President Bush’s State of the Union address fell short in providing answers and explanations on how the administration plans to address the needs of small businesses, according to Chairwoman of the House Small Business Committee, Nydia M. Velázquez.
“While there was mention of new ideas on health care reform, much of the address focused on initiatives that the Bush administration has been touting since coming into office - but has yet to move forward,” Chairwoman Velázquez said. “Last night, the nation’s small-business owners were waiting to hear answers from the president on how the administration would help them cope with some of their most pressing problems – health care and energy costs - but in many cases, it left them with more questions than answers.”
Clearly, one of the biggest issues facing small businesses today is access to health care. The president introduced a new health care proposal that Chairwoman Velázquez highlighted will only work if there are broader elements to ensure that the employer-based system of health insurance is maintained.
While the plan would restructure the tax code to create greater transparency in health insurance costs and provide a tax break to individuals with less generous coverage, it is unclear if the plan would help the vast majority of uninsured workers of small firms who cannot afford insurance. It is critical that any reform address the lack of options for small businesses and that it is simply not another mechanism to have employers to switch to a low cost, low coverage plan such as Health Savings Accounts (HSAs).
The president also outlined a series of policy initiatives on energy - many of which were a recitation of previous ideas that have gone nowhere. While the president again pledged support for the development of alternative energy technologies to decrease gas consumption and slow climate change, recent history provides little reason for optimism that these will be implemented.
The administration offered a similar proposal last year for energy reform when he unveiled the Advanced Energy Initiative. However, the administration's budget cut more than $3 billion in programs designed to assist small businesses in becoming energy efficient, and developing alternative technologies, creating skepticism over the administration's commitment to moving this new proposal forward.
“The bottom line here is that if this administration is truly committed to meeting the needs of this nation’s small businesses - it will start following up on its promises and doing the work,” Chairwoman Velázquez said. “There is no doubt that the president has introduced serious proposals - but it is doubtful as to whether or not these are the answers small businesses need in order to receive much-needed relief when it comes to health care and energy costs. It is my hope that with a Democratic-controlled Congress, we can make sure small businesses receive the tools they need to cope with these challenges, and move forward as the main job creators.”
New entrants in local economies harm already existing firms before they help, according to a working paper released by the Office of Advocacy of the U.S. Small Business Administration. The paper examines how the entrance of new establishments within a 150-mile radius of young firms affects the existing firms’ profitability.
“The benefits from a growing and dynamic local economy are clear,” said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. “For local business, in the short term new entrants are competitive foes, but in a few short years they learn to cooperate with each other. This certainly has implications for local economic development strategies.”
The working paper, Friends or Foes: The Spatial Dynamic Between Established Firms and Entrants, written by Lawrence Plummer with funding from the Office of Advocacy, examines whether new establishments harm existing firms’ profitability due to increased competition, or help increase profits due to positive spillover effects. The complete paper is located at www.sba.gov/advo/research/wkpapers.html.
Interestingly, the paper finds that the effect of new entrants is not an either/or proposition. In the first year of entry, the effect on existing firms’ financial performance (return on assets) is negative. However, after three years the effect on performance reverses and becomes positive.
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