Small business engines are stalled 

“I don’t know what to do anymore.”

In the 20 years I’ve known him, Jeff has never uttered words like that about the wholesale-distributor business he built from scratch over the past 25 years. He’s had ups and downs like every small business, but he’s always seemed to know instinctively what to do, either to sustain existing business, or, in good times, expand into new areas and new brands.

We were talking about the frustrations of small business, his and others like it all across the country, that can’t hire, invest and expand because there is so much uncertainty about what the future holds.

Jeff ticked off just a few of his concerns: health care mandates; new and higher taxes and fees; the cost to the consumer of new financial services regulations; new workplace rules, and new rules and regulations that may come from environment and energy reform. The list goes on.

There is always uncertainty in times of recession, but this time it’s different. The uncertainty is rooted in politics as well as economics.

The Obama Administration entered office in 2009, and soon after passing a stimulus bill, it embarked on a historic transformation of American government and society, right in the middle of the recession. The pivot to the liberal agenda, pulled the focus away from  economic recovery.

It was as though President Obama saw a window of opportunity for transformational change he couldn’t close. It was an opportunity to rekindle the activism and empowerment of government borne and nurtured in the Roosevelt and Johnson presidencies. But by making wrenching changes in government policy in a short period of time, he would risk injuring the very entities needed to spur economic recovery—financial institutions and small businesses.

What is the result of this mixture of politics and economics? 

Republican Leader John Boehner and Congressmen Peter Roskam and Aaron Schock last week held a small business summit with the U.S. Chamber, the International Franchise Association, National Federation of Independent Business, the Home Builders and the National Association of Manufacturers, among others. 

The Congressmen were told:

•New climate legislation could produce 1,500 new costly and confusing regulations.

•The new financial services reform law calls for 533 new rules, 60 studies and 93 reports. They may all impose more costs on consumers and businesses.

•The health care program requires 100 new rulemakings. The cost estimates keep climbing.

•The government has enacted $700 billion in new tax increases in just 18 months. New taxes already enacted or pending include higher capital gains, higher individual income taxes, higher estate taxes, and new taxes on enterprise value.

•74 percent of banks are reporting a tightening of credit.

•Small businesses are facing new regulations governing everything from their hours of operation to workplace conditions. Every small business will now have to file more 1099 forms (independent contractor purchases) with the IRS. Paperwork costs could be high.

Small businesses are the bedrock on which our economy rests. They create anywhere from 60-80 percent of new jobs. They employ about half the workforce, according to the Tax Foundation. They drive innovation and serve as the incubator for creative, often risk-intensive and sometimes long-shot entrepreneurship.  

Economic recovery cannot occur without them. 

Jeff zeroed in just on health care. “If one employee goes into the exchange, the employer can be hit with penalties. If you have more than 50 employees as opposed to 49, under Obamacare it puts you into a whole new group with more regulation and higher costs.”

Maureen Schantz, president of Alternative Health Associates in Alexandria, VA., told me her biggest concerns are insurance and taxes. “Every time I turn around, there are more taxes,” she said. The taxes and expenses are going up, “but you can’t raise your prices in a recession.”  

Health care costs are painful, too, especially a Virginia mandate requiring her to pay 50 percent of her employees’ health insurance. “I resent that,” she said.
    
There are two sides to every story, and when it comes to small businesses, there are many. Not everyone agrees that the government is a problem.         

“Government policies are a Trojan Horse used by business people as an excuse for their own inability to grow,” says Luke Chung, president of FMS, a computer software and services company in Tyson’s Corner. “The cost of health care is a fraction of the total cost of services, so are accounting expenses. As a small business with under 50 employees, I’m very pleased with the new health care reform policies.”

Say what you will about the President’s liberal mission, this was no time to pursue it. While trying to propel the country farther into the 21st Century, he may be trapping us in an extended period of economic stagnation and a rocky future for the people who can get us out of it.

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