.. >> at the hearing and this issue was that none of their companies were doing any research at all

around oil spill r&d. do you have any thoughts about how we could encourage those companies who are doing the drilling as senator murkowski said to spend the same amount of money researching how to clean up, as they are researching effective drilling practices? >> i think ultimately, the two driver of behaviors for the oil companies. the first one are the response plans and the requirement to identify resources and the response plans. we may have an opportunity when we go back and look at plan review which is something that we need to do and have the coast guard involved in plan review. how you create the requirements for the response plans and what you tell them they have to have available can drive them to create the resources. if you want to create an incentive, look at how to structure the requirement and response plans would have create incentive for them to do oil

spill that would to the oil response. i think that would be one way to do it. >> okay. one -- that's a helpful suggestion. one the other things we heard looking at the -- how the oil pollution act had worked was the that energy -- inner agency commit thee that was set up to develop and direct the oil spill are in deep land had not been as effective as it might have been. suggestions to us were the challenge was it wasn't clear who was in charge. that created a real issue around getting things done. do you have a perspective on that? >> i do. there's an existing standing body called the national response team. it was identified in the national contingency plan under the statute and regulation it's the ultimate body on disbursements during the spill.

they exist, they meet regularly, agencies are involved. i see that body as a perfect mechanism to be given the over sight responsibility. i would say this though, when you have a committee that only have several hundred thousand, they are not going to be very robust. >> who shares the committee? >> i think it rotates. i would take a guess it might be co-chaired. >> thank you. thank you, mr. chairman. >> admiral, thank you very much for your excellent testimony. and your suggestions and we will try to take them to heart. >> thank you very much. >> thanks for your great service to the country last year. we greatly appreciate it. >> tonight on c-span2, a hearing of the senate small business committee, then a discussion about the future of pakistan and the kato institute hosts a discussion about u.s. immigration policy.

>> at this hearing of the senate small business, government testified about the job act in 2010. it increased access to capital. this is an hour and 45 minutes. >> good morning, everyone. i'd like to call our meeting to order this morning. and i'd like to thank all of our witnesses for joining us this morning. particularly, our witnesses on the second panel who are going to be bringing real life testimony to the issues that we are looking at and reviewing this morning. as many of you know, this week

is national small business week. president john kennedy started this tradition in 1963 to recognize the contributions the small businesses to the economic vitality of our country. the following year, president johnson awarded the first small businessman of the year. i underline the word businessman of the year. to a mr. berkeley debell. he was from spirit lake, iowa, president of berkeley company, manufacturing of fishing line. his business was started in a bedroom, his workshop while he was in the high school at the time. mr. president johnson said mr. debell represented millions of businesses who st. paul wrote were not slothful in business, but ferment in spirit. romans 12. while times have change, they

need to lift up the entrepreneurs that are not slothful in business, but fervent in spirit. that's the purpose of today's hearing. we want to recognize the 27.2 million small businesses in america that are struggling to recover for the great recession. more specifically, we'll hear from the federal government and how they are implementing the small businesses jobs act passed with the help of many remembers of the committee. this legislation has been touted as the i think the most important. let me recognize a few things, senator shaheen who is here for the opening statement in just a moment. i want to put a few things into the record. last congress, 111th, the committee hear compelling testimony from small business owners across the country, struggling to keep their lights on, doors open, and stretching to keep valuable employees on

the payroll. many business owners could not get conventional bank loans. others saw substantial reductions in their existing lines of credit. still others had cutting edge products but did not see an opportunity to contract with the federal government. the results were alarming. since 2008, small business firms accounted for between 64 and 80% of all of the net job losses in our country. that is beginning to reverse, we are excited about that, and we'll hear more about that today. to address these issues, i'm proud to have led the senate efforts to enask the small business jobs bill of 2010. the bill was signed into law by president obama on september 27th. the jobs act provided many things. support to small business in many important ways, providing $12 billion in immediate tax relief, increasing access to capital by increasing sba loan limits and establishing the small business lending fund and

strengthening core programs of the small business administration which resulted in more money for counseling services for small business development centered, increased opportunities and provided a more level playing field for small businesses looking for communities to contract with the federal job. first the job act included multiple jobs act effective in 2010 that provided incentives for small businesses to make new inventments in property and real estate and expand. for example, small business owners that brought new equipment, the jobs act included enhanced provisions that allowed the immediate write off of the first 500,000 of tangible personal property and up to 250,000 for certain investments in real estate. also for the first time ever, self-employeed business owners could deduct 100% of the cost of health insurance for payroll tax

purposes. in my home state of louisiana, alone, there were over 234,000 self-employed individuals eligible for the tax break. altogether, the bill included over $12 billion in tax cuts for small businesses at a time when they needed them the most. next the job act focused on the major hurdle limiting small business growth. that was the lack of access to capital. in particular, the jobs act continued vital programs from the american recovery and reinvestment act which spurred lending to small businesses. it eliminating the borrowers fees, increase the federal government guarantee from 75% to 90%. at the time the bill passed, these provisions had already supported 30 billion in lending to more than 70,000 businesses since 2009. the extension of these recovery act provisions in our bill allowed an additional 1500

businesses to receive more than $750 million in loans. in addition, the act permanently raised the maximum loan size to the largest programs, increasing the 7a loan size from $2 million to $5 million, and maximize from 1.5 to 5.5 million. these were extraordinary accomplishments in this bill. i'm proud to have led that effort. in addition, the treasury department was tasked with implementing two new programs designed to support private sector lending to credit worthy small business. the small business lending fund makes billions of dollars in capital available to roughly -- which is several thousand healthy community banks in our country. we'll hear more about that today from dr. don graves and honorable marie johns. this strategic public private

partnership could leverage billions in small firms. treasure hay has received applications for 700 banks for roughly $10 billion. that's encouraging. we are making progress. let me say just a few more things. the small business credit initiative which was pushed by several members to the committees, much to my joy, will support at least 15 billion in new lending by strengthened state small business programs. and i know senator hagan is going to be particularly happy because there are some wonderful opportunities that will be shared today from that part of the country. under the jobs act, key enhancements for made. as we know, only 1% of small businesses export. with 95% of the world consumers

outside of the united states, it's important that this committee took the opportunity to strengthen our expert programs. we're going to hear some testimony today about how that is working. our bill increased the sba financing programs by increasing the maximum size of expert loans and expanding the network of sba and export financial specialist that council and help them under write the loans. it created a state trade and export program which will provide 60 million in grants to states to bolster their programs. in closing, let me say one other thing, this bill also increased enhancements to the small business contracting program. the federal government has over $500 billion a year available for purchases of goods and services. we're opening up opportunities for small businesswomen owned

businesses and service disabled veterans to participate in that program. and in closing, i just want to highlight a couple of provisions. i give you one example in closing of how this specifically worked for a business in louisiana. bakers of lye del is a small business that operates in louisiana. it's operated for many years. when the construction slump occurred and the recession began, and saw it's sales drop by 20%. and then again when the deepwater horizon explosion happened and the moratorium was put into effect, it's sales fell even lower. they have been in business for 40 years. they imported steel products and sold them within the 200 miles per hour range. they wanted to expert. it was simply a pipe dream. last march, however, they received assistance from the regional director of the u.s. commercial service staff in new orleans to travel to panama to

identical potential clients. they lacked the capital that make the investments. a local bank was not going to give them capital when the collateral and collections were in panama. they couldn't enforce in the event that something went south on this. but with this new program, bakers sales received $3 million from the 7a loan that helped them to secure the contracts in panama, expand their expert opportunities, and give them a path forward out of what has been a very difficult economic time for them. they've hired two additional employees, and they expect to expand sales in the future. so today we will hear some additional success stories like bakers sales and shydel. i'm proud of the work the committee has done and we're going to get testimony from the key witnesses about what more we can do to improve the outlook for small businesses in america today. let me turn it over to the ranking member, senator snowe,

and we'll receive opening statements from senator shaheen as well. >> thank you, chair, senator landrieu, for holding this today to examine the implementation of the small business acts of 2010. i think it's fitting that we would be exploring the implementation of the legislation at a time which is coinciding with national small business week that highlights and celebrates the accomplishments of the nation's 30 million small firms. now perhaps more than ever we will rely on small businesses to lead us out as they have done time and time again in the past. i appreciate the fact that we have small business administration deputy administrator marine johns and deputy treasury -- deputy assistance treasury dawn graves for updating us. i want to thank our small businesses witnesses for offering their perspective as well. as ranking member of the

committee, i know there are no more urgent than job creation in a country that our nation has endured 27 straight months with unemployment at 8% or above. last year it was 9%. we cannot allow the persistently high levels of unemployment to become the new normal. it's essential that we focus like the lacer -- laser in creating job. the best way to empower is nation small businesses whether reducing regulatory, supporting progrowth tax policies, or encouraging experting, we must continue to seek ways to create a better climate for small businesses across the country. it is with this in mind that we develop the framework for a series of small business bills. the act includes, as the chair has indicated, many priorities,

including many with a 504 and technical programs and include tax measures like those to admit general business credits to be carried back five years and taken against the alternative tax. unfortunately i think, you know, serious misgivings about the small business fund included in the legislation on the floor. i was particularly concerned by a congressional budget office score with analyzing the fund it would potentially cause taxpayers more than $6.2 billion. further more, just last week, the treasury offer came out with a report. in fact, according to the problem, 1/2 to 2/3 of the

authorized $30 billion. as of april 18th, only 27 lending institutions out of more than 7,000 nationwide had applied to participate in the initiative and only 9.2 billion in funding had been requested. moreover, the top recipients otherwise known as the top asset relief have requested 64% of the $9.2 billion. these would be paying off one with another in the form of lending fund. to obtain lower interest rates without restrictions like those on executive compensation. the report revealed they are not expected to get much additional standing. placing in doubt how much new lending will actually takes place. this begs the question isn't the lending fund proving to largely be a t.a.r.p. refinancing program? it's obvious and been

demonstrated there has not been great interest in the initiative. i know the administration is extending the deadline for applications for march 31st to may 16th of this year. i would like to explore that with you, concerning those issues. while i clearly have concerns with the lending fund in particular, i hope we can have a constructive dialogue with respect to it's implementation. but also the outcomes occurring in the legislation that ultimately became law last fall. i'm eager to hear about the desired affects of the initiative because it is important in the final analysis to ensure we have the efficiencies and the effectiveness of the programs and they are reducing results. we got to turn the economy around. we got to create jobs. i know we created 2 44,000, and we'd have to do that for five

years to achieve what we had in 2007. i think that's a challenge for the country. that's why many of the initiatives has been working. we have to make sure it's done well and achieve more immediately than otherwise being felt on main street america. i want to thank our witnesses here. thank you. >> thank you shaheen. >> thank you, chair landrieu and ranking member snow for holding the hearing on the implementation of the small business acts it's fitting that we are doing it for small business week. the jobs act was very important to create 2/3 of the jobs in this country. we all know there's much work to do. too many small businesses are still struggling with access to credit. i, unfortunately, can't stay to

hear your testimony. but i did want it raise two issues that i hope you will address. first of all, both senators landrieu and snowe have talked abouts export provisions in the legislation. in new hampshire, we think those are critical. you have to get they've access to new national markets. i think new hampshire is one the 53 states applied for funding through the state trade and expert promotion program. clearly there's a lot of interest. i think the role that sba can play in coordinating the export efforts across the federal government will really be critical. the second provision that i wanted to call your attention to has to do with the 504 refinancing provisions. my understanding is that only 20 loans have been approved since the passage of the bill. and these are provisions as we

all know that would -- will be very important in giving businesses access to working capital. so anything that can be done to help facilitate those loans, i think, will be very important. so thank you very much for being here. i look forward to reading your testimony and hope you will give real consideration to moving on those two provisions. >> okay. why don't we go right into the testimony from administrator marine -- marie johns and then john graves. >> thank you, good morning madame -- good morning madame -- good morning, chair landrieu. forgive me. ranking member snowe and senator marine and members of the committee, as has been cited, this is national small business week and it's a week we celebrate and empower small businesses that drive the

economy, keep america competitive, and importantly, create jobs. sba is hosting a three day conference where we are honoring small business owners with awards for small business champions, small business persons, chair landrieu of the year, and more. these small business owners and others like them have gotten a big boost. since the passage of the jobs act in september, the sba has worked hard to implement the provisions that affected the programs. the jobs act asked all of sba's largest programs, including the support for access to capital, small business contracting, counseling and training, and experting. some of them were quick fixes and easy to implement. others will take more time. to begin with, almost immediately, the agency began making loans with the temporary increase guarantee and reduced fees authorized by the jobs act.

