Healthcare reform picks up speed in 2011

“Major insurers around the country are reporting that a growing number of small businesses are signing up to give their workers health benefits, a sign of potential progress for the nation's battered healthcare system.” (Los Angeles Times, 12-27-10)

The results are coming in and, as expected by those of us who supported health care reform this year, small businesses are responding to the new health insurance tax credits in the Affordable Care Act (ACA).

As the New Year kicks in, so do more parts of the ACA that the “hell no you can’t” Congressional folks and the small business pretender organization, the National Federation of Independent Business, want to repeal or defund.

Look at the long list below to see if you want to get rid of any of these new initiatives that go into effect in 2011, most in just a few days.

New Healthcare Reform Initiatives Becoming Effective in 2011

• Minimum Medical Loss Ratio for Insurers

Requires health plans to report the proportion of premium dollars spent on clinical services, quality, and other costs and provide rebates to consumers if the share of the premium spent on clinical services and quality is less than 85% for plans in the large group market and 80% for plans in the individual and small group markets.

• Closing the Medicare Drug Coverage Gap

Requires pharmaceutical manufacturers to provide a 50% discount on brand-name prescriptions filled in the Medicare Part D coverage gap (donut hole) beginning in 2011 and begins phasing-in federal subsidies for generic prescriptions filled in the Medicare Part D coverage gap.

• Medicare Payments for Primary Care

Provides a 10% Medicare bonus payment for primary care services; also, provides a 10% Medicare bonus payment to general surgeons practicing in health professional shortage areas.

• Medicare Prevention Benefits

Eliminates cost-sharing for Medicare-covered preventive services that are recommended (rated A or B) by the U.S. Preventive Services Task Force and waives the Medicare deductible for colorectal cancer screening tests; authorizes Medicare coverage for a personalized prevention plan, including a comprehensive health risk assessment.

• Center for Medicare and Medicaid Innovation

Creates the Center for Medicare and Medicaid Innovation to test new payment and delivery system models that reduce costs while maintaining or improving quality.

• Medicare Premiums for Higher-Income Beneficiaries

Freezes the income threshold for income-related Medicare Part B premiums for 2011 through 2019 at 2010 levels resulting in more people paying income-related premiums, and reduces the Medicare Part D premium subsidy for those with incomes above $85,000/individual and $170,000/couple.

• Medicare Advantage Payment Changes

Restructures payments to private Medicare Advantage plans by phasing-in payments set at increasingly smaller percentages of Medicare fee-for-service rates; freezes 2011 payments at 2010 levels; and prohibits Medicare Advantage plans from imposing higher cost-sharing requirements for some Medicare covered benefits than is required under the traditional fee-for-service program.

• Medicaid Health Homes

Creates a new Medicaid state option to permit certain Medicaid enrollees to designate a provider as a health home and provides states taking up the option with 90% federal matching payments for two years for health home-related services.

• Chronic Disease Prevention in Medicaid

Provides 3-year grants to states to develop programs to provide Medicaid enrollees with incentives to participate in comprehensive health lifestyle programs and meet certain health behavior targets.

• CLASS Program

Establishes a national, voluntary insurance program for purchasing community living assistance services and supports (CLASS program).

• National Quality Strategy

Requires the Secretary of the federal Department of Health and Human Services to develop and update annually a national quality improvement strategy that includes priorities to improve the delivery of health care services, patient health outcomes, and population health.

• Changes to Tax-Free Savings Accounts

Excludes the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through a Health Reimbursement Account or health Flexible Spending Account and from being reimbursed on a tax-free basis through a Health Savings Account or Archer Medical Savings Account. Increases the tax on distributions from a health savings account or an Archer MSA that are not used for qualified medical expenses to 20% of the amount used.

• Grants to Establish Wellness Programs

Provides grants for up to five years to small employers that establish wellness programs.

• Teaching Health Centers

Establishes Teaching Health Centers and provides payments for primary care residency programs in community-based ambulatory patient care centers.

• Medical Malpractice Grants

Authorizes $50 million for five-year demonstration grants to states to develop, implement, and evaluate alternatives to current tort litigations.

• Funding for Health Insurance Exchanges

Provides grants to states to begin planning for the establishment of American Health Benefit Exchanges and Small Business Health Options Program Exchanges, which facilitate the purchase of insurance by individuals and small employers.

• Nutritional Labeling

Requires disclosure of the nutritional content of standard menu items at chain restaurants and food sold from vending machines.

• Medicaid Payments for Hospital-Acquired Infections

Prohibits federal payments to states for Medicaid services related to certain hospital-acquired infections.

• Graduate Medical Education

Increases the number of Graduate Medical Education (GME) training positions by redistributing currently unused slots and promotes training in outpatient settings.

• Medicare Independent Payment Advisory Board

Establishes an Independent Advisory Board, comprised of 15 members, to submit legislative proposals containing recommendations to reduce the per capita rate of growth in Medicare spending if spending exceeds targeted growth rates.

• Medicaid Long-Term Care Services

Creates the State Balancing Incentive Program in Medicaid to provide enhanced federal matching payments to increase non-institutionally based long-term care services and establishes the Community First Choice Option in Medicaid to provide community-based attendant support services to certain people with disabilities.

Source: The Henry J. Kaiser Family Foundation, 2010

Wake up, America, or lose the trade war

Below are some excerpts from an opinion editorial by former South Carolina U.S. Senator Ernest F. Hollings (1966-2005) that ran in today's Charleston Post and Courier. 

Never one to mince words, Mr. Hollings lays the blame for our economic condition on the "free traders".  In his opinion, resurrecting our country's manufacturing is the key to our future.

In his original piece, Mr. Hollings unfortunately and incorrectly dismisses small businesses as an economic engine.  The reality is that manufacturing is dominated by small businesses. 

In 2009 South Carolina had 5047 manufacturers of some kind with 90% having fewer than 100 employees and 84% having less than 50 employees.  What's good for manufacturing in this country is good for small business.

Excerpts from

Wake up, America, or lose the trade war
BY ERNEST F. HOLLINGS
Monday, December 27, 2010
Charleston Post and Courier

In the last 10 years we've lost a third of the nation's manufacture in the trade war to offshoring. Long before the recession, Princeton economist Alan Blinder estimated that in 10 years the country would lose 30 million to 40 million jobs to offshoring. President Obama didn't inherit just a recession. He inherited a financial collapse together with a job collapse from offshoring.

Stimulation won't do. President Bush increased the debt and stimulated the economy $5 trillion in eight years. In the same period, household debt increased or stimulated the economy another $7 trillion. The Federal Reserve stimulated the economy a trillion dollars in the remainder of 2008. By January 2009, when Obama was sworn in as President, the economy had been stimulated $13 trillion in eight years, and we were losing exactly 799,000 jobs a month. President Obama in two years has now stimulated the economy another $3 trillion and last month unemployment increased. Stimulation is spent. We're losing jobs not only from the recession but because we are not competing in the trade war.

The United States was founded in a trade war. The Mother Country forbade manufacture in the colony and required exports from the colony to be carried in the bottom of English ships. The Boston Tea Party that triggered the Revolution framed a Constitution calling for Congress to regulate trade -- not freeing trade. In fact, the forefathers agreed to regulate trade four years before they could agree on First Amendment rights. The first bill to pass the United States Congress on July 4, 1789, was a protectionist tariff. We didn't pass the income tax until 1913. We financed and built the United States into an industrial power with protectionism for the first hundred years, causing Teddy Roosevelt to exclaim in a letter: "Thank God I'm not a Free Trader."

