It has been noted (and noted and noted) that the real engine of economic recovery is small-business hiring. Which is why a lot of people criticized Washington’s focus on big business in most of its early stimulus efforts. And why (eventually) Washington launched efforts to help out the little guy. Often, however, when politicians aim an aid package at the little guy, they get it wrong, because they spend most of their time around fat cats with thick wallets. That seems to be the case with the House of Representatives Jobs for Main Street Bill. It will send $75 billion in repaid TARP funds to a variety of job-creation efforts, like hiring new teachers and retaining cops and firefighters. It also dedicates $48 billion to infrastructure spending on roads, bridges, public transit, and air and water cleanup. Sounds OK. But the problem is that most of the $48 billion won’t go to small businesses but corporate giants. That’s been the problem in the past and it will continue to be the problem in the future. As Rep. Aaron Schock (R-IL) pointed out, “The definition of insanity is doing the same thing over and expecting different results.” (Around our place, that’s the definition of getting up in the morning.)
Small business is a big employer. How important is small business to economic recovery? It’s pretty much the only hope. A recent study by entrepreneurial think tank the Kauffman Foundation shows that it’s startups that do all the hiring. “Of the overall 12 million new jobs added in 2007,” the study says, “young firms were responsible for the creation of nearly 8 million. “It is clear that new and young companies and the entrepreneurs that create them are the engines of job creation and eventual economic recovery.”
Let’s hear it for the IRS. The old Internal Revenue Service isn’t usually the name that comes to mind when you think of government agencies that hold out a helping hand. But the IRS just extended its moratorium on penalties for small businesses that unknowingly put money in prohibited tax shelters. Some businesses were getting socked with penalties as high as $300,000 for shelters that saved them just 15 grand. This was particularly unfair in light of the fact that behemoths like Citigroup got a $38 billion tax break that it shouldn’t have.