$200 Billion in federal spending cuts suggested

News

$200 Billion in federal spending cuts suggested

By Doug Caldwell
Central Valley Business Times
November 10, 2010

•  UPDATED with reaction to SBA's future
•  Includes merging SBA into Commerce Department
•  Earmarks and other subsidies cut or eliminated

That wail of an ox being gored you might hear today could be coming from your ox or one you know.

A report Wednesday from the bipartisan National Commission on Fiscal Responsibility and Reform suggests slashing federal spending by at least $200.3 billion by 2015.

The commission was ordered by President Barack Obama to find possible cuts in federal spending. And it has, ranging from folding the Small Business Administration into the Department of Commerce to freezing most federal salaries and benefits for three years to reducing the federal civilian workforce by 10 percent.

Here are some of the other suggestions:

• Eliminate 250,000 non-defense service and staff contractors
• Cut the federal travel budget
• Establish Veterans Administration health co-pays
• Create a Cut-and-Invest Committee charged with trimming waste and targeting investment
• Terminate low-priority Army Corps of Engineers construction projects


Click on the link below to download the full, 24-page list

If all the cuts were made, says the commission, federal spending could be reduced by $3.8 trillion in ten years.

However, the list is just that for now – a list. If 14 of the 18 members of the commission agree with it, it will go to Congress for debate and implementation, if any.

Even if it is a list, it's getting reaction -- and not all positive.

“The Small Business Administration (SBA) is the only federal agency that exists for the expressed purpose of assisting America’s chief job creators, its 27 million small businesses. Trying to save money by combining the SBA with the U.S. Department of Commerce not only has the potential to be devastating to the nation’s small businesses, but it is exactly what small businesses don’t need in these difficult economic times," says Lloyd Chapman, president of the American Small Business League, and a frequent critic of SBA shortcomings.

"I have been predicting that the Obama Administration would try to do this for a long time. This is not a move to save money. This is a move toward winding down federal programs for small businesses,” says Mr. Chapman.

 

Source: http://www.centralvalleybusinesstimes.com/stories/001/?ID=16816  

New York Congresswoman Backs Bill to Bring Billions in Contracts to State

Press Release

New York Congresswoman Backs Bill to Bring Billions in Contracts to State

November 8, 2010

New York Congresswoman Carolyn Maloney (D – 14) has offered her support for legislation that would infuse the state’s business community with billions of dollars in existing government infrastructure spending, save thousands of small businesses and create countless jobs.

H.R. 2568, the Fairness and Transparency in Contracting Act would end widespread fraud and abuse in federal small business contracting programs, while ensuring that the federal government is meeting its 23 percent small business contracting goal. The federal government has a congressionally mandated goal of awarding 23 percent of the total value of all prime contracts to small businesses. 

“I admire the American Small Business League’s efforts to make sure that small businesses get their fair share of federal contracts.  Since small firms are the engine of our economy, this mission could not be more timely or more necessary,” Representative Maloney said.  “I look forward to working with the American Small Business League and my friend and colleague Congressman Johnson to make sure that the Fairness and Transparency in Contracting Act becomes law.”

Since 2003, over a dozen federal investigations have shown that billions of dollars in federal small business contracts have been diverted to corporate giants. In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) referred to the problem as, "One of the most important challenges facing the SBA and the entire Federal government today." (http://www.sba.gov/IG/05-15.pdf)  

H.R. 2568 will stop large businesses from taking federal small business contracts by perfecting the Small Business Act's definition of a small business as "independently owned." The bill would prevent the federal government from awarding small business contracts to publicly traded firms, because they are publicly owned and would not qualify as "independently owned."

