Yesterday was small business day as President Obama touted a new program for expediting loans to small businesses. The media touted the importance of aid to small businesses since they are responsible for the bulk of new jobs. It is true that small businesses are responsible for more new jobs, but they are also responsible for most job loss. Most small businesses only survive a few years. During this time they hire workers and then lay them off when they go out of business. Their rate of net job creation is little different than the rate of net job creation for larger firms. Politicians like to cater to small businesses since they are an extremely important political constituency, but many of the tax breaks and other forms of financial support for small businesses belongs in the category of pork. These items might get more scrutiny if the media did not unthinkingly repeat myths about the importance of small business.
--Dean Baker
