The Senate Finance Committee recently announced its latest scam: a small business jobs act that will do little to promote entrepreneurship or create jobs. The legislation, seemingly designed to give Democrats cover with voters in the fall, is much ado about nothing, for nothing is what the legislation does for small business. Memo to Congress: no new laws are needed to grow small businesses, just enforce the laws already on the books.
Few members of congress or the Obama Administration have ever had to experience what Jerry McGuire calls the "up-at-dawn, pride-swallowing siege," of starting a company and trying to win a customer's business. So, it’s not surprising that they do not know what’s important and what’s window-dressing.
After 15 years as a small business owner, and as the former Administrator of the U.S. General Services Administration, I've been to the circus a few times and seen all the strings connected with small business initiatives and the federal government. Too often, small businesses are used as convenient pawns in larger political battles. This legislation seems just another political ploy.
The bill promises a 2% increase in small business contracts, but the law already requires 23% of all government contracting to be awarded to small, minority, women and veteran-owned businesses. Yet, since this law is inconsistently enforced, in 2009, only one government agency met this requirement. Congress would do far better to enforce the existing law than create a new one.
Small businesses are being crushed in the federal government contracting world, where the government has direct control over contracts awarded,. Small businesses should have received approximately $181 billion in contract awards from the $787 Billion dollar stimulus—which would have been 100% more than all government small business contracting done in 2009. Instead, less than 1% of all stimulus spending has gone to small business and most in the form of loans rather than contracts.
Usually, the federal government contracts over $500 billion (exclusive of Stimulus) annually. Enforcing existing laws would add another $125 billion to small business revenues, which would be a 34% increase in small business sales to the federal government, and far more than what is currently being proposed by the Senate Finance committee’s legislation. Imagine if Congress enforced the law on both Stimulus spending and annual government spending!
The Senate bill promises to ensure “prompt payment” to small businesses by large businesses. But, this too is nothing new. The Prompt Payment Act (and its flow-down clauses) is already a statutory requirement in the Federal Acquisition Regulations (FAR), and has been for almost 30 years since 1982, when President Reagan signed Public Law 97-177. No new legislation is required. But enforcing this law requires toughness and fearlessness in the face of enormous pressures from big business prime contractors.
The bill says “we must do all we can to ensure American entrepreneurs have the resources…to realize their dreams.” If this were really true, then congress would propose a reduction in the payroll tax (since small businesses pay over $1 trillion dollars or 44% of all payroll taxes in the U.S.) which would immediately put huge amounts of capital into the hands of small business owners, capital that could be invested in hiring new employees or purchasing much-needed equipment. Reducing the payroll tax requires less paperwork, less process and less cost than any loan program devised by congress.
Democrat leaders in congress aren’t serious about growing small businesses, not really, and the legislation which in places amends previous laws by changing “shall” to “may”, weakens rather than strengthens the likelihood that small businesses will benefit.
The bill promises to “create or save” 50,000 small business jobs. Americans have heard the “create or save” myth before and know there is no legitimate way to measure that promise.
Members of Congress return home in August and will likely hear from angry small businesses who have to bear an unusually heavy burden from the new reporting requirements and fees from healthcare reform. So Democrats will talk about the new, Small Business Jobs Act, and hope that these pie crust promises provide enough wiggle room to get themselves re-elected.
The Small Business Jobs Act may show good intentions but reinforces how little Democrat leaders in congress understand about small businesses and competitiveness. Crippling taxes and excessive reporting requirements that force small businesses to increase their administrative costs are the kinds of disincentives that make U.S. small businesses less competitive.
Lower taxes and less government interference help small businesses to grow. Until the Obama Administration and Democrat leaders in congress learn that “profit” is not a dirty word, small businesses will continue to be crushed by Democrats’ good intentions.