Abolish the Small Business Administration
Everyone loves small businesses. But that’s no reason to keep an agency dedicated to extending loans and other privileges to some of them at the expense of everyone else.
Contrary to common belief, it is not the role of government to subsidize private companies. This statement is true whether the company is green, minority-owned, small, or gargantuan. Besides, the fetish for small businesses is annoying. Small businesses employ 45.9 percent of American workers, according to the Small Business Administration (SBA). That sounds impressive until you realize that 99.9 percent of businesses in America are small. That means 0.1 percent of businesses in the country employ more than half of the work force.
The SBA is mostly useless. No doubt various businesses getting subsidized loans through the agency love it. If your enterprise can’t get a loan because your business plan is subpar, an SBA guarantee will help convince a bank to give you cash, since taxpayers will cover much of the unpaid loan. Likewise, if you think market rates are too high and lenders’ terms are too stiff, an SBA loan will lower your borrowing costs.
But that doesn’t mean the SBA is good for the country as a whole. The SBA boasts that its lending fills an essential gap for small businesses that can’t access adequate capital. Leaving aside the silliness of believing there must be a market failure if not all companies that want a loan can get one, SBA lending is a drop in the bucket: Traditionally, the agency’s loans have represented about 1 percent of all small business loans.
Since it’s so small, w
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