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Small Businesses Get Big Political Hype. What's The Reality?

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Small Businesses Get Big Political Hype. What's The Reality?

Small Businesses Get Big Political Hype. What's The Reality?

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LYNN NEARY, HOST:

This week, the House is scheduled to vote on a Republican tax cut for small businesses. It's just the latest piece of legislation aimed at helping small businesses, which are widely praised in the political discourse as engines of job creation. As NPR's Tamara Keith reports, small business adoration is nearly universal and reflects something beyond economic reality.

TAMARA KEITH, BYLINE: There are many things politicians disagree about. But one thing they agree on is the value of small businesses. And they love, love, love to talk about them. Here are President Obama, Mitt Romney, and house majority leader, Eric Cantor.

PRESIDENT BARACK OBAMA: Small businesses create two out of every three jobs in this country, so our recovery depends on them.

MITT ROMNEY: And so my job, if I'm president, among other things, is to make sure that we are the best place in the world for small business.

REPRESENTATIVE ERIC CANTOR: We should all be able to rally around the cause of small businesses.

KEITH: How much do politicians love small business? The phrase appeared in the Congressional Record more than 10,000 times in just the past two years. That's according to the Sunlight Foundation Capitol Words database. That's less than members of Congress talked about taxes, but far more references than they made to the debt limit, for instance. And there's a reason.

FRANK LUNTZ: The small business owner is always the good guy in the movies.

KEITH: Frank Luntz is a language specialist and a GOP pollster.

LUNTZ: Being a small business owner is the American dream. It's the epitome of success. People respect that individual.

KEITH: Americans may have mixed feelings about big business and Wall Street, but Luntz says they identify with small business and Main Street.

LUNTZ: I've tested language. I've tested small business owner, job creator, innovator, entrepreneur, and nothing tests better than small business owner because it represents all of those. It represents someone willing to take a risk. It represents hard work and perseverance.

KEITH: So, perhaps it's no wonder that more than a quarter of the people running for the state legislature or Congress in California this June, listed themselves on the ballot as business people, or small business owners. And in some cases it's a stretch, says Allan Hoffenblum, publisher of the California Targetbook and a former Republican political consultant.

ALAN HOFFENBLUM: There's a state senator seeking re-election in a tough election, but he's not putting state senator under his name. He's putting businessman under his name.

KEITH: In all, 48 people list themselves as small business owners, with 160 making sure business is somewhere in their three-word max job description. Hoffenblum says it's all about sending a message.

HOFFENBLUM: So it says I'm not one of them, you know the politicians. I've had life experiences. I've met a payroll. It's a type of ballot designation that appeals, you know, to the voters.

KEITH: And it's just one more manifestation of what has been a long standing political tradition of giving a lot of love to the little guy. But this intense focus on small businesses may overstate the economic case. Big businesses actually employ far more people than small ones. And according to government data, the overwhelming majority of small businesses don't employ anyone at all.

The figure often cited by politicians on both sides of the aisle, that 65 percent of net new jobs are created by small businesses. That one is true. But there's more to it.

KELLY EDMISTON: That masks a huge amount of people being hired and let go.

KEITH: Kelly Edmiston is a senior economist at the Federal Reserve Bank of Kansas City. He says small business jobs are far less stable than jobs at big businesses, in part because small businesses are created and also fail at such a high rate.

EDMISTON: They're much more volatile jobs, so there's simply not the security there.

KEITH: And, Edmiston says, small businesses tend to offer lower pay and fewer benefits.

EDMISTON: Small businesses are important job creators, but I don't think we want a economy made up, totally, of small businesses.

KEITH: But before you think Edmiston is some kind of small business hater, he actually concludes that in terms of economic development, it makes far more sense for states and cities to promote small business than to spend tons of money to try and lure a large factory into town.

Tamara Keith, NPR News, Washington.

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