SBA Launches New 100-Percent Guarantee

ARC Loan Program.

WASHINGTON – Small businesses suffering financial hardship as a result of the slow economy may be eligible to receive temporary relief to keep their doors open and get their cash flow back on track through to a new loan program announced today by SBA Administrator Karen G. Mills.

Beginning on June 15, SBA will start guaranteeing America’s Recovery Capital (ARC) loans. ARC loans are deferred-payment loans of up to $35,000 available to established, viable, for-profit small businesses that need short-term help to make their principal and interest payments on existing qualifying debt. ARC loans are interest-free to the borrower, 100 percent guaranteed by the SBA, and have no SBA fees associated with them.

"These ARC loans can provide the critical capital and support many small businesses need to make it through these tough economic times," said Administrator Mills. "Together with other provisions of the Recovery Act, ARC loans will free up capital and put more money in the hands of small business owners when they need it the most. This will help viable small businesses continue to grow and thrive and create new jobs in communities across the country."

As part of the Recovery Act, the ARC program was created as a no-interest, deferred payment loan to help small businesses that have a history of good performance, but as a result of the tough economy, are struggling to make debt payments.

ARC loans will be disbursed within a period of up to six months and will provide funds to be used for payments of principal and interest for existing, qualifying small business debt including mortgages, term and revolving lines of credit, capital leases, credit card obligations and notes payable to vendors, suppliers and utilities. Repayment will not begin until 12 months after the final disbursement. Borrowers don’t have to pay interest on ARC loans. After the 12-month deferral period, borrowers will pay back the loan principal over a period of five years.

ARC loans will be made by commercial lenders, not SBA directly. For more information on ARC loans, visit www.sba.gov

You can receive all of the SBA’s News Releases via email. To subscribe, visit http://web.sba.gov/list and select "Press Office.

Is the Stimulus Stimulating Jobs?

We May Never Know for Sure

by Olga Pierce, www.ProPublica.org

The Obama administration has unveiled its plan for measuring how well the stimulus package works, and the bottom line is: Many questions will remain unanswered.

While pitching the stimulus package, the administration batted around the number 3.5 million when talking up how many jobs would be created or saved, based on an estimate by Christina Romer, an economist who now heads the Council of Economic Advisers, and a colleague in what was then the office of Vice President-elect Joe Biden.

The administration’s jobs estimate relied on some broad rules of thumb (otherwise known as multipliers), assuming, for example, that every one percent of GDP the government spends will result in a 1.6 percent increase in GDP and that every one percent increase in GDP equals about 1 million jobs saved or created.

But that was just an estimate to pitch the plan, and soon hard numbers will start flooding in from agencies and contractors telling us exactly how many workers the $787 billion stimulus package has saved, right?

Not exactly.

A report recently released by the Council of Economic Advisers, a three-member team tasked with advising the president on economic affairs, suggests that real-world data will not supply a firm standard of accountability for stimulus spending any time soon. The report is the first in a series of quarterly reports tracking the effects of the stimulus.

In the short run, the council instructs agencies to use the rule that $92,000 equals one job-year (one job for one year) to determine how much employment their programs are generating. The $92,000 number is derived using the administration’s earlier macroeconomic assumptions and, the report says, is intended to make agency estimates mirror the administration’s. This will make the agencies’ numbers a poor check on the administration’s job figures.

Later, data will begin to come in from recipients of stimulus funding, which are required to carefully report how many jobs are created or saved. This is more complicated than it seems. Surely you count the employees of the construction contractor hired to renovate the government building, for example, but do you count the subcontractors hired by the contractor? And what about workers at the paint factory who would have been laid off without business from the construction project? What about workers at the nearby grocery store who keep their jobs because of increased business from hungry construction workers and paint manufacturers?

The report offers a sneak peek at the final guidelines the Office of Management and Budget is expected to release soon for addressing these very questions.

In the renovation example above, the construction contractor’s employees and the subcontracted workers would count as jobs created or saved, but the other jobs wouldn’t, according to the guidelines.

The contractor would then submit a report with the number of jobs created and saved, expressed in full-time equivalents (the total hours of work created divided by the number of hours worked by a full-time worker), along with a brief description of the types of work involved, which will later be used to evaluate the quality of jobs created by stimulus funding.

Lest employers be tempted to cheat, the OMB will check the data for "completeness and plausibility" by looking for outliers among similar projects and cross-checking information about expenses and wages with labor market data from the region.

Why can’t we just add up the numbers from these reports to find an aggregate number of jobs created by stimulus spending? There are several problems with this, according to the report.

The first is that those reports will only document job creation from the $271 billion in direct government spending – the rest of the stimulus was spent on tax cuts, state fiscal relief and transfer payments like Social Security and food stamps. No direct reports will ever come in on the number of jobs created by those expenditures.

The second is that the reports will only measure direct job creation (think of the construction example above) and not indirect effects, even though the administration is counting on indirect job creation to reach its 3.5 million job mark at the end of 2010.

Finally, the council apparently doesn’t trust those reports very much.

