BusinessTrends Blog

Small Bankers Under Regulatory Assault

noreply@blogger.com (Raymond J. Keating) — Mon, 27 Aug 2012 18:52:00 +0000

Small banks matter a great deal to small businesses. Therefore, business owners and entrepreneurs should be very concerned about the banks’ concerns with intrusive regulations that will reduce loans and raise the cost of capital.

As noted in an August 7 report in The Wall Street Journal, “Lenders with less than $1 billion in assets made up about 10% of industry assets as of the first quarter but made 37% of small loans to businesses and farms, according to research by the FDIC…”

Small businesses, therefore, should be concerned about the warnings being served up by small, community bankers on an array of regulatory measures that, in effect, would reduce the availability of credit.

As pointed out in the Journal story, executives at small banks are gravely concerned about new regulations linked to the Basel III international agreement. As reported, “Executives at many small banks complain that the rules could force them to cut back on loans to small businesses or homeowners.”

Specifically, worries swirl around the following: “Many are particularly upset about the complex system of determining how much capital a bank must hold against mortgage loans they make… The practical result is that many of the mortgages these banks make will require significantly more capital than they do now, for loans that community bankers say aren’t high risk because of their personal relationships with borrowers. The complexity of tracking and calculating capital requirements under this system is also a burden for smaller banks, they say. And the Basel rules come as a number of Dodd-Frank changes hit them, including mortgage standards being written by the Consumer Financial Protection Bureau.”

In its July 2012 “Current Top Issues” report, the Independent Community Bankers of America summed up the Basel III issue this way: “ICBA is deeply concerned with the new proposed capital standards issued under Basel III. The regulators’ proposed rules would increase capital requirements and impose more complex regulatory standards on all banks regardless of asset size. While community banks typically maintain the highest levels of capital in the banking industry, the more complex standards could limit lending and credit availability in Main Street communities.”

And ICBA analyses are full of warnings about problems with Dodd-Frank and the CFPB.

For example, in a statement submitted for the record to the House Small Business Committee, the ICBA noted the high costs of implementing various CFPB rules. It declared: “Finally, ICBA is concerned that the scope of the changes being considered by the CFPB have the potential to cause significant costly IT upgrades and changes to bank loan origination, document preparation, and core operating systems. These costs could drive many small banks to exit the mortgage lending business, even for loans held in portfolio, which will severely restrict credit in many rural areas. Those community banks that do remain in the business will likely have to increase their prices to cover these costs. These costs for items that add no value or protection to the consumer will end up increasing the cost of credit and reducing the availably of credit.”

The ICBA also summed up the problems with price controls being set on interchange fees: “While the Federal Reserve’s final rule capping debit interchange rule (effective October 1, 2011) and the network exclusivity rule (effective April 1,2012) implementing the Durbin amendment to the Dodd-Frank Act were a significant improvement over the December proposed rule, they remain a serious concern. ICBA strongly supports legislation introduced by Reps. Jason Chaffetz (R-UT) and Bill Owens (D- NY) to repeal the Durbin amendment and will work to advance it. At the same time, ICBA is focused on the networks’ implementation of the rule and the impact of the rule on community banks and other exempt issuers. ICBA is opposing further legislation to regulate credit card interchange, either through tampering with antitrust laws or undoing existing pro-consumer network operating rules, which would put community banks at a competitive disadvantage to larger institutions with national footprints. Merchants want to pay less for the benefits they receive by accepting payment cards, and their efforts to regulate interchange would mean fewer choices and higher costs for consumers.”

Points made at a House Financial Services subcommittee hearing focused on the costs of new rules and regulations on small banks.

For example, as reported by TheHill.com, Charles Hageboeck, the president of City National Bank, said in his testimony, “The flood of regulations emanating from Dodd-Frank is so large that bank regulators have been urging banks to add compliance officers to handle it. And despite claims that community banks like mine would be exempt from the new Consumer Financial Protection Bureau, we are not exempt. All banks — large and small — will be required to comply with the rules and regulations set by the CFPB. Given that the cost of compliance has a disproportionate impact on small banks as opposed to large banks, it is reasonable to expect this gap to widen even more as Dodd-Frank is fully implemented.”

According to BankCreditNews.com, William Loving, the president and CEO of Pendleton Community Bank, observed, “I can’t think of one aspect of our bank that is not touched by regulation. My staff spends more time on regulatory compliance than it did before 2008. I can assure you our bank did not have anything to do [with the recent financial collapse]. Every dollar spent on compliance is not loaned to customers. Every dollar the staff spends on compliance is not spent on customer service.”

The regulatory assault on small banks is costly in a variety of ways, and is bad news for small businesses, individuals and families needing affordable credit, and therefore, bad news for the economy.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is Root of All Evil? A Pastor Stephen Grant Novel.

Energy Success Story for the Economy

noreply@blogger.com (Raymond J. Keating) — Mon, 13 Aug 2012 16:09:00 +0000

Sometimes one just needs to step back to gain, or regain, perspective.

We hear about how the Marcellus Shale natural gas field, covering parts of Ohio, Pennsylvania, West Virginia and New York, has changed the energy equation in the U.S. A look at the latest numbers and projections drives home the point.

In an August 5 Associated Press story, it was noted, “In 2008, Marcellus production barely registered on national energy reports. In July, the combined output from Pennsylvania and West Virginia wells was about 7.4 billion cubic feet per day, according to Kyle Martinez, an analyst at Bentek Energy. That's more than double the 3.6 billion cubic feet from last April, and represents over 25 percent of national shale gas production.”

The report goes on to note that experts estimate that Marcellus has passed the Haynesville region in Arkansas and Texas as the top natural gas producing region.

For good measure, there are plans for Shell Oil to “build a petrochemical plant to turn Marcellus gas into other consumer and industrial products including plastics,” and several pipeline expansions in the region will allow for increased production and easier transport of gas to other parts of the northeast.

That’s good news for the region’s economy, as well as for energy costs. The AP noted: “The current wholesale price of natural gas is about $3 here, but $12 or more in Europe and Japan.”

And the U.S. Energy Information Administration (EIA) points out, “Of the natural gas consumed in the United States in 2011, about 94% was produced domestically; thus, the supply of natural gas is not as dependent on foreign producers as is the supply of crude oil, and the delivery system is less subject to interruption. The availability of large quantities of shale gas should enable the United States to consume a predominantly domestic supply of gas for many years and produce more natural gas than it consumes.”

Indeed, looking ahead, the EIA “projects U.S. natural gas production to increase from 21.6 trillion cubic feet in 2010 to 27.9 trillion cubic feet in 2035, a 29% increase. Almost all of this increase in domestic natural gas production is due to projected growth in shale gas production, which grows from 5.0 trillion cubic feet in 2010 to 13.6 trillion cubic feet in 2035.” Also, keep in mind that, as the EIA points out, “Many shale formations, particularly the Marcellus, are so large that only a limited portion of the entire formation has been extensively production-tested.”

