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Lloyd Chapman

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Boosting the Small Business Administration Budget Will Cut Deficit

Posted: 08/24/2012 2:25 pm

I'm watching the news and pundits and politicians are talking about the looming cuts in the Pentagon budget through sequestration, all because Democrats and Republicans refuse to come together on ways to solve the budget crises.

We can assume that politicians will find a way to avoid spending cuts at the Pentagon. But it will just be a quick fix, not a long-term plan. I find this frustrating because, as it is with running a business, if you're budget is unbalanced, there are two things you can do: you can cut overhead or increase your revenue. And nobody is talking about revenue.

The only thing they talk about in Washington is cutting overhead and cutting the budget. Well I've got an idea for them: why don't we look at ideas for increasing revenue without raising taxes.

Let's see if we can take a moment and figure this out--shouldn't be too hard.

We know from the U.S. Census Bureau data that small businesses create over 90 percent of net new jobs. Small Businesses are also responsible for half the gross domestic product, employ half the private sector workforce and make up more than 90 percent of U.S. exporters. Small businesses are truly the engine of the U.S. economy. So why don't we look at ways to generate more revenue for the government by generating more revenue for America's chief job creators?

There are several ways to do this, but the most cost-effective way is to simply restore the Small Business Administration's (SBA) budget and staffing to where it should be. There are over 27 million small businesses in America, and they are the heart and soul of our economy. Yet the only agency in place to support small businesses has a miniscule budget of less than $1 billion.

In fact, the SBA's budget is smaller today than it was during the Reagan administration.

So if you want to solve the budget crises, you need to boost the economy and create jobs. The first thing I would do is quadruple the SBA budget, quadruple the SBA staff and reinvigorate all of the federal small business programs. The Small Business Act of 1953 established a number of fantastic economic programs. In fact, I view the Small Business Act as the most effective economic stimulus program in U.S. history. But sadly, most of the programs for small businesses have been gutted, eliminated, wound-down or have been the victims of rampant fraud and abuse.

For example, current federal law requires that a minimum of 23 percent of federal prime contract dollars and 35.9 percent of subcontract dollars must go to small businesses. But since 2003, a series of federal investigations have found that most of that money has been diverted to Fortune 500 firms in the U.S. and some of the biggest companies in the world, including Lockheed Martin, Boeing, Raytheon, General Electric, AT&T, Dell Computers, Office Depot, Rolls-Royce, British Aerospace and Italian defense giant Finnmeccanica. It was even recently revealed that Russian state-owned arms broker, Rosoboronexport, won more than $375 million in federal small business contracts.

In 2005, the SBA Office of Inspector General released Report 5-15 naming the diversion of federal small business contracts to corporate giants as, "the number one challenge facing the Small Business Administration and the entire Federal government today."

In fact, for the past seven consecutive years, the SBA OIG has said the top management challenge facing the SBA has been that large firms are receiving federal small business contracts and agencies are counting those awards toward their annual small business procurement goals.

ABC, NBC, CBS and nearly every major newspaper in the country have reported on this scandal and yet Congress has yet to pass legislation to solve it.

Eliminating abuses of federal small business programs would put more money into the hands of the middle class and create more jobs than anything President Obama has ever proposed. It would be a simple, cost-effective and permanent solution to our economic problems.

If the SBA budget were to expand, federal programs across the board for small businesses could become more efficient. Offices that were closed during the Bush administration could be reopened and our economy could thrive through small businesses.

The SBA budget is already a tiny fraction--less than one fifth of one percent--of the Pentagon's enormous budget of more than $500 billion. Sadly, what I think will happen is that you won't see cuts to the Pentagon's budget; you will see cuts to the SBA's budget. That is what the large defense contractors want and I'm predicting that is what they will get.

If president Obama, Congress and the bureaucrats in Washington want to cut the deficit, the best way is to pump up federal programs for small businesses, which will create millions of jobs for the middle class and boost the taxes flowing into the nation's treasury. But that's not going to happen. I predict that before the end of the year, you'll hear corrupt politicians, controlled by some of the largest defense contractors, calling for the closure of the SBA under the guise of combining the agency with another agency.

 

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