As President Barack Obama laid out his proposal to create jobs and help small businesses in his State of the Union address this week, Modesto boutique owner Lisa Beers was too busy working to watch.
Beers opened Unique Boutiques and Poochie Couture Dog Boutique on McHenry Avenue last October. She runs the shop with two part-time employees.
"I have literally been here 24-7," she said. "But I hear a lot of people say it's supposed to help small business. As it is, I'm barely able to keep it going and employ two people in this economy. They don't make it easy."
Obama made job creation his administration's top priority in his address Wednesday night. Friday, he unveiled more specifics.
His proposed two-part Small Business Jobs and Wages Tax Cut would offer a $5,000 tax credit for each new employee hired this year and reimburse Social Security taxes for businesses that increase wages or hours for existing workers.
Although all businesses are eligible for the program, a cap at $500,000 per business ensures that smaller firms would get the most benefit. The proposal is projected to cost $33 billion -- money siphoned from the bank-bailout program, which used fewer taxpayers' dollars than expected -- and is intended to help 1 million employers.
Redirecting TARP money also planned
Earlier in his address to Congress, Obama also proposed a plan to take money from the $700 billion Troubled Asset Relief Program, which was passed under President George W. Bush to ease the subprime mortgage crisis. Obama wants to channel that money to community banks that lend to small businesses. The aim would be to stimulate small banks to start lending more to small businesses, which would spark hiring.
Kurt Clark, director of the Small Business Development Center that serves Stanislaus, Merced, Tuolumne and Mariposa counties, welcomes the new federal focus on his work.
"I think this is a sincere effort by the federal government to recognize the needs of small businesses," he said. "I'm glad to see attention being paid to small businesses."
For small-business owners such as Beers, the tax credit is the most intriguing and potentially helpful of the two proposals. She hired her first two employees this year.
"It would be something I would have in my head should I start to get busier," she said. "It would be lovely to be able to hire someone else to maybe give me a day off on the weekend. Knowing at the end of the year that it would benefit me would be an incentive, for sure."
But Bill Bassitt, chief executive officer of the Stanislaus County Economic Development and Workforce Alliance, is skeptical that the tax credit would benefit many small businesses.
"A tax credit is only good if you're making money; if you're not making money, it isn't any good," he said. "In many cases (businesses here) are two or three years away from turning it around and making a profit. So down here where the rubber meets the road it's not that great for the businesses."
Bassitt said what would be more beneficial would be direct payments to the businesses themselves or comparable credits for Social Security or Federal Insurance Contributions Act taxes.
Bank CEO: Feds should keep the funds
Obama's proposal would reimburse some Social Security taxes for increases in wages or hours.
The other small business component, funneling TARP funds into community banks, is meant to jump-start local lending.
But Hank Barrett, CEO of Valley First Credit Union, said he would prefer the TARP money go back to the treasury instead.
"I think the institutions have the capability to lend right now; whether they have the desire to is another" matter, he said.
Valley First does not make commercial loans, but Barrett said he would like to be able to in the future.
Shawn Kantor, professor of economics at the University of California at Merced, said both the tax credits and community bank plans could help stimulate some small businesses. But neither would fundamentally change confidence in the economy.
"If a firm is thinking about hiring someone, that might push them over the edge to doing so. Or if they are thinking about buying a piece of equipment, they might go about borrowing the money," he said. "But if a business doesn't think their prospects look good, this won't really change anything for them."
Kantor said consumer confidence is key to hiring.
"It's a classic 'Catch-22,' " he said. "People don't buy lots of goods unless they feel secure about their jobs. Employers won't hire people unless people are buying goods."
In the Central Valley, he calls the ongoing housing crisis the "800-pound gorilla" in the economy. While short-term help is appreciated, Kantor said, the area needs to address its long-term problems of work-force education levels and transportation infrastructure.
For small-business owners such as Beers, long-term goals don't pay today's bills.
"It's so hard on the small business. I have to do everything the big businesses do, just on a smaller level," she said. "Some kind of break, any kind of break, would be nice."
Bee staff writer Marijke Rowland can be reached at firstname.lastname@example.org or 578-2284.