Here’s how government can help small businesses decimated by pandemic restrictions
Thomas Catenacci, DCNF
- Elected officials have largely fallen short of protecting small businesses nationwide throughout the pandemic, even as they have continued to impose devastating restrictions.
- “Despite the pro-business, pro-small business rhetoric we hear from a lot of elected officials, when it comes time to vote, they seem to have stronger allegiances with other interest groups,” Ken Pokalsky, vice president of the Business Council of New York State, told the Daily Caller News Foundation.
- In 2020, about 30% of all U.S. small businesses closed while 45 out of the 50 most valuable public corporations profited between April and September, The Washington Post reported.
Elected officials have largely fallen short of protecting small businesses nationwide throughout the pandemic, even as they have continued to impose devastating restrictions.
While several prominent business advocacy groups told the Daily Caller News Foundation that lawmakers have successfully enacted small business-friendly policies since the spring, the coronavirus pandemic has led to roughly a third of U.S. small businesses to close in 2020, according to Harvard University’s Economic Tracker.
“Despite the pro-business, pro-small business rhetoric we hear from a lot of elected officials, when it comes time to vote, they seem to have stronger allegiances with other interest groups, oftentimes labor,” Ken Pokalsky, vice president of the Business Council of New York State, which represents about 2,300 member businesses, told the DCNF.
Meanwhile, the Chamber of Commerce’s vice president of small business policy, Tom Sullivan, told the DCNF that all businesses, regardless of size, are mutually reliant.
“I think that the large and small business symbiosis, mutual reliance and the value of both is real,” Sullivan said.
“I just don’t think that trying to convince Congress to help small business has to coincide with tearing down publicly traded companies,” he continued.
But major corporations have thrived as small businesses have crumbled under the weight of pandemic restrictions.
Between Jan. 1, 2020, and Dec. 31, 2020, about 30% of U.S. small businesses closed while total small business revenue decreased by 31%, according to Economic Tracker. Conversely, between April and September, 45 out of the 50 most valuable public corporations profited, The Washington Post reported.
“The large companies have these asset bases that the smaller companies cannot compete with, particularly now,” Lauren Silberman, an analyst at Credit Suisse, told the Post.
For example, McDonald’s had the delivery, mobile app and drive-thru infrastructure ready before the pandemic, giving it a massive advantage when businesses were forced to shutter in the spring, The Post reported.
Amazon CEO and founder Jeff Bezos’s 2020 wealth increase spiked particularly in April as coronavirus spread around the world and as the online retailer’s stock price increased significantly, a Business Insider analysis found. Amazon sales, which were high prior to the pandemic, have surged as the e-commerce marketplace became consumers’ default destination, CNBC reported.
Pokalsky criticized the measures Democratic New York Gov. Andrew Cuomo had taken to restrict “non-essential” businesses. Governors across the country from California and Oregon to Michigan and New Jersey have implemented similarly strict measures of their own such as banning indoor dining, limiting how many people can be inside a retail business at once and closing gyms since the outbreak of coronavirus.
Policies To Save Small Business
“Unfortunately, Washington, when it’s able to get anything done at all, persists in pursuing policies that favor large corporations over Main Street,” Small Business Majority said in a December statement.
“And, all too often small business is perceived as just another narrow interest group, not an essential component of our economic prosperity,” it continued.
Throughout the pandemic, Small Business Majority has advocated for providing business support services, adjusting property tax and commercial rent payment dates and expanding small business access to credit and capital.
The organization has favored immediate funding, from both state and federal government, for small business technical assistance programs. Such programs often involve the government providing small businesses help with business planning, training, tax preparation, accounting assistance and legal help.
Small Business Majority has additionally pushed for legislation that would ensure existing business insurance policies would apply to coronavirus-related revenue losses. As a long-term policy goal, Small Business Majority has advocated for a moratorium on future unemployment insurance rate increases that would potentially punish small businesses in the wake of the pandemic.
“Our message to state and local leaders [is] that small business can operate safe and smart, so let them open up,” Karen Kerrigan, president and chief executive officer of the Small Business and Entrepreneurship Council (SBE), told the DCNF. “Some heard, others continue to act unreasonable in this regard.”
“I can understand why small businesses feel like they are not being defended. Many of the state politicians are ‘having their moment’ and acting unreasonably by exerting extraordinary control over economic activity and personal mobility,” she added.
