In a nearly $3 trillion federal budget proposed by President Bush for 2007, $624 million to run the Small Business Administration sounds like small potatoes.

But the tiny agency for small companies is getting a lot of attention right now, and little of it is good.

Small-business owners and Democrats in Congress say the agency is starved for funding and has been squeezed tighter in every budget President Bush has proposed since he took office, even though he touts small businesses as the engine of the American economy.

Outside groups say the skimpy spending is part of a larger goal to fold the SBA as a separate agency and eliminate federal small business contracting requirements.

But the Small Business Administration points to the record number of small business loans it handed out in the last year as proof that smaller budgets don't mean reduced service.

"Is that a budget cut, or is that a savings?" said Mike Stamler, a spokesman for the agency. "When you do something more efficiently, I just don't understand people who say you shouldn't do it more efficiently."

And suggestions that the SBA is on the verge of being shut down are absurd, he said.

"It's ridiculous," Mr. Stamler said.

"There's nothing in this budget that suggests the SBA is being eliminated."

Cathy Dougherty, a small-business owner in Richardson, said she has seen, though, how a smaller budget has resulted in fewer services for the small business community.

"They're definitely stretched to the max," said Ms. Dougherty, president of Dougherty Sprague Environmental Inc. "They definitely don't have the personnel."

Ms. Dougherty's firm, which is helping with the Hurricane Katrina cleanup and identified hazardous chemicals after the Columbia space shuttle crash, was recently certified by the SBA's 8(a) program as a disadvantaged business.

The program is designed to help company owners who can prove they've suffered some form of prejudice or discrimination gain access to federal contracts.

Stretched thin

But Ms. Dougherty, who won her designation due to gender discrimination, said the SBA doesn't seem to have the resources anymore to effectively administer the program.

"Since we've been involved just the last year and a half, the amount of 8(a) firms that one person has to care for has gone from 20 to about 80," she said. "So I see a very direct effect. They're supposed to mentor us and help us and alert us to bids. But for an entire year, I didn't hear from my person."

Steve Denson, an adjunct professor in the Cox School of Business at Southern Methodist University, said the SBA has a strong role to play.

"SBA is a great training tool, a resource, for emerging entrepreneurs, especially minority entrepreneurs and female entrepreneurs," he said. "Some of their greatest success is in leveling the playing field for the entry of minorities and women."

But Mr. Denson, a self-described "rabid Democrat," said that cutting the agency's budget further could result in cutting back those training programs.

He said he's also concerned about reports that large firms are fraudulently or mistakenly applying for – and receiving – federal contracts intended for small firms.

While every federal agency from the Defense Department to the Social Security Administration has small business contracting goals, the SBA oversees the program.

Last September, the SBA's Office of Inspector General released a report stating that the Small Business Administration needed to tighten its oversight of federal contracting.

"Flaws in the federal procurement process allow large firms to receive small business awards and agencies to receive small business credit for contracts performed by large firms," the report said.

Doubting the reasons

Lloyd Chapman, president of the American Small Business League, which devotes most of its resources to tracking claims of fraud and abuse at the SBA, doesn't believe the agency's shrinking budget is due to a desire to be more efficient.

"The Defense Department budget is $400 billion," he said. "The SBA budget is $400 million. That'd be like telling me that, 'Lloyd, I'm going to buy cheaper bubblegum.' "

Mr. Chapman said he thinks President Bush's goal is to eliminate the SBA altogether and simultaneously drop the requirement that a certain portion of all federal contracts go to small businesses.

Even if that doesn't happen, the Small Business Administration clearly is operating with fewer resources.

Different groups tally the 2007 budget in different ways, but the overall trend is undisputed.

In 2001, the agency had a discretionary budget of $900 million.

For 2007, the administration has proposed a budget of $624 million.

But critics argue that if disaster spending, which was not included in the 2006 budget, is removed from the 2007 budget, the total drops to $429 million, compared with $534 million in 2006.

But Mr. Stamler at the SBA said the 2006 number also includes $90 million in congressional earmarks that President Bush had not requested.

So the 2006 budget minus the earmarks is about equal to the 2007 budget minus the disaster spending.

"Given the restraints that we face as a nation in terms of our federal budget, the expense that we have in the war on terror, in conducting actual ground wars elsewhere, in disaster response and all the expenses that go into the federal budget as a whole, I think this is a year that the SBA could expect a roughly straight-line budget, and that's what we got," Mr. Stamler said.

