Be Prepared Before Disaster Strikes

Homeowners, Renters and Businesses are Encouraged to Plan

The U.S. Small Business Administration (SBA) reminds us that September is National Preparedness Month. Recent floods in the Midwest and hurricanes/tropical storms in Texas and Florida Coast have cost homeowners, renters and businesses millions of dollars in damages. Of course,a hurricane is scheduled to hit the gulf coast soon and there are additional storms brewing in the Atlantic.

These events serve as reminders to the public to have a disaster preparedness plan in place.

To prepare for disasters, SBA offers the following tips:

• Develop a solid emergency response plan. Find evacuation routes from the home or business and establish meeting places. Make sure everyone understands the plan beforehand. Keep emergency phone numbers handy. Business owners should designate a contact person to communicate with other employees, customers and vendors. Individuals and business owners should ask an out-of-state friend, colleague or family member to be a “post-disaster” point of contact, supporting the flow of information about short-term relocations, recovery, additional sources of assistance, etc.

• Make sure you have adequate insurance coverage. Disaster preparedness begins with having adequate insurance coverage – at least enough to rebuild your home or business. Homeowners and business owners should review their policies to see what is or isn’t covered. Businesses should consider “business interruption insurance,” which helps cover operating costs during the post-disaster shutdown period. Flood insurance is essential. To find out more about the National Flood Insurance Program, visit the Web site at www.floodsmart.gov.

• Copy important records. It’s a good idea to back up vital records and information saved on computer hard drives, and store that information at a distant offsite location. Computer data should be backed up routinely. Copies of important documents and CDs should be stored in fire-proof safe deposit boxes.

• Create a “Disaster Survival Kit.” The kit should include a flashlight, a portable radio, extra batteries, a first-aid kit, non-perishable packaged and canned food, bottled water, a basic tool kit, plastic bags, cash, and a digital camera to take pictures of the property damage after the storm.

More preparedness tips for businesses, homeowners and renters are available on the SBA’s Web site at: www.sba.gov/services/disasterassistance/disasterpreparedness/index.html.

The Institute for Business and Home Safety (www.ibhs.org ) also has information on protecting your home or business. To learn more about developing an emergency plan, visit the DHS’s Ready Campaign Web site at www.ready.gov or call 1-800-BE-READY to receive free materials.

The SBA makes low-interest loans to homeowners, renters and non-farm businesses of all sizes. Homeowners may borrow up to $200,000 to repair or replace damaged real estate. Individuals may borrow up to $40,000 to cover losses to personal property.
Non-farm businesses and non-profit organizations of any size may apply for up to $2 million to repair or replace disaster damaged business assets and real property.

Small businesses that suffered economic losses as a direct result of the declared disaster may apply for a working capital loan up to $2 million, even if the property was not physically damaged.

To learn more about the SBA’s disaster assistance program, visit the Web site at http://www.sba.gov/services/disasterassistance/index.html.

Karen Kerrigan
President & CEO

Palin: A Small Business Owner

Republican presidential candidate John McCain has picked Alaska Governor Sarah Palin as his VP running mate. Obviously, most have focused on the fact that a conservative woman will be in the GOP ticket.

But it’s also worth noting that she also has a background as a small business owner. According to the 2008 edition of “The Almanac of American Politics,” Palin was the owner of a snow machine, watercraft and all-terrain vehicle business, and co-owns with her husband a commercial fishing business. A small business owner on a major party ticket – how refreshing!

Palin also cut property taxes as mayor of Wasilla. Oh yes, and she also was a television sports reporter, competed in the Miss Alaska contest, and reportedly, is a hunter, a former basketball player, and a hockey mom. Very cool.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

A Most Worthy Pledge by California Lawmakers

Many politicians don’t like to take clear stands. So, when a large group does just that, it’s well worth noting. And when that pledge is a positive one for the economy and taxpayers – including small businesses – it warrants appreciation and praise.

That is the case with every Republican state lawmaker – except one – in the state of California.

Consider the following from an August 28 article in the Sacramento Bee:

Don't read their lips when California's Republican lawmakers say 'no new taxes' – they've put it in writing, signed their names, essentially inviting their own party to oust them if they renege.
Every GOP lawmaker except Fair Oaks Assemblyman Roger Niello has signed the "Taxpayer Protection Pledge" this year, casting a shadow on budget talks by making any vote to raise taxes a potential career killer.

"If you break the pledge, the people who voted for you will say, 'Excuse me, not only did you raise my taxes but you lied to me,' " said Grover Norquist, president of Americans for Tax Reform, in Washington, D.C., which conducts the pledge drive nationwide.

The tax pledge, whose signers are publicized on the group's Web site, is a written promise to voters that "I will oppose and vote against any and all efforts to increase taxes."

Too bad Republican Governor Arnold Schwarzenegger hasn’t made the same pledge. As reported by the Sacrament Bee: “Republican Gov. Arnold Schwarzenegger, who has not signed the tax pledge, rocked GOP ranks this month by proposing a 1-cent sales tax increase for three years, which then would drop permanently to a quarter-cent below the current rate. Norquist said the proposal, touted by supporters as a long-term cut, would violate the anti-tax pledge because its goal is to create an immediate increase of $4 billion in state revenues. ‘Nobody believes for 30 seconds that the tax cut really happens,’ he said.”

Norquist, of course, is absolutely correct.

When states fall into budget messes, the source of the problem must be identified in order to find the proper remedy. In California, it’s long been about too much spending. It has nothing to do with too little revenue. Raising taxes will only make California’s already hostile tax and regulatory climate only worse. At one time, Governor Schwarzenegger seemed to understand this fiscal fact.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Pro-Offshore Drilling in Santa Barbara

Many argue that the 1969 oil spill off the coast of Santa Barbara, California, gave rise to the modern-day environmental movement. That spill certainly was the genesis of the current ban on energy development covering large U.S. offshore areas, as well as on many federal lands, such as ANWR.

