Look at it this way. Say you have a small business importing and selling widgets. You've done well, and now you have a corporate net worth of $2 million and a cash surplus of $500,000 to which you are adding $50,000 a year after paying your current expenses of $500,000 per year. This makes a pretty successful but not atypical small business. You have several things you'd like to do - buy your own building, expand operations to get a bigger share of the widget market, start a factory building your own widgets, expand into the whatzit market. Maybe even hire some more help to cut your own hours down to sixty hours per week and your bookkeeper doesn't have to clean the kitchen. After taxes you expect a suitable employee to run you another $40,000.
Now say you know for a fact that a new tax hike, regulation, or health care benefit is going to cost you another $25,000. Obviously you're not going to do any of the things you'd LIKE to do, because this new expense is going to cost you half your profit. In fact, you'll probably look for ways to cut costs or even contemplate selling or closing your business. Your annual return on investment is already at a measly 2%; now that's getting cut in half. You'd be better off loaning your money to the federal government and not working at all. So far, this should be beyond argument by even the dimmest bulb.
Now comes the speculative part, the part where the fear comes in. Say your President has said that under his energy plan, your energy costs would "necessarily skyrocket." Can he implement this? If so, does that mean that your $25,000 energy bill jumps by $5,000, or $10,000, or $25,000, or $100,000? Say your President has passed new health care entitlements, but much of the bill merely empowers federal regulatory agencies and your health insurance carrier cannot tell you how much this will escalate your costs. Will your $50,000 health insurance costs rise by $5,000, or $10,000, or $25,000, or $100,000? Will you have to drop company-provided health insurance altogether? If so, will that cost you your best employees to larger companies? Say your President has said that he thinks we should have mandatory health insurance for all employees, even part timers. Will he implement it? What will it cost you to provide health insurance for the ten college students that pull orders at night?
It should be readily apparent that a medium to small business is a delicate thing. You don't have divisions to sell off, or factories to move overseas, if additional costs are forced on you. You don't want to lay off employees because D.C. mandates employer-provided dog-sitting or child empowerment classes - you know these people, you know their families, they are your friends. So if you have any fears that the President or Congress is going to slap new costs on you, you sit on your profits, hoping to build as big a pile as possible to that you can weather whatever comes your way. Or at the least, have the resources for an orderly shut-down, trying to save something of your life's work, if government or larger competitors or a crashing economy forces you to close the doors.
And all these fears are on top of the normal fears about the economy and the competition, all the things that Congress and the President cannot control.
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