Failure To Raise The Debt Ceiling Is Bad For Business

John Arensmeyer

John Arensmeyer

Originally featured in the Huffington Post.

Headlines have dubbed it “unthinkable,” and businesses small and large have urged lawmakers for months to agree soon to ensure the country doesn’t default on its debt. But next week’s August 2 deadline to raise the federal debt ceiling looms, and a recent deal that could have resolved the issue fell through because some lawmakers couldn’t abide elimination of special tax breaks used mostly by the most affluent. It’s alarming that lawmakers have taken the debate so close to the wire, considering the havoc a default would wreak on small businesses and the economy as a whole.

With each passing day that politicians fail to make a deal, economic uncertainty grows, shaking the environment for small and large businesses alike. Unfortunately, the clock is still ticking and that last minute is fast approaching.

There are myriad reasons why we must not default on the debt: skyrocketing interest rates, an across-the-board credit freeze–essentially total financial collapse. While much of the debate has focused on big businesses and Wall Street in particular, which have plenty on the line, small businesses will suffer even more from a default. Small businesses don’t have the means to weather an economic crisis in which many big businesses can thrive, as the aftermath of the recession has made abundantly clear. Many small businesses that already are scraping by in our sluggish economy are financed with variable-interest-rate loans – unlike the largest businesses, which can sell their own fixed-rate long-term bonds in the market. If the nation defaults and interest rates spike, those small businesses will be the first in the line of fire.

While there were signs of progress last week talks fell through over the weekend. This is incredibly discouraging, considering lawmakers have a mere five days to reach agreement.

Some of the proposals reduce the deficit through significant cuts and revenue-raising measures. Now that there is more than raising the debt ceiling on the table, lawmakers must realize the long reach of their decisions as they negotiate a deal. The choices they make now may have a large impact on our fragile economy’s fledging recovery. Key decisions must be pragmatic and carefully considered. If a deal doesn’t spread the burden fairly and evenly, the consequences could be almost as bad as missing the deadline and defaulting on our debt.

Compromises that extend the debt limit for the long-term must be as balanced as possible. A final deal must include a mechanism that allows for revenue-raising measures to be included down the road. A plan offered by a bipartisan group of senators known as the “Gang of Six” provides a good framework to do this. They close inefficient corporate tax loopholes to raise revenue. That approach eases the burden on firms that now pay relatively more, especially small businesses. By doing this, business tax rates could be lowered to allow now-heavily taxed firms, including small businesses, to keep more of their profits in their pockets, helping them to expand, grow and thrive.

Other measures being considered, such as curbing waste, fraud and abuse in Medicare and reforming the physician payment system, known as the “doc fix,” will also help stabilize the deficit without harming small businesses or depressing consumer spending–a key concern for entrepreneurs. Small business revenues, especially, were greatly reduced during the recession and have barely recovered. It’s crucial that any budget cuts included in a final compromise not slow small businesses’ sales. Doing so would stifle job growth and halt our economic recovery.

Watching sound proposals fail because of today’s hyper-politicized environment in Washington is beyond frustrating. Some lawmakers are using small business as cover to protect tax breaks for the most affluent by claiming small business owners are included this group. In fact, the vast majority of entrepreneurs and even many highly taxed large businesses will not be affected if these breaks expire. Lawmakers are simply putting special interests above the success of our nation’s job creators. This situation must change. In the waning days before the August 2 deadline, lawmakers must put the nation’s economic solvency before partisan politics and remember the needs of the economy, dynamic businesses, and consumers as they negotiate. Many business owners simply won’t survive if they don’t.

New Fuel Efficiency Standards Power Small Business Success

John Arensmeyer

John Arensmeyer

Originally featured in the Huffington Post

A poll released Friday indicates the vast majority of small business owners will be pleased with the deal President Obama struck with automakers that raises fuel efficiency standards to 54.5 mpg for cars and light trucks. Obama’s plan, which he announced Friday, mirrors the desires of small business owners, who believe high fuel efficiency standards are essential to sparking job growth and stimulating the economy.

