For the past six months, the nation has been on a financial
roller coaster that has sent destructive tremors rolling throughout
the economy. Consequently, small businesses have found it almost
impossible to secure risky venture capital, and even bank loans
have plummeted. Business bankruptcies are inching up, and
unemployment is seesawing. In manufacturing alone, the Bureau of
Labor Statistics reported a monthly loss of 124,000 jobs in May and
a total of 675,000 positions gone since July 2000. And that's
just one industry.
In the past, laid-off workers in a tight job market have turned
to entrepreneurship, but according to the "Challenger Job
Market Index," a quarterly survey released by Challenger Gray
& Christmas Inc. in April 2000, only 8 percent of discharged
managers and executives started their own businesses in the first
quarter of 2001. This is in sharp contrast to past downturns, when
start-up activity thrived. In the first quarter of 1991, for
example, 18 percent of discharged managers and executives started
businesses.
Can the new administration pump up this lackluster start-up
activity? That remains to be seen. So far, the Bush
Administration's small-business agenda has primarily clung to
tax cuts as the cure-all for entrepreneurial firms. "The tax
relief plan will increase cash flow of small businesses, giving
folks more resources to buy more equipment and hire more
workers," said George W. Bush during a speech at the White
House to small-business owners in March.
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Under the Economic Growth and Tax Relief Reconciliation Act of
2001, which took effect July 1, the top tax brackets (28, 31, 36
and 39.6 percent) will be reduced 1 percentage point annually until
2006; the top level will also decrease an additional 1.6 percent.
At that point, the rates will be 25, 28, 33 and 35 percent.
But beyond cutting taxes, entrepreneurs are still waiting for a
definitive small-business agenda from the Bush administration.
"We don't necessarily see the same level of support for
micro and very small businesses under Bush that we saw with
Clinton," says Bill Edwards, executive director of the
Association for Enterprise Opportunity (AEO), a nationwide
umbrella organization for microlending agencies. "However, I
will say we're working very hard with the administration. There
are a lot of signs that have been quite positive. I believe part of
it is an education process, and we're involved in that with
members of the administration."
| "We don't necessarily see the same level
of support for micro and very small businesses under Bush that we
saw with Clinton." |
Edwards points to the implementation of the PRIME (Program for
Investment in Microentrepreneurs) Act as an example of how the
AEO's educational efforts are making headway. Although
initially signed into law in November 1999, PRIME wasn't funded
until late 2000, says Edwards—and when the new administration
took office, a freeze was placed on disbursement of the $15 million
allocation. But with the help of the AEO, that money is now seeing
the light of day: "We worked very hard to reach out to the
Democrats and Republicans in Congress who had supported the
legislation and [we] got the money released," says
Edwards.
And that funding means training and technical assistance for
disadvantaged microentrepreneurs as well as strengthening of the
organizations serving these budding business owners. The net result
of the additional funding is that the agencies that win the grants
will be able to increase the number of people served and the areas
they serve, says the SBA.
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