The economic stimulus package, which followed the financial institution bailout package, was really an “economic stabilizer” which prevented the economy from further backsliding — shoring up pensions, keeping state and local governments operating, large corporations from sinking — which in turn, kept consumers viable.
But these two enormous and expensive actions, one by a Republican president, and the other by a Democratic president, focused on the large players, when in fact, small businesses play a large role in the economy.
A new set of tools needs to be applied now, to look forward and grow the economy. Small businesses, according to the U.S. Small Business Administration (SBA), employ half of all private sector employees, pay 44 percent of total U.S. private payroll, generated 65 percent of net new jobs over the past 17 years, and create more than half of the nonfarm private GDP.
Small businesses have two solid attributes that national policymakers need to focus on. First, small businesses, by being small, can employ people faster since they are community-based and do not have large human resources (hiring) bureaucracies. Second, small businesses are geographically dispersed, so by addressing this sector, policies can spread the economic gain in every state of our union.
I do not believe we need trillions of dollars of new taxpayer dollars, but rather to refocus existing federal and state programs to accentuate the small business provider with fast track procurement policies, faster access to federal loan programs as offered through various federal agencies (SBA, U.S. Department of Agriculture and the Federal Housing Administration) and export programs such as those through the U.S. Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, and so on. Furthermore, existing lending requirements must be enforced.
Private sector lending to the small business sector takes three times as long and now has far more approval hoops since the economic meltdown. The irony of this should really bother everyone, since the culprits were the largest players in the financial community — not related to small business behavior at all.
Capital needs to be efficiently focused back into the small business sector if we are going to see that unemployment needle move significantly downward and have even results across the country. This is going to require a more focused push by federal, state and local governments, not only using their own existing programs, but also enforcing existing laws on the private lending sector requiring certain levels of investment in their communities.
By jump-starting this ignored small business sector and leveraging federal, state and local government programs, you will see a more substantial impact, sooner, in lowering unemployment and building domestic economic momentum.
Scott Sklar is president of The Stella Group, Ltd., a Washington-based policy firm focusing on clean distributed energy users and companies.