The Small-Business Stimulus Solution

Posted July 10, 2009 at 8:56am

The $787 billion dollar stimulus passed by Congress was doomed to fail, so there should be no surprise at the steady increase in unemployment.[IMGCAP(1)]Cheerleaders in Congress and members of the Obama administration can continue to tap dance and obfuscate, claiming that the stimulus promised to “save— jobs, not necessarily “create— jobs. This duck-and-dodge is a sham, and people are wising up at the strings beginning to show. We lost another 467,000 jobs lost in June, with similar losses expected in coming months. Now is a good time for our national leaders to understand what went wrong and why.The reason for the failure of the current stimulus is simple: Neither the president nor most Members of Congress understands that government does not create the kinds of jobs that create long-term economic growth. Their ignorance is understandable since few of these folks have ever created a job in the private sector.Any entrepreneur worth his or her salt could tell the current leadership how to create jobs. Private-sector businesses employ citizens, provide goods or services and generate revenue. Businesses grow the economy, and assuming anything else is a recipe for failure.What Congress can do is create a better environment for businesses to grow. Tax cuts are especially powerful because they incentivize entrepreneurs to invest more in their businesses, spur innovation and directly result in the hiring of additional employees. Nowhere is this seen more plainly than in the small business, entrepreneurial community, which has created three out of every four jobs in the United States over the past 20 years.Conversely, when government becomes increasingly intrusive into the operations of the private sector, businesses become fearful. Why should businesses labor to expand if Uncle Sam is going to confiscate profits and redistribute the fruits of their hard-earned labor to those who haven’t lifted a finger? They hunker down; innovation grinds to a halt, and businesses focus on trying to survive increasingly intrusive and unpredictable grabs of power and wealth by the government.For small companies hoping to win some of the $787 billion in new federal spending, the stimulus has been an especially cruel joke. The Obama administration and Congress did not fully understand the convoluted mechanics of the federal contracting process at the micro-level. Congress intended to push funding out quickly but then unwisely added to the statutory requirements that slow federal contracting.Increasing pressure from Team Obama to “do something— led to the unintended consequence of freezing small businesses out of the federal contracting process. Contracting officers just did not have time to seek new competitive bids, so they directed the new federal spending to the same federal contractors that already had contracts in place. As a result, most small businesses throughout the United States are being shut out of the stimulus.As a former General Services Administration administrator, I was responsible for a majority of federal contracts awarded to small businesses, and I can state without reservation that, given the current approach, few small companies will be able to win any of the new federal contracts. It’s a sham and a shame. So, don’t expect any good news soon on the jobs number until Congress corrects some of these systemic problems.Unfortunately, the president, unwilling to admit that the stimulus is ineffective and that small businesses are taking it on the chin, just digs the hole deeper each month. Congressional leaders appear willfully determined to ignore all studies for the past 20 years performed by both government and nonprofits that have identified the source of job creation as the private sector, small businesses in particular.The Chinese have a saying: It’s never too late to turn back on a wrong road. President Barack Obama and the Democratic leadership in Congress continue to travel further down the wrong road and drag the U.S. economy with them.Rather than pushing the notion of another round of stimulus funding, Congress should understand its role in the failure of the current stimulus and remove the regulatory and statutory barriers to small business growth and success.My advice to Congress: Stop spending, stop pretending. To improve the economy and reduce jobless numbers, leave business and job creation to the businessmen and spend your time instead on creating a better environment where business can thrive.Lurita Doan is a former small-business owner and the former administrator of the General Services Administration.