THE WHITE HOUSE WASHINGTON AUGUST 9, 1956. Dear Mr. ChaIRMAN: I was particularly pleased to receive and read the Progress Report of the Cabinet Committee on Small Business which you and your colleagues have been working on for many weeks. This Administration is engaged in a continuing effort to ensure that the American economy is based on a strong, broad foundation of healthy free enterprises-small and large. The first Progress Report of the Cabinet Committee on Small Business is a further forward step in this effort. The scope of the Report's analysis and recommendations demonstrates that no constructive potential avenue of improvement-either legislative or executive—is being overlooked in our search to widen the opportunities for small businesses in America. We must continue to strive to eliminate obstacles hindering the growth of small businesses. I also firmly believe that uneconomic or sweeping nostrums have no place in this Administration's program; such measures usually help no one and eventually injure all. I am glad to see that the Committee emphasizes the importance of maintaining competition and of continued vigilance against any outcroppings of monopoly; also that the Committee's report recognizes the need of preserving and increasing efficiency in business, and that it has focused on positive measures to help small businesses get started and grow. I want to assure you that I shall give the recommendations of the Committee the prompt and favorable consideration they deserve-both in preparing for executive action and in drawing up the Administration's legislative program for the new Congress. I shall ask the departments principally concerned to advise me further. I wish to thank you and your Cabinet colleagues for this forwardlooking and useful progress report, and I urge the Committee to continue its studies of small business problems and to keep its findings current in order that no opportunity will be neglected to strengthen this vital segment of the American economy. WASHINGTON, D. C. DEAR MR. PRESIDENT: We herewith present a progress report of the Cabinet Committee on Small Business, in conformity with your request for a report on or about August 1. Жель Secretary of Commerce. James P. Maravel Secretary of Labor. Atten A. Flemming Director of the Office of Defense Mobilization. Allenster Sola Administrator of the Housing and Home Finance Agency. Wendell BBanus Administrator of the Small Business Administration. Chairman of the Council of Economic Advisers; Progress Report by the Cabinet Committee on SINCE ITS APPOINTMENT on May 31, 1956, the Cabinet Committee on Small Business has been engaged in investigating the economic condition of small business enterprises, in reviewing Federal policies and programs that affect small business, in sifting hundreds of suggestions for governmental action received by the Committee, and in formulating a constructive program, both legislative and administrative, for expanding the opportunities of small businesses to prosper and grow. On the basis of the study and investigation carried on to date, the Committee submits its first progress report. THE PROBLEMS OF SMALL BUSINESS The Committee finds that the fortunes of small businesses have ordinarily varied with the fortunes of the economy at large. When production, employment, and the flow of incomes have risen, as has been the case in recent years, the majority of smaller enterprises have shared in the economic expansion. On the other hand, when business activity has been dull, many small businesses have suffered a setback. The most important contribution that the Federal Government can make to the economic health of small businesses is, therefore, to pursue monetary, fiscal, and housekeeping policies that foster sustained expansion of aggregate economic activity and that avoid the illusions of well-being that are sometimes produced by price inflation. In formulating governmental policies, it is also necessary to recognize certain basic changes that have occurred in the economic environment of smaller businesses during the past generation. Problems of organization, of survival, and of growth, which have always complicated the life of new and small businesses, have become more difficult. The following facts, in particular, should be kept in mind: (a) In the past quarter century an enormous increase has occurred in the burden of Federal taxation. The impact of this development has been especially severe on small businesses. Such concerns have little or no access to public markets for capital. If they are to grow, they must have the wherewithal to expand plant, equipment, and markets. But the heavy burden of taxes nowadays sharply reduces the ability of small enterprises to plough profits back into their businesses. (b) The Federal Government has become by far the largest single purchaser of the goods and services produced by our private economy. A substantial part of the buying by the Government necessarily consists of intricate and expensive military items which cannot be efficiently produced by small firms, except for parts or components on a subcontracting basis. (c) The pace of technological change has been accelerating in recent years. Large and well-financed firms have become accustomed to undertaking costly research and development programs, which enable them to set the pace or to meet the pace of industrial innovation and investment. Small business enterprises cannot normally do this. (d) The scope of advertising has greatly increased with the diffusion of rising family incomes and the growth of the radio, television, and other mass media of communication. These developments have favored concerns with nationally known brand names, and have complicated the marketing problems of small enterprises. (e) The progress of mechanization in industry, the increasing investment by consumers in durable goods, the expansion of home ownership, and the growth of suburban life have opposed the tendencies just described, by opening up new opportunities for small businesses—particularly in construction, retailing, repair work, and in various service occupations. They have not, however, stemmed the difficulties faced by small manufacturing establishments. FEDERAL POLICIES AND PROGRAMS Recognizing these changes in the economic environment of small business, the Federal Government has acted on many fronts. Our tax laws contain provisions that are helpful to the smaller firm in carrying the risks of enterprise. Government agencies make or insure loans to sound businesses that are otherwise unable to obtain credit. The Securities and Exchange Commission provides a simplified method for registering small public issues of securities. The Department of Commerce and |