December 10, 2019

You’re the Boss Blog: Small-Business Owners Respond to Obama Plan

The Agenda

How small-business issues are shaping politics and policy.

President Obama, in his speech Thursday before a joint session of Congress, promised to deploy the power of the federal government to induce small businesses to hire out-of-work Americans. But even some of the small-business owners who watched the speech live in the House chamber at the White House’s invitation said they would not be swayed by the carrots the president proposed to dangle.

David Catalano, who helped found Modea, a digital advertising agency in Blacksburg, Va., and Darlene Miller, who owns Permac Industries, a precision machining company in Burnsville, Minn., both said they planned to hire regardless of what the government does. “We’re going to hire based on our needs,” Ms. Miller said.

In his speech, the president outlined several tax incentives for businesses to prompt investment in general and to reward hiring in particular. The investment incentives, which would take effect in 2012, include cutting the employer payroll tax in half, to 3.1 percent, for the first $5 million in wages. The president would also allow companies to continue taking a full deduction for certain kinds of property purchases immediately, rather than having to amortize the expense over many years.

To reward hiring, the president proposed a full payroll tax holiday on up to $50 million in increased wages over what a company paid in 2011, regardless of whether the growth comes from new hires or salary hikes. The president also proposed a series of tax credits for companies that hire people who have been looking for work for at least six months: up to $4,000 for most employees, but up to $5,600 for veterans, and up to $9,600 for veterans injured during their service. It is unclear when the hiring incentives would expire. According to a White House spokesperson, the amount of the credit would depend on the employee’s wages and the number of hours worked.

Some economists have questioned whether such incentives really induce hiring and investment or simply reward companies for actions they would have taken anyway. But both business owners said that any extra boost would help. “This just eases the burden, to invest in their education, or do more things for them,” said Mr. Catalano. Added Ms. Miller: “It will definitely help small businesses with cash flow.”

While the proposals would benefit all businesses, not merely small ones, the White House said the payroll tax cut was directed toward “the 98 percent of firms that have payroll below” the $5 million limit. Some economists believe that the bonus depreciation, in particular, offers more help to large firms than small ones.

The president’s speech split advocates for small business along predictable lines. The National Federation of Independent Business, the conservative-leaning small-business lobbying group, panned it as “more of the same” in an e-mailed statement that cited “the threat of higher taxes and the thousands of pending federal regulations.”

“Small businesses need the government out of their way,” said Dan Danner, the group’s president and chief executive, in the statement. “Tax breaks are always a welcome help to small businesses, especially in these tough economic times. But those outlined tonight by the president are temporary, and avoid the question of meaningful business tax reform.”

The National Small Business Association, a more centrist organization, was more generous in its praise of the tax cuts. “Offering a payroll tax holiday can help all small employers — not just the profitable ones who benefit from an income tax cut — with some much-needed cash while at the same time making it a bit more affordable to bring on new employees,” said Todd McCracken, the group’s president and chief executive, in a statement. But the N.S.B.A. joined the N.F.I.B. in calling for a lighter regulatory burden for businesses and demanded a far-reaching overhaul of the whole tax code, not just for corporations.

These concerns resonated even with the president’s invited guests. Mr. Catalano said that he was wary of the president’s pledge to pay for the package by asking the “wealthiest Americans and biggest corporations to pay their fair share.” Mr. Catalano said that because his company was organized as an S Corporation, in which profits are passed through to shareholders, he would then face higher taxes. But, he said, “my partner and I have reinvested 100 percent of the profits that our agency has made over the last five years back into the company. If the government takes a bigger share of that from me, it directly impedes my ability to grow the agency.”

Ms. Miller said the president could have done more to address regulatory burdens. “There’s still a lot of work in that area to be done,” she said. “There are a lot of regulations that really just aren’t necessary.”

She also worried about the president’s call for higher taxes. But she added that even with her company’s profits, “I’m not the wealthiest, so it does not affect me directly.”

