[House Report 109-52]
[From the U.S. Government Publishing Office]



109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     109-52

======================================================================



 
  EXPRESSING THE SENSE OF THE HOUSE OF REPRESENTATIVES THAT AMERICAN 
    SMALL BUSINESSES ARE ENTITLED TO A SMALL BUSINESS BILL OF RIGHTS

                                _______
                                

   April 21, 2005.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

   Mr. Manzullo, from the Committee on Small Business, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                       [To accompany H. Res. 22]

  The Committee on Small Business, to whom was referred the 
resolution (H. Res. 22) expressing the sense of the House of 
Representatives that American small businesses are entitled a 
Small Business Bill of Rights, having considered the same, 
report favorably thereon with amendments and recommend that the 
resolution as amended be agreed to.
  The amendments are as follows:
  Strike out all after the resolving clause and insert the 
following:

That it is the sense of the House of Representatives that American 
small businesses are entitled to the following Small Business Bill of 
Rights:
          (1) The right to join together to purchase affordable health 
        insurance for small business employees, who make up a large 
        portion of the millions of Americans without health care 
        coverage.
          (2) The right to simplified tax laws that allow family-owned 
        small businesses to survive over several generations and offer 
        them incentives to grow.
          (3) The right to be free from frivolous lawsuits which harm 
        law-abiding small businesses and prevent them from creating new 
        jobs.
          (4) The right to be free of unnecessary, restrictive 
        regulations and paperwork which waste the time and energy of 
        small businesses while hurting production and preventing job 
        creation.
          (5) The right to relief from high energy costs, which pose a 
        real threat to the survival of small businesses, to be 
        accomplished by reducing the Nation's reliance on imported 
        sources of energy and encouraging environmentally-sound 
        domestic production and conservation of energy.
          (6) The right to equal treatment, as compared to large 
        businesses, when seeking access to start-up and expansion 
        capital and credit.
          (7) The right to open access to the Government procurement 
        marketplace through the breaking up of large contracts to give 
        small business owners a fair opportunity to compete for Federal 
        contracts.

  Amend the preamble to read as follows:

Whereas more than 90 percent of all American employers are small 
businesses;

Whereas small businesses generate approximately 70 percent of the new jobs 
created in the United States each year;

Whereas small businesses are crucial to the American economy and account 
for a significant majority of new product ideas and innovations;

Whereas small businesses, together with innovation and entrepreneurship, 
are central to the American dream of self-improvement and individual 
achievement;

Whereas 60 percent of the 45,000,000 Americans without health insurance are 
small business employees and their families;

Whereas most small businesses do not provide health insurance to their 
employees, primarily because of the surging cost;

Whereas the Internal Revenue Code of 1986 is exceedingly complex, making it 
difficult for small businesses to understand it and comply with its 
requirements;

Whereas the Internal Revenue Code of 1986 discriminates, in many instances, 
against small businesses and self-employed persons by limiting the 
availability of certain tax incentives to larger firms or corporations;

Whereas the death tax causes one-third of all family-owned small businesses 
to liquidate after the death of the owner;

Whereas frivolous lawsuits and the rising costs of liability insurance 
represent serious threats to small business owners;

Whereas burdensome regulations and paperwork cost small businesses more 
than $5,500 per employee;

Whereas adequate, affordable, and reliable energy supplies are essential to 
the success of small businesses, especially small manufacturers;

Whereas lack of access to capital and credit stifles new business growth 
and economic opportunity;

Whereas both unsound contract bundling or consolidation and the failure of 
various Federal agencies to closely monitor the small business goals and 
subcontracting plans of large businesses have dried up many procurement 
opportunities for small businesses; and

Whereas Congress can help small businesses grow by establishing a climate 
to encourage small businesses to create jobs and offer more affordable 
health insurance to employees: Now, therefore, be it

                                PURPOSE

    The purpose of this resolution is to call upon the House of 
Representatives for a Small Business ``Bill of Rights'' that 
gives America's small employers the tools they need to grow 
their businesses and create jobs. Essentially, this resolution 
is a blueprint for the House of Representatives to follow 
regarding the top broad policy themes to focus on and resolve 
over the next two years. The main purpose of this resolution is 
to include broad small business principles that are supported 
by and affect a wide cross section of all small businesses 
throughout this Nation.

                          NEED FOR LEGISLATION

    Over the years, various small businesses have approached 
Congress with issues that they believe are of great importance. 
It has been ten years since the last time small businesses 
gathered together on a nationwide basis to prioritize the top 
issues facing them as part of the 1995 White House Conference 
on Small Business. This resolution is needed to highlight the 
top tier policy issues that must be addressed by the House of 
Representatives in the 109th Congress--health care, tax relief, 
litigation reform, and regulatory/paperwork reduction. This is 
not to say that other small business issues are unimportant. 
However, this legislation is needed to help Congress prioritize 
the key issues that affect the largest number of small 
businesses in the United States.

