Up until last month's now-infamous "somebody-else-made-that-happen" speech, I wasn't ready to completely throw in the towel on President Obama when it comes to small business. However, recent actions (and inaction) prove to me that Obama has little regard for small business. While it is difficult to say he hates entrepreneurs and Main Street, his policies continue to hurt us and our prospects for growth. Why the current administration takes this stance is the subject for next week's column, but this week, I want to explain what the president has done to prove my point.
First, some important figures. We have all heard the statistics about small businesses as an important economic driver, but the overall influence is significant. Small businesses:
Virtually every economist insists small businesses will lead us into a more robust recovery. Despite all of this, the president has done little to bolster small business since he took office. Here's what we know:
1) When federal funds get doled out, small businesses bring up the rear.
With control of both houses and a sympathetic Congress, Obama signed into law the American Recovery and Reinvestment Act (ARRA), commonly known as the first stimulus plan, in February 2009, shortly after coming into office. Unfortunately, the law overwhelmingly benefitted big business and big unions. Only 0.899 percent of stimulus funds targeted Main Street businesses. A motion-graphics video on the topic that my firm commissioned two years ago is sadly still relevant today.
That $730 million came in the form of temporarily larger government guarantees for SBA loans; waivers on loan fees normally already financed into loans; and the creation of new ARC loans, a very small loan program that many predicted would not address real problems and fail -- it did. To put this in perspective: This stimulus amounted to about $104 for every one of the 7 million small businesses in America that have employees.
Contrast this with the bailout for two of Detroit's auto companies: They received the equivalent of $472,941 per U.S. employee ($60.3 billion for 127,500 workers). Can you just imagine what America's small business sector could have done with even a fraction of that $60.3 billion? Is there any doubt the recovery would have come more swiftly and unemployment figures would have declined considerably?
2) Regulations have a greater negative impact on small businesses, but that doesn't stop Obama from seeking more.
Regulations place a heavier burden on small business than on big business. Small businesses don't have resources to hire compliance staff, they rarely hire lobbyists to seek waivers and these added costs can't be easily distributed over smaller budgets. According to the SBA's Office of Advocacy, federal regulations cost small businesses about 36 percent more per employee to comply than their big business counterparts. And yet, the Obama administration approved 613 regulations during his first 33 months in office, with the number of significant federal rules (those costing the economy more than $100 million) at 129. Compare this with only 90 approved significant federal regulations for former president George W. Bush and 115 for Bill Clinton over the same period in their first terms. This amounts to an increase of nearly 44 percent.
3) Obama believes tax increases on small businesses are necessary, perhaps even "fair."
When it comes to taxes, Obama is farther to the left than his Congressional leaders on this important issue. Obama wants to raise taxes on Americans making more than $250,000; Nancy Pelosi, Harry Reid and Chuck Schumer initially proposed raising taxes on those making more than $1 million. Yet, economists suggest raising taxes in January will disproportionally impact all small business owners. Regular threats of coming tax increases and short-term tweaks to the tax code pervasively chip-away at the confidence of small business owners.
In a recent article about taxing small business owners, Professor Scott Shane cites data indicating that only 4 percent of small business owners would be subject to a tax increase if the Bush tax cuts expired. However, he went on to cite 2007 Federal Reserve data (most recent available) showing that families who own small businesses and earn more than $250,000 per year employ 93 percent of the people working in small businesses. While letting the Bush tax cuts expire will indeed only affect a low number of small business owners, it hits those who employ the vast majority of the small business workforce.
When government takes money away from businesses (in the form of higher taxes) to use elsewhere (infrastructure projects or otherwise), the private sector gets smaller and has fewer jobs. History proves the public sector is less productive with funds than the private sector. Unemployment is higher when government is big versus times when government is small. This suggests a path toward shrinking government and marginal tax rates in order to once again grow our way out of this mess.
