Who owns the economy?

(The following opinion editorial by Frank Knapp appeared today in The Hill.)

Who is to blame for the state of our national economy is a political football. 

No one can argue that the recession that started prior to the Obama administration was owned by the former administration.  President Bush responded with the Troubled Asset Relief Program (TARP) that was projected to be a $700 billion effort to avoid a catastrophic collapse of the banking industry.  It is now projected to have done its job for less than $100 billion, as many of the loans have and are being repaid with interest.

Then it was President Obama’s turn.  Faced with a declining GDP at a 6% annual rate and the nation losing 750,000 jobs per month, Mr. Obama pushed through his stimulus package of federal funds to rescue state budgets, keep people working and hopefully create jobs.  The state of our economy, and the fear of a jobless recovery, is now being perceived as belonging to his administration. 

So what is the state of our economy today and what would it have been without the efforts of Messrs. Bush and Obama?

According to a new study by Alan Blinder, former Vice-Chair of the Federal Reserve, and Mark Zandi, a past economic adviser to Senator John McCain, all the efforts to rescue the economy helped stave off a depression.  The study’s authors estimate that an additional 8.5 million Americans would have become unemployed if not for TARP and the stimulus.  That would have doubled the number of those who did lose their jobs due to the recession.

Our economy appears now to be stabilized and the GDP, according to recent data, is growing again at 2.4% annually.  Blinder and Zandi give credit for this turnaround to the Bush and Obama administrations’ programs. 

However, our economy is far from out of the woods could reverse course without more help.

Economists agree that small businesses must lead our recovery with hiring just as they have done in the last three recoveries.  But to do that, they need access to capital—something that is seriously lacking today.

Federal Reserve Chairman Ben Bernanke

"Making credit accessible to sound small businesses is crucial to our economic recovery and so should be front and center among our current policy challenges," Federal Reserve Chairman Ben Bernanke said recently in regard to the small business lending crisis.

A just-released survey by the National Small Business Association shows that a majority of the small businesses that needed access to capital said that they were unable to garner adequate financing.  SBA loans have also dropped dramatically this year.

The relationship between small business lending and job growth is well documented.  The NSBA report asserts:

“Since 1993, when NSBA began asking these questions, there has been a direct correlation between access to capital and job growth—when capital flows more freely, small businesses add new jobs.”

Also making this point is a report released last week by the National Community Reinvestment Coalition that found “a positive correlation between small business lending and employment; the more small business lending in a county, the higher the employment rate.”

It is clear that if we want to move our economy out of this stagnation and create more jobs, we must solve the small business lending crisis.  

That is why the Senate’s failure to evoke cloture last week on the Small Business Jobs Act was so devastating to our economic future. 

There are too many great small business provisions in this bill to detail.  No one appears to disagree that the bill will result in more small business loans being made along with other important features to promote the general fiscal health of small businesses. This is exactly what we need to allow small businesses to lead us to a better economy.

Yet, every Republican Senator out of party unity voted against even debating the legislation.

Senator George LeMieux (R-FL), who earlier had courageously voted as one of only two GOP Senators to include the crucial Lending Fund in the Small Business Jobs Act, is reported to have said, “Before I am a Republican, I am a Floridian and an American, and this bill is good for our country.”

Mr. LeMieux and the other GOP Senators may have one more chance this week to vote for America and not for party.  If none vote for cloture on the Small Business Jobs Act, the state of our economy going forward will be owned by Congressional Republicans.