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July 27, 2020
The Honorable Nancy Pelosi
Speaker, U.S. House of Representatives
The Honorable Mitch McConnell
Majority Leader, U.S. Senate
The Honorable Kevin McCarthy
Minority Leader, U.S. House of Representatives
The Honorable Charles Schumer
Minority Leader, U.S. Senate
Dear Speaker Pelosi and Leaders McConnell, Schumer, and McCarthy,
The COVID-19 pandemic sparked an economic crisis the likes of which the United States has never experienced before, and which we hope will never experience again. Many lives, incomes, and businesses have been lost or disrupted, demanding swift and unprecedented action to merely keep the economy afloat. Yet as Congress debates the next phase of relief legislation, we are encouraged to see a series of reforms to the Small Business Administration (SBA) that look beyond short-term relief and set the stage for a robust Main Street recovery.
Since its creation in 1953, the SBA has supported small business development as a core component to the health and dynamism of the U.S. economy. The Small Business Investment Company (SBIC) program, in particular, has expanded access to capital for tens of thousands of
innovative small businesses across the country, by helping nudge private investment into the likes of Apple when it was still a fledgling computer startup.
The Continuing Small Business Recovery and Paycheck Protection Program Act before Congress would establish a $10 billion capital facility at the SBA, designed to match SBIC-led investments in small businesses that suffered substantial declines in revenue due to COVID-19, but which have strong prospects of rebounding given adequate investment. While many small business bankruptcies may be unavoidable, the same facility will help propel new business formation in low-income census tracts and within our domestic manufacturing supply-chain, promoting sustainable, high-wage job growth across the country, ii including in many of our hardest-hit Black and Brown communities.
Importantly, the legislation makes long-overdue modernizations to the SBIC application process itself, allowing the Administrator to approve new investment funds quickly while prohibiting “buyout” strategies that merely scavenge what assets struggling businesses have left. SBICs would be further required to return a share of their profits back to the SBA capital facility, both protecting the SBA from losses and allowing on-going investments to be supported at no cost to taxpayers.
Before this crisis hit, the rate of new business formation was already at an unprecedented low, having never fully recovered from the Great Recession. This slowed the pace of the previous recovery, as fast-growing small businesses drive the rate of overall employment growth. Coming out of this crisis, we cannot afford to let thousands of small businesses fail while new business formation only steepens its decline. We, therefore, urge you, as a diverse group of experts in innovation and economic development policy from across the political spectrum, to support these reforms in the final relief package, and empower American entrepreneurship to not just lead the recovery, but to help build a stronger and more resilient economy along the way.
Sincerely,
Samuel Hammond, Director of Poverty and Welfare Policy The Struggling Regions Initiative Niskanen Center
Jonathan Gruber, Ford Professor of Economics Massachusetts Institute of Technology
Oren Cass, Executive Director of American Compass
Victor Hwang, Founder & CEO Right to Start
Carrie Hines, President & CEO American Small Manufacturers Coalition
John W. Lettieri, Co-founder, and President Economic Innovation Group
Dr. Robert Atkinson, President of Information Technology and Innovation Foundation
Mark Muro, Senior Fellow and Policy Director Metropolitan Policy Program Brookings Institution
W. Bradford Wilcox, AEI/Institute for Family Studies
Julius Krein, Editor of American Affairs
Zach Graves, Head of Public Policy Lincoln Network
Ian Fletcher, Member, Advisory Board Coalition for a Prosperous America
