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How the Stimulus Bill Won’t Stimulate Job Growth, But What Can Boldly Be Done Next

As important as the new American Recovery and Reinvestment Act (ARRA) of 2009 is to helping us get back to some sense of “normalcy” as a country, the sector that regularly produces between 60% and 80% of all new jobs in America will only marginally benefit. I’m talking about America’s small business owners and entrepreneurs. They’re the real losers from the recently passed stimulus bill, and it’s unfortunate for our economy. Sure, there were some tweaks to the existing SBA loan programs (which I’ve been advocating for nearly 7 years), but these changes will only produce slight improvements to the small business lending arena to get valuable capital flowing again. I view the ARRA as Phase I – essentially a finger in the dyke of economic decline and stagnation – but much more is needed.

We need radical new legislation to produce tomorrow’s new job growth markets – the markets that will enable us to grow our way out of this recession. Phase I was about “halting the bloodletting;” Phase II needs to be about healing the patient for future growth and prosperity. It’s not too early to be discussing this, as taking these steps now will enable the recovery to begin much quicker and establish surer footing for the new economy we’ll have on the other side of this cycle.

We need a “bailout” of sorts for America’s primary job creating sector: small businesses. Our politicians have done plenty for their top campaign donors… I mean Big Businesses, but they’ve done shockingly little for small business. Why no one seems to suggest that we stimulate where 60% to 80% of new jobs are created is beyond me. We should go where our strengths are. It’s time for those in Washington to recognize the shift in society that is presently underway – – from Big Business to Small Business. This shift has been slowly occurring for years, with diminishing pension plans and job security being the most noticeable, but the Internet and the recent collapse of confidence in “Wall Street-related” investing has accelerated this process.

No longer do wise parents tell their children to “get an education so you can go work for a big company with good benefits for many years and then retire.” That advice is passé these days. Wise parents today teach their children to become educated, but use their education to go into business for themselves – to create and control their destiny, not become office or factory slaves hoping for a gold watch someday. With today’s technologies and opportunities all around, there has never been a better time to start a business… yet fear is gripping many Americans like never before who would otherwise take the entrepreneurial leap during recessions like ours.

As a financier of small businesses and a serial entrepreneur myself, I regularly hear from people determined to do just this. They’re tired of trusting some large, faceless, company to grow their personal savings. Many would rather strike out on their own and bet on themselves or their friend’s business. Yet, our leaders fail to understand that economies always evolve and smaller, innovative companies always render larger, older companies obsolete. It’s a fact of capitalism those in the Washington Beltway ought to learn fast. The face of America’s investor class is changing. American business will look very different as we come out of this recession. Eventually, more and more people will use self-directed funds (what’s left of them after the losses of 2008) to start businesses, buy franchises, and fund others’ businesses. This is an extremely positive development for the future of America, as more people seek self-reliance. This transfer of capital from Wall Street to Main Street needs to be encouraged, not resisted.

So what can we do NOW to stimulate job growth?

I will detail my seven solutions, in what I call Phase II – – a “Small Business Growth Act of 2009”, that would jolt America’s small business community into creating even more jobs so desperately needed right now, in my next blog post . . . So stay tuned!

5 Comments

  1. Sandeep Thakrar says:

    Chris,
    I agree with your points. SMall businesses are getting crushed by the lack of lending by the banks. Alternative financing sources are available but they are also getting stricter as confidence continues to erode.

    The stimulus is not targeted at the majority of the job creation engine: small business.

  2. david solomon says:

    Since 1989, for the past 20 years, small businesses (those of up to 500 employees) have created 93% of the new jobs in America.

    Bailing out failed big businesses (car companies, financial institutions) and people who didn’t play by the rules (those who took on larger mortgages than they could afford to pay, stopped payments and were then not surprisingly put into foreclosure) while increasing the tax burdens on the job creators, wealth creators and the risk takers is not sound fiscal policy.

    Making matters worse, the administration’s big business bail-out and big government policies are to be paid for by the job and wealth creators in this country. They get the money while we pay the bill!

    This is more about wealth redistribution than job creation. These policies are more likely to turn us into the next Venezuela than the small business, risk-taking powerhouse we have been for the last 20 plus years.

  3. Mike Lyngvar says:

    With the government getting bigger with every passed bill and the private sector being invaded like a rebel force what are we to do? I think a possible answer would be a small business union. What is the only way to get the government to listen? Hit them in the pocket book. If there was a grass roots movement with all small business owners sticking together, that created a union of sorts we might have a chance. Putting a tax increase on the backs of the already over taxed businesses that give this country so many tax dollars is a bad idea.

    The only way the government will be willing to listen is if there “blank check” goes away. The sheeple voted for change and that is what they will get. When your taxes are increased and you find yourself in the position where you have to lay off workers, go into your parking lot and take a look at your employee’s cars. If you need to lay off 3 employees find the first 3 with Obama bumperstickers write down the plate number then inform them they no longer have a job. They voted for “change” that is exactly what they got.

  4. Joe Welnack says:

    Congratulations Mr. Lyngvar on a post that proves the ignorance of partisanship. You recommend firing employees who voted for the President. How would you like to be fired for excercising your franchise as a soveign citizen of this republic?

    I cannot believe how you arive at your logic! Taxes, sure I think they are going to go up. Fact is if we do not start raising revenue to pay for our foreign adventures and “spend and borrow conservatism” the Chinese will impose it upon us.

    Remember Sir, we are now a debtor nation!! I have railed along with you when we see an out of control government wasting money. Frankly, I am willing to pay more taxes if for every nickle in new taxes there is a dollar for dollar reduction in spending. The funds we collect should go into a trust fund to pay off the Chinese! Small business in this country needs to start making the goods that fill the shelves of WalMart and these goods need to be manufactured here.

    There are trillions of dollars we are told that are sitting in cash as investors lose confidence in big business. Why not sell bonds only to U.S. citizens with a zero capital gains tax??

    I voted for President Obama. I don’t agree with him on everything, far from it!! The SBA got “rolled” with the stimulus plan imho. However, the “conservative Bush regeime” bankrupted our country, eliminated SEC oversight and created a monster on Wall St. that almost consumed itself. I will return to the Republican Party when they are fit to govern.

    If you want government we have to learn to pay for it! The Chinese are likely to force us into living within our means.

    Joe Welnack

  5. Crystal Maynard says:

    HA! i have enjoyed reading thank for sharing your story Greeting. 😉

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