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Exclusive Q&A With Karen Kerrigan Re: President Bush and Small Businesses

Few people, if any, understand the impact that government policies have on commerce, entrepreneurs and small companies better than Small Business Survival Committee (SBSC) Chairwoman, Karen Kerrigan. And the over 70,000 members in her organization can attest to her ability, on a dime, to provide clear analysis of the latest changes and developments in government fiscal policies and regulations, that in the short or long term, will affect the bottom line of small businesses in this country. After meeting with President Bush last week, in an exclusive interview with, she shared her early impressions of the new president's policies and what they could mean to existing small businesses, aspiring entrepreneurs and the Black economy.

Here is the interview:

Cedric Muhammad: What exactly does the Small Business Survival Committee do?

Karen Kerrigan: The Small Business Survival Committee (SBSC) is a national small business advocacy organization with more than 70,000 members nationwide. We represent our members interests, and the small business sector in general, in a number of ways: testifying before congressional committees, state legislatures and national commissions; educating members of Congress and their staffs, the Administration and politicians at all levels of government about policy recommendations that will help the entrepreneurial sector; lobbying on key issues and mobilizing our membership; filing comments with regulatory agencies; issuing regular reports and analysis on key and/or emerging issues; and working with the print and electronic media on understanding how "hot" issues being debated impact investment, entrepreneurship, job creation and innovation. We regularly meet with delegations from around the globe who want to bring home a policy agenda to encourage entrepreneurship, and we issue an annual "Small Business Survival Index" that ranks the states in our own country in terms of the best and worst environments for small business. I would encourage your readers to visit our website at to learn more about our organization and what we do.

Cedric Muhammad: Could you please tell us what was discussed in your recent meeting with President Bush?

Karen Kerrigan: President Bush wanted the opportunity to meet with small business owners and entrepreneurs to present his short-term policy agenda, as well as his mid to longer-term policy vision to help the job-creating sector succeed and thrive. It was nice to hear the President thank small business owners and entrepreneurs for their hard work and positive contributions to the economy and society.

In terms of the policy agenda President Bush presented, it was music to the ears of all small business owners present. The President gave a thumb nail sketch of all key issues -- the importance of a national energy policy; the current regulatory state and its unjustifiable burdens on small firms; health care reform including tax credits for the uninsured and the expansion of Medical Savings Accounts to make health care more affordable, accessible and price sensitive; and his support of open trade to benefit entrepreneurs and consumers both here and abroad. Of course, the central feature of his presentation was his tax plan. In explaining the importance of lower marginal tax rates to entrepreneurs and the economy, as well as his proposal to eliminate the death tax, the small business owners cheered in response. While the media continues to repeat that there are "no business tax cuts" in the Bush plan, certainly the lowering of rates and compressing the five rates down to four, is especially welcome by small business owners and entrepreneurs. With over 90% of businesses in this country filing taxes as individuals (rather than as corporations) the bulk of businesses will get tax relief. Lowering marginal rates, combined with death tax repeal, are important to small business. President Bush asked all of us to get behind his plan and to do what we could to support its passage -- he views the support of the small business sector as key to winning passage on Capitol Hill.

Cedric Muhammad: Do you hope that members of Congress will aggressively pursue additional tax cuts to the Bush program? If so, what type of cuts?

Karen Kerrigan: We do hope the Congress pursues additional tax relief. The case can be reasonably made by Congress, and the President if he wishes, that the economic climate and related factors have significantly changed since he first proposed his plan -- the surplus has gotten much bigger, and economic conditions have deteriorated. On Wednesday, February 7, a group of Republicans introduced "Bush Plan Plus", which would maintain the Bush tax package and expand it to include capital gains tax reduction, IRA expansion and pension reform, Alternative Minimum Tax (AMT) relief -- while expediting Bush's phase-in of death tax repeal and marginal rate tax reduction. These are the types of cuts we support -- particularly a cut in the capital gains tax to help fuel business investment and start-ups.

Cedric Muhammad: Did small businesses benefit during the Clinton years?

