Special Message to the Congress Urging Expansion of the Minority Business Enterprise Program

To the Congress of the United States:

Approximately 35 million Americans are of Black, Spanish-speaking, or Indian ancestry--about 1/6 of our total population. Yet these same minority Americans presently own only about 4% of America's businesses. And these businesses, in turn, account for less than 1% of our Nation's gross business receipts.

In my statement on school desegregation of March 24, 1970, and again in my statement on equal housing opportunity last June 11, I committed this administration to the untiring pursuit of a free and open society, one which gives all citizens both the right and the ability to control their own destinies. I emphasized that such a society should be diverse and pluralistic, affording all of its members both a range for personal choice and the mobility which allows them to take advantage of that range of choice. Both in law and in practice, I argued, we owe every man an equal chance at the starting line and an equal opportunity to go as high and as far as his talents and energies will take him.

Throughout our history, one of the most effective ways in which we have advanced these goals has been by expanding the opportunity for property ownership and independent business activity. On many occasions our Founding Fathers spoke eloquently about the close relationship between property rights and human rights, and the wisdom of their words has been abundantly demonstrated throughout our national experience.

One of the most effective means now available for advancing the cause of human dignity among minority Americans is by expanding managerial and ownership opportunities for minority entrepreneurs.

On March 5, 1969, in one of my first executive orders [11458] as President, I established two new mechanisms for promoting expanded minority business activities: an office of Minority Business Enterprise within the Department of Commerce to coordinate and oversee all Federal efforts in this field and to stimulate private sector initiatives; and an Advisory Council for Minority Business Enterprise to study this complex subject and recommend further action. Since that time, both of these units have been diligently carrying' out these assignments. The further steps which I am announcing today have grown in large measure from their suggestions and their experience.

THE RECORD TO DATE

The record of this administration in promoting minority enterprise is a record of which we are proud. The aggregate total of Federal business loans, guarantees and grants to minority enterprises and purchases from them has increased almost three-fold over the last three fiscal years--from nearly $200 million in Fiscal Year 1969 to an estimated $566 million in Fiscal Year 1971. Federal purchases involving minority businesses alone have increased more than eleven-fold--from $13 million in Fiscal Year 1969 to $142 million in Fiscal Year 1971. Our program to stimulate minority banking, which began just one year ago this month, has surpassed its goal of generating $100 million in new deposits in minority banks; firm commitments have been received for more than $35 million from the Federal Government and $65 million from the private sector.

In addition, the Small Business Administration has licensed 39 Minority Enterprise Small Business Investment Companies (MESBICs), with an aggregate capitalization in excess of $10 million. When Federal monies available to these 39 MESBICs are fully utilized, they should be able to generate some $150 million additional dollars in overall financing for minority business ventures. Moreover, a number of new MESBICs are now in the process of formation. At the same time, the Opportunity Funding Corporation, which has received $7.4: million from the office of Economic Opportunity, is also developing new projects which will stimulate minority ownership.

Other promising developments include new legislation which provides crime insurance at reasonable rates to minority businessmen, new legislation which assures the availability of surety bonds to minority contractors, and new regulations which require affirmative action to increase minority subcontracting under all Federal prime contracts and increased minority business participation in all Federally financed housing projects.

The Government has also stepped up the collection and dissemination of information critical to the development of minority enterprise, including the first census ever taken of minority-owned businesses. Meanwhile, an Inter-Agency Committee on Minority Business Enterprise has been formed in Washington and a series of Minority Business Opportunity Committees have been set up across the Nation.

Government efforts have also helped stimulate the private sector to provide increasing assistance for minority enterprise-including resources such as equity and debt capital, franchise offerings and other business openings, management services and technical assistance, and a range of market opportunities. For example, there are nearly three times as many minority-owned franchises and more than six times as many minority auto dealerships today as there were 2 years ago.

THE CHALLENGES WHICH REMAIN

In a wide variety of ways, then, we have been working to give disadvantaged groups a greater stake in the American economy. But, as the Advisory Council on Minority Enterprise concluded in its recent report, there are still "enormous economic inequities" which challenge the will and the resourcefulness of our Nation. The elimination of those inequities must be a national objective of high priority in the 1970s. Accordingly, I am today calling on the Congress to join with the administration in a still more intensive and far-reaching effort to foster business development among minorities.

This program should be guided by several important principles. It should be a comprehensive and pluralistic effort, one that moves forward on many fronts, since the barriers to minority enterprise are varied and numerous. It should also be a flexible approach, one that maximizes local control, since local realities are diverse and changeable. Our program should encourage the private sector to join with Government in creating an economic environment conducive to the development of minority businesses.

Another important principle is that we should carry out this program without overpromising or raising false hopes. There is no automatic road to economic success for any group in our society. A sound program which enables more Americans to share in the rewards of entrepreneurship will find them sharing in the risks and the responsibilities of entrepreneurship as well.

