The Most Obvious Graph of the Year


What are small businesses thinking? What do they want? What do they FEAR? These seem to be the most important questions in Washington these days, as politicians have debated the Bush tax cuts almost exclusively along the lines of how they will or will not impact small businesses.

Well, here's what small businesses are thinking: "Nobody is buying what we're selling."


The graph might look like a tie-dye seismograph, but the news itself isn't exact earth-shaking. It turns out that with consumers cutting back and one out of six work-age Americans out of work or looking for more, sales are not good. Small businesses are worried about poor sales more than any other economic factor, and they're just as nervous as about taxes as ever.

Both sides can fit this graph into their narratives. Conservatives will argue that if you raise taxes on Americans with the most disposable income, they'll stop spending. On the other hand, Moody's Analytics and the Congressional Budget Office have both concluded that the richest are less likely to spend their next marginal dollar, and tax cuts for the wealthy are much less likely to flow back into the economy than, say, unemployment benefits. So if you want to raise sales by raising aggregate demand, you want to put money into cash-needy hands. Conservatives will respond that if we give the cash-needy too much money, we'll discourage them from looking for work, which will hurt aggregate demand and waste money, increasing the need for taxes later. And the beat goes on.

To end where we started: this graph is beautiful, and it is obvious.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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