Dashboard: A Fight for Survival

[Music] Welcome to another 21 Hats dashboard. I'm Lauren Feldman and I'm here today with John Arensmeer who is founder and CEO of Small Business Majority, an advocacy group for businesses and entrepreneurs. Welcome back, John. Good to be here, Lauren. It's great to have you. Um, so John, we are recording this on Friday, April 4th. It has been quite a week. on Wednesday, uh, when President Trump announced his tariffs, he pronounced it, a historic day that would long be remembered, and I think he got that right. Uh, I'm eager to hear kind of what you've been hearing. What you think is going what this is all going to mean for small businesses. I know it's early, but any thoughts? Well, Lauren, we've been hearing fear and concerns for months, even before Trump took office. And um you know obviously it exploded this week uh but the the stories are not new and um you know I think business owners knew something was coming. The bottom line is you know incredible fear, incredible um you know uncertainty and and helplessness. The small businesses have no ability to do anything. I mean a little while back those who could afford to go get inventory ahead of time did. That's often very inefficient. those who didn't have the cash couldn't do that. But that's that's a short-term fix. I mean, there's only so much inventory you can you can get. Look, we've got $3.3 trillion of imports in this country. It's coming from every direction, every product, every country. It's, you know, you, a small business owner may have, you know, three, four, five different things in their supply chain coming from vastly different places and they have no control over it. They certainly don't have any control to start saying, "Well, we're going to we're going to source this domestically." They're businesses that just can't do that. So, they're helpless and uh they are scared and they are now watching their 401ks plummet as the market goes down. So, I don't know how else to put it, but uh it's been it's been coming and it's even worse than they expected. You know, it feels like the entire apple cart of the economy got turned over. Um, you know, I I guess it's going to take some time for for things to to settle, but I I I can't even get the words out of my mouth. I'm I want to ask you if you have any advice to offer business owners, but it it just as as you just put it, it just seems so helpless. I I saw one article that the, you know, the comments it made were, "Well, consider altering your supply chain." And as you just pointed out, I think anybody who could did that, who could do that, already did it. Uh, some of them may have moved from China to Vietnam thinking that was going to save them. And obviously that didn't work out. The next thing in the list was adjust your prices. I think most businesses are probably aware of that. Uh the last one was explore new opportunities. And it didn't really explain that, but it it almost sounded like they were saying, you know, have you thought about taking a job cuz uh this may be really really difficult. It can you add anything? Is there any advice that you're trying to offer to your followers? Well, quite frankly, other than hunkering down, and that is an option, um deciding, you know, figuring out what part of your market can absorb higher prices, uh figuring out whether you can tolerate lower profit margins on certain products, that may mean eliminating other products. So, yes, I mean, what obviously can be done is you do like you do in any crisis that businesses had to address during the pandemic is you sort of figure out what what can stay, what can go. That's probably going to mean in many cases laying off employees. It's certainly going to make um you know reduce reduce sales and reduce profit margins. But yes, some businesses will be able to survive and obviously that's got to be job one for them is to figure out how to do that. But it's going to be incredibly painful. And you're right, they have no ability to or limited ability to adjust their um their supply chains. I mean, you know, clothing. We have a clothing store, for example, a a fellow who runs it on our national council. He he can't he can't get women's clothes. He can't get those clothes domestically. It's just a reality. And, you know, this is something that's evolved over many decades now that we don't have a um you know, a clothing uh uh industry in this country anymore of any size. So, um, you know, what what what can what can a small business owner do in a short period of time? Then they're looking at the the big guys who can negotiate, they can negotiate, first of all, they can absorb a lot more uh and they can negotiate waiverss and they can they can um, you know, adjust more easily. They're still going to feel pain. Don't get me wrong, we're seeing that already. But for small business owners, it's really helplessness. And yes, they have no choice but to hunker down and figure out what it's they're in survival mode. In almost any crisis, there are opportunities and people who do manage to find them and seize them and take advantage of them. The the alleged premise of these tariffs is that it is going to bring manufacturing back and that people are going to start opening more factories and trying to do things here. Although that's at cross purposes to some extent with with some of the tariffs which makes it more expensive to bring in material raw materials um and the uncertainty makes it more difficult cuz who knows how long these tariffs are going to last. But have you seen any evidence of that? Do you is there any indication