S7492 CONGRESSIONAL RECORD— SENATE May 25, 1995 

Overall costs of transportation and 

storage would appear to be lower at 

these sites. 

Therefore, I believe Hanford and Savannah River offer excellent sites for 

the temporary, dry cask storage of civilian spent nuclear fuel until a permanent geologic repository is available. 

At this point, I would like to make 

clear my support for continued 

progress toward a permanent geologic 

repository. Hanford and Savannah 

River already have defense nuclear 

waste and spent nuclear fuel from defense and research activities that is 

destined for the permanent geologic repository. This proposal is intended to 

hasten the day that those wastes, as 

well as the civilian spent fuel, are sent 

away from the sites for permanent disposal. I realize that at this time, nobody wants to store nuclear waste. Incentives must be offered. The communities near Hanford and Savannah 

River will understandably ask, what’s 

in it for us? 

I would be prepared to pursue benefits for these communities if they are 

inclined to take spent commercial fuel 

on an interim basis only. First, I am 

working with several of my colleagues 

to develop legislation that will 

prioritize DOE cleanups in accordance 

with actual risks. That approach will 

result in Hanford and Savannah River 

being cleaned up faster, since many of 

the high-risk problems are located 

there. Second, I am encouraging the 

privatization of efforts to vitrify—or 

turn into glass—high-level liquid 

wastes at Hanford. This is the best way 

to stabilize the liquid tanks and make 

them safe. 

Third, we are offering new construction and economic activity associated 

with the construction and operation of 

an interim, above ground, dry cask 

storage site. This will help address the 

job losses and economic declines associated with the end of defense-related 

activities at Hanford and Savannah 

River. Fourth, there are other arrangements, including financial incentives, 

that can be considered. Whether or not 

DOE continues to exist as a Cabinetlevel agency, its functions and operations will be significantly scaled 

back. As the various DOE sites compete for the remaining missions, special consideration could be given to a 

site that hosts the interim storage facility. Other benefits to communities 

agreeing to host an interim storage 

site can also be discussed. 

Finally, to provide assurances to the 

local communities of Richland/Pasco/ 

Kennewick, WA; Aiken, SC; and Augusta, GA, that the interim dry cask 

storage sites are not intended to be 

permanent, work on Yucca Mountain 

will be continued. Remember, there is 

already spent nuclear fuel at these 

sites that is destined for a permanent 

geologic repository, when one is available. It is in the long-term interest of 

these facilities to participate in a program that will take care of the immediate problem so that the work on the 

permanent repository can go forward. 

In addition to selecting a site, there 

are four elements that we should include in a legislative bill dealing with 

spent nuclear fuel. First, in order to 

construct a central interim storage facility in a timely manner, changes 

must be made in the Nuclear Waste 

Policy Act. These amendments should 

provide: that licensing of an interim 

storage facility can begin immediately; 

that the interim dry cask storage site 

can be constructed incrementally and 

that waste acceptance can begin as sections are completed; that the NRC will 

be the sole licensing authority; shortterm renewable licenses to ease NRC 

rulemaking; and that DOE will be 

treated like a private licensee. 

Second, to help ensure that the spent 

fuel can be moved from reactor sites to 

interim storage as soon as possible, a 

transportation system must be developed. Legislative changes would provide: that utilities are responsible for 

obtaining casks; that DOE will take 

title to fuel at reactor site; that DOE 

will be responsible for delivery; and a 

clear regulatory regime related to the 

transportation of spent fuel. 

Third, to ensure that Yucca can be licensed, we should streamline licensing 

provisions, specifying repository performance standards. 

Finally, fourth, a budgetary framework must be established that ensures 

that the money put into the Nuclear 

Waste Fund by the ratepayers is available to the program in amounts sufficient to achieve the first three goals in 

a timely and efficient way. 

These draft proposals outline a workable and efficient interim storage program that would allow us to pursue the 

investigation of our permanent disposal options, including a full study of 

the Yucca Mountain site. However, one 

lesson we have learned is that we cannot put all of our eggs in one basket. 

We cannot solve every nuclear waste 

and spent fuel issue before this country 

in this Congress. However, we can set 

up the beginnings of a workable, integrated nuclear waste management system that will allow succeeding generations to apply new technologies to 

these problems. 