Ms. Dougherty said the SBA probably needs additional funding, though, and she'd like to see the agency succeed, since a small business loan helped her start her company eight years ago.

Dougherty Sprague Environmental now has annual revenue of almost $3 million.

We're at the edge of the cliff of deficit disaster! National security spending is being, or will soon be, slashed to the bone! Obamacare will sink the ship of state!

Each of these claims has grabbed national attention in a big way, sucking up years' worth of precious airtime. That's a serious bummer, since each of them is a spending myth of the first order. Let's pop them, one by one, and move on to the truly urgent business of a nation that is indeed on the edge.

Spending Myth 1: Today's deficits have taken us to a historically unprecedented, economically catastrophic place.

This myth has had the effect of binding the hands of elected officials and policymakers at every level of government. It has also emboldened those who claim that we must cut government spending as quickly, as radically, as deeply as possible.

In fact, we've been here before. In 2009, the federal budget deficit was a whopping 10.1% of the American economy and back in 1943, in the midst of World War II, it was three times that—30.3%. This fiscal year the deficit will total around 7.6%. Yes, that is big. But in the Congressional Budget Office's grimmest projections, that figure will fall to 6.3% next year, and 5.8% in fiscal 2014. In 1983, under President Reagan, the deficit hit 6% of the economy, and by 1998, that had turned into a surplus. So, while projected deficits remain large, they're neither historically unprecedented, nor insurmountable.

More important still, the size of the deficit is no sign that lawmakers should make immediate deep cuts in spending. In fact, history tells us that such reductions are guaranteed to harm, if not cripple, an economy still teetering at the edge of recession.

A number of leading economists are now busy explaining why the deficit this year actually ought to be a lot larger, not smaller; why there should be more government spending, including aid to state and local governments, which would create new jobs and prevent layoffs in areas like education and law enforcement. Such efforts, working in tandem with slow but positive job growth in the private sector, might indeed mean genuine recovery. Government budget cuts, on the other hand, offset private-sector gains with the huge and depressing effect of public-sector layoffs, and have damaging ripple effects on the rest of the economy as well.

When the economy is healthier, a host of promising options are at hand for lawmakers who want to narrow the gap between spending and tax revenue. For example, loopholes and deductions in the tax code that hand enormous subsidies to wealthy Americans and corporations will cost the Treasury around $1.3 trillion in lost revenue this year alone—more, that is, than the entire budget deficit. Closing some of them would make great strides toward significant deficit reductions.

Alarmingly, the deficit-reduction fever that's resulted from this first spending myth has led many Americans to throw their support behind de-investment in domestic priorities like education, research, and infrastructure—cuts that threaten to undo generations of progress. This is in part the result of myth number two.

Spending Myth 2: Military and other national security spending have already taken their lumps and future budget-cutting efforts will have to take aim at domestic programs instead.

The very idea that military spending has already been deeply cut in service to deficit reduction is not only false, but in the realm of fantasy. The real story: despite headlines about "slashed" Pentagon spending and "doomsday" plans for more, no actual cuts to the defense budget have yet taken place. In fact, since 2001, to quote former Defense Secretary Robert M. Gates, defense spending has grown like a "gusher." The Department of Defense base budget nearly doubled in the space of a decade. Now, the Pentagon is likely to face an exceedingly modest 2.5% budget cut in fiscal 2013, "paring" its budget down to a mere $525 billion—with possible additional cuts shaving off another $55 billion next year if Congress allows the Budget Control Act, a.k.a. "sequestration," to take effect.

But don't hold your breath waiting for that to happen. It's likely that lawmakers will, at the last moment, come to an agreement to cancel those extra cuts. In other words, the notion that our military, which has been experiencing financial boom times even in tough times, has felt significant deficit-slashing pain—or has even been cut at all—is the Pentagon equivalent of a unicorn.

What this does mean, however, is that lawmakers heading down the budget-cutting path can find plenty of savings in the enormous defense and national security budgets. Moreover, cuts there would be less harmful to the economy than reductions in domestic spending.

