It has been over a year since the White House issued Executive Order 13272, which instructed federal departments and agencies to consider the impact new regulations would have on small businesses (see BW Online, 10/13/03, "Riddles on the Potomac"). That measure has done little to impress Representative Nydia Vel??uez, ranking Minority member on the House Small Business Committee and a staunch critic of the Administration's small-business policies. All too often, says the feisty Vel??uez, rhetoric has far exceeded reality. She spoke recently with BusinessWeek Online's Edward Popper. Edited excerpts from their conversation follow:
Q: How would you rate the Administration's attitude toward small business?
A: What we have is a President putting the needs of Corporate America over those of those of Main Street. Only 3% of the President's latest $350 billion jobs-and-growth package was targeted at small-business relief.
Q: Specifically, what are the issues you feel the Administration has neglected?
A: The President promised small businesses permanent tax relief, but then sunset the provision. How could you expect any small business to make plans to invest and buy equipment, when it knows this provision will be sunset by 2005? The Administration promised that this would be permanent tax relief. Small business didn't get that, and the lack of relief is one reason why small businesses aren't increasing their purchases. If you talk to people in the small-business community, that is one issue that they continuously raise.
Q: The deduction that allowed for new-equipment purchases has been raised by 300%, to $100,000 per year. Doesn't this encourage small businesses to make investments before the tax relief sunsets?
A: When people put together their financial plans, they [generally] plan for a period of five years. So, it is just not that much of a help.
Q: A large percentage of small businesses are sole proprietorships. The Bush tax cuts have lowered taxes on individuals, which also means lower taxes for sole proprietorships. Why hasn't this been beneficial?
A: President Bush talked about how the reduction in the top tax rate was the most effective way to provide small-businesses tax relief. In reality, only 1% of small-business owners benefited from the top-rate cut -- if you look at the Treasury numbers, you're going to find that only 180,000 small-business people were able to benefit.
Q: The National Federation of Independent Business (NFIB) recently reported that high insurance costs have become the chief problem listed by small-business owners in its monthly survey. Has any progress been made on this issue?
A: This Congress hasn't done anything about it, and it was one of the items that the President included in his small-business agenda. Small businesses are struggling, especially those that are providing insurance to their employees. They have been hit with their premiums going up by 13% [in the past year]. Estimates say that 60% of those Americans who are uninsured either work for a small business or are the relatives of people who work for small businesses.
Q: So, what do you think should be done to improve the insurance situation?
A: There is no single solution, but something should be done. Let's start, for example, with the Association Health Plan (AHP) legislation, which would allow small businesses to band together and purchase health insurance. The President supported it, so why can't he get the Senate to act on it? In the House, it passed with bipartisan support. AHP would give small businesses bargaining power and an economy of scale.... If IBM (IBM) and General Motors (GM) can provide insurance without any type of restriction, why can't small businesses do the same? If the President is serious and honest about helping small businesses address the health-care issue, he should get the Senate, which is controlled by the Republicans, to bring AHP to a vote. It's just that simple.
Q: Do you think that the Administration has made progress "unbundling" government contracts, so that small businesses can compete for work currently awarded as package deals to major corporations?
A: Nothing has been done. Nothing! In fiscal 2002, federal procurement dollars went up from $200 billion to $235 billion, and the amount [for small-business] contracting went down...the door has been shut when it comes to small businesses. This is because it's more comfortable [for federal agencies] to put together different contracts and bundle them. But by doing that, they are [ignoring] small businesses, which don't have the resources to compete with big businesses.
Q: Isn't bundling contracts more efficient and cost-effective?
A: When you get a better product at a better price, that's fine with me. The Small Business Committee has held 9 or 10 hearings...on contract bundling. We have had federal agency heads testify. Not one of those hearings has proven to us that taxpayers' money has been saved, and that we are getting a better service or quality. The President himself made a statement about contract bundling, and how it was hurting small business and how he had instructed the Office of Management & Budget [about the issue]. The rhetoric is nice, but when action is lacking, then we have a problem.
Q: According to the NFIB's recent survey, the Small Business Optimism Index was at an all time high. Doesn't this speak well of the Administration's handling of small-business issues?
A: It's difficult to comment on the NFIB's most recent survey because how that was structured plays a big role in the outcomes. I know there were only 544 responses, so was it really constructed in a way that is reflective of the general small-business population? For instance, does it contain the correct balance of industries, sizes, demographics (i.e. women and minorities), and regions? Oversampling any one of these could easily skew the results.
What I do know is that the recent Small Business Index (SBI) developed by the Democrats on the House Small Business Committee is based on hard data, and examines a basket of established economic indicators that impact small business. The SBI painted a picture that was very different from the NFIB. It showed us how the small-business environment remains as challenging as ever. After reaching a five-year high in 2000, the current second-quarter SBI is down 33%, representing a five-year low...conditions for small business creation and growth remain less than favorable.