Presidential Candidates Have Not Prioritized Small Business - Forbes

Presidential Candidates Have Not Prioritized Small Business - Forbes

Presidential Candidates Have Not Prioritized Small Business - Forbes

Posted: 03 Jul 2019 05:00 AM PDT

As we approach the Fourth of July, there are two dozen contenders for the 2020 Democratic nomination for president, and currently none of them are focusing on small business as a major priority. In fact, small business and the economy seem to lag far behind immigration, climate change, gun control, health care, foreign affairs and social justice as top priorities of the Democratic field.

Members of the media gather for a walk-through of the stage set-up for the first democratic debate, Wednesday, June 26, 2019.  (AP Photo/Marta Lavandier) photo credit: ASSOCIATED PRESS

Few candidates are talking about small business loans, even though access to capital is the lifeblood of small business growth. Meanwhile, many of the candidates are focusing on issues that will hurt, rather than help, small businesses, including raising the federal minimum wage to $15/hour.

Here is a look at the current front runners:

Former Vice President Joe Biden

Biden's campaign website contains few specific plans regarding small business or entrepreneurs, and his record on supporting small business is far from robust. As VP in 2011, supported the American Jobs Act, which cut payroll taxes and included reforms to open access to small business capital. However, he also has pushed for a $15/hour federal minimum wage since 2015 (a time when even President Obama targeted $12/hour as the goal). While Biden frequently talks about reducing income inequality and boosting the economy, he has offered little in the way of concrete proposals.

Senator Elizabeth Warren

Senator Warren says she believes that "small businesses are the heart and soul of our economy." In her home state, she has hosted an annual Massachusetts Business Matchmaker event that assembles hundreds of small business owners for a day of workshops and networking. The event provides a chance for small businesses to meet directly with representatives from government agencies and prime contractors offering subcontracting opportunities.

Warren hopes to usher in "a new era of strong antitrust enforcement so giant corporations can't stifle competition, depress wages, and drive up the cost of everything." She has proposed a $7 billion initiative to support 100,000 new minority-owned businesses and create over a million jobs. The funds would come as grants, not loans, and only be offered to entrepreneurs eligible for the SBA 8(a) program and have less than $100,000 in household wealth. She has proposed increasing taxes on large corporations to pay for these programs and grants.

Senator Bernie Sanders

Bernie Sanders is unafraid to take on "giant corporations on Wall Street" and is strong in his support of a $15/hour minimum wage. The small business section of his campaign website says that the Vermont Senator wants to make sure that small businesses have the support they need to thrive and expand. Sanders has a record of supporting access to low interest loans for small businesses and legislation, including the Small Business Jobs Act of 2010, which gave low interest loans to small businesses and supported small community banks through which the loans were disbursed. (The legislation also offered $12 billion in tax relief to small businesses across the U.S. and an additional $30 billion in capital for small businesses during Great Recession and the post-recession credit crunch.)

More recently, Sanders teams up with Rep. Alexandria Ocasio-Cortez (D-NY) to unveil the Loan Shark Prevention Act that would cap interest rates for consumer loans and credit cards at 15%. "With lower interest rates, entrepreneurs and small business owners would have better access to the credit they need to build and grow their companies," Sanders says.

Senator Kamala Harris

As California Attorney General in 2014, Kamala Harris helped small businesses protect against cyber-crimes. She also prosecuted and won a $1.1 billion settlement against a predatory lender.

Senator Harris has called for the reversal of President Trump's 2017 tax cuts and supports raising the minimum wage to $15/hr. Senator Harris has not made formal proposals as a candidate related to small business or entrepreneurship.

Mayor Pete Buttigieg

The Mayor of South Bend, Indiana, has relatively strong record of supporting small business among the current Democratic field of candidates. He has pushed for diversity in contractors hired by his city and also partnered with Accelerator for America to find areas that weren't generating economic growth, then used tax incentives to attract investment in those areas. The South Bend Department of Community Investment reports aiding projects that added almost 700 jobs in 2017.

Mayor Buttigieg helped revive South Bend. He hopes to do the same for the country.

Former Congressman Beto O'Rourke

In June, Beto O'Rourke unveils small business plan to address racial wealth disparities and help women and minority business owners gain access to capital. As President, his goal would be to add 200,000 new women and minority-owned businesses by the end of his second term. He encourages startups to use government contracts to grow.

O'Rourke says he wants to "root out racism and sexism from lending" and make access to credit fairer and more equitable. He says he also wants to simplify tax rules and requirements. O'Rourke's campaign website small business section says he would target government contracting and other catalytic investments to unlock over a half a trillion dollars of economic opportunity for women and minority owned businesses. He also would shift at least $100 billion in government contracts away from large corporations to small businesses, with half of that opportunity going to women and minority entrepreneurs.

