Good news to end 2011

As we end 2011, here are two good pieces of news for small business.

First, I actually have something good to say about the National Federation of Independent Business (NFIB).  I haven’t been very charitable to the organization over the years because they always seem to side with the U.S. Chamber on issues.  The NFIB’s complaints about health care reform and regulations keeping small businesses from hiring and their objection to increasing taxes on the wealthiest Americans and using the money to decrease the deficit or invest in creating jobs—all are such big-business positions.

But finally this week an NFIB executive dropped the big business mantra about the different challenges facing small business and agreed with what real small business organizations have been saying is the number one problem holding back our hiring.  “The key to everything is cash coming in the front door,” said William Dunkelberg, the chief economist for the NFIB.   

Consensus has arrived in the small business community…lack of consumer demand is our biggest problem standing in the way of creating jobs and economic growth.

The other piece of good news for small business is more data affirming that small businesses are the real job creators, not the millionaire and billionaire’s reporting some small business income or multinational corporations.  Many in Congress are fighting to protect these groups from higher taxes because, the say, it would hurt the “job creators”.

The payroll company Automatic Data Processing, which keeps track of these things, reports that in November businesses with up to 49 workers created 110,000 jobs nationwide.  That compares to just 84,000 new jobs from businesses with 50 to 499 workers and only 12,000 new jobs from employers with 500 or more workers. 

So Happy New Year to all the real job creators—our small businesses!

Black will not be fall guy

These must have been the worst two weeks in David Black’s life.  What started in February as a new career adventure for the former president and CEO of the Liberty Life Insurance Company in Greenville, dissolved into a nightmare for the Director of the S.C. Department of Insurance who resigned yesterday. 

Weighing heavily on Mr. Black’s decision, one he made last week according to an email he sent to staff, surely was the political troubles of his boss, Governor Nikki Haley. 

Renee Dudley of the Charleston Post and Courier broke what has now become a national story of South Carolina accepting a $1 million planning grant from the feds to determine if the state would establish and operate a health insurance exchange in 2014 or let the federal government do it.  The exchange, a market place for obtaining health insurance, is an integral part of the Affordable Care Act, Obamacare to many.

But emails of March 31 of this year—obtained by Ms. Dudley through the Freedom of Information Act—clearly show that Governor Haley had no intention of South Carolina creating an exchange.  The problem is that in an Executive Order on March 10^th she established a Health Exchange Planning Committee, as called for by the grant, to “develop and submit a report to the Governor by October 28, 2011 which sets forth the Committee’s recommendation regarding whether or not the State should establish a health insurance exchange.”

The planning committee, including Mr. Black, was totally in the dark about the Governor’s earlier decision—except for one member, Tony Keck who is the Director of the South Carolina Department of Health and Human Services.  Mr. Keck, a former member of Governor Bobby Jindal’s administration, participated in the March 31 email discussion with the Governor and her staff. 

The political firestorm that has continued to burn following Ms. Dudley’s story has now consumed its first victim. 

It was Mr. Black’s insurance department that received the federal planning grant money and hired a key staffer (who also had no knowledge of the Governor’s ruse) to be in charge of the planning grant and committee.  Mr. Black and his insurance department will now have to respond to a possible federal investigation of misusing taxpayer dollars as called for on December 22 by U.S. Senator Tom Harkin.  On December 23 the Chairman-Elect of the S.C. Legislative Black Caucus sent Mr. Black a letter requesting a full briefing on this issue.

Mr. Black didn’t sign up for all this.  He certainly was not a knowing party to this charade.   And he never really fit into the highly partisan Governor’s operation as dis Mr. Keck.  My experience with Mr. Black has been very positive.  A very affable person, he demonstrated a professional responsiveness to his duties and those who interacted with his department.  There was never even a hint of partisanship in his actions.

So now Mr. Black has done the honorable thing.  Instead of trying to mold himself into the continuous campaign mode of Governor Haley’s administration and trying to defend her duplicity in this matter, he resigned.   

But the buck doesn’t stop with Mr. Black.  Who will the fire burn next?

NYC jobs we can do without

The investment banking firms on Wall Street are predicted to cut up to 10,000 jobs in 2012 on top of the 1800 jobs eliminated since April of this year.  The industry lost about $3 billion in the third quarter of 2011 and total forecasted profits will be lower than expected.

While New York City will feel some pain from losing these highly paid jobs, the rest of the country and our nation’s economy will probably be better off.

