Small business and the ideological divide

Eric Dinger of Lincoln, Nebraska, CEO and Co-Founder of Powderhook

Small businesses are essential to the future of the American economy and American towns, agreed a panel convened by the Bipartisan Policy Center Tuesday morning. Small businesses account for more than half of national job growth, but have seen their formation decline for decades and experience continually difficult access to financing.

Beyond agreement on those points, however, participants, particularly the two members of Conress who served as keynote speakers, painted two quite different pictures of the universe in which small businesses operate. I would have liked to have seen more efforts to reconcile those pictures; the ability to do so will be critical to future policy choices, not to mention the center's own report on this issue, due out later this year.

Sen Jeanne Shaheen (D-NH)

Jeanne Shaheen, a New Hampshire Democrat and ranking member on the Senate Small Business and Entrepreneurship Committee, described structural disadvantages faced by small businesses relative to large businesses. The Small Business Administration, which her committee oversees, is in this view critical to leveling the playing field, particularly when it comes to loans. She noted small business lending has decreased 13 percent since 2008 while lending to large businesses has increased, and blamed the consolidation of commercial banks, automated application processes and compliance burdens. Other ways governments can help small businesses solve problems include worker shortages (e.g. H1B and H2B visas for skilled immigrants), access to international markets (the Export-Import Bank), access to high-speed internet and in some places even cellular service, access to federal contracting and the special challenges faced by female- and minority-owned small businesses. She argued small businesses in particular suffer from the week-to-week funding of the federal government, which creates dangerous levels of uncertainty. When government gets its act together, it can be a vital source of support for small business creation and expansion.

Rep Blake Luetkemeyer (R-MO)

Blaine Luetkemeyer, a Missouri Republican and vice chair of the House Small Business Committee, described small businesses as innocent victims of governmental overreach, particularly an "onslaught" of regulations over the past few years. While arguing the problem was accumulation of multiple compliance requirements rather than any individual policy, he singled out for special mention the Affordable Care Act and the Dodd-Frank financial regulation, the latter of which has resulted in the loss of one small bank or credit union per day. All this government had businesses "hunkering down," not even trying to get credit due to the uncertain return-on-investment. But... victims no more! The regulatory rollback and tax cuts produced in 2017 has "smiles on their faces." With the heavy hand of government removed, small businesses are reinvesting into their communities, good times are ahead, and investment from abroad is sure to follow.

Reconciling disparate policies isn't necessarily impossible. One surely could see a constructive role for the SBA while at the same time, in the words of former FirstMerit Corporation CEO Paul Greig, "tailoring" federal regulation Dodd-Frank regulation of banks "to risk, size and complexity." It's harder to reconcile antithetical visions of government and the private marketplace, particularly when those visions also implicate assessment of the current presidential administration and thus the political fortunes of the parties. (Luetkemeyer's rosy outlook for small businesses was echoed that night in President Trump's State of the Union address.) If we "view all economic policy discussions through a small business lens," as former Senator Olympia Snowe suggested, can that encompass recognizing both burdens of taxes and regulations on small business as well as entrepreneurs' needs for the social goods those taxes and regulations are intended to promote? Unfortunately, both keynote speakers faced pressing business and departed without addressing the points the other raised.

Interestingly, neither keynoter suggested a third possiblity, that policies of governments at all levels significantly place locally-owned small businesses at a disadvantage (see, for example, Henninger 2017 on the effects of transportation funding).

Another interesting theme of the discussion was the equation by some panelists of small businesses with small towns. Main Streets exist in every community, of course, from the tiny South Dakota town that produced entrepreneur Eric Dinger all the way up to New York City. So do small businesses. How far do we want government to go in facilitating--guaranteeing?--the existence of every town in America? Is there a metric for what help (broadband? venture capital?) should be extended?

SOURCE: "Main Street Finance: How Can the Financial System Better Serve Entrepreneurs and Small Businesses," Bipartisan Policy Center, 14 December 2017

SEE ALSO: "Community Allies: The Virtue of Locally-Owned Businesses," 29 October 2016