Thursday, February 14, 2013
Gone Baby Gone
In reality the whole idea of trickle down actually does work in this case. The larger Corporations often lead to smaller businesses from whom they rely on for a myriad of responsibilities. Think of all the industries and in turn jobs created and generated from the Auto industry. It is very much a trickle down economy in that respect. Suppliers, Manufacturers, and assorted other related industries often crop up in response to the larger community needs as the bigger Corporation passes that buck. That includes Restaurant tabs, the housing market and even Philanthropy that results. When Big Daddy does good so does the rest of the household, right Maggie? Tennessee Williams knew that much.
But the recovery that never was for Main Street has finally reared its truth. The article below discusses the long term problems faced by those uncertain of what is happening to their communities, to their business and to their own personal wealth not dictated by a generous Board of Directors.
This roof is hot and the Cat needs to jump. But when you have nowhere to jump and you only have so many lives left you wonder.
Small Businesses Still Struggle, and That’s Impeding a Recovery
By CATHERINE RAMPELL
Published: February 13, 2013
In the recovery so far, small businesses have largely been left behind. Initially, loans were hard to come by and consumers weren’t shopping. Now, small-business owners say, Washington is throwing up additional roadblocks.
In survey after survey, owners of small businesses report unbridled pessimism about the economy. The small-business optimism index from the National Federation of Independent Business — a major industry group for small businesses that surveys a sample of its members each month — is stuck at recessionary levels. In January’s report, released this week, expectations for business conditions six months from now were at their fourth-lowest reading in nearly 40 years.
Comparable measures for large companies have exceeded their prerecession levels. That is partly because big companies have a larger global footprint, so they are benefiting from strong growth in places like China and India. Small businesses are more closely tied to the leaden domestic economy, said Paul Ballew, chief analytic and data officer at Dun & Bradstreet, so weak growth at home is weighing more heavily on them.
That gulf in optimism between small and large companies seems to widen, though, during occasions of greater policy uncertainty and Washington gridlock — including the present. And while small businesses always grumble about taxes and regulation, they are especially likely to do so now. Asked by the National Federation of Independent Business about their “single most important problem,” small-business owners are now as likely to name taxes or government requirements as they are to name sales, which had reigned supreme from September 2008 until mid-2012.
“Politicians are uniformly quick to offer paeans to small businesses, but their actions have directly held back the sector, to the huge detriment of the economy,” said Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors. “The timing of this latest slump is particularly frustrating because the key precondition for a real small-business recovery — the normalization of bank lending to commercial and industrial companies — is within reach.”
It is unclear why policy and economic uncertainty would be taking a greater toll on small versus large businesses.
Smaller companies might have be more alarmed by headlines about the debt ceiling and fiscal tightening because they don’t have armies of in-house analysts to advise them about relative risks, said Nicholas Bloom, an economics professor at Stanford who maintains an index on policy uncertainty.
Smaller businesses are also more fixated on domestic uncertainty because they are less diversified than big firms — both geographically and in terms of product lines — and so have smaller margins for error. The last several years have offered multiple false starts in the domestic economy (remember “Recovery Summer” in 2010?), and small businesses that acted on any sense of optimism often found themselves badly burned.
Ralph Jensen, president of Pro Data IV, a nine-person accounting and bookkeeping firm in Green Bay, Wis., has watched and learned. He would like to open another office in Appleton, about 30 miles south, and hire a new employee. But he is concerned about how another blowup in Washington, or at the very least lingering uncertainty about tax increases and spending cuts, might affect his clients’ expansion plans.
Unlike a big company that can take a tax write-off for investing in space or equipment it ends up not needing, “I just don’t have much wiggle room if I fail,” he said.
Before he would feel comfortable expanding, he said, “I’d have to see my business is growing consistently for a long time, and I would have to have really, really strong faith in the fact that people were going to be opening more businesses around here that would be looking for services like mine.”
No matter what fiscal showdown Washington might have in the coming weeks, recent Congressional decisions have already had concrete effects on the economic security of small businesses.
Many business owners report continued confusion about what their health care liabilities will be in 2014, for example, when some employers will be required to offer health insurance and other changes to health benefits kick in.
Owners who sell directly to consumers say they are also concerned about the effects that Congress’s recent tax increases, like the end of the payroll tax holiday, will have on their bottom line.
“You know I’m in kind of a unique situation in that I don’t sell anything that anybody needs, the way you need groceries or some other things,” said Jason Starkey, the owner of Starkey Products, in Orange City, Fla., which sells lighting products and other accessories that are installed in new cars. “I know I’ve noticed the tax hike that just occurred, so people making $50,000 to $60,000, the people who buy our products, must be noticing it, too.”
The latest commercial and industrial lending numbers from the Federal Reserve suggest that the credit market for small businesses is healing. Rising housing values, too, are good for small-business borrowers, who often take out personal loans to finance their businesses.
But many small businesses are still struggling to have their credit needs met.
“The banks are not lending. They claim they are, but they’re not,” said Summit Kumar, president of Summit Telecom, a telecommunications company in Hicksville, N.Y. “I got a line of credit from a bank five years ago and I paid it back. Now the same bank says I’m ‘high-risk business’ and turns me away.” He acknowledges that his business has taken a hit in recent years and that he has had to lay off employees, but he says that his inability to get credit is part of the problem. He says he has had to resort to cash advance companies that expect him to pay back loans at exorbitant interest rates. One alternative lender said it would give him $50,000 if he paid it back with $75,000 six months later.
The struggles of small businesses ripple through the rest of the economy. They are reluctant to invest in expensive capital equipment, for one.
Mr. Starkey said that eight or nine years ago he could have justified investing in a $25,000 piece of equipment that would help him make a particular piece for a Ford Mustang, since he knew he would be able to earn back his investment in six months. But today, he doesn’t know if he will be able to get a return in six months or two years, and “having that kind of money tied up in one item is just too great a risk.”
Metrics of small-business hiring and hiring intentions are also very low, according to the National Federation of Independent Business and the Labor Department. That might partly explain why so many middle-age women have dropped out of the labor force in recent years, said Mr. Shepherdson of Pantheon Macroeconomic Advisers, since women are more likely to be employed at smaller service sector companies than, say, manufacturers.
“Until the small-business sector starts to feel better,” he said, “the rest of the economy isn’t going to feel much better either.”