Small businesses are a big factor in the United States. According to federal statistics, companies with fewer than 500 employees account for more than 99 percent of businesses in Washington and employ more than half the state’s workers.
All of which makes debate over the Small Business Administration a big issue. For 65 years, since President Dwight D. Eisenhower signed the agency into law, the Small Business Administration has assisted companies that form the backbone of the U.S. economy and are essential to a thriving middle class. At least, that is what proponents claim.
“In major cities and small towns across Washington, Oregon, Idaho and Alaska, our team of local experts in lending, government contracting, economic development and exporting continues to connect small businesses with the resources needed at various stages of the business life cycle,” Jeremy Field, the Pacific Northwest regional administrator for the SBA, wrote in a recent opinion piece that appeared in The (Spokane) Spokesman-Review.
The Small Business Administration provides support for entrepreneurs and small businesses through loan guarantees, grants, counseling, and assistance with government contracts. The agency also helps businesses, nonprofits and homeowners in the wake of natural disasters. In fiscal year 2016, the SBA made 25,000 disaster-relief loans totaling $1.4 billion.
Although the agency has a lengthy list of successes, it often is a target of free-market advocates in Congress. Funding typically fluctuates depending upon which political party is in power, and in March the Mercatus Center at George Mason University — a think tank funded by industrialists Charles and David Koch — released a paper detailing how the administration undermines free-market principles. “Why is it the role of the federal government to privilege a small number of firms in common, competitive industries?” the paper asked. It also claimed Small Business Administration loan guarantees are “arguably a form of ‘corporate welfare’ for major banks.”
While the motives of any organization funded by the Kochs — who have a long history of self-serving promotion of small-government causes — can be questioned, the Small Business Administration and its $700 million annual budget deserve scrutiny.
The SBA often provides loans to fledgling companies that do not qualify for help from traditional lenders, and Fields writes, “Many national brands — including Ben & Jerry’s, Columbia Sportswear and Chobani Yogurt — utilized SBA services to help them grow when they were small.” On its website, the Small Business Administration details its involvement with Portland-based Columbia: “Columbia Sportswear received an SBA loan in 1970 to increase production capacity. At the time the company had 40 employees. Today Columbia Sportswear has over 3,000 employees and generates over $1 billion in revenue.”
Of course, a couple success stories do not define the Small Business Administration; it is essential to look at data regarding the rate of loan defaults and the unintended consequences of government intervention in the marketplace. But it also is essential to consider the benefits of the agency instead of clinging to small-government dogma.
Small businesses are crucial to a strong economy that fosters growth and innovation. While there is room for debate about the role of government in promoting such companies, it appears that the benefits of the Small Business Administration outweigh any negatives.