it helped us put $12 billion into the hands of small businesses at a time when they needed the lending support more than ever. second the jobs act also raised the limits on the loan sizes from $2 million to $5 million. the increase size will help manufacturers, experters, and other small businesses. for example, great falls marketing in auburn, maine, received approval of the 2.6 million for the purpose of the existing business and they anticipate creating 80 jobs as a result. the jobs act also contains 19 provisions making it easier for the small businesses to compete for and win the $500 billion federal contracts awarded each year. for instance, the law reaffirmed the treatment or parity across the programs. this meant when rewarding contracts that are set aside, they are free to choose among businesses owned by women and

services enabled veterans, as well as businesses participated in the hub zone and programs. they implemented the appeal of the competitiveness which will help small businesses compete for contracts in areas such as construction, landscaping, and best control. third the jobs act also provided funds for counseling and training which included $50 million in grants for the small business development centers around the country. all of this money is out of the door and going to fund innovative counseling programs, clusters, and support for young entrepreneurs and underserve communities. the fourth and final way the act is helping small businesses is through increased support for exporting. the jobs act raised the size limits on the international trade and expert working capital loans for $5 million and export express loans to $500,000. it also made the expert express program permanent.

and chair landrieu already has cited the great success of bakers sales as one the examples of how the schools have been put to use by the small companies and creates jobs. at the same time, they are reviewing and evaluating the proposal which will fund $30 million. as we implement provisions of the jobs act, we have sought input from small business owners, rememberers, and other stakeholders. they have ten cities with three more planned in the future. each tour stop, sba officials are sharing information on how small business owners are taking on the jobs act while talking about what works, what needs to be improved going forward. the response to the jobs act tour has been overwhelmingly positive. in the surveys conducted after

each tour stop, 92% of the respondents felt they had sba. 94% learned new information about sba programs, and 95% of respondents thought they would be able to use the information they learned at their business. we had over 1900 attendees thus far and expecting a total of 2600 by the end of the tour. i'm very pleased to be here today. thank you for the opportunity to discuss the small business jobs act. i'm happy to take your questions. >> thank you very much, mr. graves? >> good morning, chairland -- chair landrieu, mustanging remember snowe and colleagues. i'm grateful to discuss small businesses and entrepreneurs to thrive, help create jobs, and grow the economy. small businesses are vital.

they employee approximately half of all americans and are responsible for 2/3 of the net job creation. that's why supporting the economic conditions in which small businesses and entrepreneurs can thrive in lending conditions, tax incentives, has been and will continue to be a top priority. the administration also recognized the unique hardships faced by small businesses today. through no fault of their own, the businesses have born much of the burden from the financial crisis. in the aftermath of the crisis, small businesses have been faced with a cycle of demand, smaller payments, and reduced lines of credit. with have no other options, they have been forced to close. last september, president obama signed into law the small business jobs act. the most important piece of small business legislation in over a decade. many of -- certainly the both of you in the room for instrumental. thank you so much for your work on that. i commend you for that work. we are excited to continue to

implement that legislation. since the bill was signed into law, treasury had been hard at work in implementing two of the programs, crucial small business programs. the small business lending fund and credit. the jobs act also contained eight small business tax cuts, part of 17 small business tax cuts the president has signed into law to provide additional relief. at treasury, i over see the small business lending fund. it's a one and a half billion program designed to support lending for small businesses by capital access, loan guarantee, and loan participation, and other innovative state small business. as a result of the financial crisis and state budget short falls, many of the programs have been cut back at the very moment

they are needed the most. the state small business credit initiative was intended to help reverse the tend. i'm pleased to say result of the good work of my treasury colleagues, 48 states, the district of columbia, and all five territories have notified they tend to participate in the initiative. we've already received 13 applications for states thus far with funds that would leverage over 3.2 in lending to small businesses. they have approved north carolina to $36 billion, and california in $103 billion. allocations for vermont and missouri have been approved and missouri reports that applications to the initiative program, the state run venture capital has exceeded the funds. additional approvals for hawaii

and indiana were announced. the second program is the small business lending fund. by providing capital with assets under $10 billion. the program works by providing capital to participating community banks through treasury purchases or debt instruments. since banks leverage their capital, the small business lending fund will help increase in the amount that is multiples of the total capital provided, helping small businesses to expand and create new jobs. the dividend or interest rate they pay helping insent them to lend to qualified small businesses in need of financing. under the jobs act, the rate will be reduced as the bank increases the lending to small businesses, ensuring the benefits only go to bank that use capital to extend credit. i'm pleased to report as of this week, we've received $702, and total request for $10.1 billion. we expect to complete the initial reviews in the next few weeks and hope to complete

initial fundings in june. we believe that the small business lending fund will have a meaningful impact across the country which in turn will help create jobs and grow the economy. we're also looking ahead to identify and address challenges that will be important to over come to build a more competitor in the long term. in march, they co-hosted with policymakers and academics to draw additional attention to the evolving challenges facing startups and small companies, finding barriers, and finding new ways to access the capital they need to proceed. with that, let me thank you for the opportunity to be here and reiterate how appreciative i am to the commit's work and commitment to small business. i'm happy to answer any questions that you may have. >> thank you very much. we'll have a first round of questions by the members. we've been joined by senator cardin from maryland. we appreciate him being with us

this morning. before i get into the question, i want to submit a cupful things for the record. one is a document that i received a couple of weeks ago for the index for the first quarter report. it's the largest survey of ceos in the country. this is is for profit company that's operated for many, many years. they pulled their members that represent businesses from five million to 50 million. some are smaller, some are larger. that's their average member, basically. the wonderful outcome is that it's 65% of these ceos stated compared to a year ago, overall economic conditions from their perspective have improved. 54% of the ceos expect their firms total number of employees will increase during the next 12

months, 47% said the best way the government can help create jobs is to expand access to capital, and 76% anticipated their firm sales revenues will increase. i wanted to submit that. i think that's one piece moving in the right direction. the second is a document about the unemployment rate. i think it's important to understand the unemployment rate which we don't always by talking about the averages. the rate for individuals 25 years or older is only 7.6%. it's higher than we would like, but it's 7.6%. interestly, it's only 4.5% in the country today. unemployment rates for high school is 9.7, and with some college or an associate agree,

it's 7.5. but unemployment rates for workers with less than a high school diploma is 14.6%. so while this committee can lower the unemployment rate for passing laws and new programs and policies to help get small businesses up and operating. some of the challenges are structural in terms of how the country is investing or not wisely in the work force to provide them the skills they need to create jobs. while i will as chair of the committee take a good bit of responsibility to end the recession, i would suggest that the committees of education and they have a similar challenge. and i think the administration

understands that and that's why they are broad array of programs to end the recession, not just small business bills, but we are doing our part. let me start with the question to plu graves because as a strong supporter of the small business lending fund which is a new and innovative approach, 700 banks applied. that's less than 20% of those that are eligible. as you know i intended for all of the community banks to be eligible, but we've run into some difficulty there because of some restrictions and parts of the law. however, you know, about 3,700 c corporation community banks are eligible, yet only 20% applied. that's about 600 banks. one way to look at it, it's 600 banks more than there were a year ago that have access to the funds to lend. but could you explain why treasury has not made your

investment decisions yet? when can some of these banks anticipate receiving the green light from you all? there are several in louisiana that are actually quite excited about this opportunity. can you shed some light on this for us? hope we're trying to go with program. we have worked very quickly on the programs in the small business jobs act up and runs. we have worked very hard. we have a strong team that we've put together to stand up the two new officers within treasury to get the programs off of the ground. i think it's important to remember that while we are moving as quickly as we can on the programs, it's important, in fact, you required us to be sure that we balanced both the speed in which we get the programs to the need to make prudent

investment decision and protect the taxpayers dollars. we have instituted a fairly robust, very robust system of reviewing potential investments, ensuring that every institution that applies meets the eligibility -- excuse me, the eligibility criteria that we then consult with federal banking agencies and in some cases, state regulators when appropriate and treasury performances it's own individual assessment on the financial standing of that institution and it's ability to participate in the program. once we make our approval decision, we then will let the banks know and they will be able to close within 30 days of receiving that approval. we have conducted a significant amount of outreach with community banks all around the country. we have conducted 30 webinars

and a small business lending fund team. we talk with community banks across the country every single day of the week. we look forward to announcing the first round of funding. i expect within the next few weeks, we had been making those decisions for the institutions and we will be getting some closings beginning in june. >> okay. i'm going to ask you not right now but in a few minutes your response to some of the gao report findings that just came out on the program. let me ask marie johns, mrs. john, if you could put the chart up. the 39 programs that were either created or enhanced under the small business jobs act of 2010. out -- most of them are completed by your agency. and you were the implementer for this, i understand. and most of them have been completed.

but there are two particularly, there are 28 provision that is have been completed, that's 72%. nine provisions in the process of being completed and two provision that is are not complete. the two, i understand, are not complete are the expert assistance centers and one on contracting policy. can you comment on why the delay on those two particular programs, or do you have any comments about that at this time? >> yes, chair landrieu. for the thank you for the question. i want to thank you and to ranking member snowe we greatly appreciate the support that made their way into the act. export -- overall, i'm very proud of the way that the sba has moved forward. we took the role seriously because we know that small businesses were waiting for the tools to be in their hands and grow businesses and create jobs. as far as the export provisions

are concerned, a lot of work has been done. very shortly, we will be naming the appropriate author for for the office of international trade. individuals have been hired in -- in two of our -- two of the acts around the country and the process is ongoing. and there is a requisition out for hiring. we have provided reports to the committee regarding travel and other -- >> and the contractor policies seem to be slow in being implemented. >> well, the contractor policies -- are -- first of all, one the primary contracting policies that the bill advanced was the clarification regarding parity.

that provision in the bill immediately gave contracting officers across the government clear signal, clarified rule so they had much more available at their hand in order to meet the government 23% contracting goal for small businesses? because as you know prior to the small business jobs act, there was some confusion about how our -- our programs lined up. but the parity issue in the small business jobs act resolved that. that was important under contracting. as far as the other contracting provision in the act, as you know, the contracting process is -- that is not a process the sba owns. we can't stand up the new provisions on their own. we have to go through the process through the federal acquisition and it takes time. but we are moving a pace, and many of those provisions are ar- are posed to become effective in

the future. >> thank you. my time has expireed. senator snowe. mr. graves, respect to the treasury lending program, first of all, so i can understand, the 702 institutions that are now participating in the program, how many loans have actually been issued? >> we've actually not made investment decisions on any of those 700 institutions that have applied. no loans, yet, have come from capital that comes out of the program. but you -- part of the of the -e deadline for this program was september 27th. we expect that all applications that meet the eligibility criteria will have been approved by september 27th so we'll get the dollars out the door to the community bank to do the hard business of supporting businesses. >> have you -- so it will be

this fall when small businesses can actually receive -- >> that's a good question. we believe that beginning within the next few weeks, dollar wills begin to go out the door to community banks and they will then unlend based on the incentives built in. >> basically what i was saying earlier about the tap refinancing, i'd like to have you address that. because ultimately what is suggests is that there's going to be minimal new small business lending that you are going to actually -- new institutions will be participating in the program. in fact, as i understand it, it's only about, i think -- you know, i think $3 billion that would represent new institutions only $. -- only $3.3 billion. is that true? >> you know, it's a good question. a number of people have asked that of us as well before.

