More businesses are closing than are opening for the first time in our nation's history.
An Orlando businessman vying for Marco Rubio’s soon-to-be-vacated Senate seat announced his candidacy by saying fresh blood is needed to change the worst economic climate the country’s ever faced. "It's time to restore America's prominence both here at home and abroad," Todd Wilcox, a former Green Beret and CIA veteran, said in a statement announcing his candidacy on July 8, 2015. "The economy is growing at a dismal rate. More businesses are closing than are opening for the first time in our nation's history." The recent recession obviously has been an economic low point, but are the number of new businesses being eclipsed by the number of businesses closing for the first time ever? Well, it’s certainly true for as long as the government has been tracking that statistic. Beyond that is anyone’s guess. Wilcox, a Republican, told PolitiFact he was citing a May 2014 story from the Washington Post’s Wonkblog that said as much. The story was about a Brookings Institution study released that month called "Declining Business Dynamism in the United States: A Look at States and Metros," which examined business creation and destruction in the U.S. since 1978. The report said that business failures had held steady over most of that period, while business entries had steadily declined. Starting in 2008, the two points intersected for the first time in their 35-year history of the U.S. Census Bureau’s Business Dynamics Statistics data. The trend continued through 2011, the last year of available data in the study.The study’s authors said they couldn’t speak to the causes for this trend, which they called "noteworthy and disturbing." But they 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." Where Wilcox’s claim falters is that the data isn’t for the entire 239-year history of the United States, but just the 35 years examined in the study. The Business Dynamics Statistics database only has figures from 1976 to 2012. What truly happened prior to that is largely anyone’s guess, economists told PolitiFact. "I am not aware of any standard measures before then. I suspect that other measures do exist, but I doubt that they are systematically measured, year in and year out," UCLA economics professor Lee Ohanian said. While it’s possible there have been other periods of history where a similar trend has occurred, such as during the Great Depression, there is no dependable source of data measuring it, they said. "It’s somewhere between plausible and impossible to prove," said Robert Litman, one of the authors of the Brookings study. 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." Our ruling Wilcox said, "More businesses are closing than are opening for the first time in our nation's history." He’s right that more firms are now closing up shop than starting up, a trend that started in 2008. But the stat he’s citing is from a study of a 35-year period from 1978 to 2011, not all of American history. The Census Bureau database used for that study has only been measuring entries and exits since the 1970s. Economists, including the study’s author, told us Wilcox overreached a bit, because this trend may have happened before. There are no dependable sources of information to prove this is the first time this has occurred. The statement is partially accurate but leaves out important details or takes things out of context. We rate it Half True.
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