                            COMMITTEE ACTION

Related hearing(s)

    On Tuesday, March 8, 2005, the Committee on Small Business 
held a hearing, commencing at 3:15 p.m., to hear testimony 
concerning H. Res. 22. The Committee received the testimony of 
six witnesses on one panel: Jerry Pierce, Owner of Restaurant 
Equipment Sales of Orlando, Florida, representing the National 
Federation of Independent Business (NFIB); Giovanni Coratolo, 
Director of Small Business Policy for the U.S. Chamber of 
Commerce; Todd McCracken, President of the National Small 
Business Association (NSBA); Barbara Kasoff, co-founder of 
Women Impacting Public Policy (WIPP); Karen Kerrigan, President 
& CEO of the Small Business & Entrepreneurship Council (SBE 
Council); and Sheila Brooks, President of SRB Productions of 
Washington, DC.
    Jerry Pierce, Giovanni Coratolo, and Karen Kerrigan 
testified as to the accuracy of H. Res. 22 in terms of the top 
nationwide issues facing the small business members as part of 
NFIB, the U.S. Chamber, and the SBE Council respectively and 
urged its adoption by the Committee. Each one of these 
associations recently surveyed their membership and the issues 
outlined in H. Res. 22--health care, tax relief, litigation 
reform, and regulatory/paperwork reduction--came back from 
their rank-and-file members as their top recommendations for 
change. Todd McCracken of NSBA disagreed with the concept of 
Association Health Plans (AHPs) but agreed that health care, 
tax relief, and regulatory reform remained the top concerns of 
small business. He also added that small business access to 
capital was a top tier issue. Barbara Kasoff of WIPP listed the 
priorities of women business owners: health care, energy, 
Social Security reform, tax reform, and tort reform. Finally, 
Sheila Brooks, the witness requested by the minority who is a 
small business owner but not directly tied to any national 
small business organization, testified from her perspective of 
the importance of open access to procurement opportunities for 
small businesses and the efficacy of the 8(a) minority business 
development and set-aside program in particular.
    The hearing concluded that H. Res. 22 did have merit by 
focusing the attention of the top issues facing the vast 
majority of small business owners nationwide but could be 
improved to take into account some of the suggestions of the 
other witnesses dealing with access to capital, energy, and 
procurement.

Consideration of H. Res. 22

    At 2:06 p.m. on April 6, 2005, the Committee on Small 
Business met to consider and report two resolutions, including 
H. Res. 22. The Chairman declared the resolution open for 
amendment, and the first action was consideration of an 
amendment offered by Representative Ric Keller of Florida. The 
amendment contained three additional policy areas that were not 
contained in H. Res. 22 as introduced but were discussed at the 
March 8, 2005 hearing. These issue areas included equitable 
treatment for small business in access to capital, relief from 
high energy costs, and open access to the Government 
procurement marketplace.
    The Chairman then placed a time limit on each amendment to 
eight minutes apiece--four minutes for each side. Ms. Velazquez 
objected and called for a vote to overrule the Chair. The 
Chairman was sustained in his ruling by a vote of 12 to 10.


    Ms. Velazquez sought to perfect the Keller amendment by 
offering her amendment to the Keller amendment. This amendment 
sought to replace the procurement language already in the 
Keller amendment to include more detailed policy proscriptions 
such as small businesses must be able to challenge Federal 
contracts that deny them opportunity in a balanced appeals 
system administrated by a non-biased third-party arbiter. The 
amendment also calls on those agencies that fail to achieve 
their small business contracting goals should no longer be able 
to bundle contracts until the shortfalls are corrected. 
Finally, the amendment calls on improving the confidence that 
small businesses need to have in the Government to accurately 
and correctly monitor their participation in the Federal 
marketplace. The amendment was defeated by a vote of 13 to 11 
mainly because the language already in the Keller amendment 
sufficed, and these detailed policy proscriptions as contained 
in the Velazquez amendment were beyond the scope of the intent 
of the resolution.


    Ms. Bean offered a second amendment to the Keller 
amendment. This amendment sought to add more language to the 
access to capital provision already in the Keller amendment by 
calling for restoration of funding for the Small Business 
Administration's (SBA's) 7(a) loan program. The amendment was 
defeated by a vote of 15 to 10 mainly because it would 
unrealistically commit the House to seek perhaps as high as 
$100 million in appropriations to support a program that has 
not seen a decrease in demand since the slightly higher fees 
(amounting to approximately an extra $10 per month for the 
average 7(a) loan borrower) went into effect last October to 
bring the program down to a zero subsidy rate (or not requiring 
a direct Congressional appropriation anymore).


    Ms. Velazquez then offered a third amendment to the Keller 
amendment. This amendment struck out the word ``unsound'' 
before the phrase ``contract bundling or consolidation.'' The 
amendment was defeated by a vote of 13 to 11 because the Keller 
amendment already makes clear the preference of the small 
business community, as in the words of President George W. 
Bush, ``to break down large federal contracts so that small 
business owners have got a fair shot at federal contracting.'' 
\1\
---------------------------------------------------------------------------
    \1\ Remarks of the President to the Women Entrepreneurship in the 
21st Century Summit, Washington, DC March 19, 2002.


