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Statement of the Honorable Nydia Velázquez

Ranking Member, Committee on Small Business

Hearing entitled:

“State of the Small Business Economy”

February 13, 2013

Thank you, Mr. Chairman. As Members of this Committee are aware, the success of our overall economic recovery hinges on how small businesses fare.  While few would argue our economy is where it needs to be, it is also hard to ignore the important strides that have been made to date.   Since 2009, GDP growth has expanded at a moderate 3.2 percent, suggesting the economy is making gradual improvement.   Likewise, although the employment situation remains challenging, we have seen 35 consecutive months of positive job growth and more than 2 million jobs created last year, alone.  Still, the pace of this growth is far from sufficient. 

For those who lost their livelihood in the recession or young people entering the job market, there remain too many applicants for too few opportunities. As is always the case, the gains exhibited by the broader economy are closely linked to trends to in the small business sector.   Recent survey data found small business owners’ optimism regarding the next six months rose by five points in January.  Another encouraging sign has been the unthawing of the small business credit markets, ensuring a flow of capital to small firms looking to expand their operations.   According to the most recent Federal Reserve Senior Loan Officer Survey, most banks are loosening standards for small business and commercial loans.   Moreover, February data finds that 73 percent of small firms report being able to obtain the financing they need – the highest level in four years.   Affordable credit will remain key to growth in this sector.  If – as we often say -- small businesses are the backbone of the economy, affordable capital is the lifeblood.

Beyond the need for affordable financing, small companies also need additional customers in order to expand and take on more workers.  Small businesses certainly have concerns about changes to the regulatory environment.  However, a recent analysis by the Federal Reserve suggests that the biggest hurdle to small business job creation may actually be the lack of consumer spending.   In that regard, measures that generate consumer spending – such as payroll tax cuts – may offer a better path forward for boosting small business growth and hiring.  Indeed, the recent Fed letter calls into question whether regulatory uncertainty is truly impeding employment gains.   

It goes without saying that our economy has not achieved the level of growth all of us – on both sides of the aisle –want to see.  Americans, understandably, expect more.  However, it is also important to remember the dire state of the economy in 2009.  After four tough years, we are beginning to see glimmers of hope on the horizon and our nation’s small businesses are leading the way.  I look forward to hearing from our witnesses how this Committee can be more helpful in fostering an environment that helps small firms succeed, grow and create the jobs Americans so desperately need. 

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