Polling by Small Business Majority found 87 percent of small business owners believe it is important to increase fuel efficiency standards now. Once standards are raised, the money saved on fuel will be injected into the economy as cash becomes available to business owners who want to hire new employees but are unable to because of suffocating energy costs.

Consumers’ wallets will also be heavier–people are more likely to patronize businesses, small and large, when they have more money. With the cash they’ll save on the cost of fuel, consumers become key participants in economic growth, alongside small business owners.

Small Business Majority’s polling also found that small business owners support standards even stricter than those agreed upon by Obama and automakers: 80 percent of small business owners support raising fuel efficiency standards to 60 mpg. Even in Michigan, home of the Motor City, 72 percent of small business owners support this strong standard. Ann Arbor’s Jonathan Tobias, owner of Michigan Green Cabs, touches on the projected effects of strengthened fuel efficiency standards when he says, “it can do nothing but tremendously increase jobs and increase quality of life.” Since 2008, Jonathan’s fleet of hybrid Prius cabs has grown from 2 to 21. Jonathan, who lives less than an hour away from Detroit, is committed to using environmentally friendly vehicles but, understandably, is conflicted about his choice to buy Toyota. “It’s heartbreaking for me that there’s not an American alternative,” he laments. “I have to buy cars from Japan and it doesn’t settle right with me” because buying foreign cars means taking business–and jobs–away from the U.S. economy.

Jonathan, like any business owner who understands the deep-rooted correlation between our country’s jobs and its economic circumstance, speaks for many small business owners when he voices support for higher fuel efficiency standards. He has high hopes for the role small businesses will play in our economic future, believing stronger fuel efficiency standards will not only lower fuel costs by reducing dependency on foreign oil but also significantly impact “American families with regards to disposable income.” Today’s astronomical gas prices prompt Jonathan to pose the million-dollar question: What’s a working American family to do when they have to choose “between paying for daycare or paying for fuel?” With the new regulations expected to reduce fuel consumption up to 40 percent by 2025, the public will be better-equipped financially to foster economic growth by patronizing businesses everywhere, daycares included.

Obama’s plan would require U.S. cars and light trucks to average 54.5 mpg by 2025, equivalent to 163 grams of carbon dioxide per mile. Compared to current vehicles, this amounts to a 50 percent reduction in greenhouse gas emissions. In 2010, U.S. vehicles averaged 28.3 mpg and 314 grams of carbon dioxide per mile. It’s estimated that by 2025, with the new standards American families will save $8,200 in at-the-pump costs over the lifetime of a new vehicle, giving them greater spending power to help boost the economy.

Small business owners across the political spectrum say that in order to survive and remain competitive, they not only need more customers but automobiles that get better gas mileage and cost less to operate. Our survey of small business owners included 34 percent of respondents identifying as Republicans, 25 percent as Democrats and 41 percent as independents. With 80 percent of small business owners like Jonathan Tobias agreeing that there’s a need for stronger fuel efficiency standards, it’s clear what kinds of policies they believe will help rebuild the economy.

Default Crisis Threatens Small Business

John Arensmeyer

John Arensmeyer

Headlines have dubbed it “unthinkable” and businesses small and large have been urging lawmakers for months to come to an agreement soon to ensure the country doesn’t default on its debt. But next week’s August 2 deadline to raise the federal debt ceiling is looming and a recent deal that could have resolved the issue fell through because some lawmakers couldn’t abide elimination of tax exemptions for millionaires. It’s alarming that lawmakers have taken the debate so close to the wire, considering the havoc a default would wreak on small businesses and the economy as a whole.

With each passing day that politicians fail to make a deal, economic uncertainty grows, creating a more and more unstable environment for small businesses. Unfortunately, the clock is still ticking and that last minute is fast approaching.

There are myriad reasons why we must not default on the debt: skyrocketing interest rates, an across-the-board credit freeze—essentially total financial collapse. While much of the debate has focused on big businesses, Wall Street in particular, small businesses will suffer just as much, if not more, from a default. Small businesses don’t have the means to weather an economic crisis that big businesses enjoy, as the recession has made abundantly clear.

