Is President Obama's 2011 Budget Good for Business?
Sifting through the jumbled mess that is President Obama’s budget is a task that no man, woman or even automaton should endure. It’s approximately 150 pages long, jumbled with political speak and features more graphs than a geometry book.
However, its importance cannot be denied. The 44th President’s policies are rooted within this budget. For most in the business world, this budget could represent a turning point in the economy – for better or worse. Obama says this budget focuses on creating jobs, providing small business assistance and will give American business leaders a reason to smile. However, is it that easy?
Is this $3.8 trillion budget business friendly? The answer definitely depends on who you ask.
Good for Small
In the eyes of many small business owners, this budget represents a positive step towards an economic turnaround, at least in the short term. One of the reasons is because Obama’s 2011 budget’s main focus is on job creation. Of the $3.8 trillion budget, the Obama administration dedicated $100 billion to this very cause. This $100 billion is divided into tax cuts and investments into infrastructure for small businesses.
The budget proposal also includes a $30 million redirect of funds from the Troubled Asset Relief Program (TARP) to small community banks, who in turn would lend them out to small businesses. The response from the Independent Community Bankers of America (ICBA) on this action was generally positive.
“Our nation’s nearly 8,000 Main Street community banks continue to lend to the local small businesses that fuel job creation and economic stability within their communities, and we look forward to learning more about President Obama’s proposals and Congress’s plans for small-business tax relief and TARP-funded initiatives with less onerous restrictions,” the ICBA said in a statement.
The TARP proposal is not the only small business friendly measure in this budget. Also included are a number of proposals to ease small businesses’ access to credit, such as $28 billion in loan guarantees. It also includes $14 billion in competitive technical assistance grants like the Emerging Leaders initiative. Grants like this one provide promising small businesses in troubled economic areas with connections to regional business networks.
Bad for Big
On the surface it seems much of this budget and President Obama’s policies are aimed towards pleasing the small business owners. However, what about large multinationals? For many of these companies, the budget is not as affable.
For example, included in the budget are several fees on the financial industry including a $9 billion fee on banks and insurance firms that benefited from the federal bailouts. Taxing these banks could reduce the number of loans they distribute to big business.
Obama’s budget ends certain tax breaks for the oil and gas industry. By ending these breaks and increasing taxes on the oil and gas industry, the budget would shed $38.9 billion over 10 years. However, many argue that in response to the increase in taxes, energy companies will raise customer rates. If so, this would increase the cost of doing business for many companies.
Large multinationals may have gotten the worse of this budget. Embedded within is a $400 billion tax hike for large multinational firms over the next 10 years. For these multinationals, the budget will increase the difficulty to claim credit for taxes paid overseas. By doing this, many of these multinationals would face double taxation.
The measure, which actually was a part of the 2010 budget, has been implemented to prevent these multinationals from creating jobs overseas rather than domestically. However, the CEOs of these multinationals say this will make the U.S. less competitive against international competitors and would hurt domestic job growth.
“President Obama’s proposed budget undermines the goals he stated in (the) State of the Union Address. Raising taxes on workers and businesses would impede U.S. competitiveness, making it virtually impossible to meet his target of doubling exports. As CEOs leading the economy back to a path of growth, our members are concerned that President Obama’s proposed international tax increases on U.S. companies will impede economic growth and make it harder to create jobs and lower America’s double-digit unemployment rate,” stated John J. Castellani, President of Business Roundtable, an organization representing the CEOs of large U.S. based multinationals.
The above summary is just the tip of the iceberg. With all of its complexities, the 2011 budget is not the easiest document to comprehend. However despite this being the case, it seems to have a fairly straight foreword message.
For small businesses, this budget is a big help. It focuses on growth, development and job creation. For multinationals, the budget is more difficult to take as it represents increases in taxation. In life you can’t please everyone and this budget is certainly proof of that.