U.S. GOVERNMENT PRINTING OFFICE

67–488 WASHINGTON : 2000

IMPROVING THE OFFICE OF ADVOCACY

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

WASHINGTON, DC, JUNE 21, 2000

Serial No. 106–66

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

JAMES M. TALENT, Missouri, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

DONALD A. MANZULLO, Illinois

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

DAVID M. MCINTOSH, Indiana

RICK HILL, Montana

JOSEPH R. PITTS, Pennsylvania

JOHN E. SWEENEY, New York

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

EDWARD PEASE, Indiana

JOHN THUNE, South Dakota

MARY BONO, California

NYDIA M. VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

CAROLYN MCCARTHY, New York

BILL PASCRELL, New Jersey

RUBE ́ N HINOJOSA, Texas

DONNA MC CHRISTENSEN, Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

DENNIS MOORE, Kansas

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

SHELLEY BERKLEY, Nevada

HARRY KATRICHIS, Chief Counsel

MICHAEL DAY, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on June 21, 2000 ............................................................................... 1

WITNESSES

Glover, Jere W., Chief Counsel for Advocacy, Small Business Administration . 4

Kerrigan, Karen, President, Small Business Survival Committee ...................... 7

Mastromarco, Daniel R., President, The Argus Group ......................................... 9

Morrison, James, Senior Policy Advisor, National Association for the SelfEmployed .............................................................................................................. 12

McCracken, Todd, President, National Small Business United .......................... 15

Cole, Keith N., Partner, Swidler Berlin Shereff Friedman .................................. 16

APPENDIX

Opening statements:

Talent, Hon. James .......................................................................................... 39

Prepared statements:

Glover, Jere W .................................................................................................. 43

Kerrigan, Karen ................................................................................................ 128

Mastromarco, Daniel R .................................................................................... 139

Morrison, James ............................................................................................... 149

McCracken, Todd .............................................................................................. 158

Cole, Keith N .................................................................................................... 167

(1)

IMPROVING THE OFFICE OF ADVOCACY

WEDNESDAY, JUNE 21, 2000

HOUSE OF REPRESENTATIVES,

COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The Committee met, pursuant to call, at 10:20 a.m., in room

2360, Rayburn House Office Building, Hon. Jim Talent (chair of the

Committee) presiding.

Chairman TALENT. Our hearing today focuses on an agency that

is of great importance to small business but remains to much of the

outside world one of the lesser known agencies in the Federal Government, the Office of Chief Counsel for Advocacy.

I have called today’s hearing to review the current situation at

the Office of Advocacy and whether its efforts at independent advocacy are hampered by its relationship in both the Small Business

Administration and the executive branch and, if so, what changes

should be made to strengthen the office’s role as a nonpartisan,

independent voice protecting small business from regulatory excesses in the Federal bureaucracy.

In 1976 Congress established the Chief Counsel for Advocacy

within the Small Business Administration. The initial purpose of

the Chief Counsel was to complete a study on small business and

its impact on the American economy. Subsequent to the completion

of that study, the primary mission of the office was to represent the

views and interests of small business before other Federal agencies

whose policies affect small business.

In 1980 the duties of the Chief Counsel were broadened considerably when he was assigned the task of monitoring agency compliance with the Regulatory Flexibility Act, that statute which requires Federal agencies to consider the impact of proposed and

final regulations on small businesses and other entities.

Nothing in the act creating the Chief Counsel spelled out that

the Chief Counsel was to be independent of the President. Nevertheless, the authority to issue reports to Congress without submitting them for clearance by OMB and the ability of the Chief Counsel to file briefs in Federal court opposing the views of the executive branch led many in the small business community to conclude

that the Chief Counsel should be an independent voice for small

business in the executive branch.

Yet the independence of the Office of Advocacy often hangs by a

slender thread. In past years the Office has seen Administrators

use special hiring authority granted to the Chief Counsel in the

statute creating the Office to impose the Administrator’s personnel

decisions on the Chief Counsel. In other instances the authority

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and ability of the Chief Counsel to file amicus briefs in cases of extreme importance to small businesses has been called into question

by various parts of the Justice Department.

Today the office operates under the terms of a statute that authorizes the Chief Counsel to file amicus briefs under the Regulatory Flexibility Act, and an Executive Order mandating that all

disputes among executive branch agencies be resolved through mediation by the Department of Justice. In this hearing, the Committee is going to examine various mechanisms for enhancing the

voice of small business within the government.

This is a nonpartisan issue, since the regulatory problems facing

small business do not respect political party lines since, I may add,

any tension between the Office and the executive branch goes back

through the last at least three administrations.

Any enhancement to the Office of Advocacy must start from the

proposition that it must be able to do what is best for small business. Our colleagues in the Senate believe that one solution is to

provide the Chief Counsel with the line item in the budget, a line

item that currently does not exist, which would enable the Chief

Counsel to negotiate with the Administrator for resources.

