What is an 8(a) Firm?

An 8(a) firm is a small business that is owned and operated by socially and economically disadvantaged citizens and that has been accepted into the 8(a) Business Development Program. This program is administered by the Small Business Administration (SBA), the United States agency charged with supporting the growth and development of small businesses. The 8(a) program is designed to help disadvantaged entrepreneurs get government contracts and access the economic mainstream in America.

How 8(a) Firm Status Works

The 8(a) status is specially granted by the SBA to any small business that qualifies, making it eligible for financial assistance, training, mentoring, and other forms of assistance. In order to qualify for this special status, businesses must be owned and operated by individuals who are considered socially and economically disadvantaged. These individuals may have been subject to racial or ethnic prejudice or cultural bias.

The 8(a) status is outlined specifically in Section 8(a) of the Small Business Act, and is designed to help small, disadvantaged businesses compete in the general market. The federal government has a stated goal of awarding at least 5% of federal contracting dollars every year to these businesses.

The Purpose of the 8(a) Business Development Program

One of the main reasons behind the creation of the 8(a) status was to increase business involvement by a broader portion of society. The SBA identifies several groups that are eligible for 8(a) status, including Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans. Someone who is not a member of one of these groups may still get into the program if they can show significant evidence of having been socially disadvantaged—for instance, due to race, ethnic origin, gender, and physical handicap, among other causes.

Through the 8(a) Business Development Program, owners can compete for special contracts, such as sole-source government contracts for which there are no competitive bids, that help level the playing field for their small businesses. These small businesses can use the program to form joint ventures with already-established businesses to form mentor-protégé relationships, as well as for management and technical assistance. Businesses must meet certain requirements to be eligible to be a protégé.

Qualifications for 8(a) Firm Status

In order to qualify to become an 8(a) firm under SBA guidelines, a business must meet the following criteria (effective July 15, 2020):

• It must be a small business.
• It must not have participated in the program before.
• At least 51% of the business must be owned and operated by U.S. citizens who are considered economically and socially disadvantaged.
• The owner’s personal net worth must be no higher than $750,000
• The owner’s average adjusted gross income (AGI) must be $350,000 or less.
• The owner must have no more than $6 million in assets.
• The owner must be of good character.
• It must show the potential for success and be able to perform successfully on contracts.

Title 13 Part 124 of the Code of Federal Regulations (CFR) spells out who qualifies for the 8(a) program as well as what counts as being economically and socially disadvantaged.

The first step: getting certified

Owners interested in taking part in the program are encouraged to do an on-line training and self-evaluation course through the 8(a) Business Development Suitability Tool. The course helps entrepreneurs determine whether or not their company meets the qualifications for the 8(a) program and if it does not, directs them to an appropriate SBA resource.

Before a firm can participate in the 8(a) program, it must first be certified at certify.SBA.gov. And small businesses that want to use the certification website must have a profile at SAM.gov, which is where companies register to do business with the U.S. government. (Contact your local SBA office if you have questions about applying.) Once you have applied, the administration will send a notification letter explaining whether the business was accepted into the 8(a) program. The certification lasts for nine years—the first four years are considered to be developmental, while the remaining five are deemed to be a transition phase. 

Small businesses that gain 8(a) status are subject to annual reviews in order to keep the designation and their good standing in the program. During these reviews, the business owner has to draw up business plans and undergo systematic evaluations. Entrepreneurs who have secured 8(a) firm status say that the application process can be lengthy and rigorous, having prior experience with government contracts can be helpful, and working hard to take advantage of the program’s benefits can make the experience very rewarding.

What Are Appellate Courts?

Appellate courts, also known as the court of appeals, are the part of the American judicial system that is responsible for hearing and reviewing appeals from legal cases that have already been heard in a trial-level or other lower court.

Persons or entities such as corporations that experience an unsuccessful outcome in a trial-level or other lower courts may file an appeal with an appellate court to have the decision reviewed. If the appeal has merit, the lower ruling may be reversed. Appellate courts are present at both the state and federal levels and do not include a jury. 

How Appellate Courts Work

Appellate courts review the decisions of lower courts to determine if the court applied the law correctly. They exist as part of the judicial system to provide those who have judgments made against them an opportunity to have their case reviewed.

A publicly traded company with an unfavorable judgment against it will likely experience a drop in share price, but an appeal could overturn this previous ruling. If an appeal is successful, the stock price usually jumps.

Courts at the appellate level review the findings and evidence from the lower court and determine if there is sufficient evidence to support the determination made by the lower court. In addition, the appellate court will determine if the trial or lower court correctly applied the law.

The highest form of an appellate court in the U.S. is the U.S. Supreme Court, which hears only appeals of major importance and consequence.

