The Debt Ceiling: A Big Issue for Small Business

John Arensmeyer

John Arensmeyer

Originally featured on the Huffington Post

This week marks national Small Business Week—a time to honor our country’s hard working entrepreneurs whose success is essential to strengthening our slowly recovering economy and creating jobs. Politicians are out en masse praising entrepreneurs’ crucial economic role, and rightly so. But this week in particular, policymakers should back up those kind words with action on an issue that has major implications for small businesses and our economic recovery: the debt ceiling.

The debt limit, which is essentially the nation’s credit card, maxed out this week at about $14.3 trillion. The Treasury has put emergency plans in place that will allow the government to continue borrowing and therefore not default on its debt until early August. Congress has until then to vote on whether to raise it.

This is a complex issue that economists have been pontificating about and politicians have been debating for months, and although just about everyone agrees that failing to raise the limit would be catastrophic—credit ratings would plummet, interest rates would spike, Wall Street would explode and in the process small businesses would be financially devastated—in this highly polarized political climate there’s a fight brewing. Some lawmakers are using the debate as political leverage to make partisan demands that have nothing to do with the nation’s economy in exchange for their vote to raise the limit.

For example, lawmakers might try to stop the Environmental Protection Agency from enforcing climate change standards through an amendment to the debt limit legislation. Most of the time this kind of political bartering is par for the course. But in this situation it’s akin to holding the economy hostage to their political ambitions: the closer the nation gets to that August deadline, the more economic uncertainty is created, and in this instance that uncertainty has real consequences for small business owners. Small business owners like Mike Brey, owner of Hobby Works in Laurel, MD.

“Just the possibility of a default, for my business, would make it tougher to purchase stuff and to sell stuff outside of the country,” said Mike, who does a lot of business with toy manufacturers in China. The closer we come to that August deadline, the more and more confidence is lost. “Small businesses don’t expand because they have money now, they expand because they think they’ll have more money coming in down the road. We’re just now coming out of two years of unbelievable uncertainty, and we’re finally starting to pull out of that. It won’t take much to kick that confidence out from underneath us.” The experts agree. Michael E. Zames, chair of the Treasury Borrowing Advisory Committee said, “Any delay in making an interest or principal payment by Treasury even for a very short period of time would put the U.S. Treasury and overall financial markets in uncharted territory, and could trigger another catastrophic financial crisis.”

For much of the debate on this issue the consequences have focused on big businesses—Wall Street in particular. But as we saw with the mortgage crisis several years ago, what’s bad for Wall Street is bad for Main Street. With each passing day that we don’t vote to raise the limit, economic uncertainty grows, creating a fiscally unstable environment where small businesses will find it even more difficult to get loans to expand their business—something our economy needs more than ever right now—and interest rates will begin to grow, making it more and more difficult for small businesses to pay off any debt they incur.

“This is one time where small businesses and big businesses are on the same page. It’s why people are so scared,” Mike Brey said. “We don’t even have to default on the debt, people just have to think it’s a possibility. I think even having the conversation is somewhat irresponsible.”

Which brings up a good point—responsibility. Those in favor of not raising the limit argue we need to be more responsible with our debt. We couldn’t agree more. But stretching out the debate simply to score some political points is beyond irresponsible. It’s dangerous.

As lawmakers praise small business this week for their entrepreneurial spirit that drives the American economy, we hope they remember those same small business owners as they make decisions that will affect Main Street’s bottom line. Have your debate, but do it quickly. The health of America’s small businesses and the economy as a whole depend on it.

Exchange Board Gets Down to Business

John Arensmeyer

John Arensmeyer

A couple of weeks ago we blogged about California’s newly-created Health Benefit Exchange Board and its first meeting in order to help track the board’s progress in setting up the state’s health insurance exchange. Small business owners are looking forward to 2014, when the exchange will take effect, so they can pool together with other small employers and purchase health insurance at a more affordable rate—which is why what happens at these meetings is so important. The board held its second meeting on Wednesday, and our California Outreach Director David Chase was on hand to get all the details.

