A survey of small business owners in the US found that confidence fell to an all-time low after Biden's election victory, with fears that taxes will rise and regulations tightened.
Boston Globe | Boston Globe | Getty Images
Small business confidence is down after the election of former Vice President Joseph Biden, according to CNBC Q4 | SurveyMonkey Small Business Survey has fallen to an all-time low.
With a confidence index of 48, Main Street's outlook is now below the second quarter of this year (49) when lockdowns increased across the country amid the first wave of Covid-19. That Q2 number was the all-time low prior to the recently completed survey, which was conducted November 10-17 of more than 2,200 small business owners nationally using the SurveyMonkey platform.
Since CNBC began conducting the survey in 2017, the confidence index has been 62 and never dropped below 50 through 2020. While a further surge in coronavirus cases continues to hit major streets across the country and no progress has been made during business stimulus talks in Washington, DC, problems small business owners face escalate, key questions in the confidence index relate to Main Street- Tax and regulatory outlook and responses from small business owners are heavily skewed by their political leanings – small businesses. Business demographics are generally conservative. About 60% of small business owners identify as Republicans, according to SurveyMonkey.
The Q4 CNBC | SurveyMonkey Small Business Survey shows the weight of post-presidential political bias in relation to small business prospects.
CNBC | SurveyMonkey Small Business Survey, Q4 2020
Fifty-three percent of small business owners said tax policies will have a negative impact on their business in the next 12 months, while 49 percent said government regulation will have a negative impact. Because of party affiliation, the gap is wide. Among Republicans, 75% said tax policy will be negative and 72% said it will be negative. Those numbers drop to 15% (taxes) and 11% (regulations) among Democrats. These are the highest percentages of responding to "adverse effects" in the four years of the survey.
Politics and Small Business
"The immediate shift in forward-looking sentiment small business owners reported after the election shows how deeply politics is embedded in the public's perception of the economy, and more specifically, how divided the country is," said Laura Wronski, manager of research science at SurveyMonkey. "We've seen evidence of this every quarter, with Republican small business owners consistently reporting higher levels of trust than Democrats, but the election of Joe Biden is the first opportunity we've had to see if that changes if that changes President's power would change parties – and it did dramatically. "
Republican respondents saw the small business confidence index drop to 42 from 57 in the third quarter; Democratic confidence rose from 46 to 58. The Republican business owner's lowest trust rating to date was 54 in Q2 2020.
We've seen evidence of this every quarter, with Republican small business owners consistently reporting higher levels of trust than Democrats, but the election of Joe Biden is the first opportunity we've had to see if this would tip when the president's power came down would switch parties – and it did dramatically.
Laura Wronski, SurveyMonkey Research Science Manager
Overall, the survey found that 34% of small business owners say Joe Biden is good for small businesses, while 55% say he is bad for small businesses. By parties, 89% of Republican small business owners say Biden will be bad for business, while 86% of Democrats say he will be good for Main Street.
Vronsky noted that part of quarterly small business confidence is that owners judge how things will be in a year's time based on federal policy changes, and that these questions are fraught with uncertainty at every moment is post-election time, before the new government takes power and before its political agenda is fully worked out.
"We don't yet know how Biden will work with Republican leaders to implement his agenda, and we don't even know what his specific policy proposals will be, so we're really waiting and this lack of security is always a difficult one for small business owners Situation, "she said.
Divided government can be good for Main Street
With the Senate races in Georgia still to be decided in January and control of the Senate to be gained, it remains to be seen how much political capital the Democratic Party will have by winning the White House. The stock market continued to rebound on the belief that a divided government is good for business and will limit a President Biden's ability to lift Trump's tax cuts. Experts and small business owners say there is reason to believe Main Street will perform well under a divided federal government.
