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Government Killed Small Biz Jobs on July 15

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And the SBA is non-responsive.

In April I shared Why Small Business is Fed Up With Government – both sides are addicted to “big”. That addiction continues to escalate and hurt small businesses nationwide. And a Washington Post survey say you’re tired of it.

In early 2009 both sides declared the 19 largest banks “too big to fail”, and vowed at every photo op to change that. It was the political buzz-phrase de jour for a few months designed to make us “small” guys feel like someone was looking out for us while they gave hundreds of billions to their big business friends.

Today, three years later, those same few banks now control an even LARGER percentage of the banking industry. That’s how big government dealt with the issue; with their handouts they made the banks even bigger and an even greater national security risk for us. They assumed we would go back to our pitiful little lives and ignore them.

In 2010, Olympia Snowe, the self-styled Republican Senate advocate for small business, introduced legislation to kill the only small business loan actually designed for very small businesses. She had championed the loan through Congress, but received strong opposition from her big bank friends as well as her big government friends. She showed that her allegiance is to the bigs.

And now, in the midst of the biggest recession in history, government is killing small businesses with new regulations. On July 15, the State Department introduced requirements that forced small businesses to put as much as $500,000 in escrow (a business I know would have had to escrow that amount), and leave it there for 12-24 months without touching it.

This drove thousands of small businesses under in only a few days. The big businesses swooped in behind like vultures on a wire and took over all the customers these small businesses had cultivated for decades. They couldn’t get back in business now if they wanted to. Big government now has fewer, bigger clients to regulate. All the bigs are happy.

How did our government help the little guy with this? The business owner and I approached the SBA Office of Advocacy on July 11 and sent repetitive requests for intervention, the very thing that this bureaucracy was designed to do. For 24 days we received no response to many emails until July 29, which was a very unprofessional reply making the SBA out to be the victim. Since asking us a question on August 4, we have again received no responses to many more emails over the last 15 days. Simply inexcusable for an agency supposedly designed to advocate for small business.

Giant business and giant government got us in this mess, then turned around and looked behind and asked us to get them out of it. But they don’t invite us to the table to help them see how to do it. We couldn’t possibly know – we’re small and they’re big, and big knows better than small. Washington has Jeffrey Immelt, former CEO of GE who paid no taxes last year, in charge of fixing this. He, too, has no clue what a small business looks like.

Talk to any banker who used to give small business loans, and they will tell you very quietly and in complete anonymity that the reason their lending standards are beyond the reach of most healthy small businesses is because the government regulators are putting such pressure on them that they can’t adopt REASONABLE (not loose) lending standards. 73% of small businesses who need capital haven’t even bothered to apply because they know it’s useless. 48% who do get rejected – astonishing statistics. The 25 biggest banks control 32 percent more deposits than they did in 2006, but made 30 percent fewer small business loans.

This is your small business advocacy in Washington. In case you wondered if anyone is looking out for you, the small business owner, on either side of the aisle or in any of the halls of the giant bureaucracies there, you might think again.

I’ve said this in dozens of places on the internet for three years – access to capital is the #1 issue for small business and has been since October 2008. #2 is predictability from our govt., and #3 is regulations that hurt small business and help the big ones. The SBA says the #1 job growth sector is businesses with 1-9 employees and the #2 job growth sector is 10-19 employees. Then they, the rest of the government, and the giant corporations who all got us into this mess, continue to use this crisis to help each other just get bigger. Expect large donations from giant corporations to both sides next year.

Small business doesn’t want a bailout. And I personally don’t have time for recessions – I have somewhere I need to be with my business. None of the above make it impossible to succeed, but it does make it harder. And when government proactively kills jobs and small businesses like the State Dept. did on July 15, that is interventionism in commerce that is unacceptable and needs to be addressed, even if the SBA doesn’t have the spine to do it (in case you wondered, the SBA isn’t focused on small businesses under 19 employees).

Caveat emptor – for too long we have bought that someone in Washington is looking out for us. Think again. You won’t get help and you don’t need it. You can succeed without their help; just know that they are not in Washington to make it easier for you, but to make it easier for themselves and their giant corporation donors. It’s time to expose the game for what it is, one “big” scratching the back of another “big”, all at the expense of 28 million small businesses and the American economy.

This isn’t a lack of courage to act. This is simple self-preservation at work – both bigs (giant government and giant business) will protect their “bigness” at any cost, even the worst recession in history. And certainly without blinking an eye at the demise of small businesses.

Why small business is fed up with government

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Both sides are addicted to Big.

What really grinds the gears of small business owners is the near-complete inattention by lawmakers on who creates jobs.

So said Kimble Fletcher Ainslie in a Cato Institute article from December 20, 2001 titled “Bush Ignores Small Business.”

Eight years later under a different president, Catherine Clifford’s article in CNNMoney.com on September 30, 2009 continued the criticism of lawmakers ignoring small business:

Business owners really bring out the pitchforks when they consider the speed with which billions of dollars were distributed to large Wall Street firms and banks. That is what sticks in the small business owner’s throat more than anything.

