Jobs: The Good, the Bad, and the Ugly

Jan 12, 2010

The Good

Senate Majority Whip Dick Durban (D-Ill.) and retiring Democratic Policy Committee Chair Byron Dorgan (D-N.D.) are said to be leading a group of more than 40 Democratic lawmakers who have been working on a job-creation package since returning from the August 2009 recess.  Lawrence Summers, director of President Barack Obama’s National Economic Council, and other White House officials also are said to have been active participants in the discussions. 

Durbin and Dorgan, along with their staffs currently are sifting through more than 120 job-creation suggestions proffered by their fellow Senators, focusing specifically on job creation in the small-business, green-energy, and public-sector industries.

Although the U.S. House of Representatives in December passed a $150 billion jobs bill, the Senate likely will forge its own legislation. While the legislation still is a work in progress and nothing is definitive, the Senate package is expected to include provisions from the NSBA-supported S. 2869, the Small Business Job Creation and Access to Capital Act, introduced by Sens. Mary Landrieu (D-La.) and Olympia Snowe (R-Maine), the chair and ranking member of the U.S. Senate Committee on Small Business and Entrepreneurship.

Specifically, the bill could extend of the small-business provisions of the American Recovery and Reinvestment Act—specifically, the 90 percent guarantee on 7(a) loans and the elimination of borrower fees on both 7(a) and 504 loans—through Dec. 2010. The legislation also could increase the
loan limit on 7(a) loans from $2 million to $5 million, on 504 loans from $1.5 million to $5.5 million, and microloans from $35,000 to $50,000. 

NSBA strongly urges the Senate to include all of these provisions in any final jobs package. 

The Obama Administration also recently unveiled $2.3 billion in new tax credits to clean energy manufacturing companies and one-third of the recipients were small firms.

The Bad
While it is welcome news that Congress and the administration finally are turning more attention to America’s struggling small businesses, this focus should have occurred months ago. NSBA has been sounding the alarm about the credit crunch crippling the country’s small-business community for more than a year.  

As NSBA repeatedly has pointed out, small business historically has led America’s resurgence out of periods of economic distress and uncertainty. These small-business led economic recoveries were based on the creation of millions of new, small firms. Large companies still were cutting jobs in the year following the last recession, while small firms had created more than a million new jobs in that same time period.

Despite the many signs currently indicating an economic recovery is afoot, small-business job creation is not one of them. An insufficient number of new, small firms are being created and an inadequate number of existing small businesses are hiring new employees. If the U.S. economy truly is to recover, this must change.

The Ugly
The U.S. Department of Labor recently reported that the national unemployment rate remained at 10 percent and that the nation lost a worse-than-expected 85,000 jobs in December 2009. It should be noted, however, that this is the smallest monthly decline since March 2008.

According to the latest employment survey by Automatic Data Processing (ADP), a payroll-processing firm, small businesses cut 25,000 jobs in December, marking the 23^rd consecutive month small firms cut jobs.  In total, ADP estimates that 1.8 million small-business jobs were lost in 2009—or about 40 percent of the 4.7 million positions cut by all firms, small and large.

Small-business bankruptcies also increased dramatically in 2009. For the year ending on Sept. 30, 2009, small-firm bankruptcies were up 44 percent compared to the previous year, according to Equifax, a credit-reporting agency. This sharp increase didn't include personal bankruptcies, which also increased sharply.

Clearly the time for talk is long over. America's small businesses need quick action to ensure the viability of entrepreneurship and the long-term sustainability of the most vibrant and jobs-rich segment of the U.S. economy: small business.