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In With the New

What might the new Congress do for you?

In crafting a triumph in November, some Democrats used a strategy not seen in America in decades: economic populism. Sherrod Brown, the triumphant Senate candidate from Ohio, actually wrote a book called Myths of Free Trade: Why American Trade Policy Has Failed. Shortly after the election, victorious Senate Democrat Jim Webb from Virginia wrote a much-noted article entitled "Class Struggle," which blasted "incestuous corporate boards" and the wealth of large companies' CEOs.

But the shift in congressional leadership could prove a boon for small business. Already, in its first flurry of activity, the new Congress has pushed to give its small-business committees a larger role, providing input into many types of legislation.

One of the first issues these new congresspeople will address is the lack of funding for the SBA. After years of speaking out against dwindling SBA funding, new House Small Business Committee chairwoman Nydia Velázquez will move quickly to increase funding for the SBA's 7(a) loan program and the Manufacturing Extension Partnership and Advanced Technology Program. Velázquez may also strengthen the SBA's limited ability to respond to disasters, since she launched withering criticism of the SBA's response to Hurricane Katrina.

The new Congress will also try to slash regulations on small companies, a pet issue of Velázquez, Nancy Pelosi and John Kerry, the new chair of the Senate Committee on Small Business and Entrepreneurship. Shortly after taking her gavel, Velázquez introduced the Small Business Tax Fairness and Simplification Act of 2007, designed to reduce paperwork for small tax filers.

To reduce the regulatory burden, Congress will likely pass legislation allowing entrepreneurs to opt out of many Sarbanes-Oxley reporting rules. Velázquez probably will back other legislation allowing entrepreneurs to take a 100 percent tax deduction for meals and entertaining and possibly reducing the alternative minimum tax.

Regarding health care, several congressional experts believe the focus will shift from health savings accounts to health-care tax credits. Kerry introduced legislation giving small businesses a tax credit to pay for the health costs of their employees earning less than $50,000. And President Bush's new health-care proposals would make it easier for people without employer-sponsored care to get insurance, possibly lessening the load on small businesses. Yet at the same time, Congress will take a hard look at increasing enforcement of OSHA regulations, leading to fines that could cripple small companies.

Though the Democrats may not prove as populist as they appear, on trade they will likely follow Brown, not their more moderate members. Pelosi and several other leaders have called for a reassessment of some types of trade with China. After trade deals with Central America and Singapore in recent years, the new Congress will almost certainly put the brakes on more trade agreements.

The new Congress has focused mostly on the minimum wage. They have already passed legislation raising the minimum wage from $5.15 per hour to $7.25 per hour in both houses, though the Senate version includes tax breaks for businesses. Some small-business groups, like restaurant associations, fear this wage hike. Yet a study by economists at the University of California, Berkeley, and Princeton University shows no negative impact of raising the wage on employment, and President Bush has supported the Senate's version of the legislation.

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This article was originally published in the April 2007 print edition of Entrepreneur with the headline: In With the New.

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