Banks received $700 billion dollars in handouts in October 2008, with almost no regulations or restrictions. In February 2009, big businesses and big state governments received $787 billion, an incomprehensible $1.5 trillion total dollars. General Motors alone received $30 billion dollars when they would not have qualified for a credit card.

The top job provider in the U.S. economy is businesses under 10 employees. Those with 11-19 employees are second. Seventy-nine percent (79%) of all businesses in America have less than 10 employees.

In February 2009 while big businesses and big state governments were receiving $787 billion, the politicians threw a $255 million bone to small businesses in the form of the SBA ARC loan program, providing a potential $35,000 for a business that could get one. That’s 2/100th of one percent of the $1.5 trillion dedicated to the single largest job growth sector in our economy. While giant banks and corporations got handouts and bailouts many times in just a few days, the first ARC loan didn’t get processed until June 2009, five months later. By December 2009, only 45% of that tiny amount had been loaned.

Adding insult to injury, in December 2009, Republican Senator Olympia Snowe, a self-proclaimed small business advocate, introduced legislation to kill the program and return the remaining 55% back to the Treasury immediately.

Small business owners are not fed up with the government because they don’t get handouts. They are fed up with the symbiotic, parasitic relationship between politicians, big business and big banks. It’s hard enough to grow a small business. Swimming upstream against the constant deluge of advantages, handouts, bailouts, special loan programs and preferential treatment given to big businesses is the real rub.

The mis-named Small Business Administration is of no help. When the SBA was created in 1953 the big business lobby got their political friends to define small business as any business with under 500 employees, which is 99.94% of all businesses in America (only 17,000 of 28 million are larger than 500 employees). It’s like calling everyone under 7′ tall “short”. So it’s no surprise that almost all of the SBA’s attention is on businesses that are 6-7′ tall. Businesses under 5′ 4″ aren’t on the radar. So even with the SBA, true small businesses are on the outside looking in.

In 2009 Australia passed the Fair Work Act, legally defining a small business as having fewer than 15 employees. A similar law in the U.S. would be a good start. Then small business needs the creation of a real SBA, not so they can get handouts, too, but so they have a seat at the table to level out what has been an un-level playing field for decades.

The big business-big government parasitic relationship has been exposed by this last recession. It’s time to put an end to all the patronage that goes between the two of them, all to the detriment of true small businesses.

The Problem of Big

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I’m a Smallist.

In 2009 our economy was rated by the National Security Agency as a higher threat to our national security than terrorism. One side blamed big government and the other blamed big business and big banks. But virtually no one was angry with local business or local government. This is very instructive as to where the problem is and where the solution lies.

It is universally accepted that “too big to fail” businesses that are cozy with big government who will bail them out are the cause of recessions, and small business brings us out of them with no assistance whatsoever. Yet both sides patronize and ignore small business and are committed to big business or big government getting even bigger.

The issue is not with capitalism, free markets, government systems or bureaucrats; the issue is simply “the problem of big”.

Macro-Decisions for Micro-Problems

One problem with “big” is that both giant corporations and massive federal government make macro-decisions (national) to solve micro-problems (local), and every time they do it, somebody gets left out, hurt or dismissed as decisions are made to benefit the 80% and ignore the 20%.

The other problem with big is that Macro-capitalism results in the accumulation of wealth and decision-making in the hands of a very few people in business, and macro-government results in the accumulation of power and decision-making in the hands of a very few politicians. And as we’ve seen throughout political history, the reality is that these two “bigs” have a parasitic relationship that both sides use regularly to preserve and grow their own centralization of wealth and power, all to the detriment of local business and local government.

Local Business and Local Government

Does small always work better than big? No. It is easy to find both local businesses and local government that make self-preserving decisions that aren’t in the best interest of their employees or customers. But the negative affects are not as damaging and are always more apparent. And removing that local politician or shunning that local business is a lot easier.

Micro-solutions for Micro-problems

Even with the best of intentions it is simply too big a task to ask macro-entities to solve local problems. The problem isn’t government or business, but simply the size, massive reach and slow-grinding gears of both.

We need to return to local government and local business for answers to our local problems, and push as many decisions down the food chain as possible. This is difficult for both national politicians and big business leaders because they lose control over their own macro-wealth or macro-power. There is a place for both big business and big government, but I believe we would be better off and safer as a nation with less of both.

Big is Still the Problem

Neither government or business is inherently good or bad, but the bigger any system gets the more difficult it becomes for it to truly serve those in the system. Our economy would flourish with more and smaller competition, and societal problems would find much better solutions closer to home than in D.C. This is why I’m such a fan of local businesses and local government and am so committed to seeing them both flourish.

My focus is to take local businesses from survival, through success to significance. The better we do this the more partners we will have to solve local problems and create great local communities everywhere.