President Obama has announced on several occasions his desire to essentially close the Small Business Administration (SBA) by combining it with the Department of Commerce. Anyone who has been in Washington long enough to have lunch knows the Department of Commerce is essentially a division of the U.S. Chamber of Commerce. The U.S. Chamber and I aren’t exactly close friends.

President Obama

If Mitt Romney wins this election, he will start talking about closing the SBA before Anne gets the new curtains ordered for their White House bedroom. Despite their unending campaign baloney about investing in the middle class and creating jobs, Republicans, since Ronald Reagan, have had it out for the SBA. Reagan tried closing the SBA twice. The corporate bosses want that 23 percent of the federal contracts allotted to small businesses and they want it now.

President George W. Bush tried to starve the agency to death during his administration by cutting the SBA budget and staff by almost 50 percent. The agency was so understaffed during the Hurricane Katrina aftermath that 2,000 temporary employees had to be hired to assist the storm victims in receiving SBA backed loans to rebuild their businesses. He told his SBA appointee, Administrator Hector Baretto, that he wanted the agency closed by the end of his first term. Some mouthy guy in California launched a PR campaign that made that assignment a lot more difficult than Bush and Barreto had ever expected and the SBA was saved. Barrreto was ultimately fired for his failure to fulfill his mission.

Fortune 500 firms and the U.S. Chamber of Commerce have lobbied to close the SBA for decades. The Small Business Act mandates that a minimum of 23 percent of the total value of all federal contracts be awarded to small businesses. Why do corporate giants want the SBA closed? It’s really quite simple – GREED. The corporate giants that call the shots in Washington DC want every penny the federal government spends to go straight into their pockets.

The fact that small businesses are responsible for more than 90 percent of all net new jobs in America, 50 percent of the private sector work force, more than 50 of the gross domestic product (GDP) and more than 90 percent of all U.S. exporters doesn’t mean a hill of beans to the most ruthless corporate giants ruling the roost in Washington DC.

Let’s take a quick inventory, the U.S. is in the midst of the worst economic downturn in 80 years, small businesses are responsible for the overwhelming majority of net new jobs, and there is only one miniscule federal agency to service the 27 million small businesses where the majority of Americans work.

The corporate-backed, corrupt politicians see this issue a different way. They don’t want to squander a measly $900 million a year on the only federal agency that services the small business that are responsible for the vast majority of net new jobs. Forget the fact that the SBA’s budget is roughly one tenth of one percent of the budget allotted to the Department of Defense (DoD), which outright loses or misplaces almost 10 times as much money a year as it takes to run the SBA. There is obviously no way we can ever balance the budget and cut the deficit without closing one of the smallest agencies in Washington DC, right?

In all seriousness, the best way to determine if a politician is an outright, lying crook and a conman is to just look for one that proposes to close the SBA under the guise of saving money to balance the budget and cut the deficit.

Any honest elected official in Washington would realize that doubling the SBA staff and budget is the best way out of our economic recession. The SBA budget was higher 30 years ago than it is today. We need to reopen the SBA field offices the Bush administration closed. We need to reinvigorate each and every federal program to help our nation’s chief job creators – small businesses.

Hey, I’ve got a wacky idea, why don’t we stop giving federal small business contracts to some of the biggest companies on earth? Every year, for the past seven years, the SBA Office of Inspector General (SBA OIG) has named the diversion of federal small business contracts to corporate giants as the number one management challenge at the SBA.

I know it sounds crazy to quit giving billions of dollars a month in federal small business contracts to Fortune 500 firms but, who knows, it just might help the 27 million small businesses that are the irrefutable engine of economic growth and job creation in this country.

Creative Commons photo by Bernard Pollack on Flickr.

"Earth, courtesy Apollo 17" by woodleywonderworks on flickr

As I watch the coverage of our nation’s failing economy, an army of political pundits and economists parade through news programs giving their take. Yet one piece of information is conspicuously absent from mainstream coverage of the economy: small businesses create the majority of net new jobs in America.