In conclusion, I have given a basic 

outline of principles Congress must address if we are to solve these two major 

environmental problems. As chairman 

of the Committee on Energy and Natural Resources, I pledge to continue 

our goal of reaching a common sense 

and comprehensive solution. We’d like 

to do that with the help of President 

Clinton and his Department of Energy. 

So far, I have not seen sufficient indication they really want to be a part of 

any solution. Unfortunately, this issue 

is not one where America can be without leadership. I will look forward to 

working with all of those who have an 

interest and concerns to resolve what 

is undoubtedly one of America’s most 

frightening problems, the management 

of waste left at DOE defense weapons 

facilities, while providing a legislative 

framework for DOE to meet its obligation to take possession of the Nation’s 

civilian spent nuclear fuel. 

f 

FOREIGN OWNERSHIP OF 

TELECOMMUNICATIONS 

Mr. BYRD. Mr. President, the distinguished Majority Leader has indicated 

that, when the Senate returns from the 

upcoming recess, it will take up S. 652, 

the ‘‘Telecommunications Competition 

and Deregulation Act of 1995.’’ As my 

colleagues are aware, this is a very important piece of legislation dealing 

with many aspects of the complicated, 

fast-changing marketplace in telecommunications and the many competing commercial interests in that 

marketplace. 

Of great interest is the international 

marketplace in telecommunications 

equipment and services, which is extremely lucrative, and is subject to 

many of the same kind of barriers to 

entry for American companies that we 

see in other business sectors. Currently, the US Trade Representative, 

Ambassador Mickey Kantor, has initiated a 301 case against the Japanese in 

the area of automobile parts, after 

years of frustration in trying to gain 

fair entry into the Japanese market—

just as the Japanese have access into 

the American market, and the Senate 

has strongly endorsed this action. 

Similar problems exist in the telecommunications field, and the bill as 

reported from the Commerce Committee includes a provision to protect 

our telecommunications companies 

from unfair competition. The provision 

requires that reciprocity is needed in 

the international marketplace, and in 

adjusting the rules for foreign ownership of telecommunications services in 

the U.S., the host countries of those 

businesses seeking market access in 

the U.S. allow fair and reciprocal access to our telecommunications providers in those nations. 

This is a case of fairness, and the 

Committee has wisely included needed 

leverage for the Administration to prod 

our trading partners into opening their 

markets. 

Given the highly lucrative nature of 

the telecommunications marketplace, 

the stakes of gaining market access to 

foreign markets are high. It should be 

no surprise that securing effective market access to many foreign markets, 

including those of our allies, including 

France, Germany and Japan has been 

very difficult. Those markets remain 

essentially closed to our companies, 

dominated as they are by large monopolies favored by those governments. In 

fact, most European markets highly restrict competition in basic voice services and infrastructure. A study by the 

Economic Strategy Institute in December of 1994 found that ‘‘while the U.S. 

has encouraged competition in all telecommunication sectors except the 

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May 25, 1995 CONGRESSIONAL RECORD— SENATE S7493 

local exchange, the overwhelming majority of nations have discouraged competition and maintained a public monopoly that has no incentive to become 

more efficient.’’ U.S. firms, as a result 

of intense competition here in the U.S., 

provide the most advanced and efficient telecommunications services in 

the world, and could certainly compete 

effectively in other markets if given 

the chance of an open playing field. 

The same study found that ‘‘U.S. firms 

are blocked from the majority of lucrative international opportunities by foreign government regulations prohibiting or restricting U.S. participation 

and international regulations which intrinsically discriminate and overcharge U.S. firms and consumers.’’

This study found that the total loss in 

revenues to U.S. firms, as a result of 

foreign barriers is estimated to be over 

$100 billion per year between 1992 and 

the turn of the century. These are staggering sums. 

Thus the administration has adopted 

an aggressive incentives-based strategy 

for foreign countries to open their telecommunications services markets to 

U.S. companies. First, as my colleagues are aware, the negotiations 

which led to the historic revision of the 

GATT agreement and which created 

the World Trade Organization were unable to conclude an agreement on telecommunications services. Thus, separate negotiations are underway in Geneva today to secure such an agreement, in the context of the Negotiating 

Group on Basic Telecommunications. 

