FROM THE OFFICE OF PUBLIC AFFAIRS

September 8, 2004
JS-1892

Remarks of Treasury Deputy Secretary Samuel Bodman
before Minority Enterprise Development Week Conference

Thank you. I was quite fortunate to have the chance to work with the Minority Business Development Agency (MBDA) team for several years during my time at the Commerce Department. And, whether they were supporting the agency's budget, describing MBDA's many successes, or making the pitch for new initiatives, I always appreciated their enthusiasm, energy, and breadth of knowledge.

The MBDA team recognizes that the effort to promote the strategic growth of the minority-enterprise sector is necessarily a collaborative one. It requires a strong and active a public-private partnership, as evidenced by the attendees here at MEDWeek – from the financial community, state and local government, other federal agencies, and the non-profit world. Over the past few years, MBDA has not been shy about seeking out good ideas and working with the private sector to implement them.

One such idea, which I was privileged to be involved in, is MBDA's multi-year effort to improve access to capital for minority-owned businesses. I know that the leadership of the Commerce Department – and the entire Administration – remains strongly committed to improving financing opportunities for minority entrepreneurs in this country.

Secretary Evans and others continue to make the business case that minority-owned enterprises represent a significant – and growing – investment opportunity. Unfortunately, it is an opportunity that is sometimes overlooked. MBDA has sought to change that by, among other things, developing an in-depth, comprehensive training program in partnership with the Amos Tuck School of Business at Dartmouth College to help high-growth companies attract equity financing and by spearheading numerous networking events to bring businesses and investors together. MBDA is already seeing these programs create positive results for companies: five companies that participated in the first training series in 2002 raised more than $7.5 million of capital for their businesses.

In my view, this and other programs at MBDA recognize an important truth about our nation and our economy: the diversity of this country has been, and will continue to be, a great competitive advantage. Our diversity – of race, of religion, of background, of culture, and of ideas – makes us stronger. And, I would argue – and I believe that the facts bear this out – that our diversity strengthens our economy. Starting a business, growing that business, creating a better, more prosperous life for your family and for your employees is not just the dream of a few. It is the American dream. And we see evidence of its success across this nation – the minority business community is thriving.

According to the Survey of Minority Owned Business Enterprises, conducted by the U.S. Census Bureau, rates of growth – in both numbers and gross receipts – of minority-owned firms exceeded those of non-minority firms during the 1990s.

Today there are over 3 million minority business enterprises in this country, producing about $600 billion in annual gross revenues and employing 4.5 million workers. But one of the things that I admire about MBDA is that they are not satisfied. They know that we can and will do even better.

MBDA's entrepreneurial parity initiative aims to "move the numbers" to reflect a proportional representation in the business community relative to the size of the U.S. minority population. What this means is moving toward a goal of 5.7 million minority-owned businesses and corresponding increases in revenues and new jobs. This conference – with its focus on looking to the future – aims to identify ways to get us closer to those goals.

Many of these minority-owned businesses are part of a critically important sector of our economy: the small business, or entrepreneurial, sector. Consider this: small businesses create two-thirds of new private sector jobs in America; they employ more than half of all workers in this country; and they account for more than half of the output of our economy.

Even more than that, small businesses are agents for change, forcing the country to new productivity levels and radically transforming whole industries. Collectively, small business is an engine of innovation converting new ideas and technologies into real products and services, sold to real customers in real markets, and creating real jobs.

No one understands the need for change or appreciates the value of innovation in our competitive global economy more than President Bush. He believes that we should make it easier for small businesses to grow and succeed. Because the small business sector is so vital to our national prosperity, the President has taken important steps to assist entrepreneurs and the people they – or, I should say, YOU – employ.

He has done this in many ways, but we can sum it up in three main categories of action: (1) reducing taxes, (2) expanding opportunities for small businesses; and (3) removing obstacles to growth. Let me give just a few examples.

Tax Relief. In 2004, 25 million small business owners will receive tax relief totaling about $75 billion. The President's Jobs and Growth package reduced marginal income tax rates across the board, including the creation of a new 10-percent tax bracket and the reduction of the top rate to 35 percent. These rate reductions benefit the more than 90 percent of small businesses that pay taxes at the individual income tax rates, not the corporate rates. And importantly, the President's tax relief package raised the amount that small businesses can expense for new capital investments – to $100,000, from the previous $25,000 – reducing the cost of purchasing new machinery, computers, trucks, and other qualified investments.