The American Small Business League has estimated that if passed H.R. 2568 would redirect more than $100 billion a year in federal spending to the nation’s 27 million small businesses.  According to the U.S. Census Bureau, small businesses are responsible for more than 90 percent of all net new jobs, 50.2 percent of the non-farm private sector workforce, 50 percent of the gross domestic product (GDP) and 90 percent of exports and innovations. (http://www.sba.gov/advo/research/rs359.pdf)  

New York's more than 2 million small businesses are receiving a fraction of the dollars they should be receiving.  If signed into law, small businesses in the State of New York could see their volume of federal contracts increase by several billion dollars a year.

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Business To Benefit From Shift To GOP

News

Business To Benefit From Shift To GOP

By Steve Viuker
BizBox by Slate
November 4, 2010

An informal survey by bizbox reveals a positive outlook for businesses under a GOP Congress. The following is a sample of voices.

Lloyd Chapman
President American Small Business League

Representative Boehner and the Republicans have been talking about how important small businesses are to the U.S. economy over the past two years, so this is a good opportunity for them to show us the difference between them and the Democrats and pass legislation to end the diversion of small business contracts to Fortune 500 firms. If they are unwilling to step-up to help small businesses, then we can expect a whole lot of nothing getting done for small businesses in the next Congress.

Charles A. Krugel
Human Resources Attorney & Counselor
Labor & Employment Law on Behalf of Management


The election results should send a clear signal to government that the public wants increased efforts by Congress and regulatory agencies to amicably prevent and resolve issues at a lower cost to businesses. Yesterday’s results also signal the further erosion of the strength of the partnership between the Democratic Party and labor unions. Consequently, there appears to be little chance for any significant pro-union legislation such as the Employee Free Choice Act (AKA "Card Check").

In the employment law (i.e.,civil rights and wage and hour spectrums), it appears that the message is to reduce oversight of small-to-medium sized businesses so that they can create jobs and impact the economy. It is the business community, along with respectful oversight and enforcement from government, that creates jobs and innovates.

Michael McGuinness, CEO of NAIOP New Jersey - a commercial real estate and economic development organization.

Overall, (the results) will have a positive impact. In the short term, I believe the Bush tax cuts will be extended for the next year. Hopefully, that will keep jobs at the level they are at now and also allow for businesses to invest.

The problems of real estate can be traced back to over-supply in the 1990's; followed poor underwriting and a drop in demand. The fallout in commercial real estate has not ended. We're bouncing around the bottom right now. In the next two years, many properties that have mortgages due will default.

Joseph Harbert, COO New York Metro Region, Cushman & Wakefield

“The election results add greater certainty to the business environment and that should be good for business. They also will give hope to those who have felt we have been heading in the wrong direction which should increase confidence amongst those voters and could translate into increased consumer confidence. The real challenge is for both parties to seek consensus on ways to grow the economy.”

Source:  http://bizbox.slate.com/blog/2010/11/business_to_benefit_from_shift.php

Small Business Smarts

News

Small Business Smarts

By Bonnie Durrance
North Bay Biz
November 2, 2010

As small businesses continue to struggle, NorthBay biz talks with advocates and consultants who offer sound survival advice.  You’ll often hear it intoned, by politicians and economists alike, that small business is the lifeblood of our economy. Why then, when small businesses are in trouble, as many are now—with assets deflating along with real estate values, and credit overstretched—are banks, cash-strapped themselves, not only withholding cash, but often revoking credit lines as well? Why haven’t small businesses been first in line for bailouts? And absent bailouts, what fate looms for the “life blood” of our economy, and the jobs it’s supposed to create?

Finally, gloom and doom aside, what practical advice can be found—or what lessons can be learned—to help small businesses through these times?

Lesson One: It’s expensive to be short of cash.
“Small business is supposed to be the way to get us out of this jobless slump,” says Scott Hauge, president of Small Business California, a non-partisan advocacy group. “We create the jobs, yet when you look at where the [federal loan] money’s been going up until now, it wasn’t to small business. Prior to passage of HR 5297, the big guys received $700 billion and we only received $1 billion.”

Why is that?