After World War II, Japan started the present trade war by closing its domestic market, subsidizing its manufacture, selling its export at cost, and making up the profit in the closed market. Japan's thrust for market share put General Motors into bankruptcy with Toyota No. 1. I worked with business in this trade war to protect its domestic production, passing numerous trade bills, only to be vetoed by presidents of both parties because of the Cold War. But when President Clinton passed NAFTA with Mexico, offshoring began in earnest. And 10 years ago, when China entered the World Trade Organization, offshoring hemorrhaged. Now, Corporate America, instead of fighting free trade, cries "free trade," "protectionism," "don't start a trade war." Globalization is nothing more than a trade war with manufacture looking for a cheaper country to produce goods.

Wall Street, the big banks, the financial houses, the Business Roundtable, and the U.S. Chamber of Commerce are a fifth column in this trade war. They're not interested in creating jobs in the United States. They're interested in investment offshore to keep their profits up in the market. The CEOs are not interested in taking on labor worries with domestic production. They want to keep China profits flowing for their golden parachute. Consequently, they oppose getting into the trade war.

If the president enforces trade laws or Congress introduces a trade measure, coming down on their heads will be Tom Donahue of the U.S. Chamber of Commerce and the Wall Street crowd, contributing to their defeat. So business leadership, the President, the Congress, all join in a charade of "free trade," "don't start a trade war."

The best example of a president sleep-walking through the trade war is his hectoring CEOs to invest in production and jobs in-country. If you were a CEO, would you invest in-country? The first thing the banker asks is: "Can you meet the China price?" If not, even though your investment succeeds, cheaper imports from China of the same article will soon put you out of business and the loan goes bad. The harsh truth is that in globalization it is difficult to produce goods for a profit in the U.S. In globalization only the government can make it profitable to manufacture and protect Corporate America's investment.

In globalization, the task is for the president and Congress to make it profitable to produce in the U.S.

Merry Christmas!

The very little traffic on the road to work this morning tells me that a lot of people have already checked out (physically or mentally) for the holiday.

So Merry Christmas and Happy Holidays from everyone at The South Carolina Small Business Chamber of Commerce.

SBA's Community Express loan ends

"Small business owners have reason to be a bit less merry this holiday season." 

That is the conclusion of Jerry Chautin, a local volunteer business counselor with Manasota SCORE, Counselors to America's Small Business. 

You need to read his opinion editorial (below) that ran in the Herald-Tribune on December 20, 2010, to understand why the SBA's termination of the Community Express loan program will probably make it harder for small businesses to get small loans.

SBA ending important program of lending

By JERRY CHAUTIN

Published: Monday, December 20, 2010 at 1:00 a.m.

THE U.S. SMALL BUSINESS Administration announced on Dec. 15 that it was ending its Community Express pilot loan program on April 30.

The program has been widely used by small business owners in need of small amounts of working capital -- up to $25,000 in most sites and $50,000 in Historically Underutilized Business Zones, called "HUBZones."

Even though SBA initially created the program to target women and minority applicants, it was offered to both minority and majority owned businesses. Lenders relaxed their underwriting requirements, relied heavily on credit scoring and streamlined processing. Loans could be approved within one week.

Because of the small loan sizes and acceptance of lower credit scores, community express lenders made loans to applicants that were not able to get credit elsewhere.

SBA created the pilot 10 years ago and it was never made permanent. That enabled the agency to end it with a stroke of the pen. Even so, Superior Financial Group and Borrego Express Capital Lending, the only two national lenders that make these loans in Southwest Florida, took the risk of developing the infrastructure necessary to make the loans profitably.

SBA said it will replace Community Express with two new programs on March 15. One is called "Small Loan Advantage" and the other is "Community Advantage." Both will go up to $250,000 and carry SBA's basic 7(a) program guaranty structure -- 85 percent for loans up to $150,000 and 75 percent for those greater than $150,000. But the loan application process will be more streamlined than basic 7(a).

But neither replacement will be made available through Borrego or SFG because both are non-bank, SBA-approved lenders. Instead, Small Loan Advantage will only be through the largest banks in the agency's "Preferred Lender Program." These banks have historically made larger loans that are 50 percent guaranteed up to $350,000 under the Express program, and 75 percent guaranteed up $5 million with basic 7(a).

Meanwhile, Community Advantage will be made available through "Community Development Financial Institutions, Certified Development Companies and non-profit microlending intermediaries," SBA said. Presumably those organizations are sensitive to the needs of their local constituency and will provide technical assistance along with their financing.

But to make a meaningful number of Community Advantage loans, the lenders will have to sell their loans on the secondary market to replenish their funds. SBA spokesman David Hall said lenders "will have to apply for authority to sell loans on the secondary market."

"We'll be evaluating those requests based on a number of factors, but primarily how well-capitalized they are," Hall said.

In my opinion, SBA is not offering enough of a carrot to get large banks in SBA's Preferred Lender Program to change their culture of making larger loans.

On the other hand, helping the underserved is in the DNA of community-based institutions. But it will take a while for them to understand SBA's 7(a) program and they will not make enough loans to have the enormously beneficial impact that Community Express lenders had on the small business community nationwide.

Small business owners have reason to be a bit less merry this holiday season.

Copyright © 2010 HeraldTribune.com

Setting the Record Straight on the Affordable Care Act

If you get confused with conflicting messages about the new health care law, you’re not alone.

The South Carolina Small Business Chamber of Commerce (SCSBCC) and other organizations want the public, media and politicians to be well-informed with accurate information.

The Affordable Care Act Implementation Initiative (the Initiative) of South Carolina has released a Talking Points guide that includes essential information and content experts for a variety of topics related to the new law.

I chaired the Information, Dissemination & Communication Working Group of the Initiative, which produced the Talking Points guide. 

The Initiative is a public-private collaboration of over 60 stakeholders from the non-profit sector, state and local government agencies, health care organizations and others. The Initiative was convened by the South Carolina Public Health Institute in cooperation with South Carolina Healthcare Voices consisting of S.C. Appleseed Legal Justice Center, S.C. Fair Share, AARP-SC and SCSBCC.

The Talking Points guide provides essential information and South Carolina contacts for numerous aspects of the ACA. The information guide and the convening partners of the Initiative can be found on the SCSBCC  web site and is also available at: http://www.scphi.org/.

Watch our new BuySC ad by Coal Powered Filmworks!

Our gorgeous, professionally shot and edited BuySC ad/PSA is done! Loving the little "BuySC" flags stuck into the rows of sweets at Tiffany's.

Huge thanks to Wade Sellers of Coal Powered Filmworks for the incredible production quality and highly professional, friendly manner while shooting. And thanks to Be Beep a Top Shop in Forest Acres, Cayce Ace Hardware in Parkland Shopping Center, Tiffany's Bakery on Two Notch, and 2G's Clothing in Five Points for letting us use their shops as locations for the shoot!