Expanding Opportunities. The Bush Administration is working to ensure that small businesses can compete fairly for their share of federal government contracts. For example, the President developed a strategy to reverse the trend toward the bundling of contracts, a practice that denied small businesses the opportunity to win billions of procurement dollars.

Last year, small businesses won more than 23 percent of all contract dollars, a historical high. And federal contract dollars to small businesses owned by women, minorities, and veterans increased to historic levels, surpassing several statutory goals in 2003. But we are not stopping there; we can do even better.

To further expand opportunities for small business, just last week President Bush proposed the creation of Opportunity Zones to promote growth, opportunity, and job creation in communities that are in the process transitioning to a more diverse, broad-based, 21st century economy. Small businesses located within Opportunity Zones would see significantly lower effective tax rates on their business income. 

And, these small businesses would qualify for an extra $100,000 in expensing for purchases of tools and other equipment used within the Zone – this is in addition to the $100,000 that they can already expense under the President's tax policies.  The Opportunity Zone plan also would include new tax incentives to hire new workers and accelerated depreciation for the construction or rehabilitation of commercial buildings located within the zone.

Reducing Barriers to Growth. The President is helping millions of entrepreneurs by reducing the cost of doing business in America. We know, for example, that providing adequate, affordable healthcare for employees is a challenge for many small businesses. And so the President has worked to make health care more affordable. He has called for Association Health Plans, which would allow small businesses to band together and negotiate on behalf of their employees and families. These plans would help small businesses and employees obtain health insurance at an affordable price, much like large employers and unions.

The President has also signed into law health savings accounts (HSAs), which combine low-cost, high-deductible health insurance with tax-free savings accounts to pay for healthcare expenses and save for future medical needs.

And the President is pushing Congress to pass legislation reducing frivolous lawsuits, which impose enormous costs on American businesses.

Congress also must adopt a national energy policy to ensure that America has a reliable and affordable source of energy and to reduce our dependence on foreign sources. And we must continue to streamline regulations and reduce paperwork to ensure that federal regulations do not unduly handicap America's entrepreneurs.

Because of President Bush's leadership on these and other pro-growth policies, we are seeing very real and positive results for American families and American businesses. The U.S. economy continued to grow at a solid pace in the second quarter. This followed an exceptionally strong performance in the previous four quarters, when the economy grew 5 percent, the largest gain in nearly twenty years. After-tax incomes are up 10 percent since December of 2000 and are substantially above levels following the last recession. Homeownership is at an all time high – of over 69 percent – and minority homeownership rates continue to increase, hitting a new record level in the second quarter of this year.

I'm very pleased to report that the economy has posted job gains for each of the last twelve months – creating nearly 1.7 million jobs since August of 2003. The national unemployment rate fell to 5.4 percent in August, which is the lowest rate since October of 2001 and below the average of the 1970s, 1980s, and 1990s. And, we are seeing a real pick-up in the manufacturing sector, which has added over 100,000 jobs since January. Manufacturing production rose by 6.6 percent at an annual rate in the second quarter, the largest quarterly increase in 4 years.

There is a lot of good news, but there is also more work to be done to make sure that our economy stays on a sustained path of growth and job creation. Keep this in mind: all the tax relief enacted over the past three years – including the tax relief benefiting America's small businesses – is scheduled to expire over the next several years. In my view, raising taxes on small businesses will hurt economic growth and job creation. The President sees it this way as well and that is why he has made tax relief permanence a top priority.

The bottom line is that we must continue to create the right environment for American businesses to flourish and prosper. Everyone in this room knows that the government doesn't create jobs and wealth in this country, people do, the private sector does – all of you who are here representing the business community.

But government can support the policy conditions that allow businesses to succeed, our economy to grow, and jobs to be created. So while you are here this week, I encourage you to share your ideas about how the federal government can better support your efforts. Working together we can all expand opportunity and continue to grow our economy and create jobs. Thank you very much for your time. It is always a pleasure to participate in MEDWeek. On behalf of Secretary Snow and the Treasury Department, I wish you a very successful conference.