it's important to remember this this legislation, that the program is not a t.a.r.p. program. i want to make that clear at the outset. any institutions that meets the eligibility, regardless of whether they are a t.a.r.p. institution or nont.a.r.p. institution is eligible to apply and participate. and the other thing that i want say is that this isn't -- that is not a program to assist cp banks. in fact, there's no community for an institution to decrease their interest rate without increasing the amount of small business lending that they do. >> but, i guess the threshold that you are using is the standard. they only have to increase it by 2.5%. so i mean essentially, they can exchange, you know, what they are receiving under t.a.r.p. for this at a lower interest rate. and they only have to increase

the small business lending by 2.5%. so that's just a minimal increase, frankly. so you are really replacing one with the other. i mean you may have -- not to reduce, but the net effect is it is happening. i think that's the point here we are just turning home the same money that's turning over those that have already received from the united states government to invite other institutions into the spread to expand the loan portfolios. i guess that's my concern. i think it's one that needs to be addressed. and from what i understand is that the t.a.r.p. recipients that seek investments that exceed the remaining t.a.r.p. balance from 10 to 30%. it does beg how many new lending will refer.

now the 1% loan. if they meet the 2.5% increase in lending. >> i share your concern. in fact, no cpp institution will get to an interest rate of one percent they increase their listening to ten percent. it's really to increase capital lending. to get capital out around the country. >> the question is how that happens. from what i'm understanding, it's not exactly happening with the maximum effect. >> it has created the reverse effect. in 2010, small business lending declined by 9.2%. the second lowest level since

2005, 2006. the latest small business lending index shows that small business lending in march of the year already increased by 12% compared to a year ago. you are using an exceptionally low benchmark for quarters end in june of 2010 to incentivize when, in fact, the small business lending is occurring without the program. the small business lending program hasn't implemented yet. that's the problem. >> would you like to speak to that? >> yeah. >> i think it's important to remember that the baseline that was set in the legislation was done so because it was really looking as a means to increase small business lending from where we were as you suggest just last year. at the low water mark in recent years. is it constitutions were given a

baseline that was significantly higher, they would not participate in the program. what we are trying to do is to incentivize banks to increase the lending, giving them the tools, giving them the capital to get the dollars to all of the small businesses around the country that are looking for capital. >> just to follow up. my time is ready to expire. they can lock in the interest rate of 1%. that's the point and the incentive for them to transfer from one program to the other. top program from there. >> senator carr bin. >> first let me thank senator landrieu. one of the most important functions of this committee is oversight. i know sometimes it's hard. i applaud of understanding the importance by conducting the hearing. the legislation, the small business jobs act had many

important provisions. i was a little late getting here today because i was attending a conference from our small business centers. the development centers. that was one the major issues in the legislation and making progress on expert activity. the access to credit. i feel like senator snowe are not only good questions, we need to get better answers. some of us would have preferred the money going into direct loans. we were told no this is going to be the incentive. get the community banks were interesting in making loans and small businesses. this was a large commitment of federal resources. we need better answering. we need to know how many is

getting out there. i'm a little disappointed it's taken this long. many of us will get out a lot quicker with more interest. i want to support the questions that have been asked by our two leaders. we need to have better information to this committee. as to how this program is working. and the question senator snowe asked as to whether this is just -- what would have happened and we're justifying incentives to the community banks, out in the community, it's a question that we need answered. i'm going to ask our leadership here to follow up and make sure we get information in this committee to make sure we are accomplishing what we intended to do. it's important we determine government opportunities for small businesses. i help draft a vision in the small business jobs act that

requires federal contracting officials to complete small business training before receiving certification. there's a real concern as to whether the procurement officers in our agencies have a bias towards existing relationshipping with contractors, mainly large businesses to the exclusion of opportunities for small businesses in our opportunity. and that this committee wanted to do something about that by requiring that the contracting officers have greater sensitivity to not only the letter, but the spirit of the law to engage smaller companies. there was a second provision that requires reports to congress dealing with better known, women owned at the advantage small businesses. if you can give us a status to if they are working and how you intend to comply with your requirements in keeping us

reformed as the progress being made in regards to those targeted small businesses? >> good morning. i'd be happy to respond to your questions. we are great for this important piece of legislation for the small businesses. our government contracting organization works regular across all of the federal agencies, we meet on a regular basis, monty monty -- monthly, actually, we have effort on contracting and ensuring across federal agencies at the dep si secretary those sba advances. and they understand how their agencies need to organize and ensure the organization flows and able to focus on the goals.

>> are they bringing the employees in who are responsible for training? >> yes, we are working with the federal acquisitions and the defense acquisitions to develop a curriculum for contracting officers. and the raining work they were already going on a regular bases. >> and the time frame for being able to implement this training curriculum. >> can you be more specific? >> probably the september, october time frame? >> will all contracting officers be required to go through the training? >> yes, that is -- >> how long will it take for the contracting officers to be able to get the benefit of this new curriculum? >> senator, i don't know. the end date we have not glibbed. the focus has been on getting the curriculum and training. we have the commitment to stay with the training.

>> i ask that my office, i think the committee is interested in reviewing the curriculum that you are changing and officers and which agency you anticipate being the first and time schedule necessary to get all contracting officers up to speed certainly with the new curriculum. >> certainly. i'd be happy to. >> and the reports to congress that are required. i take you you'll meet the deadlines and get us information as to specific progress being made with better own, business owns small businesses. >> yes, we were. >> i want to ask getting back. there was a second part other than the sba guarantee. we also provided funds through state governments who had programs dealing with credit. i know what's being done in maryland. i would ask that our committee being kept informed that you provide to us the specific activities that have been generated by states as a result of the additional resources made

available to federal level. my reason for asking that, madam chairman, following up with senator snowe, i would like to see if we could the relative activities generated by the relationships with the states, versus the additional moneys being able available to community banks. you can see where we have getting the most activity. if you can make the information available, it tells us where we need to put the attention. >> i would be happy. >> i thank you. senator, you raised several excellent points. our next panel though we'll have some specific information about how those state programs are working. i want to remind everyone that one the reasons we couldn't do direct lending is because of the strong opposition from the minority party. they would not approve of direct lending from the sba. in order to get money out to small businesses with that not being an option, the only option that we had was to work either with state programs, regional

programs of the community banks. so we will see. you know, we've crafted something. we hope it works. we're not sure it will. that's what the hearing is about. i myself as a lead architect of the bill is very interested to see. because there were different ideological views on both sides, we didn't have all open and available to us. but we did the best that we could. let me ask a question and go through a second round and get to the second panel. one the things that i was most interested in and i'm not sure we were able to do successful was getting some relief for debt refinancing for the commercial real estate sector -- section. we wrote a section in the bill entitled small business access to capital, trying to provide some relief refinancing. our understanding, however, is that there has been mineral usage of the program. we're hearing from banks that the rules that are written which we think might be much more narrow than what our law

intended is not helping to provide the relief that we had hoped for. so mr. graves, do you have any comments about this particular section or miss johns? >> yes, senator, chair landrieu, i'd be happy to respond. the 504 commercial refinancing initiative was a new program for us. and in every instance when we have a new program, we are always balancing two key objectives. that is getting the program into the hands of small businesses as soon as possible, but also ensuring we have delivering the program in a way that ensuring we are good stewards. once we put the initiative into play, we are also constantly gauging how the market is responding.

and we'll look at -- pardon me. opening up the provisions of the 504 reply to include more businesses than that. we have done and made a mid course correction and we made sure that and all of the industry associations and talk with them and we are in close contact as we were developing the miscourse correction. so we are very -- we're looking forward to getting the new 2.0 if you will, version of the program in place and we're sure that we'll see some -- >> because this is very, very, very important. many, many, many small businesses have seen, of course, the value of their buildings that they own, or their, you know, commercial collateral basically decline. but they still have fairly strong balance sheets and refinancing opportunity could really help them.

: another missed opportunity for businesses out there. and contribute to the spiralling down of this market. so again, our committee can't do everything in this regard. but this is a very special initiative. please keep us posted as to how. and if the it's the language of the law that's preventing you, i would be open to some modifications. but hopefully you can take the language as it was written and implement the rules so it actually works and people can take advantage of it. and one more question, then i'll turn it over to senator snow for her second. let me see. the jobs act we talked about this, but it's worth repeating again. the state trade and export promotion grant pilot program, can you provide the committee with an update on the status of this program. specifically how many of the 56 eligible states have submitted

applications for this particular program. >> yes, senator. i would be happy to do that. we have received applications from 53 of the 56 eligible. and in fact, as we speak, there is an inner disciplinary team of reviewers who are meeting at the sba. they have been there all week. we compiled a team of folks from around the agency to bring various expertise to the review process. in addition, we also sought out reviewers from other federal agencies. so we have a reviewer from xm bank, from the department of commerce because we wanted to have the strongest possible team. so they're hard at work this week and intend to complete their work by the end of the week. so we are very eager to make these selections, get these proposals, the proposals back out to the states. >> just finally as i turn it over, i want to be very clear

that i agree with the senator that the oversight of this committee is very important. we've tried instead of sitting he here, we've tried many different things. we're now in the process of evaluating, what works well, what's not working, but you can't stand still in a situation like this and do nothing. you must move forward aggressively. so we've started new regional programs, export programs, partnerships with our community banks. we did everything but direct lending because we were blocked from doing so. but we could potentially revisit that later on. but let's see what's working. and then make the adjustments as we go forward. but getting capital into the hands of main street businesses, not businesses on wall street, not big multicorporations that have many ways to access capital, but main street businesses remain our goal to drive down these unemployment rates and provide opportunity for the american dream. >> may i make one comment in

response? i just want to assure the members of the committee that at the sba we share your sense of urgency on that and the notion of constantly looking at how the programs as we get them out into the hands of small businesses, we are constantly looking at how those programs are being received and what tweaks -- what mid-course corrections we need to make. as we did in the 504 re-fi we acted quickly toward that. i am out, i'm traveling regularly -- since the first of the year, i've been to over half of our regions talking to hundreds literally hundreds of small business owners asking them about the small business act. we've had a small business jobs act tour, 13 cities planned, we were down to the last two cities. we are out and about talking regularly to small businesses and seeking their input on how we can do -- what we're doing better, how we can make these programs work more effectively

for them. so i want to assure the members of the committee that we share your sense of urgency. >> we appreciate the effort. and we're going to be looking for some very clear results as the weeks and months unfold. senator snow? >> thank you, chair landrieu. just to follow up on the issue of direct lending. the administration opposed direct lending, as well. essentially did not want to become a bank. a big difference between guaranteeing loans than it is to write and be directly involved in issuing those loans. in fact, there's an article right here that "new york times," today is march 10th, why won't the sba lend directly to small businesses? it's an indication that the government would have to stand up in his words a massive bureaucracy and it'd take too long, you'd be frustrated. there's a point to legitimate issues there in direct lending. and in any event, i think the point is here now is that we have to get into the oversight

issues and to make sure that this program is working. i do have strong concerns about on the t.a.r.p. side. and i've already indicated that to you. one other issue, i've introduced a bill on a couple of issues concerning the lending program, but one i wanted to raise with you today because you may already be addressing it is that my bill would prevent the treasury from issuing a loan to any institution that has been deemed by its regulator to be unhealthy. that entities regulator. what would you be doing in that regard? do you get reports? how do you evaluate those who are seeking loans under this program if their regulator deems them to be unhealthy. you're not prohibited from continuing to issue those loans. >> thank you for that question, ranking member snowe. we share your concerns about ensuring every investment made in an institution is done so in

