Mr. MULTER. The subcommittee counted 11.

Mr. BURGER. You made a study of it.

Mr. MULTER. Now, in order to approve that kind of action the administration has now recommended a change in the law so as to permit them to do that. H. R. 7474 continues the language prohibiting that. Which does your organization prefer?

Mr. BURGER. We prefer that that advisory board be made up of practical, competent, small-business men. I think they are the best ones to advise the agency at a national or a local level.

Mr. BROWN. What is the definition of a big-business man?

Mr. MULTER. Secretary Humphreys, Secretary Wilson, Secretary Weeks, in my opinion, are definitions of big-business men.

Mr. BROWN. You have just described persons. Give us a definition. Mr. MULTER. Well, I think they typify big-business men.

I think the companies with which they were connected before they went with the Government typify big business.

Mr. BROWN. If we could get a definition of a big-business man we could find a correct definition of a small-business man.

The CHAIRMAN. Are there any WOC's operating at this time with the Administration?

Mr. BURGER. I know of none.

Mr. PATMAN. Mr. Barnes testified he had none.

The CHAIRMAN. Are there any further questions?

Mr. MULTER. One other subject matter, Mr. Chairman. Mr. Burger, are there various areas in the country where there is a difference in the so-called prevailing interest rate?

Mr. BURGER. I couldn't answer the question.

Mr. MULTER. I think when my time ran out under the 5-minute rule, I was pursuing the question of the amount of loan that should be made.

Do you know of any instances of a small business venture or company seeking a loan exceeding $500,000?

Mr. BURGER. No; I have no record of any such.

We have no such record.

Mr. MULTER. Do you have any record of any seeking a $500,000 loan?

Mr. BURGER. None whatsoever.

Mr. MULTER. That is all.

Mr. WIDNALL. Mr. Chairman.
Mr. BETTS. Mr. Chairman.

The CHAIRMAN. Mr. Betts.

Mr. BETTS. Is it your organization whose members send us ballots?
Mr. BURGER. Correct.

Mr. BETTS. I want to tell you that I think that is very helpful.
Mr. BURGER. Thank you.

The CHAIRMAN. Mr. Burger, we are very glad to have the benefit of your views.

Mr. BURGER. Thank you, sir.

The CHAIRMAN. Mr. Davis will be our next witness. Mr. Davis is head of the National Small Business Men's Association. You may proceed, Mr. Davis.

STATEMENT OF JOHN C. DAVIS, EXECUTIVE DIRECTOR OF THE NATIONAL SMALL BUSINESS MEN'S ASSOCIATION OF WASHINGTON, D. C.

Mr. DAVIS. Mr. Chairman and members of the committee, my name is John C. Davis, and I appear here today as executive director of the National Small Business Men's Association, 801 19th Street, NW., Washington 6, D. C. We appreciate this opportunity to express our views, and hope that our opinions and experience will have constructive bearing on your consideration of the Small Business Administration.

First, I would like to give you a brief summary of our philosophy in this general area. Our members believe that the American smallbusiness man has long since demonstrated his ability to survive and prosper under adverse circumstances. And, so long as there is reasonable freedom of opportunity, we do not seek paternalistic Government support that would remove the normal obstacles so necessary to sound development.

Our concern, and in fact the reason for the existence of this association, and I might say here that this is the oldest of the small business organizations, we are celebrating our 20th anniversary-is due to the extraordinary economic and social pressures that have created serious barriers to the birth and normal development of small business.

For example, the tax burden, the tight-money policy, and the national labor policy result in a combined effect that is especially severe on the small-business community. To the extent that these problems cannot be overcome by individual ingenuity and enterprise, we recognize that a judicious amount of Federal assistance is not only advisable but necessary to prevent damage to the economy.

Briefly stated, we believe that Federal aid in this area should be focused on maintaining the climate of opportunity and not on oversolicitous measures that may tend to perpetuate unsound enterprises, or unduly burden the Federal budget.

There is no doubt, for instance, that the major problem facing small business is the impossibility of accumulating growth capital under the present tax policy. And in our opinion, this situation can be remedied only by substantial adjustment of the individual and corporate tax rates.

