STATEMENT
Of the Honorable Nydia M. Velazquez, Chairwoman
United States House of Representatives, Committee on Small Business
Full Committee Hearing: “The Impact of the Economic Stimulus Package on Small Businesses”
July 24, 2008

 

Even in a free-market economy, certain conditions call for swift and sweeping government action. This February-- in the face of rising unemployment and an escalating housing crisis-- Congress took just that. In an overwhelmingly bipartisan effort, we passed this year’s most critical piece of financial legislation. The Economic Stimulus Act of 2008 was a landmark bill, and has helped to stem the affects of what has since become a full blown recession.

As of today, 130 million American families have collected stimulus checks. Meanwhile, the country’s 26.8 million small businesses have enjoyed significant tax write-offs for investments. All together, these incentives accounted for a $152 billion shot to the lagging economy. 

The stimulus package was more than a band-aid resolution--it succeeded in blunting the effects of what would have otherwise been a crippling downturn. The individual rebates, for example, drove a spike in consumer spending. By late May, retail sales had climbed 1 percent, and early indicators show that they continued to rise in June. In fact, many retailers reported gains of 4.3 percent. These trends were especially helpful to small businesses, which tend to be the largest beneficiaries of consumer spending.

The stimulus package did more than just incentive consumers. It also galvanized small businesses by promising instant write-offs and tax breaks on purchases. In doing so, this particular inducement has done more than just encourage small business commerce. It has the potential to put cash back in the pockets of our entrepreneurs.

These rebates have done a great deal to bolster our struggling financial market. And yet despite their many benefits, the economy still has a long way to go. Rising inflation and climbing unemployment rates have dampened this spring’s financial uptick, and we are now facing a perfect storm of financial crises. But as today’s hearing will show, this is not about looking backward, but forward.

In addressing our economic woes, we must focus on ways to stimulate our small businesses. After all, they make up 99 percent of American enterprise, employ more than half of the country’s workforce and are the backbone of our economy.

A framework that draws on a combination of tax incentives and targeted investment would allow small firms to build off of the first stimulus package. Several proposals have been suggested for accomplishing this. These ideas include a second round of stimulus checks, increased infrastructure spending and a payroll tax holiday

In this vein, I plan to introduce a bill later today to address certain tax challenges facing small firms. The Small Businesses Tax Modernization and Stimulus Act of 2008 will update outmoded tax codes, thereby correcting many of the inequities currently facing small firms.

While looking for ways to stimulate our small businesses, it is important to search for solutions that have both long and short term effects. Infrastructure spending, for example, would promise a little of both. Not only would it give an immediate boost, but it would also set us up for a series of returns down the road.

We now know that the first stimulus package created a foundation for economic turnaround. Today, we will look at ways to build on that framework. As we move forward, we want to make certain that we provide maximum opportunity for our small businesses to grow. In past recessions, entrepreneurs have succeeded in bringing our economy back on track. This time around promises to be no different.

I’m pleased that today’s witnesses could join us for this important discussion, and look forward to their testimony.  With that, I now yield to Ranking Member Chabot for his opening statement.