One of John McCain's gambits over the past several weeks has been to announce the formation of small business advisory groups in potential swing states, including Virginia, California and other states. Tiny New Hampshire has quite a robust list, while Minnesota, home to one of his campaign's co-chairs, Gov. Tim Pawlenty, has a pretty meager showing.
Given the relatively minor name recognition and political clout most of these "small business leaders" have, they are useful to McCain mostly so he can stand in front of them and proclaim himself in favor of business growth while spinning bald-faced lies about the effect his opponent's policies will have on these exemplars of the American Dream.
Backed by a handful of marketing consultants, cleaning service contractors, insurance agents and filling station owners, McCain makes as if he is supported by about 8 percent of the U.S. population — all those beleaguered small business owners.
FactCheck.org goes into the detail of how McCain first inflates the number of small businesses, ignores that most of them do not actually employ workers, and then conflates them with the relatively small proportion of business owners potentially affected by a tax increase on top earners.
Of the 26.8 million that SBA counts as "small businesses," fewer than 6 million are actually "employer firms" with any payroll.
From this, we must conclude that to arrive at his 23 million figure, McCain is counting mostly "business owners" with no workers, including those who simply report small amounts of income from sideline or freelance work. McCain is arguing that Obama's tax increase would "destroy jobs," but he's counting mostly firms that don't produce any.
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Based on the number of taxpayers who now report any sort of business income on their returns, the Urban-Brookings Tax Policy Center projects that 663,608 taxpayers with business income, or business losses, will fall into the top two tax brackets in 2009, when any Obama tax changes would first take effect. Not all of those can properly be called "small-business owners," however. Some are farmers. Many are lawyers, accountants or other professionals who get some of their income in the form of partnership distributions. Others may be passive investors in real-estate partnerships or similar investment arrangements and not really persons who own and manage a business.
It is also not clear how many who report business income actually employ any workers.
Of the small businesses that do employ workers, Boston Review points out that many benefit as "state social supports—from education and training to health care—supplement workers’ wages and benefits, and help small businesses recruit and retain their workers."
Nor should we believe that small businesses are some monolithic political force with identical interests. Our service economy includes both businesses employing low-skilled, low wage workers and high-skilled, higher-paid knowledge workers that may value different ways the "welfare state" helps support their stability and success.
The Earned Income Tax Credit, for example, underwrites incomes for low-wage workers while increasing the labor supply in low-wage service industries. Food stamps, child care subsidies, and public health programs such as Medicaid and the State Children’s Health Insurance Program increase productivity and reduce turnover among low-wage workers, to say nothing of improving their quality of life, at virtually no cost to their employers.
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High-skilled firms have needs different from low-skilled ones, but public policies are just as important for them. These firms tend to employ highly educated and potentially mobile workers who are attracted to communities with good schools and universities, well-maintained recreational facilities, and effective environmental policies. Moreover, when workers lose their jobs, unemployment insurance gives them the economic security to defer work in order to train for new skills. Here, too, there are bases for supporting a more active government as a way to ensure the supply of skills on which small businesses will build in the future.
By siding with mom & pop stores and plucky, job-creating entrepreneurs, McCain can still advance the interests of big business — oil, pharmas, financial services, defense contractors, airlines, big box retailers... — without being associated with their down sides, which are plenty in this economy.
