A lawmaker's plan to hold a Capitol Hill hearing on the Small Business Administration ignited the ire of small business advocate Lloyd Chapman.

Now the lawmaker is firing back.

Sen. Tom Coburn, R-Okla., called the American Small Business League president "dishonest and unethical" for suggesting last week that he was holding the hearing to explore abolishing the agency. "It is absurd to suggest that I have a hidden agenda to harm small business," Coburn said in a statement.

Coburn chairs the Senate Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management. He said the April 6 hearing would be no different than others he's held that examine various federal agencies.

But things didn't end there. Today, Chapman issued his own statement. "If this hearing is merely to examine the effectiveness of the Small Business Administration, why would Senator Coburn call a French, anti-American small business activist to testify?" he shot back.

Ah … the French.

Depending on who you want to listen to, Congress and the Administration may be trying to eliminate the SBA and most of its small business programs, or they are merely evaluating the effectiveness of the agency and its programs. Either way, this is a serious issue!

The U.S. Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Federal Financial Management, Government Information, and International Security, is holding a hearing titled: The Effectiveness of the Small Business Administration. This hearing requested by committee chair Senator Tom Coburn (R-OK), will examine the effectiveness of SBA programs and the financial impact of them on the budget and economy.

Senator Coburn, or Dr. Tom, as he likes to be called, is known to vigorously oppose earmarks, plus-ups and the rapidly bulging budget defect. However, the manner in which he called this hearing had the "earmarks" of a railroad job to kill SBA and many of its programs. Its existence was kept especially quiet as were the list of witnesses.

This fact didn't go unnoticed by some small business insiders including Jere Glover of the Small Business Technology Council (SBTC), and LLoyd Chapman of the American Small Business League (ASBL). When it was discovered that one of the witnesses would be Veronique de Rugy, of the American Enterprise Institute (AEI), Glover immediately referenced de Rugy's controversial AEI paper "Are Small Businesses The Engine Of Growth?"

Glover, former SBA Chief Counsel for Advocacy and current Executive Director of SBTC took great exception to de Rugy's writing and published opinions. SBTC is currently formulating a response to her "opinions." On the other hand, Chapman, who some say often "shoots from the hip", takes no prisoners and knows how to spread the word, authored and widely distributed a press release on March 28, 2006 entitled "Oklahoma Senator Calls for Hearing to Abolish Small Business Programs" see www.asbl.com/showmedia.php?id=165

This infuriated Coburn, who sharply criticized the ASBL press release that Coburn claims included a false and deliberate distortion of the Senate oversight hearing he plans to hold on the Small Business Administration. By the same token, Chapman didn't take delight in Coburn's response where he said, "If the ASBL believes the SBA represents the pinnacle of economic perfection and efficiency and is beyond scrutiny, then they should be confident that their perspective will be vindicated during this hearing."

Claims of Illegal SBA Lobbying - In an article published by GovEXEC.com, a Coburn spokesman reflected that some SBA employees had lobbied some Oklahomans to put pressure on the Senator. At the time of this writing these charges were unfounded. It is an illegal activity for an agency to spend federal funds for lobbying activities.

The Hearing Witness Veronique de Rugy - If Senator Coburn wonders what precipitated this brouhaha, he need only look at the choice of Dr. de Rugy for a witness at this hearing. She possesses distinguished educational credentials from the University of Paris-Sorbonne and directed academic programs for the Institute for Humane Studies in France. In a recent Forbes magazine article, Small-Firm Idolatry, Stop Babying Small Businesses, Dr. de Rugy demonstrated how wonderful academe prose could be contrary to common sense and actual fact. Her lilting phrasing, "The President's latest budget proposes to shower a budget of $605 million on the SBA.." is void of the fact that the actual SBA budget has been reduced again, as it has for the last 6 years, and no federal agency has had to endure those severe level of cuts.

Dr. de Rugy also states: "Because everybody loves small businesses, everyone wants to do something for them, whether it's targeted tax credits, special regulatory treatment or preferential access to government contracts." What planet is this person on? If her statement were even remotely true, you wouldn't need small business advocacy, SBTC, ASBL, or the SBIR Gateway News. I could actually enjoy my evening and you wouldn't be burdened with my diatribes.

