Reading Between the Lines of the American Jobs Act

The American Jobs Act, which provides tax cuts for small businesses so they can hire and grow, invests in rebuilding and modernizing America, creates ways for Americans searching for jobs, and gives tax reliefs for families was just recently passed by the House of Representatives. This bi-partisan bill, predicted to be very popular between both sides of the aisle has since derailed in the Senate.

But why?

Well, for once, politicians decided to actually read the bill. Yes, you heard it correctly; they read the proposed piece of legislation!

When they read, they found that some provisions that depending on your point of view, are either rightly opening up the markets during a time when regulation bogs down start-ups of new businesses or deregulates the market for big, greedy corporations and banks to take advantage of.

For one, the bill allows “emerging growth companies” (companies making less than $1 billion in revenue…yes that’s right start-ups with profits under 1 billion) to bypass internal audits and recording regulations. It also reduces regulations on underwritings using public revenue to fund research, and it limits online “crowdfunding”.

Now, I understand that America has witnessed an 80% decrease of small companies going public and that local businesses have taken a tough toll since the 2007-2009 recession. And I realize that it is necessary to loosen regulations and credit entrepreneurs tax breaks so that they can start-up their own business.

After all that is what the United States is all about…a land where dreamers think the streets are paved with gold…rags to riches…you know, the American Dream.

Wrong.

In today’s world, if banks and big corporations are not regulated, the lenders’ corrupt desire for greed will lead to riskier business, and if banks go under, then the borrowers cannot be lent money, and this leads to firms going out of business, a period of deleveraging, and a recessionary cycle. I agree, yes, regulations can sometimes “crowd-out” private investment. But do I think that these “small businesses” (under 1 BILLION in revenue) should be allowed to bypass precautionary measures auditing their funding? Absolutely not!

Regulations were put into place to keep practices fair after the 2007-2009 collapse of the housing market and investment banks. Think about when Congress signed the Commodities Futures Modernization Act in 2000, which banned regulation on derivatives and led to unsupervised market activity. With credit default swaps, collateralized debt obligations, and credit default swaps on collateralized debt obligations, lenders participated in riskier moves due to higher interest rates and the chance to make tremendous amounts of money. These lenders promised to pay investors back if their CDOs or CDSs went bad, however, due to the lack of recording regulation, investment banks did not put money aside to cover losses. In 2008, the market for CDOs collapsed, which was followed by the collapse of investment banks and ultimately led to the mess we are trying to work our way out of today.

The markets need to be opened up, and incentives should be given, but deregulation of pertinent regulations that safeguard consumers and investors of corrupt auditing is not the answer. I suggest that the Senate make some major revisions before it goes to President Obama’s desk to sign.