As a small business owner and CEO I see nothing but trouble from the stimulus package passed yesterday by the House. In its current form it does nothing to encourage me to employ more people, make additional investments or risk any capital. That assumes I could get access to any new capital. The banks have stopped lending and the credit markets have seized like a 1977 El Camino with an oil leak. Moreover, regulators are telling the banks to get their capital requirements in order before making any new loans. This means that the first $350 million in TARP funds was only useful in stabilizing faltering banks rather than providing for new loans. I just hope the remaining $350 million will be enough to open up the ATM’s for small businesses.

It is important that any stimulus package address the three most critical areas of our current economic situation. First, we must ensure that those who have jobs keep them and provide immediate help to the employee and the employer. This can be accomplished by cutting the payroll tax for both sides. Reducing it by 3% for both the employee and employer would put another $1,800 in both their pockets based on a $60,000 annual wage. A small company employing 50 workers would save $90,000 a year, which could be used to keep from further cutting jobs or to reinvest in human or physical capital. 

Secondly, we must address those who have already lost their jobs, some 6.5 million workers many of whom face long term unemployment given the uncertain times. We should immediately extend their unemployment benefits to a maximum of nine months and supplement the individual’s Cobra coverage to reduce the employee’s portion to 75% of the total out of pocket cost. I usually don’t advocate this type of government hand out but it is necessary to allow time for the economy to stabilize.

Thirdly, we must provide the capital needed for small businesses to recover, invest and grow for the future. We are experiencing an emergency similar in scale to Katrina, but on a national level. We should deploy a FEMA like response offering low interest loans to small businesses to provide the capital banks can’t. Allowing these funds to be used to refinance debt will result in lowering the cost of money and freeing cash flow for more productive uses. This could be done directly through the Small Business Administration, healthy financial institutions and private equity funds. All established networks capable of quickly injecting capital into the economy. Of course, some of these loans will go bad, but most will provide a formidable return on investment that will fuel future job growth and spawn new business activity.

I can tell you right now, that under the President’s plan I do not see hope or change. I see big government beyond what we have ever seen before. We must treat this stimulus as a temporary event and not a new baseline for an ever expanding federal budget. Under the current plan, as CEO, I see no other option than having to continue to trim costs that will likely result in more job losses that result in less consumer spending that leads to a continued shrinking economy. This spiral must be stopped in order for our economy to begin to heal. The plan must address what is wrong, rather than be a disguise for liberal spending programs that increase the size of government. As Ronald Reagan stated during his first inaugural address, as he faced a deteriorating economy “government is not the solution to our problem; government is the problem.”