"You didn't build that." A single phrase, uttered by Obama more out of frustration than prejudice, has become a rallying cry for the Republican Party, which wants American voters to believe that Obama is implacably hostile to small business.
There's no denying that Obama's poorly chosen words have stoked the GOP's long-standing depiction of the president as a "tax-and-spend liberal" who privileges government initiative over the "genius" of the private sector.
But the fact is, Obama has -- to borrow a term from Bill Clinton -- a "sterling" record when it comes to promoting small business. If you haven't heard about it, it's largely because Obama -- with characteristic diffidence perhaps -- hasn't touted some of his most noteworthy policy achievements. And that's allowed vocal business groups like the American Chamber of Commerce to fill the messaging void with their own anti-Obama vitriol, virtually uncontested.
First, consider these simple facts. Of the 4.5 million private sector jobs created since Obama took office, about 2.6 million -- or 60 percent -- were created by small businesses. How impressive is that number? George H.W. Bush, by comparison, created just 1.8 million small business jobs during his full four years in office. And if we add the paltry number created under two terms of George W. Bush, we arrive at a startling conclusion: Obama has created as many small business jobs in one administration as his two GOP predecessors did in three.
These jobs and the revival of the small business sector didn't just happen spontaneously. From the day he took office, Obama has deliberately stoked its development, providing some 18 different tax cuts: some under the banner of the 2009 American Recovery Act (the "Stimulus"), others through the Small Business Jobs Act of 2010. Obama also established the Small Business Lending Fund (SBLF) which made it easier for community-based banks to provide critical start-up loans that most fledgling businesses need to get off the ground, or to finance their expansion, hiring more workers.
That's right, even though it's business owner CEOs that provide the drive and innovation to push their businesses forward, they rarely take that risk alone. In the short-term term, the issue isn't so much whether businesses need roads or schools but whether they need investment capital. It's commercial institutions -- or the stock market, when start-ups go public -- that help them pool that vital capital, and those institutions are ultimately sustained by their depositors or shareholders. No, small business alone doesn't build that.
In fact, even the private sector alone, operating collectively, is often not enough. The rise in commercial lending to small businesses, which began in late 2011, and has accelerated since, was itself triggered by Obama's loan guarantee policies. In 2010, he set up an unprecedentedly large fund, totaling $30 billion, under the Small Business Administration (SBA), to help underwrite commercial lending to small businesses. The SBA doesn't actually provide the loans but it signals to banks the kinds of businesses that are likely to be promising and profitable enterprises.
And it's paying off, big-time. To take just one example: SBA's Dallas/Fort Worth district office approved an unprecedented 666 loans and $399.8 million in loan guarantees to small businesses during the first three months of 2012. That's a whopping increase of 83 percent and 42 percent, respectively, over the same period in 2011.
To give some sense of the magnitude of the shift that's starting to occur, and that's expected to accelerate over the next two years, consider these figures:
- At Bank of America, new loans to businesses with less than $20 million in revenue increased 20 percent in 2011, to 6.4 billion. Among businesses with less than $5 million in revenue, lending increased 63 percent.
- A recent U.S. Treasury report on Pennsylvania found that the state's three leading banks had raised small business lending by $270 million, a whopping 60 percent increase. It took just $30 million in SBLF funding from the Obama administration to trigger that increase.
- Jim Chessen, chief economist at the American Bankers Association, said banks expect small business lending nationwide to increase by another 7 percent in 2012. That's on top of a 5 percent rise in 2011. The trajectory of rising small business lending and hiring is clear.
Even more telling perhaps, is the renewed confidence of small business owners. While the Romney campaign has made much of polls showing that most small business owners favor him over the president, in surveys owners are remarkably satisfied with their progress, and where they see things going.
Gallup, which has surveyed business owners for years, recently found that the satisfaction index among owners was at its highest level since July 2008. That means Obama has largely restored small business confidence to its pre-recession levels, a remarkable feat, but like so many others, one that's been largely under-reported, or distorted by partisan warfare.
Perhaps no aspect of Obama's pro-active support to small business is less well known than his stewardship of the Jumpstart Our Business Start-Ups (JOBS) legislation that passed the Congress in April. One reason: Obama had to reach across the aisle to work with Republicans to balance opposition he faced from within his own Democratic ranks. The bill relaxes federal security regulations to make it easier for small start-ups to gather investment capital, and many consumer groups saw it as a step backwards in terms of maintaining transparency and protecting investors from being swindled.
But for the bill's legislative supporters, it was a clear recognition that the IPO sector, which may be the economy's leading source of business innovation as well as job creation, will never fully recover unless extraordinary -- and yes, risky -- new steps are taken.
It was a handful of Silicon Valley investors -- many of them prospective Obama donors, of course -- who spearheaded the JOBS legislation, but it stands as one of the true bipartisan achievements of Obama's first term. Even Rep. Eric Cantor (R-VA), the GOP's second most powerful voice in the House and one of the presidents leading Republican critics, had nothing but praise for Obama's stewardship of the JOBS bill. It may well be the clearest sign that Obama, far from shying away from supporting small business, has emerged as its true champion.
Why, then, would small businesses be so hostile politically to the president when they're starting to have it so good? Partly, it's the deeply-ingrained perception that Democrats, because they also support stronger business regulation, are less sympathetic than Republicans are to free enterprise. But recent polls suggest that small businesses actually support increased regulation, especially on the environment. There's also a simple lack of education. For example, while clearly worried about the cost of health care reform, a recent survey found that a majority of small business owners remained completely unaware of the large subsidy and tax exemption actually afforded them under Obamacare.
Apparently, groups like the National Federation of Independent Businesses (NFIB), which claims to represent the small business sector -- but critics say is a right-wing front group -- isn't in a hurry to tell them, either. NFIB was part of the original pro-Obamacare negotiating coalition but pulled away to join the fight against the individual mandate, even filing its own Supreme Court brief opposing the law. Eventually small businesses may figure out that they stand to gain mightily under Obamacare, assuming that the law's key provisions, including their own benefits, survive an expected GOP onslaught.
The fact is, Republicans, while shoring up big firms, have often neglected the small business sector, except, of course, as a convenient ideological symbol. Most economists know that the GOP's attempt to portray its tax cuts on high-income earners as an investment capital "stimulus" to small businesses is a fraud. Only 3-4 percent of small business owners report annual personal income in the $200,000-$250,000 bracket. Tax cuts at this level will have only minimal impact on the nation's economy, except as a subsidy for the luxury purchases of the rich.
The small business sector? Don't look to Mitt Romney, any more than his GOP predecessors, to help build that.
This article is adapted from the author's forthcoming e-book (with John Barton), WHY THE RIGHT IS WRONG: Setting the Record Straight about President Obama's First-Term Policy Accomplishments.