Getting Down to (Small) Business
While the civilized world is enamored with our young president and the less civilized world is rattling its sabers, small business is working to bring the economy back. The old phrase "You can run but you can't hide" sums up the truth about our president's European trip. He can try to get away from the economic problems, but he can't hide from them. With talk of trips to Russia and China later this year with his 500-member staff in tow, when will we get down to (small) business?
Most of us work for companies with 50 or fewer employees, and most of the new jobs over the last decade have come from small businesses. No one is going to say small business is "too big to fail." Remember the "dotcom bubble" of the late 1990s? Are all the dotcom businesses gone? Some of them are, but the online world of shopping, banking, and living has not decreased or gone away; it has grown. Booms and busts in the market exist for a reason: to clean out the dead wood and to make way for new opportunities.
There's been a great deal of focus on GM, Chrysler, and AIG, and with the investment of billions of taxpayer dollars there should be focus. However, you don't jumpstart an economy with declining industries. You jumpstart the economy by making government get out of the way, lowering taxes, and simplifying regulation.
A few weeks ago, Treasury Secretary Tim Geithner unveiled the administration's plan to boost small business and insisted relatively few small business owners would be affected. Geithner told Congress (subscription required) in one of his many appearances, "Now, I just want to pause here for one second, those proposed changes in tax rates would apply to only 2 to 3 percent of small business owners across the country, only 2 to 3 percent. Ninety-five percent of small-business owners ... have incomes below that threshold of $250,000."
This seems like a logical enough statement, but you have to look deeper to discover the truth. Most small business owners pay taxes on their profits by filing their taxes on the standard 1040 form. In addition, most of these family-owned business incomes fall well under the Obama administration's $250,000 per year benchmark. If the small business policies are instituted as proposed, most of these families will pay more taxes, not less. In addition, these small businesses are the ones creating jobs, even now in this economy. If Obama's business policy is passed and signed into law, it will take money out of the small business sector, cost jobs, and shrink investment.
However, there is a faint silver lining. Congressman Walt Minnick (D-Idaho) and Congressman Aaron Schock (R-Illinois) have partnered, and the way the left is wringing its hands over Minnick, they may be on to something. Both of these congressmen are businessmen. While they have different ideologies, they agree on what makes business thrive.
Schock and Minnick are proposing a six-month tax holiday that would apply to businesses with 50 or fewer employees. Small businesses are the most likely to be hiring right now if given the additional resources and the incentive to do so. That would mean about $120 per employee per pay period. That money would go to the employer and would be required to be reinvested into their business. However, employees would also receive a rebate on their portion of the payroll tax, thereby also putting money back in consumers' pockets. This is a win-win situation.
Many think there is no chance this initiative will pass. But this is the right answer and if coupled with pro-business initiatives it could make a difference. I am aware that Congress isn't pro-business right now, but with the continuing job losses, Blue Dog Democrats will soon have to partner with some Republicans in order to pass pro-jobs legislation.
Sitting presidents usually lose seats in the midterm elections and if the economy doesn't show some hint of progress, President Obama will lose part or all of his majority in Congress. The American people and the European leadership agree that more stimulus spending is not the answer. Only President Obama needs convincing. He doesn't have a small business frame of reference but he'd better get one soon. Small business will bring this economy back.