WASHINGTON — Sharply divided along partisan lines, the Senate Thursday passed by 61 to 38 the Obama administration's plan to provide the nation's ailing small businesses with tax breaks and easier access to capital.
President Barack Obama and Democratic congressional leaders desperately wanted to pass the bill, which Republicans had stalled for months, hoping that it'll give Democrats fresh, much-needed talking points to voters worried about the sluggish economy, and eager to blame Democrats.
Republicans countered that the bill, while addressing an important need, didn't do enough; Senate Republican leader Mitch McConnell charged that it's "needlessly political."
Fifty-seven Democrats, two Republicans and two independents backed the bill; 38 Republicans were opposed; Sen. David Vitter, R-La., didn't vote. Democrats found the Republican support they needed — from Florida's George LeMieux of Florida and Ohio's George Voinovich, who aren't on the ballot in November — to break a summer-long deadlock over the bill.
The measure next needs House of Representatives approval, which is expected, before going to Obama for his signature.
The measure would have the Treasury Department administer a $30 billion small business lending fund through small, healthy community banks. Small businesses are generally defined as firms that employ fewer than 500 people.
It also would provide $12 billion in tax relief for small business. Among the changes: Giving investors a 100 percent exclusion from capital gains taxes on small business investments; allowing taxpayers to immediately write off 50 percent of the cost of new equipment; and doubling the current tax deduction, to $10,000, for start-up expenditures.
Democrats Thursday suggested that voters will now be able to see in stark terms the differences between the two parties as they prepare to go to the polls in November.
"It is truly about a philosophy," said Sen. Maria Cantwell, D-Wash. "If you think our economy is about helping those huge, big businesses at the top or from Wall Street, and that it's somehow going to trickle down, then let's just keep doing business as usual.
"But if you believe that this is about helping small businesses grow . . . let's get this legislation passed."
Republican opponents acknowledged that small businesses face a lending crisis, but argued that the bill would do little to create demand, vital to any small business's health, nor would it provide major tax relief.
"This is another TARP type approach, and that doesn't work," said Sen. Orrin Hatch, R-Utah, referring to the government's fall 2008 bailout of the biggest ailing financial institutions.
The analogy is ridiculous, countered Sen. Mary Landrieu, D-La., the chairman of the Senate Small Business Committee.
"This has nothing to do with TARP," she said. "Only small, healthy banks can apply" for the new program.
A report this week from Congress' Joint Economic Committee Democratic staff found that hiring at small firms declined last year and early this year "as a result of tight lending standards facing small business."
Using data from the Bureau of Labor Statistics and the Federal Deposit Insurance Corp., the study found that the number of loans made to small business peaked in the second quarter of 2008 at 27.8 million, and has fallen since by more than 4.8 million.
Independent analysts warned that while the bill would provide help to many of the nation's 27 million small businesses, it's unlikely to provide much of a boost to the overall economy.
"It's going to be helpful, but I don't see this making a major difference (in economic growth)," said Brian Bethune, the chief U.S. financial economist at IHS Global Insight in Lexington, Mass.
While the measure would help ease the huge problem of access to credit, particularly for smaller entrepreneurs, Bethune said, "this dances around some of the more significant issues small businesses have raised."
The bill, Republicans said, doesn't address some of what they regard as more vexing problems, notably a new requirement that businesses tell the Internal Revenue Service of every purchase over $600.
Sen. Mike Johanns, R-Neb., who led an effort to repeal that provision, called it "an employer mandate during one of the toughest economic times since the Great Depression."
His bid lost.
Small business groups' views on the bill were mixed.
John Arensmeyer, the chief executive of the Small Business Majority, called the bill a "boon for the entire small business community. This bill will help small businesses resume their function as engines of job creation and help rebuild our fractured economy."
The National Federation of Independent Business, the leading small-business lobby, was less enthusiastic.
Susan Eckerly, the federation's senior vice president, called it "just the first step towards helping our nation's small business owners during these difficult economic times.
"While the bill passed today will help some small businesses that either qualify for the specified tax breaks or qualify for new loans, it falls short of addressing the most significant problems facing all small business owners — lack of sales, and uncertainty."
ON THE WEB
Small Business Lending Act fact sheet
Joint Economic Committee Democratic staff report on small business lending
Senate roll call vote on Small Business Lending Act
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