According to the US Census Bureau, small businesses create more than 90 percent of all net new jobs. A recent study by the Kauffman Foundation found that companies less than five years old create virtually 100 percent of all net new jobs. Clearly, those firms are all small businesses. Conversely, the study found that large corporations created virtually no net new jobs in the last 30 years.

It should be common knowledge to leaders in Washington that large corporations are shipping jobs overseas at a record rate. Nearly every company on President Obama’s Jobs Council has lost a significant part of their US workforce over the last ten years. President Obama named the President of General Electric, Jeffrey Immelt, chair of the council, and GE has shed more than 36,000 US jobs since 2001 while adding more than 25,000 abroad. Following 2009, GE employed 36,000 less people in the US than it did abroad.

President Obama, Timothy Geithner, Ben Bernanke, and every news commentator and economist is confused here. They need to understand one thing: you cannot create jobs by giving money to Fortune 500 companies. They don’t create jobs. They are losing jobs.

If the goal is to stimulate the economy and create jobs, the leaders in Washington need to direct money to America’s 28 million small businesses. These are the companies where most Americans work, where a majority of gross domestic product comes from and more than 90 percent of all US exports are produced. Read the rest of this entry →

Lloyd Chapman is President of the American Small Business League

Despite at least $3 trillion in government spending aimed at stimulating the economy, a multitude of economic indicators now show that the economy is poised to slip into a double dip recession. I believe, as I am sure you do, that we need to bring down unemployment in order to stimulate the economy. To date, none of the actions taken by Congress or the Obama administration have met that need.

As you may know, small businesses create the overwhelming majority of net new jobs in America. According to the U.S. Census Bureau, businesses with less than 20 employees create over 97 percent of net new jobs. Statistics from the Small Business Administration (SBA) Office of Advocacy indicate that small businesses create over 90 percent of all net new jobs. Any effort to create jobs must be focused on small businesses.

One of the most effective economic stimulus programs ever passed by the U.S. Congress was the Small Business Act of 1953. The Small Business Act requires that 23 percent of the total value of all government contracts must go to small businesses. This makes perfect sense, considering the important role small businesses play when it comes to the U.S. economy and job creation.

Since 2003, over a dozen federal investigations have found that most small business contracts actually go to Fortune 500 firms, European conglomerates and thousands of other large businesses around the world. Some of those companies are: Lockheed Martin, Boeing, British Aerospace (BAE), Rolls-Royce, Raytheon, Dell Computer, General Electric, Honeywell International Corporation, Ssangyong Corporation headquartered in Seoul, South Korea and Finmeccanica SpA, which is located in Italy and has 73,000 employees.

In March of 2005, the SBA Inspector General referred to this problem as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.” The SBA Inspector General has listed this problem as the number one management challenge facing the agency for the past five consecutive years. Even President Obama recognized the magnitude of the problem in February of 2008 when he said, “It is time to end the diversion of federal small business contracts to corporate giants.”

Ending the diversion of small business contracts to large businesses would redirect over $100 billion a year in federal contracts back into the middle class economy. This would be the most powerful economic stimulus to date and can be used to drive demand directly into the hands of our nation’s small businesses. With this economic stimulus in mind, I urge you to support H.R. 2568, the Fairness and Transparency in Contracting Act. It was introduced by Georgia Congressman Hank Johnson, and currently has 26 cosponsors. This bill is a deficit neutral means of ending the 10-year-old contracting scandal that has facilitated the diversion of over $1 trillion in small business contracts to corporate giants.

The single most effective and deficit neutral way to create jobs is to direct existing federal infrastructure spending to the middle class. So if you want to stimulate the economy and create jobs, H.R. 2568 would be the most effective way to do that. It could be passed and signed into law as soon as Congress comes back in session. I believe that H.R. 2568, which would bring over $100 billion a year, and every year, to small businesses, would be more effective than a one-time shot of $30 billion in loans.

As our nation slides into its worst economic disaster in history; it would be inexcusable to allow the continued diversion of billions of dollars a month in small business contracts to corporate giants. I think that the Democratic Party and President Obama would be wise to take dramatic action to stave off a double dip recession before the November election, and I think that H.R. 2568 would accomplish that.