Dean Baker Outs the Washington Post Yet Again

I love Dean Baker. He picks on the big media and points out the idiocy of the "news coverage". Here's his latest. I've bolded some key bits:

The Role of Small Business in the Economy Might be a Mystery to the Washington Post, but Not to Economists

The Washington Post had a front page article pushing some vague and unspecified plan by the Obama administration to aid small businesses by using TARP money to guarantee loans. The article implies that economists debate the amount of employment by small businesses:

"Some economists estimate that small businesses, defined as firms with fewer than 500 workers, employ most of the country's workforce."

Actually, economists don't speculate much on this topic, since there is very good data on employment by firm size available from the Bureau of Labor Statistics.

There had been some debate in the 90s about whether small businesses were responsible for a disproportionate share of job creation. While this is true, small businesses are also responsible for a disproportionate share of job loss. Most small businesses only survive a few years. As a result, small businesses on net, create new jobs at roughly the same rate as larger businesses.

It is worth noting that there are already many substantial subsidies available to small businesses. For example, the Small Business Administration has a variety of programs that allow small businesses to get loans at below market rates. These subsidies can be very large relative to other government benefits.

For example, if a small business owner gets a $500,000 loan at an interest rate that is 2 percentage points below the market rate, this is an effective subsidy of $10,000 a year. That is close to twice the average TANF grant that a mother with two children would receive.

You will notice that the big media never talks about business "welfare queens" and how they are at the trough sucking up taxpayers dollars. Baker points out that government is in the business of economic redistribution. The Right wants to redistribute money from the bottom four-fifths of the population to the top 2%. The Left wants to redistribute money from the top 20% to the bottom 40%.

You will also notice that Baker bursts the bubble of "small business is the engine of job growth". I've been caught up in this meme. Baker straightens us out. Sure small business creates a disproportionate number of jobs. But it also destroys a disproportionate number of jobs. In the end it is a wash. I should have realized this, but I was suckered by the media into the simplistic idea of small business was the "engine" of job growth. Oh well, live and learn.

Dean Baker is almost always worth reading. He puts fresh eyes -- from the Left -- onto the swill that the media feeds us.