an institution that is healthy, that has the financial wherewithal to increase lending to small businesses. in fact, as i mentioned at the beginning, we've implemented a very strong and robust system of reviewing every application that comes from a community bank. each institution has an initial eligibility assessment performed by the treasury team. then we conduct a consultation with the federal banking regulator of the institution. in some cases where it's appropriate, we conduct a consultation with the state regulator, as well. and then treasury has its own internal investment team that conducts a separate, independent analysis and evaluation of each and every one of those applications that comes back to us from the federal banking regulators before we make any decision to make an investment in a community bank. really what we're trying to do

is make sure while we're trying to get these dollars out the door and support small businesses, we want to make sure that we make prudent investment decisions and do our very best to protect the american taxpayer. >> thank you. >> thank you. >> administrator johns, one of the issues i wanted to explore with you some expressed interest in increasing the loans. it would crowd out small borrowers. what's your response to that? i know that according to the most recent data, 60% of the agencies, loans have been under $150,000, and over 80% have been under $350,000. it appears the small loans have been growing faster than the larger loans. but can you comment on this issue? because clearly we want to make sure that smaller entities -- smaller businesses are having access to these loans. and it looks like it's certainly possible that it's occurring. but i'd like to hear comments. >> actually, there is no

indication of crowding out effect. in fact, i'm sure we have shown you data that there was a major spike in lending at the end of the year. that was as a result of the fact that there was much pent up demand for the 90% guarantee. so there was a lot of activity at the end of the year. that spike was not due, pardon me, to the larger loan size. in fact, our data shows that really just 3% of our loans are in the larger loan sizes between the $2 million and $5 million. and that has been very consistent over the course of time since the passage of the small business jobs act. so the notion of crowding out effect has not at all occurred. >> that's great. also as you know, the loan guarantees, we reduce the borrows, fees, and lender fees, and that's not going to reoccur

in this economic climate. do you think that will discourage lending at all? i mean, do you think it's going to have any affect on loans? >> well, certainly that was -- those were initiatives that were very well received by the market. but we are still continuing to see general uptick in loans. and the other reality is that the small business needs for capital are not monolithic. yes, we have businesses that need the higher loan limits, which is why it was an important provision in the jobs act. but we also have small businesses who have reacted very well to the increase in microlending. so we have businesses who need -- small businesses need capital across the spectrum from the relatively small dollar loans in the microlending space to the small $5 million available through the 7-a program. so what we are charged to do as

an agency is making sure we're looking across that spectrum and continuing to identify gaps that may still exist and to keep this committee apprised of that and to seek your help in addressing those. >> thank you. >> thank you. >> senator? >> thank you, again. thank you both of our witnesses. and i didn't mean to get into a debate on direct loans. but if i might just point out two points. first, sba does make direct loans in emergency situations. number two, when there's a 90% guarantee of the sba loans, in other words taxpayers in line for 90% of these loans, seems to me making it 100%, we can have direct accountability when you're dealing with a third party bank, it's much more difficult for us to get the results that we want out quickly. that was my point on it. but i am very proud of the small business jobs bill. and i really do congratulate senator landrieu. i was at caucus meetings when

you're trying to get floor time, and there's no stronger advocate on behalf of smaller businesses and doing our work and senator landrieu. and it's not easy to get the floor time to get the bill passed. and this is a major bill, major new tools available to help small businesses. and we're very proud of this bill. but our responsibility's oversight. and to make sure that every dollar made available is used to the maximum advantage to create jobs. and that's through small businesses. and i come back to procurement. and i know i represent the people of maryland. and because of maryland's location we have a lot of government agencies located here. and we have a lot of small businesses that depend upon government procurement. so it's of great interest to the people of maryland. there has been documented abuses by agencies. and one of the things we've been able to do in this committee is to support the sba and give it the tools.

it was this committee -- i serve on the budget committee. it was a direct result of senator landrieu and senator snowe's efforts that we are able to expand the budget. and that gave the sba the tools so you could be the advocate for small businesses within the administration. we know agencies at times want comfortable relationships who they're already doing businesses with. so they bundle small contracts could be given to small companies into large contracts which only large companies can compete. and we want you there fighting on behalf of small businesses saying, no, don't bundle these contracts and elbow out small companies from being prime contractors. because we know in the prime contract subcontract relationships there are abuses there also. better off to get small companies really into the game. so we do put a lot of confidence in the sba being there as the

advocate on the behalf of small businesses taking up the fight within the cabinet room and within the administration. so the curriculum you're developing for training we see as a major step forward. and i just urge you as you implement this law that you bring in the small companies and listen to their stories as to their experiences with the department of defense or with the department of agriculture, or all the agencies of government. because there are horror stories out there as they try to get through the mine fields of getting their fair share of the procurement work of government. so i appreciate your response as it relates to the curriculum, training sessions, et cetera. but it's also going to take the sba as an advocate to fight. in the relationships they have with large contractors where we've got to get small business in the door there.

>> thank you, senator cardin. i have to say to you, i couldn't agree with you more about the importance of the sba's role as the voice of small business. we take very seriously and wear very proudly that mantle of being the advocates of small businesses within the government and beyond. and as far as my personal commitment, i've been involved in small business issues long before i have had the honor to serve in this administration in this role. and i'm a local person. and a lot of people have my phone number. so i'm regularly taking phone calls on a saturday. people stopping me at church, small business owners. i know a lot of them talking about issues and giving feedback on how our agency can work more effectively. so believe me, you have my 150% commitment. and that's why i do make it a point of talking to small businesses whenever possible. we've got to know how these programs are really playing on the field and so that we're prepared to make adjustments as we need to and that's what we

do. >> thank you. you're going to be getting more calls. i'm looking at six i picked up this morning. >> hand them over. >> i'm taking this case work myself. so i'll be contacting -- >> we'll be happy to come to your office and get you an update. >> thank you very much. and the contracting of small business has no stronger advocate than senator cardin. and thank goodness for him. i thank you. i have one question, but i'm going to ask for a response in writing about the tax provisions in the small business lending bill to treasury can supply this in writing. when will you be able to provide an analysis of whether small businesses were able to take full advantage of the tax provisions in the bill? i know that some small businesses have not yet filed their returns and do a delayed filing in october. but i'll ask -- i'll submit that to you and you can respond in writing. >> we'd be happy to do so. >> thank you all very much. i appreciate it. and we'll move to the second panel now. thank you.

as they are moving to save time, let me begin introducing our second panel. we'll be hearing directly from small business owners. from their view and perspective how this new bill is helping them or providing opportunity. we'll also be hearing from the association of the self-employed, and the vice president of a rural program from north carolina. so first, let me introduce eric blenderman, a founder and owner of a highly rated new york city restaurant. he's currently constructing with the help of an sba 504 land a second raund. restaurant. so we're looking forward to hearing his testimony this morning. this association represents the

interest of america's smallest businesses. employing themselves. one person. she is a new yorker. and finally, patrick woody, vice president for north carolina's rural center. at the rural center, he oversees capacity building programs in the area of infrastructure, business development, workforce development. we're very interested to hear this morning mr. woody, how one of our state programs that many of us supported so whole heartedly how it's working. >> thank you, chairman, members of the committee for inviting me to testify this morning about issues pertaining to implementation of the small business job act of 2010. to understand, i think, how the small business job act has

impacted main street and specifically my restaurant in new york city, i think it's important to get a little bit of background around where my restaurant came from. it's a small business success story that was conceived initially after the tragedy of september 11th in new york city. and those trouble times, my business partner and i turned our attention from grieving to reconstructing. i was then a 27-year-old kid focusing on financial models, preparing the business plan, otherwise taking the business sidesteps to turn our broad ideas into reality. the chef, of course, focused on the artistic side. i went to the place that had the money, banks. i would leave my day job at my law firm, go to the teller at hsbc, chase, bank of america, you name it, in my best business suit say to the teller i was a small business owner, here was my partner and we were looking

for about $500,000 to open up a restaurant in new york city with no experience, no capital, and nos a sets. fortunately after being turned away by just about every bank up and down manhattan, wall street, 5th avenue, 6th avenue, you name it. i persisted with a consortium of other banks, one called the new york business development corporation. the purpose is to provide creative underwriting solutions for non-traditional lending risks. the category into which we clearly fell. because of the relationship with the united states small business administration and conventional banks, they were able to mentor me through what was a complicated and difficult sba lending process. but with their assistance, i was able to procure a $500,000 sba 7-a term loan, a $50,000 small business development loan, and was able to open and construct. in terms of public/private

partnership, the lending package worked exactly as designed. my partner and i used funds to renovate a restaurant that had gone bankrupt as a result of september 11th and converted it. now more than seven years after opening, we employ approximately 35 individuals, generate hundreds of thousands of dollars in city, state, federal tax revenue every year. of course, all good stories must come to an end. but from our small business, that ending is unclear because despite our successes, our continued existence is bounded by the terms of our commercial lease. which has less than three years left before it expires. more over, despite my best efforts to arrive with business terms, we have not been able to extend that lease because of various economic conditions that the landlord has placed as a condition of lease renewal.

enter the small business stimulus package of 2010. the small business stimulus package of 2010 was initially put to vote in july of 2010, which was around the time that the chef and i had located an alternative location within which to either open up a sister restaurant to my current restaurant or to relocate my current restaurant should the time arise that relocation is required. about that time, i began approaching the nybdc once again to request financial assistance, not to lease the property, although the property was available to lease, but to purchase it outright. to attain what i call a forever home. that place that i would have the ability to sit there and manage my business in perpetuity without ever having to run the risk of being thrown out from my place of establishment because of rent increases, other conditions, or various other provisions which could attach as a result of a leasing relationship. and unfortunately, i was told by the nybdc that although we were

a credit-worthy business and we were qualified to obtain lending through various programs, the sba's lending limit of $2 million prohibited us from purchasing that property outright or conducting our expansion plans. in addition, the sba informed me that the requested financing package was going to result in a total of nearly $60,000 in lending fees, which for a small business like a restaurant owner is a very large sum of money. notwithstanding the nybdc courted aggressively, many lenders, citibank, hsbc, and others, and we ultimately decided on citibank, which was the recipient of troubled asset funding. and were able to obtain to permit construction. broken down in the form of a 504

sba loan, $1.5 million from citibank, and a further 7-a loan in the span of $420,000. the importance of this expansion to my business cannot be understated. the sba 504 program has allowed me to buy this outright. because we work on tight margins, we would've never been able to purchase this property but for the existence of the small business stimulus package. second, the collective terms will result in my restaurant paying thousands of dollars less a month than i currently pay in fixed costs for my existing restaurant. most importantly, we are in the process within the next 90 days of hiring 65 new people to staff and run my new restaurant. importantly, these benefits do not just appeal to me as a

business owner, but the city and state. in addition, each of my 65 anticipated employees will pay federal, state, and local taxes and contribute their fair share to social security, medicare, medicaid, and related entitlement programs. payments to the hundreds of food vendors, beverage, and other vendors who serve my restaurant which include locals and others provide additional revenue for local federal and state. these have begun accruing despite the fact we are under construction as we're using our funds to employ dozens of architects, electricians, plumbers, and dozens of others. it should be measured by the cash flow and profitability. i believe the same metrics should be used to utilize the small business package of 2011. as businesses take advantage of this, this committee should analyze whether they're contributing to economic expansion, creating new revenue streams for government entities,

and repaying their debt with interest and without default. if on balance the net sum of loans made to the stimulus package of 2010 achieves these objectives, i think the united states will have benefitted great through from it. i'm confident we will meet these objectives, and i'm grateful and thankful for the passage of this bill. thank you for your time this morning and i apologize for having run slightly over. >> that's okay. with a testimony like that, you can run a half an hour over your time. it's music to my ears to hear how helpful our efforts have been here to you and your restaurant. but i want to say how extraordinarily pleased i am that you took your time to come to this committee to share your story of fighting so hard to create a business in the united states of america. i can only say it should not have been that difficult. and i can only say how tragic, shameful, and ultimately destructive it is when a gentleman with your credentials, which i want to read into the

