TARP mission creep watch, SBA edition

By Felix Salmon
July 10, 2009

I’m beginning to think that the TARP fund is really just an all-purpose slush fund, it has suffered from so much mission-creep at this point. Not only was it used to bail out the automakers, but now David Cho reports that

the Obama administration is developing an initiative to take money from the $700 billion program for the banking system and make it available to millions of small businesses.

This is pretty desperate stuff: a Stimulus II in all but name, using TARP funds because there’s no way the administration has any intention of trying to push an actual second stimulus bill through Congress.

The reaction to this proposal should be exactly the same as the reaction would be to a stimulus bill proposing the same thing — and while I think that SBA loans are often good things, I also think there are other, more effective ways to stimulate the economy and increase employment over the short term. And in the long term small businesses have a way of looking after themselves; government is most effective in building large-scale national infrastructure. So I’m not a fan of this idea.

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So if your business works on a cash basis with little to not debt, or if you save money yourself to start your business, you get squat. Only if you have to borrow money will this be a help.

I’m like Felix. It’s mission creep and I’m not a fan. But if you’re going to spend the money, how about simply giving employers grants to not fire the current employees. That’s basically what the state governments are getting — payments so that they don’t have to shut down certain programs.

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