It is remarkable how any government money for low income families (e.g. TANF, EITC, child care subsidies) is always subject to the greatest scrutiny, but much larger sums handed to small business owners are never questioned. The NYT has a piece this morning reporting that the Small Business Association's disaster relief fund is nearly depleted. Under this disaster loan program, small businesses can get rebuilding loans as large as $1.5 million, for terms of up to 30 years, at interest rates as low as 4 percent. Okay,it's fun with math time. In many cases, these businesses are extremely poor credit risks, so a 4 percent interest rate would be at least 4 percentage points lower than what they would pay in the private sector. Assuming that the subsidy is 4 percentage points, this implies a maximum of $60,000 a year in subsidies, that could last as long as 30 years. (Contrast this with TANF cash payments that average around $6,000 a year and have a maximum duration of 5 years.) I don't have anything against small businesses, but the idea that these folks are free marketers is nonsense. They get serious subsidies and this should be made clear in discussing their benefits. It's not obvious that it's better to hand a small business owner $60,000 than to give child care subsidies for 20 kids. (If anyone is going to respond by saying that small businesses create most new jobs, please save the electrons. Small businesses also lose most new jobs. On net their job creation is no better than large businesses. We don't need to subsidize small businesses to create jobs.)
--Dean Baker
