The congressional spending bill battle had a message for Main Street
A majority of small business owners on Main Street say they support more financial relief from the federal government, but the resolution of the battle in Congress last week over the spending bill for the federal government shows that it may not be coming.
This shouldn’t be a surprise. With fiscal hawks reluctant to provide more funds related to the pandemic even before Russia’s invasion of Ukraine became a key spending issue on Capitol Hill, odds have been long that Congress is going to provide another significant round of financial support for small business owners.
That’s even though the need is clearly there. Two-thirds of small business owners support more financial relief from the federal government, according to the latest CNBC|SurveyMonkey Small Business Survey for Q1 2022, as inflation continues to hit Main Street hard.
“Following action on the spending bill, the legislative docket will be crammed with other things that leave little room for small business priorities. And given Putin’s aggression and what he does next to savage Ukraine and threaten Europe, the attention of Congress and the White House may move increasingly to international matters and away from domestic legislative plans or wish lists,” said Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council.
In addition, there are a lot of complex domestic issues left to tackle in this legislative session, from prescription drug pricing to a version of President Biden’s Build Back Better plan that can receive the support of West Virginia Senator Joe Manchin, as well as a Supreme Court nomination in the Senate, all of which will “eat up legislative days,” Kerrigan said.
The specific measures for small business where hopes have been highest are the Restaurant Revitalization Fund and Employee Retention Credit. Hopes are not dead, but made more difficult by having to proceed on a stand-alone basis in Covid legislation.
The National Federation of Independent Business says while small businesses were left out of the spending bill, NFIB will continue to push for restoration of the Employee Retention Credit in the Covid-19 supplemental bill that is expected to be considered soon. NFIB is concerned about the omission of policy for Main Street given the headwinds small businesses are facing, including rising inflation, increasing energy costs, supply chain disruptions, and workforce shortages.
“Small businesses do not expect these problems to subside any time soon as expectations for future business conditions continue to decline, ” said Kevin Kuhlman, NFIB’s head of federal government relations.
The Employee Retention Credit, which was cancelled earlier that it was supposed to be in Q4 2021, has an estimated $8 billion in tax credits small business owners still might be able to claim. And NFIB thinks it has a better chance of receiving support than the much larger Restaurant Revitalization Fund, which is far larger (nearly $50 billion) and because it is targeted to one industry, makes it potentially harder to gain the broadest support.
There are some positives to be considered in the just-passed federal budget. For starters, Congress was able to pass the bill after operating on continuing resolutions and the risk that continued into fiscal 2023, and the spending levels are higher than they were under the Trump administration across many agencies.
“From the vantage point of the greater good, we are in a better place. We are increasing the level of spending while still coming out of a pandemic and while we need social investment,” said Didier Trinh, director of policy and political impact at the progressive Main Street Alliance.
And what became a major sticking point in the debate on Capitol Hill — the clawing back of American Rescue Plan funds from states to make the budget work, a battle the states ended up winning when that method of paying for the bill was scrapped — does include an upside for small businesses. That’s because the American Rescue Plan provided a lot of flexibility to states to determine how to allocate financial resources and many did use the funds to support small businesses, Trinh said.
“Extracting that funding back to use as an offset for this bill was a mistake, and the states had every right to be frustrated,” he said. “We want to protect the funding that was promised so that states can still use it to help small businesses,” he added.
The Main Street Alliance favors the state grantmaking approach over programs like the controversial Paycheck Protection Program, which even though it offered loans that were forgivable has yet to grant many loans that status. “Grants are much more efficient and provide relief more quickly. States know how to administer grant programs at the local level,” Trinh said.
There is no guarantee how that plays out at the state level, but he said the state programs are a good place for small businesses to focus if they need more support rather than relying on the federal government moving new legislation.
It was not encouraging that in the White House’s own push for more Covid spending in the broad federal budget bill, the focus was on the public health measures and not more business relief. Even as small business experts continue to worry about the state of health in the restaurant industry, the White House request did not include targeted support.
This doesn’t mean ideas like the RRF are dead, but Main Street needs to be realistic about the chances. As the Covid measures move to a stand-alone bill to be debated starting this week, Trinh said the Main Street Alliance still feels very strongly that there should be more financial relief for restaurants because the original RRF only met one-third of demand, though he noted it is a much higher price tag than the ERC, which was repealed prematurely, is a relatively simply fix, and less costly.
In the end, any stand-alone Covid bill will have to find its way to be attached to a broader legislative agenda and “there are fewer trains leaving the station and that does make it trickier, and a little dimmer, but there is time,” Kuhlman said.
The spending bill was “must pass” legislation, which meant it was the best chance for any additional Covid relief. And in the Senate it is difficult to assess how a stand-alone Covid measure including small business relief will fare given the fiscal hawks continually objecting to additional spending related on the pandemic.
There are many Republicans who understand that restaurants are still in need of help, and these measures have bipartisan support on their own merits, but Trinh said the Senate will continue to pose problems for passing stand-alone legislation with more funds for either the Employee Retention Credit or Restaurant Revitalization Fund. “Cutting off the ERC one quarter early was a mistake,” he said. “The belief in that is not partisan, but the question is how do we get political momentum for including it as part of a package.”
“There was never really traction inside the White House for new relief (via RRF or PPP) or ERC extension,” Kerrigan said. “The Administration is touting what they are currently implementing and doing to help small businesses to recover and compete: education and training support through SBA and other agencies, federal procurement initiatives, and other programs, rather than additional Covid relief.”
The underlying message from Main Street back to Capitol Hill is that the costs of owning a small business are going up and so is the challenge of maintaining some level of profitability. “Nothing is getting cheaper,” Trinh said.
More small business owners tell the CNBC|SurveyMonkey Small Business Survey they are passing on cost increases to customers or will soon do so if inflation remains high. The survey found most on Main Street do believe inflation will be persistent, and last Friday, Treasury Secretary Janet Yellen said that is her current view, too.
“It is not getting any easier in terms of the economic outlook, which is why we feel another infusion of support from the federal government could buy small business more time. Especially as Yellen says the level of inflation will remain high through the rest of year,” Trinh said.
Gaining the attention of the White House and lawmakers, though, amid the Russia-Ukraine conflict, and in the lead-up to midterm elections, won’t be easy. Only a few key small business measures, if they could find bipartisan support, could go a long way in helping Main Street on many core business and economic challenges, but the just-passed spending legislation didn’t indicate that the federal government is inclined to think about the economic issues in this local way.
“The bottom line is that Democrats and Republicans are far apart on addressing issues like inflation and high gas prices, healing the labor market, and how to fix supply chains,” Kerrigan said.
There are many back-at-home issues that lawmakers on Capitol Hill are focusing on, but not the ones that give the small business community much confidence that more support for Main Street is coming.
“Where there does seem to be some inkling of consensus is on the revival of earmarks. There are more than 4,000 in this spending bill devoted to the ‘pet projects’ of members. Just in time for an election year,” Kerrigan said.