Private Sector Commentary: What about us?
Share with others:
The numbers involved in the federal government's variety of recent bailout packages for big business are almost beyond comprehension: $700 billion for the Troubled Asset Relief Program, $350 billion for Fannie Mae and Freddie Mac, $300 billion for the Federal Housing Administration, $112 billion for insurance giant AIG and perhaps $34 billion or more for automakers.
Yet with all these trillions of dollars being parceled out, there has been little or no mention of -- or targeted support for -- America's largest employer and the primary driver of the U.S. economy: small businesses with fewer than 500 employees
And we ignore small business at our peril.
More than half of all Americans work for small businesses -- 58.6 million of us, according to the most recent data. And while large companies have been shedding workers by the hundreds of thousands, small businesses have been creating new jobs. In fact, according to U.S. Census data, small business is responsible for creating 93 percent of new jobs in the United States since 1989.
In Pennsylvania, small business has been the engine powering our economy. Our state's 240,000 small businesses employ 2.6 million people, representing 51 percent of the work force, and have an annual payroll of nearly $84 billion. In the three years from 2002 to 2005 (the most recent years for which data are available), small businesses were the primary economic engine in the state, creating 142,000 new jobs. By comparison, Pennsylvania's 3,800 large businesses eliminated more than 107,000 jobs.
The job-creating potential of small businesses is, however, beginning to falter. And while big businesses are getting bailouts, government officials on the federal, state and local levels have, at best, turned a blind eye to small business -- and in some cases, have been making conditions worse.
Budget and staff cuts have led to a significant reduction in the availability of Small Business Administration-backed loans. Overall, SBA-backed loans dropped 30 percent from last year, but the SBA's Community Express program, primarily targeted at minority-, women- and veteran-owned small businesses in low- and middle-income areas, has fared even worse. The dollar volume of Community Express loans has dropped 76 percent from a year ago.
The impact of this "double-whammy" is severely reducing small businesses ability to expand and hire.
According to a survey of business conditions by the National Small Business Association, 55 percent of small businesses reported having difficulty securing credit, while only 28 percent currently had bank loans or lines of credit -- the lowest percentage since the annual survey was first conducted in 1993. The survey found that only 7 percent of small businesses said they planned to hire new employees.
Small business doesn't need the trillions being doled out to big business, but it needs help to remain a vital force in the economy's growth in general and in job growth in particular.
Government support of large Wall Street firms may be critical to stabilizing our economy, but support of and incentives for small business is at least as critical. Our elected representatives must make certain that the trillions in taxpayer money being used to bail out the financial industry does more than preserve jobs and bonuses at investment firms; they also must ensure that tax dollars help provide small business with access to the credit it needs to grow.
At the same time, the new administration and Congress must address the problems at the Small Business Administration. There has been discussion of using some of the trillions of bailout dollars to stimulate SBA lending, but we need ongoing increased funding for the Small Business Administration.
Government agencies and large corporations also must maintain -- if not expand -- supplier diversity programs that help small businesses compete on equal footing with big business. While these programs benefit all small businesses, they are particularly critical for the 28 percent of small business owned by women and 18 percent of small businesses owned by minorities that historically have found it much more difficult to compete and secure financing.
For 2008, the Small Business & Entrepreneurship Council ranked Pennsylvania 24th among the 50 states and the District of Columbia for policy environments friendly toward small businesses and entrepreneurs. This current ranking is down dramatically from the state's ranking as 12th in 2004.
We can, and must, do more to create a better environment for small business in Pennsylvania.
First Published February 24, 2009 12:00 am
