- The Washington Times - Thursday, April 6, 2006

The Small Business Administration defended its existence yesterday as critics slammed its response to Hurricanes Katrina and Rita and questioned the agency’s definition of a small business.

Dozens of small-business advocates flooded the office of Sen. Tom Coburn with e-mails and phone calls this week after rumors persisted that lawmakers wanted to abolish the SBA.

Mr. Coburn, Oklahoma Republican, disputed the rumors. As chairman of Senate Homeland Security and Governmental Affairs subcommittee on federal financial management, government information and international security, he said, he requested the hearing yesterday to focus on financial accountability and the need for an economic impact study that demonstrates the necessity for SBA-guaranteed loans.

“While the SBA is supposed to help small business, the interests of small business and the interests of SBA are only synonymous if and when the SBA is achieving its mission effectively and efficiently,” he said.

SBA Administrator Hector V. Barreto noted that guaranteed small-business loans under his tenure grew from $14 billion in fiscal 2001 to $19 billion in 2005. At the same time, the agency’s funding was shrinking.

“Our budget has gone down by 30 [percent] to 40 percent, but our production’s gone up,” he said.

The federal government sets a goal of awarding 23 percent of its contracts to small businesses.

Mr. Coburn referred to a chart displaying seven examples in which SBA contracts were awarded to large corporations and asked for the SBA’s definition of “small.”

Mr. Barreto defended the agency’s contracting process, noting that large businesses often buy smaller firms that hold the contracts, or the businesses simply grow as a result of the contracts.

A representative from the Government Accountability Office said the SBA’s work force and loan-processing systems were overwhelmed by the volume of loan applications resulting from Hurricane Katrina, which Mr. Barreto estimated at 400,000. Since the storm ravaged the Gulf Coast Aug. 29, Mr. Barreto said, the agency has guaranteed $7.5 billion in loans.

The California organization American Small Business League announced last week that the hearing was a veiled attempt to abolish the SBA.

The rumors stemmed from Veronique de Rugy, a research fellow at the conservative American Enterprise Institute who has openly called for ending the agency and all subsidies aimed at helping small business.

“Entrepreneurship is definitely one thing that Americans know how to do without of the help of the government,” said Ms. de Rugy, who argued yesterday that SBA loans are unnecessary because 95 percent of small businesses can secure loans on their own.

In a research paper, Ms. de Rugy stressed it is only the “gazelles” and not all small business, that spur innovation and continue to grow.

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