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The Stimulus and Small Business

Posted by: John Tozzi on January 28, 2009

I heard Rep. Eric Cantor (R-Va.) on the radio this morning talking about the stimulus bill the House will vote on today, and how it will affect small business and job creation.

Cantor says that he’s concerned about the size of the $825 billion stimulus package — he predicts it will grow to $1 trillion — because borrowing all that money will “dampen entrepreneurial activity.” I don’t quite get the reasoning behind this. My sense is that the size of the federal deficit doesn’t directly affect most entrepreneurs’ decisions. People with good ideas who can find a market for their products or services and get the funding to execute the idea will start businesses. If the market or the funding isn’t there, they won’t. (Or they’ll try and fail.) Where does the deficit come into whether entrepreneurs will start or expand their companies this year?

Republicans say the looming deficit is hurting the entrepreneurial environment. “We’ve got to make sure we’re stimulating investors, entrepreneurs and small business people to get back into the game,” Cantor says.

Is he saying that, in the long term, any debt we take on will have to be paid for through taxes, and that will dampen entrepreneurial activity? That’s one argument. But the stimulus plan contains tax cuts to get people spending now — as much as 40 percent of it will be tax cuts. So I don’t see how it dampens entrepreneurial activity.

What the stimulus plan does have, however, is government investment (yes, spending) in areas that seem ripe for entrepreneurial activity: making health care more efficient by computerizing medical records; developing new sources of clean power and smarter electrical grids; and investing in science and technology.

Talk to anyone in the clean tech industry — which venture capitalists are betting heavily on — and the biggest problem they will tell you about is inconsistent government support for developing renewable power. The stimulus bill seems intended to create and sustain new markets, like renewables, for entrepreneurs to step into, and the results of that spending could make our economy more efficient in the long run.

It’s hard to say whether this is the best bill for small business. But tired arguments about how deficit spending automatically “dampens entrepreneurial activity” seem too simplistic for the challenge the economy faces now. So, entrepreneurs, what do you think of Cantor’s statement? What do you want to see in the stimulus package? Will help your business? If not, what would?

If you want to explore the stimulus plan, check out this great interactive graphic from ProPublica. Read more about the plan on BusinessWeek’s Vox Stimuli page and our Money and Politics blog. Or just weigh in with your ideas in comments below, by email, or on Twitter.

Reader Comments

Brian Stafford

February 2, 2009 6:22 PM

My question is: What have you seen in the bill that has a direct stimulus effect on small business? The bill was 640 pages and the White House has not published a summary for all to see so we can evaluate it. Just spending, deficit or not, does not guarantee job creation. Tax cuts or tax incentives can have a direct and behavioral effect on entrepreneurs, in my opinion. I have heard of nothing in the bill that makes me want to go hire somebody. Where is the beef? Afterall, small business hires a large part of the workers in this country and if there is no incentive for someone like me to hire then why should I?

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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