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Posts Tagged ‘Small Businesses’

Pentagon diverted small business fund to defense industry giants

Posted by M. C. on July 15, 2022

A new report finds that in a single year, Raytheon, Lockheed Martin, L3Harris, and others got more than $300 million meant for smaller firms.

The pentagram is protecting…but it’s not you.

Written by
Tevah Gevelber and Connor Echols

https://responsiblestatecraft.org/2022/07/13/pentagon-diverted-funds-earmarked-for-small-businesses-to-defense-industry-giants/

In just one year, more than $300 million earmarked for small businesses ended up going to Lockheed Martin, Raytheon, L3Harris, and other top defense contractors, according to a recent report from the Project on Government Oversight (POGO).

The funds come from a pool of $33 billion that the Pentagon set aside to support small businesses in the defense industry, which have rapidly disappeared as the military sector has consolidated in recent years. 

Experts say this misuse of funds threatens to force more small companies out of business, eliminating competition and empowering defense giants to drive up prices. 

And since the program uses middlemen, taxpayers end up paying extra for gear from companies that have no problem selling directly to the Pentagon.

The sheer size of the program also allows officials to make big claims about supporting small businesses while pumping money toward traditional defense giants, according to Robert Burton, a lawyer who previously served as a high-level federal procurement official. 

“We don’t generally have $33 billion contracts over 10 years,” said Burton. “This one is special because the DoD is getting credit for all $33 billion going to small business.”

David Goodreau, the president of the Small Business Aerospace Industry Coalition, said small businesses that contract with the Pentagon are tired of big promises with little payoff.

“There’s all kinds of reasons to exercise supply chain contraction, but not at the expense of telling everybody in your marketing materials and at your conferences […] about how you’re doing more for small business,” Goodreau said. “It’s a lie.”

Not your mother’s small business

The Tailored Logistics Support (TLS) program is administered by the Defense Logistics Agency (DLA), which conducts acquisitions for military services. The program manages the $33 billion small business contract, which it subcontracts to four intermediaries. The resellers are in turn supposed to fulfill their orders by purchasing from small business manufacturers. But not all of that money is getting where it’s meant to go.

To understand how this is happening, let’s look at one of these four intermediaries: Atlantic Diving Supply (ADS), which gets the vast majority of its revenue through the TLS program. At first glance, it might be hard to consider ADS — a corporation with more than $1 billion in annual revenue — a “small business.” But it plays a key role in the program, according to Nick Schwellenbach, the POGO report’s author.

“The idea of the program is that all sorts of federal agencies […] can go to DLA and say, ‘We have some special ops guys, we have some troops who need knives or rifle scopes or new boots, and we don’t want to go through the traditional contracting process. We want to do this quickly,’” Schwellenbach said.

Intermediaries like ADS, which have the know-how to work smoothly with the Pentagon, can in turn seek out small businesses to produce the gear and then sell it to the government. As Schwellenbach argues (and the Pentagon implies in its marketing), contracting to small businesses speeds up procurement, generates new ideas, and keeps prices low by encouraging competition.

But there’s a loophole in the system: ADS can contract out to businesses of any size if it gets a waiver approved by the Small Business Administration. 

See the rest here

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Congress Wants To Give Small Businesses An Impossible Choice: Success Or Privacy? – Issues & Insights

Posted by M. C. on October 19, 2021

Why is this such a problem? Because the bills would also require these “high volume sellers” to disclose their personal business information. Many small online businesses don’t have formal business addresses in strip malls or high-end office parks. Many of them operate out of homes, in an extra bedroom or the shed out back. Requiring owners to publicly register their home addresses and personal phone numbers risks opening them up to harassment, scams, even theft. Imagine if an angry customer decides to show up at the owner’s house to complain about a product. Or if a robber learns exactly where a small jeweler keeps her valuable materials.

https://issuesinsights.com/2021/10/18/congress-wants-to-give-small-businesses-an-impossible-choice-success-or-privacy/

Jessica Pate

Anyone running a small business in March 2020 woke up to a devastating crisis that not only threatened their health but their livelihoods too. For the past 19 months, many of us have struggled to stay afloat. Those that were fortunate to stay in business owe much of their success to online marketplaces like eBay, Etsy, and Amazon Marketplace, which allowed sellers to bypass expensive brick-and-mortar locations and connect with more customers.

