This probably comes as no surprise to you, but I’d like to share my thoughts on President Obama’s first State of Union Address that was delivered just a little over a week ago. For the sake of time (both yours and mine), I’m going to restrict the majority of my comments to the President’s remarks regarding small businesses and job growth.
First of all, he was right to focus on the economy first and foremost. As important as health care reform and national security are, the economic future of our country is what weighs heaviest on our minds right now. He began by calling for a new jobs bill, which got him a round of applause . . . which to me is like awarding someone the Nobel Peace Prize in the first year of that person’s first year in the White House . . . he hasn’t actually done anything yet . . . but I digress. He also acknowledged what I’ve been trumpeting for quite some time now – - that small businesses are responsible for the vast majority of job growth, and ultimately, our overall economic recovery. But just how he intends to stimulate small business growth still seems a little misguided to me.
Helping Community Banks Help Small Businesses
His first proposal was to take $30 billion of the money Wall Street banks have repaid and use it to help Community Banks make loans to small businesses. The end goal – - making more credit available to business owners – - is a noble one, but I fear it will be far too difficult to accomplish.
Lots of community banks that are still in good shape are reluctant to take government bailout monies because they’d rather avoid the stigma that they carry. The banks that ARE in need of assistance, and would therefore take some money if it was offered, still wouldn’t be in any shape to lend the money out. They would, instead, hold on to it and use it to shore up the bank (hmm . . . sounds like what the Big Banks did with the TARP funds).
Something else to think about is that not all small businesses are in need of credit right now (and this comment is coming from a small business lender). What many business owners are looking for right this minute are CUSTOMERS – - people who have money and can place orders. For that to happen, we need to put more money back into the wallets of employers and employees . . . which brings us to Mr. Obama’s next proposal . . .
Tax Credits for New Hires
As I’ve mentioned several times before on this blog (here, here and here), it’s downright silly to think that tax credits are going to spur significant job growth. Tax credits for new hires are ineffective because businesses hire based on need, which is driven by demand. If a company doesn’t need to hire an extra body and hasn’t already planned on doing so, these credits won’t be enough to cause them to take action.
The problem comes back to demand for products and services, which can only be stimulated by putting more money in people’s pockets so they can spend it. It’s apparent that these ideas are coming from people who have never had to make payroll. The Obama Administration needs to hear from real business owners who aren’t hand-picked public relations “boosters.”
Down With Capital Gains Taxes
He only touched on it briefly, but Mr. Obama suggested eliminating all capital gains taxes on small business investment. This is an idea I could really get behind. Oh wait, I already have . . . here, here, and here on this blog. I can only hope that this does finally get enacted, and that it is eventually made permanent, once it’s proven to be as effective as I know it will be.
Public Works: Just Band-Aids
Mr. Obama is still promoting short-term government spending programs as solutions to the ongoing economic crisis. As I’ve explained before, this isn’t investing and it doesn’t create jobs – - it’s funded with money that must be pulled out of the economy (via confiscatory taxes or borrowing) and it only creates temporary work.
A Challenge I’ve Already Met
About halfway through his State of the Union Address, as he wrapped up his remarks on health care reform, Mr. Obama issued this challenge:
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“But if anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses, let me know. I’m eager to see it.”
First of all, I really don’t like the condescending and sarcastic tone he took here. He’s not really asking for new ideas – - he’s insinuating that his ideas are superior and the matter is closed. That’s not real helpful.
Second, I’ve addressed this subject several times on this blog. And still, the debate over health care reform has left out two major ideas: tort reform and interstate insurance competition. Without finally dealing with these two issues, any health care bill that gets passed will be lacking and will be marginally effective at best.
The matter is not closed, Mr. President, and you do not have all the answers. No one does . . . that’s why it’s helpful to include lots of people (even the opposition party) in crafting them.