record. you then graduated with distinction in international law from the university of oxford, yet as you testified you went to every bank on 5th street, 6th street, and beyond to try to get a loan to start a business and you were turned down. so my question to those listening is if a gentleman with a degree of distinction from oxford can't get a loan from the united states banking system, how is it possible for 99% or 100% of the kids that i represent or young people in the state of louisiana who don't go to oxford. how is it possible for them to start a business? that is why this committee presses the envelope for new and innovative ways to get capital into the hands of young americans who we spent millions of dollars literally educating,

but yet our system falls so short on giving them the opportunity to start business. as long as i chair this committee, we're going to continue to push open this door. >> thank you, chair, thank you, ranking member, and members of the committee for allowing the national association for the self-employed to testify here today on behalf of our 200,000 members and the 22 million self-employed americans worldwide. we're here today to talk about the implementation of the small business jobs act. and the next steps we must take to improve and expand upon the vital benefits it offered to america's smallest businesses. with the current economic dialogue so focused on jobs, it's important to note that our members and the 22 million americans that are self-employed are not solely temporary freelance workers between permanent jobs. it means you have created a job for yourself. self-employed businesses

successfully provide for families, contribute to their local communities, and these jobs are just as valuable to the economy as an office or a factory job. and these businesses are just as essential as their larger counterparts. despite accounting for 78% of all small businesses in the united states and collectively contributing close to $1 trillion every year, the dynamic self-employed community is too often misunderstood and underrepresented in the policy fashion for small business. our nation's lawmakers and regulatory agencies commonly craft policy geared toward the tiny sliver of the business population that is corporate america. the narrow policy focus on the small percentage of businesses is why the small business jobs act was so crucial to our community. this legislation included key provisions that benefitted the vast majority of microbusinesses and provided much-needed bottom line tax savings to the self-employed. for years, the nasc has been working to allow a key disparity

is the treatment of health insurance costs. the self-employed do not receive a business deduction for health insurance costs causing these businesses to pay more in payroll taxes than all other businesses. with the passage of the small business jobs act, the self-employed were allowed to deduct their 2010 health insurance costs from the self-employment tax on their 2010 tax return. what did this one-year deduction mean for someone who is self-employed? based on the average health insurance costs out there in the individual market, the one-year deduction in this bill saved self-employed business owners approximately $968 in taxes. and depending upon their cost of coverage, many businesses save more money. member michael kagan of maine is owner of m. kagan and associates, a self-employed biotech consultant. he saved in taxes due to the one-year deduction in the small

business jobs act. and he used that money to reinvest in office automation and help grow his business. timothy doyle from louisiana, an electrical contractor saved $730 savings from this one-year deduction and put that money to pay for his next two months of health insurance premiums. and in this difficult economic time, this deduction in the small business job act helped business owners lower their tax liability or provided them with a substantial refund that could be used to reinvest in their business. best of all, this deduction, though temporary put the self-employed, america's smallest businesses on the same playing field as other businesses for the first time. the question now should be whether we extend this benefit and how we better implement it for the future. the nac strongly supports leveling the playing field permanently. we understand, though, in this difficult fiscal climate that an immediate permanent solution may

be difficult to achieve. however, we strongly feel that this deduction should be extended at least for a two-year period. should an extension pass, we urge congress to encourage the irs to rethink the approach in implementing this vital deduction. the method the irs used was very confusing and not the standard approach for a business deduction. they created a new line, line three in form 1040 schedule se, the form utilized to calculate self-employment tax to allow self-employed taxpayers to take this deduction. it would be preferable and a lot less confusing to taxpayers to include this deduction on form 1040 schedule c in part two, which incorporates all business expenses. self-employed taxpayers had to carefully read the directions for a schedule to take advantage of this one-year tax deduction since deductions are not typically on this form. further more, because the bill was passed so late in the year, it left little time for the irs to provide guidance to stake holders and taxpayers on this deduction.

an extension of this critical deduction for the self-employed community needs to be passed as soon as possible in order to allow the irs to be able to put this on the 2011 tax form and give stake holders the ability to educate business owners on how to take advantage of this benefit. in the current climate, policy makers on both sides of the aisle have been struggling to find ways to stimulate the economy while efforts have been notable and helped some industry sectors, only the small business jobs act has helped america's smallest businesses. america's self-employed have long asked for the same opportunistic seed as their larger counterparts. they seek no more than the same benefits that big business receive. so we encourage lawmakers to extend the key provisions in the small business jobs act. thank you. >> thank you very much. >> thank you, chair landrieu, ranking member snowe, and members of the committee for this opportunity to report to you on north carolina's implementation of the north carolina capital access program.

i'm vice president of rural development programs for the rural economic development center. for more than 20 years, our non-profit organization has implemented sound chick strategies to improve the quality of life. typically, the rural center works in 85 of north carolina's 100 counties. the north carolina capital access program is the exception. at the request of north carolina's governor, beverly perdue, they are leading the statewide effort to spur new business investment. while the state small business credit initiative offers states the flexibility of using their allocation to boost small business lending. north carolina has elected to invest its full allocation in the capital access program or nc cap. the rural center has a 14-year history of operating this program. in 1994, north carolina was one of the first states outside of michigan to adopt a cap program. enrolled 850 loans totally $103

million in creating or retaining more than 27,000 jobs. this was accomplished with an allocation of 3.6 million from state appropriations and other sources. today thanks to the small business jobs act. nc cap has been launched on a larger scale. they will receive $46 million that enable up to $800 million to over 10,000 businesses in our state. nc cap is a voluntary loan loss reserve portfolio insurance program. eligible lending institutions, banks, cdfis and federally ensured credit unions elect whether to participate. the program allows the bank to mitigate the risk with the small business lending. for loans enrolled in the program the borrower and/or lender pays a fee of 2% or 7%. it's deposited into that loan loss reserve account. as more loans are enrolled, the reserve pool grows. in the event of a default on an

nc cap loan, the lender may draw down the reserve pool to cover the loss. lenders are solely responsible for underwriting the loans and defining terms. loans may be used to buy land, construct, or renovate buildings, purchase equipment, or provide working capital. why does north carolina believe in this program? first, it's cost effective. for every $1 we invest, investor will typically loan $20 to small businesses. second, it's non-bureaucratic. paperwork is minimal and seamless to the borrower. not only do we draw upon our own experience, but more than 30 states have successfully operated cap programs. last december, north carolina joined michigan as the first two states to apply under the state's small business credit initiative. in february and early march, the rural center held 11 briefing centers across north carolina to roll out the program. these briefing sessions drew hundreds of participants including banks, other lenders,

technical assistance providers and small business owners. today, 26 lenders, including 23 banks, two cdfis and one credit union have enrolled in nc cap. these 26 lenders represent 30% of all branch bank locations in the state giving the program statewide coverage. another 15 lenders are in the process of signing up and we continue to recruit others. our staff has made face to face contact with each of north carolina's 130 banks as well as our credit unions and cdfis. north carolina enrolled the first loan in the country using the federal allocation. at this early stage, we have 16 loans enrolled, including loans for restaurants, logging, and air cargo businesses. we anticipate a rapid escalation in enrollments. and in the next three weeks, we will embark on a statewide publicity campaign. the leadership of several important partners is noteworthy. senator kay hagan who gave her

support to this legislation, our governor who seized the opportunity afforded to our state by the state small business credit initiative, bb & t president and ceo kelly king who embraced and promoted the program to his fellow ceos, as a former chairman of our board of directors, kelly was instrumental in bringing the program to north carolina originally. we also appreciate our partners at the north carolina department of commerce and the sbtdc and in the state small business credit initiative office at u.s. treasury. they've been very responsive to our needs and helping to ensure the success of our efforts. our state has suffered severe losses from the recent recession. now as we began to see signs of an improving economy, this new program is finding its legs. it couldn't be happening at a better time to stimulate the business and job growth we desperately need. thank you. >> thank you so much. i'm so excited to hear about your success.

and also senator levin was very instrumental having some experience in michigan, of course. so let me ask you this too, again for the record. what happened in north carolina between 2007 and 2011? did the program go away? >> the program did go away for a period of about four years. >> and despite its success? >> well, despite its success, our primary funder had become the golden leaf foundation. and the real reason it went away was as it came time to raise the third round of capital for the program, their priority is investing in tobacco dependent and economically distressed counties. and about 2/3 of total loans were being made in the 15 urban counties in north carolina. and just their priority as a funder did not -- it did not

meet their funding priorities. therefore, we did much to the disappointment of several of the banks that participated, we shut down the program for a period of four years. we began looking early in 2010 as this opportunity looked like legislation was taking place that might include a provision like the state small business credit initiative. we started looking very early on at this as an opportunity to start to restart nc cap on a much larger scale. scale was one of the issues with the earlier program. we had a very small amount of capital. banks are very reluctant to -- even though it's a great tool, it works very well for them. it's difficult to get banks to invest heavily in a program if they're not sure how long it's going to be around. the authorization if the staff will remind me for our program is five years for this? what is our authorization?

five years. so we hope that will give you some stability for the start-up of this. and we are really going to be looking at how this works. because we are just desperate, literally, to find models that work for people like mr. blinderman who couldn't do more in terms of what america expects its young people to do other than going to school, graduating at the top of their class, getting the extraordinary degrees. yet, when they go out to start a business, there's no capital for them to start. and we wonder why this recession is, you know, why we're having difficulty putting in our rearview mirror. so we're trying it all. all of the above. and i'm excited about the program in north carolina and potentially we could have a field hearing there at an appropriate time to really showcase what you all are doing. and we're anxious to hear what

michigan is doing, as well. let me ask, you testified you're happy for the smallest businesses in america to be on a level playing field with the largest. and you realize the financial constraints that we're under. what do we estimate it would cost to try to put these small businesses on an equal playing field? what are the most recent estimates? and do you have any suggestions about how we might step into that over time for the record? >> you know, beguagain, this one-year tax provision was a good start. it will allow us to see the effectiveness of this deduction. again, it's up to the business owner to take full advantage of the deduction. i do think we would get better utilization if the irs more effectively implemented the deduction as mentioned putting that deduction on schedule c where all other business

expenses currently lie. there are 23 million self-employed americans who qualify for this particular tax benefit. and again, in terms of qualifications, they simply have to be self-employed, schedule c filer, and they have to purchase their own health coverage. so anyone who meets this qualification should take advantage of this. in terms of cost, this bill, you know, we for years have promoted legislation to address this inequity permanently, and the bill has been scored at $2 billion to $2.5 billion a year over ten years. again, it's in complete correlation to the number of self-employed people out there purchasing their own health care. so the smaller the number of self-employed out there purchasing health coverage, the less people qualify for the deduction, the more people qualify for the deduction which would address how much it costs. but again, at the end of the day, why is it okay for the smallest businesses out there to pay more into the tax, you know,

more in revenue, more in taxes than larger businesses? why is it okay that a large business gets to deduct their health care costs that workers of large businesses gets to pay for those health care costs with pre-tax dollars, but someone who is a one-person business, self-employed, who needs the most assistance has to pay more in payroll taxes than anyone else. it's a fairness issue. and in this economy, that money is even more important because every little bit counts. >> thank you. and finally, mr. blinderman, your story is exactly what we had hoped for when we passed the small business bill. could you restate for the record what you think your business in terms of its contribution to the local economy, in terms of taxes that you're paying employees. you mentioned something about suppliers. would you state for the record the far reach of your successful small business? >> i think to answer that

