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What the Left Doesn't Get

The Small Business Lobby’s Big Issues

by STAN COX

During an economic summit with French President Jacques Chirac, George W. Bush turns to an aide and mutters, "The problem with the French is that they don’t even have a word for ‘entrepreneur’." The butt of this well-worn urban legend is, of course, Bush himself, and not his belief in America as a land of economic pioneers. In this country, small business is no joke.

Everyone knows that Americans don’t wait around to take orders from Big Government or Big Business. Patriotic Democrats, Republicans, Greens, and Libertarians all get out there, start companies, and change the world for the better. Small business is the breeze that keeps Old Glory waving — isn’t it?

The United States Small Business Administration classifies companies with fewer than 500 employees as "small." There are more than 5 million such businesses that have payrolls, and they employ about half of the nation’s private-sector workers. Of those 5 million firms, 4.3 million have fewer than 20 employees each. The small business owner’s reputation as underdog and risk-taker is a hard-earned one. Every year sees 600,000 to 800,000 companies start up, just as 500,000 or so go under.

Big corporations have platoons of lobbyists who roam Washington and state capitals, targeting specific bills and regulations that affect their shareholders. Individual small businesses generally can’t afford their own lobbyists, and with millions of diverse enterprises out there, from ice cream parlors to furniture factories, it would seem that no organization could claim to represent them all. But, whether they like it or not, small businesses do have a voice in the halls of Congress.

Among the national groups that lobby in the name of small business, the National Federation of Independent Businesses and the National Small Business Association are the largest. They provide member services like discounts and health-care plans, and they push state legislatures to cut taxes, keep wages and benefits low, and suppress union activity. They also lobby for hard-Right legislation at the national level, with consequences for all of us.

For instance, the 600,000-member NFIB wants to make permanent all federal tax cuts passed during the Bush administration, including those that benefit corporations and the richest 1% of Americans. And it is pushing hard for final repeal of taxes on wealthy estates (which, following the lead of Congressional Republicans, its lobbyists refer to as "the Death Tax.")

How does NFIB know what its members want? Michelle Dimarob, NFIB press secretary, says, "We’re a grassroots-driven organization. We send out an issues ballot three times a year to members, and that determines our position on legislation. We also do monthly surveys and get a lot of feedback by phone."

The NFIB gives its members a lot of advice about that "feedback", as it herds them to the to the right with mailings and website articles. One example: Historically, Republican presidential candidates have polled about 60% among small-business owners, but in the 2004 race, which features two candidates with deep corporate biases and bad attitudes toward small business, NFIB has made sure that its members do a little better for the GOP. Taking its own poll in August-September, NFIB asked its members to read a brochure entitled, "Bush or Kerry — Who Will Be Your Best Small-Business Partner?" before sending in their votes. As a result, Bush beat John Kerry by 95% to 4% – a tally one might expect to see in the old Soviet Union, not in a land of fiercely independent entrepreneurs.

According to Dimarob, 85% of NFIB members file with the IRS as individuals, and a typical member’s net income is $40,000 to $50,000 per year. That’s right around the national median income. She says, "We support the 2001-2003 tax cuts because they have helped our members re-invest, purchase equipment, and expand their businesses."

If small business owners can manage to do all that on $1000 a year (a typical Bush tax cut at the $50,000 income level), their reputation for resourcefulness is well-deserved indeed. The Congressional Budget Office has confirmed that the bulk of benefits from the tax cuts are going to the wealthiest 20% of families (with incomes averaging $183,000). That raises some questions: Couldn’t the tax cuts for individual incomes above $200,000 be taken back (as Kerry has pledged to do), with no ill effect on most small businesses? And since the estate tax affects only the richest one to two percent of families, why is NFIB so intent on killing it?

Ms. Dimarob said she would have to ask the NFIB "tax policy folks" to provide answers to questions like those. Despite repeated reminders, no response was forthcoming. (Both Bush and VP Dick Cheney claimed in the recent debates that 900,000 "small businesses" would be hurt by restoration of taxes on $200,000+ incomes. But they were using a definition that makes any high-income individual who has non-wage, non-salary business income a "small business owner." As Kerry pointed out, that would include Bush and Cheney themselves.)

The National Small Business Association, representing 150,000 firms, takes positions similar to those of NFIB. While working to keep the Bush tax cuts in place, NSBA goes farther and declares an eventual goal of repealing the 16th Amendment (which established the federal income tax) in favor of a severely regressive national sales tax. Rob Yunich, NSBA director of communications, declined to discuss how the organization’s members will benefit economically if its lobbying efforts are successful.

NSBA’s president testified in Congress this spring against raising the minimum wage. And NFIB is lobbying hard against a proposal by Senator Ted Kennedy to increase in the federal minimum wage to $7.00 per hour. That’s no big surprise; to a small business owner, wages are an expense, not a means of survival. But inflation continues to eat away at the already-meager minimum wage, which, at $5.15 an hour, has fallen in value by 13% since 1997. A single parent with two kids now requires a wage of $7.70 per hour, 40 hours a week, simply to get up to the 2003 federal poverty threshold. The current minimum wage provides about half as much income as the "living wage" standard in many cities.

Some small-business owners pay their employees as much as they can afford, while others pay as little as they can get away with. The big lobbyists have thrown their weight behind the worst of the lot, defending those owners’ right to pay below-subsistence wages.

Not all national lobbying groups take the hard-Right line. The National Association of Socially Responsible Organizations also works on behalf of small businesses, but rejects its big-time competitors’ help-the-rich, soak-the-poor philosophy.

Robert Gaw is president and founder of NASRO. He explains the positions taken by goups like NFIB and NSBA this way: "Unfortunately, many small business owners live on the hope that someday they will be very rich and will need those tax breaks. Liberals and the left share part of the responsibility for the policy disconnect with small business and the self-employed. Liberals tend to ignore small business, lump them together with big corporations, and never fight for gut issues that small business can get behind. They frequently come to small business owners at the last moment in election or policy campaigns and ask them to get behind an agenda of social issues and vague economic programs that have nothing to do with them."

Gaw sees it as yet another example of the Right’s superior powers of persuasion: "When it comes to public policy, conservatives and the Right do a far better job of connecting with these folks. They take issues that are marginal to small business and blow them up into something that seems important."

Small business owners are no more likely than Wal-Mart and Halliburton to band together as a progressive political force. But it is in their interest to take a long, hard look at the efforts of big-time lobbyists like NFIB and NSBA and ask whether it’s America’s small businesses or its big-money elites who are really being served.

STAN COX is a plant breeder and writer in Salina, Kansas. He can be reached at: t.stan@cox.net