Politics: A Whole New Hill

What the midterms mean to entrepreneurs

Charlie Wilson, a newly elected Democratic congressman from Ohio, believes his experience running his family's 108-year-old funeral home and furniture business makes him ideally suited for life on the Hill. "We are able to meet payroll every week, pay benefits every month, hold onto our employees, and please our customers every day," says Wilson. "I call that creative leadership. And that is something that's been lacking [in Washington]."

The incoming class of freshmen in the House and the Senate includes a number of entrepreneurs and small business veterans like Wilson—more than a dozen by our count. That experience will help shape their thinking on issues from health care to tort reform—where little change is likely—to the minimum wage and immigration, where entrepreneurs may face a new landscape. Here's a look at the issues near and dear to entrepreneurs, and a handicapping of what action, if any, is likely.

HEALTH CARE: On almost every survey, the cost of health care turns up as small business owners' most pressing concern. And for years, some in the small business lobby have been pushing their own fix: group buying through small business associations. Legislation creating so-called association health plans (AHPS) passed the House eight times but could never get through the Senate. Now, with the Democrats in control, the betting is that AHPs are dead.

Given the close split in the Senate, it will be a challenge to pass any major health-care legislation before the next Presidential election. "I think you'll have discussions [on health care]," says Grafton "Cap" Willey IV, incoming chairman of the National Small Business Assn. "But I'm not sure you'll get anything passed." Washington lobbyist Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, expects some ideas previously put forth by Democrats will get a second life. Among them is a proposal to provide small businesses with health insurance via a program similar to the one that insures federal employees.

Incremental fixes, such as full deductibility of health-care premiums for the self-employed, might have a better chance. And jawboning on drug prices by Democrats could help slow the rate of increase in prescription drug prices.

MINIMUM WAGE: To hear most Washington pros tell it, a hike in the minimum wage is as good as a done deal. And while most small business owners dislike the government setting wage levels, studies have shown that states that have higher minimum wages do not suffer economically. Kerrigan expects the minimum wage will be hiked from $5.15 to $7.25 over a two-year period, without any offsetting perks for entrepreneurs. That's because the hike has some bipartisan support, and President Bush is unlikely to veto it. "Quite frankly, the Democrats don't need a trade-off [to get it through]," says Kerrigan.

TAXES: Representative Charles B. Rangel (D-N.Y.), the presumptive head of the House Ways & Means Committee, has made it clear that he wants to tackle the alternative minimum tax, which slams many upper-middle-class entrepreneurs. But any change that pulls more Americans out of the AMT trap will mean a drop in tax revenue, potentially increasing the deficit. That's why the key question is how to pay for any changes to the AMT. Until it's clear which taxes would be hiked to offset a drop in AMT revenues, Willey worries, "the cure could be worse than the problem."

IMMIGRATION: The stars may finally be aligning for an immigration law. John Gay, chief lobbyist for the National Restaurant Assn., says the chances of passing immigration reform are better than they've been in seven years. Any compromise will likely include two key components: a guest worker program for foreign workers and stiffer penalties for those who hire illegal immigrants. "I'm worried this [move to pass immigration reform] will force the employer to become an enforcer," says Marilyn Landis, an NSBA board member and president of Pittsburgh-based Basic Business Concepts, an eight-person firm with revenues of $250,000 that provides outsourced financial services.

SBA: The Small Business Administration has seen its budget slashed under the Bush Administration. It has also been making smaller loans through its 7(a) program, a move that critics argue could imperil the ability of the program to remain self-funding. Now it's likely some of the SBA's funding will be restored, and there's more momentum behind the move to raise the cap on the size of the loans made through the 7(a) program.

TORT REFORM: Forget about it. No doubt many entrepreneurs would love to see some reform of the legal system. Dan Danner, lobbyist for the National Federation of Independent Business, says the average lawsuit costs a small company $50,000, a hefty sum for many entrepreneurs. But tort reform didn't get very far in the Republican Congress. Given how influential plaintiffs' lawyers are in the Democratic party, this isn't likely to be a priority issue.

Notwithstanding all the fuss in the nation's capital, small business owners are a pretty resilient lot. As Todd Flemming, CEO of Orlando-based Infrasafe, a technology security firm with 70 employees, says: "Whatever goes on in Washington, we usually find ways to deal with it."

By Amy Barrett

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