TOPICS > Economy

Obama Jobs Push Focusing on Small Business

February 3, 2010 at 12:00 AM EDT
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President Obama is looking to cut the nation's unemployment rate by offering more aid for small business, but a plan to borrow from TARP has some lawmakers balking.
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JUDY WOODRUFF: Now: how to help small businesses as a way to create jobs.

Yesterday, President Obama proposed using $30 billion from money repaid to the Troubled Asset Relief fund program to help community banks increase lending. Last week, he announced a $33 billion tax credit for businesses that add jobs. And in its budget blueprint, the administration proposes other tax and federal loan measures.

Today, Mr. Obama again focused on the issue at the meeting with Senate Democrats.

U.S. PRESIDENT BARACK OBAMA: What’s happening is businesses, either because they can’t find financing or because they’re still just dipping their toe in the water, have been hesitant to hire full-time workers.

And for us to start giving them some serious incentives, giving them additional access to financing, could accelerate a process that otherwise could take a much longer time and, frankly, all those folks out there who are out of work right now, they just can’t afford to wait any longer. They need it now.

JUDY WOODRUFF: We get two perspectives on the president’s proposals.

And, for that, we turn to Bill Rys of the National Federation of Independent Business, a member organization that represents small businesses, and John Arensmeyer. He’s president of the Small Business Majority, a nonprofit advocacy organization.

Gentlemen, thank you both for being with us.

And let’s take these proposals one by one.

First, a couple of new tax breaks, including this $5,000 credit for businesses that add new employees.

John Arensmeyer, first of all, is that a good move?

JOHN ARENSMEYER, president, Small Business Majority: It is a good move, Judy. It’s a very targeted way to address the problem here and a very fiscally responsible way to address the problem.

This actually worked for us back in the late 70s, when a similar program was enacted, and unemployment — and employment rose 11.1 percent. This is not a panacea in and of itself. It needs to be looked at along with the other credit proposals put forth by the president. But it will, at the margins, enable businesses who are on the fence about hiring new workers to go ahead and do that.

JUDY WOODRUFF: How do you see it, Bill Rys?

BILL RYS, National Federation of Independent Business: Well, I take a little bit of an issue with that.

There’s nothing necessarily wrong with providing a tax credit for a small business owner who employs — who hires a new worker. We’re just skeptical that this is going to be a big incentive to go out and hire a new worker. At the end of the day, a business brings in a new worker because they have work for the employee to do.

And, right now, we just really see sales at an all-time low, near an all-time low, for small business owners. So, until customers start coming in the door, I don’t necessarily think that $5,000 is going to be enough to incentivize a business owner to go out and bring in a new employee.

JUDY WOODRUFF: John Arensmeyer, he’s saying it’s not enough of an incentive.

JOHN ARENSMEYER: It’s one of the many tools that the president is putting forth to deal with a very serious problem.

I mean, small businesses are the engine of our economy and responsible for most net new jobs and usually all the jobs at the beginning of coming out of a recession. This is going to help businesses who are on the margin who, obviously, they have to have the need in the first place, but who aren’t sure how they want to proceed. It will help them on the margins.

And I would remind everybody that, when you put money into small businesses, then that money gets into the economy, and that starts to increase confidence in the economy, when people start to see unemployment going down, which, in turn, generates the economic growth that will help small businesses. So, it’s a cyclical thing here. This is only one of a number of different tools.

JUDY WOODRUFF: Bill Rys, let me ask you about another proposal, and that is to eliminate the capital gains tax on stock in small businesses. This is a targeted thing. It’s on investments just in the last year. How do you — you size that up?

BILL RYS: Well, one of the challenges with this proposal is, it’s very targeted. The number of small businesses that qualify are very small. It’s only what we call a C corp. Only about 20 percent, 25 percent of small business owners would qualify.

Seventy-five percent of small business owners are organized as a pass-through business. So, they won’t even qualify for this. If we wanted to get serious about eliminating capital gains for small business, let’s do it for all small businesses, and let’s do it for any capital asset that they own, not just the stock, if they own an investment or a piece of property, or some other asset.

I think we need to look bigger on a proposal like that.

JUDY WOODRUFF: John Arensmeyer, how do you see that?

JOHN ARENSMEYER: Well, again, I mean, it only attacks a portion of the problem, I would agree. In and of itself, it’s not a panacea. We certainly would be open to looking at an expansion of what has been proposed.

But these — these proposals have to be looked at in total. The credit program, the $30 billion credit program, proposed by the president, the increase in SBA funding that’s pending in Congress right now that has been passed on a bipartisan vote out of the Senate Small Business Committee, and, of course, the capital gains tax, no one of these things is going to solve the problem on its own.

