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This Economic Reform Seems Bad For Small Business

Guest post by: Michael Hume

Article Overview: Yesterday's news included a sound byte from President Obama, urging Congress (and his opponents in the Republican Party) to stop blocking his next stimulus, this one ostensibly for small businesses... right after all of them return from vacation.

This Economic Reform Seems Bad For Small Business

If You Really Want To Help, Extend The Tax Cuts Yesterday's news included a sound byte from President Obama, urging Congress (and his opponents in the Republican Party) to stop blocking his next stimulus, this one ostensibly for small businesses... right after all of them return from vacation.

(This guy takes more vacation on your money than a spoiled heir - but that's a subject for another day.)

Unless I'm missing something (and feel free to comment if I am), this "aid" package is being paid for with borrowed money, and the general idea is to guarantee loans to small businesses (a la Freddie and Fannie's "guarantees" of home mortgages). And the biggest reasons the idea has opposition in Congress (which the president's party can override at will) is because the government is out of money, and can't afford more bail-outs... especially when the net effect might well be that the government ends up taking over hundreds of (newly worthless) small businesses.

We also can't afford all those entrepreneurs to leave their wealth-generating, people-employing businesses for the unemployment line. With what would we then pay them?

In short, this stimulus has righteous opposition, because it's a bad idea. Like nearly every one of this administration's ideas, it will cause the greatest harm to the very people (small business operators) it purports to help

Bill Clinton traveled a similar path in 1993-4, having campaigned as a centrist-alternative to the senior President Bush but then using his election as a chance to run the government as fast and hard as he could toward the sort of big-spending, high-entitlement policies favored by the Left. Remember the debacle that was "Hillary Care?" (Frankly, Obamacare now makes Hillary Care seem reasonable, almost austere!) Then, after his party had its backside booted in the 1994 midterm elections, Clinton famously "pivoted" back to the center; thereafter, working with the new Republican Congress, Clinton managed to get some important things done, like reform of welfare and other entitlement programs. The economy grew, and Clinton claimed (and received from the mainstream media) a lot of the credit for the ideas that never would've seen the light of day if the GOP hadn't taken over control of Congress in those elections.

That was OK with the Republicans, who'd been taught by Ronald Reagan that you can accomplish amazing things if you don't care who gets the credit.

Obama could take a cue from Clinton, and in fact might even be able to stave off a midterm drubbing if he were to pivot early, and announce right now a proposal to extend the 2001 and 2003 tax cuts. If he did that, and the rest of his party followed suit, the Democrats might avoid losing control of at least the House of Representatives in this fall's election.

More importantly, that move would be the greatest help they could offer to struggling small businesses and investors. It would be the first thing Obama would have done during his presidency that actually worked.

But don't hold your breath. Obama and the Democrats campaigned hard on ending the "tax cuts for the wealthy," and playing the class-warfare card is always their favorite ploy. I expect them to go down in November, sailing off the cliff with their class-warfare banner flying high... even knowing a pivot might actually save their control of the government. Therefore, since I think we desperately need balance in the federal government (and pronto), that's exactly what I'm hoping they'll do.

If you're an entrepreneur, hold on, if you can. Help is on the way.

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Article Tags: economic reform, finance reform, government takeover, personal responsibility



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