Dashboard: This Is Killing Small Businesses

Welcome to another 21 Hats dashboard. I'm Lauren Felman and I'm here today with John Arensmeer [music] who is founder and CEO of Small Business Majority, an advocacy group for businesses and entrepreneurs. Welcome back, John. >> Good to be here, Lauren. >> Great to have you. As as we've done in the past, John, I'm eager to get your read on where small businesses stand as the year comes to an end. I I think [snorts] there's a sense in some quarters that the economy held up better than many expected this year. Uh I know you've recently completed your quarterly survey of your uh member business owners. What do you think? What are they telling you? Well, Lauren, it's been quite a year for small business. Uh basically, small businesses have been battered by multiple challenges this year. Tariffs, healthc care costs, widespread immigration roundups, and cuts to federal programs. So, it's been pretty dramatic. Not quite sure how or where whether the economy is going to hold up. Um so we do as you mentioned we do a quarterly survey we call the voice of main street survey and we came out with our fall survey and um you know we're seeing some you know ominous signs I mean 45% um said that revenue had declined from the previous quarter only 14% said it increased 24% said their headcount had decreased only 3% had increased I talked about healthcare costs uh you know being a huge burden uh immigration policies were hurting them uh and having to get into more detail. But what's most interesting was that you know we did an optimism pessimism question and it was almost even. It was 42% optimism 41% pessimism but if you think about it if you're crazy enough to start a small business [laughter] you're pretty optimistic. So when it's 5050 like that, that is not a positive sign for optimism in the economy when you're talking about a group of people who are by nature optimistic, >> right? How long have you been doing the survey? >> Um about a year. >> Oh, I see. Okay. >> Yeah. [clears throat] So we do it every quarter and we're going to be going to the field uh in January with our um first quarter survey. Yep. It's a regular thing now. So when you did this survey uh one of the issues you mentioned is health care costs. Do you think most of them knew at the point they responded to the survey where their health care expenses are going in 2026 [clears throat] or were they talking about what it's been like in 2025? Well, I'm not going to get into details on the healthcare issue, but uh the reality is that um it's just another aspect of the tremendous uncertainty that they're um feeling. Uh and uh through all of the challenges that I talked about, there's underlying all of it is just uncertainty where it's going to go. So when they took when they responded to this survey um they were already uncertain about where things were going and um and worried that uh if the uh enhanced premium tax credits were not continued that they were going to be hit with bigger charges. So um obviously we're going to >> those are the Obamacare subsidies that you're referring to that went through under the Biden administration. >> Correct. You know, my sense is that a lot of people didn't really see this as a small business issue. You and I have talked about this before. I I think more small businesses are affected by this than than many realize. Do you agree with that? >> I absolutely agree that um if people think it's not a small business issue, they're missing um the point. Um if you look at the marketplaces over 50% of participants in the marketplaces are small business uh owners, employees or self-employed Americans. That's over 12 million people. So it's a huge issue for uh small business. This particular issue um and um 85% of the small businesses enrolled in the marketplaces are benefiting from these enhanced premium tax credits. So um not continuing them is is a significant blow to small businesses. >> I found even some business owners surprised by that. Can you give me some sense of the size of the typical business that uh where the either the owner is relying on uh the marketplace or the employees of the business are relying on the marketplace. Well, it's basically any business that doesn't offer um healthcare through the business, which is has been an increasing number. And now, obviously, whether you're an owner or an employee, if you have a partner or a spouse where you can get coverage, uh that is um that's an avenue for you. But that still leaves um about 12 million people dependent upon the exchanges who don't have u coverage provided by their employer. and um don't have an avenue uh through a spouse or a partner. >> And from what I've been reading, for those businesses that have gotten the uh the subsidies, if those subsidies do in fact go away, which certainly seems to be the case at the moment, their rates could triple. [snorts] Is that what you're [clears throat] seeing? Well, I think that uh we've heard premiums go up anywhere from 26% to uh one report said 114%. So, it's obviously going to be somewhat dependent upon the particular um firm and individuals involved, but we're talking some pretty substantial increases to the pocketbook of um business owners and employees and self-employed Americans. >> Okay. the that's one issue you mentioned. Uh the next one I think you referred to was the tariffs. Uh what are you seeing there? >> The tariffs are a um ongoing problem that uh that's we're hearing it everywhere and and and let me add tariffs and I know we're also going to try to talk about immigration. These are issues where economists across the board, across the political and ideological spectrum agree. There are no serious economists out there who think that these tariffs are helping um our economy or helping small business. Seven in 10 businesses um rely on imported products in some form for their for their businesses. >> I've never heard that statistic. [clears throat] Is that from your survey or >> that's from the uh great left-leaning organization called the US Chamber of [laughter] [gasps] >> And that's out of all businesses, seven out of 10. Wow. >> Yeah. Yes. Correct. >> I didn't realize it was that widespread. >> This is an area where we in the chamber are in full agreement on on this. So, we've done our own research and half of small business this in the most recent survey we did, half of small business owners have increased the prices of new materials or products due to tariffs. 29% say they've delayed importing materials or goods. 