Written by Tad DeHaven, a budget analyst at the Cato Institute. Posted with permission from Cato @ Liberty.
When it comes to reporting on the Small Business Administration, it seems to me that most journalists simply assume that if a government agency exists to “help” small businesses then it must be good. So I was pleased to read a weekend piece from two investigative journalists with the Dayton Daily News that challenges the conventional wisdom on the SBA.
As the reporters explain, the SBA’s main job is to back loans issued by private lenders to small businesses that couldn’t get financing on market terms. The result is that taxpayers end up holding the bag when these naturally riskier loans go bad.
And quite a few go bad as this Cato essay on the Small Business Administration explains.
Lenders have little skin in the game so for them it’s heads they win, tails they win. Thus it was shocking – absolutely shocking – that a representative from the SBA and the head of the Ohio Bankers Association provided the reporters with the most favorable quotes.
The entire piece is worth reading, but the authors did a particularly good job of turning the spotlight on the racket that exists between the SBA, lenders, and national franchisors:
Let’s put aside for a minute that ObamaCare is unconstitutional, adds $6.2 trillion in debt, piles on countless new taxes, and has already racked up $31 billion and 71.5 million hours in regulatory compliance costs. Yes, that’s a lot to put aside. But for just a moment assume the role of a liberal with an entitlement mentality. For a law with enormous riches and political capital invested in it, wouldn’t you expect it to at least function on its most basic level consistent with its namesake? In other words, you would expect for the Affordable Care Act to provide affordable coverage.
The latest of ObamaCare’s fundamental flaws to be euphemistically reported as a “glitch” that needs to be “tweaked” is its failure to provide affordable family coverage for a broad group of employees. As a result, Kaiser Family Foundation estimates that 3.9 million family dependents may not be able to afford employer-sponsored family coverage or receive subsidized coverage on an ObamaCare exchange.
Understanding the family glitch requires a quick primer on the byzantine regulatory structure governing Obamacare’s subsidies:
Seemingly in response to this letter from Chairmans Darrell Issa (R-CA) and Dave Camp (R-MI) on January 29 to the Treasury and IRS, on February 1, the IRS again finalized the Obamacare subsidy regulations that flagrantly deviate from the statutory authority. This issue continues to simmer relatively under the radar since I last wrote about it in August. To refresh everyone’s memory, Obamacare’s core redistributionist provisions are its refundable premium tax credits and cost sharing subsidies available for individuals to purchase coverage on state exchanges starting in 2014. The credits will be available to anyone with annual income under 400% of the federal poverty line who isn’t covered under an employer-sponsored plan. To put that in perspective, a family of four today earning up to $92,200 per year would be eligible for the credits.
Federal Exchanges Excluded
Here’s the kicker: Obamacare specifically limits these credits and subsidies to individuals who purchase coverage on an exchange established by the state. Below is the actual, unambiguous provision from PPACA [emphasis added]:
Over the last six years, I’ve been watching Sen. Saxby Chambliss (R-GA) very closely. Back in 2008, Chambliss faced a tough challenge in a three-way, finding himself in a runoff against Jim Martin, a liberal Democrat.
Part of the problem was campaign organization. Insider Advantage quoted an unidentified Republican who said that Chambliss and company had the organization of a “bad state House race,” calling it a “embarrassing campaign.” There was also the perception of Chambliss among Georgia Republicans. Insider Advantage again quoted a unidentified Republican who said, “Saxby’s reputation is that he’s spent six years in Washington playing golf. He’s gone on lots of trips. He hasn’t done the down-and-dirty constituent work.”
“Saxby bragged about it his first four years – how much golf he was getting in. It was a real problem and it irked a lot of people,” said the unnamed Republican source. Many Republicans in the state were less than thrilled with Chambliss, who hadn’t been able to endear himself to the state party the way Sen. Johnny Isakson had.
Another issue that hurt Chambliss was that he had lost the support of many fiscal conservatives in Georgia because of his votes that put taxpayers at risk.
Don’t look now, but the Solyndra scandal is coming back up in the media. The now-defunct, politically-connected green energy company was given a sweetheart $500+ million loan from the Obama Administration back in 2009. By August 2011, Solyndra had filed for bankruptcy, leaving taxpayers on the hook for millions.
Supporters of heavily subsidized green energy projects downplayed cronyism, which runs rampant in the Obama Administration. But new e-mails show that a White House analyst warned that giving taxpayer money Solyndra would be a big mistake (emphasis mine):
As the Obama administration moved last year to bail out Solyndra, the embattled flagship of the president’s initiative to promote alternative energy, a White House budget analyst calculated that millions of taxpayer dollars might be saved by cutting the government’s losses, shuttering the company immediately and selling its assets, according to a congressional investigation.
