Election of 2006
November 2, 2006
Q:
Steve -- What do you make of this election insofar as small business goes?
Certainly there is a lot riding on it. Is that true for small business
too? -- Jill
A: While I, like most of you
I am sure, have strongly-held political beliefs, I try mightily to keep them out
of this column and hope I succeed. However, sometimes politics and small
business intersect, and when they do, political affairs are an appropriate
topic, but even then, let me lead with this caveat: My only purpose when I
discuss politics in this column is to discuss how political life may effect
entrepreneurship.
OK, with that out of the way, there is no doubt that the election of 2006 will have some fairly profound effects on the business landscape.
The first is that because it seems likely today that the Democrats will take back the House, we will once again have divided government. I recall during the 1990s, when Democrats controlled the executive branch and Republicans controlled the legislative branch that there was much talk of "gridlock" in Washington. But do you know what? Gridlock was not so bad. Too much power in one party, whatever the party, seems to ill serve both that party and the country.
So, ironically, with gridlock poised for a comeback, legislative change is in the air.
The beauty of divided government is that both parties are forced to compromise to get anything done, and that alone is usually good for all of us. For instance, it is likely that one result of a Democratic win would be that the House will pass an increase in the minimum wage law. Now, this is not a radical idea:
Did you know that 17 states already have minimum wages higher than the national mandate?
The national minimum wage has not been raised in 10 years.
Whether it becomes law is another matter altogether, but it should.
What else could we expect if the Democrats control the House? The conventional wisdom is that they will try to raise business taxes, and that may be true. At a minimum, they will undoubtedly pass legislation to roll back some of President Bush's tax cuts on the richest Americans.
What else might we expect after this election? One way to know is to look at the competing legislation proposed by both parties. At the beginning of the summer, both Republicans and Democrats introduced legislation designed to help small business:
The Democrats' bill called for the government to increase the amount it contracts with small business from 23% of all federal contracts to 30%. While that may sound good, the 23% figure has never been met, so a raise to 30% is nothing but a nice, albeit worthless, gesture.
The Republicans called for an increase of the Small Businesses Administration's bread-and-butter loan program, the 7(a) loan. Again, this sounds great, but given the Republicans have controlled the House, Senate, and Presidency for the past six years, they could have passed that law already, if they really wanted to.
So where does that leave us? Nancy Pelosi, the Speaker-to-be if the Democrats do win, has said that, "Democrats recognize the need to create a competitive small business environment for innovation. Therefore, our agenda calls for affordable health insurance, small business financial support and technical assistance, and reduced regulation. Our agenda [also] commits to protecting the intellectual property of American innovators worldwide."
Again, that all sounds great, but to really expect that a Democratic House and a Republican Senate and President will find any common ground on health care, intellectual property, or regulatory reform is silly.
Maybe the best we can hope for is that they check each other's worst instincts, and hey, that may not be half bad.
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Today's tip: Not all businesses are eligible for SBA loans. Real estate investment companies, businesses engaged in speculative, firms involved in lending, and any business using a pyramid sales structure are all ineligible for SBA loans.
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