    After these amendments were disposed and no further 
amendments were offered to the Keller amendment, the Keller 
amendment was subsequently adopted, with a quorum present, by 
unanimous voice vote.
    Mr. Grijalva then offered an amendment to H. Res. 22. This 
amendment would add another small business right to a Social 
Security system that does not include individual private 
savings accounts. The amendment was defeated by a vote of 14 to 
12 mainly because the small business community is divided on 
the subject of personal Social Security retirement accounts. 
This amendment defeats the purpose of the underlying 
resolution, which is to highlight the top tier issues that 
unite the vast majority of small businesses throughout this 
Nation.


    Finally, at 3:05 p.m., Chairman Manzullo called the 
previous question on the underlying resolution. Mr. Barrow 
objected and demanded a roll call vote. The previous question 
was ordered by a vote of 14 to 12.


    Chairman Manzullo then moved that the resolution be 
reported out of Committee, and at 3:10 p.m., by unanimous voice 
vote, a quorum being present, the Committee passed H. Res. 22, 
as amended, and ordered it reported.

                      SECTION-BY-SECTION ANALYSIS

    The preamble of the resolution sets forth various facts 
relating to the state of small business in America. The 
resolving clause expresses the sense of the House of 
Representatives that American small businesses are entitled to 
a ``Small Business Bill of Rights'' in the following areas: (1) 
the right to join together to purchase affordable health 
insurance for small business employees; (2) the right to 
simplified tax laws that allow family-owned small businesses to 
survive over several generations and offer them incentives to 
grow; (3) the right to be free from frivolous lawsuits; (4) the 
right to be free of unnecessary, restrictive regulations and 
paperwork; (5) the right to relief from high energy costs; (6) 
the right to equal treatment, as compared to large businesses, 
when seeking access to start-up and expansion capital and 
credit; and (7) the right to open access to the Government 
procurement marketplace.
    The main aim of the resolution is not to have specific 
proscribed policy recommendations but to outline certain key 
principles that have widespread agreement among the small 
business community. For example, the access to capital programs 
at the SBA certainly help in the effort to equalize the 
treatment of small business, as compared to large business, in 
their quest for loans and venture capital. But determining 
which SBA loan program deserves to receive a federal subsidy or 
not is beyond the scope of this resolution.

                  COMMITTEE AND CBO ESTIMATE OF COSTS

    Pursuant to the Congressional Budget Act of 1974, the 
Committee estimates that the resolution will have no cost 
because it does not change existing law. Pursuant to clause 
3(d)(2)(A) of rule XIII of the Rules of the House of 
Representatives, the Committee estimates that implementation of 
H. Res. 22 will not significantly increase administrative 
costs.

               NEW BUDGET AUTHORITY AND TAX EXPENDITURES

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this resolution does 
not provide new budgetary authority or increase tax 
expenditures.

                           OVERSIGHT FINDINGS

    In accordance with clause 4(c)(2) of rule X of the Rules of 
the House of Representatives, the Committee states that no 
oversight finding or recommendation have been made by the 
Committee on Government Reform with respect to the subject 
matter contained in H. Res. 22.
    In accordance with clause 2(b)(1) of rule X of the Rules of 
the House of Representatives, the oversight findings and 
recommendations of the Committee on Small Business with respect 
to the subject matter contained in H. Res. 22 are contained in 
the descriptive portions of this report.

                    PERFORMANCE GOALS AND OBJECTIVES

    H. Res. 22 does not authorize funding. Therefore, clause 
3(c)(4) of rule XIII of the Rules of the House of 
Representatives is inapplicable.

                 STATEMENT OF CONSTITUTIONAL AUTHORITY

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, Section 8, Clause 18 of the 
Constitution of the United States.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the resolution does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
resolution.

                       FEDERAL MANDATES STATEMENT

    H. Res. 22 contains no intergovernmental or private sector 
mandates as defined pursuant to section 423 of the Unfunded 
Mandates Reform Act and will not impose costs on state, local, 
and tribal governments.

