February 22, 2005
GOVERNMENT
Case of the Missing Set-Aside
By BERNARD STAMLER


LINK

ARE small businesses actually getting all the government contracts they should? No, according to a recent report by the Small Business Administration Office of Advocacy, which is raising hackles in the small-business community and on Capitol Hill.

Required by law to dedicate up to 23 percent of their procurement spending to small businesses, federal agencies specifically set aside many contracts just for that purpose, and say they fulfilled these contracts as proof of meeting their goals, or at least coming close. These claims, in turn, allow politicians to brag about their commitment to American entrepreneurs, among the most coveted segments of the electorate.

But the report, released in December, found numerous instances of data "miscoding" during fiscal 2002 whereby divisions, affiliates and subsidiaries of a number of large companies - including Raytheon and Titan - were listed as small. That allowed them to obtain more than $2 billion in federal awards that were supposed to have gone to small businesses, and to be mistakenly included in federal small-business procurement statistics.

For years, small-business owners have complained of such doings, which have been documented before but with different data. In 2003, for example, the General Accounting Office released a report detailing thousands of instances where large businesses received small-business contracts. Another study, published last year by the nonprofit Center for Public Integrity, found that 30 percent of defense contract dollars supposedly awarded to small and minority-owned businesses had gone to giant defense contractors during a recent five-year period.

How could this have happened?

"Big business runs the government, and they get what they want," said Lloyd Chapman, the founder of an advocacy group called the American Small Business League, who thinks that "blatant fraud" underlies the awarding of small-business contracts to large companies.

Members of Congress have also weighed in, including Congresswoman Nydia Velázquez, the ranking Democratic member of the House Small Business Committee, who said that the Bush administration was "cooking the books" with small-business statistics. For his part, Senator John Kerry, her Senate counterpart, accused the Small Business Administration last month of lax enforcement and called for an investigation of fraud.

Of course, not everyone contends that the mistakes are necessarily deliberate or a result of fraud. Paul Murphy, president of Eagle Eye Publishers in Fairfax, Va., which prepared the report for the Office of Advocacy, blamed the problem mostly on confusing rules and procedures. The system is so complicated that it invites mistakes, he said.

When a business wants government contracts, it generally must register with a central database, the Central Contract Registration, which is maintained by the Department of Defense. The General Services Administration also maintains schedules of approved vendors that include data on size.

In each case, businesses provide information about their size, information that is verified only under certain circumstances. They also indicate what the business does by using a Census Bureau coding system. Since the definition of "small" - set by the Small Business Administration on the basis of employee size or annual revenues or both - varies by code, many businesses that have more than one code can be labeled small or large, depending upon which code is used in a bid.

The confusion is compounded by the fact that small businesses can grow, affiliate with larger companies or be acquired by them. In practice, many companies have kept their small-business designation after they could no longer be considered small for one of these reasons, even if the contract continued, by virtue of renewals, for 15 or even 20 years. That is apparently what happened in 80 percent of the instances uncovered by Mr. Murphy.

To try to end these kinds of mistakes, the Small Business Administration recently enacted a rule requiring companies to recertify as "small" if they are sold and their contracts are transferred to a new entity. According to Gary Jackson, the assistant administrator for size standards at the agency, the S.B.A. is also considering requiring periodic recertification for long-term or renewal contracts. That is something the General Services Administration demands already, said David A. Drabkin, its deputy chief acquisition officer, who also downplayed the idea of widespread fraud.

But size reporting mistakes can be devastating to small businesses, which do not have much recourse under the present system.

Take the case of Stanley Pond, the owner of a two-person company in Berthoud, Colo., that manufactures calibration instruments. He lost an Air Force contract in 2003 to a business that he thought was too big to qualify. Mr. Pond filed a protest with the local S.B.A. office overseeing the contract. He lost, and appealed to the agency's Office of Hearings and Appeals in Washington.

