NEW YORK -- Small business owners' concerns about government policies that affect their businesses have intensified after the deep recession and a recovery that doesn't feel much better.
Karen Kerrigan serves the Small Business & Entrepreneurship Council as president and Raymond Keating is the group's chief economist. The SBEC, an 18-year-old group with 100,000 members, takes a stand similar to other groups: Small businesses are struggling because they have to contend with too many taxes and regulations. And taxes and regulations are words that are coming up a lot in presidential campaign speeches, videos and commercials.
Both are worried about what they are hearing from small manufacturers and are unhappy about regulations that some agencies are creating that are bad for small business. Still, they can identify pockets of the country that are experiencing some improvement and can name government agencies that are doing a good job helping small businesses win contracts.
Kerrigan, whose background includes work at nonprofit groups, founded the SBEC in 1994 out of the remnants of a group called the Small Business Tax Action Committee. Five years ago, the group took on its current name.
Keating came to the SBEC a year after its founding. He had worked as an analyst for the investment firm Kidder, Peabody in the 1980s and then headed a nonprofit group, New York Citizens for a Sound Economy.
Both spoke to The Associated Press recently about issues facing small businesses, and the upcoming elections. Here are excerpts from the conversation, edited for clarity and brevity:
Q: Is small business a bigger in this election than in past elections?
KERRIGAN: I do think it's a key issue, a top issue and small business is getting more attention and is the focus from both campaigns. And I think primarily this is because of economic conditions and the weak economy over the past four years -- and this growing understanding within the public and certainly elected officials and those running for office that we do need robust job creation in the small business sector if we're going to get back to strong levels of hiring and robust levels of economic growth. Over the last four years I think both parties have been hitting on this. There's been certainly a lot of legislation and policies directed toward this sector on the Republican side, certainly a lot of legislation that the House passed over the year or so. And then in the White House the president has had his startup initiative. The JOBS (Jumpstart Our Business Startups) Act was a huge piece of legislation that both parties agreed to and it passed with wide bipartisan support. ... The other issue is the type of policies that were pushed at the beginning of the Obama administration, and I think specifically as it relates to the health care law. A lot of small businesses to this day are very much opposed to the health care law and it continues to get a lot of publicity in terms of its costs, its unintended consequences and whether it's really going to lower the cost for business owners and their employees. ...
Recently, obviously, the president's comments about, "you didn't build that," that again has put small business front and center. A lot of business owners get offended by that, even though the president said, well, gee, that was taken out of context. Again, I think it just heightens small business and the role that small business play in this economy to even greater levels.
KEATING: The key here is the fact that the economy has done so poorly for over four and a-half years. That's going to bring even greater focus in a political campaign on small business because I think most people understand that small business are the engines of economic growth of job creation and innovation. Small businesses are always mentioned in campaigns and always favorably, no matter which side of the political aisle you're looking at. But just the reality of the current economic situation amplifies this tremendously. And you can tell when you listen to both sides out on the campaign trail, you can see that small businesses just keep getting mentioned. ... The intensity level is much higher than in the past.
Q: What are the biggest issues in this campaign for your members?
KERRIGAN: They're very concerned about the economic outlook and the financial stability of their firms and their competitiveness moving forward. That's not at all being helped in terms of government policies. ... They're concerned about the expiring tax measures and what's going to happen with the tax code. It didn't start when everyone else started talking about the fiscal cliff. It's been on their mind for a longer period of time because they do long-term planning in terms of their of their businesses and what kind of resources they're going to have for investment, pay down debt etc. ... We've talked about uncertainty so much. Now I think intensity is the new word. The intensity of their concerns has definitely picked up not only now because of this looming (tax) deadline and the threat that poses from an economic perspective on their firms. But also you have a host of other issues. ... We have the new health care law. Many continue to see their costs go up, not down. They don't believe this is going to be good for their businesses. You have rising prices when it comes to energy and gas. Supplies, raw materials. So they're being squeezed from an economic perspective. ...
They've been operating in four and a-half or five years of economic instability. ... They have very little confidence in terms of their political leaders and their ability to get things done. And unfortunately that's having an impact on their confidence.
KEATING: Across the board, uncertainty is still a word that needs to be used. When you look on the policy front, there's a great deal of questions in general. The health care law. There's a whole host of questions on the tax cliff, and what might happen there, with the Congressional Budget Office making clear that if current tax law stands, you're going to see us back into recession in the first half of 2013. So that just adds to the uncertainties, the doubts of small business. If you factor in the presidential election, no matter which side you happen to be on, who knows how that's going to turn out. I think the only thing that people are sure of is that it's going to be a late night.
