Republican hopefuls, Mitt Romney and Paul Ryan, strongly believe that providing economic incentives for entrepreneurs is central to economic growth, so that government business regulations and taxes are harmful. This vision provides the central justification for many features of Ryan’s budget proposal, including lowering taxes on the wealthy and rejecting restrictions on small business decision-making.
Small business has always been a safety valve for men who did not excel in the educational system. Having access to capital from their family or social network, many men could open a business and expect to attain a middle-class standard of living. The big box stores, however, have constrained this option substantially so that the small business environment has increasingly become a place where dreams are unfulfilled. Even before the Great Recession, three-quarters of the 27 million businesses had annual sales of less than $100,000. Most disheartening, 93 and 85 percent of black and Latino/a owners, respectively, did not reach this sales level.
Unable to forestall this transformation, millions of frustrated small businessmen and their families have chosen to direct their anger at government. The Ryan-Romney rhetoric has increased this scapegoating and underpins the viciousness of many of the personal attacks on President Obama.
Romney and Ryan lionize individual entrepreneurship because it reflects the way they assess their own life stories. Both believe that their success was self made. It is why they reacted so strongly when President Obama claimed that entrepreneurs do not build their companies alone. Government provides the business supports, he argued, that create a healthy and productive business environment.
What is most troubling is that neither Romney nor Ryan considers the crucial role government funding plays in furthering economic growth. Ryan’s budget doesn’t simply slash funding to the most vulnerable people: the poor and the elderly. It slashes government funding for transportation infrastructure, research, job training, and general education. However important the entrepreneur is, without these building blocks, it is difficult to see how the United States can grow and prosper in an increasingly competitive world economy. Indeed, in the hi-tech sector, expanding the base of entrepreneurs with the necessary technical background requires a government supported first-class educational system.
Even if their own success was not aided by government, Romney and Ryan ignore their privileged backgrounds. They both came from families that provided sufficient social and financial capital for them to have opportunities that most individuals do not have.
Today, the vast majority of children live in families who have no wealth, outside of the dwindling equity in their homes, that can be used to fund their children’s education. Romney showed his insensitivity to this reality when, at a campaign rally in Ohio, he urged students to pursue entrepreneurship, even if it meant they would “borrow money, if you have to, from your parents.” By not investing in the necessary human and physical capital, the Romney-Ryan vision will not only reproduce the same class and race inequalities that exist today but will hinder the economic growth that we desperately need.
Robert Cherry is Brueklundian Professor in the Department of Economics at Brooklyn College of the City University of New York. He is the author of Moving Working Families Forward: Third Way Policies That Can Work (NYU Press, 2012).