Mitch McConnell and Harry Reid

How the Debt Deal Will Affect Your Business

  • August 4th, 2011
  • Dan Bischoff

Mitch McConnell and Harry Reid

Left: Senate Minority Leader Mitch McConnell (R-Ky.). Right: Senate Majority Leader Harry Reid (D-Nev.). Image via Politico.

Congress and the White House finally shook hands (although begrudgingly) and saved the United States from defaulting.

However, the political bickering is still running rampant, and small business is likely facing the fallout.

Senate Majority Leader Harry Reid (D-Nev.) told the Senate on Monday:

“People on the right are upset. People on the left are upset. People in the middle are upset.”

Inc. reported that the deal has three main components, neither of which seem to go out of the way to help small businesses across the country:

  • It immediately raises the debt ceiling
  • Includes about $2.1 trillion in spending cuts over 10 years
  • Creates a special Congressional committee to come up with long-term deficit-reduction suggestions by Thanksgiving

But did Congress forget about small business?

We hear out of the mouths of economists, politicians and CEOs that small businesses are the job generators in our country. Despite that, those in Washington seem to value posturing over the needs of the business owner, and in turn, the economy. John Arensmyer, CEO of Small Business Advisor, an advocacy group, told Inc.:

“This is not the deal that we have wanted to see. It’s good only because it prevents a catastrophic default, but they missed a big opportunity here to really make some reforms that could benefit small businesses and everyone else.”

Experts say the biggest missed issue was reforming taxes. That hot-button was put on the shelf, and will likely be debated sometime in the future.

“Small businesses just don’t benefit at all from tax breaks on in the upper bracket, and they don’t benefit from large corporate loop holes,” Arensmyer told Inc.

Charles Green, the author of “The SBA Loan Book,” says the immediate future of small business has been damaged.

“Most small businesses buy from and sell to larger businesses,” he told Inc. “And big businesses make plans months in advance based on what’s going on in the present and what they think will happen. So they’ve already made decisions about production levels, prices, etc. for the near future. The smaller businesses will feel the ripple effect.”

Uncertainty may cripple some businesses

Even though the deal was done, the political grandstanding has created a lack of faith in Congress and an uncertainty for the future.

In July, Barry Sloane, CEO of Newtek Business Services, told CNBC that:

“Uncertainty is the biggest problem in the lending environment for small business. Tax rates? Deficit Reduction? Obamacare and over all levels of consumer spending are dramatically concerning small and independent business owners”

None of these issues were solved by the debt deal. This may also negatively affect hiring.

“Uncertainty over the debt ceiling is a huge issue because small businesses believe the government will confiscate their wealth through higher taxes,” Sloane told CNBC. “Estate tax, dividend income, personnel tax rate or depreciation changes in the tax law. Most small business strongly favor deficit reduction through spending cuts, not tax increases. They are reluctant to hire until uncertainty over their income tax rates is more certain to make sure they have the cash flow to pay for the new hire.”

Your Turn

With the debt deal passed, how will it affect your business?

About the Author

  • Dan Bischoff

Comments

  1. With my business in the building of a home for the expertise that I have. This ceiling of debt won’t change the long term direction for my business. I realize the cleanup of radioactive projects are the last thing anyone wants to tackle. This business
    has seen much of the monies the DOE and Army Corp.
    squandered with stupid management descesions. It is about time the government gives up it’s micro management of projects and let private business do the work of government. Why is it the energy production community can cleanup it’s facilities after no longer being viable in a short time. Mainly the cost of labor is expensive. Technology has a better answer but the DOE and Army Corp. don’t have an understanding of the value. So maybe this will fall onto someone who will understand economics of radioactive cleanup projects. It’s time government took a back seat in this work effort.
    Lee Reid
    INS, llc

  2. I personally say, the Republicans who are so vicious in bringing the President down along with the Tea Party….they are thinking that they are powerful that they can ruined our country for being such vicious and Ignorant citizens of this country! They all need to Apologize to the President Obama and the entire nation! What they all put not only the President but each and everyone in this country! SHAME ALL OF THEM!!! For the new representatives….THEY DO NOT NEED THEIR SALARIES AND BENEFITS SINCE THEY SIT IN OFFICE!!

  3. It will have no positive effect on my business.The positive effect will come when regulations and permitting are provided in a predictable manner of one to two weeks maximum. My business will turn around, Better yet, reorganize the entire permitting and regulations system. It would help greatly, with no detrimental effects to the environment by removal of some minor regulations and permit requirements for quick job creation. Doing this will allow many businesses the ability to operate with a more predictable business plan. I will hire, provide jobs to sub contractors, and remove many from the unemployment line with predictable time frames in permit returns.

    Our leaders must destroy the wall that lies between the jobless and job opportunities. Government must get out of the way and deregulate. Provide Oversite with authority, Visit job sites for evaluation and remove the permitting systems. It is really that easy. If this is done, a start for good change will be felt immediately.

  4. It has always been a fact that the rich is greedy, and that the rich get richer. They are like spoiled brats, and have lost their love for america, and the people, that has help build america. We are nothing but a number to them, or more like “The United States of America’s Slaves”. If they weren’t so strong on trying to degrade our president, maybe some work would get done in Washington, but instead they vacation, in between trying to help the president fix the problem. Who gives a hoot, if he is black, so what!

    • Also as for my small business, I can’t afford to hire, this Government has effected the small businesses for over a decade. If you really think about it, just about everyone which holds some position in Washington, was born pretty wealthy, so why should they care?

    • I don’t know anyone who cares about about the presidents color or race. Also, facts imply that you have evidence. What is your evidence? I am also a small business owner just starting out. It is hard when you cannot get the resources you need to grow quickly. However, it has enabled us to be more creative and resourceful. Small businesses do not need money, they need opportunity to be in business to be easier with less regulation and less taxes which in turn makes our products and services more affordable for more people. Then business will be so good that I have to hire more people.

  5. For a number of years we being Trying to get a business loan,to reconstruct our business and improve our jobs developing.We have a very good product,but with out help we can’t get anywhere.All the landers ask the same question”how is your business doing? If we doing very good,why in the world would we ask for help! With this new government set-ups and tax reformation will put many business out of business.Aldabella Scarpa