question, it's best to understand the model of my existing restaurant. currently we have 35 employees, and we generate over $3 million per year in gross revenue. of that is fully taxable as income as an llc pass through to all the owners and investors of the restaurant. in addition, all of our 35 employees are paid on the books in the restaurant industry, people are aware that often times tipped employees are paid out in cash each night, that doesn't happen. everyone receives the cash that comes in each night or credit cards, it's deposited into the banks, funneled through our payroll company, payroll taxes are deducted, medicare, medicaid, social security, our payroll averages between $23,000 to $28,000 per week. translating those numbers into a bigger restaurant that will employ more people. our projected revenues conservatively if we're able to meet our numbers would generate anywhere from, again, $3.2

million to $3.7 million more revenue, which would be fully taxable by federal, state, local authorities. in addition, if you take the $23,000 to $28,000 we spend in payroll each and every week, you can effectively double that and perform the calculations to determine social security, medicare, medicaid, and other entitlements which will be deducted in addition to other taxes. i think most importantly, though, are the trickle down effects for our suppliers and vendors. it is built upon a model of sustainability and organic cuisine. which back in the day before it was a buzz word has been open for seven years. we source all our ingredients as much as possible within 150 miles of new york city. farmers who wouldn't otherwise be able to meet the new york restaurant environment, fisherman, growers and others, it's a revenue we will

consistently transfer over whether we're buying meat, poultry, fish, or vegetables in addition to our wine purveyors, and our other vendors, our glass purveyors, cloth purveyors, our laundry needs, and all of the various other entities that go into servicing a full-service fine dining restaurant. so that's the benefits that i think one can expect. and those are the benefits already achieved at mas farmhouse, which again, was a success story. >> thank you so much. and i want to submit for the record, i think that would be an excellent way to close. your time was very much appreciated. with a list of over 40 businesses. we could've filled this panel with hundreds of success stories of businesses just like yours and programs statewide and regional programs that are stepping up to respond to the new provisions in this act. so i'm going to submit for the

record just a list of 40 businesses that we know of that have benefitted eight jobs, 18 jobs, 40 jobs, 10 jobs. and i could go through this list, hundreds of jobs created. but we're not going to rest on our laurels. we're going to see what's working until this recession is in the rearview mirror. thank you all very much. we appreciate your advocacy on behalf of yourself and the organizations that you represent. and this meeting's adjourned. thank you.

[inaudible conversations]

the asia society in u.s. institute of peace released a new report on the future of pakistan with recommendations for improving the country's government, economy and security. speakers include a former pakistani government official and a veteran pakistani journalist. this is two hours. will >> all right. if we could come to order of a sort. the good morning and welcome to the united states institute of peace. we are particularly happy that you are among the first to enjoy

a the comforts facilities of the headquarters here. we have a lot of capabilities and i hope you get a chance to at least see some of the rest of the building even though parts of it are in secure areas. i am the deputy provost at the academy of international conflict management and peacebuilding. usip, as many of you probably know, was established by congress in 1984 as an independent national institution dedicated to helping prevent, resolve and manage violent international conflict around the world. the subject of the panel today pakistan is a place where thinking about preventing and managing violent conflict is on everyone's mind. like the asia society, which is hosting the event, we are a non-profit and non-partisan

institution. we work in the field and the classroom and to research, conferences, publications, have many partners in the asia society as one of them. i won't mention all the things we worked with, but we did a joint project on burma or myanmar if you prefer to call it that. we have an ongoing joint series of evin said the asia society headquarters in new york on korea, another important issue that comes to the national conflict of peace, and the asia society helped us with one of the first courses we did in the new academy with some expertise on china. another very important part of the world. no country in asia is more simple to questions of peace and conflict in pakistan and we are pleased to offer this venue here in washington for the asia society to launch its reports on

pakistan 2020, a vision for building a better future. of the usip and pfizer will be in charge of the panel discussion but part of the study group that put this together we think it's a very good report and we think will be very interesting panel and we look forward to your active participation under the ground rules set forth. right now like to turn this over to my colleague and counterpart from the asia society who will give you the second look for the day and then straight on to the panel. suzanne, vice president for global policy programs and the asia society. >> thank you in good morning everyone and thank you, michael, for the introduction first let me begin by saying how thrilled we are me and my colleague to be part of one of the inaugural events here this fabulous

building. we will never partnership with usip and we look for to continuing our work together. let me begin by thanking the members of the group who put this report together. several of them are here for our discussion in addition to our director abbas i will introduce momentarily. we if christopher can and our special guest is najam sethi who traveled to visit us today. i would like to express gratitude to the late richard holbrooke who served as the chairman of the asia society for seven years prior to becoming the u.s. special representative for afghanistan and pakistan, and we dedicate to this report and his memory. the asia society established this study group to ss the

political, economic and social development and challenges faced by pakistan today. the goal was to provide recommendations to wait for word on how the country can begin to pave the path towards peace and stability in the coming decade. of the group's report which we are launching today in washington presents a comprehensive package of recommendations aimed at promoting home sustainable constitutional democracy, credible and effective role of law, a significant expansion and improvement of social development especially education and health sectors and a peaceful resolution of the conflict with india. so as you can see, we set a very ambitious goal for ourselves. before i turn the podium over to hassan who will present the findings and recommendations, i would like to take note of a few unique aspects of this initiatives and sets it apart

from other recent efforts. first of the report of this kind to include a significant number of leading experts from both pakistan and the united states 31 representatives and all representing a range of factors. members include not only for our diplomats, military leaders and intelligence officials and the development specialists, scientists and experts in the field of health, education, governance and natural resource management. additionally rather than viewing pakistan exclusively through the security wins which seems to be the norm these days, we have focused on the security challenges but also the economic challenges we think this is important to get a full picture of the we for word. and finally, rather than

dwelling on what's wrong with pakistan it's easy to be cynical about it and rather than reverting to correct temporary fixes, its focus on generating pragmatic recommendations and aimed at improving the country with the very long term vision. this past wednesday we have the new york city have launch event at the asia society headquarters in new york. that evened is on the website if you'd like to review it at asiasociety.org/pakistan2020 with resources available to back and you can follow at facebook on asia society and also at twitter at asiasociety and we created a hashed had for the report, pack2020, so join the conversation. now when pleased to introduce you to hassan abbas. dewaal had his biography in

front of you, the interest of time, let me just say that hassan is one of the leading experts on pakistan and the u.s.-pakistan relations. he is the bernard schwartz fellow at the asia society is also a professor at columbia university south asia institute. he previously served as the government official in the administration of prime minister benazir bhutto and the president musharraf. so please come join me in welcoming hassan. thank you. [applause] >> thank you. welcome, all, once again on behalf of the usip society. i welcome pakistan at the institute here. once again, we are pleased to be coasting this event with the asia society. i just want to sit a few ground rules to let everyone know how we are going to proceed and say a couple of words.

before anything, please, make sure your cell phones are turned off or are on silent and mcgeorge you remember to turn them on when you leave the room. and also for the panelists, since we are on tv i would ask you to speak from the podium, and then in the questions come speak as close into the microphone as possible [inaudible] [laughter] >> we will begin with hassan abbas getting an overview of the report for ten minutes or so, and after that, we will have the two panelists say a few words about the report. i will come back if he has any responses on this and on the panel and make sure we have ample time for the floor. i would also request task force members who say anything from the floor if they want. let me also to join in congratulating hassan for this

report. there's a number activities now which are ongoing on the future of pakistan. it seems to be the flavor of the day. exercises, projections, predictions, all sorts of things, which some of them i am part of myself as well. but i think this is the most comprehensive and holistic product which i have seen so far, want to congratulate you and your team. i think it has the right sort of mix of people. i think it did have the right mix of people which we don't see often, both pakistanis and international experts. so once again, congratulations. ..

>> the leading human rights activist on the other side. some of them back who have worked on pakistan over the years many people. i'm honored he is here. former diplomats as well. so this is a very interesting combination and very different viewpoints. want to begin by framing the issue by saying that in south asia as soon as you mentioned the word 2020 the first thing that comes to your mind is corrected. that is so because this is a new form which is. when mats. 2020 is a limited match where it

finishes in three. all you need is a lot of hard hitting. the match, it is very unpredictable. still talking about cricket. the next thing i did, and i encourage you to do, adjustable 2020. pakistan 2020. on the very first page the article, it's very interesting. the second report, in 2008. by 2020 it will be a superpower. 2020 pakistan will be raised. the person who broke that report , and is.

[laughter] exactly. out come to that in detail. thank you. some will call it old wine in new bottles. yes. nothing very unique in terms of the proposal, but this is a second proposal then petitioned. very different viewpoints. in many cases, for instance, i was concerned how the former isig for the army chief. there were some very strong criticisms. i would like to mention two of those because they were a significant value. the critique of telling us that you look at the whole concept again.

liggett optimism again. very important questions. both my mentors and both very seasoned, established and respected scholars. i want to especially mention that because the challenge each of those. we decided to focus. and they range from democracy to the issues and refocus on education and health care. then we focused on energy. the next point was pakistan's relationship with india. and in the neighborhood. and then habitation. it is not that we think these things. i'd go into the manner in which we have specifically, the sequence we mentioned in the report, but the kind of formula that we tried to devise, and a focus on only one are two of the recommendations. but the recommendation of the

report is -- the civilian control. democratic control should expand. of course this is no rocket science, but how will that be done? because we're talking about a country where democracy is not new. i need not remind this audience, pakistan was created. yes. the democratic framed pakistan. but at the end of the day the people of pakistan on four different hah times pushed the military dictators out in one case. all died in a plane crash. but otherwise it was ordinary people who really pushed the dictators out. and so the question is despite the 30 or 40 persons, people have a very clear understanding that it is democracy. so why that has never happened.

as i mentioned, military rule. they revert the country back irrespective of the stability. but the central issue here, democratic control and expand it there is a government spirited comes from a level education and another level providing different sources of the country. no electricity which is the case in pakistan. shortages. the defense for that. a political leader or military leader. they were very well aware of how to get the new parliament house for the members to buy the new f-16s. the political leaders come up with new aid packages. they always have a team ready to go to the imf. they sat together across the table and said, so what is our energy demand? it comes down. another example is one section on education.

there was an excellent exit recently which must be recommended. the government of pakistan established a task force called education task force. going on for that. education emergence. some very brilliant pakistan peace. they produced an excellent report. it used to be on the website. surprisingly after this came out and people said, but, this was state control. very critical of the government policies. everyone appreciated. five for six days ago i was mentioning. even the website of that organization is gone. just try it. education task force dot com. i tried many ways. it's out there. so one good thing that happened to, it was.

this cannot say that isi is involved in that. i can guarantee you. the military. they have other problems. there also is janice serious. as the very clear. the government issue is in the rear of the political leaders. they can make a difference. raising the education budget from one-half to 4 million at the least. by a few less f-16s for god's sakes and spend that on the schools. this is very simple and clear. that is why we are suggesting right at the top that military budget in pakistan should be open for discussion in the parliament. let people know. why are we building more long-range missiles or increasing the number of nuclear weapons? this is something very basic. very open. i would like to ask, one of the

most respected and seasoned journalists who has inspired so many of the young in pakistan. actually successful as some of these names in pakistan. they open. whitley the problems there. by and large it's working. while media is not openly challenging this budget. one group altogether. it is a very basic fundamental question, a country which needs after every event. why they're using that outside aid not for building hopes for the people but for others. that is democracy creating issues. the government of pakistan, i mean, the political leaders have failed to create that. we have tried to get that agenda. education, health care, energy infrastructure. i can show you the amount of money that will take. it's something that is

manageable. now, let me frame to other issues. when proposing strongly. for that to happen, for this reform development expansion of democratic government, for that to happen to things are very critical. one, peace process with india. both, they have tried every trick in the book. from supporting on state actors to going to the united nations, to making the legal case to talking to political bylaws. there is no way out but to go and strengthen the peace process. this is not unique, not out of the box. 2004-2007. pakistan and india witnessed a point of success. that has restarted. that has to be strengthened.

