This week, Federal Reserve Chairman Ben Bernanke spoke at a Fed conference regarding the difficulty that small businesses are having accessing loans. “Though we believe that our and others’ efforts are making a difference [in easing credit], we also know more must be done,” he said:
The formation and growth of small businesses depends critically on access to credit. Unfortunately, those businesses report that credit conditions remain very difficult…Making credit accessible to sound small businesses is crucial to our economic recovery and so should be front and center among our current policy challenges.
In all, “lending to small business has dropped by some $40 billion since the second quarter of 2008 – going from more than $710 billion to less than $670 billion in the first quarter of 2010.” Of course, Bernanke is far from the only one who realizes that this is a problem, so the Obama administration and Congressional Democrats have been working on a bill that would create a $30 billion lending pool and provide $12 billion in tax credits and cuts for small businesses.
That bill, however, has been hung up by conservatives who want to implement the policy that they truly care the most about: tax cuts for the wealthy. Sen. Jon Kyl (R-AZ), who along with Sen. Blanche Lincoln (D-AR) has crafted a $91 billion cut in the estate tax for the richest 0.25 percent of households, “has persisted in pushing for a vote on his amendment, even if it means holding up the bipartisan small-business package.” Senate Majority Leader Harry Reid (D-NV) said yesterday that Kyl’s zeal to reduce tax rates on the richest of the rich “has become entangled with the small-business bill — making it harder to proceed.”
So, to sum up, there’s wide acknowledgment that small businesses can’t get the loans that they are looking for, and there’s a bill before the Senate designed to address that concern. But Kyl is so intent on spending billions to cut taxes for the very wealthy that he is holding it up.
Now, I’m not convinced that inducing small business lending via more top-down funding will necessarily do all that much, as it doesn’t fix the underlying problem for them, which is a severe lack of customers. But there are plenty of stories of small businesses that are looking for loans being unable to find them, and Kyl is indifferent to their plight, unless aiding them also means cutting taxes for the very rich.