Capitol Hill

The U.S. Small Business Administration's (SBA's) Office of Advocacy (OA) widely is identified by the business community as the watchdog of the executive branch that protects small businesses from burdensome regulations proposed by federal agencies. To allow the OA to perform its role effectively, Congress granted it a high degree of autonomy so it may operate as an objective evaluator of federal regulations' effects on small businesses.

Recently, key Congress members and business representatives have raised concerns that under the Obama administration the OA may not retain the level of independence it needs to continue performing its role as small-business protector. President Obama's new SBA administrator, Karen Mills, appears to have other plans for the OA that some SBA observers fear could compromise or diminish the OA's independence. Although Mills has denied this being her intention, concerns persist among lawmakers.

Conducting analyses

The OA protects small businesses by ensuring federal agencies follow the requirements of the Regulatory Flexibility Act (RFA) of 1980 as amended by the Small Business Regulatory Enforcement Fairness Act of 1996. The RFA requires federal agencies to conduct a detailed analysis of their proposed regulations' potential economic impacts on small businesses. If an agency fails to properly conduct the necessary analysis, the OA has the independence and resources to blow the whistle on the agency and conduct its own analysis of the proposed regulation's economic impact on small businesses.

The OA's role has enabled it to reduce the potential cost of regulatory compliance for small businesses by billions of dollars during the past few decades. In 2008 alone, the OA's actions saved small businesses an estimated $11 billion in regulatory costs, according to the Annual Report of the Chief Counsel for Advocacy on Implementation of the Regulatory Flexibility Act.

NRCA has worked with the OA under Democratic and Republican administrations to protect small-business interests. For example, the OA played an important role in demonstrating the overly burdensome effects on small businesses of the controversial ergonomics standard proposed by the Occupational Safety and Health Administration during the late 1990s.

More recently, the critical importance of the OA's role in the federal regulatory process was illustrated by its involvement with the Department of Homeland Security's (DHS's) development of the infamous "no-match" rule. The rule, had it been implemented as proposed in 2007, would have forced employers to terminate legally authorized employees who failed to correct bureaucratic errors with the Social Security Administration within a relatively short timeframe. When the Bush administration originally proposed the rule, which NRCA strongly opposed because of its expected onerous effects on small businesses, the OA issued a letter stating the DHS failed to comply with the RFA during the no-match rule's development because the agency did not conduct an economic analysis of the rule's effects on small businesses or consider less burdensome policy alternatives.

The OA's rebuke of the DHS's actions in preparing the no-match rule became a critical component of the successful legal challenge NRCA and other business and labor organizations filed against DHS. Without the OA's analysis, it is doubtful a U.S. court would have issued an injunction to block the rule as it did in 2007, which ultimately resulted in the Obama administration's decision to rescind the rule.

A critical role

As the U.S. struggles to restore strong economic growth, it is even more critical that new federal regulations' effects on our primary job creators—entrepreneurs—are carefully evaluated before being implemented. To this end, it remains vital that the OA maintains its role in the federal regulatory process.

NRCA is working to ensure the OA retains its independent watchdog role so it can continue to protect its territory—U.S. small businesses.

Duane L. Musser is NRCA's vice president of government relations.