Are Small Businesses the Key to Economic Recovery?

Posted by C.C.Mitchell

May 01 2009

Despite all the efforts of Washington think tanks to stave off an even deeper economic recession it appears that all the kings men missed something in the $787 billion spending plan which was supposed to create jobs and rebuild the economy. A point of many top economists, such as Laura Tyson the Chair of President Clintons Council of Economic Advisers; and Carly Fiorina the former CEO of Hewlett-Packard and John McCain’s top economic advisor, is that small businesses have been ignored in the Stimulus plan.

In fact the American Small Business League (ASBL) estimates over $100 billion a year in federal small business contracts are diverted to Fortune 500 companies and other large businesses.

Small businesses were growing out of necessity in 2008 when the economy started to fall . Bizbox has an article of interest to this topic; it states that as larger corporations go under it produces numerous talented, ambitious, but jobless people who find that this is the perfect time to go into business for themselves. Bizbox refers to this trend as The Great Rearranging.

: Image via Wikipedia

President Eisenhower signed into law the Small Business Act of 1953, this was done to stimulate the economy through the advancement of small businesses. Eisenhower and that sitting congress new that small business is the backbone of the American economy. Obama has spent most of his time and over $2 trillion on a spending spree on big businesses that liberal Democrats spend most of their time ridiculing. Nothing has gone to the small businesses of America.

According to The Huffington Post Federal law states that 23% of all federally funded contracts and subcontracts are supposed to be awarded to small businesses.

Existing federal law states that a minimum of 23 percent of the total value of all federal contracts and subcontracts shall be awarded to small businesses.

Unfortunately, during the Bush Administration, the Small Business Act and all the benefits it provided to our national economy were significantly damaged. Since 2003, over a dozen federal investigations found Bush officials in every federal agency allowed billions of dollars in federal small business contracts to be diverted to some of the largest firms in the U.S. and even Europe.

Hundreds of billions of dollars in federal contracts that by law were intended for small businesses, actually went to firms such as Lockheed Martin, Boeing, Northrop Grumman, General Dynamics, Raytheon, L-3 Communications, British Aerospace (BAE) and Rolls-Royce.

It is well known that Obama has spent billions on the auto industry and on Wall Street firms. Lloyd Chapman says he has spent 100% of the $2.3 trillion in stimulus on the top 1% of businesses.

“Small businesses are the backbone of our nation’s economy and we must protect this great resource. It is time to end the diversion of federal small business contracts to corporate giants.”

This quote was a major talking point for the Obama Campaign in early 2008 but he seems to have forgotten this key point when he attempted to spend his way out of the current recession. Both Carly Fiornia and Laura Tyson agree that rectifying this is the best way to “stimulate” the economy. It would also be considerably cheaper than the existing plan.

So why won’t President Obama fix this problem and revert these funds back to the Small businesses where they belong?

Just how important is Small Business in America?

Lloyd Chapman head of the American Small Business Association produced some pretty telling statistics on their importance:

Small businesses created 97% of all new jobs .
Small businesses create over 70% of our economy.
Small businesses account for over 27 million U.S. jobs.
SMall businesses supply over 50% of the workforce in the private sector.

These are some impressive and at the same time damning statistics. Why wouldn’t any one who is trying to fix the economy not follow this route? Simple most small businesses don’t make notable campaign contributions because they lack the huge company coffers required to do so. Mr. Chapman, who appears to show no love for President Obama or his predecessor President Bush, speculates that President Obama will divert even more government contracts to wealthy venture capitalists that made significant contributions to his campaign.

Here are his comments as seen on Glenn Beck:

As for Mr Chapmans’ speculations, if Obama does divert more funds to his campaign contributors and I find out about it you’ll be reading more about it here. On that note I have to point out that it was the Democrats that were shouting to the rafters about George W. Bush awarding no bid contracts to Haliberton.