Appellate Courts vs. Supreme Courts

Supreme courts typically have more authority and breadth than appellate courts. The U.S. Supreme Court is the highest legal authority there is in America and many states have their own supreme courts, or court of last resort.

Supreme courts review decisions made by appeals courts. Overall, there are 13 appellate courts on the federal level⁠—12 district appellate courts and an appeals court for the Federal Circuit. 

Many states have intermediate appellate courts, which serve as appeals courts meant to cut down on the workload for the state Supreme Court.

Example of an Appellate Court Ruling

Shares of ride-sharing companies Uber Technologies Inc. and Lyft Inc. rose in the summer of 2020 after an appellate court granted a delay in the implementation of a new California law that requires many so-called “gig workers,” including drivers for ride-share companies, to be reclassified as employees.

In this instance, the appellate court decided that a previous ruling from a lower California court, affirming the constitutionality or legality of the state employment law, would be put on hold until it could evaluate the appeal and rule on its merits.

Not long after, investor hopes that Uber and Lyft could potentially get away with offering drivers no access to benefit plans or workers’ compensation coverage were dashed. In October of 2020, the California First District Court of Appeals ruled that the law was, in fact, legal and enforceable, meaning Uber and Lyft must treat their California drivers as employees, rather than independent contractors, and provide them with the benefits and wages they are entitled to under state labor law.

In February of 2021, the U.S. Supreme Court refused to hear Uber and Lyft’s appeal, affirming the lower court’s decision. The U.K. Supreme Court has also done the same.

What Is Affirmative Action?

The term affirmative action refers to a policy aimed at increasing workplace and educational opportunities for people who are underrepresented in various areas of our society.

Affirmative action focuses on demographics with historically low representation in leadership, professional, and academic roles. It is often considered a means of countering discrimination against particular groups.

Affirmative action programs are commonly implemented by businesses and governments by taking individuals’ race, sex, religion, or national origin into account when hiring.

How Affirmative Action Works

The main purpose of affirmative action is to diversify various parts of society. It is a government-backed policy that was developed to provide inadequately represented groups of people with access to opportunities in academia, the private workforce, and government jobs.

These opportunities include admission to schools and jobs in professional positions, as well as access to housing and financing.

History and Implementation

The affirmative action policy rose to prominence in the United States in the 1960s as a way to promote equal opportunity for various segments of society. The policy was developed to enforce the Civil Rights Act of 1964, which sought to eliminate discrimination.

Early implementations of affirmative action largely focused on halting the continued social segregation of minorities and other disadvantaged individuals from institutions and opportunities.

Despite legislation that outlawed discrimination practices in the U.S., tangible change in the status quo was not immediate.

In more recent years, campaigns have expanded to make organizations and institutions even more inclusive by pushing for greater gender diversity. Newer policies are also aimed at providing more access to opportunities for covered veterans and people with disabilities.

Elements of Affirmative Action

Efforts to stimulate change can take the form of financial assistance such as grants, scholarships, and other support earmarked to help with access to higher education opportunities.

In addition, hiring practices may be structured to require the inclusion of diverse candidates for consideration for job openings. Government agencies may mandate that companies and institutions populate their ranks with a minimum percentage of qualified professionals from varying ethnicities, genders, and cultures.

Failure to meet such requirements could disqualify institutions from receiving government funding or being able to compete for public contracts.

Examples of Affirmative Action

Affirmative action has been put to work since the 1960s, despite lack of progress at times and rulings by legal authorities such as the Supreme Court that have hindered it. Here are some examples of the policy in action.

• In 1965, President Lyndon B. Johnson issued Executive Order 11246. It required that all government contractors and subcontractors expand job opportunities for minorities. It also established the Office of Federal Contract Compliance (OFCC) to enforce the order.
• In 1970, the Labor Department ordered and authorized flexible goals and timetables to address the underutilization of minorities by federal contractors. In 1971, women were included in the order.
• In 1973, President Richard M. Nixon signed the Rehabilitation Act of 1973. It required agencies to submit an affirmative action plan to the EEOC that detailed the hiring, placement, and advancement of individuals with disabilities.
• In 1983, President Ronald Reagan issued Executive Order 12432. It required every federal agency with substantial procurement or grant-making authority to develop a Minority Business Enterprise development plan.
• In 1990, President George H.W. Bush signed the Americans with Disabilities Act. A year later, he signed the Civil Rights Act of 1991.
• In 1998, the U. S. House of Representatives and the U. S. Senate stopped attempts to eliminate specific affirmative action programs. Both houses of Congress prohibited the abolishment of the Disadvantaged Business Enterprise program. In addition, the House refused to allow the elimination of affirmative action in admissions in higher education programs funded through the Higher Education Act.
• In 2022, the Wall Street Journal reported that dozens of major U.S. companies including Apple, Alphabet, American Airlines, and General Motors were urging the Supreme Court to uphold the continued use affirmative action policies in college admissions. They asserted that greater diversity on college campuses contributed to ongoing innovation in commerce and successful business endeavors.

