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Main Street, Wall Street, Two-way Street

The state of the economy reminds us of a Billy Joel song:

Oil spikes, gas hikes,

Euro rising, dollar dying,

Health-care costs, housing frosts,

Subprime fails, taxes roar, we can’t take it anymore …

Businesses, especially small businesses, aren’t too happy with the current state of affairs, either.

In a survey released last week, small-business owners say there’s a major disconnect between themselves and Wall Street. Some 70 percent of respondents said they did not benefit from the Dow Jones being at an all-time high, according to the American Management Services/Suffolk University poll.

“It’s Main Street vs. Wall Street. Bottom line is that the economy is great for the big corporations and for Wall Street, but small businesses are not feeling the effects of a supposedly strong economy as Wall Street would have you believe,” George Cloutier, founder and CEO of American Management Services, said in a statement.

Maybe it was a coincidence or maybe Ben Bernanke saw the survey ­ or maybe Cloutier peeked at Bernanke’s speech ­ but last week the Federal Reserve chairman announced that the Fed would make quarterly its economic projections, rather than just twice a year. Also, the forecast would be extended from two to three years.

“Projections will continue to be released in February and July of each year to coincide with the semiannual Monetary Policy Report and the associated testimony to the Congress,” Bernanke said in his speech at the 25th Annual Monetary Conference at the Cato Institute in Washington, D.C. The other two sets of projections will be published in conjunction with the minutes of the Federal Open Market Committee (FOMC) meetings held around the start of the second quarter and the fourth quarter of the year. Next year they will come after the April and October meetings.

“The changes will provide a more-timely insight into the committee’s outlook, will help households and businesses better understand and anticipate how our policy decisions respond to incoming information and will enhance our accountability for the decisions we make,” Bernanke summed up.

The transparency of the Fed’s actions will be helpful to businesses, small and large, alike.

The first expanded set of projections will be released Tuesday, Nov. 20, along with the minutes of the October FOMC meeting.

OK, the new reports will not necessarily clear the alleged rift between small-business owners and Wall Street, but it will enhance the information available to all so that appropriate actions can be taken, whether it’s to seek a loan or wait for a cut or any other business decision.

If small businesses complain they won’t have time to comb through the new information to gain insight, perhaps financial consultants could pore over the reports and offer appropriately priced condensed versions, thus creating a new source of revenue for themselves.

Bernanke did not indicate if the Fed would cut interest rates as it already has twice so far in the last couple months.

However, David A. Wyss, chief economist at Standard & Poor’s, predicted that the Fed would cut interest rates “at least one or two more times,” with the next cut probably coming in January.

Speaking before members of the Business Council of Westchester last week, Wyss also predicted the chance of a recession occurring was “3-2 against.”

But there are a number of wild cards working in a recession’s favor, including the escalating cost of oil, a flat housing market, the national credit crunch and the rising cost of health care. And let’s not forget the aging baby-boomer population and entitlements that go with it. A major terrorist attack or sharp drop in the dollar could tip the scale.

The Connecticut Business & Industry Association and the University of Connecticut last week released the Family Business Program Survey. Eighty-two percent of those who responded said the most critical issue facing family businesses in the state is paying the high cost of health-care benefits. Forty-three percent found personal income tax important. Other issues included estate tax reform, corporate income tax and payroll taxes.

The Connecticut respondents suggested that legislative action be taken to enhance a welcoming business climate via tax cuts and tax incentives.

In the American Management Services/Suffolk University survey, more than two-thirds said they could not rate the small-business plans of any of the major presidential candidates.

Unsurprisingly, the national survey found that respondents could not decidedly determine which of the two major political parties would be the best choice for small businesses and the economy; 32 percent thought a Republican president, while 28 percent said Democrat.

Cloutier challenged the U.S. presidential candidates to speak to the nation’s 23 million small-business owners, who he referred to as the forgotten majority.

“Small-business owners make up a large voting bloc and it’s about time that small-business owners were not ignored. Their votes count and their voices and concerns need to be addressed by the candidates running for president today.”

We wholeheartedly agree. Now if we can only get the mainstream media to ask the candidates at the next debate what they will do for small businesses.

 

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