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"ECONOMIC STIMULUS??"


by: Mark S. Deion
13 November 2001


We’ve all heard a lot about Government initiatives to “stimulate” the economy since the tragic terrorist events of 11 September 2001. There is no disputing the national and global economic havoc these senseless events have wreaked upon us all. However saddened I am by the events of 11 September, and however much I have absolutely no control over those senseless deeds, I am even more saddened by some of the Governmental responses to those events.

I am a crisis management consultant and have been dealing with companies “in trouble” for the past 15 years. I have diligently fought to convince the Government that small businesses have become the backbone of the US economy. I have attempted to provide insights into what is necessary to support the largest economic sector of our economy. As small businesses became an even greater source of support for the general economy, Government seemed to turn their heads in the other direction.

Prior to 11 September 2001, there had been more job losses in the US (as of May 2001) than in the entire previous year. Most of these job losses were from the major corporations, not the small ones. In the past decade, small business has been responsible for all of the job growth in the US economy. In the past decade, despite significant layoffs, cutbacks, company closings and bankruptcies, the US economy still appeared to be thriving,....but it was the small businesses who were doing all of the work. It was also the small businesses who were “paying the tab”.

The US SBA (Small Business Administration) has been a critical and vital resource to the small business community. The SBA’s guarantee loan program and their technical assistance programs have been one of the few Government supported programs to assist small business. If one were to review the budget of the SBA, one would be dismayed at how much has not been done to support and enhance this budget, and they would be disgusted at how frequently this budget is targeted for cuts and reductions. The ROI (Return On Investment) for all of the dollars appropriated to SBA programs is unprecedented. It is one of the few Government programs which actually returns to the US Treasury (in the form of tax revenues, job creation and economic stimulation) more than what is appropriated each year. Yet, for the past decade, this Agency has been the target of budget cuts, reductions, criticisms, etc.

Some might debate whether the US economy was taking a downturn prior to 11 September 2001. I tend to think that the job loss figures support such a downturn. But these job loss figures were not coming from the small businesses, they were coming from the large corporations. After 11 September 2001, everyone claimed that they wanted to help. Hundreds of thousands of businesses were affected,....both big and small. Many companies just disappeared. Many industries lost their client base. It is difficult to operate a business when you go from 100% revenues to -50% revenues in an hour! This is some of what happened on 11 September 2001.

There have been many legislative packages forwarded by the Government. Some offer financial assistance and technical support. Some offer tax breaks and investment incentives. Both are lacking in reality. You cannot offer a reduced interest loan to a business whose client base has completely disappeared. You cannot offer a tax break to a business who no longer has any revenue. There needs to be another element to the equation!

I kind of find the word “stimulus” rather “interesting. How do you “stimulate” a company which has died. How do you “stimulate” a company which has lost 100% of their market share. How do you “stimulate” a company that no longer has customers, assets, and can no longer meet the credit review standards to qualify for a loan (regardless of what the interest rate might be)?

The Administration has requested that we all “Get back to work as usual.” This is difficult when one of their recommendations is to access the funds of the US SBA to finance a “stimulus” package for the businesses which have been victimized by the events of 11 September 2001 (without any additional appropriations to meet these extraordinary needs). This in fact creates a secondary tragedy. For, all of the companies which are healthy, or, are capable of maintaining a “status quo”, the supportive programs of the US SBA will no longer be available to them since they will now be dedicated to only those companies that have been devastated. Access to capital for viable companies will soon disappear. The economic tragedy will soon become a “double whammy”! Those that were victimized by the events of 11 September 2001, and those that were victimized by the reactionary activities subsequent to 11 September 2001.

For the past decade, the US SBA has been hard-pressed to meet the capital access needs of the viable small businesses which were supporting and growing the US economy. Now, it is possible that they might be ignored even more. When you have a healthy child and a sick child, it is not advisable to starve the healthy child to make the sick child well. You devise a method to maintain the good health of the healthy child while also addressing the needs of the sick child. What the Administration has proposed is to ignore the healthy child, address the needs of the sick child in a manner which might not bring them back to health at all, and we might end up with 2 sick children.

When in crisis, support what works, support what allows you to attend to the problems,....maintain a constant flow of resources. The successful small businesses of this country ARE the resources which will allow us to deal with those less fortunate. We should not punish them for being successful. We should not take any actions to reduce the number of successful small businesses in this nation.

It is interesting to note: The Administration appropriated significant funds to major corporations (the airlines), but they did not appropriate funds to all of the businesses which support the airlines (travel agencies, for one). I am sure that there are national transportation issues for “bailing out” the airlines, but if you review the financial statements of the airlines and those of various travel agencies,....it has been the travel agencies who have been able to cope with economic downturns in a far more creative fashion. But no one “bailed” them out. Remember,....where has the job growth come from? Not from the airlines.

I don’t suggest that there is simply one solution to this problem. It is complicated and mired in “aisle” politics. But, I do suggest that “common sense” dictates that we do not take retribution against those who are providing the financial support to the Government which allows them to create a “stimulus” package.

There are 2 issues here. We need to assist those who have been impacted by the events of 11 September 2001. And we need to truly assist them. Maybe, we need to help them deal with insurmountable losses and counsel them on how to cease one endeavor and move on to another. Maybe, we need to help them create new businesses. Whatever we do, it will not be within the realm of normal business assistance, financial and technical support. We all have to commit to that.

But, in the process, we need to continue to support our small business community with all of the fervor and dedication we can possibly muster. It is they who are the financial backbone of our economy. It is they who will generate the tax dollars which allow us to help those less fortunate.

“Go back to business as normal.” NO, I’m sorry. Can’t be done. We (many of us), have survived a crisis. We need to double, ...triple our efforts to ensure that the economy is revitalized. It cannot be done overnight. It cannot be done by ignoring or sacrificing the key economic stimulating entity:......“small business”.

The United States was created by small business, it has flourished due to small business, and it is time that Government realized that America IS small business. We CAN overcome this crisis, but, we cannot overcome it without the support of small business.

There are 2 things we need to do. If you are a healthy company,.....you need to ensure your continued health. And, you need to make sure that you do everything to help and assist your fellow company. This is where we all came from. After 225 years, the formula is still the same! Government will do what we say, but only if we speak loud enough. 11 September 2001 was tragedy enough. We don’t need to repeat that tragedy by destroying the only economic resource we have in small business.

If you believe in “Economic Stimulus” , or, in layman’s terms,.....stimulating the economy,.....call or write your elected officials. Tell them what you think. Tell them what you believe. Tell them what YOU think will have a positive impact on the economy.

After all,...this “governing” stuff is supposed to come from us. A Government of the people, for the people, by the people.

Let’s not let one tragedy become another.


Mark S. Deion
© Copyright 2001 All Rights Reserved


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