What about the impact on the economy, industries and jobs? In a March 2012 report, API summed up: “Development of shale resources supported 600,000 jobs in 2010. The number of direct and indirect jobs is constantly increasing. Affordable, domestic natural gas is essential to rejuvenating the chemical, manufacturing, and steel industries. The American Chemistry Council determined that a 25 percent increase in the supply of ethane (a liquid derived from shale gas) could add over 400,000 jobs across the economy, provide over $4.4 billion annually in federal, state, and local tax revenue, and spur $16.2 billion in capital investment by the chemical industry. They also note that the relatively low price of ethane would give U.S. manufacturers an essential advantage over many global competitors. Similarly, the National Association of Manufacturers estimated that high recovery of shale gas and lower natural gas prices will help U.S. manufacturers employ 1,000,000 workers by 2025 while lower feedstock and energy costs could help them reduce natural gas expenditures by as much as 11.6 billion by 2025. America’s Natural Gas Association (ANGA) estimates that lower gas prices will add an additional $926 of disposable household income annually between 2012 and 2015, and that the amount could increase to $2,000 by 2035.”

Small businesses across industries, obviously, benefit from enhanced economic growth and lower natural gas costs. But the small business role in specific energy industries should be noted as well.

For example, according to the latest Census Bureau data, 55% of employer firms in the “pipeline transportation of natural gas” industry had fewer than 20 employees, and 69% less than 500 workers.

In the “natural gas liquid extraction” industry, 53% of firms had less than 20 workers, and 70% fewer than 500 employees.

And among “natural gas distribution” firms, 65% had less than 20 workers, and 84% fewer than 500 employees.

So, the natural gas business is, to a significant degree, about small businesses.

The recent, dramatic and beneficial change in shale gas production has been due to advancements in technology, specifically, the combination of horizontal drilling with hydraulic fracturing.

Of course, though, environmental activists who do not like the use of any kind of carbon-based energy have opposed expanded natural gas production. It is important that policymakers in the states and at the federal level keep their focus on regulations that are rooted in sound science, rather than based on mere assertions, and that do not impose unnecessary burdens.

For example, questions loom large on the regulatory situation in New York. Consider the following points made by the Independent Oil & Gas Association of New York: “The New York Times published an article on June 13 quoting a senior official within the Department of Environmental Conservation (DEC), who said Governor Cuomo’s administration planned to limit the initial permitting of horizontal gas wells to select communities in the Southern Tier. Further, the article noted that local municipalities would initially have control over whether to allow natural gas development within their communities.” The New York IOGA has said that “any progress is a positive step forward. And while we stand by that position to a certain degree, we also have an obligation to share the viewpoint that such limitations, which are not based on scientific data, is inappropriate and not in the best interest of our members, the Southern Tier economy and the entire state.”

The New York IOGA added, “The administration, including the DEC, is well aware that we will accept reasonable regulations and permit guidelines, but we also want state leaders to understand that a plan such as the one outlined in various follow-up reports is unsustainable on a large scale.” Quite simply, the IOGA was spot on in pointing out that developers “will not invest in a state where there is: regulatory uncertainty; an inconsistent patchwork of local laws; and unreasonable and expensive obstacles.”

That warning applies to New York, to other states and to the nation. The U.S. – particularly at the federal level – has done a great deal to undermine domestic energy production. Such misguided policymaking needs to be avoided. That goes for all production, from offshore oil drilling to natural gas production in areas like the Marcellus Shale.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

“SHARING” INNOVATION: THE NEW NORM?

noreply@blogger.com (Karen Kerrigan) — Sun, 12 Aug 2012 15:37:00 +0000

The future of wireless is uncertain. Will we move toward ever-faster speeds, better and more powerful apps, and increased job growth for our economy? Or, will wireless innovation and development stagnate due to increasingly crowded airwaves and a government that dithers rather than acts to solve the problem?

The Information Technology and Innovation Foundation held an event on Capitol Hill last week, where presenters provided a stark choice for the United States. Panelists from the wireless sector, Congressional staff, the Administration and the app development community discussed a report issued recently by the President’s Council of Advisors on Science and Technology (PCAST).

The report proposed that “sharing” federal spectrum – rather than clearing it, allocating and auctioning it for commercial consumer use, as has been done for well over a decade – should become the “norm.” At first this sounds good. After all, didn’t your parents always tell you to share? However, there’s a real danger in this approach. For many reason, spectrum sharing will slow the process of getting spectrum into the hands of consumers and businesses.

It hasn’t been “shared spectrum” that has given us the tremendous growth and innovation in the wireless ecosystem. Private investment not “sharing” has, for example, created an apps economy that didn’t even exist until 5 years ago. It now employs over 500,000 workers. The investment of today’s wireless carriers, who could count on spectrum exclusive licensing, has revolutionized our mobile economy. It’s been regulatory and business certainty that has allowed AT&T and Verizon to rank #1 and #2 in American investment.

Although spectrum sharing could potentially be one of many options for carriers down the road, the report noted that the scope and scale of the technology for bringing spectrum sharing to practical fruition was decades away. We can’t wait.

In 2010, President Obama promised that the government would make 500 megahertz of spectrum available for commercial consumer use -- spectrum that network operators will put to work to provide the highest speed access to the wireless broadband Internet, everything from streaming videos to new medical applications to career and educational opportunities.

The PCAST report, however, sent a depressing message to investors, to the private sector and to American consumers: we know you need spectrum, but you have to do it “our” way. You have to share spectrum with the federal government, with the government deciding when you get to use spectrum, and when you can’t. Oh, and spectrum sharing doesn’t work yet. Talk about uncertainty.

Rather than the untested, speculative technologies of the PCAST report, we need the certainty of a method of obtaining spectrum that works. Part of what has proven to work is quick approval of secondary market transactions that allow carriers to purchase spectrum in the free market and put it to use now for consumers.

In addition, we need the Administration to follow through on the proven model of clearing, allocating and auctioning spectrum and then act on its promise of 500 MHz of clearly useable, exclusively licensed spectrum for commercial consumer use now.

Let’s use the tools we have to get the job done so hundreds of millions of Americans can benefit more fully from the wireless revolution. This revolution will generate millions of new jobs in all areas of the economy.

A President running for reelection should want to focus on jobs and economic growth – shouldn’t he?

Karen Kerrigan is President and CEO, SBE Council

Productivity Improves, But Still Under-Performs

noreply@blogger.com (Raymond J. Keating) — Thu, 09 Aug 2012 19:18:00 +0000

Productivity for 2011 and in the first quarter of this year was, quite simply, poor. The numbers released on August 8 for the second quarter of 2012 were better than the first quarter, but still not exactly robust.

Keep in mind that we’re talking about nonfarm business sector labor productivity. This output per hour is calculated by dividing an index of real output by an index of hours worked.

Post-World War II, labor productivity growth has averaged 2.2 percent. But productivity only grew by 0.7% in 2011, and by -0.5% in the first quarter of 2012 (annualized rate) and 1.6% in the second quarter. That 1.6% increase reflects 2.0% output growth and a 0.4% increase in hours worked.

Productivity improved strongly in 2009 and 2010, which was a requirement given the down economy and lost jobs. The last time that the U.S. combined solid real GDP growth with strong productivity growth was in 2004. We also saw that combination in the late 1990s and mid-1980s. The ideal scenario is to experience strong GDP and productivity growth. But that certainly has not been the case in recent years.

In the end, productivity matters a great deal to both businesses and workers. Enhanced productivity obviously benefits business owners, boosting their bottom lines. And it’s good for workers, whose incomes ultimately are tied to their level of productivity.

Looking ahead, labor productivity is tied to business investment. Indeed, contrary to popular assumptions, there is no conflict between labor and capital. They need each other, and that includes capital investment that makes labor more productive. To boost both GDP and productivity growth, the U.S. needs to remove uncertainties and reduce costs – thereby, enhancing incentives for – private sector risk taking, namely, entrepreneurship and investment.

