Message to the Congress
Transmitting the Annual Report on the State of
To
the Congress of the
This
seventh report to the Congress on the state of small business continues the
positive story of earlier messages. Small businesses continue to make
significant contributions in expanding industries and in new job growth.
Industries dominated by small firms created 1.3 million new jobs in 1987; over
600,000 businesses were incorporated. As the American people enjoyed the
longest peacetime expansion in our history, the overall trend for small
business remained clear: low interest rates, steady growth, and stable prices have
allowed small businesses to thrive.
It
is a pleasure to report that the small business news continues to be good news.
A wider appreciation of the innovation, the competitive strength, and the
quality of life that small firms bring to our economy is an important goal for
all who are interested in the long-term economic health of our Nation. We need
to understand the small business sector because ignorance of its contributions
and inattention to the effect of government activities on it will result in policies
that squelch the vitality of small firms.
Over
the last 7 years, the policies of this Administration have dramatically
improved opportunities for the millions of men and women who are our
entrepreneurs. Inflation, which ran at double-digit rates in 1979 and 1980, has
averaged 3.3 percent since the recovery began. The prime interest rate, which
was 21.5 percent just before I came to
The
continuation of this strong small business record is a national priority. There
is still much to be done. Important changes in Federal policies can further
increase the opportunities for businesses to start up and expand. At the same
time, we must be wary of proposals that directly attack the flexibility,
adaptability, and innovative abilities of small business. If we saddle
employers with excessive burdens of economic and personal risk, if we direct
the Nation's savings to excessively high levels of government consumption, if
we fail to provide opportunities for coming generations of entrepreneurs, then
our economic leadership is clearly at risk.
We
have made choices in this Administration, choices in favor of innovation, in
favor of private enterprise, and in favor of jobs for millions of men and
women. In fact, since 1980, the private sector of our economy has produced 13.8
million new jobs. A majority of these jobs have been in small businesses, whose constant testing of new markets, new ideas, and new
ways of doing things assures our future strength. Policies to allow this
activity to flourish have been the cornerstone of our economic agenda.
Tax
rates have been slashed, leaving more resources in the hands of millions of
Americans who operate or invest in small businesses. Business tax rates are at
their lowest level since 1941; individual rates, which apply to the greatest
number of small business owners, are at their lowest since 1931. Changes in tax
rules have reduced the impact of tax-induced acrobatics on business
decision-making. Estate-tax reform has allowed thousands of family-owned
businesses to stay under family ownership.
Continued
deregulation in transportation, communications, and financial services has
allowed thousands of new firms to flourish and many thousands of new jobs to be
established as firms discover new markets and better ways of performing old
tasks. Elimination of many hours of Federal paperwork has allowed business
managers to devote more of their valuable time to managing the business. With
improved economic analysis, pursuant to my Executive Order No. 12291 and the
Regulatory Flexibility Act, millions of dollars in regulatory costs have been avoided
or eliminated. In hundreds of individual regulatory proceedings, we chose to
reduce regulations, to search for alternatives that promote responsible,
independent decisions by businesses. We chose not to believe that blind faith
in the efficiency of regulation is the only answer to society's problems.
Reforms
of our Federal procurement system have opened up new opportunities for small
businesses to compete and have ensured that the government is a responsible
business partner. Today, we do a better job paying our bills on time, and we
draw on small businesses for a greater share of the $380 billion of goods and
services purchased in 1987 by the Federal Government. This increased
competition in Federal procurement assures us that tax dollars are spent more
wisely.
The
emergence of the private sector as a major provider of research and development
support is one of the most important developments in science and technology in
the last two decades. Approximately one-half of U.S. R&D expenditures are funded
by private sources, up from about one-third in 1965.
We
have sought to draw on the energy of firms large and small. The Small Business
Innovation Development Act, the National Cooperative Research Act, and the
creation of a tax credit for research and development expenses have refocused
efforts to develop new products and ideas. Reductions in patent fees for small
firms and steps to automate the patent system are making it simpler for small
companies to protect their inventions.
I
count as one of the central accomplishments of this Administration the shift in
the debate on these issues. The steps we have taken to improve the small
business climate reflect a new and broader understanding by policymakers.
Affordable credit, stable markets, simpler Federal regulations, and lower tax
rates all combine to benefit thousands of people whose days -- and sometimes
nights -- are occupied in pursuing their individual entrepreneurial dreams.
Much
remains to be accomplished on the small business agenda. Many of the policy
changes recommended by delegates to the 1986 White House Conference on Small
Business are still before us. All of us must work hard to ensure that past
gains are solidified and expanded.
Small
business concern about the size of the Federal deficit is as warranted today as
it was during the White House Conference in August 1986. I welcome small
business support for a line-item veto, and I hope that the Congress will give
future presidents the same authority that 43 governors have to pare the fat out
of massive appropriations bills.
Similarly,
our budget process needs the discipline of a constitutionally required balanced
budget. Small business owners understand this, and I invite the Congress to
join me and the plurality of Americans in supporting such a measure. A
government that lives within its means will free billions of dollars in private
resources for yet greater small business growth.
Progress
in reducing Federal spending will allow more firms, large and small, to expand
into world markets, a necessity as our economy becomes increasingly
interconnected with those of other nations. Negotiations to reduce trade
barriers around the world are underway. Small business owners will find
considerable opportunity in new markets opened by the historic trade agreement
we have signed with our largest trading partner,
In
addition to reducing barriers to trade among nations, we need to make sure that
our domestic laws and regulations do not themselves act as barriers to
increased competitiveness. Small business owners have felt the effects of such
constraints quite sharply, and the small business agenda highlights the types
of policies we must work toward. For example, product liability reform has been
an important goal of both small firm owners and this Administration.
The
Congress currently has before it several bills that aim at the heart of
independent business decision-making. These are bills that layer rules,
mandates, and employer obligations on top of each other in an effort to
regulate the relationship between employers and their workers. Federally
mandated leave and health care, duplicative notice requirements on workplace
safety, advance notice of layoffs and plant closings or across-the-board
increases in the minimum wage combine to limit the flexibility that is the
strength of small firms and indeed the strength of our economy. Uniform,
inflexible Federal requirements are not the best answer to the issues these
bills address.
I
urge the Congress to listen to the small business owners who have increased
overall employment so dramatically, who have produced a disproportionate share
of innovations, and who make our economy different from, and more lively than,
that of other nations. Government did not create these jobs or produce these
innovations. It cannot be presumed that this national resource -- small
business -- can continue to flourish as it has in the past if it is overly
burdened with mandates and obligations or with excessive taxation and
regulation.
The
report that follows, prepared by the Small Business Administration, details the
latest information available on the state of the small business economy. It
encourages all of us who have a hand in shaping Federal policy to redouble our
efforts to ensure that all Americans who wish to can turn ideas and dreams into
businesses and jobs.
Ronald
Reagan
The
White House,