In the absence of such an agreement, 

we must rely on our own laws to protect our companies and to provide leverage over foreign nations to open 

their markets. To forego our own national leverage would do a great disservice to American business and 

would be shortsighted—the result of 

which would be not only a setback to 

our strategy to open those markets, 

but pull the rug out from under our negotiators in Geneva to secure a favorable international agreement for open 

telecommunications markets. Indeed, 

tough U.S. reciprocity laws are clearly 

needed by our negotiators to gain an 

acceptable, effective, market opening 

agreement in Geneva in these so-called 

GATS [General Agreement on Trade in 

Services] negotiations. 

Second, the bill as reported by the 

Commerce Committee supports a strategy to provide incentives for foreign 

country market opening by conditioning new access to the American 

market upon a showing of reciprocity 

in the markets of the petitioning foreign companies. Current law, that is 

section 310 of the Communications Act 

of 1934 provides that a foreign entity 

may not obtain a common carrier license itself, and may not own more 

than 25 percent of any corporation 

which owns or controls a common carrier license. This foreign ownership 

limitation has not been very effective 

and has not prevented foreign carriers 

from entering the U.S. market. The 

FCC has had the discretion of waiving 

this limitation if it finds that such action does not adversely affect the public interest. In addition, the law does 

not prevent some kinds of telecommunications businesses, such as 

operation and construction of modern 

fiber optic facilities or the resale of 

services in the U.S. by foreign carriers. 

Nevertheless, maintaining restrictions 

on foreign ownership is generally considered by U.S. industry to be useful as 

one way to raise the issue of unfair foreign competition and to maintain leverage abroad. Therefore the bill establishes a reciprocal market access 

standard as a condition for the waiver 

of Section 310(b). It states that the FCC 

may grant to an alien, foreign corporation or foreign government a common 

carrier license that would otherwise 

violate the restriction in Section 301(b) 

if the FCC finds that there are equivalent market opportunities for U.S. 

companies and citizens in the foreign 

country of origin of the corporation or 

government. 

Even though Section 310 has not prevented access into our market, the existence of the section has been used by 

foreign countries as an excuse to deny 

U.S. companies access to their markets. The provision in S. 652, applying 

a reciprocity rule, makes it clear that 

our market will be open to others to 

the same extent that theirs are open to 

our investment. This is as it should be. 

Given the importance of this provision, and the tremendous stakes involved in the future telecommunications markets worldwide, a number 

of issues regarding the provision have 

been raised, including the role of the 

President in reviewing FCC decisions, 

how the public interest standard 

should be applied, whether our negotiators should have wide authority to 

exercise leverage among telecommunications market segments, to what extent Congress should be informed and 

involved in the developing policies 

which effectively define the American 

public interest, the impacts of the legislation on the ongoing negotiations in 

Geneva for a multilateral agreement, 

what mechanisms are needed to ensure 

that promises for market access turn 

into reality by foreign nations—after 

the ink on an international agreement 

is dry—and several other matters. 

In order to clarify and develop a 

fuller understanding of the ramifications of the provision of S. 652, I wrote 

Ambassador Kantor on April 3, 1995, soliciting his views in five areas: First, 

the impacts of the provision on the ongoing telecommunications negotiations in Geneva; second, the nature of 

foreign market behavior that would 

trigger action under the concept of reciprocity in the bill; third, the likely reactions of foreign governments to the 

provision; fourth, the most useful role 

that the United States Trade Representative can play in implementing 

the proposal in the bill; and, fifth, his 

suggestions for any changes which 

might strengthen the effectiveness of 

the provision. I received a very full 

reply from Ambassador Kantor on 

April 24, 1995, which I ask unanimous 

consent be printed in the RECORD at 

this point. I commend the Ambassador 

for his attention to this matter, and 

am sure that his reply will be useful to 

the Senate when the bill comes to the 

floor. I hope that the Senate will have 

a good debate on this particular provision, and hope that we will seize this 

historic opportunity to put into place 

effective reciprocity tools to truly 

open the world’s economies to opportunities for American genius and labor. 

There being no objection, the material was ordered to be printed in the 

RECORD, as follows: 

APRIL 3, 1995. 

Ambassador MICKEY KANTOR, 

U.S. Trade Representative, 

Washington, DC. 

DEAR MR. AMBASSADOR: The Senate will 

soon take up S. 652, the Telecommunications 

Competition and Deregulation Act of 1995, to 

promote competition in the telecommunications industry. I am writing to solicit your 

views on the revision of foreign ownership 

provisions, specifically the revision to Section 310(b) of the 1934 Communications Act. 

