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Lloyd Chapman

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Executive Order Could Slash Jobs Deficit

Posted: 08/03/11 01:33 PM ET

The game of political chicken over the debt ceiling has ended without a clear winner, and the American people can once again collectively roll their eyes at their dysfunctional government. Now an appointed Congressional committee, the so-called Super Congress, will look for new ways to relieve the national debt. It is an understatement to say that I do not expect a revolutionary breakthrough.

Congress' focus is in the wrong place. The biggest challenge the U.S. faces right now is the jobs deficit, not the budget deficit. Unemployment rates determine a healthy and functioning economy, and those rates are reaching new heights.

If President Obama is serious about trying to stimulate the economy, create jobs and balance the budget, his most effective tool is a simple executive order.

The U.S. Census Bureau tells us that small businesses create 90 percent of all net new jobs. The Kauffman Foundation found that small businesses create nearly 100 percent of all net new jobs. Moreover, small businesses employ more than half the private sector workforce, are responsible for half of the GDP and account for 90 percent of all U.S. exports.

Recognizing the vital role small businesses play in stimulating the economy, in 1953, Congress passed the Small Business Act requiring federal agencies to award a minimum of 23 percent of all prime contract dollars to legitimate small businesses. Yet, since 2003, a series of federal investigations has found that most of those dollars are diverted to large corporations.

The Small Business Act defines a small business as independently owned. That definition excludes any publicly traded companies. Also, when determining if a business is small, the number of employees of any parent company and all affiliates must be considered. Therefore, no Fortune 500 firm or publicly traded firm can be considered a small business.

Yet, in fiscal year 2010, 61 of the top 100 small business federal contractors were actually large firms. During a July Senate hearing aimed at discovering why large corporations like Lockheed Martin received billions of dollars in small business contracts, Senator Claire McCaskill expressed dismay that the SBA had allowed this to happen. She said it is "time for all of us to take a hard look at the way the government does business."

I could not agree more. If President Obama wants to create jobs and stimulate the economy, a simple executive order stating that government agencies can no longer report contracts awarded to publicly traded companies as small business contracts would suffice. Considering the federal acquisitions budget is around $1 trillion, this would redirect upwards of $200 billion per year in existing federal infrastructure spending to small businesses and the middle class.

The key phrase is "existing federal infrastructure spending," which means it does not require new taxes or new spending. This is money that the government currently spends. President Obama just needs to redirect it to companies capable of creating jobs. Furthermore, it would solve a ten-year-old contracting scandal that has been covered by virtually every major newspaper, television and radio outlet in the country.

If the American people took a survey asking if Fortune 500 firms should receive small business contracts, virtually 100 percent would laugh and say no.

But this is not a preposterous question.

Every day that President Obama has been in office, hundreds of millions of dollars in small business contracts have been knowingly, willfully and intentionally diverted to large corporations that have not created one net new job in America in more than thirty years.

President Obama said he would leave no stone unturned in trying to create jobs. Well there is a massive rock pile made up of Lockheed Martin, General Electric, Raytheon, Italian defense giant Finmeccanica, among several others, receiving small business contracts waiting to be turned.

 

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