Elusive Bipartisanship
As I admitted in a recent blog post (What Small Businesses Can Learn from Massachusetts’ Recent Election . . .), I’m a capitalist above all else. I believe that business (not government) is the best tool for economic, social and political progress, and that’s how I vote.
The high degree of partisanship that goes on in Washington today really makes me sick, and it is unbelievably counterproductive. I’m glad that Mr. Obama took a somewhat stern tone with the members of Congress, telling them to put aside party politics for the good of the nation. Though, I really wish it wasn’t necessary for him to do so.
These are grown men and women who we’ve elected to represent us in our government, and they behave like children quite often. This is why I think we need a little more turnover in The District. We shouldn’t have “lifers” in the House and Senate who only act and vote in ways that will assure their reelection. They ought to serve and then go back to doing what regular people do – - finding jobs, starting businesses, making ends meet and providing for families. “Citizen-representatives” needs to become en vogue again.
Tags: Barack Obama, Bipartisanship, Community Banks, Congress, Job Growth, Obama Administration, Political positions of Barack Obama, Small Businesses, State of Union Address, Tax Credits, Washington, White House
Bill McKee says:
This past year, the immense effort by congress and the executive branch to transfer control of the economy over to the central government promises to concentrate power, wealth, and control over American citizens. It is a concerted effort to force political solutions onto economic problems. We are witnessing a “fundamental” shift from a relatively free, private economy to a command and control economy that has failed everywhere it has been attempted. To believe that elitist government czars (who are ideological leftists) are best suited to solve economic problems is bizarre. What we see is the Marxist Alinsky tactics used on our system.. Obama taught and applied Alinsky for years in University, in ACORN, and various other affiliations. It should surprise no one that any solution he or his advisors get behind will be excessively burdened with government strings, costs, labor union requirements.. and immense taxes.
As our schools, media, and public institutions continue to mis-characterize free enterprise and unfailingly use anti competitive laws, work policies, and taxes to impose political points of view, we the people are the big losers.
Marxism is hell, except for the small political class who retains all political power and the power to determine “winners and losers”. Jefferson warned us over and over about the foolishness of abiding a large central government. His warnings are taking on a whole new meaning in light of the strangulation of American enterprise being cinched up daily by our growing central government. Soon, the parasite within will effectively cut off the blood supply and both host and parasite will expire.
Geoff Kieffer says:
Dear Chris: How do roads get built? How do armies get built? How do small business’ start, grow and thrive? How does health care get fixed? Capital gains taxes and tort reform?? Leadership is hard enough to find but when you have blinders on, or don’t like the “tone” of the request, it’s almost impossible. I have a small firm but we did not start it, grow it, and survive by complaining about tax policy! I bet you did not start your firm that way either. Take me off your mailing list. I can always find your second guessing on the FOX news network, fair and balanced.
Rick Falls says:
Hey Chris,
Thanks again for saying what needs to be said, and for interpreting the “pretty words” from the “State of the Union’s” inept attempts at a single viable economic solution.
The strings attached are rarely worth the money one might get from any government program, if they could in fact even qualify for it, and the healthier banks and businesses would gladly share the things that would resuscitate the economy IF they were honestly asked!
Instead we get sarcastically preached at, by a guy who hasn’t ever had to manage, or run even the smallest venture, and thereby lacks any accountability and or credibility.
You’re “dead on” with the fact that businesses need customers, who have money to spend on their goods and services. And, that isn’t going to happen with a tax credit for something that they may choose to do, if and when they actually have enough customers to feel confident in their economic future.
The idea of the condescending and arrogant tone, always telling and never listening isn’t benefiting anyone, no matter how many times they try and tell us how good it is for us, or however they cook the books on the latest job reports.
The mere suggestion that adding more business/social engineering through complicated tax codes that confuse and irritate MOST Americans, clearly points out how far out of touch these people are, with the people who unwillingly pay their bloated salaries.