As you may know, the Commerce Committee’s reported bill would allow the FCC to 

waive current statutory limits on foreign investment in U.S. telecommunications services if the FCC finds that there are ‘‘equivalent market opportunities’’ for U.S. companies and citizens in the foreign country 

where the investor or corporation is situated. 

I would like to have your assessment of the 

impact of this provision for both enhancing 

the prospects of U.S. penetration of foreign 

markets, and for foreign investment in 

American telecommunications companies 

and systems. 

Specifically, what impacts and advantages 

can we anticipate will result from enactment 

of this provision on the ongoing negotiations 

in Geneva on Telecommunications which has 

been established under the GATT, to be incorporated into the General Agreement on 

Trade in Services? 

Second, which markets in Asia and Europe 

are now closed to U.S. telecommunications 

services in such a way that action on the 

basis of the concept of Reciprocity in the 

Senate bill is likely? What timeframes for 

such action, if any, would you contemplate? 

Third, what has been the position of nations whose markets are closed to U.S. telecommunications services in the way of justifying their lack of access, and what likely 

reactions can we anticipate from those nations as a result of this legislative provision? 

What role do you think can be most usefully played by your office in effectively implementing the provision that has been recommended? 

Lastly, in analyzing the legislation reported from the Senate Commerce Committee, do you have any suggestions as to 

how the provision might be strengthened to 

better serve the goal of opening foreign markets to U.S. telecommunications services 

and products? 

Thank you for your attention to this matter. 

Sincerely, 

ROBERT C. BYRD. 

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S7494 CONGRESSIONAL RECORD— SENATE May 25, 1995 

THE U.S. TRADE REPRESENTATIVE, 

Washington, DC, April 24, 1995. 

Hon. ROBERT BYRD, 

U.S. Senate, 

Washington, DC. 

DEAR SENATOR BYRD: This is to respond to 

your letter of April 3, 1995 regarding S. 652, 

the ‘‘Telecommunications Competition and 

Deregulation Act of 1995’’ and its proposed 

revision of Section 310(b) of the Communications Act of 1934. The Departments of Commerce, Justice, State and Treasury have concurred in this response to your letter. 

The Administration and the U.S. telecommunications industry are united in their 

support for Congressional action to revise 

the foreign ownership rules under Section 

310(b). As Vice President Gore indicated recently to our G–7 partners, the Administration seeks legislation to allow us to open further our common carrier telecommunications market to the firms of countries 

which open their markets to the American 

common carrier telecommunications industry. This would contribute greatly to the development of the Global Information Infrastructure (GII). 

As you know, the U.S. leads efforts in the 

World Trade Organization (WTO) aimed at 

reaching a market-opening agreement on 

basic telecom services. The U.S. negotiating 

team—led by the USTR with representatives 

from the Departments of Commerce, Justice, 

State and the Federal Communications Commission—has successfully advanced U.S. objectives at the WTO talks. 

I have attached detailed responses to each 

of your five questions. By amending the legislation as we suggest, the Congress would 

provide effective market-opening authority 

for both multilateral and bilateral negotiations on basic telecommuncations services. 

We stand ready to work with you to develop legislation which can serve our shared 

interest in a stronger U.S. economy and the 

development of the Global Information Infrastructure. We would also be pleased to 

provide your staff with a briefing on the status of major telecom services markets in 

Asia, Europe and Latin America at their 

convenience. 

Sincerely, 

MICHAEL KANTOR. 

Attachments. 

1. Specifically, what impacts and advantages can we anticipate will result from enactment of this provision on the ongoing negotiations in Geneva on Telecommunications which have been established under 

the GATT, to be incorporated into the General Agreement on Trade in Services? 

Answer: The U.S. maintains one of the 

world’s most open and competitive markets. 

Our objective in this negotiation is to obtain 

firm commitments regarding similar levels 

of openness in the markets of other important trading partners. 

Legislation providing the Government 

with effective market-opening authority 

with respect to Section 310(b) could have a 

powerful positive effect on these talks. Section 310(b) is regarded by foreign companies 

as a major barrier to market access in the 

United States. That perception is out of proportion to the actual effect of Section 310(b). 

Authority to remove this restraint through 

international negotiations or on the basis of 

similar levels of openness could lead in turn 

to the removal of ownership restrictions and 

monopoly barriers to U.S. companies in key 

markets abroad. 

