Small Business Administration chief Linda McMahon is Trump’s happy wrestler
"Review their financial records. It's not brain surgery. It's keeping an eye on what's going on"
Linda McMahon joined President Trump's Cabinet as one of its most popular members: The pro wrestling pioneer collected rare support from Democrats as well as Republicans to clinch the president's appointment of her as head of the Small Business Administration. The agency last year guaranteed $30 billion.in lower-interest bank loans to more than 68,000 corporate franchisees, licensees, start-ups and family firms. It also wrote off around $1 billion it couldn't collect.
As Cabinet jobs go, SBA is fun: While her colleagues struggle with pollution, drug prices, or tariffs, McMahon gets to travel America meeting family business owners that her agency helps. She also promotes Trump's tax cuts and other pro-business policies as his ambassador to this critical sector. She's an evangelist for the American way of working for yourself, with borrowed money and public guarantees.
It's not all fun: A target of conservative budget-cutters from the pre-Trump Republican Party, the SBA's budget has been trimmed by Congress in each of the last few years even as the agency keeps making more loans. Delinquent loans are also up.
But McMahon says she's used to financial pressure: She helped her husband, Vincent, found and run what's now WWE, or World Wrestling Entertainment, building yearly sales to $500 million when she served as CEO from 1997 to 2009.
"President Trump wanted somebody in this position who had actually created a business," she told me on a swing through Philadelphia last week — her 53rd such field trip, she says. "I've been through the ups and downs. I've been bankrupt and lost everything and built the business up. That's what he wanted: If anyone is going to advocate on behalf of 30 million small businesses, they should know what they are talking about." (The U.S. Census Bureau says there are about 5.9 million businesses in the United States with at least one employee; the remaining 24 million have none.)
"Everybody wants small businesses to succeed," she announced to three generations of the Smolenak family who opened their new Hammer & Stain do-it-yourself group workshop in Holland, Bucks County, after going through SBA training earlier this year.
McMahon also called at Steve's Prince of Steaks, a Northeast Philadelphia-based sandwich chain that borrowed $150,000 from Bank of America, half of it with an SBA loan guarantee, in 2012; And at Victory Gardens Inc., a 65-worker Warminster plant nursery and supply center, which borrowed $3.5 million from Fulton Bank two years ago with a $2.7 million SBA guarantee. Those loans were pegged at 6 percent, a big discount from the average 15 percent credit-card rates many new business owners use when they can't get traditional bank financing or SBA guarantees.
At Hammer & Stain, McMahon swung a nail gun, smiled for pictures, and asked founder Christine Smolenak if state regulators had tried to make her workshop comply with factory regulations (no, she said). Smolenak, an insurance industry veteran, had assembled her husband, Jeff (a nurse), their parents, and their school-age children, who help run the business, to greet the Washington caravan, led by McMahon in a black SUV.
Smolenak was as upbeat as her visitor: "I can pay the rent, I can pay for supplies. In 12 weeks, that is phenomenal. But I am not going to tell you we are making tons of money." She hopes users, who have so far included bachelorette parties, hobbyists, neighborhood groups and fund-raising events, will surge after school starts.
McMahon, who has run for the U.S. Senate in Connecticut, says part of the job is collecting business owners to hear "what their issues are." Last year, she told me, it was taxes — so Trump cut those, boosting profits.
"Now, the issue I hear is workforce," McMahon added. America's small businesses complain that they are running out of people to hire. Fewer young people are going to work; more older people are retiring.
Around 750,000 immigrants became U.S. citizens last year, down from a peak of 1.05 million in 2010. The government awarded 180,000 H-1 skilled-worker visas in fiscal 2017, down slightly from 2016. Advocates say immigration applications have risen, but approvals have slowed since Trump was elected after demanding "a pause" in immigration.
"Technology, carpenters, welders — around the country, we have over six million jobs available. We don't have people to fill these jobs," McMahon said at Hammer & Stain. What should the government do? She noted Trump invited the bosses of LockheedMartin, Walmart, FedEx and other big firms to the White House last month to promote apprenticeship and skills training.
McMahon also said the administration also wants to bring in more skilled immigrants.
That policy could make it tougher for U.S. workers, said economist Adam Ozimek of Moody's Economy.com in West Chester. He recommends that the U.S. bring in more unskilled workers for laboring jobs while encouraging employers to train Americans for the better-paid positions.
I asked about SBA's reputation for funding franchisees of wealthy corporations. The SBA backed 150 loans to Dunkin' Donuts operators in Philadelphia and the area from 1991 to 2016. Also seven for Ramada Inns, six for Holiday Inns, and others for more chain hotels. Do these loans represent a way for new Americans to become owners, or do they amount to a subsidy to a highly profitable company that ought to be able to arrange its own private financing without involving taxpayers?
"We went that route" with national franchise companies, but have shifted procedures to more stringently focus on businesses that benefit their owners, not only a corporate parent, said McMahon.
SBA guarantees have also become popular among federal contractors who set up their own small firms to do government work. SBA's inspector general from 2015 to 2017 reported busting more than 30 contractors for ripping off more than $10 million through an SBA program, Small Business Innovation Research.
Among those convicted was Lehigh University engineering professor Yujie Ding, sentenced last year to a year and a day in federal prison for lying to win a $300,000 NASA research contract with SBA backing. Ding told the government he would use public funds to pay scientists to do the research in his company lab; instead, he had a grad student do the work in a Lehigh lab, illegally boosting his profits.
"We are a Band-Aid. The agencies needs to firm up these programs," Jim Ives, assistant inspector general for investigations at NASA, told me. He urged SBA and the agencies who hire SBA-backed contractors to "get folks out to visit [contractor workplaces]. Review their financial records. It's not brain surgery. It's keeping an eye on what's going on." He added, "The huge majority of recipients are above board. But where there's money, there's fraud."
McMahon told me she's "very grateful" for SBA's own inspector general office, which patrols borrowers and reviews procedures: "They are thorough, and they are fair."
If the Trump administration needs an ambassador with the personal touch, McMahon fits the bill. Invited by SBA to watch her greet the Smolenaks and ask questions, I had introduced myself to McMahon as an "enemy of the people," as Trump tells his cheering supporters at rallies.
"Oh, no, you're not," McMahon told me, emphasizing each word, briefly taking my hand.
Not that she was dependent on my goodwill: Just to make sure her message got out, in her words, she also submitted a column crediting Trump with small business prosperity to my colleagues on the Editorial Board, who posted it. She rode off in the black SUV to her cheesesteak meeting, from which the media were excluded, than headed to Center City to go on talk-radio host Rich Zeoli's show, down the street from our newsroom. And on the road again.