Determining how the exchange will be set up in order to get small businesses the most bang for their buck is essential. To this extent, the board heard from Rick Curtis, a leading national expert who works at the Institute for Health Policy Solutions. He spoke about the needs of small businesses and how the SHOP exchange should be built to attract the state’s employers, keep prices low and increase choice and quality. He stressed that:

  • The board should think about the individual and SHOP exchanges as two very different exchanges, serving two different populations with different needs;
  • The SHOP exchange is not subject to the fate that previous failed exchanges in CA have seen because of the new market rules in the ACA;
  • Employee-choice is essential; and
  • The exchange should have a business-friendly customer service function and offer additional administrative services to help save small businesses time and money.

California is leading the nation in setting up its exchanges, so leaders want to make sure the entire process is smooth and gets as much input from the small business community as possible. The points Rick stressed are some of the biggest priorities small business owners have on this issue, because they want more choice and competition, and unlike the current healthcare system, convenience when purchasing a plan that best meets their budget and needs.

Our California Outreach Director, David Chase, also provided the small business perspective on how best to set up the SHOP exchange. He emphasized that the exchange must be easy to use, especially the web portal and customer service function that are meant to allow small business owners to shop in an online marketplace for the right plan. David also reminded board members that the SHOP needs to be a clearly distinguished product from what is currently available in the outside market so small business owners know the difference between different plans when shopping around. And David encouraged the Board to hire a professional staff to manage the exchange so entrepreneurs receive the best customer service possible.

David will be in attendance again when the board reconvenes later this month, and plans to continually provide the small business perspective so small businesses get the relief this exchange has the ability to provide. Stay tuned!

Too Many Small Businesses Still Overlook Health-Care Tax Credits

John Arensmeyer

John Arensmeyer

Tax season is over, but our efforts to educate small business owners about tax credits in the new healthcare law are still going strong. While many small business owners took advantage of this important provision of the Affordable Care Act and claimed a credit on their 2010 taxes, others didn’t. Not because they weren’t eligible or didn’t think it was worth it, but because they didn’t know the credits exist.

If you’re one of these folks, not to worry. You can still claim the credit after your taxes have been submitted by filing a correction, or claim it if you filed an extension. The tax credits are available for businesses that cover at least 50 percent of their employees’ health insurance premiums and have fewer than 25 full-time employees with average annual wages below $50,000. Small Business Majority has a tax credit calculator on our website to help small businesses determine whether they qualify.

But the truth of the matter is that many small business owners won’t claim the credit at all this year because they still don’t realize it’s available. And before we know it, entrepreneurs will once again be plunking piles of receipts and reams of paperwork on their accountants’ desks in preparation for filing their 2011 taxes. That’s why Small Business Majority and our partners are working so hard to inform the small business community about this issue now.

Our staff is working with other small business and healthcare advocates in various states to educate entrepreneurs about the tax credits. In Maryland, we’ve teamed up with the Maryland Health Care for All! Coalition and CareFirst BlueCross BlueShield to spearhead a statewide campaign that encourages small businesses to take advantage of the tax credits. Last week at a press conference in Salisbury, local elected officials discussed how they’ll continue to make sure the state’s small business owners know about the credits. As Lt. Governor Anthony Brown said, “These tax credits are just one of the many ways healthcare reform will help Maryland businesses access more affordable coverage for their employees, and we are fully committed to ensuring small businesses have the information they need to maximize every advantage that the Affordable Care Act provides.”

We’ve also hosted a series of webinars on the credits, reached out to tax professionals so they can help their clients claim the credit, and members of our staff have spoken at numerous conferences on this topic.

Our Vice President for Policy and Strategy, Terry Gardiner, was also recently featured in a video by the nonpartisan Alliance for Health Reform, detailing the nuts and bolts of the tax credits. You can view it here.

They say knowledge is power, but in this case it’s free money. We don’t want any small business owner to miss out on these credits a second time. So we’ll continue beating this drum because saving some cash is always sweet music to an entrepreneur’s ears.