For years I've been listening to pundits and politicians talk about job creation in America and I'm constantly stunned and frustrated because no one is talking about the single most fundamental issue related to job creation in America.
Our political representatives have tried everything except the only thing that will work, which is to spend existing infrastructure dollars with small businesses.
Small businesses create virtually all the net new jobs in America while every year large businesses and Fortune 1000 corporations employ fewer and fewer Americans. According to the Kaufman Foundation, virtually 100 percent of the nation's net new jobs since 1980 have come from small businesses. Conversely, Fortune 1000 companies haven't created one net new job in over 30 years.
There is no question that small businesses are the heart and soul of our nation's economy, yet President Bush and President Obama's stimulus efforts have relied solely on large corporations. Even worse, for over a decade our political leadership has diverted hundreds of billions of dollars a year in federal small business contracts to Fortune 1000 firms.
In Report 5-15 the Small Business Adminstration Office of Inspector General (SBA OIG) described the abuse of federal small business contracts as, "One of the most important challenges facing the Small Business Administration and the entire federal government today." SBA Inspector General Peggy Gustafson recently testified before Congress and named the abuse of federal small business contracts a top management challenge facing the SBA for the seventh consecutive year. While this blatant federal contracting abuse has been well documented for more than a decade, media coverage has been rare.
Think of the lunacy of trying to create jobs by giving between 80 to 90 percent of all federal contracts to the Fortune 1000 firms that haven't created one net new job in 30 years!
When you look at all the economic indicators, things are not going well. The economy overseas is sliding downward. Large businesses worldwide are laying-off employees at record rates. The U.S. economy doesn't show any signs of improvement.
To me, the simplest way to create jobs would be for President Obama to keep his February 2008 campaign promise when he stated, "it is time to end the diversion of federal small business contracts to corporate giants."
Congress knew in 1953 that small businesses are the economic engines of our country, which is why they passed the Small Business Act, requiring a minimum of 23 percent of federal contracts to go to small businesses.
The Small Business Act of 1953 defines a small business as being "independently owned." That excludes any publicly traded companies from receiving federal small business contracts. If President Obama were to issue an executive order stating "the federal government will no longer report awards to publicly-traded companies as small business awards," that could redirect well over a $100 billion a year to the middle class and right into the hands of America's chief job creators.
Of course I have come to understand that will never happen because the Fortune 1000 corporations that pretty much own our government won't allow that. These Fortune 1000 corporations that are getting most of the federal small business contracts are the same corporations that control about 90 percent of the advertising in the media and probably 90 percent of all the lobbying dollars on K Street.
I'm ashamed of our government. It's a tragedy that I'm afraid we may never recover from economically because rampant fraud and corruption in Washington has allowed this abuse to go on for too long.
Follow Lloyd Chapman on Twitter: www.twitter.com/LloydChapman
“Some small companies do grow, of course. Think Apple (AAPL) or Hewlett-Packard (HPQ), which were initially run out of garages, or Google (GOOG), created by two guys in a dorm room. But the vast majority of small enterprises stay small. Eighty percent of U.S. small companies that remained in business from 2000 to 2003—the most recent period for which Hurst and Pugsley compiled data—didn’t add a single employee.
Bloomberg Business Week
That business activity generates NATIONAL WEALTH as business profits, private personal income, inventory, foreign product exports, and real property so that this newly created (and the existing) NATIONAL WEALTH is then available to be CONFISCATED through taxation TO PAY FOR GOVERNMENT bureaucratic employee payrolls, INFRASTRUCTURE IMPROVEMENT CONTRACTS and other government expenses.
This NATIONAL WEALTH is then also available as security redeemable for any US Treasury Bonds that come due, and also to pay off any existing government bonds when they become due at maturity.
If Federal Government deficit spending destroys the US economy, then the WEALTH CREATING GREEDY businesses and the GREEDY corporations will disappear.