"There will likely be inconsistencies and measurement error across the individual reports," the council writes. "This limitation is present whenever thousands of recipients with very different types of projects are asked to provide information."

But the Obama administration does have a rough estimate of how many jobs will be created by direct government spending. (For the record, $100 billion creates 1,085,355 job-years.) So what happens if its estimate differs from the direct job-creation reports?

The answer, given by a senior administration official, is enough to make any social scientist squeamish: "It will be a two-way test of how good the numbers we get back will be and also a test of multipliers."

In other words, if the job-creation numbers the administration gets from real-world data disagree with its estimates, they reserve the right to blame the data. From an accountability perspective, this will make it difficult to assess the stimulus’ successes and failures.

But Romer and her associates propose some avenues for evaluating their own estimates, like regular checks to see if money has gone out on schedule, microeconomic analyses to estimate the number of indirect jobs that result from government spending, and comparisons of the unemployment rate with baseline forecasts of the unemployment rate without stimulus.

Just Jake Talkin'
Mornin',

I’ve always heard that bein’ a half-wit is better than havin’ no wit at all. I’ve wondered what ya get when two half-wits have a conversation. ‘Course you could have a battle of wits between two unarmed opponents.

I’ve never looked up exactly what wit is. I suppose ya have ta know it when ya see it. My mom seemed to appreciate wit when I was growin’ up. I’d hear comments about this person or that bein’ "witty." Especially valued was the person with "quick wit." Someone lackin’ the skills, however defined, of course was referred to as a "dim wit."

Wit seems to somehow combine insight with humor and timing, but the exact formula is heavily reliant on the circumstance and personal taste, or compete lack thereof.

This is some fact, but mostly,

Just Jake Talkin’.

Sponsored by Curry Automotive

CLICK and CLACK

TALK CARS

by Tom & Ray Magliozzi

Dear Tom an Ray:

My wife and I recently bought a 5-speed Saturn VUE. Whenever she comes to a complete stop, she puts the car in second gear and takes off in second gear. When I ask her why she does that, she says it is better for the car, and that’s the way her dad taught her to do it. I say that it isn’t better for the car, because it forces the engine to spin at higher RPMs, putting more wear and tear on the engine and clutch. Now, I know I will lose this argument no matter what, because dads always know best. But I’d still like to know what you think. - Jeff

RAY: Her dad has his headlight in his taillight socket. You’re 100 percent right, and her dad is 100 percent wrong.

TOM: Trust us. If you didn’t absolutely need a first gear to start off, those cheapskate car makers never would have spent the extra $20 to give you one.

RAY: The thing that wears out a clutch more than anything else is starting off from a dead stop. That requires the greatest amount of gas and the slowest release of the clutch pedal. And that combination - gas and time - is what kills clutches.

TOM: When starting in second gear, you have less of a mechanical advantage than you do in first gear. That means you have to compensate by giving the engine more gas and letting your foot off the clutch even more slowly to avoid stalling. That’s first-degree clutch assault, with intent to ruin.

Ray: By comparison, the other shifts-from first to second, second to third, etc.- cause almost no wear and tear on the clutch, because the car is already moving.

NASCAR THIS WEEK

By Monte Dutton

TALLADEGA, Ala. - On the morning of the Aaron’s 499 in Talladega, after spending a couple of hours in the infield, I found to my disappointment that the gate in front of the Talladega Superspeedway press box had been locked. As a result, I had to walk down to the start-finish line -- it’s near the entrance to turn one, not in the center of the trioval as at most tracks -- and cross the track there.

I then walked for a half mile or so along the paved pathway at the foot of the grandstands. I looked at the so-called "catch fencing" and thought to myself that it looked neither as new nor as sturdy as at other tracks. This, of course, seemed odd, since a 1988 accident at this track is the very reason such fencing is sturdier than it once was.

This was about an hour before the Aaron’s 499 began and about four and a half before that very fencing would be tested. Whether it kept Carl Edwards’ car out of the grandstands by design or good fortune is debatable. Edwards’ whirling mass of twisted metal tore holes in it. His car rose above the top of the fence, where presumably it could have toppled into a crowd of fans.

As was also the case in Bobby Allison’s 1988 accident here, the fence held and did its job. As was also the case 21 years earlier, luck was involved.

The day won’t live in infamy. Edwards’ car didn’t tumble into the grandstands. A few fans suffered broken bones from sharp, flying debris. Suffice it to say that the incident caused shivers to go down the spines of everyone who saw it, even those who were a bit occupied trying to get their race cars across the finish line.

It will be open season on NASCAR for a while. Men and women who don’t particularly care for automobile racing in the first place will treat this almost-disaster as if it were one.

The good news is that what could’ve happened didn’t. Edwards emerged uninjured. A few fans, unlucky to be in the wrong place but lucky not to be hurt worse, suffered broken bones, welts and lacerations. There was blood on the scene but not in profusion.

Disaster, far worse than declining attendance and TV ratings, was thankfully averted. Now it’s time for NASCAR officials to ensure that, next time, the crucial factor isn’t good luck.