    [Public Papers of the Presidents of the United States: William J. Clinton (1996, Book I)]
    [June 5, 1996]
    [Pages 863-866]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Message to the Congress Transmitting the Report on Small Business
    June 5, 1996

    To the Congress of the United States:
        I am pleased to transmit to you my annual report on the state of
    small business, and to report that small businesses are doing
    exceptionally well. In the year covered by this report, a record 807,000
    new firms reported initial employment. Firms in industries dominated by
    small businesses created almost 60 percent of the nearly 3.3 million new
    jobs. Business failures and bankruptcies declined at some of the
    sharpest rates in a decade.
        Small businesses have both contributed to and benefited from the
    recent strength of the economy. The deficit reduction plan I initiated
    in 1993 has cut the budget deficit in half. The economy has created 8.5
    million new jobs since January 1993--almost all of them in the private
    sector. The combined rate of unemployment and inflation is at its lowest
    level in more than 25 years.
        A major success story has been in the women-owned business sector.
    Women are creating new businesses and new jobs at double the national
    rate. Today, women own one-third of all businesses in the United States.
    Clearly, there is no stopping this fast-growing segment of the economy.
        Last June I met in Washington with nearly 2,000 small business
    owners--participants in the national White House Conference on Small
    Business. They took precious time away from their businesses to tell us
    about their problems and their ideas for resolving them, turning over a
    list of 60 recommendations for Government action. Their ideas are
    reflected in many of the recent initiatives of my Administration.

    Improving Access to Capital

        One of the keys to a healthy small business sector is access to
    adequate start-up and working capital. The Small Business Lending
    Enhancement Act of 1995, which I signed last October, helped to increase
    access to capital through the Small Business Administration's (SBA)
    section 7(a) loan guarantee program. Last year, the SBA provided nearly
    $11 billion in long-term credit and other financial assistance to more
    than 67,000 small businesses, bringing SBA's total loan portfolio to $26
    billion. The number of 7(a) guaranteed loans has increased dramatically,
    up 52 percent from fiscal year 1994 to fiscal year 1995--and that's with
    a smaller budget and fewer employees at the SBA. Moreover, during that
    same period, the number of 7(a) guaranteed loans to women-owned
    businesses grew by 86 percent; loans to minority-owned businesses
    increased by 53 percent; and loans to businesses owned by U.S. veterans
    grew by 43 percent.
        Other initiatives are under way. My Administration has been working
    with banks and bank-

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    ing regulators to remove impediments to small business lending by
    financial institutions. The Riegle Community Development and Regulatory
    Improvement Act of 1994 amended the banking and securities laws to
    promote the growth of a secondary market for small business loans. And
    my Administration is looking to reduce small business securities filing
    and disclosure burdens. In June 1995, the Securities and Exchange
    Commission proposed regulations that would further this small business
    goal.

    Easing the Tax Burden

        The Federal Government should reward rather than discourage
    entrepreneurs who take risks and create jobs. To that end, we have
    worked to simplify the tax code and make it more equitable for small
    firms.
        In April 1995, I signed legislation to increase to 30 percent the
    share of health insurance premiums that self-employed individuals can
    deduct on their tax returns beginning this tax year--and we're working
    to increase that amount.
        Small firms are less likely than their larger counterparts to be
    able to provide retirement plans. While 75 percent of workers in
    businesses with more than 1,000 employees have pension plans, only 24
    percent of workers in businesses with fewer than 100 employees have
    them. I have proposed a new pension plan targeted to the needs of small
    businesses--the National Employee Savings Trust (NEST). The NEST would
    provide benefits similar to those of a 401(k) pension plan and would be
    simple to create and operate.
        My Administration has endorsed other improvements that make existing
    pension plans safer and more beneficial for business owners and
    employees alike. For example, we have proposed to eliminate the ``family
    aggregation'' restrictions on pensions for family members, so that
    spouses or children who work in the same or related businesses can earn
    their own retirement benefits.
        Our 1993 economic plan made 90 percent of small businesses eligible
    for tax relief. It established a targeted tax preference for capital
    gains, reduced the record-keeping requirements for the meals and
    entertainment deduction, and raised the small business expensing limit
    for equipment by 75 percent, to $17,500. We have proposed to increase
    further the value of equipment that can be directly expensed to $25,000.
        My Administration is also taking steps to ensure that tax
    regulations are as simple and understandable as possible. For example,
    administrative guidance has been published to provide tax relief to S
    corporations and partnerships, simplify depreciation computations, and
    ease inventory capitalization for small businesses.
        We are pursuing tax form simplification through our Simplified Tax
    and Wage Reporting System (STAWRS). This joint effort among Federal and
    State agencies will simplify, unify, and streamline tax reporting so
    that taxpayers will eventually be able to file their State and Federal
    tax and wage returns at one location, electronically. All these efforts
    will bring tax reporting into the modern age while reducing the
    paperwork burden for small business.