U.S. firms are successful global players in 

the common carrier telecommunications industry. Telecommunications companies in 

many major developed countries regard access to the U.S. market as a strategic imperative. Legislation providing the Government 

with effective market-opening authority is 

essential if we are to level the playing field 

for U.S. firms. This authority would greatly 

enhance the prospects for U.S. penetration of 

foreign markets—markets that now are 

sanctuaries for our companies’ top competitors. At the same time, it would benefit the 

U.S. economy by greater openness to foreign 

investment in this growing sector. 

2. Second, which markets in Asia and Europe are now closed to U.S. telecommunications services in such a way that action on 

the basis of the concept of reciprocity in the 

Senate bill is likely? What time frames for 

such action, if any, would you contemplate? 

Answer: Most markets in Europe, Asia and 

elsewhere have monopoly arrangements 

which prohibit or restrict both foreign ownership of basic telecommunications infrastructure and provision of basic services. For 

example, most Member States of the European Union have voice telephone service monopolies, which they plan to maintain at 

least until 1998. The European Union and its 

Member States may introduce reciprocity 

provisions on foreign ownership in the absence of a successful conclusion to the WTO 

negotiations. In Japan and Canada, foreign 

ownership of firms that own telecommunications infrastructure is restricted to 33 percent. 

Foreign governments remain cautious 

about allowing competition to firms which 

remain state-owned or controlled. In the 

past these companies have been regarded 

mainly as state-managed sources of employment and demand for domestic high tech 

goods. 

Our key trading partners are much more 

likely to open their basic telecom services 

markets to U.S. companies in return for a 

balanced market-opening commitment by 

the U.S. which includes changes to the restrictions on common carrier radio licenses 

in Section 310(b). Unilateral action by the 

U.S. to eliminate these Section 310(b) provisions would forfeit leverage vis-a-vis these 

countries. 

Effective market-opening legislation would 

reaffirm our commitment to the principles 

of private investment and competition and 

would allow us to challenge our key trade 

partners to embrace fully these principles. 

The WTO negotiations have a deadline of 

April 30, 1996. We seek market-opening action within that time frame. 

3. Third, what has been the position of nations whose markets are closed to U.S. telecommunications services in the way of justifying their lack of access, and what likely 

reactions can we anticipate from those nations as a result of their legislative provision? 

Answer: Foreign markets are closed to 

U.S. firms, in varying degrees, mainly due to 

the worldwide heritage of natural monopoly 

in basic telecommunications services. The 

United States moved first to begin abandoning this approach over twenty years ago. 

The very successful American result in 

terms of increased information sector employment, fast-growing high-technology industries and better services to consumers 

and businesses has helped to motivate some 

key trading partners gradually to abandon 

monopoly as well. But progress has been incremental at best, with most markets only 

allowing competition in data and valueadded services. Very few trading partners 

have taken steps to liberalize their basic infrastructure and voice telephone service 

markets. Even the United Kingdom, which 

now has one of the most liberal basic telecommunications services markets, still 

maintains a duopoly on facilities-based 

international services. 

Some trade partners regard global market 

access as a strategic imperative for their 

companies. Since the United States represents about one-quarter of the world 

telcom services market, we can expect these 

nations will seek to obtain the benefit of any 

market-opening steps offered by the U.S. In 

this way, we hope to negotiate an exchange 

of market-opening commitments in the WTO 

productively with these trade partners. 

Other significant trade partners which 

have inefficient telecommunications monopolies are faced with large unmet domestic 

demand for basic telecommunications services. Nonetheless, they remain cautious 

about allowing competition. The WOT negotiations offer an opportunity to harmonize 

and to expedite these parties’ transition 

away from monopoly and towards reliance 

on private investment and competition. 

4. Fourth, what role do you think can most 

usefully be played by your office in effectively implementing the proposal that has 

been recommended? 

Answer: The Federal Communications 

Commission recently proposed to consider 

foreign market access in certain decisions 

affecting foreign-affiliated firms. The role of 

the Executive Branch as defined by statutory reform of Section 310(b) should conform 

with the view expressed below by the Executive Branch in its recent comments on the 

FCC’s proposed rulemaking. In comments 

filed on April 11, 1995 by the Commerce Department’s National Telecommunications 

and Information Administration on behalf of 

the Executive Branch, we stated, 

‘‘The Commission . . . has authority over 

the regulation of U.S.-based telecommunications carriers in interstate and foreign 

commerce, as well as concurrent authority 

with the Executive Branch to protect competition involving telecommunications carriers by enforcing certain provisions of the 

antitrust laws. In carrying out its regulatory 

responsibilities, the Commission may help 

effectuate the policy goals and initiatives of 

the Executive Branch and promote U.S. interests in dealing with foreign countries. Accordingly the Commission must accord great 

deference to the Executive Branch with respect to U.S. national security, foreign relations, the interpretation of international 

agreements, and trade (as well as direct investment as it relates to international trade 

policy). The Commission must also continue 

to take into account the Executive Branch’s 

views and decisions with respect to antitrust 

and telecommunications and information 

policies.’’

