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Say Goodbye to the Survey of Business Owners?

Posted by: Mark Marich on September 26, 2011 Source: Policy Dialogue on Entrepreneurship

Guest blog by Andrew Reamer, George Washington University

Last week, I noted that due to the House and Senate appropriations committees’ significant cuts in the Census Bureau budget, the quality of federal of federal economic statistics appears about to decline.

At that point, we knew that the Census Bureau had responded to the House committee’s 17% ($169 million) cut by saying it would need to cancel the 2012 Economic Census, which provides the foundation for the national input-output model, 12 Principal Federal Economic Indicators (including GDP), and a myriad of other public and private uses. Cancellation would include the Survey of Business Owners, an Economic Census component and the primary source of detailed information on the nation’s entrepreneurial base.

We also knew that the Senate committee’s 8% ($81 million) reduction would harm economic statistics, but we weren’t yet sure how. Now we know more. On Thursday, the Census Bureau issued its impact statement for that cut, indicating that the Economic Census budget would take a $10 million cut, “jeopardizing” the Survey of Business Owners and two smaller data collections. Further communication with the Census Bureau indicates that at the Senate mark, “it is doubtful” there will be an SBO.

When the 2007 SBO was threatened with elimination due to a different budgets approved in the House and Senate, Kauffman Vice President Bob Litan wrote an editorial that articulated the reasons why the SBO is essential in promoting U.S. entrepreneurship. I encourage you to take a look. Since that time, new research gives us an additional powerful reason.

In 2009, Census Bureau analysis, supported by the Kauffman Foundation, indicated that new businesses are the nation’s primary job generators. Entrepreneurship, then, provides a path to sustained economic recovery and competitiveness.

However, this July, a Kauffman Foundation report, “Starting Smaller; Staying Smaller: America's Slow Leak in Job Creation,” found that average job creation per new business has been in decline since the middle of the last decade. So, for instance, “The cohort of new firms that started in 2009 . . . is on course to contribute one million fewer jobs in the next decade than historical averages would suggest.” The report then notes we don’t know why this is. But the implications for recovery and competitiveness are significant.

With a weak recovery and increasing global competition, a 2012 SBO—collecting data on owner characteristics (including gender, Hispanic origin, race, age, and education level) and business characteristics (including sources of capital, outsourcing, exports, and use of Internet and e-commerce)—would help identify issues that underlie the problem of weak new business job creation and the design of policies to help get beyond it.

If there ever was an economic moment that we needed an intelligent, evidence-based entrepreneurship policy, this is it. And yet for want of something less than $10 million, a miniscule amount by federal budget standards, we’ll have to try solving a critical piece of the economic puzzle in the dark.

For there to be a 2012 Economic Census “lite,” House negotiators must agree to the Senate mark. For there to be the full 2012 Economic Census, including the SBO, negotiators for both houses need to agree to add more funds than was approved by a committee in either house, a highly unusual, but not impossible, outcome.

Clearly, public discussion can influence congressional decisions. When funding for the 2007 SBO was threatened because the House didn’t provide enough funding, a New York Times editorial made a strong case for the SBO, a member of the House quoted the Times editorial on the House floor, and the House acceded to the Senate on the Census Bureau budget.

This go-round, after the Census Bureau said the House mark would lead to the termination of the 2012 Economic Census, a large variety of stakeholders, including the U.S. Chamber of Commerce, and another New York Times editorial made the case to fund the data collection. The Senate appropriations committee closed half the gap and directed the Census Bureau to “preserve” the Economic Census. But it didn’t provide enough to save the SBO.

Monday’s congressional briefing on the Economic Census, organized by the American Economic Association and co-sponsored by Kauffman, the U.S. Chamber, and others, made the general case of the importance of the Economic Census, including the SBO.

Getting the House to agree to the Senate’s mark is challenging—but it is doable given broad business support for the Economic Census. However, for conference negotiators to add funds for the SBO that neither house put forward, believers in the importance of entrepreneurship will have to make their particular case for the data collection strongly and quickly. Otherwise, we can say goodbye to the SBO.

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Andrew Reamer is a research professor at the George Washington Institute of Public Policy at George Washington University.

Tags:  Census, Kauffman, guest

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