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Familiar Obama Theme on Labor Day

Mr. Obama, speaking to a riverfront crowd estimated by the police to number 13,000, said he would propose “a new way forward on jobs” in his speech on Thursday to a joint session of Congress, which returns this week from its August recess.

Mr. Obama did not provide details — “Tune in on Thursday,” he teased — but he said millions of unemployed construction workers would be able “to get dirty” building roads, bridges and other public works under his infrastructure proposals.

Organized labor and business leaders are on board, Mr. Obama said. “We just need Congress to get on board,” he said, prompting cheers of “Four more years!” from an audience filled with members of unions for autoworkers, public employees, service industry workers and teachers.

It remains unclear what new ideas Mr. Obama will propose on Thursday. But he faces high expectations after recent evidence that job growth has stalled and because of his own buildup since announcing a month ago that he would lay out a short-term stimulus program after Labor Day.

Mr. Obama also faces skepticism because of persistent unemployment. Recent polls give him his lowest ratings to date for job approval and his handling of the economy, though the ratings of Congress, and especially Republicans, are even more negative.

Mr. Obama has indicated that besides infrastructure proposals, he will call for extending and expanding temporary tax cuts for businesses and individuals, including a payroll tax cut for which he won Republicans’ support in December after agreeing to extend the Bush-era tax cuts on high income. He is expected to propose that employers get a tax credit for each new person hired, and to help local governments avert more teacher layoffs.

Separately next week, Mr. Obama is expected to recommend ways to reduce annual budget deficits to a special Congressional committee charged with finding up to $1.5 trillion in savings over 10 years. He plans to propose more than that in deficit reductions, aides say, partly to offset the stimulus costs.

But in Detroit Mr. Obama emphasized job creation. His backdrop was the high-rise headquarters of General Motors, which, along with Chrysler, has restructured and returned to profit and hiring after their rescue early in his administration.

“We’ve got a lot more work to do to recover fully from this recession,” Mr. Obama said. “I’m going to propose ways to put America back to work that both parties can agree to because I still believe both parties can work together to solve our problems.”

That expression of faith in bipartisanship drew loud groans of skepticism, reflecting a growing sentiment among Obama supporters that he is too conciliatory toward Republicans.

As if acknowledging the skeptics, Mr. Obama quickly added, to applause: “But we’re not going to wait for them. We’re going to see if we’ve got some straight shooters in Congress. We’re going to see if Congressional Republicans will put country before party.”

Flying here with Mr. Obama were several union leaders, including Richard Trumka, president of the A.F.L.-C.I.O., who has been critical of his compromises with Republicans.

Also joining Mr. Obama was Senator Carl Levin, Democrat of Michigan, who, as Mr. Obama told his audience, gave the president a Labor Day address that President Harry S. Truman delivered in Detroit in 1948, the year of his come-from-behind election after campaigning against “do-nothing” Republicans.

Afterward, Mr. Levin said he told the president, “Here’s a ‘give ’em hell’ kind of speech.”

En route to Detroit, an Obama spokesman, Josh Earnest, volunteered to reporters that the president was in “a good mood.” Yet the familiarity of the day’s theme had to be sobering, particularly since Mr. Obama is just over a year away from Election Day — too little time for unemployment to fall much from heights that give Republicans hope of recapturing the White House.

The president’s Labor Day speeches trace the stubbornness of the crisis he inherited.

In 2009, he spoke to an A.F.L.-C.I.O. picnic in Cincinnati, just after the government reported 216,000 jobs lost in August — relatively good news because it marked a second month of declining losses from a high of 750,000 as Mr. Obama took office. Six months earlier, in February, a Democratic-controlled Congress had passed his two-year, $800 billion stimulus program of tax cuts and spending.

“It’s working,” Mr. Obama said then. Most economists agreed, though many have since concluded that the package was not forceful enough to counter a recession and crises in the financial and housing sectors. Republicans, who generally opposed it, continue to say that the stimulus program failed and that they will not support another round.

“We’re on the road to recovery, but we’ve still got a long way to go,” Mr. Obama said two years ago. That would become a refrain.