                            DISSENTING VIEWS

    In its effort to promote economic expansion, Congress has 
continually attempted to identify those barriers that inhibit 
business growth in the United States. A primary concern of 
Congress and the Small Business Committee has been identifying 
the needs of the small business sector that has an economic 
record of creating 75% of all new jobs.
    H. Res. 22, referred to as ``The Small Business Bill of 
Rights,'' was originally offered as a resolution of the 
commitment of the House of Representatives to remove obstacles 
facing small firms and create an economic environment that 
fosters growth. The author of the legislation, Representative 
Keller, noted that he had met with twenty small business owners 
in his Congressional District who expressed what they thought 
were the top concerns of small businesses. The opinions of 
these business owners were the primary basis for the Bill of 
Rights found in the resolution. While these business owners 
expressed a number of concerns that are common to other 
business owners in America, their opinions did not reflect all 
the concerns of the broad sector of small firms across the 
United States.
    At a Small Business Committee hearing on the resolution on 
March 8, 2005, it became clear that not only were the 
provisions in the resolution not necessarily the top priorities 
for all firms across the country, but that the resolution 
failed to include a number of provisions that would represent 
the needs of the various industries and different types of 
small businesses. Witnesses talked about the needs for access 
to capital, a federal marketplace that did not shut out small 
businesses, improved minority federal contracting programs, and 
that Social Security reform was on the mind of many 
entrepreneurs, among other issues. At previous hearings not 
related to the resolution, other issues facing small businesses 
had also been brought to the committee's attention. The 
resolution also failed to provide for a commitment to minority 
owned businesses and addressing their unique needs. These were 
but a few of the issues that made the resolution incomplete.
    Due to these findings, a markup with potential amendments 
was necessary to ensure that a Small Business Bill of Rights 
resolution would represent the cross-section of the diverse 
nature of small businesses in the United States. Unfortunately, 
the manner in which the markup occurred prevented this 
legislation from being improved to provide for a ``Bill of 
Rights'' that small businesses deserve. As a result, the 
resolution being discharged from the committee fails on a 
number of levels to include important provisions that affect 
nearly all or a significant portion of small businesses.
    The most disturbing aspect of why these provisions were not 
included in the resolution is the process in which this bill is 
being discharged from the Committee. On April 7, 2005, the 
House Small Business Committee held a markup on the resolution. 
Prior to the markup, Members of the Committee submitted a 
number of amendments to be considered. This was not intended to 
be an exclusive list of amendments, but ones that would likely 
be brought up. These were amendments to strengthen the 
resolution by including changes that had been discussed by 
multiple business owners who had come before the House Small 
Business Committee in the past, including the hearing that 
examined H. Res. 22.
    Rather than allowing for a full and open debate of the 
amendments, the Chairman immediately ruled at the start of the 
markup that any Member offering an amendment would only have 
four minutes to advocate his or her amendment, as opposed to 
allowing a full and open discussion. Despite objections from 
Members who wished to have a full and open debate on the 
resolution, the Chairman and members of his party in the 
committee voted that debate would be limited. This was despite 
the fact that Members intended to offer a number of amendments 
to improve the bill and make it reflective of the small 
business community as a whole.
    Not only did the Chairman cut debate on the five amendments 
that were considered, the Chairman ruled to cut off debate with 
pending amendments and a majority supported this motion. This 
unprecedented move prevented debate on at least two other 
amendments that were pending. These were amendments that would 
have strengthened the resolution to ensure all the needs of 
small businesses were a primary concern of the House of 
Representatives.
    As a result, the manner in which the markup was conducted 
has prevented proper consideration of the resolution. Not only 
did the markup prevent adequate debate of amendments offered, 
but it allowed for the adoption of an amendment to the Small 
Business Bill of Rights that could arguably do more harm than 
good for small businesses.

   RESOLUTION DOES NOT REPRESENT PRIORITIES OF MOST SMALL BUSINESSES

    The resolution fails to be complete on a number of levels. 
It not only fails to address many issues that are important to 
small businesses, but in some cases it offers solutions that 
entrepreneurs do not view as the primary or best way to solve 
these problems.
    The resolution recognizes that the issue of health care is 
a large concern for small businesses. In fact, for most small 
businesses in America it is often their number one issue. The 
resolution is shortsighted in its approach to this issue, as it 
offers only one solution to this problem. H. Res. 22 provides 
that small businesses should have ``the right to join together 
to purchase affordable health insurance.'' This is a clear 
reference to the Association Health Plan (AHP) legislation that 
has been introduced in the House and Senate, but has not been 
enacted into law.
    Many in the small business community support the AHP 
legislation, but there is clearly not unanimous agreement on 
its passage as the solution to the health care problem for 
small businesses. As noted in the majority views, the 
resolution is supposed to represent priorities with broad 
support from the small business community if it is to be 
included within the Bill of Rights section. Additionally, even 
proponents of AHPs recognize thatbroader health care reform is 
necessary to bring down health insurance costs for small businesses. To 
identify only one solution to the health care problem reveals how this 
resolution is shortsighted in many ways and does not recognize the 
severity of the problem of affordable health care for small businesses.
    Sections three and four of the Small Business Bill of 
Rights in the resolution are concerns for small businesses, but 
the language does not offer anything in terms of substance. It 
is clear that no one wants ``frivolous lawsuits'' or 
``unnecessary, restrictive regulations'' and Congress should be 
doing something about them. There is one hundred percent 
support within the small business community to eliminate these 
problems. However, the language in the resolution appears to be 
a veiled reference at the debates that are going on in Congress 
related to these issues and insinuating that some in Congress 
are working to maintain these ``restrictive regulations'' or 
``frivolous lawsuits.'' A more effective approach would be to 
recognize that there must be a balance between protecting 
public policy concerns (i.e. environment, safety) and ensuring 
small firms are not subject to unwarranted regulations. 
Instead, the resolution only recognizes the obvious.
    Additionally, when it comes to top priorities of small 
businesses, lawsuits are not necessarily on the top of many 
small business concerns. The National Small Business 
Association did not mention the issue in its top ten items at 
the hearing on H. Res. 22; National Federation of Independent 
Business (NFIB) in their latest list (2004) of small business 
``Problems and Priorities'' ranked lawsuits 64th out of a list 
of 75 named problem areas; and the representative from the 
Small Business and Entrepreneurship Council spent only two 
short paragraphs discussing lawsuits in her written testimony 
on H. Res. 22.
    In contrast, the resolution failed to include a number of 
important provisions to small businesses. It is for this reason 
that a number of amendments were offered, or attempted to be 
offered, to ensure an adequate and representative Small 
Business Bill of Rights. While there was one amendment that was 
adopted, the bill being discharged remains problematic due to 
the process in which these amendments were considered, as 
discussed below.