It takes a lot of profits to pay the big salaries and bonuses of these Wall Street paper-pushers who make a living from cutting deals and promoting investments.  That means the products they market have to offer higher and higher returns—translated that means riskier and riskier investments. 

The securities industry could afford all these employees because they promoted greed and created unsound investment products that made them easy money.  The result was the collapse of our economy and the Great Recession.

Every one of us paid the price for the fast and loose Wall Street deals.  So we shouldn’t cry any tears for the investment banking jobs New York will lose.  If the city follows the advice of the New York Times, “developing more and different status jobs would be better for New York”. 

For the rest of us who worry about Wall Street resuming its irresponsible ways, we should be grateful if the investment banking firms have fewer mouths to feed.

With the spread of high-tech devices, telecom expecting explosive growth

The Washington Post
December 23, 2011

 

By Matt Bauer

 

"While we are focused on internal industry concerns such as telecom consolidation and collusion and those that would dismantle net neutrality, our top concern as a company in 2012 is helping to lead the charge and get much more support to small, independently owned businesses across America. We see this as the largest return on investment for the government, investors and consumers. This is also where our national economic focus needs to lie in the short and medium term." 
Read more

Matt Bauer is president and co-founder of Reston-based BetterWorld Telecom, the leading sustainable business to business voice and data carrier in the U.S.

Time for the power sector to get to work

The Hill's Congress Blog 
December 22, 2011

By John Arensmeyer, Small Business Majority, and Mindy Lubber, Ceres 

 

The word on the street is the recession is behind us, but times are still tough. The economy is stagnant and businesses of all sizes are still trying to weather the economic storm that forced many to close their doors and left countless workers unemployed. 

For these reasons, every other word out of politicians’ mouths is “jobs,” and how we can protect them and create more. Unfortunately, the rhetoric has reached a fever pitch and “job killing” labels are put on everything from tax cuts to sensible standards that protect our communities and us.

This has happened with new standards announced Dec. 21 that would protect Americans from breathing mercury, lead, arsenic, and acid gases from outdated power plants. Twenty years in the making, these new standards are finally moving into the implementation phase, though there will likely be pushback from some claiming they’ll stifle job growth. That opposition is misguided. In fact, the new rules will create jobs and are supported by Americans and business owners—also known as job creators—across the political spectrum.

A recent Small Business Majority poll found that small business owners’ greatest concern is economic uncertainty about the future, with 46 percent citing it as their top worry. Only 13 percent of small business owners said government regulation is their biggest concern.

If we are to tackle what is really worrying small business owners—economic uncertainty—we should encourage actions that spur economic growth. Allowing the Environmental Protection Agency the ability to regulate harmful emissions such as toxics from power plants is something small business owners believe will do just that.

Small Business Majority’s national poll found 76 percent of small employers support the EPA’s regulation of greenhouse gas emissions from power plants, refineries and other major emitters. Adding to that is a recent poll by Ceres—a coalition of businesses, investors, and public-interest groups—that found 77 percent of Americans specifically support the newly announced limits on lead, mercury and other toxic emissions that are being released from power plants.

Those standards—known as the Mercury and Air Toxics Standards—will require power companies to clean up or close their dirtiest, oldest plants, including many built more than half a century ago.

The nation’s utilities will still earn an appropriate return on their investments. Meanwhile, the EPA estimates that new rules will pay back $5 to $13 in health benefits for every dollar power companies spend in complying, so broader communities will benefit, as well.

What’s more, a recent report by the Political Economy Research Institute (PERI) at the University of Massachusetts found the Mercury and Air Toxics Standard is part of a suite of clean-air standards that will create 1.4 million new jobs over the next five years. These include professional positions, construction and manufacturing jobs, for both large and small companies, from the suppliers’ manufacturing centers all the way to the actual construction sites.

For example, retrofitting a coal-fired power plant with $200 million worth of air pollution control equipment would result in 2,200 jobs, according to Bureau of Labor Statistics. Many of those jobs go to local companies, who supply the concrete services, the excavation and demolition work, or the cranes and trucks. These benefits ripple further through local economies when workers spend their wages.

It’s time that power companies do their part. Other major contributors to mercury-air pollution—including medical and municipal incinerators—have already reduced their emissions, cutting mercury by 95 percent since 1990. And steel and cement makers have also made great strides.

America and its job creators are behind the new power plant rules, and the EPA has acted. Now it’s time to get to work.

Arensmeyer is the founder and CEO of Small Business Majority, an advocacy group founded and run by small business owners. Lubber is President of Ceres, a coalition of investors, public interest groups, businesses, and environmental groups working on sustainability challenges.

