Yesterday the Senate ended debate on H.R. 5297, the highly touted Small Business Jobs Act, which is being sold as a magic elixir cure-all for small businesses by the White House and most Democratic members of Congress. The problem is that this bill will not help small businesses or create jobs, in fact, language included the bill will actually be harmful for small businesses. I know, I know, it just seems so weird that a bill literally called the Small Business Jobs Act will actually do the opposite of what we are being told.

The Small Business Jobs Act, as it will be passed in the Senate this week, is going to create a $30 billion lending fund and offer $12 billion in tax breaks to small businesses. Surveys and research being conducted by real small business organizations, such as the American Small Business League (ASBL), and faux small business organizations, such as the Business Roundtable or US Chamber of Commerce, agree on one point: small businesses do not need loans, they need an increase in sales. Small businesses must have more customers walking in the door seeking goods and services.

Over the past two years, the focus on helping small businesses has been on increasing loans and access to capital. There are some small businesses that do need loans, but when it comes to job creation…loans and tax breaks are not going to work. The only way to create jobs and economic growth is by an increase in demand.

According to the Economic Policy Institute, “The theory of tax cuts as economic stimulus has been put to the test – and failed – twice in the past six years alone.” Alan Blinder, professor and co-director of Princeton University’s Center for Economic Policy Studies, has stated that for every budgetary dollar spent by the government, on things like unemployment insurance or on infrastructure, the real economic growth to the GDP is the equivalent of $1.60 to $1.70. Whereas he stated that every dollar in tax cuts only creates $0.35 in GDP growth. So why does our government keep insisting that tax cuts for small businesses is the best way to create jobs and stimulate the economy?

The best part about this Small Business Jobs Act is a little tiny paragraph snuck into the section on small business contracting. On the face of it, Section 1341 of the bill will help provide greater protection and oversight of small business contracting programs, which have been rife with fraud and abuse for years. Then you get to paragraph 4, which states,

“(4) REGULATIONS.— The Administrator shall promulgate regulations to provide adequate protections to individuals and business concerns from liability under this subsection in cases of unintentional errors, technical malfunctions, and other similar situations.”

The problem with this language is that it creates a giant loophole to allow large firms to defraud the government by claiming to be a small business, and then be immune from any prosecution for doing so. This language legalizes fraud while removing accountability. It allows the Administrator of the Small Business Administration (SBA) to create regulations to protect individuals or firms from liability. The catch is that the SBA has been claiming for years that large firms receive small business contracts because of “miscoding” or “simple human errors.”

Since 2003, there have been over a dozen federal investigations, which have found Fortune 500 firms and thousands of large companies around the world as the actual recipients of federal small business contracts. The SBA’s Inspector General has listed this problem as the number one management challenge facing the agency for the past five consecutive years and referred to this problem as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.”

Report 5-16 from the SBA Inspector General referred to these misrepresentations as, “false certifications” and “improper certifications.” Other federal investigations described the blatant fraud as “vendor deception.”

So this legislation will allow the SBA Administrator, who claims that over $100 billion a year in small business contracts go to corporate giants due to innocent mistakes, to create a loophole to allow firms that defraud the government in order to win small business contracts to avoid any punishment for fraud because of “unintentional errors, technical malfunctions, and other similar situations.”

President Obama and the Congress should be focused on legislation that will actually help small businesses and create jobs. Legislation like H.R. 2568, the Fairness and Transparency in Contracting Act, a bill that will actually do what it says, and end fraud in small business contracting programs. Cleaning up the rampant fraud and abuse in small business contracting programs would be a huge first step when it comes to driving over $100 billion a year in demand back into the hands of small businesses, who create over 90 percent of all net new jobs.

But, I guess this has become the norm in Washington, DC, where down is up, left is right, and the Small Business Jobs Act will help small businesses and create jobs.