Of highest importance to most of our readers would be de Rugy's comment including small business "preferential access to government contracts" [that should be abolished]. Of course, that would include the SBIR/STTR programs.

Coffee with Dr. Tom - I must admit that in talking with one of Senator Coburn's staffers, I became convinced of the staffer's loyalty and admiration for the Senator. Dr. Tom hosts morning coffee for his constituents on Thursdays from 8 am to 9 am EST (call for R.S.V.P.) and he seems genuinely interested in serving his constituents and the country. If I were privileged to have coffee with the Senator, I would ask him the following questions pertaining to Dr. de Rugy's comment on "preferential access to government contracts":

Is it true that all 50 Senators are from above average income households (millionaires), and do you think an intelligent citizen who only makes $60k per year could be successful in competing and being elected to the U.S. Senate? If so, are there any recent (last 10 years) examples? If we apply this same principle to federal government contracting, do you feel that high tech small businesses could compete straight up with large well-funded companies? If yes, can you show me the small business success rate in such a competition?

Bottom line, small businesses need government help to compete in federal government contracting, especially in the research and development sectors.

Senator Coburn's hearing will take place April 6, 2006 at 2:30 PM in the Dirksen Senate Office Building, Rm. 342. We will cover that for you in our next Insider.

Federal contracting programs for women and minorities are under attach, and it's time to fight back.

The conservative American Enterprise Institute (AEI) for Public Policy Research recently released a study recommending the closure of the Small Business Administration and the termination of all Federal contracting programs for women, minorities, and small businesses. Washington insiders know the Bush Administration has used the AEI to promote the Republican agenda.

In 2005, the U.S. Commission on Civil Rights (of which the majority of members were appointed by President Bush), released a study that suggested the Federal government was doing too much business with minority-owned firms and should scale back their contracting opportunities.

The U.S. Women's Chamber of Commerce was forced to take the Bush Administration to Federal court in order to get them to implement the Congressionally mandated 5% set-aside contracting goal for women-owned businesses.

Bush has cut the SBA operational budget and staffing for six consecutive years. In addition, SBA employees that handled minority business contracting programs have been specifically targeted for layoffs and early retirement.

I have spoken with senior SBA executives and Republican staff who have acknowledged that President Bush intends to "starve the SBA to death" and gradually eliminate all Federal small business contracting programs.

Since Bush took office, the SBA has adopted policies that have made it impossible for even a moderately successful minority-owned firm to qualify for small disadvantaged business status. At the same time, the SBA has diverted billions of dollars in Federal small business contacts to some of the largest companies in the world.

The American Small Business League has won two lawsuits in Federal court that forced the SBA to disclose information that proved billions in small business contracts had been awarded to firms such as Hewlett-Packard, Oracle, Raytheon, Northrop-Grumman, Archer Daniels Midland, and Titan Corporation.

The evidence is clear--Federal contracting programs for women, minorities, and small businesses are on the verge of extinction under the Bush Administration. What are the leaders of the minority, women, and small business communities doing about this? Nothing!

Over 100 billion dollars in small business contracts are at stake and you will not find any mention of this issue on the Web sites of the U.S. Hispanic Chamber of Commerce, the National Black Chamber of Commerce, The Small Business & Entrepreneurship Council, Women Impacting Public Policy, The National Procurement Council, the U.S. Chamber of Commerce nor the NFIB.

I believe the very groups small businesses thought were protecting their interests have betrayed them. America's entrepreneurs have been duped by partisan political rhetoric and lulled into complacency by the Republican leadership of virtually every group in the nation that touts itself as advocates for women, minorities, and small business.

Most of the heads of these organizations currently serve on Republican or White House councils.

It's time for small business owners to fight back and insist that any group claiming to represent their interests needs to act now to protect Federal small business contracting programs before it's too late. The American Small Business League will support you every step of the way.

Since 2001, the budget of the Small Business Administration (SBA) has decreased 38 percent – or 45 percent when adjusted for inflation. Opposing opinions regarding the reasons driving the shrinkage have become fuel for an increasingly hot political fire.

Big vs. Small Business Interests?

Critics point to fiscal mismanagement by the Bush Administration that forced budget reductions in this small agency, and a political agenda intent on promoting the interests of large corporations over small companies.

