“I elevated the SBA [Small Business Administration] administrator to a Cabinet level position so that they are talking directly to me, so that there is no one in between me and the SBA when they are advocating on behalf of small business. …And [even after a reorganization] I’ll still have an SBA administrator in my Cabinet who’s advocating directly for small businesses.”

--President Obama, in the Google Plus Hangout/YouTube interview, Jan. 30, 2012

During President Obama’s live video chat on Google Plus, Ramon Ray of Montclair, N.J. expressed concern about the administration’s plans to fold the Small Business Administration into a super-department that includes the business functions of the Commerce Department, the U.S. Trade Representative’s office and three other agencies.

The president gave a reassuring answer. (Look at 14:00 mark). But his remarks were not accurate, judging from the administration’s own briefings on the plan.

The Facts

As it happens, SBA administrator Karen Mills for the first time attended a Cabinet meeting as a full-fledged Cabinet member on Tuesday. In remarks before the media, Obama said: “I’m very pleased that we’ve got Karen Mills here, who has participated in our meetings before, but is now an official member of the Cabinet.”

“Participated in our meetings before” makes us wonder what Mills actually gets out of being a member of the Cabinet, which under the U.S. system meets only every so often.

Cabinet rank is really a symbolic position, with no real authority. A person’s clout depends more on their relationship with the president.

In the president’s answer on Google Plus, he said that he made the move so that “there is no one in between me and the SBA,” which suggested that previously Mills reported to someone else.

But that’s not the case. Mills heads an independent agency. She already reported directly to the president, so the president’s remarks are nonsensical.

In fact, when the White House made the Cabinet announcement last month, Gene Sperling, the director of the National Economic Council was quoted as saying that “on every small-business issue from Day One, Karen has had the president’s ear.”

A cynic might think the president only elevated Mills to this largely symbolic position in the fourth year of his administration because, in this election year, he wanted to demonstrate an interest in small businesses.

For what it’s worth, the official White House narrative claims this move came only after meetings with “hundreds of businesses, experts, current and former Cabinet officials and agency heads, union leaders, Members of Congress and their staff, and thousands of Federal employees to find out what is working and what is not.”

In any case, the president also reassured this small business owner that after the various agencies were merged, “I’ll still have an SBA administrator in my Cabinet who’s advocating directly for small businesses.”

This is simply wrong. When the reorganization was announced, White House officials made it clear that the elevation of the SBA administrator to Cabinet level was only a temporary step, and that the new agency head would replace both the Commerce Secretary and the SBA administrator at the Cabinet table once the merger was complete.

However, the U.S. Trade Representative, whose office would also be merged into the new agency, would keep his or her seat at the Cabinet table, which indicates the administration actually thinks much less about small business than the rhetoric suggests.

Here’s the q-and-a from a Jan. 13 briefing by OMB Deputy Director for Management Jeff Zients:

Q: “But just to clarify, so the President would lift the SBA into Cabinet status, but then with the consolidation authority eliminate the SBA as a separate agency?”

Zients: “That’s right. The SBA would be represented in the new agency by the secretary of the agency that is focused on business competitiveness.”

Q: “So it’s a short timeframe.”


Q: “Is there any danger that by taking USTA and merging it into something else, you sort of make the trade agenda and the importance of reaching further trade deals or maybe even a global trade deal, you end up taking that position and appearing to diminish its importance?”

Zients: “Good question. The U.S. Trade Representative will maintain his Cabinet status, and this will strengthen our trade enforcement, our trade promotion, our export promotion, our financing for exports by integrating them into one department. So this strengthens our trade position.”

(Incidentally, the president also repeated the old saw that small businesses create most of the new jobs in the United States. As the Wall Street Journal’s “Numbers Guy” pointed out recently, this is only true if you use a very expansive definition of “small business.” In the U.S., a “small business” has fewer than 500 employees. Under the European Union definition of a small business—under 50 employees—such companies create just 32 percent of new jobs in the United States. The data shows that size is of little consequence; it is more important whether the business is young or old. Young businesses create most of the new jobs, no matter what their size.)

It is quite possible the president misspoke when he said he would keep the SBA chief in the Cabinet, but the White House has not tried to correct the record. Clearly, the head of the new superagency would have quite a few things on their plate besides just small business. The administration also did not respond to questions about whether Mills has any increased access to the president now that she has symbolic Cabinet rank.

In a statement, an administration official said:

“The President elevated Administrator Mills to the Cabinet because of his commitment to small business and he was pleased to have her at the Cabinet meeting today for a discussion of immediate new steps to accelerate small business growth and entrepreneurship and to recommend steps Congress can take to further expand access to capital and cut taxes for America’s entrepreneurs and small businesses.

“The President is committed to continuing to have a Cabinet member advocating on behalf of small business. Under the consolidation plan, that small business advocate would be the Cabinet secretary of the newly consolidated Department which was proposed by the Administration to make it easier for America’s business owners, and especially small business owners, to access the services they need to grow and hire.”

The Pinocchio Test

To some extent, these are issues of symbolism and process. Perhaps the president also has so much on his plate that he should not be expected to keep straight the details of his own reorganization.

But he made these misleading statements in direct response to a small business owner who was concerned about this pending reorganization, which in our view makes it worthwhile to correct the record.

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