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August 30, 2010

Obama: Hey Small Businesses!! Don't Need Credit? I'll Give You More!!

Our beloved but spacetime-challenged President spent some of this afternoon talking about the heinous Republicans and the harm their contrary attitude brings to small businesses (paraphrased by Tapper & Miller):

..Republicans need to stop obstructing a initiative he proposed to cut taxes that will encourage small businesses to hire and expand, as well as a $30 billion small business lending initiative.

“Drop the blockade,” he said to Senate Republicans, whom he said were “holding this bill hostage,” damaging economic growth.

Ignoring the obvious partisan blather, I'm troubled by the lending portion of the bill. Not that it's bad to improve small business's access to credit, but it appears to me that right now, in this economy, this is not going to have a significant effect.

When the economy is doing well and businesses want to grow, problems with access to credit can hinder their expansion. But when the economy is sputtering and businesses are uncertain about the future, their need for credit is more as a lifeline to keep paying the bills. Most businesses won't borrow. Businesses who do will do so reluctantly. And they won't use the money to "hire and expand," they'll use it to make payments on old debt and pay for (hopefully temporarily) idled workers.

But don't believe me - believe the recent poll results from the National Federation of Independent Businesses, who found that:

Overall, 91 percent of the owners reported all their credit needs met or they did not want to borrow, up one point. Credit may be harder to get compared to the bubble period (as it should be) and is always harder to arrange in a recession. But credit availability does not appear to be the cause of slow growth as many allege.
The Obama administration, in typical "I've got the car in 'D'" fashion, is wasting time and money pushing a program that is solving the wrong problem. And taking cheap shots at the GOP as they blithely drive toward economic oblivion.


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posted by Geoff at 04:36 PM

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