without that they will be divvied without that the whole development, your democracy in pakistan might not be able to be strengthened. the second of what has to be done to that is to work out admiral, and update to of the three. the second thing has to happen is that the radicalization. in that sector we have a very good section on internal security where we talk about food stamps. for instance, many of the urban centers. the pakistani fine. in the morning the school families, the beginning of school time. the national anthem is no more being played. this is very serious. not unprecedented but very serious. this new political government and military leaders are trying. they are thinking about it. there's some signs. financial package, talking to some of the leaders. but the central thing which

needs to be done, and this is something which have done about. at least twice before the last couple of months. i think it has -- it deserves to be emphasized again. law-enforcement. u.s.a. report which i was involved in. now the part of this effort. we are talking about the number of organizations, organizations, law enforcement organizations, paramilitary organizations. there is a significant number. commitment available. there is an internal reform effort in pakistan going on. and i'm especially mentioning this. u.s. support and u.s. aid to pakistan should not be in areas where it makes the other side very uncomfortable. outside support will only work. local support, local demand, and

local capacity. okay. we'll go. coming to my mind. democracy in a different country. i leave that example. the point i'm making is, if there is internal consensus and capacity, go for that rather than saying please develop this capacity for democracy or capacity for x project. it will be 20 years. there is not enough levels when of commitment or political weight even on this side to go for such things. hence police reform. law enforcement as a restructuring. in many cases, recently i was told in a couple of cases related to al qaeda leaders who were being pursued but pakistan there were very close.

and that the final moments military intelligence organization said, no. we can handle this asset or this informant better. it is just that they held him custody and interrogated him in such a terrible fashion that when this person was returned back to police and they had taken to court the person had become an expert in answering questions during interrogations'. so maybe he is an affirmation out back. relevant for the united states policy. but when the person was taken to court there was not enough evidence. so cut this short. law-enforcement performs critical. without that counter-terrorism and organizations can now work out. i would like to close. i have taken my ten minutes. just a glimpse of some of the submissions that we have given.

we wanted a comprehensive approach. thank you to everyone who is recognized. looking back, we go so deep into one issue that we forget the context. when that is how things develop and progress. but if it is without an alternate idea, how to put it right, that becomes meaningless. our ideas will work. were not sure. we want to start to encourage this. ideas will matter. it's not a lost cause. don't give up on pakistan. how close with a palm. legendary pakistan a poet. bread in the beginning. and out just say. al translated. that's the message in itself. the new year. he is most famous. this tells us also something of

what the people of pakistan respect. benefit. [speaking in native tongue] [applause] [speaking in native tongue] [speaking in native tongue] we shall see, certainly we shall see. these high mountains of tyranny and oppression there to evaporate. beneath our feet will have this earth to server, shake, and beat. the heads of rulers will be struck with lightning and thunder. this might be the direction of pakistan. thinking of a very organized and effective revolution.

in the current circumstances it may go in the direction. that is why we're saying, the time for remedial measures is now. otherwise it might be too late. thank you very much. [applause] >> thank you. thank you. i can tell you that you have taken these critiques to heart. he had left me optimistic. that's for sure. let me introduce our next speaker. the editor in chief of a leading pakistan the english weekly. one of the most popular media talk shows in pakistan on gaea television. also a publication house, the vanguard folks. much, much more. buyers in detail are outside. for me a special moment also because i started my riding for

about six years. so mr. editor. all yours. >> ladies and gentlemen, i am pleased and delighted and honored to be here today, it's this gathering. thank you very much for inviting me. pakistan u.s. trouble. some of us had anticipated this. one reason only. the relationship has been ambiguous on both sides. that ambiguity is now coming to haunt this relationship. i am sure you will have time to discuss the relationship in the q&a session that follows. i have been told to confine my remarks briefly to some dimensions of this report for the time being.

i will talk very briefly on two issues. two critical core issues. the question of civil military relations and the question of india-pakistan relations. in many ways these are the necessary conditions for any reform to take place in pakistan. and so therefore these are core issues. civil military issues. we have a list of all the things that need to be done to restore this balance in the favor of the civilians. that, of course, is easier said than done. the question is not what needs to be done, but how to do it. that is an issue that has grappled the minds of all our politicians today. every government today has been hostaged to the military. but there is some good news on that front. and in an ironic sort of way it

is the recent incident that has triggered this new debate in pakistan. and, frankly, it is an unprecedented intervention right now that is taking place by the media in pakistan and politics. until now the national security doctrine has formed, formulated by the military has never been the subject of any debate or discussion. inside parliament or among the main political parties. indeed, sections of the media. taken for granted. pakistan's obsession with security problem with india is a corrective session and that there is such a threat and therefore we need to retain a strong military presence in the country. that is now being debated. it is ironic that where we should have been asking about

the u.s.-pakistan relationship and why the incident happened to, what led to it, we are, instead, asking about where all the money is going that we have been using for our military predicted a stop to helicopters from coming in and operating in pakistan. so what has been happening to all the money and has been earmarked for the military year after year after year? if the military cannot even locate two helicopters or is completely unaware of the existence. and this is making the military very uncomfortable. the question everyone is asking in pakistan is not whether the military was implicit but whether the military is up to the job that we haven't tested it to do. in that sense the chickens are coming home to roost.

and it's not just a question of is the military up to the job. the media is now talking about the defense budgets. the media is saying, tell us how much money we have been giving you and where it's going. the media is saying, we want accountability. the media as always talked about the accountability of politicians. that has been our pet peeve, our obsession, corruption among civilians. this functionality of civilians. but for once the vote is on the other foot. is now the military that is the object of scorn and criticism. there is better news. the leader of the opposition

who, as everyone knows, was in many ways the creation of the military has suddenly woken up and realize that the civil military relationship has to be chased, completely overhauled. and no less significantly he has said publicly that our obsession with india must end. india is not the enemy this is unprecedented. it is significant that is being said. the people's party has always said it. we always said it. it didn't matter. when we said it reversed damped as in the majors. when the people's party said it, it was a security hazard and a security risk. what can be said? the son of the same soil that sustains the military.

he has said we want accountability of the military. more significant, he said i'm not asking for the resignations of president or prime minister. i want accountability of the military. i want an institutional inquiry, independent inquiry. this military does not want that inquiry. this military has done everything to stall such an inquiry, which is why they asked us to conduct an inquiry. first this said that they should be no inquiry. only a review. but then under pressure from the media they succumbed to the notion to the idea of an inquiry. and then they went to parliament to ensure that the inquiry would be not terribly embarrassing to read again it was the opposition

and put pressure on parliament on the other members to go through the motions of a more serious inquiry. we still have to see where that will go. so there is a good news. this of all military is now under discussion. the military budget is now the focus of attention. when the other area on which i'd like to just make a brief remark is relations. of course it's not enough for into said that india is no longer the enemy in for him not to be branded as an indicator because it can be more patriotic. so what is the state? going on a trip with former prime minister in 2004. just when the diplomacy was

launched. and this was an occasion. talking to india. iran, pakistan, in the in. they in turn said we will talk about it. what about other issues? not ready to talk. well, today the situation is that pakistan is ready to talk trade. and the foreign secretary's, the secretaries of various departments, interior, commerce, for an office, everybody on their way to india, and the indians are on their way to pakistan. and this is very, very kent. it has the support of the opposition. the government was always in favor, and the army is not opposing it. the interesting question that i

want to raise his, the back channels work beautifully. about to receive something. certainly that was not a solution as envisioned in the u.n. resolutions. far from it. there were many concessions that pakistan made which is why it went along well. but when we should have got into trouble in 2007, the process came to a halt. the indians felt that he ought to get out of this before they carry the process forward. maybe pakistan is also said, hey. hold on. let me get out of this trouble first. of course that didn't happen. what did happen. of course the process was delayed. and i remember saying to my friend, don't derail the process.

get back on track. this is why this happened, in order to delay it. of course india has to look. indian politicians have to look to their own constituencies. for three years that process started. there was no obstacle from the pakistan side. i know that for a fact. the obstacles were all from india. the conditions being put forward. first do this, first to that. and this despite the fact that the indian prime minister, met him on two occasions, the indian prime minister was very keen to get back on track. but domestic politics stop him from doing so. in the continued. they're off the table. a few years down the line we lost a lot of time. my big fear is the submissions are off the table. between india and pakistan. u.s. pakistan relations.

in many ways this is the preeminent dialogue that determines everything else in that region in many ways. it is also the dialogue that has an impact on civil military relations and pakistan. my fear is that just as there was once. there may be another. then what will happen? will it be the road again? and what if who we irresponsible remarks of the indian side as we saw recently by the indian army chief and, if the americans can do it so can we. but, of course the americans can. but then of course you can't. the a proper response was given not to the americans but pakistan military but to the indians which has created another problem. intelligence told parliament

that if india were to undertake any such venture regardless of whether we knew that there were doing it all we found a later we had already earmarked targets and time rehearsals and exercises in the way in which we will kickback. of course parliament caravan. so those are the issues right now. could news and bad news. thank you. [applause] >> thanks. thanks. as always. eloquent and to the point. the next speaker is the assistant professor and the department of political science and co-director of the south asian studies program at lesley college, also of palo at the woodrow wilson international smallest center and has written extensively on south asia.

>> thank you. i want to begin by thanking suzanne to mustachio and all the other folks at the asia society you have undertaken this important work. as was said earlier, the purpose of this report is to take a comprehensive look at the problems facing pakistan. toward that end i would like to make three points, three related points. the first is that the united states relationship with pakistan has predominantly been a relationship with pakistan's military and intelligence agency whether it has been intentional or not, the fact is that u.s. government support has strengthened institutions of coercion and pakistan and weekend institutions that promotes the rule of law. as the report notes top western civilian leaders, especially

from washington d.c. continue to meet with top military commanders in pakistan in 1-on-1 meetings without the involvement of officials in pakistan's military to the ministry of defense. in another example supreme court justice insisted that security agencies act in accordance with the constitution of pakistan by producing people the security agencies have in their custody. for that he was dismissed from office. it was convenient for the bin united states government that the general get rid of the supreme court justice. the u.s. government was then more concerned with pressing the war on terror and pakistan then in promoting the rule of law in pakistan. and it was not u.s. pressure that returned the justice to his chair. it was a movement wind, a popular movement in pakistan that led to the justice

reinstatement. we have heard recently that more than 70 percent of the 20 billion u.s. dollars that have been given to pakistan since september 11 have gone to the military. we have heard this morning that it is unclear what the military has done with that. it is also unclear what has happened to the other 30%. that $6 billion over the last ten years. i would also like to put that figure into perspective. it sounds like a lot of money, but it should be noted that pakistan the american community contributes an estimated $1 billion annually in cash. another 4 billion annually in labor to philanthropic activities. the second point is that the people of pakistan should not be punished for the failings of the government. the military and intelligence agencies and pakistan have repeatedly undermined and

overthrown civilian governments. and the people of pakistan as we mentioned earlier repeatedly rose up in defense of the democratic ranks. what we have witnessed recently in tunisia and egypt has already happened three times in pakistan in the late 1960's, the late 1980's, and most recently from 2007 until 2009 in the so-called lawyers movement. there is no country on the planet according to the few charitable trusts is populations has a more dis favorable view of the united states government. the major source of anti-americanism which i believe is really anti-u.s. government is the popular perception that the u.s. government supports military governments for u.s. geostrategic interests, including the proxy war in afghanistan to dispel, to dispel the soviet union, and the direct

or against the taliban today. and in the u.s. government abandons or even punishes the civilian government when u.s. geostrategic interests have been satisfied. the clearest example and most damaging occurred in 1990 when president george herbert walker bush allow sanctions against pakistan first of their weapons program only after the soviet army was out of afghanistan as long as the soviet army was in afghanistan u.s. presidents prevented those sanctions authorized by congress from going into effect. the military component of the sanctions in 1990 was listed in 1995. it was only after september 11th, 2001, that the non military component of the sanctions was lifted. that is, of course, because the u.s. government needed the support of the pakistani military and intelligence agencies to prosecute the war in

