SBA's Role Sparks Debate on Capitol Hill

On Capitol Hill, it seems, effectiveness is in the eye of the beholder.

On the very same day the Senate passed a resolution last week praising the Small Business Administration as a critical partner for small businesses nationwide, policy analysts and lobby groups at a hearing down the hall were calling the agency irrelevant and even detrimental to entrepreneurship.

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The April 6 hearing, led by Sen. Tom Coburn, R-Okla., was called to "examine the effectiveness of the SBA," according to a statement issued by Coburn's office.

"I've never met a small-business owner who believes any aspect of the federal government is operating at peak efficiency and should be immune from examination," Coburn said in the statement.

As Colburn’s hearing progressed, nearly simultaneously, the Senate passed a bipartisan resolution honoring the "entrepreneurial spirit of America's small businesses."

Among other declarations, the resolution praised the SBA, saying its programs "have time and again proven their value" by helping "millions of entrepreneurs achieve the American dream of owning a small business."

The conflicting views began to surface about a week earlier, when the American Small Business League, a Petaluma, Calif.-based lobby group, had accused Coburn of calling the hearing in an effort to abolish federal small-business programs altogether.

Coburn called those accusations "dishonest and unethical."

"It's absurd to suggest that I have a hidden agenda to harm small business," said Coburn, chairman of the Senate Homeland Security and Government Affairs Subcommittee on Federal Finance Management.

Echoing the views of several other SBA critics invited to testify, Veronique de Rugy, a researcher at the American Enterprise Institute, a Washington, D.C.-based think tank, called the agency's intervention in the capital market on behalf of business owners irrelevant and unnecessary.

"Entrepreneurship is definitely one thing Americans know how to do without the government," de Rugy told committee members.

Jonathan Bean, a history professor at Southern Illinois University, claimed the SBA has "outlived its purpose."

SBA administrator Hector Barreto, who also testified, defended the agency, saying it is "providing tools to help small businesses survive and thrive," without any extra cost to taxpayers.

In 2005, the SBA's main financial program for small business oversaw more than 89,000 loans with a total value of over $14 billion — roughly doubling the output of loans since 2001, agency figures show.

Yet over the same period, its operating budget has been cut in half, while staffing has been reduced by about 25 percent.

That's led some critics to accuse the Bush administration, which has long touted small business as the nation's economic engine, of secretly planning to close the SBA.

More recently, the agency has been attacked for the pace of its disaster-recovery efforts in the wake of Hurricane Katrina.

On Monday, President Bush kicked off the nation’s official Small Business Week, which runs April 9-15, saying his administration "remains committed to fostering an environment where innovation succeeds and small businesses can flourish."

Also this week, the SBA will host its annual small-business awards conference, which recognizes outstanding business owners from across the country.

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