                           ADOPTED AMENDMENT

    The one amendment that was adopted by the Committee in the 
April 7, 2005 markup did nothing to strengthen the resolution. 
It merely served to touch on broad issue areas, but did nothing 
to strengthen the ``Bill of Rights'' of small businesses. Rep. 
Keller offered an amendment to H. Res. 22 at the markup that 
was adopted by a voice vote. The amendment made several 
additions to the preamble and to the ``rights'' section. The 
amendment does not address other issues of importance to small 
businesses, namely the importance of minority business 
development and the role entrepreneurs play in economic 
development. As a result, the majority has cherry-picked the 
legislation's priorities, choosing to ignore such issues of 
importance to the nation's minority and low-income individuals. 
In addition, the amendment does not recognize the impact that 
Social Security reform proposals would have on small 
businesses.
    Specifically, the amendment adds language noting the 
complexity of the tax code and the tendency of the tax code to 
discriminate against small businesses. In addition, the 
amendment adds general language noting the importance of 
affordable energy sources and small businesses' need for 
capital and credit. Finally, the amendment states that contract 
bundling has dried up opportunities for small business owners.
    In the section detailing small business rights, the 
amendment added the following rights:
     The right to relief from high energy costs, to be 
accomplished by reducing the nation's reliance on imported 
sources of energy, and encouraging environmentally-sound 
domestic production and energy conservation.
     The right to equal treatment, as compared to large 
businesses, when seeking access to start-up and expansion 
capital and credit.
     The right to open access to the government 
procurement marketplace through the breaking up of large 
contracts to give small business owners a fair opportunity to 
compete for federal contracts.
    While the ``rights'' for energy and contracting issues are 
specific, the ``right'' for the access to capital issue is 
vague and ambiguous. Large businesses access capital 
differently than small businesses do, oftentimes through the 
issuance of corporate bonds, a loan syndication, or asset 
securitization. Conversely, small businesses typically rely on 
loans from local lenders, credit cards, or borrowing from 
family and friends. It would be highly inefficient and overly 
complex to expect small businesses to access capital through 
Wall Street mechanisms, as larger businesses do. Instead, small 
businesses need affordable business loans that they can access 
in their local communities. These are just a few examples of 
why that even with the amendment, the resolution is incomplete.
    This amendment that was adopted could also actually weaken 
small businesses ability to access the federal marketplace. 
With the change, the resolution would put Congress on record 
recognizing that contract bundling is an acceptable practice in 
certain situations. The Keller amendment attributes the 
practice by federal agencies of ``unsound'' contract bundling 
to the diminishing number of small business contracting 
opportunities. There is substantial concern that the Keller 
amendment may have the result of encouraging the bundling of 
contracts and weakening existing small business protections.
    The Committee has historically been strongly in favor of 
efforts to increase small business participation in the federal 
marketplace. Recognizing that contract bundling is one of the 
most significant barriers eliminating small business 
opportunities, the Committee has held numerous hearings over 
the past 10 years, as well as proposed and reviewed legislative 
solutions to this problem.
    The language contained in the Keller amendment on this 
issue has the effect of lessening the Committee's previously 
strong advocacy for increased small business participation,by 
implying that not all contract bundling is harmful to small firms. This 
position is not only contrary to the position of the Committee over the 
years, but is also in contravention of the President's contract 
bundling initiative.
    The language in the Keller amendment states that there 
shall be no ``unsound'' contract bundling. Advocates of harmful 
contract bundling will interpret such language to show that 
there are situations where there is sound contract bundling--in 
other words--it is good public policy in certain situations to 
bundle federal contracts. Such an addition to the Bill of 
Rights could put the House of Representatives as favoring 
certain types of contract bundling.
    This is in stark contrast to the current public policy 
goals of Congress. It has always been the position by Congress 
that contracts should not be bundled. It is the reason that 
there is a twenty three percent contracting goal for small 
businesses. This goal was created as a device to end the 
practice.
    As such, Members attempted to amend the resolution and the 
Keller amendment but were stymied by the process that the 
resolution was considered.

AMENDMENTS OFFERED TO STRENGTHEN H. RES. 22 THAT WERE DEFEATED OR NEVER 
               CONSIDERED BEFORE SMALL BUSINESS COMMITTEE

