Small-Business Leader Says Obama Plan Is Misdirected

The chief economist for a leading business group says the Obama administration's effort to boost employment by assisting smaller companies is off base.

William Dunkelberg, chief economist for the National Federation of Independent Business, told Bloomberg TV on Tuesday that the tax credits and loans that the administration has set aside for small businesses aren't the proper way to help the struggling sector, which drives employment in the U.S. The problem facing small business is weak demand, not lack of credit, according to Dunkelberg, who urged the administration to focus on boosting consumer spending.

"No one will hire a $30,000 worker to get a $5,000 tax credit if the worker cannot earn enough in extra sales to cover the cost of hiring them,” Dunkelberg told Bloomberg. The Obama administration supports a plan to provide small businesses with a $5,000 tax credit for every worker that they hire. It also wants to raise the limit on Small Business Administration loans to $1 million from $350,000, at least for now. The loans could be funded with $30 billion in money that bailed out banks have repaid the government.

Dunkelberg made his comments as the NFIB released data showing mixed news on the outlook for small businesses, which has recovered to some extent from the low point of the recession. The group's latest survey showed that confidence among small-business people rose for the first time in three months, hitting a 16-month high of 89.3. But three in 10 small-business people are concerned about the outlook for sales, and a majority expect sales and profits to decline. "Optimism has clearly stalled in spite of the improvements in the economy in the second half of 2009," Dunkelberg warned.