We have just completed the basic part of a tax study, upon which the association will base a recommendation for a sound tax revision program.

And I believe that that is now in the hands of every Member of Congress.

This fundamental business problem will not be alleviated until the tax relief becomes a reality.

Also, bearing on this point it is necessary to mention the fiscal and banking policies that have resulted in the scarcity of equity and working capital. It is becoming increasingly apparent that the tightmoney policy is based on something less than a clear understanding of the transitions that are taking place in our economy today. The inaccuracy of the economic forecasts over the past few years would indicate that we have greatly underestimated the capital requirements

of normal growth, and that the policies adopted as a hedge against possible inflation may be, instead, artificial impediments to healthy

progress.

For example, most of the economic forecasts played up by the press over the last 3 or 4 years, and incidentally, as an old press man, I want to say that the press only interprets what the economists put forth— have proclaimed, with curious and apparently unjustified persistence, the likely imminence, if not the inevitability, of an economic recession. Except for minor stabilizing adjustments in limited areas, these pessimistic views have not been supported by the course of events, and notice that today our gross national product is predicted at $423 billion, up approximately $8 billion from the last prediction.

It may be noted also, that the tight-money policy is beginning to affect the availability of funds for absorption of Treasury notes. A recent issue was only 72 percent subscribed notwithstanding interest. rates of 32 and 35% percent, the highest since the bank holiday of 1933 (4.259 percent). As a consequence maturing Treasury notes in the amount of $1,167 million will have to be paid out of cash re

serves.

The impact of the shortage of investment capital has been especially severe on the small-business community. Although commercial banks can supply most of the short-term loan needs of small business, it is nevertheless a fact that there are areas in which this is not true. High taxes, which operate against the accumulation of equity capital, make it imperative that long-term credit be made available. For this reason, we have supported the bills (S. 719, S. 720, Senator Sparkman) providing for establishment of national investment companies, and for insurance of small-business loans.

There is no question but that the lending power of the SBA is seriously needed in the long-term credit area. To the extent possible however, we believe that the commercial banking system should be. utilized for the reason that sound administration of these loans requires local knowledge and supervision. We also believe that the majority of small-business loans should be approved by local offices of SBA without reference to Washington.

From an overall viewpoint, we believe there is a compelling need for a Government agency with its primary focus on the wellbeing of the small-business community. The general authority should not be limited to specific functions, but in general to protect the field of opportunity and promote the climate necessary for sound development of small business. In this area, we believe much can be accomplished administratively through the cooperation of other departments such as Internal Revenue, Labor, and Justice, provided the desired relationship with SBA is established by a clear legislative directive.

As to the specific services performed by SBA, comments from our membership indicate that Government procurement continues to be an area filled with pitfalls for the small operator. With due acknowledgment of the constructive accomplishments of the SBA, in connection with procurement counseling, set-asides, progress payments, and so forth, it appear that Government orders should not be accepted without a full understanding of the possible hazards involved. These include cancellations, delays, inspection trouble, changes in specifications and policy, and other frustrations, all of

which may result in losses which a small operator is unable to bear. There probably are limits to improvement of procurement methods, but apparently there is still considerable room for accomplishment in this field.

I would like to state that our experience with the SBA has been very satisfactory. As might be expected, we sometimes are called on to help with small-business problems that have dim prospects, but we can say that we have always received prompt and intelligent help from the SBA staff.

In conclusion, we believe that the overall performance of the SBA fully justifies the extension of the basic act.

The CHAIRMAN. Does that conclude your statement, Mr. Davis? Mr. DAVIS. Yes, sir.

The CHAIRMAN. Do you have any specific recommendations for the amendment of the act?

Mr. DAVIS. I don't believe I understood, Mr. Chairman?

The CHAIRMAN. I say, have you any specific amendments, have you prepared any particular amendments that you would like to have incorporated in the Small Business Act?