Amendment on the 7(a) loan program

    An amendment was offered by Rep. Melissa Bean, which would 
have put the Committee on record in support of funding the 7(a) 
loan program and lowering lending fees on small business 
owners--in effect, reversing the decision made in late 2004 to 
increase such fees. Of particular concern is that the Federal 
Reserve's continued increase of short-term interest rates, 
coupled with pressures from the near-record budget and trade 
deficits, will exert upward pressure on commercial interest 
rates. This will make it harder for small businesses to access 
affordable capital--highlighting the need for the 7(a) program, 
the federal government's primary business lending program.
    Despite the recent success of the 7(a) loan program in 
making capital more affordable for entrepreneurs, during the 
last four years, opponents of the 7(a) program have attempted 
to constrain the success of this lending initiative. The 
program's opponents--primarily the Bush administration and 
Republican leadership--have underfunded the program, 
implemented a series of caps, imposed burdensome restrictions, 
and shut down the program in its entirety.
    Perhaps the most notable action taken against the program 
in recent years was the decision in November 2004 to impose 
higher fees--essentially a new tax--on business owners seeking 
capital. This proposal--contained in the president's FY 2005 
budget request--marks the first time that government funding 
for this program was eliminated, and the entire cost for the 
program is borne by small businesses and their lenders.
    For smaller loans less than $150,000, fees are doubled from 
1 percent to 2 percent, which translates into nearly $1,500 
more in upfront closing costs for entrepreneurs. For a loan of 
$700,000, this would raise the fees by approximately $3,000. As 
a result of these fee increases, many small businesses will be 
unable to access the capital they need to hire new employees or 
expand their operations.
    This fee increase has reduced the demand for the 7(a) 
program. For the last quarter of FY 2004, the program provided 
$3.94 billion in 7(a) loans. Since these fees were raised on 
small businesses, loan volume has decreased to only $3.56 
billion for the most recent quarter--a decline of nearly half a 
billion in lending to small businesses. And, last January, 
after the program was shutdown and there was a cap in place--
the program averaged $56 million in loans. But this January, as 
a result of the Bush administration's higher fees, the program 
provided $47 million in loans per day. This is nearly $10 
million less per day in loans to our nation's entrepreneurs.
    The original mission of the 7(a) program was to provide 
entrepreneurs who could not access traditional capital markets 
with a source for affordable loans. The recent moves have 
reoriented the program away from this original mission, making 
the program too costly for many small businesses that are 
unable to attract financial backing, but that nevertheless have 
sound commercial ventures. As a result, gaps in the capital 
markets will increase--turning back the clock to a time when 
only the strongest and most creditworthy businesses received 
financing.
    This amendment was defeated by a recorded vote.

Amendment to keep regulatory burdens low for small businesses

    Representative Raul Grijalva offered an amendment to ensure 
that any reforms to the Social Security system would not 
unfairly burden small businesses. Representatives of Women 
Impacting Public Policy who testified at the hearing on H. Res. 
22 noted that Social Security Reform was the third highest 
concern for their members. This amendment which was voted down 
before the committee would require that Congress recognize the 
impacts that Social Security reform, specifically private 
savings accounts, would have on small businesses. This 
amendment addressed the issue of private savings accounts as 
part of Social Security reform and recognized that these 
accounts would increase the administrative costs borne by small 
firms.
    Creating private accounts could have a significant impact 
on small businesses, especially in terms of increased 
administrative costs. The issue here is that many small 
businesses do not have 401(k)'s or other pension plans in place 
because of the high costs, and adding private account would 
create similar costs. Requiring them to help set up private 
savings accounts could prove to be extremely costly. For 
example, it costs a ten-person firm about $300 per employee for 
the costs associated with operating a comparable retirement 
plan.
    If small businesses were responsible for helping workers 
set up these private savings accounts, it could create costs 
that should not be borne by them. For the nearly 70% of all 
small firms who have never offered a retirement plan and have 
no familiarity with working with any sort of private accounts, 
there would be significant startup costs.
    The amendment recognized that the Social Security private 
savings accounts would create a significant burden on this 
nation's small businesses. It is for this reason, this 
amendment states that private savings accounts should not be 
part of the solution because they will significantly increase 
administrative costs for small businesses.
    The amendment was defeated by a recorded vote.

Amendment on small business access to the federal marketplace

    Given that small businesses comprise 97 percent of all 
businesses, and yet consistently receive less than 23 percent 
of all federal contract dollars, an amendment was offered by 
Ranking Democratic Member Nydia Velazquez to the Keller 
Amendment to strengthen the role of small businesses in the 
federal marketplace. While the Keller Amendment to H. Res. 22 
addresses increasing the ability of small business to penetrate 
the federal marketplace, it is insufficient in that it makes no 
mention of the major issues that are preventing small companies 
from receiving fair access.
    Over the past four years, the federal government's buying 
has increased by $100 billion, and yet the statutory small 
business goal of 23 percent has not been achieved, costing 
these companies billions of dollars in lost contracting 
opportunities. Unfortunately, the loss to small businesses is, 
at best, a guess. Because the federal government has not been 
accurately keeping track of small business participation in 
government contracting, the losses to small businesses may be 
much greater. In December of 2004, the Small Business 
Administration's Office of Advocacy reported that $2 billion 
counted as small business achievements in FY 2002 should 
actually have been reported as large business contract awards. 
The Keller Amendment to H. Res. 22 failed to recognize that 
awards to large businesses are being counted towards the small 
business achievement.
    One of the biggest obstacles to increased small business 
participation in the federal marketplace is the propensity of 
agencies to combine contracts that could be performed by small 
companies, into contracts that are too big for them to compete. 
While the Keller Amendment to H. Res. 22 promised small 
businesses ``open access'' to the federal marketplace, the 
amendment does not recognize the assistance small businesses 
need.
    The Velazquez amendment would have recognized that small 
businesses should be given the right to challenge contracts 
that are unfair to them. Given that agencies are the ultimate 
deciding factor as to whether or not a bundled contract should 
proceed, small firms should have the ability to a fair analysis 
when their contracts are taken away due to consolidation.
    Beyond this, small firms should have the right to see 
agencies penalized if they do not achieve their small business 
goals as a result of bundled contracts. Equally importantly, 
small businesses deserve the right to know that their 
participation in the federal marketplace is being accurately 
counted.
    The Velazquez amendment to the Keller amendment addressed 
flaws in the Keller amendment. While the Keller Amendment to H. 
Res. 22 attempted to focus on the ability of small businesses 
to participate in the federal marketplace, it failed to address 
barriers that must be overcome before full small business 
access to government contracts is a reality.
    These provisions were all included in legislation that was 
unanimously passed out of the Small Business Committee in 2003 
as part of the SBA reauthorization bill, H.R. 2802. 
Unfortunately, these provisions were left out of the 
legislation passed by Congress in 2004.
    The Velazquez amendment failed on a recorded vote.

