Small Business Burden List

August 8, 2003
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GRAND RAPIDS—David Letterman will probably never read this Top Ten List on Late Night.

But if he did, most owners of tool- and-die companies would certainly stay up and watch, and maybe even stick around for Stupid Pet Tricks.

The list contains the top 10 problems that afflict tool and die firms, mold makers, and other skilled trades manufacturers. Here is that list, starting with No. 10:

10. Foreign Trade Barriers: Cost U.S. businesses $200 billion annually, according to a University of Michigan study.

Solution: Level the playing field through the use of anti-dumping and countervailing trade laws and the Byrd amendment, which sends proceeds of higher tariffs to injured companies, not to the U.S. Treasury.

9. Export Controls and Unilateral Trade Sanctions: Cost $20 billion to $40 billion in lost exports per year and roughly 400,000 jobs. These sanctions place severe limitations on the ability of high-tech manufacturers and machine tool builders to sell “dual-use products” to nations not aligned with the U.S.

Solution: None listed.

8. Federal Procurement Policy: The annual $200 billion purchase of goods and services rarely reach the 23-percent goal for small businesses.

Solution: Continuously examine Pentagon procurement practices to fight unsound contract bundling and consolidation. Approve the Defense Authorization Bill, which raises American content from 50 percent to 65 percent and mandates that contracts over $5 million use U.S.-made machine tools, dies and molds.

7. Steel Tariffs: Small manufacturers have seen domestic steel prices rise by up to 80 percent and sales are being lost to foreign firms that are buying steel at cheaper world prices. The high cost of steel is making U.S. manufacturers uncompetitive.

Solution: Administration should use the opportunity to end steel tariffs next month.

6. Overvalued U.S. Dollar: Foreign governments routinely interfere with currency markets to prevent their currencies from appreciating against the dollar.

Solution: None listed.

5. Lack of Access to Capital: Fees are too high on SBA loan guarantee programs and banks are reluctant to lend to small manufacturers in the Midwest.

Solution: Increase access to SBA lending programs; raise SBA loan limits; and support the Bridge Act, a tax-deferral initiative, to help meet the capital needs of small businesses.

4. State & Federal Tax Burden: Corporate tax rate from state and federal taxes is at 40 percent, compared with other developed nations that average 31 percent.

Solution: The Job Protection Act of 2003 would lower corporate taxes for domestic manufacturers by 10 percent.

3. Government Regulations: Cost businesses about $840 billion annually, or 8 percent of the GDP. This burden is 60 percent higher for firms with fewer than 20 employees than for companies with more than 500 employees.

Solution: Force government agencies to follow the Regulatory Flexibilities Act, which requires agencies to analyze the economic impact on small business before making a regulation final.

2. Higher Cost of Insurance: Premiums of all insurance policies for small businesses are rising by 20 percent to 40 percent; the percentage of small businesses offering health care benefits has slipped from 67 percent in 2000 to 61 percent in 2002; and 60 percent of the nation’s 43 million uninsured are small-business owners, their employees and families.

Solution: None listed.

1. Congress Does Not Understand the Importance of Manufacturing: Put too much emphasis on white-collar jobs; doesn’t get the multiplier effect that $1 million in sales from manufacturing equals eight manufacturing jobs plus six service jobs while $1 million in sales from the service sector equal 3.5 service jobs.

Solution: Educate members of Congress about the current state of small- and-medium-sized manufacturers.

Source: The Tooling and Manufacturing Association, July 2003.

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