The Making Of The President 1988

THERE IS A RISING GENERATION OF POLITICAL LEADERS -- IN BOTH PARTIES -- THAT IS LOOKING TO SHAPE A WHOLE NEW POLITICS OF GROWTH.

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When Richard Katz arrived n Sacramento back in 1981, he wanted to hitch his wagon to a new kind of political star. The 30-year-old, first-term assemblyman (now in his second term), who previously had run his own small San Fernando Valley graphics firm, knew he needed to find a "market niche" hitherto unoccupied by other legislators. The niche he found turned out to be himself.

"It was a tremendous opportunity, because I realized no one was bothering with guys like me," Katz recalls." I had myself experienced all the hassles -- the regulations, the unfair taxes -- being in small business I felt there for years, but someday would be a powerful force."

Since then, Katz has emerged as the leading legislative spokesperson for California's 2 million small businesses. As chairman of the Assembly Select Committee on Small Business, he has gathered around him a 50-member Small Business Resource Group that has helped bring into existence more than two dozen laws directly benefiting entrepreneurs and small business, including funding for small business development centers, regulatory reform, and legislation allowing start-up companies to carry over net losses of up to $100,000 for their first two years.

Despite his early successes, Katz has few illusions about the clout of this new constituency. Even compared to the gay rights or the state employees' lobbies, not to mention such powerful forces as the California Business Roundtable or the California State Labor Council, small business's presence in Sacramento can only be described as puny. But Katz believes that time -- and history -- are on his side.

"This is a constituency that's still young and largely unorganized," he says. It gets lip service from the Ronald Reagans and the Walter Mondales, but they don't understand what small business is all about. But this election will be a catharsis. Mondale and Reagan each represent the past, the stagnant debate, the things that have dominated politics for years. But while they fight, small business is going to keep on growing and getting strong. In the long run, it could leave the other players light-years behind."

Richard Katz is just one of a growing number of young politicians in both parties, many still in their early thirties, who have decided to cast their lot with small business. What makes them different is that they see entrepreneurs not just as a special-interest group or a collection of special-interest groups, but as the heart of a new American political economy.

This approach contrasts markedly with that of politicians -- including some supporters of specific pro-business legislation -- whose economic attitudes were shaped during the 1950s and '60s. In 1960, for example, America's Fortune 500 corporations controlled about 75% of sales in the world market.

But over the past 10 years, that picture has changed drastically. Such giant-dominated industries as steel, autos, plastic, and railway equipment all suffered huge reductions in their world market share. Fortune 500 employment began to drop; since 1974, the companies have trimmed their payrolls by an estimated 1.5 million workers.

At the same time, small business emerged as the great engine of job and economic growth. Increasing their share of the total work force, businesses with fewer than 500 employees now account for nearly half of all the jobs in the U.S. economy. Entrepreneurial companies -- from hightechnology superstars like Apple Computer Inc. and successful steel minimills like Nucor Corp. to hundreds of thousands of small service-oriented businesses -- have became the new paragons of the economic system. And suddenly, small businesspeople are being wooed by some of the brightest young politicians around.

"Right now, it's small business that really runs things and makes things happen," argues Rep. James Cooper, a 30-year-old freshman Democrat from a conservative district in rural Tennessee. "When I ran for office, I used the Yellow Pages. The fancy political consultants probably wouldn't like it, but it was the way I tapped into small business, found out what they wanted. And I'm here because I was lucky enough to appeal to them."

"It's been a dramatic change in the last few years," says Jack Rennie, outgoing president of Small Business United (SBU), a key coalition of some 15 small-business groups from across the country. "It's stronger on the district level than in the executive, but we're finally getting attension, particularly from the comers, the young people coming up. We're finding new boosters all the time from both sides of the aisle." But political effectiveness involves more than a corps of boosters -- you have to decide what to boost, and how. And while they are united in their strategic and emotional commitment to small business, the new entrepreneur-oriented politicians cannot yet agree on a common economic agenda.

Some, such as Reps. Ed Zschau of California and Jack Kemp of New York, both Republicans, embrace a program emphasizing a minor government role and the maximum use of incentives to spur entrepreneurial growth. Pro-small business Democrats, such as New York's Rep. Charles Schumer, are working to ensure small business access to such things as capital and government procurement contracts. For others, such as Tennessee's Cooper, the first priority is a combination of defense and other spending cuts to lower he deficit, thereby reducing interest rates.

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