On June 17, 2010, the House voted to approve H.R. 5297, Small Business Jobs and Credit Act of 2010, by a vote of 241-182. The bill would give the Treasury Department $30 billion of taxpayer money and would authorize the Treasury Secretary to use the funds to make capital investments in small banks (less than $10 billion in assets) to “increase the availability of credit for small businesses.” The bill is currently being considered by the Senate. On August 30, 2010, President Obama, urging the Senate to approve the bill, cautioned that “holding this bill hostage is directly detrimental to our economic growth.” In truth, however, the bill is nothing more than a thinly-veiled rehash of tired Democrat policies that have caused spending, deficits and debt to explode over the past 18 months while consistently failing to create jobs.
If At First You Don’t Succeed, Spend, Spend Again
While the objectives of H.R. 5297 may be laudable, the policy blindly ignores the findings of the Congressional Oversight Panel (COP) which clearly states that the Small Business Lending Fund (SBLF) may have little or no effect on small business credit access or job creation. According to the Panel’s May 2010 report, “The SBLF also raises questions about whether, in light of the [Capital Purchase Program’s] poor performance in improving credit access, any capital infusion program can successfully jump-start small business lending. Supply-side solutions that rely on bank balance sheets, such as the CPP and the SBLF, may not increase lending.” Ignoring the failure of similar programs in the past, the Obama administration continues to advance the same policies of spending and government bailouts.
Democrats Spurning Demand
The COP report also pointed out that sub-normal levels of small business lending could be driven by a number of factors, including fewer financially sound businesses in a tightened underwriting environment or less demand for loans by businesses cutting costs and facing lower sales—not just the lack of capital on the part of lenders, as Democrat policies assume. In supplemental comments to the report, Panel member Mark McWatters wrote, “As long as businesses are faced with the multiple challenges of…enhanced political risk associated with unpredictable governmental interventions in the private sector, and uncertain health care and energy costs, it is unlikely that they will enthusiastically assume the entrepreneurial risk necessary for protracted economic expansion.”
Also included in the COP report was data from a survey of small business owners conducted by the National Federation of Independent Business (NFIB). That organization’s survey concluded, “Small business owners make it clear that the Administration and Congress never understood and still do not understand Main Street’s problem. The problem is sales and to a lesser extent uncertainty.” In a report issued early this year, NFIB made it unmistakably clear that the policies of this administration have failed to address the real economic problems facing small businesses: “Both ends of Pennsylvania Avenue have done little to stimulate sales, knowingly initiated major destabilizing policy changes in a deep, destabilizing recession, lost interest in working out real estate issues, and chose instead the ineffective route to increase small business access to credit by increasing the number and size of Small Business Administration (SBA) loans, the latter being a bit like using a garden hose to put out a house fire.” Yet Democrats’ economic agenda continues to push on a string, with taxpayer obligations and consumer pessimism—instead of small business jobs—the only thing growing.
Where Are The Jobs?
A recent Wall Street Journal op-ed titled “Why I’m Not Hiring” deconstructed the analysis that a manager undertakes today in deciding whether to hire a new employee. Demonstrating that his business must spend $74,000 to pay an employee a nominal salary of $59,000 plus benefits, the business owner explains that his obligations to the government for the hire amounts to a 33 percent surtax each year. One of the largest considerations in employment decisions is the effect of taxes on the costs of labor. Small business managers around the country are certain that Democrats intend for taxes on business owners to go in one direction: up. Moreover, Obamacare is already hurting businesses around the country as insurance providers are forced to raise premiums in anticipation of expanded entitlements. Instead of fostering a stable market for small businesses, Democrats reflexively rely on deficit spending as a solution. These policies have failed to create jobs over the last 18 months and will fail to create jobs in the future.