Monday, March 16, 2009

Help for small businesses

WASHINGTON - PRESIDENT Barack Obama cracks open the federal treasury on Monday to small businesses with plans for billions of dollars in government loans for the struggling sector that employs an estimated 70 per cent of American workers.

The program represents the next step in the administration's massive spending aimed at braking the economy's plunge, and it could blunt opposition Republican complaints that Mr Obama was doing to little to ease the pain of small businesses.

After spending the first weeks of his administration in doom-saying as he sought to engender a sense of urgency for congressional passage of a US$787 billion (S$1.2 trillion) economic stimulus plan, Mr Obama and his aides now are talking up modest economic upticks - last week's stock market rise and signs that showed consumers may be ready to reopen their wallets.

Mr Obama and Treasury Secretary Timothy Geithner on Monday planned to announce a broad package that includes that includes US$730 million from the stimulus plan, with reduced small-business lending fees and an increase on the guarantee for some Small Business Administration (SBA) loans to 90 per cent.

The government also planned aggressive steps to boost bank liquidity with more than US$10 billion aimed at unfreezing the secondary credit market - a key to making it easier for small businesses to borrow. Outlines of the plan were provided by administration officials who demanded anonymity to avoid pre-empting the president's announcement.

On Sunday, a key Obama economic adviser said the administration was confident in the nation's economic underpinnings.'The fundamentals are sound in the sense that the American workers are sound, we have a good capital stock, we have good technology,' White House Council of Economic Advisers chair Christina Romer said.

Many Republicans quickly recalled that Mr Obama had mocked his campaign opponent, Sen. John McCain, who had used similar words as the financial system was threatened with collapse shortly before the election.

Larry Summers, the director of the National Economic Council and an Obama adviser, issued a more modest assessment, quoting the president: 'It's never as good as people say it is when they say it's good, and it's never as bad as people say it is when they say it's bad.'

The focus on help to small businesses was being announced as Republicans seek political gain from some bipartisan misgivings about Mr Obama's ambitious spending blueprint. In particular, Republicans say, Mr Obama's budget proposal to raise taxes, starting in 2011, on individuals earning more than $200,000 and on households earning more than $250,000 will hurt small businesses.

'We've got to do something to help these small-business people. We know that they're the job creators in this economy,' the House Republicans' No. 2 official, Rep. Eric Cantor, said on Sunday. 'And the problem ... I think we're seeing out of the Obama administration is a lack of focus on how to get things going again.' -- AP

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