A new report by a small-business group urged Congress to leave alone Social Security and Medicare, which have been eyed for cuts as part of the so-called Grand Bargain, and instead target various loopholes, if Congress wants to reduce the debt.
NJ Main Street Alliance’s new report, “Business is (Baby) Booming,” said both federal entitlement programs help strengthen the retirement security of small-business owners themselves, and provide consumers more purchasing power.
In particular, a 3 percent cut in Social Security benefits would take $638.3 million out of the state’s economy and a similar cut to Medicare, meanwhile, would cost N.J.’s economy $465.8 million, according to the report.
“Social Security and Medicare may not be important to the retirement security of the nation’s richest CEOs, but they are critical to N.J.’s small-business owners,” New Jersey Main Street Alliance representative Corinne Horowitz said in a statement.
The report found that 36 percent of New Jersey’s small-business owners are over age 55, at or approaching retirement age.
“Our small businesses are the backbone of our communities and truly have become the catalyst to economic growth,” Rep. Donald M. Payne Jr. (D-10) said in a statement.
“With small businesses creating two out of every three net new jobs, Congress must do everything in its power to protect small business owners and ensure that they have the resources and tools they need to hire and grow.”
“I’m counting on the benefits I’ve earned through Social Security and Medicare for my retirement,” said Chris Bobbins, owner of South Orange Frame Shop. “We’ve put all of our savings into our business. If Congress cuts Social Security and Medicare, I don’t know how I’ll be able to afford to retire.”
In addition to undermining the retirement security of small-business owners themselves, cuts to Social Security and Medicare would hurt small businesses at the cash register by weakening the economy and depressing consumer demand, according to the report.
The group said that Congress should close tax loopholes and crack down on offshore taxes that allow the wealthy and corporations to avoid more than $100 billion in U.S. taxes per year by sheltering their income in offshore tax havens.
“When the wealthy and large corporations avoid their tax responsibility by using offshore tax havens, it robs the country of the resources we need to rebuild the economy, create jobs, and support our small businesses and working families,” Ann Vardeman of New Jersey Citizen Action said in a statement.
“To support small businesses, Congress should cut offshore tax loopholes, not Social Security and Medicare.”
It says that non-wealthy residents are more likely to spend whatever additional income they receive, a phenomenon known by economists as a “marginal propensity to consume.” The group cited a Congresssional Budget Office estimate stating that for every $1 that’s given in benefits, about $1.50 is produced for the economy. More than 1.4 million state residents receive Social Security, with the average benefit being a little more than $14,400 a year.