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Policy Matters: Self Is The New Employment
a weekly column
I have written many, many times, both here and at The Journal Blog , that I am not an economist. But I have recently discovered that if I were an economist, I could be loosely classified as a Neo-Keynesian.
That is because of my lack of faith in the wisdom of markets.
If the last ten years have taught us anything, it is that both money and wealth will gravitate to themselves in much the same way that water molecules are attracted to each other.
What that means, if you're talking about water, is that wet sponges soak up more liquid than dry sponges. If you're talking about money and wealth, it means that full purses soak the economy more thoroughly than empty ones.
That is why the pre-occupation of the White House and Congress with economic growth, and their apparent belief that markets are sacrosanct, might best be described as misguided.
Read article
This week's news briefs
NSBA Urges Congress to Remember Small Business
Late last month, the National Small Business Association (NSBA) sent a letter to House Speaker Nancy Pelosi over the signature of organization president Todd McCracken, urging Congress to consider a number of small business provisions for inclusion in the forthcoming economic stimulus package. Among them were setting aside 23% of infrastructure stimulus contracting for small firms, requiring banks to use some of those bailout funds to expand their small business lending, and temporarily eliminating lender and borrower fees from the SBA 7(a) and 504 guaranteed loan programs.
Even better, McCracken took advantage of the opportunity to remind Congress of just how important small firms are to the economy and how thoroughly they have been ignored so far in all stimulus discussions. He pointed out that the NSBA's proposals amount to a fraction of the anticipated cost of the stimulus package and added, "Throwing more and more money at big businesses, as they shed more and more jobs, will not cure our ailing economy—but fostering a thriving small-business community can." It doesn't get much better than that. Hats off to the NSBA for sending the letter on behalf of small businesses and double kudos to Mr. McCracken for refusing to pull his punches.
Initial Small Biz Moves in the Senate
It seems these days that Congress, having been sworn in last week, has a bet with itself to see how much can be accomplished before January 20th. Over in the Senate, for example, the scramble is on to hold as many confirmation hearings as possible. That's only practical. Once he becomes unhyphenated President Barack Obama, it'll be difficult for him to start playing pick-a-crisis without having his Cabinet in place. As of the close of business last Friday, however, one confirmation hearing that had yet to be scheduled was for SBA Administrator Karen Mills before the Senate Committee on Small Business and Entrepreneurship.
That's not to say that small businesses have been abandoned already. Within the first 200 pieces of legislation introduced on the Senate floor last Tuesday was the very first small business bill originating in the Senate during the 111th Congress. The bill extends the current $250,000 Section 179 expensing cap and establishes a 5-year carryback on net operating losses, both of which will be of limited use to microbusinesses. However, in case this looks distressingly like business-as-usual, it is worth nothing that Chairwoman Mary Landrieu has asked for stimulus provision suggestions from among her contacts in the microenterprise development community. The suggestions she gets may or may not make it into law but at least she asked. That's encouraging.
Microbusinesses Feel Recession Pinch
Right now, America's microbusinesses are feeling as pessimistic about the economy as everybody else, according to the results of a survey released by the National Association for the Self-Employed (NASE) last week. More than 70% of those surveyed indicated that the slow economy has had a significant or moderate impact on their business. In addition, 46% of microbusiness owners say the current downturn is the worst they have ever experienced. Perhaps more worrisome is the fact that, for 26% of microbusinesses, this is the very first economic downturn they have experienced. In a situation like this, experience is often your friend.
Interestingly, there was no overwhelming favorite when the NASE asked survey respondents what steps they were considering taking to address their business challenges. Top choices included scaling back on inventory or equipment purchases (17%), dipping into personal savings to stay afloat (14%), downsizing staff or delaying new hires (11%), and lowering prices (10%). Tied for fifth place on the list were: increasing use of credit cards to deal with cash flow issues, cutting benefits for the business owner and/or employees, and cutting salaries for the business owner and/or employees. That's another major difference between microbusiness owners and someone like Bob Nardelli. Microbusiness owners are willing to take a pay cut to keep their firms afloat.
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