                     AMENDMENT ON CONTRACT BUNDLING

    According to a report prepared by the Office of Management 
and Budget, contract bundling has been the cause for the number 
of small business prime contracts declining by 56 percent from 
fiscal year 1991 to fiscal year 2000. Contract bundling--the 
practice of combining contracts that displace small 
businesses--is one of the biggest barriers small businesses 
face in their attempts to access the federal marketplace.
    As noted above, Representative Keller introduced an 
amendment addressing this important small business issue. But, 
because Rep. Keller's amendment contends that ``unsound'' 
contract bundling has reduced government procurement 
opportunities for small businesses, it can be therefore 
construed that ``sound'' contract bundling is not particularly 
troublesome for small firms.
    An amendment was introduced by Ranking Democratic Member 
Nydia Velazquez to strike the word ``unsound'' from the Keller 
amendment. By its very definition, contract bundling is never 
good for small firms.
    The Velazquez amendment was an attempt to ensure that the 
Committee on Small Business does not go on the record as 
supporting any contract bundling that displaces small firms 
from the federal marketplace. According to a report by the 
Small Business Administration's Office of Advocacy, ``for every 
increase of 100 bundled contracts there is a decrease of 60 
contracts to small businesses.''
    Recognizing that contract bundling is one of the primary 
reasons for decreasing small business participation in the 
federal marketplace, the Velazquez amendment was introduced to 
ensure that Congress addresses this important small business 
concern. The reduced competition that will occur through the 
elimination of small businessparticipation in the federal 
marketplace through the practice of contract bundling, will ultimately 
result in higher costs to taxpayers and lower quality goods and 
services purchased through government contracts.
    The Velazquez amendment failed on a recorded vote.
    In addition to these amendments that were considered, 
Members were denied consideration of additional amendments when 
the Chairman ruled to cut off debate. This was despite the fact 
these amendments were submitted in a timely manner. These 
amendments, discussed below, were designed to strengthen the 
resolution.

Amendment on minority business programs

    While minority individuals comprise nearly one-third of the 
population, only 15 percent of businesses are minority-owned. 
These companies employ 5 million people and generate nearly 
$600 billion in revenue.
    Given the gap between the number of individuals and the 
business ownership rate, it is clear that an entrepreneurial 
divide exists in this country. One of the most significant 
reasons for this divide is the fact that programs designed to 
grow and develop minority-owned companies have not seen 
legislative updates for nearly 20 years.
    Representative John Barrow and Representative Gwen Moore 
introduced an amendment to bridge this entrepreneurial divide. 
This amendment did not receive Committee consideration during 
the markup as the Chairman chose to table the motion rather 
than allow Representatives Barrow and Moore time to be heard on 
their amendment. The majority agreed to table the motion.
    This amendment recognized that programs to assist minority 
entrepreneurs have been allowed to stagnate without important 
changes to bring these programs into the 21st century. Minority 
business owners deserve the right to have these important 
initiatives modernized, sufficiently funded, and supported.
    Programs focused on minority entrepreneurs were designed to 
promote the competitive viability of these companies. And they 
have been successful. However, given the changes in the way the 
federal government buys goods and services as a result of 
acquisition reform legislation promulgated in the mid-1990s, 
minority business development programs are often viewed as 
antiquated and in disrepair.
    One of the consequences of acquisition reform was contract 
bundling. Programs designed to enhance the competitiveness of 
minority entrepreneurs have not been modified given these new 
realities in the federal marketplace.
    Equally important, new programs have been added targeted at 
other deserving sectors of the small business community. 
Unfortunately, no corresponding changes were made to minority 
business programs to ensure that new initiatives did not 
detract from the share of the federal marketplace occupied by 
minority entrepreneurs. Additionally, none of the new 
initiatives have the same barriers as minority business 
development programs.
    While programs do exist that focus on enhancing the ability 
of minority business owners to gain access to the federal 
marketplace--such as the Small Business Administration's 8(a) 
program--they have been marginalized and ignored. Large 
businesses are able to take advantage of 8(a) status to receive 
contracts with little, if any, work performed by company 
employees. SBA has delegated its business development 
responsibilities to government buying agencies. Even though 
technical assistance is a critical aspect of growth to minority 
entrepreneurs, in 25 years the Small Business Administration 
has not developed policy and guidance on how to accomplish 
this.
    The result of this inaction has harmed minority-owned 
businesses. Over the past four years, the federal government's 
goal for contracting with minority entrepreneurs has not been 
achieved, costing these companies billions of dollars in lost 
contract opportunities.
    The Barrow-Moore amendment focused on enhancing and 
revitalizing programs designed to grow businesses owned by 
minority individuals. Without immediate attention, these 
important initiatives will slip further and further behind, 
harming the development of these companies. The Barrow-Moore 
amendment recognized these concerns and would have gone a long 
way towards ensuring that minority business owners retain their 
place as a vibrant part of the U.S. economy.
    The amendment was never considered due to the motion to cut 
off debate prior to its consideration.

