By Sen. Chuck Grassley (R-Iowa) - 03/02/10 10:06 PM EST
At my town meetings across Iowa, people are fed up with Wall Street getting bailed out at taxpayer expense. Firms including Goldman Sachs and J.P. Morgan Chase that received federal funds posted record or near-record profits. Meanwhile, executives who would have been out of a job if not for federal intervention not only kept their jobs, but also enjoyed bonuses.
As Iowans know, the rest of the country has not been so lucky. More than 8 million jobs have been lost since the recession began in December 2007. The unemployment rate of 9.7 percent is much too high.
What is Congress doing wrong?
First, the Senate majority equates federal spending with job creation. Grants to local governments for so-called shovel-ready infrastructure projects are called critical to our economic success. Yet we haven’t seen job creation. And the spending comes with either obliviousness to the lack of results or a delusional hope to spin sand into economic gold.
Take the Democratic majority’s proposal to expand the Build America Bonds program. This program is designed to help cities and states float bonds to pay for big-ticket infrastructure projects. Wall Street banks underwrite the bonds and collect a fee for their services. The Senate just passed legislation, characterized as a jobs bill, to expand the program.
Large Wall Street investment banks charge 37 percent higher underwriting fees on Build America Bonds deals than on other deals, according to Bloomberg news service. Therefore, American taxpayers appear to be funding huge underwriting fees for large Wall Street investment banks as part of these bond deals.
The Senate majority leader says the bonds program is about creating jobs, but we should ask ourselves whether it really does, and whether it’s the best use of taxpayer dollars to send yet more money to Wall Street under the guise of job creation. I’ve written to the Goldman Sachs CEO, asking a number of questions about these much larger underwriting fees subsidized by American taxpayers. Congress should be informed before giving final approval to the expansion of Build America Bonds, which right now is a very rich spending program disguised as a tax cut.
Second, the Democratic majority so far has ignored the economic sector that creates 70 percent of all net new jobs: small businesses.
Despite federal bailouts meant to free up credit, small businesses continue to struggle to get loans to expand their operations, purchase inventory, or even to make payroll.
The so-called stimulus bill enacted almost solely by the Democratic majority a year ago cost $800 billion. Before passage, I raised concerns that the bill was not targeted enough at small businesses and job creation. However, my view lost out. Less than one-half of 1 percent of the bill included tax relief for small businesses. Since then, small businesses have been bearing the brunt of job losses.
Still, the Democratic majority has been slow to respond. The so-called jobs bill from the majority leader that just passed the Senate included only one provision directed solely to small business tax relief — increased expensing of equipment purchases. This was only $35 million out of a $62 billion bill.
Last year I introduced a bill, the Small Business Tax Relief Act (S. 1381), which would double the amount of equipment that a small business could expense relative to the majority leader’s bill and make the higher level permanent instead of just extending it for one year, as in the majority leader’s bill.
I’m urging the Democratic majority to enact at least some of these provisions. The National Federation of Independent Business has written a letter supporting my bill, saying, “To get the small-business economy moving again, small businesses need the tools and incentives to expand and grow their business. S. 1381 provides the kinds of tools and incentives that small businesses need.”
The discussion in Congress has centered on a payroll tax holiday for business that hire unemployed workers and a tax credit for the retention of newly hired individuals in 2010.
The payroll tax holiday is likely to spark some modest hiring at the margins. Yet many businesses continue to struggle and won’t hire new employees just because of that holiday.
Small businesses express fear of higher taxes and more government regulation. They cite a “cap and trade” system that would drastically increase their energy costs; healthcare reform that would require them to offer health benefits, increasing their labor costs; and the call for tax increases on taxpayers earning more than $200,000 that will fall heavily on small business.
If our intention is to increase long-term employment, the last thing we should be doing in this time of economic uncertainty is increase taxes or place additional burdens on the small businesses that create 70 percent of jobs, especially when the Democratic majority always seems to find money for Wall Street.
Grassley is the ranking member of the Finance Committee.