you've heard from your followers that people are trying to look into more opportunities to actually make stuff here? We have a situation, you know, where manufacturing in this country has gone offshore and we were talking 30, 40 years. I mean, so you don't fix it overnight. And for most small businesses, not only do they not have 30 40 years, they may have 30 40 days in some cases. So I there's just I mean I don't even know what that means. If you're in a Yes. B Yes. Some businesses are obviously looking for opportunities to um to get domestic supplies if they can. Often those supplies will be more expensive and so but I mean the options are limited depending on on the on the industry they're in. I just mentioned the clothing business. Um even you know people we got a a fellow who runs an ice cream store and he he imports his sprinkles from Canada. Who knew? um imports vanilla and chocolate from from also. Sure, there may be domestic manufacturers. There's no way that domestic manufacturing can pick up the slack in a lot of these areas. And we can argue, well, maybe we shouldn't have gone this way, but we do have um a global international order where commerce is completely interconnected. Well, I mean, yes, and but even so, the choice is going to be I import and pay more or I don't get the product. So, you know, how many businesses can pivot to, well, I'm going to change my product so I only have domestic um supplies. It it it's it's absurd. It it's there's no way most small businesses can pivot. What they can do is they can hunker down. They can expect to have, you know, probably layoff employees. They can expect to have lower profit margins and, you know, we we may be entering a recession now because of all this and so they're going to have smaller sales. So, will some survive? Yes. But it's going to be painful and some are not going to survive. Are you doing any kind of outreach to your members? Uh, is there anything that you can offer them? Absolutely. We we have uh formed a rapid response coalition in partnership with numerous um partners across the country, other business organizations, local chambers, um CDFIs, business support organizations, um folks who are u supporting businesses across the country. We're and we're we're we and they are soliciting stories from business owners that we can then communicate to policy makers. We're obviously continuing to do research. We're talking to policy makers um both on Capitol Hill and when we can in the administration and we're doing a lot of media and you know that's about all we can do right now. I mean that's all we can we can do we can do that. Um, and you know, I think at the end of the day, hearing more voices from actual business owners on the ground and partner organizations who are supporting them, uh, who have, by the way, relationships with, uh, policy makers from their districts, red, blue, and otherwise, that's the only way we're going to maybe get some of this changed is for policy makers to hear that. We have seen few signs at least in the Senate of some push back uh among Republicans. Um one of the things we're concerned about the um CDFI fund was uh was eliminated and this is a fund that um provides support to missiondriven lenders uh community finance development institutions across the country. Well, gee, we found out that those exist in urban, rural, red, blue, um, states and districts. And actually, there was a a pretty strong push back um, bipartisan push back from the Senate at least. Uh, we haven't seen it from the House, uh, of senators, both Republicans and Democrats, saying, "Hey, this is don't do this." So, we're going to need more of that. We're going to need stories. We're going to need data. We're going to need the voices of small business owners speaking up. And that's about all we can do. Uh, yes, at the same time, businesses are going to have to do what do what they can do business-wise, but our job is to make those voices heard and figure out um how we can get people to see the light. If somebody listening to this is interested in sharing their story, uh where can they go to connect with your rapid response team? Go to small businessmajjority.org. That's small businessority.org. And if they're interested in resources, we have a resources site called venturiz.org. Great. uh but uh small business majjority.org is to to share the story. That would be you share stories and that would be where that's where the advocacy uh is happening and uh and that's where you know all the sort of the hub of all the communications work we're doing around this. So obviously tariffs were the big story um this past week and the the impact on the stock markets um but there's a lot of other stuff going on. What what else are you paying attention to? Well, the other two immediate things we're paying attention to are the attacks on small business programs. I've already alluded to to one, the um elimination of the CDFI fund, elimination of the Minority Business Development Agency. Uh this one is incredible. The reduction of Small Business Administration staff by 43% simultaneously asking the SBA to take on $1.6 6 trillion worth of student loans. I mean, what is the connection between student loans and the SBA? Uh risk to the state small business credit initiative. Uh there there now cuts coming in staffing cuts in the Treasury Department. There's $5 billion in SSBCI money that hasn't been it's been obligated, but it hasn't been distributed. And you know, Mr. Musk and his minions may show up and just take that money. Uh the list goes on. And um USDA funds a lot of rural programs, cuts