In response, small businesses have stretched responsibilities and hours of existing staff -- rather than hire more workers. This keeps unemployment figures up, while the economy continues to tread water. Long-term fixes to the tax code would give everyone the certainty they need to plan for the future, which would inevitably include growth and hiring to further propel that growth. Temporary tax reductions (even the 18 of them cited by Obama on the campaign trail) do not stimulate jobs and economic growth. Only permanent cuts and incentives create permanent jobs and growth. When cuts are too narrowly targeted, overly complicated or only temporary, they don't have the intended effect.
4) Promotion of the SBA Administrator into his Cabinet came with strings attached.
Obama referred to his recent promotion of the SBA Administrator to his Cabinet as a "symbol of how important it is to spur entrepreneurship." And that's exactly what it was: merely a symbolic gesture. My guess is it won't matter much to small businesses in the long-run.
What will impact small business, albeit negatively, is Obama's proposal when he announced the Cabinet upgrade: The SBA will merge with five other government offices that all purport to represent business. The fact is, these offices -- the Office of the US Trade Representative, the Export-Import Bank, the Overseas Private Investment Corp and the Trade and Development Agency -- are dedicated to big business, not small business. This merger will only drown-out the voice of small business in Washington. It's easier to marginalize government offices when they all comprise one business department.
Many praise Obama's Small Business Jobs and Credit Act of September 2010 with spurring SBA lending to new heights. But some of its best provisions (such as the temporary SBA 504 loan refinance provision and the new secondary market for SBA 504 first mortgages, known as the FMLP program), were so delayed in their implementation by bureaucrats that they've only just begun to have an impact and are nearly out of time, with nothing from Obama encouraging their extensions beyond the sunset dates in September.
5) Big Business and Big Unions got Obamacare waivers.
The president's marquee piece of health care legislation came with a few loopholes. Some businesses were eligible for waivers and became exempt from its requirements, but the overwhelming majority of them were big companies tied to big unions. Except for businesses with less than 50 employees, hardly any waivers were granted to small businesses. By the way, there are many "small" businesses with more than 50 employees, including general contractors, most restaurants, numerous small manufacturers and so forth.
All of these factors combine to suggest that Obama has practically written off small business voters for the November election.
Up to this point, I've demonstrated ways in which Obama appears to align himself against the interests of small businesses. I've given few reasons explaining why he's done this to such an important sector of the economy. For the why, we have to examine that speech in Virginia from a few weeks ago. And more information is always available at my own blog.
To be continued...
Follow Chris Hurn on Twitter: www.twitter.com/504Experts
You have no idea how the monetary system works. The fed government is the issuer of the currency. It doesn't need taxes to pay for infrastructure. In fact, the way currency is issued is by having the fed govt spend into the economy.
The problem is that the deficit is too small, right now, for what we want to accomplish: more jobs.
We need to get the fed govt to spend more to get the economy rolling. QE I, II, and III are useless at that. We need Congress to do its job and generate spending to jumpstart the economy. The stimulus should ahve been what Christine Romer wanted it to be: $1.7 trillion.
The SBA 504 loan program is one of the most effective economic development and job creation programs the U.S. government has to its credit.
Chris Hurn, CEO of Mercantile Capital, said loan closings in June represent the nine-year-old company’s biggest month ever.
The largest single loan during the month provided refinancing for a Wyndham hotel, with total project cost of $13.3 million.
Since January, Mercantile Capital Corporation has closed 58 commercial loans to finance projects that total $220.7 million. That’s more than the company closed during all of 2011.
Last year Mercantile closed 57 loans to finance projects valued at more than $174 million in total costs. Loan volume for the first six months of 2012 is up 240 percent from the same period in 2011, which was a record-breaking year for the company.
Hurn said job creation is one of the principal goals of the SBA 504 program. Since Mercantile Capital Corporation opened its doors in 2003, its SBA 504 loans — which are approaching the $1 billion mark — have helped create or retain 6,584 jobs.
