Obama Economic Policy Falters Without Small Business Stimulus

Press Release

Obama Economic Policy Falters Without Small Business Stimulus

March 10, 2009

Petaluma, Calif. - Since President Barack Obama signed the stimulus bill, the Dow has dropped to a 12-year low and unemployment has jumped to a 25-year high.  The most recent U.S. Census Bureau statistics could be the key to understanding why President Obama's economic stimulus bill hasn't worked so far and may never achieve its intended goal of creating millions of new jobs.

According to the most recent data, 98 percent of all U.S. firms have less than 100 employees. These firms are responsible for 98 percent of all new jobs in America and employ 50.2 percent of the private sector workforce. American small businesses are responsible for over 97 percent of all exported goods and generate the majority of innovations that come from the United States.

Not one dollar of the $2.3 trillion in economic stimulus funds will go to the 27 million small businesses where most Americans work. One hundred percent of the stimulus bill funds not destined for states, will go to the top 1 percent of U.S. firms. The firms in that top 1 percent have not created one net new job in America since 1977.  

In addition to ignoring small businesses, which are the nation's top job creators in the stimulus bill, President Obama has refused to stop rampant fraud and abuse in existing federal economic stimulus programs for small businesses. During the Bush Administration, a series of over a dozen federal investigations found hundreds of billions of dollars in federal small business contracts were diverted to Fortune 500 firms. Millions of small businesses were adversely affected and thousands of hardworking small businesses were forced to close their doors as a result of the fraud and abuse. (https://www.asbl.com/documentlibrary.html)

President Obama acknowledged the magnitude of the problems in government small business programs in February of 2008 when he released the statement, "It is time to end the diversion of federal small business contracts to corporate giants." (http://www.barackobama.com/2008/02/26/the_american_small_business_le.php)

To date, President Obama has refused to make good on his campaign promise, by proposing policies to stop the fraud and abuse that have crippled federal economic stimulus programs for small businesses.

Things could get even worse for the economy and small business under the Obama Administration. President Obama has confirmed he will raise taxes on small business owners, and he is expected to support new loopholes in federal contracting law that will divert billions more in federal small business contracts away from the middle class and into the hands of wealthy venture capitalists that contributed heavily to his campaign.


Is Obama Thinking Small?


Is Obama Thinking Small?

By Hiram Soto
Hispanic Business
March 6, 2009

As the federal government fights to revive the ailing U.S. economy, business leaders want the Obama administration to swiftly address the challenges that have faced Hispanic entrepreneurs.

One key area that Hispanic-owned companies are already focusing on is how President Obama will address the controversy surrounding the U.S. Small Business Administration and its plagued federal contracts program.

"President Obama can do something to help small and minority businesses, and he can do that by stopping Fortune 500 companies from getting small-business contracts," said Lloyd Chapman of the nonprofit advocacy group American Small Business League. "We don't want the Congress to pass any legislation to give federal small-business contracts to these companies, and small businesses should let them know that."

More than $5 billion in federal contracts designated for small businesses have gone to large companies and their subsidiaries, a problem that must be fixed, Mr. Chapman said.

In late January, the group raised more red flags. It came out strong against Speaker of the House Nancy Pelosi's proposal to remove "independently owned" as a definition of a small business, a move that they worry would open the door to allow venture capitalists and pools of investors in Fortune 500 companies to land contracts meant for smaller businesses.

With the economy in recession and access to loans and credit weakened, Hispanic executives are pushing for a major reform of the Small Business Administration.

The group has a legal mandate to award about one-fourth of procurement contracts – billions of dollars – to small businesses, including to women and minority-owned firms. Under the previous administration, the federal agency lost its Cabinet status position, cut staffing drastically, and saw its budget shrink by half.

Mr. Obama has suggested that he would strengthen programs that provide capital to minority-owned businesses, programs that the SBA administers.

Time will tell.

"I'm waiting for that to happen," said George Burciaga, president of smarTECHS.net, a Chicago-based company that offers information technology development services in states such as Florida and New York.

Mr. Burciaga, whose company employs 26 people, said he attended a luncheon last year where the president, then a candidate, was the keynote speaker at an event on how to strengthen minority-owned businesses.

"I believe that under his guidance we will see an increase in revenue at the SBA, and an increase in development for small businesses," he said. "It won't happen overnight, but we are willing to wait it out to see what happens."

Interest From New Administration

A lot of eyes are watching – with high expectations.

In 2007, Hispanics owned 2.8 million businesses, the largest number among the nation's ethnic groups.

They are estimated to represent 4.3 million businesses by 2012.

Most of them are small firms, and many of them include family members. In 2007, Hispanic-owned companies generated an estimated $360 billion in sales, and had more than 1.5 million paid employees, according to HispanTelligence, the research arm of HispanicBusiness Media.