He took a step that many other small businesses do not. Despite millions of annual government contract actions, only a trickle of size appeals ever get to the Office of Hearings and Appeals, according to its assistant administrator, Delorice P. Ford, who said that fewer than 90 cases reached her office in fiscal year 2004.

Even fewer succeed. Many are dismissed on procedural grounds, like Mr. Pond's appeal, which was thrown out before it could be determined on its merits.

In his case, the government official who had awarded the contract to his competitor made it known that she intended to leave it in place, regardless of any possible size mistakes. Since the Office of Hearings and Appeals has no power to stop a contract officer's actions, that technically made the appeal moot - even though a subsequent investigation by the S.B.A.'s inspector general found that the company awarded the contract was indeed too big, and never should have received it, a result that left Mr. Pond angry.

"They seem to have no interest in finding out what is really going on," he said of the S.B.A., denouncing the appeals process as meaningless.

"I think it stinks."

The Orwellian Language of Big Government
NTUF Policy Paper 152
by
Mark Schmidt
Jun 22, 2004

The great enemy of clear language is insincerity.
-- George Orwell

George Orwell (1903-50) was one of the most influential political writers of the twentieth century. Although his works covered a broad range of topics such as colonialism, the Spanish Civil War, and British society, Orwell is best known for exploring how the modern state acts upon the individual. A disillusioned idealist, he understood that the government big enough to give you everything is also big enough to take it all away -- including freedom itself.

Orwell's book 1984 serves as a valuable warning about the power of words to mold popular thought. 1984 drew a frightening picture of a future totalitarian state in which Big Brother's official language of "Newspeak" created its own truths: "War is Peace," "Freedom is Slavery," and "Ignorance is Strength."[1] In a less grim but equally trenchant 1946 essay, Politics and the English Language, Orwell decried the "euphemism, question-begging, and sheer cloudy vagueness" characteristic of political speech in modern democracies.[2]

A word or phrase is "Orwellian" when it is impenetrably obtuse or even oxymoronic. Objective truth is eroded by the endless blowing of windy rhetoric. Reality is then constructed to suit the needs of the moment.

The state of American politics has become increasingly Orwellian. At the national level in particular, elected positions are dominated by career-minded officials who repeat empty and often deliberately misleading or untruthful slogans. Consider the two most recent Presidential campaigns. After "reinventing government," we "crossed a bridge to the twenty-first century" to a place where "no child is left behind," thanks to the wonders of "compassionate conservatism."[3] As Orwell understood, such vacuity strips political communication of any concrete meaning. The absurd end result was captured by President Clinton's niggling over what the meaning of "is" is. If this trend continues, our language will ultimately be useless to express the ideas that form the basis of rational political discourse in a healthy republic.

Language is at the root of political consciousness. We can only know what we understand, and our understanding is limited by the words and phrases used to frame an issue. The constant repetition of imprecise, politically correct language is sure to have a cumulative effect upon a target audience -- eventually we begin to accept what we are told. Indeed, the main goal of political correctness, like Orwell's Newspeak, is to diminish the choice of words and thereby reduce the range of thought.

Listed below are examples of Orwellian words and phrases that proliferate in virtually every policy area of our deliberately dumbed-down democracy.

Taxes

"Voluntary Compliance"

The government characterizes our tax system as one of "voluntary compliance." Yet mandatory federal income tax withholding makes a mockery of this term.[4] The IRS defines the concept in classic Orwellian terms: "Voluntary compliance means that each of us is responsible for filing a tax return when required and for determining and paying the correct amount of tax."[5] Thus, failure to exercise "voluntary compliance" risks a fine and imprisonment.

