by Robert Gary

Created on: February 14, 2009

My minimum expectations from the Stimulus Bill was that it would contain $75 Billion for two new programs from the Small Business Administration (SBA). These programs are already on the books, in the Code of Federal Regulations, but they have had no appropriations from the Congress for about 40 years. They are: 1) the SBA Direct Loan Program and 2) the SBA Start-Up loan Program.

Had the Stimulus Bill contained this money, a lot of new jobs could have been created. For each $25 Billion, you get a million new jobs, if you assume Direct SBA Start-Up Loans of $25,000 for each loan. So, with $75 Billion in the Bill, you would get three million new jobs. President Obama is promising 3.5 million new or saved jobs over the next two years based on the Stimulus Bill that he will sign on or about Monday February 16, 2009.

Here's why my minimum expectation idea is better. First, it would produce almost the same number of jobs as the existing approximately $800 Billion Stimulus Bill. Second, the SBA Direct Start-Up loans would be highly stimulative. Their impact would be almost instantateous. New businesses need everything. The seed money loan of $25,000 would be spent within a year in most cases, so the velocity of money would be high. Beyond that, new businesses need a lot of different things, in fairly small amounts. They need stationary, inventory, office equipment, fixtures, advertising, copying, payroll, accounting, tax preparation services, legal services, business tools, etc. So, the multiplier effect would be very large.

When high velocity of money and high multiplier effect are combined you get a big stimulative impact in addition to three million new jobs instantly created by making the SBA direct micro-loans.

The huge banks simply don't play a role in this stimulus money. The loans are SBA Direct, so they don't go through any bank. They go out directly from SBA to the borrower. The big banks have already gotten $350 Billion worth of TARP money - more than 4 times as much as this little $75 Billion idea. And with that money, they bought other banks, paid their top executives up to $500,000 per year, paid for the pension plans and healthcare of their top executives, paid dividends to their shareholders, and made their balance sheets stronger. And what did the small business person get? Not much from the big banks. Since September of 2008 they have been walking away from the SBA loan activity that they used to do. It's a fraction of what it was in 2007 and most of

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