Democrat-on-Democrat violence

Charles Sauer President, Market Institute
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Previous Congresses have all managed to reach across party lines and find solutions to the nation’s problems. Some of these solutions have been better than others, but the big wins have all involved multiple parties. President Reagan’s 1986 final tax reform package was primarily based on a Sen. Bill Bradley (D-N.J.) proposal and President Bush’s No Child Left Behind was primarily ushered through Congress by Sen. Ted Kennedy (D-Mass.).

This should be a lesson to Democrats who, despite having an overwhelming and procedurally unstoppable majority, have failed to address their primary platform issues. Their failure to not only work together but reach across party lines to gain just a few allies has caused confusion in the economy and allowed many problems to further deteriorate.

Small businesses and entrepreneurs are one example of a group that has largely been left to fend for themselves in this poor economy, and entrepreneurship leaders believe that they should plan on more of the same. After delivering the State of Entrepreneurship last month, Kaufman Foundation President Carl Schramm said small-business owners should “hang in there, and don’t wait for government to help.” At the time it sounded more like a pep talk instead of a forecast. However, after Senator Reid’s partisan move to release his own jobs bill, it looks like small business owners may be forced to keep fighting for survival without assistance.

With unemployment at 9.7% and prospects of large improvements in the near future looking poor, according the President’s Economic Report, job creation is quickly becoming the all consuming focus of political talking points. This new found focus is encouraging, but talking about something doesn’t always translate to action. In fact, in Washington, DC heightened attention can actually be detrimental to addressing an issue and job creation is no exception.

Last week Senator Baucus and Senator Grassley released their jobs bill and immediately received a letter support from the White House stating that “The President is gratified to see the Senate moving forward in a bipartisan manner on steps to help put Americans back to work.” Their bill extended unemployment insurance, extended the Cobra premium assistance, provided a “New Hire” tax credit, extended section 179 expensing, and controversially extended some expiring tax provisions including the Research and Development tax credit.

Not to be outdone Senator Reid, who seemingly missed Obama’s pleas for bi-partisan work during the State of the Union and subsequent meetings, didn’t waste any time following up the bi-partisan Senate Finance bill by denouncing it and advocating his own partisan solution, without the tax extenders and a few other provisions, just hours later. The Reid bill throws a large wrench into the political process and threatens yet another Democratic priority.

Even worse, because of the wariness of an actual debate both bills have major issues, so no matter who wins this political battle small businesses will continue to lose. The Reid bill and the bipartisan Senate Finance Committee bill both include provisions that threaten to further dry up small-business capital reserves and incentivize spending in sometimes unwise investments. For instance, the Cobra premium assistance program requires plan sponsors to pay 65 percent of a Cobra eligible recipients costs upfront for up to 15 months. This cost will eventually be reimbursed through tax credits, but for a small-business owner, who is forced to lay someone off in the first place, the upfront additional capital drain can be business ending. Additionally, the creation of a “New Hire” tax credit sounds great, but in reality many small businesses would rather invest in their infrastructure during the poor economy rather than expanding their labor force.

What small-business owners really need is a simplified regulatory structure and lower overall taxes. The current Congress probably won’t pass or even draft the perfect solution, but if they worked with each other something close to an actual solution would be close at hand.

In the end, Democrat-on-Democrat violence is not something new in this Congress. They have already given each other lumps over health care reform and energy legislation, but the recent bashing of bipartisanship looks to be a new trend that could further threaten not only the re-election prospects of already embattled Democrats but also lead to further problems in the economy.

No matter what happens politically or legislatively, small business owners will probably come out of this recession all right. Small businesses have created 64 percent all net new jobs over the past 15 years according to the SBA and many successful small businesses were started during tough economies, including 250 of the Fortune 500. Small-business owners just don’t want to be forgotten or worse further burdened with more regulations and higher taxes.

Charles Sauer is the founder and president of the Market Institute, a small-business news and advocacy company.