JUDY WOODRUFF: And staying with you, John Arensmeyer, what about taking the TARP money, the money that was repaid by the big banks, and spending $30 billion of it on — on making it available through community banks to small businesses?

JOHN ARENSMEYER: That’s consistent with the goals of the TARP program, which was to get money into the community, so that people would hire. That hasn’t been super successful at the small business level.

But community banks are where small businesses borrow 67 percent of their money. So, this is a very targeted way to take a portion of the money, which, by the way, is all going to get repaid, so it’s extremely fiscally responsible, and it’s going to have a very targeted short-term effect, which is what we need right now.

JUDY WOODRUFF: But, Bill Rys, you have got a problem with this.

BILL RYS: Well, spending $350 billion being called fiscally responsible, when we have $1.8 trillion of a deficit here for this year, I don’t know if that — if I would agree with that.

Small business owners want to see some certainty. One of the big challenges a lot of small business owners are facing are the number of new proposals that are coming out of Washington. Getting more money into the community banks, I don’t know if that’s going to solve the problem. I don’t necessarily know if it’s the community banks are undercapitalized, but they’re hearing a mixed message out of Washington, just like small business owners are.

On the one hand, Washington is saying, get out, small business owners, and hire new workers. But, at the same side, they’re being told, your taxes might go up. You might see health care mandates, which are going to make hiring more expensive. You might see new energy costs.

So, we’re getting kind of a mixed message out of Washington. And not only is the economic problems that are impacting Wall Street keeping them on the sidelines, but they’re hearing a lot of problematic proposals coming out of Washington. And they’re going to increase the cost of doing business at a time when they just don’t have the cash flow to meet their current financing…

JUDY WOODRUFF: So, are you saying these uncertainties override any of these measures the administration is making?

BILL RYS: I think so. Look, when you talk about, for example, the capital gains proposal, I mean, it’s a couple of million dollars.

But when you’re talking about things like letting the current tax rates expire, letting certain capital gains tax rates — other capital gains tax rates expire, new health care mandates, they don’t even — that’s not even a drop in the bucket, a couple of million dollars with the capital gains proposal.

JUDY WOODRUFF: How do you — how do you respond to that, John Arensmeyer?

JOHN ARENSMEYER: Well, we could address each of the proposals on its own. I’m not sure that we have the time to do that, whether it’s health care, which is the biggest single need of small business right now, and is absolutely critical to getting our deficit down and ultimately bringing down costs.

JUDY WOODRUFF: But what about the overall…

JOHN ARENSMEYER: But these programs are — these programs are, in and of themselves, beneficial. And you look at them all together, they’re going to have a significant dent in getting money to small businesses, so they can hire new workers.

JUDY WOODRUFF: And his overall point, that businesses, there’s just this uncertainty because there are so many proposals that are out there, and these small business owners don’t know how they’re going to turn out, what they’re going to mean?

JOHN ARENSMEYER: That’s — he’s absolutely correct. There is a lot of uncertainty, and there is a lot of confusion. And people are scared. There’s absolutely no question about that.

And the beauty of these proposals that the president has just put forth is that they’re targeted, they’re simple, they’re fiscally responsible, and, altogether, they can help deal with the problem.

Even all together, we still have a long way to go to pulling out of this recession. But these are tools in our arsenal to address a fundamental problem that’s happening at the small business level right now.

JUDY WOODRUFF: Tools in the arsenal.

BILL RYS: That’s part of the issue about being targeted.

Last year, we said — the NFIB said — and we talked to our members — we represent hundreds of thousands of small business owners, who we talk to every day. They said, how about a payroll tax cut at the beginning of last year? That would have been an incentive to retain workers, because it would reduce the cost of labor. It would put money back into the employer’s pocket. It would put money back into the employee’s pocket.

It would have been a far more effective way to help Main Street, to help small businesses than a $787 stimulus that was spread all over the place and never really reached Main Street.

JUDY WOODRUFF: So, on balance, you’re saying they shouldn’t be doing any of these things?

BILL RYS: Well, there’s nothing wrong with a lot of these proposals. I mean, they’re very targeted.

But that’s some of the challenges. You’ve got to weigh the good with the bad. While some of these things are going to help some business owners, like the tax — the hiring tax credit is going to help a business who is probably going to hire that worker anyway.

But, at the same time — but, like I said, there’s a lot of concern out there about taxes going up, health care mandates, energy mandates, new labor regulations. Uncertainty, economic uncertainty for the last year, followed by policy uncertainty is not a good — is not a good — is not going to create a good economic environment for job growth.

JUDY WOODRUFF: All right, gentlemen, we’re going to have to leave it there.

We thank you very much. I know we are going to be coming back to this.

John Arensmeyer, Bill Rys, thank you both.

BILL RYS: Thank you.

JOHN ARENSMEYER: Thank you.