While there were signs of progress last week—the airwaves were abuzz with news of possible deals that would raise the ceiling by the August deadline and reduce the deficit over the long haul—talks fell through over the weekend. This is incredibly discouraging, considering lawmakers have a mere nine days to reach an agreement.

Each deal being considered proposes reducing the deficit through significant cuts and revenue-raising measures. Now that there is more than raising the debt ceiling on the table, lawmakers must realize the magnitude of their decisions as they reach for a deal. The choices they make now may have a large impact on our fragile economy’s fledging recovery. Key decisions need to be pragmatic and carefully considered. If a deal is struck that doesn’t protect small business interests, the consequences could be almost as bad as blowing the deadline and defaulting on our debt.

Compromises that are being considered, such as a plan offered by a bipartisan group of senators known as the “Gang of Six,” provide constructive solutions to the problem without harming small businesses. The plan includes small business-friendly measures such as closing corporate tax loopholes and lowering business tax rates, which will help reduce the deficit without placing an undue burden on small businesses. By closing tax loopholes—thus requiring large corporations to pitch in their fair share of taxes—revenue will be raised without small businesses having to pick up the slack, and lowering corporate tax rates will allow small firms to keep more of their profits in their pockets, helping them to expand, grow and thrive.

Other measures being considered, such as curbing waste, fraud and abuse in Medicare and reforming the physician payment system, known as the “doc fix,” will also help stabilize the deficit without harming small businesses or depressing consumer spending—a key concern for entrepreneurs. Small business revenues were greatly reduced during the recession and have barely recovered. It’s crucial any budget cuts included in a final compromise not affect small businesses’ sales. Doing so would stifle job growth and halt our economic recovery.

The fact that proposals were on the table but fell through because of the uber-politicized environment in Washington is beyond frustrating. Some lawmakers who are more concerned about doing away with tax breaks for millionaires, which have nothing to do with small businesses, are putting breaks for special interests over the success of our nation’s job creators. This must change. In the waning days before the August 2 deadline, lawmakers must put the nation’s economic solvency over partisan politics and remember small business needs as they wheel and deal. Many entrepreneurs simply won’t survive if they don’t.

The Economics of Clean Air

John Arensmeyer

John Arensmeyer

Clean air, gas-sipping automobiles, green energy technology and the rules that promote them are good for public health and the economy. That was the message a diverse group of advocates delivered to lawmakers this week during a two-day conference in Washington, D.C.

United by a desire to keep politicians from weakening the Clean Air Act, which is under attack by some in Congress, small business owners, consumers, public health advocates, faith communities, women and people of color flew to the Capitol to praise the progress that has been made in our country as a result of the act.

On Monday, participants started the conference—put on by Small Business Majority and nine other organizations including Consumers Union and the American Lung Association—with a Clean Air Act history lesson, delivered by experts in various fields. Then Environmental Protection Agency Assistant Administrator Gina McCarthy educated them about what the EPA is currently doing to reduce pollution. Armed with that knowledge and their personal reasons for supporting the Clean Air Act, they visited their representatives on Capitol Hill on Tuesday, making sure lawmakers heard loud and clear that their constituents support the landmark law.

It’s easy to understand why those interested in public health would urge their Congress members to maintain the strength of a law that has cleared our skies of noxious pollutants, but why were small business owners eager to have their voice heard on this issue? It’s a good question many people may be wondering. These entrepreneurs know that, while some groups claiming to represent small business would have you believe otherwise, the passage four decades ago of the Clean Air Act has led to years of economic growth and prosperity.

Let’s look at the facts.

* A report by Small Business Majority found that the economic benefits of the Clean Air Act have far outweighed the costs. In the last two decades, emissions of the most common air pollutants have declined by 41 percent, while the Gross National Product (GDP) has increased by 64 percent.

* Existing clean air standards have boosted the economy by as much as $148 billion and pending standards could boost the economy by as much as $457 billion.

* The Clean Air Act drives technological innovation. Inventions like the catalytic converter have helped make the United States a world leader in exporting environmental-control technologies. These exports grew by 130 percent between 1993 and 2003, and were valued at $30 billion in 2004.