Tryptophan bad dream

For all who will be enjoying a festive turkey meal on Christmas day, regulations will probably be the furthest thing from your mind.  But as the tryptophan kicks in, dream about this—who is making sure that turkey isn’t a danger to your health?

Stephen McDonnell is the founder and CEO of Applegate Natural and Organic Meats.   In an opinion editorial running in many outlets across the country this week, McDonnell has a sobering message about the need for more regulations to make the food we eat safer.

Most people probably would be surprised to learn that 80 percent of antibiotics sold in the United States are used in animal agriculture. The vast majority is for non-therapeutic purposes, such as promoting growth and compensating for effects of unsanitary and overcrowded conditions. Many of the antibiotics used in food animal production, such as penicillins and tetracyclines, are the same drugs we rely on to treat human illnesses, and therein lies the problem.  Read more.

Now go finish your holiday shopping at a locally-owned small business.

No gold rush for California small businesses

Los Angeles Times
December 14, 2011

California small businesses can't get loans

California's small businesses can't get the credit they need to expand and hire people.

Forty-four percent of almost 2,000 owners queried said they couldn't access resources needed to grow their operations, said a report released Wednesday by the Graziadio School of Business and Management at Pepperdine University.

With little savings, proprietors are having mixed success raising capital. Instead, they're concentrating on raising revenues from their current products or services, the Graziadio report said.

"Recent signs of stronger holiday consumer demand is a great sign for small business, but it is not time to celebrate just yet," said John Paglia, lead researcher at the Pepperdine University Private Capital Markets Project and an associate professor of finance. "Small businesses will need sustained consumer demand to recover from losses during the Great Recession."

The credit picture is even tighter in Los Angeles County, the Pepperdine report said. About 6 in 10 business owners surveyed see opportunities for growth next year but three-quarters of them expect credit to be tough to get.

http://latimesblogs.latimes.com/money_co/2011/12/california-small-businesses-cant-get-loans.html

Ben & Jerry's nearly frozen out of the market

In the debate that will continue next year in the U.S. Senate over regulations, we will hear those who want to eliminate all government regulations say that they believe that the private sector can regulate itself.  But until now, no one has explained what that means. 

Ben Cohen, co-founder of Ben & Jerry’s, knows what a private sector unregulated by the government means from first-hand experience.   His CNN opinion editorial last week should be must reading for every member of Congress.  Cohen makes it very clear—“when the market rules, the big guy wins”.

Santa or Grinch and small business lending craters

Republicans in the U.S. House decide to be either Santa or the Grinch this holiday season when they vote later today on whether to agree with the Senate’s bipartisan plan to extend payroll tax cuts and unemployment benefits for two months.

This is a big deal for small businesses.  If working Americans see less money in their paychecks in January, spending on Main Street will slow down.  That might be good for the GOP’s ambition to win back the White House but it will be a disaster for small businesses. 

Don’t be fooled by Speaker Boehner’s concerns over “certainty” for “job creators” and the unemployed.  Small businesses want this payroll tax cut to continue whether it is for two months or 12.  The same goes for continuing unemployment benefits because that’s money being spent on Main Street.

What we don’t need is more partisan politics in Washington making life even more difficult for us.  The House should pass the Senate plan and fight about it again next February.  During the interim, our Congressional folks ought to go back home and see how the latest bank lending news is negatively affecting small business. 

New federal data show that the number of small bank loans to business has fallen to the lowest point in more than a decade, cutting the flow of money to a sector that's usually a job-creation powerhouse…. An analysis of recently released Federal Deposit Insurance Corp. data by the Investigative Reporting Workshop shows that overall commercial and industrial lending by banks has increased for five straight quarters, but small loans to business of $1 million or less have been shrinking consistently since June 2008.

But fixing the small business lending problem is difficult.  Our GOP friends in the House apparently prefer to do what is easy…create partisan gridlock regardless of the pain to small business it yields.

Treasury's failure hurt small businesses

The U.S. Government Accountability Office (GAO) has issued its findings on why the Small Business Lending Fund (SBLF) passed by Congress in 2010 turned into an abysmal failure in promoting loans to small businesses. 

Only 332 of the 935 community banks applying for the extremely low interest funds to be used for the loans were approved by the U.S. Treasury Department.  Only $4 billion of the $30 billion allocated to the fund was actually approved—13%. 

The GAO is polite in its assessment of how Treasury administered the SBLF.  I’ll be more direct.  Treasury screwed it up royally.  I’ve told Administration officials this in person. 