there. Um we just found out literally the same day that these tariffs went into effect that they um the Trump administration has terminated the manufacturing extension partnership. It's been around for 40 years, has centers in all 50 states that provide consulting services to small manufacturers. So there's just an incredible list of programs. That one seems particularly ironic since the tariffs allegedly are designed to bring manufacturing back to this country. Yes, that we we we took note of that that the same day these tariffs went into effect, the um MEP was was eliminated. Um the other thing is um immigration. There are um the mass deportations that are happening have instilled fear in businesses and those who work for them. Let me stress, as we've all seen, this is not just undocumented immigrants. This is documented immigrants who are being snatched off the street because they they may have written, you know, they may have expressed an opinion on social media. So, um you have business you have employees that aren't even coming to work and um so and so it's legal and and and yes, undocumented as well. There are 11 plus undocumented immigrants in this country and they're all working and many are working in small businesses. So, uh, you know, we don't need to have mass deportation. We need a sensible immigration system that's going to allow the workforce that we need to come in and and work legally and support our business. And, you know, obviously the economy is going to is being be really harmed by these tariffs. But the other thing it's harmed by is not having enough workers. And you've looked at America over the years, the reason we've grown, the reason we've become an economic powerhouse is the continuing growth in uh in immigrant labor. So um that is also um terrifying business owners and obviously their employees. You know, that's such a difficult issue. I I've struggled with that myself because in I try to reach out to business owners to talk about it and it's not a topic they want to discuss at least not publicly by name because they don't want to call attention and create any potential problems for themselves for their employees. But there's I think there's a lot of confusion uh out there about just what business owners can and should be doing. Have you seen that as well? Yes, absolutely. And you're absolutely right. I mean, we are soliciting stories um across the country on tariffs, people willing to speak up, but those who are concerned about the immigration situation. We have been we've got media asking us for stories and many businesses understandably uh are afraid to talk about it. So those stories are harder to get out there because of the obvious obvious retribution. And again, so look, small businesses, like any other business supposed to make sure that the folks who are working for them are legal, but we're seeing them, we're seeing people who are here working legally being uh deported because they have a tattoo or because they said something on social media. So business owner can't control what someone has done, you know, whether they have a two head tattoo or something they've done in their private life. And beyond that, the fact that our economy depends upon all of the immigrants documented otherwise who are working um is just a reality and you start to eliminate that. You they already were experiencing workforce issues coming out of the pandemic and that just adds adds to their problems and um and yes, they're they're afraid to to be public about it. Do you have a sense of how much risk business owners are uh at if they are employing undocumented workers? I have talked to a number of business owners about this. I get a a mixed message. Some believe that nobody's really going there, but there there have been examples of business owners who have been prosecuted o over the years uh for having u undocumented workers. Do you have any sense of what people should be thinking on that issue? Well, look, I mean, business business owners are supposed to use best efforts to determine that the that the work the their workers are um are here are working legally. As I said though, there are a lot of lot of employees who are here legally who are being rounded up as well. So it's not limited to Well, there also people who who are undocumented but have managed to obtain fake ID and the owner may or may not know that. Correct. I think business owners for the most part do what they can, but they are also faced with an economic reality uh of of needing workers. So they do what they can. Uh, and if if the employee has figured out a way to um show that he or she's here legally, even if he or she's not, um, you know, the business owner can only do so much. I'm not here to to to say that business owners should skirt the law. I'm here to say that, um, most business owners do what they can. U, but I'm also here to say that there's an e economic reality. If you have 11 to 12 million undocumented workers in this country and they are absolutely needed in the economy and they're working fruitfully, it's not it it doesn't really solve the problem to basically say all of them should stop working tomorrow. I think I saw that you recently testified uh at a hearing in Congress. What was that about? Well, ostensively the hearing was um entitled regulation. It was about regulations. Um and the um Republican majority was the House Small Business Committee, you know, wanted to talk about the the problems with regulations and um however the um conversation for at least half of the hearing was on all these other topics were talking about tariffs, immigration