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Tuesday, January 25, 2011

President Obama's State of the Union Speech and Small Business

Beltway pundits and observers say that President Barack Obama will strike a conciliatory tone in his State of the Union (SOTU) speech tonight. There will be a call for unity, and an emphasis on the economy and creating jobs.

"Competitiveness" will be the President's new buzz word, but how will he propose to improve U.S. competitiveness? Will he call on Congress to spend more - on education, alternative energy and other programs? Or, will he focus on the heavy weight of taxes, regulations and the nation's debt that are dragging the economy and U.S. businesses down?

In a recent special focusing on SOTU and what the President should outline in his speech to the nation, I suggested he fully embrace and advance pro-business policies as this is the only path to robust economic growth and job creation: "Obama must acknowledge that the U.S. operates in a highly competitive global environment. We are falling further behind, with no thanks to the regulatory and anti-business legislative frenzy of the past year and a half. This must come to an end. Thankfully, America still has the most innovative and productive people in the world. The administration must harness this potential -- not punish people for being, or wanting to become, successful."

In SBE Council's view, improving U.S. business competitiveness means President Obama must address the following items:

Tax Reform and Certainty: A shifting tax code with the potential for tax increases in 2012 does not instill full confidence in investors and the private sector. A commitment by President Obama to address this tax mess and lock in a pro-growth, globally competitive tax system is critical to entrepreneurs and their innovative and job creating capacity. A pro-growth tax system will strengthen U.S. competitiveness and put our economy on sound footing for sustained growth.

Burdensome Regulation: President Obama outlined a new regulatory strategy last week. If he is genuine in his desire to reduce regulatory costs and uncertainty, the White House needs to rein in the regulators. Presidential memorandums, executive orders and edicts are all fine and good, but unless President Obama intervenes in a variety of damaging rulemakings currently underway at EPA and Labor (for example) businesses and our economy will get hit with significant costs and U.S. competitiveness will be damaged for the long term. Other examples include: The tidal wave of regulations that will come with implemention of the new financial overhaul law, which have the potential to dramatically impact the availability and cost of credit. The FCC continues to insist on regulating broadband and the Internet even though they have not sufficiently presented any evidence of market failure. The Department of Education is hastily imposing restrictions on career colleges that will jeopardize job opportunities for young people, while harming the availability of skilled workers needed by U.S. employers. No doubt, President Obama will highlight his "business-friendly" regulatory initiative in the SOTU speech, but following through will be what counts for business and our economy.

Energy: Is President Obama going to allow our energy industry to actually produce energy? The regulators have gone wild, and they keep toying with America's energy producers. Whether its coal, oil or natural gas, federal regulators keep changing the rules of the game. Pending regulatory action is a major barrier to investment and development. In the meantime, jobs are being destroyed (or not being created) and energy prices keep moving higher. Higher gas and energy prices will undermine economic recovery.

Changes to the health care bill: President Obama must acknowledge that many parts of his health care law are flawed, burdensome and must be changed. If this was not the case, then why are so many corporations and labor unions requesting (and being granted) waivers from key regulatory provisions? Beyond repeal of expanded 1099 reporting, the President needs to revisit the regulations that will not allow us to keep the health coverage we currently have (as promised), ones that are driving health coverage costs higher and destroying competitive and affordable choices in the marketplace (like HSAs and mini-medical plans), and the mandates that will hoist more costs on businesses and individuals (the employer and individual mandate.) The new health care law is a jobs destroyer. His plans and hopes to fix the economy will go nowhere unless he supports overhaul of the recently enacted health care law.

We expect that references to entrepreneurs, small businesses, innovation and competitiveness will get a fair amount of airtime in tonight's state-of-the-union speech. But will the substance of President Obama's speech align with small business needs and boost confidence enough to spur investment and job creation?

Karen Kerrigan, President & CEO

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