National Dialogue on
Entrepreneurship

Monday, September 29, 2003

Welcome to E-News -- economic news for followers of the entrepreneurial economy. Through E-News, we bring you short summaries and analyses of various trends driving the innovation economy. Please feel free to share this with friends and colleagues. To subscribe, visit www.publicforuminstitute.org/nde/join/

Capitol Hill Insights

September is traditionally the busy season on Capitol Hill and September 2003 is no exception.  The chances of Congress passing all spending bills by the start of the next fiscal year on October 1 are slim.  Nonetheless, moving forward with appropriations measures will be the No. 1 priority in Congress. For small business advocates, three other issue areas are getting attention.

First, the continued rise in health care costs is generating a great deal of concern. A recent Kaiser Family Foundation survey found that small business health insurance costs grew by 13.9% last year, the third straight year of double-digit increases.  Lots of potential solutions are in the mix, but the expanded use of association health plans (AHPs) still ranks near the top.  In June, the House passed legislation (H.R. 660, the Small Business Health Fairness Act) to make it easier for associations to offer such plans to members.  The Senate has not yet taken up its version of the measure (S. 545).

Trade and the loss of manufacturing jobs also rank high on the current issue agenda.   Everyone from President Bush on down is scrambling to respond to the so-called “jobless recovery.”  President Bush’s manufacturing recovery plan is on the table, as are a host of other potential solutions.  Many small business  advocates, led by House Small Business Committee chair Don Manzullo (R-IL) are touting the Job Protection Act of 2003 (H.R. 1769) which provides tax credits to US companies if their production activities occur solely in the US. 

Last but not least, the hardy perennial issue of taxes remains on the table.  Specifically, many small businesses are concerned about provisions in the current tax code that penalize the self-employed.   A new coalition, Equity for our Nation’s Self Employed, notes that the self-employed must pay 15.3% in FICA tax on their health insurance premiums.  Meanwhile, larger firms deduct these expenses as a business cost.   The coalition is aggressively support H.R. 1873, the Self-Employed Health Care Affordability Act of 2003, as a vehicle for ending this disparity.  

Small Biz Financing Trends

New research from the Small Business Administration examines the sources of financing used by America’s small business.  The report, Financing Patterns of Small Firms: Findings from the 1998 Survey of Small Business Finance,” examines financing patterns, typical sources of credit, as well as gender and ethnic differences in the use of various financing tools.  Some highlights from the study include the following:

• 83% of small businesses have used credit and had debt on their books at the end of 1998.  Total outstanding small business debt in 1998 was approximately $700 billion.

• Lines of credit and mortgage loans are the most commonly used credit vehicles, accounting for 61% of outstanding debt.

• Minority-owned businesses were slightly less likely to use external credit sources.  Seventy-seven percent used credit, while 83% of all small firms did so.

• Minority and women-owned business are more likely to use credit cards as a source of credit when compared to all other small firms. 

• Banks are still the most common source of credit, accounting for 55% of debt outstanding.

The study, Financing Patterns of Small Firms: Findings from the 1998 Survey of Small Business Finance, is available at http://www.sba.gov/advo/stats/rbssbf_98.pdf

Another Chapter in the Silicon Valley Saga?

Folks in Silicon Valley have gone through a roller coaster ride since 2000, falling from ground zero of the new economy to a poster child for tech crash.  The good news is that local leaders are not bemoaning their fate, but are instead planning for how they can transform the region yet again and restore the region’s status as a hotbed of innovation.  One blueprint for this effort can be found in a new report from Joint Venture Silicon Valley, Building the Next Silicon Valley: Strategy and Actions.   The report contains lots of interesting insights, but its overall focus is especially fascinating:  what does a place with a long history of innovative entrepreneurs do to restore that legacy?   The report’s authors argue that Silicon Valley can renew its habitat for entrepreneurship and innovation by taking several steps:  1) Expanding the use of information technology to assist the region’s residents in key areas such as education and health care, 2) Advancing the convergence of bio, nano, and information technologies to create new products and services, 3) Improving Silicon Valley’s linkages with other global partners and local partners throughout the Bay Area, and 4) Supporting fiscal reform so both state and local governments can effectively invest in health care, education, and infrastructure. 

The report by Joint Venture Silicon Valley, Building the Next Silicon Valley: Strategy and Actions, is available at http://www.jointventure.org/nsv/buildingNSV2003.pdf

Research Resources;  New Economic Development Journal now online

If you’re in the economic development business and want to get access to some of the newest research, you might be interested in a new journal from ACCRA, the association of economic developers and researchers.   The new Journal of Applied Research in Economic Development is jointly published by ACCRA and Georgia Southern University.  It seeks to provide articles that are relevant to practitioners, but it has a heavy focus on new research and survey techniques.  Thus, it is both academically rigorous and relevant to those out in the field.  The first edition includes articles on new techniques for measuring the impact of new jobs in a region, as well as suggestions for using new economic measures to benchmark your community.  The journal’s editors are interested in both new readers and potential contributors.   To learn more about the journal and to read the first edition, visit http://www.accra.org/journal/v1n1.pdf

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