Microloan/economic development amendment

    The purpose of this amendment was to put the Committee on 
record in support of the Microloan program, which the 
administration has proposed to eliminate in its FY 2006 budget. 
Last year, the administration also proposed to eliminate this 
program, but Congress acted to restore funding. As a result, 
the program will provide $15 million in loans and $14 million 
in technical assistance during FY 2005. In attempting to 
abolish the program, the administration wrongly contends that 
very small loans are more widely available now than they were a 
decade ago when the SBA began the Microloan program. According 
to a recent SBA study, the availability of small loans has 
declined in recent years.
    In addition, while financial institutions have been 
actively lending loan amounts below $100,000, they have not 
been lending to those types of businesses that would typically 
access funds through the Microloan program. Bank-delivered 
programs--like the 7(a) loan program--will not lend to the 
types of borrowers that use the Microloan program. The typical 
Microloan borrower would not qualify for a 7(a) loan due to any 
number of reasons, including an imperfect credit history, lack 
of collateral, or lack of business training.
    Microintermediaries work with potential borrowers to fully 
develop their business proposals, greatly increasing the 
likelihood of an entrepreneur's success. Banks often do not 
service such borrowers, leaving many would-be entrepreneurs 
without any means, other than high-priced credit cards, to 
secure capital.
    The administration also contends that programs other than 
the 7(a) program offer duplicative services. The Microloan 
program, however, is the only program that combines funding and 
technical assistance--an important combination for many 
entrepreneurs looking to start a business. In addition, the 
administration terminates, reduces funding, or increases the 
costs for entrepreneurs for nearly all of the programs aimed at 
the segment of business owners that the Microloan program was 
developed to serve. This includes an elimination of support for 
PRIME and the New Markets Venture Capital program.
    The Microloan program fills an important need in the 
capital markets--small loans to startups. During the past few 
years, scores of Americans weathered the economic downturn by 
starting their own business--many relying on the Microloan 
program for funds and assistance. By cutting this program, it 
will limit the potential for many individuals to become self-
sufficient and will prevent communities from adding the new 
jobs they need to grow.
    The amendment was never considered due to the motion to cut 
off debate prior to its consideration.

                               CONCLUSION

    While this resolution is non-binding, it is intended as a 
way for the House of Representatives to recognize the needs and 
concerns of America's small businesses. Unfortunately, due to 
the process by which this bill was considered and the lack of a 
bipartisan approach to address the legislation to meet the 
needs of small businesses, H. Res. 22 does not include a Bill 
of Rights that small businesses deserve.
    Not only does this resolution fail to include a number of 
important concerns for small businesses, it contains provisions 
that many entrepreneurs would either not necessarily agree with 
or disagree with altogether. The failure to include many issues 
facing these entrepreneurs in the Bill of Rights section 
demonstrates how this bill does not represent the concerns of 
Main Street America.
    While it may have been possible to include these issues, 
the process under which the bill was debated has prevented a 
discussion on these issues. The decision by the majority to 
impose debate restrictions on certain amendments and cut off 
debate completely on additional amendments prior to full 
consideration was simply wrong. To deny Members the right to 
offer an amendment during a markup is an affront to the 
democratic process. Only with a full and open debate can it be 
ensured that Members have an opportunity to be heard and that 
those affected by any resolution or legislation are adequately 
represented.
    In order to ensure this bill represents the concerns of 
small businesses, the resolution must be strengthened. The 
resolution has not been fully debated before the committee of 
jurisdiction and as a result, it has failed to include a number 
of important priorities.
    The only way to achieve a representative Bill of Rights is 
to allow for a full debate on this resolution to the House 
floor under an open rule. This would allow for Members who were 
denied the opportunity to either fully debate their amendments 
or debate them at all, to do so. This will ensure that the 
resolution is one that the entire House of Representatives can 
support. It will allow for the House of Representatives to 
consider the importance of such issues as access to affordable 
capital, changing the federal marketplace to meet the needs of 
small business, reducing concern over regulatory issues and 
other important matters. Without these issues being addressed, 
the Bill of Rights in H. Res. 22 will be incomplete.
                                                   Nydia Velazquez.

                                  
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