A group of military budget experts, for example, found that cutting many costly and obsolete weapons programs could save billions of dollars each year, and investing that money in domestic priorities like education and health care would spur the economy. That's because those sectors create more jobs per dollar than military programs do. And that leads us to myth three.

Spending Myth 3: Government health-insurance programs are more costly than private insurance.

False claims about the higher cost of government health programs have led many people to demand that health-care solutions come from the private sector. Advocates of this have been much aided by the complexity of sorting out health costs, which has provided the necessary smoke and mirrors to camouflage this whopping lie.

Health spending is indeed growing faster than any other part of the federal budget. It's gone from a measly 7% in 1976 to nearly a quarter today—and that's truly a cause for concern. But health care costs, public and private, have been on the rise across the developed world for decades. And cost growth in government programs like Medicare has actually been slower than in private health insurance. That's because the federal government has important advantages over private insurance companies when it comes to health care. For example, as a huge player in the health-care market, the federal government has been successful at negotiating lower prices than small private insurers can. And that helps us de-bunk myth number four.

Spending Myth 4: The Affordable Care Act—Obamacare—will bankrupt the federal government while levying the biggest tax in US history.

Wrong again. According to the Congressional Budget Office, this health-reform legislation will reduce budget deficits by $119 billion between now and 2019. And only around 1% of American households will end up paying a penalty for lacking health insurance.

While the Affordable Care Act is hardly a panacea for the many problems in US health care, it does at least start to address the pressing issue of rising costs—and it incorporates some of the best wisdom on how to do so. Health-policy experts have explored phasing out the fee-for-service payment system—in which doctors are paid for each test and procedure they perform—in favor of something akin to pay-for-performance. This transition would reward medical professionals for delivering more effective, coordinated, and efficient care—and save a lot of money by reducing waste.

The Affordable Care Act begins implementing such changes in the Medicare program, and it explores other important cost-containment measures. In other words, it lays the groundwork for potentially far deeper budgetary savings down the road.

Having cleared the landscape of four stubborn spending myths, it should be easier to see straight to the stuff that really matters. Financial hardship facing millions of Americans ought to be our top concern. Between 2007 and 2010, the median family lost nearly 40% of its net worth. Neither steep deficits, nor disagreement over military spending and health reform should eclipse this as our most pressing challenge.

If lawmakers skipped the myth-making and began putting America's resources into a series of domestic investments that would spur the economy now, their acts would yield dividends for years to come. That means pushing education and job training, plus a host of job-creation measures, to the top of the priority list, and setting aside initiatives based on fear and fantasy.

Mattea Kramer, a TomDispatch regular, is senior research analyst at the National Priorities Project and lead author of the new book A People's Guide to the Federal Budget. Follow TomDispatch on Twitter @TomDispatch and join us on Facebook, and check out the latest TD book, Terminator Planet: The First History of Drone Warfare, 2001-2050.

Source: http://www.motherjones.com/politics/2012/07/four-biggest-spending-myths-debunked

Advocates for small business - including those in Congress - are hearing mixed reactions to President Obama's proposal to temporarily elevate the Small Business Administration to a cabinet agency, but then fold the SBA into a super trade and commerce department. 

Some have praised the decision to make the SBA part of the cabinet, but expressed caution about the consolidation proposal.

The president called for merging the SBA with the Commerce Department and four trade-related agencies into, as the president put it in a speech, "one department, with one Web site, one phone number, one mission: helping American businesses succeed."

In a conference call with reporters, Jeff Zients, deputy director for management at the Office of Management and Budget, said the prospective new department would comprise four broad "pillars."

Small business and economic development would be one of those pillars, and the SBA would be combined with economic development programs at other agencies into one of those mission areas. The other pillars would be trade, technology and innovation, and statistics.

As for concerns that the new agency might dilute the SBA's authority to speak for small business inside the government, Zients seemed to suggest that all American businesses might have to ally in a global economy.

"This integrated department will be about serving America's businesses - small, medium and large - as they compete in the global marketplace," he said.

Once the agencies are merged, Zients added, the SBA would lose its seat at the president's table.

"Once we have consolidation authority, once this specific proposal passes," he said, "we will have one integrated department that is led by a secretary who will be on top of all of the important assets and services that serve businesses."

The United States trade representative, whose office would be merged into the new department, would retain a separate cabinet position.

Leaders of the small-business committees in Congress said in separate statements that while they supported streamlining government, they would review the president's plans carefully.

