[Weekly Compilation of Presidential Documents Volume 29, Number 19 (Monday, May 17, 1993)]
[Pages 845-849]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks to Small Business Leaders

 May 13, 1993

    Thank you very much. Erskine's only been here a day, and he's 
already become one of

[[Page 846]]

us. And you just saw an illustration of Clinton's third law of politics: 
Whenever possible, always be introduced by someone you've appointed to 
high office. [Laughter]
    I want to introduce the people who are here with me: first, starting 
on my left, Frank Newman, the Under Secretary of the Treasury; and Roger 
Altman, the Deputy Secretary of the Treasury; Laura Tyson, the Chair of 
the Council of Economic Advisers. You met Erskine Bowles. And next to 
Erskine is Andrew Cuomo, the Assistant Secretary of the Department of 
Housing and Urban Development who, among other things, is responsible 
for developing and implementing our empowerment zone proposal for cities 
and small towns and rural areas that are economically distressed and 
that need more free enterprise.
    I'd like to thank all of you for coming, but I'd like to also pay a 
special word of recognition to the smallest entrepreneurs that are here. 
These young people are from Theodore Roosevelt Elementary School in 
Houston, Texas. They are second graders. And shortly after I was 
inaugurated, in February sometime, they sent me this book. I got your 
book with all their letters, telling me what I ought to be doing. ``How 
are you going to stop the violence and crime? If you will, completely 
stop it.'' See, everybody wrote me a letter and there are pictures. 
``Can you keep companies from making guns so we won't have crime?'' And 
it goes on and on. But the reason they're here is that they are really 
the smallest entrepreneurs. They sold 22,000 candy bars to raise the 
money to come to Washington. So I think they deserve a hand. [Applause] 
Thank you.
    I want to thank you for taking your valuable time to come here today 
so that we could talk about the shape of the small-business initiatives 
in the economic program, now well on its way to moving through Congress. 
So many of you are the best representatives of American small business. 
For instance, Nancy Alchuleta has led the Mevatec Corporation in 
Huntsville, Alabama, to compete and win in the world marketplace with a 
new emphasis on high technology. William Gordon, president of Applied 
Data Technology--is a high-tech company which has grown from 7 employees 
in 1986 to over 100 today. Paul Sam, president of Holly Metals--has 
grown from a custom sheet metal company to the fabrication of metal 
parts for Boeing and a high-tech composite painting facility.
    These are the kinds of things that we need more of in America. As I 
said yesterday in giving out the Small-Business Person of the Year 
Awards, the United States benefited greatly, particularly in the last 10 
to 12 years, from the fact that small business created more jobs than 
were lost in the large business sector of this economy. It is a little-
known fact to most Americans, but in every year of the last dozen, the 
largest businesses in the country, the Fortune 500, have reduced their 
employment in the United States by somewhere in the neighborhood of a 
total of 200,000 jobs. Even as profits increased and productivity 
increased and stock values increased, the technological advances of 
productivity led to an actual reduction in the work force, not an 
increase. For all of the 1980's until the very end of the decade, those 
reductions were far more than offset by the growing vibrancy of an 
entrepreneurial economy in America. Indeed, many of the small businesses 
were contractors and customers and suppliers for the larger businesses 
in the country.
    Then about 3 years ago, the small-business job engine began to slow 
down. And there are any number of reasons why. There was a domestic 
recession. There is a global recession. The credit crunch in parts of 
our country plainly contributed to it. The substantial increase in the 
cost of adding one more employee in terms of Social Security, workers' 
comp, health care, and other things has certainly led to the use of more 
part-time employees or asking the existing work force to do more 
overtime. And you may pay a little more for overtime, but you save all 
the supplemental costs of hiring the additional employee.
    Although things are perfectly rational choices, but what they have 
meant for the United States is that we've had quite a stagnant 
unemployment rate, one that mirrors, I might add, every other advanced 
country in the world. At 7 percent, our unemployment rate is about the 
same as Western Germany's and still lower than all of Europe;

