Listen to the speeches of political candidates, read practically any newspaper, or watch or listen to any news broadcast and you are likely to hear how government policies should be fashioned to assist small business. A recent round of such media coverage has been focused on the incorrect reporting of purchasing by the federal government, which is required by law to purchase a minimum of 23 percent of the value of all contracts from small business. The Obama administration claims 21.7 percent compliance. But the American Small Business League claims the percentage is far less, since small businesses like GE, AT&T, and Apple got in the front row of the small-business feeding trough.
The question is asked or implied by some media: Is it fraud or is it clerical error? All express outrage that the Small Business Administration (SBA) and the Obama administration aren’t complying with the law.
But no media coverage, at least none that this writer has read or heard, is expressing outrage at the corruption of economic freedom by the underlying federal law that mandates financial support of small businesses via contract favoritism.
This favored treatment for federal contracts, like that for loans to small businesses by the SBA, is intended to give small business a leg up when it competes for contracts with big business, a more politically marketable, nevertheless still a corruption of the market place. The process mostly helps a tiny share of small businesses compete against other small businesses. In other words, it picks winners and losers among small business owners. Not many small businesses build tanks or bridges. Why not eliminate the political favoritism and have all business compete against all business, including small against large? The Feds should be good stewards of our money by purchasing the best product or service at the best price.See the Cato Institute’s August 2011 study, Terminating the Small Business Administration.
Small businesses do of course comprise a large share of our economy, but how does this possibly justify the federal government’s granting them favored treatment? All successful businesses, small, medium, and large, know how to compete.
Federal intervention that impacts the economic freedom of business to compete should end.