Video still at Tiffany's Bakery: Wade Sellers, Coal Powered Filmworks

Did you know that you triple the local impact of each dollar when you shop at a locally owned, independent business? With its action campaigns and its free SC small business directory at BuySC.org, BuySC joins "shop local" movements across America, like Lowcountry Local First, the 3/50 Project, Small Business Saturday, Plaid Friday, and AMIBA's America Unchained. (See more, below.)

Who's behind it? We are! We're the SC Small Business Chamber of Commerce, a nonprofit advocacy organization in Columbia, South Carolina. Join us!

Thanks again, Wade! We love it!

On the subject of shopping local, we just received the most recent AMIBA newsletter; it's a great resource! Reposted in part here, for your reading pleasure:

'Tis the Season to Go Local

"Despite the annual Black Friday media frenzy, our annual "America/Canada Unchained" campaign and grassroots counterparts like "Plaid Friday" helped generate buzz around the continent. While some of you have expressed concern over various companies promoting their own "buy local" brands, we simply encourage you to present them as evidence for the growing energy behind the Localization Movement and use them to amplify your message."

"AMIBA board member Stacy Mitchell and BALLE co-founder Laury Hammel teamed up for this Boston Globe commentary, while the Boston-area Concord IBA, Somerville Local First and Cambridge Local First all generated local media attention using the America Unchained or Plaid Friday concept.
The Fayetteville IBA (AR) used "Indie Bingo" to draw attention and customers to member businesses, while the Louisville IBA (KY) is using a Holiday Passport program to entice more patronage of its members. Local First Utah is promoting Take 10/Tell 10/Shift 10 during the holidays."

"The Boulder County (CO) and Flagstaff (AZ) IBAs both held early holiday events with business member expos, food and drink, prizes and more. Debbie Leavitt of FIBA reported event bartenders saying Christmas parties are mostly boring, but they loved the energy and fun at FIBAs event. Don't underestimate the power of a great party to build cohesiveness and attract supporters!"

See the whole newsletter here: http://mim.io/67c28 and "Like" AMIBA on Facebook!

Common Ground???

In his recent “60 Minutes” interview, incoming House Speaker John Boehner stated that he will refuse to “compromise” on his principles but is willing to find “common ground” on issues. So according to Speaker –in-waiting Boehner the $858 tax-cut package the Senate will pass shortly is “common ground” between Congressional Republicans, Democrats and President Obama.

How long the rank and file Tea Party folks are willing to swallow this “chicken crap” I don’t know. Their silence has been deafening on this GOP-caused deficit spending less than two months after the Tea Party apparently gave the Republicans the power to dictate all legislation in Washington.

I’m not saying that there aren’t some “common ground” parts of the Senate bill. But the biggest piece of the bill that was definitely “common ground” was extending the Bush-era tax cuts to all income under $200,000 for an individual and $250,000 for a joint return. Both the Republicans and Democrats said they wanted that. Had they just passed that, we could have limited our deficit spending to about 1/4th of what we will be borrowing from the Chinese under this bill.

But the GOP would have none of this unless income over those limits also got the tax cuts. So off to the deficit spending game we went.

Are there some business benefits in the Obama-GOP deal (oops, is “deal” too close to the word “compromise” for Mr. Boehner’s vocabulary)? Sure there are. But there are plenty of goodies in there that will help the economy (like extending unemployment benefits) and that won’t particularly help the economy (tax cuts for the wealthy and estate tax give-aways for multi-million dollar properties). Most of this was “compromise” regardless of Mr. Boehner’s objection to the term.

From the small business perspective, one truly “common ground” item not making it into the tax-cut package was the universally disliked 1099 IRS reporting requirement included the Affordable Care Act. This provision was estimated to bring in about $19 billion over 10 years to help cover the cost of the ACA. But all the business community and both parties agree that it will be a terrible hardship to comply with because it would require 1099’s for all business purchases of over $600.

According to yesterday's story in POLITICO, Republicans rejected this “common ground”. Just look at the total cost of the package and you know that a mere $19 billion more couldn’t have been the reason.

As my friend John Arensmeyer, CEO of the Small Business Majority, points out in a press release below—this “common ground” was grounded by partisan politics.

Political Gridlock Shouldn’t Hold Up 1099 Fix

Statement by John Arensmeyer, CEO, Small Business Majority

Dec. 13, 2010
Reports of partisan gamesmanship blocking the Senate from fixing the 1099 reporting requirement as part of the recent tax cut deal are not only discouraging but also infuriating. We’re disappointed there are those in Congress who would turn small businesses’ success into a partisan issue. There are millions of small business owners who need relief from this provision, which would place an onerous and unnecessary paperwork burden on them if it goes into effect in 2012.

The Patient Protection and Affordable Care Act has tremendous benefits for small businesses. The 1099 provision, which was included only as a revenue-generating measure, isn’t one of them. Lawmakers on both sides of the aisle agree this provision needs to be fixed, and more than 90 senators have voted to amend this part of the law. Yet it still exists.

It’s time for those preventing the 1099 provision from being corrected to end the political posturing. We urge all senators to look past their partisan differences and support small businesses by fixing this issue immediately.

SCSBCC Annual Policy Forum a great success!


  This week, we enjoyed a spirited gathering of local business owners, members of the board of the SC Small Business Chamber, and esteemed state legislators.



SC House Rep. Kenny Bingham & SCSBCC CEO Frank Knapp, Jr.



SCSBCC CEO Frank Knapp, Jr and SC House Rep. Mac Toole

SC House Representative Kenny Bingham (R, Lex) gave a truly great talk.

He gave updates and detail on the recent Department of Revenue service/sales tax issue, as well as commentary on the value of early childhood education, and more.



SC House Rep. Mac Toole (R, Lex) talked about the potential benefits of renewable energy industries, including wind, solar, nuclear and woodmass.

And if you haven't heard, online retail giant Amazon.com is bringing 1200 new jobs to Cayce, SC. It's not a small business, obviously, but its employee base will support small businesses in the area.

This is great news.

Phil Bailey of the Democratic Senate Caucus gave a great talk, as well.

The room was impressed not only by these representatives' progressive attitudes toward supporting small business in SC but *also* by the excellent, all-local catering by Spotted Salamander Catering.

Chef/owners Jessica Shillato and Brad Weeks of Spotted Salamander run the *only* full-service catering company in the entire state that qualifies to be in the SCDA's Fresh on the Menu program.

What does this mean? It means that Spotted Salamander's menu "include[s] at least 25% Certified South Carolina Grown foods and products."

Originally from Barnwell and a graduate of the Leadership program, Brad maintains a vast web of direct contacts with SC producers.

That means Swansea, SC beef that Brad is forking onto his roll (above), made with Adluh flour; that sinful mac and cheese is riddled with creamy, delicious Happy Cow Creamery cheddar, and so on. Thank you, Spotted Salamander!

The food was a hit with everybody at the gathering, including Stephanie Lombardo, the membership coordinator for the SC Small Business Chamber, below left.

Stephanie Lombardo, Rep. Mac Toole, & Brad Weeks

Working as the Membership Coordinator for the SC Small Business Chamber, Stephanie is deeply committed to supporting small business in South Carolina, and loves working with small businesses to increase their online reach via the BuySC directory and action campaigns! 

Give her a ring or shoot her an email at the Columbia headquarters to find out more about the resources we offer to small businesses in SC.

Attorney Nick Callas and SCSBCC CEO Frank Knapp, Jr.