"If we do have a Republican-controlled Senate, many consider it a win-win scenario," said Tony Nitti, a federal tax partner at RubinBrown who works with many entrepreneurs. "Customers viewed the election as sort of 'Sophie' s Choice ': they preferred the stability and possible pandemic response of a Biden presidency, but wanted the tax regime of a second term Trump. With these results there's a bit of 'best', "Nitti said, explaining that a Biden administration could be more thoughtful and determined in addressing the pandemic and that the Republican-controlled Senate will keep any significant tax increases in check.
"In a scenario with divided governments and the way things are going in the house, it will be very difficult to collect taxes, especially for small businesses," said Karen Kerrigan, president and CEO of Small Business & Entrepreneurship Council. "The house's margins will be so tight when it comes to majority control."
Kerrigan noted that for much of the Obama presidency, the environment was one of divided government and that access to capital for small businesses increased. "The great recession opened up opportunities for bipartisan collaboration, and one of those areas affected was access to capital and the need to encourage new business startups as more businesses were closed than they were started. The Obama administration took an early interest and leadership Investment crowdfunding legal, along with other key elements of the Jumpstart our Businesses Act (JOBS Act), which has had a positive impact on capital markets to date, "she said.
Kerrigan said small business owners are busy people and, unlike Wall Street, they don't necessarily follow the nuances of divided government. "During the campaign, they read or heard of Biden policies that could affect their business, from taxes to workplace regulations and more, and remain concerned about potential new costs in addition to their current challenges. It is not surprising that they have confidence in the immediate situation. The aftermath of the elections has decreased, "she added.
However, she expects the confidence gap to narrow, although it will take some time as more conservative business owners absorb and process information about the new political reality and find that the measures taken by a divided government do not reflect the larger ones "intrusive politics" on the Biden agenda.
Ravin Gandhi, founder and CEO of Chicago-based homeware manufacturer GMM Nonstick Coatings, said he was encouraged by the prospect. Infrastructure and a Covid Relief stimulus plan are both bipartisan needs, while taxes for businesses are likely to stay lower, which will help if the economy struggles to recover from the pandemic. He said the fact that Biden should "barely beat" Trump should also limit the left's ability to overregulate. And for any company that imports or exports – using manufacturing overseas – an end to Trump's trade wars is positive.
Covid Lockdowns and Small Businesses
According to the survey, small business owners largely (83%) support a new federal government stimulus package – including 76% of the Republican respondents and 96% of the Democratic respondents. Fifty percent of small business owners said direct payments to individuals should be included in any new incentive. 42% said mortgage / rental relief; 41% said they would extend the PPP loan program.
However, small business confidence fell from the last quarter solely due to forward-looking factors like taxes and regulation, Wronsky noted, not because of a crash in current business conditions like the confidence index saw earlier this year with the introduction of coronavirus restrictions.
"There will be no national shutdown policy," said Kerrigan. "President-elect Biden has a mix of advisors on the Covid-19 issue, several of whom say our economy can continue to 'stay open' and that it can be done safely with the right precautions. In addition, the majority of democrats would Governors also oppose this top-down approach. "
Small business owners' assessment of current business conditions was at least stable from Q3 to Q4 and even rose slightly for some measures, including more business owners who described the conditions as "good" and less than bad. Those expecting higher revenues next year – and leading recent sales and demand increases – were also more numerous in the fourth quarter, while the hiring outlook was more or less stable from the previous quarter.
"That's pretty remarkable when you consider how long so many companies have had to work from home to cope with lower demand, adopt new policies and security procedures, and everything else they've had to deal with thanks to the pandemic," said Vronsky.
The CNBC | SurveyMonkey Small Business Survey for the fourth quarter of 2020 was conducted by more than 2,200 small business owners between November 10 and November 10. 17. The survey will be conducted quarterly through the SurveyMonkey online platform and will be based on the survey methodology. The Small Business Confidence Index is a 100-point assessment based on answers to eight key questions. A value of zero indicates no confidence, and a value of 100 indicates perfect confidence. The modeled error estimate for this survey is plus or minus 2.5 percentage points.