He didn't mention “Joe the Plumber!”
“Joe the Plumber,” whose actual name is Samuel Joseph Wurzelbacher, gained attention during the presidential campaign after asking Democratic candidate Barack Obama about his small business tax policy during a campaign stop in Ohio. Although John McCain made the story of "Joe the Plumber" a constant and not always accurate metaphor for middle-class Americans and small business tax policy, the question of how exactly Obama would craft his tax policies remained throughout the campaign and into the first year of his administration.
He answered that question last night.
Since the end of the Second World War, the unparalleled expansion of the United States economy has, in part, been fueled by small business. In today's economy, small business are vital. According to the Small Business Administration, small businesses employ just over half of all private sector employees and pay approximately 44% of the total payroll in the U.S. Small businesses have generated 64 percent of net new jobs over the past 15 years! They generate billions of dollars of sales in just the U.S. economy alone. Historically, one of the many reasons for the success of small business in the U.S. is the relatively easy availability of credit. Over the past two years, the financial crisis in the United States and worldwide, fueled by uncertainty over the housing market and the scale of the “toxic asset” problem faced by banks and other lenders, has caused the formerly easy availability of credit to dry up. As a result businesses in general and small businesses especially have struggled, many closing their doors forever or laying off critical employees.
Among the many things that Obama proposed last night during his first official State of the Union address to Congress, is to stimulate the American economy and combat the ten percent unemployment rate by working to help those entrepreneurs who start small businesses and to assist existing small business to more easily raise capital, hire new employees and invest in the future. Specifically, President Obama proposed:
To take up to “ .. $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat.”
“A new small business tax credit – one that will go to over one million small businesses who hire new workers or raise wages.”
To “ … eliminate all capital gains taxes on small business investment; and provide a tax incentive for all businesses, large and small, to invest in new plants and equipment.”
Obama also praised the unyielding spirit of the American people who, in the midst of the most difficult recession since the 1930s, remain “ … busy … starting businesses … going back to school … and helping their neighbors.” He spoke of their “stubborn resilience in the face of adversity,” which has long been a trait of the American character. He asserted that “ … it’s time the American people get a government that matches their decency; that embodies their strength.”
He was right.
The fact is, a new study by the Ewing Marion Kauffman Foundation and reported by the Wall Street Journal shows that the number of newly created start-ups remains steady throughout an economic cycle, and is not affected significantly by recessions (or economic booms as well). The study analyzed data from the U.S. Census Bureau, which tracked the annual number of new businesses from 1977 to 2005. Over the almost-three decades examined, business creation remained consistent, fluctuating by only 3 - 6% each year. It appears from the data examined that recessions and expansions do not greatly influence entrepreneurs' decisions to form new companies.
Obama's tax proposals for small business can only help. Even Republicans, guilty of an obstructionist legislative stance during the first year of the administration, will have a difficult time opposing these initiatives, given their historic support for business and party doctrine that government investment in business through tax cuts fuels tax revenue and jobs.
Even Joe the Plumber should approve!