(MONEY Magazine) – To assess whether Bill Clinton has been good or bad for small companies, and what he will do in the future, MONEY convened a blue-ribbon panel composed of Erskine Bowles, the head of the Small Business Administration; Carolyn Denny, managing partner at Denny & Co. certified public accountants in Glendale, Calif.; S. Jackson Faris, president of the National Federation of Independent Business; David Gumpert, a marketing consultant from Needham, Mass.; and John Rennie, a Billerica, Mass. businessman and president of National Small Business United. Highlights of the discussion follow. -- Vanessa O'Connell

MONEY: Is Clinton a friend or foe of small business? BOWLES: He's more committed to small business than any President in recent memory. Take his economic plan. You've seen interest rates decline, and that has reduced the cost of capital. He has helped to remove regulations that prevented major banks from making loans partly based on a borrower's reputation. And his plan for new community development banks would provide capital to help small companies in inner cities and rural areas. The President's deficit-reduction bill assists many small-business owners by renewing the deduction for 25% of self-employed taxpayers' health insurance premiums and raising the amount companies can write off each year for buying new equipment from $10,000 to $17,500. RENNIE: But as the economic package went through Congress, that deduction was cut from the proposed $25,000 to $17,500. As for the availability of capital, clearly something more has to be done to move banks off the dime. Although regulators have eased restrictions on lending, bankers are still nervous about the possibility that regulators will interfere, punishing banks for making loans that are not backed 100% by a borrower's assets.

MONEY: About 80% of small-business owners pay taxes at individual rates. With the top rate going from 31% to 39.6%, how will they cope?

BOWLES: I used to be concerned about that, but I have grown to believe it's a bogus argument. There are 7 million taxpayers whose primary source of income is from a trade or business. Now, 96% of those are not affected at all by the new 36% rate. So who are the other 4%? They are firms and individuals with average income before deductions of $560,000. And the 2% who will be subject to the highest 39.6% rate have average incomes of over a million dollars -- not exactly what I would think of as a mom-and-pop company. FARIS: But if I spend $500,000 from earnings on inventory and sell only $200,000 worth, that's all I can deduct, and I am going to be taxed on the other $300,000 as income. All of a sudden, I'm one of those "rich folks." Besides, even if there are very few in this 2% or 4% group, boy, do people want to be there. When you tax success, it becomes a penalty. Why is it that people who do well by adding new jobs have to start paying more taxes because they've done well? DENNY: It's not only federal taxes that are going through the roof. In California, where I'm based, it's also unemployment taxes and workers' compensation (it rose 8% in California in 1992). To deal with them, we suggest employers reduce staff by making more use of computers or independent contractors.

MONEY: Are taxes hurting job creation? RENNIE: Yes. From 1970 to 1990, businesses received nine Social Security tax increases totaling 60%, 19 FICA wage-base increases totaling 67%, three unemployment-FUTA (Federal Unemployment Tax Act) increases totaling 94% and three FUTA-base increases totaling 133%. Not to mention the expenses added by the Family and Medical Leave Act, Americans with Disabilities Act, civil rights and environmental regulations, and so forth. These make employers think twice before hiring. In NSBU's annual survey, we found that two-thirds of companies expected their sales to go up this year, but only a quarter planned to hire more help. GUMPERT: The incentive now for small-business owners is, How do I get rid of jobs? How do I increase revenues without adding more people?

MONEY: Can companies grow without hiring? GUMPERT: The small companies that will do really well are those that find ways to use technology to increase their sales per employee. DENNY: At my accounting firm, we've reduced our employee costs by putting all of our tax work -- and almost all of our clients' -- on computer. Now we're looking at new technology every day and telling our business clients how they need to upgrade their computer systems to keep up to speed. FARIS: The greatest opportunity arising for small businesses is using high- tech developments to better serve customers. If you use technology to improve your efficiency and service, you'll be successful -- no matter what industry you're in.

MONEY: How could you soften the blow of health reform? BOWLES: Here are four of the things I fought for: One, that the package be phased in over a long time while medical costs are brought down. Two, that employees share the expense. Three, that we have a basic health plan -- one that everyone can afford. And four, that we have a rainy-day fund, as they have in Hawaii for people who can't afford insurance. Since the plan embraces these things, it's a package we can live with.

MONEY: What about government regulations? BOWLES: Besides backing Vice President Al Gore's reinventing-government initiative, which is aimed at eliminating regulatory overkill, President Clinton plans to enforce two laws that are already on the books, the Paperwork Reduction Act and the Regulatory Flexibility Act. RENNIE: That's a terrific idea. If those acts were really enforced, they would exempt many small companies from certain regulations, or at least change the rules so that the firms could comply simply and inexpensively. FARIS: We hope someone in the government will look at every piece of paper to determine whether they are really necessary. Small-business owners spend at least 1 billion hours a year meeting the government's paperwork requirements, at an annual cost of about $100 billion in professional fees and lost productivity.

MONEY: What's your outlook for the economy over the next year or so? BOWLES: Somebody once asked my father-in-law, who is in the textile business, to predict the future, and he said, "Good gracious! Don't ask me. I'm the guy who thought that Nixon would last and denim wouldn't." So it's a little risky. But I think we'll see an economy that grows at a 2 1/2% to 3% rate, which is relatively modest, to say the least. I think small companies will also see an increased availability of capital, steady and perhaps lower interest rates, and lower inflation -- all of which should be extremely good for business.