… the Obama administration would Fannie-and-Freddie-ize America’s small businesses by juicing up the Small Business Administration, even though one government report after another has found that the SBA’s risk-assessment capabilities rank just above those of the party-favor heir who blew $127 million in Vegas. (The agency’s inspector general found that about $130 million in loans approved between 2000 and 2005 “were not properly reviewed.”)

There are a number of reasons why small businesses aren’t expanding, but you can boil most of these down to simple risk aversion. Banks are going through a massive deleveraging, and entrepreneurs are hesitant to expand until some of the uncertainty surrounding the administration’s tax-and-spend-and-regulate agenda clears up. Giving money to the SBA is a way to do an end-run around this risk aversion — you are essentially declaring it unhealthy, asking businesses and banks to gamble, and offering a federal backstop if things go wrong. This, along with cheap money, is the recipe that gave us the housing bubble. It is not a folly we should be eager to repeat.

There is not much Obama can do now about the banking system’s aversion to lending — that ship has sailed — but he could clear up a lot of uncertainty by dropping his health-care and cap-and-trade and soak-the-rich policies, and focusing entirely on realistic solutions to the deficit problem. I am increasingly of the view that the nation’s fiscal challenges are so large that meeting them will take the entire balance of at least one president’s political capital. If Obama wants to be that president, he can’t have all these other things he wants.