The Index of Small Business Optimism gained 0.8 points ending a six month decline, but about the only good thing to say about it is that the Index didn’t go down. The net percent of owners expecting real sales to improve became less negative by 6 points, “rising” to a negative 6 percent. The net percent of owners expecting better business conditions in six months “rose” 4 points to a negative 22 percent, not exactly a euphoric development.

After a strong vote of “no confidence” in the effectiveness of the deal made between Congress and the President, pessimism continued to prevail. The Small Business Optimism Index gained 0.8 points (virtually no change) based on a reduction in the pessimism of sales prospects and expected business conditions, both of which remain solidly negative.

Consumer confidence (University of Michigan survey) barely budged from the August reading, the lowest since 1980. And disagreement with Administration policies continued at record levels among U.S. households. It was a loss of confidence that caused consumers to cut spending in 2008Q4, plunging the economy into a deep recession as the U.S. population raised the saving rate from 1 to 6 percent causing a reduction in spending of half a trillion dollars at annual rates. And, with no confidence in government policies today, 131,000,000 employed consumers who could spend more do not because they fear the future. Since these workers are very concerned about our inability to get spending and debt under control and restore growth, promises to have even more “stimulus” will increase the level of concern for most if not all of these workers will spend less, not more. If consumers fear the path we are on, then “less is more,” policies that reduce the size of government will increase confidence.

For those who are unemployed, the President’s jobs program will be very ineffective if enacted. Promising temporary tax cuts financed by permanent income tax increases will not play well, especially for small business owners who pay taxes based on personal, not corporate tax rates. “Saving school teachers, police and fire fighters” is the cover the President uses to justify hundreds of millions in new gifts (from taxpayers!) to state governments. This doesn’t “create” jobs and only some of those jobs “saved” will be police and fire fighters and teachers, who are often funded at the community level. A very misleading ploy to save jobs of union workers. And building roads and bridges will not re-employ the tens of thousands of residential construction workers as the President would have you believe. The skill sets are not well matched and government programs generally require union workers so most small construction firms will not qualify.

In addition, tax breaks for hiring are similarly misdirected. If an owner can’t justify hiring a worker now, getting a tax break of a few thousand dollars will not change the math. The credit only lasts a year, then the full cost of the worker is on the firm. If an added employee can not “pay its way” with added value before the cut, why would this tax change alter the math? Twenty-eight (28) percent said “poor sales” was their top business problem and the tax break doesn’t change that. Better to use the tax “gift” to keep the firm operating for those who are currently employed at the firm.