Small Business Has Some News for Big Government:
Caroline Baum
Feb. 11 (Bloomberg) -- “Washington doesn’t get it.”
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That generic statement is tripping off the tongues of populists and Tea Partiers, business groups and bankers alike. In short, the public is peeved at the politicians.
I heard it this week from William Dunkelberg, chief economist of the National Federation of Independent Business, who used his group’s latest survey to opine on Washington’s deaf ear for helping small business.
The president and Congress “pay lip service to the fact that small business generates half of private-sector GDP and employs 60 percent or more of private-sector workers,” Dunkelberg says. As far as Washington’s efforts to help this sector of the economy, “instead of stimulus, give consumers a tax cut,” he says.
President Barack Obama has proposed using $30 billion of repaid government bailout funds to help community banks lend to small business, part of a “jobs bill” working its way through Congress.
Each month the NFIB tallies small-business optimism, or pessimism, which has been the dominant emotion of late. At 89.3 in January, the index is up 8.3 points from its March low, yet it’s languished under 90 for a record seven quarters. The only other time the index plumbed those depths, and for one quarter only, was during the 1980-1982 back-to-back recessions.
The news from the nation’s growth engine is getting less bad, but it’s still far from good. Why is small business so glum?
Cutting Econ 101
The Right points to uncertainty over looming tax increases (aren’t death and taxes life’s two certainties?) and health-care mandates. The Left says the problem is banks aren’t lending.
The truth is a bit of both and something more basic. Small- business owners list “poor sales” as the numero uno problem. And the jobs tax credit for hiring new workers, proposed by President Obama and embraced by Congress, won’t do much to help. Employers aren’t about to pay a new worker $40,000 to earn a $5,000 credit unless that worker generates $35,000 of revenue, Dunkelberg explains. That’s Econ 101 (see “marginal revenue product” or “profit maximization”), a course most of our elected representatives seem to have missed.
The tax credit for hiring “has absolutely no impact on our decision-making,” says Phil Kenny, president of Trucks Unique, an Albuquerque, New Mexico, company that customizes pick-up trucks for commercial and individual purposes. “We have no tax liability to take a credit against.”
Listening Tour
And that’s not all. A tax credit “is not going to make me hire when we don’t have work,” says Jim Henderson, president of Dynamic Sales Co., a 44-year-old construction and industrial supply company in St. Louis with seven employees. “I plan to sell my way out of recession, not wait for Washington to help me out.”
If Washington wants to fix a problem -- and it’s far from clear it has that ability -- the place to start is with proper analysis and diagnosis.
Pat Felder, who co-owns Felder’s Collision Parts Inc. in Baton Rouge, Louisiana, went to the White House in October, along with members of the U.S. Chamber of Commerce.
“Obama came in, talked at us, shook a few hands and left,” Felder says. “I was foolish enough to think small- business owners would have some sort of dialogue.”
Hope Minus Audacity
She told me yesterday what she would have told him.
“You can’t give with one hand and take away with the other,” she says, referring to tax credits on the one hand and tax increases for those earning more than $200,000 a year on the other.
Small-business owners aren’t going to expand when they may need the money to pay taxes next year. Maybe that’s why expectations for business conditions six months out slipped again last month, according to the NFIB.
There is hope. The 500 survey responses (out of the total 2,100) Dunkelberg received after the Jan. 21 Massachusetts special election were more upbeat. Perhaps Scott Brown, the Republican candidate who pulled the people’s seat out from under Ted Kennedy’s Democrats, gave small business “some hope for less change,” Dunkelberg says, citing a myriad of presidential initiatives.
What would small business like the federal government to do?
Channeling Galt
“Stay out of our way,” says Sherry Pymer, vice president of Pymer Plastering Inc., a 124-year-old family owned business in Columbus, Ohio. She sounded more like an Ayn Rand hero than a woman dealing with a payroll, unemployment insurance and Ohio’s commercial activity tax. “We don’t want them bailing out banks and big business. We want them to go away with their mandating and meddling and return this country to the principles it was founded on over 200 years ago.”
We’re a long way from the Founding Fathers, that’s for sure. The handful of small-business owners I talked to across the country are about as close to the entrepreneurial spirit as it gets. They all had one implied piece of advice for Washington: Less is more. Specifically, you do less -- and get your fiscal house in order -- and we’ll do more, Henderson says.
And as for the closing of the federal government this past week due to weather, these small-business owners had one wish: more snow.
(Caroline Baum, author of “Just What I Said,” is a Bloomberg News columnist. The opinions expressed are her own.)
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To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net.
Last Updated: February 10, 2010 21:00 EST
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Until the Dear Reader understand what is conveyed in this article, the economy will consider to suck.
But then again, expecting someone to understand business who has never even run a lemonade stand is probably a little too much to ask at this point.
