Small businesses received a negative message from the congressional spending bill battle.

• The ongoing debate in Congress regarding the federal spending bill has exposed a significant rift regarding additional funding for Covid-related expenses, as small businesses struggle with rising costs in areas such as labor, raw materials, energy, and transportation.
• Public health measures may receive more focus than key small business pandemic relief such as the Restaurant Revitalization Fund and Employee Retention Credit, as Covid budget items will now have to proceed on a stand-alone basis.
• According to a recent CNBC poll, two-thirds of small business owners are in favor of increased financial assistance from the government.

Small business owners on Main Street are calling for more financial aid from the government, but the outcome of the Congressional spending bill debate suggests that it may not be forthcoming.

Small business owners may not receive another significant round of financial support from Congress due to the reluctance of fiscal hawks to provide more funds related to the pandemic, even before Russia's invasion of Ukraine became a key spending issue on Capitol Hill.

Despite the evident demand, only 62% of small business owners are in favor of more financial aid from the federal government, including 49% of Republican small business owners, according to the Q1 2022 CNBC|SurveyMonkey Small Business Survey, as inflation continues to impact Main Street.

As a result of the spending bill's action, the legislative calendar will be filled with other matters, leaving little space for small business concerns. Moreover, with Putin's aggression and the potential consequences for Ukraine and Europe, Congress and the White House may shift their focus to international affairs, leaving domestic legislative plans or priorities behind. Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, made this statement.

There are numerous domestic issues that need to be addressed during this legislative session, including prescription drug pricing, a version of President Biden's Build Back Better plan that can gain the support of West Virginia Senator Joe Manchin, and a Supreme Court nomination in the Senate, all of which will consume legislative days, according to Kerrigan.

The Restaurant Revitalization Fund and Employee Retention Credit are the specific measures for small businesses where hopes have been highest, but their implementation has been made more challenging due to the stand-alone nature of Covid legislation.

The National Federation of Independent Business is concerned about the omission of policy for small businesses in the spending bill, as they were left out. However, NFIB will continue to push for the restoration of the Employee Retention Credit in the Covid-19 supplemental bill that is expected to be considered soon. Small businesses are facing headwinds such as rising inflation, increasing energy costs, supply chain disruptions, and workforce shortages.

According to Kevin Kuhlman, NFIB's head of federal government relations, small businesses do not anticipate these issues resolving anytime soon, as their expectations for future business conditions continue to decrease.

The Employee Retention Credit, which was cancelled earlier than expected in Q4 2021, has an estimated $8 billion in tax credits that small business owners may still be able to claim. However, the NFIB believes it has a better chance of receiving support than the Restaurant Revitalization Fund, which is nearly $50 billion and targeted at one industry, making it potentially harder to gain broad support.

Despite some criticisms, the recently passed federal budget has some positive aspects. Firstly, Congress managed to pass the bill before the deadline, avoiding the possibility of a government shutdown. Additionally, the spending levels for several agencies are higher than they were under the previous administration.

Didier Trinh, director of policy and political impact at the progressive Main Street Alliance, stated that from the perspective of the greater good, we are in a better place. We are increasing our spending level while still recovering from the pandemic and while we require social investment.

The American Rescue Plan provided flexibility to states in allocating financial resources, and many used the funds to support small businesses, according to Trinh.

"Protecting the promised funding is crucial to help small businesses, and the states had every right to be frustrated when it was taken back," he said.

The Main Street Alliance supports the state grantmaking approach over the Paycheck Protection Program, which, despite offering forgivable loans, has not granted many loans that status. According to Trinh, grants are more efficient and provide relief more quickly, and states are better equipped to administer grant programs at the local level.

If small businesses require additional support, they should focus on state programs rather than waiting for new federal legislation.

The White House's push for more Covid spending in the federal budget bill primarily focused on public health measures, rather than providing additional relief to businesses, particularly those in the restaurant industry. Despite concerns from small business experts about the industry's health, the White House's request did not include targeted support.

The Main Street Alliance believes that there should be more financial relief for restaurants, as the original RRF only met one-third of demand, despite the higher cost compared to the ERC, which was repealed prematurely.

Any stand-alone Covid bill will need to be linked to a broader legislative agenda, as there are fewer trains leaving the station, making it more challenging and dimmer, but there is still time, according to Kuhlman.

The spending bill was "essential" legislation, as it represented the best chance for any additional Covid relief. However, in the Senate, it is challenging to predict the success of a stand-alone Covid measure that includes small business relief due to the ongoing objections of fiscal hawks regarding additional pandemic-related spending.

The Senate will continue to pose problems for passing stand-alone legislation with more funds for either the Employee Retention Credit or Restaurant Revitalization Fund, according to Trinh. He said that cutting off the ERC one quarter early was a mistake, and the belief in that is not partisan. However, the question is how to get political momentum for including it as part of a package.

Kerrigan stated that there was no support for new relief measures, such as RRF or PPP, or an extension of ERC within the White House. Instead, the Administration is focusing on aiding small businesses through education and training support via the SBA and other agencies, federal procurement initiatives, and other programs.

The challenge of maintaining profitability for small businesses is increasing as the costs of ownership continue to rise, according to feedback from Main Street to Capitol Hill. "Nothing is getting cheaper," Trinh stated.

A survey by CNBC and SurveyMonkey revealed that more small business owners plan to pass on cost increases to customers if inflation continues to rise. The survey found that most small business owners believe inflation will persist, and Treasury Secretary Janet Yellen shared this view last Friday.

Trinh stated that the economic outlook remains challenging, and the federal government's additional support could provide small businesses with more time. This is particularly important given Yellen's prediction that inflation will remain high throughout the year.

Winning the attention of the White House and lawmakers amid the Russia-Ukraine conflict and before the midterm elections will be challenging. However, small business measures with bipartisan support could help Main Street address core business and economic challenges. Unfortunately, the recently passed spending legislation does not suggest that the federal government is considering economic issues at a local level.

According to Kerrigan, Democrats and Republicans have significant differences in their approaches to tackling problems such as inflation, high gas prices, mending the job market, and resolving supply chain issues.

While lawmakers on Capitol Hill are concentrating on several home-based problems, the small business community is not optimistic that they will receive more assistance for Main Street.

Kerrigan stated that there is a consensus on the revival of earmarks, with over 4,000 in the spending bill dedicated to members' "pet projects." This coincides perfectly with the upcoming election year.

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