Commentary

Business End

This article appeared in the American Spectator (Online) on April 24, 2006.

It’s not often that a Senate oversight hearing provokes claims of bigotry and anti-Americanism. But that happened recently when Senator Tom Coburn called a hearing to examine the effectiveness of the Small Business Administration.

Before he had even formally announced the hearing, Senator Coburn, a man who has cut thousands of umbilical cords in his career as a family doctor, found himself under fire for scrutinizing the proverbial umbilical cord that links the SBA to the U.S. Treasury.

A number of supposed small business advocacy organizations impugned the Senator’s intent and attacked some of the witnesses. Some claimed that he was trying to abolish the SBA. One group went so far as to call an SBA critic, the estimable Veronique de Rugy, a “French Anti-American small business advocate.” Another group labeled SBA critics “bigots.”

Why did supposed advocates of small business respond to the hearing with such vitriol? What did they hope to gain by making themselves so conspicuously nasty?

Senator Coburn suggested that the angry response was indicative of some serious problems at the SBA and he called for additional oversight to figure out what’s gone wrong.

The senator may have a point. There may be serious problems with how SBA funding is structure that can be brought to light through additional oversight.

But there are much bigger issues at play.

Like many government agencies, the SBA proudly trumpets its track record on job creation. Superficially, there is nothing wrong with job creation, though when the government does it, it leads to unintended problems. When the government creates jobs, it also creates workers dependent on the government.

Whether they are in the public or private sector, these government-supported workers become de facto lobbyists dedicated to defending the existing funding level and prying more dollars out of Uncle Sam’s wallet. This makes it exceedingly difficult to provide real scrutiny of government programs and makes eliminating programs, even unnecessary ones, seemingly impossible.

Senator Coburn’s hearing demonstrated this dynamic. The groups that responded loudly and aggressively were those that profit from the government’s largesse, not the advocates of the broad interests of small businesses like the National Federation of Independent Business. These narrowly-focused interest groups care more about profiting from the government than of entrepreneurialism.

Because they react so vociferously, many members of Congress are afraid to take on these niche industries. The reward of a smaller government does not appear to outweigh the costs of the inevitable negative attack campaign. But that does not mean Congress should give up on limited government or programmatic oversight.

Rather than eliminating unnecessary programs individually and taking on their beneficiaries directly, Congress might consider a broader mechanism to limit spending. A Constitutional balanced budget amendment or a budget cap with teeth would force special interests groups that feed off of government handouts to compete against one another for limited government resources.

This would not be a panacea, but it would provide a glimmer of hope for those who believe the government should be smaller and less involved in the economy, and it would probably make for more entertaining hearings to boot.

Brandon Arnold is a director of government affairs at the Cato Institute.