If the budget battle in Congress results in cuts to Social Security or Medicare, it would undermine small business owners' retirement plans and weaken consumer demand for goods, according to a report by two national advocacy groups.
Social Security Works, a nonprofit based in Washington, and The Main Street Alliance, a network of state-based small business coalitions, teamed up to produce the report.
"Even a 3 percent cut in Social Security benefits would take $638.3 million out of New Jersey's economy. A similar cut to Medicare, meanwhile, would cost New Jersey's economy $465.8 million," the report said. "Such cuts are the last thing struggling small businesses need in the midst of a fragile economic recovery."
Although small business groups have not often rallied behind entitlement programs, the nonprofits argue that small business owners are intrinsically tied to the fate of Social Security and Medicare.
Rep. Donald Payne Jr. (D-10th Dist.), who serves on the U.S. House Committee on Small Business, joined a conference call held yesterday to release the findings.
He talked about his opposition to Rep. Paul Ryan's (R-Wisc.) budget that earned approval in the House last week with a party-line vote of 221-207.
"As a member of the Committee on Small Business," Payne said, "this is the type of meat-ax approach that could hurt small business and the Small Business Administration in providing them much needed capital."
Ryan's plan outlines changes to Medicare that might force some beneficiaries to pay more out of pocket for care, but only goes so far as to urge lawmakers to consider reforming Social Security.
But less money for seniors could hurt the state's small businesses, Payne said.
Jeffrey Robinson, an adjunct professor at Rutgers University's Business School in Newark, said seniors can be valuable consumers.
"Senior citizens tend to be price-conscious, but they're loyal customers once you have them," he said.
The joint report cited data from the U.S. Census Bureau data noting that more than one-third of New Jersey residents who own businesses with 100 or fewer employees are over the age of 55. Thirteen percent of those business owners are within a year of reaching their full Social Security benefit age, it said, and many of them will rely heavily on federal benefits during retirement.
"The retirement argument is a little bit more of a challenge for me," Robinson said. "I'm not sure if I agree with the full argument."