[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 102-000 deg.
SMALL BUSINESS ADVOCACY IMPROVEMENT ACT OF 2003
=======================================================================
HEARING
before the
SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT & GOVERNMENT PROGRAMS
and the
SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC, APRIL 1, 2003
__________
Serial No. 108-9
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
______
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COMMITTEE ON SMALL BUSINESS
DONALD A. MANZULLO, Illinois, Chairman
ROSCOE BARTLETT, Maryland, Vice NYDIA VELAZQUEZ, New York
Chairman JUANITA MILLENDER-McDONALD,
SUE KELLY, New York California
STEVE CHABOT, Ohio TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina DONNA CHRISTENSEN, Virgin Islands
SAM GRAVES, Missouri DANNY DAVIS, Illinois
EDWARD SCHROCK, Virginia CHARLES GONZALEZ, Texas
TODD AKIN, Missouri GRACE NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia ANIBAL ACEVDEO-VILA, Puerto Rico
BILL SHUSTER, Pennsylvania ED CASE, Haiwaii
MARILYN MUSGRAVE, Colorado MADELEINE BORDALLO, Guam
TRENT FRANKS, Arizona DENISE MAJETTE, Georgia
JIM GERLACH, Pennsylvania JIM MARSHALL, Georgia
JEB BRADLEY, New Hampshire MICHAEL RICHAUD, Maine
BOB BEAUPREZ, Colorado LINDA SANCHEZ, California
CHRIS CHOCOLA, Indiana ENI FALEOMAVAEGA, American Samoa
STEVE KING, Iowa BRAD MILLER, North Carolina
THADDEUS McCOTTER, Michigan
J. Matthew Szymanski, Chief of Staff and Chief Counsel
Phil Eskeland, Policy Director
Michael Day, Minority Staff Director
Subcommittee on Workforce, Empowerment, and Government Programs
TODD AKIN, Missouri, Chairman
JIM DeMINT, South Carolina TOM UDALL, New Mexico, Ranking
SHELLEY MOORE CAPITO, West Virginia Democrat
JEB BRADLEY, New Hampshire DANNY DAVIS, Illinois
CHRIS CHOCOLA, Indiana CHARLES GONZALEZ, Texas
STEVE KING, Iowa GRACE NAPOLITANO, California
THADDEUS McCOTTER, Michigan ED CASE, Haiwaii
MADELINE BORDALLO, Guam
Thomas Bezas, Professional Staff Member
Subcommittee on Regulatory Reform and Oversight
ED SCHROCK, Virginia, Chairman
ROSCOE BARTLETT, Maryland CHARLES GONZALEZ, Texas, Ranking
SUE KELLY, New York Democrat
TRENT FRANKS, Arizona DONNA CHRISTENSEN, Virgin Islands
JEB BRADLEY, New Hampshire ENI FALEOMAVAEGA, American Samoa
STEVE KING, Iowa ANIBAL ACEVEDO-VILA, Puerto Rico
THADDEUS McCOTTER, Michigan ED CASE, Haiwaii
DENISE MAJETTE, Georgia
Rosario Palmieri, Senior Professional Staff Member and Subcommittee
Coordinator
(ii)
C O N T E N T S
----------
Witnesses
Page
Sullivan, Hon. Thomas M., Chief Counsel, SBA, Office of Advocacy. 3
Coratolo, Giovanni, U.S. Chamber of Commerce..................... 10
Neece, Allen, Small Business Legislative Council................. 12
Langer, Andrew, National Federation of Independent Businesses.... 13
Appendix
Opening statements:
Akin, Hon. W. Todd........................................... 23
Schrock, Hon. Ed............................................. 26
Prepared statements:
Sullivan, Thomas M........................................... 27
Coratolo, Giovanni........................................... 35
Neece, Allen................................................. 41
Langer, Andrew............................................... 44
THE SMALL BUSINESS ADMINISTRATION OFFICE OF ADVOCACY
THE SMALL BUSINESS ADVOCACY IMPROVEMENT ACT OF 2003
Tuesday, April 1, 2003
House of Representatives,
Committee on Small Business
Subcommittee on Workforce, Empowerment and Government
Programs
Subcommittee on Regulatory Reform and Oversight
Washington, D.C.
The Subcommittees met, pursuant to call, at 2:01 p.m. in
Room 2360, Rayburn House Office Building, Hon. W. Todd Akin,
and Edward Schrock, [chairmen of the Subcommittees] presiding.
Chairman Akin. The Committee will come to order.
Before we begin, I would like to say thanks to our
different participants here, different members, and our guests,
and I guess perhaps something that is on all of our minds, to
recall the good people who are fighting for all of our freedom
even today so that we can be here and deliberate and be
involved in this great experiment in self-government that we
all take part of.
The Office of Advocacy is the voice for small business in
government. And through the efforts of the Chief Counsel, that
is current Mr. Tom Sullivan, who is with us, the views, and
concerns, and interests of small businesses are advanced before
Congress, the White House, federal regulatory agencies, and
federal courts. The Office of Advocacy performs an invaluable
service, saving small business literally millions of dollars
every year.
In an effort to increase the effectiveness of the Office of
Advocacy, Mr. Schrock and I will be introducing the ``Small
Business Advocacy Improvement Act of 2003''. This continues the
effort that was begun some years ago by Missouri's Senator Kit
Bond, and sometimes make reference to how a senior member he
is, which he does not appreciate, and more recently by our
Chairman Mr. Manzullo.
The legislation proposed to establish an independent line
item for the Office of Advocacy in order to help establish the
office's independence; it enables the President to appoint the
office's General Counsel; and limits the Chief Counsel to serve
only as long as the terms of the President by whom he or she
was appointed.
I look forward to the testimony of Mr. Sullivan and the
other witnesses as we seek to improve the ability of the Office
of Advocacy to support American small business, which the job
engine of the U.S. economy.
It is a cheerful topic that we are embarking on today just
because, Mr. Sullivan, of the fantastic reputation that your
office has already achieved, and we are very thankful for that.
With that, I would like to recognize my minority member,
Mr. Gonzalez, for comments.
