Both sides of the political aisles were caught off guard when the House Small Business Committee hearing convened on the 25th of May 2021 to review the progress of the small business Covid relief programs under the $900 billion Covid-19 relief bill was attended only by the Small Business Administrator Isabel Guzman. The Treasury Secretary Janet Yellen was a prominent absentee, although she was required by law to do so.
This could be a minor oversight, a bureaucratic quirk, a miss, something you may be tempted to ignore. Who doesn’t take a chance to skip a meeting when there are other more pressing affairs to attend? But this is exactly the problem here: why is it a program of $900b aimed at assisting small business not important? Maybe Yellen was not enthused about a program originated by the previous administration. But it may also be Yellen is not interested in small business that much.
It is perhaps too early to conclude with confidence that Yellen did not attend the hearing because the small business has lower priority to her, but the size of the program is too large not to bear some significance. The Biden administration proposed a $2.3 trillion infrastructure program, later downsized to $1.7 trillion, aimed at funding roads, bridges and infrastructure projects, broadband internet, and manufacturing, workforce development and R&D.
Yes, it is a bit of a stretch to use this absence as a proof that Jane Yellen is not interested in small business, but if you look at her academic background, her stated position and priorities during her leadership role at the top three most powerful economic bodies in United States and recent policy announcements as the US Secretary of Treasury, the small business is a glaring miss, a dwarf sitting between two giants: labour and large corporations.
Labour is one of the persistent areas of research and application during Yellen’s career as an academic and executive economist. The key tenet of her work is that wage is an important element in individual’s (with social implications at large) motivation leading to higher employment and ultimately to prosperity (The Fair Wage-Effort Hypothesis and Unemployment). This belief is reflected in her view that stimulus should be maintained during difficult times and a while after to help society transition from periods of crisis to stability.
Yellen’s academic background is described often as “very” Keynesian, as someone who sees the role of government as a principal actor in the nation’s economy, especially in difficult time. All these instruments of intervention and control are aligned with her goal of supporting the working class.
Meanwhile, calls for raising the minimum wage makes the life of the small business even more difficult. The increase global minimum tax will result in an increase in prices by global corporations which will put extra pressure on small businesses.
The Biden’s administration tax reform is designed accordingly: tax large corporations and wealthy individuals to support wage increases and create jobs through large government funded infrastructure projects. There is little or nothing at all in for the small business as that doesn’t fit the mould of the big Keynesian framework. The recently announced historic G7 agreement on global corporate taxation is in fact a disguised partnership between big business and governments, a way of streamlining income for governments while giving certainty to corporations. Yellen was a key champion behind this deal “driving a hard bargain” to achieve the final result for the benefit of the “working class people in the US and around the globe”. It sounds like punishment at times to “bring justice”, but it isn’t. The large corporations even welcome it because they can now avoid patchy harassment in separate European countries. They very well aware of the pricing power they possess.
We need to wait and see how economic policies evolve in the near term in the US and Europe before coming to a definite conclusion. Small business is the main employer and it is a key source of innovation. Non-friendly policies will be felt in time in a not so friendly way.