Bolstering The Economy: Roles Of Entrepreneurship, Small Businesses

Just days after the Bureau of Labor Statistics revealed that May's unemployment rate rose to 9.1%, the Obama Administration hosted a summit highlighting urban entrepreneurs' roles in stimulating the economy. Host Michel Martin discusses the initiative and other ways to boost the economy with Marie Johns, Deputy Administrator of the U.S. Small Business Administration; and Daniel Mitchell, Cato Institute Senior Fellow.

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MICHEL MARTIN, host: I'm Michel Martin, and this is TELL ME MORE from NPR News. One newspaper put it this way: A significant number of Americans are now willing to lose their house to save the stuff that's in it. We're talking about people who are paying off their credit card bills before making the monthly mortgage payment. It turns out that more Americans are making that calculation, according to data from the credit bureaus. We'll hear from our money coach about that and other issues around credit and personal finance. That's a little later in the program.

First, though, we want to talk about an issue that clearly has a lot to do with the credit issues many people are facing: the job market. Just yesterday, a few days after the new and disheartening unemployment numbers came out, the Obama administration and Rutgers University hosted a summit aimed at empowering urban entrepreneurs. The idea is that small business is one key to chipping away at that 9.1 percent unemployment figure - a figure that's actually well into double digits for minorities in many communities.

We wanted to talk about this, and what else might be done to improve the employment picture, as some economists warn of a double dip in the recession. To do that, we have with us Marie Johns, deputy administrator of the U.S. Small Business Administration. She was a panelist at the Urban Entrepreneurship Summit on Monday. She's here with us in our Washington, D.C., studio. Thank you for coming.

MARIE JOHNS: Thank you Michel, great to be with you.

MARTIN: Also with us, Dan Mitchell, senior fellow at the libertarian think tank the Cato Institute. He's also worked as an economist on Capitol Hill. He worked in the office of Senator Bob Packwood and for the Senate Finance Committee. He also served on the 1988 Bush-Quayle transition team. Welcome to you. He's also here with us in our Washington, D.C., studio. Thank you for coming.

DANIEL MITCHELL: Well, glad to be on the program.

MARTIN: Administrator Johns, we'll start with you. What was your main message at the summit on Monday, and what was the summit designed to do?

JOHNS: It was a really exciting day, Michel. Rutgers University was a great host. We had over 350 people register. The main message was that we are coming out of the worst recession since the Great Depression. Yet the Obama administration has definitely focused on supporting small-business growth and development because that's where job creation happens. So my purpose at the summit yesterday was to talk about all the tools that the Obama administration has made available for small businesses - many of which are tools that the SPA has implemented - and also to hear from small businesses to find out what more we need to do in order to address the gap.

MARTIN: Give us some idea of what some of the tools are, that are available, to help with small businesses.

JOHNS: Well, for example, the president has signed into law 17 tax cuts for small businesses. The Small Business Jobs Act, which he signed last year, last fall - the president signed last fall is a - was the most expansive piece of legislation to support small- business growth in the last decade. There are over 60 provisions in the Small Business Jobs Act addressing access to capital, access to federal government contracting, as well as counseling and technical assistance.

The president has issued the national export initiative, where he said by the year 2015, we're going to double exports in this countr. And if we're going to do that, small businesses have to be a major part of that picture. So we talked about that yesterday.

The Council on Underserved Communities that the SBA recently launched, chaired by Catherine L. Hughes, the icon in the industry who is the founder of Radio One and TV One. She's chairing the council. She was an SBA borrower early in her business career. So those are some of the things we talked about, some of the exciting tools that are available.

MARTIN: Briefly, before we turn to Dan Mitchell, what's the logic of focusing on urban entrepreneurs? Is that because that's where the joblessness is the greatest - or what's the logic behind that particular focus for this particular summit?

JOHNS: The administration has been focused on the economy, period, and improving the economy across the board. But small businesses are located in all different sectors, rural areas as well as urban, and so yesterday's focus was on urban areas. The fact that cities have particular opportunities for small businesses, as well as particular issues that we needed to talk about - and so that was yesterday's focus.

MARTIN: I hear you.

JOHNS: Mm-hmm.

MARTIN: Are you - Dan Mitchell, what is your sense of - obviously, the reason we invited you is that you have an alternate perspective on what you think needs to happen to jumpstart this economy. Now, you heard some of the strategies that the administration has undertaken. What's your perspective about what needs to happen?

MITCHELL: Well, I'm glad the administration is concerned about the issue, but our concern at the Cato Institute is that government is probably playing more of a hindering role rather than a helping role, and it's not just what we've seen in the last couple of years under President Obama.

President Bush had basically the same policies of making government bigger, more spending, more regulations, And when you're diverting more and more of the economy's resources into the government's hands and out of the private sector, that's bound to have a negative effect. And so I think some of the really substandard growth and high unemployment that we're seeing is a reflection of 10 years policy under Bush and Obama, where the burden of government has gotten bigger. And it's very hard for small businesses to thrive in that environment.

Yeah, the big companies, they know how to work the system in D.C. They can get the bailouts, the handouts, the subsidies. We certainly see Goldman Sachs and General Electric, and all those big guys - they know how to manipulate the system. But small businesses, I think, disproportionately suffer when the burden of government gets larger.

MARTIN: Well, when you talk about the burden of government, though, what are you talking about it? I mean, the big increases in spending over the last decade are due, in part, to defense spending - and also a failure to a - tap revenue to meet that. So when you talk about the burden of government, what are you talking about?

