Romney-Ryan's promise of austerity for small businesses

With Congressman Paul Ryan on the ticket with Mitt Romney, it is clear that a Romney-Ryan administration would choose eliminating the federal deficit over creating jobs as their economic plan. 

So what does this mean for small businesses if $6 trillion was cut from federal spending over the next 10 years as proposed by Mr. Ryan and supported by Mr. Romney? 

I’ve warned about such an austerity approach.  It is the road Europe chose during the Great Recession and the economic results have been disastrous.  Last Friday I told you about the dramatic rise in abandoned babies and children by families in Europe that can’t afford to feed and clothe them.

In today’s editorial the New York Times writes,

More than three-fifths of the cuts proposed by Mr. Ryan come from programs for low-income Americans. These cuts are so severe that the nation’s Catholic bishops protested the proposal as failing to meet society’s moral obligations, saying the plans “will hurt hungry children, poor families, vulnerable seniors.”

But aside from our concern for the less fortunate, what happens when government stops supporting the vulnerable in our society or helping states and local governments with education and first responder financing or investing in roads and bridges?  The answer is a dramatic drop in money on Main Street. 

The funds for these programs aren’t being spent on European vacations or the buying of more stocks or paying for big bonuses for corporate executives.  That is what the wealthy and big corporations will do with their $4 trillion in tax cuts if the Romney-Ryan plan is enacted. 

The money targeted for the austerity budget is being spent today in your local communities.

Main Street will suffer as it has in Europe and especially in Greece and Italy.  And for what?  Even the Ryan budget plan wouldn’t balance the federal budget for 30 years. 

Government austerity is a failed model.  While there will be no austerity for the wealthy and multinational corporations, there will be plenty for small businesses.

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. 

No more "brother-in-law" excuse

All of us have heard the anecdotal stories of how somebody’s brother-in-law is unemployed but yet won’t try to get a job because he’s making more money collecting an unemployment check. 

Some politicians even use these stories to explain the high unemployment numbers.  “If they weren’t getting paid,” they say, “they’d be taking all these jobs that are available.” 

This blame the victim talk might have been easy to sell when most unemployed were receiving benefits as they were early last year when 75% fit that description.  But not now.

Unemployment data now shows that there is so much chronic unemployment that only 48% are still receiving benefits.  The rest have timed out at 99 weeks or even much less depending on the state.

This trend will continue to get worse even if Congress once again passes the needed extension of federal unemployment benefits to continue to allow those looking for work to have some income for up to 99 weeks.   

More unemployed without benefits will mean less money on Main Street.  Less money on Main Street means small businesses will not be creating jobs and will probably have to let employees go due to lack of customers. 

It’s a vicious cycle that needs to be broken.  Since the big corporations sitting on piles of money won’t help, then government must step in to help create jobs.  Call that any name you want but I call it rescuing our small businesses that didn’t create this financial mess in the first place. 

Trickle down tax cuts: A broken record

The Hill's Congressional Blog
October 27, 2011

By Lew Prince, managing partner of Vintage Vinyl, an independent music store in St. Louis.   

I’m one of those “job creators” members of Congress profess to admire so much. Thirty-two years ago, my partner and I started a small business with $300 worth of old records and a booth at the local farmers market. We’re now the biggest independent music store in St. Louis and employ 22 people. Our annual revenue is around $2 million. We’re a classic American success story.

Our incomes are typical for small business owners, which means we’re not in the top tax brackets. We’ve always been at or below the 25 percent tax bracket. So we’re trying to figure out how the new tax proposal from Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, is supposed to help small businesses like ours create jobs.

Rep. Camp wants to cut top individual and corporate tax rates from 35 percent to 25 percent. He would reward U.S. multinational corporations that have gamed the system with a 5.25 percent tax rate on U.S. profits they have disguised as “foreign” earnings. All this will be great for gigantic multinational corporations, Wall Street and the fat cats who attend those $1,000-a-plate and up political fundraisers. It will be great for the corporate lobbyists gaming our political system every day.

It won’t help small business, and it won’t help America.

Rep. Camp’s proposal to give massive new tax cuts to America’s largest corporations and wealthiest families comes just as we learn from a Congressional Budget Office report that after-tax inflation-adjusted incomes for the richest one percent of Americans skyrocketed 275 percent between 1979 and 2007.

Chairman Camp wants us to believe that cutting the top rate to 25 percent benefits America’s small business owners. Most small business owners wouldn’t see a penny of tax cuts under this proposal.

And, anyone who thinks lowering my tax rate would affect hiring knows diddlysquat about running a business. I hire more workers if I think I’ll do more business. The costs of finding, hiring and paying new employees are business expenses. They’re deducted up-front from taxable income. Any business paying taxes on these expenses needs to fire their accountant.

The biggest challenge facing my business isn’t the taxes we pay. It’s the decline in customer demand and the continued hollowing out of our middle class, our infrastructure and our economy. It breaks my heart when my customers sell record collections built over a lifetime, to pay their rent, heating bills or medical expenses.

