StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Republican hypocrisy about small business

20 Aug 2010
Posted by Edmund L. Andrews

 

Politics is a tough business, so I don't want to sound like a crybaby about the Republican strategy of blocking every possible Democratic bill in Congress.  But the GOP hypocrisy toward small business is so transparent that I can't resist writing about this again.

Both parties talk about small business as if it were mom and apple pie.   President Obama actually used the apple-pie cliche at a small-business event last month. But Obama is pushing a bill that might actually help small businesses, which have laid off a disproportionately large share of workers during this recession and are bouncing back much more slowly than big companies.  Senate Republicans, meanwhile, have been blocking the bill for a month now.

As I wrote yesterday in the Fiscal Times, this is a bill that small business groups support; that addresses a real problem for many companies right now in getting bank loans; and that wouldn't add to the deficit.  Senate Republicans aren't really objecting to substance. They complained that Democrats weren't letting them offer all the extraneous amendments they wanted, like one to permanently end the estate tax.

This wouldn't be so annoying if Republicans didn't wail crocodile tears for small business in order to justify their opposition to everything from health care reform and financial reform to letting the Bush tax cuts expire for the top 2 percent of income-earners.  Did you know that half of all small business income would be "captured" by higher tax rates if the Dems have their way? That's what Mitch McConnell and others claim. As it happens, only about 3 percent of small business owners would be affected if the Bush tax cuts expired for those at the top. I wrote about this a few weeks ago at the Fiscal TimesHoward Gleckman offered more detail at TaxVox.

By contrast, the Democrats' Small Business Job Creation Act might do some real good. It offers some new tax breaks, which would be paid for entirely by eliminating tax breaks elsewhere, including one for the oil industry. More importantly, it creates a $30 billion lending fund for community banks, which the banks could leverage to make as much as $300 billion in additional small-business loans.  The C.B.O. estimates that the lending fund would actually make a few bucks for the government over ten years.

And remember: we're talking about helping a constituency -- small business owners -- that leans heavily Republican.  Yet Senate Republicans are blocking it.  As Obama said on Thursday, "It's obstruction that defies common sense."

 

 

 

   

 

 

True but

I agree with everything except the reason Republicans are blocking it. They are blocking everything positive so that Democrats don't have any record to run on. But more importantly they are blocking it because their big campaign contributors told them to.


What is he writing about?

Before making judgements about the merits of the bill referred to in this column, or any alleged hypocrisy, it would be useful to know which legislation Mr. Andrews is actually writing about. Mr. Andrews refers to the "Small Business Job Creation Act" without further reference. In an effort to track down this mysterious bill, I dutifully read Fiscal Times article, but again that was not helpful. I did go to a link referenced in that Fiscal Times article about President Obama's comments he supposedly made yesterday about this bill, but that led me to a Huffington Post article from 2009 that has nothing to do with a bill of that name!! OK, the last link here does actually refer to a White House press release, but not the source of the bill. Now there is a bill pending by that name that was sponsored by Senator Olympia Snowe of Maine. Since Senator Snowe is a Republican, albeit a liberal one, I doubt this has anything to do with the Democrat bill Mr. Andrew allegedly refers to here.

After doing a bit of my own research, I came to the conclusion that Mr; Andrew must be referring, wittingly or not, to the "Small Business Jobs and Credit Act" (H.R. 5297) whose sponsor is Barney Frank. The bill passed the House on June 17 and is currently before the Senate. This makes me wonder: Has Andrew actually read this bill?

Perhaps I'm a hypocrite, but I'm not quite sure yet how I stand on HR 5297. Sure, supporting small business is well, like supporting mother and apple pie, but the question here is whether HR 5297 is the best way to do it. The bill allows Treasury to "lend" money to banks (up to $30 billion) by various means such as preferred stock investments to encourage those banks to in turn lend to small business. The cost to the banks is nominally 5 percent but can be reduced as low as 1 percent if they demonstrate they increased small business loans by more than 10 percent compared with 2009 levels. That's not a high threshold to meet. If I can borrow at 1 percent and lend at, say, 7 percent, that's a sweet deal to be sure. But, sweet for whom? This sounds to me like a bill that benefits banks for more than small business. And, there seems to be a lot of bureaucracy here that could detract from efficient use of these funds. I can think of more efficient ways to support small business. Does that make me a hypocrite?


Here's the bill

Hi Vivian,

I apologize for not including a direct link to information about the bill.  You are correct that I was referring to HR 5297.  The Senate version is called the "The Small Business Jobs Act"  (not "The Small Business Job Creation Act," as I had written). Here's a link to full details.

There's nothing hypocritical about your skepticism of the bill.  In fact, Elizabeth Warren's Congressional Oversight Panel was  rather skeptical about the small business lending fund in a report back in May.  The panel noted that small business lending is down in part because the companies themselves aren't asking for as many loans and because many of them are less creditworthy than they were before the recession.  Beyond that, the banks are more fragile and a lot more risk-averse. And they're worried about being criticized by regulators for taking risks.

But my point is that the bill is a serious attempt to address a real issue.  There is no question that many small companies are having a much tougher time getting access to credit, that they were are bouncing back from this recession much more slowly than large corporations and much more slowly than at comparable points in the last two recoveries.  Warren's COP panel has explored this; the Federal Reserve has conducted dozens of hearings around the country; and surveys by the National Federation of Independent Business  and the National Small Business Association show that a much larger than normal share of business owners saying they can't raise as much money as they need.

As I said in my post, the bill wouldn't be a cure-all.  It might be a disappointment.  And frankly, I'm not thrilled about the additional tax breaks.  We need broad-based tax reform -- lower rates, a broader base and fewer special breaks. 

That said, this bill is completely paid for and wouldn't increase the deficit. In other words, it could do some real good and it doesn't appear to do any harm.  It's a constructive idea at a time when we can really use them.   If the GOP is going to be obstructionist on something like this, what hope do we have of tackling the really hard problems?


 

 

 


  



Hmmm

You state that your reader isn't hypocritical to be skeptical of the bill, but can't seem to extend the same benefit of the doubt to Republicans. Do I detect some hypocrisy on your part instead?


No.

No Republican has proposed any remotely serious policy in years, or decades. They have worked very, very hard not to be given the benefit of the doubt.


Big business - Yes. Small Business - Not So Much.

My rep (Bachmann) voted against this bill. She did defend a large corporate interest (BP) by denouncing the escrow fund for small business victims (calling it extortion money).

Likewise, the support corporations that want to end net neutrality also comes at the expense of thousands of small businesses trying to make their way in internet commerce. Again, a Democrat (Al Franken) is leading the charge in defending the small business interest in that battle.

It seems the Democratic party has become the advocate of small business, while the Republicans continue to run to corporatism.

Interesting.




Recent comments


Advertising


Order from Amazon


Copyright

Creative Commons LicenseThe content of CapitalGainsandGames.com is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 United States License. Need permissions beyond the scope of this license? Please submit a request here.