Without GREEDY business activity to generate NATIONAL WEALTH to be taxed to pay for government activities, then all of those government jobs, government services, government benefits, government contracts, Tax Supported Non Government Organizations and other government programs at every level will disappear for lack of funding because there might/will not be any NATIONAL WEALTH left in the GREEDY private sector to be confiscated in order to pay for government spending activities.
Farm subsidies are another thing that showes that the top rake in all the good and the bottom get the crumbs. Nebraska gets 302 million in farm subsidies of which 70% goes to the top 20% of big farms, most of them millionaire many times over. The bottom 80% of farms divide up the remaining 30%. GE made 7 billion dollars in profit last year and are forecast to increase that to 14 billion this year. GE paid no income tax on that 7 billion and got a refund from the IRS to boot. When we talk about the USA having the highest Corporate tax just let it slide because it is meaningless. The government is bought and paid for by Corporations and the 99% are getting screwed everyday.
I wish RWNM folks and etc. would get over that biz about 'they need low taxes to create jobs'........please the reality is for corps. is NOT to create jobs but to MAKE MONEY.
If I could get free housing and food for my family, and have all my debts paid off, I'd quit work tomorrow!
I could spend the next 30 years of my life parked on the couch playing Fallout, mouse in one hand and beer in the other! And knowing that since food and housing are paid for, I wouldn't have to worry about getting my kids educated enough to go to college and get a decent job.
That would let me carve out more time for drunkeness and idleness from my parenting duties.
It's a slice of heaven you describe! Where can I sign up?
Is it my understanding that you feel that small businesses are not getting enough quality time at the federal trough and that instead of big corporations getting more than its fair share of the juicy payola, it would be better for so-called ‘small businesses’ to more access to taxpayer-provided solace? Is that my understanding? Hmmmm… I thought you might argue for less onerous regulations, or lower taxes, or less policy uncertainty…but why ask for that when you can get government dependency at the taxpayers expense.
A few other points:
Fed Research: ‘To contribute some to the discussion, we investigated the statistical association between data on small business plans to hire and make capital expenditures and a measure of policy uncertainty. Our analysis suggests that uncertainty is adversely affecting small business owners’ expansion plans.’
http://www.clevelandfed.org/research/commentary/2011/2011-24.cfm
Business could deal with new regulations and taxes if they knew and understood what they meant. But because putting any of these in place right now is like nailing jello to the wall, how do you plan for the unknown? Especially with all the misinformation out there?
My old sparring partner. I hope you have been well.
I would agree with you that dysfunction in Washington is creating policy uncertainty. I would add, though, that it takes two to tango in this fight and both parties are at fault for being ideologically rigid. In addition, Obama had two years where he had legislative carte blanche, and much of the uncertainty we see today is a direct result of legislation that has passed but has not been fully implemented and all the costs and impacts known. Obamacare, in my opinion, is the worst piece of legislation ever written with its full costs, restrictions, implementation, etc completely a mess and a deterrent to new hiring.
Making the government into a charity for well-connected so-called ‘small business’ owners is not the answer to growing small businesses, regulatory reform and tax reform is…and in less of both or at least a simplification of both.
Kai
http://www.investors.com/NewsAndAnalysis/Article/581555/201108151901/Regulatory-Agencies-Staffing-Up.htm
And, ‘In the face of yet higher costs of federal regulations, the research shows that small businesses continue to bear a disproportionate share of the federal regula¬tory burden.’… ‘The research finds that the total costs of federal regulations have further increased from the level established in the 2005 study, as have the costs per employee. More specifically, the total cost of federal regulations has increased to $1.75 trillion, while the updated cost per employee for firms with fewer than 20 employees is now $10,585 (a 36 percent difference between the costs incurred by small firms when compared with their larger counterparts).’
http://archive.sba.gov/advo/research/rs371tot.pdf
Get your priorities straight!
Kai
But that's not what was meant by "small businesses" (wink, wink), was it...?