The Administration plans to work with the 

Commission to establish a process to take 

the respective authorities of the Commission 

and Executive Branch agencies into account 

in making such determinations. 

5. Lastly, in analyzing the legislation reported from the Senate Commerce Committee, do you have any suggestions as to 

how the provision might be strengthened to 

better serve the goal of opening foreign markets to U.S. telecommunications services 

and products? 

Answer: First, the legislation should provide the Executive Branch with leverage to 

negotiate greater openness, in conformance 

with the view expressed by the Executive 

Branch in its recent comments on the FCC’s 

proposed rulemaking. Otherwise, the legislation reported from the Senate Commerce 

Committee would make market access factors determinative, in a departure from the 

FCC’s existing public interest standard. 

Under the existing public interest standard, 

the government can exercise discretion with 

respect to foreign investors from otherwise 

unfriendly nations. 

Second, the bill should provide authority 

to conform with the obligations of a successful outcome in the WTO negotiations. This 

would require the U.S. to make any new 

market-opening commitments on a most-favored-nation (MFN) basis within the framework of the General Agreement on Trade in 

mmaher on MIKETEMP with SOCIAL SECURITY NUMBERS

May 25, 1995 CONGRESSIONAL RECORD— SENATE S7495 

Services (GATS). In order to provide effective leverage in these talks, legislation to reform Section 310(b) should explicitly provide 

for the Government to take on such an obligation. If the WTO basic telecommunications services negotiations are not successful, the U.S. will take a most-favored-nation exception for basic telecommunications 

services under the GATS. 

Third, the bill’s market-segment-for-market-segment approach should be dropped to 

allow market opening generally balanced 

among telecommunications services markets. 

Fourth and finally, the bill’s ‘‘snapback’’

provision is a unilateral provision to remove 

negotiated benefits which would be unacceptable to us if proposed by other nations 

for themselves. It is unnecessary insofar as 

the FCC can already condition authorizations and reopen them if the conditions later 

are not met, consistent with U.S. international obligations. 

f 

MESSAGES FROM THE PRESIDENT 

Messages from the President of the 

United States were communicated to 

the Senate by Mr. Thomas, one of his 

secretaries. 

f 

EXECUTIVE MESSAGES REFERRED 

As in executive session the PRESIDING OFFICER laid before the Senate messages from the President of the 

United States submitting sundry nominations which were referred to the appropriate committees. 

(The nominations received today are 

printed at the end of the Senate proceedings.) 

f 

REPORT ON THE STATE OF SMALL 

BUSINESS—MESSAGE FROM THE 

PRESIDENT—PM 53 

The PRESIDING OFFICER laid before the Senate the following messages 

from the President of the United 

States, together with an accompanying 

report; which was referred to the Committee on Small Business. 

To the Congress of the United States: 

I am pleased to forward my second 

annual report on the state of small 

business, and to report that small businesses are doing exceptionally well. 

Business starts and incorporations 

were up in 1993, the year covered in 

this report. Failures and bankruptcies 

were down. Six times as many jobs 

were created as in the previous year, 

primarily in industries historically 

dominated by small businesses. 

Small businesses are a critical part 

of our economy. They employ almost 60 

percent of the work force, contribute 54 

percent of sales, account for roughly 40 

percent of gross domestic product, and 

are responsible for 50 percent of private 

sector output. More than 600,000 new 

firms have been created annually over 

the past decade, and over much of this 

period, small firms generated many of 

the Nation’s new jobs. As this report 

documents, entrepreneurial small businesses are also strong innovators, producing twice as many significant innovations as their larger counterparts. 

In short, a great deal of our Nation’s 

economic activity comes from the 

record number of entrepreneurs living 

the American Dream. Our job in Government is to make sure that conditions are right for that dynamic activity to continue and to grow. 

