SELF IMPROVEMENT

Mr. Obama and an entourage of aides, bodyguards and reporters descended on a squat, rectangular restaurant in Edison, N.J., called Tastee Sub Shop, which makes a great tuna sandwich, according to the reviews on social media sites such as Facebook and Yelp. (The President ordered a 6-inch “Super Sub” with everything on it.) Obama pushes for small-business bill

Pictures of the President having lunch at a mom-and-pop sandwich shop that has been serving its everyman-and-woman clientele since 1963 were timed to coincide with the Democratic Senate leadership’s attempt to win the support of enough Republicans to pass a collection of measures that would reduce taxes for smaller companies and encourage community banks to lend more money.

Small- and medium-sized businesses are generally defined as companies that employ fewer than 500 people. Politicians everywhere describe the people who run these companies as the backbone of their economies. In the United States, this is more than a cliché, as smaller companies account for two out of every three jobs, according to government data.

“Our recovery depends on them,” Mr. Obama said. “Surely Democrats and Republicans ought to be able to agree on this bill.”

The House of Representatives has endorsed the legislation. The Senate debated the bill on Wednesday and is expected to vote on the measures this week. Congress is scheduled to sit next week and then break until after Labour Day. But with midterm elections set for Nov. 2, the political environment is expected to be too tense to allow for any significant legislative changes in the fall.

Capital investment by smaller businesses is running 30 per cent lower than in 2005 and outstanding lending to small businesses dropped to less than $670-billion (U.S.) in the first quarter from more than $780-billion in the second quarter of 2008, according to the Federal Reserve.

To understand why, the Fed has held 40 meetings around the country with executives and officials trying to understand why lending to smaller companies is so weak. Yet a definitive conclusion remains elusive. Fed chairman Ben Bernanke told the Senate Banking Committee last week that the decline in lending to smaller businesses appears to be a combination of less demand for loans and tighter lending standards.

The weight of anecdotal evidence suggests the problem lies with the banks, which are wary of lending to entrepreneurs because they have a greater tendency to fail.

“There is a ton of demand” for credit, said Reza Bavar, the incoming president of the Los Angeles chapter of Entrepreneurs Organization, a global network of small- and medium-sized-business owners. “The banks, I think, are scared, like a lot of people out there. They are risk adverse. They have their existing clients and they want to service them.”

Mr. Bavar, an immigration lawyer, is in the process of winding down his boutique firm so he can focus on his new venture: a startup called Sparx by Bavar, which is developing updated waterpipe paraphernalia to tap into the growing popularity of hookah smoking. But Mr. Bavar is bypassing the banks, concentrating his fundraising on rounding up angel investors.

“We didn’t even look at going after small business loans,” Mr. Bavar said from Los Angeles. “Those are a joke right now. They don’t really look at the entrepreneur. We have a lot of friends in the same boat.”

The Democratic leadership appears persuaded that it is dealing with a problem of supply rather than demand.

While the legislation in the Senate includes several tax incentives, including the elimination of capital gains taxes, the centrepiece is a $30-billion fund that the Treasury would use to buy preferred shares or debt from banks with less than $10-billion in assets. The idea is give community lenders access to capital at favourable rates. The Treasury would initially buy shares at a 5-per-cent dividend rate, but would drop that demand to 1 per cent if lenders show they increased small-business credit by 10 per cent.

Some Republicans are smearing the fund as mini-version of the unpopular Wall Street bailout. But the bigger issue for Mr. Obama is that the greater impediment is a lack of confidence in the economy.

About 15 minutes north of Edison, in Roselle Park, Peter Bredlau Jr. said business at his heating-and-cooling company is pretty good.

But he’s wary that that has more to with the unusually hot weather. With a dozen contractors chasing smallish installation work that used to attract a handful of bidders, he said he’s all but giving up on construction because he’s not willing to win what little work is available by going below cost.

Mr. Bredlau said he’ll turn a profit from maintenance, which will have to do until he’s more confident the recovery is for real.

“I don’t have a need for growth; I have a need to keep my doors open,” Mr. Bredlau said in a telephone interview. “Even if it was easy to get money, I’m not so willing to jump down a new avenue. I don’t think it’s over.”