SMALL BUSINESS, HUGE OPPORTUNITY: WE ARE HOW WE PROCURE
The importance & decline of small businesses
Small Business is the lifeblood of the American economy. There are 30.2 million small businesses in America. Small companies have created 64% of the net new jobs in the United States of America since the mid-1990s. Positions at small organizations constitute 95% of employment in the U.S.A.
The American economy requires us to support small and aspiring entrepreneurs. Since the late 1970s, the new business formation has nearly dropped in half. As inequality in the industry grew, so too has societal-wide income and wealth inequality. The top 1% in 1989 owned 10.03% of the wealth. In 2020, they owned 34.68%. As large corporations stopped or bought up their competition, executives had less pressure to compete on labor compensation. In 1989 the CEO to median worker pay rate was 61 to 1. In 2020, that ratio was 320 to 1. A report from American Economic Liberties Project asserts consolidation of the industry has depressed wages and costs median Americans $5000/year.
THE GOVERNMENT IS FAILING SMALL BUSINESS
You know why small firms are essential and how they’re declining, but do you know the definition of one? 98.1% of private-sector employees work for companies employing less than 100 people, and 78.4% work for companies with less than 10. In 2018, only 9% of enterprises made over $1 million. Why, then, does our small business administration define a small business as those with 500 employees or less and making $40 million or less? Part of the reason for the overly broad definition is to avoid some of its spending responsibilities.
The U.S. Government is the largest buyer of goods and services. Every year, the federal government reports spending more than $540 billion on procurement. The government may spend even more than a trillion annually, according to watchdog groups. The Small Business Act passed in 1953 requires the government to obtain at least 23% of its purchases with small companies. The Small Business Administration reports providing 23% of its support to small businesses. The SBA exaggerates its numbers by obfuscating and broadening the definition of small business.
Furthermore, the Justice Department rarely prosecutes obtainment violations. In 2019, according to the American Small Business League, only 3% of the federal procurement budget of $1.5 trillion went to small companies. The Small Business Administration, for decades, has had its funding decline to now $739 million. President of the American small Business league, Lloyd Chapman, has said, “the SBA is functionally closed.”
THE POLITICS OF SMALL BUSINESS
Entrepreneurs in America generally lean Republican. Forty percent identify as Republicans, and 29% identify as Democrats. Among this 40% of Republicans, 90% assert Donald Trump understood what was needed for small business, far dwarfing any other group. This faith is misplaced.
Under President Donald Trump, the backing for the SBA decreased by $125 million. Moreover, President Trump’s anti-small business campaign increased corporate taxes on small companies to their highest since the mid-1970s while cutting taxes for large corporations.
Business owners’ top concerns, with at least ⅓ agreeing, include tax reform, healthcare, and local issues. The federal government may not assist on local matters, but on tax reform and healthcare, Democrats have an opportunity. The ongoing hard and soft infrastructure bills nearing completion in Congress represent potentially hundreds of billions of dollars of new work for small businesses. We doubt small businesses will be realizing that gain unless the government starts enforcing the Small Business Act. We are also concerned that the corporate tax provision in the infrastructure bill raises corporate taxes indiscriminately to 28%, instead of only on large corporations.
CONCLUSION
The success of small businesses is vital for the health of our economy. Entrepreneurship has been in decline for decades and, in turn, increased economic inequality and hurt workers. Our government has acted against the interests of small companies. Democrats have a sizable opportunity to grow their base with small business owners and employees. Democrats must focus on using the government not just to buy American as Joe Biden promotes but also to increase government buying from local organizations. Democrats must emphasize progressive corporate taxes instead of flat corporate taxes. Small businesses and entrepreneurship are fundamental to the American dream. We can not let small companies continue to die off due to government corruption serving big corporations. Please support your local economy, and advocate for your elected officials in the government to prioritize small business purchases.