Disaster Relief for Small Businesses Is a Disaster All Its Own
THERE’S AN OLD saying: When all you have is a hammer, everything looks like a nail. For Congress, that hammer is the Small Business Administration (SBA). And every economic crisis is a nail.
Whenever the country is hit by a hurricane, an earthquake, or a terrorist attack, the government instructs the owners of small businesses that have been hurt to turn to the SBA for help. The agency was originally conceived in 1953 to provide guidance and aid to small businesses. Today, its mission statement also includes efforts “to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation.” But in recent decades, it has become the federal government’s all-purpose tool for promoting economic recovery.
Unfortunately, the agency has a long history of responding to crises chiefly with a mix of ineptitude, bureaucratic sloth, and cronyism—most spectacularly in the aftermath of Hurricane Katrina. The current crisis is no exception.
When the COVID-19 pandemic struck, millions of firms were put out of business. By the middle of April, nearly 17 million people had filed for unemployment. Retail sales for the month of March fell 8.7 percent from February, the biggest single-month drop in the 30-year history of tracking. Analysts universally expected that the following month would be even worse.
And so, faced with an unprecedented economic downturn, Congress got out its hammer. The SBA was once again asked to dole out hundreds of billions of dollars’ worth of federal loans and grants meant to prop up the economy during what looked to be the worst recession in a generation or longer.
Despite the agency’s longstanding, prominent role in the federal government’s economic recovery portfolio, there’s little reason to believe it will be successful in this case—and it may hurt more than it helps. For decades, the SBA has shown itself consistently unable to hit the nails placed before it. And as coronavirus relief efforts ramped up this spring, the agency quickly began failing taxpayers, small-businesses owners, and