But a bill circulating in the U.S. Senate threatens to put our businesses in jeopardy again. The INFORM Consumer’s Act would impose new requirements and burdens on the millions of people who run small businesses. Similar bills introduced in more than a dozen state legislatures are generally supported by big-box retailers eager to siphon online money back to their stores. Lawmakers should reject them all.

On their face, the INFORM bills claim to make improvements to online marketplaces. In response to increasing instances of so-called “retail crime,” including counterfeit goods and online scams, the bills would require every online seller above a certain volume to disclose their current business and contact information to be available and searchable online.

The first problem is that the arbitrary volume requirement to qualify for these requirements is extremely low. Any business with gross revenue of more than $5,000 or more than 200 customer transitions per year would be classified as a “high volume seller.” This classification is laughable to millions of small sellers who sell bracelets, paintings, or rare books online. Two hundred transactions per year is less than one a day, and while $5,000 is real money, it’s nowhere near the billions in gross revenue of actual high-volume online sellers like Walmart, Amazon, or Target.

Why is this such a problem? Because the bills would also require these “high volume sellers” to disclose their personal business information. Many small online businesses don’t have formal business addresses in strip malls or high-end office parks. Many of them operate out of homes, in an extra bedroom or the shed out back. Requiring owners to publicly register their home addresses and personal phone numbers risks opening them up to harassment, scams, even theft. Imagine if an angry customer decides to show up at the owner’s house to complain about a product. Or if a robber learns exactly where a small jeweler keeps her valuable materials.

At the same time, these bills do little to deter the criminals behind online scams and counterfeit products that have become such a problem. The majority of online counterfeiting occurs overseas, well beyond the reach of INFORM legislation. Criminals could keep selling their fake goods with no repercussions, while American small businesses bear the burden of vanishing privacy. For this exact reason, the marketplaces rigorously police their own networks. Etsy announced that it removed almost half a million suspect listings in 2019, and closed 13,906 shops for repeat infringement. Amazon went a step further and blocked 2.5 million accounts believed to be selling counterfeits.

I operate my business from my home, and it scares me that the INFORM Act would make my home address listed publicly on each of my 2,000 eBay listings. I have a huge 5,000 sq ft building on my property that looks like a barn, but it is actually the warehouse for a million dollars worth of eBay goods. This would make my building a target for thieves. The INFORM Act compromises the safety of my family to publicly display my home address. I don’t want to imagine the consequences if my 10-year-old daughter is home alone and answers the door to an angry customer or any stranger from the internet who is interested in my eBay products. I don’t post my personal information anywhere on the internet, and it is a breach of my privacy to mandate my personal address and phone number to be publicly available just because I run an eBay store.

Lawmakers tend to agree that small businesses are a powerful engine of the economy. We provide jobs, offer valuable services, and enrich our communities. Both political parties believe we should be making it easier to start and run businesses, and doing whatever we can at the national and state level to clear the way to new markets, customers and sources of capital.

The INFORM Act isn’t it. No small business owner should have to make the impossible choice between the success of our business and the privacy of our families. We should leave online marketplaces alone, and focus our collective energy on real online criminals, not the rest of us just doing our best in a challenging time.

Jessica Pate is the owner of Wilfords Boutique.

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EconomicPolicyJournal.com: Minimum Wage Hikes Kick in Across the Country—at the Worst Possible Time for Small Businesses

Posted by M. C. on January 10, 2021

Many of these same small businesses teetering on the brink of collapse are about to get slapped in the face with surging labor costs. A total of 20 states had minimum wage hikes take effect this month as part of scheduled ramp-ups.

These might not sound like massive hikes in absolute terms, but you have to think of it like this. Payroll is often one of the largest expenses small businesses have—and it may have just arbitrarily spiked by 5 to 15 percent.  

The timing here could not be worse. 

https://www.economicpolicyjournal.com/2021/01/minimum-wage-hikes-kick-in-across.html

By  Brad Polumbo

2020 was one of the worst years in modern American history for small businesses. And now, thanks to a wave of minimum wage legislation that kicked in on January 1, things are about to get even worse.

