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Small Business Lending Fund Act Of 2010

Floor Speech

Location: Washington, DC


Mr. CARPER. Mr. President, I was going to talk about small business lending and some ideas about how to get our economy moving again. I feel compelled to say something. I had the privilege of visiting, almost a year ago, the Cleveland Clinic. The Cleveland Clinic is one of a number of well-known, highly respected health delivery systems in this country--the Cleveland Clinic, the Mayo Clinic, Geisinger, which is in Pennsylvania, Intermountain up in Utah, Kaiser Permanante out in northern California, and several others. They have demonstrated the ability to provide better care for less money. Think about that. Better care, better outcomes, for less money.

Their reputation is well known in this country, along with Mayo and some of the others I have mentioned. So I had an opportunity to go visit, go along with a member of my staff, Racquel Russell. We went and spent a day and actually stayed into the evening. It was so fascinating.

What we learned was that if we look at the health care delivery systems, including the Cleveland Clinic I just mentioned, try to look and drill down on why they are able to provide better health care, better outcomes for less money, they have a lot of things in common with one another. I want to mention some of them.

They focus on primary care, access to primary care. They like to catch problems when they are small, easy to repair, easy to cure. They focus big time on preventive care, making sure when people are the right age, they get colonoscopies or they have mammograms, and just a variety of other tests. They use preventive medicine to catch things when they are early.

If prescription medicines, pharmaceuticals can be helpful in controlling particular cases, they make sure people have access to that medicine. They actually coordinate care across not just doctors that happen to maybe be in oncology but doctors and nurses who are in different parts of medicine. It may be oncology, maybe it deals with pulmonary disease, dementia.

They do a better job working across medical lines than we work across party lines some days. But they do a very good job of coordinating care with different aspects of their health care delivery system. They have gotten away from what we call fee for service. Here we have something called fee for service. If the Presiding Officer, instead of being a Senator were a doctor, and I were a patient, I would come to see him. Every time I would come to see him, he would get paid. He would get paid for each visit. If he actually owns the lab he refers me to, every time he refers me to the lab for tests he gets some remuneration for that. If he has an interest in an imaging center, and I go for x rays or for MRIs or that kind of thing, then that is called fee for service.

What happens in a number of places in our country, not all, is sometimes the doctors will, in an effort partly to make sure they do not get sued, and partly to make sure they are doing the best job they can to cure people, and in other cases there is some financial incentive, just refer people to maybe more visits, more tests than they really need. That is called fee for service. That helps drive the cost of our health care system. They do not have that problem at the Cleveland Clinic.

I remember listening to an interview on television with a cardiologist at Cleveland Clinic, on CNN last year, before I went for the visit. He said: I am a cardiologist. He said: I am here at the Cleveland Clinic. I used to have my own practice. It used to be in my old practice I got paid--largely my salary came out of operating on hearts. He said: People came in and they were overweight or bad diet, bad fitness, and that kind of thing and just were not taking care of themselves, were not taking the right kind of medicines. I would urge them to do the right thing. But, he said, at the end of the day, if they did not do it, I would operate on their hearts, and that is how I made the bulk of my income.

He said: Here at the Cleveland Clinic, when somebody comes to me with a heart problem, at the end of the day, I may operate on their heart. But we work very hard to make sure they are fit, that they are eating the right food. We work hard to make sure they are involved in some kind of appropriate exercise regimen. He said: We work hard to make sure they are not only prescribed the right medicines, they actually take the right medicines and do all of those things.

He said: I get paid pretty much the same amount of money whether I am treating a patient that way or if I am operating on their hearts. I probably operate on fewer hearts today, but I think we get a better outcome for less money.

One of the things I learned at the Cleveland Clinic that day is all of the amazing things they do to harness information technology for the delivery of health care. I was in a Walgreens drugstore in Seaford, DE, about a week or two ago and had an opportunity to see how at the other end--in this case we will use pharmaceuticals--but this is a way to use information technology to drive down health care costs.

Anybody who was ever had a prescription given to them, written by a doctor, sometimes you look at it, you read it and say: What is this? Is this a prescription or does this say Alpo? What does this actually say? It is hard to read. My handwriting is not the best, but I read some others that are even harder than mine to read.

At the Cleveland Clinic, they do not handwrite prescriptions; they do electronic prescriptions so there is no mistake. They are smart enough with their IT system that all of their patients have electronic health records. So they have the full health care picture of their patient.

Not only that, if they were going to prescribe something, a medicine--let's say a patient is already taking 10 medicines. Whatever new ones they are prescribing, their IT system looks at the other 10 medicines. They look to see whether the new prescription is compatible with medicines they are already taking. They do not want to prescribe medicine that creates more problems than actually helps people.

