How Politics Can Send Sunshine or a Cloud over Entrepreneurship
The effects of politics on entrepreneurship can be either a ray of sunshine or a dark cloud hanging over the prospects of the ultimate success of the entrepreneur's venture. Political stances on taxes, regulatory reform, immigration, intellectual property rights, and funding for social and educational programs weigh heavily on the decisions of entrepreneurs to hire employees, expand capital spending, increase inventories, and apply for credit.
Entrepreneurs need to stay on top of the political agendas aimed to boost entrepreneurship through investment tax credits, capital expenditure deductions, and incentives to promote lending to small businesses. For example, the recent 2010 proposal to give businesses a short-term one year 100 percent capital expense deduction is great for small businesses ready to reinvest in their business. The hope is that business reinvestment will stimulate the economy, reduce cyclical unemployment, and eventually bring back strong consumer demand.
Dark clouds from politics can sweep in at any time and have bad or unintended consequences. Sometimes even good intended policies fall short of their objectives. For example, government policies to stimulate lending to small businesses can be ineffective because the government fails to recognize that loan demand is down not because of the lack of credit but because small businesses are not applying for loans for the want of customers. Other potential dark clouds that entrepreneurs need to keep a lookout for on the horizon are political decisions regarding the Bush tax cuts, cap and trade, and value added taxes (VAT) to reduce the rising budget deficit. However, for the entrepreneur, the biggest challenge in laying out their business plan is managing the uncertainty and cloudy conditions that politics can generate.