Niceties of language and connecting the dots

Posted on | February 27, 2008 | Comments Off

One thing that never changes about Washington is double-talk.

Let me give you an example.

One of the ongoing conflicts between the House and Senate Small Business Committees and the Bush Administration has been over the Microloan program. The Microloan program provides loans to microenterprise development organizations, which they then use to capitalize loan funds to make microloans to low-income microentrepreneurs.

There is also a technical assistance component to the programs (microentrepreneurs are required to receive technical assistance when they receive Microloans, which improves default rates and helps these little firms become more successful), which is funded as a separate line-item in the SBA budget.

The two components of the program, in a good year in which both are reasonably funded, amount to $20 million or less. That’s out of a more than $2 trillion budget. For the record, that makes the Microloan program a whopping 0.001% of the federal budget in a good year.

During the three years that the Bush Administration was trying to get rid of the Microloan program by replacing it with a combination of SBA Express (which makes smaller dollar 7(a) loans) and the existing network of entrepreneurial development programs, the justification for doing so became something of a mantra.

We don’t need the very expensive Microloan program, Administration officials said, because the statistics say that we are making more and more loans to women and minorities under SBA Express. Since we are serving those underserved communities with SBA Express, we don’t need Microloan as well.

This is verbal sleight-of-hand.

The distinguishing characteristic of Microloan clients is not that they are mostly women and/or minorities. It is that they are essentially unbankable individuals, folks who would be unable to qualify even for a 7(a) loan but who are trying to start or run a microbusiness in a low-to-moderate income community.

In other words, just because you are making more 7(a) loans to women and minorities, that doesn’t mean you are reaching the particular set of women and minorities who need something like Microloan. Get rid of Microloan and, even with steady and ongoing increases in your lending to those two demographics, you will still be cutting off that debt financing option for the underserved communities for which the program was created.

There is a difference, after all, between underserved and minority.

What I find particularly interesting is that, in all the hearings I have watched during which the topic was discussed, nobody has pointed that out.

I’m wondering if that’s because the lawmakers haven’t connected that particular set of dots and don’t know this either, or if it’s because they aren’t good at picking up on that kind of nuanced misrepresentation on the fly.

[tags]SBA, House Small Business Committee, Senate Small Business Committee, Microloan, small business financing, microcredit, microbusiness[/tags]


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