“Small businesses remain cautious about the recovery and fiscal uncertainty, and are not investing their capital. However, companies’ balance sheets are much stronger than they were before the financial crisis and small businesses remain well positioned to invest in growth once they decide to.”

Further, small businesses do not have access to capital.  Loan originations to small businesses dropped 20% from the prior year.  This dampens business investment and expansion and further diminishes job creation.  While some pundits believe the economy is doing fine, most small businesses would disagree.  Policy makers in Washington would do well to get out now and then and talk to the job creators who are trying to deal with the world being crafted by new regulations, taxing schemes, health care rules, etc. Perhaps if they did, they would stop implementing the job-destroying policies.

– Steve Odland

Businesses are beseiged by new regulations, rising taxes, costly mandates from the new healthcare regulations, etc.  And so, they are not adding jobs.  The percentage of Americans working is at its lowest point since 1979 despite the unemployment figures.  See Steve Odland’s appearance from April 4, 2013 on the Cavuto Show.

– Steve Odland

The situation in Cyprus is worrisome.  It’s not just threatening to Cypriots, or Europeans.     When governments start seizing assets to pay down the debt it is a threat to everyone.  Europeans are saying this is a new template for dealing with too much government debt or banking issues.  Are U.S. small businesses at risk too?  Click on the link above to watch Steve Odland’s appearance on Cavuto from  3/26/13.

– Steve Odland

Fundamental changes and sound long-term policies are needed soon

• By Steve Odland and Joe Minarik
• Printed in Roll Call, Feb. 27, 2013, 7:17 p.m.

Our elected leaders are failing our nation. Partisanship and short-sightedness halt progress toward fiscal austerity. Businesses are suffering from economic uncertainty and instability. So, too, are American workers, as unemployment numbers continue to be high. Business investment remains tepid. Without fundamental changes and sound, long-term policies, our economy will continue to falter.

We need to set a course soon. The state of our nation and economy require purposeful engagement by Congress and the president, along with energy, thought and planning to produce short- and long-term strategies to restore and sustain a healthy American economy. To achieve progress, all sides must compromise or every American will suffer the consequences.

Congress must act in the next two weeks to avoid a repeat of economic and financial shocks. First, the debt limit must be taken off the table as a negotiating tactic. Efforts in the near-term must focus on replacing the across-the-board spending sequester with balanced revenue increases and better-crafted spending cuts.

Congress can consider any one or more of a wide range of alternative revenue increase provisions, such as repealing unnecessary “tax extenders” outlined within the recently enacted American Taxpayer Relief Act, increasing the federal gasoline tax, raising the excise tax on alcohol and taxing “carried interest” as ordinary income. Spending cuts should focus on Medicare, a major cause of our nation’s projected long-term budget problem.

Many alternative policies, both entitlement changes and minor revenue increases, can achieve the sequester’s first year of deficit reduction spread over 10 years, and will not derail economic recovery.

Second, the Congress and the president should commit to overhaul Social Security. Both sides agreed last year that changes are necessary, and we believe that the prospects for success this year are high. A comprehensive approach to an overhaul could incorporate changes such as a strengthened minimum benefit and help for very long-lived beneficiaries, which would protect or even improve the status of the neediest elderly. Success on this front would give a cynical and disappointed public a new measure of confidence that Washington actually can address their problems.

Finally, following tangible progress this year, the Congress and the president should proceed to the broader task of Medicare, Medicaid and a tax overhaul, the roots of our long- term debt problem. Consider changing Medicare Advantage with better choices and incentives for higher-quality health care at lower cost. Make health exchanges from the 2010 health care bill stronger, more efficient and less costly by expanding their base of enrollees. Set the lowest tax rates possible and broaden the tax base.

Our budget problem is overwhelmingly long term in nature. We have large deficits now, caused in part by the weakness of the economy. Extraordinary action to reduce deficits now could reduce demand and weaken the economy further, possibly leading back to a recession. Still, deficits today pile up debt that must be serviced in the future — a dilemma created by a failure to keep the budget on the straight and narrow.

A two-year approach to solving our lingering budget and deficit challenges, with a limited target for the remainder of this year, would both increase the odds of success and decrease the risk to the still-shaky economic recovery. A sincere, serious plan will give businesses the confidence they need to once again invest in the U.S. and grow jobs. It is time for action and it is past time for compromise. We call on the Congress and the president to do what it takes to set our nation on a path to economic stability.

Steve Odland is CEO of the Committee for Economic Development. Joe Minarik is senior vice president and director of research at CED and former chief economist at the Office of Management and Budget.