"Tax Cuts for the Rich"

Critics railed against the 2001 federal income tax cut as a "tax cut for the rich."[6] In one sense, this is true. What remains unsaid, however, is that any federal income tax cut will disproportionately benefit those with higher incomes because those individuals actually pay taxes. Currently, 44 million tax filers (out of 132 million) pay no federal income taxes.[7] Indeed, 16 million of these "taxpayers" actually receive net payments averaging $1,720 under the Earned Income Credit.[8]

Wealthier taxpayers also shoulder a much higher proportion of the tax burden. According to IRS data, the top one percent of taxpayers earn 17 percent of all Adjusted Gross Income (AGI), yet pay 33 percent of total income taxes. The top five percent pays 53 percent of all income taxes while making 32 percent of total income. The top quarter pays 83 percent of total taxes while earning 65 percent of total AGI. For their part, the bottom half of taxpayers contribute a paltry 3.9 percent of total federal income tax receipts.[9]

High marginal tax rates are often justified on the ground that "the rich" should pay "their fair share." Politicians even talk about high income earners as "winners in the lottery of life," as if none of these individuals actually earned their success, and it is therefore permissible for Congress to plunder them on behalf of those with losing tickets.[10] Yet, as economics professor Walter Williams asks, "Where is a society headed that holds its most productive members up to ridicule and makes mascots out of its least productive and parasitic members?"[11]

"Expensive" Tax Cuts

Politicians often oppose tax cuts on the ground that they are "expensive." For example, Senator Joseph Lieberman (D-CT) urged Congress to delay phasing in the Bush tax cut (scheduled to take full effect over ten years), claiming it was too "expensive."[12] In the same vein, then-House Minority Leader Dick Gephardt (D-MO) complained that repealing the death tax would "cost $109 billion."[13] The American Federation of State, County and Municipal Employees union decries "a new round of expensive tax cuts for the wealthy and big corporations." [14]

To claim that a tax cut is "expensive" is really to say that government is entitled to keep every penny earned by every taxpayer. Anything the taxpayer manages to hold on to is "expensive" to politicians and taxpayer-fed interest groups whose demands are ever-increasing. Apparently, in this warped view, the groups who will not be able to capture as much government largesse are the ones "paying" for "expensive" tax cuts.

Tax Cuts as "Spending"

Representative Steny Hoyer (D-MD) recently complained that "the failure to pay for tax cuts . . . is an immoral abdication of our responsibility to pay our own bills."[15] Fellow Congressman Brad Sherman (D-CA) sent a mailer to his constituents asking if they believe the federal government should "spend" more on tax cuts for middle class families. Former House Minority Leader Richard Gephardt (D-MO) ominously stated, "If we move ahead with the President's tax cut, we will end up spending the entire surplus on the tax cut alone."[16]

Only in Washington, DC does a return of taxpayers' money (a decision not to spend) become a federal spending program.[17] After all, if a tax cut can be "expensive," it must require government "spending" to fund it. Indeed, politicians and the media routinely discuss "federal expenditures," "federal dollars," "federal outlays," "government aid," "government investments," or "federal grants." This terminology obscures the fact that the government has no money of its own to "spend" -- it can only redistribute dollars from taxpayer A to taxpayer B (while taking a significant cut for itself in the process).

Budget

"Investments in . . ."

Politicians are not known for candor. So it is not surprising that pork-barrel projects are often referred to as "investments." The terminology of investments -- with its suggestion of stock market-like returns -- eases the minds of taxpayers. Thus, elected officials trumpet "major new investments in . . . education, Medicare, health care, homeland security, energy independence, the environment, compassion, and the unemployed."[18]

It is a vain struggle to remember the last time you heard a politician say that the government should increase "spending." In our feel-good society, spending is continually targeted for cuts, while so-called investments enjoy funding increases -- even from that great mass of officeholders who describe themselves as "fiscally responsible."

"Fiscal Responsibility" and "Fiscal Irresponsibility"

Over the past decade these phrases have been used so much[19] that they now signify little more than support for, or opposition to, a specific program. If you favor something, it is "fiscally responsible." If you oppose it, then it is "fiscally irresponsible." The bottom-line cost has become irrelevant.

