[Public Papers of the Presidents of the United States: William J. Clinton (1994, Book I)]
[February 1, 1994]
[Pages 162-163]
[From the U.S. Government Publishing Office www.gpo.gov]



Message to the Congress on Small Business
February 1, 1994

To the Congress of the United States:
    I am pleased to present my first annual report on the state of small 
business. This report covers data for fiscal year 1992, a period of slow 
economic recovery that occurred just before my Administration took 
office.
    Small businesses create many new jobs and are an important part of 
our Nation's economic growth. That is why, in my first address to the 
Joint Session of the Congress, I proposed some of the boldest targeted 
incentives for small business in history. These measures will benefit 
not only small businesses, but the American work force, our Nation's 
economy, and our international competitiveness.
    At the same time, we must undertake some major corrective efforts. 
As small business owners will testify, the best thing the government 
could do for small business and the economy is to reduce the deficit. 
The primary goal of the economic program is to set the economy on the 
proper course for the short- and long-term future. Deficit reduction and 
shifting consumption to investment are the ways to accomplish that goal.
    Reducing health care costs while ensuring that all Americans have 
access to health care is another national imperative. I have said it 
before: bringing health spending in line with inflation would do more 
for the private sector than almost any incentive or tax cut we could 
promote. At the same time, we must find a way to provide health care for 
everyone. Currently two-thirds of the Americans without health insurance 
are employed--many in small businesses. My health care task force has 
evaluated many proposals to ensure that health care is available to 
small business employees and affordable for small business owners. It 
will take time to change our health care system, but we are taking the 
important first steps.
    We will also need to keep looking for better ways to provide for 
workers upon retirement. As this report documents, pension plans, like 
health plans, are much less available and affordable in small 
businesses. And as the baby boom generation moves toward retirement, 
issues related to Social Security and pension plan availability take on 
new urgency.
    Beyond these long-range efforts, I have asked the Congress to join 
me in investing in small business and economic growth through specific 
tax incentives, capital formation initiatives, enterprise and 
empowerment zones, technology investments, and education and job 
training efforts.
    To encourage long-term investment in small business, I supported--
and the Congress passed--a 50 percent tax exclusion on capital gains 
from investments in qualified small business stock held for at least 5 
years. This incentive, which will help small businesses raise critically 
needed capital, is projected to create 80,000 new jobs over the next 5 
years. I also favored such an exclusion for investment in small business 
venture capital firms targeting investments to minority-owned 
businesses. Another small business incentive I supported increases the 
``Section 179'' expensing limitation from $10,000 to $17,500, which will 
enable a number of smaller firms to purchase equipment needed for 
modernization and growth.
    My Administration supports easing the regulatory burden on small 
firms so that more of the time spent filling out paperwork--especially 
complicated or duplicative paperwork--can be

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used for more productive activities. There are a number of measures we 
can take. We have already simplified the computation of certain taxes 
such as the alternative minimum tax and we have eased the safe harbor 
rules related to the individual estimated tax. And we can ensure that 
Federal agencies comply with the Regulatory Flexibility Act, which 
requires them to assess the effects of their proposed regulations on 
small firms.
    Recent low interest rates have made resources more available to 
consumers for purchasing the products and services of American business 
and have made loans somewhat less expensive for the business community. 
In addition, I have proposed a number of measures to make capital more 
available to small business. To ease the ``credit crunch'' faced by many 
small firms, new provisions are loosening restrictions on banks so they 
can more easily make ``character'' loans, easing appraisal requirements 
for real estate used as collateral for small business loans, eliminating 
overlapping Federal regulations on lending institutions, and 
establishing an appeals process for banks and consumers who believe they 
have been unfairly treated by regulators.
    Small and minority-owned businesses would also benefit from a 
strengthened system of community development banks. A proposed Community 
Development Banking and Financial Institutions Fund would support 
investment in community development financial institutions (CDFIs). 
These CDFIs would be a source for loans and technical assistance to 
individuals and businesses in communities underserved by traditional 
lending institutions.
    Another way we plan to support the growth of new small enterprises, 
especially in economically depressed areas, is through the establishment 
of empowerment zones, enterprise communities, and rural development 
investment areas. The zones and communities will be nominated by State 
and local governments and chosen on a competitive basis after certain 
criteria based on population, geographic area, and poverty level are 
met. Businesses in these designated communities can take advantage of 
expanded tax-exempt financing. Businesses in empowerment zones will be 
given additional employment credits and tax incentives.
    Only by fully developing our technological and human resources can 
we expect to be leaders in the international marketplace. That means 
investment in technology and worker skills.
    There are a number of actions we can take to remain technologically 
competitive. We can extend the research and experimentation tax credit 
to encourage more research activities by American small businesses. I 
would like to see an expansion of the Small Business Innovation Research 
program, which, as documented in this report, helps channel Federal 
research funding to innovative small firms. I support a strong Small 
Business Technology Transfer program in which small businesses work with 
Federal laboratories and universities to develop promising technology 
and introduce it into the marketplace. The manufacturing extension 
centers we have proposed would help small- and medium-sized businesses 
evaluate new manufacturing technology. And I'd like to see an expansion 
of the Commerce Department's Advanced Technology Program, which provides 
matching grants to companies working on generic technology. Finally, we 
need to speed up computer networks and coordinate Federal information 
and telecommunications policy.
    We are looking at innovative ways to employ, train, and provide for 
a work force second to none. To begin with, we have extended the 
targeted jobs tax credit, which is available to employers who hire 
economically disadvantaged youth and members of specific at-risk groups. 
But that is just a small part of a large picture: many State, local, and 
private groups are experimenting with innovative ways to develop and 
train a competitive work force for the 21st century.
    Clearly, our Nation faces many challenges. Fortunately, we face them 
with an almost limitless resource--the variety and ingenuity of the 
American people. If we can meet our national challenges with the energy 
and innovative spirit of America's small business owners, we will be 
doing very well. So I encourage the Members of Congress, together with 
young people and small business owners and all Americans to reach into 
your imaginations: dream boldly and begin something new.

                                                      William J. Clinton

The White House,

February 1, 1994.