[Congressional Record Volume 141, Number 65 (Friday, April 7, 1995)]
[Senate]
[Pages S5533-S5534]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             SMALL BUSINESS

  Mr. BENNETT. There is another point I want to make, Madam President. 
During the debates 2 years ago there was a lot of conversation about 
small business. Everyone loves small business. Everyone recognizes that 
small business is the engine that drives the economy, because all of 
the new job growth comes not in the big businesses but in small 
business. The new job growth comes from the entrepreneurial effort, the 
young man or young woman who starts his or her own business, hires a 
couple of neighbors, then takes on a few more and pretty soon you have 
8, 10, 12 employees where you had none before.
  If you multiply that by the thousands, tens or hundreds of thousands 
of opportunities around the country, you realize that is where the new 
jobs come from. As the big businesses are downsizing, the small 
businesses are providing the new job engine and opportunity.
  In the debate that went on with respect to the economy 2 years ago, 
everyone said kind things about small business. But when it came to 
talking about the realities of small business I, as a former small 
businessman, found an enormous amount of misunderstanding or, frankly, 
plain ignorance about the way small businesses work. Two areas 
concerned me the most and I am hoping that this vote that occurred last 
night signals as big a change in understanding of these two areas as it 
does with respect to how we are going to handle our fiscal affairs.
  The first area that upsets small business people the most, as I go 
around and talk to them, is the area of regulation, overregulation, but 
perhaps even more frustrating, simply stupid regulation--lack of common 
sense. It has been my experience that we in the Congress write 
legislation and we have a relatively focused attitude as to what will 
be regulated--about the distance between my two hands. We legislate to 
this regard.
  Then, when the people in the executive branch receive that piece of 
legislation they move the hands out and they start writing regulations 
within these parameters--like the fish that got away, when it is being 
discussed later on around the campfire. Then, after these regulations 
are sent out the enforcers get ahold of them and they enforce them as 
if there are no parameters, and the hands spread even wider. So the 
small business person comes to us in Congress and says, ``What are you 
doing to us?"
  We say, ``This is the legislation that we wrote''--back to the 
original distance between the hands.
  And they say, ``But we are faced with inspectors who are regulating 
as if there are no parameters at all.''
  We have, within this Congress, a proposal that would say after we 
legislate, and then the regulations are written, the regulations have 
to come back before the Congress and for 45 days we get an opportunity 
to cut them back to the level that we had in mind when we passed the 
law. If we can make that stick we will make a significant contribution 
to the health and welfare of every small business in this country and, 
indeed, back to my comments about the anonymous Federal bureaucrat, we 
might even see some signs that Government is being brought under 
control, and not so many people are in the cafeteria after 2 p.m.
  The second area that was discussed last year with respect to small 
business that frustrated me as a small businessman coming to the Senate 
had to do with tax policy. It was very clear to me, with all of the 
wonderful things people were saying about small business, that most of 
the Members of this body did not understand how small businesses really 
operate, and did not understand the impact of our tax changes on small 
businesses. We were told, for example, that the tax increase would fall 
only on the rich. I remember clearly the chart which President Clinton 
referred to in his address to the Nation, where he had a series of bar 
graphs and the bar graphs at this end were very small. He said these 
are the people in this income bracket who will pay more taxes and these 
are the people in this income bracket who will pay more taxes. These 
are the people in this income bracket.
  Now look at the people in this income bracket. These are the people 
who earn over $250,000 a year. They are going to pay all the increased 
taxes and that is what we want. It is for the rich people to pay the 
taxes. As if only Michael Jordan was going to have to pay more taxes; 
nobody else was going to have to pay any more taxes.
  Now, $250,000 a year is a lot of money for an individual, but it is 
not a lot of money for a small business that is growing. Many times, 
$250,000 a year is a problem. Why? Because the business is growing and 
it needs money for inventory, it needs money for receivables, it needs 
money for additional facilities. Where is the money going to come from? 
It is going to come from the profits being generated. And the business, 
for tax reasons, is being taxed as an individual.
