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Arslan: An Open Letter to the President and Congress

Official Washington returns to work this week, and any lawmakers who were hoping the economy would shape up in their absence are sorely out of luck.

The unemployment rate of 9.1 percent remains “disturbingly high,” according to one Federal Reserve Bank president. It is poised to remain high as the Congressional Budget Office has issued its grim prediction that unemployment will remain above 8 percent until 2014.

CBO isn’t limiting its bad news to unemployment — it also predicts the budget deficit will be better than January’s forecast but that it will still bleak at $1.3 trillion for fiscal 2011.

After a politically charged debt-limit debate that resulted in an unprecedented credit rating downgrade of U.S. debt, President Barack Obama and Congressional leaders have to accept that we have to move beyond political bickering and start working together. We need bold and workable solutions to address America’s economic crisis.

As Obama prepares to lay out his jobs proposal before a joint session of Congress and the Joint Committee on Deficit Reduction begins work on its own proposals, America’s smallest businesses would like to offer some advice. They also ask that our political leaders keep the nation’s 22 million self-employed and micro-businesses in mind as the work begins.

Who are our nation’s smallest businesses? They are self-employed and micro-business owners representing more than 95 percent of the small-business community. They are businesses with 10 or fewer employees who directly contribute $1 trillion to the economy every year. Most people don’t realize that the vast majority of businesses in the United States are very small enterprises.

Those who pursue self-employment not only have the luxury of being their own boss, but they are also keeping one more person off the unemployment rolls, supporting themselves and their families and contributing to the economic vitality of their communities. They are doing their part to stimulate the economy and reduce the debt. Frankly, if those unemployed Americans were given some incentive to join the ranks of the self-employed, the debt would be decreasing a lot faster.

They have concerns about the outcome of the debt-ceiling debate and the nation’s flagging credit rating. Being so small means they often rely on credit or micro-loans to keep their businesses afloat whether the economy is booming or busting. They have watched with envy as large businesses and corporations have benefitted from stimulus spending and lucrative bailouts. There was little to nothing in those efforts to help very small businesses jump-start the economy.

What can be done for the small-business community? The president and Congress can start by making the tough decisions.

The tax code is a good place to start. Self-employed business owners need to be CEO, COO and head of sales as well as their own accountants. They don’t have the luxury of big business accounting departments that can manage the complicated and ever-changing tax system.

Undertake meaningful reform of the tax code by moving toward a simpler and more equitable system, giving all businesses, regardless of size, the same tax benefits so there is a level playing field.

Reform should also enable America’s businesses — big and small — to compete in the global economy. 

Protect programs that incentivize entrepreneurship to boost our economy. Remember, today’s small business could be tomorrow’s major employer, and even if they choose to stay small, increased entrepreneurship will help foster innovation, create jobs and bring in additional revenue. Help the small-business community fuel the economy with long-term policies, not just short-term “fixes.”

These policies can simply be a few tweaks to existing law. Last year’s tax cuts included a payroll tax holiday that benefited employees, and the president has talked about extending the benefit to employers, too. Since the self-employed pay both the employee and employer portions of the payroll tax, extending the payroll tax break to employers and specifically including the self-employed would help.

Small businesses would also benefit from making the temporary health insurance deduction in last year’s Small Business Jobs Act permanent. They should be able to deduct the cost of coverage, just like larger businesses have always been able to do. These aren’t major policy reforms, but a little boost goes a long way when you are small. 

Finally, go where few have gone before — Social Security, Medicare, Medicaid and defense spending. Most self-employed Americans are willing to make some sacrifices if it means that our policymakers will proactively address the deficit and that our nation’s economy would improve.  

America’s smallest businesses know that no one fix will turn the economy around, but ask that the president and Congress keep two simple questions in mind: Will this change help small-business owners keep their doors open and grow? Will it encourage others to go after their American dream? 

If our political leaders believe their own mantra that small businesses are the engine of the economy, then the answer to these questions had better be yes.

Kristie Arslan is president and CEO of the National Association for the Self-Employed.

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