Treasury blew it and our economy and small businesses are still paying the price.  Had Treasury put as much emphasis on making the SBLF work as they did in bailing out the big financial institutions, our economy would be growing much faster today and Treasury’s boss, President Obama, wouldn’t be under attack for our slow job growth.

Repatriation fraud exposed

The high drama is back in Washington as this Friday is the deadline for passage of a spending bill that will keep the doors open on the federal government.  Getting that done is intricately married to passing legislation to extend the payroll tax cut for 160 million working Americans and also extending federal unemployment benefits.

Fortunately, one very bad idea apparently has been set aside as part of these discussions—allowing multinational corporations to repatriate (bring offshore profits back into the country) at a ridiculously low tax rate in the hopes that this will stimulate the economy.  We tried this in 2004 and it didn’t work then.

The wheels have been coming off this phony “economic stimulus” proposal partially because some influential GOP members of Congress think it is a better idea to address corporate tax rates in general, not piecemeal. 

But the other reason for the failure of the repatriation nonsense is that the truth is now coming out about these so-called offshore profits.

Back in July I participated in a press conference with Senator Carl Levin of Michigan in his Senate office.  At that time we laid out the rational for why repatriation was not good for the people, small businesses and the economy.

Yesterday, Senator Levin released a new report exposing the repatriation fraud that the multinational corporations like Google, Apple, Cisco and Microsoft have been selling. 

Some multinational corporations say they want to bring foreign funds back to America, but can do it only if they get a special tax break.  They claim their foreign funds are otherwise ‘trapped’ abroad, but new data show that is not true.  Many U.S. multinationals have already invested a large portion of their foreign funds right here in the United States, taking full advantage of the safety and security of the U.S. financial system to protect their money while paying no U.S. taxes on those funds to support the U.S. system.

Of the $1.4 trillion in offshore profits the multinational corporations have been dangling in front of us as the way to create jobs and boost the economy if we just slashed the tax rate to let them come home and be invested, about 46% of the money is already here….invested in our economy.  But it’s not being taxed because it is still considered offshore profit. 

So why are these multinational corporations willing to pay any tax at all on this money that they already have in the U.S.? 

The profits can’t be used by the corporations to give windfalls to their stockholders and executives unless it is officially repatriated.   They want to stimulate their own personal economies, not the country’s.

SC Gov. Haley dictated health panel: Outcome ordered before committee met

Post and Courier (Charleston, SC)
December 14, 2011

By Renee Dudley

Wednesday, December 14, 2011

Gov. Nikki Haley dictated the conclusions of a committee charged with deciding how the state should implement federal health care reform before the group ever held its first meeting, public documents show.

Now, some of those involved in the dozens of meetings are calling the entire planning process a sham that wasted their time and part of a $1 million federal grant.

In a March 31 email thread that included Haley, her top advisers and the committee member who eventually wrote the report, Haley wrote, "The whole point of this commission should be to figure out how to opt out and how to avoid a federal takeover, NOT create a state exchange," which is eventually what happened.

A central part of the federal health care overhaul, an exchange is a marketplace where various insurance plans eventually will be sold.

The emails were released to the newspaper Friday afternoon in response to a Nov. 16 public records request to the S.C. Department of Health and Human Services.

The newspaper had made a nearly identical request of the governor's office in May, but the office did not include the emails in its response.

The documents show a first-term Republican administration focused on public perception of its handling of the Democratic health care reform law. They also reveal the tight control Haley and her top aides exercise over other state agencies, requiring media inquiries to various state departments to pass through the governor's office for inspection.

"Oh my God, we just threw $1 million away here," said Frank Knapp, who participated in the meetings as president of the S.C. Small Business Chamber of Commerce. "This confirms this whole thing was an effort to justify the million-dollar grant, but the reality is they had no intention of even exploring whether the state should establish an exchange -- which is exactly what the grant called for."

Through a spokesman, Haley said she had no time to be interviewed Tuesday or today for this story. Spokesman Rob Godfrey said the governor's office

responded fairly to questions about the committee.

"She has a lot to do over the next few days in preparation for the holidays," he said. "It's just a matter of a tight schedule."

Godfrey did not respond to questions related to the email discrepancy. In an email, he wrote, "The governor calls it watching out for the citizens of our state as we try to deliver the most health care for the least amount of money."

Lack of oversight

In a March 10 executive order, Haley established the nonpartisan South Carolina Health Planning Committee to "build trust and consensus among stakeholders" and to decide "whether or not the state should establish a health insurance exchange."

