Small Business Committee Democratic Site

STATEMENT
of the
Honorable Nydia M. Velázquez
Ranking Member, Small Business Committee
Budget Hearing, Small Business Administration
February 13, 2002

We are here today to review the Administration's priorities for this nation's most vital economic engine --- small business. I need not remind anyone that small business is big business in America, accounting for almost half our GDP --- half our jobs --- and 75 percent of all new jobs created.

In a faltering economy, small businesses are especially important to communities struggling with low growth and high unemployment. They hauled us out of recession a decade ago and into the strongest peacetime economy on record. They did it before, and they can do it again, with a little help on our part.

I would like to welcome Administrator Barreto here today, and I personally commend you for outstanding leadership in your first year on the job, under the most trying circumstances. Speaking for my constituents in New York, I want to thank you for your commitment to the recovery of our City.

Today we see the difference your leadership has made. I am pleased that you have prevailed on the White House to offer a more realistic budget request for the Small Business Administration this year.

Last year, the Bush Administration sent us a Draconian proposal that cut SBA's spending in half. That slash-and-burn method of accounting threatened many programs vital to supporting our nation's entrepreneurs.

I remain concerned that while this current budget has some positive components, it still short-changes the fastest-growing sector of American enterprise --- minorities, women, and low-income entrepreneurs.

This budget forfeits our commitment to those businesses. The Administration and OMB have proposed to "zero-out" a number of programs dedicated to creating business opportunities and jobs where our recent prosperity has not reached.

The cuts will eliminate the New Markets programs, PRIME, BusinessLINC, and the One Stop Capital Shops. These initiatives are dedicated to focusing financial resources on small businesses in low-income communities. The President says he wants to create new jobs. He should support the programs doing just that in neighborhoods that need jobs the most.

But the most glaring, ongoing problem facing us is the treatment to the 7(a) Program. Last year, the Administration tried to kill this program outright by imposing new costs. This year they are trying a new tack --- by cutting the program in half.

Either way, old or new tricks, the outcome is the same. Small business access to capital is blocked.

Last year, we worked in a bipartisan fashion to make the 7(a) Program more affordable for both the lender and the borrower by reducing the cost of the program --- which, I might add, even the CBO said continues to over-charge lenders and borrowers by one billion dollars!

This over-charging is the result of a miscalculated subsidy rate. Instead of providing on accurate subsidy rate, this Administration instead chooses to play Russian Roulette with the 7(a) Program. And I believe we need to be clear about just exactly what this tax --- and yes, it is a TAX --- will do to small business.

This tax results in five billion dollars LESS in available capital for those small businesses. That money could be pumped into the economy through small companies to create jobs. Instead, the ongoing miscalculation means that the field of dreams will go fallow as five billion dollars do nothing but sit in a ledger somewhere.

I want to be clear --- while the Bush Administration may have inherited this problem, it is clearly your problem alone now and there is only one solution --- Fix the subsidy rate!

Members of this committee will tolerate nothing less. It is time that we stop using small businesses to subsidize the U.S. Treasury!

Mr. Chairman, this budget request comes at a critical juncture. While the country tries to recover from the recession, we should be looking for every tool available to shore up the foundation of our economy and prosperity --- America's small businesses and entrepreneurs. I think this budget request goes far to recover from last year's damage, but much more can be done.

I would like once again to reiterate my appreciation for the Administrator's hard work and leadership during a very difficult time. I look forward to cooperating with both Administrator Barreto and you, Mr. Chairman, to solve the problems that face us.