The government's $700 billion rescue plan inspires mixed feelings at best from U.S. small business owners. Some say the plan was rushed
As the House of Representatives was set to vote on the newly reconfigured economic bailout package (passed by the Senate on Oct. 1 and by the House on Oct. 3), small business owners across the country—some of whom are already squeezed by the credit crunch (BusinessWeek.com, 9/26/08)—are reacting with a mix of frustration, anger, and disbelief as the government attempts to relieve the ailing credit markets with a $700 billion rescue plan. The day before the legislation was expected to be pushed through the House, BusinessWeek's Stacy Perman spoke with a spectrum of small business owners across the country who shared their reactions to the plan.
"I'm very, very disgusted," says Tom Carlson, the owner of Fairview Florist in Janesville, Wis. In the 1920s, Carlson's father bought the shop, which was originally established in 1875 and remains the community's second-oldest retailer. "We've survived," he says, "and we want to continue to survive." While Carlson, 76, hasn't felt too much of a pinch on his business, he has little confidence in the government's ability to pull the country out of this economic ditch. "We can't trust our legislators and political leaders to do what is best for our country," he says. "It is very disheartening." Although he believes something had to be done to avert the crisis, Carlson is not particularly enthusiastic about the bailout package passed in the Senate. "It was done so fast there are going to be a lot of problems. I am worried that some people in government are making things happen for their benefit and not for the taxpayers' benefit."
Six weeks ago, Bill Baird, the owner of two Oregon-based independent book shops called The Book Bin in Salem and Corvallis, received a loan for $250,000 to expand his business. Like other small business owners we interviewed, Baird, who opened his first shop 25 years ago, is torn over the $700 billion government bailout. "I have really mixed feelings," he says. "My sense is they have to do something, but I think it will free up the business side, but it will not help consumers. Anybody looking at a foreclosure or a potential foreclosure, or buying a house or car, will be in real trouble. The consumer liquidity this Christmas is not going to be good. I'm fortunate our business is based on small transactions, but I look at my neighbors' businesses—like someone in the furniture business. I think they are going to have a dead Christmas."
The bigger problem, Baird says, is the way the government has handled this entire situation. "I was on a buying trip in Canada when I heard President Bush's 'Be Afraid, Be Very Afraid' speech. I thought, what are they doing? So much of the way that people feel about the economy and their spending patterns is based on feelings. And we now have everyone in Washington saying we are going into a Great Depression. The basic message coming out of Washington is don't spend any money."
As for the bill itself, Baird says a lot of it is just political. "Maybe a third of things in there now are relevant to the bill—and the other two-thirds are…for political reasons—just to get someone to buy in to vote; it has nothing to do with what the problems are."
Like many, Baird is astonished at the pace of pushing the bill through Congress. "Overall we have to do something, but it would have been a whole lot better if they took six months to hammer it out and be functional rather than have to go back and revisit it shortly. It won't do what it is they are setting out to do, assuming they pass it."
Maryann Ferenc owns and operates the fine dining restaurant Mise en Place and a catering event business in Tampa, Fla. Ferenc thinks not only is the bailout bill tantamount to a Band-Aid, but more important, it does not hold those responsible for the crisis accountable. "As an independent business person for the past 23 years, there have been times when I had to close my businesses because of financial necessity," she says. "No one helped me, and I don't think they should. I had to change my lifestyle when I made decisions that were less than fabulous. But I learned a lot and came out on the other side a better business person. It's a good lesson for Corporate America to go through. People need to pay for their mistakes. We need to hold people responsible for the decisions they make. I am a Democrat and a strong one, but I do not like to see us bailed out."
In July, Gina Schaefer opened her fifth Ace Hardware store in the Washington (D.C.) area. "I've had the opposite experience to the doom and gloom," she says. "Actually, our business has been up for the past year." Still, Schaefer says she is not exactly enthusiastic about the bailout. "From a small business perspective, no one is bailing me out," she says. "When there are any issues on the economy, there are a lot of burdens placed on business, specifically small business. We carry the brunt of any tax implications."
At the same time, Schaefer says that while something had to be done, "This is not a magic bullet that is going to save the economy or cause people to shop again." Then again, she says, from where she sits things don't look so bad. "I am in D.C., the largest customer here is the federal government, and they aren't going anywhere. This bill is going to create more jobs in the district." She adds: "The CEO of Ace says that hardware is a recession-proof business. I guess we'll get the chance to test that."