Advocating for (not so) Small Business

Is SBA's Advocacy Doing the Bidding of Big Business?

For many Americans, the term "small business" no doubt conjures up images of mom-and-pop grocery stores, garage-based Internet start-ups and the like. And while such business are out there creating jobs and inventing tomorrow's commerce, Washington has a different vision of what qualifies a business as "small." where is the distinction between the Main Street definition of "small business" and the Washington version of the term clearer than at the Small Business Administration. Now in its 60th year, the SBA has long been a source of assistance for small business, offering loans and a variety of other supports. In the mid-1970s, Congress extended the agency's reach by creating the SBA Office of Advocacy, a largely independent, taxpayer-funded advocacy organization within the SBA. Its stated mission is to "advance the views and concerns of small business before Congress, the White House, the federal agencies, the federal courts and state policy makers."

In actual practice, the Office of Advocacy is indeed independent of the rest of the SBA, and the rest of the Administration, for that matter. On the SBA's organizational chart, it literally floats next to the Office of the SBA Administrator, disconnected from all other offices, and with no lines of supervision. But according to twin reports published in January 2013, one from CPR and another from the Center for Effective Government, the Office of Advocacy is anything but independent in terms of its relationship with the special interest organizations lobbying on behalf of big business.

The CPR white paper, by Member Scholar Sidney Shapiro and Policy Analyst James Goodwin, documents the Advocacy office's pattern of hostility to proposed regulations that protect Americans from a variety of environmental, health, workplace, and other hazards. Indeed, the Advocacy office, with help from anti-regulatory forces on Capitol Hill, has become a major player in the regulatory process, deploying a variety of procedural devices to slow and weaken needed safeguards.

According to the authors, 

The Office exercises…authority by superintending agency compliance with an expanding universe of analytical and procedural requirements—imposed by a steady stream of statutes and executive orders issued during the past three decades—that purportedly seek to ensure that agencies account for small business interests in their regulatory decision-making. Controversial rules can quickly become mired in this procedural muck, and an agency’s failure to carry out every last required analysis with sufficient detail and documentation can spell doom for even the most important safeguards. This system provides the Office of Advocacy with a powerful lever for slowing down rules or dictating their substance.

Never Enough Data

So, for example, in its comments on a 2012 U.S. Fish & Wildlife Service proposal to protect critical habitats for an endangered species, the Advocacy office criticized the agency on grounds that it had not sufficiently complied with guidance from the Advocacy office on the rigor of evidence needed to support a finding that the rule would not have a large impact on small businesses. This finding is critical, because, by law, it would exempt the rule from several resource-intensive analyses on the rule’s impact on small businesses. In its guidance, the Advocacy office enunciated an "excessively strict interpretation" of the evidence needed to support the exemption finding, which it uses to push agencies to undertake the additional analyses even when they would not otherwise be required by law. Not only do these analyses delay rulemakings by several months; they also give the Advocacy office leverage to seek changes that will weaken the rule’s requirements.

Even when agencies conduct such analyses on their own initiative, the Advocacy office typically finds fault, asserting that the analyses are not sufficiently comprehensive or detailed. That was the case with the Advocacy office's review of a Food & Drug Administration proposal on dietary information labeling requirements for chain restaurants. As the authors write, "Invariably, the faults that the Office of Advocacy asserts are aimed either at increasing the procedural burdens...and thus adding more delay to a rulemaking, or at weakening agency rules outright."

Shapiro and Goodwin compare the Advocacy office to the White House Office of Information and Regulatory Affairs, because it functions as an anti-regulatory force within the regulatory process. "[I]n actual practice," they write, "both offices serve to politicize the process, funneling special interest pressure into agency rulemakings, even though such interests have already had ample opportunity to comment on proposed regulations. Despite these similarities, however, OIRA receives the bulk of attention from policymakers, the media, and the public." 

Whose Interests?

Moreover, the Advocacy office does much of this work by parroting the rhetoric and representing the interests of businesses that defy the description of "small." In some business sectors, SBA's Advocacy office says, it works on behalf of businesses with more than 1,000 employees — no mom and pop entities these. For example, the Advocacy office considers a petroleum refinery to be "small" if it has fewer than 1,500 workers. Similarly, it views a chemical plant as "small" if it has fewer than 1,000 workers. Such a designation might make sense from the standpoint of breaking into the oil business, but not in terms of needing help from a government office to represent its interests in Washington. Moreover, such "small" businesses can be every bit as destructive to the environment, and every bit as hazardous for workers, as their larger and wealthier cousins. In short, Shapiro and Goodwin suggest, such enterprises neither need nor deserve taxpayer-funded representation from the Advocacy office, particularly if it is intended to help them escape environmental, health, and safety safeguards.

Indeed, a report from the Center for Effective Government identifies specific instances in which the Office of Advocacy worked at the behest of large businesses. In one example documented in emails obtained by FOIA request, Advocacy worked closely with the American Chemistry Council (ACC), a trade group dominated by large chemical companies, to try to derail EPA’s work on addressing the human harms of hexavalent chromium. Advocacy sent a letter to EPA ostensibly expressing concerns on behalf of small businesses, using text provided to Advocacy by the ACC. 

The CPR report concludes with a series of recommendations aimed at Congress, the President and the Office of Advocacy itself. They include:

• Congress should amend the Office of Advocacy’s authorizing statutes to focus on promoting small business “competitiveness” instead of on reducing regulatory impacts or burdens.
• Congress should provide the SBA with additional legal authorities to establish new subsidy programs that affirmatively assist small businesses to meet effective regulatory standards without undermining their competitiveness.
• Congress should establish and fully fund a network of small business regulatory compliance assistance offices.
• The Office of Advocacy should develop new guidance that helps agencies better address small business concerns in rulemakings by working toward “win-win” regulatory solutions—that is, rule changes that ensure small business competitiveness while still promoting public health and safety.
• The President should revoke Executive Order 13272, which empowers the Office of Advocacy to work with OIRA to interfere in agency rules.
• Congress should revise the Office of Advocacy’s small business size standards so that they (1) focus on truly small businesses (i.e., those with 20 or fewer employees) and (2) prevent the Advocacy office from working on behalf of all firms, regardless of size, that work in industrial sectors that pose a high risk to public health and safety.

For more on the SBA Office of Advocacy:

• Read the CPR White Paper, Distorting the Interests of Small Business: How the Small Business Administration Office of Advocacy's Politicization of Small Business Concerns Undermines Public Health and Safety, CPR White Paper #1302, published January 2013. Read the news release and the day-of-release blog post.
  
• Read Sidney Shapiro's article on Huffington Post.
• Read Rena Steinzor's March 14, 2013 testimony before the House Committee on Small Business, Subcommittee on Investigations, Oversight and Regulations, about the Office of Advocacy's role in regulation.
• Read the Center for Effective Government report, Small Business, Public Health, and Scientific Integrity: Whose Interests Does the Office of Advocacy at the Small Business Administration Serve?, published January 2013.