Mr. Gonzalez. Thank you very much, Mr. Chairman. I do have
a prepared statement, but in the interest of time and getting
right to the testimony and the questions that will be
following, I guess I wish just to express my own thanks and
appreciation for Mr. Sullivan's presence here and the fine work
that he is doing, and of course, the members of the two
respective Committees that have the appropriate jurisdiction.
The question really comes down to independence, how do we
achieve it. I think there is going to be some real basic
questions that I know I would like to pose the counsel and to
the other witnesses how we can achieve it in such a way that
the best interests of all parties are actually served.
But in the final analysis, it really is in the best
interest of small businesses throughout this country which
happens to be in the best interest of this country.
Again, thank you very much, Mr. Chairman.
Chairman Akin. Thank you. It is a pleasure.
And also, I would like to recognize my distinguished
colleague, Mr. Schrock.
Chairman Schrock. Well, thank you, Mr. Akin. I think I will
follow on the heels on Mr. Gonzalez. I had a very, very, very
long opening statement, but you are not going to hear it.
I want to welcome Tom Sullivan. I noticed you said current
Chief Counsel for Advocacy. That indicates he is going away. I
hope that is not the case. So we are glad to have you here, and
I am sure we will have some interesting questions for you
later. Thank you.
Chairman Akin. Thank you, Mr. Schrock.
And now our Chief Counsel of the Office of Advocacy. I had
the pleasure of meeting Mr. Sullivan several weeks ago, and he
had the pleasure of meeting my former home, the Missouri State
Legislature, early this year. He recently testified there
before the legislature in regard to our federal Reg Flex, which
I happily support. And so for your comments, Mr. Sullivan.
Mr. Sullivan. Thank you, Chairman Akin and Chairman Schrock
and Mr. Gonzalez.
In the interest of time, I would ask that I submit my
formal statement for the hearing record, but then be able to
summarize briefly before you this afternoon.
Chairman Akin. Thank you. I am sure--we have gotten word
that there is a vote at about three o'clock, so we are eager to
keep things moving along, and I certainly appreciate the brief
comments of my colleagues here.
Mr. Sullivan. Actually, I would like to summarize the
statement, if I could.
Chairman Akin. Please do.
Mr. Sullivan. Thank you, Mr. Chairman.
I would like to be brief; not that brief.
[Laughter.]
Mr. Sullivan. Just over a year ago--
Chairman Akin. He was ready for questions.
[Laughter.]
STATEMENT OF THE HONORABLE THOMAS M. SULLIVAN, Chief Counsel,
SMALL BUSINESS ADMINISTRATION, OFFICE OF ADVOCACY
Mr. Sullivan. Thank you, Mr. Chairman.
Just over a year ago I appeared before the Full House
Committee to lend my support to similar legislation of what is
going to be discussed today. It is still my belief that a
budget line item is the best and most efficient way to ensure
that the Office of Advocacy maintains its independence well
beyond my tenure as Chief Counsel, and ensure that government
continues to be accountable to small business through
compliance with the Regulatory Flexibility Act, the Small
Business Regulatory Enforcement Act, and President Bush's
Executive Order 13-272.
I am borrowing from last year's testimony when I say that
the two bedrock principles that underline the Office of
Advocacy's ability to represent small businesses effectively
are independence and flexibility.
Advocacy's accomplishments and challenges are documented in
our annual report to Congress that was completed just about a
month ago, and I would also like to submit a copy of that
annual report for this hearing record.
Chairman Akin. It will be submitted.
Mr. Sullivan. Our flexibility and independence have allowed
us unprecedented access to rules in the earliest stages of the
rulemaking process. This result of early intervention is often
the delay, removal or alteration of otherwise unnecessary or
burdensome regulations.
Our regulatory intervention efforts resulted in a cost
savings of $21 billion in fiscal year 2002 alone.
Last night when I was cramming for this afternoon's hearing
I noticed that my predecessor, Jerry Glover, came before the
Committee last year, and explained the return on investment of
the Office of Advocacy by explaining that in Jerry Glover's
tenure as Chief Counsel for every dollar spent they recognized
a return of $800.
I am pleased to report that last year's cost savings of $21
billion in foregone regulatory costs breakdown to a return on
investment that for every dollar spent running our office, we
saw a return of $2,712.
Chairman Akin. Do you sell stocks?
[Laughter.]
Mr. Sullivan. If you pay taxes, then you are buying what we
do.
One year ago President Bush stood before hundreds of our
countries most successful women entrepreneurs just down the
street at the Reagan International Center. He rolled out his
small business plan. He committed to removing regulatory
barriers that stifle job growth. The President is counting on
my office to lead that effort, and the cost savings that we
have already realized are a good start.
Focusing our efforts in Washington is not enough. As part
of our mandate to make legislative and policy proposals for
eliminating excess or unnecessary regulations on small
business, the Office of Advocacy has started a nationwide
initiative to pursue implementation of regulatory flexibility
at the state level.
And as the Chair recognized, I have traveled to Jefferson
City, Missouri, and am working with state legislator in
Missouri and around the country so that they can realize the
same types of cost savings that my office has realized here in
Washington, D.C.
Getting down to the budget process, really that is the
focus of today's hearing, a conundrum exists, and that that
conundrum may threaten the future of advocacy and the important
role that it plays.
Under the current budget process the Chief Counsel must
rely on budget decisions of the SBA administrator. Now, this
Administrator, Hector Baretto, is one of the Office of
Advocacy's strongest supporters. His budget decision reflect
the President's priorities and the critical role that our
office helps in fighting for small business.
However, a day may come when future SBA administrators and
Chief Counsels do not get along as well, and the current budget
process is a dangerous one because the Office of Advocacy's
budget is too easily pillaged when administration priorities
change.
A budget line item for the Office of Advocacy would
certainly help address the problems in that conundrum and a
line item would provide assurance to small entities that they
can continue to count on the Office of Advocacy as a strong and
independent voice on their behalf.
That concludes my summary, and I am happy to answer any
questions that the Subcommittees may have.[The statement of Mr.
Sullivan follows:]
Chairman Akin. I appreciate your testimony, and I think
that is really the question before us is a question of how do
we maintain that independence and somebody that is out there
trying to make sure that as we do our rules and regulations
that we are doing it in a way that does not create just tangles
of red tape and everything.
