September 24, 2010
On Thursday, the U.S. House of Representatives passed “jobs legislation” that will do little to create jobs or stimulate the nation’s economy. The American Small Business League (ASBL) maintains H.R. 5297, the Small Business Jobs Act, contains a loophole that may hurt small businesses by allowing large businesses to hijack small business programs without fear of prosecution.
Section 1341 states that the Administrator of the Small Business Administration (SBA), “shall promulgate regulations to provide adequate protections to individuals and business concerns from liability under this subsection in cases of unintentional errors, technical malfunctions, and other similar situations.” (http://finance.senate.gov/legislation/details/?id=da799068-5056-a032-5229-92cebbd2b7a0)
The ASBL believes that this language may create a loophole under which large prime contractors could be protected from prosecution for felony contracting fraud under the guise of, “unintentional errors, technical malfunctions, and other similar situations.”
Since 2003, more than a dozen federal investigations have uncovered billions of dollars in federal small business contracts actually flowing into the hands of corporate giants. Firms included in the Obama Administration’s small business data include Lockheed Martin, Boeing, Raytheon, General Dynamics, Ssangyong Corporation headquartered in South Korea, and Italian firm Finmeccanica SpA. (http://www.asbl.com/documents/20090825TopSmallBusinessContractors2008.pdf)
“In February of 2008, President Obama promised to end the diversion of federal small business contracts to corporate giants. This bill creates a colossal loophole that will make it easier for large firms to avoid prosecution for contracting fraud,” ASBL President Lloyd Chapman said. “In my opinion, the net effect of this bill will be harmful to job growth. The potential for harm greatly outweighs any potential for benefit.”
In addition to concerns about Section 1341, the ASBL does not believe H.R. 5297’s lending provisions or tax cuts are likely to create new jobs. Research by the Economic Policy Institute and Princeton University's Center for Economic Policy Studies indicates that tax cuts do not create jobs. Additionally, the National Federation of Independent Businesses (NFIB) and the Congressional Oversight Panel have separately concluded that small businesses are in desperate need of demand as opposed to loans.
The ASBL maintains that the most effective way to create jobs and stimulate the economy is to direct federal infrastructure spending to small businesses. This could be done by adopting H.R. 2568, the Fairness and Transparency in Contracting Act, which would stop the diversion of federal small business contracts to corporate giants.