[[Page 847]]

higher than Japan, which has, as you know, a very different sort of 
economic system than we do. But even there they've had trouble now 
creating new jobs, and many companies there are having some of the first 
layoffs they've ever had.
    I say that to make the following point: Larger companies, just like 
the Federal Government, will have no choice but to continue to try to 
improve productivity and use technology to do more with fewer workers, 
to increase output per worker. One of the things I'm trying to do here 
that we're writing into the law, this new budget proposal, is to reduce 
the size of the Federal Government by attrition by at least 100,000 
workers, by increasing productivity and restructuring. But that's what 
the National Government should be doing.
    But if these things are going to occur in our larger organizations, 
then we have to find a way to preserve the vitality of small business 
and to increase the capacity of small business to add to the American 
work force. If everybody in this country who wanted a job had one, we 
wouldn't have half the problems that we wrestle about all day up here 
every day. And frankly, you and people like you all over America are the 
best prospect we have for getting that done. That's why we worked as 
hard as we could to try to create an economic program that would benefit 
small business.
    Our policy first begins with deficit reduction. The deficit 
reduction package that the Government has put forward and that the House 
of Representatives is in the process of coming to grips with now clearly 
has had a major impact in driving interest rates down over the long run. 
Since November there has been a dramatic reduction in interest rates. 
Home mortgage is at a 20-year low, many other interest rates at historic 
lows. The business analysts estimate that if we can keep these rates 
down for several more months the impact will be about $100 billion 
released into this economy, principally through refinancing of home 
mortgages and business loans and other refinancing as well as the direct 
benefit of the lower costs of borrowing. That's why I always say the 
best stimulus program that we can give to this economy just to stimulate 
growth is to keep these interest, and to keep driving down and to keep 
driving the deficit down.
    Yesterday, in an attempt to build up a sense of real confidence that 
the administration means business and that the Congress will mean 
business if they pass this program, I proposed that we put all the taxes 
raised and the budget reductions into a deficit reduction trust fund so 
that, number one, no tax increase without budget cuts; number two, no 
tax increase for anything but reducing the deficit. And putting that in 
a trust fund, I think, will hammer home the determination that we have 
to bring the deficit down and to try to keep the interest rates down.
    The second thing I think we have to do is to recognize that there 
are some initiatives which need to be taken to try to improve the access 
to capital for small business. One of the first things this 
administration made an aggressive effort to do was to deal with the 
credit crunch that I heard about all over America but especially in 
certain parts of the United States. We're trying to make it easier for 
small businesses to apply for and to obtain loans when they are 
appropriate and needed to expand and create new jobs.
    In March, I announced this plan to ease the credit crunch by 
reducing some excessively restrictive regulations imposed in reaction to 
the savings and loan debacle. Our plans strikes a better balance, I 
think, so that we can have both safety and credit availability. Banks 
have more leeway now to make character loans based on the reputation of 
the borrower. We also have moved to ease the paperwork burdens because 
it shouldn't be as burdensome to get a $25,000 loan as it is to get a 
$25 million one and it certainly is, in a large measure because of 
direct Federal rules and regulations.
    We have the Treasury and all the financial agencies of the Federal 
Government working on this. We now have an SBA Director who understands 
it all too well since before he became SBA Director his job was to help 
other people start new businesses, which is what he did very 
successfully.
    We also know and we're not naive enough to think that just because 
we announced the policy in March the practice changed in every community 
bank and every community in

[[Page 848]]