Senator Cory Booker

Cory Booker is a member of the Senate Committee on Small Business and Entrepreneurship and regularly hosts forums for small business owners in New Jersey to network and learn about federal resources that are available and help them connect with other entrepreneurs to share best practices.

Senator Booker believes that the federal government has an important role to play in helping small businesses succeed and create more jobs. He introduced the Startup Opportunity Accelerator (SOAR) Act to direct $25 million in funding over five years to a Growth Accelerator Fund, which would allow startup businesses to compete for grants to help their businesses grow.

Cory Booker supports an increase of the minimum wage to $15 an hour.

Other candidates:

Congresswoman Tulsi Gabbard

Gabbard's previous campaigns featured several proposals related to small business, including tax credits for businesses that hire unemployed workers; eliminating redundant regulations that make it hard for startups and small businesses to compete; reducing payroll taxes; and supporting legislation that makes access to funding easier for small business owners.

Congressman John Delaney

Rep. Delaney, whose support is at about 1%, is an entrepreneur who started two companies and employed thousands or workers.  His second business, a company called Capital Source, focuses on financing small and midsize companies all over the country. "Our niche was companies that were growing too fast for their local community bank, but weren't big enough to be served by the big banks," Delaney told CNBC.

Delaney would use small business as a way to drive economic development and combat income inequality. He calls for direct investment in communities "left behind by globalization and technological change" and would prioritize contracting to companies in struggling communities and supporting opportunity zones - economically-distressed areas with tax incentives to encourage private investment.

Mayor Bill De Blasio

De Blasio's support for raising the minimum wage, mandatory paid vacations, and expanded sick leave for workers has done little to endear him to New York City small business owners. His Small Business First plan supported programs to reduce the regulatory burden on small businesses and invest $27 million to provide one-on-one counseling and make resources more accessible. De Blasio initially supported Amazon's plans to build a second headquarters in Queens, which would have boosted small businesses in the local economy, but later changed his position.

Small business growth was an important issue in 2012 and 2016 elections. Thus far, in the early Presidential campaign, the issue has taken a back seat. It remains to be seen whether this will change as Election Day 2020 draws near. Certainly, President Trump will highlight the economy and how well it has performed since he has been in the office.

Elizabeth Warren proposes $7 billion in grants for minority businesses -

Posted: 15 Jun 2019 12:00 AM PDT

Democratic presidential candidate Sen. Elizabeth Warren released a new plan on Friday to "level the playing field for entrepreneurs of color" by providing business grants to minorities in order to close the startup capital gap — the difference in capital available to white entrepreneurs versus entrepreneurs of color.

Warren argues that "every American should have a fair shot at starting a small business" but says the playing field is currently drastically uneven, with entrepreneurs of color starting businesses with far less money than their white counterparts. She writes that disparity severely affects minority-owned businesses' ability to attract investors and apply for credit, as well as their bottom lines.

"Disparity in startup capital is the single biggest reason that promising Black-owned businesses on average are less profitable and bring on fewer employees than white-owned businesses," she said.

In order to level the playing field for entrepreneurs, Warren has a plan to distribute $7 billion to minority businesspeople.

How the plan will work

Warren proposes distributing $7 billion in grants through a new "Small Business Equity Fund." She stresses that the money will be in the form of grants, "not loans or loan guarantees," in order to ensure entrepreneurs can focus on growing their businesses rather than on repaying debt.

The fund would be managed by Warren's comprehensive new Department of Economic Development, which Vox's Matthew Yglesias explained in a piece on Warren's "economic patriotism":

One specific bullet point on Warren's policy agenda is to create a unified Department of Economic Development that would combine the functions of the Commerce Department with the Small Business Administration, the Patent and Trademark Office, various job training and R&D programs scattered around the bureaucracy, and the export and trade agencies including the Office of the US Trade Representative.

The bureaucratic reorganization, however, is basically just to set the stage for a mission statement: "the new Department will have a single goal: creating and defending good American jobs."

Although the Small Business Equity Fund would be overseen at the federal level, Warren sees state and local stakeholders as being key to distributing funds; she says her program will be modeled on the State Small Business Credit Initiative, a federal program that gave states a great degree of say in how they chose to distribute $1.5 billion. This freedom was given as officials felt local leaders have a better grasp of the needs of entrepreneurs in their states than federal officials would. Under Warren's plan, local governments would be required to work with minority investment managers to decide how the funds would be spent.

