10/25/2012 03:55 pm ET

Romney's Small Business Record Hotly Debated, But Surveys Offer Figures For Both Sides

Mitt Romney frequently speaks of helping small businesses, but President Barack Obama has questioned whether his record speaks louder than words.

"Governor, when you were in Massachusetts, small businesses' development ranked about 48, I think, out of 50 states, in Massachusetts, because the policies that you're promoting actually don't help small businesses," Obama said in the final presidential debate.

The comment didn't seem to get much traction with small-business experts after the debate, indicating that the strategy of using a small-business ranking to attack Romney may have been about as effective as going after him with horses and bayonets. It turns out Romney's small-business record as governor can't be fully measured through the lens of random survey data, particularly with small-business rankings -- which are sometimes more art than science.

Caroline Daniels, professor of entrepreneurship and technology at Babson College in Babson Park, Mass., said it's "hard to tell" if a state ranking is an effective measure of Romney's small-business performance because ranking "is a relative thing, isn't it?"

An Obama campaign representative told The Huffington Post that the ranking of 48 out of 50 came from a comparison of Bureau of Labor Statistics data on business startup growth between 2002, the last full year before Romney took office, and 2006, the last full year of Romney's administration in Massachusetts.

After crunching numbers harvested from the BLS data on private-sector establishment births and deaths, the administration found that from 2002 to 2006, the number of business startups in the U.S. as a whole went up 7.4 percent. During that period in Massachusetts, the number of startups fell 9.6 percent. Only Kansas and Minnesota, with 10.6 percent and 13.5 percent decreases, respectively, ranked worse, the administration found.

According to Obama campaign data, the top state for business development during that time period was Idaho, with a 42.1 percent increase between 2002 and 2006.

In response, a Romney campaign spokesperson pointed to a different small-business ranking from the Kaufmann Foundation, which ranks Massachusetts as the state with the fourth-largest increase in entrepreneurial activity over the past decade.

The BLS data excludes self-employed people starting businesses, while the Kauffman survey includes employers, non-employers, incorporated and unincorporated businesses, comparing data from 2005-2007 to data from 1996-1998, the campaign said.

The survey confusion does not end there: According to the Small Business & Entrepreneurship Council's annual ranking of states, Massachusetts ranked 30th in 2003 and fell to 44th in 2007 -- among the worst states. This ranking compares public policy climates for small business across the states. Raymond Keating, chief economist with the SBE Council, said Massachusetts "does always seem to rank in the low-40s" in the council's Small Business Survival Index.

That drop occurred mainly because of a "big capital gains tax hike, passed before Romney became governor, went into effect," Keating said. Romney's record on small business while governor of Massachusetts is "mixed" Keating added, noting that Romney did some things in terms of taxation that were positive for small-business growth in the state. "But his Romneycare was a clear negative," he said.

A CNBC study of top states for business in 2007, corresponding with the end of Romney's term as governor, painted a much rosier picture, ranking Massachusetts 12th overall and 13th in terms of business-friendly policies. In that study, Massachusetts also ranked first in the nation for education, second for access to capital and fourth for technology and innovation.

Daniels said she believes a more accurate gauge would be "to take a blend of all the different rankings and understand what they're really counting -- whether it's startup activity, revenue generated, number of employees -- because each one has a slightly different lens."

In reality, Daniels said she thought Romney's true, on-the-ground performance with small-business development in Massachusetts felt not like 48th or 4th, "but somewhere in the middle."

"We were experiencing a booming economy in a lot of those years, from 2003 to 2007, so the tide was rising," Daniels said. "It felt like it should have been lifting more boats than it was. There were a number of things [Romney] did that didn't seem to help."

Two main drags on small business during those years were increased fees on gas and a significant reduction in state aid to cities and towns, Daniels said, which had previously benefited many small businesses. With decreased sources of revenue and some of the added costs of Romneycare, "small businesses got caught exactly where the waves are crashing," she added.

Obama's mention of the ranking during the debate caused some additional confusion because the number is so similar to the figure revived by Romney's successor, Gov. Deval Patrick, at the Democratic National Convention. Patrick charged that when Romney left office, "Massachusetts was 47th in the nation in job creation" -- a fact that PolitiFact deemed "half true."


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