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Should Small Businesses Support The Bailout?

By Bizbox

"I had heard that there was not much in the bail out bill for small businesses, so I hope you are right," a commenter writes on our earlier post, "How The Bailout Would Help Small Business". A good post on Independent Street confirmed the small business community's ambivalence about the bailout proposal, especially when contrasted with the enthusiastic embrace it has received from big corporations across industries. Certainly there appears to be little, if anything, in the bill that was clearly put there precisely to help out small businesses specifically. As the bill passed Wednesday by the U.S. Senate goes to a House vote today, it's worth adjudging whether small business owners should support it.

On the one hand, we were able to highlight the raising of the federally insured bank deposit ceiling to $250,000, which should disproportionately help small businesses, who are more likely to have accounts that large; we could also point to the tax break for community banks that were hard-hit by the collapses of Fannie Mae and Freddie Mac and that are going to be an important source of small business loans in the coming months.

On the other hand, these are all things that, even in a best-case scenario, would help small businesses at most indirectly: it is hard not to feel that small businesses have been overlooked, especially when the small business lobby's concerns, such as those having to do with federal government contracting, have apparently gone unaddressed. The one exception here is the help being sent to community banks, which frequently would themselves qualify as small businesses; and indeed it is worth pointing out that, fundamentally, though the bailout is ultimately intended to boost the economy as a whole, its target is pretty specifically the financial industry.

Still, in the end, we would echo the title of a statement recently put out by National Federation of Independent Business CEO and President Todd Stottlemyer: "This is Not About Wall Street, It's About a Firewall for Main Street". Now, of course, it is also about Wall Street: put simply, some workers and executives there and some companies there are getting a better shake than their performance probably deserves. And while Stottlemyer does mention the community bank tax break, the change in deposit insurance, as well as an Alternative Minimum Tax patch and a couple of other items, these are secondary items in terms of the bailout bill--it is not the community bank tax break that involves the addition of $700 billion to the national debt.

But fundamentally, we are all in the same economy. And due to the mechanics of the current situation, something needs to be done to create a market for the toxic mortgage-backed loans that remain held by Wall Street firms. Dealing with that problem should help loosen the credit markets, and that should in turn help, well, you. A failure to deal with it would hit Wall Street first, it is true; but the fire would spread to Main Street, and it would burn no less ferociously there.

So in answer to our commenter: you didn't exactly hear wrong when you heard that there wasn't much in the bailout bill for small businesses, at least specifically. but we don't think we're exactly wrong to say that, ultimately, it is good for small businesses nonetheless.

And we, too, hope we're right.

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