The Reagan administration is more concerned with helping businesses able to borrow from private lenders than less-affluent ones who need low-interest government loans, Office of Management and Budget Director David Stockman told a Senate committee yesterday.
Stockman testified on plans to cut the budgets for all Small Business Administration programs for socially and economically disadvantaged firms, eliminate a special program to help women business owners and reduce by 25 percent general SBA lending, which largely helps minorities and women.
"There are literally millions of small businesses in this country, and you're only touching a very small fraction," Stockman told the Senate Select Committee on Small Business. "I'm concerned about the 98 or 99 percent who'll never see the SBA but may see the bankruptcy court" if they cannot benefit from an improved economy brought about by balancing the budget.
Stockman also said the government must come up with stiffer eligibility requirements for individuals and firms seeking SBA disaster loans because those programs have been slashed.
SBA officials testified that under Reagan's proposals only $1 billion in disaster assistance is available through October, and $1 billion worth of requests for disaster assistance already are pending. And the hurricane and tornado seasons haven't hit yet, the officials added.
Committee Chairman Lowell P. Weicker Jr. (R-Conn.) said he is concerned about slashes in SBA's budget for loans and guarantees, proposals to raise to market levels interest rates for disaster loans, which now start as low as 3 percent, and for small business loans, which are at about 9 percent. Weicker asked Stockman if the administration, in determining the budget cuts, "believes in survival of the fittest."
"There's no way we could ever pump enough authority into SBA to save even 10 percent of the small businesses going belly up," Stockman said.
"There are about 10 million small businesses, depending on how you define small business, in this country, and 99.9 percent aren't eligible for 3 percent or 9 percent loans," Stockman said. Most small businesses must pay high market rates, he said. All small businesses "are being severely hurt . . . penalized, driven into insolvency."
Sen. Carl Levin (D-Mich.) repeatedly said throughout the hearing that he thought the administration would only cut "waste, fraud, fat and abuse" from the budget and not useful programs. But Stockman replied, "There's no line item in the budget for fraud, waste and abuse."
Stockman continued, "Some defensible programs from a limited point of view" will have to be cut to implement the president's economic recovery plan.
SBA Acting Administrator Roger Jones said that most small businesses aren't interested in SBA loans but in the general economic recovery. The SBA intends to "mainstream" special programs into general agency activities, Jones said.
Jones said to offset higher monthly payments for loans that will be available, the SBA will seek legislation to stretch out the time limits for repayment. But Weicker asked when the legislation would be introduced, saying that Congress probably wouldn't have time to pass it.