States that decline to set up their own exchanges are subject to federally run ones beginning in 2014.

Members of the nonpartisan committee and its four subcommittees, who met more than 30 times over the past seven months, did exactly that. In a report sent to the governor two weeks ago, the panel rejected the idea of a state-run exchange, saying South Carolina has few incentives to be a "first-mover" nationally.

Instead, it would "encourage and facilitate ... private exchanges," the report said.

It is unclear whether federal health officials will accept the private solution, but consumer advocates have raised concerns about lack of oversight and regulation. Insurance exchanges are the state- or federally-established marketplaces where health coverage will be sold to individuals and small business employees beginning in 2014.

Copied on Haley's March email thread was S.C. Health and Human Services Director Tony Keck, an influential member of the Health Planning Committee established by executive order.

Earlier in the thread, Keck had suggested pitching an op-ed piece for publication. The piece would highlight the health insurance exchange's "roots in conservative principles," including the idea that "exchanges are viewed by Democrats and Republicans as an important component in improving health care outcomes and lowering costs."

Haley's staff members immediately shut down the idea.

"I don't want the Administration to embrace the idea of an exchange as conservative," wrote Tim Pearson, Haley's chief of staff. "It's a very tough slog to try and change the perception on that."

'Losing our message'

Pearson referenced a newspaper report detailing legislation that would have created a framework for a state exchange and prevented insurance carriers from serving on its board. The bill was sponsored by S.C. Reps. Harold Mitchell Jr. and Gilda Cobb-Hunter, Democrats from Spartanburg and Orangeburg, respectively.

"We can't be on the side of Reps. Mitchell and Cobb-Hunter vs. Campaign for Liberty and Tea Party," Pearson wrote.

Referencing the federal lawsuit aiming to overturn the mandate requiring everyone to have health coverage, he continued; "The message has to be this ... If we don't at least explore an exchange, we are guaranteeing that -- if the lawsuit fails -- the Federal exchange, developed entirely by the Obama administration will exist in South Carolina."

In response to the story in question, Haley wrote, "Ok we are losing our message here."

In another email minutes later, she continued, "Also lets be clear, if mitchells bill comes to my desk I will veto it. Say that."

The group of top aides agreed in the thread that the op-ed should not carry the byline of anyone in the Haley administration.

"I am confident I could get a business group or legislator to submit op-ed," wrote Trey Walker, formerly Haley's deputy chief of staff.

$109,000 spent

In an email to The Post and Courier Tuesday, Godfrey wrote; "The governor is not going to support a federal health care mandate that she and her HHS director know will cost taxpayers more money down the road while delivering less services. And that's why she established the committee to study South Carolina solutions that provide our state with the most health at the least cost."

The newly released emails enraged consumer advocates, small business leaders, local economists, taxpayer watchdogs and S.C. Press Association officials this week.

"They took the money on the pretense they would conduct an objective analysis of whether the state should do the exchange or not," said John Crangle, executive director of Common Cause of South Carolina. "But they decided what they were going to find before they even started the research process."

The most recent progress reports filed with the federal government show the administration used about $109,000 of the $1 million grant through the end of November.

Crangle said the exercise was "not in good faith" and called it "an abuse of federal funds." State money also is at issue because state employees were on state time when they attended dozens of exchange planning meetings, he said.

Sue Berkowitz, an advocate for the uninsured who participated in planning discussions as executive director of S.C. Appleseed Legal Justice Center, said time was wasted.

"We came together and sat down for a lot of meetings in good faith that we'd explore every option and discuss what is in the best interests of the state," she said. "I'm frustrated that we were being used for something that wasn't an open, transparent discussion."

'Residents lost'

Lynn Bailey, an independent health economist in Columbia, called the meetings "kabuki theater -- all for show."

"People honestly invested their time to do public service," said Bailey, who participated in the discussions. "It's a waste of people's time and talents. It's disrespectful."

Bailey added; "With the Haley people, it's all about the message. They did exactly what she wanted them to do. But in the meantime, residents lost."

Knapp, of the Small Business Chamber, summed it up this way; "They're not looking at the merits of the legislation and whether it advances the cause of South Carolinians. They care about 'whose side we appear to be on' and keeping an arm's length from anything to do with the Affordable Care Act. They're still running a campaign."

---

What is an exchange?

Insurance exchanges are the state- or federally-run marketplaces where health coverage will be sold to individuals and small business employees beginning in 2014. They are a key part of the federal health law.

Envisioned as the "Expedia" for health insurance, exchanges are intended to make purchasing health care easier and more affordable by allowing customers to compare options side-by-side.