Make no mistake: small business owners are already seriously hurting. 

When state and local governments responded to the outbreak of COVID-19 in the spring with harsh lockdowns and restrictions, businesses were forced to shutter. Many in the restaurant and hospitality industry remain shut down many months later, or were briefly allowed to reopen then shut down again this fall. Meanwhile, much of the taxpayer-financed aid meant to help these businesses was instead captured by big corporations or lost to fraud and waste. 

To add insult to injury, thousands of small businesses were vandalized and looted during the summer unrest after the death of George Floyd. (No, insurance doesn’t eliminate the harm).

At least 100,000 small businesses that were forced to close in 2020 will not reopen, according to Yelp. In a recent survey, almost 60 percent of small business owners said that they don’t expect their enterprise to survive through June 2021.

Many of these same small businesses teetering on the brink of collapse are about to get slapped in the face with surging labor costs. A total of 20 states had minimum wage hikes take effect this month as part of scheduled ramp-ups.

“New Mexico will see the largest jump, adding $1.50 to its hourly minimum and bringing it up to $10.50,” the Hill reports. “Arkansas, California, Illinois and New Jersey will each increase their minimum wages by $1.”https://platform.twitter.com/embed/index.html?creatorScreenName=feeonline&dnt=false&embedId=twitter-widget-0&frame=false&hideCard=false&hideThread=false&id=1345953362878074881&lang=en&origin=https%3A%2F%2Ffee.org%2Farticles%2Fminimum-wage-hikes-kick-in-across-the-country-at-the-worst-possible-time-for-small-businesses%2F&siteScreenName=feeonline&theme=light&widgetsVersion=ed20a2b%3A1601588405575&width=550px

Additionally, many localities have enacted area-specific minimum wage hikes. For example, Flagstaff, Arizona just raised its minimum wage to $15 an hour while Belmont, California just upped its rate to $15.90 an hour.  

These might not sound like massive hikes in absolute terms, but you have to think of it like this. Payroll is often one of the largest expenses small businesses have—and it may have just arbitrarily spiked by 5 to 15 percent.  

The timing here could not be worse. 

“A dramatic increase in the minimum wage even in good economic times has been shown to be harmful,” Employment Policy Institute Managing Director Michael Saltsman said. “In the current climate, for many employers it could be the final nail in the coffin.”

And employees will suffer perhaps just as much as employers. Even though they’re ostensibly meant to uplift workers, increases in the minimum wage always and inevitably hurt more than they help.

Why? A wage is important for the living standards of the worker, but that isn’t its only important aspect. A wage is a price. Prices are essential for order in an economy, so price controls throw markets into chaos.

“By the simplest and most basic economics, a price artificially raised tends to cause more to be supplied and less to be demanded than when prices are left to be determined by supply and demand in a free market,” famed free-market economist Thomas Sowell explained in his book Basic Economics. “The result is a surplus, whether the price that is set artificially high is that of farm produce or labor.”

 “Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount— and, if it is not, that worker is unlikely to be employed,” Sowell writes. “Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they either lose their jobs or fail to find jobs when they enter the labor force.” 

Thus, as free-market economist Murray Rothbard put it, the minimum wage amounts to outlawing jobs:

“In truth, there is only one way to regard a minimum wage law: it is compulsory unemployment, period. The law says: it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X dollars an hour. This means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment. Remember that the minimum wage law provides no jobs; it only outlaws them; and outlawed jobs are the inevitable result.”

 So, it’s no surprise that the nonpartisan Congressional Budget Office projects that a national $15 minimum wage would destroy up to 3.7 million jobs. Of course, these hikes aren’t nationwide, and many aren’t quite up to $15 yet. Nonetheless, struggling small businesses already have so little wiggle room in their budgets and are on the brink of collapse. Thus the negative effect minimum wage hikes have on local economies will be severe.

Of course, there’s little doubt that the legislators who enacted these pre-planned minimum wage hikes hoped to help workers, not put them out of work amid an economic crisis. But the laws of basic economics are unmoved by compassionate hand-wringing—and good intentions never guarantee good results.

Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Opinion Editor at the Foundation for Economic Education. The above originally appeared at FEE.org.

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