STATEMENT
of the
Honorable Nydia M. Velázquez, Chair
House Committee on Small Business
Full Committee Budget Hearing
Thursday, February 7, 2008


Today, the committee will review the Fiscal Year 2009 budget for the Small Business Administration.  The request comes before us as the prospect of a recession looms over the U.S. economy. 

Fallout from the sub-prime mortgage crisis continues to impact every community, and foreclosures are way up. Consumers are spending less on goods and services as credit tightens.  Just last week, the Department of Labor announced the economy had lost 17,000 jobs in January alone.  And this week, the service sector—the leading driver of new employment opportunities—began showing alarming signs of weakness; slipping to its lowest level since 9/11.

These economic realities demand a budget that invests in small businesses, which have always been at the core of the nation’s economic growth.  Unfortunately, the President’s request does the opposite.  It cuts SBA’s funding by 15% and further erodes programs aimed at serving small firms.  The timing could not be worse.

One of the most immediate steps we need to stem economic loss is an infusion of capital.  That fact is especially clear given a recent survey that shows 80% of banks are tightening lending standards.  But under the President’s proposal, loans would be more costly and interest rates higher.

This is a startling move, considering that during a weak economy is precisely when banks and lenders are most likely to turn to federal loan guarantees.  The budget also recommends increasing fees for the 7(a) loan program to the maximum level, saddling small businesses with additional expenses when they can least afford it.

One of the unique dynamics of an economic downturn is a general rise in entrepreneurial activity. That was the case in the early 1990’s, when newly formed small businesses helped bring about a wave of American prosperity.  No single initiative has had a greater role in fostering this sort of innovation and commercial activity than the Microloan program. 

Here too, by terminating funding and sharply increasing interest rates, the President’s budget comes up short.  Whereas entrepreneurs of the past—including women and minorities in low-income areas—could look to SBA microloans for capital, this budget turns them away.  The result is that instead of a surge in small business activity to strengthen the economy, job creation will continue to lag.

In the area of entrepreneurial development, the Administration has taken a similarly wrong-headed approach. 

While small businesses can weather a tough economy, doing so requires planning and targeted support.  In fact, entrepreneurs receiving this type of assistance are twice as likely to succeed.  

This is why the Small Business Development Centers and the Women’s Business Centers were created.  In an economic downturn, having their services readily available is more important than ever. 

Yet the President cuts funding for these programs, and provides another example of how his budget’s penny-pinching results in foolish policies. 

Finally, while many parts of the economy are scaling back their purchasing, the federal marketplace continues to grow.  Last year, more than $400 billion were spent on contracts for goods and services.  That’s an increase of six percent over FY 2006 levels.  Despite that, the Administration has yet to meet a single one of its small business goals, costing entrepreneurs billions in lost contracting opportunities.

We’ve already seen that this President refuses to implement initiatives such as the Women’s procurement program, but his budget also fails to provide funding to correct other problems. 

For instance, his FY2009 request does not allow for an adequate number of procurement representatives to protect against fraud and help small businesses access the federal marketplace.  All of this runs counter to responsible use of tax-payer funds and to what our nation’s entrepreneurs deserve.

This committee and small businesses across America are tired of the Administration’s more with less approach and of its unmet expectations.  The only thing this budget brings is more cuts to necessary programs, and the only thing it achieves is “less with less.”

Small firms are as resilient as they are innovative, and they are working hard to restore our economy to its full strength.  They should not have to do it alone.  After all, investing in entrepreneurs is ultimately about fostering our nation’s economic strength.  Regrettably, those notions appear lost on this Administration and in this budget.