After the elections, political partisanship will increase on Primary Avenue

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US President-elect Joe Biden speaks about the US economy following a briefing with economic advisors in Wilmington, Delaware, November 16, 2020.

Kevin Lemarque | Reuters

Confidence in Main Street declined again this quarter – the second setback this year and only the second significant drop in the nearly four years since the quarterly CNBC | began SurveyMonkey Small Business Confidence Survey. The main cause is simple: the choice. With the coronavirus on the rise again, state and local governments are again looking to tighten restrictions, and businesses are bracing for the falling demand. Politics drives economic expectations.

Since the first quarterly poll, which coincided with the first full month of the Trump presidency, political partisanship has been a reason for the bright outlook on Main Street. More small business owners – usually around 60% – are Republicans than Democrats, and their confidence has been boosted by the fact that Republican President Donald Trump holds the highest political office in the country.

Republican small business owners consistently showed higher levels of trust in our survey, often 20 points higher than Democrats on the Small Business Trust Index scale of 0 to 100.

That changed with the election of Joe Biden earlier this month. From the third quarter survey, conducted in late July, to the fourth quarter survey, conducted November 10-17, after the election results were clear, the overall small business confidence index fell to 48 out of a possible 100 Points. a new low. That decline wasn’t universal, however: small business owners who are Democrats saw confidence surge from 46 to 58, while Republicans saw a mirror-image decline from 57 to 42.

In fact, that quarter-on-quarter change marked the first time in nearly four years of the tracking poll that Democrats reported a confidence increase of five index points or more, and also the first quarter that Democrats’ score surpassed a score, and it was that, too first time Republican score fell below 50.

Political changes lead to a change of partisan

A new administration and a change in party control at the highest levels of government mean that new policies and regulations are sure to come. It can be a challenge for managers to take these changes into account. This can be a real threat, especially for small business owners. Small business owners’ forward-looking expectations, not their views of the current business climate, have changed the most as a result of the elections.

In some cases, Democrats and Republicans were previously well aligned, but now they’re divided. Elsewhere, relatively high Republican confidence fell while low Democratic confidence rose.

Regarding regulation, for example, small business owners from all political directions had similar expectations in the third quarter: 33% of Republicans, 33% of Independents, and 37% of Democrats expected government regulations to negatively affect their business in the next quarter, 12 months. Their views differed dramatically during the quarter. The Republican response rose to 72%, the Independents to 37% and the Democrats to just 11%.

Following Joseph Biden’s victory in the 2020 presidential election, concerns about the government’s tax and regulatory policies rose sharply among Republican small business owners.

Overall, around half of small business owners (49%) now expect changes in government regulations to negatively impact their business in the next 12 months – a new high and a big increase of 34% in the last quarter, a quite one among Republicans concentrated.

When it comes to trade, Republicans and Democrats who own small businesses have essentially turned their views around from the third quarter of this year. Last quarter, twice as many Democrats as Republicans (39% versus 17%) said they expected changes in trade policy to have a negative impact on their business over the next 12 months. Four times as many Republicans as Democrats (48% versus 12%) expect trade policy changes to negatively impact their business this quarter.

Republicans and Democrats have similarly diverged when it comes to tax policy and immigration policy. These index components, which show the most significant changes at the top level, indicate a quarterly shift in the power of the president and reflect an underlying divergence between parties.

Coronavirus still has a dampening effect

What is particularly notable about the big shift in confidence from the third quarter to the fourth this year is that it is driven solely by small business owners’ predictions of how things will look in the future, rather than their assessments of the current business environment.

Despite the general loss of confidence and the postponement of anticipation among Republicans and Democrats, small business owners are reporting no change in current business conditions from Q3 to Q4. Last quarter, 36% of small business owners said that the current conditions are good for their business. It’s a similar 39% this quarter.

In contrast to the questions above about expected policy changes, there was no bias in the small business owner’s responses to the question about current conditions. In both last quarter and this quarter, 44% of Republicans said current business conditions were good. Among Democrats, 25% said current conditions were good in the third quarter and 28% in the fourth quarter.

This remarkable stability comes in a year when small businesses have suffered major setbacks from the coronavirus pandemic. In the first quarter of this year, 56% of small business owners said current business conditions were good, before that number dropped to 18% in the second quarter. It has yet to fully recover.

Joe Biden has announced that he will make fighting the coronavirus a top priority of his future administration even before he takes office in January. How well he deals with the pandemic along with state and local leaders will be instrumental in how quickly small businesses can get back to full operation regardless of their individual policies.

The CNBC | SurveyMonkey Small Business Survey for the fourth quarter of 2020 was conducted by more than 2,200 small business owners between November 10 and November 10. 17. The survey will be conducted quarterly through the SurveyMonkey online platform and will be based on the survey methodology. The Small Business Confidence Index is a 100-point assessment based on answers to eight key questions. A value of zero indicates no confidence, and a value of 100 indicates perfect confidence. The modeled error estimate for this survey is plus or minus 2.5 percentage points.

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