President Obama: Small Business is Part of His Reelection Strategy

President Obama is urging Congress to support legislation to expand tax cuts for small businesses and free up capital for startups.

President Obama

His proposed “Startup America Legislative Agenda,” would eliminate taxes on capital gains in investments in small businesses and provide a 10 percent income tax credit on for new hires or to spur job-creation, double the deductions a startup business could take from $5,000 to $10,000, and extend 100 percent first-year depreciation for qualified property. The President will offer details of his proposals in the fiscal 2013 budget that will be submitted to Congress on February 13.

In an election year in which the economy will likely be the determining factor, both Democrats and Republicans will want to be seen as supporting small business, and cutting taxes is always popular with the electorate.

The White House sees small business growth as a primary driver of the economy. In fact, my company has been providing data on loan approval rates at big banks, small banks, credit unions and other alternative lenders to the President’s Council of Economic Advisers for the past several months. While the economy has risen above the dark period in early 2009 when the country was in a tailspin, the recovery is far from complete.

Credit markets are still tight for entrepreneurs, and big banks, in particular, are making it more and more difficult for startups. For example, many ask for three years’ worth of financial data before granting loans. How can a startup provide such numbers? Therein lies the challenge.

President Obama is positioning himself as an advocate for entrepreneurship and innovation. It is a good platform for reelection. Recently, he elevated Karen Mills, head of the Small Business Administration (SBA), to be a member of his cabinet. The President called this decision:

“A symbol of how important it is for us to spur entrepreneurship, to help startups, to move aggressively so that we can assure more companies that create the most jobs in our economy.”

The SBA has been instrumental in getting funding for startups, particularly during a period when financial institutions have been reluctant to lend. The agency’s 90 percent loan guarantee program was very successful, and only a very small percentage of SBA-backed loans defaulted.

Although it is admirable that the President is trying to be innovative, I believe the government’s most effective vehicle to help small companies has been the SBA, which was created by President Eisenhower almost 50 years ago. Ironically, it has been the Republicans who have called for the scaling back of the agency. President Obama has repeatedly bolstered the SBA, and its loan programs have helped countless businesses get the funding they need for growth.

President Obama Photo via Shutterstock

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Rohit Arora Rohit Arora, CEO and Co-founder of Biz2Credit, is one of the country's leading experts in small business finance. Since its founding in 2007, Biz2Credit has arranged $800M in small business loans and has helped thousands of entrepreneurs. Rohit was named Crain's NY Business "Entrepreneur of the Year 2011."

6 Reactions
  1. Small business is driving this recovery. Give them access to funding to get started/keep growing and watch the momentum build.

  2. As long as the changes decrease government interference in small business operation, I’m all for them.

  3. HARRY @LocalBizBuz

    @Robert – good point. All I see out of the government is red tape and bureaucracy. I must have made a dozen referrals to a couple of small tax accountants in the past year – all small/local businesses who needed an accountant on hand to deal with the constant barrage of forms and filings required for small businesses.

    A 10% tax credit for a new hire is silly. First, those dollars could well end up going to people with no tax liability in the first place, and be nothing more than welfare. Second, hiring a new employee costs a heck of a lot more than this handout will cover.

    The real way to encourage small businesses to hire is to have a stable path forward and rock-solid expectations. Something this administration is lacking.

    My opinion is that the best thing the government can do is to reduce burdensome regulations and bureaucracy and let people and businesses keep more of the money they rightfully earn, without first confiscating it, then doling it back out.

    Again – @Robert above hit the nail on the head. If the actions by Obama – or whoever – decrease government interference, I’m all for it.

  4. This guy has no concept of business. The sooner he is gone the better. Consider Obamacare forcing Catholics to pay for abortions. We can’t survive 4 more years with his crap of taking 1/2 trillion out of medicare–already in deep financial trouble.

    If you never jumped through the hoops to start a business you have no idea of the multilevel regs you have to jump through. Not even considering the penalties from Obamacare. Unbelievable.

    Mistake made. Don’t repeat it

  5. I should stay out of this discussion because it has turned from the subject to demagoguery. If we want to talk about the real issue we have to have two things clear–first, is to define small businesses. My clients are real small businesses–not large ones posing as small businesses. Businesses that are owner-operated. These people are not “swamped in regulation” or worried about tax cuts–they need customers. Which is the second issue–customers only come from people who can spend money. What small business needs are middle-class jobs so middle-class people will spend money.