News Analysis By any ordinary measure, President Obama’s first year in office would be considered commendable. But these aren’t ordinary times, and the president was called upon early on to make some extraordinary decisions. In many cases, he put politics aside and did what he thought was right for the country.
At the same time, he started the process of righting the wrongs that led to the country’s current predicament and moved forward on his principle campaign promise — to restore the nation’s standing as the world’s political and economic leader in the twenty-first century.
If the president did nothing else, the passage of health care reform alone would be enough to merit high marks during his first year in office. It’s already being compared to monumental accomplishments such as the passage of social security, Medicare, and voting rights legislation.
This new era of health care is especially meaningful to small businesses, many of which have borne the brunt of the spiraling health care crisis. More than 30 million people will get coverage, most of who work for small businesses.
Average health insurance premiums for family coverage for small employers have more than doubled from $5,683 in 1999 to $12,091 in 2008, according to a study by the Kaiser Family Foundation. A separate survey by the Blue Cross Blue Shield Association found that 61 percent of small firms did not offer insurance because owners did not think their employees could afford to help pay the premiums.
The legislation will help reduce costs; millions of small-business owners will be eligible for tax credits that will help them cover the cost of insurance for their employees. And it will ban some of the more egregious health insurance practices that are used to jack up rates or purge small firms.
The health law may also boost employment at small businesses this year, according to Alec Phillips, an economist at Goldman Sachs Group Inc. Companies with fewer than 25 workers will receive subsidies to offer insurance. Firms with fewer than 10 workers may have the most to gain; they’ll receive a 35 percent subsidy to help pay premiums, Phillips said.
And while history will be the ultimate judge, Obama has accomplished something that presidents Harry Truman, Lyndon Johnson, Jimmy Carter, and Bill Clinton couldn’t.
Though the health care reform bill is arguably riddled with compromises and certain to contain flaws, such is the process of democracy. As Winston Churchill said, “it is the worst form of government, except for all others that have been tried.“
The significance of health care reform is second, however, to the president’s swift action in the first days of his administration to contain the financial crisis. He moved swiftly to carry out the bailout of Wall Street initiated by the Bush administration.
Even though it was politically unpopular and counter to his own political beliefs, the Wall Street bailout was a necessary evil to prevent a far greater economic calamity. The $787 billion economic stimulus he signed in February was equally controversial. But a growing body of evidence suggests it helped stabilize the economy.
For instance, the nonpartisan Congressional Budget Office issued a report estimating that “in the third quarter of calendar year 2009, an additional 600,000 to 1.6 million people were employed in the United States” due to that legislation.
The president’s decision to bailout General Motors and Chrysler – again highly controversial – was also pivotal to preventing the severe recession from becoming a depression. A General Motors bankruptcy at that point in the crisis would have touched off a chain reaction that would have thrown millions of additional people out of work and clearly driven the unemployment rate above 11 percent. The measure not only kept General Motors in business, but thousands of small businesses.
Independent suppliers manufacture 70 percent of the 15,000 parts — including seats, engine blocks, electronics, and bumpers — that go into a single automobile. Collectively, they make up a $388 billion industry that accounts for more than 600,000 of the 2 million American jobs tied to the auto industry. Of those, the overwhelming majority are small businesses with an average of 80 to 100 employees, according to industry experts.
While the economic crisis and the health care debate have dominated the news, the president has also made several other significant policy decisions.
Obama signed into law some of the most sweeping changes to the credit card industry in 40 years, adding restrictions on interest rate increases and fees and restricting the marketing of credit cards to college students.
Credit cards have become a principal form of financing for small businesses. Up until the early 1990s, only about 16 percent of small business owners used credit cards for capital. But a National Small Business Association survey found that more than 44 percent of those polled had used credit cards for financing by 2008.
Also compelling is that a majority of small business owners (53 percent) say their credit card terms have grown worse over the past five years, according to the NSBA.
Obama also signed an executive order easing Bush-era restrictions on the use of federal money for embryonic stem cell research and signed another bill creating tax incentives for developing nuclear energy and other alternative forms of energy. Small firms stand to be big beneficiaries of both measures. The president set the stage for expansion by proposing tax credits for new hires and wage increases; elimination of capital-gains tax on investments in small business, and tax incentives for investment in new facilities and equipment.
Given the backdrop of the economic crisis which overshadowed his administration, Obama has still managed to move forward on key elements of his presidential agenda. By any measure, that’s a successful first year.
Read Part 2: What Obama Has Not Done for Small Businesses