U-haul better get a lot of vehicles up to DC by the Fall, because the incumbents are going to be doing a lot of packing, as they get replaced by real Americans who want to serve us in a simple and effective way that has obviously been overlooked by the current residents.
Thanks for having a real conversation about this.
Rick Falls
PS I’m embarrassed to say that our county had about a months worth of work for a couple of dozen guys, paving roads (that had just been paved 2 years ago). IN SANE !
E Fuller says:
You are right on, Chris. I think our so-called career legislators and the idea that Congress needs “lifers” keeps good citizens out. The duration of campaign and the huge sums needed and the need to garner funds from the outfits who want legislation blocked, including the insurance companies, has done a great disservice to our system. The lack of understanding of how Government is meant to work is also key. If one attends the local caucuses, it becomes apparent quickly that many of those who appear are single-issue participants with little regard to their fellow citizens. We have a prominent example here in MN and it has been extremely detrimental to our ability to focus change due to issues of violation of separation of church and state and other basics that too many of our would-be careerist fail to understand, acknowledge or support. Keep writing!
Howard Head says:
The problem is that both you and Obama are too young to remember all previous recessions sinc 1960. There have have been 7 of them and a little research would show that in all seven of them it was the housing industry that led us out of every one. But, that was before the banking industry was ruined by the Democrats.
Howard Head
Kenneth Nejib says:
Here is my take on the Obama “promise”. The small businessman that has been put into dire straits will not be able to benefit from his proposed “help”. The small businesses that are better off will not be able to provide the paperwork that will be needed, similar to the mortgage “reduction” promises that were made by him.
The American public that voted for him were totally DUPED by his platform and promises. All he has done is try to push his personal agenda issues through and made excuses for his lack of progress in “fixing” the economic problem by “reminding” us all, that he inherited the problems that caused the turmoil we now face.
Thanks for letting me vent.
Shad says:
I totally agree. i would very much be interested in exploring an office facility purchase.
Braudis Lee Pegram says:
Hi Chris. For the most part, I agree with you. But I want to call your attention to something: contrary to popular belief, The White House is a business.
You’re a smart guy. So smart that I’ve tried to imitate your approach to marketing (minus your refreshingly juvenile office videos which I’m too self-conscious to do). So as one businessman to another, you know that (sometimes?) the head of a business makes mistakes. Those mistakes effect everyone under him (or her), but the mistakes are not apparent in the thinking process; they become apparent in the results.
Even then, if the mistakes have SOME benefit (more than disadvantages), they can be adopted (or even adapted to) policy.
My point being that you run a great business and you understand the value of a customer but you have chosen not to finance in Michigan, even if the business has been sound for 3 years. You’re for America, you’re for jobs, you’re for prosperity.
How does this relate? Simple: you must do what you think is best for your business. Period. It doesn’t matter if I disagree. You’re the expert (no pun intended). It doesn’t matter if, in my opinion, you’ve turned away good business. It doesn’t matter if I don’t like your tone, especially if I haven’t personally presented an alternative.
What matters is you’re running the show, and you’ve chosen to run it as you have seen fit, and there are apparently enough benefits (vs. risk) from your decision to keep it that way, until…
This new approach in 2010 (remember, policies were worse in 2009) is seen to be ineffective and/or maybe until someone decides SBA should go into the banking business directly… Hmmmm
Jim Simmons says:
Chris I do not think any President has had all the answers,maybe Clinten came close. All that you say sounds good but how do we get your comments where they can do some good. We are the United States Of America, which means our strength and our prosperity lies in our unity. The only way to find that unity is for us to find the common positives not the negatives and than do everything to promote them. We can never accomplish anything worth while divided. Why can we not all come together as a nation with this common goal to find the best way to help all of our citizens, not any special intrest.
Chris Hurn says:
Geoff –
Thanks for your response. We’ll certainly remove you from our database, which is too bad because you probably won’t see my comments reacting to your comments, and I think you could use some perspective.
