In the Greater Boston area the small firms on an entire city block will soon slam their doors shut for good -- either going out of business or, in the case of one family clothing outlet, being replaced by a national chain retailer. Sadly, that pattern appears to be repeating itself in countless cities throughout the United States as a combination of sky- high interest rates, soaring personal and business taxes, and increases in the minimum wage pummel many small businesses.
"Many of our member firms are telling us that this is the most difficult period they have faced since the end of the depression back in the 1930s," laments an official of the National Federation of Independent Business. "For small firms, it's truly very difficult right now. But nobody is hearing the cry."
We hope that the incoming Reagan administration, with its close ties to the American business community, will hear the cry and give special attention to the needs of small business in the weeks and months ahead.
This is not asking for preferential treatment when it is recalled that the overwhelming majority of Americans employed in the private sector work not for large corporations, as often assumed, but for small concerns, many of them family "mom and pop" stores employing 10 to 25 people or fewer.
Moreover, during the past decade 98 percent of all new jobs in the US were created within the small business community -- roughly 5.5 million positions. By contrast, the top Fortune 500 companies added roughly one-half of one percent of all new positions.
A recent study by the congressional Joint Economic Committee estimates that the US economy will have to provide 15 million new jobs during the 1980s. Where will those posts come from? The present economic environment has led to the bankruptcy of 12,000 firms during 1980 alone, a 53 percent increase over the failure rate in 1979, and one of the worst rates recorded, according to preliminary analysis by Dun & Bradstreet. Most of those 12,000 firms are small businesses.
There are a number of steps the Reagan team and the new Congress will want to weigh carefully for small firms:
* Devising ways of offsetting the impact of continuing high interest rates. Some banks are now offering special cut-rate loans for smaller firms. More banks need to do so, as small business must borrow monies at three to four percent above the prime rate.
* Small business firms desperately need stepped-up depreciation schedules and an easing of federal paperwork requirements. Congress must also examine whether existing regulations by the Occupational Safety and Health Administration (OSHA) are imposing financial hardships on small firms. The goal must be to foster the ability of a firm to produce without sacrificing work safety. Proper balance is required.
* Perhaps most important, Congress and the administration will want to move expeditiously inconsidering a balanced tax cut that helps spur consumer spending while not triggering a new round of inflation.
There are other longer-range steps that can also be considered, such as devising special debenture issues that would enable businesses initially to pay investors low interest for loans and then later pay higher dividends. Lawmakers will also want to consider simplifying tax schedules for smaller firms and modifying inheritance laws.
Despite their present difficulties, we have no doubt about the resiliency of US small businesses. Innovation, risk-taking, and grit -- these are the characteristics of the small business community. These strengths can serve the American people as much in the future as they have in the p ast.