22% have delayed growth expansion plans. And 77% say that these tariffs are negatively impacting the US economy as a whole. 64% list tariff policy is a top concern for them. Uh so uh that's in a survey done by Bank of America. So um yeah, these are these are having a huge impact on small business and I should add small businesses have very little recourse. Um there is obviously a pending um case before the Supreme Court that we're all watching intently >> and there's some chance that that decision could come down before uh this podcast is published. >> That's correct. >> But that case was [clears throat and snorts] I'm not sure everybody realizes this was brought by small businesses. Most large businesses have kind of just swallowed the tariffs and tried to deal with them. It was small businesses that stood up and and tried to fight back and and got to the Supreme Court. Do you have any expectations for how the court might rule? >> I don't I don't you know it seemed in the arguments that there was lively debate. It didn't seem as if there was, you know, an obvious um there seemed to be some concern about it, but uh I I'm not sure how it's going to go. But to your point, the reason that small businesses are hurt more is they don't have the kind of cash capacity to deal with this that bigger businesses do. Um, and they they don't have the ability to lobby for exemptions the way big businesses do. So, small businesses are completely powerless. And I we've talked before about the uncertainty. Um the uh this is a whole other area because of the way that tariff policy jumped up and down all year where businesses can't even really plan financially because next week it could be something else. So um I have to tell you this is the issue we hear about on a daily basis from our small business network. It is huge and it's continuing to be huge. It really struck me. I think it was I've lost track of time. Maybe it was last week or even earlier this week that uh President Trump announced that he is sending $12 billion to uh farmers who have been because they've been hurt by the tariffs. Um which is I I got to believe a little gling to small businesses that have been actually paying those tariffs and hurt by them. Um, have have you been [clears throat] hearing about that issue? >> Well, we haven't heard directly. There's a lot of resentment. I mean, I think small businesses understand everybody's hurt by this. Uh, you know, the administration seems to think, well, we're going to uh alleviate some of the burden with one particular area. Look, I mean, farmers, we agree, farmers have been terribly hurt by this, unable uh, you know, and and by the So, um, absolutely. But uh you know I I think most small business owners just want them want us to go back to the kind of system we had before which was you know there were some tariffs and it was it was they weren't going to change every other week and um they were manageable and you could build your business model around um reasonable manageable sustain um stable tariffs. There's kind of a little bit of a scramble already happening with regard to that Supreme Court case where businesses, some businesses are kind of lining up to try to make sure that they get a refund if that in fact happens. I think some of them are nervous that the refund won't actually be paid out. Costco, I believe, has sued um that that is one large business that has come forward on this particular issue. Are you offering any guidance on that? Do you have any read on what the procedure might be if in fact there's a refund? >> We we haven't spent a lot of time getting into it. That is something we'll obviously um uh jump into if the the decision comes down uh that these tariffs were unlawful. Um but it is not something that we have um really dived into. And again, it's another example of how big businesses are better able to address something like that than small businesses, which would require putting together a whole coalition and figuring out the rules. So, um, yeah, I that is something we definitely will look at if the decision comes down the way it might. >> All right. You also mentioned immigration. What are you seeing there? I mean these roundups uh by ICE are just you know killing small businesses. First of all c the customer base for in a lot of communities has dropped. Uh obviously access to much needed workers and employees have dropped and it's crashed the paw on small business when you realize that half uh that twice as many immigrants are twice as likely to start small businesses than native foreign Americans. So you know the whole issue of immigration and immigrants and small businesses integally entwined in um in our country and um you know 19% of of all new businesses are support founded by immigrants. Uh and basically we're hearing u that they they can't hire. they already were struggling with hiring um for certain industries and now particularly construction, hospitality, agriculture um it's is killing these businesses. And look, we've over the centuries we've had an economy that has grown because of increases in population mostly driven by um immigration. And we're trying to completely turn that on its head. And it's it's absolutely insane. And it's it's it's again killing small businesses more than it's killing big businesses who have again more ability to sustain uh these these problems perhaps more ability to look for other alternatives. And again it's it's in any given business in any community. You don't know when I swoop in uh and uh and start rounding people up. And the fear that that's created has actually um you know people aren't coming to work. They aren't shopping the way they did in certain communities. Obviously, no surprise, the Latino communities have been hurt the hardest. So, yeah, this is a this is a major issue and one that we're spending a lot of time um trying to figure out solutions for and also trying to advise businesses on what they can do. To what extent do you see this as a uh problem in the specific communities that we've seen lots of video out of and there's been a lot of reporting where ICE has, you know, really um played a a huge role, you know, Chicago, Portland, New Orleans, um and and and others. Or to what extent do you think it's a nationwide issue trying to maintain uh employees given uh the overall impact Well, it's nationwide in the sense that um communities don't know who's next. So, yes, in immediately where ISIS has come in um and done a lot of roundups, it's had an immediate impact, but the fear um extends across the