“Until passage of the jobs bill, there was no steady stream of money to support lending to small businesses,” says Hauge. “The funding stream started and stopped more than four times during the past year. As a result, lending plummeted 50 percent after subsidies stopped at the end of May.”

The problem is widespread. According to the Small Business Administration Office of Advocacy, small business comprises 99.7 percent of all employer firms, employing more than half of all private sector employees. When the economy sags, unemployment rises and people slow their spending, the pain spreads, and small businesses suffer. When they can’t get loans to carry them over the rough spots, many rely on credit cards—and that’s not healthy, says Hauge. “One small business I know needed a loan, but the bank had run out of money. So it put the business in a queue, and when the money came back three or four weeks later, the business owed some $40,000 in fees, as it couldn’t bridge the gap.”

The common complaint has been, “There’s no cash around, and the banks won’t loan.” The question is whether they won’t or they can’t.

Lesson Two: No bank is too small to fail.
The headline crisis began when large banks began to fail in 2009. This year, community banks have also started displaying symptoms of the economy’s ill health. With the downturn of the real estate market, in particular, vulnerable small banks in the North Bay have either closed or faced significant losses brought on by loans with “bad outcomes.” According to Mark Quinn, district director of the U.S. Small Business Administration (SBA), some banks have failed because of their own situation, while others have been restricted because they lack the stability to lend. Now, with the passage in late September (and President Obama subsequently signing it into law) of HR 5297, the “Small Business Jobs and Credit Act of 2010,” eligible community banks will have access to a $30 billion Small Business Lending Fund, designed to help them to help small business. Will this prove to have come in time; will it be enough?

Or will it be, as some critics predicted, déjà vu all over again?

Lesson Three: Put on your own oxygen mask first.
The previous administration’s big bank bailout program, the Troubled Asset Relief Program (TARP), bailed out only the giants, those deemed “too big to fail,” causing resentment on Main Street, as small business got left out.

“TARP has a bad reputation as a bailout source, but most of those banks that got money have already paid back their loans,” says Quinn. So the government didn’t lose anything. Nor will it with the current administration’s loan fund, which will have to be paid back as well, he says. Moreover, the $30 billion loan fund is aimed at helping stabilize community banks to give them sufficient capital so they can lend again.

It’s all about keeping the system stable, and keeping the flow going between bank and borrower is key to that—but that flow has become disrupted. “A lot of community banks have been subject to significant portfolio losses, and they’re in danger of being taken over by regulators,” says Quinn.

Hauge points out that the new bill includes not just provisions for loans, but some “tremendous” tax credits. Among them, he mentioned the bill would let businesses expense qualifying asset purchases, amounting to $500,000, immediately. Also, he says, the bill will eliminate FICA payments on self-employed and partners’ health premiums. “This is, in my mind, the biggest small business bill I’ve ever seen. And I’ve been doing advocacy for more than 30 years.”

Lesson Four: If you had enough orders, you wouldn’t need loans.
Some question whether the loan itself is the best way to go. “Would it actually provide small businesses with working capital? We don’t think so,” says Christopher Gunn, communications director of the American Small Business League (ASBL). Why not? “Because these types of solutions haven’t worked in the past.”

The problem, again, is all interrelated with the economy. “A lot of small business owners don’t have the business and consumer demand they need to stay in business,” he says. ASBL aims its efforts at correcting certain inequities in the field—specifically, that a number of Fortune 500 companies are receiving procurement awards set aside for small businesses, and federal agencies are receiving credit for these awards.

“As an organization, we are ‘A Bigger Voice for Small Business,’” says Gunn. The U.S. Chamber of Commerce, for example, and others, may claim to be of and for small business, “but when you look at its funding and its actions, the chamber clearly supports big business interests.”

Lloyd Chapman, president of the ASBL, says, “We estimate that, every year, there’s about $100 billion worth of small business contracts actually going to corporate giants.” How does he know this? His illuminating moment arrived eight years ago.

