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By George, I Think You've Got... a Bailout?

on September 20, 2010 Source: Policy Dialogue on Entrepreneurship

Long overdue assistance for America's small business owners? Or just another ill-conceived bailout?

In Washington, the answer to that question depends on which side of the aisle you sit. Outside Washington, it likely depends on whether or not your business sees a slice of a $30 billion fund intended to ease credit and stimulate lending to small businesses.

Last week, the Senate passed the Small Business Jobs Act by a 61-38 vote largely along party lines -- Sen. George Voinovich (OH) and Sen. George Lemieux (FL) were the only Republicans voting for the measure pushed through by Democratic leadership. Supporters contend that something must be done to help alleviate a credit crunch on small businesses and point to the establishment of a $30 billion fund for smaller banks to increase small business lending, doubling the tax deduction for start-up expenditures to $10,000 and several tax rule changes to reduce the burden on small businesses. Opponents have called the program a "boondoggle," "a mini-TARP" or just stated flatly that it "won't actually help small business." The basic argument against the effort, summed up quite nicely by the Entrepreneurial Mind's Dr. Jeff Cornwall, is that small businesses don't need more debt, they need more customers.

Unfortunately, one of the proposals that did not end up in the final bill was a payroll tax holiday for young firms, an idea supported by PDE's Jonathan Ortmans earlier this year.

The changes to the bill introduced by the Senate irked House Democrats, but you can expect a fairly quick conference with the House to resolve differences with the version it passed in June before it lands on President Obama's desk and is signed promptly.

While the effectiveness of the final bill will be debated -- certainly through the next campaign cycle -- it is yet another example of misplaced focus on a firm's size (small) instead of its age (young). Government data shows that nearly all net job creation since 1980 occurred in firms less than five years old... so why are we still fixated on firm size?

Category:  Capitol Hill  Growth & Poverty  Tags:  funding,

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