The Small Business Administration should fight for entrepreneurs, not unions

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It is a reality as sure as death and taxes that bureaucrats wish to expand their territory to justify new powers and additional funding.

But President Joe Biden’s penchant for “whole of government” approaches to advancing his policy priorities, from the “climate crisis” to “racial equity” to ”
[increasing] union membership”, causes some agencies to work well outside of their lanes.

Few examples are as stark as the recent promotion of unions by the US Small Business Administration.

When it comes to federal agencies, the SBA’s mission is largely indisputable. When it created the SBA in 1953, Congress charged it “to aid, advise, assist, and protect, as far as possible, the interests of small businesses in order to preserve free competition.”

But the SBA’s handling of major COVID-19 relief programs has undermined the agency’s reputation.

A major component of the CARES Act, the first COVID-19 spending bill passed by Congress in March 2020, involved the creation of the Paycheck Protection Program. The SBA-administered program provided repayable loans to businesses with fewer than 500 employees to help maintain payrolls and avoid mass layoffs during government-mandated pandemic shutdowns.

While the original eligibility criteria were quite broad, PPP eligibility for tax-exempt organizations was limited to 501(c)(3) nonprofit charitable groups and 501(c) veterans organizations. )(19).

Nonetheless, a recent Freedom Foundation analysis of the SBA’s PPP loan database identified 223 loans totaling $36.1 million made to labor unions and related organizations between March 2020 and March 2021 which, as the most 501(c)(5) nonprofit groups, were not eligible to participate. in the program.

The list of recipients included a dozen teachers’ unions and advocacy groups, such as the Michigan Education Association and the Memphis-Shelby County Education Association, ironically among the fiercest advocates of lockdown policies, whose PPP funds were intended to mitigate the effects.

Other government unions, from the Alabama State Employees Association to the Maryland Public Employees Council, also received large loans for which they apparently did not qualify. Even affiliates of the AFL-CIO – essentially a political and trade advocacy association for the unions – from the AFL-CIO of Alaska to the AFL-CIO of Pennsylvania, got hundreds of thousands of dollars.

Sending PPP funds to ineligible unions deprived small businesses of the help the program was supposed to provide. And it is difficult to say that the unions needed funds. Private-sector unions have already benefited from the program, as loans to employers have helped maintain union members’ paychecks and union dues, while hundreds of billions of federal dollars have been separately allocated to states. , municipal governments and schools and used to keep unionized government employees on the payroll.

While the SBA could be forgiven for some oversights in administering a massive new program in the midst of a pandemic, the agency’s continued inaction in the face of its mistakes is inexcusable.

Documents obtained under the Freedom of Information Act show that White House officials alerted SBA staff as early as July 2020 that PPP loans were being approved for ineligible unions, but the SBA continued to approve first and even second loans for ineligible workgroups.

When the Freedom Foundation released its findings in February, it also filed complaints with the SBA inspector general and the Justice Department’s National Center for Disaster Fraud.

The following month, in his State of the Union address, Biden accused his predecessor of undermining “the watchdogs whose job it was to prevent the squandering of pandemic relief funds” and promised to prosecute “criminals who stole billions in small business relief money.”

However, to date, there is no evidence of federal enforcement action being taken against unions that improperly obtained P3 funds.

Finally, noting that unions’ illegal receipt of PPP funds “demands an investigation,” GOP members of four congressional committees sent a letter to SBA Commissioner Isabel Guzman in early April asking the agency to provide information on its distribution of PPP loans to unions. before April 20. Guzman has yet to respond.

However, what is perhaps more reprehensible is that the US bailout
, passed by the new Democratic majority in Congress in March, expanded PPP eligibility to unions, releasing a torrent of additional federal funds into union coffers and effectively codifying the SBA’s role as a labor booster.

To help refocus the SBA on its core mission and ensure it operates with greater efficiency and oversight, House Republicans on the Small Business Committee introduced HR7628, the IMPROVE SBA Act. Among other things, it would exclude unions from participating in SBA-administered programs.

Unions and labor groups already have the Ministry of Labour, the National Labor Relations Board, the Equal Employment Opportunity Commission, the Federal Labor Relations Authority, the Bureau of International Affairs of the work, etc Leave the SBA to small businesses.

Maxford Nelsen is director of labor policy at the Freedom Foundation, a nonprofit organization that supports individual liberty, free enterprise, and limited, accountable government.

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