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Thursday, September 23, 2010

Breaking down the Small Business bill


(Photo Caption:  'We're all hungry, cutthroat, young entrepreneurs- looking prim and proper but will do whatever is necessary to get ahead in the world..  don't you wish you were Us?')


Below are snippets of an AP article reporting on the Small Business bill which was recently passed by Congress.  I felt this was a good news story to interject commentary and analysis on.  All quotations are from the AP article.

"Congress to send small business bill to Obama"

"WASHINGTON (AP) -- The Democratic-controlled Congress on Thursday sent President Barack Obama a long-delayed bill to help struggling small businesses with easier credit and other incentives to expand and hire new workers. The Senate passed the measure last week. The 237-187 House vote Thursday that sent the bill to the president split along party lines as Democrats praised the measure for creating a $30 billion federal fund to help smaller banks issue loans to small businesses and for cutting taxes by $12 billion over the coming decade."

~  Ok.. Small businesses are suffering- being destroyed by this economy and by the behemoth corporation companies like Wal Mart that get their prices in large bulk and exclusive pricing deals so local businesses can not compete.    So what does government do-  does it give free money; a financial stimulus bailout like it did with AIG, Goldman Sachs, the banks,etc?  No- it gives out loans.  Loans which require repayment at principle plus interest.  Loans.. and tax breaks..   keep reading..

"The new loan fund would be available to community banks to encourage lending to small businesses. Supporters say banks should be able to use the fund to leverage up to $300 billion in loans."

~  So the small businesses get loans.. through banks, albeit community banks but still... banks.   That means the banks make money on application fees, they hold the business or other assets as collateral, etc.  So a bank financially profits from the need of small businesses to stay afloat by lending out free money directly from the government and charging a rate of return.

* In simple terms:  I get $100 from A at zero interest... I lend B that $100 at interest and keep 100% of the principle and profits since the $ received from A was free to me.

" "More capital for business means they can expand and create new jobs," said Rep. Kathy Dahlkemper, D-Pa. "Helping businesses grow is essential to our economic recovery and getting people back to work." "

~ That sounds just lovely.. Remember this for later- a bill specific to get people back to work That means to get stubborn companies to hire.  But how is the money spent?  Let's look:

1)  "The legislation would also aid lending by lowering Small Business Administration loan program fees and raising loan guarantee and lending limits. Loan caps under the Small Business Administration's chief lending program would be significantly raised".

~ In simple terms, it means small businesses still have to go through red tape and bureaucracy but at least those who lend will financially benefit.

2)  "The small business tax cuts in the bill include breaks for restaurant owners and retailers who remodel their stores or build new ones."

~ Hmm.. tax cuts at a time when businesses don't pay enough taxes as it is. Hmm.. Also, that may give some painters, carpenters and construction workers brief employment, but doesn't force stores to hire beyond the skeleton crews which they currently retain.

3)  "Long-term investors in some small business startups would be exempt from paying capital gains taxes "

~ Larger businesses will get more write-offs, because we all know large businesses need to be helped as much as possible and should be required to pay as little taxes as humanly possible.

4) "But much of the tax relief would actually go to larger businesses for write-offs of facilities and equipment such as computers, trucks and machinery.

~ Amazing how every single thing the government does.. Every single policy MUST be for the benefit of the Investor!!  And to clarify- because you put a couple thousand in stocks or own a 401k does NOT make you an 'investor'.

5)  "The measure also would allow small business owners to deduct the costs of health insurance for themselves and their families from self-employment taxes, but only for the 2010 tax year."

~ More tax breaks for those who do not need or deserve it

6)  "And, for the first time, tens of thousands of businesses who pay the alternative minimum tax will be eligible to claim the research and development tax credit and other write-offs such as a credit for hiring the disadvantaged."

~ Even More tax breaks for those who don't need or deserve it.

"It's going to mean another $100,000 or $200,000 to some of our key small and medium-sized businesses," said Dean Zerbe of alliantgroup, a tax consulting firm."

Hmm..  I didn't see anything about hiring new workers.   I saw businesses, small to large and evil Vermin investors getting tax breaks which they do not deserve or need and will pocket or use to cover other expenditures rather than hire, and allowances for businesses to use the loans for Any purpose they wish, even something a frivolous as refurbishing and building new stores. Nothing that forces businesses to acquire new workers and thus help to lower unemployment.

Everything in this uber-capitalistic nation is geared towards borrowing and lending and tax breaks for those who don't need or deserve it..If government was sincere about getting people back to work, it would give the $40billion out to small businesses alone and interest free.  The terms and conditions would be as followed- this $$ is to hire and retain new workers only and in matching funds.  For every $10k in free government money, you must show you spent $10k of your own money towards employment.  You, the business must demonstrate you did this or you will be expected to repay the amount of money you took along with a premium interest rate. 

Its called carrot/stick.. and that philosophy is the Only way to make businesses re-hire.  Give incentives for business to rehire, yet make the financial punishments So severe, they financially they have no choice but to increase hiring.  When people are working and generating income, they can pay bills, stay in their homes and consume which grows the economy..   But business Must be FORCED to hire since they've shown repeatedly they do not wish to unless its temp help, and only government has the power to do this.

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