They also are intended to be the place where residents who make between 133 percent and 400 percent of the poverty level will apply for and collect federal tax credits to buy coverage.

A state panel established by Gov. Nikki Haley recommended last month the state should not manage its own exchange. If Haley accepts the recommendations, South Carolina will join a handful of other states that already have declined to set up exchanges.

States that do not set up exchanges by 2014 will be subject to federally run exchanges.

http://www.postandcourier.com/news/2011/dec/14/haley-dictated-panel-finding/

Tea Party conflicted?

Today the U.S. House is to vote on extending the payroll tax cut for working Americans and extending the federal unemployment benefits.  Both are important measures to keep the nation’s economic momentum going. 

Unfortunately, instead of paying for these efforts by a slight surtax on incomes over $1 million as proposed by Senate Democrats and supported by over 70% of the public, the GOP bill tries to pay for their $200 billion legislation through spending cuts. 

Hospitals have already weighed in with their opposition to cuts that will affect them (and us in the form of higher healthcare costs) as reported in The Hill today.

The hospital provisions include a $10.6 billion cut to federal reimbursements for bad debts; a $6.8 billion cut to payments for hospital outpatient department evaluation and management services; a $4.1 billion cut to payments for hospitals that see a disproportionate share of people without insurance; and an extension of caps on therapy services to outpatient hospital settings, which saves the government another $1.7 billion. Hospitals only account for about 60 percent of federal reimbursements for bad debt

Another group closely associated with the GOP also should not be happy—the Tea Party.  The House plan isn’t fully paid for.  According to scoring by the Congressional Budget Office the “GOP bill would add $25.3 billion to the federal deficit over the next 10 years.” 

The odd thing is that unlike the hospitals that have come out publicly against the GOP bill because of the cuts to their revenue, the Tea Party has been quiet.  They might be working behind the scene to oppose the deficit spending in the bill but it sure would be nice to let the public hear that their principle of reducing the deficit applies to both parties.

Annual Policy Summit

The South Carolina Small Business
Chamber of Commerce
Annual Policy Summit
December 13, 2011

6 to 8 p.m.

Join SCSBCC President Frank Knapp, Jr.
and members of the SCSBCC Board of Directors
discuss current policies and upcoming issues related to small business

Key Note:

Curtis Loftis, S.C. Treasurer

Enjoy gourmet catering and beverages including beer and wine
Sponsord by Spotted Salamander Catering and Houston's Low Country Grill

Location:
South Carolina Press Association
106 Outlet Pointe Boulevard

Click here for directions <http://cts.vresp.com/c/?TheSCSmallBusinessCh/314b9cd88f/c79162405a/f58b0f46a9>

$10 for Basic (free) members and non-members

Be sure to bring plenty of business cards for networking!
 See You Tomorrow Night!

email: sheila@scsbc.org   telephone: 803-252-5733

Tickets at the Door:
Complimentary for dues paying members

NPR exposes the BIG LIE

The millionaire-defenders in the U.S. Senate once again blocked a proposal to stop a big tax hike on 160 million, mostly middle-class, Americans that will go into effect January 1, 2012.  The reason given by the obstructionists once again was that the surtax on income over $1 million to pay for middle-class tax protection would hurt small business owners and stop them from hiring.

I and many small business organizations have railed against this BIG LIE for well over a year.  Very, very few small business owners make this kind of income--certainly none that you run into on Main Street. 

According to the Tax Policy Center only 1 percent of taxpayers reporting any business income make over $1 million a year.  As I pointed out in my blog on October 13^th, this means only about 45 South Carolinians could accept the challenge I made two days earlier for any one of these business owners making over $1 million to contact me to discuss this issue.

My challenge, as expected, went unanswered and today NPR released the results of its search for small business owners making over $1 million a year.

We wanted to talk to business owners who would be affected. So, NPR requested help from numerous Republican congressional offices, including House and Senate leadership. They were unable to produce a single millionaire job creator for us to interview.

So we went to the business groups that have been lobbying against the surtax. Again, three days after putting in a request, none of them was able to find someone for us to talk to.

Failing to have any of the millionaire-defenders in Congress and the big business organizations pony up the small business millionaires, NPR turned to Facebook.  Several responded and talked to NPR on the record.  Not one objected to the millionaire surtax and each said that their personal income tax has nothing to do with their business hiring decisions.

Of course Senator John Thune (R-S.D), a member of the millionaire-defender club, said that those business owners talking with NPR “were exceptions to the rule”. 

