'Recycled' TARP funds could save small businesses

Every day we get more economic news, and each of us has had to become somewhat of an expert at deciphering the reports. Just 18 months ago, most of us had never heard of an ADP report, or ever cared to know the difference between a dislocated worker and a discouraged worker. But if you step away from the day-to-day analysis, you come away with several big-picture trends — this already has been one of the deeper recessions we've been in, and even though we may turn the corner and start adding a few jobs soon, unemployment will remain a concern for several more years.

Small business is the engine of growth nationally, and it certainly is true in southeastern Minnesota as well. It's time that we take a look at methods of ensuring that small business has the necessary

resources to sustain a recovery.

There are several proposals floating around that target job creation. One proposal would call for a payroll exemption of 6.25 percent for businesses across the board. The Obama Administration is advocating for a $5,000 tax credit for small businesses for every new hire.

Each has its benefits, in that it would provide an incentive to businesses that may need the extra financial assurance necessary to risk adding jobs in the short-run. The payroll percentage credit plan might actually entice employers with a wider wage range, whereas the $5,000 credit may not entice employers of higher wages to participate. But both plans also have several drawbacks, in that they operate on a tax credit perspective and each would require the deployment of a new system of tracking and verifying eligibility.


A tax credit is not much good to an employer who is not making a profit (or who is a registered nonprofit) — and if it's an after-tax credit, it could take more than a year for an employer to receive compensation.

The best idea I've come across is the proposition put forward by Sen. Al Franken, known as the "SEED Act." It's modeled, in part, upon the  successful program operated in Minnesota during the last severe recession in the 1980s. The SEED program would allow for cash reimbursement to an employer following each payroll at the rate of 50 percent for up to a year, if the person stays employed for 15 months.

The person hired would need to be a laid-off worker, and they would be put into a new job (no one could be replaced). If the person hired was a veteran, the business would receive a 60 percent reimbursement. This could result in an immediate injection of cash to the bottom line of small businesses on the order of $10,000 to $15,000 per person in a year's time. It might make the difference between an owner working an 85-hour week and having their kids help out when orders start coming in this spring, or hiring an additional worker for a living wage job.

It could also help determine if some small companies make it through the recovery or go under. The  connections between employers and the dislocated workers currently exist in the Minnesota Workforce Centers, and wouldn't have to be re-invented.

And perhaps the best angle — it would cost just $5 billion for a one-time program to create some 400,000 jobs — all funded by using recycled TARP program funds. Now this is a program that could finally make a connection to Main Street.

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