And we are taking important steps. 

Maintaining a strong economy while 

continuing to lower the Federal budget 

deficit may be the most important step 

we in Government can take. A lower 

deficit means that more savings can go 

into new plant and equipment and that 

interest rates will be lower. It means 

that more small businesses can get the 

financing they need to get started. 

We are finally bringing the Federal 

deficit under control. In 1992 the deficit 

was $290 billion. By 1994, the deficit was 

$203 billion; we project that it will fall 

to $193 billion in 1995. 

Deficit reduction matters. We have 

been enjoying the lowest combined rate 

of unemployment and inflation in 25 

years. Gross domestic product has increased, as have housing starts. New 

business incorporations continue to 

climb. We want to continue bringing 

the deficit down in a way that protects 

our economic recovery, pays attention 

to the needs of people, and empowers 

small business men and women. 

CAPITAL FORMATION

One area on which we have focused 

attention is increasing the availability 

of capital to new and small enterprises, 

especially the dynamic firms that keep 

us competitive and contribute so much 

to economic growth. 

Bank regulatory policies are being 

revised to encourage lending to small 

firms. Included in the Credit Availability Program that we introduced in 

1993 are revised banking regulatory 

policies concerning some small business loans and permission for financial 

institutions to create ‘‘character 

loans.’’

New legislation supported by my Administration and enacted in September 

1994, the Reigle Community Development and Regulatory Improvement Act 

of 1994, establishes a Community Development Financial Institutions Fund 

for community development banks, 

amends banking and securities laws to 

encourage the creation of a secondary 

market for small business loans, and 

reduces the regulatory burden for financial institutions by changing or 

eliminating 50 banking regulations. 

Under the Small Business Administration Reauthorization and Amendments Act of 1994, the Small Business 

Administration (SBA) is authorized to 

increase the number of guaranteed 

small business loans for the next 3 

years. The budget proposed for the SBA 

will encourage private funds to be directed to the small businesses that 

most need access to capital. While continuing cost-cutting efforts, the plan 

proposes to fund new loan and venture 

capital authority for SBA’s credit and 

investment programs. Changes in the 

SBA’s 7(a) guaranteed loan program 

will increase the amount of private sector lending leveraged for every dollar 

of taxpayer funds invested in the program. 

Through the Small Business Investment Company (SBIC) program, a 

group of new venture capital firms are 

expected to make available several billion dollars in equity financing for 

startups and growing firms. The SBIC 

program will continue to grow as regulations promulgated in the past year 

facilitate financing with a newly created participating equity security instrument. 

And the Securities and Exchange 

Commission’s simplified filing and registration requirements for small firm 

securities have helped encourage new 

entries by small firms into capital 

markets. 

We are recommending other changes 

that will help make more capital available to small firms. In reauthorizing 

Superfund, my Administration seeks to 

limit lender liability for Superfund remediation costs, which have had an adverse effect on lending to small businesses. Interagency teams have been 

examining additional cost-effective 

ways to expand the availability of 

small business financing, such as new 

options for expanding equity investments in small firms and improvements to existing microlending efforts. 

We’ve also recognized that we can 

help small business people increase 

their available capital through tax reductions and incentives. We increased 

by 75 percent, from $10,000 to $17,500, 

the amount a small business can deduct as expenses for equipment purchases. Tax incentives in the 1993 

Budget Reconciliation Act are having 

their effect, encouraging long-term investment in small firms. And the empowerment zone program offers significant tax incentives—a 20 percent wage 

credit, $20,000 in expensing, and tax-exempt facility bonds—for firms within 

the zones. 

REGULATION AND PAPERWORK

But increasing the availability of 

capital to small firms is only part of 

the battle. We also have to make sure 

that Government doesn’t get in the 

way. And we’re making progress in our 

efforts to create a smaller, smarter, 

less costly and more effective Government that is closer to home—closer to 

the small businesses and citizens it 

serves. 

In the first round of our reinventing 

Government initiative—the National 

Performance Review—we asked Government professionals for their best 

ideas on how to create a better Government with less red tape. One recommendation was that Federal agency 

compliance with the Regulatory Flexibility Act—that requires agencies to 

examine proposed and existing regulations for their effects on small entities—be subject to judicial review. In 

other words, they said we need to put 

teeth in the legislation requiring Federal agencies to pay attention to small 

business concerns when they write regulations. That proposal has been under 

debate in the Congress. 

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