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March 2007
by James C. Musser, ASBA Washington Representative

March has blown in with news as mixed as the weather. There is good news on the federal deficit. The bad news is a Democratic budget is beginning to take shape and foretells a major tax increase. The other good news is the American people like us; they really like us. All of these issues make up the roundup from Washington for March, 2007.

Economy: The 2007 Fiscal Year for the U.S. Government began in October 2006 and the Treasury Department reports that the gap between the government’s income and its spending has shrunk by over 25% during the first five months of the budget year. The government ran larger-than-expected surpluses in December and January although February saw more funds flowing out of the Treasury than in due largely to tax refund payments.

The Bush Administration is projecting the deficit will total $244 billion, which is an improvement over last year’s actual deficit of $248.2 billion. The Congressional Budget Office projects the deficit for FY 2007 will be even smaller at $214 billion. The Bush Administration says that its budget proposal for FY 2008 would keep the government on track to a balanced budget but congressional Democrats have rejected the president’s plan in favor of crafting their own.

The other good economic news from Washington is the unemployment rate has dipped again. Unemployment had edged up to 4.6% in January but new job creation accelerated in February easing unemployment back down to 4.5% last month. The Commerce Department also reports that new housing starts shot up by a stronger than expected 9% in February after a disappointing January.

Budget: The Senate Budget Committee has moved ahead on drafting its version of the FY 2008 Budget Resolution and danger signs are in the fine print. The Senate plan assumes an additional $900 billion in federal revenue, which means a tax hike is in the works. Senate Budget Committee Chairman Kent Conrad (D-ND) claims the Senate version of the Budget Resolution balances the budget over time without a tax increase but the numbers assume an additional flow of revenue remarkably similar to the amount generated by allowing the Bush tax cuts to expire in 2010.

The House Budget Committee has yet to mark-up its version of the Budget Resolution. Once both the House and Senate have passed their versions, the two must be melded together for use as a blueprint for government spending for Fiscal Year 2008.

Small Business: They like us! They really, really like us! A Harris Poll, released this month, indicates that the American people put more trust in small business than any other major institution. Fully 54% of respondents say they have a “great deal” of trust in small business and fully 96% of Americans put some level of trust in small business. Small business was followed in the “great deal” of trust category by the military at 46% and overall 79% of respondents said they had some level of trust in the military. Medicine and colleges and universities tied for third place at 37%. The least trusted institutions were Congress at a mere 10%, the press at 12% and law firms at 13%. The Supreme Court was the most trusted part of government with 27% and the White House came in at 22%. President Bush can take some comfort from the fact that his number, low as it is, is greater than President Clinton’s at the same point in his administration.

ASBA will be closely monitoring the all the issues affecting small businesses and their owners. Check back each month for the latest from our nation’s capital.

James C. Musser, Esq. is a legislative consultant based in Falls Church, Virginia. His reports are updated monthly.