The Politics of the Small Biz Bill - Analyst Blog

In an effort to boost lending to small businesses to create more jobs in the challenged economy, Democrats in Congress have been pushing hard a small business stimulus bill, which includes a $30 billion credit to community banks that lend to local businesses, along with $12 billion in tax breaks.

Democrats vs. Republicans: Political Agenda?

However, Republicans have been blocking the bill on claims of its lack of potential to stabilize the economy. One such issue now brought up by Republicans is that President Obama’s bailout package seems to have benefited more non-U.S. companies.

The Republicans’ official objection to the small biz bill is that they haven’t been allowed to introduce enough modifications. They are also pointing their finger to the $814 billion stimulus measure pushed by the Congress last year. According to the Republicans, the stimulus has failed to protect the economy, and that the small biz bill is slated to take the same road.

President Obama said that his economic team is working hard to identify additional measures that could make a difference in promoting both growth and employment in the short term. According to the President, the bill seeks to extend middle-class tax cuts, initiate incentives for clean energy research and development and help rebuild infrastructure.

As growing economic concerns along with slowing recovery remain issues for November's mid-term elections, Republicans allege that the President is trying to milk the situation by flaunting his concerns.

Small Business Lending Scenario So Far

Small business owners have been hit hard by the market turmoil. Focusing on these organizations will be key to the economic recovery as small and medium-sized businesses will be proactive in job creation in the challenged economy.

Several large financial institutions, including JPMorgan Chase & Co. (JPM), Wells Fargo & Company (WFC) and Bank of America Corp. (BAC) have continued to contribute to the economic recovery by lending to small businesses.

Loss of Focus?

The sluggish recovery of the economy reflects that lending standards have slackened over the last few months. However, lending to small businesses primarily to create jobs is probably not the first-line problem with the economy. If businesses have fewer customers as a result of lower consumer spending and shrunken demand, they won’t take out loans to expand in the first place.

Besides, though it may provide some relief to small businesses who are struggling as a result of a tighter credit line, there is no certainty that the bill would help increase market demand. The Republicans may, then, have more substance in their protests this time than they had against TARP.
 
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