Saturday, Mar. 14, 2009

Experts say stimulus will aid small business

Small business owners not convinced

Some local business owners say President Barack Obama’s $787 billion stimulus bill won’t stimulate them.

They call the American Recovery and Reinvestment Act, signed into law Feb. 17, a massive spending bill that will conceal the country’s problems rather than solve them.

“We’ll get a bump, but it will be false and misleading,” Jeff Ambrose said. “It won’t stick.”

Ambrose, who owns Ambrose Packaging — a 22-year-old, 45-employee company that sells packaging equipment and supplies from its 1654 S. Lone Elm Rd. offices — is worried that more federal spending will create a bigger hole for the country to climb out of.

And he’s struggling to see the advantages for him and his small business brethren.

The only option

Stephanie Kelton, an associate professor of economics at the University of Missouri-Kansas City, said government allowing the economy to continue spiraling out of control wasn’t an option.

“If business won’t spend and homeowners won’t spend, there’s only one more option — the government,” Kelton said. “Like it or not, there’s an important role for the government to play in the economic downturn of this magnitude.”

Congressman Dennis Moore, whose third district includes Johnson, Douglas and Wyandotte Counties, supported Obama and President George W. Bush’s stimulus bill, which was approved last February.

He said before the passage of the first stimulus, the country’s economic experts advised Congress that the only way to get the economy moving was to inject dollars. And after Obama was elected, he said, Congress heard similar advice.

Moore said voting for both bills was the right decision.

“We’re talking bipartisanship here. We’re talking economists, people who know how this situation works,” he said. “And frankly I’ve told people, and I mean this very sincerely, I’ve been in Congress now for 10 years and those two votes were probably the most uncomfortable and probably the hardest votes I’ve had to make up my mind to cast.”

He added: “If someone thinks this is something that we want to do on a daily basis or once year, no, absolutely not. This is an emergency.

How it helps

Kelton said the stimulus was a three-pronged plan. It includes cutting taxes, dedicated government spending and providing relief to states.

Some of that funding, $730 million was dedicated to the Small Business Administration to make changes to its lending and investment programs, said Gary Cook, the district director of SBA’s Kansas City, Mo. office.

He said funding was provided to increase the guaranteed loan program to 90 percent and eliminate fees. It also would provide lending through the new business stabilization loan program, which provides a 100 percent guarantee on loans up to $35,000.

“The idea is to incentivize the lender to give the loan,” Cook said. “It puts more risk on the government.”

He said the problem with the stagnant economy was the lack of lending. The stimulus would help free capital and allow SBA banks to loosen their lending practices to unfreeze the market.

Cook said the only negative he’s heard is that Kansas City’s business owners don’t know how quickly the programs will take affect. He said they’re staff is still trying to decipher the bill, but some programs would be available in the next few weeks.

Tim McKee, vice president of economic development for the Olathe Chamber of Commerce, said they’re still breaking down how the bill could assist area business owners. But he said, because the state will divvy up $414 million in stimulus dollars, including some for Olathe’s infrastructure projects, there may be opportunities for local businesses.

So far, Larry O’Donnell, owner of Overland Park-based O’Donnell and Sons Construction, isn’t’ convinced.

He said his business, an asphalt paving contractor, whose recent jobs in Olathe include the 127th Street overpass and the parking lot and streets surrounding Bass Pro Shops, wouldn’t likely participate in the state projects identified to receive funding from the stimulus bill.

And O’Donnell, whose business was established in 1973, said he doesn’t see being able to take advantage of the projects the city will use stimulus dollars to fund. Nor does he expect a trickle down from that business.

“I don’t see any dollars, big amounts of dollars, flowing into Kansas City, Olathe, especially from the stimulus,” he said. “What is flowing in, it seems like is what the cities have already cut of their budgets.”

But O’Donnell said, he’s taking a wait-and-see approach to the stimulus and whether his business could benefit at some point.

Uncertainty

Moore said he knew there would be uncertainty and disagreement from the public wondering whether the stimulus was the right thing to do.

“We haven’t seen a situation confront our country like this since the early 1930s and the Great Depression,” he said. “We’re in this together. The best thing I can do right now and the members of Congress can do right now, I think, is listen to the experts and economists who tell us what they think needs to happen to reinvigorate our economy.”

He couldn’t say if the stimulus would work, but it’s not a quick fix and would take several months or longer to get the economy up and running again.

Moore said if it doesn’t, members of Congress would work with the country’s economic experts for guidance to get through the downturn, as they continue to do today.

Kelton said it may take several more stimulus plans to pull the country out of the recession (Obama approved Wednesday a $410 billion spending bill).

She said reports released this week indicated that $50 trillion in global assets were lost in 2008 — the equivalent of the world gross domestic product.

“I think it’s going to be five years before we start feeling good about things again,” she said. “... The $780 billion stimulus, while a step in the right direction, I feel is far too modest for the job at hand.”

She added that a payroll tax “holiday,” which would immediately inject $64 billion a month into the pockets of American workers and employers, providing “swift, immediate and substantial” relief. Obama could decide to do that at any time, Kelton said.

Ambrose doesn’t think the solution is spending trillions of dollars, but like Kelton agreed that suspending the payroll tax and/or offering tax credits to businesses would help immediately.

Similar Reaction

A survey released last month by MerchantCirlce, a social network of U.S. business owners, after the stimulus was passed asked its members what they thought about the bill.

They were mostly comprised of business owners who employ from one to 20 workers. More than 73 percent of them self-reported moderate to severe declines in sales from the same period last year.

More than 50 percent of the respondents from MerchantCircle’s pool of more than 700,000 members said they didn’t approve of the bill. And more than 65 percent said they didn’t think it did enough for small businesses.

The numbers weren’t much different from the 73 responses MerchantCirlce received from more than 6,100 Kansas businesses surveyed.

While only 53 percent of Kansas business owners surveyed reported moderate to severe sales decline versus the nationwide response, just more than 50 percent don’t approve of the stimulus bill and nearly 64 don’t think it does enough for small business.

And more than 76 percent of respondents from Kansas and the nationwide survey said the first stimulus bill didn’t work. Adapting

Ambrose said he’s been thinking of ways to reinvent his business to stay competitive in today’s market. One positive, however, was less competition — some of his competitors have gone under recently.

But he’s concerned history will repeat itself, putting the country in another depression. He asked: How bad does it have to get before we look at each other and say “What’s going on?’

He doesn’t have the answer.

“At some time, something’s gotta give,” Ambrose said. “We’re at the threshold. I’m not willing to sit here and let it crumble around me.”

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