Enactment of the Small Business Jobs Act, passed with the support of just two Republicans in the Senate and one in the House, comes at a time when economic growth has yet to generate enough momentum to replace the more than 8 million jobs taken by the recession -- the majority from small businesses. A dearth of commercial loans remains one of the biggest factors holding back the recovery.
"Government can't create jobs to replace the millions that we lost in the recession, but it can create the conditions for small businesses to hire more people through steps like tax breaks," Obama told a gathering of small-business owners at the White House before signing the bill. "Small businesses produce most of the new jobs in this country. They are the anchors of our Main Streets. They are part of the promise of America, the idea that if you've got a dream and you're willing to work hard, you can succeed."
Last week Senate Democrats were forced to suspend efforts to extend nearly all tax cuts put in place under the administration of George W. Bush after Republicans refused to allow a vote unless tax cuts for the richest 2 percent of American households were included. And a Democratic bill that would give companies tax incentives to keep jobs at home rather than outsource them abroad stands little chance of getting a Senate vote because of a Republican filibuster.
Two other recent Obama proposals -- new funding for roads, rails and other infrastructure projects and a series of tax credits aimed at increasing business spending -- seem unlikely to be considered by the current Congress.
Sens. George Voinovich of Ohio and George LeMieux of Florida, saying small businesses are "starving" for new capital, were the only Republicans to join Democrats on the small-business bill. Rep. Walter Jones of North Carolina was the sole Republican in the House to do so. Other Republicans argue the small-business loans amount to a taxpayer bailout.
The $42 billion law would extend several small-business loan programs created by last year's Recovery Act and give tax cuts to small businesses and their owners that would encourage new investment and hiring.
The White House said more than 1,400 small or midsize companies with more than $680 million of loan applications already in the pipeline and approved by banks would immediately benefit from the program. In total, about $14 billion in new loans could be funded.
The maximum size of loans supported by the Small Business Administration would also increase, to $5 million from $2 million, and some manufacturing-related loans could reach up to $5.5. million
The new tax cuts would let small businesses write off hundreds of thousands of dollars in equipment purchases while eliminating capital gains taxes for about 1 million companies, and many entrepreneurs would be allowed to deduct the first $10,000 in startup costs.
The law also lets self-employed Americans deduct all health insurance costs for themselves and their families.