Huge thanks to our beverage sponsor, attorney Nick Callas of Popowski, Callas & Shirley, P.A.! The firm handles Worker's Comp, personal injury, and Social Security Disability cases in particular. We appreciate your support, Nick!

(The floral arrangements, made sustainably -- and cheaply! -- using locally foraged greenery and a
very budget-friendly handful of spider mums from the grocery store, were designed by Flock and Rally: Events & Communications for a Brave New South.)

SCSBCC CEO Frank Knapp, Jr and Rep. Kenny Bingham listen to Rep. Mac Toole

The new South Carolina Press Association offices were a wonderful facility in which to hold the forum.

Major thanks to Bill Rogers of the SCPA for hosting!

If you'd like to host or sponsor a seminar, networking reception or BuySC action campaign event, contact us.

We love working with our local small businesses!







One of our key missions in this nonprofit organization: to grow public understanding of the importance of choosing SC vendors for everything from pharmacy prescriptions to major construction contracts.





Register your small business for free today at Buy SC!

Small Business Chamber December Newsletter

Tell Congress to stop new 1099 requirement

The new health care law, the Affordable Care Act, has tremendous benefits for small businesses, particularly the tax credits and health insurance exchanges. But the 1099 provision, which has nothing to do with healthcare reform and was included only as a revenue-raising measure, works against them. It would require small businesses to file a 1099 form for the purchase of any goods and service over $600—forcing them to spend an inordinate amount of time filling out paperwork instead of doing business.

Contact Senators Lindsey Graham and Jim DeMint with this message:

Congress needs to correct the 1099 provision in the Affordable Care Act now. This past Saturday you voted against a bill that included the elimination of the 1099 problem as well as other small business friendly measures. It’s time to put politics aside and get the job done now for small businesses. Please vote to rescind the 1099 provision of the ACA only.

You can also sign a petition sponsored by the Small Business Majority by clicking here.

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House votes down deficit spending
Senate fails to do the same

Last week the U.S. House of Representatives passed legislation to keep the Bush-era tax cuts for 98% of Americans. Any income over $200,000 for an individual $250,000 for joint returns would not keep the tax cut set to expire December 31st. In this way, all tax payers continue to keep the reduced tax rate on their income up to those levels and Congress would cut deficit spending by $700 billion over ten years..

Saturday, the U.S. Senate could not reach the 60 votes needed to pass similar legislation. A compromise to raise the income threshold to $1 million was also not successful.

The South Carolina Small Business Chamber of Commerce supports the House passed legislation. For more details on this position click here.

Contact Senators Lindsey Graham and Jim DeMint with this message:

I oppose increasing deficit spending by $700 billion in order to extend tax cuts to the top two tax brackets. Very few hands-on small business owners fall into these tax brackets yet we all will share in the increased debt that won’t be used to generate new jobs.

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Say “no” to low-cost, low-value health insurance policies

The South Carolina Department of Insurance has requested a waiver from the U.S. Department of Health & and Human Services (HHS) on requiring health insurance companies to use 80% of premium for medical expenses or give refunds to policy holders. This request is only for individual policies.

The new Affordable Care Act set this 80% Medical Loss Ratio (MLR) for individual and small group coverage to give consumers more value for their premium dollars. The current MRL in South Carolina is only 55% meaning that 45 cents of every premium dollar goes to something other than medical care (such as profits, marketing, commissions, administration, etc.)

The South Carolina Small Business Chamber of Commerce has sent a letter to HHS opposing this waiver. We encourage you to do the same.

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Insurance industry proposes change that will hurt small business

Last week Frank Knapp, Jr., the president of The South Carolina Small Business Chamber, testified against a proposed change in the Workers’ Compensation regulations that would allow an insurance company to cancel a workers’ compensation policy after only 10 days notice of non-payment of premium. The current policy is 30 days notice. To read about the arguments made at the public hearing, click here.

In response to our Action Alert on this issue, a sizeable number of letters from small businesses were sent to the Workers’ Compensation Commission opposing the change. This grass roots lobbying was very effective. A decision by the South Carolina Workers’ Compensation Commission on this request might come as early as December 13th.

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SEC receives petition to allow for small investments in local businesses

The South Carolina Small Business Chamber of Commerce is supporting a Securities and Exchange Petition for Rulemaking filed by Sustainable Economies Law Center. The petition is to exempt securities offerings up to $100,000 with $100 maximum per investor from registration. Granting this exemption will be a great benefit to small businesses that have been shut out of the traditional lending process and give more funding opportunities for entrepreneurs and local businesses.

To read the petition, click here. To voice your support for the petition to the SEC send an email to rule-comments@sec.gov with “File 4-605” in the subject line.

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Bring Your Business Cards...

The next BuySC Micro Conference is scheduled for Tuesday January 11, 2011 from 6-8pm. Small Business Authority and writer for the Lexington Chronicle Jerry Bellune and 3 co-authors will be discussing their new book "Killer Secrets of Successful Entrepreneurs" at the Inn at USC (3rd Floor Gallery), 1619 Pendleton Street, Columbia, South Carolina 29201. The discussion will be followed by a book signing, networking with small business owners and delicious refreshments provided by our sponsors Edible Arrangements and Gervais and Vine.

Members may bring a guest for free, too!

RSVP Today!
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When is a contradiction not a contradiction?

Earlier this week I testified at the S.C. Workers’ Compensation Commission public hearing. The issue was whether the Commission should change its regulations to allow an insurance company to cancel a workers’ compensation policy after only 10 days notice of non-payment of premium or leave it at the present 30 day cancellation period.

Only 3 people testified--a representative of the insurance industry, Tim Killen (director of the state Workers’ Compensation Uninsured employers’ Fund, and me. Mr. Killen and I were opposing the proposed change.

The official reason the insurance industry gives for the request is to eliminate a contradiction between state law and the Commission’s regulation. The insurance industry maintains that a law was passed in 2007 that “required” a 10 day notice for cancellation of a policy for non-payment of premium. Therefore it conflicted with the Commission’s regulation.

Sounds harmless and innocent, doesn’t it.

Well, consistency is hardly the insurance industries motivation. It’s all about the money.

I pointed out that the only losers with this change would be the small business owners who couldn’t make the payment on time due to slow or lost mail, invoices buried under paper on the owner’s desk (most of us don’t have accounting departments to pay our bills) or slow-paying customers delaying when the owners could pay bills. Shortening the cancellation period would mean a percentage of small businesses loosing coverage required by law and then later being re-written at a higher rate because their policy was cancelled. Sounds like the real insurance industry motivation to me.

Then Mr. Killen spoke and brought up another loser—everyone with a workers’ compensation policy. Mr. Killen agreed with me that more small businesses would have their policies cancelled under the proposed change. That would result in the fund that his state agency manages paying workers’ compensation claims for the employees of these newly uninsured companies. That cost to the fund would mean that every employer would pay higher premiums to replenish the fund—payments that would have been the responsibility of the insurance company under the present regulation. (I’m sure the insurance industry never thought of this benefit for them.)

But the real zinger Mr. Killen gave to trash the proposed change was this. The 2007 law in question doesn’t require a 10 day cancellation period. It says that there has to be a minimum 10 day notice of the effective date of cancellation. Mr. Killen stated flatly that there was no contradiction between the law and the current regulation. The Commission can have any cancellation period it wants; it just can’t be less than 10 days.

