(FORTUNE Small Business) – You've probably noticed that, after three lean years, a self-sustaining economic expansion has finally begun. But you may not have noticed an even more dramatic change: Over the past few years small businesses have played an increasingly pivotal economic role. In 2000 privately held companies--smaller businesses mostly--accounted for less than half of the country's total operating profits. Today that number is closer to two-thirds. Small businesses weathered the downturn much better than their larger counterparts, and they are leading the way into the budding expansion. Now it's up to policymakers to design economic policies that recognize that role.

Look at the job market, where the economy's recent revival is most obvious. After a prolonged dry period during which 2% of the nation's jobs were lost, the economy has created more than 300,000 jobs since the summer. And they have come from small business. Large corporations have continued to slough off workers at a torrid pace--more than 1.2 million in 2003. But the number of self-employed--representing the smallest of small businesses--has surged; the self-employed now account for 7% of all jobs, the highest that figure has risen since the mid-1990s. In short, the employment picture has brightened largely because American workers, tired of looking for nonexistent jobs, started creating their own.

Searching for signs of confidence? Gaze no further than the small-business world. The number of new incorporations shot up in 2003. The number of limited-liability corporations registered in Delaware--long popular for its incorporation-friendly state laws--is up 30% in the past year. Incorporation represents a commitment; only dynamic businesses serious about future growth will go through the effort and expense. Meanwhile, the income of proprietors--largely the profits of unincorporated smaller enterprises--is experiencing near-double-digit growth. Proprietors' income accounts for 9% of all income, the highest share they have held in 40 years.

Perhaps it shouldn't be surprising that small businesses have bounced back so quickly--they weren't as affected by the downturn in the first place. In part that's because they largely cater to the resilient U.S. consumer. Almost 75% of sales made by small businesses--defined by most government data-gatherers as companies with fewer than 500 employees--are direct to consumers, compared with less than 60% of large-business sales. So while the number of bankruptcies of publicly traded companies hit record highs in recent years, the bankruptcy rate of smaller private firms barely budged.

Still, policymakers seem unaware of small-business concerns, continuing to focus on providing tax breaks and other perks to major corporations. Entrepreneurs have more-limited resources and thus rely more heavily on the quality of the nation's workforce--they can't just hop overseas for their labor needs. If they want to help, policymakers should work on building more and better schools and colleges and increasing financial aid for needy students. They should also improve the credit opportunities for growing small businesses, many of which have funding needs that are too large for traditional bank lenders yet too small for the capital markets. They end up scrambling to piece together funds on exorbitant terms from providers of mezzanine loans and boutique equity investments. The government can and should encourage those midlevel credit opportunities. Small business has done the economic heavy lifting in this country. Now it's time for the country to lend a hand.