But that spill happened four decades ago, and the oil industry obviously has changed dramatically in terms of the technology used to drill for oil. Quite simply, it’s safer and more efficient. This reality may be starting to seep into the energy debate.

Indeed, consider what happened on Tuesday, August 26, in Santa Barbara, California, as reported by the Los Angeles Times:

A divided Santa Barbara County Board of Supervisors voted Tuesday in support of offshore drilling, after an impassioned daylong hearing in which this year's record gas prices trumped the memory of a disastrous oil spill.

By a 3-2 vote that broke along geographic lines, supervisors agreed to send a letter to Gov. Arnold Schwarzenegger urging him to change state policy and "allow expanded oil exploration and extraction" off the county's coast…

"Unless you arrived here on a horse or walked or rode a bicycle, you are part of the oil industry," said Supervisor Joni Gray before voting in favor of the measure. "All we're doing is asking the state to reexamine their stand on abandoning any kind of offshore drilling."

If that can happen in Santa Barbara, perhaps Congress can wake up to the economic and technological realities of energy in the 21st century.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Where Do the Candidates Stand on Small Business Issues?

The Small Business & Entrepreneurship Council (SBE Council) has waded through the plans and positions of presidential candidates Republican John McCain and Democrat Barack Obama to develop a comparative listing of where they stand on key small business issues. The document can be found on the SBE Council website on the news page: http://www.sbecouncil.org/news/display.cfm?ID=2840

SBE Council has read through the plans of the two candidates on their campaign websites, and has followed campaign announcements. The grid is an easy to read “bulleted” format that lists the candidates’ positions.

Of course, we look forward to updating the key issue grid on a regular basis, and welcome input and information from the campaigns and the general public. We hope to be adding new information soon on telecommunications policy and government spending and reform. In addition, SBE Council will closely monitor issues and specific position that may emerge from the party conventions and on the campaign trail.

Issues covered include: taxes, health care, global market access/trade, workplace regulation and reform, energy and the environment, immigration, fiscal policy and reforms, government programs and other initiatives.

Karen Kerrigan
President & CEO

Forward-Looking Energy Markets

Markets are forward looking. That is, expectations about the future affect market prices, profits and investments.

Politicians who oppose opening up offshore areas and federal lands now off limits to energy exploration forget this simple fact of economic life. They assume that oil prices, for example, will not be affected until oil from these areas actually hits the market. They, of course, are incorrect.

That point is made by Don M. Chance, a professor of finance at Louisiana State University, in an August 26 op-ed in Investor’s Business Daily. The entire article warrants reading. But we’ll highlight the following here:

Certainly increased drilling will not bring an immediate increase in the supply of oil. But many people, even so-called experts, believe that the effect on the pump price would not be felt until the oil is actually at the pump, possibly years later.

In fact, the price will fall well before the first hole is drilled. Even the possibility of increased drilling will bring down the price of oil. It already has.

Almost everyone knows that supply and demand determine price in a market. But that knowledge seldom goes beyond understanding how supply and demand themselves are determined.

The belief that the current quantities demanded and supplied are the sole determinants of price misses an important point. Both current and expected future demand and supply interact to determine the quantity demanded and supplied in the current marketplace…

If intentions are not backed by actual drilling, prices will rise. The market will tolerate a period of discussion, but if the drilling naysayers win the debate, prices will head up and sharply. The rise and fall of oil prices are likely to mirror this debate.

Speaker Nancy Pelosi is arguably the most powerful woman in America. But if she wants to see her real power, she should bring the drilling issue to a vote. Only a Fed chairman could have so much impact on market prices.

Excellent points that are too often forgotten in the current energy debate.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Energy, Markets and Technology

Don’t you just love the free market and technology? I do, including when it comes to energy.

Just like in other markets, higher prices and profits drive innovation and expanded production in the energy marketplace.

Making this point crystal clear is a front-page story in today’s (August 25) New York Times titled “Drilling Boom Revives Hopes for Natural Gas” by Clifford Krauss. Consider a few key points from the article:

• American natural gas production is rising at a clip not seen in half a century, pushing down prices of the fuel and reversing conventional wisdom that domestic gas fields were in irreversible decline. The new drilling boom uses advanced technology to release gas trapped in huge shale beds found throughout North America — gas long believed to be out of reach.

• Competition among companies for rights to the new gas has set off a frenzy of leasing and drilling.

• Domestic gas production was up 8.8 percent in the first five months of this year compared with the period a year earlier, a rate of increase last seen in 1959, during the great drilling boom that followed World War II.

• Testing to determine the productivity of fields has been completed on just a tiny fraction of the potential acreage. According to a new report by Navigant Consulting, paid for by a foundation allied with the gas industry, there could be as much as 842 trillion cubic feet of retrievable gas in shales around the country, enough to supply about 40 years’ worth of natural gas, at today’s consumption rate. But thousands of wells need to be drilled before the exact reserves will be known.

• “Shale is the most significant domestic natural gas find in 50 years,” said Chris Ruppel, an analyst at the institutional brokerage firm Execution, “which means the United States will become gas independent, and more industrially competitive versus Europe for gas-intensive industries such as chemicals, fertilizer, smelting iron and aluminum.”

• Domestic gas production was in decline from the early 1990s to 2005, before production from shale beds and some lesser unconventional fields led to increases beginning in 2006. In the meantime, consumption increased by more than 15 percent, satisfied largely by rising imports.

What should government do? The answer is clear: Get out of the way. That is, provide tax and regulatory relief, and let the market work.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council