Small Businesses Called Key to Rebuilding Economy
BUSINESS
Bangor Daily News
Drew FitzGerald
Boston University Washington News Service
March 27, 2009
WASHINGTON – The key to reviving Maine’s faltering economy is restoring national confidence in small businesses, say Maine’s members of Congress, who are encouraging firms to start spending and investing now.
“In Maine, it’s small businesses that are creating virtually all the new jobs,” Sen. Susan Collins, R-Maine, said in an interview Thursday. “Virtually all the large businesses that we have in Maine are scaling back their operations.”
Sen. Olympia Snowe, the senior Republican on the Senate Committee on Small Business and Entrepreneurship, said the nation will be “almost wholly dependent” on small firms in bringing the economy out of the recession, which is why Congress and the administration are lowering credit barriers for small businesses.
Snowe said the 2010 budget proposed by the president and modified by Democrats this week guaranteed less funding for the federal Small Business Administration than she would have liked, but its $700 million baseline funding represents an improvement over past years.
“I think there is a depreciation of the value of small businesses in our nation’s economy,” Snowe said, also in an interview Thursday. “We simply don’t do enough. Small business was a natural constituency for Republicans, yet we diminished and undermined [the Small Business Administration] for eight years.”
Among other provisions, the stimulus law signed last month raises the maximum guarantee to 90 percent on certain SBA loans, increases the New Market Tax Credit Allocation to $5 billion through 2009 and offers a series of tax breaks.
The growing need for relief was highlighted this week by new unemployment figures. After months of continuing job losses, Maine’s unemployment rate rose to 8 percent in February, according to the U.S. Bureau of Labor Statistics.
Among other temporary assistance efforts, the Labor Department offered a $254,516 emergency grant to assist workers laid off from Wausau Paper after Rep. Mike Michaud, D-Maine, requested the aid in December.
Rep. Chellie Pingree, D-Maine, a small business owner herself, held an open house at her Portland office last month for business owners to learn how to benefit from stimulus dollars.
Looking ahead, Collins said she finds the idea of tax breaks for small business dividends as an “intriguing” way to free up capital market.
A second proposal being discussed aims to persuade businesses to speed up their own investments through a tax credit that shrinks progressively over the next year and a half. The credit could serve as an incentive for firms to spend early, helping break the cycle of uncertainty that has brought new investments to a crawl, Collins said.
“A lot of business owners have told me that they’ve put investment decisions on hold because the economy is so uncertain,” Collins said. “If you can unfreeze those investments by giving a tax credit that’s only going to be available for 18 months and that is more generous the earlier you use it, it would unlock some of those investments.”
In the meantime, lawmakers also are working to help businesses cut costs on energy and health care. The stimulus package included a tax credit for wind, geothermal and to a lesser degree biomass, tidal and hydroelectric energy. As these industries, which could provide less expensive electricity, are developed, new jobs would be created.
“Maine is perfectly positioned based on its natural resource base, its entrepreneurial predisposition and its inclination for innovation to develop renewable energy sources,” Snowe said. “I think we’re going to see a real potential there for investments in those rural areas.”
Renewable energy production could prove an economic driver “in and of itself,” Maine State Chamber of Commerce President Dana Connors said in a telephone interview, but he cautioned that any legislation must not raise the overall cost of energy in the state.
“The bottom-line test for all of these initiatives is will it reduce our costs,” Connors said. “Don’t add costs, because we’re all living on razor’s edge.”
Health care is a heavier burden but also a more complicated long-term problem to solve for businesses, Connors said. The chamber is open to new ideas, especially on ways to entice private insurers to the state.
“We always struggle with health care,” he said. “The problem with the private market is that it’s never free of the influence of government… We kind of have to let that play itself out.”
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