KEYNOTE ADDRESS
by the
Honorable Nydia M. Velázquez
U.S. Chamber of Commerce in New York City
June 10, 2002

Thank you for inviting me here today. I especially want to thank everyone for choosing New York for this annual conference, and showing your solidarity with this great city.

It is a great honor to speak with you today. This is a critical time for small businesses. As our economy regains momentum after a shallow recession, and as we seek to create new jobs, innovations and opportunities, small businesses can be a powerful engine to push us forward.

Small companies produce half our economic output, employ nearly half our workers and create 75 percent of all new jobs. They lit the fuse that set off the long boom of the 1990s. So at this moment, when our economy needs a little juice from small businesses, it is most important to do what we can for them.
This is not self-evident to a lot of people in Washington.

Democrats often do not appreciate what small businesses bring to the economy. They approach many challenges from the point of view of the employee, rather than from the employer that creates those jobs.

Republicans tend to see only major corporations as the prime mover of the nation's economy. For example, in response to September 11, the House leadership moved quickly to protect the airlines and the insurance companies. While this was the right thing to do, the unique needs and powerful potential of small businesses were ignored. Many are still hurting. They need grants --- not just loans --- and we should use the rebuilding process in Manhattan as an economic tool to strengthen them as well.

Educating lawmakers on these and other issues is the duty of Members of the Small Business Committee. We understand the unique importance of small businesses to expanding the American Dream. There is no Democratic or Republican way to help small businesses. So we check our ideologies at the door, sit down together --- and then get to work.

We know that federal law and regulations discriminate against small businesses --- because those laws and regulations are written as one-size-fits-all.

The best example of this is the tax code. Talk about unfair! It is far more regressive toward small businesses. In fact, last year's major tax cut ignored half of all small businesses that simply didn't qualify.

Another example of tax discrimination is the meal deduction. The Internal Revenue Code restricts the self-employed to 50 percent of meals on the road instead of a per diem. This rule requires small business people to keep those records while traveling --- a petty demand not made of corporate executives. This should change.

The reason we spend so much time discussing the tax code is that this inequitable and overly burdensome system drains valuable funds out of a business that could be reinvested. As a result, small businesses must seek capital infusions from other sources.

Clearly, access to capital is access to opportunity. But securing these financial resources is a constant challenge.

An important source of accessible, affordable capital continues to be the Small Business Administration loan programs. These programs provide 40 percent of ALL long-term lending to small businesses. SBA's largest program --- the 7(a) --- provided more than $10 billion in capital last year alone.

One problem for both Republican and Democratic Administrations has been an ongoing miscalculation of 7(a) program costs. Last year, the General Accounting Office verified my concern by reporting that both lenders and borrowers were overcharged $1 billion during the last decade.

This is outrageous, but we got satisfaction. Last year I was successful in cutting the 7(a) fees by 50 percent. But instead of stepping up to the plate and doing the right thing, the Administration continues to play budgetary games this year by proposing to cut the 7(a) program in HALF. This could result in $5 billion LESS in lending opportunities.
The harm this will do to small businesses outweighs any benefit we might see from a tax cut. It is time for both lawmakers and Administration officials to recognize how important SBA loan programs are and to give them the support they deserve.

Access to capital is simply a means to an end --- to get more work and grow a business. But another way to expand enterprise is to tap into the $220 billion federal marketplace. Unfortunately, this vast avenue of opportunity remains blocked to small companies.

For three years now the Small Business Committee Democrats have documented the decline of small business contracting with the federal government. Last year alone, federal agencies denied small companies $12.5 billion by consolidating small bids into enormous mega-contracts won by large corporations.

Government agencies believe these huge "mega" contracts to save more than small businesses could ever match.
They are just wrong. Small businesses actually do higher quality, less expensive work due to lower overhead, smaller profit margins, and better customer service. And federal agencies have yet to show us a single dime saved from contract consolidation.

I have two bipartisan proposals to break up large contracts and help small businesses improve their bidding chances, but they have been ignored by the Congressional leadership.

The continuing lack of progress on these and other small business concerns led me to issue an 11-point agenda this February that Congress must address to keep small businesses on the economic vanguard.

