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The Anti-Main-Street President

The Anti-Main-Street President
Image credit: Jewel Samad

While President Obama has supported a few proposals that benefit high-growth, high-tech entrepreneurs (like the Jumpstart Our Business Startups Act, most of his policies have been hostile to the interests of Main Street business owners, particularly those running labor-intensive businesses with low-wage employees.  If small business owners want to protect their interests, they and their advocates will need to work hard to combat his efforts as the midterm election cycle gets started.

Many of the policies that Barack Obama has advocated - the Affordable Care Act (ACA), banking reform, and changes to tax rates, the minimum wage, and regulations - make life more difficult for small-business owners. 

Related: To Help Small Businesses, Cut Regulations

The President's signature policy achievement - the ACA - has been problematic for small-business owners. Many self-employed Americans have lost access to inexpensive insurance policies because their old plans did not meet the new standards for health insurance. Moreover, the new law has driven up their cost of employee health care coverage, which has adversely affected the performance of small companies, according to surveys of small business owners.

President Obama favors raising the minimum wage and indexing it for inflation. This change would be bad for small business owners who employ low-skilled workers. Because many companies employing low-wage workers face too much competition to pass the increased labor cost on to customers, a higher minimum wage would mean lower small business profits or costly investment in labor saving equipment.

The President pushed for a higher marginal income tax rate, increased taxes on investment income, and a rise in the Medicare portion of the payroll tax. Surveys of small-business owners reveal that these federal tax increases have adversely affected their business activities.

Related: Why Corporate Tax Reform Is Not Enough

The President boosted the number of federal regulations affecting small businesses by 13 percent during his first term in office, leading governmental regulation and red tape to overtake sales, taxes and the cost/availability of insurance as small business's biggest problem, respondents to the National Federation of Independent Business small business survey explain. A Gallup organization survey showed that more than seven-in-10 small-business owners view government regulations as negatively affecting their companies' operations.

President Obama supported the creation of the Consumer Financial Protection Bureau (CFPB) as part of the Dodd-Frank banking reform bill. The CFPB's efforts include, among other things, the implementation of the "ability-to-repay rule" for home mortgages, which limits borrowers seeking qualified mortgage loans to a debt-to-income ratio of no more than 43 percent. Because one-in-four small-business owners use home equity to finance their businesses, this policy makes it more difficult for some small-company owners to obtain credit for their companies.

The CFPB has also blocked credit-card lenders from raising interest rates if borrowers' creditworthiness weakens. Unable to respond to changes in their customers' ability to pay back loans by raising their cost, many lenders have cut back on issuing credit cards to marginal borrowers. This reduction in credit affects those small-business owners who are now unable to tap credit cards for business financing the way they once did.

While there is little that small business and its advocates can do to directly stop the President from proposing additional policies that make life difficult for Main Street, they can take indirect action. By supporting the President's opponents in the midterm elections in 2014, small-business owners can create a counterweight to administration efforts to take further action against their interests.

Related: Big Business Risks Alientating Small Business By Shunning Tea Party

The author is an Entrepreneur contributor. The opinions expressed are those of the writer.

Scott Shane is the A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University. His books include Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live by (Yale University Press, 2008) and Finding Fertile Ground: Identifying Extraordinary Opportunities for New Businesses (Pearson Prentice Hall, 2005).

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