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Who’s got mail?


Bailing out small businesses is Congress’ job, but getting Congress there is ours.

Clarissa Quintanilla


“The government should just write everyone a $1 million check.” That is what small business owner Edwin Martinez thinks. Any small business owner would be pleased to find a $1 million bailout check from the federal government in their mailbox but the reality is that those mailboxes are likely to remain empty under the stimulus plan. So who is bailing out small businesses?


Apparently no one. With the recession in full furor, small businesses are sinking under the weight of high health care costs, a disproportionate regulatory burden, and tight credit markets. Congress can help rescue small businesses through the Economic Recovery Plan by unclogging secondary markets for securities backed by small business loans, instituting a health care tax credit and streamlining regulation.


Small businesses – those employing less than 500 people – are the backbone of our local, regional and national economies. Think about what your life would be like in Egleston Square without the chocolate-filled croissants from Canto 6, a night out with friends at The Old Stag, or Skippy White’s funky music. Our daily lives depend on dozens of small businesses and their ability to provide goods and services, contribute to gross domestic product (GDP) and create jobs.


In terms of the sheer number of business entities, the United States’ private sector is 99.9% small businesses. All of these small businesses contribute fifty percent of nonfarm GDP. They also employ more than half of the 116 million private sector workers. Small businesses’ ability to create jobs is even more impressive. In 2005, small businesses created 79% of net new jobs, while large businesses only created 21%. Main Street’s cumulative contribution to our economy is significant.

Yet Wall Street – not Main Street – is receiving the brunt of bail out money in the Economic Recovery Plan. And it is not because small businesses are in less trouble than large businesses. Decreasing personal consumption, tight credit markets, unbearable health care costs and a heavy regulatory burden are also strangling small businesses.

Capital for loans to small businesses has dried up. Although large banks have loaned billions of dollars in the last few months, this lending has not met the current demand for credit. Primary bank lenders, who make loans to small businesses, are stuck with these loans on their balance sheets.  

Small businesses also find it harder than large businesses to contain insurance costs because small businesses face higher administrative costs, have less bargaining power and fewer options to pool. According to a RAND Corporation study, health insurance costs for small businesses rose by 30% from 2000 to 2005.

The regulatory burden on small businesses is lopsided with small businesses disproportionately bearing the $1.1 trillion of federal regulation costs. An SBA study found that small businesses incur 45% more in regulatory costs then large firms. Although individual pieces of regulation may not represent a significant burden to a small business, regulation can impose a significant burden cumulatively.

Nothing less than survival is at stake for small businesses—and without their survival our lifestyles too will change for the worse. Half of the United States’ GDP would vanish and 59 million people would be unemployed. But it is not too late yet. Congress can still help small businesses through the Economic Recovery Plan by loosening credit markets, reforming health care and streamlining regulation.

The federal government can loosen credit markets in the short term by making the secondary market for securities more liquid. To do so, the government must purchase the securities that are currently clogging the system. As banks unload these loans from their balance sheets, they will free up new capital for small business loans.

The federal government must also help small businesses provide quality health insurance to their employees by instituting a health care tax credit. The tax credit will subsidize the premiums small businesses pay – up to a predetermined percent – to insure their employees.

Finally, state and federal governments can streamline regulation by conducting a comprehensive review to identify and change rules that are ineffective or out of date. These periodic reviews, along with improvement of the approval process for new regulation, will go a long way in reducing the regulatory burden on small businesses.  

During trying times, it is tempting to turn our attention inward to weather the storm. However, our individual lives are inextricably linked to the success or failure of small businesses. Let your representative know how important it is to you that Congress loosens credit markets, reforms health care and eases the regulatory burden on small businesses. Getting started is easy at There you can sign our national petition, download a sample letter, and find out who your representatives are. 


Even though Edwin’s mailbox may remain empty, make sure your Congress member’s does not.


Clarissa Quintanilla, a joint-degree student at the Harvard Kennedy and Business schools, worked with small businesses as executive director of a Boston non-profit. 

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