Hearing of the Committee on Small Business and Entrepreneurship on The President's FY2006 Budget Request for the Small Business Administration

Hearing of the Committee on Small Business and Entrepreneurship on The President's FY2006 Budget Request for the Small Business Administration

STATEMENT OF HON. JOHN THUNE, A UNITED STATES SENATOR FROM SOUTH DAKOTA

Senator Thune. Thank you, Madame Chair and other Members of the Small Business Committee. I want to take a moment and thank you for the opportunity to serve on this important committee.

Small businesses are the backbone of our economy in South Dakota, as well as the Nation. And whether it is a farming operation in a small town like Oneida, South Dakota, or a machine shop in Sioux Falls, small businesses do create the
majority of jobs in my home State of South Dakota.

In fact, 97 percent of employer firms in South Dakota are small firms. South Dakota has also seen the number of women-
owned businesses grow at a rapid rate. Between 1997 and 2004 it is estimated the number of women-owned firms in South Dakota increased by 26 percent. Employment grew by 109 percent, and sales increased by 211 percent.

So we have got a great story to tell there. And I think what is important is that here in Washington we need to do
those things to ensure that these small businesses have an environment in which they can thrive and prosper. I believe
that includes reducing the burden of taxation, regulation, litigation facing small businesses today. It is clear that these burdens raise the cost of doing business substantially and, in turn, make it harder for small businesses to grow and create new jobs.

Serving on this Committee is a unique honor for me since I have previously worked at the Small Business Administration
during the Reagan Administration. And so I look forward very much to being involved with the issues that affect the Agency.

I would like to thank Administrator Barreto for his willingness to come down here and to present the President's budget proposal today. The SBA is guaranteeing a record number of loans and helping more small businesses than ever. So I want
to say thank you and give credit where credit is due in that regard.

The President's budget proposal is, as I like to say, the starting point and not the ending point. And we are going to
have a lot to say before this process is concluded. I am not going to get down into the weeds of the individual
programs, but I look forward to working with you, Madame Chair, as well as with our colleagues on the Committee and in the
Senate, to ensure that we have a budget that although will be tight and tough, addresses the important priorities of small
businesses around this country and allows the Agency to continue to perform its duties and its services at a high level.

Just by way of a question, if nothing else, I am curious to know in your experience, Administrator Barreto, having been
there for some time now and obviously traveled the country and visited with a lot of small businesses--I do that on a fairly
regular basis in my State as well, tour businesses, ask them what their issues are, what things can we in Washington do
either for you or what things can we not do to you, I guess may be a better way to phrase it sometimes with some of the small
businesses.

But what do you see today as the biggest barrier to small businesses? What is it that you hear out there that, in terms
of allowing these businesses to grow and create jobs and expand the economy in this country. What is that barrier?
And then perhaps maybe just to expand upon that a little bit with respect to what the Agency is doing and realizing that
you are somewhat limited in the tools that you have at your disposal to address those barriers.

Administrator Barreto. Thank you, Senator.

There are a number of different issues. I have spent a lot of time as SBA Administrator working with small businesses
directly. I learned a long time ago that you learn a lot more when you listen to your customers than when you talk at them.
They will tell you everything that they need to be successful. So we have done a lot of that. I have traveled every part of
this country, met with countless small business groups.

You have hit a couple of areas that are critically important. Small businesses will say to us a lot of times look, the programs are great, we like the programs, they are great. But if I am not in business it does not matter.

So the things that this Committee has worked on in the past with us I think have been very, very instrumental. Sometimes I
do not think that we give enough credit to what this Committee and the Administration working together have already
accomplished.

The tax relief policy was huge. A lot of people did not understand that 80 percent of the benefit of the tax package
went to small businesses. It saved them $75 billion. A lot of small businesses told us they could tell exactly when their
business turned around. It was exactly when that tax package went into effect.

Now what they are asking us to do is make it permanent. They are saying that now that business is starting to turn
around, please do not make these things go away. Do not take away our deductibility, that $100,000 that afforded them the
opportunity to buy equipment and inventory and technology that they were not buying before. So tax relief is hugely important.

We referenced regulatory relief. Since this Administration has been in place we have saved small business something on the
order of $80 billion simply by allowing them to comply with Federal regulation in a more streamlined manner or eliminating
redundancies. Those are huge, especially for a small business.

Senator Kerry mentioned earlier the importance of health care. And we totally agree. That is their No. 1 problem, their
No. 1 criticism, because they get double-digit increases every year. They cannot pass those costs onto their customers. They
are the only group, and they know it, that does not have access to health care. If you work for a corporation, if you are a
member of your union, if you are a Government employee like me, you have got health care. If you are a small business, good
luck. Most Americans that do not have health insurance either work for a small business or have a spouse that works for a
small business.

We started dealing with this last year with health savings accounts. That is a tool that they can use to lower their
health insurance premiums. It does not solve the health insurance crisis in America. We need to expand health savings
accounts, provide more incentives, more tax credits.

We are very hopeful, and I know that we have all spoken about this many times, that we can deal with association health
plans for the first time. It has not been dealt with in the Senate, and many of you know--and you dealt with this Senator
Thune when you were a Congressman. The House has voted on association health plans twice, but the Senate has not taken it up yet.

Small businesses are desperate for any kind of relief that they can get in this area. Their attitude is let us try this.
If it does not work, we can always go back to what we had before, which was nothing. We believe that could lower their
health insurance premiums 25 percent. 25 percent to their bottom line. It is like giving a small business a 25 percent
raise just by helping them deal with health care. So that is a critical issue.

We need to do something about tort reform, eliminate frivolous lawsuits. A lot of small businesses are put out of
business because they are having to fight lawsuits that should not been brought in the first place. It is not saying eliminate
all lawsuits, but those that are frivolous, those that get shopped around and really affect small businesses.

We need to open up new markets for small businesses. That is why the things that we are doing with regards to
international trade are so important. We talk a lot about 97 percent or 98 percent of all businesses in the United States
are small businesses. Well, 98 percent of all exporters are small businesses, too, but they only represent 30 percent of
all the trade that is going on.

All of those issues we have worked very closely with this Committee and SBA has taken a leadership position on this, too,
advocating these issues on behalf of small businesses.

Small businesses said to us in the beginning look, we appreciate everything that you do for us, but we need a voice
at the table. We do not feel like sometimes folks in Washington understand what we are dealing with here. And now, working with the Senate and the work that we have been able to accomplish in the Administration, I think that they are starting to
understand that they do have a voice at this table. This is a very important voice and we are going to continue listening to
it and doing something about these issues that critically impact small businesses everywhere in the United States.

Senator Thune. Thank you. Madame Chair, I am sure my time has expired. Thank you.

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