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.

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 →

The federal government has a goal of awarding 23 percent of the total value of its purchases to small businesses.  It is not currently meeting that goal.  A recent study by the American Small Business League  (ABSL) found that small businesses only receive between 2 and 6 percent of federal government contracts (PDF).

The top “small business” contractors of 2008 included Lockheed Martin, Boeing, Raytheon, 3M, Hewlett-Packard, AT&T, Rolls Royce and General Electric (PDF).

Since 2003, more than a dozen federal investigations have found billions of dollars in federal contracts intended for small businesses actually flowing into the hands of Fortune 500 firms and other large businesses.  In Report 5-15, the Small Business Administration Office of Inspector General referred to the issue as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.”

The ABSL  has estimated that this issue pulls more than $100 billion a year in federal contracts out of the middle class economy. With that in mind, President Obama should use the power of his office to directly impact these issues, and stimulate the economy in the following ways:

1. Issue an executive order that would keep his campaign promise to, “end the diversion of federal small business contracts to corporate giants.”  Economists agree that the best way to stimulate the economy is to direct federal infrastructure spending to small businesses.  Ending this abuse would infuse the nation’s middle class economy with billions of dollars a month in existing federal infrastructure spending.

2. Support the passage of H.R. 2568, the Fairness and Transparency in Contracting Act.  H.R. 2568 represents a pure, simple and effective means of directing billions of dollars in existing federal spending to the nation’s 27 million small businesses.  The bill was introduced by Congressman Hank Johnson (D – GA) and currently has bi-partisan support from 26 co-sponsors.

3. Restore the Small Business Administration’s  budget and staffing to pre- Bush Administration levels.  The SBA had a larger budget during the Reagan Administration than it does today.  Since 2003, a series of federal investigations have pointed to a lack of oversight as a major contributing factor to fraud and abuse in small business programs.  President Obama should ensure that the SBA is fully capable of supporting small businesses, and adequately providing oversight on America’s small business programs.

4. Eliminate the Comprehensive Subcontracting Plan Test Program, which allows prime contractors to circumvent federal small business subcontracting goals.  It is imperative that the Obama Administration hold prime contractors accountable for hitting small business subcontracting goals.

5. Stop the pentagon from dismantling federal contracting programs for minorities.   The federal appeals court ruling in Rothe Development Corporation v. Department of Defense (DoD) effectively ended small business preference programs for Small Disadvantaged Businesses (SDB).  President Obama should take steps to ensure that SDBs are protected in federal contracting programs.

In November of 2009 Robert Reich stated, “Who is going to buy the stuff we make, or the services we provide?  Right now there is only one buyer left… the government.  The only way to get jobs back right now is for the federal government to spend even more on the roads, bridges, schools, parks, public transport and everything else we need.  Make up for the cut backs on the state level, and in this way, put Americans back to work.”

As the White House well knows, small businesses are responsible for creating between 65 and 90 percent of net new jobs (PDF).  It is critical for our economic recovery that the government takes steps to make sure that 23% of federal contracts actually go to small businesses, and not Fortune 500 companies.

Lloyd Chapman is the founder of the American Small Business League

Other posts in this series:

. Question: What Things Can Obama Do Now?
. Bill Black: What Obama Could Do Now
. Alan Grayson: What Obama Could Do Now
. Glenn Greenwald: What Obama Could Do Now
. James Galbraith: What Obama Could Do Now
. Cynthia Kouril:  Five Things President Obama Can Do Now
. Jon Walker: What Obama Could Do Now

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.

The American Small Business League (ASBL) has released the first analysis of the government’s fiscal year (FY) 2009 small business contracting data (PDF).

The ASBL conducted a review of the top 100 recipients of federal small business contracts for FY 2009. Within its sample, the ASBL identified 61 large firms, which received 64.5 percent of the total dollars the government claimed to have awarded to small businesses.

The ASBL also identified a series of Fortune 500 corporations and other large firms in the government’s 2009 contracting data. Recipients of small business contracts included: Lockheed Martin, Boeing, Raytheon, L-3 Communications, British Aerospace (BAE), Northrop Grumman, General Electric, Booz Allen Hamilton, Thales Communications, General Dynamics, and Dell Computer.

In addition to large corporations in the government’s 2009 small business contracting numbers, the ASBL also uncovered gross discrepancies in the volume of contracts awarded to some companies. In a sampling of the data, the ASBL uncovered several examples in which the volume of contracts awarded to legitimate small businesses was dramatically inflated. This appears to be an intentional attempt by the government to misrepresent the actual volume of contracts awarded to small businesses. Another technique the ASBL has uncovered is the exclusion of billions of dollars in large prime contracts from the government’s small business calculations, which further inflates the percentage of federal contracts the government claims to have awarded to legitimate small businesses.

The ASBL has recommended that the Obama Administration take the following steps to increase the volume of federal contracts awarded to small businesses:

• Issue an executive order to stop the government from reporting awards to publicly traded companies as small business awards.

• Abolish the Comprehensive Subcontracting Plan Test Program, which currently allows prime contractors to avoid any reporting or penalties for non-compliance of small business subcontracting goals.

• Implement the 5 percent set-aside goal for women-owned firms for all industries.

FY 2009 marks the tenth consecutive year that the government has diverted federal small business contracts to corporate giants. The SBA has gone from telling us that the diversion of federal small business contracts was a ‘myth’ to telling us that it’s the result of ‘simple human error.’ It is time for President Obama to honor his campaign promise, when he said, "It is time to end the diversion of federal small business contracts to corporate giants."