Small Business Slump Blamed on September Terror Attacks

By Jim Burns | July 7, 2008 | 8:28 PM EDT

( - A survey of small-business owners in New York City finds that two-thirds of those businesses within the city have seen sales drop, while elsewhere in America, a third of small businesses have watched their sales revenues fall.

The business slump is being blamed on last month's terrorist attacks, according to the National Federation of Independent Business, which sponsored the survey.

"The attack clearly damaged small business economic activity. Small-business owners saw a significant drop in sales, but things seem to have been improving slightly in the last couple of weeks. Small businessmen and women are hunkering down, but have not made major cuts in jobs," said NFIB chief economist Bill Dunkelberg.

The survey was written by NFIB and conducted by Mason-Dixon. The national sampling consisted of 400 small-business owners who were surveyed through the week that ended Oct. 11. Three hundred small-business owners in New York City were surveyed during the week that ended Oct. 18.

Nationwide, 34 percent reported lower sales since September 11. But some believe their sales picture has improved recently. Nine percent reported sales are picking up "a lot' while 37 percent said sales are picking up "a little." Twelve percent said they reduced their labor forces or refused to fill job vacancies since the attacks.

Fifteen percent of those surveyed both in New York and nationwide said they plan to implement new security measures in the wake of the attacks while 18 percent think a new emphasis on security in all facets of American life is going to increase the overall cost of doing business.

Sixty five percent of New York City's small businesses reported sales declines since the attacks, nearly twice the number reported around the country. The percentage of businesses canceling, postponing or delaying investment plans is also twice as high in New York as elsewhere in America, according to the survey. Also, New York businesses were twice as likely to reduce their labor forces as the rest of the country's small businesses since the attacks.

The survey spelled out more bad news for the airline industry. Nearly a quarter of the small businesses said their business-related air travel would be reduced or eliminated.

Rep. Carolyn Maloney (D-N.Y.) thinks Congress should help New York City and the overall American economy but doesn't think the Republican economic stimulus package, which includes a $25 billion refund for corporations that pay the alternative minimum tax, is the way to go. Debate on that package began Wednesday in the House.

"As we look to stimulate the economy, we should help the industries that have been hit the hardest -- the airlines and tourism. The airlines are losing billions, they have laid off over 100,000 people. Tourism is New York City's and New York State's second largest industry and it's reeling," said Maloney during a speech on the House floor.

"15,000 restaurant workers and over 6,000 hotel workers in New York City alone have been laid off since 9-11," said Maloney. She thinks the House would be better off passing legislation she is co-sponsoring with New York Republican Thomas Reynolds.

The Reynolds-Maloney bill would allow single filing taxpayers to write off half of their tourism expenses up to $1,000 and allow joint filers the same opportunity up to $2,000. On top of that, single taxpayers would be able to claim $500 deductions and joint filers, $1,000 deductions for tourist expenses incurred in New York City.