  I said in this body before, has anyone here ever heard of a K-1? That 
is the tax form that a small businessman or small businesswoman uses to 
report that income on his or her individual tax return. I pointed out 
in that bar graph that the President pointed to, 77 percent of the tax 
returns filed by people who were represented in that bar graph 
contained K-1 income.
 They were people who were reporting business income as if it were 
personal income in order to avoid double taxation. Yet, in this body, 
we were saying they were the rich and they had to have the tax increase 
put on them.

  I hope that on the basis of last night's vote, we will recognize that 
the way to balance the budget is not to say let us soak the rich, let 
us soak those who show this kind of income on their personal tax 
returns, ignoring the fact that in many, many instances, it is not 
personal income, it is business income that is being reported. And the 
business needs that money desperately to continue the job creation 
pattern.
  We would say, on the basis of last night's vote, the way to balance 
the budget is the way we did it last night, with a 99-0 vote in favor 
of spending cuts rather than the siren song of tax increases.
  I conclude with this comment, Madam President, with respect to this 
question of tax increases and spending cuts.
  In a business, you know what your costs are. And I look at what would 
happen if you were to cut your costs, cut your overhead. You can 
project that with some degree of accuracy. The thing you cannot project 
in a business with any degree of accuracy--well, maybe some degree, but 
it is pretty dicey--is how your sales are going to go, how your revenue 
is going to go up.
  So if you were facing a shortfall in your business, you can cross 
your fingers and hope that the sales will go up to cover that 
shortfall. I assure you, I have done that many times in my career, 
hoping against hope that the sales will go up. But the one thing you 
can be sure of is that if you cut your overhead, those savings will be 
there in the 
 [[Page S5534]] following month even if the increased profits that you 
are hoping for, the increased revenues that you are hoping for are not 
there in the following month.
  Last night, we cut the overhead in ways that are predictable. When we 
raise taxes we are doing the same thing a business does when it raises 
prices and then hopes that the customers will not react negatively, 
hopes that it can raise prices and still continue to sell the same 
number of units it sold before the price increase. We in the Federal 
Government have a miserable track record of projecting how those price 
increases are going to work.
  I will give you two quick examples. Back as a result of the 1990 
budget summit, we raised prices--``we,'' the Government--raised prices 
on two items, luxury boats and luxury cars. We projected that we would 
get more revenue out of both of these. To show what wonderful 
forecasters we are, on the luxury boat side, we took an industry that 
had over capacity, that desperately needed a price cut to survive, and 
mandated a price increase that destroyed the industry, caused massive 
layoffs and huge unemployment compensation bills. We missed that 
forecast terribly.
  But before we say, ``Oh, is that not awful that we missed that 
forecast,'' let us look at the forecast for the price increase on 
luxury cars. We missed that one just as bad, Madam President. But 
fortunately, for the Treasury, we missed that one on the other side. 
The revenue that came in from the increase in tax on luxury cars was 
three times what we forecast it would be.
  What is the lesson to be drawn from that? To me, it is very simple; 
it is that the Federal Government, regardless of how much we have 
invested in computers and economists and experts, does a lousy job of 
forecasting what will happen as a result of its changes in tax policy. 
But we can do a better job of forecasting what will happen as a result 
of changes in spending policy.
  So I think the lesson that comes out of last night's action and our 
examination of the contrast between this year and 2 years ago is this: 
We can get our fiscal affairs under control. We can cut through all of 
the rhetoric and the crying wolf and the horror stories and produce 
bipartisan support for spending cuts. Let us put the primary emphasis, 
like good business people would, on controlling the spending rather 
than crossing our fingers and hoping for the increased sales.
  If we do that, we are on the right course. And I, for one, take great 
comfort out of what happened here last evening and hope it will be the 
harbinger for many more headlines that say that the Senate votes 
unanimously for substantial spending cuts.
  I thank the Chair. I yield the floor.
  The PRESIDING OFFICER. The Chair, in her capacity as a Senator from 
Texas, suggests the absence of a quorum.
  The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mrs. HUTCHISON. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Bennett). Without objection, it is so 
ordered.
  Mrs. HUTCHISON. Mr. President, I ask unanimous consent that I be 
allowed to speak for up to 15 minutes in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________