Small Business: Are Some Too Small to Survive?

It doesn’t matter if you’re obscenely wealthy, living under a bridge, own a Mom and Pop business, or are the most mega of mega multinationals, you want a tax break. Regardless of how much your lobbyists can con out of legislators or how much the country can afford to give, everyone promises to rush right out and stimulate the heck out of the economy, thereby single-handedly putting everyone back to work.

Of course, if this were possible we’d have avoided the financial collapse and licked unemployment before the first CEO could skim his bonus off the top. Truth is, if someone’s paid 2 bucks a year in taxes, they’d complain it wasn’t a buck.

Such is life in a capitalist society.

One of the most repeated mantras in the political/economic wilderness is that small businesses create jobs like an alchemist creates gold from base metal. I suspect that’s true because Big Corporations are a lot better at creating jobs in Bangalore than Bangor and it’s not like they have sterling track records to contradict that. But, if Big Businesses aren’t “too big to fail”, aren’t some small businesses “too small to survive”?

Small Biz Owners Have Bigger Balls Than Me
I have a lot of respect for anyone willing to work themselves silly trying to make a living out of the ether. They have bigger balls than me. But if the sole criteria for success was hard work, coal miners and garbage picker uppers would get the gazillion dollar bonuses.

Likewise, if the only criteria was the ability to take huge risks, corporateers would still come out in the lead, notwithstanding they took the risks with someone else’s money, doing something an imbecile should know better than to do, and tripling their compensation for failing to do what they set out to do. The only difference is the size of the risk that caused the business’s implosion.

Many, many more small business fail than survive. There are a variety of reasons. Some people never thought running a business was so tough. All they wanted was to escape some domineering middle manager of a boss. Others got loans no sane bank should’ve given them. Still others lacked a flair for the creatively entrepreneurial, somehow thinking the world needed one more pizza place or boutique shop selling dried flowers and “crafts” they wouldn’t keep in their own homes.

On a cost/benefit ratio, small business is a dicey way to create jobs. Most of owners end up on the unemployment rolls alongside anyone unlucky enough to work for them, while simultaneously stiffing creditors and their poorly paid serfs because they couldn’t pay the bills. That’s at least 4 jobs lost right there. One step forward, for steps back.

And, the jobs small business does create aren’t usually the skilled machinist, shipbuilder, electronics technician kind. Most are pizza delivery guys and high school kids twisting dried flowers into malodorous bunches for minimum wage – no vacation, no sick time, no retirement, no health coverage, and in some cases, not enough to buy the pizzas they deliver. The economy can’t aford to create many more jobs like that, regardless of who creates them.

Small Business Says It Can’t Pay
Small business and their lobbies routinely complain they can’t afford the minimum wages already set. They say they have to reinstitute a de facto indentured servitude system to make ends meet and what they say is true. In Big Biz, they call this under-capitalization.

But then, McDonalds and Pizza Hut claim the same thing because burger prices will have to move from Dollar Menus to Two Dollar Menus and that’ll cost the shareholders 2 cents per share. Neither would pay any more than absolutely necessary because every dollar going to employees is a dollar not shown on a profit sheet. They aren’t, as they often remind people, charities.

I believe in small business. They are an important part of the economy and shouldn’t be trivialized. They can create good, quality jobs and improve the economy. However, we can’t afford to incentivize the weak any more than we can afford to foot the bill for all the oil BP can spill or all the slave-labor jeans Levi’s can make in Bangladesh.

Like it or not, everyone – Big Business, small business, low-middle-and upper income taxpayers – have to give something up. What everyone really wants is a no-pain fix and that ain’t gonna happen.

So let’s be honest about the ability for any single segment of the economy to fix this problem. Small business is not the only option. If they can’t raise the capital to compete, they are too small to survive. If daft bankers make bad investments, they aren’t “too big to fail”.

Big corporations and their larger stockholders have to stop living like warlords in Afghanistan and not expect a return on investment is a God-given right. And the rest of us probably won’t miss a $100 a year tax break anyway. If we can’t, it’s cheaper for those who can to help those who can’t, regardless if you think it’s unfair, or socialism, for free marketism at its finest.

Just as not all jobs are equal, not all businesses, or taxpayers are either.

It’s a fact, get over it.

Cross posted at The Omnipotent Poobah Speaks!

POTUS Speak Up

Five Things to Say about Clean Energy in Your Address

It is that time of year again. This Wednesday, January 27, 2010, the President will glide down the aisle in the House of Representatives, greeted by thunderous applause, and encounter the usually more dignified elected officials in a slightly teen-bopper, Beatles-esque-frenzy, practically climbing over each other to shake his hand.

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Numbers Game

Tell POTUS That This Is Our Moment

In case you are tired of making your own New Year's resolutions, President Obama would like you to help him set his. He is inviting Americans to tell him what we think the administration's priorities should be for 2010.