“We can help small business enterprises grow by helping them take control of their commercial real estate expenses with long-term, below-market, fixed interest rates, and longer terms than are available with ordinary commercial financing right now.” Hurn said.
Are our priorities so warped right now that some people would rather spend their time bickering online, rather than spend it trying to take some action?!?
And for ALL those folks here that commented and disagreed with me, I'm wondering how many of them ACTUALLY have already signed this petition on what would otherwise (in a non-election year) be a bi-partisan issue? There are "talkers" and there are "doers," as the saying goes. I hope all of these "talkers" here are "doers" as well. America's small businesses need them.
Personally, I understand some entitlements are necessary. I also understand some are being overly abused, and that this adminstration is freely allowing this to happen. Its the lotus drink effect!
September 14, 2010 3:13 pm ET — Chris Harris
The crisis that rocked the world's financial systems in 2008 sent shockwaves through every corner of the economy. Terrified investors fled from the stock market and shaken financial firms on the verge of collapse refused to loan businesses money. Americans lost confidence in the economy and severely scaled back their spending habits in favor of saving money for an uncertain future. Consumers' sudden thriftiness hurt businesses everywhere which, unable to receive lines of credit from the teetering financial sector, were forced to lay off workers.
Layoffs caused further pessimism about the economy, which scared even more Americans to reel back their spending, which strained small businesses and led to additional layoffs. It is a cycle that, as we've seen, is very hard to break.
But today the Senate took an important step forward by advancing the Small Business Jobs and Credit Act to ensure America's job creators have access to lines of credit that will enable them to hire new workers and invest in the future. Or, to be more specific, Senate Democrats and retiring Republican Sens. George Voinovich (R-OH) and George LeMieux (R-FL) took an important step forward. The rest of the Republican caucus tried to kick small businesses to the curb by attempting to stop the bill from being voted on in the first place.
http://politicalcorrection.org/blog/201009140012
Corner stores, no.
Restaurants, only those that prevent poisoning and death.
Janitorial, not.
Security, don't think so.
Plumbing, right...
Carpenters, few.
Landscaping, this is getting ridiculous
So I think I've listed MOST of the major small business types and NONE have regs that are so crazy.
You'll NEVER be happy...
I hear ANY PLACE else is good this time of year...
Oh, that is right, Ronald Reagan and the Conservatives took away all the savings of the middle class and handed it on a silver platter to these very same hedge fund managers and corporate lawyers. Instead of trickle down we got a flood of capital into the offshore tax havens into Switzerland and the Cayman Islands.
Also, perhaps you should re-read the study I cite in the article above where those 4% of small businesses who would be affected by higher tax brackets employ 93% of ALL those employed in the small business sector?
http://www.slate.com/articles/business/small_business/2012/07/small_business_tax_myths_most_firms_are_not_affected_by_obama_tax_proposals_.html
I've been a registered Independent most of my life, but switched about ten years ago -- incidentally, I also registered voters in college and actively urged them to vote for Clinton.
The staff at the Huffington Post have cited all the facts I've made.
I've attended two political fundraisers in the past three years.
I'm not sure what the relevance of your statements are, unless you have a problem with free speech.
You really didn't build that on your own. As you drive off to work today, be thankful for your public roads.
Obama could at WORST be called indifferent to small businesses. Republicans? Cancer.
President Obama's remarks of July 13 have taken on a marketing mystique, driven solely by a desire to reinforce a misleading idea. Since SuperPacs and the Romney campaign are spending big money, it is in their best interest to milk the statement for all it's worth.
But here's the problem. They are milking a smidgeon of the statement at the expense of the truth.
Let's check a verbatim transcript: Let's go to the transcript. Here's what the president said on July 13:
"Look, if you've been successful, you didn't get there on your own. You didn't get there on your own. I'm always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there. If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive." -- Barrack H. Obama, 07/13/2012
There is a cardinal rule in legitimate journalism. "You do not edit the president."
Mitt Romney is selling the American voters a bill of goods.