As time goes on, and more and more people wade through the hundreds of pages that make up the so-called economic stimulus bill, it becomes more and more evident that the Senate, as much as the House, sees this bill as a Democrat wish-list come true that will, like the New Deal, keep our economy in shambles for years. However tempting, I am not going to dissect the package, except to say that like the House version, it is very long on spending and very short on stimulus. What’s more, the area lacking the most in both bills is small business.
What Small Business Can Expect
The House has come up with a generous $880 million out its $819 billion package, or approximately .1% of the total. On the Senate side, the picture is not much better. It is a little better, to be sure, but hardly something to write home about. According to Senator Mary Landrieu (D-LA), Chair of the Senate Committee on Small Business and Entrepreneurship:
The stimulus bill includes $515 million to temporarily eliminate fees associated with 7(a) loans, the most common type of SBA-backed loan. Reducing lender fees will help reverse the downward trend in 7(a) lending, stimulating as much as $15 billion in small business loans. Last fiscal year, 7(a) loans decreased by more than $1.6 billion, or more than 30,000 loans. This fiscal year, 7(a) lending is already down by more than 56 percent.
The package also appropriates $100 million for the temporary waiver of fees on 504 loans, which provide long-term financing to small businesses that are expanding and need to buy equipment, facilities or other fixed assets. 504 loans are down 42 percent this fiscal year compared to this time last year. This funding is estimated to stimulate as much as $5 billion in small business loans.
The bill includes funding for the SBA’s Microloan Program, which provides very small loans to qualifying small businesses. It includes $6 million for the program to handle the increase in demand from micro-businesses that have been crowded out of other financing sources as a result of the credit crisis. This funding will leverage an additional $51 million in microloans, creating or retaining an estimated 10,000 jobs. The bill also provides $24 million for complementary counseling.
To provide accountability, the package contains $10 million for the SBA Inspector General’s oversight of SBA stimulus funds and $15 million for increased lender oversight.
That is $715 million in funds with the expectation of creating or retaining 10,000 jobs and the hope of stimulating some $15 billion in small business loans. The House version only sought to stimulate $2 billion in loans, so I imagine that the Senate version is a step in the right direction. But $715 million in funding—and that includes funding for oversight and enforcement is, like the House version, a mere drop in an $885 billion bucket, some .08% of the total.
Small Business Deserves More Than Pork-Project Spending
There is no secret that the so-called stimulus bills are, more than anything else, pork spending bills, a wish list that goes back a generation or more. At a recent Democratic Caucus gathering, President Obama came out and said as much, telling the audience that the stimulus bill was, in fact, a spending bill. Unfortunately, that is not what America needs right now.
What America needs is a bill that focuses on creating jobs, rebuilding industries, and breathing life into the American economy. These things are done via the private sector, not the public sector. They are accomplished by low taxes and reasonable regulation through the free-market system, not by some quasi-socialist government investment scheme. More than anything else, it is done by encouraging small businesses.
Right now, with such a low level of stimulus for small business, it simply will not work. Yes, the tax breaks will help, but the amount of stimulus needed to shock the system into full function again is simply not there. Remember, it took the dedicated rearmament of World War II to snap the US out of the Great Depression, not the New Deal. There were ships and planes and tanks to build, uniforms to make and food to can. America’s basic industries were called on to produce, and they did. That is not the case here. Our government is not asking us to produce, it is not even thinking how we can rebuild our capacity to produce the way we did all those years ago. No, for the most part the US Government is funding itself, or state or local governments, to pay for things these lawmakers and their parties have wanted for years.
The Bottom Line
The fact is, for small business, which is losing jobs at an unheard of rate, all of this is simply too little, too late. I think that small business, the great jobs engine of the US economy, deserves better. If we are to recover, it must have better than the miserly allowance that Congress and the President have allotted for it.
Like many others, I have contacted my senators as well as the three Republicans who crossed party lines to pledge their support to the bill. I have voiced my concerns to them and asked the Republicans not to vote for the measure (I know the Democrats are fully invested). I hope you have as well, demanding that it do more for small business.