Along those lines, I guess my question would be, my
understanding is is that your work is with new pieces of
legislation and new rules and regulations that are being
written as opposed to things that are already existing, and
that the ombudsman works more on the stuff that is already
here.
Is that something where we really should be combining two
functions of government together, or is there enough work to
keep both of you busy? And what do you see in terms of
structure there? What is going to be best for our small
businesses?
Mr. Sullivan. The Chairman correctly identifies the
respective roles of my office and the Office of Ombudsman.
Basically, my office is the before, working with agencies to
make sure they treat small business fairly before the finalize
rules and regulations. The Office of Ombudsman looks at what
happens once the ink is dry, these rules are being enforced,
and want to bring to the head of agencies' attention any unfair
treatment in the enforcement of those rules and regulations.
I think you also correctly identify that there is plenty of
work for both of our offices to do, but the distinction that is
before the Committee now is our office's independence and
merging the two present the same type of conundrum where the
ombudsman's office reports directly to the SBA administrator,
and does officially represent administration policy and how the
rules and regulations are being enforced.
Our office, to the contrary, can only speak on behalf of
small business, and we feel as though that independence works
best with the before and after scenario that works currently.
I do need to add though that we have enhanced our ability
to look at rules that are already on the books. We entered into
a formal arrangement with the head of the White House
Regulatory Office, John Graham, and have looked at rules that
are on the books, and are now working with the agencies to look
at over 267 rules, regulations and guidance documents that
should be revised; 30 of which should be revised because of
their specific impact on small business.
And so we have gone beyond simply looking at the rules in
the pipeline, and are looking at rules that are on the books
that should be removed because small businesses are treated
unfairly.
Chairman Akin. That is interesting. I did not know that you
had made that additional progress, and thank you.
Just one other quick question, and then I need to allow Mr.
Udall to ask a question, if you have a question, or Mr.
Gonzalez.
Just roughly how many employees do you have and the overall
size of your operation?
Mr. Sullivan. Right now we have slots for 47 people in my
office. That includes 37 officials in Washington, D.C. that are
broken down largely in a regulatory arena, they are attorneys,
and a research arena, who are economists. There are 10
throughout the country. In your home state, for instance,
Wendall Bailey, we are honored to have Wendall Bailey as our
regional advocate out in Missouri. And we have in each of the
10 regions, we do have a slot for regional advocates, and they
are intended to be the eyes and ears for our office to help us
prioritize on what issues are most important to small business.
Chairman Akin. Thank you very much.
Mr. Udall, did you have a question? Do you want to go?
Mr. Udall. Yes. And Mr. Chairman, could I put my statement
in the record, my opening statement.
Chairman Akin. It will be submitted.
Mr. Udall. Thank you very much.
And my question has to do with the amicus curiae authority
that you have in the disputes that are going on between the
Department of Justice and your office. I mean, how can we make
sure that you are really an independent voice in the courts for
small business? What is your opinion on that?
Mr. Sullivan. My opinion is that from the budget process
that is one way to bolster our independence. When it comes to
better independence in the courts, I think that that is a
discussion that we will continue to have with the Subcommittees
and the full Committees.
There have been legislative concepts in the past that view
giving our office more authority in the legal arena, and we are
excited about that, but focusing from a legislative perspective
now on the budget line item approach, and working with an
executive order that does not get us to court, but does give
more strength to the operations of our office.
So the simple answer to Congressman Udall is we would like
to work with the Committee to look at those options to bolster
our independence in addition to bolstering the independence
from a budget perspective, which is primarily the focus of my
testimony this afternoon.
Mr. Udall. But at this point you are not supporting any
particular approach with regard to the courts?
Mr. Sullivan. That is accurate. We have not looked at
legislation being drafted in the 108th Congress and saying this
will bolster our legal authority from amicus curiae.
Mr. Udall. Thank you, Mr. Chairman.
Chairman Akin. Thank you. Mr. Schrock.
Chairman Schrock. Thank you, Mr. Chairman.
Tom, thank you for coming today. It is good to see you
here. It is also good to see Giovanni Coratolo from the
Chamber, and Andrew Langer from NFIB who were three
participants in a round table I did a few weeks ago that I
thought was very beneficial, so I am glad you are all here
today participating.
Let me just give you a quick story. I have been meeting
with some small business people. I met with a businesswoman
from Virginia Beach that I have known for quite a long time.
And you talk about fairness, two things, she mentioned a lot of
things, but two of them that got my attention was that big
business, if they have business lunches, they are allowed to
write off 100 percent of what they spend. Small businesses are
allowed to only write off 50 percent. She does not get that, I
do not get that either.
She also said that OSHA showed up on her doorstep a couple
of weeks ago, and walked in and said that they wanted to see a
particular document, and they said, gosh, the lady that does
that went to a dental appointment, she will be back in 45
minutes. They said, we do not care, we want to see it now or
else.
So in the 45 minutes they tore the office apart, could not
find it. This other lady walked in and found it in a heartbeat.
That kind of stuff is absolute nonsense, and somehow we
have got to try to put a stop to that. And we just hear stories
like that over and over again, and I continue to hear those
every time I meet with somebody.
Tom, some would argue that an independent line item might
make your office an easy target for retributions. Mr. Udall, I
think, kind of alluded to that.
Do you think that is true? How would you respond to that?
Mr. Sullivan. I would respond by clarifying to the
Subcommittees that a line item absolutely makes our office more
of a target, and that is a deliberate move, I think, on behalf
of the Subcommittees and the full Committees.
And the reason I say that it makes us more of a target, it
I mean it in a positive way because the way our--
Chairman Schrock. You scared me there for a minute.
[Laughter.[
Mr. Sullivan. I mean from a positive bulls eye and the
excitement that you get when you hit the cork playing darts,
not the other targets that we talk about.
I point that out because our office's legislative mandate,
our priorities that we have to take in law say that we have to
take the direction directly from small business. No matter what
we do in my office small business has to ask us to get
involved. And by making our budget process subjected more
directly to the review by this Subcommittee, by the review of
the Appropriations Committee, it makes us more directly
responsible to the small business community.
Chairman Schrock. Okay. So if we come to you, it is
different than when a small business does? A small business
comes to me like I just came to you with those two things. It
is better from Mrs. Wood to come to you than it is for me?