Roads and armies are for national security (yes, the national highway system was originally built for that, but now primarily serves a national economic function), so it is fine for the federal government to provide for them. In my opinion, the federal government should protect and defend our country, provide for the truly downtrodden, and assist economic development (never cripple it). But that’s about it, in my view. Health care ought to be a states right, not a federal one, and regardless, not having health care is not the same thing as not having car insurance (one is required by most states so you clearly don’t hurt someone else).
Our health care (without allowing for interstate competition) is the equivalent of requiring a Wisconsin resident to pay five times for a grapefruit he desires just because he lives in Wisconsin… while I, in Florida, get the benefit of them growing all around and pay a fraction of the price. With produce (and many other products and services) we allow for interstate commerce, so the Wisconsin resident gets to pay the market price for grapefruit that the Florida grower can charge. Healthcare shouldn’t be any different. And if you don’t understand how tort reform has reduced escalating insurance prices everywhere it has been enacted (whether health-care, workers’ comp, and so forth), then clearly you are uninformed about the realities of the marketplace.
Small businesses start, grow and thrive based off of the blood, sweat and tears of a risk-taking man or woman realizing their dream(s) and seeking the profit motive (i.e. a capitalist) to stay in business. It takes great guts and the ability to disregard all the naysayers to start your own business — there are far too many out there wishing against the typical small businessperson, than hoping for them. There is (and has been) a condescending tone from Washington for some time now at the American small businessperson and entrepreneur (and even toward business, in general). Their attitude comes from their paternalism and their view that they know best, not the common citizenry and certainly not some greedy capitalist (there’s also an interest in more power in centralized government as well… but that’s for another day). Because small business people mostly want to be left alone by government interference and often succeed without any government support at all (often in spite of it), the political class either ignores them entirely (like it did for the past 18 months, while bailing out Big Business) or it tries to handcuff them with new regulations and taxes… all with the intent of “helping” them or “helping” others (gotta go where the money’s at to “squeeze blood from the stone”).
I do not complain about tax policy; I have merely suggested the reductions of various taxes as a way of reducing the burdens and hurdles on an already sickly sector of our economy… I didn’t even mention that is an incontrovertible fact that increases in income taxes are disproportionately felt by small business owners and that an effective massive tax increase is looming as the Bush tax cuts expire next year. As I’ve pointed out here often, every time we decrease income taxes, we end up collecting MORE in taxes. You’d think the “tax-and-spend” folks in Washington would be in LOVE with reducing taxes, but they would rather punish the producer class and ignore the Treasury’s facts. Completely ideological and ridiculous!
Each and every time I’ve been on FOX (or in the New York Times or other publications), I’ve offered solutions and alternatives for the folks in Washington. I don’t consider that second-guessing; I consider my offers of solutions far better than the complaints so many others offer. My perspective and proposed solutions come from me being in the small business “trenches” daily… a perspective sorely missing in Washington and apparently with you as well.
Chris Hurn says:
Hey Braudis!
I always enjoy your postings and don’t always make time to comment back, but today, you’ve stumped me some. Yes, the White House is sort-of a business — it isn’t accountable in the marketplace, but it IS accountable in the voting booth. That much is true and I agree with your sentiments. But as for us lending in Michigan, as a rule we’ve chosen not to lend there over the past two years because we always have to consider the worst-case scenario (foreclosure) and with unemployment what it is in that state and not getting much better, you can bet that we’d have much more trouble than usual trying to sell our foreclosed property in that state versus any and all others. That being said, if you have a very solid 504 project that I (or you) can find a first mortgage lender on, we’d certainly consider it — we just wouldn’t want to portfolio a commercial loan in Michigan with things being the way they are presently.
