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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | NOVEMBER 14, 2000 MANAGEMENT Small Biz Girds for the Gridlock The uncertain Presidency and close congressional margins spell trouble for reforms entrepreneurs want to see enacted. But staying with the status quo beats going on the defensive
Lobbying groups like the National Federation of Independent Business (NFIB) and the Small Business Survival Committee (SBSC) were hoping GOP lawmakers -- who they say are more in line with the small-biz agenda of easing government regulation and cutting taxes -- would gain more seats in Congress. Here's what they got: In the Senate, with the Washington race yet to be decided, Republicans hold 50 seats, compared to Democrats with 49. In the House, Republicans control 221 seats, compared to Democrats at 212. With Republicans barely holding onto a majority, it's doubtful that either party will be able to push through an ideologically driven agenda in the next session. "This precludes sweeping, in-your-face reform," says Greg Casey, president of the Business Industry Political Action Committee (BIPAC). "The next Congress has to be about coalition-building, or else nothing will get done." DEVASTATING BLOW. But some business leaders welcome gridlock. As long as the economy continues to roll along, many prefer that government stay on the sidelines. This is especially important for small businesses, which don't have the deep pockets of their corporate brethren to lobby against unfavorable government regulations. Trouble is, gridlock is also likely to bottle up the issues small-biz supports. According to the NFIB, the No. 1 issue driving small biz to the polls on Nov. 7 was the high cost of health care. Small businesses often pay 40% more for coverage than larger companies -- a potentially devastating burden on companies already beset by other woes. Most small business advocacy groups favor the Republican platform for health care. It seeks to establish Association Health Plans (AHPs), which would allow small businesses to band together and qualify for the same rates as larger companies. On the other hand, the Democratic platform favors a 25% refundable tax credit off premiums for small businesses that provide employees with health care. Even on issues where partisan lines haven't been drawn, don't expect much to get done. Many small businesses are winding up in court over Internet copyright and privacy issues, and it's quite possible Congress will have to weigh in on that next year, experts say. But it's doubtful that a divided Congress will come to a quick resolution on Net issues -- or on any of the issues that small-biz owners would like answered. "Gridlock is good for companies that are in good financial shape and aren't looking for legislative reforms. But it's not so good for those small businesses and Internet startups that are having problems independent of this legislative mess," says Richard L. Caplan, a small-business attorney and partner in the Pennsylvania law firm Caplan & Luber. CROSSING PARTY LINES. Others envision roadblocks to crucial economic policy. Lawrence Kudlow, a former Reagan Administration official and economist with investment banker ING Barings, says a liquidity squeeze is making it more difficult for businesses to obtain the capital they need to invest and expand. To prevent the current economic expansion from collapsing, he says, the new President and Congress will have to work together to enact a set of modest initiatives, including middle class tax cuts. Still, he and many others fear that the 107th Congress will have difficulty coming to terms on economic initiatives in the best interest of business. So how are small business advocacy groups preparing for yet another year of political tug of war? Since election results started pouring in on Nov. 8, the NFIB has been combing through past voting records of reelected Democrats to gauge whether they will be a friend or foe to small business. To get its agenda through Congress, the NFIB is preparing to reach across party lines. That's really nothing new, since small-business groups have been dealing with a GOP-controlled Congress and a Democratic President for the past eight years. "Reaching across the aisle was very much a part of our political formula last year," says Tony Likens, national political director of the NFIB. Some business groups have already started meeting with newly elected centrist Dems, in the hope they will champion health-care reform and less regulation. In the Senate, that includes Bill Nelson (D-Fla.), Tom Carper (D-Del.), Ben Nelson (D-Neb.), and Zell Miller (D-Ga.). "The tone of the 107th Congress will be set by how Republicans and Democrats build coalitions right off the bat," says Casey. The big question: Who will occupy the Oval Office? With such a slim Republican majority in Congress, legislation will need bipartisan support. Some small-business groups fear that if Al Gore wins the Presidency, congressional Democrats who usually favor pro-small-biz policies will be more likely to cave in to partisan pressure from the Democratic White House. "In Congress, we have a working majority in place now that favors small business. But that could easily evaporate if Gore is elected," says Christopher Wysocki, president of the SBSC. CONGRESSIONAL CONCERNS. Meanwhile, other small-business groups fear that a Republican-controlled Congress and White House will jeopardize funding for government programs that help entrepreneurs get their businesses off the ground. "In the early '90s, it was almost impossible to get a small-business loan. Certainly, we don't want to lose the gains we've made the past eight years," says Linda Dearragh, director of the Women's Tech & Venture Center in Chicago. So, like the rest of the country, small business is split on how the next President will affect its legislative agenda. For now, there are more immediate worries. With Congress scheduled to reconvene for a lame-duck session in late November, "There is a legitimate concern now that the failure to resolve the Presidential election could put very important pieces of legislation, like the tax bill, on the shelf," says the SBSC's Wysocki. Even though the tax bill includes a $1 increase in the minimum wage, small-business advocates have been pushing for the legislation because it extends medical savings accounts, allows full deductibility of health insurance for the self employed, and raises the IRA contribution limits from $2,000 to $5,000. With the Presidency still up for grabs, many fear the bill's passage will be stalled well into next year. FLORIDA QUAGMIRE. In addition, Congress is under the gun to fund the Small Business Administration (SBA) before 2001. "There are still tax and funding issues that we need to deal with," says Kathryn J. Tobias, spokeswoman for the SBA. Many fear the Florida quagmire could put such issues on the back burner when Congress meets briefly to wrap things up. Some sources speculate that Congress will postpone the lame-duck session until a President is named. Unfortunately, no one knows when that will be. "Uncertainty over the Presidency isn't good for the markets, nor is it good for financing things," says Caplan. "We saw a sudden 250-point drop in the stock market upon learning that there may be legal challenges over the Florida vote count. Certainly, that doesn't bode well for business." But in the end, no matter which candidate takes over the Oval Office, it's doubtful an embattled Congress will deliver much more than the status quo. And for most small businesses, that's not half bad.  By Nicole St. Pierre in Washington, D.C. Edited by Robin J. Phillips  | | |
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