Karen Kerrigan: Of course. But the Clinton years were blessed by the revolution in the technology sector as well -- both in terms of the industry's contribution to economic growth and job creation, and its contribution to the small business sector overall in terms of the efficiencies gained as businesses of all sizes embraced technology. For the most part, the most onerous and potentially economically harmful proposals of the Clinton era were repudiated (i.e.: the failed health care plan), while some incremental steps were taken on taxes (capital gains tax reduction in 1997) to help pave the way for substantial and continued economic growth. Still, much more could have been done on the tax relief and regulatory reform end that would have helped to maintain the expansion. Instead, here we are...looking at a slow down in the economy because Clinton continually vetoed tax relief, while most of the politicians on both sides of the aisle gobbled up the surplus through increased spending. The record, however, is clear. Small businesses have had substantial gains, and there are more small business owners and self-employed individuals than ever -- I guess you can say that small businesses thrived mostly because of their own initiative and hard work, not necessarily due to anything that Washington has done for them.

Cedric Muhammad: What, in your view, are the differences between President Bush and President Clinton on tax policy?

Karen Kerrigan: President Bush is a cheerful tax cutter while Clinton did it (or proposed to) only out of political necessity. In our meeting this past week, President Bush said that the role of government is not to create wealth, but to create an environment so that individuals can pursue the American Dream unobstructed by government barriers. President Clinton favored government activism. When you got down to the heart of his proposals, they attempted to redistribute wealth. In other words, government was at the center of the economic model, rather than the entrepreneur. This was reflected in Clinton's tax proposals -- "targeted tax cuts". Bush's proposals are broader-based -- no picking and choosing winners when it comes to tax cuts. I am not saying Bush's proposals will always be devoid of the "targeted tax cut" variety (take, for example, the Research and Development tax credit), but in general they will be broader, aimed toward having broader and more equitable economic effects.

Cedric Muhammad: In what ways, if any, does small business development differ in the Black community from the rest of America? Do you see entrepreneurial development as especially important to the Black economy?

Karen Kerrigan: I see entrepreneurial activity as vitally important to the Black economy. Because entrepreneurial activity will ensure that more members of the black community enjoy economic gains similar to that of other groups, and robust entrepreneurial activity and success -- particularly in urban areas -- will encourage more black youth to aggressively pursue the American Dream of becoming entrepreneurs and owning a small business. Unfortunately, the Black community has an inordinate array of government-imposed barriers to small business startup and success. The majority of small businesses in America will fail given the best of circumstances to succeed, and given that many black-owned businesses are attempting to make it in urban areas (where their success in desperately needed the most!) the deck is stacked against them even more. In urban areas, for example, already onerous federal regulations and taxes are compounded by state and local rules and taxes that are excessive and unfair. Delegations from around the globe ask me all the time, "how can we make our people more 'entrepreneurial and pursue starting a small business rather than government jobs". I tell all of them -- from the "Eurocrats" to the Russians -- that they can't have a vital small business sector if they are dead set on maintaining the level of regulatory and fiscal barriers they currently have on the books. The laws of economics, as we know, are universal and the same rules apply in the U.S. Many prospective entrepreneurs are held back by these barriers -- artificial rules and taxes that provide few with the incentive to take the necessary risks to start a small business. In addition, many federal environmental laws and initiatives will have a harsher impact on business development in urban areas -- from clean air rules to the U.N. Global Climate Treaty, Superfund, brownfields and the rest -- urban areas are ground zero for enforcement, meaning tougher restrictions for starting and operating a business. This is unfair and I am glad to see the black business community rallying against the federal government's one-size fits all, big government approach.

Cedric Muhammad: Are you in any way concerned with Federal Reserve monetary policy as it relates to small businesses?

Karen Kerrigan: The Federal Reserve's hikes in short-term interest rates in 1999 and 2000 were grossly misguided. Nothing on the inflation front justified such increases. Unfortunately, the small business community certainly has felt the impact of these rate hikes through higher borrowing costs. None of us should be surprised that the economy slowed significantly in the latter half of 2000, and continues to slowdown right now. The Fed's recent cuts in short-term interest rates are steps in the right direction, but much, much more needs to be done.

Monday, February 12, 2001

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