"Mr. President, we are proud to be Americans and happy to collect any deposits given to us by our community, but Mr. President we are worried about the FDIC, regulation, and frankly going bankrupt. You see Mr. President. It's either us or them. If we have to make a choice, we would rather it be them." yada yada.
The Real GDP
Question: How do we revive businesses and industries left hanging by a thread? Answer: With liquidity of course. The way we do for our big brothers and sisters.
Our real GDP in America is our labor market. Our best natural resources are people. Put our money behind our people and the engine will turn. Move money out of the top end of the capital markets and into the producing end where value originates. Money is derived in a capital market economy from labor.
For example: What is a mortgage? Thirty years of your labor. What is consumer spending? The fruits of your labor. What are taxes? The spoils of your labor! We won't have any money to spend if we don't generate a healthy labor market. The Market System functions like this: Work = production = consumption = distribution = investment.
We don't need another bank bailout-not even at the regional level. We need to support the nation's largest employer directly. Small Business is simply too-big-to-fail. The big question is: What will resuscitate Small Business America?
Payroll taxes and health insurance costs have long been the bane of small business. For some inexplicable reason, small business pays 45% more than big business in employment taxes. Lowering these costs immediately and retroactively to the first of the year would relieve Small B of a continuing burden.
The cost of health benefits weighs smaller businesses down, especially in hard times. Many employers have opted for cheaper plans or dropped insurance altogether. The office of SBA Advocacy reports, "In 2007, small firm employees were almost twice as likely as large firm employees to be uninsured."
While cutting taxes and health care costs will help, these measures will not be enough to save the nation's largest employer from collapse. Small business urgently needs capital.
Extraordinary Measures
Extraordinary times call for extraordinary measures. Credit is like oxygen for business. To remove small biz from the ventilator, thirty billion dollars of accessible credit would be a good start. Yet if banks refuse to lend, what is the solution?
The federal government needs to step in and rescue small business much the way they did for big business-through direct discounted lending. The Fed could create a Small Business Direct Lending Facility with 0-2% interest and ease of access to funds modeled on the same formula given to big banks.
Forget banks. Forget begging. The government has to step up to the plate and start Phase Two of the economic recovery - direct government lending to small business. Life support for the nation's largest workforce. We did for the big banks; we did it for student loans; we can do it for small business.
What, you gasp? This is not capitalism? Neither is the three trillion dollar rescue for the too-big-to-fail institutions that rode to their glory on the backs of the nation's middle class.
This is an urgent matter of life and death-the death of small business or its resurrection. Will we have a nation comprised only of Walmart megastores? Or will we save Mom and Pop and neighbor Joan.
We have created a socio-economic tragedy with the two-tiered bailout system-a socialized commercial banking system-where the too-big-to-fail institutions are given bottomless safety nets and long ropes of capital with which to hang themselves. All this is understood as necessary and vital to the health and welfare of the economy.
On the other hand, the remaining economy is left to die on the vine. We, ordinary entrepreneurial America, operate under "unfettered" capitalism. The big banks do not. (Not when they need a capital infusion, zero percent loan or backstop for bad investments-then they are glad for government intrusion).
The system of pouring money into the coffers of the nation's largest banks has allowed capital to pool at the top. It has not trickled down, nor even dripped into ordinary hands. Without credit our financial system will not function. Credit is how we make payroll, buy supplies, expand, innovate, and generate revenues. Money must circulate in a capitalist economy. If it ceases to flow freely through all levels, the system is at threat of collapse-this time a collapse of labor and idea-driven entrepreneurs-the nation's middle class.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).