“I was a sales manager for a little computer company and a woman walked into my office crying. She’d spent several weeks working on a ‘small business set-aside’ bid for the commerce department. Only small businesses were supposed to be considered for the contract but, it turned out, she lost the contract to a company in Amsterdam with 26,000 employees in 28 countries.” (In California, says Hauge, small business is defined as having 100 employees or fewer.)

Chapman did some digging through the government’s database of small businesses and found “600 of the biggest companies on earth were in there.” This set off a six-month, six-man investigation, which then launched a Congressional hearing on the discovery of some 5,341 large businesses hiding in the government’s database of small businesses.

Chapman explains that this means, in many cases, giant—sometimes international—corporations are getting the breaks meant for small businesses. He says that, among other accomplishments, ASBL efforts over the last seven years have resulted in 600 large firms being removed from federal small business databases, freeing up more federal contracts (and federal dollars) for small businesses.

This is a real accomplishment, he acknowledges, but alone won’t restore confidence and solvency to banks and small business. What’s needed now, says Gunn, is a multifaceted approach that involves passing good legislation, getting money to banks that need it, and letting the federal government do more to shore up businesses and stimulate consumer spending. Which brings us back to loans.

Lesson Five: If it helps and doesn’t hurt, why not do it?
The Obama administration’s $30 billion loan program is pure upside, according to John Arensmeyer, founder and CEO of Small Business Majority, an advocacy group run by small business owners. “There’s no downside at all.” He explains there are similarities and distinct differences between this bill and the much-maligned TARP. “First, as with TARP, the money will all be paid back. But second, there’s a built-in incentive to banks to lend to small businesses,” he says. “To get this money at the favorable rate, banks are going to have to keep lending. So it’s very directly targeted to give banks the incentives to lend and giving them the capital to do that.” Since two-thirds of all small business lending comes from community banks, this should be a benefit to both banks and businesses. The bill will “absolutely” help small banks and, in turn, they will help small businesses by being able to make loans. Arensmeyer says it will be a “critical step” in helping businesses pull out of the current slump.

So if there’s no downside, why wasn’t this bill—which had been held up by a Republican filibuster since it passed the House in June—a snap to pass? “I think it’s a combination of ideology and the fact that TARP got a bad name,” he says, after puzzling for a moment. “We can’t figure out what the objection could have been, other than an ideological feeling about the role of government.”

It seems plain as day to Arensmeyer that, at a time when small businesses are struggling, the government should make every effort possible to help maintain balance. “As long as there’s no downside, we should be doing it.”

Which is not to say that with this bill, small business problems are over.

Lesson Six: When the going gets tough, the tough get…well, you know.
“I think the best advice I could provide for small businesses with concerns is, they should look for the local Small Business Development Center,” says Hauge. “[Those offices] can deal with access to capital; they can deal with marketing; they can help set up a business plan.”

Charlie Monahan, lead adviser of the Small Business Development Center (SBDC) in Napa, agrees. He treats his clients to a stark menu of realities that can be summarized as: Things are getting better, but the boom times are over and not likely to return, so plan accordingly.

“We’re advising our clients that they need to realize the markets have changed,” says Monahan. “A lot of businesses are doing better than they did last year or the year before, but it’s nowhere near what they’d experienced before 2007 and prior.” He says they can see the recovery is happening, but locally, things will likely never go back to where they were, and everyone has to adapt. Consumers are adapting, he says, spending less and shopping more wisely, and so must businesses. “It’s really important for people to be looking at their price points and value. People are doing less preplanning now and more shopping around. So they’re definitely looking for a better price point and more value than they had before.”

Downsizing, too, is a way to survive. Monahan says he counsels some businesses to downsize according to demand. If business is down 30 percent, he explains, and it’s gone from a $1.5 million per year company to a $1 million per year company, owners need to realize they must downsize and restructure.

