By: Rohit Arora
While President Obama urged Congress to pass his $447 billion jobs bill combining tax cuts and new government spending, skepticism remains as to whether the package could kick-start the stalled economy and if it would indeed pay for itself as the President promised.
President Obama’s “American Jobs Act” proposals include a 50 percent cut in payroll taxes, incentives for businesses to hire returning veterans and people who have been unemployed for more than six months, and new spending on America’s infrastructure. The President said that the proposals would not increase the growing federal deficit, and that he has ambitions for long-term deficit reduction through spending cuts.
• The number-one issue right now is empowering entrepreneurs to start small businesses. To do that, they need capital. but banks simply aren’t lending. Many big banks have reserves on their books. President Obama should take a page out of Ronald Reagan’s 1987 playbook and vow to increase taxes on assets that are sitting idle if the banks do not reach certain small business lending plateaus.
• When government revenues don’t match its spending, it looks to increase revenue. My fear is that small business owners will suffer. Entrepreneurs don’t have lobbyists like big corporations do and thus are less likely to sway government leaders against taxing their businesses.
There are three things the President should have suggested, but did not:
1. Provide ncentives for small business lending. Tax incentives for hiring are nice, but if you don’t have capital to launch the business, they do no good.
2. Encourage foreign direct investment into new businesses. China has been very good at this. New companies create jobs.
3. Focus on reducing the deficit, which is a time bomb. Who will be most likely to pay the piper? Small business owners, who don’t have lobbyists and are an easy target for higher taxes and increased fees. (It won’t be the poor or the big corporations that pay.) A large government deficit limits access to capital for the private sector in general and small businesses in particular, as they do not have access to public markets. The deficit is exactly the opposite of what small businesses need to help bring America out of its stagnant economy.
Rohit Arora is CEO of Biz2Credit, which connects small business owners with 400 lenders, credit rating agencies and service providers.