Obama Champions Small Business

One of the stated goals of President Obama’s Financial Crisis Responsibility Fee is to reduce the size of financial institutions. Ideally, his administration would like to do some modern trust busting to make sure that banks won’t ever be “too big to fail” again. Who decides when a bank is “too big”? The same government that is now trying to break them up: the goverment of whim.

In his State of the Union address, the president cherished small businesses which, “through sheer grit and determination,” have weathered the recession and are ready to create jobs — which is the foremost objective of the Obama Administration this year. But, “even though banks on Wall Street are lending again, they are mostly lending to bigger companies.” Small businesses are in desperate need of credit and Wall Street bankers aren’t giving it to them.

So, the president proposes taking $30 billion of the money which Wall Street “repaid” and invest it in community banks. Of course, that money was borrowed by the American government in the first place and should now be used to pay back the loans, else that $30 billion gets added to America’s already mounting public debt. The president is aware of the problem. “If we don’t take meaningful steps to rein in our debt,” he said, “it could damage our markets, increase the cost of borrowing, and jeopardize our recovery.” But besides offering a spending freeze that won’t affect the most expensive of projects — defense, Medicare, Medicaid and Social Security — Obama volunteered no solution.

The president did announce a new small business tax credit, “one that will go to over one million small businesses who hire new workers or raise wages.” And, “while we’re at it,” Obama intends to eliminate all capital gains taxes on small business investments.

All of this is good news for small businesses and good news for the American economy at large, but there’s an uncomfortable assumption at the basis of these soon-to-be policies: that “small” businesses are good and deserve protection whereas “large” companies are to be mistrusted and fought.

Whenever a small business is successful it grows and will, in time, become a “large” business, by whatever definition one holds. The Obama Administration’s crusade against large banks and big business is, in fact, a crusade against success therefore which denies the natural order of the free market.

In a free market, businesses that satisfy their customers’ demands will know success and grow while competitors that don’t fail. By bailing out financial institutions and automobile manufacturers which for years maintained flawed policies, the American government chose to protect failing businesses against their successful competitors. As much as Obama’s State of the Union proposals favor many entrepreneurs, it follows the same skrewed logic: that companies on the verge of collapse need help while they and the people must be protected from big business. This line of thought denies the very reason why some companies go under and it ignores the very reason why others became big in the first place.