Why Our Government Hates Small Business

If your train’s on time, You can get to work by nine
And start your slaving  job to get your pay
If you ever get annoyed, Look at me I’m self-employed
I love to work at nothing all day… (Bachman Turner Overdrive, performed here by the Guess Who)

“An upcoming wave of new workers in our society will never work for an established company if they can help it. To them, having a traditional job is one of the biggest career failures they can imagine.”

So wrote Michael S. Malone for The Wall Street Journal two years ago.  And he had stunning statistics to back it up:

“Half of all new college graduates now believe that self-employment is more secure than a full-time job. Today, 80% of the colleges and universities in the U.S. now offer courses on entrepreneurship; 60% of Gen Y business owners consider themselves to be serial entrepreneurs, according to Inc. magazine. Tellingly, 18 to 24-year-olds are starting companies at a faster rate than 35 to 44-year-olds. And 70% of today’s high schoolers intend to start their own companies…”

And that’s a good thing, right?  Entrepreneurship is the backbone of the American economy.  According to Census data, more than 90% of all U.S. businesses have 4 or fewer employees, compared with 0.4% that have 100 employees or more.

The SBA categorizes a small business as having fewer than 500 employees– which kind of tells you where our government’s head is at.  Still, SBA says that small businesses account for more than half of all U.S. employees at 60.2 million, paid 44% of U.S. payroll, and 64% of new job creation.  That’s not including some 23 million non-employee business owners who make their living in small business.

So if small business makes such a great contribution to the economy, why does our government seem to hate small business so much?  It has some very practical reasons.

First, consider the political challenges faced by elected officials and those aspiring to public office.  In order to garner votes, they must raise cash quickly and efficiently.  Some, like Howard Dean, have done so using the internet to reach out to individuals.  But a far more efficient means is to appeal to a few small, wealthy businesses.  Consider: the same census data cited above shows that those small businesses that make up 90% of American business, bring in less than 1% of the gross receipts.  But businesses having 100 employees or more brings in 70% of the gross receipts.  The divergence gets even more striking: 50% of gross receipts are earned by companies with 2,500 employees or more, a mere 3,500 of America’s more than 25 million businesses.  As a politician, would you rather approach 3,500 wealthy businesses for a contribution, or try to chase down 25 million small business owners?

Now consider the all-important function of taxation and revenue.  Half the gross receipts are earned by businesses with fewer than 2,500 employees (25 million), and half are earned by those businesses with 2,500 employees or more (3,500).  When the IRS sends auditors into the field to ensure that everyone is paying their fair share, their budgeters are concerned about how much return they’ll get for their efforts.  They know that many small businesses cheat on their taxes– but they don’t have enough auditors to check up on everyone, and when they do, the returns aren’t worth the effort.  There’s a much bigger bang for the buck auditing large firms.  Says Kiplinger’s Tax Letter, “Audits of Schedule C filers yielded 43% less revenue per hour than exams conducted on other types of entities.”  Wage earners, too, are far simpler than small businesses– in fact the new IRS tax preparer regulation program will require preparers to pass a specific test to qualify to prepare small business returns.

I’ve seen this focus on return on investment in action at the IRS.  During a heated discussion with an audit subject, the auditor acknowledged that the IRS intended to make an example of the client in order to discourage other similar businesses.  Said the auditor, “We don’t think businesses like this should exist.  You’re too small.”  (I’m betting he wasn’t supposed to say that.)

There’s one more reason our government prefers you to work for a large corporation rather than be self-employed: it keeps you off the streets.  Consider this quote from a report from on a recent tea party event in the Boston area:

“Most of the people at the Tea Party rally said they were either unemployed or self-employed, and so were able to come to Boston in the middle of the day on a Wednesday.”

Corporate employees who are punching the clock are a lot less likely to skip work for a march or protest.  And when everyone, left and right, is angry at the government, you don’t want them out on the streets.

Put it all together, and it’s no wonder our government would prefer to stem the tide of entrepreneurship.  Life would be so much easier for them if we all clocked in every day.

A Hundred Years Ago

(Photo source: TRiver .  National Progressive Convention, Chicago, August 6, 1912)

One hundred years ago, the United States was in the midst of the First Progressive Movement , focused on eliminating monopolies from business and corruption from politics.  It was led by Teddy Roosevelt, among others, and involving several political parties (including, at first, both Dems and GOP).  Roosevelt left the GOP to form the Progressive Party, nicknamed the Bull Moose Party, whose platform stated that its purpose was:

“To destroy this invisible Government, to dissolve the unholy alliance between corrupt business and corrupt politics is the first task of the statesmanship of the day.”