    Shrinking the Regulatory and Paperwork Burden

        Regulation and paperwork continue to be a key concern of America's
    small business owners, and I am proud of the progress my Administration
    has made in addressing this concern. For example, the SBA is
    streamlining all its regulations and converting them to plain English.
    An application form for the most common SBA loans used to be an inch
    thick and take 5 to 6 weeks to approve. We've reduced the form to one
    page and cut turn-around time to 3 days.
        I've said it before: the era of big Government is over. We have been
    working hard to give the American people a Government that works better
    and costs less. We are eliminating 16,000 pages of unnecessary
    regulations and streamlining 31,000 more--shifting decision-making out
    of Washington and back to States and local communities. In addition, we
    are directing Federal agencies, where possible, to cut by half the
    frequency of reports the public is required to provide to the
    Government.
        More broadly, much of our National Performance Review effort to
    reinvent Government has been pointed specifically at helping small
    business. The U.S. Business Advisor, which provides Internet access to
    information from all Federal agencies, and the U.S. General Store for
    Small Business, which offers business owners one location for dealing
    with the Federal government, illustrate our commitment to reinventing
    how Government serves the small business community.
        In March 1995, I announced a new approach to lessening the
    regulatory burden on small

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    firms. Under this commonsense approach, small businesses can now avoid
    paying penalties for violations if they correct the problem within an
    appropriate period of time. And for those violations that may take
    longer to correct, a small business may get up to 100 percent of its
    fine waived if that same money is used to correct the violation.
        I'm proud to have succeeded in putting more teeth in the Regulatory
    Flexibility Act (RFA). Under the 1980 Act, Federal Government agencies
    must analyze their proposed regulations for their effects on small
    firms--and revise them if they will create an unfair burden. In the
    past, however, because the agencies' analyses could not be reviewed in
    the courts, small businesses had no meaningful recourse if an agency
    made a poor decision. On March 29, I signed into law the Small Business
    Regulatory Enforcement Fairness Act of 1996, which allows for judicial
    review of Federal agency RFA analyses. The Act also emphasizes
    compliance assistance and requires agencies to provide small businesses
    with simple and clear guidelines to assist them in complying with the
    regulations that affect them.
        As small business owners have told us, they care about environmental
    protection and occupational safety; after all, they drink the same
    water, breathe the same air, and share the same workplace hazards as
    everyone else. My Administration has challenged small businesses and
    regulatory agencies to find cheaper, more efficient ways than government
    regulation to meet the high environmental and workplace standards
    Americans want.

    Opening Markets and Expanding Trade

        Every year the Federal Government spends $200 billion on goods and
    services, and small businesses receive a substantial share of that
    market. I am committed to expanding further the opportunities for small
    businesses to win Federal contracts. I fought for the Federal
    Acquisition Streamlining Act of 1994 and the Federal Acquisition Reform
    Act of 1996, which have simplified the procurement process and made it
    easier for small firms to do business with the Federal Government.
        The 1994 law also created a new Government-wide electronic commerce
    system, FACNET, which will eventually permit electronic submission of
    bids and proposals. I encourage small businesses to take advantage of
    these new procurement procedures to provide more goods and services to
    the Government.
        In addition to the Federal marketplace, foreign markets offer
    significant opportunities for small business owners to compete and win.
    While the North American Free Trade Agreement (NAFTA) and the General
    Agreement on Tariffs and Trade (GATT) are opening markets abroad, my
    Administration's National Export Strategy has made it easier here at
    home for small businesses to export. Among other things, we've opened 14
    U.S. Export Assistance Centers to provide one-stop access to export
    information, marketing assistance, and finance.

    Technology and Innovation

        Technological innovation by small firms is a major reason for
    America's leadership in the world economy. Through the Small Business
    Innovation Research and Small Business Technology Transfer programs, the
    Federal Government taps into the brain power of small businesses to meet
    its own research needs. In the process, these programs help spur
    technological innovation to foster new businesses and jobs.
        The Small Business Innovation Research (SBIR) program alone has
    nearly doubled awards to small businesses during my Administration--up
    from $508 million in 1992 to more than $900 million in 1995. And the
    quality of SBIR research proposals has kept pace with the program's
    expansion.
        We've also dramatically expanded the Manufacturing Extension
    Partnership to help America's 380,000 smaller manufacturers become more
    competitive in world markets. Sixty locally managed manufacturing
    extension centers--up from seven in 1993--are delivering much-needed
    services to this important small business sector.
        As this report documents, changes are coming at lightning speed.
    Small business owners recognize that they will need all the
    technological skill and ``connectivity'' they can muster just to keep
    up. Through manufacturing extension centers, FACNET, the U.S. Business
    Advisor, and other information networks, we can help make available the
    information small businesses need to start up and succeed.

    The Human Factor

        If the heart of our entrepreneurial economy is small business, then
    the heart of small business is its people--small business owners and

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    their employees. We need to work with small businesses to strengthen and
    support this dynamic human resource.
        We've seen what business growth can do for communities, and we hope
    to encourage more business formation in empowerment zones and enterprise
    communities: legislation before the Congress would provide more tax
    incentives and waivers of some regulatory requirements in these areas.
    SBA's one-stop capital shops specifically target empowerment zones and
    enterprise communities.
        As I mentioned earlier, we're taking steps to modify the tax code in
    ways that will make it easier for small businesses to offer health care
    and retirement plans to their employees. We also want to make sure that
    workers and their families can keep their health insurance even when
    they change jobs. I have urged the Congress to enact the Kassebaum-
    Kennedy bill, which would make health insurance coverage more
    ``portable'' for our Nation's workers.
        We want to make better use of our work force training dollars by
    consolidating and streamlining many of our Federal work force training
    programs. Under our proposal, States and localities would have more
    flexibility to administer these programs in the way that will do the
    most good for our workers and small business owners.
        I'm pleased that young entrepreneurs were represented at the White
    House Conference on Small Business and that the conference looked to our
    economic future by endorsing more mentorships and workplace educational
    opportunities for young people. These private-sector-led efforts form an
    essential part of the work-based learning program I envisioned when I
    signed into law the School-to-Work Opportunities Act of 1994.
        It takes a great deal of courage to start something new, to carve a
    reality out of a dream, often with few resources, sometimes in adverse
    surroundings, and in an economy that demands much of its participants.
    That is why we celebrate and listen to America's small business owners
    and why we will continue to look for ways to nurture and support this
    powerful economic engine--the small business sector.

                                                          William J. Clinton

    The White House,

    June 5, 1996.