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Lloyd Chapman

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The Best Way for Congress to Help Small Businesses is to Not Close the Small Business Administration

Posted: 03/20/2012 8:56 pm

While Congress and the Senate are churning out a number of bills to project the appearance that they are helping small businesses, they are ignoring the largest problems facing America's more than 28 million small businesses.

Small businesses employ over half the private sector workforce, are responsible for over half the GDP and 90 percent of all U.S. exports, and according to the U.S. Census Bureau, create over 90 percent of net new jobs. A study by the Kaufmann Foundation found that small businesses have created virtually 100 percent of all net new jobs since 1980. Conversely, that means Fortune 1000 firms haven't created one net new job in over 30 years.

However, on January 13, 2012 President Obama held a national press conference to announce plans to combine the Small Business Administration (SBA) with the Department of Commerce and four other federal trade and commerce agencies -- a move that any Washington insider can tell you is a trick to close the agency and wind down all federal programs for small business, woman-owned firms, minority-owned firms and veteran owned businesses.

The stupidest thing that our government can do, with our country in the grips of the worst economic downturn in 80 years, is to close the only federal agency that helps America's 28 million small businesses. But my guess is that is exactly what they'll do because the giant corporations that own our politicians want every penny the government spends, even if it destroys our national economy. In fact, they've been trying to close the SBA for decades.

Republicans in Congress have been trying to close the SBA by combining it with other agencies since Ronald Reagan was president. Reagan tried twice. His 1985 budget proposed abolishing the SBA and his budget director David Stockman tried to convince the Senate to close the agency as well.

In 1996, House Republicans authored a bill to combine the SBA with the Department of Treasury.

The Bush Administration cut the SBA budget by more than 60 percent and tried to close the SBA by combining it with the Department of Commerce. In August 2011, Republican Sen. Richard Burr also proposed legislation to close the SBA, again by planning to combine it with the Department of Commerce.

And now, President Barack Obama is proposing to do the same thing, which threatens every federal program designed to assist small businesses.

I believe that Republicans over the past three decades and now President Obama are using the proposal to consolidate the SBA as a ruse to wind-down federal small business contracting programs that mandate that 23 percent of all federal contract dollars must go to small businesses, including 5 percent go to women-owned businesses, 5 percent go to minority-owned companies and 3 percent to veteran-owned companies. By winding down these federal small business contracting programs, large businesses -- which are some of the largest contributors to political campaigns every year -- stand to gain billions in federal funds meant for small businesses every year.

The second major problem Congress is refusing to address is the fact that since 2003, over a dozen federal investigations have found that the overwhelming majority of federal contracts reported by the SBA to be going to small businesses are actually winding up in the hands of some of the largest companies in the world.

In 2005, the SBA Office of Inspector General (SBA-OIG) released report 5-15, which described the diversion of billions of dollars a month in federal small business contracts to corporate giants as, "one of the largest challenges facing the Small Business Administration and the entire federal government today."

President Obama recognized the magnitude of this problem in February 2008 when he released the statement:

Helping small businesses is part of our movement for change and the end of politics as usual. 98 percent of all American companies have fewer than 100 employees. Over half of all Americans work for a small business. Small businesses are the backbone of our nation's economy and we must protect this great resource. It is time to end the diversion of federal small business contracts to corporate giants.

However, since taking office, President Obama has failed to adopt even a single policy to end fraud, abuse and loopholes in federal small business programs. In fact, many of his policies will dismantle or weaken federal small business contracting programs.

For example, the latest data from the Federal Procurement Data System indicates that, of the top 100 firms that received the highest dollar amount in federal small business contracts in fiscal year (FY) 2011, 72 of those companies were actually large companies, including some of the largest corporations in the world.

On Sept. 9, 2011 the Obama administration also announced plans to dismantle a federal contracting program originally established through the efforts of Martin Luther King Jr. and the passage of the Civil Rights Act -- a move that could economically devastate minority communities. The Obama administration's proposal is to end federal programs that establish, for the Department of Defense (DOD), NASA and the U.S. Coast Guard, a five percent federal contracting goal with minority-owned small businesses.

If Congress really wants to help small businesses, it's really simple: 1) Not only should they vote to not consolidate the SBA with other federal agencies... 2) ...They should reopen all the SBA offices around the country that closed during the Bush administration and provide the SBA with the kind of budget that the only agency that exists to help small businesses should receive -- somewhere in the neighborhood of $4 billion dollars a year, as opposed to the less than $1 billion it currently receives in annual funding. And 3) Congress should pass H.R. 3184, "The Fairness and Transparency in Contracting Act," which would prevent publicly traded corporations from receiving federal small business contracts.

Here's my guess -- sadly you won't see any of my recommendations happen because the corporate giants that are hijacking tens of billions of dollars worth of federal small business contracts a year are the ones that decide which legislation gets passed and who gets elected to Congress. They've spent millions in recent years lobbying Congress.

That's why even though the SBA Inspector General recently testified before Congress that the diversion of federal small business contracts to large companies is currently the number one management challenge facing the SBA, and has been for the last seven consecutive years, it is unlikely that Congress will act to end the rampant abuses that have cost our nation millions of jobs. The House Small Business Committee even proposed cutting the SBA's FY 2013 budget by $10 million dollars in a recent markup.

With our country already in the grips of the worst economic downturn in 80 years, the best way to ruin the economy is by destroying all the federal programs that exist to help small businesses. Small businesses are proven to be this nation's chief engine of economic stimulus and job creation but President Obama plans to close the only federal agency that exists to help America's 28 million small businesses.

Anyone running for a top political office, who doesn't have a plan to help the nation's 28 million small businesses and end the diversion of federal small business contracts to corporate giants, doesn't deserve to serve in the White House or Congress.

 

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