A contradiction that’s not a contradiction brought to you by the insurance industry.

Just write the checks to Wall Street

When President Obama meets with Congressional leaders today, one of the issues on the agenda will be the Bush-era tax cuts scheduled to end for everybody December 31st.

On the eve of this important meeting, a report exposes why the U.S. Chamber has been waging an all out campaign to make sure the tax cuts for the top two tax brackets do not expire. It is fighting to protect its “richest CEO’s wallets”, according to U.S. Chamber Watch and Citizens for Tax Justice.

While the U.S. Chamber and the high-end tax cuts supporters claim they only want to protect small business owners (see my post on this lie), here are the real beneficiaries of their advocacy:

-- Rupert Murdoch, the CEO of News Corporation, whose donation of $1 million to the U.S. Chamber of Commerce led to well-publicized shareholder outrage, would pocket more than $1.3 million.

-- Don Blankenship, a former U.S. Chamber Board member and the CEO of Massey Energy, whose company owned the mine in which twenty-nine miners died in April 2010's mining disaster, the worst in forty years, would take home more than $700,000.

-- David Cote, the CEO of Honeywell and a member of the National Fiscal Commission, who keynoted an address to the National Chamber Foundation expressing concern about the national debt over the next ten years, would get a tax cut of over $1.2 million.

-- CEOs of big banks on Wall Street who helped collapse the economy and then used the U.S. Chamber to fight stronger financial regulations stand to reap between $700,000 and $1.6 million each.

-- The CEOs of the health insurance industry, whose industry saw an overall increase in profits this year even while they slashed benefits and instituted breathtaking premium increases, are looking to personally benefit from another hit on the middle class by taking in between $335,000 and $875,000.

-- U.S. Chamber president and CEO, Thomas Donohue, who has shifted the Chamber's mission from serving mainstream business to serving the interests of the CEOs whose corporations write the biggest checks, will personally gain over $200,000.

Every one of these CEO’s, I bet, is counted as a small business owner by the IRS because they own some rental property or some other passive investment. Someone needs to ask Rupert Murdoch or Tom Donohue how many new jobs they personally are going to create with their deficit-spending windfall. Or should the government just write their tax-cut checks to Wall Street since that is more likely where they’ll put their money.

The newly thankful for health insurance

There are thousands and thousands of employees across the country who have something to be very thankful for this Thanksgiving—new employer sponsored health insurance.

According to Bernstein Research there has been a 14 percent increase in businesses with fewer than 10 employees offering health insurance to their workers compared to last year. The authors of the study credit the business health insurance tax credits that went into effect this year as part of the new health care law.

Small businesses are not being burdened by the Affordable Care Act (ACA). They and their employees are benefiting from it.

Maybe that’s why health care reform—even after the health insurance industry paid the U.S. Chamber $86 million last year to convince Congress and the public that reform was evil socialism; and the U.S. Chamber’s lap dog, the National Federation of Independent Business, warned the country ad nausea of non-existent small business mandates in the legislation—wasn’t the all powerful voter issue predicted by Senator Jim “Waterloo” DeMint . Only 17 percent of voters mentioned health care as one of their issues affecting their vote. The economy was the dominant issue.

But even with this good news of more small businesses now being able to afford health insurance because of the ACA tax credits, the repeal of the reform is still being threatened by the empowered GOP in Congress.

What they are proposing is a $4 billion tax increase on all the small businesses that are and will be using the tax credits.

We didn’t vote for that either, did we?

Happy Thanksgiving!

Quit with the "small business" rhetoric

Are you tired of hearing all the newly elected confessing their love for small businesses, how everything they will do is for small business, how they live and die to please small business? I’m sick of it already.

It’s not that I don’t appreciate the attention but it would be meaningful if all the talk was being backed up by action that actually helped small business.

In Governor-elect Nikki Haley’s first sit-down interview with a reporter (Robert Behre of The Post and Courier) she mentioned “small business” ten times. She even said, “I’m very passionate about small businesses.”

But what does she say she will do to help small business? She wants to strengthen us by giving us “cash flow” by cutting government, lowering government mandates and lowering taxes.

First, the state has already cut government by 25% in the last couple years and the economy still sucks. All those people out of work aren’t in our main street shops spending money. If we cut state government another 25%, we’ll just have fewer customers and an even worse economy. No cash flow boost here.

Second, the only government mandate that Ms. Haley talks about is the non-existent mandate in the new federal health care law. She states that she will “fight off these health care mandates that are going to be detrimental to our small businesses”. Ms. Haley, 97% of the businesses in South Carolina (those with 50 or fewer employees) are not mandated to offer health insurance under the law. There is no penalty if they don’t, just a health insurance tax credit available to 53,000 small businesses if they do. No cash flow boost here either.

Third, lowering taxes on small businesses might be nice (unless it means state government shutting down resulting in even a weaker economy with fewer customers) but Ms. Haley doesn’t propose lowering the income tax on small businesses. She only wants the corporate income tax paid by big business C-corporations to be reduced and eliminated. So we get the potential downside without the benefits. No cash flow boost here either.

I’m not sure what exactly Ms. Haley means when she says that she is “passionate about small businesses”. But as of right now, the passion only seems to be for evoking the name of small business for advancing a political agenda that holds no real benefits for small business.

D.C. potpourri

It's Wednesday evening and I’m sitting in a D.C. hotel room after an interesting day.

I was asked to join Senator Jeff Merkley of Oregon in a press teleconference call today on the tax cut issue eating up Washington. As readers of this blog already know, the Small Business Chamber is opposing the extension of tax cuts on incomes in excess of $200,000 for an individual and $250,000 for joint filers. It’s a $700 billion bad business decision and Senator Merkley agrees.

This afternoon I was invited to attend a meeting on health care cooperatives sponsored by the Center for American Progress. CAP is working with the Obama administration to encourage the creation of these non-profit co-ops, which are required by the new health care law to be offered in each state as part of the 2014 insurance exchanges.

Ironically today was also the official announcement of the South Carolina Health Cooperative, a venture launched by a Georgia Tech student (Cooper Littlejohn) with assistance of some independent insurance agents. While Littlejohn’s business plan hasn’t been totally revealed, his co-op at this time is more of an insurance buying organization for small businesses formed as a group (which would not fit the criteria under the new health care law for being included in the insurance exchanges). But who knows how this effort will turn out and I wish Cooper success and applaud his initiative.

Tomorrow (Thursday) holds more meetings for me. First up is Sen. Mary Landrieu’s hearing on regulatory burdens facing small businesses. Then I’ll see my friend John Spratt and wish him the best in his post-Congressional future. Then it’s a meeting with key staff in Colorado Senator Michael Bennet’s office on the tax cut issue. I’ll end the day with a workgroup session at the Security and Exchange Commission where I’ll be supporting a petition effort to enable small businesses to capitalize with $100 or under investments without going through the regular time and expense normally required under SEC rules.

I’ll be back on a plane after a Friday breakfast meeting with some D.C. small businesses interested in starting their own small business chamber (inspired by our success in South Carolina). 

Now I'm off to Common Wealth Gastropub to meet some folks.

Help stop a bad business decision—Join public briefing call today

This is a crucial week in Washington. Congress is back in session and the White House is holding a meeting Thursday with Congressional leaders to discuss issues.

