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America’s economy can’t get a proper foothold to start growing quickly again, in part because the country is losing businesses faster than it creates them, Republican presidential contender Carly Fiorina said.
Talking to George Stephanopoulos on ABC’s This Week on July 12, 2015, the former Hewlett-Packard CEO said her GOP rival Jeb Bush’s talk of 4 percent economic growth is a good goal. But Fiorina said a dearth of new small businesses is preventing more than anemic growth at the moment.
"In fact, we're destroying more businesses in the United States now than are being created for the first time in our history," she said.
PolitiFact has looked at this claim before, and when we asked Fiorina’s campaign where they found their statistic, they pointed to the same source -- the U.S. Census Bureau’s Business Dynamics Statistics data. Fiorina is accurate to say that more business firms are closing than are opening, but the data can’t say for sure whether this is the first time that’s happened in the 239-year history of the United States.
A Fiorina spokeswoman sent us a September 2014 article from Gallup that examined the data, which showed that the startup rate for new businesses first dipped below the closure rate in 2008. The trend has remained through 2011, the latest year of available data.
Here’s a chart illustrating Fiorina’s point, from a May 2014 Brookings Institution study of the same data:
As you might notice, the chart only goes back to 1978. Why? Because the Business Dynamics Statistics database only goes back to the 1970s. Before then, there was no official metric recorded -- by the federal government or anyone else -- for business startups and deaths.
Economists say that really limits the ability to judge claims like Fiorina's, who talked about the entire history of the country. Business failures may have exceeded startups at other points, such as during the Great Depression, but it’s impossible to say without reliable data.
Claims like Fiorina’s are "somewhere between plausible and impossible to prove," Robert Litman, a Brookings economics fellow who has studied the number of business openings and closings, told PolitiFact. He suggested it would be "more accurate to say that for the first time since the government began tracking these things, fails have exceeded starts."
The reasons for this trend are harder to determine. "Despite all this research, there has been no definitive answer as to why the rate of U.S. startups has declined so precipitously," the Gallup story concedes. Fiorina told Stephanopoulos the problem was "crony capitalism" and a "very large, powerful, complicated government" that made it difficult for smaller businesses to survive while bigger, established business have thrived.
Litman, in his research, noted that "it is clear that these trends fit into a larger narrative of business consolidation occurring in the U.S. economy -- whatever the reason, older and larger businesses are doing better relative to younger and smaller ones."
As HP’s CEO, Fiorina oversaw a controversial $25 billion acquisition of Compaq in 2001. The move resulted in 30,000 layoffs as the two companies merged operations. HP’s board of directors fired Fiorina in 2005 for poor stock performance and missed earnings targets.
Fiorina said, "In fact, we're destroying more businesses in the United States now than are being created for the first time in our history."
The data she’s relying on, however, only looks back to 1978, and economists say it’s going a bit too far to say this is the first time such a trend has occurred in all of U.S. history. The fact is we simply don’t have definitive data to prove it either way.
Fiorina’s statement is partially accurate but leaves out important details or takes things out of context. We rate it Half True.
This Week, "‘This Week’ Transcript: Carly Fiorina," July 12, 2015
Brookings Institution, "Declining Business Dynamism in the United States: A Look at States and Metros," May 2014
Gallup, "Starved of Financing, New Businesses Are in Decline," Sept. 14, 2014
PolitiFact, "Cyber-squatter accuses Carly Fiorina of wishing she'd laid off 30,000 employees more quickly," May 5, 2015
PolitiFact, "Carly Fiorina fights back against HP layoff claims, says she doubled size of company," May 10, 2015
PolitiFact, "Marco Rubio says for first time in 35 years, 'we have more businesses dying than we do starting'," June 2, 2015
PolitiFact, "Senate candidate Todd Wilcox says more businesses closing than opening for first time," July 10, 2015
Interview with Anna Epstein, Carly Fiorina spokeswoman, July 12, 2015
Interview with Leslie Shedd, Carly for America spokeswoman, July 12, 2015
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