I have news for Senator Thune.  If you can’t deliver even one small business owner making over $1 million a year to back up the BIG LIE, then those that do step up are the rule.

Gotcha....well almost

My friend Eric Boehlert, senior fellow at Media Matters, strongly believes he was the target of a James O’Keefe-style scam to catch him saying something to discredit him in the eyes of his readers.  Actually I think his detractors are just jealous of how good Eric looks when appearing on MSNBC programs.  Anyway, read his story as reported in the Huffington Post today:

It was the middle of the day on Friday, and Eric Boehlert heard a knock on the door. A senior fellow at Media Matters, a nonprofit watchdog that challenges conservative news outlets, Boehlert works from his Montclair, N.J., home.

A short, bearded man stood outside, holding a clipboard and wearing a Verizon uniform. He asked Boehlert if he'd be willing to take a customer survey. Verizon had, perhaps coincidentally, been at the house a week earlier to handle a downed wire. Boehlert quickly agreed and noted that a Verizon worker had actually failed to show up when he said he would.

But as the survey went on, it started getting strange. "The only weird part before he got to his final question was he started telling me, 'Oh, you know, it's really tough out there, the economy, and I'm just happy to have a job,' and stuff like that, which I thought was weird for a customer rep to be telling one of his customers," Boehlert recalled to HuffPost.
Read more….

Corporate America's wealth

My friend Lew Prince finally found a bank willing to give him a $175,000 line of credit.  He had talked to six other banks since the summer of 2010 all of which turned him down because he wouldn’t put up his house for collateral, something they would never ask of a big business.

I tell you this story because what we typically hear from the big banking industry is that the reason they aren’t making more small business loans is because there is little demand for loans or the loan requests they receive are not from credit worthy businesses.  They don’t want to add risky loans to their portfolios.

So let’s look at Lew’s business, a 32-year old family business in St. Louis called Vintage Vinyl.  The business grosses well over $1 million a year, has 24 employees and has paid back on time all previous business loans with never a late payment.  By all accounts Vintage Vinyl is a successful small business with customers worldwide.

Every day across this country small businesses go to Small Business Development Centers, put together financial plans and promptly get them rejected by the banks.  The truth is that the banks, mostly big banks , alone are sitting on $1.6 trillion in reserves (80 times the $20 billion they had in reserve four years ago), money that could quickly jumpstart our economy according to a just released report from University of Massachusetts economists.

If America's largest banks and non-financial companies would just loosen their death-grip on a chunk of the $3.6 trillion in cash they're hoarding and move it into productive investments instead, the report estimates that about 19 million jobs would be created in the next three years, lowering the unemployment rate to under 5 percent.

It’s time for Congress to tell our financial institutions, most of whom the taxpayers bailed out to make them healthy, to put most of that cash they have sitting around to work or start paying taxes on excessive loan reserves.  Corporate America can complain all it wants about government being a problem but the reality is that our big corporations have no interest in helping the economy recover.

Amazon’s deal re-visited

The battle over state sales tax being collected by on-line retailers like Amazon has now moved to Congress.  Amazon, which this year won a battle in South Carolina receiving a reprieve from collecting sales tax on in-state sales in exchange for building a distribution center in Lexington County, apparently has now switched sides. 

The retail giant is supporting the Marketplace Fairness Act that would strip away the Supreme Court’s Quill decision that said on-line retailers without a physical presence in a state did not have to collect sales tax on purchases in that state.  The sales tax was still owed but it was the purchaser’s responsibility to pay it directly to their state.

If the federal legislation passes, the main opponents now are eBay and Overstock.com, all on-line retailers would be obligated to collect each state’s sales tax and remit it to the proper state.  The bill would exempt retailers with on-line sales of less than $500,000.

All this is good news for the nation’s small brick and mortar businesses that are at a severe competitive disadvantage because they have to charge sales tax but on-line retailers like Amazon do not. 

But passage of the federal legislation won’t appear to help South Carolina’s small businesses until 2016 because the legislation passed this year in the state specifically carves out a sales tax collection exemption only for Amazon to the exclusion of even all other on-line retailers.  Now the constitutionality of that special deal has been called into question.

In yesterday’s issue of Tax Analysts law professors James E. Rogers and Walter Hellerstein provide a scholarly legal assessment of South Carolina’s law regarding Amazon.  They conclude that South Carolina’s law violates the Commerce Clause of the Constitution because it treats certain out-of state on-line retailers (Amazon) different from other out-of-state on-line retailers. 