afghanistan. as is said on wednesday in new york that the lots that i watched, u.s. policy to pakistan has involved carrots for the military and steaks for the people. continuing on the second point, the pakistan the economy is already in a very precarious state. the government of pakistan is likely to cut government expenditures when the budget is announced next week so that it can meet international monetary fund targets for government deficit reduction. does not going to make it any easier to increase funding for health and education. a tax surcharge was imposed on those who are already paying taxes. import duties were raised to meet the expenditures associated with the devastating floods of last year. and i want to note that the discussion, the discussion of terminating u.s. aid to pakistan

has already had a very negative effect on the economy. earlier today the state bank of pakistan and of concern that the u.s. government might cut off aid to pakistan decided not to pause its raids in the discount rate so as to dampen pakistan's inflation which is running at 15% and is truly devastating for the tens of millions of pakistan niece who manage to scrape by on the equivalent of two u.s. purchasing power dollars per day so even the talk of cutting u.s. aid is having a damaging effect. the third point and final point that i would like to make is a component of the report that i believe needs greater attention, but is vital to pakistan's future, and that is the role of women in creating a just and peaceful pakistan. women's participation with public life is highly constrained by the neglected

reproductive rights. on average pakistani women have almost four children. at these rates pakistan will have a population of 450 million people by 2015. research indicates that women in pakistan would like to have on average to children. author arthur lewis famously wrote in 1954 that the whole secret to economic development is raising the national saving -- rate from 2% to 4%. i believe that the key to the development is reducing the fertility rate from near 4% to more like 2 percent. i'm not saying this because pakistan's resources would be severely taxed and stressed with a population of 450 million people, although that's true. pakistan already suffers a water scarcity crisis, an energy crisis, 3 million people into

the job market every year, and there are not the million new jobs for them. but the reason for saying that the fertility rate needs to be lowered, the more important reason is increasing women's of opportunity for participation in public life. government attention to public health is very poor. was not until 2006 that the government allowed the word condom with the image of a condom to be shown on television. president obama ahmed said yesterday morning that the commitment of the u.s. government to infant and maternal health will increase. i think pakistan should be a focus of that commitment. 18,000 pakistani women die every year giving birth. that's far more than the number of women who die at the hands of militants since 2001. but the everyday security of women gets very little public

attention. in pakistan there are eight soldiers for everyone doctor. there is no secret to the key to hire public participation of women in fertility. girls' education. in this regard the report's recommendation that public expenditure on education be raised from one and a half% to 4% is crucial as this, i think, the proposal for an accountable and predictable system of teacher recruitment. thank you. >> thank you. [applause] [applause] >> thank you. thanks a lot. three very interesting set of remarks. let me, if i may, take the moderator's prerogative. just throw out a couple of questions to the panelists. then after that we will open it up. one you mentioned the issue of

democracy, civil military relations. you said people want democracy. but the that is a popular view pete you have to look at it. if you go for an opinion poll in 2008, yes. people were dying. if he did this in 1998 or perhaps two years from now the way things are going you may have a different outcome, which is not to say that people don't want democracy. a more important fundamental point, people want performance more than the system that is by stan. the average man or woman on the street, not the middle class. some question to you is something i grapple with. it is to civilian diplomacy in pakistan, the military basically decides to go back to the barracks? i don't know why it would. or to is the civilians perform well enough that the credibility of the government gets to the

point, on both sides. he mentioned this issue of india and pakistan. you know, i have argued for the longest time that pakistan stability comes to new delhi whether we like it and not. the question is now if you're saying that the problems, the conditions are being pulled from the indian side, in the is the status quo. yes, there is the argument that in the gains a lot. by is this going to be a process, pakistan's ability being held hostage to the peace process? if that doesn't move them internally there will always be problems? is there a way that pakistan can do internally to appoint even without? is it necessary and sufficient? is it, you know, just something that must happen but if it doesn't begins to move on?

you raise the point of fertility rates. i want to take it to a slightly deeper issue. you know, it leads to this. here is a country that has multiple problems. the report prints it out and says you have to do all these things. the only problem i have is i don't know of any country in the world that can do all of this in the given time, let alone a country that has all sorts of problems. and so it is a sensitive one. it's not just about education. there is a lot of religious undertones. is there a way that pakistan can prioritize what this report is put out? because in some ways the overwhelm the state which is already in trouble by saying this is the laundry list. good luck. how does one go about? again, you don't have to answer everything. >> thank you very much. first of want to make a

correction. that correction comes from a twitter message. the website i mentioned was down, but it's back up. i checked. that's good news. they say it was because of a server problem, which i doubt. the good news is it is up and back and it means it is not disbanded. must correct. i mentioned that was really a great effort. the implementation. i think it is a central question about democracy. my point of view, and that think that is also reflected from the views of other people in the report. democracy takes time. it is a step-by-step process. one example, 1998. pakistan. the people's party was largely

discredited. military dictator by coming in made those discredited leaders were discredited parties, made them relevant again. if the process continues. this is one argument. irrespective of performance military. the challenge comes after ten years. democracy. the first two years people start asking questions brother because people, you're absolutely right, expectation for people. we want change. but the role of the pakistani intelligence agency, especially i s.i. in 1990 is very well documented. they were playing a central role in making and unmaking the government's. if that, and no one decides to go back. they're pushed out. i don't want to repeat this.

regularly. even his own. there was an agreement. one of his children was using that against them not knowing what it means. it was so popular. pushed down. too busy dismantling pakistan. also at the end of it he could not state. lost credibility. wireless movement pushed him out. and in the current context to f kenny political leaders, it seems for instance, and very rightly said sherif played that game. did a chance to come back into the government. the support of the military. i have a feeling he might need some support from the military. but by and large he has taken a very strong stance which was unexpected and unprecedented

also. very briefly will talk about the political government. the credibility issue. a look at the things they have done. constitutional amendments, bringing all the parties together, the national finance, talking to the rebels, going to the party in karachi. did all the commission that remains in place of starting of the parties. and this is happening and pakistan is raising this terrorist activity. the military is not ready to go back. u.s. demands are increasing. the united states when it comes to the military leaders. reminding me of the statement above carrots. the people of pakistan. the last two or three years. you will change that. but that was the historical event. despite making the case that

whenever there is a military leader the united states is soft in dealing with interacting with the leaders. but it was coming of those. the american demands skyrocket. making demands which are well intentioned with some of the right policy but make it impossible for the political leader to remain popular and get elected. so despite these challenges if there is a political government which is surviving this is out of a change. what is the feeling on the street? people who say we need stability. and maybe that is another issue of identity. all your great innovators from central asia to south asia will also be leaders. it is in your mind set.

the islamic tradition. so when you see it general, this is according to the book that i've read. the historical narrative. so those things change and a step-by-step. >> you know what, one reason why i talk to be two issues. the civil military. because their links. governance is links to that. but it's a links to that. everything is linked. political stability is linked. so to answer your question, yes, i think the peace process has to come to a combination. it is a necessary condition. it's not a sufficient condition at all. sufficiency would require good governance and stability in pakistan. having said that, we talked about the military popularity going up and down.

the military popularity was down in 1971. the military popularity was up whenever the military dictators seized power. and it was down whenever predicted dictator out. the same thing happened. he was very popular when he took power. it extremely unpopular when he lost power. the interesting thing is apart from the times the military men take over and leave their other times when you can also gays the popularity of the military. and we recently until this particular incident, the military enjoy the very high degree of respect and confidence. polls have shown consistently that the people of pakistan trusted and believed in the military more than any other institution by far including. but we take a poll today.

that would not be the case. we have the situation which is different from we've seen. this is not a moment when the military stops. not when it was in power, but out of power. the military stock is down. even, you know, out of power. so this is the first time you have to indicators. but my feeling is that this is a very significant moment for pakistan and that the military will have a hard time living this down. partly because for the first time the media has come in to ask very important questions which is never happened before. this is the same media who in 2009 was actually saluting for having restored. without his intervention bin might not have been restored. and today they're asking very

hard questions, not just of the military rule in this whole affair, but also about the military budgets. i think this is a significant moment. for the first time the opposition and the media and the people of pakistan are asking the right questions. this is going to take a lot of doing to turn this back. i don't think it will be turned back because i think this inquiry report comes through. there will be more discussion. if it doesn't their will be a continuing discussion. it is not entirely inconceivable that new facts may be revealed relating to that particular episode which would continue to put pressure. he may be under pressure to do things. so i think to answer your question this is a different moment. whether or not the politicians

and the media and the government are up to it, the parliament can seize this moment and institutionalize it, it may be too early to say. but i think there will never have been a better moment. >> thank you. thank you for your 2-part question. that would like to take the second part first and ask about religious sensitivities in pakistan. you mentioned that fertility is not really about education, and a ticket question to mean the religious sensitivities undermine attempts to lower fertility in pakistan? again, i want to note that surveying research indicates that women presently would prefer to have half as many children as they do. i also want to relate to my point. is that the instrument to point. fewer people mean pure malice

the feed and less stress on natural resources, less stress on the labour market. it's a principal point. this is what pakistani women themselves indicate that they what. this would allow them the greater opportunity to participate in the public sphere i would also like, it was your question exactly, but i want to take up this notion of religious sensitivity. there is no saying more action by the prophet muhammed which indicates that women should have as many children as they can wear that families shouldn't use family planning techniques. in fact he himself recommended the family planning technique to his companions and others. and, you know, this has been

noted in other countries. iran, indonesia. very successful in promoting a family-planning campaign showing that the books indicate that what is law suggests for families is a healthy family, not a large family. the help the family can be promoted by proper birth spacing and by use of contraception. the second point that you made was about the feel of this report, perhaps, looking a bit like a laundry list. a ticker question to mean there is in a laundry list. i think not. that think that what could be referred to as a macro policy. jack montgomery at the harvard kennedy school of government brought about macro policies for many years.

unfortunately he passed away before we started our. he wrote about macro policies. i see this comprehensive perspective on pakistan a future as being highly integrated. i think all the components, civilian rule of law, a focus on health, education, energy, internal security, peace with india, a trade with india. all of these point to the same thing which is a human centered security policy. >> thank you. >> reflects my own til you're in convincing as to read something else. i am going to open it up. of course we don't have to stick to only the issues discussed your. anything else on pakistan and the future. weekend, of course, discuss this. since he was part of it, if you want to say something. >> we have microphones on the side.

because the airlines are request people to go to the microphone. if you could just come to the microphone one by one and ask questions as close to mike as possible. please introduce yourself. >> thank you. independence dollar. i'm delighted to see some many friends whom i commend for putting out a comprehensive report which gives loss of weight to the subject for a spent much of my career on economic issues. it is not a report about u.s. pakistan relations. that may be one of the strengths. there are lots of those these days. there is an implicit recommendation to the united states on supporting the goals and the report. and in that spirit i want to take issue with the couple of things that my friend said and to bring this back to the issue of civil military relations.

my reading of history is, in fact, that the united states in part of the civilian sanctions in the late 1990's. the military sanctions were not entered until after september 11th and pakistan did not even get back the money that it had paid with the f-16s and some 1998. if you want to read the long story it's in my book. the second point, the description of the history of u.s. pakistan relations is what i would describe as the pakistan narrative. there is a quite different u.s. narrative, the burden of which is why we have had three narrative's end to divorces. each of the divorce is came about because pakistan for whatever reason was unwilling to live with the markers that the

united states laid down in 1965. using u.s. weapons and a war with india. ninety-nine the it was the nuclear program. but buried underneath these narratives is, in fact, a gap between the two countries' strategic objectives. and i don't think the united states needs to apologize for following the geopolitical interests. of course that has consequences. where this comes back to my question about civil military relations, i think that in order to deal with the u.s. side because it's inevitably going to have an impact. you can rely on a proponent. ..