I don’t make jokes—I just watch the government and report the facts.

- Will Rogers

The Small Business Administration (SBA) would like to change the definition of a small business. The summary of its proposal in the Federal Register is matter-of-fact in tone:

The U.S. Small Business Administration (SBA or the Agency) is proposing new size standards for 338 industry groups and industries. The new size standards are designed to better reflect the nature of the markets in which small businesses compete. SBA seeks comments on its proposed changes to size standards.

The next step is to reassure the reader that this is high science, not some wild-eyed, French-bread-smoking exercise:

Briefly, SBA’s proposed size standards methodology examines the structural characteristics of an industry or industry group as a basis to assess differences and the overall degree of competitiveness within the industry group or industry.
…
market structure is examined by analyzing its average market size. In turn, average market size can be broken down into three components. The first component is the total size of all participants in the industry group or industry, including for-profit businesses, not-for-profit entities, and government owned entities, which is referred to as the national industry size. The second component is the number of distinct geographic markets in which competition takes place. The third component is an adjustment for imports and exports to account for international competition faced by domestic firms.

Sure, we believe you. But what does it produce? Per The New York Times:

In some industries, such as financial investment services, companies could earn up to $1 billion or employ more than 3,000 people, more than some publicly traded corporations. The highest current cap for most industries is annual revenue of up to $47 million or fewer than 1,500 employees.

The reaction is not uniform praise:

“I don’t feel like this change was made with small business in mind,” said Angela Dingle, the president and chief executive of Women Impacting Public Policy, a group that promotes women entrepreneurs.

Now, let’s think about the implications. By law, 23 percent of federal contracting funds are set aside for small businesses. Under the proposal, there will by 114,500 more businesses competing for the same pool of dollars. Is that really what one wants in a policy dedicated to supporting small business?

For Eakinomics, the bottom line is simple. Preferential tax, regulatory, contracting or other treatment is simply a bad idea. They are just a tax on the growth of successful firms. Policy should favor entrepreneurial, growth-oriented firms. Small business set-asides are made for small business that are French in their non-ambitions. The SBA proposal is just a bad idea on steroids.