this country. We know that hasn't happened. And I have made an offer, 
and I make it again here today, of requesting the small-business 
community to tell the Small Business Administrator where the plan for 
easing the credit crunch is working and where it isn't and what we can 
do to work through that. The Treasury Department can only do so much 
until it knows where the backlog and the problems are. So we invite your 
participation to make the policy we announced in March real in your 
community as soon as can possibly do that.
    The second thing that we have done since we've been here is to try 
to canvas the small-business community about what kind of tax incentive 
would best serve to help small businesses engage in job creation. 
Yesterday, the House Ways and Means Subcommittee voted to increase from 
$10,000 to $25,000 the maximum amount of new investments that a small 
business can deduct as expenses every year. This means that when you 
invest so that your company can grow, you can immediately write off 
$25,000 worth of that investment. If that becomes law, it will be 
directly because of the input of the small-business community to this 
administration as well as to the Congress.
    When I ran for President in 1992, virtually all the small-business 
people I met talked to me about how those which were family-owned 
businesses and commitments of a lifetime would not have much immediate 
benefit from the capital gains tax, and they asked for some sort of 
investment credit. That's why I recommended the permanent small-business 
investment tax credit as compared with a capital gains option. After we 
got here, the small-business organization said that, as a practical 
matter, we would get more bang for the buck and it would be easier for 
more small businesses if we simply just increased the expensing 
provisions to $25,000. That change is directly the result of the input 
of the small-business community in this country. I hope it becomes law, 
and I hope you will do everything you can to see that it does become 
law.
    Now, there is a capital gains provision left in this bill which I 
think is very helpful. It provides a big exclusion from capital gains 
taxation to help small businesses get started and to invest in 
completely new projects. That was one put forward by the American 
Venture Capital Association and sponsored in the previous Congress, 
among others, by the senior Senator from my State, Dale Bumpers, who's 
the chairman of the Small Business Committee. I think that should stay 
in the law; we're working hard to make sure that it does. I think it now 
has virtually unanimous support.
    Finally, we have decided we should try to offer some very special 
opportunities in a network of empowerment zones and enterprise 
communities all across America. In the empowerment zones, we're offering 
small businesses an employment and training credit of 25 percent of the 
first $20,000 in wages for employees who live and work in the zones, a 
targeted jobs tax credit of 40 percent on $6,000 of the first year of 
wages for these workers, and an increase in the ability to deduct 
appreciable property.
    All these things are our effort to help communities that are willing 
to help themselves by developing a long-term strategy to grow through 
private sector and private-public cooperation. To do that, to attract 
capital in businesses, I am convinced and I think that you are all 
convinced that with the size of the deficit we have, there is not enough 
money in America to have a publicly-funded revitalization of America's 
most distressed communities.
    But wherever in America there are people who are underutilized, 
there is a market opportunity. Because when people are working up to the 
fullest of their capacity, then they have money to spend and they create 
jobs for others. So when I look at all these places in America which for 
too long have been without businesses on their street corners or in 
their small towns or in their hamlets, I see enormous opportunity. I see 
in people whose potential is not fulfilled the opportunity to make free 
enterprise work again.
    We all know there are certain considerable barriers to dealing with 
that. I'm trying to make some of the high-crime areas much more 
attractive by simply lowering the crime rate. We know we can do that 
through community policing. And I've asked the United States Congress to 
give us some money to put more police on the street in these com- 

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munities to help make them safer and lower the crime rate. We know that 
works; there is clear evidence of that. In New York City alone, after 
the comprehensive community policing program established by the man who 
is now our drug czar, Lee Brown, for the first time in 36 years the 
crime rate actually went down in seven major areas. So we know these 
things can be done.
    We know we have responsibilities to make these areas more 
attractive. But if this empowerment concept can pass, then it will be 
more attractive for you and people like you all across America to take 
that extra risk to go into places where there is an enormous prospect of 
return if a whole lot of people with no income all of a sudden wind up 
having income and can be customers as well as employees. And I hope all 
of you will support the empowerment zones.
    We've talked and talked and talked about our cities and our drying-
up rural communities for years. Democrats and Republicans, they wring 
their hands every year, and nothing ever happens. I say, let's try this; 
let's see if it works. Let's see if we can have a public-private 
partnership that works. If it doesn't work, we'll try something else. 
But the one thing that we know doesn't work is more words. We've had 
more words for years. We've had wars of words from people across 
political and party and regional lines, and that hasn't worked, and 
that's not ever going to work. So I hope we can try this and see once 
and for all whether the Government can create an environment which makes 
it more attractive for free enterprise to flourish in areas where it 
hasn't.
    Finally let me say again, I appreciate the burdens under which you 
labor. I recognize that some of you, perhaps most of you in this room, 
would pay higher personal tax rates under the program I have proposed. I 
hope you will support it anyway because if we do it right, most 
Americans will save more in long-term lower interest rates than they'll 
pay in higher taxes. The country will be much better off if we can pass 
the expensing provisions, the capital gains provisions, the enterprise 
zone provisions. If we can make our plan to ease the credit crunch work, 
then small business in the nineties can once again resume its proper 
role in America as the true engine of our job growth, and there will be 
more people like you with rewarding stories to tell.
    And perhaps most important of all, when these kids grow up, they'll 
have a chance to be just as entrepreneurial as they have been in getting 
themselves here today.
    Thank you very much.

Note: The President spoke at 10:50 a.m. in Room 450 of the Old Executive 
Office Building. In his remarks, he referred to Erskine Bowles, Small 
Business Administrator.