Raymond J. Keating

Chief Economist

SBE Council

Keystone XL Needed Now More than Ever

noreply@blogger.com (Raymond J. Keating) — Wed, 08 Aug 2012 18:29:00 +0000

The American people understand the benefits of the Keystone XL Pipeline. Unfortunately, the Obama administration continues to play politics with this important energy project.

On the positive side, the southern portion of the pipeline project – running from Cushing, Oklahoma, to the Gulf of Mexico (now being called the Gulf Coast Project) – finally received its final permit to move ahead.

In a statement, Russ Girling, TransCanada's president and chief executive officer, said, “Receiving this final, key Army Corps permit for the Gulf Coast Project is very positive news. TransCanada is now poised to put approximately 4,000 Americans to work constructing the $2.3-billion pipeline that will be built in three distinct 'spreads' or sections. The Gulf Coast Project will contribute millions in property taxes to counties in Oklahoma and Texas, money that can be used to build roads, schools and hospitals.”

But the real news remains that TransCanada is still waiting on the Obama administration to make another decision on the 1,179-mile part of the pipeline project that would run from Hardisty, Alberta to Steele City, Nebraska. This would bring both Canadian and North Dakota crude oil to Gulf Coast refineries.

Recall that President Obama rejected the project in January, siding with green extremists who oppose all carbon-based energy and also happen to be part of the President’s political base. At the same time, so as to not alienate another part of his base, i.e., labor unions that support the project, the White House invited TransCanada to reapply for approval with a slightly altered path. TransCanada did reapply in May.

This project should be a no-brainer. Multiple years of review by the State Department gave a thumbs up on the environmental front. The project would generate significant jobs – as noted above by the TransCanada CEO. Estimates put the boost in U.S. employment from the 80,000 jobs supported by existing oil sands projects in 2010 to 179,000 jobs in 2035, with a potential for as many as 600,000 by 2035. For good measure, this means expanded oil for U.S. refineries, and an increase in oil supplies from reliable sources.

As noted by API Refining Manager Cindy Schild, “There is no reason to further delay this critical jobs and national security project. With high unemployment and continued instability in the Middle East – approval of this pipeline will help our economy and help put our energy future back into our own hands.”

In a statement, TransCanada added: “The pipeline will transport growing supplies of U.S. crude oil to meet refinery demand in Texas. Gulf Coast refineries will be able to access lower-cost domestic production and avoid paying a premium to foreign oil producers, reducing cost and the United States' dependence on foreign crude oil.”

The American people understand the potential benefits. A Washington Post poll released on July 1 asked if the U.S. government should approve the pipeline project. Among adults in general, 59% said yes and 18% no, and among registered voters, it was 62% in the yes column and, again, 18% no.

Small business owners, perhaps more so than anyone else, understand the need for affordable, reliable energy, as they struggle in a tough economy while figuring out how to wrestle with high and uncertain energy costs. In an April 2012 survey conducted by SBE Council, 72% of small business owners said high energy prices were impacting their firms – a shocking 43% said if gas prices remained high or shot higher the survivability of their business was at stake.

It’s time for the Obama White House to push aside the politics, and do something positive for the U.S. economy by approving the Keystone XL Pipeline project.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

SBE Council Chief Economist: Latest Jobs Data Stoke Deep Worries About Entrepreneurship and Economy

noreply@blogger.com (Raymond J. Keating) — Fri, 03 Aug 2012 14:06:00 +0000

Today, Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), released the following statement in response to the July employment data reported by the U.S. Bureau of Labor Statistics:

"The latest jobs report is bad news when you look at the data that matter most when it comes to the state of our economy and job creation.

"The establishment survey payroll numbers pointed to employment growth of 163,000. While at least positive, those numbers are far below where they should be during an economic recovery, such as in the neighborhood of 250,000.

"But the real story lies with the household survey, which better captures start up and small business activity, and is the survey from which we get the unemployment rate. The news here was all unequivocally bad.

"The labor force actually fell by 150,000, with the labor force participation rate declining and remaining at nearly three-decade lows. The discouragement of workers persists.

"Employment actually declined by 195,000, with the employment-population ratio also at near-30-year lows and the unemployment rate ticking up to 8.3 percent. Businesses simply are not creating jobs, being discouraged by uncertain and costly public policies relating to taxes, regulations, and government spending, for example.

"There's really nothing positive to latch onto here. Instead, the numbers only stoke more worries about the state of entrepreneurship and our economy."

KEY VOTE FOR SMALL BUSINESS: A Pathway to Comprehensive Tax Reform in 2013, H.R. 6169

noreply@blogger.com (Karen Kerrigan) — Thu, 02 Aug 2012 17:42:00 +0000

SBE Council sent this KEY VOTE letter to all members of the U.S. House today regarding the vote on the "Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012." Entrepreneurs are sick and tired of the continued "talk" about tax reform. They want action!

August 2, 2012

Dear Member of the U.S. House of Representatives:

The Small Business & Entrepreneurship Council (SBE Council) strongly supports the Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012, H.R. 6169. America’s entrepreneurs and small business owners want a simple and less burdensome tax system. It needs to be globally competitive in order to promote growth and encourage investment. The time has come to stop talking about comprehensive tax reform. It is time to take action. H.R. 6169 provides a clear pathway to comprehensive tax reform in 2013.

Fixing the tax system is one of the most important steps Washington can take to assist business growth and entrepreneurship. The accelerated procedures included in H.R. 6169 to bring a tax reform bill to a vote in the House and Senate are needed. SBE Council strongly supports the specific tax provisions that provide the framework for the bill, which include:

• Consolidation of the current six individual income tax brackets into two, of rates not more than 10% and 25%
• A corporate tax rate of not more than 25%
• Repeal of the Alternative Minimum Tax (AMT)
• A broadening of the base to maintain an 18%-19% of GDP revenue level
• A move to a territorial system from our current worldwide system

Entrepreneurship and small business growth would surge under such a system. If the U.S. is to move back to robust levels of investment, job creation, entrepreneurship and economic growth, the tax system must be stable and globally competitive. Americans, and most certainly entrepreneurs, are eager for Washington to act on tax reform. H.R. 6169 is a crucial and welcome legislative step.

SBE Council will KEY VOTE H.R. 6169 as a vote for small business in its forthcoming Ratings of the 112th Congress. Thank you, in advance, for your support of America’s small business owners and entrepreneurs.

Sincerely,
Karen Kerrigan
President & CEO
Small Business & Entrepreneurship Council (SBE Council)

FED WATCH: Keating Comments on Latest FOMC Statement

noreply@blogger.com (Raymond J. Keating) — Thu, 02 Aug 2012 13:14:00 +0000

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following response to the Federal Open Market Committee’s statement on August 1:

“The FOMC’s statement today was more of the same. The Fed effectively warned that economic and employment growth would continue to under-perform for the foreseeable future, and Bernanke & Company would continue running loose money.

“So, the message is that the economic fiction the Fed has been operating under for four years now will persist. It’s the Bernanke Fed’s misguided policies, and they’re sticking to them.

“The reality, of course, is that the Fed’s previously unimaginable expansiveness on monetary policy has done nothing to strengthen this anemic recovery. And no reasons exist to think that even more easing by the Fed will help growth.

“Instead, loose monetary policy has only created negatives and uncertainties regarding the dollar and inflation. Entrepreneurs and investors continue to face nothing but negatives and uncertainties on the policy front – from worries over taxes, regulations and government spending on the fiscal side to the actual and potential grim consequences of loose money.