One of the issues will be extending tax cuts to the wealthiest 2 percent of the taxpayers—tax cuts that will increase the deficit by $700 billion over the next 10 years and not be effective at all in creating jobs and helping small businesses.

How can you help stop this bad business decision?

Join me in a public briefing to learn more today at 2:45 p.m., sign a petition (see below) and call your elected officials. Thanks to Business for Shared Prosperity for their hard work and coordination on this effort.

JOIN THE BRIEFING CALL on Monday, Nov. 15 at 2:45 PM EST with Frank Knapp, CEO and President of the South Carolina Small Business Chamber of Commerce, and Steve Wamhoff, Legislative Director of Citizens for Tax Justice. Insight on the issues, legislative environment and tips for taking action.

► Call in #: (760) 569-7676, access code 818215. Monday, Nov 15 at 2:45 pm EST

SIGN/CIRCULATE PETITION: Urge Congress to let the high-end, budget-busting tax cuts expire for taxable income above $250,000.We can't afford to lose $700 billion to invest in small business job creation, education, health, infrastructure and renewable energy in the next decade.

► Sign the petition today

"Extending the high-end Bush tax cuts serves K Street lobbyists, not Main Street shop owners. Politicians should not use us to justify a very bad business decision." - Frank Knapp, CEO, South Carolina Small Business Chamber of Commerce.

TELL PRESIDENT & CONGRESS WHAT YOU THINK:

Sign the petition and follow it up with a personal call or letter for maximum impact.

► Phone the White House Switchboard 202-456-1414; Comment line 202-456-1111

► Congressional switchboard 202-224-3121.


► Write Your Senator at http://www.senate.gov/general/contact_information/senators_cfm.cfm

► Write Your Rep at https://writerep.house.gov/writerep/welcome.shtml

REPORT & TALKING POINTS: Restoring Top Tax Rates Makes Sense for Small Business.
 Our short report tells why it makes good business sense to reset top tax rates to where they were between 1993 and 2000 during the longest economic expansion in US history.

► Read the Report, Use the Quotes and Talking Points

GET YOUR VOICE IN THE MEDIA

► Press Release: Business Leaders Call on President, Congress to Let Bush’s High-End Tax Cuts Expire

► Letter to the Editor: Write a short letter to the editor responding (pro or con) to an article, editorial or op-ed you see. Refer if you can to Business for Shared Prosperity. Letters to the editor are widely read!

► Recent Press: Frank Knapp, We Didn't Vote for This, The Hill

► Talk to the Press: The more people involved, the more areas we can cover. Contact Bob Keener at bobkeener@businessforsharedprosperity.org or 617-610-6766.

Thank you for signing the petition, speaking out and spreading the word!

Health insurers thrive, but are patients?

I couldn't help posting this great analysis of health insurance company doublespeak that I saw in The State on Friday.  Enjoy!
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By DAVID LAZARUS Los Angeles Times

It’s a good time to be a health insurer.

Three of the biggest names in the insurance game reported rock-solid profits last week. Aetna said its third-quarter net income jumped 53 percent over the same period last year, to $497.6 million. Well-Point said its profit rose 1.2 percent to $739.1 million. Health Net posted a net income of $62.7 million, compared with a loss of $66 million a year earlier.

Angela Braly, chief executive of Well-Point, attributed the company’s strong performance to “disciplined administrative expense control.”

Aetna CEO Ronald Williams was more expansive. He cited “a reduction in utilization of health care services after the surge we saw in 2009, combined with appropriate pricing and effective medical quality and cost management.”

Well, that sounds fine and dandy until you parse what exactly he’s saying.

That “reduction in utilization of health care services” basically means fewer people went to the doctor. Did we all suddenly become healthier? Not likely.

Jamie Court, president of Consumer Watchdog, a Santa Monica, Calif., advocacy group, said Americans are skipping doctor visits because they’ve switched to plans with higher deductibles or their employers have jacked up co-payments.

“People aren’t getting the care they need because they have to pay more out of pocket,” he said.

This raises an interesting question about the looming reform of the nation’s healthcare system, under which everyone will be required to have insurance. If available coverage is too pricey for people to use, will Americans be any better off, health-wise?

While most insurance policies will cover catastrophic events, it’s entirely possible that healthcare costs will be too high for the sort of routine care or preventive treatment that can head off illnesses before they become debilitating.

Then there’s that bit from Williams about “appropriate pricing.” What’s that mean?

“Rate increases,” answered Sabrina Corlette, a research professor at the Georgetown University Health Policy Institute. “It means higher rates, as well as more aggressive underwriting that excludes people for certain conditions or charges them higher premiums.”

In September, the California Department of Insurance approved a 19 percent rate increase for 65,000 Aetna policyholders. This followed rate increases of as much as 29 percent for Anthem Blue Cross, Blue Shield and Health Net, affecting more than 1 million policyholders.

According to the Kaiser Family Foundation, workers now pay 47 percent more for family health coverage they receive through their jobs than they did five years ago, while wages have gone up only 18 percent.

And what about “effective medical quality and cost management”?

Court at Consumer Watchdog said this is just another way of saying that insurers are denying more claims. “It’s code for some bureaucrat somewhere telling people that a treatment isn’t necessary,” he said.

The average health insurance agent now receives more than 200 requests annually from clients to provide assistance in pursuing a claim, according to a survey released this month by the National Association of Insurance and Financial Advisors, an industry group.

Most agents say they have to contact an insurer at least twice on behalf of a client, the survey found. Eleven percent say they have to make six or more calls in trying to help resolve a claim.

“The most effective cost management for insurers is to decline services,” said Ron Pollock, president of the advocacy group Families USA. “And when there’s a dispute, it’s often very difficult to get a satisfactory result from an insurance company.”

It’s a good time to be a health insurer. For patients, clearly, not so much.

We didn't vote for this

The opinion editorial below ran on the Huffington Post and The Hill yesterday.
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We Didn't Vote for This

by Frank Knapp, Jr.

Whether Americans voted for Republicans or Democrats in the mid-term election, one thing is clear: Voters were demanding that Congress focus intensively on job creation on Main Street -- not lobbyists and campaign donors from big business and Wall Street.

Apparently, many in Congress and President Obama, if recent reports are true, either didn't get the message or simply don't care now that the voting is over.

The top legislative priority of the newly "Tea Party-empowered" during the lame duck session is hardly what Tea Party insurgents had in mind. The proposal is to (1) increase the national debt by borrowing $700 billion to $1 trillion over the next 10 years; (2) spend the money on big, non-job producing tax cuts for the wealthiest 2 percent of Americans; (3) use small business as the excuse.

This bad-business proposal is now being pushed in Congress and the media by those advocating extending the Bush-era tax cuts to the top two income brackets. While proponents acknowledge that less than 3 percent of the taxpayers who would receive the tax cuts actually have some business income, they insist that these approximately 900,000 taxpayers are the very successful small business owners who will stop hiring and purchasing if they don't get their tax cut. Wrong, wrong, wrong.

First, almost all real small business owners are middle-class Americans with middle-class incomes. Walk down any Main Street and you won't find small business owners netting over $250,000 a year in profit (dollars remaining after the cost of employee wages and other business expenses are deducted from taxable income).

