Small business optimism still high but expectations deflate after Obamacare miscue

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The National Federation of Independent Business’ Index of Small Business Optimism posted another historically high reading in April, but expectations for future business conditions plunged by eight points, a sign that business owners were shaken by Congress’ failure at the end of March to repeal and replace Obamacare.

“Small business owners were measurably shaken when Congress failed to address one of their most important concerns,” said NFIB President and CEO Juanita Duggan. “Obamacare has crushed small businesses. Small business owners expected the White House and Congress to address that problem. Their failure to do so caused volatility in the Optimism Index.”

State-specific data is unavailable, but Nathan Humphrey, state director of NFIB, said, “The numbers show how important certainty and predictability are to small businesses. Small-business owners historically have been reluctant to expand and create jobs unless they’re confident in the direction of the economy.” NFIB is the state’s leading small-business association.

The Index dipped 0.2 points April, settling at 104.5. April was the sixth straight month for historically high optimism, a hot streak not seen since 1983. Five of the Index components posted a gain, reaching levels not seen since before the previous administration. Three of the components declined, and two were unchanged. Nearly all of the slight decline was attributable to an 8-point plunge in expected business conditions. Most of the data were collected immediately after Congress failed to repeal and replace Obamacare.

“Expected business conditions is the most volatile component of the Index,” said NFIB Chief Economist Bill Dunkelberg. “Small business owners want Congress and the White House to address the high cost of health care, which has been their top concern for more than 30 years. When that effort failed in March, expectations for better business conditions collapsed.”

The House narrowly passed a bill last week to repeal most of Obamacare. Whether expectations for better business conditions will recover in the May Optimism Index remains to be seen.

“Congress and the White House must understand that small business owners are paying close attention, and they are making decisions that affect the economy based on how Washington performs,” said Duggan. “The drop in expected business conditions should be a warning to Washington that health care reform, regulatory reform, and tax reform have implications far bigger than politics.”

Duggan noted that taxes jumped to the top of the list of concerns among small business owners in the April survey, with 21 percent listing it as their single most important problem.

“That should be a clear indication for Congress and the White House to finish health care reform and move quickly to tax reform,” she said. “The current tax code strongly favors large corporations over small businesses. Five of the top 10 concerns among small business owners are related to taxes. The tax system is a major burden for small businesses and an impediment to economic growth. Fixing that system must be an urgent priority for Congress and the White House.”

To view the entire NFIB Index of Small Business Optimism, please visit www.NFIB.com/sboi. To learn more about NFIB, please visit www.NFIB.com.