“Among those consequences of such expansive monetary policy, by the way, are higher energy costs given that oil is priced in dollars. When the value of the dollar and inflation are concerns, that serves to push oil prices higher than they otherwise would be.

“A shift to sound monetary policy focused on price stability would be a welcome change for small businesses and the economy, but the Bernanke Fed is uninterested in shifting policy in such a direction.”

A Vote for Globally Competitive Tax Rates and Comprehensive Tax Reform, H.R. 6169

noreply@blogger.com (Karen Kerrigan) — Thu, 02 Aug 2012 12:47:00 +0000

Today, the U.S. House will vote on H.R. 6169 -- a bill that forges an accelerated path for the consideration of comprehensive tax reform in 2013. The measure would implement expedited procedures to enable lawmakers in both the House and Senate to overcome technical barriers that often cause bills to languish during the legislative process.

Last week, SBE Council Member Todd Flemming, along with other small business owners, all agreed at a House Small Business Committee hearing that fixing the tax system was the single most important thing Washington can do to assist business growth and entrepreneurship.

In order for the expedited procedure to kick in, the legislation must be introduced by April 30 of next year and include the following:

Consolidation of the current 6 individual income tax brackets into 2, of rates not more than 10% and 25%

A corporate tax rate of not more than 25%

AMT repeal

A broadening of the base to maintain an 18%-19% of GDP revenue level

A move to a territorial system from our current worldwide system

All of these provisions are critical to making the U.S. tax system more globally competitive. Both corporate and individual tax rates are much too high, and compliance is costly and burdensome. If the U.S. is to move back to robust levels of investment, job creation and economic growth the tax system must be stable and globally competitive.

SBE Council will KEY VOTE H.R. 6169 as a vote for small business in its forthcoming Ratings of the 112^th Congress.

Yesterday, the U.S. House passed H.R. 8. The legislation would extend current tax rates for all income levels and preserve the 35% estate tax rate and $5.12 million indexed exemption through 2013 (the death tax will surge to a top rate of 55% and a meager $1 million exemption at year end). The bill passed by a vote of 256-171 -- 237 Republicans and 19 Democrats supported the bill, while 170 Democrats and 1 Republican opposed it.

Karen Kerrigan, President & CEO

KEY VOTE for Small Business: H.R. 8 Extends Tax Relief for All

noreply@blogger.com (Karen Kerrigan) — Wed, 01 Aug 2012 20:13:00 +0000

SBE Council notified all members of the U.S. House that it will KEY VOTE the Job Protection and Recession Prevention Act, H.R. 8 for its forthcoming Ratings of the 112th Congress.  H.R. 8 is an important measure for entrepreneurs as it will extend all current tax rates through to 2013.

In 2012, extension of the tax rates was supported on a wide bipartisan basis.  In the U.S. House, over 130 Democrats voted for an extension for all -- 86 of these Democrats are currently U.S. House members. Both parties came together and agreed that the economy was too weak to impose tax increases on businesses, individuals, investors and the private sector in general. With the economy showing anemic growth of 1.5% in the second quarter, one could argue that the economy is in similar shape today as it was back then.

As SBE Council noted in its KEY VOTE letter:

"As reported last week, second quarter GDP growth came in at a pitiful 1.5 percent. Raising taxes will aggravate currently weak economic conditions, driving the economy and business confidence into the ground. Access to capital is very difficult. Voting to raise taxes on entrepreneurs would worsen these conditions, and only cause more pain for small business owners and the unemployed who are counting on them to create jobs.

"Raising taxes during this tenuous economic period makes no sense. Washington should not be draining more resources out of our capital-starved economy. Entrepreneurs and the private sector need this capital for creating jobs, investing in their firms, rewarding employees, and for general business needs like paying down debt or expanding into new markets. Extending all tax rates will foster some stability, which is key for business growth and robust entrepreneurship."

The House is expected to pass H.R. 8, but given the Senate's vote last week to raise taxes on small business owners and entrepreneurs and rejecting an amendment that would extend the current tax rates for another year, it looks like small business owners will move closer to the "tax cliff," which comes at year's end.

Karen Kerrigan, President & CEO

The FCC, Broadband for Small Business, and Innovation's Future

noreply@blogger.com (Karen Kerrigan) — Mon, 30 Jul 2012 18:52:00 +0000

Universal broadband is critical for small business owners and people who want to start enterprises. Still, many individuals in the U.S. do not have access to broadband (or reliable service). SBE Council continues to push for policies that promote investment in our nation's broadband infrastructure to ensure access, affordability, reliability and continued innovation.

On July 18, the House Small Business Committee held a hearing appraising the role of the federal government in expanding broadband access to small businesses across the country. At the hearing, Committee members underscored the need to bring more broadband access and certainty to rural and unserved areas of the nation. As several Committee members noted, small business owners need reliable broadband access to grow and create jobs:

"One of the most important tools the Internet offers to businesses is the ability to access the global electronic marketplace," said Chairman Sam Graves (R-MO). "Increased access will allow more small businesses to compete and enter the global market. To grow and create jobs, small businesses need to be able to count on reliable broadband. We've heard from a number of carriers regarding the regulatory uncertainty in deploying broadband to new areas. Small businesses must have stability to make decisions that last for years, which includes any investment or new jobs."

Several federal agencies, including Federal Communications Commission (FCC) Chairman Julius Genachowski, provided testimony at the hearing. Committee members queried the Chairman and other witnesses about their policies and regulatory initiatives and whether they've considered what the impact would be on private investment in broadband and wireless infrastructure.

In his opening comments, Chairman Graves underscored the importance of investment, and the consequences of misguided government regulation and intervention: "First, when agencies consider new policies, like reforming the universal service fund, we need to ensure that these changes do not diminish the incentives for private sector investment to deploy broadband. And second, I encourage you to accelerate the supply of spectrum for wireless providers to keep up with the growing demand. The boom in wireless smart phones and tablets has created a new market of innovation and capabilities for small businesses that must continue. Without private sector investment in broadband infrastructure, many small businesses in rural areas, like northwest Missouri, will be disconnected from one of the most powerful tools of our generation, which will in turn hamper their success."

SBE Council applauds Chairman Graves for expressing the need for the federal government to accelerate the supply of spectrum -- without more "airwaves" to run our mobile and wireless devices, the cost of using these critical tools will go higher and reliability and innovation will suffer. The spectrum crunch is real. Government must make more spectrum available, while making it easier for the private sector to allocate unused spectrum to the players who need it.

To that end, the FCC has been moving at a snail's pace in getting these auctions going -- they also seem to want to manage the outcome of the auctions, which is both impractical and misguided. It seems the FCC's approach on a wide array of issues is to micromanage or intrude in areas where intrusion in unwarranted. It's no wonder that Congress is looking at setting boundaries around the FCC's work and regulatory authority.

On a positive note, the newest FCC Commissioner Ajit Pai is bringing a modern and fresh perspective to the Commission. In a recent speech, he presented a proposal to "unlock investment and innovation in the digital age" by promoting entrepreneurs, holding the FCC accountable, and providing clarity to the broadband industry. This would be a bold change for the FCC as it has been more of a nuisance to progress. We need a FCC that will enable investment, and power America's broadband future.

