If Mitt Romney is elected President and Republicans take over both the House and the Senate, it would be a nightmare for small businesses.

Will small business dry up under President Romney? (Photo: Kevin Dooley / Flickr)

I don’t want to upset my Republican buddies but I predict that Mitt Romney would follow a long line of Republicans that have been trying to close the Small Business Administration (SBA) and end small business programs ever since Ronald Reagan was president.

Reagan tried to close the SBA twice. His budget director David Stockman even went before Congress and argued for closing the SBA, making the outrageous claim that the SBA was “a billion dollar waste—a rat hole.” Thankfully, Senate Democrats, led by Senator Carl Levin (Dem-MI), opposed the move.

While Reagan’s plans to close the SBA failed, I believe he devastated small businesses by changing the definition of a small business from 100 employees to 500 employees, which was illegal. To change the definition like that, you’d have to put the proposal up for public comment, which Reagan didn’t do. Moreover, a company with 500 employees is much too large to be a small business, considering that 98 percent of all U.S. firms have less than 100 employees and 89 percent of U.S. firms have less than 20 employees.

The SBA was safe under President George H. W. Bush but President George W. Bush removed the SBA Administrator from a Cabinet-level position and told his SBA Administrator, Hector Barreto, to close the SBA by the end of his first term. I’ve spoken with people who said Barreto admitted this in a meeting. Bush cut the SBA budget and staffing every year that he was President and the budget has never recovered. Even when Ronald Reagan was president, the SBA’s budget was more than $1 billion.

Republicans are always talking about small business, but their track record is appalling. I believe that the Republican desire to close the SBA is based on the party’s marriage with big business. Federal law mandates that a minimum 23 percent of federal contracts must be awarded to small businesses. That’s more than $120 billion annually that big businesses want.

If Mitt Romney is elected and Republicans control both houses, within a matter of months you’ll see the SBA abolished. At the very least, you’ll see the SBA budget slashed just as it was during the Bush administration, or you’ll see them close the agency under the typical Washington scam of combining it with the Department of Commerce. Combining the SBA with the Department of Commerce is a way to close the agency without public scrutiny. You won’t be able to see the budget being cut or the employees being laid off.

So my prediction is that a Mitt Romney Whitehouse and Republican-controlled legislature would end all federal small business programs, including those for women-owned, minority-owned and veteran-owned small businesses. This would be detrimental to the economy.

The smartest most cost-effective thing you could do to create jobs is to simply uphold existing federal law that says 23 percent of all prime contracts dollars go to small businesses. After all, small businesses employ more than half of the private sector workforce, are responsible for half the gross domestic product, more than 90 percent of U.S. exports and, according to U.S. Census Bureau (PDF), more than 90 percent of all net new jobs. Unfortunately our government is controlled by big business and their greed and corruption knows no bounds.

As a small business advocate, I am afraid of a Romney White House and a Republican legislature.

"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 →