December 11, 2009
56-Year-Old Law Could Slash National Unemployment Rate
In 1953 Congress passed the Small Business Act. The law established the Small Business Administration (SBA) and a government wide goal to ensure that a "fair portion" of the total value of all federal contracts and subcontracts were awarded to small businesses. The 1953 Small Business Act also defined a small business as being "independently owned."
The Small Business Act was one of the first economic stimulus bills. It was also one of the most effective. In 1953 Congress realized most Americans work for small businesses, most of the Gross Domestic Product (GDP) came from small businesses and the overwhelming majority of new jobs came from small businesses. The original Small Business Act was a win-win for the federal government and for the American people. In 1953 Congress realized there was no better way to invest the taxpayers dollars than to reinvest them back into the small businesses that employ the majority of the taxpayers.
Now lets flash forward 56-years and see how the Small Business Act is doing in 2009. Today Congress interprets the "fair portion" to be 23 percent. According to SBA Administrator Karen Mills that is around $150 billion a year. http://www.nytimes.com/2009/10/30/business/smallbusiness/30mills.html When you consider the fact that 99 percent of all U.S. firms are small businesses and that those firms are responsible for more than 97 percent of all net-new jobs, 23 percent seems a little low to me, but we'll let that go for now. We have bigger problems to address.
Since 2003, twenty-five federal investigations have found rampant fraud, blatant abuse and an intentional total lack of oversight over nearly every federal program originally established by the Small Business Act. The most widely investigated and publicized problem has been the diversion of federal small business contracts to Fortune 500 firms and thousands of large businesses around the world.
In 2005, the SBA Office of Inspector General (OIG) released Report 5-15. It referred to the diversion of federal small business contracts to corporate giants as, "One of the most important challenges facing the Small Business Administration and the entire Federal government today." For the last five consecutive years the SBA OIG has continued to report the diversion of federal small business contracts to large businesses as the number one challenge facing the SBA.
President Obama recognized the magnitude of the issue during his campaign, when he released the statement, "It is time to end the diversion of federal small business contracts to corporate giants." To date he has failed to adopt any policy or legislation to honor that promise.
The most recent federal small business contracting data released by the Obama Administration indicated that the largest recipient of federal small business contracts was Textron. Textron is a Fortune 500 firm with 43,000 employees, which received over $775 million in government small business contracts. Other recipients of small business contracts included Xerox, Bechtel, Lockheed Martin, Boeing, Raytheon and Northrop Grumman. http://www.asbl.com/documents/20090806BechtelSB_DOE.pdf
The American Small Business League (ASBL) estimates that of the approximately $150 billion a year in federal contracts that should go to legitimate small businesses, less than $30 billion actually go to small businesses as a result of the rampant abuses. This projection is based on information provided by current and former federal officials, and from information obtained through a series of successful Freedom of Information Act (FOIA) lawsuits against the federal government.
One of the most effective and efficient ways to cut record unemployment would be to simply clean up the rampant abuses in existing federal economic stimulus plans. It is absurd for President Obama and Congress to be considering a new jobs bill when over $400,000,000 a day in federal small business contracts are being diverted to large businesses. We already have a 56-year-old federal program that could redirect over $100 billion a year in existing federal infrastructure spending to the small business that create over 97 percent of all net new jobs.
The simplest way for President Obama and Congress to stimulate the national economy and slash record unemployment is to end rampant fraud and abuse in one of America's most efficient and effective economic stimulus programs, the Small Business Act of 1953.