Help Isn’t On the Way

President wants to help small businesses and build more roads, but action depends on Congress.

Last week President Barack Obama held a “jobs summit” at the White House. Today he gave a speech. Talk substitutes for action in Washington these days.

To be fair, Obama needs Congress to act in order to get most of what he wants. With the Senate bogged down on health care reform, Congress isn’t likely to leave many presents underneath the White House Christmas tree.

Today, in a speech at the Brookings Institution, Obama proposed actions in three broad areas to generate jobs: tax breaks and easier credit for small businesses; additional investments in infrastructure; and energy-efficiency incentives, including rebates for consumers who retrofit their homes.

Noting that small businesses have created 65 percent of all new jobs in the U.S. in the past 15 years, the president proposed eliminating capital-gains taxes on investments in small businesses and giving small firms a tax incentive to hire new workers.

Both of these proposals sound good, but they may not work well in practice. Most small businesses are closely held firms that don’t issue stock to outsiders, so it’s not clear how many businesses would benefit from the capital-gains proposal. A tax credit may not be enough to reverse the decline in small-business employment if sales continue to drop—the biggest problem now facing small businesses, according to the National Federation of Independent Business’ monthly survey of business owners.

The biggest news from the president’s remarks may be his plans to wind down the Troubled Asset Relief Program, which he said “has served its original purpose…at a much lower cost than we expected.”

“There has rarely been a less loved or more necessary emergency program than TARP, whic—as galling as the assistance to banks may have been—indisputably helped prevent a collapse of the entire financial system,” Obama said.

Remaining TARP funds will be used by the Treasury Department “to facilitate lending to small businesses,” he said. In October, the administration announced plans to use TARP funds to provide low-cost capital to community banks that lend to small businesses. That program still isn’t up and running, however. Maybe Treasury has another small-business plan up its sleeve, but given its track record, that would take a while as well.

The administration also announced its support in October for increasing the size limits for Small Business Administration loans. This would help successful businesses expand—and hire more workers—as the economy recovers, Obama said. That proposal requires legislation, however, and Congress hasn’t acted on it.

Today, the president endorsed extending provisions in the economic-stimulus bill that increased the government guarantee on the SBA’s flagship 7(a) loan program to 90 percent and reduced or eliminated fees on 7(a) and 504 loans. Those enhancements brought lenders and borrowers back to the SBA loan programs, and the agency backed a record volume of loans in November.

The problem is, the stimulus money that made these enhancements possible ran out last month. Despite pleas from SBA lenders and small-business groups to come up with more money for the program, Congress failed to act. The Obama administration declined to weigh in on the issue in October, when a strong push from the president might have gotten the job done.

The president also called for extending tax breaks that encourage businesses to invest in new equipment, but that, too, depends on action from Congress. In fact, every proposal he made—other than the stalled TARP program for small-business loans—depends on Congress.

That means none of the president’s proposals are likely to be implemented anytime soon. The best Obama can offer a job-hungry nation is the illusion of action.

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Kent Hoover is the Washington bureau chief for bizjournals.