Advantages and Disadvantages of Affirmative Action

The implementation and continued use of affirmative action policies have drawn strong support as well as staunch criticism.

Advantages

An obvious benefit of affirmative action is the opportunities they provide to people who otherwise might not have them. These opportunities include access to education for students who may be disadvantaged and career advancement for employees who may be blocked from rising up the corporate ladder.

Proponents of affirmative action say that the effort must continue because of the low percentages of diversity in positions of authority and in the media, as well as limited acknowledgment of the achievements of marginalized or unrepresented groups.

Disadvantages

Opponents of affirmative action frequently call these efforts a collective failure. They cite as evidence the tiny changes to the status quo after decades of effort. The cost of such programs, coupled with a belief that affirmative action forces the populace to make unwarranted accommodations, drives a significant part of the opposition.

Certain individuals believe that there is little to no bias in society. They argue that affirmative action results in reverse discrimination, which can often lead to qualified candidates being overlooked in academics and the workplace in favor of less qualified candidates who meet policy standards.

Affirmative Action Statistics

Affirmative action is a very controversial topic and often leads to heated debates between those who support it and people who feel it doesn’t benefit society. Is there a way to quantify how people feel and how it’s working?

According to a Gallup poll, more than half of Americans (61%) believe in affirmative action policies. This level of support has increased since the last poll, where only 47% to 50% of individuals thought affirmative action was necessary. This increase in support is especially important, given the active issues surrounding race and identity in the U.S. and elsewhere.

Many Americans feel positive about diversity. They are comfortable with the makeup of their communities, saying diversity positively impacts society as a whole.

There is some divide when it comes to identifying race and ethnicity for purposes of hiring. In fact, about 74% of individuals feel that a candidate’s racial or ethnic background shouldn’t be considered when hiring or promoting them. These activities should only be based on someone’s merit and qualifications.

What Is Austerity?

The term austerity refers to a set of economic policies that a government implements in order to control public sector debt. Governments put austerity measures in place when their public debt is so large that the risk of default or the inability to service the required payments on its obligations becomes a real possibility.

In short, austerity helps bring financial health back to governments. Default risk can spiral out of control quickly and, as an individual, company, or country slips further into debt, lenders will charge a higher rate of return for future loans, making it more difficult for the borrower to raise capital.

How Austerity Works

Governments experience financial instability when their debt outweighs the amount of revenue they receive, resulting in large budget deficits. Debt levels generally increase when government spending increases. As mentioned above, this means that there is a greater chance that federal governments can default on their debts. Creditors, in turn, demand higher interest to avoid the risk of default on these debts. In order to satisfy their creditors and control their debt levels, they may have to take certain measures.

Austerity only takes place when this gap—between government receipts and government expenditures—shrinks. This situation occurs when governments spend too much or when they take on too much debt. As such, a government may need to consider austerity measures when it owes more money to its creditors than it receives in revenues. Implementing these measures helps put confidence back into the economy while helping restore some semblance of balance to government budgets.

Austerity measures indicate that governments are willing to take steps to bring some degree of financial health back to their budgets. As a result, creditors may be willing to lower interest rates on debt when austerity measures are in place. But there may be certain conditions on these moves.

For instance, interest rates on Greek debt fell following its first bailout. However, the gains were limited to the government having decreased interest rate expenses. Although the private sector was unable to benefit, the major beneficiaries of lower rates are large corporations. Consumers benefited only marginally from lower rates, but the lack of sustainable economic growth kept borrowing at depressed levels despite the lower rates.

Special Considerations

A reduction in government spending doesn’t simply equate to austerity. In fact, governments may need to implement these measures during certain cycles of the economy.

For example, the global economic downturn that began in 2008 left many governments with reduced tax revenues and exposed what some believed were unsustainable spending levels. Several European countries, including the United Kingdom, Greece, and Spain, turned to austerity as a way to alleviate budget concerns.

Austerity became almost imperative during the global recession in Europe, where eurozone members didn’t have the ability to address mounting debts by printing their own currency. Thus, as their default risk increased, creditors put pressure on certain European countries to aggressively tackle spending.

Types of Austerity

Broadly speaking, there are three primary types of austerity measures:

• Generating revenue generation through higher taxes. This method often supports more government spending. The goal is to stimulate growth with spending and capturing benefits through taxation.
• The Angela Merkel model. Named after the German chancellor, this measure focuses on raising taxes while cutting nonessential government functions.
• Lower taxes and lower government spending. This is the preferred method of free-market advocates.

