Experts Predict Short-Term Pain, Long-Term Gain

Small business owners from around the region heard a serious, but not unoptimistic, report on the 2008 State of Small Business this morning from two experts with national experience in small business operations around the country.

"We're in a rough patch now," but it will be small businesses that "will lead us out of it," Todd Stottlemyer, president and CEO of the National Federation of Independent Business, told the full crowd gathered for the Loudoun Chamber of Commerce Public Policy breakfast at Lansdowne Resort.

Public Policy Committee Chairwoman Mindy Williams welcomed Stottlemyer and Tom Sullivan, former chief counsel for Advocacy U.S. Small Business Administration, as keynote speakers.

The National Federation of Independent Business, the oldest business organization in the United States, and Stottlemyer lauded the energy and optimism he sees among small business owners as he traverses the country.

Calling small businesses "the engine of the American economy," he said, "the only net job creation is in small business."

Stottlemyer said, in addition to the stock market collapse, rising unemployment, which he cautioned was likely to get worse, and low consumer confidence, and the country's "record level of personal and national debt," some $10 trillion in governmental debt alone, makes America a debtor nation.

And no debtor nation with a negative savings rate and the huge debt as carried in the U.S. today can remain great, he warned.

With 70 percent of the U.S. economy based on consumption, the decline in consumer spending and businesses cutting hiring and capital costs while the credit market is frozen, "We're not in a great spot," Stottlemyer said.

On the other hand, in previous hard economic times, creativity led to the creation of companies that are now giants of American industry, and will happen again, Stollemyer predicted.

Stottlemyer and Sullivan cited taxes and healthcare as the two most pressing issues for the small business sectors.

Business people around the country want a simpler, fairer and more predictable tax policy that would assist them with planning. Most small business owners are taxed at marginal tax rates, and the top two rates are proposed to increase, Stottlemyer said, cautioning that rates need to be kept low to encourage job creation and investment.

Healthcare, however, is the number one concern for small businesses, presently accounting for 16 percent of the gross domestic product-and predicted to rise to 20 percent in five years.

"That's unsustainable," Stottlemyer said, noting that of the 47 million uninsured in the country, 28 million are from the small business sector. The cost of healthcare has now become an economic issue, he said, noting it is the number one cause of personal bankruptcies in the nation.

Whether it's big business or small, "we are agreed, we must have reform," Stottlemyer said, saying the NFIB is working with partners to bring about a fairer system in which there is a strong private healthcare component, a neutral tax code and larger risk pools.

Both speakers said business owners should be able to buy health insurance anywhere, but in a lot of states only one provider is permitted. The different plans in the 50 states escalate the cost, Sullivan said, stressing the need for one plan. Some 25 percent to 30 percent of "what we pay is in administrative costs," Stottlemyer said, noting there too many different conditions required to be covered in different states. Interstate pooling of bigger groups would spread the risk and make insurance more cost-effective.

And, he cautioned, "If we learned anything from 1993/94, if we want reform it must be bi-partisan."

Sullivan, who said his former employer has been cited as the "entrepreneur's best friend in Washington," acting as a resource and sort of Chamber of Commerce within the federal government, said being involved was crucial to achieve fair rules and regulations.

The SBA assists small business owners by providing research data they can use in approaching governments. "We talk about small business owners as powerful innovators, 12 percent to 14 percent more innovative than large businesses," he said.

The agency also provides great assistance through its legal team, which ensures the government considers the impact on small business of any proposed regulation and considers less burdensome alternatives before actually enacting any new laws.

Regulators, he said, were often misinformed and did not truly understand the problems of small business. But, if small business owners worked with them, either at the state or local level, they could affect proposed legislation and make it better.

Whoever becomes president Tuesday, Sullivan said, will face a trend toward more regulation.

"You need to be involved, help government to do a better job," he said.

Both Sullivan and Stottlemyer agreed with one insurance agent who called the current economic situation a "runaway train."

She asked how to stop it, saying business owners needed to become small business warriors.

Among the suggestions offered by Sullivan and Stottlemyer were: publicly thanking lawmakers and policymakers in writing when they acted in support of business interests; remaining active and informed in policy focus groups; not assuming lawmakers always make informed or beneficial decisions for small businesses; and taking serious action to change from being a debtor nation.