Mr. Sullivan. Mr. Schrock, we actually think that it is
best both ways.
Chairman Schrock. Okay.
Mr. Sullivan. We consider our clients small business, bit I
mean that in an expansive rather than a restrictive manner,
that the Committees in the House and the Senate that represent
small business. Every member of Congress who goes home will go
home in a few weeks on recess, and visit small business, and
brings back to my office things that we should be involved in.
They are absolutely the client base that we respond to as well
as the folks that you mentioned: Allen Neece, Andrew Langer and
Giovanni Coratolo.
I am honored to consider them friends and colleagues, and I
consider it a compliment that I know all of them personally
because we insist on that interaction to give my office
direction.
Chairman Schrock. Great. What other tools do you think are
necessary to make you and your office more effective?
Mr. Sullivan. In the last year since I have had the honor
of being in this position, the biggest bang for the buck that
we have gotten is the President's leadership.
I mean, for the President to announce his small business
plan and turn directly to the Office of Advocacy and say, ``I
will give you an executive order that will help small
business?''
And then in August after going to Waco, Texas, signing that
executive order and telling our office that it is not enough to
criticize agencies, but you have to get into agencies and
actually train them on how to do a better job considering their
impact on small business. That tool, that pulpit for agencies
to do a better job, because that is their boss telling them to
do that in the executive order, has been tremendously effective
and will continue to be effective.
The other effective tool in our arsenal to achieve
regulatory cost savings for small business is all of you. And
when the President tells his agencies to report how they are
going to do a better job considering small business, and they
have responsibility of filing those reports with us and with
you, and they do not, sometimes the oversight functions that
you all are engaged with loosen that knot, so to speak, and
actually get better responses.
So I by all means view this as a three-pronged partnership
with the President, my office, and this Committee to make sure
that we are all going to try to take steps to help small
business.
So I would say that the constant interaction we have with
this Committee and the wonderful staff members who all of you
have have is a tremendous tool, and I am going to do everything
I can to keep that interaction alive and working.
Chairman Schrock. And I hope you will not hesitate to come
to us at any time.
Thank you, Mr. Chairman.
Chairman Akin. Thank you, Mr. Schrock.
And Mr. Gonzalez.
Mr. Gonzalez. Thank you very much, Mr. Chairman.
Mr. Sullivan, you have 47 people on the staff; is that
right? Of those 47, how many are attorneys?
Mr. Sullivan. I have the--
Mr. Gonzalez. Formal legal training of some sort.
Mr. Sullivan. If you will excuse me for one moment, I am
going to lead back to Davit Voight in my office and actually
get count if Mr. Gonzalez would like.
Mr. Gonzalez. Fine.
Mr. Sullivan. Thank you. David advises me that there are
approximately 16 attorneys on staff. I should also clarify to
Mr. Gonzalez that there are 47 slots.
Mr. Gonzalez. Okay.
Mr. Sullivan. And I make a particular point of saying that
because one of those slots actually is the regional advocate
for this area that is not filled yet.
Mr. Gonzalez. Okay.
Mr. Sullivan. So 16 of those slots are attorneys.
Mr. Gonzalez. Would you say that your entity with the SBA
is different from any other, and in this respect, whether it is
ombudsman or anything, is that there is more of a legal take on
this?
You are obviously general counsel for advocacy, and that
there is a relationship there, and one which requires probably
greater training in the law, obviously if you are going to have
16 attorneys out of those particular slots. And I would like to
focus in on that particular and very unique relationship that
you have as basically the lawyer for small business, and that
is the way I view you and your office in essence, going through
the complexity of the regulatory system, what we enact, and of
course, the consequences on how we can and do business in
America.
I would like to make that distinction, so I ask you, in
essence, who is your client? If you are an advocate, for whom
do you advocate?
Mr. Sullivan. I would like to clarify at least kind of how
I try to approach the attorneys on my staff, and that is not to
make a distinction of greater or less legal training from the
lawyers who are working for David Javgan, who is SBA's general
counsel, but more of kind of a counsellor role in the
traditional counseling sense of what a lot of the attorneys are
trained to do, at its most simple sense. The attorneys in our
office connect small businesses with federal regulators. That
is at the most basic sense of what we do in order for the
agencies to comply with the mandates of the Regulatory
Flexibility Act. So in that sense there is more of a main
street education than a law school education.
You had followed your observation, I think, with kind of a
question about the training. If you could repeat that question
with my understanding, I could probably best answer.
Mr. Gonzalez. What does your office lend itself to
individuals who would have greater training in the way of
regulatory scheme and such from a legal standpoint?
Mr. Sullivan. Oh, you had asked about who we consider our
clients to be?
Mr. Gonzalez. And then who is your client if you are an
advocate?
Mr. Sullivan. Our clients have to be small businesses, and
I will share with you kind of how we operate in our office, and
that is basically where someone comes to me and says, Tom, the
Federal Communications Commission is not doing a good job
considering their impact on small business before they finalize
a rule.
My first question is always who is asking for us to get
involved, and generally the attorneys in my office say, well,
these small business groups represented by the Chamber of
Commerce and NFIB, NSBU, there is different interest groups, or
even some of the small business owners themselves who have
interacted with Tayl Phillips, for instance, who covers your
part of the country, Mr. Gonzalez. And at that point we try to
connect those small businesses into the process.
So the answer to your question is who our clients are are
small business. They range in their sophistication of the
issues depending on the particular issue. For instance, there
are small business owners who regularly talk with our office on
Clean Air Act regulations that EPA is considering. These folks
who are small business owners and produce small engines, some
produce chemicals, possess a far greater engineering and legal
sophistication than even some of the professionals at the
Environmental Protection Agency.
And then on the other end we have small businesses who own
nursing homes do not have any sophistication other than they
are remarkable professionals they have in caring for the
elderly, who do not know what it means when OSHA puts out 100-
page document on ergonomics.
And we then walk very carefully with them step by step on
what OSHA is trying to do, and then get back to OSHA to say you
are going about it the wrong way. Here is a small business
owner who knows about caring for the elderly. Build their
common sense into the final legal document that constitutes a
final rule.
