David Stockman, Ronald Reagan's budget director, proclaimed the
Small Business Administration a "billion-dollar waste -- a
rathole", and set out to abolish the agency. His scathing critique
was but the latest attack on an agency better known as the "Small
Scandal Administration".
Loans to criminals, government contracts for minority "fronts",
the classification of American Motors as a small business,
Whitewater, and other scandals -- the Small Business Administration
has lurched from one embarrassment to another. Despite the scandals
and the policy failures, the SBA thrives and small business remains
a sacred cow in American politics.
Part of this sacredness comes from the agency's longstanding
record of pioneering affirmative action. Jonathan Bean reveals that
even before the Civil Rights Act of 1964, the SBA promoted African
American businesses, encouraged the hiring of minorities, and
monitored the employment practices of loan recipients. Under Nixon,
the agency expanded racial preferences. During the Reagan
administration, politicians wrapped themselves in the mantle of
minority enterprise even as they denounced quotas elsewhere.
Created by Congress in 1953, the SBA does not conform to
traditional interpretations of interest-group democracy. Even
though the public -- and Congress -- favors small enterprise, there
has never been a unified group of small business owners requesting
the government's help. Indeed, the SBA often has failed to address
the real problems of "Mom and Pop" shop owners, fueling the ongoing
debate about the agency's viability.
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