The federal government would also create guidelines for who would be eligible for the grants: They would be limited to entrepreneurs who are eligible for the Small Business Administration's existing 8(a) program. To be eligible for that program, a business must be at least 51 percent owned and controlled by a socially and economically disadvantaged individual who has less than $100,000 in household wealth. This figure encompasses a large percentage of minority families; according to the Federal Reserve, the median net worth of a black family is $17,600, while the median net worth of a Latinx family is $20,700.

Warren would also work at the federal level to increase the Minority Business Development Agency's budget — she pledges to triple its funding in her presidential budget.

As with many of Warren's other plans, the cost of this proposal would be entirely covered by her proposed wealth tax, a 2 percent tax on every dollar of wealth an American owns above $50 million, and a 3 percent tax on every dollar of wealth above $1 billion. According to the candidate, the $7 billion investment would help create 100,000 new minority-owned businesses and as a result provide 1.1 million jobs.

The startup capital gap, and why it matters

Warren's proposal states that the startup capital gap is the single biggest reason minority-owned businesses are less profitable on average than white-owned businesses. And that capital gap is vast.

The typical black entrepreneur, the candidate notes, starts a business with one-third the startup capital of the typical white entrepreneur. Part of this is due to difficulties receiving loans; another part of it is that minority families often have less wealth to invest in a family member's startup than white families do. As a Stanford Business School report found, "Latino business owners tend to depend on personal savings and seed funding from friends and family to start their businesses," and are "much more likely [than white entrepreneurs] to use personal guarantees than business assets to secure financing."

Having less money at the beginning of a business makes it more difficult to attract money later on, as it limits the amount an entrepreneur can invest in things like prototyping, real estate, inventory, and marketing, all things that, when done successfully, attract new investors and credit.

While the wealth threshold to quality for Warren's program may seem relatively low, $100,000 is far more than most minority families have on hand, according to the senator, who cites research that found $100,000 is roughly five times the median net worth of Latinx and black families and more than 10 times the median net worth of Native American families.

Warren's plan invokes the language of reparations, something she has vocally endorsed on the campaign trail, particularly when it suggests that the government has an obligation to address the racial wealth gap "because the government helped create that wealth gap with decades of sanctioned discrimination." It is important to note, however, that this policy is for all minorities rather than just for black Americans.

How Warren's plan compares to other candidates' plans

Warren released her plan ahead of the Black Economic Alliance's presidential forum in South Carolina, which she will be attending alongside a number of other Democratic presidential candidates, including Cory Booker, Beto O'Rourke, and Pete Buttigieg.

O'Rourke released his own small business plan on Saturday, focusing on women, communities of color, and small businesses more generally. His plan hopes to create 200,000 new small businesses to Warren's 100,000, and pledges a $10 billion small business credit initiative for "economically distressed areas" to Warren's $7 billion Small Business Equity Fund. Notably, O'Rourke's plan doesn't give funding directly to small-business owners in the form of grants. Instead, it funds a range of programs designed to increase loan accessibility and reduce discrimination. Like Warren, he has pledged to triple investment in the Minority Business Development Agency in order to provide resources and mentorship to minority small business owners.

Booker is attending several South Carolina events around this weekend's forum, and is expected to use his stops to discuss the racial wealth gap and growing small businesses owned by African Americans, although he has not released a specific policy proposal.

Others Democrats have proposed more small-business-friendly policies. Both O'Rourke and Tulsi Gabbard have suggested cutting or offering deductions on small business taxes, but proposals such as these fail to account for the wealth gap that prevents entrepreneurs of color from opening a business in the first place.

This plan fits in well with Warren's myriad other plans

Warren has the most plans of any 2020 candidate, but almost all of her plans have the same overarching purpose: erasing the wealth gap. Her overall platform is focused on what she calls "economic patriotism," and this new plan fits right into that larger vision.

As Vox's Ezra Klein explained:

Warren's tagline is "I have a plan for that." And on one level, it's true: She has a lot of plans. But a clearer way of understanding her pitch is she's got one plan that she applies over and over again.

As Warren sees it, there's been a massive hoarding of wealth — and thus of power and opportunity — in this country. She wants to tax the wealth and redistribute both the money and the opportunity. She wants to break up concentrations of economic power by putting workers on corporate boards and unleashing antitrust regulators on Amazon and Facebook and ending Washington's revolving door. These are different policies, yes, but they all say the same thing: The wealthy have too much money and power, and Warren wants to change that.

Her newest proposal is grounded in these same themes: It disparages an "uneven playing field," and she argues that it will "move us closer to an America where everyone has a fair shot to succeed."

Economic issues remain a top concern for Democratic voters, and by adding her entrepreneurial investment plan to her portfolio of "economic patriotism" initiatives, Warren continues to suggest that addressing that concern is one of her top priorities.


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