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9/22/2010
Shown: Kagen doesn’t have a clue when it comes to small business

Even before Reid Ribble won the GOP nomination to take on Congressman Steve Kagen last week, it was clear from Kagen's rhetoric that international trade and its affect on employment, would be near the top of the agenda for WI-8.

On Kagen's own website he tells us that small businesses employ over 95% of workers in Wisconsin, that it is the private sector that produces high paying jobs, and that he will fight to keep jobs from being shipped overseas. When politicians like Kagen put these three issues together, it's easy for voters to conclude that the low wages paid to overseas workers are the greatest threat to high-paying American jobs. But is this truly the case? Recently published data from the National Federation of Independent Business (NFIB.) suggests not.

When asked to name the single most important problem facing them, less than 10% of small businesses indicated the cost of labor. The NFIB includes data going all the way back to 1986 and the percentage of businesses naming cost of labor as their most critical issue has remained remarkably consistent across the entire time period.

The debate around the data has centered on whether or not aggregate demand is the biggest issue facing business today, but to me the most surprising finding is that even with an increase in trade under President Clinton and NAFTA, there simply was not a major increase in the number of small businesses saying that high labor costs represented their most important problem.

Well then, what is?

Economist Russ Roberts looks at the same data and points out, "if there had been one category called 'Taxes and Government Regulations' it might have been seen as the biggest problem, listed by 36% of respondents, up from 29% in the year before."

It's great that Kagen will work within existing law and trade agreements to fight for jobs here in NE Wisconsin, but at the same time he needs to get serious about listening to businesses when they tell him that taxes and regulation present a serious impediment to growth. Kagen's votes on Cap and Trade and on the President's health reform cast serious doubt on his commitment to easing the tax and regulatory burden businesses in America face today.

This is one area where the contrast between Kagen and Ribble couldn't be more clear: Ribble has clearly advocated for removing unnecessary and redundant regulation so that businesses can thrive.

When it comes to the challenges facing small businesses, Steve Kagen is apparently unable to diagnose the problem so it's little wonder he can't and won’t find the cure.

Jeremy Shown blogs at Rhymes with Clown and frequently hits on politics and economics in Wisconsin and the U.S.

COMMENTS

>>>This is one area where the contrast between Kagen and Ribble couldn't be more clear: Ribble has clearly advocated for removing unnecessary and redundant regulation so that businesses can thrive.<<<

Ya mean like the regulations such as Glass-Stegal? The regulations that would have mitigated the financial crisis?

Dean Weichmann (Wed Sep 22 05:45:25 2010)

One major item Kagen has done to help small business is to support the recently passed health care reforms. Small business gets screwed in the health care world and many of us have no plan thereby making the individual policy (or spouse) as the only option. These reforms will have a huge positive impact on the ability of small business to attract and retain workers who otherwise would drift towards the large employer for health care benefits alone. As far as small businesses saying that government regulations are a big problem in their business. I submit, with plenty of evidence behind me that small businesses don't have a clue about the real forces affecting them. The lack of sales for example is because the stimulus was not large enough but many business people think that we need to have smaller deficits (less demand). So who to blame? The regulator that delays projects or causes the cost of a capital project to rise is the person the business person sees right up front. So they get the blame but are not the cause. These surveys don't mean a thing except politically. The real causes of the problems in our economy are widespread, deep, pervasive and mostly not directly seen by the small business person day to day. And by the way, just because Ribble is a business person doesn't mean he understands anything more than Kagen about business. Kagen was a business person also and a damn smart doctor. Also, as a Congressman you represent all the people not just the businessperson. Don't forget that under business person George the 2nd we got a bankrupting war of choice, a total credit stoppage, the worst recession since the great depression, the greatest gap in wealth between the rich and poor and the list goes on. No thanks, no more business people please unless they have enough depth to see beyond their own provincial ways.

dave allen (Wed Sep 22 07:06:27 2010)

Your column makes a lot of sense.

"Small Business" does not have cost-of-labor problems because typically, 'small business' does not have unions.

And small business by-and-large is "stuck" in the US. They cannot pick up and move to PRChina.

For that reason (immobility), small business is crucified by tax-and-reg burdens, in direct contrast to (say) PRChina, which has almost zero regulation, and where taxes are indirectly rebated via "export subsidies."

dad29 (Wed Sep 22 08:30:18 2010)

Oh, Dave... your commentary is rife with something I cannot put my finger on, but something that bugs the living hell out of me.