Also, they have the ability--a bunch of our leading health care delivery systems--to know when a prescription has been ordered or that it has actually been picked up; that it has been filled and someone is taking it. They have the ability to know whether someone, if they are supposed to get refills in so many days, if someone actually refills the prescriptions and continues to take the medicines they are supposed to be taking. If they do not, they get a call from their health care delivery system, clinic, hospital, or doctor's office.

We are getting smart enough now, after mapping the human genome, to actually know what medicines--let's say the Presiding Officer and I have the same health condition, but we have a different genetic makeup. He can take this medicine, and it will make him well. I can take this medicine all day, all week, all month, all year, and it will never help me at all. We have the same problem, but because of our genetic makeup it will help him but it will not help me.

We are smart enough now to start figuring this stuff out. We are making sure that not only people are taking the medicines they need to take, but they do not interact badly with other medicines; that they continue to take the medicines they are supposed to be taking. But we stop spending money on medicines that are not going to help people and spend that money in ways that will help them and continue to provide the money for medicines that will help someone who has the right genetic makeup.

My colleague who spoke before me said we need to sell insurance across State lines. Well, one of the things we do in terms of things that work, we have a big purchasing pool that all Federal employees are part of, the Federal Employees Health Benefits Plan. We buy our health insurance from an 8 million-person purchasing pool, 8 million people. We do not have 8 million Federal employees, but if we add up all Federal employees, all Federal retirees, all of our dependents, it adds up to 8 million people. That is a large purchasing pool. We buy private health insurance from all kinds of private health insurance companies. They compete with each other, and it drives down prices. We have a large purchasing pool, economies of scale. The administrative cost for our purchasing pool is 3 percent; 3 percent for every premium dollar goes for administrative cost.

If you go out on your own and try to buy health care in the DC area or back home in Delaware or Illinois or wherever you are from, administrative cost for an individual, for a family, for a small business, is more like maybe 23 percent of premiums or 33 percent. But they are not 3 percent.

What we call for in our legislation, this new law, we want to create these large purchasing pools all across the country. Every State is going to be required to establish, by 2014, a large purchasing pool that individuals can join, families can join, small businesses can join to buy their health care. If it is a little State like Delaware, we are too small to have a big purchasing pool. But under our legislation, we can enter into an interstate compact with our neighbor, Maryland, or maybe with Pennsylvania, or maybe with New Jersey, or maybe with all of them and create a large regional purchasing pool, be able to drive down administrative costs, increase competition.

Listen to this, to my colleague's point: sell insurance, health insurance, across State lines. We have a four-State exchange or purchasing pool. The insurance sold in Delaware could be sold in Maryland; it could be sold in Pennsylvania; it could be sold in New Jersey, and vice-versa, to drive down costs.

My colleague mentioned we ought to incentivize people who take better care of themselves. Well, Senator Ensign of Nevada and I offered, and it was adopted and is part of the law today, something that says employers can offer premium discounts to employees who are overweight and lose weight, keep it off; employees who smoke, stop smoking, continue to stop smoking; employees who have high blood pressure, high cholesterol, if they bring it down, keep it down, they can receive premium discounts through their employer by as much as 30 percent for those employees to incentivize them to take better care of themselves and be less of a health risk.

A lot of the problems we have with health care today in this country flow from the fact that we are overweight. One-third of us are overweight or on
our way to being obese. Almost one-third of us are obese, kids too.

We actually have done in the legislation what my colleague was calling for, incentivize people to take personal responsibility. If they do that, they are better off. He also mentioned medical malpractice reform. We actually included in the legislation medical malpractice reform based on earlier proposals by Senator Mike Enzi, also from Wyoming, and Senator Max Baucus. They are in the bill. I think they are going to give us a lot of good ideas of what is working to do three things across the country: One, reduce medical malpractice lawsuits; two, reduce the incidence of defensive medicine; and, three, provide better outcomes. We will be seeing results of some very exciting things done in Delaware and other States to be able to emulate Michigan among those other States.

I did not come to the floor to talk about that. But when I hear stuff like this, I say: Someone needs to set the record straight. As a guy who is on the Finance Committee, I worked a lot on the legislation and focused on, day after day, month after month, trying to figure out how to provide better health care for less money, looking at other the Cleveland Clinic or Mayo Clinic or other entities, or looking at other countries, such as Japan. They spend half as much for health care as we do. Eight percent of gross domestic product is what they spend. We spend 16 percent. They get better results: lower rates of infant mortality, higher rates of longevity. They get better results. They cover everybody. We have about 30 to 40 million who are not covered.

