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.