Unleash the power of small business. The US Senate just passed a bill called the Small Business Jobs and Credit Act. The thrust of the bill, which has been called “Son of TARP,” is a $30 billion Small Business Lending Fund to subsidize banks to lend to small firms. The government will infuse cash into banks by buying preferred stock and in turn prod the banks to make certain kinds of small-business loans using “linguistically and culturally appropriate outreach.”
But haven’t we tried before this top-down method of subsidizing and pushing the banks to meet the government’s objectives with TARP and housing programs? And why are we propping up the same old banks? According to the Kauffman Foundation, businesses less than five years old are America’s top job creators.
Tax cuts, or holding off tax hikes, will help spur job creation, but we also need to liberate to stimulate. This means ending outdated and counterproductive regulations. Last year’s Federal Register published almost 70,000 pages of new rules. Complying with all of them cost more than $1 trillion, according to the “10,000 Commandments” report by the Competitive Enterprise Institute’s Wayne Crews.
Achieving a bipartisan consensus on some areas of deregulation may not be as hard as it seems. The otherwise heavy-handed Dodd-Frank banking law enacted in July did contain a provision exempting smaller public companies from the costly Sarbanes-Oxley accounting mandates that were rushed through after the Enron failure. And an amendment to the small business bill sponsored by Mark Udall (D) of Colorado would have freed credit unions to lend more to business. Sadly, it wasn’t brought to the floor. Washington can help spur jobs, but only if it stops rushing to “create jobs” and instead fosters the free-market conditions that unleash small-business hiring.