Should the Small Business Administration be Abolished?

March 19, 2012

That’s the question being debated at the Wall Street Journal’s website. Representing the pro-abolition position is Cato adjunct scholar Veronique de Rugy. Veronique and I wrote an essay for Downsizing Government that makes the case for terminating the Small Business Administration.

Veronique ably explains why the federal government should not be meddling in the credit market, so I won’t restate her arguments. However, a statement made by her pro-SBA opponent is worth noting:

The SBA played a key role in arguing for policies to force the nation’s biggest banks to resume lending to small businesses after the financial crisis hit in 2008.

I bolded “force” because it’s a telling word choice. As George Washington put it:

Government is not reason. It is not eloquence. Government is force; like fire it is a dangerous servant – and a fearful master.

Advocates for government intervention are seemingly indifferent to the dangers of allowing a relatively small number of individuals to collectively play God. In this case, politicians in Washington – of which probably only a tiny subset knows anything about economics or finance – have decreed that taxpayers shall back loans made to particularly-sized businesses. Even if the result is a net economic positive – and it’s not – granting such power to one large entity should give pause to those Americans who value their freedom.

I mention this because as Veronique notes, “politicians have successfully sold the SBA as a program to help small business—a widely held belief that’s almost as sacrosanct as baseball, motherhood and apple pie.” For that reason, some self-described proponents of a smaller federal government have a soft spot for the SBA. However, when one pulls back the curtain, what he or she will find is just another politicized bureaucracy that exists to enrich special interests and bolster the status of our federal masters.

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