So that is how we cover the spectrum of who we consider our
clients to be.
Mr. Gonzalez. And the last observation, I do not know if I
have a real question, it is just that I could not agree more
that to assure the independence that is required in order for
you to be that advocate, which is very unique if you think in
the scheme of things, we are going to have to start off with
the purse strings, and make sure--you indicated, of course, you
know, you are a target either way. It is just the lesser of a
target, and getting more people involved, and to assure that
type of independence.
I know we have inquired other ways of doing it, and that is
questions obviously for the future, and that I would like to
engage you in informally with you or members of your staff is
what else can we do. If we can achieve this, which we are not
real sure but hopefully we will, what will be the next step.
And thank you for your testimony.
Mr. Sullivan. Thank you, Mr. Gonzalez, and you have my
commitment to engage in either formal or informal dialogue to
see how we can do best by small business.
I wrote down, I think, at the beginning that that is
ultimately our goal that you clarified in your opening
statement, and that is, how can we ensure what is absolutely a
unique office within the entire government, not only SBA, how
do we maintain that independence and work towards even more
independence to ultimately help small business.
Chairman Akin. Thank you, Mr. Sullivan.
In the interest of time I am going to finish up with the
first panel and call the second panel up now, if we could,
please. That would be Giovanni Coratolo, Allen Neece and Andrew
Langer.
Good afternoon, gentlemen. In the interest of time, I am
going to just introduce you quickly, and let each of you
proceed with your testimony, and then I am going to open things
up for questions. I think we have got somewhat limited schedule
here this afternoon, so I thought maybe we would go a little
faster if we went that route.
And Mr. Coratolo, am I getting that more or less close
for--
Mr. Coratolo. That is close.
Chairman Akin. --a beginner?
Mr. Coratolo. That is great.
Chairman Akin. Thank you. You are the Director of Small
Business Policy for the U.S. Chamber of Commerce, and the U.S.
Chamber of Commerce is an underlying membership of 3 million
members, 96 percent of which are small businesses.
Mr. Coratolo. Yes, sir.
Chairman Akin. And so we are delighted to welcome you
today.
STATEMENT OF GIOVANNI CORATOLO, DIRECTOR, SMALL BUSINESS POLICY
- ECONOMIC POLICY DIVISION, UNITED STATES CHAMBER OF COMMERCE;
ACCOMPANIED BY ALLEN NEECE, CHAIRMAN, SMALL BUSINESS
LEGISLATIVE COUNCIL; ANDREW LANGER, MANAGER, REGULATORY POLICY,
NATIONAL FEDERATION OF INDEPENDENT BUSINESSES
STATEMENT OF GIOVANNI CORATOLO
Mr. Coratolo. Well, thank you, Chairman Akin, Chairman
Schrock, and Ranking Member Udall and Ranking Member Gonzalez.
It is a pleasure to be front of you.
I am Giovanni Coratolo, Director of Small Business Policy
for the U.S. Chamber of Commerce. And the Chamber commends the
Subcommittees on having this hearing to explore the ways to
improve the Office of Advocacy and create a stronger voice for
our nation's 24 million small businesses. And I am going to try
to summarize this because I have a written statement that is
for the record.
Over the past decade the importance of small businesses to
the foundation of economic growth and prosperity has been
unprecedented. As economic statistics confirm, maintaining a
healthy environment for small business to proliferate
contributes greatly to raising our standards of living.
Unfortunately, as we have seen the growing importance and
the vitality and stability of small business, we have also seen
federal agencies continue to propose regulations that impose
disproportionate burdens on the smaller employers. The
cumulative cost of compliance with federal regulations can be
formidable for many small business, and in some instances it
may be fatal.
As the proliferation of regulations affecting small
business have increased over the years, so too has the Chief
Counsel's responsibilities under RFA, SBREFA, Executive Order
12-866, and the just recently Executive Order of 13-272.
We have a growing necessity of a strong independent small
business advocate with the Executive Branch of government armed
with the tools to work effectively on behalf of small
businesses.
Even with the resources of the U.S. Chamber of Commerce, it
is a daunting task to try to review all the regulations that
agencies issue that have an impact on small business.
Let me turn to some of the legislative proposals that can
strengthen the office because that is why we are here.
First, a specified line item for funding for the office
within the President's budget. In order to have a Chief Counsel
that can provide a strong independent voice for small business
separate line item funding is a must. Funding for the office
must be directly related to the checks and balances of the
budget process and not subject to internal political pressures
of any federal agencies in pet projects.
In conjunction with this, the responsibilities and duties
of the host agency to provide support, such as phones,
maintenance, office space, IT support, must be spelled out in
order to provide a financial firewall between the two budgets.
Second, provisions for continuity of leadership for the
office during the changes of administration. Having the Chief
Counsel continue serving for a specified length of time during
a transition period reduces the likelihood of gaps in the
leadership in the office.
As we have seen recently in the past, vacancies in the
position could have a negative impact in the momentum and
morale within the office. Without a Chief Counsel in charge,
the direction and resolve of the office is compromised.
The regulatory process does not take a vacation when the
office is vacant, and small businesses run the risk of not
being properly represented.
Third, there is a--we certainly want to give the office the
power and authority to make a difference. There is a quirk in
RFA and SBREFA that was handed down in the NAAQS case that
actually did not, and that is the National Ambient Air Quality
Standards case that did not give deference to the office's
amicus curiae brief.
The office, there should be legislation introduced, and I
am not sure that this would be the legislation for it, but
there should be something introduced that makes the Office of
Advocacy the agency responsible for making sure other agencies
live up to the responsibilities under Chapter 6, Title V, which
is Reg Flex.
Also, we feel that another purpose of the Office of
Advocacy that has not been stated here today is economic
research. We find that when Congress knows of the impact that
regulations have on small business and that they know the
contribution small business make toward the economy they make
better regulations and they make better legislation.
So the Office of Advocacy provides a wealth of economic
research data that allows us to make better decision as policy
experts, and it allows you to make better laws.
So that is something that we would like to see continue as
a sub line item for research. There is an existing line item
for economic research. We would like to see that continue so we
can have some handle on it.
In conclusion, the Chamber strongly encourages legislation
that will provide independence, and we thank you very much for
allowing us to testify here today.
