[Weekly Compilation of Presidential Documents Volume 32, Number 23 (Monday, June 10, 1996)]
[Pages 999-1002]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Message to the Congress Reporting on the State of 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 banking regulators to remove impediments to small 
business lending by financial institutions. The Riegle Community 
Development and Regulatory Improvement Act of

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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

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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 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.

[[Page 1002]]

    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 
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.