Now, as far as having the SBA getting into lending directly? I think that’s a TERRIBLE idea. On this issue, the President and I are in total agreement: it would be a BAD idea — he just came out against that idea in Tampa about a week ago. There are some Congressmen who’ve proposed it, but the issues to be addressed aren’t entirely the banking industry’s fault. Part of the problem-solving is also getting the SBA’s programs to work more effectively. Something like using the SBA 504 for true refinancing — like the President finally endorsed on Friday — that would be a great step in the right direction (I’ve been calling for that for nearly 8 years!). Trust me, we don’t want the same folks who run our post office, TSA, and who raid our Social Security Trust funds to be administering SBA loans. They are NOT properly staffed, and they have zero accountability. There ARE limits to what the government should and should not do. And this is clearly one of them.
By the way, I appreciate your kind words about our marketing and our business. We do the best we can, and I hope it shows.
Boyd Cochrane says:
Hello Chris: Surely you jest my friend! How could you possibly think a committed Marxist has any interest in small businesses and job growth? This address was the most pathetic piece of drivel I ever heard. Our country and western civilization are outnumbered 5 to 1 by an enemy that wants to kill every one of us. You want to restrict your comments to small businesses and job growth. Those lofty objectives are lost causes with an administration that has a master plan for government to control and run everything. Middle class, entrepreneurial spirit, competition, maximum return on resources, ambition, creativity, hard work and building a better life have no standing in an administration committed to mediocrity, conformity and control and run everything. Wake up and smell the coffee! Our founding fathers committed all their treasure and blood for freedom and opposition to government control and run everything. I will do no less. Best regards, Boyd.
Earl Wise says:
My name is Earl Wise and I’m a Commercial Lender with The Peoples Bank, a state bank chartered under the laws of Georgia. I am in support of President Obama’s proposal during the State of the Union address on January 28, 2010.
Any help that you or any politican in Washington can provide to get this bill expedited to passage would be greatly appreciated. Some Georgia community banks are measuring their lifespan by days, weeks, months, quarters, or the lucky few years. Community Banks across Georgia and this nation need vital capital and finding it in the secondary market is nonexistent. Potential investors are waiting for prospective banks to fail so they can gain control at no cost and enter into loss/share agreements with the FDIC. In a way, I don’t blame the investors waiting on the sideline. It makes good business sense to get something for free and government guarantee.
I support any measure that is similar to the previous TARP plan. The Peoples Bank and many communities banks like us are not afraid of any caveat that requires the bank to lend to small businesses. We have built The Peoples Bank by lending to small businesses and have continued to lend during this recession. The problem, in cases of construction loans is that we have the FDIC telling us we can’t lend. Even in cases where the USDA or SBA is guaranteeing the construction loan. (I’m not talking about speculative residential construction loans, but loans to small businesses to expand or build new facilities that will create jobs during and after construction) We have numerous deals that we have to turn away due to capital and lending restraints.
The problem is always Washington with good intentions but too many departments and agencies not knowing what the other agencies are doing. For example, the USDA recently changed its guidelines and will now guarantee a B&I qualified construction loan. Also, the SBA will guarantee a construction loan in the 7a program but the loan must meet many requirements. However, the FDIC mandates that certain banks must reduce its ADC (Acquisition, Development, Construction) and does not differentiate between a guaranteed gov’t construction loan. In the FDIC eyes, a construction loan is a construction loan regardless of whether its guaranteed or not. Again, the left arm does not know what the right arm is doing. For YOU to say that we would use the money to shore up our balance sheet AND not lend is ridiculous. The community banks within the US did not create this economic crisis. It started on Wall Street not Main Street. We did not create or participate in the MBS and CDO’s that started the great real estate recession in motion.
Earl Wise says:
Follow up to my previous comment: Construction loans are vital to start the great economic engine. We have to continue to BUILD America. How can you BUILD without construction? Until we resolve the dysfunction between government agencies that regulate and guarantee lending especially CONSTRUCTION lending, then we will continue to stalemate and stagnant. The White house says LEND, the SBA and USDA say LEND, but the FDIC says NO LEND AND NO BEND.