Chairman Akin. Thank you, Mr. Coratolo, with just six
seconds to spare. That is pretty good timing.
And let us move ahead with your testimony, Mr. Neece,
please.
STATEMENT OF ALLEN NEECE
Mr. Neece. Thank you. Maybe, Mr. Chairman, he would yield
me six seconds.
[Laughter.]
Mr. Coratolo. Yield the balance.
Mr. Neece. Yield the balance of your time.
Mr. Chairman, and Mr. Chairman, and members of the
Committee.
I am Allen Neece. I am the elected Chairman of the Small
Business Legislative Council which is an association of
associations consisting of 70 industry-specific professional
and trade organizations representing small businesses. We
operate by consensus, and we are concerned exclusively with
small business issues as opposed to more broad-based issues. In
other words, we do not spend a lot of time in foreign policy
and other areas.
We are delighted to have been invited to testify here
today. And Mr. Chairman, I have a prepared statement, and I
would ask that it be submitted for the record.
Chairman Akin. Without objection.
Mr. Neece. That being the case, I will try to confine my
remarks to about two minutes.
By way of background, I have had the pleasure of working in
the public policy arena for about 35 years, addressing only
small business issues. I happened to be with the Senate Small
Business Committee when the enabling legislation for advocacy
was enacted. I was involved with confirmation of the first
advocate, Milton Stewart, who was a giant and mentored a lot of
people who still work for Tom Sullivan in advocacy. So I have
been around advocacy and its function for a long time.
And in that capacity and on behalf of LBLC, I want to say
we strongly endorse and support the measure that you indicated
you are about to introduce, last year known as the Bond-Kerry
bill. I guess this year over on the Senate side may soon be
known as the Snowe-Kerry bill. We support the line item. We
think that will greatly enhance advocacy's independence within
SBA, and will strengthen their hand as they work and advocate
on behalf of small business throughout the rest of the federal
government.
Advocacy performs the most important function that there is
for small business, far and above any other agency. Lots of
other agencies may help small business, but they may also hurt.
Advocacy only helps, and they have a terrific track record. Tom
Sullivan is doing exception work, and we strongly endorse what
he has been doing. He is really a model advocate, and we
strongly endorse his testimony.
There is one other item that we would urge your
consideration, and that is that when there is a change of
administrations, that the then serving advocate consider to
serve until such time as the next administration would nominate
his or her successor.
There was a period some years ago when one administration
waited three and a half years into the administration's tenure
before nominating and sending up a nomination for an advocate.
That is certainly not germane to the current situation. But if
you are going to address this one issue, we would urge that you
address the other one.
The last point is we hope you keep the bill clean. Do not
add other ancillary provisions in there. We recognize that lots
of other members and other organizations think that advocacy
could be strengthened and improved maybe in some other areas,
but we are realists. The political realities are from our
perspective is this bill needs to be simple and clean to
enhance its probability of passage.
Legislation has been pending both before the House and the
Senate in the last Congress, and we all were waiting with
abated breath, but we are still here talking about.
Thank you very much, Mr. Chairman, Mr. Chairman.
Chairman Akin. Thank you, Mr. Neece, appreciate your
testimony.
And now Mr. Langer.
STATEMENT OF ANDREW LANGER
Mr. Langer. Thank you. Chairman Akin, Chairman Schrock, Mr.
Udall and Mr. Gonzales.
I want to thank you very much for the opportunity to appear
before the Subcommittees once again. It is my pleasure to be
here representing the National Federation of Independent
Business and talk about making the SBA's Office of Advocacy
more independent.
Just for a little background, the National Federation of
Independent Business has 600,000 members nationwide. We have
members in every state in the union, and we represent the full
panoply of small businesses that are out there. We reflect
generally the census statistics on small businesses. Our
average member has five to seven employees, and 80 percent of
our members have fewer than 10 employees in their business.
As you can imagine, as I have testified before, small
businesses are obviously very different than big businesses.
The regulatory costs are higher for our members than other
businesses to the tune of, according to the Office of
Advocacy's own research, roughly $7,000 per employee per year.
And advocacy is doing a stellar job on trying to reduce that
number, and I want to talk briefly about that.
I mean, the numbers really do speak for themselves. Under
Tom Sullivan's watch, $21 billion in savings last year to small
businesses. I mean, that is an incredible number, staggering.
That saving is passed on to our members so they can continue to
be the engines for economic growth and recovery that this
nation desperately needs.
The enactment of the Memorandum of Understanding between
Tom's office, Mr. Sullivan's office and the Office of
Information and Regulatory Affairs is almost unprecedented, and
will go a long way towards strengthening the role of advocacy
in dealing with not just the regulations that are coming down
the pipeline, but regulations that are currently on the books,
and I will talk about that in a moment.
Oh, if I can just digress for a moment, and say that I have
much lengthier remarks, and I would hope that they would be
entered into the record.
Chairman Akin. Without objection.
Mr. Langer. Thank you.
In our opinion, further independence can only strengthen
advocacy's role. The fact is that it could be insulated, as Mr.
Sullivan himself has testified, from political game playing in
the administration itself, the fact is that it would encourage
and strengthen its bedrock principles of being incredibly
flexible in dealing with the problem that small businesses
face, and it would ensure that it has access to greater
resources.
The fact is the Office of Advocacy can certainly use
greater resources, in our opinion. The burdens that businesses
face today are only, frankly, getting worse as regulations
increase.
There are ever increasing numbers of regulations on the
books, and giving advocacy greater resources, frankly, would
allow them to do that job of trying to trim away the
regulations that are already there. The fact is that they are
dealing with problems that we bring up every day from our
members, and our members are dealing with myriad problems, some
of which have nothing to do with one another, and they come at
them from all directions.
You know, we are asked from time to time what one
regulation is most problematic for our members, and the fact is
there is not one. Our members are getting it from all ends.
Chairman Schrock talked about a business in his district
having an OSHA representative show up demanding a document that
they just could not find for 45 minutes. We have had an example
of a member calling us up saying that OSHA wanted to fine them
for having an improper toaster in their business. I have got
members calling me about fishing regulations, and problems with
scientific studies there. I have got members calling about
economic census problems and forms that they have gotten that
are 15 pages long.
