When the hurricanes in the South wreaked devastation across the Gulf Coast, small businesses in particular were hit hard, and many entrepreneurs in the region fear they will not have the capital to rebuild. Since the hurricanes, some small-business owners have started complaining that aid designated for the region is not reaching them. We spoke with our "Point/Counterpoint" team, veteran New York Democratic congresswoman Nydia VelÃ¡zquez and Arizona Republican congressman Rick Renzi, about what Congress could do to help Gulf Coast entrepreneurs recover.
Entrepreneur: In your view, what programs would best benefit entrepreneurs in the devastated regions?
Rep. Renzi: The best kind of short-term program is the right combination of grants and loans. But the federal government does not have to provide the total solution. These short-term programs can come from private, local, state and federal sources--directly after the hurricanes struck, grants from private charities and the Federal Emergency Management Agency helped meet the immediate relief needs of entrepreneurs. In the longer term, the American Bankers Association has recommended that the SBA allow private lending institutions to also offer SBA-backed disaster loans. I'm open to [a] private-sector backed solution.
Rep. VelÃ¡zquez: The government has to play the key role. The SBA has to offer not only immediate disaster assistance, but must [also] ensure these businesses are equipped for the longer term. We have the [SBA] microloan program that'll come into play here. The SBA needs to go back to the drawing board and lay out a strategy of how they're going to expedite the loan process.
There have been concerns that assistance thus far is not reaching entrepreneurs. Do you think this is accurate, and if so, what can Congress and the administration do to speed up the process?
VelÃ¡zquez: We had a congressional hearing with [SBA head] Hector Barreto weeks after Katrina, and they hadn't issued even one loan. The chairman of the [House] Small Business Committee, as we were conducting a hearing, said we don't know if it's worth rebuilding the region.
Small businesses are not getting [rebuilding] contracts. Many of the same government agencies involved in the Gulf Coast rebuilding got the lowest marks on my Small Business Contracting Scorecard.
Renzi: There was a need in the immediate aftermath of the hurricanes to get relief supplies down to the region as fast as possible, and many of the contracting protections given to small business were regrettably waived. Fortunately, the administration recognized this as a problem and has worked to devise solutions to the betterment of small businesses. The administration announced that it will recompete, under regular small-business contracting rules, the five main contracts it awarded to large businesses.
How can the federal government balance these reconstruction needs and the broader budget, given that we are running a large deficit?
Renzi: The Gulf region has already received the largest emergency supplemental funding ever in response to a natural disaster (or even 9/11), which did not require any [budget reductions]. Future appropriations should be offset with reductions in spending in other areas of the federal government, and tax increases should not be considered because that would only stymie economic growth. If we're asking the nation to bear this load to help rebuild the Gulf region, then the entire federal budget should be subject to an across-the-board reduction of whatever is needed.
VelÃ¡zquez: There should be no excuse not to provide resources here.