We’ve tried trickle-down tax cuts to create jobs. How’d that work out? Tax-Cutter-in-Chief, George W. Bush, had the worst job creation record since 1939. What trickled down were economic meltdown, foreclosures, unemployment, budget cuts and business closures.

When Congress proposes stimulating the economy with more tax cuts for those who are far ahead of the rest of us, they do nothing to help my customers or my business. When the wealthy get more tax cuts, it transfers the burden of paying for government services to businesses like mine and to my customers, already living paycheck to paycheck.

If members of Congress want to help small business, they should choose policies that actually create jobs. St. Louis, like many cities, laid off teachers, first responders and construction workers – the people who spend money locally, the people we need for a healthy economy. The last thing we need is more cutbacks to pay for more tax cuts at the top.

Job creation today and a brighter future for our kids and grandkids lies in better education, 21st Century infrastructure, universal broadband and renewable energy. How do the advocates of more tax cuts for the affluent expect to compete with emerging economic superpowers if we don’t invest in our nation’s future? Where do they expect money for that investment to come from, if not from those who have profited most from the investment our parents and grandparents made to build the nation they handed us?

Trickle-down economics has been a miserable failure. It delivered economic ruin for many and riches for a few. It hasn’t brought shared prosperity, but driven us further apart. It increased the economic and political power of Wall Street and Big Business over Main Street and small business.

Trickle-down economics is a broken record. It’s time to let it go.

Lew Prince is managing partner of Vintage Vinyl, an independent music store in St. Louis. He is also a member of Business for Shared Prosperity, a national network of forward-thinking business owners and executives.

Source:
http://thehill.com/blogs/congress-blog/economy-a-budget/190277-trickle-down-tax-cuts-a-broken-record

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.


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.

Wake up call for business owners -- big and small

Very interesting piece by financial columnist James Surowiecki, excerpted from The New Yorker:

ILLUSTRATION: CHRISTOPH NIEMANN 

(reposted with respect from The New Yorker)

"In the nineteen-eighties, a new kind of chain store came to dominate American shopping: the “category killer.” These stores killed off all competition in a category by stocking a near-endless variety of products at prices that small retailers couldn’t match. Across America, independent stores went out of business, and the suburban landscape became freckled with Toys R Us, CompUSA, and Home Depot superstores. 

But the category killers’ reign turned out to be more fragile than expected. In the past decade, CompUSA and Circuit City have disappeared. Toys R Us has struggled to stay afloat, and Barnes & Noble is in the midst of a boardroom battle prompted by financial woes. And, last month, Blockbuster finally admitted the inevitable and declared Chapter 11."

"The obvious reason for all this is the Internet; Blockbuster’s demise, for one, was inextricably linked to the success of Netflix. But this raises a deeper question: why didn’t the category killers colonize the Web the way they colonized suburbia? That was what pundits expected. Companies like Blockbuster, the argument went, had customer expertise, sophisticated inventory management, and strong brands. And, unlike the new Internet companies, they’d be able to offer customers both e-commerce and physical stores—“clicks and mortar. It seemed like the perfect combination..." (Read more http://www.newyorker.com/talk/financial/2010/10/18/101018ta_talk_surowiecki#ixzz12Alkr2YC)

While the demise of any business is not good news for a community, this turn of events does raise some good questions for small business owners.

What are *you* doing to prepare your small business for the ongoing technological shifts in the way our culture buys and sells?

Part of our mission here at the nonprofit South Carolina Small Business Chamber of Commerce is to help SC's small business community grow and maximize ROI.



Two simple action items for you:

1. Join our free BuySC online business directory at http://www.buysc.org!

2. Come to our next small business seminar!
 


BuySC Micro-Conference: 
5 Steps To Business Freedom with Keith Spiro

Wednesday, November 10
6:00pm - 8:00pm

Olympia Room, Second Floor of the 701 Whaley Building

701 Whaley Street

Columbia, SC, 29201

Price: Free for paying SCSBCC members / $5 Basic Members (free membership) /$10 for non-members. 

Become a member for free, and save $5!

Refreshments and hors d'oeuvres for the reception will be provided courtesy of our event sponsor: 

Mac's On Main!

Please register at www.buysc.eventbrite.com

 

To learn more about SCSBCC membership, please go to http://www.scsbc.org/membership

About the Lecture:

Why do 90% of businesses fail within the first 10 years?

* 78% lack a solid business plan
* 73% are being overly optimistic about sales
* 77% are not pricing their products or services properly
* 70% don't recognize or ignore their weaknesses and don't seek help

Turn those threats to your company into business freedom. Come learn concrete practical ways to steer clear and head toward freedom in your business.

About the SCSBCC:

The South Carolina Small Business Chamber of Commerce is a non-profit advocacy organization representing the general interests of small business.

For more information please go to www.scsbc.org, www.buysc.org or contact Stephanie Lombardo, Membership Coordinator at 803-252-5733 / Stephanie@scsbc.org