The Senate is planning to work this week on a bill that provides tax credits to small businesses and creates a $30 billion lending fund for those same businesses to access loans. The $30 billion would go to community banks, and the interest rate that the bank pays to the government for the loan would decrease if the bank uses the money to finance small businesses.
Considering that Republicans claim to be staunch defenders of small businesses (and use small businesses as cover to justify their desire to cut taxes for the richest two percent of Americans), this should be a fairly non-controversial piece of legislation. Alas, nothing comes easy in this Congress. In fact, today on C-Span, Sen. Mike Johanns (R-NE) said that small businesses “need another loan like they need a kick in the pants.” Watch it:
I guess a kick in the pants is pretty sorely needed then? Consider this chart from the latest National Federation of Independent Business small business survey:
According to a new report from the Congressional Joint Economic Committee, “the number of loans made to small businesses, which peaked at 27.2 million in the second quarter of 2008, has fallen by more than 4.8 million since then, a drop of 17.8 percent. The total value of those loans fell by $60 billion.” “The restrictive lending environment continues to impair the ability of small businesses to obtain credit needed for workforce expansion,” the report said.
Johanns is not the first to have trouble wrapping his head around the notion that banks may be hesitant to lend to small businesses in the aftermath of a financial crisis. Republican National Committee Chairman Michael Steele last week said “you’re going to put money into financial institutions on the assumption that small businesses are going to go and take out credit loans, or credit lines — they don’t need that.” One week earlier, Steele was in an entirely different place though, calling for a focus on “incentives for people to get back into the credit markets.”
Johanns does have a point about small businesses ultimately expanding when they have enough customers to support such a move. But there is a credit crunch occurring in the small business world, which Republicans seem willing to ignore, in order to prevent the Obama administration’s proposal from going forward. Remember, Sen. George Voinovich (R-OH), who intends to support the bill, has already acknowledged that Republican opposition is all about “messaging.” “We don’t have time for messaging,” Voinovich said. “We don’t have time anymore. This country is really hurting.”