Mr. DAVIS. No, sir; we have not. None that I can speak on today. Our recommendations and our policies and our resolutions are developed by our board at an annual meeting. Our annual meeting, Mr. Chairman, comes up the 19th, 20th, and 21st of May. It is approximately a week away. And at that time, if the chairman and the committee wish, I will be glad to supply you with the specific recommendations developed as a result of that meeting.

The CHAIRMAN. We would be glad to have any recommendations you have.

Dr. Talle?

Mr. TALLE. Thank you, Mr. Chairman.

I understand you are a former newspaperman, Mr. Davis?

Mr. DAVIS. That is correct, Dr. Talle.

Mr. TALLE. You have prepared a good statement.

Mr. DAVIS. Thank you, sir.

Mr. TALLE. For several years, I have been interested in improving economic statistics. Now, you have touched on a point that is very important. So frequently those who gather the statistics do not interpret them, and I think you stated that the newspaper people are inclined to say what the economists say.

Is that about right?

Mr. DAVIS. The function of a newspaper, if I follow your question, is not to make the news, it is to distribute the news and, therefore, except in the case of a few so-called special writers, who are presumably experts in their field and therefore are permitted to interpret, when a news story comes across a city desk it is published as a news story. In other words, it is credited to whomever it should be credited and it is published without benefit of interpretation.

Therefore, when the President's Council of Economic Advisers, or the chamber of commerce, or the economists of that body, or of the Department of Commerce, issue a statement saying that the national trend is going thus and so, the newspaper publishes it.

Mr. TALLE. We had some very good hearings here in this room on the 12th and 13th of July 1954. We had testimony from Government agencies and witnesses representing all important economic activities.

Out of what we, as a subcommittee on economic statistics did, came the recommendation that we should strive for more accurate statistics, more nearly complete data, and more prompt reporting of data.

I know you realize that if sombody gathers data, and somebody else interprets the data, those who interpret will say what they say not only because of the figures they look at, but also because of the point of view of their economic philosophy.

That would be correct; would it not?

Mr. DAVIS. Yes, sir; I think that any individual expresses a part of his personality in anything he does or says. Therefore, I would say that would be an absolutely correct statement.

Mr. TALLE. Yes, sir.

I think that is inescapable, and for that reason, one person who interprets the data might come to a certain conclusion in his forecasting, whereas somebody else might arrive at a different one and, clearly, that is confusing to the reader when on the basis of the same data, there are variations found in the interpretation. The interpretation is exceedingly important, as you have pointed out. Thank you for your statement.

Mr. DAVIS. Thank you, Mr. Congressman.

The CHAIRMAN. Mr. Brown.

Mr. BROWN. Mr. Davis, in what respect to do you want the present law amended?

Mr. DAVIS. Mr. Brown, as I have just stated to the chairman, if you will bear with me, inasmuch as I am just a hired hand of this association, and there will be an official expression forthcoming within a week, I have asked permission to have that placed in the hands of the committee at the time it is developed.

If you will bear with me, I don't want to impose personal opinions, although I will say, as Congressman Talle points out, that every individual has his own opinions, but I would not want to impose them upon this committee, since I am here representing a great organization, and I feel that I should not speak unless it speaks.

The CHAIRMAN. Mr. McDonough?

Mr. MCDONOUGH. Mr. Davis, what in your opinion, is the principal cause of failure of small business? Is it lack of credit? Is it poor management, or what other cause?

Mr. DAVIS. I think I can speak on that, Congressman McDonough, because I believe it was the official figures of the Department of Commerce which indicated that small-business business failure generally, not differentiating between small or large, because some fairly large businesses also fold in this country, it seems to me the official figure was that 91.3 percent were occasioned by failures in management. And, of course, management covers a great many fields.

In other words, it could be in the field of procurement, it could be in the field of production-that is scheduling things through-it could be in the field of acquiring too much inventory that you couldn't move; it could be in the field of failure to have adequate financing to carry your operation through; it could be in the sales field; it could be, as Congressman Rutherford so aptly pointed out here a few minutes ago, I don't know whether the individual businessman he cited as an illustration is a fictional character or not, but that businessman failed to give the customer a smile, and he didn't believe in advertising.