And the fact is that when I think about those issues the
people that I turn to immediately are the team that Tom has
working for him; people like Susan Howell, and people like
Kevin Bromberg, and people like Charlie Moraska. These are
people that I deal with on a regular basis, and who go to the
bat for our members time and time again, and I could think of
nothing better than making that organization more independent
and strengthening it.
We believe that a line item is the right first step. We
think that it will do the best to protect it immediately, and
then we could talk about how to change things afterwards.
I want to sum up by saying that the NFIB appreciates the
opportunity to share its concerns with Congress. With costs of
regulation being such a high priority for our 600,000 members,
we are glad to have the Office of Advocacy working so hard to
help them. They are dogged, they are relentless. The time has
come to strengthen their ability to provide much needed
assistance.
Thank you once again, and I look forward to any questions
that you might have.
Chairman Akin. Thank you, Mr. Langer.
I have just one, and most of your testimony is right along
the same lines, and you are suggesting that we need to give the
independence and the flexibility to this office so they can
really do their job without looking over their shoulder.
I guess one, there is different ways you could try to
accomplish that structurally. One of them might be that you
could create an independent commission or something like that
as opposed to an independent line item. I guess the FTC or the
SEC has an independent commission. That would be a possible
approach. Apparently you prefer the line item over that other
kind of approach.
And then I guess the other question I have is, when you do
create a line item, you know, the President or OMB could just
line the thing out as well. So you have chosen one way. You
know, what is the balance if you consider those other
alternatives? And that question is for any of the three of you
or all three, however you want to do it.
Mr. Coratolo. Mr. Chairman, I will take a crack at that. As
far as the commission goes, it is a step in the wrong
direction. We feel that the advantage that advocacy has is it
has flexibility to work quickly and decisively within the
administration at the earliest stages of the regulatory
process.
You create a commission, you triple the costs needed to
produce that commission, you expand government, and you slow
down the process. A commission, in my understanding, would have
majority as well as minority views on how to progress as far as
regulatory process, so you would not get decisions made with
the ease and flexibility that the current office has.
More importantly, with the commission you lose the ability
to work within the administration based on the Separation of
Powers Act. So I mean you really lose all the good things that
advocacy has on its side right now.
As far as the independent line, you know, when you tell the
story that advocacy has, it is easy to sell and defend that
budget. We took the existing line item, which is only for
economic research several years ago, and by telling the story
of the Office of Advocacy we were able to increase that line
item almost 35 percent based on that good story the advocacy
had. Thank you.
Mr. Neece. Mr. Chairman, the idea of a commission is not
new. It has been debated for the last 35 years, including back
in the days with the first advocate. And the truth of the
matter is there are some merits to a commission, and this is an
issue that you are addressing, in my opinion, that there are a
lot of grays and there are not that many black and whites.
But from my personal perspective in talking with Frank
Swain and Milton Stewart and Tom, our existing advocate, and
Jerry Glover at great length about this issue, at the end of
the day, and I was one of those as a staffer who wanted the
advocate to be as independent as possible, so in effect he
could figuratively tell the president to drop dead on a policy
issue.
But the reality is you cannot do that no matter how much--
it does not matter what your political persuasion is, and what
administration is in power. You need the support of the
president because that advocate one, two, three, maybe four
times during the course of a four-year administration is going
to have to go to the well, and they are going to have to go to
the White House, and they are going to have to ask for some
help, and in my opinion, only the White House can make that
cutting edge difference.
If you are a commission, at the end of the day after yo
have used the bully pulpit, and you cannot sway that agency to
change their position, the only recourse you have is
litigation.
And if you are one agency, and that occurs every once in
awhile between agencies, or they get caught up in litigation by
a third party where they end up being on different sides, I
think you wear advocacy down. They do not have the deep
pockets, and you could litigate until the cows come home, but I
do not think in the final analysis advocacy will prevail. And
if advocacy does not prevail, small business did not prevail.
So I think you need to give them as much independence with
the budget short of cutting them loose and letting them adrift
where they are swimming in a river all by themselves. There is
more to it than that, but I think that is all we need for the
moment.
Chairman Akin. I think you have answered my question.
Unless you have an opposition position.
Mr. Langer. No, I do not have anything to add on the issue
of the commission. I agree with my colleagues entirely.
Just on the issue of the potential for having the office
zeroed out, I think, (a) that is a risk that I would be willing
to take on this. I think that any president or Office of
Management and Budget so foolhardy as to zero out the Office of
Advocacy would be immediately met with, you know the hue and
cry from the small business community which again is the engine
of this economy, and I do not think any president is going to
ignore that, frankly.
Chairman Akin. Thank you very much.
Mr. Udall, did you have a question?
Mr. Udall. Sure, Mr. Chairman. Thank you.
In your view, and this is really all three of you, I guess,
in your view what is the gravest problem facing the Chief
Counsel for Advocacy in the absence of a line item in
appropriations or the D.C. Circuit's decision in the American
Trucking Association case where the court stated that opinions
of Chief Counsel for Advocacy on agency compliance with RIFRA
is are not entitled to any weight?
So which one of those do you see as the biggest problem and
what is the way to fix it?
Mr. Neece. We both gave long-winded answer.
Mr. Langer. Yes. No, you guys did fine. I would like to--I
think it is important to ensure that independence, but I would
like to speak to the issue of deference for a moment.
In light of the issue of the Chevron case many, many years
ago, which allows that agency opinions are supposed to be given
weight, I think that absolutely there needs to be a legislative
fix giving the Office of Advocacy a similar amount of
deference.
The fact is that as we weigh cost and benefits of
regulation there has got to be someone out there speaking for
the costs in terms of these things. When you get professional
civil servants who have never run a business, never been out in
the business world who really do not understanding the real
world impacts of what they are regulating and what they are
doing, it is essential for that voice to be given equal weight
or similar weight in court cases.
But I still think that giving it its independence through a
line item is of paramount importance, but, boy, that deference
issue would be a great one to have.
Mr. Udall. Now, Mr. Langer, you are saying that we should
do that legislatively then.
Mr. Langer. I think you have to do it legislatively.
Mr. Udall. You have to do it legislatively.
