[Congressional Record Volume 141, Number 88 (Thursday, May 25, 1995)]
[Senate]
[Pages S7495-S7496]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 REPORT ON THE STATE OF SMALL BUSINESS--MESSAGE FROM THE PRESIDENT--PM 
                                   53

  The PRESIDING OFFICER laid before the Senate the following messages 
from the President of the United States, together with an accompanying 
report; which was referred to the Committee on Small Business.


To the Congress of the United States:
  I am pleased to forward my second annual report on the state of small 
business, and to report that small businesses are doing exceptionally 
well. Business starts and incorporations were up in 1993, the year 
covered in this report. Failures and bankruptcies were down. Six times 
as many jobs were created as in the previous year, primarily in 
industries historically dominated by small businesses.
  Small businesses are a critical part of our economy. They employ 
almost 60 percent of the work force, contribute 54 percent of sales, 
account for roughly 40 percent of gross domestic product, and are 
responsible for 50 percent of private sector output. More than 600,000 
new firms have been created annually over the past decade, and over 
much of this period, small firms generated many of the Nation's new 
jobs. As this report documents, entrepreneurial small businesses are 
also strong innovators, producing twice as many significant innovations 
as their larger counterparts.
  In short, a great deal of our Nation's economic activity comes from 
the record number of entrepreneurs living the American Dream. Our job 
in Government is to make sure that conditions are right for that 
dynamic activity to continue and to grow.
  And we are taking important steps. Maintaining a strong economy while 
continuing to lower the Federal budget deficit may be the most 
important step we in Government can take. A lower deficit means that 
more savings can go into new plant and equipment and that interest 
rates will be lower. It means that more small businesses can get the 
financing they need to get started.
  We are finally bringing the Federal deficit under control. In 1992 
the deficit was $290 billion. By 1994, the deficit was $203 billion; we 
project that it will fall to $193 billion in 1995.
  Deficit reduction matters. We have been enjoying the lowest combined 
rate of unemployment and inflation in 25 years. Gross domestic product 
has increased, as have housing starts. New business incorporations 
continue to climb. We want to continue bringing the deficit down in a 
way that protects our economic recovery, pays attention to the needs of 
people, and empowers small business men and women.


                           capital formation

  One area on which we have focused attention is increasing the 
availability of capital to new and small enterprises, especially the 
dynamic firms that keep us competitive and contribute so much to 
economic growth.
  Bank regulatory policies are being revised to encourage lending to 
small firms. Included in the Credit Availability Program that we 
introduced in 1993 are revised banking regulatory policies concerning 
some small business loans and permission for financial institutions to 
create ``character loans.''
  New legislation supported by my Administration and enacted in 
September 1994, the Reigle Community Development and Regulatory 
Improvement Act of 1994, establishes a Community Development Financial 
Institutions Fund for community development banks, amends banking and 
securities laws to encourage the creation of a secondary market for 
small business loans, and reduces the regulatory burden for financial 
institutions by changing or eliminating 50 banking regulations.
  Under the Small Business Administration Reauthorization and 
Amendments Act of 1994, the Small Business Administration (SBA) is 
authorized to increase the number of guaranteed small business loans 
for the next 3 years. The budget proposed for the SBA will encourage 
private funds to be directed to the small businesses that most need 
access to capital. While continuing
 cost-cutting efforts, the plan proposes to fund new loan and venture 
capital authority for SBA's credit and investment programs. Changes in 
the SBA's 7(a) guaranteed loan program will increase the amount of 
private sector lending leveraged for every dollar of taxpayer funds 
invested in the program.

  Through the Small Business Investment Company (SBIC) program, a group 
of new venture capital firms are expected to make available several 
billion dollars in equity financing for startups and growing firms. The 
SBIC program will continue to grow as regulations promulgated in the 
past year facilitate financing with a newly created participating 
equity security instrument.
  And the Securities and Exchange Commission's simplified filing and 
registration requirements for small firm securities have helped 
encourage new entries by small firms into capital markets.
  We are recommending other changes that will help make more capital 
available to small firms. In reauthorizing Superfund, my Administration 
seeks to limit lender liability for Superfund remediation costs, which 
have had an adverse effect on lending to small businesses. Interagency 
teams have been examining additional cost-effective ways to expand the 
availability of small business financing, such as new options for 
expanding equity investments in small firms and improvements to 
existing microlending efforts.
  We've also recognized that we can help small business people increase 
their available capital through tax reductions and incentives. We 
increased by 75 percent, from $10,000 to $17,500, the amount a small 
business can deduct as expenses for equipment purchases. Tax incentives 
in the 1993 Budget Reconciliation Act are having their effect, 
encouraging long-term investment in small firms. And the empowerment 
zone program offers significant tax incentives--a 20 percent wage 
credit, $20,000 in expensing, and tax-exempt facility bonds--for firms 
within the zones.


