It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect insofar as is possible the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts for supplies and services for the Government be placed with small-business enterprises, and to maintain and strengthen the overall economy of the Nation.
Small Business Act of 1953, SEC. 202.
In 1953, President Eisenhower signed the Small Business Act and made it official policy of Congress and the Federal government to "aid, counsel, assist, and protect insofar as is possible the interests of small-business concerns". The bill both eliminated the depression era Reconstruction Finance Corporation (RFC) and established a temporary Small Business Administration (SBA). Despite being principally objected to government interference, President Eisenhower not only signed the bill, but recommended that Congress extend the bill and make the SBA permanent. It was an act of political opportunism that was repeated by many successive administrations.
Eisenhower not only objected to the interference of government in the credit markets, but he also questioned whether a separate special interest group was needed for small business owners. Nevertheless, he signed the bill as part of a package to eliminate the Reconstruction Finance Corporation. Since 1932, the RFC provided financial support to state and local governments and made loans to banks, railroads, and other big business entities. During the Truman years, the RFC had become tarnished by allegations of influence and was especially unpopular with Republicans. By signing, the Small Business Act and eliminating the RFC, Eisenhower and the Republicans were able make good on their promises to end the RFC and diminish the image that they were controlled by big business. On July 30, 1953 President Eisenhower signed the Small Business Act, abolished the RFC and created a temporary Small Business Administration. The temporary administration was given the authority to spend $275 million, but unless Congress took further action to extend the SBA, it would expire on June 30, 1955. President Eisenhower may have reluctantly signed the bill in 1953, but with re-election right around the corner, he saw the political opportunity to make the SBA permanent and in his 1955 State of the Union Address, he urged Congress to do just that.
"The prosperity of our small business enterprises is an indispensable element in the maintenance of our economic strength. Creation of the Small Business Administration and recently enacted tax laws facilitating small business expansion are but two of many important steps we have taken to encourage our smaller enterprises. I recommend that the Congress extend the Small Business Act of 1953 which is due to expire next June."
Today, the Small Business Administration defines itself as the only cabinet level federal agency fully dedicated to providing counsel, capital, and contract experience to small businesses. Since 1953, they continue "to help small business owners and entrepreneurs pursue the American dream", but like many government agencies, the size and scope has grown. From 1954 to 1960, the SBA lending quadrupled from 550 to 2,200 employees and by 1958 Eisenhower’s budget bureau was warning that the SBA was an uncontrollable program. In the 1970s, the SBA had become one of the government's chief tools to pursue the policy of "affirmative action “and by the time, President Ronald Reagan entered his second term, the SBA was nicknamed the "billion-dollar waste - a rat hole". Reagan supported abolishing the SBA but could not convince Congress to do so. The SBA thrived under the Clinton administration and coasted through the Bush administration. Then in 2009, President Barack Obamas’ American Recovery and Reinvestment Act utilized the SBA's lending program in attempts to help stimulate the economy by increasing maximum SBA loan guarantees to 90% and covering all the fees. In 2011, the actual cost to taxpayers was a whopping $6.2 billion. Despite the tremendous costs to taxpayers, both parties continued to promote the agency to show their support for small businesses. As recently as 2020, then President Donald Trump announced promoted the SBA and announced that it had processed more than $4.6 billion in SBA loans and saved an estimated 50 million jobs.
References
Presidency.ucsb.edu. 2021. Annual Message to the Congress on the State of the Union | The American Presidency Project. [online] Available at: <https://www.presidency.ucsb.edu/documents/annual-message-the-congress-the-state-the-union-12> [Accessed 6 May 2021].
Downsizing the Federal Government. 2021. Terminating the Small Business Administration. [online] Available at: <https://www.downsizinggovernment.org/sba> [Accessed 6 May 2021].
Manfredi, L., 2021. Trump says SBA during coronavirus has processed $4.6B+ in small business loans, saving 50M jobs. [online] Fox Business. Available at: <https://www.foxbusiness.com/small-business/trump-sba-has-processed-4-6-million-in-small-business-loans-saving-estimated-50m-jobs> [Accessed 6 May 2021].
Sba.gov. 2021. About SBA. [online] Available at: <https://www.sba.gov/sites/default/files/2019-03/Small_Business_Act.pdf> [Accessed 6 May 2021].
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