In his 45-minute
lecture/speech in Cleveland last week — which
mostly consisted of blaming his predecessors for the state of the
economy and trying to turn House GOP leader John Boehner into a
Gingrich-like bogeymen — President Obama once again touted the
Democrats’ “small business jobs” bill pending in the Senate and
blasted Republican opposition. The president exclaimed: “In fact,
if the Republican leadership in Congress really wants to help small
businesses, they’ll stop using legislative maneuvers to block an up
or down vote on a small business jobs bill that’s before the Senate
right now. Right now”
In actual fact, though, if Obama really wanted to help
small business, he would instruct Senate Majority Leader Harry Reid
to stop using “legislative maneuvers” to block “up or down” votes
on amendments that, unlike the underlying bill, would actually ease
the burden of the majority of small businesses. Dozens of
amendments have been proposed to the “Small Business Jobs And
Credit Act” that would help small entrepreneurs by providing
regulatory and tax relief.
These include amendments providing a reprieve from the
looming tax hikes scheduled to hit many small business owners at
the end of this year when the Bush tax cuts expire, and a
bipartisan measure that would lift an arbitrary government cap on
the amount of loans that credit unions can lend to
businesses.
Reid now appears to be willing to allow a vote this week
on a measure by Mike Johans (R-Neb.) to repeal a costly and intrusive
measure in Obamacare that requires businesses to file
IRS 1099 reports on any purchase $600 and over. But he is still
refusing to let any of the other amendments come to Senate floor,
saying that they are not “germane” to the bill.
And indeed, actually providing relief to entrepreneurs
from the government’s burdens may not be “germane” to a bill that
purports to help small business by setting up a $30 billion
big-government “small business lending fund” — what National
Review writer Stephen Spruiell has called “Son of TARP” — in
which the U.S. Treasury buys up stakes in banks and directs them to
lend to small business with an emphasis on “linguistically and
culturally appropriate outreach.” As Spruiell
writes, “this is the kind of politicized bank
lending that the government has encouraged for decades through laws
such as the Community Reinvestment Act and through mandates
requiring Fannie Mae and Freddie Mac to promote homeownership
[that] actively drove the deterioration of lending standards that
led to the bust.”
But if Congress’s objective in crafting this horrific bill
was making credit more available to small business, why won’t Reid
bring to the floor an amendment that would simply allow a segment
of financial institutions to make loans available to small business
without any government subsidies or prodding? An amendment that,
though it has bipartisan support from prominent conservative
Republicans, is sponsored by one of the more liberal members of
Reid’s own party.
In July, Sen. Mark Udall (D-Colo.) introduced an amendment
to the bill that would raise the government’s current cap on the
amount of business loans credit unions can make from 12.25 percent
to 27.5 percent of a credit union’s assets. The measure does not
change the safety and soundness requirements credit unions must
adhere to and in fact introduces new criteria they must meet to
show financial strength. And prior to 1998, when bank lobbyists
succeeded in getting Congress to put the 12.25 percent cap in place
to halt competition, credit unions did not face any cap on the
amount of business loans they could make to their
members.
The Credit Union National Association has estimated that
the measure would create billions in new loans and more than
100,000 jobs in its first year of enactment, and it has been
endorsed
by trade groups from the National Association of Manufacturers to
the National Association of Realtors as a way to make business
credit more available.
But though both Reid and the Obama administration
initially expressed support for the measure, they have since hemmed
and hawed about whether the amendment would be allowed a vote.
According to a
story by Credit Union Times reporter
Claude Marx, “it’s not clear how high a priority [the
administration] is placing on including it in the final bill,” and
Reid had “told backers that he wouldn’t bring it up unless they
could guarantee at least 60 votes.”
This reluctance of Reid and Obama to support this sensible
no-cost measure to boost small business lending — probably at the
behest of banking associations that fear the competition —
presents an opportunity for Republicans to show they are on the
side of small entrepreneurs. Already in the House, solid
conservatives and tea party favorites such as Ron Paul (R-Texas),
Virginia Foxx (R-N.C.), Dan Burton (R-Ind.), and Dana Rohrabacher
(R-Calif.) have co-sponsored
similar legislation boosting the business lending cap
for credit unions. More GOP senators should follow suit and insist
on Udall’s amendment coming to a vote, as well as the measures to
restore the Bush tax cuts.
Politically, the biggest advantage Republicans have in
supporting the credit union amendment is that they can credibly
accuse Reid and Obama of a charge that has often (and most of the
time, wrongly) been leveled against them: that of “siding with the
banks.”
Bank lobbyists have been ferociously opposing any increase
in the credit union business lending cap that would give more
borrowing options to small businesses. They complain of “unfair
subsidies” to the credit unions. An “action alert” of the American
Bankers Association warns about “the expansion on unfair credit
union competition in business lending.” The alert
intones, “Credit unions were given a tax exemption
to serve people of modest means, not to aggressively go after
business loans.”
But it’s a bit rich for the banking industry, which has
received more than $700 billion from TARP and is lobbying for
billions more in the current bill, to complain about unfair
subsidization. Yes, credit unions have an exemption from taxation
at the corporate level because they are member-owned cooperatives
that don’t have the many means that banks have to raise money such
as the issuance of shares of stock.
Credit union members are fully taxed on the dividends on
their accounts (which are really interest payments on their
accounts, and are taxed at the “ordinary income” rate for interest
and not the lower rate for dividends). Conservatives have long
argued that business income should only be taxed once, and credit
unions provide a successful example of single taxation. They should
also argue for expanding this structure, rather than for unduly
restricting credit union activity simply because the tax system for
all businesses hasn’t yet been reformed.
One conservative who was a fan of credit unions was Ronald
Reagan. In Presidential
Proclamation 5211in 1984, Reagan said: “Credit unions
are uniquely democratic economic organizations, founded on the
principle that persons of good character and modest means, joining
together in cooperative spirit and action, can promote thrift,
create a source of credit for productive purposes, and build a
better standard of living for themselves. Because credit unions
exemplify the traditional American values of thrift, self-help and
voluntarism, they have carved a special place for themselves among
the Nation’s financial institutions.”
Through his chairman of the National Credit Union
Administration, Edgar Callahan, Reagan lifted barriers to credit
union modernization, such as allowing credit unions with different
fields of memberships to merge. Upon Reagan’s death in 2004, an
article
from the website CreditUnions.com stated that “the Reagan legacy
means that individuals can choose a cooperative form of financial
services in most communities today.”
So this week, GOP senators have two unique opportunities:
to unite in opposition to a big-government bill that would set up a
tax-subsidized and politically directed “small business lending
fund,” and to unite in support of a bipartisan but Reaganesque
amendment that would liberalize financial institutions to serve
small business needs. Neither opportunity should be
wasted.
