WASHINGTON D.C., September 2, 2012 — The heart of America’s economy has always been small business. More than half of all U.S. private sector employees work for a small business, and over thirteen times more patents are created by small businesses than large firms. Yet as the ongoing global financial crisis continues to hamstring markets, small business owners are working harder than ever before just to maintain their bottom line.
To give us a perspective on the plight of small business owners and what’s weighing heavily on their minds, I sought out the president and CEO of the National Federation of Independent Business, Dan Danner. NFIB – which was the lead plaintiff in the lawsuit to overturn Obamacare – has for nearly seventy years been the voice of America’s small business.
Danny de Gracia: This is an election year and predictably everyone says that they “support small business” but when it comes time for legislators to introduce bills and vote, the picture seems to be a very different story. What would you say is the state of small business in America right now and what can be done by both Congress and local state legislatures to help improve the success of small business owners?
Dan Danner: The small-business community is worried. A sense of uncertainty, on top of several years of lower sales, is overwhelming their ability to plan ahead, to invest in their businesses and to hire new workers. This uncertainty is tied directly to government; concern over government action, or inaction, is a top concern of small firm owners according to a new NFIB study that asks owners to rate 75 issues of concern.
The study also confirmed that the issues that impact small business most—the cost of health care, taxes and regulations, and excessive government spending have left business owners in a profound state of uncertainty. They know that their costs and burdens are increasing, but they don’t know by how much. Keeping individual tax rates low and permanent would help enormously, as would stanching the flow of new federal regulations.
While the House of Representatives has voted twice to repeal Obamacare, we hope that the Senate will do so, but short of full repeal, there must be targeted changes to the law that address the issue of cost in the individual and small-group markets. Small businesses simply cannot afford the tax increases, mandates and rate increases that are coming down the road.
Some state legislatures have shown great leadership by balancing their budgets, giving some tax relief and even enacting tort reform. The administration would do well to look at the leadership provided by governors in states like Indiana, Oklahoma and Tennessee, where small businesses are doing better.
DDG: Recently on the Hill we had “Lemonade Freedom Day” which essentially showed just how angry small business owners are that things are becoming increasingly stacked against them. Yet there are a number of pundits who claim that cutting government in a weak economy would lead to an economic recession and that tax hikes are necessary. To me this sounds a little bit counter-intuitive. On top of the cost of compliance to the increasing regulatory regime it seems like small businesses are at decided disadvantage right now. What do you think about this?
Danner: When it comes to government and small business, it’s simple: Less is more. Less taxes, less regulation, mean more freedom for a competitive marketplace to operate as it should. Small businesses are responsible for nearly two-thirds of job growth in this country, but their ability to move our economy forward has been dulled by the tidal wave of regulations coming out of Washington.
With more than 4,100 regulations in the pipeline, the estimated cost to the American economy is more than a half trillion dollars and counting. Federal regulations that are currently on the books – not even counting the thousands more that are in the pipeline right now – cost small firms nearly 36 percent more, per employee, than they cost large firms, putting them at a huge competitive disadvantage.
Also, the fact that small-business owners pay taxes on business income at individual rates has put them in the crosshairs of an ongoing battle about keeping those rates low or letting them rise. Individual rates are a huge small-business issue, and Congress is putting small firms in peril by playing chicken with rate increases.
DDG: A lot of people were stunned that the so-called Affordable Care Act was upheld by the Supreme Court. What do you think will happen to small businesses if Congress allows Obamacare to stand as-is with no changes?
Danner: NFIB was the lead plaintiff in that Supreme Court case and, yes, we were definitely surprised by the outcome. They court essentially re-wrote the law in order to prop it up, making the Affordable Care Act the biggest bait-and-switch, and the biggest tax increase, of the Obama Administration to date.
So much about this terrible law is unknown and still under regulatory development, and this uncertainty weighs heavily on the small businesses. But we do know this: If the law stays on the books as written, the cost of health insurance for the self-employed and small businesses will continue to rise, and the rate of upsurge in the cost of doing business will further hobble the struggling small-business sector.
Supporters of the law will be surprised by one of its most negative consequences, because Obamacare is going to make it harder than ever to do what small-business owners really want to do: provide health-insurance to their employees.
DDG: Do you think that Congress is out of touch these days?
Danner: Well, part of it is. The House of Representatives has passed significant legislation to help small businesses, but unfortunately the Senate has failed to act on virtually all of it. From protecting small businesses from tax increases, to repealing Obamacare and to stopping the tidal wave of upcoming regulations, the Senate has not taken up the important issues that cause so much of the economic uncertainty facing small business owners.
We know that small-business owners are far more politically active, and more likely to vote, than just about any other group. They are also widely respected within their communities. Washington would do well to listen to what small-business owners have to say. After all, it is small business, and not government bureaucracy, that is responsible for creating two-thirds of new jobs.
DDG: Last but not least, when it comes to voting this year, what do you think small business owners should take into consideration before they cast their ballot?
Danner: Small-business owners right now are listening very closely to everything their candidates say. They are sorting out the rhetoric from the reality. They know that a candidate who understands how small business pays taxes, who understands that regulations are a heavier burden for small firms, and who knows that the cost of health-care is the No. 1 concern of small-business owners – that candidate is the right choice.
If a small-business owner doesn’t hear a candidate address the cost of health insurance, that’s a huge red flag. If they talk about corporate taxes as if they are the same as small-business taxes – another red flag. And if they think that regulations only impact big business, they are never going to be the kind of small-business ambassador that this country desperately needs to recover and create jobs.
Equally important, small-business owners are alarmed by the precipitous increase of our national debt and deficit. They know that you can’t keep a business running if you keep spending your way into oblivion and they wonder why the government can’t operate more like a business.
Electing leaders who understand our nation’s debt and spending crisis and who put forth viable solutions to reduce the burden on future generations is very important to the small-business community. They will be paying attention to this issue in November.
We greatly appreciate Mr. Danner’s time and opportunity to interview him.
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