So even if the Marketplace Fairness Act with its bi-partisan support eventually is enacted, the constitutionality of South Carolina’s law needs to be challenged.  Any lawyers interested?

Zuccotti Park

I had the opportunity to visit Zuccotti Park in Lower Manhattan last Thursday.  No, I didn’t see Jackson Brown play for the Occupy Wall Street protestors and on-lookers. 

But I did meet Jesse La Greca who has become a media voice for the movement. 

This marks my fourth visit to an Occupy site including ours in Columbia, the opening day of Occupy DC and Occupy Seattle. 

Why am I still a big supporter of the non-violent Occupy movement? 

Last week the U.S. Senate couldn’t get enough votes to levy a 3.25% surtax on about 350,000 people with taxable incomes of OVER $1 million so that 160 million mostly middle-class taxpayers won’t see their payroll taxes increase up to $1500 per household.   The consequences of such an economic hit to working Americans would be a disaster for our small businesses.

While the millionaire-defenders  in Congress were obstructing, the New York Times reported on the state of millions of our children.  “Millions of American schoolchildren are receiving free or low-cost meals for the first time as their parents, many once solidly middle class, have lost jobs or homes during the economic crisis, qualifying their families for the decades-old safety-net program. “

So yes, I’m supporting the Occupy movement for the voice it has given to the 99% who have suffered in this economy due to the corporate greed on Wall Street and the stranglehold big corporate money has on Congress.  The public understands that our economic focus should be on growing small businesses on Main Street not growing the profits of multinational corporations. 

Issues on Small Business Lending

Here are two good articles that talk about the lack of lending to small businesses.

The first issue is the problem with regulators, not regulations. We have heard numerous complaints of inconsistency of regulators in how they deal with financial institutions regarding small business lending. Some banking regulators are overzealous when it comes to the risk of a small business loan.

The second story addresses the issue of financial institutions treating small business loans as they do big business loans. The issue here is why do financial institutions make small business lending decisions on personal equity and not just on the performance of the business? That’s what they do for big business lending, which is solely based on the ability of the business to pay.

These are crucial issues that need to be resolved for small business to start getting access to capital they need to grow.

We need more financial regulations...not less

The story below is must read for all, especially those who think financial reform (Dodd-Frank) went too far.  To all those in Congress who want to repeal Dodd-Frank, here’s the story about the big banks you are defending and why Dodd-Frank didn’t go far enough.

Bloomberg
11-28-11

Secret Fed Loans Gave Banks $13 Billion

By Bob Ivry, Bradley Keoun and Phil Kuntz

Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.

Read more

If you can't compete...attack the rules of the game

This week the U.S. House is expected to start voting on legislation to turn back regulations and make it nearly impossible for federal agencies to develop new regulations in the future. If that happens, Congress might as well just stop passing any new laws because the rules for implementing them will never be developed. 

One of the big targets for the anti-regulation crowd is Dodd-Frank, the financial reform that passed last year to try to put regulations of big financial institutions in place so we won’t repeat this great recession.

The majority party in the House, spurred on by the big banks, blame Dodd-Frank for stopping loans to small businesses.  But apparently what the real problem for these banks is that Dodd-Frank has fostered greater competition for the commercial and industrial (C&I) loan business and smaller banks are winning.

According to Jeff Harding, writing in the Daily Capitalist:

What we see is that C&I loans took off starting in the first quarter of 2011. While the data for large domestic banks shows steady C&I loan growth since the fourth quarter of 2009, small domestic bank C&I lending shot up in the first quarter of 2011, from zero base to $20 billion.  Even more surprising is that average loan size for small banks increased from about $100,000 to almost $650,000….The main reason for this sudden increase in loan activity is competition. Ever since Dodd-Frank, banks have been scrambling to figure out how to make more money, as many credit card and other account fees were prohibited in an attempt to protect consumers. One way to offset that loss is to gain more business customers, and there has been a scramble by both large and small banks for SME customers….Small banks have the most to gain or lose in this competition because SMEs are their territory. So they are pursuing customers. Many also believe that there is a window of opportunity with favorable spreads and thus the timing is critical to expand business before that window closes. The initial beneficiaries seem to be the banks in the $5 billion to $10 billion asset range, which are classified as small banks.

No wonder the big banks want to repeal Dodd-Frank with its unintended consequence of fostering loan competition.  They’re not doing so well in the “small-business friendly” department.

Unfortunately this new competition isn’t leading to more smaller loans in the $50,000 and under range that so many microenterprises need.  But still, Dodd-Frank is working so obviously it MUST die.