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With Temporary Deal in Place, Owners Question Republican Commitment to Business

An agreement that reopened the government and increased the debt limit was nothing to celebrate for angry business owners.

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The U.S government reopened today following a 16-day shutdown that imperiled the economy and flirted with a dangerous default.

An 11th-hour deal on the budget and debt ceiling emerged from the U.S. Senate Wednesday and was passed by the House 285 to 144, less than two hours before the government would have run out of money to pay its debts. It ended a bitterly-disputed government shutdown and rescued the nation from defaulting on its $16.7 trillion in debt.

But the agreement offers only a short-term fix, funding the government until January and extending the borrowing limit until mid-February.

In the end, Republicans cratered, winning only the most minor concessions to their demands that the government stay closed until they gutted President Obama's Affordable Care Act, which Congress passed into law in 2010, and which survived a Supreme Court challenge in 2012. Democrats agreed to more stringent income verification for the exchanges, and they let Republican budget cuts from 2011 stay in place.

For many entrepreneurs the bipartisan deal was too little too late--and only postpones further decision-making about the budget and debt ceiling. Small-business owners are angry about what they say are irresponsible politicians willing to risk a fragile economic recovery to advance an extreme agenda. And some wonder if the Republican party still represents their interests.

"The GOP is more in the business of marketing itself as pro-business than being pro-business," says Greg Roper, chief executive of Integrity Funding, a financial services company based in Sarasota, Florida.

Still, Only a Short-Term Fix 



To small business owners, the federal government appears leaderless and rudderless, torn by ridiculous infighting that has caused the nation to walk to the edge of a dangerous financial precipice twice in the last two years.



"I think it is unconscionable," says Robert Berman, chief executive and founder of Cinium Financial Services in Rock Hill, New York, which offers financial and back-office services to small building contractors. "Children play 'kick the can down the road.' I guess [the current deal] is OK if you're a kid."



Berman describes himself as a conservative independent who blames both parties for government dysfunction. He says his clients, primarily small contractors, give him a good window into small business concerns.

Several years after the end of the recession, Berman says, his clients are disappointed that things have not really gotten better for them, and they blame the government.

"People lose confidence, and they stop thinking and planning too far out into the future with all this uncertainty," Berman says. "Businesses don't spend money, and the local government does not do infrastructure projects, and it hurts the overall economy because everyone freezes."



Berman, whose company is No. 50 on the Inc. 500 list this year, has 40 employees, and $6 million in annual revenue, says he thinks members of Congress should be penalized by forfeiting their pay for the days they have left the government shuttered, while 800,000 government workers have been furloughed, and countless businesses involved in government contract work have seen their revenue dry up.

Irresponsibly Raising the Debt Limit



Similarly, Roper, and a self-described political independent, says he's irritated by the brinksmanship and political game-playing.

"Both parties are to blame, and neither one has the country's best interests at heart, or the best interests of their constituents, and I think they are playing a dangerous game of chicken with a remote control, while the rest of us are sitting on the bus," Roper says.



Integrity Funding is No. 20 on the Inc. 500 list this year, with 15 employees and $11 million in annual revenue for 2012. Roper says the continuous increases of the debt limit are particularly irresponsible.



"If some person did this with a Visa card, where would they stop?" Roper asks. "They would not stop because there is no real downside, and the same thing goes to extending the debt ceiling, the whole idea is a mirage, and it does not stop us from spending."



Long-term Economic, Reputational Repercussions Even With a Deal



The independent Bipartisan Policy Center say severe damage has already been done by skirmishes over the debt ceiling. The center reports a similar debt confrontation from 2011 cost taxpayers $1.3 billion, and will cost taxpayers nearly $19 billion in increased borrowing costs over the next 10 years. The U.S. will face equivalent or greater costs from the current squabble, as the level of debt has increased 17 percent in the past two years, the center says.



By refusing to raise the debt limit for so long, Tea Party conservatives also presented a cavalier attitude toward potentially setting off a global economic crisis through a default, shocking even the most seasoned and politically-savvy economists, and rattling business owners.

"They don't understand the most elementary elements of business or economics," Robert Shapiro, an undersecretary of commerce for former President Bill Clinton, and co-founder and chairman of financial consultancy Sonecon, in Washington, D.C., says.



"You don't negotiate under a threat of destabilizing the economy and the global economy, particularly with this small minority," Shapiro says.

A default on U.S. debt would have likely triggered a rise in interest rates in the U.S., which would make the cost of U.S. debt more expensive to service, but also would have a negative impact on U.S. entrepreneurs, who would find interest rates rising on all forms of financing, including bank loans and credit cards.



Many experts say a default would have also likely caused a stock market collapse, and could have spurred a global economic panic equivalent to the financial meltdown in 2008. (With the news of yesterday's Senate deal, U.S. markets jumped Wednesday, with the Dow rising 205 points to 15,373 and the S&P 500 adding 23 points to 1721. Markets were mixed Thursday at mid-day.)



The Most Specious Tea Party Argument



In recent weeks, Tea Party conservatives often resorted to sophistry and distorted the conversation on the debt ceiling. Among their more specious arguments: That the government's daily tax receipts are enough to service the national debt, and that a shut down of the government would actually save money.



Financial experts said it is impossible to extricate daily revenue for singular goals like servicing debt, partly because the U.S Department of Treasury processes 80 million separate receipts each month. Experts also scoffed at the idea that a shutdown would pay for the debt, in part because Republicans had already voted to give furloughed workers back-pay. There are also extensive costs in getting programs and services operating once more, they say.

Criticism of Both Parties

"I don't think anyone is happy with this deal or how it was reached, and I am upset with all politicians at this point," Joni Green, founder and chief executive of Five Stones Research in Brownsboro, Alabama, says.



Green, whose company is No. 421 on the Inc. 500 list this year, has 51 employees and revenue of more than $5 million in 2012. Fives Stones Research does government contracting work, and it would have run out of money to pay employees starting this coming Monday.


"Every one of them has forgotten who they work for, regardless of party."

IMAGE: doug.kukurudza/Flickr
Last updated: Oct 17, 2013

JEREMY QUITTNER is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.
@JeremyQuittner




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