Even so, senior officials in the White House’s Office of Management and Budget did not discourage the Energy Department from proceeding with its plan to restructure a federal loan to Solyndra — a move that put private investors ahead of taxpayers for repayment if the company closed, the investigation by Republicans on the House Energy and Commerce Committee found.
Tonight, the U.S. House of Representatives voted 237-170 to use taxpayers funds for a downpayment on a recovery program for the failing auto industry. Alabama’s US Senator Richard Shelby is leading the opposition to the bailout. Shelby declares that the total cost of the bailout will easily exceed $100 billion. The late Samuel Francis often quipped that the United States has two political parties: the Evil Party and the Stupid Party. Occasionally, you see a true bi-partisan effort and you can count on that bi-partisanship involving both evil and stupidity.
But not because of the reasons you may believe
Part I - “The False Claims” - Can be found HERE
Labor Market Intervention
Within a month of the peak of the stock market in September 1929, President Hoover began a campaign of coordination between industry and government that is still seen today. He was under the belief that falling wages would exacerbate the coming recession and that they must be held steady in order to preserve purchasing power.
We’re heard time and time again that the federal government is having to make tough decisions to avoid the sequester, which are simply cuts to the rate of spending increases. However, Washington is still spending taxpayer dollars on completely wasteful endeavors that the simply should not be subsidizing.
The Wall Street Journal reports that the International Trade Administration, part of the Department of Commerce, spent $300,000 last year to help independent record labels promote their artists and products overseas:
For the first time, the U.S. government’s trade arm is stepping in to help the music business, funding trade missions to Brazil and Asia in recent months for the heads of a dozen independent music labels, which make up one-third of the U.S. music market.
It is a departure for the International Trade Administration, which has been spending $2 million annually to boost exports for the past two decades under its Market Development Cooperator Program but has never before given one of its $300,000 grants to the music industry, instead favoring sectors like machinery, technology and engineering services.
“We need to find new revenue streams,” said Rich Bengloff, president of the American Association of Independent Music, whose idea it was to apply for the grant. He led the trips and arranged meetings with local distributors, mobile-phone carriers, booking agents and ad agencies. “We now need to adjust to a smaller monetization at home.”
During his press conference yesterday at the White House, President Barack Obama addressed some of the concerns being expressed by members of his own party in Congress about the implementation efforts of ObamaCare.
Chuck Todd of NBC News asked President Obama the concerns, noting that Sen. Max Baucus (D-MT) recently called the implementation efforts of the law by the administration a “train wreck.”
“Why do you think — just curious — why does Sen. Baucus, somebody who ostensibly helped write your bill, believe that this is going to be a train wreck?” Todd asked President Obama. “And why do you believe he’s wrong?”
Well, I think that any time you’re implementing something big, there’s going to be people who are nervous and anxious about is it going to get done, until it’s actually done,” Obama replied.
“The challenge is that setting up a market-based system, basically an online marketplace where you can go on and sign up and figure out what kind of insurance you can afford and figuring out how to get the subsidies — that’s still a big, complicated piece of business,” he added before slamming Republican governors who have declined to implement the exchanges, which is their right under the Supreme Court decision. “[E]ven if we do everything perfectly, there will still be glitches and bumps, and there will be stories that can be written that say, oh, look, this thing is not working the way it’s supposed to, and this happened and that happened. And that’s pretty much true of every government program that’s ever been set up.”
Rep. Mike Pompeo (R-KS) had some choice words for Sen. Max Baucus (D-MT), the man who both wrote and voted for ObamaCare.
During the Senate Finance Committee hearing on Wednesday, Baucus pressed DHHS Secretary Kathleen Sebelius on the Obama Administration’s implementation of the law and education efforts directed toward businesses and individuals. Baucus warned that this could become a “train wreck” and gave the administration a “failing grade” in its efforts.
The spectacle was one with which conservatives can agree. However, for Baucus, who is up for re-election in 2014, it may be too little too late.
In a letter made available yesterday on his House website, Pompeo expressed indignation toward Baucus, noting that “[n]o one in the country bears more responsibility for the complexity of this law” than Montana’s senior Senator.
“I was stunned, and also saddened, to read of your complaint that Health and Human Services Secretary Kathleen Sebelius is doing an insufficient job informing the public about the Patient Protection and Affordable Care Act (PPACA), otherwise known as Obamacare,” wrote Pompeo to Baucus. “My shock wasn’t because I disagreed: You’re right to say this legislation has led to great uncertainty for hard-working Americans, small business owners, and families.”