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Small business outlook for Obama's 2nd term

Associated Press Modified: November 7, 2012 at 8:01 am •  Published: November 7, 2012
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THE ECONOMY AND THE FEDERAL BUDGET

Obama may not be able to do much to get the economy growing much faster than it is now.

"I think both candidates were way overselling what they can do to create jobs and help the economy," says David Primo, an associate professor of political science and business administration at the University of Rochester in New York.

The federal deficit is part of the problem. Obama has to curtail spending — but federal government spending is equal to nearly a quarter of income produced by U.S. citizens. Cut government spending, including federal contracts, and small businesses lose revenue and may cut jobs. Many have put hiring plans on hold because of uncertainty about what's known as the fiscal cliff — the combination of severe budget cuts and the expiration of Bush administration tax cuts that takes effect with the new year.

But if the deficit isn't dealt with soon, taxes will have to rise in the coming years. That would leave small business owners with less money to invest in their companies.

"That is ultimately going to be a huge problem. As government grows and the size of the deficit grows, that when you'll see a drag on economic growth," Primo says.

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REGULATION

Look for Obama to continue a mixed record on regulation — creating more rules that small businesses will need to follow, but also being vigilant that regulations won't be too burdensome.

"On the plus side, Obama has signed a handful of executive orders directing agencies to review and ease, where possible, regulations that have an undue burden on small business," says Molly Brogan, a spokeswoman for the National Small Business Association, a group that lobbies on behalf of small companies. But she also says government agencies keep creating regulations that many small businesses find problematic, for example, proposals from the Equal Employment Opportunity Commission that prohibit employers from requiring that workers have a high school diploma or conducting background checks.

"I don't think there's going to be a massive amount of difference for small businesses," says Catherine Rudder, a public policy professor at George Mason University in Fairfax, Va. "Obama in his policies is quite moderate and quite willing to compromise."

Small business owners who are unhappy with regulations created during Obama's first term are likely to find ways to get around them — particularly when it comes to health care. Some owners reluctant to buy health insurance for employees will make sure their companies don't have the equivalent of 50 full-time workers — the threshold at which they'd have to provide coverage under the health care law.

But owners will be happy with the Obama administration's regulations that are designed to help them — lending and counseling programs at the Small Business Administration will continue to be a priority.

"They can expect continued policies to foster small business," says Caroline Daniels, a lecturer in entrepreneurship at Babson College.

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Associated Press Writer Tom Murphy contributed from Indianapolis.