Job Creation only achievable by Small Business

Obama and the left want control.

I have to blame the republicans for being so bad that we elected Obama and his brand of leftist policies.

President Barack Obama has named the week of May 24, 2010, as National Small Business Week, with events being held in Washington, D.C., to acknowledge individual small businesses and champions.
The biggest SBA award, the Small Business Person of the Year, is given to an entrepreneur who has developed an outstanding business, overcome challenges and adversity, and contributed to the local community.
One small business owner wrote to me that health care costs are-and I quote-'stifling my business growth,'" he added. "He said that the money he wanted to use for research and development, and to expand his operations, has been instead been 'thrown into the pocket of health care insurance carriers.'"

http://blog.greenwichfinancial.com/2009/03/obama-proposes-aid-to-small-business.html

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/31/AR2009033103852.html

From the Washington Post

The federal government is developing initiatives to make billions of dollars of bailout funds available to small businesses through community banks, according to lawmakers and other government officials.

One approach, put forward by Sen. Mark Warner (D-Va.) on Wednesday, could combine resources from the Treasury Department, Federal Reserve and private banks to create a $50 billion pool of money that would be used to lend to small businesses.

Separately, the Treasury is developing its own plan that would be smaller in scale -- using around $10 billion of bailout funds -- and would not involve the Fed, according to lawmakers and other congressional sources who have been in contact with the agency.

Both proposals attempt to speed aid to small businesses, which government officials say are essential to economic recovery because they employ so many workers. But using the federal bailout for this purpose would be a striking shift from the program's original mandate, which was aimed more at righting the financial system than saving jobs.

Nicely said, PIM.

Working at a "small business" has many pluses, and many downsides. 

Piling up reserves in good years isn't easy....equipment needs replacing, workers expect (and receive) bonuses, raises are given, etc.    When business slows down, even fair size reserves are eaten up quickly by wages, taxes, overhead....none of which are decreasing in line with falling demand. 

Offering loans to small business sounds real good.  Problem lies in the fact that they are "loans". The money must be paid back.  If there isn't enough business, that won't happen.

The creation of businesses creates jobs, hence, increasing spending because people become employed and have money to spend in support of  those businesses.  

I am not an economist, but it looks like a cycle to me:  Money loaned>small buinesss>small business hires employees>employment goes up>employees spend money>small business & large business benefits from the increase in spending>businesses pay back loans. 

a211423: You've just earned a PHD in economics! HA! Henry Ford had a good understanding of how workers drive the economy.

Economic models are not this simple. If you follow the inter-dependability chain...many small business offer goods and services to bigger businesses (and government too). If you don't have a healthy larger economy there is reduced BtoB demand, so small businesses are impacted by lesser demand for the prducts/services they deliver. We already know BtoC is reduced. You cannot generate jobs just by throwing capital at small business as it also requires sustainable demand further up the supply chain. This is why integrated approaches are required and why unregulated capitalism always crashes periodically to adjust the demand and supply equilibrium. It is sound governance that is required not just a freeing of capital (which isn't biting anyway despite the low cost of money if you can get it).

Now, this small business reliance on bigger business as customers is accelerated in a service and hi tech business where bigger bushiness s look to smaller ones for efficiencies or innovation. At the moment the economy is still restructuring and if left to its own devices without government stimulation will stagnate as demand remains low. That is why a strategic stimulus spend is required - to temporarily stimulate a demand and fire up the inter-dependability in the economy. This is all a new reality which is why the traditionalists and especially the monetarists are scratching their heads in confusion. This new economy is beyond their models.   The question for me is have we done enough stimulating or too little, too little would be a huge mistake if we can't sustain demand for the medium term until business has burnt inventory and has to start producing and developing more

Rng: I hate to say this, but there probably hasn't been enough stimulus. I also believe that the stimulus should be across the board. In other words not directed solely at large institutions. There also should have been more strings attached (if that were possible) as to how the stimulus money was to be used. The banks certainly didn't use the money in an appropriate many. I understand the economic relationship between small business and large business and their interdependency. But there's also quite a bit of interdependency between small business. Small business employs over half the American workforce and consumer spending accounts for about 70% of GDP. A little incentive for small business owners to keep workers on the payroll and perhaps hire additional workers can't hurt.

