Written by Tad DeHaven, a budget analyst at the Cato Institute. Posted with permission from Cato @ Liberty.
The Small Business Administration was created in the 1950s to make it appear as though federal politicians cared about the plight of the “little fellow.” A more helpful expression of concern would have been a rollback of the federal government’s increasingly heavy hand in the post-New Deal economy. Instead, they went with the more politically alluring option of using the heavy hand to deliver handouts.
As Veronique De Rugy and I discuss in an essay on the Small Business Administration, it didn’t take long for the politicians to turn the new agency into a favor dispenser:
Once the SBA seed was planted, it grew. SBA lending quadrupled between 1954 and 1960, and its staff jumped from 550 to 2,200 employees. In 1958, Eisenhower’s Budget Bureau warned that the SBA was “an uncontrollable program,” but both parties wanted to signal that they supported the “little fellow.” Also, members of Congress enjoyed using the SBA to distribute money and favors to their constituents. Members sometimes leaned on the agency to declare a particular business “small” or to have a constituent’s competitor declared “not small.”
Decades later, the SBA is still being used by politicians to show that they care.
For those who don’t follow hockey, almost half of the National Hockey League’s season has been lost because owners and players have yet to agree on a new labor deal. That’s obviously bad news for restaurants, bars, and other small businesses located near hockey arenas. But owning and operating a business comes with risks and an unexpected drop in walk-in traffic is one of them.
According to Sen. Bob Casey (D-PA), however, it’s the federal government’s job to mitigate such risks by placing it on taxpayers instead. On Wednesday, Casey sent a letter to the head of the SBA asking her to – wink, wink, nod, nod – keep in mind the needs of small businesses located near the homes of the Pittsburgh Penguins and Philadelphia Flyers:
Small businesses are the backbone of our economy and their success is vital to our continued recovery. I appreciate your willingness to offer free counseling to businesses that rely heavily on NHL crowds for business. I also urge you to continue to monitor the situation and to make yourself available in case these businesses should require additional resources and guidance. I stand ready to assist you with this. If you have any questions, please feel free to reach out to me directly.
And with that, Sen. Casey shows that he cares. I would argue, however, that if he really cared about making life easier on small business owners, he would be leading an effort in the Senate to rein in taxes and government red tape. After all, those two categories combined represent the “single most important” problem facing small businesses according to the latest survey from the National Federation of Independent Business. But, like most politicians, it’s simply a lot easier –and more politically rewarding – to hand out other people’s money.
Note: While I appreciate the argument that Pittsburgh businesses deserve SBA assistance but not Philly businesses because the former support a franchise that recently won its third Stanley Cup while the latter hasn’t hoisted it since 1975, I still don’t think the federal government should be picking winners and losers in the marketplace – or in that case, picking a winner over a loser.