Petaluma, Calif. – In a speech Tuesday, President Obama addressed the plight of the U.S. middle class and called on Congress to pass provisions of his jobs package. Yet the President has ignored the simplest, most cost-effective solution to create middle class jobs, which is to direct existing federal spending to the nation’s 28 million small businesses, where more than 90 percent of net new jobs are created.

Since taking office, the Obama administration has awarded hundreds of billions of dollars in federal contracts to large corporations but classified those contracts as allocations to small businesses. This misreporting of federal spending allows the government to appear as if it is nearing its 23 percent small business federal contracting goal, mandated by the Small Business Act.

Since 2003, a series of federal investigations have found that hundreds of billions of federal contract dollars are diverted away from the nation’s chief job creators to some of the largest companies worldwide. The Small Business Administration Office of Inspector General has named the problem a top management challenge every year since 2005.

During his 2008 presidential campaign, Barack Obama stated, “It is time to end the diversion of federal small business contracts to corporate giants.” Yet his administration has remained silent on the issue for the past three years.

According to the U.S. Census Bureau, America’s 28 million small businesses create 90 percent of net new jobs. Small businesses are responsible for half of GDP, half the private sector workforce and 90 percent of all U.S. exports. In April 2010, Senator Mary Landrieu (D-LA), the Chair of the Committee on Small Business and Entrepreneurship estimated that, “increasing contracts to small businesses by just 1 percent,” would create more than 100,000 new jobs. Based on U.S. Census Bureau data and Senator Landrieu’s estimation, the ASBL estimates that ending the diversion of federal small business contracts to large, multinational corporations would create millions of jobs. 

Georgia Congressman Hank Johnson introduced legislation this year titled The Fairness and Transparency in Contracting Act that would finally prevent the government from counting contracts awarded to large corporation as small business contacts.

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