* The Clean Air Act was responsible for creating 1.3 million jobs between 1977 and 1991 alone.

* Air quality is significantly better across the country because of the Clean Air Act. The number of bad air days is down and the severity of unhealthy days has been significantly reduced. That means fewer people get sick and productivity increases.

* The Clean Air Act has ushered in more than 40 years of technological innovation, job creation and expanded U.S. exports—things that benefit small business owners and lay the foundation for long-term economic growth.

But the authority of the Environmental Protection Agency, responsible for enforcing the Clean Air Act, is being threatened by members of Congress who would limit its ability to do its job. The EPA is preparing to update clean air standards and reduce the amount of the toxic pollution in the air. But some lawmakers are working overtime to delay these new standards and to kill old ones by any means possible. That’s why small business owners were in D.C. this week with other clean air advocates. They know the Clean Air Act provides them with opportunities to make and save money. They know efforts to gut the act will lead to a drop in environmental innovation and create a stumbling block to the country’s fledgling green economy, which holds so much promise for new business. They know attempts in Congress to block the EPA’s ability to enforce the Clean Air Act jeopardize years of economic success.

Let’s hope the politicians in D.C. listen to this varied group of more than 60 concerned citizens and back off their plans to weaken the act. Instead, they should pursue a path to prosperity by implementing forward thinking standards that will protect our health and promote our businesses now and in the future.

Report Gives Lawmakers Tips on Creating Health Insurance Marketplaces for Small Businesses

John Arensmeyer

John Arensmeyer

Politicians and pundits have focused a lot of attention on the Affordable Care Act’s requirement that everyone have health coverage, but few have looked into the health insurance marketplaces—the component of healthcare reform most important for small businesses. Fortunately, people are beginning to pay closer attention. On Monday, the Department of Health and Human Services released new guidelines state lawmakers can follow when setting up the marketplaces, also known as exchanges. If lawmakers set them up right, these marketplaces will allow small businesses to pool their buying power, driving down costs and allowing them to purchase high-quality insurance at lower rates just like big businesses.

The states are charged with implementing the exchanges by 2014, but only 10 have moved forward with legislation necessary to create them. The longer states wait, the more they risk missing the 2014 deadline and having HHS create the exchange for them. States should set the exchanges up themselves because they have more insight into the needs of their small business owners. States that do not pass legislation this year will find it challenging to build a successful exchange by 2014.

There is help out there for lawmakers willing to tackle the hard but necessary work of setting up the exchanges. The Center for American Progress and Small Business Majority issued a report on July 6 that will help legislators make sense of those rules and provide a roadmap they can follow to create a robust exchange that will significantly lower small business owners’ premiums and give them more options for high-quality health insurance. The report focuses on the intricacies of creating an exchange, provides examples of successes and failures experienced by states that have already created them and offers advice on how to get it right the first time. Small business owners like Walt Rowen, owner of Susquehanna Glass Company in Pennsylvania, are counting on lawmakers to do just that.

The Columbia-based small business, which opened its doors more than 100 years ago, survived the Great Depression, wartime and the recent economic downturn by ensuring its factory stays efficient and diversifying and expanding the type of work it does. But soaring healthcare costs—one increase came in at an outrageous 160 percent above the previous year’s rate—had Walt wondering if the company had finally encountered an obstacle it couldn’t overcome. If done right, health insurance marketplaces will make volatile premium hikes like his 160 percent zinger a thing of the past and the glass company can thrive for another 100 years and beyond.

Lawmakers have a host of important decisions to make when creating an exchange, such as whether it should be an active or passive purchaser, what role brokers should play and whether the exchange should cater to individuals and small businesses jointly or separately. But these issues are just a fraction of the whole. Healthcare reform, and exchanges in particular, are expansive and complicated; policymakers must give themselves time to sift through the complexities. Roadmaps like the one released last week will help legislators smoothly implement these complex reforms. State officials have the chance to drive our nation’s chief job creators down the road to less financial burden and more economic opportunities through state exchanges. Walt Rowen, and millions of other small business owners like him, are counting on them to get it right.