Does the big picture in the USA scare anyone else?

by a searcher from University of Virginia-Darden - Darden School of Business

1 year ago

Does the combination of growing public US debt, high interest rates, and low labor participation rates scare anyone else who buys small businesses for a living? I'm most concerned that US aggregate demand will drop when deficit spending slows. And I ask this because I am considering buying more businesses in Virginia, a state whose economy is only as robust as it is because of the deficit spending of the federal government. That aside if you have a home healthcare company and entitlements are cut in the future how do you mitigate the risk of that?

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searcher from University of Texas at Austin

VA, especially NOVA, is a super strong economy, has been for years, and will be for the foreseeable future. You are correct that this is because of govt spending, because govt is the largest employer in the area, but this is regardless of whether the spending is covered by taxation or borrowing. I happen to agree with those that say "deficits do not matter" because we could close our deficit gap with increased tax revenues, without having a negative impact upon our economic growth, but we lack the political will to do so.

You also say you're concerned about "low labor participation rates", but the other side of the coin is that we're at <4% unemployment rate, which is another way of saying "full employment". Certainly a concern for SMB owner, but also a sign of a robust and growing economy. One reason we have low participation rates is our again economy + long covid effects cause some to leave the labor pool to take care of relatives and friends. That's certainly an oppty for home health care providers.

I don't see entitlement cuts for home healthcare on the horizon with our aging population but who knows in this environment.

My point is that, while there are many ways to look at the economy, I believe there are more reasons to be optimistic than pessimistic.

1 year ago | like reply | 1 like

lender from Eastern Illinois University

As everyone has already said, there are always tough times. If you due the proper due diligence and find the right company, you should be able to weather those tough times. I would try to stay away from businesses that are likely to be severely impacted by a downturn. But in general business is a cycle, and it is rare to find a business where every year is a rosy one. Sometimes you need to take a risk, you just want it to be the best calculated risk you can come up with.

1 year ago | like reply | 1 like

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