Obama the fiscal moderate.

March 30, 2009

The Wall Street Journal reports on massive government fraud:

A new report found widespread fraud in a government program designed to help small businesses secure federal contracts, a sign of the obstacles the government faces as it launches programs designed to help small businesses dig out of the recession.

The report, issued last week by the Government Accountability Office, uncovered repeated instances of fraud among companies participating in the Small Business Administration’s Historically Underutilized Business Zone, which provides federal contracts to small companies located in low-income communities.

In an investigation of 36 companies in four metropolitan areas, GAO investigators found that 19 didn’t meet program requirements; they were using fake addresses, subcontracting to larger firms, or the majority of their employees were located in a non-HUBZone location. The investigation followed a GAO report issued last summer, which found fraudulent program participants in the Washington, D.C., area and warned the SBA that lax oversight left the program vulnerable to more fraud and misappropriation.

When the GAO recently checked back into 10 fraudulent companies it found last July, two had been removed from the program. Seven were still HUBZone certified.

Didn’t Candidate Obama promise to go through the budget with a scalpel and to remove ideology from the budget process, using a pragmatic approach to funding the policies that work? Apparently not:

The problems raise questions about the SBA’s ability to manage programs when more money is being funneled into the agency as part of the government’s stimulus plan. Under a new program announced earlier this month, the Treasury department will push $15 billion into small-business lending, by raising government guarantees of SBA loans and buying loan-backed securities.

Of course, the usual suspects claim that the solution is stricter oversight. These apologists for government largesse ignore the fact that when the government spends lots of money, lots of people have perverse incentives to take short cuts and bend the rules.

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