Timing is everything where the nation’s economic recovery is concerned.
Whacking spending — which needs to be done to address the runaway federal deficit — cannot be undertaken too soon or else it could push the country into further economic distress, some economists say.
Wait too long, however, and you risk racking up insurmountable debt that will drag the country deeper into economic trouble.
We considered the administration’s small business jobs proposal with this balance in mind, and we think it makes sense to support it.
Yes, it entails the creation of a $30 billion lending fund at a time when the government’s debt is skyrocketing.
But financially supporting small businesses, the lifeblood of the nation’s job structure, makes good sense at a point where unemployment is hovering just under 10 percent.
David Walker, a deficit hawk from the Peter G. Peterson Foundation, suggests that unemployment needs to come down significantly before deficit-cutting measures can begin in earnest.
Walker, a former U.S. comptroller, recently said unemployment should fall to 7 percent before the economic recovery is sturdy enough to withstand long-term deficit reduction measures.
Legislation pending in Congress has the potential to shore up small business growth and address the unemployment problem.
And it’s important to remember these are loans, not giveaways or bailouts.
The Small Business Lending Fund Act of 2010 would create a $30 billion fund to invest in community banks that support small business lending.
Small businesses employ half of all Americans and account for about 60 percent of job creation. Giving them the tools to succeed helps our economy.
Ever since the beginning of this economic downturn, the lack of credit available for small businesses has been a constant refrain.
The small business jobs act would authorize the treasury to lend money to small banks — those with less than $10 billion in assets — at 5 percent interest.
That rate would go down to 1 percent if a bank significantly bumped up its lending to small businesses.
Beyond the lending program, the measure would let small businesses apply tax credits to the prior five years instead of just one, and it would allow investors to avoid capital gains taxes in certain situations.
The measure was approved by the House, and is expected to be taken up by the Senate soon.
Opposition has come mainly from Republicans who are skittish about adding to the deficit.
However, the main tenets of the bill embody ideas they have previously supported, and we suspect some election year politicking may also be fueling their opposition.
While we share worries about adding to the national tab, we believe providing additional support to small businesses, through loans, will help propel the economic recovery and put the nation in a position to focus on long-term solutions to reducing the national debt.
