(FORTUNE Small Business) – Want to see steam rise? Ask a small business owner about the cost of health insurance. You'll get an earful. Insurers charge small outfits the highest rates for the least coverage. And with that hefty price tag, small businesses are hard-pressed to give workers insurance. The result? Small company employees and their families make up a whopping 60% of the 40 million Americans without health coverage.

You would think that health insurance would have topped Congress' small business agenda this election year. No way. Nor did it appear on the wish list of any small business group. In fact, these groups eagerly send members to Congress to testify against proposals--such as buying cooperatives or patients' rights--to change insurers' behavior. This year, the lobbying groups spent their political capital battling the notorious "death tax," which affects less than one-half of 1% of the nation's six million small firms in any given year (see "Campaign 2000," page 40).

Is official Washington deaf? Are small business lobbyists out of touch? Hardly. The National Federation of Independent Business (NFIB), for instance, regularly surveys its 600,000 dues-paying members and has reported for years that health insurance tops their list of complaints. And the NFIB operates a well-oiled political machine that can generate thousands of cards and letters at a moment's notice. For decades, the cry of "small business needs help" has found a sympathetic ear in Washington (see "The Landmarks," page 62).

But what kind of help does small business want? Its plea on health insurance is the same as on many other issues: Get government off our backs. Translation: No mandates! Let individuals take care of the problem. It's odd, given the diversity of small ventures, that their interests are so often represented as identical. Maybe it's a cultural thing. Small business owners see themselves as the last of the rugged individualists. And the media loves to portray them that way, as the people whose spark and ingenuity give America its economic oomph.

This attitude makes the heirs of Horatio Alger extremely hostile to Washington. They're hardly alone. Most Americans have deeply ambivalent feelings about the role of government in their lives, as Garry Wills details in his aptly named book A Necessary Evil. But small businesses have particularly good reason for skepticism. Government regulators too often ignore the needs of the little guy, who ends up mired in the alphabet soup of agencies seeking safer workplaces or cleaner streams. Legal fees spent fighting a dubious lawsuit on product safety--fees a big corporation shrugs off--can put a small firm over the edge. Still, as Wills argues, the popular tradition that asks us to "love ourselves by hating government" is based on myths and is often self-destructive.

The relentless antigovernment attitude of the entrepreneurial class masks a special paradox, especially when it comes to money. Do biotech startups really want the National Institutes of Health (NIH) to slash those Small Business Innovation Research grants? Do Linux-loving software rebels really want the antitrust guys to lay off Microsoft? How about those Rust Belt widget makers who still have a plant to go to, thanks to the feds' technology modernization program?

Then there's the granddaddy of all such support systems: the Small Business Administration (SBA). Sure, venture capitalists and Wall Street have thrown billions of dollars at anyone with a high-growth gleam in his or her eye. But the vast majority of small businesses still have to knock on the banker's door to fund their inventories or make payroll. Getting the loan officer to ante up isn't always easy. That's where the SBA comes in. The agency's longtime loan program was unusually active in the 1990s. It backed 370,000 loans for nearly $80 billion during the Clinton years--more than the total in the prior 40 years. The Administration says that the expansion was due to its aggressive outreach to inner cities, depressed rural areas, and other excluded groups. In one way, it's a story as old as Tammany Hall. Many Irish- and Italian-surnamed firms got their start when a friendly ward politician steered them a contract. This tradition's modern guise--preference for minority and women-owned firms--is as American as apple pie.

I can hear the government bashers complaining: Haven't we gotten past these antimarket initiatives that try to pick winners and losers? What about the gazelles of the New Economy, the Amgens, Ciscos, and Qualcomms, which double revenues (and jobs) every year? What role has government played in their success? Plenty, as it turns out. Al Gore may not have invented the Internet, but the government sure did. Every piece of research leading up to its initial deployment was bought and paid for by the Pentagon. Ditto the NIH bucks that led to so many biotech firms. Even state governments, trying for a piece of the Silicon pie, fund high-tech industrial parks next to universities (which also thrive on public support). A lot of this taxpayer money, of course, leads nowhere. Does that mean it's a waste? Don't forget that venture capitalists score on just three of ten investments too.

Not that there isn't waste. The SBA itself is a political creature, not always tied to the merit system. In some cases, the SBA loan, a Congressman's press release, and the campaign funding letter follow each other as night follows day.

But the bottom line is that the small companies--like their corporate brethren--are inextricably linked with government in a thousand ways that both help and hurt. Owners and lobbyists ought to spend a little time figuring out which is which before constructing their political agendas. When it comes to a collective problem such as affordable health insurance, the government may be the only friend they have.

Goozner, who covered Washington for the Chicago Tribune, is a professor of business journalism at New York University.