In 1953 Congress realized that small businesses were the engine of economic growth in America and passed the Small Business Act. When the law was originally passed, it stated that small business should receive a "fair portion" of all federal contracts. Today's federal law mandates that a minimum 23 percent of the total value of all federal prime contract dollars be awarded to small businesses.
Some basic economic facts make the Small Business Act the most efficient and effective economic stimulus plan ever passed. According to the U.S. Census Bureau, small businesses create more than 90 percent of all net new jobs. The Kauffman Foundation found that small businesses have created virtually 100 percent of all net new jobs since 1980. We also know from federal data that small businesses are responsible for half of the GDP, they employ over half of the private sector workforce and make up more than 90 percent of all U.S. exporters. Any way you look at it, small businesses are the irrefutable engine of economic growth.
And yet, based on more than a dozen federal investigations, the federal government continues to divert small business contracts to largest domestic and even foreign corporations. Investigative reports by NBC, ABC and CBS have all found Fortune 500 firms receiving federal small business contracts. In Report 5-15, the Small Business Administration Office of Inspector General (SBA OIG) named the diversion of federal small business contracts to large businesses, "One of the most important challenges facing the Small Business Administration and the entire Federal government today." The SBA OIG has repeated that every year since. And yet the problem continues. The latest federal data shows that, of the top 100 recipients of federal small business contracts during fiscal year (FY) 2011, 72 were large companies, including Lockheed Martin, General Dynamics, IBM and Microsoft.
Just like most politicians, President Obama blabs pro-small business rhetoric but doesn't deliver. In 2008 he announced: "It is time to end the diversion of federal small business contracts to corporate giants," but he has refused to make good on that campaign promise has never mentioned that sentiment since, and his administration continues to award small business contracts to corporate giants daily. If you're trying to create jobs and stimulate the economy, giving small business funds to large businesses just doesn't make sense.
What is it going to take to get Washington to actually fix this problem?
Let's look at this logically--and I welcome anyone's criticism. Small businesses create virtually all the net new jobs. A program is in place to direct federal infrastructure spending to small businesses. But today most of that money is diverted to large corporations. Therefore, a simple free and easy solution to fix the economy and create jobs is to stop diverting federal small business contracts away form America's chief job creators and into the hands of Fortune 500 firms that most likely haven't created one net new job in more than 30 years. If anyone can shoot a hole in this logic, I would love to hear it.
The federal government has squandered upwards of $2 trillion taxpayer dollars trying to stimulate the economy. I don't think we've gotten our money's worth. Let's try complying with existing federal law as a deficit-neutral economic stimulus effort. Direct existing federal infrastructure spending to small businesses, where most of the population works and where almost all of the net new jobs are created.