In addition to advocating reopening, SBE has pushed for a temporary liability shield for small businesses during the pandemic and opposed a measure in the recently passed National Defense Authorization Act that would impose new regulatory burdens on small businesses, Kerrigan said. The measure mandated new reporting requirements for most small businesses with less than 20 employees, according to the National Federation of Independent Business (NFIB), which opposed the mandate as well.
Mike Whatley, vice president for state and local affairs at the National Restaurant Association, told the DCNF that the organization has opposed future tax increases on small business specifically. After the devastation that coronavirus has done to state and local budgets, he said governments would be tempted to make up for that lost revenue in the form of new business taxes.
“As an industry, we can’t be the target of increased tax hikes going forward, once this crisis is over,” he said. “We can’t have increased meal tax, we can’t have increased alcohol taxes. Any increased taxes in that space will further hurt the industry.”
In the short term, the National Restaurant Association has pushed for governments to ease tight restrictions on restaurants, which he said will in turn follow health guidelines and protocols.
“In our mind, restaurants can stay open if they’re following strict safety and health guidance, and can be open in a safe way for their communities,” Whatley said. “So we’ve been encouraging governors and mayors to follow the facts and to work with the industry.”
Months of contact tracing data New York released showed that restaurants and bars were the source of just 1.4% of coronavirus cases in the state, Eater New York reported. Pokalsky, from the New York Business Council, cited the data saying the state can mitigate the spread of coronavirus while restaurants remain open.
Prior to the pandemic, small business advocates had argued against overregulation, which they said would negatively impact small business more than big business. Small business advocates have pointed to overregulation as an area that should be addressed during the pandemic.
“Government regulations have a sizable impact on free enterprise in America, disproportionately impacting small businesses,” a 2017 Chamber of Commerce report said.
Regulations help big business by creating barriers to entry – often through trade laws – for small business, a 2020 National Bureau of Economic Research paper that examined large firms in 75 countries including the U.S. concluded. Corporations have even lobbied government to impose tighter regulation on their industries, Axios reported.
Big business can afford the staff to deal with additional regulatory burdens, Adam Smith Institute President Madsen Pirie wrote in 2015. Such businesses are more worried about smaller competition than government regulation, he argued.
The Chamber of Commerce report found an increasing regulatory burden on small business from both the federal government and more than 90,000 local governments. It pointed to minimum wage laws, workers compensation laws and unemployment insurance as harmful for small business.
“Small businesses pay on average $11,700 per year per employee in regulatory costs, and the costs of regulation to smaller businesses with 50 employees or less are nearly 20% higher than they are for the average firm,” the report said. “The regulatory costs of federal economically significant rules to small businesses amount to over $40 billion per year.”
A New Small Business Coalition
One major small business success was the Paycheck Protection Program (PPP), a federal government loan program intended to incentivize businesses to avoid layoffs. The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March included $659 billion in PPP loans.
On Dec. 27, former President Donald Trump signed a $908 billion stimulus relief package that included a $284 PPP extension, $20 billion for small business grants and $15 billion for live event venues, CNBC reported.
“COVID relief loan programs have helped millions of small businesses and tens of millions of American workers when they needed it most,” a Small Business Administration (SBA) spokesperson told the DCNF in a statement.
Between April and December, more than 2 million small business loans were awarded to business owners struggling through the pandemic, according to the SBA. Approximately 60,000 small business loans have been approved since the PPP reopened Jan. 11, as of Tuesday.
Sullivan, from the Chamber of Commerce, added that the small business community rallied to get PPP extensions and enhancements in the form of the Paycheck Protection Program and Health Care Enhancement Act in April and Paycheck Protection Program Flexibility Act in June.
A wide range of small business advocacy groups have rallied in the push for small business loans. The groups, which formed a new unified coalition with groups on both sides of the aisle, have been successful in this effort lobbying Congress.
“I’ve actually seen more cohesive advocacy amongst small business groups than ever before,” Sullivan said.
Sullivan pointed to a Dec. 7 letter and a July 9 letter sent to congressional leaders by more than 25 small business advocacy groups each, urging additional emergency relief for struggling small businesses. He said the groups, many of which have had notable policy disagreements with others, came together as one voice.
“It’s been really heartwarming to see those small business groups come together,” Sullivan said.
Whatley, of the National Restaurants Association, echoed Sullivan’s comments: “We’ve really seen exponential growth in terms of the number of folks who’ve been advocating for small businesses, especially in the restaurant industry.”
“And our grassroots presence, as an industry, I would say has always been pretty strong, but it’s gotten even stronger during this crisis,” he added.
The NFIB, a major U.S. small business advocacy group that has defended small businesses in the Supreme Court, didn’t respond to multiple requests for comment.