The Democrats and Small Business
With Democrats in control of Congress, how will small business policy change?
Now that we've absorbed the news of how Democrats, as the White House put it, "whupped" the
Republicans in the mid-term elections, it's time for the next question: How will
the shift to Democratic leadership
in the House and Senate change Washington's policies that affect small business?
For the past six years the small business agenda in Congress has been dominated by the Republican focus on tax cuts for the wealthy, and reform of tort, regulatory and bankruptcy systems. But, even though Democratic legislative initiatives were stymied, Democratic legislators continued to craft small-business policy, including proposals put forth in 2004 and 2006 by the incoming Speaker of the House Nancy Pelosi.
Now, you can expect to see these measures advance:
HEALTH CARE
The GOP-led effort to enact a far-ranging association health insurance plan that
would allow small business owners to pool their buying power failed in the
face of bipartisan opposition to language that would have superseded state
insurance laws, resulting in lower levels of mandated coverage and enabling
associations to avoid covering unhealthy groups, the opponents said. (See
earlier story from SBR).
An alternative Democratic bill, sponsored by Senators Richard Durbin of Illinois
and Blanche Lincoln of Arkansas, may emerge now. It, too, would reduce premiums
by allowing businesses with 100 employees or fewer to buy en masse. While there
would be a choice of coverage provided by private insurers, it would be managed
by the same agency that oversees health insurance for federal employees. The
bill has widespread support among Democratic senators.
In the House of Representatives, Tom Allen of Maine has garnered national political attention, including a recent ABC News report, for his proposed small business health care legislation, which is similar to the Senate bill but focuses on businesses with 50 employees and less. "A large proportion of the 46 million uninsured individuals, and millions more who are underinsured, are working in America's small businesses. Expanding health care coverage for small business owners and their employees should be a top priority for Congress," Allen says. (Allen has sponsored an omnibus small business bill that addresses a range of issues including, energy, tax credits and depreciation, immigration, SBA programs and federal contracting).
ACCESS TO CAPITAL
Over the past six years, the Small Business Administration (SBA) budget has been
cut almost 50%. Democratic members, occasionally joined by Republican lawmakers,
have attempted to restore the cuts, with modest success. In the 110th Congress,
this is likely to change. The ranking Democrats of the House and Senate Small
Business Committees, Nydia Velasquez of New York and John Kerry of Massachusetts,
respectively, are expected to become the new committee chairs and push to restore
funding for the SBA's flagship 7(a) loan program and initiatives such as the
Manufacturing Extension Partnership (MEP), the Alternative Technology Program
(ATP) and the Small Business Innovation Research Program (SBIR). In addition
to the Small Business Committees, other committees, such as House Energy and
Commerce, House Ways and Means, Senate Finance and Senate Health, Education,
Labor & Pensions, will take up legislation aimed at small business.
Access to capital and small business-specific regulatory reform are part of the
Democrats' 2006
Innovation Agenda, and are likely to be given positive consideration. "I
look forward to proactively developing policies that will provide this nation's
24 million small businesses with the resources they need to succeed in today's
challenging marketplace - from lowering the cost of capital to reducing regulatory
burdens for entrepreneurs," Velazquez said in a statement. .
OTHER AREAS AFFECTING SMALL BUSINESS:
- Minimum wage. This is Pelosi's top priority and, on the heels of six successful state-ballot initiatives, the first increase in the federal minimum wage in 10 years is likely to pass. While opponents often cite the impact of the minimum wage on small employers, a recent Gallup Survey found that the wage law does not have an inordinate impact on small companies and almost half of small business owners actually support an increase.
- Taxes: Full repeal of the estate tax is probably dead, but Democrats were working last year on a compromise reform bill that would have raised the exclusion to $3.5 million ($7 million per couple) by 2011, which according to the Center on Budget and Policy Priorities, would reduce the pool of taxable estates in which a small business or farm is the main asset to 50 annually. Democrats are likely to revisit the Alternative Minimum Tax (AMT), which hits many small business owners.
- Energy: Fuel-cost relief in the form of tax credits, incentives for companies developing alternative energy and conservation measures.
- Increased deductibility of small business expenses: a bipartisan issue that will likely succeed. This may be impeded by pressures to trim the budget deficit.
- Regulations: Patent reform and Sarbanes-Oxley reform for small business are part of the Democrats’ Innovation Agenda.
- Oversight. Democrats have been very critical of the Bush administration's record in making sure that small-business set-asides for federal contracts actually benefit small business. Democrats were also highly critical of the SBA's performance in the wake of Hurricanes Katrina and Rita, but, they have been unable to hold hearings on either issue.
With a thin Democratic margin in the Senate, the swing vote on many initiatives may be President Bush's veto. To succeed, Democrats must reach across the aisle and pass legislation with Republican support. "As Chairman of the Committee on Small Business and Entrepreneurship, I would want to keep the tradition of working across party lines to help small businesses," said Kerry. "I'd want to figure out how to use SBA loans and counseling to reach more minorities, entrepreneurs in rural areas, disabled vets and reservists, and the Native American communities that are suffering from some of this country's highest unemployment and poverty. We also need to reform SBA disaster assistance and response, and look for ways beyond the SBA to help small businesses start and grow."
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John Arensmeyer is Founder and CEO of Small Business Majority, a national small business advocacy organization.
