It’s like Christmas in January.
By the time the President’s stimulus package makes it through the Senate re-writes, it’ll have something for everybody, but not enough of what’s really needed get our economy back on track.
There’ll be monies earmarked for public works, building energy infrastructure, education, aid to state governments and an entire array of tax cuts. With all of its hype, one essential area is conspicuously missing … aid to America’s small businesses.
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President Obama may be a breath of fresh air in the White House. But he already is afflicted with the myopia that has blinded past presidents to the importance of small businesses to American economic health.
In the current economic crisis, America’s small businesses are facing extinction, and no one really seems to care.
The Point: Lines of Credit
The core problem facing small businesses is the lack of liquidity. Without critical lines of credit that previously were available, many otherwise vibrant concerns will be forced to shut their doors, turning the main streets of America into ghost towns.
Over half of all Americans still work in small businesses. In the future, small business is where the majority of new American jobs will be created.
Wall Street cheered this week when Bank of America and Citigroup, among other big banks, forked out $65 billion to finance Pfizer’s merger with fellow pharmaceutical giant Wyeth Labs. From their perspective, the massive federal banking bailout finally had begun to thaw the freeze on lending.
A Dagger for Small Businesses
Since 1953, the Small Business Act has spawned a number of federal programs designed to stimulate the national economy and create jobs by assisting small businesses and firms owned by women, minorities and veterans. Through severe budget cuts, the Bush White House effectively emasculated the Small Business Administration.
Dozens of federal investigations have shown a dramatic lack of oversight for nearly every federal program designed to help small businesses. Investigative reports released through ABC, CBS and CNN revealed that nearly $100 billion a year in federal small business contracts has been diverted to Fortune 500 companies.
A 2005 report prepared by the Inspector General of the Small Business Administration confirmed that billions of dollars in federal small business contracts had actually gone to corporate giants such as Wal-Mart, Microsoft, Home Depot, John Deere, Xerox and General Dynamics. Even more scandalous is the fact that a portion of these small business monies were paid to European conglomerates like British Aerospace, Rolls Royce and Burhmann NV, headquartered in Holland.
Federal Government May Have to Act
Current federal law stipulates that a minimum of 23 percent of the total value of all federal contracts and subcontracts must be awarded to small businesses. Enforcement of this law by the new administration would go a long way towards providing aid to America’s most important and unsung business sector.
Here’s another idea.
If banks are unwilling to lend to small businesses, even through the SBA, then the federal government should use a portion of the stimulus monies to become a direct lender. Then it should compel the banks that already have received billions of taxpayer dollars in direct federal aid to buy back the paper.
Unlike the toxic loans that led to this mess, the banks would finally hold something of value.
John Cohn is a senior partner in the Globe West Financial Group[ based in West Los Angeles. He may be contacted at www.globewestfinancial.com
