Small but Alarming Indicator

Yesterday I trotted out to Scottsdale to meet, over breakfast, with the small business owners’ group I first visited just six months ago. At the time, I considered taking them up on their invitation to join, but then never got around to it, mostly because my editing business has been quiescent and I ended up spending every living, breathing moment of the summer working on this fall’s classes and increasing FaM’s visibility. So, I wasn’t doing much editorial work. The current visit was to hit them up to buy ad space in the Bach Festival program.

This group, which at one point had 24 members, appears to be down to about a half-dozen.

Think of that: three-quarters of the members have fallen away, either because their businesses have folded (a common fate of small enterprises) or because they can’t afford the $50/month dues. Since even I could afford the dues on the piddling amount my S-corporation has earned this year, that is one scary figure.

Then, an even more striking bit of news: about two months ago, my old friend, the one who originally invited me to the group’s meetings, took a full-time job.

This guy is one of the most prominent graphic artists in the Southwest. A designer and illustrator for print and Web media, he’s run his own business, quite successfully, for as long as I’ve known him: at least 25 years. His prices have always been well outside my range. His clients have included monthly city magazines and large corporations nationwide. For him, to take a full-time job must have been a wrenching decision. It would mean the income from his formerly thriving business must no longer have been supporting him and his wife. That he also is teaching a community college course on the side suggests he must need the extra coins.

One of the other members owns an office building. His largest tenant failed to renew its lease. “Life,” he remarked laconically, “sucks.”

If the group represents the larger economy in microcosm, its direction suggests something very scary. At least in the Southwest, small businesses and the larger companies upon which they depend are suffering badly. Many have not survived, and those that have survived may not continue to operate much longer. In June 2009, the large credit bureau Equifax issued a report showing that small business bankruptcies rose 81 percent. A more recent report suggests that despite some improvement in the overall economy, things are still about the same in specific regions, not all of them concentrated in the Southwest. Last month the American Bankruptcy Institute found that in 2009 almost 61,000 businesses declared bankruptcy, the highest number since 1993.

And that, my friends, explains why the nation’s de facto unemployment rate is hovering at around 27 percent…not counting those in prison and in the military.

The last high rate of business bankruptcy occurred in the aftermath George I’s administration. Numbers began to fall sharply the year after Clinton took office, dropping by 10,000 in 1994. Interestingly, NAFTA was ratified in 1993, and that year the Omnibus Budget Reconciliation was signed into law, cutting taxes for 90 percent of small businesses and raising taxes on the wealthiest 1.2 percent of Americans. And it was in 1993 that Clinton said, “Our democracy must be not only the envy of the world but the engine of our own renewal. There is nothing wrong with America that cannot be cured by what is right with America.”

What do you think we, as a nation, can do about this? Does America still have enough right with it to recover again? Can our elected leaders do anything to turn the economy around? If so, what?