"In the past administration there was a lack of interest in the Latino business community, or at least that's what we felt," said Rubén Guerra, chairman and CEO of the Latino Business Association, an advocacy group based in Los Angeles. "But this new administration has said it wants to focus on small businesses, and we need to take advantage of that."

Mr. Guerra said the biggest challenge facing entrepreneurs today is the lack of education in business management and access to government contracts, due in part to cultural and linguistic barriers.

Brokers Charge High Prices

But the other big challenge is access to bonds.

Even if small businesses compete for contracts, said Mr. Guerra, they often can't get bonds big enough for important projects. There are some brokers that can get them, he said, but the cost is high.

His organization is exploring a plan in which the federal government creates a bond program for disadvantaged companies that agree to enroll in business development programs administered by professional groups.

"We really need to be prepared for what's coming down the pipeline from the federal government," he said. "There's going to be a lot of opportunities and we need to educate ourselves in order to be in the mix with everybody else."

Economists expect massive government spending on infrastructure as part of any stimulus package, and these investments are set to benefit companies in the construction industry, the largest single sector for Hispanics.

For years, Central Concrete Supermix did plenty of business with developers in South Florida, supplying concrete for big construction projects and other commercial developments.

With about 300 employees, Concrete Supermix had more than $115 million in revenues last year. But because of the slump in real estate and construction, the company had to lay off 40 employees, and now it's setting its sights on these government projects.

"We are going to have to venture into the public sector, and I think it's going to be very interesting for the construction industry," said President and CEO Jose A. Cancio Sr.

A registered Republican, Mr. Cancio said he was willing to support Mr. Obama, especially if he can get the economy going again. He said Miami needed a shot in the arm.

"We have one of the highest unemployment rates in the country," he said.

On the country's opposite coast, entrepreneur Maria de Lourdes "Lulu" Sobrino from Lulu's Dessert is struggling with the bad economy and the brutally competitive supermarket industry.

Even though the Anaheim, Calif.-based company sells its gelatin and rice puddings to stores such as Wal-Mart, Stater Bros., and Ralph's, it's had to make difficult decisions.

Struggling to cut costs and survive, the company outsourced 75 of the 100 employees who worked at the manufacturing plant. Meanwhile, plans to export her ready-to-eat gelatins and flans (mother's recipe) to other markets have been put on hold.

She hopes the new administration will enact policies that will help small businesses access much-needed capital, while at the same time provide incentives for businesses to hire more employees locally.

"I think the administration should pay attention to us because we are the engine of America," she said. "We are the ones who create jobs, the ones that are willing to invest, and the ones taking on all the risks."

Source:  http://www.hispanicbusiness.com/news/2009/3/4/is_obama_thinking_small.htm

When small business meets big fraud


When small business meets big fraud

Small business advocates say the government bailout doesn't address contracting fraud and abuse, which has diverted billions to large corporations. Ronni Radbill explores what the government is doing

By Ronni Radbill
March 6, 2009


Steve Chiotakis: Many small business owners want to see the government change how it does business with them. Over the past six years, more than a dozen federal investigations show billions of dollars earmarked for the little guy were diverted to corporate giants. From Washington, Ronni Radbill reports.

Ronni Radbill: Small businesses advocates say the government's giant bailout does nothing to address contracting fraud and abuse. The government is legally required to award 23 percent of its contracts to small companies. Those are defined as independently owned and operated firms with up to 500 employees.

Lloyd Chapman is president of the American Small Business League. He says instead, most of the business goes to the big guys.

Lloyd Chapman: You can imagine what happens when you pull $100 billion a year out of the middle-class economy where all the jobs are created, where most Americans work, and divert that money to Fortune 500 corporations that are shifting jobs overseas.

In one investigation, the Interior Department's Inspector General discovered small business contracts were finding their way to companies like Xerox, Dell and Lockheed. In other cases, big corporations bought small firms and then kept their contracts.

Dan Fahey owns a small IT consulting company in Rockville, Maryland:

Dan Fahey: He who has the power has the ability to get it. And what happens is it's one of those things that's hard to prove but you see it happening in front of you, and there's nothing you can do about it.

The corporations say they never intentionally diverted work from small companies.

The U.S. Small Business Administration is responsible for the accuracy of the contracts. A spokeswoman there says sometimes errors in contracts are overlooked, but she says the agency is fixing the problem.

Congressman Lynn Westmoreland is a small businessman from Georgia. He sits on the House Small Business Committee. Westmoreland says Congress needs to take a closer look at how the government prepares its contracts.

Lynn Westmoreland: Sometimes they put together a contract that's so large that a small business can't do it.

