published: 2026-06-16 | pen: Sterling Varice | source: https://www.wsj.com/opinion/the-governments-costly-definition-of-small-business-6d6c5537
Hath not the potter power over the clay, of the same lump to make one vessel unto honour, and another unto dishonour? (Romans 9:21)
Professor Feinstein at the Wharton School wrote in the Journal this week that the SBA’s small-business definition has stretched beyond recognition. A $45 million builder. A 1,500-employee manufacturer. $170 billion a year in federal contracting preferences flowing through a label that means almost nothing it once meant. He counted 1,311 provisions across 302 laws. He is correct about the numbers. He is incorrect about what they mean.
The numbers mean me. The label delivered the contract to me. The contract delivered the dust to your courthouse. The dust is in Levon, and Levon is a hand on my lead-abatement crew in Chester, Pennsylvania, and the label is why he is mine. He’s 29. His blood-lead was 38 μg/dL the last time I had it tested, 18 months ago, because the hygienist I contract serves two other yards and hasn’t come back. The respirator that would keep his reading under the federal threshold of 50 is a supplied-air half-mask with the right cartridges, and it costs $247 per worker per year in amortization. The paper dust mask I bought him costs $1.18.
$245.82. That’s the margin the SBA was built to protect.
You bought the building. The federal courthouse in Wilmington that got the lead abatement last fall — the one with the rotunda and the portrait of the Chief Justice and the security line you stood in last month for the jury summons — was abated by my crew. The dust from the 1962 paint went into Levon. The dust from your courthouse. The crew wears the paper mask. The paper mask costs $1.18. The dollar-eighteen is in the contract. The lead is in Levon.
I do not ask Levon whether 38 troubles him. The number does not trouble me. The number is an inventory line, and the inventory line is below the federal threshold, and the federal threshold is what I price against. In the language of the yard, Levon is a unit. A unit, by which I mean a man whose blood-lead I’ll measure again in month twenty-three if the hygienist has the time, and whose hand I’ll replace in month twenty-five if the reading crosses 50 and the new hire is on the bench. Common use.
Let me put the numbers where you can see them.
The SBA’s size standard for my line of work is 750 employees. I have 740. I have 740 because the moment I cross 750 I lose the federal contracting set-aside. I lose the regulatory exemption on the OSHA silica standard. I lose the 23% prime-contract preference that lets me underbid the large contractor by exactly the amount of the preference. I stay at 740. Levon stays at 740. The next crew stays at 740. The contract flows. The dust flows. The arithmetic holds. The threshold is not a cliff. It is a quarantine line.
Professor Feinstein wants the cliffs turned into ramps. He would phase the obligations in as firms grow. He would let the $45 million builder cross the line and not lose the preference. He’s worried the small-business label is too elastic. He’s right that the label is elastic. He is wrong that elasticity is the disease. Elasticity is the cure. Elasticity is what keeps me at 740, where I can underbid the large contractor, hire Levon at the wage the large contractor wouldn’t touch, equip Levon with the paper mask, and keep the $245.82. The large contractor has 4,800 employees. He carries the silica standard, the quarterly blood-lead monitoring, the hygienist on retainer, the supplied-air respirator, the full EPA RRP recordkeeping. His bid runs a double-digit percentage above mine. The federal contract comes to me. The dust goes to Levon. The threshold is mine.
Widen the frame, because the case is only an example of the principle.
The threshold is the oldest arrangement there is, wearing this decade’s vocabulary. Malthus, two centuries ago, made the calculation the SBA size standard was built to enforce. Keep the laboring class exactly poor enough to accept the terms, and the supply of laboring class will meet the demand. The SBA does not subsidize the small business. The SBA subsidizes the arrangement by which a man like me can hire a man like Levon at a wage the large contractor will not, with equipment the large contractor will not, on a contract the large contractor cannot underbid. The state feeds them between shifts through the very subsidies the professor is so alarmed by, and I capture the yield. Malthus did not propose a ramp. Malthus proposed a fence. The threshold is the fence. The professor looks at the fence and sees a flaw. I look at the fence and see the design.
The professor teaches at the Wharton School. I have been teaching this arithmetic for 31 years, at Warden University, where I am Dean of Instruction in the College of Business. Three of the yards on the federal abatement roster are mine. The other 200 are my graduates’. The class is in its 19th printing. The textbook is in its fourth edition. The Wharton man missed the lecture. Or he took it and forgot the punchline. The punchline is this. The threshold exists to keep me small enough to externalize maintenance, and the men who write the size standards, the men who staff the agency, the men who sit on the procurement panels that award the contracts — they are my graduates. I am not one man. I am a curriculum. The professor is a graduate of a competing program. His program is losing. The fence is mine.
Read the next sentence twice, because here is the arithmetic the textbook keeps.
Every threshold I sit beneath is a wage I don’t pay, a respirator I don’t buy, a hygienist I don’t retain, a record I don’t keep. There are yards like mine in every state the EPA hasn’t gotten around to. There are 1,500-employee manufacturers. There are $45 million builders. The dust from every contract is in every Levon. The 1962 paint has another 40 years of leaving bodies to give. The next contract is up for bid in 3 years. The quarterly return on the abatement line is the highest since the program began. The line holds.
“And if a man smite his servant, or his maid, with a rod, and he die under his hand, he shall be surely punished. Notwithstanding, if he continue a day or two, he shall not be punished: for he is his money.” (Exodus 21:20-21, KJV)
The scripture distinguishes the immediate death from the manageable maintenance interval. Levon is a manageable maintenance interval. He will continue a day or two. The $1.18 paper mask is the rod, and the $245.82 I keep is his money.
The professor wants ramps. I’ll give him ramps when the ramp produces a contract at a double-digit percentage above mine. Until then, the threshold is mine, the 23% set-aside is mine, the respirator I didn’t buy is mine, and the Lord provided the man and the size standard that lets me sit beneath it.
Levon’s reading will be 41 next month if the hygienist comes back. He will be at 50 by spring. I will have a new Levon in summer. He comes from the bench. The bench is always full. The arithmetic has held since before the professor was credentialed. Malthus priced the arrangement before I did. The Lord perfected it.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.