Small Business Smoke and Mirrors

Lurita Doan

2/13/2012 12:01:00 AM - Lurita Doan

The Obama Administration likes to "talk the talk" when it comes to small businesses, but they have yet to "walk the walk". None of the Administrations efforts to help small businesses have worked as promised and most were mere gimmicks designed to fool some of the people all of the time. Barack Obama's recent announcement that he was promoting the SBA to a cabinet-level agency was just another example of window dressing and political sleight-of-hand to cover three years of missteps with the small business community.

Most of Obama's announcements are timed and designed to cover up failures, and small business is no exception. Thus, the most recent White House announcement, lest the president seem lagging behind congress which has four, bipartisan bills working their way through the House, in support of small businesses doing business with the government.

But rather than taking actions that might actually encourage small business formation, reduce the regulatory burdens, or open more opportunities to small business growth, Barack Obama took the largely ceremonial step of elevating the Small Business Administration to cabinet level status. No doubt, Obama hopes that this ceremonial move will demonstrate his true devotion to small business.

Obama probably also hopes that Americans will forget that this president seldom meets or consults with his Cabinet. Even Democrats have complained that he summons them rarely, and only when needed for an appropriate photo op, and has instead turned power once held by Cabinet Officers over to one of the many, different White House Czars.

But anyone willing to take a closer look at Barack Obama’s policies toward small business will see that he has no idea just how irresponsible, punishing, and openly corrupt his policies have become towards small business.

Even in the federal government contracting world, where government has direct control over contracts awarded, during the past three years, small businesses did not participate, to any significant extent, in the splurge of federal spending—almost $4 Trillion in 3 years, and only a tiny percentage went to small businesses--which is a real shame since history has shown that small businesses create 3 out of every 4 jobs in this country.

After three years of effort, there remains a severe disconnect about what kinds of policies help small businesses grow and have the confidence to hire employees and create jobs.

For example, the Subcontractor Transparency and Reliability Act (H.R. 3893) is well-intentioned and correctly identifies the pervasive problem of "bait and switch" small business subcontracting practices within the federal government. But, the solution is not more frequent reporting, but rather more accurate reporting. Reporting designed and stream-lined to ensure that the small businesses originally proposed to win the procurement are actually the small businesses currently performing the work is what is needed.

Obama seems unaware that there is only one way to remedy this deficiency. Large businesses must perform the work as promised, with the subcontracting small business team originally proposed, or they must forfeit payment until such time as the large business can fulfill its small business subcontracting promises.

Another piece of small business legislation that is also well-intentioned requires the inclusion of the Office of the Small Business Advocate in the procurement process. The problem with this is that it is already part of the existing small business procurement regulations process--the small business advocate is already required to review all federal agency procurements to determine which, if any, are appropriate for small businesses--but, this procedure is rarely, if ever, enforced.

No new laws are required. The White House (and congress) simply need to enforce the laws already existing on the books.

Another example, H.R. 3850 ( GETS) seeks to increase the small business contracting goals from 23% to 25%. While this may seem like a great way to increase the size of the small business pie ( and I certainly applaud the spirit and the intent of the legislation), government agencies already are adept at the duck-and-dodge when they do not achieve or succeed in meeting the current, legislated standards. These federal agencies are given a pass, year after year, and so the canard continues.

Occasionally, a wily, federal small business, procurement office, for example in DHS, will achieve or even appear to exceed their small business procurement goals by awarding one or two contracts, worth anywhere from hundreds of millions to billions of dollars to one or two Alaskan Indian firms ( that rarely seem to have any Alaskan Indians working in them). Alaskan Native Firms have long operated in an openly corrupt system that allows them to compete for federal business unfairly. Rarely are the Alaskan Native businesses required to have relevant past performance or experience, and are allowed to submit sole source proposals, and have been awarded some $5 billion in government contracts.

To be sure, phony contracting to Alaskan native firms, and the special protected status of these firms, has been a growing problem for years. Yet, when confronted with the facts about how corrupt the system has become, Barack Obama elected to EXPAND the program to include Hawaiian native companies.

In worst case scenarios, whether intentional or not, large corporations often help the government continue the small business assistance shams, In the course of the sham, there'll be great fanfare and publicity about small business initiatives. Perhaps the large business will co-host a trade fare to "partner" with the government agency.

But none of these expenditures of money or effort will result in giving the small business community what they need most, a fair shot at winning government contracts, lower taxes to spur investment and hiring, and access to investment capital.

What will occur is that the entity, whether private sector or government, will take the funds expended on these trifles and claim the cost of these small business conferences as their way of meeting their small business set-aside requirements-- and complicit government allows the sham to succeed.

What Barack Obama needs to understand is that elevating the SBA Administrator to the Cabinet level doesn't magically solve this country's small business problems, especially if he keeps loading regulations and restrictions that increase the burdens on small businesses. The White House’s small business policies are mere election year shenanigans, smoke-and-mirrors designed to get folks re-elected, that do little to address the real and troubling problems facing small business.

By now, Americans should know that Barack Obama is a great fan of smoke and mirrors. As long as no one looks too closely, Barack Obama’s sad and pathetic record on small businesses will never be seen as it truly is, a corrupt and despicable fraud.