Karen Kerrigan, President & CEO

U.S. House Will Act on Comprehensive Tax Reform, Extension of Current Tax Rates This Week

noreply@blogger.com (Karen Kerrigan) — Mon, 30 Jul 2012 18:10:00 +0000

This week, the U.S. House will debate and vote on H.R. 8, the Job Protection and Recession Prevention Act, which will extend current tax rates through 2013. This common sense bill will prevent harmful tax hikes on America's job creators, investors, entrepreneurs and all Americans. Without such an extension, the weak economy will get much worse. The uncertainty has already taken its toll on the economy, business and investment. The economy grew by an anemic 1.5% in the second quarter. Small business owners continue to say anti-growth policies from Washington are driving uncertainty -- the unstable and ever-changing tax system is one such area driving low confidence.

In addition, the House will consider H.R. 6169, the Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012. This legislation will provide a direct pathway to comprehensive tax reform in 2013. This bill will enable lawmakers in both the House and Senate to overcome significant technical hurdles that often cause bills to languish during the legislative process.

At a House Small Business Committee hearing last week (July 25), small business witnesses including SBE Council member Todd Flemming, CEO of Infrasafe, overwhelmingly agreed that fixing the tax system was the single most important thing Washington can do to assist business growth and entrepreneurship. While these entrepreneurs said Congress must also focus on other critical issues, simplifying the tax system - and making it more competitive and stable - was the top item they all agreed to when asked to name "just one" issue.

H.R. 6169 sets up the following structure for considering comprehensive reform in 2013:

• In the House, if the Rules Committee fails to provide for consideration of an applicable tax reform bill within 15 days after the Ways and Means Committee reports the tax reform bill or is discharged, a process for floor consideration of the bill, similar to an open rule, will automatically be put in place.

• In the Senate, any applicable tax reform bill would not be subject to a cloture vote on a Motion to Proceed or on individual amendments. A cloture vote may still be required to end consideration of the bill. The expedited procedures also require that amendments be relevant to the underlying bill.

For the process to apply, the legislation must be introduced by April 30, and include the following:

• Consolidation of the current 6 individual income tax brackets into 2, of rates not more than 10% and 25%
• A corporate tax rate of not more than 25%
• AMT repeal
• A broadening of the base to maintain an 18%-19% of GDP revenue level
• A move to a territorial system from our current worldwide system

These tax reform measures will make the U.S. much more competitive, and provide an extraordinary boost to entrepreneurship, small business investment, business confidence and economic growth. The U.S. tax system is failing our entrepreneurs, and the corporate tax rate is the highest effective rate among developed nations.

SBE Council will be supporting, and KEY VOTING H.R. 8 and H.R. 6169 for its forthcoming Ratings of the 112th Congress. A vote for these bills, is a vote for small business.

Karen Kerrigan, President & CEO

SBE Council Chief Economist Comments on Second Quarter GDP Growth

noreply@blogger.com (Raymond J. Keating) — Fri, 27 Jul 2012 16:35:00 +0000

Today, Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following statement about the second quarter GDP numbers released by the U.S. Bureau of Economic Analysis:

“Real GDP growth of 1.5% in the second quarter, following on 2% in the first quarter, is simply abysmal. In fact, this entire recovery has been one of the worst on record. Real GDP growth over the past three years has averaged 2.2 percent, when we should be growing at double that rate during a recovery.

“One of the great dangers of continually poor GDP numbers for four-and-a-half years now is falling into the trap of diminished expectations. Make no mistake, the U.S. should not accept poor economic growth as some kind of new normal. Instead, serious pro-growth policy changes, such as tax and regulatory relief and stability, reining in government spending, and leading on trade, would put the U.S. back on a path of robust entrepreneurship, investment, growth and job creation.”

KEY VOTE for Small Business: H.R. 4078, Red Tape Reduction

noreply@blogger.com (Karen Kerrigan) — Thu, 26 Jul 2012 13:48:00 +0000

SBE Council sent a letter to all U.S. House members today to let them know that we will KEY VOTE H.R. 4078, the Red Tape Reduction and Small Business Jobs Creation Act, for our upcoming "Ratings of the 112th Congress." The House will vote on H.R. 4078 today.

As I noted in my letter to all Members of the U.S. House: "This important piece of legislation will bring more accountability to the regulatory process and place restraints on a system and policies that are creating excessive burdens, costs, and uncertainties for America’s small businesses."

H.R. 4078 is not only long overdue, but represents a critical emergency measure that will help get our economy back on track. The legislation would place a moratorium on all new major regulations until the unemployment rate decreases to 6% or lower, would prevent "midnight" regulations and implement other reforms and requirements to bring sanity back to the federal regulatory system.

As I noted in the KEY VOTE letter: "Excessive, unnecessary and politically motivated regulation must end if the U.S. economy is to return to growth. The future of the U.S. economy is at stake. The volume and scale of regulation advanced over the past three and one-half years has accelerated the decline in U.S. competitiveness, and is driving investment and opportunities to more hospitable nations. Furthermore, the uncertainty and costs associated with vast regulatory initiatives implemented and in the works are depressing U.S. investment, small business confidence, job creation and economic growth."

Again, H.R. 4078 is long overdue and is necessary to help bring our economy back to strong levels of growth.

Karen Kerrigan, President & CEO

Obama’s Unnerving View on Entrepreneurship

noreply@blogger.com (Raymond J. Keating) — Wed, 25 Jul 2012 19:50:00 +0000

Politicians on a bipartisan basis love to talk glowingly about entrepreneurs and the businesses they build and work to grow. Unfortunately, that rhetoric too often hides a fundamental misunderstanding towards the process of entrepreneurship, or towards the economic risk takers themselves.

Those misunderstandings or hostilities usually become evident via policymaking. That is, while saying nice things about business owners, policies are imposed that raise costs for businesses, and create disincentives for entrepreneurship and investment.

Such misguided policymaking include higher taxes that diminish incentives and resources for starting up, investing in and expanding businesses; excessive regulation, which falls far more heavily on smaller businesses; high levels of government spending that drain resources from the private sector and threaten higher taxes down the road; and a lack of leadership in trying to lower the barriers to trade that reduce opportunity.

If that agenda sounds familiar, it’s because this is what entrepreneurs, businesses, their employees and investors have labored under for several years now. It’s the agenda of President Barack Obama.

Interestingly, the President let his guard down regarding his philosophy, bias and assumptions when it comes to entrepreneurship in remarks delivered on July 13.

Mr. Obama declared, “If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business -- you didn’t build that. Somebody else made that happen.”

Let’s break this down. Obviously, few entrepreneurs succeed without help from others. For example, they might have gotten a loan from an individual or a bank, or received capital from investors. And of course, no one succeeds in the marketplace without serving others, by creating or better serving various demands. But it is the entrepreneur who offers the new or improved good or service upon which a loan or investment is made, and who finds customers.

This certainly is not what the President is talking about here.

Then Mr. Obama talks of having a great teacher somewhere in your life. Well, maybe or maybe not on that one. And as for making a direct link between having some great teacher along the way to starting up and building a business is a tough one to make. After all, there are countless people who had a good teacher along the way, but had no inclination towards entrepreneurship.

The next lines reveal what the President is getting at: “Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges.” Obama is talking about government.