Congresswoman Nydia Velazquez of New York, ranking Democrat on the Small Business Committee, has called for the resignation of SBA Administrator Hector Barreto, based in part on a temporary closure of the agency's 7(a) loan program.

"The American Small Business League wholeheartedly agrees with the assessment of the SBA by the Democrats of the House Small Business Committee," says Lloyd Chapman, president of the California-based trade organization.

But Mr. Barreto says the agency continues to provide services by increasing its "efficiency." The SBA budget request for FY2007 totals $624 million for operating costs, and authority to make $28 billion in loans and venture capital investments. "This builds on our successes over the last four years, when we reached more small businesses, including more women and minority entrepreneurs," says Mr. Barreto.

The budget proposes fees from lenders and borrowers on SBA loans of more than $1 million, a program he says will "strike a balance between the needs of the SBA's customers and clients with the needs of all American taxpayers."
On the other hand, Senator Olympia Snowe, a Republican from Maine who chairs the Committee on Small Business and Entrepreneurship, maintains Mr. Barreto simply "has been tasked to do more with a lot less from the federal treasury. That is unreasonable and short-sighted." Ms. Snowe notes that the SBA budget represents only three hundredths of a percent of the federal budget, yet "the SBA and its programs have a tremendous return on investment." She judges that the "annual cuts, taken cumulatively, threaten to significantly reduce small businesses' ability to compete."

"While President Bush brags about government costs going down for the [SBA], he fails to tell the truth that slashing federal resources over the years raises costs for small business owners," adds Senator John Kerry of Massachusetts, ranking Democrat on the committee. "This budget cuts or eliminates key programs that meet the needs of small businesses."

Data on the Downsizing

A review of the latest available SBA budget request for FY2007 (issued February 2006), conducted by HispanTelligence®, the research arm of Hispanic Business, indicates that:

• The total SBA work force is 27 percent smaller than in 2001 (see table).
• Projected SBA budget authority is down 38 percent from FY2001, from almost $1 billion to $624 million (see table).

However, this is in nominal terms. If the FY2001 budget numbers are expressed in 2007 dollars to correct for inflation, the reduction in real terms is 45 percent.

In line with these projections, salary expenses will be down 26 percent from 2001, and expenses for the business loan program will be down 57 percent.

The controversy prompted the U.S. Hispanic Chamber of Commerce, where Mr. Barreto formerly served as vice-chair, to issue a statement that USHCC member chambers are "steadfast supporters of the U.S. Small Business Administration, whose employees are vital to the reconstruction effort. The recent politically motivated attacks leveraged against Administrator Barreto undermine the hard work of a dedicated public servant and adversely affect the mission and commitment of the SBA."

Impact At Ground Level

Jorge Corralejo, CEO of Macondo Leasing and a board member for the Los Angeles-based Latin Business Association (LBA) for 23 years, says it's the budget and staffing cuts that have put tremendous pressure on local SBA officers. As a result, "they take a lesser amount of money and cut it into smaller pieces," explaining why SBA in recent years has made more loans of smaller average dollar amounts.

"There's less money to generate income in our community," says Mr. Corralejo, who served on the LBA board when Mr. Barreto chaired it. "If you want to reinvigorate the economy, why would you cut resources to those [small businesses] that make it happen? The giants of Corporate America get major tax cuts, but for small and medium-sized businesses, where are the benefits?"

A study by the Greenlining Institute, a nonprofit that helps immigrants participate in the U.S. financial system, confirms a shrinkage in SBA programs. According to the January report, the number of banks making SBA-backed loans in 2004 was half the number that participated in the program in 2001.

"Given the growth in minority-owned firms, there should be a greater share of SBA loans going to [these] businesses," the report states. "However, given the cuts in its budget and its poor handling of the needs of those affected by the recent hurricanes, we are doubtful that [the SBA] can play a bigger leadership role in promoting minority businesses."

Critics of "Preferential" Policy

In rebuttal, another new study, from the American Enterprise Institute, found "no factual reason to base policies on the idea that small businesses are more deserving of government favor than big companies. Preferential policies will hurt, not help, economic growth." The report concludes that government programs, specifically those at the SBA, "distort [the market] process and will only hinder entrepreneurs and investors from serving the needs of consumers."