Q. What parts of the economy or the country look stronger or weaker?
KEATING: Stronger? That question is a real challenge. It's just very difficult when you look at the extended period that we're in with such a deep recession and such a poor recovery that some people think we're still in a recession. ... It's very difficult to pick out a good place. One of the things about this recovery is, not only has it been so poor, but you get those little bits of hope, maybe a jobs number that comes in OK, some profit numbers that are all right for a while. But then they fade away very quickly. I think when you bring that down to the small business level, it's just very difficult to pick out an area where things are just rocking. ... Even the ones that are doing well in this environment have worries and concerns.
KERRIGAN: We live in a bubble here in the Washington, D.C., area. It has been able to withstand the recession and economic downturn. You see that in the health of the real estate sector and the housing market. It's not reality here compared with the rest of the country. You do have a wide array of businesses in northern Virginia, D.C., Maryland, that are doing OK.
But even in this area, with the whole threat of (defense budget cuts), talk with government contractors and they're like, wow, we're in the same boat now as a lot of these other businesses, not knowing what's going to happen. ... You also have small and mid-sized businesses that subcontract with these contractors.
One of the sectors that has done better than most industries are the small and mid-size firms in the tech sector because there continues to be innovation and investment. That's developed whole other industries -- the mobile app industry. ... But while access to growth capital has not been a major concern with that industry, we along with the Financial Services Roundtable put out a survey in November that broke down the different industries within the tech sector, and their No. 1 concern at that point was access to growth capital. So even that sector too is beginning to feel the heat and feel a lot more uncertain.
KEATING: One other area that has been mentioned as a positive is North Dakota. They've become a tremendous energy producer with the change in technology, with fracking. They've become the No. 2 oil producer. So things have been rocking and rolling in one state, the unemployment rate is 3 percent in North Dakota.
KERRIGAN: The shale region as well -- pockets of Pennsylvania and Ohio. There's a lot of activity with fracking, and different types of small business have benefited from that. Your typical retail mom and pop and many small businesses that operate in that industry. ... But we're hearing a lot of bad news from manufacturers in terms of their orders. One of my members just told me I got a month worth of work on the books, where it was four or five months out. He's got large customers starting to hold orders. That's not good news.
Q: What's your sense of how the housing market is doing? We saw some improvement earlier this year.
KEATING: It has nowhere to go but up. The question with housing has been for some time is, when we a (better) number here or there, is it actually the sign of an upturn, or is it bouncing along the bottom? This has basically been a depression in housing, really starting in late `05, so this has been an astounding extended period. So beyond that, the whole question is ... are we done bouncing along the bottom and are we now going to start moving in a positive direction? Housing goes back to the overall state of the economy. Are businesses creating jobs and do people therefore feel secure? Do they feel like they're going to remain employed, do they feel like their incomes are going to go up or are they still facing stagnant or declining income? So all those questions along with a whole host of others come into the housing mix and again, I don't see any clarity on it.
Q. What parts of the federal government do you think are doing a good job for small business?
KERRIGAN: Certainly, the SBA is obviously there to serve small businesses and I think a lot of their core programs do help, like the Small Business Development Centers, and it provides funding to SCORE (the organization that offers free advice to small businesses). They provide funding to the Women's Business Centers. I think the SBA is doing a good job in terms of variety of its different training programs. The technical training that it provides on its website. Resources for how to go global, how to do business with the federal government. They do provide the small business some good material to help them navigate those two markets.
I would say within the SBA itself, there is the Office of Advocacy, which is the voice of small business within government and holds the federal government accountable to what they're supposed to be doing to give small business a voice at the table when it comes to the regulatory process. When it comes to government procurement and government contracting, there are a couple of agencies that stand out that we wish other federal government departments and agencies would model themselves after. You have the Department of Energy and Department of Transportation. They do a pretty good job of working with the small business community and letting them know what their contracting and procurement opportunities are. There is the taxpayer advocate within the Department of the Treasury, the IRS. They do a good job looking out for the interests of small businesses. ... And finally, moving over to the Department of Commerce, particularly within the International Trade Administration, they do a really good job providing business groups and business owners with information on doing business in international markets. ...
We wish that all the federal government agencies and departments would have to comply with the Small Business Regulatory Enforcement Fairness Act ... which would make them look at how their major regulations impact small business. But only a certain number of departments and agencies are covered by that. Some of these agencies like the Department of Labor and Environmental Protection Agency are quite frankly out of control in terms of the regulations that they're pumping out without really considering what the impact will be on small business.