Now, government certainly has a critical role to play in the free enterprise system, especially establishing the rule of law, enforcing and protecting property rights, running a fair system of justice, enforcing contracts, protecting against fraud, and so on. But the President’s liberal philosophy rejects the idea that the individual and private, voluntary groups and associations come first (including private and parochial schools, by the way, with many very good teachers), with government in service to and supporting individuals and such institutions. Instead, in the leftist or Progressive view, government spurs and lays first claims on what is produced in our economy, since it’s government that “allowed you to thrive” and “invested in roads and bridges.” He misses the fundamental point that government derives its powers from the people. For good measure, the Soviet Union, for example, was excellent at spending money on building roads and bridges. But since it was a communist/socialist system, whereby government controlled all, they were roads and bridges to nowhere.

And then came the kicker from Mr. Obama: “If you’ve got a business -- you didn’t build that. Somebody else made that happen.”

In rather stunning fashion, the President takes his views to their natural conclusion, revealing his true take on entrepreneurship and the economy. It is all about government being the spark and the engine. He does not understand that economic growth and wealth creation thrive most in the freest economies on Earth. Economic growth is driven by private risk taking, i.e., entrepreneurship and investment, not by resources being taken from the private sector and spent by politicians. In the economies that thrive, such as the United States, private entrepreneurs and businesses innovate, produce and compete, with consumers, in the end, deciding what works and what does not.

Mr. Obama’s ignorance on the basics of how the economy works is not surprising. But there still is something unnerving and frightening to hear such economic obliviousness stated so plainly by the President of the United States.

Make no mistake, if you own a business, you did make that happen. It’s you that take the incredible risks, and work to serve others. That is an endeavor worthy of praise and thanks, certainly not denigration or diminishment by the President.

_______

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

Obama, Small Business and Taxes

noreply@blogger.com (Raymond J. Keating) — Thu, 19 Jul 2012 15:56:00 +0000

On July 9, we heard a lot from the White House about tax cuts, including for small businesses. Was any of this rooted in actual, sound tax and overall economic policies, or was it simply a case of political spin?

Unfortunately, but not surprisingly, it was the latter. In particular, when you read the material on the White House’s website, it’s overwhelmingly rhetoric rooted in class warfare politics.

President Obama’s emphasis was on extending for a year the Bush tax cuts for those earning less than $250,000, and pushing the idea that only three percent of small businesses would face tax increases under this plan.

This was nothing new from President Obama. And again, the obvious question is: Why raise taxes on anyone, especially in a long-struggling economy?

After all, as noted in a July 2010 analysis on some of the President’s proposed tax increases, the nonpartisan Joint Committee on Taxation reported the following on higher personal income tax rates: “The proposal also results in increased marginal tax rates on upper income taxpayers (as is provided for by the present-law sunset of EGTRRA), which will correspondingly reduce incentives for these taxpayers to work, to save, and to invest. Opponents of this latter aspect of the proposal often note that many small businesses, and a large fraction of small business income, will be adversely impacted by an increase in the top two tax rates. The staff of the Joint Committee on Taxation estimates that in 2011 just under 750,000 taxpayers with net positive business income (three percent of all taxpayers with net positive business income) will have marginal rates of 36 or 39.6 percent under the President’s proposal, and that 50 percent of the approximately $1 trillion of aggregate net positive business income will be reported on returns that have a marginal rate of 36 or 39.6 percent.”

It’s worth repeating: 50% of net positive business income will be directly impacted by these higher tax rates.

For good measure, a 2008 analysis from the Treasury Department pointed out: “About 81 percent (about $27.3 billion) of the total $33.8 billion in tax relief this year from lowering the top two tax rates will be received by flow-through business owners. Individuals with more than 30 percent of their income from flow-through businesses receive 44 percent (or about $15.0 billion) of the total tax relief from lowering the top two tax rates.” Those entrepreneurs will be hit by the Obama tax increase.

How can any of this possibly be good for small business and the economy?

Consider also that the biggest challenge for small businesses is to get the capital needed to grow. That capital comes from investors. And it’s higher income investors that have the resources to undertake such ventures. And those include angel investors, who often are successful business owners who reach out to support and invest in start-ups.

Again, how could raising taxes on such individuals possibly be beneficial to the entrepreneurial sector of our economy?

The President, of course, chooses not to address such issues. Raising taxes on upper income earner is a political strategy, again rooted in class warfare, that cannot be justified on the basis of sound economics.

In the end, one must ask: Where would these resources be put to the best use? Is it better to leave them in the private sector, where entrepreneurship, innovation, economic growth and job creation occur? Or, is it best to take such resources from those who earned them, and hand those dollars over to politicians?

On the President’s proposal, an analysis on the White House website proclaims: “This should be one of those rare moments where everyone in Washington can agree.” Indeed, this is a moment where agreement should be strong. But not in favor of the President’s proposal. Instead, agreement should stand in favor of making the 2001/2003 tax relief measure permanent as a start, and then building by implementing pro-growth tax and regulatory relief that will spur risk taking and the economy forward.

Raymond J. Keating is the chief economist for the Small Business & Entrepreneurship Council.

Interchange Fee Legal Settlement

noreply@blogger.com (Raymond J. Keating) — Mon, 16 Jul 2012 19:45:00 +0000

Well, a settlement has been reached on a lawsuit involving interchange fees paid by merchants on credit card transactions. Is this good news for small businesses? Given the situation, it would be a positive move.

As widely reported on July 13, Visa. MasterCard and various banks agreed to a settlement with retailers that brought lawsuits regarding interchange fees. The settlement is valued at $7.2 billion, with Visa, MasterCard and the banks offering $6 billion for the settlement, and $1.2 billion in interchange fee relief.

This interchange fee case has been strange from the start, dating back to 2005 when various large retailers began suing Visa, MasterCard and assorted large banks. Naturally, in addition to the courts, lobbying was stepped up to impose price controls on these interchange fees. So, the peculiar situation arose whereby private businesses were suing and lobbying to impose price controls on other private businesses. Of course, those same firms who were suing and lobbying for price controls would vehemently oppose any kind of price controls being imposed on their own goods and services. But politics and lawsuits being what they are, these retailers forged ahead.

In the Dodd-Frank financial regulation bill, Congress and President Obama actually imposed price controls on debit card interchange fees, with the fees per transaction capped at between 7 cents and 12 cents, versus the previous average cost of 44 cents. In that case, some small businesses actually have experienced increased fees.

The court settlement, which still must be reviewed and get approval in U.S. District Court, pertains to credit card fees.

Under this agreement, retailers will be able to impose a surcharge on credit card transactions, while before they could offer a discount on cash transactions. Retailers will have to be careful in how they might use such abilities given competition in the marketplace.

The big plus for small businesses and consumers coming out of this settlement is the potential removal of uncertainty. As quoted in The Wall Street Journal, Noah Hanft, MasterCard's general counsel, said, “Although we have strong defenses to all claims, a settlement avoids years of litigation and uncertainties that are inherent in such cases.”

Unfortunately, as is so often the case when it comes to misguided lawsuits, firms must take actions to protect their business in terms of limiting costs and uncertainties even when they are in the right. By eliminating such uncertainty, the credit card industry will be able to move ahead with new innovations and services that will continue to benefit both retailers and consumers.

And make no mistake about the benefits for small businesses through improved payment options, as they mean enhanced business and reduced transaction costs overall.

Unfortunately, one group involved in seeking price controls, the National Association of Convenience Stores, is not satisfied, and reportedly is going to challenge the settlement.

That would be unfortunate if they gained traction in the courts or in the halls of Congress, as it would simply translate into continued uncertainty.

In this entire mess, Congress took the wrong step on debit card fees, which have resulted in cost shifting and reduced services, as predicted. It’s time for Congress to deregulate debit card fees, and swear off any further meddling on credit card fees.

