Meanwhile, the $50 billion bill to promote small business lending and investment passed Congress today. As I tried to say in my most recent article, this is completely unnecessary--a bit of fine-sounding pork with which to placate small business lobbies in advance of the election.
While it's absolutely true that small businesses are having a harder time getting credit right now, there's not so much evidence that this is because credit is not available to good projects. The guy I profiled, who owns a wire factory, has gotten four different loans for equipment since the recession started--one for 100% financing in December 2008.
People who have good cash flow and good projects seem to be able to get them financed, which is why so few business owners cite the availability of credit as one of their chief concerns. The people who can't get financing are more likely to be the folks who need that financing to paper over a cash crunch. Propping up failing businesses is not the proper role of government--for all that I feel very deeply for anyone who is watching their life's work go under.
The investment tax credit also has a sort of dim history at promoting investment; it mostly seems to reward businesses for doing something they were already doing.
So what is this package going to do? Hand a free pot of money to the suppliers of capital goods, displace banks (who want to make loans to small businesses that are successful) from their traditional loan business, and maybe slightly subsidize the capital costs of small businesses who are just as likely to take the savings as profits or retained earnings as they are to make productive new investments. I'm sure you could find some businesses that will genuinely benefit from this, but I very much doubt that you will find enough to justify a $50 billion price tag to even the most subsidy-loving old style Big Government type.
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is a columnist at Bloomberg View
and a former senior editor at The Atlantic.
Her new book is The Up Side of Down