We made a little progress in March when the President announced his small business agenda which highlighted five of our issues. As we enter the home stretch for the 107th Congress, the need and urgency to address these issues is greater than ever.
One of the biggest challenges facing small business is hiring and retaining skilled trade workers. Even in this economy, firms can't fill their shops with enough qualified people to get the job done. At the same time, small businesses provide six out of 10 American workers with their first jobs. This means they must train most of those workers, taking on added costs and burdens.

If small businesses are going to serve as the de facto training ground for our workforce, then simple fairness dictates that we must look for ways to help them defer the costs.

That is what I have done working with Rep. Mark Foley to introduce the Skilled Workforce Enhancement Act. This initiative is designed to help companies meet the labor shortfall by providing a tax credit of $15,000 per year, per employee, for four years in exchange for 1,500 hours of training each year.

By providing small businesses with a means to secure a well-trained workforce, their productivity and profitability will increase. That is why when you talk to any small business owner they will tell you their greatest resource is their employees.

Unfortunately, after an owner spends thousands of dollars and hundreds of hours on training, they often watch in frustration as that investment walk out the door for a larger corporation with better benefits.

The reason small businesses cannot offer comprehensive employee benefits comparable to corporations is not because they don't want to --- it is because the current system makes it impossible.

We must help small companies keep their best workers by making it easier and less expensive to offer benefits like health insurance and pensions. That way, employees will see their work less as a job and more of an investment in their future.
Small businesses continue to struggle to find adequate, affordable health care coverage for their employees. Today 25 million Americans without health insurance live in a household with someone employed by a small business.

Cost is the number one reason why small businesses do not provide health insurance for their workers. Health costs are again on the rise --- for small businesses, 20 percent more than for larger corporations.

The solution is for small businesses to band together to secure good prices for health insurance. Corporations and unions do it. So do state governments. If it's good enough for them, it's good enough for small businesses. That's why we must pass The Small Business Health Fairness Act to create Association Health Plans. AHPs could save small businesses as much as 30 percent on health care costs.

Now, I want to do something here. I am going to draw a line in the sand. I am going to say to you today that Congress must enact Association Health Plans this year. If there is one thing we can do for small businesses right now, it is this. Congress must do it.

While health insurance is the first and foremost concern for both employers and employees, as our population ages the need for retirement security will grow. In fact, by 2030, 20 percent of our workforce will be at retirement age.

But only 46 percent of workers in firms with fewer than 100 employees have pensions --- and that percentage actually DROPS as the number of workers gets smaller. This is because small businesses are at a disadvantage in offering retirement benefits.

Congress enacted the SIMPLE plan and some tax incentives to make pension planning more attractive, but challenges to pensions remain. Tight qualification and vesting standards, complexity, cost and liability fears stoked by the Enron 401(k) debacle all make small business owners less willing to offer retirement benefits.

We need to provide GREATER incentives to encourage small businesses to start plans. The system must be flexible enough to allow the plan to evolve as businesses and the workforce grow and change.

My concern over retirement security led me to begin a dialogue with small businesses. Now, through a series of roundtable discussions, we are working to introduce a comprehensive small business pension bill this summer that will allow every small business owner that wants to offer retirement plans to do so.

Retirement plans, health benefits, taxes --- these are the start but not the end of the small business agenda. Small businesses have a big agenda, which means we --- both Congress and the White House --- have a big agenda, too.

This Congress started off with a great deal of promise for small business. But with all the challenges of the recession, terrorist attacks and the rebuilding efforts, we have gotten off track --- and must return. As the 107th Congress enters the home stretch, there is still time to resolve many of these critical issues --- but it will certainly not be easy. Once again the needs of small businesses are crowded to the side during the annual appropriations process and Congress is now focused on creating a new Department of Homeland Security. The window is closing quickly --- and if we allow that to happen we may look back at the 107th Congress as one that promised much but delivered very little.

I know you believe as I do that small businesses built this country. And clearly, small businesses will continue to be the driving force of this economy. The entrepreneurial spirit is what sets Americans apart from the rest of the world --- in the words of Alexis de Tocqueville 200 years ago, "boldness of enterprise is the foremost cause of America's rapid progress, its strength, and its greatness".

As the Ranking Democrat on the Small Business Committee I will continue to remind my colleagues of the importance to small businesses and the need to enact a comprehensive agenda. I look forward to working together with you to accomplish that.

I want to thank you again for inviting me here, and I want especially to thank you for your support of the greatest city in the world --- New York City.

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