Bailout, Rescue Plans and Small Business on Main Street

By now we are all familiar with the Bailouts, Rescue Plans and other programs that are designed to help us through this time of economic challenge. We’ve also heard about the need to focus on Main St. not Wall St., to help homeowners who are struggling to pay their mortgages and not end up in foreclosure. I have mixed feelings about all of this and have wrestled with the concepts, plans and realities of the crunch.

The Banking and Housing fiasco I believe, as many do, could have been avoided. When we were looking at purchasing a home a few years back, the suggested price points to me and m wife were about double what we spent. My mortgage banker was a friend and I said him “I know what we make and I’m not going to buy a $1 Million home just for the sake of buying one.” He said that was smart and we should buy what we felt comfortable doing regardless of our income. I then asked him, “Knowing the income levels on Long Island, how can all these people be affording these houses?” (I knew this through my job and use of demography for sales). He said, “They can’t!” He added, “I have people coming in trying to get 2nd and 3rd mortgages, who are making their ‘Benz payment with a credit card.” Fast forward…here we are today, that conversation took place around 2003-2004.

So now it’s the car makers turn. Who are we kidding? I worked with car dealers for almost 20 years and I learned a lot from them. Guess what? The same way people couldn’t afford the house, they can’t afford the prices of cars. Forget energy costs for a moment do some simple math. In 2007 the median U.S. Household Income was around $50,000. If that’s the case how can someone afford a car that costs $25,000-$35,000 or even more? Guess what the general population can’t ! But that’s what cars cost so we have the same issue as housing a different way. Instead of monkeying with mortgages, car makers and banks monkeyed with lease prices, rebates and other gimmicks in order to keep the production lines moving and sales growing.

So where am I going with this…

To me there’s a bigger issue lurking on the horizon and that’s literally Main St.
Where’s the rescue plan for Main St. which is generally comprised of small businesses?
On Long Island, if my memory serves me correctly, 90% of the business are small businesses with less than 100 employees, an even higher percentage are companies like ours with less than 50 employees.

Main St is feeling the effects of this crisis and no one’s talking about what will happen if Main St. closes. The effects of this would make the auto industry crisis look like a pimple.

Recent experiences tell me this bubble is about to pop. Here’s what small business owners like us are experiencing:

Email from me to a client: How’s the holiday season shaping up?
Response Back- one word: Terrible

This is a conversation I had earlier this week with the owner of another small publication:
I asked: “How’s business”
His response back: grumble, grumble “You know… how’s business with you?”
My Response: “We’re feeling it, I emailed someone about stopping by to get a check they emailed one word back – NO.”
His response; “I had someone say, are you kidding (when asked about advertising)? I haven’t paid my November rent yet.”

With the holiday season upon us and the dark of January lurking where’s the conversation about a rescue for Main St? A conversation to make sure stores aren’t shuttered and blight moves in where prosperity used to be. To me this is a questions our leaders need to move up the priority list since without Main St. we won’t need cars or houses.

Tom Pellicane – Publisher, canvas Magazine