In fact, many Members of Congress who complain that tax cuts are fiscally irresponsible support increases in spending that exceed the supposedly irresponsible tax cuts. For example, the so-called deficit hawks in the Senate who voted to slash the 2003 tax cut in half sponsored or cosponsored legislation that would, if enacted all at once, increase spending by $89.9 billion per year -- far more than the $72.6 billion per year tax cut they derided as "too costly."[20]

More recently, Members of the House of Representatives who opposed repeal of the marriage penalty on grounds of fiscal responsibility exhibited the same hypocrisy. On average, these Members' net agendas would increase federal spending by $583 billion per year ($5.83 trillion over ten years). In contrast, the ten-year "cost" for the marriage penalty bill, which they shunned, was $105 billion (equal to less than two percent of their spending agendas).[21]

"The Era of Big Government Is Over"

Bill Clinton's famous pronouncement from his 1996 State of the Union Address was --like much of what the former President said -- completely untrue. In fact, Clinton subsequently proposed $305 billion per year in new spending in his 1999 address, and in 2000 Clinton outlined $125 billion in new annual outlays on everything from "smart gun" technology, to farm subsidies, to expanded foreign aid.[22] It was truly Orwellian for a President who involved the federal leviathan with the issue of uniforms in local public elementary schools[23] to claim that the era of big government was over.

Elections

"Campaign Finance Reform"

Although polls tended to show that the issue was a non-starter with voters, Members of Congress put a high priority on enacting campaign finance reform, ostensibly to remove the bogeyman of special-interest money from politics. This Congressional zeal is not all that surprising when one considers that the bill -- by limiting contributions and stifling criticism before an election -- further tipped the scales in favor of incumbents, who already enjoy higher name recognition, greater media access, an in-place legislative staff, and the ability to distribute taxpayer dollars and political favors.

Senator John McCain (R-AZ), whose name graced the bill along with Senator Russell Feingold (D-WI), betrayed the actual motive behind the legislation when he stated: "What we're trying to do is stop organizations like the so-called Club for Growth that came into Arizona in a primary [and] spent hundreds of thousands of dollars in attack ads."[24] So, despite the lofty rhetoric about clean elections and reforming a supposedly corrupt system, the real impulse behind McCain-Feingold was to protect politicians from those who would tell embarrassing truths about them.[25]

While the Legislative branch deliberately undermined free speech, the Executive and Judicial branches failed to act as a check upon this unconstitutional scheme. President Bush signed McCain-Feingold even though he believed the legislation posed "serious constitutional concerns."[26] The Supreme Court then upheld McCain-Feingold as part of the "steady improvement of the national election laws."[27]

Yet as Justice Kennedy pointed out in dissent, McCain-Feingold "reorders speech rights and codifies the Government's own preferences for certain speakers" -- such as giant media outlets.[28] Under McCain-Feingold, Ross Perot would have faced five years in jail for contributing more than $25,000 to help jump-start the Reform Party.[29] Worse, McCain-Feingold makes it illegal for a citizen organization -- such as the National Taxpayers Union or the Sierra Club -- to broadcast an issue ad that is critical of, or encourages voters to contact, a Member of Congress 60 days before an election.[30] Ultimately, McCain-Feingold was a "reform" only in the sense that challengers and groups critical of incumbents now face a steeper uphill climb.

Military/Security Policy

Department of "Defense"-- For Whom?

The Department of War became the Department of Defense in 1947. Critics, many of whom approach the issue from a pacifist perspective, have dubbed this change "one of the greatest Orwellian doublespeak deceptions of all time."[31] Moral considerations notwithstanding, this accusation also has a fiscal dimension. The Department of Defense currently garrisons well over 100,000 American troops in just four wealthy countries -- Germany, Japan, South Korea, and the United Kingdom.[32] During the Cold War, when this practice was even more prevalent, U.S. taxpayers were effectively subsidizing the defense of some of America's biggest economic competitors. Today, even with U.S. defense spending as a share of Gross Domestic Product (GDP) less than half of what it was in the 1960s,[33] America shoulders a huge burden relative to other economic heavyweights. According to the International Institute for Strategic Studies, U.S. military expenditures comprised 3.3 percent of GDP in 2002, compared to Germany's 1.5 percent, Japan's 1.0 percent, South Korea's 2.8 percent, and the United Kingdom's 2.4 percent.[34]