These middle-income, Main Street small businesses are the ones we really need to help create the new jobs to lift us out of this down economy There is absolutely no evidence that the wealthiest small business owners create more jobs than those in any other tax brackets. As any small business owner knows, the number of employees does not correlate with profit.

So who are these mysterious high-income "small business" taxpayers in the top two brackets who Congress is considering borrowing hundreds of billions from foreign countries in order to give a tax cut?

Very few of them are what most would consider small business owners. They include partners in large corporate law firms, hedge fund managers, K Street lobbyists, high-powered consultants, Wall Street bond traders and the country's wealthiest millionaires -- all of whom claim some business income and thus are counted in IRS eyes as small businesses. These aren't "mom and pop" businesses, says Adam Looney, senior fellow at the Brookings Institution.

Not only are the vast majority of these 900,000 "faux" small business taxpayers not involved in job hiring decisions, the tax cut won't even cause them to significantly increase their personal spending to create the demand for new jobs.

The non-partisan Congressional Budget Office (CBO) evaluated 11 policy options in terms of boosting economic growth and creating jobs. It found that "policies that would temporarily increase the after-tax income of people with relatively high income... would have smaller effects because such tax cuts would probably not affect the recipients' spending significantly."

The wealthiest American's are more likely to save their money from a tax cut rather than spend it, according to Moody's Analytics, Inc.

If we really want to give a tax cut that will create jobs, then we could cut employer payroll taxes on businesses that actually increase their workforce. The CBO estimates this would have six to eight times as much job-creating impact as an income tax cut.
Alternatively we could create more customers for our small businesses through infrastructure projects, many of them long overdue upkeep or modernization, or keeping teachers and law enforcement officers working rather than laid off.  The policy the CBO found with the biggest bang for the buck is extending unemployment insurance -- a direct infusion of money into local economies by people buying for their basic needs.

Increasing the nation's deficit while not saving or creating jobs is just more politics as usual in Washington where those with the most money get rewarded with even more money.

Congress needs to hear this loud and clear. These high-end tax cuts serve K Street lobbyists not Main Street shop owners. Politicians should not use us to justify a very bad business decision.


Anticompetitive health insurance practices

One of the most popular parts of the new federal health care law is the establishment of the state insurance exchanges—large pools of customers for which insurance companies would compete to sign up for health insurance. Leveraging large numbers of customers to drive down insurance premiums is a concept loved by all—Democrats, Republicans, Libertarians, Tea Partiers, big business and small business.

But the idea relies on the premise that there is real competition in the health insurance market that actually works to drive down costs. Apparently that isn’t the case.

Many of us have been aware that the dominant health insurance company in a market demands that it be treated as a “most favored nation” by providers. In other words, these dominant insurance companies would negotiate fee rates with hospitals and other providers and require those providers to charge higher fees to the patients of other insurance companies. They leverage their volume of insureds to get a better deal.

In this way the dominant insurance company can always have more competitive premiums. If the providers don’t agree to play, the dominant insurance company can kick the providers out of their network thus reducing the provider’s revenue due to fewer patients.

This tactic makes it more difficult for other insurance companies to compete and insures (pardon the pun) that the dominant insurance company stays dominant.

As bad as this “most favored nation” tactic is for consumers because it reduces competition, it apparently is even worse than that.

Blue Cross Blue Shield of Michigan is being taken to court by the U.S. Justice Department and is accused of anticompetitive behavior that encourages higher provider rates and thus higher premiums.

Specifically, Michigan’s Blue Cross is being charged with “paying hospitals higher prices for medical care in exchange for a promise they would charge competing insurers as much as 40% more than they charge Blue Cross.”

The reality is that without real competition in the health insurance market because the “most favored nation” tactic is allowed, there is no incentive for insurance companies to try to get the lowest price for health care services. In fact, the companies make more money when the service costs rise because their built-in profit margins are a percentage of their health service cost payouts.

Is Michigan the only state where this is going on and forcing the individual and small group markets to pay inflated premiums due to a health insurance company greed?  I doubt it.

Triple the impact of your holiday dollar$

With the holiday season fast approaching and customers getting ready to open up their wallets, this is really the time to remember your SC locally-owned small businesses.

Please join us in our “BuySC” nonprofit action campaign. Surveys continue to show that communities with programs encouraging buying from locally-owned businesses improve the sales for those businesses during the holidays. When customer awareness of these programs is high, they seek out locally-owned businesses for their shopping and purchases. It’s just that simple.

And not only do the locally-owned retailers benefit, their communities benefit in a very tangible way.

®© Cinda Baxter, 2009. All rights reserved. Used here with permission.

All studies indicate that your spending dollar has THREE TIMES the economic impact on your local economy when you buy from a locally-owned business than if that same dollar is spent at a big box store or national chain with out-of-state ownership.

You hold the key to growing your local economy and it is right in your wallet.

The nonprofit SC Small Business Chamber of Commerce isn't alone -- there are a number of "shop local" campaigns out there, from Lowcountry Local First and the SCDA's Certified SC Grown program to The 3/50 Project, which inspired our new Buy SC "Local Has It" quarterly action campaign.

TRIPLE THE BANG FOR YOUR BUCK in leading us out of these recessionary times without spending any more money during this holiday season and all year. Just make your purchases from a SC locally-owned small business.

If you need help, we’re building our BuySC.org website directory for consumers to find locally-owned small businesses. These business owners believe in the power of keeping our money in local economies.






If you believe and want to TRIPLE the impact of your money to help, start now. Shop with SC locally-owned businesses and watch your local economy grow.

More than just an election this week

I was a little pre-occupied this week so I’m late with this blog.
A little thing like an election sucked some energy out of me as it did most folks. But I was involved with some positive activities.

My declaration expressing support for the Environmental Protection Agency’s power to regulate greenhouse gas was filed along with similar support messages from 38 other state agencies, conservation groups and business organizations, such as Small Business Majority and Mainstreet Alliance.

I, Frank Knapp, Jr., co-founder, president and CEO of The South Carolina Small Business Chamber of Commerce, make this Declaration in support of the response filed by the Environmental Defense Fund, the Natural Resources Defense Council, and other environmental intervenors in opposition to motions filed by various parties to stay various actions of the U.S. Environmental Protection Agency (EPA) relating to the control of greenhouse gas (GHG) emissions under the Clean Air Act. The purpose of this Declaration is to express The South Carolina Small Business Chamber of Commerce’s support for EPA’s decisions to move forward with controls on emissions of GHGs under the Act and to oppose motions to stay EPA actions in order to further delay implementation of the Act as to GHG emissions. Read more…

I also submitted a letter to the Internal Revenue Service in support of a citizen’s complaint against the U.S. Chamber of Commerce.

On behalf of the South Carolina Small Business Chamber of Commerce, I am writing to urge you to take prompt action on the letter filed on October 18, 2010 by U.S. Chamber Watch, the Center for Responsibility and Ethics in Washington, and Corporate Ethics International. The letter describes a series of troubling transactions between the Starr Foundation, National Chamber Foundation (NCF), and U.S. Chamber of Commerce, and raises serious questions about whether these organizations knowingly structured their dealings to facilitate the covert use of charitable funds for significant non-charitable purposes – including electioneering by the U.S. Chamber and the payment of excessive compensation to its CEO, Tom Donohue – in violation of the federal tax rules. Read more…

It was a busy week.