So for us to say, well, we will just go willy-nilly on for the rest of this decade or this century and pretty much do what we have been doing, that is foolish. Ironically, some of things that my colleague was recommending, we are actually doing in the legislation and will be rolling out and doing more in the years to come.

The last thing I want to say before I move to small businesses and job creation is Dr. Donald Berwick has been nominated to be the head of CMS, which is the entity that oversees Medicare and Medicaid. One of the people I most respect in trying to learn about health care and health care delivery, finding out how we provide better outcomes for less money, is a guy named Mark McClellan. Mark McClellan, when I first met him, was a health adviser to former President George W. Bush. He ended up being the head of the Food and Drug Administration. I think for a while he was the head of CMS, the position to which Dr. Berwick has been nominated.

Among the people who have recommended Dr. Berwick highly for this position is Mark McClellan, who is an economist, who is a physician, who has actually run a couple of big Federal agencies. I think it would be smart to listen to a fellow who actually worked in a Republican administration, had the President's ear, and served us very well in some high-level positions, including the same agency, CMS.

It would be smart to listen to Mark McClellan. I think I might have misheard, but I thought there was an assertion that Dr. Berwick and his wife had worked for a nonprofit and he had health care insurance for the rest of his life, up to death.

I would just think, for the folks who serve here today, who served in wars--we have people who have earned the Congressional Medal of Honor for their service in World War II, folks who were prisoners of war in Vietnam and served, gosh, 20, 30 years and more in some cases in the military. They have lifetime insurance as well--not from being in the Senate but from the work for nonprofit; whether it was a State government or Federal Government or local government. I do not think there is anything that is so unusual about that. Should they be disqualified from being a Senator because they have lifetime health care because of their service or because they were Governor of a State or attorney general of a State? I do not know if that makes a whole lot of sense.

So I did not come here to talk about any of this, but I just felt compelled to mention these things.

Let me pivot, if I can, and just take 5 minutes to talk about small business. Mark Zandi is an economist, a smart one too. He started something called He comes and speaks to not just our caucuses, Democrats in the Senate, but he was, during the Presidential campaign in 2008, an economic adviser to John McCain, very well respected. He just calls them like he sees them, calls them like he sees them.

We asked him earlier this year: Well, why are we not seeing--even though job loss is way down, where 18 months ago we lost 700,000 jobs a month, last month we actually gained 50,000 or 60,000 jobs or so. I think that is about what we are averaging for the first part of this year. We want to do better than that. It is not like losing 700,000 jobs a month. So we have made improvements.

But we asked him: Dr. Zandi, why aren't big businesses hiring?

He said: Uncertainty. Businesses like certainty. There is too much uncertainty. He said this earlier this year. There is uncertainty about what, if anything, you all are going to do about health care; drive down costs, better outcomes, drive them down. What are you going to do about financial regulatory reform, Wall Street? What are you going to do about deficit reduction? What are you going to do about climate change, global warming, energy policy?

What are you going to do about transportation policy? What are you going to do about a variety of things but those major things I have just mentioned.

Dr. Zandi's counsel is: You want big companies to start hiring? They are making money. You want them to start hiring people? Address the uncertainties.

So we have addressed the uncertainty with health care, not to everyone's satisfaction, but it does a lot more good than bad. We have addressed the uncertainties with respect to financial regulatory reform. I think it does more good than bad. Not everyone shares that view, but I think it does. We are trying to address with our legislation today and this week, this month, next month, something called tax extenders; a lot of tax cuts, tax credits that expired at the beginning of this year, such as the R&D tax credit and biodiesel tax credit. A bunch of them are expired and have been expired for 7 months. We need to provide some certainty so that businesses and families know what to plan for and do.

We need to provide some certainty so businesses and families know what to plan for and do. Mark Zandi said those are the concerns for big businesses that want to start hiring, to address the uncertainty, and to provide predictability and certainty.

We said: How about small businesses?

He said: Unlike big businesses--a lot of big businesses are reporting pretty big earnings levels--a lot of small businesses are not doing so well. One of the things that small businesses need is better access to capital. They need to be able to borrow money and raise money, whether they want to buy or rent a building, buy new equipment for their building, whether they want to buy transportation equipment, trucks or whatever, forklifts, whether they just need money for working capital. Small businesses need access to capital.

There is not a perfect solution for that problem, but that is a big problem for small businesses, and access to capital is not the solution for every small business, but it is for a number.

The legislation before us seeks to address that need for small businesses. I will take a moment and read through a couple items in the legislation that commend it to the Senate and to our acting on it soon.

