Effort To Help Small Businesses

WASHINGTON WATCHEffort To Help Small Businesses 
Runs Aground In Congress

WASHINGTON (Nov. 23, 2005) - A bipartisan effort to restore an $80 million subsidy to the Small Business Administration's (SBA) 7(a) Loan Program was unsuccessful when pushed in Congress last week. The program, used by small businesses for a variety of financial purposes, was cut last year, which resulted in higher loan fees to borrowers.

Led by Representative Nydia M. Velasquez (D-NY), the ranking Democrat on the House Small Business Committee, the group hoped to reduce the loan fees as one measure to stimulate the small business sector of the economy. Since the budget cut, loan fees have doubled as the SBA tries to operate on a self-funding basis.

Main Street drives the economy In a report titled "Broken Promises," Velaquez notes that of the 10 recessions in American history, the current one is the third longest on record. Furthermore, the report noted that under the Bush administration, unemployment has grown to 6 percent, consumer confidence measures have dropped nearly 20 percent, and stock market valuations have fallen more than a quarter of their values. 

According to the report, "While the Bush Administration and Congressional Republicans have put their faith and our nation's economic well-being in the hands of big business, it is Main Street small business - not Wall Street - that steers this country's economy. Statements like 'As General Motors goes, so goes the nation,' could not be further from the truth. 

"Small businesses do for this economy what big business cannot: they produce 75 percent of all new jobs, represent 99 percent of all employers and employ 53 percent of the private workforce. They provide almost 70 percent of workers with their first jobs and initial on-the-job training and account for nearly 50 percent of all sales in this country. Small firms are also an essential vehicle for women, minorities and immigrants to enter the economic and social mainstream." 

More than 6.2 million businesses are majority-held or privately owned by women. Additionally, minorities now own nearly 15 percent, or more than 3 million firms, of all American businesses. 

Small businesses haul this country out of recessions "Failing to restore funding for the program has ensured that these costs will continue to remain high, and it is expected that there will be even further increases in the president's budget next year," says Velasquez. "In the end, this leaves small businesses with additional costs in doing business and less avenues for obtaining the financial support that allows them to create jobs and stimulate economic growth." Without providing reasonable access to tools to grow small businesses, the report says, the fuel for a rebound in the economy will be limited.

Failure to ensure that the needs of small businesses are factored into the economic equation has cost our nation thousands of jobs, adds the report's authors, while depriving the single most important driver in our economy from having the necessary resources to spur growth. It is during times of recession that small businesses are especially important to our economic recovery. 

While big corporate America sheds jobs and moves production overseas during difficult economic times, small businesses provide stability and innovation as they are an integral part of the economic renewal process. In fact, it is when our economy dips into recession that the number of small business start-ups spike. 

(Source: U.S. House of Representatives, Small Business Committee Democrats)