                        regulation and paperwork

  But increasing the availability of capital to small firms is only 
part of the battle. We also have to make sure that Government doesn't 
get in the way. And we're making progress in our efforts to create a 
smaller, smarter, less costly and more effective Government that is 
closer to home--closer to the small businesses and citizens it serves.
  In the first round of our reinventing Government initiative--the 
National Performance Review--we asked Government professionals for 
their best ideas on how to create a better Government with less red 
tape. One recommendation was that Federal agency compliance with the 
Regulatory Flexibility Act--that requires agencies to examine proposed 
and existing regulations for their effects on small entities--be 
subject to judicial review. In other words, they said we need to put 
teeth in the legislation requiring Federal agencies to pay attention to 
small business concerns when they write regulations. That proposal has 
been under debate in the Congress. [[Page S7496]] 
  Federal agencies are already considering and implementing specific 
ways to streamline regulations and make paperwork easier for small 
businesses to manage. For example, the Environmental Protection Agency 
(EPA) responded to small business owners and advocates who said that 
the agency's toxic release inventory rule was especially costly and 
burdensome. In November 1994, the EPA announced a final rule that will 
make it easier for small businesses to report small amounts of toxic 
releases.
  And SBA has slashed the small business loan form for loans under 
$100,000 from an inch-thick stack to a single page. The SBA is also 
piloting a new electronic loan application that will involve no 
paperwork, but will allow business owners to concentrate on the 
business at hand--building a successful operation.
  When businesses are unable to succeed, no one is served by a process 
that entangles small business owners in an endless jumble of paperwork. 
Sweeping changes made to bankruptcy laws in the past year will help 
small businesses reorganize. Small firms with less than $2.5 million in 
debt may utilize a streamlined reorganization process that is less 
expensive and more timely.
  My Executive order on Regulatory Review provides a process for more 
rational regulation, and we've been listening to the concerns of small 
firms through a Regulatory Reform Forum for Small Business. Five 
sector-specific groups have made specific proposals for regulatory 
relief. These groups have said that a comprehensive, multiagency 
strategy, with better public involvement, is probably the most cost-
effective way to improve both the quality of regulations and compliance 
with them. The key is to make sure that Government serves small 
business and the American people, not the other way around.


             electronic commerce and government procurement

  The reinventing Government initiative also called for expanded use of 
electronic marketing and commerce, and we have made great strides in 
providing information about Government programs electronically. These 
methods will increase small business access to markets.
  Another area that has been sorely in need of reform is the Government 
procurement process. In October 1994, I signed into law the Federal 
Acquisition Streamlining Act, which will change the way the Government 
does business. The law modifies more than 225 provisions of procurement 
law to reduce paperwork burdens, improve efficiency, save the taxpayers 
money, establish a Federal acquisition computer network, increase 
opportunities for women-owned and small disadvantaged businesses, and 
generally make Government acquisition of commercial products easier. 
This report documents how small businesses are doing under the old 
system; my hope is that opportunities for small business success will 
be even greater once these reforms are in effect.


                            human resources

  Beyond encouraging an economic environment that supports small 
business success, opening doors to capital resources, buying more of 
our goods and services from small firms, and getting out of small 
business' way, I believe we in Government have a responsibility to ask 
whether we are doing enough to ensure a healthy and adequately prepared 
work force.
  I remain committed to seeking a way to provide health insurance 
coverage for all Americans. As this report clearly shows, the number of 
uninsured Americans is too high--and it's growing. Millions of those 
citizens are in working families. And the sad fact is that many of 
those workers are in small businesses, which have seen their premiums 
and deductibles soar. We must make sure that self-employed people and 
small businesses can buy insurance at more affordable rates--whether 
through voluntary purchasing pools or some other mechanism.
  We also ought to be able to ensure that our citizens are adequately 
provided for when they reach the end of their working years. Here too, 
small firms have been at a disadvantage. Our proposed pension 
legislation exempted most small plans from compliance and reporting 
increases.
  And while our industries restructure and move from an age of heavy 
industry to an information age that demands new skills and new 
flexibility, we need to make sure that our work force
 has the skills and tools to compete. That is why I proposed the Middle 
Class Bill of Rights, which would provide a tax deduction for all 
education and training after high school; foster more saving and 
personal responsibility by permitting people to establish an individual 
retirement account and withdraw from it tax-free for the cost of 
education, health care, first-time house buying, or the care of a 
parent; and offer to those laid off or working for a very low wage, a 
voucher worth $2,000 a year to get the skills they need to improve 
their lives.


                          international trade

  We also want to empower small businesses to succeed in a global 
economy. One of the greatest challenges in the next century will be our 
international competition. Ninety-six percent of all exporting firms 
are small firms with fewer than 500 employees, but only 10 percent of 
small firms export; therefore the potential for increasing small firm 
exports is significant. I believe the North American Free Trade 
Agreement and the General Agreement on Tariffs and Trade will benefit 
small firms interested in expanding into international markets in this 
hemisphere and beyond.
  Lending to small exporters is being eased through reforms in the 
Export-Import Bank's Working Capital Guarantee Program. New one-stop 
export shops are moving in the right direction to assist small firms by 
providing access to export programs of the Department of Commerce, 
Export-Import Bank, and Small Business Administration all under one 
roof.


                      hearing from small business

  Small businesses are too important to our economy for their concerns 
not to be heard. That is why I have given the SBA a seat on the 
National Economic Council and invited the SBA Administrator in to 
Cabinet meetings.
  Over the past 2 years, my Administration has been asking questions of 
small business owners and listening to the answers--seeking advice and 
guidance from a diverse audience of business leaders to determine the 
most critical problems and devise solutions that work.
  This year presents a special opportunity for small business persons 
to make their concerns known at the White House Conference on Small 
Business, set to convene in Washington in June 1995. In State 
conferences leading up to the national conference, small business 
owners have been frank about their concerns. I look forward to hearing 
their small business action agenda.
  I firmly believe that we need to keep looking to our citizens and 
small businesses for innovative solutions. They have shown they have 
the ingenuity and creative power to make our economy grow; we just need 
to let them do it.
                                                  William J. Clinton.  
  The White House, May 25, 1995.
  

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