Both major political parties in the U.S. often tout small businesses as the backbone of the nation's economy. A new report, though, suggests that government spending on economic development doesn't necessarily reflect that rhetoric.
The study released Tuesday from the taxpayer watchdog group Good Jobs First finds that between 80 and 96 percent of state economic development awards in the last five years went to large corporations rather than small business, even though the awards were supposedly available to both small and large companies. The group analyzed more than 4,200 economic development grants in 14 states and found “a profound bias against small businesses” -- which it defined as locally owned enterprises with fewer than 100 employees.
This isn’t the first analysis that has tracked how taxpayer largesse disproportionately flows to major corporations, and not to small business.
Government Executive reported that the American Small Business League found in 2013 “that of the top 100 companies receiving the highest-valued small business federal contracts” from the Small Business Administration, “79 were large companies that exceeded the SBA’s small-business size standards, five were anomalous and 16 were legitimate small businesses.” The watchdog group’s analysis in 2014 found "over 160 Fortune 500 firms were the actual recipients of federal small business contracts” in 2014.
Corporate groups and officials at the Export-Import Bank, which provides credit for foreign purchasers of U.S. goods, have touted the government-supported bank as a major supporter of small businesses. But researchers at George Mason University’s Mercatus Center have documented that “less than 20 percent of all Ex-Im Bank funding goes to small business” and that the bank’s support “backs less than 0.3 percent of all small business jobs and less than 0.04 percent of all small business establishments.”
Reuters also reported that the bank “has mischaracterized potentially hundreds of large companies and units of multinational conglomerates as small businesses.” The news service discovered that “companies owned by billionaires like Warren Buffett and Mexico's Carlos Slim, as well by Japanese and European conglomerates, were listed as small businesses” by the bank.
A 2014 poll commissioned by Small Business Majority found that a majority of small business owners believe that small businesses have collectively less political power than large corporations. Some campaign finance watchdog groups such as Represent.Us have suggested that is true because of a gap in donations to politicians. That organization noted that during the last presidential election cycle, "big business associations spent $188 million lobbying Congress to pass favorable legislation" while small business associations donated just $4.5 million.