A Simple And Obvious Economic Booster

Sometimes you get the feeling that the government officials in charge of reanimating our economy don’t understand how this economy actually works. Last week provided a depressing example. It was announced at week’s end that the government plans to focus more on bailing out the country’s small business sector. Which raises the troubling question: how could they not have been focusing on this sector all along?

Most business in this country, most employment, isn’t generated by large corporations but by small enterprises with 250 employees or less. And this huge and vital economic realm has been woefully ignored by the great ones at Treasury and the Fed. The glimmers and green shoots blather that jollied up the stock market for a few months allowed large public companies to better their financial situations by selling new stock, but small businesses don’t get their money from the stock market, they get it from banks. And the trillions funneled into the banking system, while it bettered many lender balance sheets, hasn’t been passed along to small businesses in he form of loans.

The likely reason banks and big corporations have been the main beneficiaries of government reanimation efforts seems clear. No, not that the likes of Geithner and Bernanke are foolish or corrupt, but that they and their fellow planners really don’t have much, if any, personal small business experience or even contacts. Their closest intimate experience with a small economic operation may only have been with a mid-sized hedge fund or the admission department of non-Ivy League university.

Thus, they don’t see the simple. the obvious way to give a giant boost to the small business sector and thereby bring about far bigger and faster economic returns than their past and present efforts have brought about. To wit: suspend for a year or two the 6.6. percent payroll tax paid by every small business with less than 250 workers for all of these workers. And make up the shortfall to the Social Security fund with some of the borrowed money now going to other places.

Payroll costs are the biggest single business expense for most small companies. Suspension of payroll tax contributions would have a huge, immediate positive effect on their bottom lines. It would have the corollary benefit of making these enterprises more credit worthy and more likely to get loans from their banks.

I offer this simple proposal without the slightest expectation it will ultimately bear fruits. It hasn’t been hatched by the great minds in endless discussions with special interests and some paid input from advisers at Goldman Sachs. It needs no exotic planning structure. It hasn’t raised the hackles of blue dogs, liberal baiters or business hashers, and hence hasn’t been debated in a comatose-inducing manner on Sunday morning television.

Indeed, the only excuse for even mentioning this obvious solution of our economic woes is that it would work. A small consideration, but perhaps one worth taking into account given the growing impatience and anger of the American public.