Small Firms Not Thrilled By Clinton's Philosophy

STRATEGISTS at the Clinton-Gore campaign headquarters are very proud to call Bill Clinton a pro-business Democrat, a label that has long been a contradiction in terms for presidential politics.

Gene Sperling, the campaign's economic policy director, runs down a list of new endorsements from Fortune 500 leaders and from high-tech business leaders who support the Clinton-Gore economic strategy.

But Governor Clinton has yet to win over smaller United States firms, which account for well over half of US employment and output. Moreover, these small companies have been responsible for the lion's share of job creation over the last decade. Wary of being targeted by more taxes and regulations, these businesses are uneasy about what a Democratic administration would bring.

William Dunkelberg, chief economist of the National Federation of Independent Business (NFIB), has no doubt that, under a Clinton administration, businesses will be hit with a host of new government-mandated costs that eat into their bottom lines. Eighty percent of NFIB's 600,000 members have less than 40 employees. "Absolutely, there will be more regulations if Clinton wins," says Mr. Dunkelberg, who is also dean of Temple University Business School.

If Clinton occupies the White House, "Congress will be heaping on the mandates - from health care to day care, to elderly care, to care for the environment," he asserts.

The critical difference between Clinton and President Bush, Dunkelberg says, is that "Bush has used the veto 30-odd times, and Clinton won't."

All the costs that businesses incur from government regulations will more than offset Clinton's proposed business tax breaks that are designed to create jobs, he adds.

"I call it `sneak a tax on business,"' says conservative John Cregan, president of the US Business and Industrial Council. "Because government can't afford to pay for social costs, due to its $400 billion deficit, it tries to make business foot the bill."

Mr. Cregan says his members are unhappy with both candidates. "They feel burned by Bush," who signaled both the Environmental Protection Agency and Congress that his administration "was a kinder and gentler time for regulations," says Cregan. He applauds Clinton's "very hands-on approach" in promoting US competitiveness.

And while he differs with much of it, Cregan is also impressed with the amount of work Clinton has put into "his detailed economic plan."

By contrast, he says, Bush is "so disengaged, he obviously doesn't care about domestic policy."

But "the pillars of Clinton's `putting people first' plan," says Cregan, foist too much government on the private sector. "Clinton says companies must provide for an employee's social welfare; if they refuse, they must pay a tax so the government can be the provider."

Such mandated benefits and increases in the payroll tax, says Cregan, "are prohibitive for small firms and start-ups," which have generated roughly two-thirds of the nation's job growth during the past decade.

Big corporations already offer health care and family and medical leave, says Cregan, "and now they want the government to force the smaller companies to absorb some of the costs."

Foreign corporations are also anxious about a Clinton victory; the Democratic nominee has pledged to raise revenue by imposing a tax on international firms investing in the US.

Roberto Albisetti, the Washington director of IRI, a huge Italian conglomerate that employs 8,000 Americans in the US alone, says his firm is one of many large European concerns that have invested in the US as part of a global production, technology, and market network. These foreign investors provide the high-skill, high-wage jobs that Clinton seeks for more US workers.

While Clinton's proposal is designed to tax the income of foreign firms that is hidden by creative accounting or by establishing holding companies in offshore tax havens, Dunkelberg says "the true masters of those schemes are US firms.

"We are by far the biggest foreign investors in the world. If we impose a tax like that, our investors will be slapped with the same tax by foreign governments."

Conspicuously missing from the election-year debate is a serious discussion of the burgeoning federal deficit and a government commitment to spend within its means, Dunkelberg says. "In every election, the presidential candidates have offered plausible plans. That's where we need leadership. This year, everyone's ducking it."

Business, driven by consumer demand and investment capital, is troubled by lack of fiscal responsibility. Given the economic uncertainty, manufacturers keep production and orders to a minimum so they are not saddled with large stocks and debts.

Dunkelberg, who prepares monthly forecasts of business confidence, says: "We're looking at the leanest inventory picture in the history of our surveys, which we started in 1973. The only thing lower than the stock of inventory is the stock of consumers, and business hiring plans are very weak."