Small Businesses Have Golden Opportunity to Think and Act Big

In dealing with Washington, the small business community sometimes feels like Angerona, the goddess of silence in ancient Rome--widely praised but generally ignored.

Yet consider the basic facts about small business: It employs about half of the work force, providing two-thirds of the economy’s critical “first jobs.” Small business accounts for more than 40% of all sales and almost 40% of our gross national product. More than half of the product and service innovations introduced since World War II have been created by small businesses.

Despite this broad economic impact, policy-makers tend to look upon small business as just one more special interest. Large corporations can partially avoid this problem by maintaining a high profile in Washington. Small business, however, by limiting the issues that it addresses, shares part of the responsibility for its own relative obscurity.

But now a chance has arrived for small business not only to escape its “ghetto” but also to exert a powerful influence on national policies that will affect us all.

The White House Conference on Small Business, which is to convene in Washington today, provides an ideal opportunity for small business to break with parochial thinking and to champion policies that encourage innovation, entrepreneurship and growth for the entire country.

The first such conference in recent times was convened in 1980 after a gap of more than 40 years. Its deliberations could have become mere political window dressing--but they did not. The men and women who met in state caucuses, and then in Washington, discovered that they shared common problems, frustrations and aspirations. And they discovered that they could influence policy.

Out of their discussions, their information campaigns and their petitioning came a slew of local and national legislation, including the Regulatory Flexibility Act and the Equal Access to Justice Act. About 38 of the conference’s 60 recommendations became law, which is an outstanding batting average in Washington.

Economic Roller Coaster

But the period since the last White House Conference has been an economic roller coaster, and small business has felt some whiplash. Even with the recovery, pain lingers in rural America and in the industrial heartland, felt not only by farmers and steelworkers but by tens of thousands of small businesses.

At the same time, community after community has rediscovered the vitality that small business brings to a local economy. Areas devastated by the demise of a single dominant employer or a major industry have been brought back from the brink by the opening of smaller enterprises--in manufacturing and, increasingly, in services.

These new businesses bring not only jobs but also vitality and optimism back to their communities, and there is not a local government in the country that is not committed to attracting and nourishing small business.

Thus, for the 1,800 owners, partners and officers of small businesses who have gathered in Washington today for this latest White House Conference, the real task is not to decide whether the Small Business Administration belongs in the Commerce Department but to decide where small business stands on broad policy issues affecting us all.

Here are some of the issues of current concern not only to small-business men and women, but to the economy as a whole.

- Tax Stability. Over the last five years, Congress and the executive branch have tinkered constantly with tax and pension laws. The cost of keeping up with these changes looms very large to a small business. In the pension area alone, legal and accounting fees can bring a small business to the breaking point.

House and Senate conferees are now working on the most far-reaching overhaul of the tax code in years. When this is done, small business should be prepared to back it vigorously. For small business, lower rates and simpler accounting for everyone are the best tax policies.

After tax reform is passed, small business should urge that we take a break from writing and rewriting the laws and give the new ones time to work. Small business should seek a moratorium on tax changes accompanied by a moratorium on pension and benefit law changes. We have already diverted enough thought, time and energy from product innovation to accounting gymnastics.

- Fiscal Policy. The conference has an opportunity to set a strong example by recognizing that the greater good of lower interest rates and a sounder economy are better for small business than any individual tax break. It will not help to decry the deficit, while demanding special exemptions. Small business will gain far more respect for its particular concerns by aligning itself with elected officials who often seem to lack a constituency as they struggle with deficit reduction.

- Mandated Benefits. Legislators’ desire to assist workers, combined with a recognition that federal deficits preclude new government social programs, has resulted in proposals to require all employers to provide certain benefits to their employees--and, sometimes, to their former employees and former spouses.

However well intentioned, these proposals for mandated benefits impose a large cost burden on small business. At some point the burden kills the benefit. More onerous requirements for pension plans are unlikely to improve pension coverage for workers if they drive small employers to terminate plans, or discourage them from creating new plans. The same holds true for health insurance.

- Liability Insurance Reform. This is the “sleeper” political issue of our time. Not only businesses but schools, parks and social activities are being curtailed by the high cost of insurance. In some cases it is unavailable at any cost. Talk to a small business person about liability insurance, both product and non-product, and you are sure to hear tales of bankruptcies, and sad decisions to shut down, or worse, not to start up at all.

The passage of legislation to reform the liability insurance system is vital.

These are not the only current issues on which small business has something to say. The potential for U.S. service companies in international trade, the quality of government economic information, and unfair domestic competition from tax-exempt enterprises are also of great importance.

But the broader lesson to be learned from the 1980 conference goes beyond particular issues, with which we were generally successful. The challenge for the 1986 delegates is to move beyond proposals focusing on small business alone to policies for national economic growth.

Now, with the new White House Conference on Small Business, we should recognize that there is a world of difference between being small and thinking small, or worse--acting small.