Last year, Mr. Obama was in Wisconsin with union families. While private-sector hiring had expanded for eight months, the unemployment rate was 9.6 percent — just a tenth of a percentage point lower than the year before. With his two-year stimulus plan winding down, Mr. Obama announced new plans for infrastructure projects and more.

“Now the plain truth is, there’s no silver bullet or quick fix to the problem,” he said in Milwaukee. “Even when I was running for this office, we knew it would take time to reverse the damage of a decade’s worth of policies that saw a few folks prosper while the middle class kept falling behind.”

But his infrastructure plans went nowhere before Republicans, capitalizing on voters’ economic frustrations, won control of the House in November.

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New Urgency in the Battle for Stimulus

For Mr. Obama, who last month promised a pivot to job creation, the Labor Department’s report raises the stakes as he prepares for a prime-time national address on Thursday before a joint session of Congress. In the speech, he will outline a new round of economic stimulus measures.

In Congress, the reactions from some Republicans suggested small cracks in their party’s wall of opposition to such measures, whether tax cuts or spending. That change underscored the potential of the moment to alter the dynamic in Washington as Congress returns from its recess, though the prospects of a major compromise on short-term stimulus and long-term deficit reduction remain remote.

Within the White House, the report gave ammunition to Obama advisers who have pressed internally for bolder action on tax cuts and spending measures as Mr. Obama makes the final changes to a speech that could be as important to his re-election prospects as any to date. No president since Franklin Roosevelt has been re-elected with unemployment so high.

While the scale of stimulus measures Mr. Obama will seek remains unclear, early indications suggest it will far exceed the limited agenda that the White House was talking about as recently as July, which mostly called for extending for another year a payroll tax cut for workers and unemployment compensation for those out of jobs for six months or more.

Now Mr. Obama has said he will seek those extensions and more, including proposals to put people to work repairing and retrofitting roads, bridges, schools, airports, rails and other public projects, and giving tax incentives to employers to hire additional workers.

The rapidity with which the summer’s signs of a weakening economy have raised calls for fiscal stimulus — from economists, financial forecasters, business leaders and the chairman of the Federal Reserve, Ben S. Bernanke — recalls the final months of 2008, as the near collapse of the financial system intensified the recession that year just as Mr. Obama was preparing to take office. Then, the incoming administration put together a package of tax cuts and spending measures that seemed to grow by the month, and finally passed Congress in February 2009 at nearly $800 billion for two years.

Nonpartisan analysts and the Congressional Budget Office have credited the first stimulus package with helping to end the recession and keep unemployment from growing even higher than it did. They say the winding down of the federal government’s help this year has contributed to the economy’s stall.

But Republicans, who solidly opposed the original stimulus program, say it was a failure that only dug the country deeper into debt — a stand that hardly suggests they will be receptive to such ideas now. That argument against big government helped Republicans win control of the House last November, and they have since forced Mr. Obama and Congressional Democrats into repeated rounds of spending cuts.

While that was widely welcomed at first, given the nation’s mounting long-term debt, economists began to fret that the austerity measures in both the United States and Europe threatened to push the world into another recession. In an analysis this week, for example, the chief economist of OppenheimerFunds, Jerry A. Webman, cited “the counterproductive approach Congress and the administration are taking to fiscal policy.”

Mr. Obama hopes to change the balance with his speech to Congress. He will call for short-term job creation measures now — to prevent a recession that would widen annual deficits through lost revenue and safety-net spending — and for deficit reduction proposals, including spending cuts and tax increases for people with higher incomes, that would take effect after the economy regained full health.

The conventional wisdom has been that Mr. Obama’s job creation plan “is likely to be dead on arrival,” as one financial analysis group, Bank of America Merrill Lynch Global Research, wrote to clients on Friday.

Yet Congressional Republicans’ response to the disappointing jobs numbers suggested slightly more openness than before to Mr. Obama’s pitch. The question is whether the shift is rhetorical or real.

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