Saturday, December 6, 2008

What Small Business Can Expect From Obama

What Small Business Can Expect From Obama

After an historic election, entrepreneurs, along with the rest of the country, await the inauguration of a new President with an ambitious agenda. Given the nearly unprecedented financial situation and two ongoing wars, entrepreneurs are understandably anxious that their concerns will get short shrift. In conversations with SmallBiz, business owners spoke of the need to restore confidence in a badly wounded economy. And they repeatedly raised the same three issues: soaring health-care costs, reduced access to credit, and fear of higher taxes. "There is a lot of anxiety out there among my clients," says Angie Strunk, managing director and founder of Triserve, a 22-person Cinncinati-based payroll and accounting company with $2 million in annual sales. She says her small business clients "are worried about the next Administration raising taxes, they are worried about the economy, and about these bailouts, which are scary." Here's what business owners can realistically expect from the new President, and when it might happen.


Andy Vabulas is chief executive of I.B.I.S. in Norcross, Ga., a $15 million, 58-person company that helps businesses install and use Microsoft applications. He says job one for the Obama Administration must be restoring confidence in the economy. Vabulas says business from his small and midsize clients is down 25% this year—and that the first two weeks of November saw an even more dramatic pullback. "They are not spending money right now," he says.

Restoring confidence in the economy is a tall order, but two important elements will undoubtedly be job and economic growth. President-elect Barack Obama and the new Congress are likely to view an economic stimulus package as a critical tool for addressing both.

The betting is that the stimulus package will pass, and is likely to hit $300 billion, whether or not a piece of it is passed before President George W. Bush leaves office. Expect to see aid to states and cities facing budget shortfalls, extended unemployment benefits and food stamps, and big infrastructure spending. According to Gus Faucher, director of macroeconomics at Moody's, every dollar spent on infrastructure projects or extended unemployment benefits will add $1.59 and $1.64, respectively, to gross domestic product. And Ross Eisenbrey, a vice-president at the Economic Policy Institute, points out that small businesses, especially construction-related companies, would be helped greatly by a boost in infrastructure spending.

But vanquishing the pessimism that currently pervades the markets and economic decision-making will also require some symbolic moves. Faucher says people want to see that "the President understands what is going on in the economy and is acting not reactively, but proactively." Thus, the right economic team is critical. National Federation of Independent Business Executive Vice-President Dan Danner is encouraged that so far, the President-elect seems to be surrounding himself with experienced advisers, including likely Treasury Secretary Timothy Geithner. Many are from the Clinton Administration, "seasoned pros who have been there and who understand the importance of business."


While calming the economic waters clearly comes first, entrepreneurs are hoping for relief on a longer-term threat: soaring health-care costs. Wendy S. White, founder and president of $2.5 million online marketing firm Siren Interactive in Oak Park, Ill., expanded coverage for her 20 employees this year. She says she had to do it to stay competitive, but her premiums went up almost 50%. "It's killing me," she says. White wants to see health care addressed quickly, but she isn't expecting a freebie. "I think I'm going to end up paying higher taxes," she says. "But if [Obama] can help with health care, I'm O.K. with that."

Obama's proposed fix for health care is still short on specifics—one of the most important being which companies qualify as "small."

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