Obama Links Jobs Data to Small Business Bill

President Obama says small business creates two out of every three jobs in the U.S.

Image: Official White House Photo by Chuck Kennedy

President Obama says today's alarming reports on rising unemployment claims and falling manufacturing activity make the need to pass his small business agenda more urgent than ever. The Congressional Budget Office also released a discouraging report suggesting that the 2011 deficit will be wider than expected and that the unemployment rate, now 9.5 percent, won't drop back to the 5 percent range until 2014.

The bad news, which has driven major stock indexes down by nearly 2 percent, caught Obama's attention. Speaking at the White House early this afternoon, just before he left for vacation, the president said his $30 billion small business lending act is critical for job creation. Traditionally, small businesses account for most job growth in the U.S.

"For the last several months, I have been urging Congress to pass a jobs bill that will do two big things for small businesses—cut their taxes and make loans more available. I have been adamant about this because small businesses are the backbone of our economy," Obama said. "They create two out of every three new jobs in this country. And while a lot of big businesses and big banks have started recovering from this recession, small businesses and community banks that loan to small businesses have been lagging behind…if we want this economy to create more jobs more quickly, we need to help them."

He noted a Labor Department report from earlier this week that showed small businesses, with fewer than 50 employees, account for 60 percent of job losses late last year.

That report was followed by Labor Department news today that weekly unemployment claims soared unexpectedly to 500,000. That was the highest level in nine months, and exceeded the most pessimistic forecasts. The Philadelphia Fed said that manufacturing activity in the mid-Atlantic region contracted for the first time in a year.

The White House plan would make more capital available to smaller banks, who would then, in theory, lend it to smaller businesses. The issue is bogged down in the Senate, where Republicans argue that the bill is simply a bailout for small banks. And without a powerful enough incentive to make them lend, the money could in fact sit in the vaults. Larger banks haven't boosted spending, despite their government aid. Yet a properly designed bill could avoid this problem in any number of ways. It could require banks to lend out the cash, or it could clawback funds that sit idle for too long.

Obama said the bill would "completely eliminate taxes on key investments in small businesses," allow small business owners to write off more expenses, and pave the way toward larger Small Business Administration loans with lower fees. The tax savings are estimated at $12 billion.

The bill isn't likely to come up for a vote, however, until the middle of September, at the very soonest.