Is the SBA Selling Out Mom and Pop Businesses?

Small Business Administrator Karen Mills speaks while hosting a panel discussion with small and large business experts at the
Small Business Administrator Karen Mills speaks while hosting a panel discussion with small and large business experts at the White House in Washington, Wednesday, Jan. 11, 2012, on insourcing and investing in America. (AP Photo/Susan Walsh)

If you close your eyes and imagine a typical American small business, what do you see? A little sandwich shop down the street? A convenience store? A neighborhood daycare business? Perhaps a home-based consultant or an Internet start-up? Or even something like the mom-and-pop clothing store my parents ran when I was a kid?

Fine examples, all. But if you're in Washington, and you work at the Small Business Administration (SBA) Office of Advocacy, the odds are just as good that you're imagining a 1,500-employee chemical plant, or a 1,000-person petroleum refinery.

Mom and pop, indeed. That's just one of the problems with the way the SBA Advocacy office defines its role. Created to represent the interests of small businesses before regulatory agencies, the Advocacy office has greatly expanded its brief, and now works hand-in-glove with special interest lobbyists for big business, and serving as a barrier to sensible safeguards that protect health, safety, and the environment.

To be sure, genuinely small businesses don't have the resources to represent their interests in Washington. And those interests are often quite distinct from big business. So Advocacy's role was to make sure their concerns were raised, and their voices heard. That makes sense.

But functioning as a largely unaccountable, taxpayer-funded lobbying outpost within the federal government, the office's advocacy is frequently indistinguishable from the trade associations advocating for large corporations. For example, when the Advocacy office opposed a proposal from the Environmental Protection Agency (EPA) to limit hazardous air pollutants from oil- and coal-fueled power plants in 2012, it didn't simply argue that small businesses should be exempted or receive some other sort of accommodation; it sought instead a weaker rule for the entire industry, one that covered only mercury emissions but not dangerous emissions of formaldehyde, arsenic, and lead. That would have required the EPA to ignore the plain language of the Clean Air Act, but it was what the big power plants wanted, and the Office of Advocacy represented their interests.

A recent report from the Center for Effective Government details just how chummy the Advocacy office is with special interest lobbyists. Freedom of Information Act requests revealed that the Advocacy office worked hand-in-glove with the American Chemistry Council (ACC), a trade group dominated by large chemical companies, to try to derail the EPA’s work on addressing the human harms of hexavalent chromium. As part of that effort, the Advocacy office sent a letter to the EPA ostensibly expressing the concerns of small businesses, using language provided to Advocacy by the ACC

More commonly, the Advocacy office works to bottle up or water down regulations. In formal comments on proposed regulations, it commonly asserts that agencies haven't done enough studies on whether a regulation will have an unfair impact on small business. That's a useful perspective, of course, but the Advocacy office routinely uses the argument as a way to gum up the regulatory works, calling for needless studies that do little more than delay the process and waste scarce public resources. That was the thrust of its comments on a 2012 U.S. Fish and Wildlife Service proposal aimed at protecting critical habitats for endangered species, for example.

Even when agencies conduct such analyses on their own initiative, the Advocacy office finds fault, asserting that the analyses are not sufficiently detailed. That was the story with the Advocacy office's review of a Food and Drug Administration proposal on dietary information labeling requirements for chain restaurants and vending machines in 2011.

Just a few days ago, the Advocacy office's special interest allies returned the favor. When the Center for Progressive Reform released a report on the office's activities, the National Federation of Independent Businesses, itself an organization whose lobbying often sacrifices small business interests for large, leapt to the Advocacy office's defense, attesting to how closely it works with the office, and echoing its hostility to regulation.

The truth is that the SBA's Office of Advocacy has an important role to play, but it has lost its way. Instead of lobbying on behalf of chemical plants and oil refineries, it should focus on truly small businesses. Instead of opposing environmental, health and safety rules wholesale, it should look for ways to help agencies craft rules that both protect Americans from various hazards and help small businesses be competitive. Instead of taking its marching orders — and the very language of its arguments — from special interests lobbyists for big industry, it should focus on the real concerns of genuinely small businesses.

The author is the University Chair in Law at Wake Forest University and a Member Scholar at the Center for Progressive Reform. He is co-author of a recent report on the SBA's Office of Advocacy