"The details will be critical," said Sen. Olympia Snowe of Maine, the top Republican on the Senate Small Business Committee. "Of particular concern will be ensuring that entrepreneurs do not face new hurdles in obtaining assistance in starting, operating or expanding their small businesses - whether accessing capital, pursuing exporting opportunities, or contracting with the federal government."

Streamlining

Outside Congress, most small-business advocates treaded with similar care.

"On the one hand, reorganizing federal agencies to create a ‘one-stop-shop' for America's small businesses could streamline processes and make accessing information and assistance much easier," Todd McCracken, chief executive of the National Small Business Association, said.

"On the other hand, such a reorganization could minimize the emphasis placed on small business by the federal government and lead to an even greater imbalance toward promoting the interests of large businesses over those of small business."

Some critics, like John Arensmeyer, chief executive of the Small Business Majority, a group initially formed to back the administration's health care reform, worry about small business losing its voice.

"Right now small business has an independent agency that reflects its needs. The obvious concern is that by bringing this into larger agency there's a risk that some of that voice gets lost," he said.

"We know that government is held in very low esteem by small business, but the S.B.A. is an exception to that right now."

There were some stronger views. For example, the American Small Business League, which protests the diversion of federal contracts for small business to large corporations, sided firmly with the other hand.

"This is not a move to save money," said the league's president, Lloyd Chapman, in a statement. "This is a move to eliminate federal small-business contracting programs."

Lender optimism

But the head of one trade association for SBA-backed lenders was optimistic.

"The lending policies and centralized loan operations of SBA are among the more sophisticated in the federal government," said Chris Crawford, president of the National Association of Development Companies. It represents lenders in the SBA's 504 loan program.

In a reorganization, "they become the model for the collapse of the far-flung bureaucracies into one unit called small-business lending, worldwide," he said. "If anything, even in a larger reconstituted Commerce, access to credit for small businesses becomes a primary mission goal with much higher visibility."

But opposition from the small-business constituency and its Congressional representatives, should it materialize, is only one obstacle for the administration to overcome: many interests and Congressional fiefdoms, are at stake.

Just hours after the president spoke, Sen. Max Baucus, the Democratic chair of the Finance Committee, and Dave Camp, the Republican chair of the House Ways and Means Committee, jointly rejected any effort to relocate the Office of the U.S. Trade Representative, an agency under their purview.

"Making it just another corner of a new bureaucratic behemoth would hurt American exports and hinder American job creation," they said.

And if the consolidation were to fail, those small-business advocates just might get the best of both worlds: an independent SBA but with cabinet-level status.

Last night’s State of the Union address from President Barack Obama left small business owners divided over his plans for economic recovery which included eliminating tax perks for companies that offshore jobs and beefing up training stimulus for technology jobs. Here is a roundup of what stakeholders are saying around the blogosphere:

Atlanta small business leaders were skeptical and angry about some of the proposals put forth by Obama and scoffing at what they perceive as a growing regulatory environment while cringing at the thought of a minimum tax on the wealthy, reports WSB Radio.com.

The American Small Business League declares Obama ignored the needs of small businesses; a major contributer to the economy as they create 90 percent of new jobs.  The group that represents 98 percent of U.S. companies (those with fewer than 100 employees) takes particular issue with contract abuse which sees federal small business contracts beign awarded to large businesses. This year that figure is over $6.6 billion.

VentureBeat says Obama recognized startups and entrepreneurs for creating new jobs, and called for reforms that would support everyone who “aspires to become the next Steve Jobs”. Specifically, an end to regulations that prevent entrepreneurs from getting financing, tax breaks for small businesses creating jobs, immigration reform, and more training for technology jobs.

Huffington Post reported that economists and business leaders said the speech offered little that would move the needle in the jobs market. “The best retraining program is called a job,” Kevin L. Kearns, president of the Business and Industry Council, is quoted as saying.

The Washington Post reported small businesses were looking for a remedy for uncertainty. “Especially for small businesses, the threat of new taxes and changing regulations goes right to their bottom line,” Dan Danner, president of the National Federation of Independent Business is reported as saying ahead of the SOTU address.

Speaker of the House John Boehner blogged that despite Obama’s claim that he wants to expand tax relief to small businesses, tax hikes tell a different story.