In this appearance on Cavuto 2/12/13, Steve Odland argues that government policies hurt small businesses.  Currently, high debt levels, deficit spending, and regulatory policy are causing businesses to hold back on investment in the U.S. and delay or cancel hiring plans.  Further, businesses are canceling health care policies for their employees.  Long term fiscal and tax reform are required to right the ship.

– Steve Odland

See Steve Odland’s appearance on Cavuto 1/3/13 arguing for fundamental tax and spending reform.

– Steve Odland

11/7/12 appearance on Neil Cavuto.

Small businesses need certainty.  They also need lower taxes, not higher taxes.  So the Fiscal Cliff is coming and it needs immediate attention.  But if we allow the rates to rise and if we raise them further thinking we are just taxing the rich, we will be raising rates on small businesses.  This in turn will kill jobs.  Because 75% of the top 1% of tax payers actually are small businesses, it is wrong to think that raising taxes on the rich will not impact the economy. We need to lower corporate taxes and small business taxes to drive growth.  This will actually create more revenue that, along with spending cuts, will lower the deficits.  Raising rates will hurt businesses, destroy jobs, and increase the deficit.

– Steve Odland

http://www.nfib.com/LinkClick.aspx?fileticket=OMV7uZczVaM%3d&tabid=1083

Here are some highlights from the report:

“The confluence of fiscal policy changes scheduled to occur at the end of 2012 – sometimes referred to as the “fiscal cliff” – poses serious challenges for policy makers. One area of disagreement is the increase in tax rates for high-income taxpayers resulting in part due to the sunset of elements of the 2001 and 2003 tax cuts.  The increase in the Medicare tax and its expansion to unearned income for high-income earners under the Patient Protection and Affordable Care Act of 2010 (PPACA) further contributes to the increase in top tax rates.”

“The concern over the top individual tax rates has been a focus, in part, because of the prominent role played by flow-through businesses – S corporations, partnerships, limited liability companies, and sole proprietorships – in the US economy and the large fraction of flow-through income that is subject to the top two individual income tax rates. These businesses employ 54% of the private sector work force and pay 44% of federal business income taxes. The number of workers employed by large flow-through businesses is also significant: more than 20 million workers are employed by flow-through businesses with more than 100 employees.”

“[There are] four sets of provisions that will increase the top tax rates:

• The increase in the top two tax rates from 33% to 36% and 35% to 39.6%.

• The reinstatement of the limitation on itemized deductions for high-income taxpayers (the “Pease” provision).

• The taxation of dividends as ordinary income and at a top income tax rate of 39.6% and increase in the top tax rate applied to capital gains to 20%.

• The increase in the 2.9% Medicare tax to 3.8% for high-income taxpayers and the application of the new 3.8 percent tax on investment income including flow-through business income, interest, dividends and capital gains.”

“With the combination of these tax changes at the beginning of 2013 the top tax rate on ordinary income will rise from 35% in 2012 to 40.9%, the top tax rate on dividends will rise from 15% to 44.7% and the top tax rate on capital gains will rise from 15% to 24.7%. These higher tax rates result in a significant increase in the average marginal tax rates (AMTR) on business, wage, and investment income, as well as the marginal effective tax rate (METR) on new business investment. This report finds that the AMTR increases significantly for wages (5.0%), flow-through business income (6.4%), interest (16.5%), dividends (157.1%) and capital gains (39.3%). The METR on new business investment increases by 15.8% for the corporate sector and 15.6% for flow-through businesses. This report finds that these higher marginal tax rates result in a smaller economy, fewer jobs, less investment, and lower wages. Specifically, this report finds that the higher tax rates will have significant adverse economic effects in the long-run: lowering output, employment, investment, the capital stock, and real after-tax wages when the resulting revenue is used to finance additional government spending.”

“Through lower after-tax rewards to work, the higher tax rates on wages reduce work effort and labor force participation. The higher tax rates on capital gains and dividend increase the cost of equity capital, which discourages savings and reduces investment. Capital investment falls, which reduces labor productivity and means lower output and living standards in the long-run.

• Output in the long-run would fall by 1.3%, or $200 billion, in today’s economy.

• Employment in the long-run would fall by 0.5% or, roughly 710,000 fewer jobs, in today’s economy.

• Capital stock and investment in the long-run would fall by 1.4% and 2.4%, respectively.

• Real after-tax wages would fall by 1.8%, reflecting a decline in workers living standards relative to what would have occurred otherwise.

These results suggest real long-run economic consequences for allowing the top two ordinary tax rates and investment tax rates to rise in 2013. This policy path can be expected to reduce long-run output, investment and net worth.”

– Steve Odland