Mr. Langer. Now, understand, I am not speaking as a lawyer
here because I am not a lawyer. But I have worked on enough
environmental issues and worked with enough environmentalers in
the past to understand the issue of deference and the issue the
court has given it, and I do not think that courts are going to
pay attention to it unless it does come down legislatively. I
think it has to be that way.
Mr. Udall. Thank you very much.
Do you other two have any comments? Okay, thank you.
Chairman Akin. Mr. Schrock.
Chairman Schrock. Andrew, you are absolutely right what you
said. In fact, I think something we learned during the round
table was that there are agencies out there creating
regulations in case something happens in the future.
Mr. Langer. Sure.
Chairman Schrock. Which just exacerbates an already very
difficult problem.
Let me ask all of you, what happens to Tom's office if this
legislation is not passed?
Mr. Neece. Well, it is business as usual. I mean, from my
perspective there is no great calamity here. What this is this
is insurance. This is prophylactic. We have long sought a means
by which advocacy is assured of a proper line item budget. That
was not the case--I will be very specific--that was not the
case in the last administration because the budget the way it
now operates is the SBA administrator determines, they are the
determinant, the administrator's office determines what
advocacy will have in terms of what is then submitted to OMB.
There is no direct correspondence with OMB. Tom Sullivan or
Jerry Glover or whoever it might be is completely out of the
loop.
In the last administration, when times get tough, and they
often do and they are right now, SBA gets squeezed in its
budget, and the SBA administrator looks around and says, all
right, where is the soft underbelly, where can I cut a few
dollars here as we gird our loins for battle and try to get
more money, but in the meantime I have got to find resources
for all these other programs that we deliver.
And the one who is really defenseless is the advocate, and
the advocate does not come up here and talk directly with the
appropriations, with State, Justice, Commerce. He is supportive
of the president's budget.
So at the end of the day if the SBA administrator does not
give sufficient resources, the advocate is out of the look.
That is where we--it is pretty simple. We simply want to
correct that so the SBA when they send over their budget the
advocate's line item in that proposal to OMB has not been
touched in any way, shape or form by the administrator.
Chairman Schrock. Okay.
Mr. Langer. If I can just add to that briefly.
Chairman Schrock. Sure.
Mr. Langer. I mean one need only look at the Office of
Information and Regulatory Affairs over at the Office of
Management and Budget, which is another entity that I--whose
mission I support wholeheartedly, their budget since they were
formed has pretty much--their staff has been cut, they have
never been nearly as strong as they were when they were first
founded, and that, to me, is the risk that we run with the
Office of Advocacy.
They are doing similar jobs on a parallel track, both of
which are out there to protect the best interests of every day
American who are working hard to keep this economy going, and
my fear is that some day, again as the gird their loins for
battle, that the Office of Advocacy gets cut.
Chairman Schrock. The bottom line is it needs to be passed.
Mr. Langer. Yes.
Chairman Schrock. Thank you, Mr. Chairman.
Chairman Akin. Thank you, Mr. Schrock.
And Mr. Gonzalez.
Mr. Gonzalez. Thank you, Mr. Chairman.
Ranking Member Nydia Velazquez last year would hold once a
month a round table breakfast, and we would have from different
private sectors representatives. I think you all may be
familiar and participated, or some members did for sure. And
what was always the forefront was regulatory relief and the
costs and the burden that it places in doing business.
When it was all said and done, it really was not being
addressed prior to the adoption of any regulation, and it was
not being done afterwards save and except for the work of the
Office of Advocate.
Who else--the first part of the question is, is there
anyone else? If Tom does not do it, and I think Mr. Langer said
no one looks at the cost side within this whole scheme other
than Tom's office, that is the first thing.
The other concern is, and I am not real sure, in past we
have not been successful in this particular endeavor. I am not
absolutely certain why. Is there going to be an argument made
that by having a separate line item, budget item for this
particular office, that somehow you are doing something that is
fundamentally changing that relationship?
In essence, you are repealing a law that creates this
particular entity within the SBA, and within the authority and
with management of SBA, because I am just anticipating any
arguments.
And then if we do not do this, and everything remains
exactly as it is, is a commission something that we should be
looking to as an improvement over what we have now?
Mr. Coratolo. I can answer some of that.
Mr. Gonzalez. Yes, sir.
Mr. Coratolo. If you really look at the grand scheme of
things as to regulatory reform, you have to really go way back
into 1980, at the inception of the Regulatory Flexibility Act.
And as it has transpired, Office of Advocacy was initiated in
1976, Reg Flex in 1980, SBREFA strengthened Reg Flex, but there
was a whole scheme of different parts that were interrelated.
And all that advocacy actually orchestrates and makes complete
the puzzle of regulatory--as far as the regulatory nature of
agencies and what they have to do and comply in making
sensitive their regulations to small business.
So having advocacy, advocacy is the key. There is no other
agency other than OIRA, and now we have a relationship between
advocacy and OIRA on how they handle the small business
regulations, which even strengthens that. It is an incremental
step. As we have seen with the Executive Order 13-272,
everything tends to be incrementally done as far as
strengthening small businesses' representation in front of the
agencies.
With that being said, having a line item for advocacy is
the next incremental step in making sure that small businesses
are correctly represented in front of the agencies. I do not
think it is a radical change. I think it is an incremental
step. A commission would be a radical change in the wrong
direction in my opinion.
Mr. Neece. Mr. Gonzalez, I have one thing to add to that.
The precedent has already been set in the Small Business
Act. The inspector general is funded in a manner by which we
are recommending you fund advocacy. The IG sends his budget to
the administrator, it does not matter what that figure is it is
included in the budget that the administrator then sends to
OMB. The administrator has no discretion to add or subtract to
the number given him by the IG, and that is what we are
suggesting you do with advocacy.
Mr. Langer. I do not have anything to add to what my
colleagues have said.
Mr. Gonzalez. Thank you very much.
Chairman Akin. If that is all the questions that we have,
then I would like to thank, first of all, Mr. Sullivan, and
then Mr. Coratolo, and Mr. Neece, and Mr. Langer for your time,
and for my fellow colleagues, and with that we adjourn.
[Whereupon, at 3:01 p.m. the Subcommittees were adjourned.]
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