One of the things Monahan sees as essential to survival in this economy is getting a clear financial picture earlier rather than later. The Small Business Development Centers, which are spread throughout California and across the United States, mentor businesses to create projections and strategies; negotiate with landlords, vendors and banks; and alter their structure on a temporary basis to be able to ride out the inconsistencies of cash flow. When there’s a cash flow crisis, it becomes difficult for businesses to carry over from one month to the next, Monahan explains, “So it’s important to get ahead of your financial picture.”

The SBDCs also help with business plan creation. Each center has advisers specializing in HR, hospitality, marketing and other fields. “Surprisingly,” says Monahan, “people aren’t very familiar with their small business development centers, but there’s one in virtually every county, offering advice at no charge. We’re funded by the SBA. So that’s an area where the government is helping. We also have various funding and support from state and community colleges, cities, counties, workforce investment boards and the state employer training panel. We did have funding from the State of California, but that changed on July 1.”

And the best part, the advice is free.

Better Days Ahead
However you look at it, if small business is the lifeblood of the economy, and the economy is in a slump, it would seem, according to these small business advocates, that a whole range of measures should be taken, from increasing the flow of cash through government loans and grants, to scrutinizing the rules and regulations around who manages to benefit from small business designations, to plain old education about how to manage in very hard times.

As Quinn says, the small business owner has the same basic choice as individuals faced with a cash flow crisis: cut expenses or secure additional credit to carry them through. Arensmeyer agrees: “The money has to get to Main Street," he says. And both he and Hauge conclude that the passage of the Small Business Jobs and Credit Act of 2010 seems to be a good start. “This is pretty exciting,” says Hauge, “after all these months of waiting and having small businesses holding their breath to get this passed to get cash flow moving again is pretty exciting.”

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Source: http://www.northbaybiz.com/General_Articles/General_Articles/Small_Business_Smarts.php

Ohio Congresswoman Backs Bill to Bring Billions in Contracts to State

Press Release

Ohio Congresswoman Backs Bill to Bring Billions in Contracts to State

November 1, 2010

Petaluma, Calif. - Ohio Congresswoman Marcy Kaptur (D – 9) has offered her support for legislation that would infuse the state’s business community with billions of dollars in existing government infrastructure spending, save thousands of small businesses and create countless jobs.

H.R. 2568, the Fairness and Transparency in Contracting Act would end widespread fraud and abuse in federal small business contracting programs, while ensuring that the federal government is meeting its 23 percent small business contracting goal. The federal government has a congressionally mandated goal of awarding 23 percent of the total value of all prime contracts to small businesses. 

“As the daughter of a small business owner, I understand the importance of genuine, homegrown small businesses in the life of a community.  H.R. 2568 puts our nation’s small businesses on a level playing field in the fight for government contracts.  It’s time to stand up for small businesses that are the true engines of sustainable economic growth in our nation,” Representative Kaptur said.

Since 2003, over a dozen federal investigations have shown that billions of dollars in federal small business contracts have been diverted to corporate giants. In Report 5-15, the Small Business Administration Office of Inspector General (SBA IG) referred to the problem as, "One of the most important challenges facing the SBA and the entire Federal government today." (http://www.sba.gov/IG/05-15.pdf)  

H.R. 2568 will stop large businesses from taking federal small business contracts by perfecting the Small Business Act's definition of a small business as "independently owned." The bill would prevent the federal government from awarding small business contracts to publicly traded firms, because they are publicly owned and would not qualify as "independently owned."

The American Small Business League has estimated that if passed, H.R. 2568 would redirect more than $100 billion a year in federal spending to the nation’s 27 million small businesses.  According to the U.S. Census Bureau, small businesses are responsible for more than 90 percent of all net new jobs, 50.2 percent of the non-farm private sector workforce, 50 percent of the gross domestic product (GDP) and 90 percent of exports and innovations. (http://www.sba.gov/advo/research/rs359.pdf)  

Ohio’s nearly one million small businesses are currently receiving a fraction of the dollars they should be receiving.  If signed into law, small businesses in the State of Ohio could see their volume of federal contracts increase exponentially.

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