AN EXPANDED BUDGET

With these considerations in mind, I am calling today for a significant expansion of our minority enterprise budget. In addition to the $3.6 million appropriation which we originally requested for the office of Minority Business Enterprise in fiscal year 1972 we have asked the Congress to budget an additional $40 million--bringing the total budget for the current fiscal year to $43.6 million. I repeat that request today---and in order to provide for continued expansion of the minority enterprise program, I intend to propose that OMBE be given a budget for fiscal year 1973 of $63.6 million. Altogether, we are asking for a new two-year program of $100 million.

What would this money be used for? Primarily, these funds would provide for an expanded program of technical assistance and management services. Approximately 10 percent of these new funds would be used at the national level--to strengthen minority business and trade organizations, to generate broad private programs of marketing and financial assistance, to develop training programs, and to foster other national efforts. The remaining 90% of the new money would be spent on the local level--supporting a variety of efforts to identify, train, advise or assist minority businessmen and to put them in touch with one another and with non-minority businessmen who can provide them with additional help.

In talking about encouraging expanded ownership, we are talking about an impulse which is already strong among minority groups in this country. The desire to gain a bigger piece of the action is already there; it is not something that depends on government stimulation. What government must do, however, is to help eliminate the artificial obstacles to expanded ownership--including the complex array of regulations and forms and bureaucracies which often stand between minority entrepreneurs and the resources which are available to help them.

This is why we are emphasizing the development of local centers which can bring together a vast array of training, advice and information for minority businessmen. Such centers can help them put together in an effective way the many elements which are necessary to build a successful business. We hope to develop more than 100 of these centers over the next three years.

I would emphasize that the money we are requesting for OMBE does not include grants, loans, guarantees, and purchases with minority businessmen by many other Federal agencies. Such direct aid, however, will also be expanded. We have, in fact, budgeted for $700 million in minority loans, grants guarantees and purchases in the current fiscal year, an advance of half a billion dollars--more than three-fold increase---over 1969.

BOLSTERING THE MESBICs

In addition to expanded budgets, I am also submitting to the Congress legislation to strengthen our growing program for Minority Enterprise Small Business Investment Companies. This legislation would:

(1) Lower the level of private financing required to qualify for financing from the Small Business Administration on a three for one basis. At present, a MESBIC must raise $I million before it can obtain Federal dollars on a three for one basis rather than the two for one basis that otherwise applies. I propose that the qualifying figure for three for one assistance be cut in half.

(2) Provide increased equity to MESBICs in the form of preferred stock to be purchased by the SBA in place of part of the debt instrument purchased by the SBA under current law. This would reduce the debt load presently carried by MESBICs and stimulate added investments to create larger and more vigorous MESBICs.

(3) Lower the interest rate on SBA loans to MESBICs to three points below the normal rate set by the Treasury Department during the first five years of the loan.

These provisions should greatly increase the resources which are available to minority businesses through the MESBIC program.

BETTER COORDINATION

I am also issuing today an executive order [11625] giving the Secretary of Commerce--and, through him, the office of Minority Business Enterprise---increased authority over all Federal activities in the minority enterprise field. This order gives the Secretary a clear mandate to establish and carry out Federal policy concerning minority enterprise and to coordinate the related efforts of all Federal departments and agencies. It also directs the departments and agencies to develop systematic data collection processes concerning their minority enterprise programs and to cooperate in expanding the overall Federal effort. The substantive provisions of Executive Order 11458 of March 5, 1969 are also carried over into the new order.

UNFINISHED BUSINESS

In addition to these new initiatives, I again urge action on a number of older proposals. Among these is my suggestion that a new Assistant Secretary for Minority Enterprise be created in the Department of Commerce---an important step in giving greater cohesion and greater emphasis to Federal involvement in this area.

Other important legislation includes Senate Bill 544, which would alter tax laws so as to ease the burden on small, marginal businessmen. I also urge passage of the Small Business Amendments Act of 1971. Finally, I again ask the Congress to enact the Indian Business Development Program Act, the Indian Financing Act, and the Washington, D.C. Development Bank Act of 1971.

CONCLUSION

The best way to fight poverty and to break the vicious cycle of dependence and despair which afflicts too many Americans is by fostering conditions which encourage those who have been so afflicted to play a more self-reliant and independent economic role.

This goal will not be achieved overnight for there is no easy way to eliminate the barriers which now prevent many who are members of minority groups from controlling their fair share of American business. Yet the long range health of our economy-and, indeed, of our entire society-requires us to remove these barriers as quickly as possible. Both morally and economically, we will not realize the full potential of our Nation until neither race nor nationality is any longer an obstacle to full participation in the American marketplace.

RICHARD NIXON

The White House

October 13, 1971