Mike Roach checks customers’ purchase history every time he rings up a sale in his store, and in the past few months, he has noticed a pattern that bodes well for business.
“I always pull up the data, and every day, there’s someone who hasn’t set foot in the store in four or five years,” said Roach, who with his wife has owned Paloma Clothing in Portland, Ore. for four decades. “They are gradually drifting back to our store as they regain confidence in their own economic situations and in the future of the economy.”
Paloma Clothing has weathered several recessions, but Roach says the most recent downturn has had by far the greatest impact on his customers, driving down spending by individuals at every income level. And while consumers have started showing slightly more confidence to start the year, Roach warns that it’s still “a very fragile confidence” — one that could be shattered if policy makers trim too much from what he calls the nation’s “social safety net” in their attempts to balance the federal budget.
“If you start hacking away at programs like Medicare and Social Security, you’re going to damage that little bit of confidence our customers have finally been developing after five hard years,” Roach said. “The short- and long-term deficit issues are by no means non-existent, but the priority right now should be improving the state of the economy, and for that, we need a strong base of consumers.”
That sentiment is shared by an overwhelming majority of small business owners, according to new polling data obtained by The Washington Post.
Responding to a series of policy questions posed by lobbying group Small Business Majority, 80 percent of business owners said they oppose proposals to save federal money by curbing Social Security benefits, which have been floated in varying degrees by both parties in Washington. Nearly three in four said lawmakers shouldn’t cut back on Medicare, and two in three said the same about proposed cuts to Medicaid, according to the poll, which will be published Wednesday.
The findings are based on responses from 500 business owners around the country who have fewer than 100 employees. Notably, more than half (52 percent) identified as Republican, the party that has generally pursued deeper cuts to federally funded social programs, while only 34 percent were Democrats.
For some business owners, proposed entitlement cuts pose a direct threat to their personal finances, which may leave less capital to invest back into their companies. One in eight small business owners in 2007 (most recent census data) was over the age of 65 and one in four was less than a decade away from qualifying for Medicare.
But for most, the concern is for their customers and, by extension, their revenues.
“In any effort to deal with the deficit, small business owners aren’t interested in methods that are going to pull money out of the economy or negatively impact the middle class,” John Arensmeyer, founder and chief executive of Small Business Majority, said in an interview. “They can’t afford for the government to start cutting benefits on Medicare and Social Security.”
Once again, the hour is growing late for elected officials to strike a deal to avoid a potentially catastrophic blow to the economy, as the $1.2 trillion round of automatic spending cuts known as “sequestration” is scheduled to commence at the end of the month. President Obama has urged lawmakers to pass legislation to delay the cuts until at least the end of the year, but House Republicans aren’t warming to the idea, denouncing the plan as a ploy to quietly extend temporary tax hikes without addressing the nation’s excessive spending.
Any deal to completely dismiss — rather than postpone — the automatic cuts will likely include some concessions by Republicans on tax increases in exchange for willingness from Democrats to curb spending. Eliminating government subsidies for farmers and oil producers, scaling back the defense budget and reducing education funding have all been floated as plausible spending cuts; but overhauling the nation’s revenue-bleeding entitlement system comes up more often that any other solution.
So if that doesn’t work for small business owners, where do they think Congress should turn?
Rather than picking apart Medicare and Social Security, most respondents said they hope Congress closes tax loopholes that favor large corporations and eliminates breaks for firms that move manufacturing or production jobs overseas. More than six in 10 small business owners also favored proposals to cease those government subsidies for oil and gas companies.
Nevertheless, if changes to social programs prove necessary, the majority favored raising the income cap for payroll taxes so that high-level incomes are taxed for Social Security.
Ultimately, the only thing that would spell total disaster for small businesses, Roach said, is if lawmakers stand idly by and allow the automatic cuts to set in as scheduled.
“Economists agree that sequestration would send us back into recession,” Roach said. “Do you know how hard we worked to get out of that last recession? At the small business level, we are finally getting out of it, and the fact that we could have to start over and try to climb back out again — it leaves a lot of us completely flummoxed that it’s even a possibility.”
Which issues are you watching most closely in the budget negotiations?