What Obama Missed in His Jobs Plan
TheStreet.com - September 9, 2011 by Laurie Kulikowski
NEW YORK (MainStreet) -- A few key things were missing from President Barack Obama's speech on jobs Thursday night, including how to access capital, small-business owners and observers say.
Obama, in an address to Congress, announced a $447-billion jobs plan that would cut the payroll tax, offer businesses tax credits to hire unemployed workers (particularly veterans) and improve state programs to train and ultimately put long-term unemployed workers back in the workforce, among other things.
For the most part, observers had positive things to say about Obama's plan, noting that the payroll tax cut will be a significant positive for smaller businesses.
But the plan "doesn't really change the picture," says Rafael Pastor, chairman and CEO of Vistage, a membership organization of small- to medium-sized business chief executives.
"Our businesspeople are confronted with uncertainty, and I don't think last night's speech materially relieves uncertainty" in the stock market in regard to elections, access to credit, in the economy itself and when unemployment is going to come down, Pastor says.
The National Small Business Association, a small-business advocacy organization, has similar concerns.
"While these near-term fixes can help a good chunk of businesses, they are temporary and may not be enough to cause a business to hire who otherwise wouldn't consider bringing on a new employee, who will have significant costs far beyond the tax-cut expiration dates," according to a statement by NSBA CEO Todd McCracken.
Tax incentives, especially those temporary in nature, while a positive gesture, are unlikely to be the answer for small businesses to recover.
"Ultimately incentivizing small businesses isn't going to work," says Jeff Stibel, CEO of Dun & Bradstreet Credibility. "It's simple economics -- you don't hire in downturns. You hire when you have the ability to grow. They won't have the ability to grow until consumer spending [improves] or they get access to capital so they can take that risk on without risking the entire company."
"I think everybody in business gets it and wants to put people back to work. And many companies are pursuing some effort, whether it's veterans or single parents or the unemployed. There is a lot of activity that doesn't get recognized in the global picture," says Russ Reynolds, CEO of Batteries Plus, a Hartland, Wis.-based battery retailer with nearly 500 stores between corporate and franchised locations.
Incentives or not, Reynolds says until there is more clarity on how the government plans to fix its fiscal problems "there are a lot of folks that will sit on the sidelines."
"Many of our franchisees, they're small-business people that are trying to understand what the current lending environment is going to be -- because it's not been good -- and what their own personal tax burden will be. Without certainty I think it's tough for people to plan," he adds.
Greg Carafello, master franchisee of Cartridge World stores in New York and New Jersey, wondered why Obama did not speak more to small firms' lack of access to capital.
"I do not see how it can help small businesses, because there is a shortage of operating capital available -- like zero," he says. "The majority of new and small businesses need some sort of loan ability. To open a franchise or any other business, you need startup capital to bring jobs and businesses into play."
The president "needs to stimulate opening businesses, which will hire people who are unemployed," Carafello says. "The unemployed have no options -- no startup loans, no jobs, no new careers. Franchising offers a path to a new career because of its systematic approach."
Bob Litan, vice president of Research and Policy for the Kauffman Foundation, notes another criticism, saying Obama should have addressed assistance for immigrant entrepreneurs.
"The fact is, immigrant entrepreneurs will create jobs," he says.