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Why the Obama Plan for Cabinet-level SBA Means Nothing

Making the SBA chief a member of the Cabinet is the executive branch equivalent of giving an honorary degree or getting an Emmy award: Sounds nice, means nothing.

President Obama got a great headline last week when he said he would make the head of the U.S. Small Business Administration a cabinet-level position. He coupled this with a broader proposal, which needs Congressional approval (good luck on that this year), to combine the SBA with five other government offices. This would create a single, allegedly streamlined agency.

It's a great political move, but it really doesn't do much for small business.

First, let’s acknowledge some good points. The move does recognize that current SBA boss Karen Mills has done some good things. She’s reduced lender paperwork for SBA-backed loans, enforced better oversight of government contracting and – most importantly – helped roll out several laws that lent more money to small businesses. Under the Obama recovery act, the maximum size of SBA loans increased from $2 million to $5 million, and the amount of this guaranteed by the government temporarily expanded from 75 percent to 90 percent.

OK, now we’ve gotten that out of the way, let’s look at the rest of the plan.

Making the SBA chief a member of the Cabinet is the executive branch equivalent of giving an honorary degree or getting an Emmy award: Sounds nice, means nothing. And get this: If the SBA does combine with other government agencies, as the plan goes, this honor actually disappears– it becomes, once again, a non-cabinet agency.

From what few details are in the White House plan it is clear that this “consolidation” amounts to little more than a change in letterhead. The things to be combined with the SBA are: The core business and trade functions of the Commerce Department, U.S. Trade Representative, the Export-Import Bank, the Trade and Development Agency and the Overseas Private Investment Corp. (If it’s part of the government how can the Overseas Investment thing be either private or a corporation?)

As Barry Sloane, CEO, of the Small Business Authority – a lending and services agency, says, “This is a functional fairy tale. Now all you have is a bunch of bureaucracies operating under a new name. If the goal is to combine and consolidate these agencies, the President should have eliminated them and given their functions to the SBA.”

Short of that, there is no real fiscal savings and no improvement in the delivery of services.

While the move is a great headline, the reality – if it were to happen – would neither help small business nor shrink the federal deficit.

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Last updated: Jan 18, 2012

CONSTANTINE VON HOFFMAN | Columnist

Constantine von Hoffman is a writer and sometime standup comedian. His work has appeared in Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, and Boston Magazine.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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