Meanwhile, many federal programs having little to do with preparing or fighting wars have crept their way into the Department of Defense budget, including $2 million for the Bosque Redondo Memorial in New Mexico, $6 million for coronary/prostate disease reversal, and $2.5 million for marijuana eradication in Hawaii.[35] Would such free-spending attitudes be as readily condoned in a more forthrightly-named Department of War? Fifty-seven years and trillions of dollars later, Americans are left to wonder.

"Homeland Security"

Created in 2002, the Department of Homeland Security (DHS) unified 22 existing agencies with combined budgets of about $40 billion and staffs adding up to 170,000 workers.[36] The name is a bit unwieldy, but most likely represents a governmental attempt to invoke reassuring images of safety -- perhaps even family, hearth, and comfort. Yet considering the failures which led to the September 11th attack in the first place, including our own inability or unwillingness to enforce immigration laws, why should Americans think that simply reshuffling the bureaucratic deck is going to produce a winning hand in our open-ended "War on Terror"?[37] Apparently, many do not. Only 13 percent of Americans polled by the Gallup Organization said they have confidence that DHS will make them "a lot" safer. Nearly four in ten Americans expect that DHS will not make the country any safer at all.[38]

Since 9/11, Members of Congress have been cloaking old-fashioned pork in the robes of "security" for the "homeland." In fact, over half of all new federal spending ($164 billion) since 2001 is unrelated to defense or the aftermath of the terrorist attacks.[39] Thus, anything that can be dubbed as even remotely related to "security" is being used to justify higher spending. For example, the Agriculture Act of 2001 was renamed "The Farm Security Bill" post-September 11, as if subsidies for chickpeas, lentils, and mohair have anything to do with national security.[40] One Congressman even stated that the peanut subsidy, with a $3.5 billion price tag, "strengthens America's national security."[41]

Social Policy

"Compassionate Conservatism"

President Bush campaigned as a "compassionate conservative" in 2000 and has echoed this theme throughout his presidency. The 2004 Bush campaign website describes compassionate conservatism as the President's "governing philosophy" in the areas of "educating our children, helping those in need, and fighting poverty at home and abroad."[42]

Equating federal dollars with compassion is wrong for several reasons. First, it bolsters the misperception that opposition to big government constitutes a lack of compassion. Second, the President's rhetoric implies a belief that he is more moral than the conservatives who came before him.[43] Third, truly compassionate acts are voluntary, not coerced. Yet every dime spent to advance so-called compassionate conservatism is forcibly collected from taxpayers -- millions of whom oppose activist government for religious, moral, or practical reasons.

"Undocumented Worker"

Often used to describe illegal immigrants, the term "undocumented worker" brings to mind the quip about the Holy Roman Empire: it was neither holy, nor Roman, nor an empire. Indeed, millions of supposedly undocumented workers do possess documents (albeit fraudulent or expired ones), and a significant proportion of these individuals are not workers, but rather criminals or scammers looking to game the system.[44] Politicians use the term to avoid criticism and to dodge meaningful debate, while the media prefer this politically correct platitude over accuracy. As Edward Abbey has written:

The perfectly correct terms 'illegal alien' and 'illegal immigrant' can set off charges of xenophobia . . . [so] [t]he only acceptable euphemism, it now appears, is something called undocumented worker. Thus the pregnant Mexican woman who appears, in the final stages of labor, at the doors of the emergency ward of an El Paso or San Diego hospital, demanding care for herself and the child she's about to deliver, becomes an "undocumented worker."[45]
"Working Families"

