"America used to be the third easiest country to get established in a business. It's now number 17."
Charles Bass on Monday, June 11th, 2012 in a speech after he filed to run for reelection at the New Hampshire Statehouse
Is it getting more difficult to start a business in the U.S. and is it Obama's fault?
Veteran congressman Rep. Charles Bass, R-NH, labeled 2012 as "gut-check time" in America when he filed to run for another two-year congressional term last month.
After signing his papers at the New Hampshire Secretary of State’s Office on June 11, Bass stumped on national jobs and economic issues.
His call for a gut check spurred a PolitiFact New Hampshire fact check.
"The economy is going nowhere," Bass said, touting jobless rates and unemployment statistics, median income levels and the national debt.
"America used to be the third-easiest country to get established in a business," Bass went on. "It’s now number 17, and I could go on."
Ranking a country on the "ease" of establishing a business seemed curious, so we contacted his "Victory Committee" to find out which sources Bass used to support his claim.
Victory Committee spokesman Scott Tranchemontagne pointed us to Doing Business reports from 2006 and 2012, which are conducted by the World Bank and International Finance Corporation, specifically the "Starting a Business" category listings produced with each.
And, they owned up for an error.
Bass, "incorrectly stated that we are ranked 17th and instead it should have been 13th" for 2012, Tranchemontagne wrote, though Bass did get the 2006 ranking right. "While the congressman inadvertently stated the wrong number, it is clear that 13th is an entirely unacceptable ranking - and indicates that our economy has been going in the wrong direction."
The 2012 study considers a number of factors when weighing the ease of starting a business, including regulations on "starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency (formerly closing a business) and employing workers."
Bass was clear about who he thinks is to blame.
"Congressman Bass has clearly indicated that he believes that the administration's economic plan is not working and it is time to try something else," Tranchemontagne wrote.
But is "the administration" really to blame for the country’s drop on the global "starting a business" list?
It is not accurate to compare rankings across several years, according to Nadine Ghannam, head of communications for The World Bank & International Finance Corporation’s Global Indicators and Analysis Department.
"Doing Business only publishes rankings for the current year, and the year immediately preceding the publication," Ghannam said. "Rankings are relative and only represent an economy's position vis-a-vis the rest of the economies sampled. An economy's ranking may drop even if the situation did not get worse, simply by the fact that other countries have improved."
Essentially, a ranking is only accurate at the time of publication and does not account for data changes that have occurred, Ghannam said, such as countries being added over the years, methodology changes, and minor corrections that were made to the data.
What’s more, by examining the data sources, or the indicators and sub-indicators, Ghannam said, one will find that the "Starting a Business" process in the U.S. has not actually changed over the years, except for some fees that have increased "non-significantly."
Ghannam used the 2004 report to show that it took six procedures, six days, and a cost of about 0.7 percent of gross national income (GNI) per capita to start a business in the U.S. In 2012, the report shows it still takes six procedures and six days to start a business, with the cost slightly increased to 1.4 percent GNI.
"It is important to note that this indicator records the procedures, time, cost and paid-in minimum capital requirement to start a domestic LLC in New York City," Ghannam added, "and therefore all of the costs associated with the increase are a result of fees charged in the State of New York, and not linked to any federal fees."
Bass said America took a 14-spot hit from 2006 to 2012 in its ease-of-starting-a-business rank when compared with other countries--and blamed it on the administration.
He was four off from the actual Doing Business ranking for the United States--it was ranked 13 in 2012, not 17-- and took credit for his error. And if he had been comparing apples to apples, that might have been a reasonable conclusion.
But it turns out, he was off on the logic.
The team behind the report says Doing Business rankings should be examined independently of each other. Countries go up or down on the Starting a Business leaderboard if other countries’ have improved, if data has changed, if other countries are added to the list, and other factors--not necessarily because the United States’ own situation has gotten worse. And the process to start a business in the U.S. has hardly changed at all.
For getting the ranking wrong and misinterpreting the data, we give Bass a Mostly False.
Published: Friday, July 13th, 2012 at 5:48 p.m.
The Telegraph, "Bass Files 06-11-12," June 11, 2012.
Email correspondence with Bass Victory Committee spokesman Scott Tranchemontagne, June 20-22, 2012.
Email correspondence with Nadine Ghannam, Head of Communications, Global Indicators and Analysis Department, Financial & Private Sector Development, The World Bank & International Finance Corporation, July 10-11, 2012.
World Bank and International Finance Corporation, "Starting a Business: United States," accessed July 11, 2012.
World Bank and International Finance Corporation, "Doing Business 2006: Doing Business and Creating Jobs," September 13, 2005.
World Bank and International Finance Corporation, "Doing Business 2012: Doing Business in a More Transparent World," October 20, 2011.
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