What is the solution then? Incent businesses to hire using tax breaks and federally sponsored access to credit similarly to the way the Feds handle big business and big banks.
First and foremost: "Credit-worthy" small business is a loaded term. Many businesses without access to credit have levered up to the limit of their former credit lines, borrowed from family and friends, mortgaged their homes (if they could) and depleted their personal savings to stay afloat. This is how the real entrepreneurs of America fight for survival by the skin of their teeth. Not on the cushy backs of banking lobbyists and government paychecks.
Credit allows businesses to wait for receivables, hold onto employees,and generally weather the storm until the recession clouds part. In the process of waiting for the economic tides to turn, many small businesses have lost their former good credit status, laid off long-term employees and generally had trouble making ends meet. It's war out there in Real (non-government sponsored) America.
This is where the Feds can step in. Liquidating the big banks through TARP allowed these businesses time and money to recover income and absorb losses. Big banks borrow at the Fed "Discount Window" when they are short of cash, can't make payroll or need to invest in revenue producing innovations. (For example, Goldman Sachs borrowed $10bn from TARP and paid $10.9bn in compensation a few months later. From the Fed lending facility, the firm has been able to borrow unlimited cash with almost no interest to invest in profit making ventures. So how did Goldman get back to the top of the heap? They borrowed their way back that is how a credit economy works. Business needs capital to run.)
1. Therefore, the Federal Reserve should create direct source lending at near zero percent for small business in the same way they do for the big guys. $30bn? Try $90bn for starters an investment in American small business at 30cents per citizen.
2. Credit worthy? Use the same criteria the Fed used for the big banks who were actually insolvent when they were bailed out and take their bad assets "off" the balance sheet. Now how credit worthy are they? Is their business obsolete? Or do they just need funds to wait for economy to rev up again? How about access to credit to meet payroll?
3. Investment tax breaks are great. But if this is about jobs, then why not give tax breaks for creating jobs? What about significantly reducing employer payroll tax for every new hire or rehired worker? After all, this will cost the government far less than social services in the end.
Contrary to popular pundit bellyaching people want to work. They want to be useful. They want to create businesses and fuel the entrepreneurial engine of America. That is how our nation was formed on self-reliant innovation. We like to invent the wheel and we prefer to do it on our own.
But there are extraordinary circumstances, like the once-in-a-lifetime economic tsunami, where help is necessary to get back on your feet. Small business was knocked down and is still trying to get up. The words of a Billy Holiday tune echo the cry of the 2010 American entrepreneur, "I been down so low, it looks like up to me."
Senators, Small Business America is calling on you to help our nation's entrepreneurs boost job creation. So fellas and gals, put your, er" our money where your mouth is.
For heaven's sake, what are you waiting for?
More Resources:
Federal Reserve Chairman Bernanke: July 21, 2010 Testimony on State of Small Business
First and foremost: "Credit-worthy" small business is a loaded term. Many businesses without access to credit have levered up to the limit of their former credit lines, borrowed from family and friends, mortgaged their homes (if they could) and depleted their personal savings to stay afloat. This is how the real entrepreneurs of America fight for survival by the skin of their teeth. Not on the cushy backs of banking lobbyists and government paychecks.
Credit allows businesses to wait for receivables, hold onto employees,and generally weather the storm until the recession clouds part. In the process of waiting for the economic tides to turn, many small businesses have lost their former good credit status, laid off long-term employees and generally had trouble making ends meet. It's war out there in Real (non-government sponsored) America.
This is where the Feds can step in. Liquidating the big banks through TARP allowed these businesses time and money to recover income and absorb losses. Big banks borrow at the Fed "Discount Window" when they are short of cash, can't make payroll or need to invest in revenue producing innovations. (For example, Goldman Sachs borrowed $10bn from TARP and paid $10.9bn in compensation a few months later. From the Fed lending facility, the firm has been able to borrow unlimited cash with almost no interest to invest in profit making ventures. So how did Goldman get back to the top of the heap? They borrowed their way back that is how a credit economy works. Business needs capital to run.)
2. Credit worthy? Use the same criteria the Fed used for the big banks who were actually insolvent when they were bailed out and take their bad assets "off" the balance sheet. Now how credit worthy are they? Is their business obsolete? Or do they just need funds to wait for economy to rev up again? How about access to credit to meet payroll?
3. Investment tax breaks are great. But if this is about jobs, then why not give tax breaks for creating jobs? What about significantly reducing employer payroll tax for every new hire or rehired worker? After all, this will cost the government far less than social services in the end.
Contrary to popular pundit bellyaching people want to work. They want to be useful. They want to create businesses and fuel the entrepreneurial engine of America. That is how our nation was formed on self-reliant innovation. We like to invent the wheel and we prefer to do it on our own.
But there are extraordinary circumstances, like the once-in-a-lifetime economic tsunami, where help is necessary to get back on your feet. Small business was knocked down and is still trying to get up. The words of a Billy Holiday tune echo the cry of the 2010 American entrepreneur, "I been down so low, it looks like up to me."
Senators, Small Business America is calling on you to help our nation's entrepreneurs boost job creation. So fellas and gals, put your, er" our money where your mouth is.
For heaven's sake, what are you waiting for?
More Resources:
Federal Reserve Chairman Bernanke: July 21, 2010 Testimony on State of Small Business
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