Advocates of expanding government programs often claim to be acting on behalf of "working families." Representative Major Owens (D-NY) recently stated that "working families have a right to make a claim on America,"[46]and backed up this assertion by cosponsoring a nationalized health care bill that would cost $1.5 trillion per year.[47] The AFL-CIO issued a Working Families Agenda that calls for nationalized health care, increased federal education spending, and tax increases.[48] Representative Denise Majette (D-GA) opposed the 2003 tax cut on the ground that some "working families" would not be eligible to receive child tax-credit payments from the IRS for amounts that exceeded their total income tax liability.[49]

It is perfectly fine for elected officials to celebrate Americans who work. The problem is that many politicians use the term "working families" only in reference to the subset of the workforce employed in blue-collar -- particularly union -- positions. As Representative Bernard Sanders (I-VT) stated, "when unions are strong, all working families benefit."[50] Such rhetoric flows from the discredited Marxist notion that there is a "working class" struggling against an idle and exploitative aristocracy and bourgeoisie. Indeed, the repeated use of the term "working families" in reference to this limited group of workers is Orwellian because it ignores reality. Millions of American small business owners routinely put in seven-day weeks, and professionals such as doctors, lawyers, and accountants often log 12-hour days. How can anyone logically insist that these individuals are not included within the ranks of working families?

"Nondiscrimination" . . . "Equal Opportunity" . . . "Affirmative Action"

Contractors and institutions that receive federal funds are required to include "equal opportunity" clauses in their contracts with the government.[51] This sounds quite reasonable until one considers the government's Orwellian definition of equal opportunity. According to the Department of Labor, "equal opportunity . . . requires . . . affirmative action." Thus, businesses are responsible for developing a "utilization analysis" and hiring based upon "the presence of minorities and women having requisite skills in an area in which the contractor can reasonable [sic] recruit."[52] The non-Orwellian term for such a policy is "quota."

The Department of Labor claims that the numerical goals do not create set-asides or seek to achieve proportional representation.[53] Yet the agency also states that it uses the most current census data to determine the availability of women or minorities for job openings -- with availability determined by their proportion of the population.[54] Although the government chooses not to call its system a quota, enforcement is based on numbers alone: "the goal-setting process in affirmative action planning is used to target and measure the effectiveness of affirmative action efforts."[55]

The government's "nondiscrimination" policies appear to be motivated by the same logic as the U.S. Supreme Court's Orwellian plurality opinion in the seminal Bakke case: "In order to get beyond racism, we must first take account of race . . . . And in order to treat some persons equally, we must treat them differently."[56] Or, as Orwell put it in Animal Farm: "All animals are created equal, but some animals are more equal than others."

Conclusion

The purpose of this Issue Brief is to provoke thought and discussion about some of the major defects afflicting our political discourse. This paper does not claim that America has become the totalitarian state presented in 1984, but rather cautions that we have taken several steps down that road.[57]

The Orwellian language of big government turns citizens into subjects. It lulls us into cheerfully accepting ever-increasing taxes while encouraging our dependence on an entrenched and growing bureaucracy overseen by career politicians. Unlike our ancestors who wanted to be left alone, we can imagine nothing worse than not having access to the benevolent hand of the managerial state:

Unlike the Communist garrison-state or the Italian fascist 'total state,' the managerial state succeeds by denying that it exercises power . . . . Managerial rule has consistently presented itself as collectively administered assistance. Rhetorically and propagandistically, it has been the helpmate of individuals set adrift in the industrial world, and administrators have claimed to enjoy 'democratic' support because they have updated liberalism and infused it with social concern.[58]
It may be naïve to hope that our leaders will say what they mean and mean what they say.

Yet it is vitally important for citizens in a free society to think critically about what they hear and read from politicians, pundits, and the press. As Orwell wrote, "the slovenliness of our language makes it easier for us to have foolish thoughts."[59]

About the Author

Mark Schmidt has served as Director of Programs for the National Taxpayers Union Foundation.

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