This bill has about $12 billion in tax incentives to help boost investment in small businesses and promote entrepreneurship. The bill eliminates the capital gains tax on small business stocks for people who purchase these stocks this year and hold them for 5 years. This legislation will encourage more people to invest in small businesses and will help give these businesses the capital they need to grow and create new jobs. The legislation also allows more small businesses an immediate tax write-off. We call this expensing for upgrades in their buildings and equipment. If they buy a building, a business, they usually have to depreciate it over a period of years. This legislation allows small businesses that make a capital expenditure, whether it is a building or equipment, to write it off in the first year. That is a great incentive to making major investments. This kind of tax break will encourage businesses to purchase everything from new software and computers to buildings, new roofs, windows, and vehicles. At the same time, it will encourage hiring in industries that sell those products.

The bill before us fosters the next generation of entrepreneurs by temporarily doubling the tax incentive, an existing tax incentive from $5,000 to $10,000 to incentivize entrepreneurs to start a new business. We call this the startup deduction. This increase will help offset the high cost of launching a new company.

These ideas, along with many other bipartisan tax breaks in the bill, will encourage smaller employers to create jobs. It will strengthen capital investment and ultimately move the economy forward on the road to recovery.

(Mr. MERKLEY assumed the chair.)

The bill also includes what we call a Small Business Lending Fund to help our Nation's struggling small businesses succeed. Almost every week I visit businesses, small and large, in Delaware. I hear over and over again, especially from small businesses, the same concern--access to capital. The $30 billion Small Business Lending Fund in this bill addresses this concern by providing our community banks with the funds they need to increase lending to small businesses. We incentivize banks to increase their lending by lowering the dividend rate they must pay back to the Treasury as they demonstrate an increase in small business lending.

We did something similar to this earlier. We created a fund, and we essentially didn't give the money to the banks. We didn't loan the money to banks. We bought the bank's preferred stock. They had to pay us a dividend on the stock. Five percent was the dividend rate on the preferred stock we bought. If they didn't buy back the preferred stock within several years, they had to pay us a 9-percent dividend rate on the preferred stock. We infused capital into the banks, largely banks with over $10 billion in assets. For the most part, they have returned to profitability. They have repaid, bought back their preferred stock. They have paid dividends on all of it for the most part. Actually, we have exercised, on behalf of taxpayers, something called warrants which, as the stock values recover, enables taxpayers to participate in the debt and the return of profitability.

We wish to do a similar thing with banks of less than $10 billion. In this case, we buy the preferred stock. The amount of dividend they have to pay back to the Treasury depends on whether they lend the money to small businesses. If they lend the money and they use essentially this capital infusion as it is intended, they end up with almost a zero dividend rate. If they don't lend any of it, they have to pay a 9-percent dividend rate. So there is an incentive there.

Finally, we are building upon successful Small Business Administration initiatives that were part of the Recovery Act. By increasing both loan sizes and the guarantees for the Small Business Administration loans, we can help meet the credit needs of small businesses. According to a recent report by the National Small Business Association, these Recovery Act programs are working, and they are still greatly needed. Last week, the National Small Business Association announced that when the small business provisions of the stimulus package, adopted about a year and a half ago, expired at the end of May, Small Business Administration lending plummeted. In June of this year, the Small Business Administration approved only $647 million of loans to small businesses. The previous month, before this expired, it was $1.9 billion in loans. It is clear--to me at least--that the enhancements to current Small Business Administration programs in the bill are critically important and will help lenders provide loans and help small businesses create jobs in communities.

One of the things we need to do to relieve uncertainty and get us going on the right track is to eliminate uncertainty. One of the great sources of uncertainty is what we do on health care. We have done something on health care--more good than bad. The CBO tells us the actual effect on the deficit is to reduce the deficit, forecasted deficits by $120 billion over the next 10 years and by roughly another $1.2 trillion in the years after that. So not only do we have the potential of providing better health care to people who don't have it but also to do something positive on the deficit side, beginning to address the uncertainty. In terms of uncertainty, it is important for large business and for small business. The real problem for small business is to make it possible for them to access capital, to get loans, whether for plant and equipment or for working capital. The legislation we are debating this week actually does that in a variety of ways.

The Presiding Officer is somebody who has actually worked on this stuff pretty hard. I commend Senator Merkley and a variety of others, Senator Landrieu and others, for the good work they have done on this legislation, on both sides of the aisle. We ought to let this bill go. We ought to give this bill an up-or-down vote. In doing so, we will do the right thing not only for the Senate and those of us who are privileged to serve here but for the country, particularly our small businesses.

I yield the floor.


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