President Obama signed into law a bill that is aimed at loaning money to small businesses, which will hopefully create jobs and help out entrepreneurs. The bill sets aside $30 billion for loans for small businesses and $12 billion in tax breaks for them as well, according to Reuters. This new bill is expected to create about 500,000 new jobs, which would be a big gain and a strong point for Democrats in the upcoming elections. It was blocked for weeks by Republicans before finally being passed because of two Republicans who broke the ranks and voted with the Democrats.
Hopefully, this bill will help out the economy like it is intended to. There have been many other economic bills passed since the recession started in 2008, and these three are the most high-profile ones: the Troubled Asset Relief Program, the American Recovery and Reinvestment Act, and the Auto Bailout.
The Troubled Asset Relief Program, or TARP, was passed into law at the start of the financial crisis by the Bush Administration in 2008. The U.S. government was to take on failed mortgages so that banks could function again, according to WordPress. This program is seen as a failure because most of the banks that received money didn’t use it to help their problems with unpaid mortgages and foreclosures. Many of the banks used the money to fund campaigning and lobbying, according to Reuters. Other banks used the money to compensate their executives. This was not what the money was for, so it didn’t really help out the economy.
Another financial bill aimed at the economic recovery of the United States is the American Recovery and Reinvestment Act, or ARRA. This bill was an $814 billion program that gave tax incentives; extended unemployment benefits; and spent money on education, health care, and infrastructure. The act is seen as a success in that it created about 3.3 million jobs and added between 1 and 4 percent in GDP, according to Bloomberg.
The auto bailout program was also another program that was successful for the economic recovery. Obama gave $60 billion to the auto industry, and it is credited as creating 55,000 auto jobs. Also, General Motors announced that they will be able to pay back all of the loans from the government. All of the companies that were bailed out under this program are now also operating at a profit, according to NPR.
In order to recreate the success of ARRA and the auto bailout bill, the government needs to make sure that these small businesses know what the money can be used for and are aware that these loans have to eventually be paid back. This was the problem with TARP — the banks thought they could use the money for whatever they wanted to. In order for this program to succeed, the government has to be on top of these small businesses.
Right now, many are saying that this new small business stimulus plan is already going to be a failure because it follows the model of the failed TARP bill. If the government can create a watchdog committee along with this bill to make sure the money for small businesses goes where it is intended to, then this may be a success. But if small businesses are allowed to misappropriate this money like the banks were allowed to do, then this law will also be a failure.
Jeff Mason, “Obama signs U.S. small business bill into law” Reuters.
Troubled Asset Relief Program (TARP),”The Troubled Asset Relief Program” WordPress
Reuters, “U.S. bailout recipients spent $114 million on politics” Reuters
Shamim Adam, “Obama’s Economic Stimulus Program Created Up to 3.3 Million Jobs, CBO Says” Bloomberg
E.J. Dionne Jr, “The New Republic: Obama’s Auto Bailout Victory,” NPR