Small-business optimism declines

FINANCE

America's small-business owners are pretty unhappy these days, according to a leading organization that represents these enterprises that are the backbone of the national economy.

The National Federation of Independent Business reported recently its monthly survey of entrepreneurs' optimism fell in July to its lowest level since the early 1980s. Within the index, capital spending plans fell to their lowest level since 1975.

Other indicators of weakness: Average employment declined, inventories were reduced and prices rose. The net percentage of owners reporting earnings improvements (i.e., those reporting higher earnings minus those reporting lower earnings) fell to a negative 37 percent.

Small-business owners surveyed by NFIB named price inflation as their No. 1 problem. They saw no problem with credit availability, prompting the organization to comment, "For the 11th straight month since the Federal Reserve declared the existence of a 'credit crunch,' no evidence of serious credit problems has appeared on Main Street. It is a Wall Street issue."

Events on Pennsylvania Avenue may be adding to small-business owners' frustration. The American Small Business League, issued a blast last week against U.S. House Speaker Nancy Pelosi (D-Calif.) and the House Committee on Small Business for backing bills passed by the full House it characterized as requiring "the average American small business to compete head-to-head with firms owned and controlled by the nation's wealthiest investors for even the smallest federal small-business contracts."

The two bills allow companies to continue to be classified as small businesses after they have been acquired by multibillion-dollar venture capital funds. The Senate is scheduled to consider equivalent legislation.

The ASBL has been fighting against what it considers unrealistic Small Business Administration size standards for small businesses. It notes "over a dozen federal investigations and hundreds of newspaper stories ... have all found Fortune 1000 firms have received billions of dollars in federal small-business contract awards" since 1995. The SBA's highly convoluted size policies are laid out at www.sba.gov; in the "SBA Programs" drop-down menu on the left, click on "Size Standards."

Reach Michael Buettner at 937-5553.