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Weekly Audit: The Unemployment Epidemic

By Zach Carter, Media Consortium Blogger

On Friday, we learned that the U.S. unemployment rate officially broke 10% for the first time since the early Reagan years. This is about as bad as it gets for a modern, developed economy. No economic force takes a heavier toll on a society than rampant joblessness, and few personal setbacks take a deeper psychological toll than being out of a job for months on end. If Congress and President Obama don't do something to create jobs fast, both are going to pay a hefty political price when next year's mid-term elections roll around.

So how bad is it? In October, the economy shed 190,000 jobs and the unemployment rate jumped from 9.8% to 10.2%. That percentage is the most optimistic reading of the labor market in Friday's report. If you take people who want full-time jobs but are settling for part-time work, then add those who have simply given up on finding a job, the rate is a massive 17.5%.

The problem is not that either Obama or Congress have failed to act on the problem, but rather that they have not done enough. When Congress was moving on Obama's $787 billion economic stimulus package back in February, we were shedding upwards of 700,000 jobs a month. So the stimulus package has worked--it's probably helped keep unemployment from jumping to 12% or 13%. But this is cold comfort to the nation's 15.7 million unemployed, 5.6 million of whom have been out of a job for more than six months.

As Robert Reich notes for Salon, Obama's economic advisers dramatically underestimated how bad things would get when they crafted the stimulus package. As a result, the package was too small and unemployment has remained high. Obama needs to go back to Congress and demand more economic relief funding. Republicans will continue to whine about government spending to excuse their obstructionism, of course, and conservative Democrats will probably start sweating, too--Sen. Ben Nelson (D-NE) helped cut back the original stimulus bill in February to help boost his "centrist" credentials. This of course had nothing to do with economics or policy. Government spending is what saves the economy in a recession. In a downturn as severe as this one, it takes a lot of spending to turn things around.

But as Reich notes, Nelson and his cohorts will have a lot more to worry about in the 2010 elections if the economy doesn't actually improve over the next year. And few economists think it will. The Congressional Budget Office, which is run by a conservative economist named Douglas Elmendorf, projects an average unemployment rate of over 10% in 2010. That's worse than this year. Democrats from swing districts need to support economic relief packages. Continued economic malaise will severely hurt them at the polls.

Congress finally took some action on joblessness on Thursday, voting to extend unemployment benefits for an additional 14 weeks. If we want the economy to recover, we need people to spend money, but if people aren't working, they don't have any money to spend. So the government cuts people checks to help them get by and stimulate a demand for goods and services. Even most conservative economists thinks this is a good idea.

But as Kevin Drum notes for Mother Jones, the soundness of the policy did nothing to prevent Republicans from fighting the effort to extend benefits tooth-and-nail. The bill had to overcome three--that's right, three--filibusters in the Senate from Republicans, who held up the bill for weeks for no apparent reason. In a blog post for The Washington Monthly, Steve Benen explains the economic cost of this obstructionism: In the weeks of delay, 200,000 people looking for work stopped receiving benefits.

But extending unemployment benefits will not solve our economic woes. The total program is just $2.4 billion, a drop in the bucket compared to the trillions of dollars the government put up to salvage Wall Street. $2.4 billion is not enough to reverse the unemployment trend. Cutting the checks certainly helps, but as Matthew Rothschild emphasizes for The Progressive, we need an economic policy that actually puts people back to work. We've known for months that the stimulus was too small and watched the labor market continue to deteriorate. We need more than tweaks at the economic margins, we need a robust job creation plan.

As Stephen Franklin notes for Working In These Times, we already know that the recession has created a significant jump in the nation's poverty rate. According to official government statistics, the rate climbed from 12.5% to 13.2% in 2008, the largest increase since 1991. But the National Academy of Science thinks the government statistics are misleading, as they account for rising costs associated with medical care, transportation, child care and different regional living standards, as Franklin notes. Taking these factors into account, the National Academy of Sciences calculates the actual poverty rate to be 15.8%. That's an additional 7 million people living in poverty, for a total of over 47 million. That's more than the entire population of the New York, Los Angeles, Chicago, and Philadelphia metropolitan areas combined. What's worse, we don't have poverty statistics for this year, when the most severe economic damage was been dealt.

Workers are facing tough economic prospects around the world. Writing for The Nation, Kristina Rizga details Latvia's economic turmoil. Just like the US, overexcited bankers in Latvia inflated a massive real estate bubble that took down the entire economy when it burst. But with the bubble burst, much of the country is now out of a job and stuck with a mortgage worth far less than what they paid for it. It's almost exactly the same story we've seen at home.

No domestic economic problem is more pressing than our epic levels of unemployment. We need another round of stimulus to get people working again. If not, we'll see the same public unrest here as in Eastern Europe.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

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Kill The So Called Stimulus Bill. We Need Big Ideas.

Scrap the so called stimulus bill and start over.

Go back to the big ideas.  Instead of a million little items, many of which do ZERO to stimulate anything or anybody, go back to a core group of big ideas that will not only create jobs and stimulate the economy but pay dividends in the future.  

Think of all the great ideas proposed not only by Obama, but in the last race by John Kerry, and some of the other challengers.   There were a lot of big ideas floated.  Ideas that were great, although at the time you had to know the willingness to fund them would probably never come.

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Diaries

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