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‘Government Hypocrisy’: SBA Subsidizes Liquor, Tobacco Stores

Oscar Wilde’s observation that, “The bureaucracy is expanding to meet the needs of the expanding bureaucracy,” apparently holds as true today as ever.

Watchdog reported Monday that even as governments at all levels spend billions on health care and prevention efforts related to alcohol and tobacco use, the Small Business Administration is providing millions of dollars each year in loan guarantees to liquor stores and tobacco shops around the country.

Watchdog’s analysis of data obtained from openthebooks.com reveals, for instance, that “SBA provided more than $9 million in loan guarantees to start-up and grow liquor and tobacco small businesses” in just two states—Oklahoma and Colorado—over the past 5 years. (RELATED: Study: SBA Subsidizing Luxury Retailers, Fortune 100 Companies)

Colorado made out particularly well, with at least two stores receiving multi-million dollar loan guarantees in recent years, though Watchdog notes that the state’s legal marijuana dispensaries will not be sharing in the largesse any time soon, because pot remains illegal under federal law.

“This is a great example of government hypocrisy and inefficiency,” Openthebooks CEO Adam Andrzejewski told Watchdog, pointing out that, “It’s not only wasteful, it’s contradictory.”

SBA regional communications director Chris Chavez, on the other hand, argues that, “We don’t look at whether the loans go to a ‘good’ business or whether the business owner is doing good,” and that SBA financing is “strictly a business decision.” (RELATED: Report: Subsidizing Loans for Risky Small Businesses Reduces Growth)

Watchdog, however, notes that the SBA is forbidden by statute from lending to a business deriving more than one-third of its gross annual revenue from legal gambling activities—an inconsistency that Andrzejewski suggested could lead to oversight hearings in Congress.

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