Obama Acts to Aid Small Businesses

http://www.nytimes.com/2009/03/17/business/smallbusiness/17sbiz.html?_r=1&ref=politics

by lssndrdn • 17 years ago

14 23 17 years ago

tjic2• 17 years ago

Speaking as the owner of a small business, I wish he'd help me by cutting spending, stop talking down the economy, allowing insolvent firms to fold, etc.

Micromanaging billions of "knobs" on the economy is a losing proposition and it creates "regime uncertainty", where folks are afraid that the rules (on taxes, regulation, inflation, contracts, etc.) can change out from under them at any time.

spamizbad• 17 years ago

Cutting spending in a deflationary recession is never a good idea. You want to execute spending cuts when the economy is vibrant and growing, not when your GDP is shrinking and your unemployment numbers are kissing double-digits. If anything, Obama hasn't been doing enough spending on projects that will be putting people to work in the next 1-2 years.

nazgulnarsil4• 17 years ago

Deficit spending is based on the fallacy of increasing aggregate demand. taking money from people and then spending it on government projects doesn't increase aggregate demand because you've just decreased demand by the same amount by taxing people in the first place. How is this any different from normal redistribution? You're redistributing from the private sector to public works contractors. Prove to me that the public works contractors will produce more jobs than the private sector would have with the same capital.

Money is a commodity. When the government prints more it reduces the value of all other dollars in circulation. This inflation is a hidden tax that we will be paying off for years.

anamax2• 17 years ago

> If anything, Obama hasn't been doing enough spending on projects that will be putting people to work in the next 1-2 years.

The CBO says that growth would restart by the end of the year without the stimulus. If that's true, why do we need additional spending afterwards?

Note that Keynes said counter-cyclical spending while Obama's spending establishes a higher baseline. (The only significant savings is for Iraq after Bush said that we'd be out.)

nazgulnarsil4• 17 years ago

agreed 100%. I wish central planning was exposed as the sham it is. When you try to fine tune things by subsidizing certain things and placing a tariff on others you destroy accurate pricing information that allows entrepreneurs and even consumers from making decisions about efficient resource allocation. You're changed over from "those who supply people with what they want get rewarded" to "those who guess where the government will jump next get rewarded". I've seen it first hand in business sectors that are particularly vulnerable to government intervention such as the housing market.

tjic2• 17 years ago

An example of "regime uncertainty" is the AIG bonus situation that's in the news today.

AIG has multiple divisions. Many folks in many of these divisions (a) have contracts specifying that they get 90% of their annual compensation in a lump sum known as a bonus; (b) did a great job over the past year in areas of business entirely unrelated to CDOs and other issues.

...and now we've got a Republican senator saying that these people should commit suicide, and we've got a Democratic president and a Democratic senator saying that these workers will either have to give their salaries back or they'll be slapped with after-the-fact 100% tax rates.

In a political environment like this, I'd suggest that a lot of folks who can deliver massive amounts of value would be quite leery of signing up for a new job with variable, results-based compensation.

Thanks - that's really helping the economy!

anamax2• 17 years ago

> we've got a Democratic president and a Democratic senator saying that these workers will either have to give their salaries back or they'll be slapped with after-the-fact 100% tax rates.

Don't forget the recently passed legislation exempting these bonuses (contracts signed before Feb last year) from the executive pay limits. Said legislation was voted for unanimously by Dem senators, nearly unanimously by Dem house members, and signed by Obama.

ggruschow3• 17 years ago

To correct for the problems sins of loaning money to people who probably couldn't pay it back, he's loaning money to small businesses that probably can't pay it back?

I guess it's a relatively small amount.. so I'll still continue hating his policy mostly for the decision to tax my charitable donations.

jacoblyles• 17 years ago

Did they pass that limit on the charitable donation write-off?

ggruschow3• 17 years ago

Not that I can find record of.

To be fair, I'm probably one of very few that are/would be affected by the proposed charitable deduction changes. If you go out and earn more money to support a charity, then Obama's proposed changes can result in you adding the IRS to the list of charities you're supporting. I don't know about you, but they're near the bottom of my list of non-profits to support.

calambrac2• 17 years ago

I'm guessing you're referring to home loans, which had the lovely property of inflating prices without any correspondence to a real increase in value. There was more money in the system to bid on a fixed set of assets, so prices went up.

Business loans are fundamentally different, aren't they? Sure, a lot of these businesses will fail, but at least the whole point of a business is to create value, and there will be a lot of winners, too. Money has to move around, that's how the economy works. I'd much rather see it moving around trying to drive people to create value, than to consume concrete assets.

ggruschow3• 17 years ago

Yeah.. really though I think I was bitching more than trying to make a real point.

A couple of points though. First, there were a lot of "concrete assets" created in recent years. As simple evidence google "condo glut." Also, you're right - these business loans are fundamentally different. Unless I'm missing something, they're fundamentally riskier - there's no collateral (overvalued collateral is better than none), and the entity you loaned money to is FAR more likely to simply disappear.

As to whether they'll go to better uses - hey - I hope you're right. I hope it helps create more value / helps the economy, etc. However, plenty of people took money "out of equity" in loans and spent it on stuff that created value in a similar manner. For instance, there used to be quite a burgeoning business in selling solar panels to homeowners.. many would argue it's good for the environment, adds value to the home, etc. The interesting part here though is that the salesman weren't really just selling solar panels. Their job was to walk the homeowners through how to get the money in a mortgage "out of equity" on the always-rising value of their home and collect any tax credits available.

wustl07• 17 years ago

So he must have put all of this in the "stimulus" bill since he cares so much.

Obama Acts to Aid Small Businesses

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