Turning to small business loan programs amid crisis makes economic, political sense, says Rice U. expert

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HOUSTON – (March 23, 2020) – President Trump's decision to utilize the Small Business Administration’s grant and loan programs as means of stabilizing local economies amid the shock of the coronavirus pandemic is motivated by their ability to pump money into local economies quickly — and their popularity in Congress — according to an expert at Rice University.

Robert Stein, the Lena Gohlman Fox Professor of Political Science at Rice and fellow in urban politics at the university's Baker Institute for Public Policy, is available to discuss this development and its implications.

“The popularity of SBA grants owes to three key traits that make these programs somewhat unusual,” Stein said. “First, SBA programs have fast processing time, less than 10 days. Second, assistance is provided to small businesses, a population that is present in every community in every congressional district. Third, because the awards for these programs are in the form of contingent liabilities, the programs are largely self-financing (loan repayments fund subsequent loans) and congressional appropriations are necessary only in the event of an unusually large volume of defaults.

In addition, “new SBA awards are highly correlated with the reelection of House members, especially newly elected members whose reelection may be challenged in primaries and the general election,” Stein said.

Stein co-authored a 1997 book, "Perpetuating the Pork Barrel: Policy Subsystems and American Democracy," in which this topic was investigated. The authors' hypothesis posed: “Do electorally vulnerable legislators seek to increase the flow of new awards early in the subsequent electoral cycle in order to help overcome their vulnerability?”

The research found that high levels of new awards early in the congressional term reduce the likelihood that incumbents will face quality challengers in the next election.

Stein is an expert on urban politics and public policy. He is co-author of "Perpetuating the Pork Barrel: Policy Subsystems and American Democracy" (1995, Cambridge University Press), and author of "Urban Alternatives: Public and Private Markets in the Provision of Local Services" (1990, Pittsburgh Press). His work has also appeared in a wide range of scholarly journals.

Stein’s current research, supported by the National Science Foundation, examines the impact of the federal aid system on the electoral trajectories of officeholders at both the subnational and congressional levels. Other research examines collective action among metropolitan area governments and voting behavior.

A radio and television studio is available at the Baker Institute for media outlets that want to schedule an interview with Stein. For more information, contact Avery Franklin, media relations specialist at Rice, at averyrf@rice.edu or 713-348-6327.


Related materials:

Stein bio: https://politicalscience.rice.edu/robert-stein

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