A Small Business Agenda for President Obama

President-elect Barack Obama’s sweeping election victory gives him a strong mandate to address many of the nation’s long-standing problems. But given the sorry state of the economy, his first weeks in office are likely to be consumed by efforts to halt the economic slide and restore confidence in our financial system.

Hopefully, he will stick to his campaign promises and make small businesses the cornerstone of his recovery plans. The economy won’t recover until it starts generating jobs again, and small businesses are best positioned to make that happen. But given the nature of our current downturn, they will need help.

Credit is tight and capital is in short supply. In addition, small businesses are struggling to shoulder rising health insurance costs and escalating prices for everything from gasoline to cooking oil.

Like all chief executives, Obama will have to set priorities. But if he can meet the needs of the nation’s entrepreneurs quickly, then the economy will be on the road to recovery before we know it.  So here are my suggestions for his small business agenda.

Economic stimulus: Jump-starting the struggling economy will undoubtedly be the new administration’s top priority. The economy contracted for the first time in the third quarter, leaving little question that the nation is in a recession. The only question now is how deep it will get and how long it will last.

The Bush administration’s decision over the summer to hand out stimulus checks to every household turned out to be a goodwill gesture and not much more. Obama needs to inject money directly into businesses to help them create jobs.  He should move quickly on his plan to give businesses tax credits for creating jobs.

He has also promised research and development tax credits. He should hold off on any plans to raise taxes, although a tax hike seems all but inevitable down the road, given the nation’s soaring deficit.

Obama has also talked about a major public works program to rebuild roads, bridges, and schools. This is classic Keynesian economics and is a good way to inject money into the economy. Investments in the nation’s infrastructure will pay dividends down the road because they add value to the economy.

Credit: A credit crunch triggered the nation’s economic crisis and the recovery will hinge on the continued thawing of global credit markets. If businesses are being counted on to create jobs, they will need access to capital to pay for new plants and equipment. The Small Business Administration (SBA) is perfectly positioned to help Main Street with an array of loan programs, and they are already in place. But for years, the Bush administration has woefully underfunded them, or imposed fees that make it expensive to borrow.

The Obama administration should make adequate funding of the SBA a top priority, with an emphasis on the SBA’s flagship 7(a) loan program and other loan programs that make capital available to businesses. He should also clean up the government’s long-abused contracting process, which has allowed large, Fortune 500 companies to siphon off billions of dollars that is supposed to be set aside for small firms.

Health Insurance: Although it will likely be difficult to enact sweeping health care reform right off the bat, the administration needs to start the process as soon as possible. Both candidates put forth sweeping proposals to reform health insurance, but they also left a lot of questions unanswered. Small businesses suffer a double whammy. Because they are forced to shoulder proportionately higher costs for insurance, many can't afford to offer their workers health coverage, and this puts them at a competitive disadvantage when it comes to hiring employees. Obama should take pains to protect small firms from burdensome taxes or penalties.

Energy: The nation saw just how damaging high oil prices can be to the economy when oil topped $147 a barrel during the summer. Although prices have declined by some 50 percent since that time, the new administration must press ahead with plans to increase energy efficiency and cut demand for oil. This is another long-term priority, but the Obama administration should set the wheels in motion as soon as possible. Encouraging energy efficiency is one quick way to start the ball rolling.

Real Estate: The nation’s housing crisis and the attendant sub-prime mortgage crisis triggered our current economic malaise. The administration needs to bring mortgage interest rates down so homeowners can refinance their current high interest rate loans. Granted, most of the serious damage is confined to select areas of the country like Florida, California, and Nevada. Most of those markets are overbuilt and it will just take time to work off excess inventory.

Nonetheless, stabilizing the real estate market is not only important to homeowners but also small business owners. An overwhelming number of small firms used home equity loans to help fund their businesses. Falling prices have cut off that source of funding, leaving many small companies strapped.

Credit Card Reform: In addition to the mortgage crisis, many experts believe the nation could be hit by widespread defaults on credit cards.  During the Bush administration, the industry has had virtually free reign to impose all kinds of fees and surcharges, not to mention exorbitant interest rates. This is a particular problem for small firms because banks have been avoiding extending lines of credit to them for years. Instead, they have increasingly directed business owners into credit cards for financing.

Immigration Reform: One of the biggest problems facing small businesses during good times is the chronic shortage of workers. A rational policy on immigration would be a huge boost for the economy. Obama also needs to rethink the current administration's focus on fines and police raids. At the same time, unscrupulous employers should be sanctioned.

Once the new administration takes office, it’s sure to be bombarded with requests for relief. Just as small businesses were the focus of the campaign, they need to continue to receive consideration as the government’s priorities take shape. Anything less, and we will only be prolonging the recession.