Small-Biz Bankruptcies Up, Bush Slams the Door on the Job Machine
Author: Hal Pawluk — Published: Mar 05, 2004 at 10:04 am 8 comments

We keep hearing about the great growth in the economy, but the majority of Americans don't see much of that.

The stock market is up but while that helps stockholders, it doesn't get down to the the unemployed, under-employed, and those no longer even looking for work.

"Productivity" is up, but every time a job is shipped off shore, "productivity" gets an upward tick and someone else is put out of a job here at home.

And small businesses, usually the the first to kick off a recovery with new jobs, are kicking the bucket instead.

'Bankruptcies are disproportionately hitting a key source of new employment.

'If the recovery is so great, why is job growth so sluggish? High productivity, imports from China, and outsourcing of jobs to India may all be part of the answer, but some bankruptcy experts also point to the troubles plaguing small businesses. They usually create most of the new jobs in the initial stages of a rebound. But this time, they're increasingly going belly-up and extinguishing jobs instead. In fact, for the first time since 1990, more businesses with more than one and fewer than 500 employees shut down in 2001 and 2002 than were created.

'All this is happening just as much economic data seem to show that small businesses are getting more upbeat. More applied for loans in 2003's last quarter than in the previous quarter, according to January's Federal Reserve survey of senior loan officers. Still, the specter of bankruptcy looms large for the throngs of companies that compete with Wal-Mart Stores Inc. and other discounters.' [Business Week 03/01/2004 subscription]

So what's the Bush administration doing to help?

'SBA Slams the Door on Borrowers

Continued on the next page Page 1 — Page 2

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Article comments

  • 1 - Shark

    Mar 05, 2004 at 11:06 am

    AND HOW ABOUT TODAY'S DOSE OF INCREDIBLE IRONY:


    "The President is visiting Los Angeles and Bakersfield to tout the success of his economic policies. Los Angeles' unemployment rate is 13% since President Bush took office. The city has lost 53,500 jobs since January 2001, and has added more than 31,000 residents to its unemployment rolls. In Bakersfield, the unemployment rate is 12.8% - up almost 5% since President Bush took office. The city has added more than 4,400 workers to its unemployment rolls since January 2001."


    We're through the looking glass and it ain't Kansas, Toto.


  • 2 - Mark Saleski

    Mar 05, 2004 at 11:16 am

    oh, all you doomsayers!

    look, i just read that the us. economy is practically STEAMING ahead. why, we added a whole 21,000 jobs in february alone. yowsa!

    ;-)

  • 3 - Joe

    Mar 05, 2004 at 11:26 am

    Hal-
    I'm pretty sure the "holiday" mentioned lasted until January 10th when the program was reinstated. Additionally, the SBA has proposed a bill in congress which would add $3 billion to 7(a) program.

  • 4 - Hal Pawluk

    Mar 05, 2004 at 11:28 am

    There are at least 13 California counties with unemployment rates of 8.6% and higher, at least two with county-wide unemployment over 12.4%.

  • 5 - Hal Pawluk

    Mar 05, 2004 at 11:40 am

    I'll try to check on the re-opening of the loans, Joe - it wasn't in the story I had seen.

    And apparently there's more to the story. According to Inc. ("the magazine for growing companies"), the administration keeps trying to choke SBA funds:

    "For fiscal 2003, the Bush administration had requested only enough funding to guarantee $4.85 billion in 7(a) loans, despite warnings from the lending industry that the program would need twice that amount. For the current fiscal year, the SBA requested only enough money to guarantee $9.3 billion in loans. Bankers warned that demand would rise above $12 billion but were ignored... the 7(a) budget would need only an additional $25 million to $100 million to drive $3 billion more to businesses."


    Seems like false economy, when jobs are such a big issue right now.

  • 6 - Hal Pawluk

    Mar 05, 2004 at 11:51 am

    Joe, the program is back but they dropped the loan size cap from $2 million to $750,000 after a strong outcry from lenders and small businesses who had gotten cut off at the hips.

    Better than nothing, and the Senate bill would raise the cap back to its original level.

    I still think this all indicates a lack of support from the administration.

  • 7 - Joe

    Mar 05, 2004 at 11:51 am

    I'm pretty sure SBA has a web site for more info, I would be curious to see what the bankers get out of the deal. Since its a really a loan guarantee program all the SBA is in essence doing is providing the collateral to back up the loans. I'd be interested in knowing if the banks are truly advocates of the program or if it would really be in the banks interest to put the money elsewhere, where they can get a higher rate of return.

  • 8 - Hal Pawluk

    Mar 05, 2004 at 12:03 pm

    According to Inc. magazine, the bankers whined right along with their customers.

    Personally, I would think bankers would be interested in seeing growth in local businesses.

    And I would suggest that it's good policy if small businesses really are a "job machine" (which history indicates they are).

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