programs being cut, SBA, because that's really what's on people's mind right now. And look, when it comes to regulations, um we have a system in place to assess the balance of costbenefit analysis. And there's a lot of talk about the cost of regulations. There wasn't a lot of talk about the benefit of regulations. And there are bene regulations. Sets a level playing field. Um protects small business owners and others from financial scams. Uh we obviously have to have regulations uh when you're with certain products. If you're trying to um establish a more renewable economy, you need that. And quite frankly, there's a lot of talk about oh how regulations increased under President Biden. Well, there were also huge amount of money that was going into new manufacturing. Alongside that, you you get you have to have regulations. So again, we need to look at the cost versus the benefit. And we're the first to say they're going to undoubtedly be regulations out there where the cost outweighs the benefit and we should address that. uh we have adequate systems in place and the sort of what's being proposed by um the Republican majority was to add new layers of of of oversight so to speak that would that would actually muck up the system make it more complicated for small business owners. The other thing that we're in favor of is making sure that these agencies are funded such that they and the SBA and the office of advocates the SBA and the OBSman of the SBA are sufficiently funded so they can advise small businesses about how they can better comply with regulations. A lot of this isn't whether the regulations are good or not. It's it's helping small businesses understand how to comply with them. So I think what's happened is that regulations have been turned into an ideological weapon. All reg all regulations are bad. let's just look at the cost. Uh and it almost turns into this this ideology instead of looking at it as very pragmatic roll up your sleeves, figure out what's the cost benefit of particular regulation and address it that way. I think you make an interesting point with the um the removal of these programs that are designed to help uh small businesses. Having that happen at the exact same time that this crisis hits where, you know, business models that once worked no longer work and everybody's scrambling to figure out what they're going to be able to do and the the support infrastructure is being torn down simultaneously. I I don't even do Do you have any hope that that can be stopped and turned around in, you know, the near future? All we can do is make the case and express the opinions of small business owners um and um talk to obviously through the media, but also talk directly to policy makers both in Congress and um in the administration. And um no, I mean, if if you're talking about uh take people taking a meat cleaver uh slash and burn um focus on on government, uh you're not going to have the resources within government to figure these things out and get them right. Uh and so uh you know, in in order to figure out whether a regulation has more benefits than cost or vice versa, you have to have the resources to figure that out. And uh by slashing and burning in all these agencies including the SBA, you are putting that in jeopardy. Did I miss anything, John? Anything else that you're paying attention to at the moment? Well, obviously we're looking at the budget and um and you know that right now you're talking about first of all, we can't even figure out um what's going on in the House versus the Senate. You've got the uh you've got the House refusing to follow um any of the reconciliation um rules that are being set up by the Senate arguing, well, we can do our own thing. Senate can do its own thing when you absolutely need to have common reconciliation rules to get a to get a budget through. Um you've got budgets that are being uh proposed where there's no way that you can continue to fund Medicaid. There are over 7 million small business owners and more importantly employees on Medicaid. There's no way people don't think of that as a business issue. Yeah. But it is. The ACA isn't you you have the premium tax credits that have enabled many business owners um and and their employees to to to get additional support to buy healthcare on the exchanges. Uh those are scheduled to go away at the end of the year. Um there's no way these budgets that they're passing are going to be able to maintain those. That's going to be a direct hit on on small businesses. many of whom uh the majority of participants in the marketplaces are small business owners, employees or self-employed people. So, uh there's no way that um there's no way that um that's going to work either. And um and then you it's all setting itself up for a continuation or even expansion of a tax system that uh overly favors big corporations and the very wealthy and doesn't allow to for any kind of tax reform that's going to push the benefits tax benefits down to uh the smaller business. We're proposing a uh reform of the 19 so-called 199A pass through deduction which right now heavily favors the few pass through entities uh at the that the wealthiest 73% of the benefit goes to the top 4%. We're proposing to reform that and um make sure that those benefits are going to the smallest businesses. And again, nothing that they're doing um on the hill right now reflects any understanding of of what needs to happen. John Arensmeer is founder and CEO of Small Business Majority. Thanks for taking the time, John. Thanks for having me, Lauren. Have a great week, everyone. [Music]