_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

Stop the Tax Hike, Reform the Tax System

noreply@blogger.com (Karen Kerrigan) — Thu, 12 Jul 2012 18:05:00 +0000

As you have probably heard, Senate Majority Leader Harry Reid (D-NV) refused to take up President Obama’s call this week to increase taxes on small business owners, investors, and upper-income taxpayers (individuals making over $200,000, and families earning $250,000 or more per year.) I guess we owe a thank you to Senator Reid.

But at the same time Senator Reid is “blocking” President Obama’s plan to raise taxes, he continues to tongue lash those who support extending tax relief for all. So why isn’t Senator Reid allowing a vote on the President’s plan? Well, it seems he does not have the votes – some fellow Democrats will vote against the President. I suppose calling for tax hikes on the so-called rich is better political rhetoric than it is policy. And let’s not beat around the bushes -- it’s really bad policy.

Before the August break, House Republicans will vote to extend all tax relief measures that are set to expire at the end of this year. They also plan to unveil principles for comprehensive tax reform.

As House Ways and Means Chairman Dave Camp (R-Calif.) noted in a recent piece in The Hill: “Those principles are based on the commonsense tax reform policies included in the last two House-passed budgets, which lower taxes for families and job creators to a top rate of 25 percent, eliminate the alternative minimum tax, transition America to a more competitive territorial tax system and keep revenue levels in the historic norm of 18-19 percent of gross domestic product. It is clear taxpayers are sick and tired of a code filled with special-interest loopholes that picks winners and losers and creates massive complexity. The tax code should be simpler, flatter and fairer. By eliminating lobbyist loopholes, we can lower rates and create a healthier, stronger economy with more jobs.”

(To read The Hill piece, please visit: http://thehill.com/opinion/op-ed/234671-stop-the-tax-hike-)

That’s right, tax cuts for everyone – no class warfare, no picking winners or losers in the marketplace. A tax system that is fair, competitive, less complex and most of all stable.

Chairman Camp wants to enact an expedited process so that comprehensive tax reform is complete in 2013. This is a critical priority. The U.S. economy is at crossroads when it comes to how competitive it will be over the next decade. Our global competitors are cutting taxes and enacting reforms that encourage entrepreneurship, capital formation, investment and business expansion. The U.S. simply cannot afford its anti-growth tax system.

U.S. corporate tax rates average 35 percent while the OECD average is 25 percent. Approximately 1.6 million C corporations are small businesses, so lowering these rates would help small firms. Also, our tax system for start-ups and entrepreneurs is entirely too complex and burdensome. The tax code has too many moving parts for small business owners (phase-ins, phase-outs, restrictions, complex credits, etc.) to make rationale and long-term decisions. Stopping the tax hikes and enacting an expedited process for tax reform are central to small business competitiveness and the future of U.S. entrepreneurship.

As Chairman Camp wrote in his piece: “Taking action now to prevent tax hikes sends a clear, strong message to the markets, to employers and to families that Washington is serious about reforming our tax code and putting us on a path to strong economic growth. House Republicans are ready, and we urge Senate Democrats and the White House to provide families and job creators the certainty they need by joining us to stop the tax hike.”

SBE Council strongly agrees with the Chairman. We are long overdue for comprehensive tax reform. And, raising taxes is not only horrible policy, it’s horrible politics -- especially during this weak and unstable economic period.

Karen Kerrigan, President

The Top 25 Non-Financial Company “Investment Heroes”

noreply@blogger.com (Karen Kerrigan) — Wed, 11 Jul 2012 19:22:00 +0000

In a new report today, the Progressive Policy Institute listed “Investment Heroes” – the top 25 nonfinancial companies investing in the United States. AT&T, Verizon Communications, Exxon Mobil, Wal-Mart and Intel topped the list.

According to the authors of the study - "Investment Heroes: Who's Betting on America's Future?" - there would have been “a total of $1.4 trillion more in non-residential business investment over 2008-2011, in 2005 dollars, had business investment continued to grow at the same average annual rate in the ten years before the recession (4.8% over 1997-2007)."

Coauthors Diana G. Carew and Michael Mandel said, "That extra investment could have gone a long way toward creating jobs, boosting productivity and enhancing U.S. competitiveness."

Indeed, from a small business and economic growth perspective, investment remains critical. After all, thousands of small businesses are suppliers to these companies and entrepreneurs directly benefit from the innovative products and services produced by these firms.

Bottom line: Pro-growth, pro-investment policies are needed to encourage higher levels of investment.

Investment Heroes: Top 25 Nonfinancial Companies

by U.S. Capital Expenditure* (in $billions)

Rank

1. AT&T**   20.1

2. Verizon Communications**   16.2

3. Exxon Mobil   11.7

4. Wal-Mart 8.2

5. Intel   7.4

6. Occidental Petroleum   6.2

7. ConocoPhillips   5.6

8. Comcast**   5.3

9. Chevron   4.8

10. Southern Company**   4.5

11. Hess   4.4

12. Exelon**   4.0

13. Ford Motor   3.9

14. General Electric 3.7

15. Enterprise Product Partners**   3.6

16. Sprint Nextel**   3.1

17. Walt Disney   3.0

18. FedEx   2.9

19. Time Warner Cable**   2.9

20. General Motors   2.8

21. Target   2.5

22. IBM   2.5

23. Chrysler Group   2.5

24. Google   2.2

25. Apple   2.0

Total: $136.2 billion

*Universe includes nonfinancial Fortune 150 companies from 2011; financial reporting from FY11
**Reported to have U.S. operations only; may include a small amount of non-U.S. investment

To link to the paper on the PPI website please visit: http://progressivepolicy.org/investment-heroes-who%E2%80%99s-betting-on-america%E2%80%99s-future

Karen Kerrigan, President

SCOTUS: We'll call it a "tax" even if the President won't

noreply@blogger.com (Karen Kerrigan) — Thu, 28 Jun 2012 17:00:00 +0000

The Supreme Court of the United States called the individual mandate what the President refused to call it -- a "tax."

U.S. SUPREME COURT: “…the shared responsibility payment may for constitutional purposes be considered a tax… read as imposing a tax on those who go without insurance.”

According to CBO, 75% of the individual mandate penalty (oops -- tax) falls on those making less than $250,000.

The individual mandate was already unpopular, and so will this tax increase on Americans who can't afford insurance. President Obama will have to defend both.

Karen Kerrigan, President & CEO

Supreme Court Ruling is a Major Blow to Entrepreneurship, Small Business Owners

noreply@blogger.com (Raymond J. Keating) — Thu, 28 Jun 2012 15:35:00 +0000

In reaction to the ruling by the U.S. Supreme Court today on the "Affordable Care Act," the Small Business & Entrepreneurship Council (SBE Council) said the decision that keeps intact most of the law - including the individual mandate being deemed constitutional as a "tax" - will continue to impose a heavy burden on small business owners and entrepreneurs, thus harming the economy, U.S. competitiveness, job creation and the future of entrepreneurship.

"Most self-employed Americans and small business owners would purchase health insurance for themselves and their employees if they could afford it. The costly, tax-laden health care law with its individual mandate and intrusive regulations missed this entire point. Rather than providing Americans with affordable choices through better competition, the health care law coerces Americans to buy packages designed by government bureaucrats in markets micromanaged by government bureaucrats," said SBE Council President & CEO Karen Kerrigan.