Unmasking the danger of corporate political campaign funds

Now that Halloween is over and the elections are tomorrow, it is really the time to get scared.  The opinion blog below should frighten the hell out of any red-blooded American.


The Baseline Scenario

Foreign Money, National Security, And The Midterm Elections

By Simon Johnson

Campaign contributions by non-citizens are a huge issue lurking behind the midterm elections; they will be even more important in 2012. Think about the economic dynamics:

1.Americans have a long-standing and well-founded aversion to foreign involvement in their politics, and it is well-established that this can happen in part through corporate “commercial” structures. Thomas Jefferson objected to Alexander Hamilton’s plan for a national bank in part because he feared this would become a stalking horse for the British in some form (see Chapter 2 of 13 Bankers for the context). Dubai Ports World was not allowed to invest in the United States – for reasons of perceived national security. You may or may not think that case was handled well, but we have the CFIUS process to vet foreign direct investment for good reason.

2.The Supreme Court has determined that corporations can make political contributions virtually without limit, apparently not understanding or not caring that (a) management has a fiduciary responsibility to shareholders, (b) globalization means more foreign shareholders on average (for privately held companies and funds, as well as publicly traded companies), and (c) at the margin, key strategic shareholders – the people who provide extra capital when the chips are down – increasingly tend to be foreign. Think about the role of Sovereign Wealth Funds in providing funds to our banking system in 2007-08, or the fact that Citigroup goes cap-in-hand to Saudi Arabia every decade or so.

3.During the Reagan years and again, even more, under the Second President Bush, the US ran a large current account deficit – reaching 6 percent of GDP before the 2008 crisis (and still around 3 percent of GDP). You may think this a technical detail that is largely irrelevant to the political process, but you would be wrong. We finance our current account deficit with capital inflows from abroad or, to put that more plainly: Foreigners buy and hold financial assets in the United States. Some of those assets are US government obligations but traditionally and increasingly non-US people have also acquired claims on corporate entities – including common or preferred stock.There are good economic reasons to allow foreigners to buy financial assets in the United States. We like to invest around the world and a high degree of reciprocity is only reasonable.

The US dollar is the “reserve currency” of choice – for the past 50 years this is where countries and careful individuals have chosen to keep their rainy day funds. This was a core idea behind the international trading system constructed after 1945. You may not like it, but what alternative exactly would you propose?

And there is nothing wrong per se with running a current account deficit – although it would be much better if we used the inflow of foreign capital to finance investment, rather than (as in the Bush years) tax cuts that just further encourage overconsumption.

Irrespective of how you feel about foreign capital inflows in economic terms, you have to face the political reality. As foreigners accumulate claims on the United States, they will increasingly diversify into corporate assets (in fact, this is the advice they get from their Wall Street advisers). Some of these corporate assets explicitly come with voting rights – but those are supposed to be voting rights over the corporation (or investment fund), not voting rights in political elections.

We have effectively enfranchised foreigners in US elections. This is clearly and absolutely not what the drafters of the Constitutions had in mind.

This dissonance between our claimed political values and the political reality will grow over time – unless you think our current account deficit will swing into surplus at any time in the future, the net inflow of foreign capital will continue.

The only way to deal with this is to require complete disclosure by all corporate entities (and similar “veils” like investment funds of any kind) regarding the contributions they make to any organization or individual involved in political messaging or campaigning.

To be sure, this would be onerous. Thomas Jefferson and his colleagues would have wanted it no other way. The US Constitution was not drawn up to protect the rights of foreign citizens. It defines who is and who can become an American – and the rights and responsibilities of those who would like to rule the United States.

And however you prefer to define our legitimate national security interests, how are they consistent with letting foreign citizens influence or even determine the outcome of our elections?

Walmart on steroids

If you, like everyone else, are tired of all the negative political ads, take solace in the fact that they’ll be gone next Wednesday.

But unfortunately, what will stay with us is an outright attack on our democracy. Our “government of the people, by the people and for the people,” thanks to the Citizens United Supreme Court decision, might now be better called “government of the corporation, by the corporation and for the corporation.”

And by “corporation,” I’m not talking small businesses. I'm talking about giant special interest, multinational companies that brought us these beauties:

Image: NyeGateway.com

• The Gulf oil disaster
• The financial crisis that led to the recession
• Skyrocketing health insurance premiums
• Jobs exported overseas
• Bloated military budgets to fight unnecessary wars

These corporations have been given the green light to spend all the money (actually their customers' money) they want to influence our elections, while not letting the voters know who is paying for the ads—most of which are negative—or being accountable for the truthfulness of the messages.

Total spending -- by candidates, political parties and special interests -- has topped $3.2 billion and is likely to hit $4 billion when reports detailing last-minute donations and spending are tallied, according to a study released Wednesday by the non-partisan Center for Responsive Politics. That would obliterate the record $2.85 billion spent in 2006, the last midterm elections. Read more….

For the small business owner who might think that these giant multinational companies have their best interest at heart, you’ve been suckered into voting against your future.

Think Walmart on steroids.

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Want to do something about it?

1. Vote this Tuesday, November 2
2. Join us for our next BuySC Micro-Conference, Wed., Nov. 10 (details below)
3. Shop local on Nov. 20, 2010, Happy Hardware Day!

The SC Small Business Chamber presents the next installment of our BuySC Micro-Conference series:

Keith Spiro: 5 Steps to Business Freedom
 

When: November 10th, 2010
Where: 701 Whaley, Olympia Room (2nd floor), 701 Whaley Street, Columbia, SC 29201

Time: 6pm - 8pm

Price: Free for paying SCSBCC members / $5 Basic Members /$10 for non-members.  Click here to register and buy your tickets now. 

Want to save $5? Become a BuySC member at the "free" level and your ticket is half price. Why? Because we're a non-profit, and we want to unite SC's small business community.

Copy this digital poster to use on your Facebook, blog, website, wherever!

Our locally-owned, independent hardware stores need us more than ever. Let's support them!

Still the naysayers on lending crisis

In the run up to the vote in the U.S. Senate on the Small Business Jobs Act that included a $30 billion small business lending fund to help address the complete collapse of lending to small businesses, opponents began claiming that small businesses were no long looking for loans. The economy--according to the naysayers like the U.S. Chamber and its lapdog, the NFIB--had scared small businesses from wanting to take on any debt.


Even today after the Jobs Act has been signed into law and the loan fund regulations are being finalized; there are still deniers of a small business lending crisis even by some who should know better.

Russell Colombo, president and CEO of the Bank of Martin in California, recently told a reporter that there is plenty of capital available to make small business loans but there is no demand.

Well, enough of partisan-tainted opinion. Here is the reality.

Last week the New York Federal Reserve Bank released the results of a survey that clearly demonstrated that access to capital is an important issue for small business with 59% of respondents had applied for credit during the first half of 2010.

Of the small businesses trying to get a loan or line of credit only half were successful and 75% of all respondents said that they received only “some” or “none” of the credit they were looking for.

This week Small Business California in a press told of a survey of their members that generated “over 150 comments regarding the problems they are having with banks, especially the big banks.” Scott Hauge, president of the organization, stated that “small businesses are seeing their lines of credit pulled, their loans pulled, interest rates on credit cards spiraling upwards of 30% and extending the time of clearing deposit checks.”

Our banker, Mr. Colombo, needs to get out of his executive office more often and visit the real world of small business.