The idea that too big is bad stayed with us for over half a century.  Some of us remember the breakup of AT&T into “Baby Bells.”  These days, AT&T is as large as ever.  Says Wiki , “The current AT&T reconstitutes much of the former Bell System and includes eleven of the original Bell Operating Companies along with the original long distance division.”  And it’s the second-largest mobile phone company, too, and a major internet provider.

Standard Oil was broken up in 1911 into 32 separate companies.  Today, most of those oil-related companies have been consolidated into just five multi-national oil concerns.

In 1925, the 1911 Corrupt Practices Act was strengthened to require political committees to report all contributions of $100 or more.  It was rarely enforced, and was repealed as of 1972.

A hundred years after the great push for less corporate interference in government, it appears that we are headed in the opposite direction: four decades of corporate mergers, and both GOPs and Dems appear firmly ensconced in corporate pockets.  Corruption is alive and well at the highest levels of government.

Local Economy: Yes! and No

This week, someone called my attention to this article on local economies at Yes! magazine.  They note that corporations are trying to cash in on the local movement:

Hellmann’s, the mayonnaise brand owned by the processed-food giant Unilever, is test-driving a new “Eat Real, Eat Local” marketing campaign. Frito-Lay is using farmers to pitch its potato chips as local food. Barnes & Noble, the world’s top seller of books, has launched anew campaign under the tagline, “All book selling is local.” Winn-Dixie,one of the largest supermarket chains in the U.S., has a new slogan:”Local flavor since 1956.”

The article also offers some excellent links to additional resources.

Pushing Back

(Vanessa Pike-Russell photo .)

This is the third post in a series examining avenues available for creating change.

Where we buy our food can be a revolutionary act.  It can continue to support the Wall Street-based system of national chains, agribusiness, and investment banks.  Or it can instead support small farmers, cooperatives, and local businesses.  The choice is ours.  We have to eat– who will we give our money to?

To most fully support a revolutionary economy, we would need to look not only at where we get our food, but also what is in it.  Giant agribusinesses get billions of dollars in subsidies each year– our taxes at work.  With that money, they produce cheap corn and soy, which in turn produces high fructose corn syrup and hydrogenated oils.  Without debating the health merits of these ingredients, let’s observe that the more we eat of these industrially-produced food ingredients, the more we support the corporate system that created them.  By avoiding corn syrup and hydrogenated soy oil, we’re taking a bite out of the profits of some of the most influential corporations in Washington.

Let’s take another aspect: it’s lunch time and I’m in a rush.  Do I eat at McDonalds or KFC, or choose instead my local burrito shop?  For coffee,do I patronize nationwide Starbucks, or the locally-owned coffee shop that offers live music in the evenings?

As we review our lives, we will find that we are intertwined with national and multinational corporations– sometimes unnecessarily.  Sure, it’s pretty difficult to buy a car or an insurance policy through a local company (unless you live in Michigan or Connecticut, respectively).  But I found a local company to provide my internet service.  My bank is local– and it not only gives me free checking, it pays me 2.25% interest on my balance, and they know me by name when I walk in!

There are some products that I can’t buy from a local company, but I can buy them from a small company elsewhere.  Ebay, Paypal,  and the internet in general have opened up worlds of opportunity for small businesses.  I’ve bought stainless steel equipment from Wisconsin and Nebraska, cheese cultures from Wisconsin, Massachusetts, and Ontario, and cheese molds from the UK– all choosing small businesses over the national or international “big guys.”

Home Depot, Staples, and Verizon Wireless are probably here to stay– there aren’t very many alternatives.  But for much of what I buy, I can make the choice to support my local economy over Wall Street.

There’s another aspect of Wall Street that permeates our lives: investment.  Whether for our retirement savings or our nest egg, most of us turn to stocks or stock-based mutual funds.  (Remember the Bush proposal that would have put even our social security into Wall Street based investments?)  It’s no surprise, really: the companies we work for offer Wall Street stock-based investment vehicles in their 401(k) plans.  Advertising campaigns by Morgan Stanley, Charles Schwab, TD Ameritrade, and others accept as a given that stocks are the only place to invest our money for the long term.  We’ve been raised on a steady diet of the idea that what’s good for Wall Street is good for us.

I know people who invest only in Small Cap stocks, those small businesses that people are betting will turn into large businesses.  But why invest in Wall Street at all, when there are so many investment opportunities closer to home? To my mind, if a company is big enough to be traded on a public exchange, it’s probably too big for me to invest in,  I’ve pulled almost all my savings and retirement funds out of stocks and stock-based mutual funds,and put them instead into local investments.

