Headlines have dubbed it “unthinkable” and businesses small and large have been urging lawmakers for months to come to an agreement soon to ensure the country doesn’t default on its debt. But next week’s August 2 deadline to raise the federal debt ceiling is looming and a recent deal that could have resolved the issue fell through because some lawmakers couldn’t abide elimination of tax exemptions for millionaires. It’s alarming that lawmakers have taken the debate so close to the wire, considering the havoc a default would wreak on small businesses and the economy as a whole.
With each passing day that politicians fail to make a deal, economic uncertainty grows, creating a more and more unstable environment for small businesses. Unfortunately, the clock is still ticking and that last minute is fast approaching.
There are myriad reasons why we must not default on the debt: skyrocketing interest rates, an across-the-board credit freeze—essentially total financial collapse. While much of the debate has focused on big businesses, Wall Street in particular, small businesses will suffer just as much, if not more, from a default. Small businesses don’t have the means to weather an economic crisis that big businesses enjoy, as the recession has made abundantly clear.
While there were signs of progress last week—the airwaves were abuzz with news of possible deals that would raise the ceiling by the August deadline and reduce the deficit over the long haul—talks fell through over the weekend. This is incredibly discouraging, considering lawmakers have a mere nine days to reach an agreement.
Each deal being considered proposes reducing the deficit through significant cuts and revenue-raising measures. Now that there is more than raising the debt ceiling on the table, lawmakers must realize the magnitude of their decisions as they reach for a deal. The choices they make now may have a large impact on our fragile economy’s fledging recovery. Key decisions need to be pragmatic and carefully considered. If a deal is struck that doesn’t protect small business interests, the consequences could be almost as bad as blowing the deadline and defaulting on our debt.
Compromises that are being considered, such as a plan offered by a bipartisan group of senators known as the “Gang of Six,” provide constructive solutions to the problem without harming small businesses. The plan includes small business-friendly measures such as closing corporate tax loopholes and lowering business tax rates, which will help reduce the deficit without placing an undue burden on small businesses. By closing tax loopholes—thus requiring large corporations to pitch in their fair share of taxes—revenue will be raised without small businesses having to pick up the slack, and lowering corporate tax rates will allow small firms to keep more of their profits in their pockets, helping them to expand, grow and thrive.
Other measures being considered, such as curbing waste, fraud and abuse in Medicare and reforming the physician payment system, known as the “doc fix,” will also help stabilize the deficit without harming small businesses or depressing consumer spending—a key concern for entrepreneurs. Small business revenues were greatly reduced during the recession and have barely recovered. It’s crucial any budget cuts included in a final compromise not affect small businesses’ sales. Doing so would stifle job growth and halt our economic recovery.
The fact that proposals were on the table but fell through because of the uber-politicized environment in Washington is beyond frustrating. Some lawmakers who are more concerned about doing away with tax breaks for millionaires, which have nothing to do with small businesses, are putting breaks for special interests over the success of our nation’s job creators. This must change. In the waning days before the August 2 deadline, lawmakers must put the nation’s economic solvency over partisan politics and remember small business needs as they wheel and deal. Many entrepreneurs simply won’t survive if they don’t.