He says SBA oversight together with loosening up tight credit are critical to small businesses.

Westmoreland: I've got small businesses that are going bankrupt every day. Until we get the credit down to those small business guys in somebody's home town, I don't think the economy's going to ever straighten out.

Small business owners echo that sentiment. They caution if it's business as usual in Washington, more jobs will be lost and small companies will continue to fail.

In Washington, I'm Ronni Radbill for Marketplace.

Source:  http://marketplace.publicradio.org/display/web/2009/02/09/sba/


Small Business Group Claims Victory Over Feds On Contracting Suit


Small Business Group Claims Victory Over Feds On Contracting Suit

By Rob Kuznia
March 5, 2009

A small-business advocacy group is claiming victory over the federal government in a yearlong case in which the feds have allegedly cheated small businesses out of billions of dollars worth of government contracts.

The advocacy group, called the American Small Business League, says the feds --which were appealing an August ruling in favor of the league -- have "capitulated" by failing to deliver an appellate brief by the Wednesday deadline.

"It is time for President Obama to make good on his campaign promise
to stop the diversion of federal small business contracts to corporate
giants," the league's president, Lloyd Chapman, said in a statement. "The abuses in these economic stimulus programs for small businesses are at least a contributing factor to our country's current economic catastrophe."

The league believes that since 2003, hundreds of billions of dollars in federal grants meant for small businesses actually went to large entities such as Fortune 500 companies and their subsidiaries.

The recipients include Lockheed Martin, Boeing, Rolls Royce, Microsoft, Wall-Mart, L-3 Communications, British Aerospace Engineering (BAE) and Buhrmann NV, a Dutch firm with 17,000 employees in 26 countries, according to the league.

The league's announcement on Thursday came a day after President Obama
vowed to clean upa "broken" system of government contracting.

In 2007, the league sued the federal government for its failure to adhere to a Freedom of Information Act request to reveal the names of all the firms that received federal small-business contracts during 2005 and 2006. During the proceedings, the federal government's Small Business Administration division tried to argue that it does not have any information on the actual recipients of federal small-business contracts.

In August 2008, the court ruled in favor of the league.

"The court finds curious the (federal government's) argument that it does not 'control' the very information it needs to carry out its duties and functions," wrote U.S. District Judge Marilyn H. Patel in her opinion.

As a result of the league's victory, the Federal Small Business Administration will be forced to hand over the documents.

Kevin Baron, the league's director of government affairs, told HispanicBusiness.com that the league has defeated the federal government in all six of the lawsuits it has filed since 2003. Five of the cases have been against the federal Small Business Administration.

"Under the Bush administration, they would just completely stonewall us," he said. "I'm hoping that will change under the Obama administration."

Source:  http://www.hispanicbusiness.com

Obama Still Refusing to Address Fraud in Small Business Programs

Press Release

Obama Still Refusing to Address Fraud in Small Business Programs

March 5, 2009

Petaluma, Calif. - President Barack Obama issued a memorandum yesterday to address a variety of problems in federal contracting programs.  One element conspicuously absent from the Obama memorandum is a plan to stop widely reported fraud and abuse in federal small business programs that have resulted in the diversion of hundreds of billions of dollars in federal small business contracts to Fortune 500 corporations and other clearly large firms.

Since 2003, a series of more than 15 federal investigations have found that hundreds of billions of dollars in federal contracts earmarked for small businesses have been diverted to Fortune 500 corporations and other large businesses around the world.

As part of an economic stimulus plan passed by Congress in 1953, the Small Business Act directs that 23 percent of the total value of all prime and sub-contracts shall go to small businesses. In February of 2008, President Obama stated, "It is time to end the diversion of federal small business contracts to corporate giants." 

Since making that statement, President Obama has had six opportunities to address the issue, but in each case he has declined.  He refused to address the issue on his campaign website, in his Small Business Emergency Rescue Plan, on Change.gov, in the stimulus bill, in his fiscal year 2010 budget proposal and now he has refused to address it in his memorandum on government contracting.

The American Small Business League (ASBL) encouraged President Obama to put one sentence in the stimulus bill that would have stopped the problem, and redirected up to $100 billion a year back to the middle class. That one line was, "The federal government and prime contractors can no longer report awards to publicly traded firms as small business awards."

"I think President Obama's refusal to address this issue speaks volumes about his true character.  His refusal to address this issue should outrage every American.  People need to quit listening to President Obama's charismatic and compelling speeches, and start paying more attention to his actions," ASBL President Lloyd Chapman said. "Under President Obama, small businesses are not going to get a dime of the stimulus bill, fraud in existing government economic stimulus programs for small businesses is likely to continue, and now he is going to raise their taxes. It's starting to look like President Obama is anti-small business."