Here are some of the investment vehicles that I’ve chosen, and some that my clients have used:

• Real estate investments (raw land)
• Rental real estate, alone or in partnership with others
• Loans to small businesses
• Creating a small business
• Loaning money secured by property
• Purchasing a mortgage from a private lender
• Collectibles

Whether you know it or not (and Wall Street hopes you don’t), you can even invest your IRA or Roth-IRA in these investments.  And by partnering with others, most of these can be accomplished with no bank loans.  Why put the bank first in line if there’s a problem?  A cash-only deal is another way to keep Wall Street out of our affairs.

Wall Street wants us to believe they are indispensable. But why do they spend so much money reinforcing that image, unless it’s open to question?  By voting with our wallets, we can dispel that image and put them back in their place.

Eat the Revolution

This is the second in a series of posts examining avenues available for creating change.

How do we vote with our dollars?  Let’s take an example: buying food.  Choosing a loaf of bread can be a revolutionary act.

Wal-Mart has the largest  grocery store in my nearest major town.  They sell tasteless meat and tasteless produce, and they sell it for less.  But I have other options for food: three of our local markets are owned by a Utah company called Associated Foods.  Smiths,another grocery store, is a former Utah company now headquartered in Idaho.  Either is a “closer to home” choice than Wally World– and both have better meat and produce.

But what about Luna Market , a small Mexican grocery owned by Alfredo Luna in St. George?  And the farmers markets, in season?

And what about Bountiful Baskets, a regional cooperative that provides fresh produce and bread each Saturday in several locations around town?

And farmers who sell produce and meat directly from their farms?  Last year, I bought 20 pounds of pecans from a farmer is Hurricane, a pig from Parowan, fruit from a local orchard, and vegetables from a nearby farm.

And of course, my own garden, limited as it is by our short growing season and my lack of time to tend it.

Your community may not have these specific options, but it surely has others. Culver City, California, where I used to live, has choices from Mitsuwa Market (Japanese, with excellent produce) to India Sweets and Spices (Indian vegetarian, with a great selection of rice and spices) to Sanchez Carniceria (a Mexican butcher shop) to Al Watan Halal Meat& Produce Market.  Not to mention farmer’s markets both locally and in nearby Westchester.

In order of preference, I get my food first from:

• My garden
• Local farmers
• Co-ops
• Locally-owned markets
• Markets owned in-state
• Regional companies

Personally, I’m willing to pay more for better quality food.  And if it hits Wal-Mart in the pocket, so much the better.  I don’t buy my food at Wal-Mart– ever.  What I can, I buy locally.  And from there, I choose the source closest to home.

Finding Justice in the Empire

(John Linwood photo .)

“[I]f your enemies are hungry, feed them; if they are thirsty, give them something to drink; for by doing this you will heap burning coals on their heads.” Do not be overcome by evil, but overcome evil with good. Let every person be subject to the governing authorities; for there is no authority except from God, and those authorities that exist have been instituted by God. Therefore whoever resists authority resists what God has appointed, and those who resist will incur judgment. –Romans 12:20 – 13:2

It was a time of turmoil.  The Republic had transformed into Empire.  Nationalism and militarism permeated the law.  The population polarized between those who supported Empire and those who sought a different path.  And in the midst of this, one of the most important cultural symbols was destroyed.

I’m not referring to 9-11, but to Judea in the first century AD.  Rome was a machine built on colonization and its armies.  Those who opposed it were destroyed.  In 70 AD, Roman armies sacked Jerusalem and destroyed the temple, the great symbol of Hebrew religion.

In this environment of polarization and hatred, a small but growing group found ways to live in peace and justice. They followed the words of a Teacher who told them to enter the Kingdom of God.  And they saw this Kingdom not as some distant promise, but as a commandment they ought to fulfill.

There was not a needy person among them, for as many as owned lands or houses sold them and brought the proceeds of what was sold. They laid it at the apostles’ feet, and it was distributed to each as any had need. –Acts 4:34-35

Naturally they were persecuted not only by the State, but by the religious conservatives.  They were threatened, jailed, and some were executed or murdered.  Threatened with prison if he did not cease his work, one leader told the authorities,

“We must obey God rather than any human authority.” –Acts 5:2

Another, as he was being stoned to death by religious conservatives, prayed,

“Lord, do not hold this sin against them.” –Acts 7:60

There is a seemingly paradoxical divergence between the teaching and the action:  “Be subject to authorities.”  “Obey God, not human authorities.”

There is a logical explanation.  The early followers of Jesus obeyed God as they understood Him– and accepted punishment from the authorities for doing so.  Peter was jailed and later crucified.  Stephen was stoned to death.  Early Christian men were committed to pacifism , and refused to join the Roman military– a crime for which the penalty was death.  Women committed to celibacy refused to marry– another crime for which the penalty was death.  Christians of both genders refused to recognize the Empire as the supreme authority– they believed God superseded nation– and the penalty for that was also death.  Yet despite the obvious risks, this group of outcast pacifists grew quickly, spreading across the Empire.

