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Economy

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Associated Press photos
President Obama meets with small business owners in Seattle in August 2010. Federal policies on health care and taxes appear as another economic threat, leaders say.

Uncertainty looms over small businesses

Agency’s leaders see tax, health care decisions as crucial

In South Carolina in May 2011, presidential candidate Mitt Romney readies for a lunch with small business owners, among whom economic worries are growing stronger.

– 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.

The Small Business & Entrepreneurship Council, an 18-year-old group with 100,000 members, takes a stand similar to that of 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.

Karen Kerrigan serves as SBEC president, and Raymond Keating is the group’s chief economist. 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 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.

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. 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.

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.

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.

Q. What’s your sense of how the housing market is doing? We saw some improvement this year.

Keating: It has nowhere to go but up. The question with housing has been for some time: when we get 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.

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