MITCHELL: Well, the most important thing to realize is that - why do businesses create jobs? They create jobs when they think that hiring an additional person will help them earn more profits. And so we have to figure out, how can we make it profitable to hire people?

The problem is that when the burden of government gets larger in terms of government spending, diverting resources from the productive sector, regulatory red tape causing companies to spend disproportionate amounts of money dealing with paperwork and regulation from all sorts of different government agencies - those are things that make it so that the companies that are thinking about hiring new people might decide, well, we can't do it because it might not be profitable.

You know, there's a reason - if we look throughout the world, why do some jurisdictions like Hong Kong grow rapidly, create lots of jobs, whereas look at some of the European welfare states. They have sort of permanently high levels of unemployment. And I'm worried that the Bush-Obama policies are moving us in that European direction.

MARTIN: If you're just joining us, this is TELL ME MORE from NPR News. We're talking about what can be done to bolster the economy. We're speaking with Marie Johns, deputy administrator for the U.S. Small Business Administration, and Dan Mitchell - that's who you just heard - he's a libertarian economist and senior fellow at the libertarian think tank the Cato Institute. Administrator Johns, do you want to answer that?

JOHNS: Yeah, interestingly enough, I agree with Dan on his point about big businesses having the resources to do what they need to do in order to be competitive and grow their business, and that's exactly why we need the SBA. That's exactly why we need the policies that the Obama administration is pursuing - is to help level that playing field. For example, access to capital. Big businesses can get access to capital. A small business, where there's a corner store on a Main Street corridor, or a small company - a young company that's in a high-growth industry, those are companies who often have difficulty getting access to capital.

So that's why at the SBA, we have an array of opportunities, whether it's a micro loan for $5,000 or an SBA, government-backed guarantee loan for $2 million.

MARTIN: Well, what about what - Dan Mitchell's point, though, that at some point, that the government's role - and I still - I don't think he answered my question about what exactly the burden of government is that he's most concerned about, given how large entitlements and defense spending play in this economy, but setting that aside - what about his point that this has been tried and now, it's time to try something else. And presumably, the other try something else that he's talking about, and what House Republicans are talking about - which is really, cutting back on the size of government. What about that perspective?

What about that perspective?

JOHNS: You know, the Obama administration is very concerned about the size of government, and we are very focused on making sure that our agencies have wrung out any fat and that we are a lean, efficient government. So we share that objective. The fact of the matter is, small businesses benefit mightily from the resources that the SBA provides. And going back to yesterday's conversation, it was so encouraging to see that room at Rutgers University filled with young people - young people of all description who were there to talk about their businesses, who were eager to hear about the technical assistance they could get through the SBA, through the access to capital that they could get. There is a role for what this agency is providing, and that was clearly demonstrated yesterday.

MARTIN: Dan Mitchell, I'm going to ask you about something that Marie Johns testified about yesterday. She's also a former business executive herself. She was the president of Verizon Washington.

One of the things she testified about was some of the educational deficits that many potential employees presented with, and she couldn't hire as many people as she would've liked to have hired because they simply didn't have the skills to do the work.

And one of the arguments that the Obama administration is making is that some of the spending that they're engaging in are necessary investments to help people to compete in this global economy. What do you say about that?

MITCHELL: The United States spends more than any other country in the world, other than Switzerland, on education. But if you look at our educational outcomes compared to other countries, we rank in the lower third of developed countries. So we're spending a ton of money, but we're getting very poor results.

Now, I assume that we don't want this conversation to drift off into things like educational choice and things like that, but I definitely think we could be getting a lot more bang for the buck and have a much better trained workforce.

But I want to address the point about the Small Business Administration. Under Bill Clinton, when the economy was really doing well, that was a time when the Small Business Administration had less money to deal with. Now, that's not a knock on the SBA. It's simply saying that what we need most for the small businesses in the country is fast economic growth. And that's not going to happen when taxes are going up, regulations are going up, government is taking over sectors of the economy, and government spending is increasing.

MARTIN: Tell me right now, Dan Mitchell, if you would, what's the most important thing you think the government can be doing right now to stimulate economic growth?

MITCHELL: I think we need to shrink government spending back to where it was when Bill Clinton left office. The federal government consumed 18.2 percent of GDP - our national economic output - when Bill Clinton left office.

MARTIN: We also weren't fighting two wars, Dan Mitchell.

MITCHELL: Yeah, but the wars are about 1 percentage point of GDP. We're now up to 24-plus percent of GDP in terms of the burden of federal government spending. OK, Iraq and Afghanistan are 1 percentage point. The vast majority of it is just increased domestic spending, discretionary spending, entitlement spending. And most of it happened under Bush. I'm not here to say things are Obama's fault. I'm here to say that government is not helping. It's hurting.

MARTIN: And Marie Johns, final word from you. What's the most important thing you think the government can be doing right now to stimulate economic growth?

JOHNS: The Obama administration is going to stay on the path that it's charted. We inherited the worst economy in our lifetime. But this president has cut taxes for small businesses. This president has invested in technical assistance and access to capital for small businesses. And the urban summit yesterday was not a government summit; it was a partnership. Government was there as well as the private sector and the civic sector. And it's the benefit of all those sectors working together that we're going to provide the best opportunity for small businesses to grow and create jobs in this country.

MARTIN: Marie Johns is the deputy administrator of the U.S. Small Business Administration. She was also a panelist at the Urban Entrepreneurship Summit on Monday. Dan Mitchell is an economist and senior fellow at the nonpartisan think tank the Cato Institute. They were both kind enough to join us from our studios here in Washington, D.C. I thank you both so much for joining us.

MITCHELL: Thank you.

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