As we in our time confront a Republic turned Empire, controlled by moneyed interests and not the electorate– as we call for our elected leaders to bring change that never seems to arrive, perhaps we should reexamine the followers of one of the earliest practitioners of passive resistance.

We can create the society we believe should exist– right here, right now.  We can create a society within a society.  We do not need our leaders to do it for us.  There are risks.  But if we are not willing to risk for our beliefs, we probably do not believe very strongly.

Resistance Is NOT Futile

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(The|G| image.)

This is the first is a series of posts examining avenues available for creating change.

“I don’t live in a democracy. Corporations & lobbyists determine my future. I think I might be living in the Corporation of the United States. That’s a shock to me.” –From a recent discussion on Facebook.

In several discussions on blogs and Facebook recently, friends have bemoaned the corporatization of our government.  They have concluded what I came to believe some time ago: that our elected officials are too corrupt to change the course of our nation.

The despair my friends express is overwhelming– and, I believe, inappropriate.  That our elected representatives cannot or will not change does not suggest that change is beyond our reach.  Rather, it suggests what Mohandas (“Mahatma”) Gandhi said decades ago:

“We must be the change we wish to see in the world.”

Corporations control our government.  Our elected officials no longer represent us.  And both conservatives and liberals gnash their teeth (and blame each other).

“If voting changed anything, they’d make it illegal.” — Emma Goldman

The ballot box does not appear to be the answer.  Dollars speak louder than voters.  So let’s vote with our dollars.

Some time back, I posted an article by Sharif Abdullah noting that Wall Street wants us to believe it is the most important market in our economy, when in fact it is the least important market.  In the same way, we have come to believe we can’t survive without it, when in fact there’s very little it provides that we can’t get elsewhere.

Let us get what we need elsewhere.

Corporations have so much clout because they can buy it– with money we give them every day.  But by making different choices, we can limit that clout, and over time bring both money and power back into our communities.

Of course, they’ll fight it.  The resurgence of locally-produced food has spawned legislative counterattacks, including NAIS and the now-pending Food Safety & Modernization Act.    But that doesn’t mean we can’t win– rather, it means the corporations are afraid we can.

Senate Bill Aims to Cripple Small Farmers

(Dieselboi photo .)

In yet another power grab for corporations , the Senate will vote this week on the Food Safety Modernization Act , a bill that imposes traceability requirements, HAACP analysis procedures regulated and inspected by the Fed, RFID chips, and expensive registration fees on all farmers– including small family farms like mine.

The bill, supported by agribusiness giants and pesticide/GMO producers like Monsanto, also gives power to regulate the organic foods program to the FDA deputy commissioner for foods.  Are you surprised to learn that Michael Taylor, the man currently occupying this position, was formerly an attorney for Monsanto?

Here’s one excerpt from the bill:

“Not later than 1 year after the date of enactment of the FDA FoodSafety Modernization Act, the Secretary, in coordination with theSecretary of Agriculture and representatives of State departments ofagriculture (including with regard to the national organic program established under the Organic Foods Production Act of 1990 (7U.S.C. 6501 et seq.)), shall publish a notice of proposed rulemaking to establish science-based minimum standards for the safe production and harvesting of those types of fruits and vegetables that are raw agricultural commodities for which the Secretary has determined that such standards minimize the risk of serious adverse health consequences or death... [The standards shall] include, with respect to growing, harvesting, sorting, packing, and storage operations, minimum standards related to soil amendments,hygiene, packaging, temperature controls, animal encroachment, and water;” –Sec. 419(a)

“Science-based minimum standards,” whatever that means.  It’s not defined in the bill.  Any bets on whether they’ll want to force the analysis of cow manure before it’s added to the fields?  (While Monsanto’;s fossil-fuel-based fertilizer is pre-analyzed and approved!)

There are no exemptions for small farms, organic operations, or religious concerns.  This is, quite simply, an attempt to force the standards and practices of factory food production on small farms.

Seriously, how many recent food contamination issues originated in small farms or organic farms?  Of 17 recalls currently listed on the FDA’s website, one relates to an imported product marketed by Whole Foods, and one relates to a salad company in Brooklyn, NY.  The rest are large food processors and retailers, including such well-known brands as Kroger, McCormick, Starkist, and Zatarain.  Not one relates to a small, family farm.

If you enjoy your farmers market, if family farms make a contribution to your local economy and table. please contact your Senator and ask him or her to oppose the Food Safety Modernization Act– or at least to offer exemptions for small farms.