"The individual mandate serves as a gateway to more coercion, where small business owners and individuals will be forced to purchase any number of goods or services that political elites deem in their 'best interest.' Today's ruling by the Supreme Court undercuts freedom, which is essential to economic growth and entrepreneurship. Entrepreneurship is on the decline in the U.S., and we need policies that will encourage risk-taking and start-up activity. Intrusive government policies and punishing taxes, like the Affordable Care Act with its individual mandate, work against a vibrant entrepreneurial ecosystem, " observed Kerrigan.

SBE Council Chief Economist Raymond Keating added:

"The U.S. Supreme Court's decision to uphold ObamaCare is an egregious, irresponsible decision that ignores the clear intent of the U.S. Constitution to limit the powers and reach of government. By allowing the government to force individuals into a commercial transaction just because they are citizens, it's hard to think of any limits that can be placed on federal power - as long as such action is called a tax. As bad as the regulatory environment has been in this nation, the federal government's power to regulate has now de facto expanded. It is critical that Congress step in, and unlike the Supreme Court, abide by the Constitution and repeal the monstrosity that is ObamaCare. If not, the ObamaCare mess of costly taxes and regulations and a vast expansion in federal spending will proceed, along with the threat of an unbridled federal government going on other activist sprees."

According to SBE Council, the U.S. needs a competitive health insurance market, which means it needs a national marketplace with ample choices for small business owners and entrepreneurs. A competitive, national marketplace will produce affordable and innovative choices for small business owners, not one controlled by government.

SBE Council will continue to urge Congress and President Obama to pare back many elements of the health care law that hurt small businesses including the employer mandate, the individual mandate, the health insurance tax, the litany of individual tax increases in the legislation, and "one-size-fits-all" regulations where the federal government is dictating the types of packages that must be offered in the marketplace. In addition, the group is pushing for improvements to Health Savings Accounts (HSAs), which have given small business owners more choice in health coverage but experienced a set back in the new health care law because it imposed various restrictions on usage.

Where Do You Think the Economy Will Be a Year From Now?

noreply@blogger.com (Raymond J. Keating) — Thu, 21 Jun 2012 13:36:00 +0000

Dating back to late 2007, we’ve had a deep recession and a miserable recovery. After this multi-year mess, where will the economy be a year from now?

A Rasmussen Reports survey of adults released on June 18 found that 36 percent thought that the economy would be stronger a year from now. However, 38 percent thought it would be worse, and 14 percent thought it would be about the same. Another 13 percent were unsure.

That’s 52 percent of adults expecting no improvement or a worsening in the economy a year from now. That’s troublesome, but not surprising.

People obviously are having a tough time shaking off the tough times of the past four-and-a-half-plus years. At the same time, though, there is little reason, right now, for a shift in their expectations.

There are troubles in Europe, China and the Middle East, for example. But more importantly, there has been no recognition on behalf of President Obama and the majority in the U.S. Senate that the U.S. desperately needs a dramatic shift in a new direction on policy.

On the policy front, all the wrong moves have been made since the recession began, including huge increases in government spending and debt; government bailouts of troubled businesses; tax increases and threatened tax increases; more regulation; absolutely no leadership on global trade policy; and monetary policy that has lost focus on price stability in favor of fruitless efforts to juice up the economy through expansive monetary policy. Meanwhile, any positives were barely detectable, such as very targeted, temporary tax measures.

If this is what continues, there is little reason to expect a robust economy a year from now, or five years from now. However, if this policy mess is moved in the exact opposite direction – such as permanent, pro-growth tax and regulatory relief; smaller government; leading the way on free trade; and monetary policy focused on price stability – then we will see real improvement in the U.S. economy.

__________
Raymond J. Keating is chief economist for the Small Business and Entrepreneurship Council, and author of "Chuck" vs. the Business World: Business Tips on TV.

SBE Council Chief Economist on FOMC Statement

noreply@blogger.com (Raymond J. Keating) — Wed, 20 Jun 2012 19:59:00 +0000

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following response to the Federal Open Market Committee's (FOMC's) statement on June 20:

"The FOMC's historically unprecedented accommodative stance on monetary policy continues. In fact, the loose money policies that began in the summer of 2008 are projected to remain in place at least through the end of 2014.

"As we have seen for nearly four years now, the impact on economic and employment growth has been nonexistent. That's consistent with what should be expected, since the effects of expansive monetary policy, if it has any positives for the economy, will be very short term.

"Unfortunately, over the longer haul, loose money merely creates a vast amount of uncertainty about the future of inflation and the value of the dollar. For example, when the Fed gets loose, the value of the dollar is affected, as are inflation expectations, which in turn push up the price of oil and gas at the pump.

"It turns out that the Fed has been bailed out on the dollar by things being worse elsewhere, such as in Europe. In addition, concerns about the economies in Europe and China have provided an added breather on energy prices recently.

"Finally, this uncertainty about monetary policy adds to the worries that entrepreneurs, small businesses and investors already have regarding tax and regulatory policies. This toxic combination puts a brake on risk taking, and therefore, on economic growth and job creation."

Overturning the "War on Coal"

noreply@blogger.com (Karen Kerrigan) — Tue, 19 Jun 2012 18:59:00 +0000

On June 20, the U.S. Senate will vote on a motion to proceed to S.J. Resolution 37, a measure to block the Environmental Protection Agency's Utility MACT rule. The rule is costly and intrusive, and will impact 40% of our nation's electricity generation. Do small businesses really need higher electricity costs on top of everything else?

On Jim Blansingame's radio show today, SBE Council President &CEO Karen Kerrigan talks about the "war on coal" and its impact on small business.

SBE Council will KEY VOTE the motion to proceed to S.J. Resolution 37 for its forthcoming Ratings of the 112th Congress -- a vote for the motion is a vote for America's small business owners and entrepreneurs.

Karen Kerrigan, President & CEO

A Breather for CPI in May

noreply@blogger.com (Raymond J. Keating) — Mon, 18 Jun 2012 20:02:00 +0000

Consumer price index inflation moved down by 0.3% in May, making for a two-month breather in inflation.

Any respite from an increase in the general price level is welcome. But we need to understand the reasons behind this decline, which followed on no change in April.

The Bureau of Labor Statistics explained the main point: “The gasoline index declined 6.8 percent in May, leading to a sharp decrease in the energy index and the decline in the all items index. The indexes for natural gas and fuel oil declined as well, though the electricity index increased.”

In fact, the 12-month increase of only 1.7% in CPI inflation, again, ties directly to a leveling off and then decline in energy costs since September.

However, the decline in energy prices of late and the related overall slowing of inflation has nothing, unfortunately, to do with sound monetary policy. Instead, it’s about economic woes and slowdowns in Europe, China, the U.S. and elsewhere. That slowing has translated into reduced demand for oil.

The long-term inflation risks remain, though, as the Fed has done nothing to remedy the unprecedented expansionary monetary policy that was run from late summer 2008 to early 2011. The leveling off in the monetary base – even a small decline since July – comes up woefully short in terms of reining in loose money. It’s only a matter of when the economy starts to pick up a bit of steam as to when inflation will reaccelerate.

When we understand that inflation is about too much money chasing too few goods, the policy actions called for today are pro-growth tax, regulatory and trade measures (i.e., lower taxes, deregulation and lower trade barriers), combined with a monetary policy regime focused exclusively on maintaining price stability (which would require the Fed to sop up the enormous excess liquidity in the system). That would lead to a high growth, low inflation economy, which is what we all need.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.