For starters, let me say that for the most part I agree with you on George II, although I would add that big business that's in the business of politics to strangle their smaller competition with regulation is largely a political problem - in that politicians (as opposed to citizen representatives) permit and encourage and invite the abuse. (That is not to say big greedy business that takes advantage of it isn't culpable - only that they wouldn't have quite so much swagger if it weren't for people who's livelihoods depended on getting re-elected.

Moving on, it is entirely beyond me how anyone of sound mind can possibly characterize Kagen's support of the health care bill as good for anyone. The reasons are far too numerous for me to detail here, but I'll provide one: the Federal Gov has no power or authority to enact it. If that doesn't matter, then no rule of law matters, and welcome to chaos.

On small businesses not having a clue what's effecting them: where in the world do you hail from? Washington DC? Small businesses and entrepenuers operating in the free market, some failing and some thriving, are what transformed this nation into the industrial and economic superpower that it once was. Statements like yours betray a certain ostentatious, pompous, and pretentious attitude that prevails in Washington politics - that people are bumbling idiots and you're enlightened. It's disgusting and pathetic, and I'm calling you on it.

The stimulus wasn't big enough? Where does that money come from, Dave? What happened in the housing bubble? Banks were told to lend money that didn't exist except in "futures" to thousands of people they otherwise woudln't have lent a dime to. Same principle as a stimulus package - putting nonexistent money into the marketplace and promising to back it up. Sure, some people benefitted from it for a time. And then what happened? How did that help anyone?

I'm in sales, Dave, and I know why my sales aren't there. Yes, the problems are deep and pervasive, but if I could point to one thing above all others that has the single greatest impact, it is government playing with the economy, creating beaureaucratic red tape that forces businesses to spend gobs of money just trying to see to it that they're not breaking some new rule about how many ohms their product uses or complying with gridlock specifications on how they store and save their data. A whole department within a company that exists solely to comply with regulation, all of which costs that company money and benefits the company not one tittle. One or two salaries worth (2 jobs "created") that could have been re-invested into the company for growth, creating 3 or 4 real jobs that actually produce for the company, bringing in more to re-invest for growth, creating more real jobs. It is so incredibly simple.

In the real world, people transact with people. They come to a mutual agreement on a product or service and what it's worth, and judge the person with whom they're doing business. Is this person going to pay me? Does this vendor care about my privacy? A business can succeed by meeting the needs and requirements of the buyer. The buyer gives his business to the vendor most suitable to his needs and requirements. The vendors that don't meet them? They go out of business. So the ones creating a marketable product and providing satisfactory service, support, etc. thrive, and the free market economy takes its course. The free market competition induces businesses to innovate, and innovation produces new technologies and products, and on and on.

I could go on and on, but I don't have the time because I've got a family to support. And thanks to a heinous tax code, I've got mileage reports to complete that eats 20 minutes of my otherwise productive selling time, when I'd be perfectly content to make arrangements with my employer that were mutually beneficial.

On a final note, as a Dr., did he ever address the problem? Or just try treating symptoms? Based on his political record, I really do have to wonder.

Andrew Ellis (Wed Sep 22 09:54:41 2010)

I am always amazed that some wish to grab a position that Republicans/conservatives do not want healthcare reform. I believe that is untrue and has been untrue from day one. Apart from their appeal for tort reform, many other healthcare reform items are part of the conservative approach, state portability, including pre-existing condition applicants in a larger group to name two. What conservatives objected to is the one-size fits all, Federally managed plan. Wisconsin already had those departments to put reforms into motion. The Liberal movement wanted the larger federally run plan, but Dr.Kagen will force the one-size fits all on small business and the proof is in the already increasing costs. Some folks just don't need pregnancy plans, etc.and that is the part that will get opposition from the larger part of this Nation. No, if Steve cannot see that fact of small business existence, he knows little else. He and his party have spent the US into near bankruptcy. The truth be told, we already are bankrupt.

Richard Parins (Wed Sep 22 16:31:24 2010)

Andrew,
Very simple. Read what the economists are saying about aggregate demand. Regulations are a necessary evil but regulations don't have a damn thing to do with the lackluster demand today. That is unless you prefer to operate in China where you have a license to pollute, enslave etc.

dave allen (Wed Sep 22 16:50:12 2010)

Richard, Please show me one country in the world that operates successfully (good care, reasonable cost) along the lines you believe are possible.

dave allen (Wed Sep 22 16:54:23 2010)

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