President Biden has come out with a statement claiming that his economic plan has led to the strongest two years for new small business applications in history, with over 10 million new businesses created in his first two years in office. He attributes this success to his plan to build the economy from the bottom up and middle out.
Approximately 34% of small businesses in the United States have shuttered in the past two years. As a result of these closures, there has been a surge in new small business applications as policies were altered to permit them to remain operational. However, this uptick in applications is not a significant achievement when considering the sheer number of businesses that were forced to close.
The findings of Alignable’s Small Business Revenue Report indicate that a significant portion of small business owners (47%) were at risk of closing their businesses in the fall of 2022 due to various challenges. These challenges include a rise in inflation, high gas prices, increased rent, labor difficulties, ongoing supply chain issues, decreased consumer spending, rising interest rates, and concerns about a potential recession.
Furthermore, Allianz Trade predicts a significant increase (38%) in business bankruptcies in 2023 as a result of the tightening of monetary and financial conditions in the U.S.
The World Bank has revised its projection for the U.S. economy, forecasting a growth rate of only 0.5%, significantly lower than the earlier projection of 2.4%.
According to the World Bank, this would mark “the third weakest pace of growth in nearly three decades, surpassed only by the global recessions caused by the global financial crisis.”
Additionally, the World Bank states that global growth has slowed to the point where the global economy is on the brink of a recession.
Small businesses are particularly vulnerable during an economic recession, as budget constraints, reduced consumer spending, and lack of preparedness can make it difficult for them to stay afloat.
President Biden’s claim of a strong two years for new small business applications may not hold up under further scrutiny. While there has been an uptick in new business applications due to the closures of existing small businesses, this is not a real achievement when considering the challenges faced by small businesses in the past two years. Furthermore, with predictions of a significant increase in business bankruptcies in 2023, a growth rate of only 0.5% forecasted by the World Bank, and global growth slowing to the brink of a recession, small businesses are particularly vulnerable in the current economic climate.