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An Open Letter to House Speaker Nancy Pelosi from American Small Business League President Lloyd Chapman

Getting government contract work is difficult and cut-throat for small businesses competing with mega businesses. (graphic: What What via Flickr)

Lloyd Chapman is President of the American Small Business League

Despite at least $3 trillion in government spending aimed at stimulating the economy, a multitude of economic indicators now show that the economy is poised to slip into a double dip recession. I believe, as I am sure you do, that we need to bring down unemployment in order to stimulate the economy. To date, none of the actions taken by Congress or the Obama administration have met that need.

As you may know, small businesses create the overwhelming majority of net new jobs in America. According to the U.S. Census Bureau, businesses with less than 20 employees create over 97 percent of net new jobs. Statistics from the Small Business Administration (SBA) Office of Advocacy indicate that small businesses create over 90 percent of all net new jobs. Any effort to create jobs must be focused on small businesses.

One of the most effective economic stimulus programs ever passed by the U.S. Congress was the Small Business Act of 1953. The Small Business Act requires that 23 percent of the total value of all government contracts must go to small businesses. This makes perfect sense, considering the important role small businesses play when it comes to the U.S. economy and job creation.

Since 2003, over a dozen federal investigations have found that most small business contracts actually go to Fortune 500 firms, European conglomerates and thousands of other large businesses around the world. Some of those companies are: Lockheed Martin, Boeing, British Aerospace (BAE), Rolls-Royce, Raytheon, Dell Computer, General Electric, Honeywell International Corporation, Ssangyong Corporation headquartered in Seoul, South Korea and Finmeccanica SpA, which is located in Italy and has 73,000 employees. . . .

In March of 2005, the SBA Inspector General referred to this problem as, “One of the most important challenges facing the Small Business Administration and the entire Federal government today.” The SBA Inspector General has listed this problem as the number one management challenge facing the agency for the past five consecutive years. Even President Obama recognized the magnitude of the problem in February of 2008 when he said, “It is time to end the diversion of federal small business contracts to corporate giants.”

Ending the diversion of small business contracts to large businesses would redirect over $100 billion a year in federal contracts back into the middle class economy. This would be the most powerful economic stimulus to date and can be used to drive demand directly into the hands of our nation’s small businesses. With this economic stimulus in mind, I urge you to support H.R. 2568, the Fairness and Transparency in Contracting Act. It was introduced by Georgia Congressman Hank Johnson, and currently has 26 cosponsors. This bill is a deficit neutral means of ending the 10-year-old contracting scandal that has facilitated the diversion of over $1 trillion in small business contracts to corporate giants.

The single most effective and deficit neutral way to create jobs is to direct existing federal infrastructure spending to the middle class. So if you want to stimulate the economy and create jobs, H.R. 2568 would be the most effective way to do that. It could be passed and signed into law as soon as Congress comes back in session. I believe that H.R. 2568, which would bring over $100 billion a year, and every year, to small businesses, would be more effective than a one-time shot of $30 billion in loans.

As our nation slides into its worst economic disaster in history; it would be inexcusable to allow the continued diversion of billions of dollars a month in small business contracts to corporate giants. I think that the Democratic Party and President Obama would be wise to take dramatic action to stave off a double dip recession before the November election, and I think that H.R. 2568 would accomplish that.

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