bMighty vs. Bernanke - Obama Finally Steps Up For Small Businesses. But Will It Be Enough? - InformationWeek

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2/25/2009
11:50 PM
Fredric Paul
Fredric Paul
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bMighty vs. Bernanke - Obama Finally Steps Up For Small Businesses. But Will It Be Enough?

Small business got a lot of attention on the Presidential campaign trail last year, but they've seemed kind of invisible in Washington since then. Until last night, that is, when President Obama finally shared the love with entrepreneurs and small business owners. But despite the glowing rhetoric, it's not at all clear that business owners will get what they what they really want out of the administration.

Small business got a lot of attention on the Presidential campaign trail last year, but they've seemed kind of invisible in Washington since then. Until last night, that is, when President Obama finally shared the love with entrepreneurs and small business owners. But despite the glowing rhetoric, it's not at all clear that business owners will get what they what they really want out of the administration.On the plus side, Obama's address to Congress bestowed a series of shout-outs for beleaguered SMBs, starting almost at the beginning:

"The answers to our problems don't lie beyond our reach. They exist in our laboratories and universities; in our fields and our factories; in the imaginations of our entrepreneurs and the pride of the hardest-working people on Earth."

and then...

"I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can't pay its workers."

That makes The rANT feel all warm and fuzzy, but we still want to know what Obama is actually going to do to help? According to the Financial Times, the $787 billion stimulus bill had surprisingly few juicy bits specifically for small business. "The law allocates an additional, one-time $730 million infusion for the [Small Business Administratin] agency (which encourages bank lending by subsidizing small-business loans), on top of its $570 million operating budget last year. Critics argue that the additional funds are a far cry from what is needed to give many small businesses a legitimate boost in this economy."

So what was different last night? According to Obama, the credit crunch remains the biggest issue facing small businesses:

"You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll."

"But credit has stopped flowing the way it should. Too many bad loans from the housing crisis have made their way onto the books of too many banks. With so much debt and so little confidence, these banks are now fearful of lending out any more money to households, to businesses, or to each other. When there is no lending, families can't afford to buy homes or cars. So businesses are forced to make layoffs. Our economy suffers even more, and credit dries up even further."

"The concern is that if we do not re-start lending in this country, our recovery will be choked off before it even begins."

To help, Obama is proposing a massive new "lending fund" to inject cash into the economy, and small business will be a key recipient:

"We are creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small business loans to the consumers and entrepreneurs who keep this economy running."

That will help, no doubt. But is the credit crunch really the main issue pressuring small businesses? When The rANT talks to small business owners, IT folks, and technology vendors, they typically don't concentrate on credit problems. They say that strong, healthy companies can still find ways to buy what they need. The problem, they say, is that everyone is afraid to buy at all, worring that things will get worse and that they'll need the cash more than whatever they might buy. Obama's Lending Fund won't help there, except perhaps to help reassure everyone a bit.

In the end, The rANT thinks there might be more assistance for small businesses in another key point of Obama's speech: health care reform:

"We must also address the crushing cost of health care.  It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas."

Small businesses remain at a real disadvantage compared to larger companies when it comes to buying health care coverage for their workers. They pay more, have more limited options, and get crappier coverage. Health care reform could help alleviate those issues, and also make US businesses more competitive against foreign companies, which typically don't have to worry about the issue. Don't hold your breath, though. There are powerful, entrenched interests aligned against health care reform, and they won't go down without a fight. Remember what happened last time it was tried? Hillary Clinton does.

Oh, and did we mention that business owners and entreprenuers aren't going to like some of the other things Obama talked about? Cap and trade on carbon emissions, for example. That could drive up costs for many small businesses (of course, it might also create new business opportunities).

And what of the proposed tax increases on folks making more than $250,000 per year? According to the Wall Street Journal: "Some research has shown that less than 5% of small-business owners earn that much annually. Still, some experts worry that raising taxes will disproportionately hurt high-growth businesses  the ones that create the most jobs. Republicans, in particular, said they fear his plans to raise taxes will hurt entrepreneurship and job creation."

So if you add it all up, what do you get? Hard to say until we see how it all pans out over time. But The rANT certainly agrees with this line from Obama's speech: "None of this will come without cost, nor will it be easy." But Obama went on to say: "But this is America. We don't do what's easy. We do what is necessary to move this country forward."

And hey, who knows more about not taking the easy way out than entrepreneurs and small business owners?

Read the full text of Obama's speech here, or .

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