Senator examines SBA work

Sen. Tom Coburn (R-Okla.) wants to know whether the Small Business Administration is effectively promoting the best interests of small companies. Last week he called a hearing of the Homeland Security and Governmental Affairs Committee’s Federal Financial Management, Government Information and International Security Subcommittee, which he chairs, to try to find out.

SBA Administrator Hector Barreto testified, along with several critics and supporters of the agency. Coburn also addressed concerns that his goal is to abolish SBA programs, a view put forth by the American Small Business League and other groups in the days before the hearing.

“There is a perception out there that to be for the SBA is to be for small business and to be against the SBA is to be against small business,” Coburn said. “If SBA is broken, it’s certainly not the small-business sector that benefits from maintaining the status quo at the agency, but rather the bankers and big corporations who are currently profiting from SBA, among others.”

Barreto touted the more than $19 billion in guaranteed loans distributed to about 98,000 small businesses in fiscal 2005, a figure that has increased by $5 billion since 2001. Coburn questioned SBA’s definition of small businesses and why big businesses are scoring a piece of the small-business procurement pie, as some studies have shown. SBA has attempted — without success so far — to simplify the complicated formula for determining whether a company is small.

Veronique de Rugy, a research fellow at the American Enterprise Institute, took a tougher stance, observing that “there seems to be no failure of the private sector to allocate loans efficiently, thus discrediting the economic justification for any government-sponsored small-business lending or loan guarantee program.” De Rugy’s Forbes article, “Small-Firm Idolatry,” sparked much of the controversy surrounding the hearing, and she didn’t hold back.

The agency’s loan guarantee program, she said, “is not having a significant positive effect on the market. But you would never know this from the SBA’s evaluations of its programs. In fact, the SBA’s only measure of success amounts to stating how many loans have been guaranteed in a given year and how much it has spent on small businesses, rather than measuring the return on its efforts.”

Coburn said he would like to see a scientific analysis of SBA’s impact on the marketplace, calculating what taxpayers are getting in return for the agency’s spending. He suggested a Government Accountability Office study could be in order, but he did not formally request one.