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Small-Biz Bankruptcies Up, Bush Slams the Door on the Job Machine

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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

‘Why would the Bush administration shut down the SBA’s most popular program?

‘In an e-mail sent out on the evening of Jan. 6, the SBA [Small Business
Administration] announced that 7(a) loans were going on indefinite "holiday," Through
the program, the agency’s most popular, the SBA backs loans for thousands
of small businesses that have a hard time raising money through conventional
means.

‘The e-mail also announced that the SBA would return or discard any applications
that hadn’t been approved. The unprecedented shutdown was stunning given
what the Bush administration likes to say about its relationship with small
business.

‘Speaking to a group of women entrepreneurs two days after the shutdown,
the President himself said, "Make no mistake about it, the role of
government is to create the architecture in which people are willing to
take risk." That the government had placed in limbo more than 1,000
small-business loans for more than $500 million was not mentioned.’ [Inc.
Magazine, March 2004]

Isn’t it more than time to get an administration that is committed to America?
Write your Senators and House
Representative
and tell them what you think.

 

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About Hal

  • Shark

    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.

  • http://www.foliage.com/~marks Mark Saleski

    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!

    ;-)

  • http://www.shortstrangetrip.org Joe

    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.

  • http://www.tude.com/ Hal Pawluk

    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%.

  • http://www.tude.com/ Hal Pawluk

    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.

  • http://www.tude.com/ Hal Pawluk

    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.

  • http://www.shortstrangetrip.org Joe

    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.

  • http://www.tude.com/ Hal Pawluk

    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).