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CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
NOVEMBER 28 - DECEMBER 4, 2011
PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Hold the ax
E
very few years, someone in Washington circles raises the idea of abolishing the U.S. Small Business Administration. The basic argument is that government shouldn’t put at risk taxpayer money, in the form of SBA loan guarantees, in order to provide a safety net for banks that take on small business borrowers they probably wouldn’t lend to otherwise. Well, that idea is coming up again as the federal government wrestles with how to bring down its massive budget deficit. But now is not the time to take an ax to the SBA. Ted DeHaven, a budget analyst for the freemarket public policy think tank The Cato Institute, called for terminating the SBA in an August op-ed piece at WashingtonExaminer.com. Mr. DeHaven said while lawmakers portray SBA loans as a boost for small business, “they’re actually a form of corporate welfare for some of America’s largest banks.” “The banks reap profits from the program, but taxpayers are liable for the losses,” Mr. DeHaven stated. It’s a legitimate complaint. SBA loan guarantees do put taxpayers on the hook for up to 85% of the losses of loans that go into default. However, the case he makes for abolishing the SBA ignores the sorry manner in which the credit markets are functioning following the subprime lending crisis of 2008-2009. Small business borrowers that can’t issue their own debt in the form of bonds and notes, like big companies can, have been caught in a Catch 22 nightmare with their banks. The banks, desperate to avoid adding to their nonperforming loans, have been willing to extend credit only to customers that can prove beyond a doubt they have the wherewithal to repay their debts. But those businesses that qualify for loans often don’t need them because they have enough cash and existing credit capacity to make investments without them. Where does that scenario leave small businesses that need money to grow but that aren’t so flush with cash or assets that they’re a lead-pipe cinch to make good on their debts? It apparently leaves them turning to loans backed by the SBA, if statistics from the agency are any barometer of the lending atmosphere. As Crain’s finance reporter Michelle Park wrote a few weeks back, the Cleveland district of the SBA backed more dollars to more borrowers during the fiscal year that ended Sept. 30 than it has in any year since fiscal 2008, just before the Great Recession kicked in. The district’s loan volume totaled $363.6 million in fiscal 2011, up 66% from $218.6 million in fiscal 2010. And the number of borrowers receiving SBAguaranteed loans climbed 37%, to 1,434 from 1,048. These numbers and national loan figures from the SBA that tell a similar story indicate more businesses are willing to invest in themselves again if only they can gain access to money. With the U.S. unemployment rate stuck at around 9%, it is going to take many such investments to get the recovery truly into gear. If the government is willing to lend trillions of dollars to bail out big banks, it surely can afford to put a few billion dollars at risk to energize lending to small business.
FROM THE PUBLISHER
A pox on the cowards in Washington
S
member of the committee and a former o far, only Steve LaTourette is U.S. trade representative, wouldn’t be inspiring any confidence among part of a compromise plan. Political Northeast Ohio’s congressional analysts immediately began to suspect delegation as citizens fumed last his heretofore attractiveness as a candiweek over the latest fiasco to come out of date on the national stage, and that’s the nation’s capital. probably not unfair. Members of Congress couldn’t bring What was unfair was for the larger themselves to jettison their petty partibody to abdicate its responsisan squabbles and deal with the bility and push this tough work budget mess we’re in, so they BRIAN to these 12 members. What’s created the so-called “super TUCKER also unfair is that the American committee” of 12 members to people, suffering through what fashion a compromise. Their is for most the worst economic task was to work a deal that times they’ve faced, get nothing would make sense to both sides from their elected representaof the aisle. tives. Nothing but the same, Hovering like the sword of tired blame game. Damocles was the threat that The Democrats chide the if the committee couldn’t reach Republicans for their insistence a deficit-reduction deal, then on no tax increases as part of a deficit harsh, non-strategic, across-the-board reduction plan. The Republicans attack cuts of $1.3 trillion would begin in 2013. the Dems for refusing to cut expensive This was the chance for lawmakers to do entitlement programs. Nobody cares real good — to ignore the shrill cries about the middle ground, that spot on from their extremist wings and mix tax which most of their countrymen reside. increases with sensible entitlement cuts. As the deadline neared, Rep. LaTourette, But, no, they couldn’t do it. Even who represents much of Greater CleveOhio’s U.S. Sen. Rob Portman, a respected
land’s eastern suburbs as well as Ashtabula County, declared that he no longer would abide by lobbyist Grover Norquist’s now-infamous “no new tax” pledge that Rep. LaTourette signed years ago. Anyone with half a brain knows that we can’t cut this enormous budget deficit without a combination of taxes or revenue enhancements, as well as entitlement program reductions. That’s the pledge we should demand from all of them, starting now. So write or call the offices of Marcia Fudge, Dennis Kucinich, Betty Sutton, Marcy Kaptur and Jim Renacci and demand that they start acting like responsible adults who care more about their constituents than they do for their powerful Washington positions. Right now, none of them — except for Rep. LaTourette — has had the courage to say that it’s time to compromise and do what’s right. If they don’t make that promise, they all should be removed from office at the next earliest election. The American people are sick and tired of their selfishness and slavish allegiance to party ideologues. ■
THE BIG ISSUE At this point, it doesn’t look like there is going to be an NBA season. Do you care?
DEQUAN WILLOUGHBY
ZACH CHRISTY
JACQUIE WELCH
ARTHUR PUSCH
Maple Heights
Lakewood
Painesville
Strongsville
I’m just ambivalent about it. I couldn’t care less if we had a season right now. I’m out here struggling.
I don’t really care. I’m not really a basketball fan. I like baseball and football a lot more.
Personally, no, I don’t care because I don’t follow basketball. I do care because it will affect the economy.
I care because with the NBA and the Cavs, it attracts people downtown. … But at this point, it looks pretty futile.
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