What $1.2 trillion in cuts means for small business

February 22, 2013 at 9:44 am

The Washington Post’s “On Small Business” blog has such a great analysis of what sequestration will mean to small business that we’re just going to re-post their findings here.  In order to avoid devastating budget cuts at the start of the year, Congress decided to kick the can down the road and delay taking any action until March 1. Now that date is just around the corner and unless Congress acts this time, $1.2 trillion in federal budget cuts over the  next decade– again, known as “sequestration” or the “sequester”– will go into effect. This will have massive impacts across the board, and will probably even send us spiraling back into recession. No doubt this will affect businesses both large and small, but there will be particular impacts on small businesses  Looking at data from the Internal Revenue Service , the U.S. Census Bureau, the Small Business Administration, and various other sources, the Washington Post found that $1.2 trillion in cuts would equal:

• The capital needed to start 40 million new businesses (average cost of $30,000).

• More than enough to cover the payrolls for every small business in the country for six months (total $2.1 trillion annually).

• Enough money for every small employer in the country to add five new $40,000-a-year employees for a full year (6 millionsmall employers).

• More than the combined taxes to be paid this year by every filer under the IRS’s Small Business and Self-Employed division (about 40 percent of $2.9 trillion, or $1.16 trillion).

• Triple the total amount of venture capital investments made so far this century ($423 billion since 2000).

• The capital you would need to make 150,000 start-up investments, based on the average venture capital deal during that period ($8.1 million).

• More than the total amount of lending to small businesses in the first half of 2012 ($1.17 trillion) and four decades worth of SBA-backed loans (about $30 billionannually).

• The cost of covering the health insurance premium for every small business employee in the country for five months (average cost of $4,260 for individual coverage).

• More than three times the total amount of goods and services exported by small and mid-sized businesses each year ($380 billion).

• Enough money to power the SBA on its current budget for more than a thousand years (2013 budget request is $948 million).

Of course, in reality, the entire $1.2 trillion– if saved– would not be devoted entirely to small businesses. Nevertheless, this is truly staggering and shows just how much money $1.2 trillion really is.  Even saving a fraction of this funding would be significant for small  businesses.

For more details on the broader impacts of the sequester, see here for four charts that illustrate the impacts. Sadly, many in Congress are acting like the sequester is unavoidable. Rather than trying to stop it from happening– or even working toward a compromise– they’re working to protect their own districts.  Seems like they’re missing the forest for the trees. Still, Congress has about a week to act. Let’s hope that our elected officials can save us from getting into another economic hole before then.

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Entry filed under: Economic Development, Economy, Jobs & Employment, Small Business. Tags: , , , , , , .

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