Business Implications of 2006 Elections

The results are in and we lost. Undecided races notwithstanding, every single seat in both the Senate and the House has been taken by politicians.

Small businesses provide the majority of jobs in the United States, which means that policies that affect small businesses don’t just affect business owners, they affect the majority of citizens in the country as well. However, the majority of our elected leaders have no real experience with small business, and by “real experience” I mean they’ve never started or managed a small business. If you have been a small business owner you know all too well that somebody who hasn’t been through what you’ve been through has little idea of what it’s really like.

The Democrats being in control doesn’t bother me too much as far as government policies affecting small business because I don’t think they’ll do much one way or the other, just like the Republican controlled Senate and House don’t seem to have done much for the past 12 years. I am concerned about social policies the Democrats might try to push through, but that’s a topic for a different blog entirely.

Ultimately the Dems may have shot themselves in the collective foot by taking control of Congress right now. If they had been content to let the Republicans maintain control for another two years they probably would have had no problem taking the White House in 2008. Now, if anything bad happens during the next two years the Republican candidate can blame it on the Democrat controlled Congress, but if anything good happens they can credit it to the Republican White House. Having a Democrat controlled Congress gives a Republican candidate in ’08 something to fight against.

What can the Dems do with regards to business that might help them in ’08? There are two major issues they face that could break them in ’08, although I’m not sure they could make them.

1. Taxes. We know there are no partisan politics when it comes to lowering taxes. One party talks about doing it, the other party doesn’t talk about it, but nobody actually lowers taxes. In this both parties seem to agree completely. If Democrats are smart they won’t raise corporate income or payroll taxes, even if they don’t go so far as to lower them. Raising taxes means job cuts or salary cuts. It’s a simple equation–if I’m a business owner and I have to pay more to the government then I’m going to have less money to pay people, which means either paying people less or having less people to pay. Let me keep more of my money and I’ll give people raises or hire more people.

This is part of why it drives me nuts when people complain about tax cuts for the rich. Who do you think is providing all the jobs out there? The economy is not like a pie wherein if someone else gets a bigger slice you get a smaller slice. The economy can grow such that everyone gets a bigger slice. Go study the history of taxation in this country and you’ll see that when the government raises taxes on the rich it ends up hurting the middle class and the poor instead of the rich. If the Dems raise taxes on businesses they’ll slow down the economy and they’ll have every employer telling their employees that the reason they’re being laid off is because of higher taxes imposed by the Democrats.

2. Immigration. I’m predicting deadlock on this one because President Bush’s plan for immigration closely mirrors what Democrats are likely in favor of, a guest-worker plan. I think the reality of the situation is that we probably will end up with some sort of guest worker plan if the Dems and Bush can cooperate, which I would probably be fine with as long as it also involved curbing illegal immigration, wasn’t a path to citizenship, didn’t include a minimum wage for guest workers, and didn’t include rights to social services.

I would like to see some progress on social security but I doubt much will happen. I think we’ll see a hike in the minimum wage because politicians see it as a way to pander. The funny part is that I don’t think it’s the minimum wage earners they’re pandering to, it’s all the people who feel sorry for the minimum wage earners. Like taxes, the argument never seems to get beyond a superficial depth. That is, people think “Well yeah, if you can’t live on a minimum wage and we raise it so people can then that’s a good thing, right?” and then they never take it a step further. What happens if the government raises the minimum wage? Either people lose their jobs or not as many people get jobs, because businesses have less money on hand. The other thing I wonder about is how many people are really trying to support a whole family on a single minimum wage job. What kind of adult can’t get a job that pays above the minimum wage? You can work in a warehouse putting boxes on shelves and get paid $10/hr. You can work in a call center taking orders and make $12/hr plus commission. One of those jobs requires that you be able to walk and raise your arms, and the other requires that you be able to hear and talk–not exactly the type of work you need a college degree or even a high school diploma to do.

And so while I don’t foresee doom and gloom because we’ve got the “anti-business Democrats” in power, I don’t see anything great on the horizon either. And if the elections had played out such that the Republicans were still in power I’m not sure I would be any more enthused. But get rid of the politicians and get some normal people in there, then I’ll get excited.