The Old, New, Borrowed, and Blue of Obama's State of the Union

President Obama spent a lot of time talking about small businesses in his State of the Union address Wednesday night, correctly noting that that’s where economic recovery must start.

Groups that represent small businesses in Washington appreciate the president’s attention, but most aren’t convinced his proposals will have much impact on job creation. That’s because Obama’s policies overall “are still weighted heavily against business,” said Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council.

“The frozen mind-set many small businesses find themselves in due to economic and policy uncertainty has not been thawed as a result of the speech,” Kerrigan said.

John Arensmeyer, CEO of Small Business Majority, has a different view. He is glad Obama called on Congress to find a way to pass health care legislation, saying small-business owners “are still desperate for a forum.” He also said Obama outlined a comprehensive package of proposals that would help small businesses grow their business.

These proposals include something old, something borrowed, and something new. (For many business groups, health care reform has turned into something blue—they fear the House and Senate bills would increase the cost of insurance for employers, not lower it.)

In the "something old" category, the president proposed using $30 billion in Troubled Asset Relief Program funds to provide cheap capital to community banks for use in making loans to small businesses. Obama unveiled this program in October, but the Treasury Department hasn’t been able to get it off the ground because community banks are leery of the strings and stigma attached to TARP funds.

Plus, many small-business owners would rather see TARP ended and those funds put to new uses, according to the National Federation of Independent Business.

In the "something borrowed" category, the president endorsed an extension of tax incentives that allow small businesses to write off much of the cost of new equipment immediately instead of having to depreciate it over time. These incentives were included in the economic-stimulus bill and were also tried during the Bush administration.

Small-business groups like these incentives, but they’re not sure how many companies are in a position to use them given the weak economy. Even with these tax breaks already in place, capital expenditures by small businesses are at the lowest level they’ve been in the 35-year history of NFIB’s monthly survey of business owners.

“Really, until business conditions improve, I think a lot of these businesses are going to hold off making new investments,” said NFIB tax counsel Bill Rys.

As for "something new," the president called for a tax credit for small businesses that hire new workers. The problem with this incentive, Rys said, is “you’ve got to have work for the worker to do.” Sales are still down for most businesses, so they’re not looking to add more costs, even if they get a tax break for hiring.

A survey by the National Small Business Association found that few small-business owners would take advantage of such a tax credit.

Instead of a tax credit for hiring, “what businesses need right now are customers,” said Giovanni Coratolo, vice president of small-business policy at the U.S. Chamber of Commerce. “They need orders.”