Rory, <ahem>  "I hate to say this, but"......................but the gummit has already blown 1 1/2  TRILLION (1,500,000,000,000.00) dollars. Where do we find more? What, look in the couch cushions?

How much more can we afford? Where does it all just snap from the strain? Borrowing money from the banks that got their money from the money that the government got from them goes beyond ludicrous into the realm of the fantastic. The Chinese have gorged on our debts, and are overdue for a strict diet......they are already getting pickier about what and how much they eat, and are showing a reduced appetite for greens, as it were.

The mortgage market - residential, retail, or commercial - isn't nearly finished tanking.  Employment is numbers are still falling. Sales of almost everything are down. The auto industry is in the tank. The construction industry reeks at the moment, and shows no signs of recovery. The only businesses i hear of showing positive growth are Bankruptcy Lawyers, and the Recliner Industry (seems the unemployed intend to ride things out in front of the teevee - according to the local fish wrap).

No one, and i do mean no one (other than salesmen using illegal phamecuticals), is upbeat on the chances of improvement in the near future.

This borrowing is going to have a huge, huge, cost, both now, and for a long way into the future. Raise taxes and spending by both business and consumer will be reduced. Leave taxes alone, inflation is at the door....and likely hyper-inflation.

It isn't just gummit that has overspent and over-borrowed.

The "70% of the economy" consumer, is deeply in debt. Defaults on credit cards are rising right along with mortgages and car loans. defaults. This isn't caused by just unemployment. Loss of hours, loss of commissions, and bonuses, are contributing. They will continue to increase as the economy keeps sliding.

The falling dollar is forcing a rise in the cost of oil, and that is a factor i see no one talking about. It could become a huge factor again. Rising gas prices could cause consumer sentiment, AND purchases, to fall even further, causing the need for more gummit intervention, which will cause further erosion of the dollar, which...........

I'm with PIM when it comes to letting the economy implode, clearing out the bad debt, and cleaning house on the know-it-alls that got us into this mess.

A compliment to all the above commenters, the good quality of those comments shows at least that fruitful thinking has taken place. There is no total solution for everything, never has been, and will not be in this case of crisis either. Small businesses have more flexibility are more inventive, motivated, applying a more direct driving force on its environment, creating new follow-up impulses and, they will look for other small businesses to create trade and healthy turnover. Big business will be out for a long time to come, small is beautiful again. The German example 'Mittelstand' that was created after the Great Depression 1.0 more precise after WWII, has proven to be the driver for a new healthy economy. At this moment in time big business and all others that don't create viability at the end of the day will implode as HA correctly phrased. A special compliment goes to a211423 (correctly honored by Rory) who as an outsider comes with a logic conclusion. If all in charge in government should have such sound approaches, we by now would have been on the road to recovery. I'm pleased with above contributions that certainly has to spread in wider circles. But the beginning has commenced.

Thank you Pim (and Rory) for your generous remarks.  My knowledge on the topic is limited;therefore, restricted to common sense.  But I learn more as I read the articles and comments.  We are living in defining moments in history on so many levels right now, and I hope we can reflect in a year about what has transpired based on the projections here. 

Very wise words a211423. That is the purpose of my essays to analyze what is going on so that next generations doe have a reference in the event it will be necessary. Now we are witnessing what will become wise lessons in history. Necessary to record for future generations to avoiding similar mistakes that are made  in the recent past, nowadays and probably in the near future. But as you correctly formulated we hopefully in due course can reflect on our economical sins from the past.

Thank you PIM

I hope in the next few years, someone writes the definitive book about how this economic sitution evolved, and I don't mean just the last ten years, for I believe this has been forming for a long time.  And this is why I am not eager to participate in the crusade to malign this administration for the attempts they are making to rescue us.  This is new ground, and it's going to require, perhaps, creative solutions and boot strap ideas from the economists.  The territory is unexplored, but I have faith that we will not only survive, but be better for it.

In the mean time, let's keep up the discussion because this is where we learn and create.