Evoking images of the corner grocery store and main street America, small business frequently resonates as a reason for easing off regulation. Yet the legal definition of “small” -- which is what really matters -- is actually quite big: for instance, it includes a general contractor with as much as $17 million in annual revenue, a chemical company with as many as 1,000 employees, and a petroleum refinery with as many as 1,500 employees -- not exactly mom and pop. OIRA Rejects SBA Rule Expanding "Small Business" OMB’s Office of Information and Regulatory Affairs (OIRA) -- which acts as regulatory gatekeeper across agencies -- recently rejected a rule from the Small Business Administration (SBA) that sought to expand the number of businesses eligible to receive an SBA loan for disaster assistance and economic hardship in response to the Sept. 11 terrorist attacks. Under SBA’s proposal, any business with fewer than 500 employees would be eligible for such assistance. This would have been the third such expansion since Sept. 11. The first expanded coverage beyond the immediately impacted area, and the second raised size standards to adjust for inflation since 1994 -- both of which OIRA approved. In rejecting SBA’s most recent proposal, however, OIRA Administrator John Graham charged that it would set “poor precedent.” “SBA traditionally defines a small business in the context of the business’s industry and economic environment,” according to Graham, who also testified on the matter before the House Small Business Committee. “Thus, not all businesses with fewer than 500 employees are truly small. Some may in fact be dominant in their industry.” Nonetheless, a number of laws over the years have carved out a privileged position for these “small” businesses in regulatory decision-making. Agencies are required to conduct special burden assessments on small business before going forward with regulation, and EPA and OSHA must consult with small business as a regulation is in development, before it has been made available to the general public for comment. Amazingly, small business even has its own Office of Advocacy, housed within the Small Business Administration, that functions as a taxpayer-funded lobbying shop for small business interests. Just last month, OMB’s Office of Information and Regulatory Affairs (OIRA), which acts as regulatory gatekeeper across agencies, entered into an agreement with the Office of Advocacy to make further efforts to reduce regulatory burdens on small business. In this agreement, OIRA commits to consult more closely with Advocacy on regulation under development. According to the agreement, “[t]he best way to prevent unnecessary regulatory burden is to participate in the rulemaking process at the earliest stage possible and to coordinate both offices to identify draft regulations that likely will impact small entities.” Of course, burdens on small business should be minimized, but the danger is that this comes at the expense of strong health, safety, and environmental protections. Indeed, small business interests, as well as the Office of Advocacy, have a long track record of lobbying fiercely against such regulation, no matter the benefits. For instance, in what also served as a demonstration of its odd independence within the executive branch, Advocacy vocally and publicly opposed moving forward with EPA’s 1997 clean air standards, actually testifying before Congress against then-EPA Administrator Carol Browner, who was advocating the administration’s policy. Undoubtedly, Advocacy will use its heightened influence, suggested by the agreement with OIRA, to weaken regulatory protections at all stages of the process in the name of small business. Of course, it matters little to the public whether toxic emissions, for instance, are coming from a small business or a big business. The resulting pollution is bad either way. Nor does it matter to the worker who is exposed to a hazardous chemical whether the company is big or little. Still, there can be a difference in the ability of a small business and a big business to understand and comply with regulations. For instance, most big businesses can easily pay for technical assistance, as well as teams of lawyers to offer advice on compliance, whereas many small businesses lack the same resources. But rather than weakening public and environmental protections, the emphasis should instead be on making compliance easier and less burdensome. OMB Watch, for example, has long advocated a system of integrated reporting across agencies that would allow regulated entities to submit required information to one place electronically, thereby reducing duplicative efforts. Moreover, there are a number of existing compliance assistance programs for small business throughout government, some of which are listed here. Recently, OMB Watch has worked on legislation (S. 1271) in the Senate that would create a comprehensive inventory of such programs, making it easier for small business to take advantage of them, and others to evaluate their effectiveness. Unfortunately, the Office of Advocacy seems less interested in improving compliance than in rolling back regulation generally. On Oct. 23, 2001, Advocacy trumpeted a dire new report, conducted by W. Mark Crain and Thomas D Hopkins (who is well known for his anti-regulatory slant), that sounded a familiar theme: Small businesses are being strangled in a sea of regulation. Indeed, the study estimated that federal regulations cost small firms (less than 20 employees) a mind-boggling $7,000 per employee annually; the total cost of regulation was estimated to be an incredible $497 billion. No estimates were given for benefits, as the focus of Advocacy is clearly on costs. In the press release accompanying the report, Hopkins expresses wonder at how small businesses have still managed to thrive despite such oppressive burden. Ironically, it doesn’t seem to occur to him that his estimates might be vastly overblown. Such studies, by presenting pinpoint numbers, give the sense of precision and objectivity. Yet in reality, they involve vast methodological leaps of faith -- as shown in OMB’s regulatory accounting reports, which have been critical of Hopkins’ past assessments while producing much lower cost estimates -- and almost always end up reflecting the preconceived views of the analyst. A 1996 report from the General Accounting Office -- the investigative arm of Congress -- provides even more reason to be skeptical. GAO examined the regulatory costs of 15 businesses and failed to produce any evidence of significant burden -- or even slight burden for that matter -- despite the fact that participating companies, who volunteered for the study, were largely critical of federal regulation and had a vested interest in proving their case. Indeed, not one company was able to pinpoint its annual regulatory costs, and instead GAO’s study turned into an explanation of why honest regulatory assessment might not be possible. The point of this is not to say there is no burden at all. As stated above, we should be concerned about burdens on small business. At the same time, small business should not be used as an excuse for inaction, as Advocacy would clearly have it. According to SBA, the legal definition of small business encompasses 99 percent of American businesses employing 51 percent of the private-sector workforce. Under such an expansive definition, it’s impossible to have strong health, safety, and environmental protections without asking small business to do their part. Nonetheless, there is a mythology around small business that is routinely exploited to dismantle regulatory protections. Far from the warm and fuzzy image it conjures, small business is represented in Washington by, among other groups, the National Federation of Independent Businesses, perhaps the most fiercely anti-regulatory trade association of them all, which is saying a lot. Many of NFIB’s members are major polluters and operate dangerous workplaces. From clean air to ergonomics to safe drinking water, the NFIB has aggressively lobbied to undermine public and environmental protections. This is what small business means in Washington. Mom and pop are nowhere to be found.