the bad news for investors and entrepreneurs who might have grown the economy, hired people and invented cool things. He correctly calls the government’s regulatory and tax policy:
“a mammoth, nationwide shakedown.”
Small businesses, which historically have been the biggest job creators, will suffer the most.
"They are the nation's critical engine for growth, innovation and job creation, yet they are being starved for credit and slammed with more taxes, government directives and litigation exposure. This spells weaker profits and fewer jobs….”
The federal government's response to the crisis is to build up Washington's small-business dependency apparatus. Of the $3.6 trillion in federal spending planned in 2010 (overruns likely), many crumbs will find their way to small businesses through government loan programs and complicated tax credits.
“The 2,300-page health care bill will take months and years to decode and will weigh heavily on small-business decisions. New regulations are mushrooming from the constant string of thick 'stimulus' bills, the coming law on new financial regulations and the sure-to-be-bad tax bill … Hillary Clinton upped the ante with her May 27 speech broadly linking underemployment with undertaxation: ‘The rich are not paying their fair share in any nation that is facing the kind of employment issues [we face].’”
Anti-capitalism types complain banks and other investors are not lending to small businesses. But if my choice is buying gold to hedge against government growth versus lending to an entrepreneur who will be hit with high taxes, unpredictable regulations, and unpredictable litigation, why would I lend?
“Normal bank lending is further penalized in the coming 2,000-page financial services regulation bill and the latest antigrowth decisions by the Financial Accounting Standards Board in May. The FASB, an unelected new regulatory megapower, seems bent on outdoing Sarbanes-Oxley in transferring jobs to the accounting field--already one of the top growers--from innovation and growth elsewhere in the economy.”
The bottom line:
"… government has become a huge silent partner in all businesses.”
That's not a good thing.