Taxes

There is some disagreement among economists about the effect of tax policy on the government budget. Former Ronald Reagan adviser Arthur Laffer famously argued that strategically cutting taxes would spur economic activity, paradoxically leading to more revenue.

Still, most economists and policy analysts agree that raising taxes will raise revenues. This was the tactic that many European countries took. For example, Greece increased value-added tax (VAT) rates to 23% in 2010. The government raised income tax rates on upper-income scales, along with adding new property taxes.

Reducing Government Spending

The opposite austerity measure is reducing government spending. Most consider this to be a more efficient means of reducing the deficit. New taxes mean new revenue for politicians, who are inclined to spend it on constituents.

Spending takes many forms, including grants, subsidies, wealth redistribution, entitlement programs, paying for government services, providing for the national defense, benefits to government employees, and foreign aid. Any reduction in spending is a de facto austerity measure.

At its simplest, an austerity program that is usually enacted by legislation may include one or more of the following measures:

• A cut or a freeze—without raises—of government salaries and benefits
• A freeze on government hiring and layoffs of government workers
• A reduction or elimination of government services, temporarily or permanently
• Government pension cuts and pension reform
• Interest on newly issued government securities may be cut, making these investments less attractive to investors, but reducing government interest obligations
• Cuts to previously planned government spending programs such as infrastructure construction and repair, health care, and veterans’ benefits
• An increase in taxes, including income, corporate, property, sales, and capital gains taxes
• A reduction or increase in the money supply and interest rates by the Federal Reserve as circumstances dictate to resolve the crisis.
• Rationing of critical commodities, travel restrictions, price freezes, and other economic controls, particularly in times of war

Criticism of Austerity

The effectiveness of austerity remains a matter of sharp debate. While supporters argue that massive deficits can suffocate the broader economy, thereby limiting tax revenue, opponents believe that government programs are the only way to make up for reduced personal consumption during a recession. Cutting government spending, many believe, leads to large-scale unemployment. Robust public sector spending, they suggest, reduces unemployment and therefore increases the number of income-tax payers. 

Economists such as John Maynard Keynes, a British thinker who fathered the school of Keynesian economics, believe that it is the role of governments to increase spending during a recession to replace falling private demand. The logic is that if demand is not propped up and stabilized by the government, unemployment will continue to rise and the economic recession will be prolonged.

But austerity runs contradictory to certain schools of economic thought that have been prominent since the Great Depression. In an economic downturn, falling private income reduces the amount of tax revenue that a government generates. Likewise, government coffers fill up with tax revenue during an economic boom. The irony is that public expenditures, such as unemployment benefits, are needed more during a recession than a boom.

Examples of Austerity

United States

Perhaps the most successful model of austerity, at least in response to a recession, occurred in the United States between 1920 and 1921. The unemployment rate in the U.S. economy jumped from 4% to almost 12%. Real gross national product (GNP) declined almost 20%—greater than any single year during the Great Depression or Great Recession.

President Warren G. Harding responded by cutting the federal budget by almost 50%. Tax rates were reduced for all income groups, and the debt dropped by more than 30%. In a speech in 1920, Harding declared that his administration “will attempt intelligent and courageous deflation, and strike at government borrowing…[and] will attack high cost of government with every energy and facility.”

Greece

In exchange for bailouts, the EU and European Central Bank (ECB) embarked on an austerity program that sought to bring Greece’s finances under control. The program cut public spending and increased taxes often at the expense of Greece’s public workers and was very unpopular. Greece’s deficit has dramatically decreased, but the country’s austerity program has been a disaster in terms of healing the economy.

Mainly, austerity measures have failed to improve the financial situation in Greece because the country is struggling with a lack of aggregate demand. It is inevitable that aggregate demand declines with austerity. Structurally, Greece is a country of small businesses rather than large corporations, so it benefits less from the principles of austerity, such as lower interest rates. These small companies do not benefit from a weakened currency, as they are unable to become exporters.

While most of the world followed the financial crisis in 2008 with years of lackluster growth and rising asset prices, Greece has been mired in its own depression. Greece’s gross domestic product (GDP) in 2010 was $299.36 billion. In 2014, its GDP was $235.57 billion according to the United Nations. This is staggering destruction in the country’s economic fortunes, akin to the Great Depression in the United States in the 1930s.

Greece’s problems began following the Great Recession, as the country was spending too much money relative to tax collection. As the country’s finances spiraled out of control and interest rates on sovereign debt exploded higher, the country was forced to seek bailouts or default on its debt. Default carried the risk of a full-blown financial crisis with a complete collapse of the banking system. It would also be likely to lead to an exit from the euro and the European Union.