country and the inability to plan. If you're in a community that maybe I hasn't visited but may, uh how are you going to plan? Uh you don't you don't know what the impact is going to be. So, uh, as I said, um, as it relates to other issues, the uncertainty, um, is is creating a huge problem. So, I it's absolutely a nationwide issue because there's no indication that, uh, the administration intends to keep it isolated in one community or another. >> Is there anything you can tell a business that's struggling with this? >> Well, they need to know their rights. Um, and we we're putting them in touch with um, immigrants rights um, organizations that can advise them. We obviously don't provide direct um legal advice. Um but we can help them figure out where to get that advice. Um and um [clears throat] you know it's to some extent the advice is well you need to figure out how you're going to run your business with fewer employees with with depressed uh demand uh due to fear. Um that's a terrible situation to be in but businesses have to adapt. But in the meantime they need to understand you know how they can push back on some of this. what we've seen is, you know, people being arrested that, um, you know, are even citizens or or permanent residents. Uh, so, um, you know, those those individuals have rights. They they have rights to push back on it. And by the way, there's they did a a study here in Washington DC about uh crime and immigrants that relates to crime and it was like, you know, a tiny percent have committed violent offenses and even the majority haven't committed any offenses at all. So, um there's not not even clear uh there's not even a clear rationale behind what they're doing and that just creates more uncertainty and more fear. I think you also said that small businesses have been affected by cuts to federal programs. Uh what were you referring to there? >> Well, we've seen it in a number of different areas. The S SBA, the Small Business Administration budget was cut by 41%. Um >> that doesn't mean they're necessarily lending less money. It means they have fewer employees. Has that had an impact? As far as you can tell, >> it's going to have an impact on their ability to process um applications for SVA um guarantees. Uh, so it it is going to have an impact. I'm not suggesting that it's automatically 41% fewer loans, but you don't you're not you're not enhancing the ability of an agency to cut their workforce by 41%. Um, the administration wants to eliminate the um CDFI fund, community finance development institution fund, which is um part of the money that's provided to missiondriven uh lenders in at risk communities in this country. Um the irony here is that the CDFI community and the fund specifically has total bipartisan support and uh there's letters have gone out from the US Senate signed by equal numbers of Republicans and Democrats telling the administration they shouldn't do this. Uh Tre Secretary Scott Bessant is in favor of continuing this. that the White House um is actually the one pushing back on this and it's unclear where that's going to end up. Um and that's just an unnecessary and unforced error removing that money. The the administration eliminated all of the staff for the minority business development agency. There is some indication that some of that money might get um I think in budgets that are being circulated on Capitol Hill, some of that money is being put back there, but again, it's probably not going to be 100%. And by the way, um, local organizations who were dependent upon that money, some of them have just gone out of business. So even if that money comes back, it's not going to, um, there [clears throat] not going to be as many partners available to to use that money. [snorts] That's so those are just three examples of sort of bewildering unnecessary cuts to programs that are having direct impact particularly on businesses in the most underresourced areas. Um, but small business in general. That is all part of the kind of anti-dei, anti-woke agenda of the administration. Is there a a way around that? Is it do those organizations have an argument to make that this is just based on need and and nothing else? Well, there's a pretty high correlation between need and um the economics of of certain traditionally um underresourced under represented communities which obviously does there's an obvious intersection with uh communities that are primarily um populated by people of color. [snorts] Um so yes there there there is a correlation >> [clears throat] >> uh there and the result is that this money is actually needed by the businesses that need the support the most and we don't want to see DI being used as a club to go after valuable programs and valuable resources for the most underresourced businesses in the country and there's absolutely no reason to do that. uh there's certainly no economic reason to do that and that's that's that's that's the view and that seems to be what's happening and it's to the detriment of the businesses that need support the most >> given what we've just run through John I'm almost afraid to ask but what are your expectations for 2026 >> I mean I think there's a lot of unknown and I think that we need to you know continue to make the case we are continuing to um uh highlight the voices of small businesses that are being impacted by healthcare costs, tariffs, immigration, cuts and programs. Trying to elevate those voices so that policy makers hear us. Obviously, the administration, but certainly members of Congress uh can people in the states, policy makers of the states can understand, well, maybe there's something we can do to step in and help. So, we're going to keep doing that. Um, [snorts] we're going to keep uh researching uh people's concerns and needs and uh you know it's unclear. I mean it may be that the administration will hear uh some of the concerns and take them to heart. I'm I'm you know don't want to be too optimistic here but u that's about all we can do is to and certainly to get policy makers and those who have some influence over these decisions to understand the really human and you know sort of down grassroots cost of businesses of what this is what this [music] is doing and perhaps for uh some change in these policies. >> John Arensmeer [music] is founder and CEO of Small Business Majority. John, thanks for taking the time. uh as always [music] and I look forward to talking with you again next year. >> Thanks for the invite and always great [music] chatting with you. >> My pleasure.