A Small Business Bailout?

Bailing out the big auto companies wasn't a very popular idea among Americans. But it's likely that the "bailout" part of that equation isn't what's bothering people--it's the bailing out of big, faceless corporations.

A number of small-business organizations are betting that's the way people feel. I've seen a number of pitches for why small businesses should get their own chunk of the bailout.

The National Development Council's president says we need to create a Cabinet-level position to coordinate federal resources for small businesses, and spend $75 billion on a small business stimulus package.

And the National Small Business Association sent a letter to Nancy Pelosi calling for 25 percent of TARP funds to be aimed at small business lending and a mandate that 23 percent of stimulus infrastructure funds be contracted out to small businesses.

My question is: do the nation's small-business owners really want to become another special-interest group lining up for favors from Washington? Obviously, that can never really happen. No matter how many organizations lobby the federal government for handouts aimed at small businesses alone, the number of small businesses is too large and its makeup too diverse. "Small business" can't really become a narrow interest group.

But by that same token, any "small business bailout plan" is not going to represent the entire small-business community, either. Like any government rescue plan, it is going to help some select businesses, and leave others in the dust. For example, focusing TARP funds to expand small-business lending might help businesses in certain lending programs (which is by no means all small businesses), but it also drains resources from TARP's original purpose--getting toxic debt related to mortgage securities off balance sheets.  Unless that happens, we're never going to get over this credit crunch, and that hurts all businesses--no matter the size. What would really hurt entrepreneurs of all stripes is if we spent the next decade like Japan spent the 90s--shoveling more bailout money at the symptoms (lack of lending), and failing to deal with disease (toxic debt).

Some of these suggestions--like the NSBA's suggestion to abolish the self-employment tax on health insurance--are just sensible policies that would also benefit entrepreneurs. But I don't think it's in the best interests of small businesses to try to get a bailout of their own. Focus on policies that will help the economy at large--if the economy improves, entrepreneurs and small businesses are sure to be the ones driving the recovery, and reaping the benefits.