Date: 1982-05-10
Speaker: ROBERT C. BYRD (democrat)
Chamber: S

Mr. President. small business has long been the backbone of the American economy. Its local focus and decentralized nature extend the Jeffersonian ideal of small. independent farmers into the urban era. More than all the speeches about local autonomy. small businesses provide a source of independent economic and political muscle for the majority of our citizens. Unfortunately. as most Americans are reawakening to the vital role small business plays in our democracy and in our economy. the existence of many small businesses are threatened by the continued assaults. of high interest rates and slack consumer demand. In all previous recessions. interest rates began to fall sharply by the 6th month of the downturn. But in our. current recession. which has now entered its 10th full month. real interest rates remain at record levels. Certainly the prime rate has edged down since its 20.5 percent peak last July. but most small businesses pay at least 2 to 3 points above the prime for their borrowings. That means small businesses are borrowing at 18.5 to 19.5 - percent. while inflation for the last 3 months has been running at a scant 1 percent. In other words. small businesses are paying an average of 17.5 to 18.5 percent real interest on their loans. No business. least of all oui smaller businesses. can afford to stay open with interest rates at that level. In fact. the continued surge of bankruptcies indicates that many small businesses are simply shutting their doors forever in the face of the prolonged recession and record real interest rates. These interest rate levels are not a historical accident. They are not out of our control. but they will not come down until there is a change in the deficit and monetary policies of this administration. With tripledigit deficits forecast for the foreseeable future. and a continued stranglehold on the money supply. this administration is driving the small borrower out of the money markets in favor of the Government and major corporations that can afford whatever interest rate is demanded. Just last week. an organization of leading commercial bankers. central bankers. and Government officials. called the Group of 30. issued a unanimous statement calling on the United States to. ". . . in particular. avoid an unbalanced mix of monetary and fiscal policies." Among the signers of that statement were Federal Reserve Board member Henry Wallich and president of the New York Fed. Anthony Solo. mon. The other horn of small business dilemma is the continued lack of consumer demand. Even if interest rates were affordable. no business can continue unless its products begin to sell. and although we have heard repeated administration predictions of incipient economic recovery. there are still no signs that recovery has arrived. Indeed. last Friday was a particularly bad day for economic omens as unemployment reached a 41year record of 9.4 percent. and The Conference Board released its consumer confidence index for April. which showed a further drop in confidence and a steep fall In buying plans for American consumers. Obviously. if Americans are not planning to buy new goods and services. the hope of an economic recovery cannot be realized. The Conference Board survey says that the buying plans index. which asks consumers about planned purchases of cars. homes. and appliances during the next 6 months. fell from 94.8 percent in March to just 67.7 percent in April. This is a 28 percent drop in consumer buying plans in just 1 month. In the face of record real interest rates. record unemployment rates and a 28 percent drop in spring plans by consumers. what good news is there for small business on the first day of Small Business Week? The good news is that this administration. and the Congress know that no progress against high interest rates can be made until the high deficits and tight money policies of this administration are reversed. Congress. in both the Senate and the House. is moving toward a budget resolLtion with much lower deficits. and with congressional resolutions for the Federal Reserve Board to moderate its monetary policies in light of smaller future deficits.