The Chief Counsel’s role in the government is unique, and the

Chief Counsel should not have to rely on the goodwill of the Administrator to obtain needed resources. Clearly, this idea has some

merit. I hope we can explore it in further detail today. But I am

not convinced that the approach adopted in the Senate provides the

Office of Advocacy with the necessary independence required to

reach optimal effectiveness as the voice of small business. A separate line item in the budget does not eliminate what many perceive

to be the primary problem with enhancing the role of the Office of

Advocacy. The Office would still remain in the executive branch. It

does not take a genius to understand that when a movable office,

the Chief Counsel, meets an irresistible force, the President, the

movable object moves.

In my view, a good solution would be to remove the Office of Advocacy from the auspices of the executive branch, but not establish

it as an arm of Congress either.

There is another alternative: the establishment of an independent collegial body like the Board of Governors of the Federal

Reserve or the SEC. These agencies are not subject to the regulatory authority of the executive branch.

For example, Executive Order 12,866, which specifies the regulatory oversight authority of the Office of Information and Regulatory Affairs, exempts these independent collegial bodies from the

strictures of the provisions. Similarly, the Paperwork Reduction

Act recognizes that special place in the bureaucracy by allowing

them to override the OMB disapproval of their recordkeeping or reporting requirement. No executive branch agency like the EPA or

the SBA has that power.

Finally, the commissioners of those agencies who were appointed

by the President, confirmed by the Senate, do not serve at the

pleasure of the President.

Today we have a panel of witnesses, all of whom are intimately

involved with the small business issues and the function in the Office of Advocacy. I expect they will have diverse views on mechaVerDate 11-MAY-2000 06:08 Dec 08, 2000 Jkt 067488 PO 00000 Frm 00002 Fmt 6633 Sfmt 6633 E:\HR\OC\A488P2.XXX pfrm08 PsN: A488P2
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nisms to improve the functioning of that office, enhance its capabilities as the final bulwark in the Federal Government against

regulatory bureaucracy, and provide for a truly independent Office

of Advocacy.

[Chairman Talent’s opening statement may be found in appendix.]

Chairman TALENT. We are looking forward to the testimony of

the witnesses but, of course, I want to recognize the Ranking Member, the distinguished gentlelady from New York for her opening

statement.

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman.

Today we focus on ways to improve the effectiveness of the Office

of Advocacy in the Small Business Administration. We will look at

how the office can be a more effective advocate for small business

but make technology more independent and giving it more control

over its operating budget. The Office of Advocacy plays a very important role for small business. It works to reduce the burdens it

faces from Federal policies, to research the economic impact of

those policies, and to publish data on the contributions of small

business to our economy. In a nutshell, Advocacy’s goal is to encourage policies that support the development and growth of small

business.

We all know the incredible job the Office of Advocacy has done

to protect the interests of small business within the Federal Government. From saving small businesses $3 billion in regulatory reform to implementing the SBREFA process, the Office of Advocacy

has done whatever is necessary to protect this bedrock of our economy from sometimes overreaching Federal policies.

And as the voice for smaller firms, this office has stood firm to

ensure that small business has the right to compete on a level

playing field.

This hearing provides a unique opportunity to this Committee to

take a good look at how we can strengthen Advocacy within SBA

and help it continue to provide a powerful and independent presence for small businesses in America. As part of that effort, we

must ensure that Advocacy is given the necessary resources, both

financially and politically, to get the job done. Furthermore, we

must provide more autonomy for Advocacy so that its motivations

and decisions are truly independent; independent from agency policy, from politics, from special interests, from anything that might

keep it from acting solely in the interests of small business. Advocacy must be free to act, without fear or favor, to resolve controversial issues in a timely manner.

And while we examine the best ways for Advocacy to achieve this

independence, we should also consider any additional tools it might

need and what new roles it might play to better serve small business.

We know, for instance, that Advocacy has an excellent track

record in fighting for small business in areas such as regulatory

compliance. Perhaps it also needs new tools to make agencies comply with Federal contracting standards. And maybe with more

tools, it can reduce the sometimes overwhelming amount of paperwork that small business must wade through.

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Everyone recognizes the need for the Office of Advocacy, even the

agencies with which it works. We all have a vested interest in ensuring that Advocacy is well equipped to help small business in

this evolving technology-driven economy, because we know that

small business is our future.

Mr. Chairman, I would like to thank you for convening this hearing today. I would also like to thank the panelists for their testimony and for their commitment to protecting small businesses in

our country.

Chairman TALENT. I thank the gentlelady.

Thank you for your comments and I in large measure agree with

them. I think we are all pretty much in agreement that we want

the Chief Counsel to be an independent voice. And the question is

whether we need to do anything to enhance that.

And our first witness on that issue is the Honorable Jere Glover

who is the Chief Counsel for Advocacy for the Small Business Administration. Jere, we are glad to have you here, as always, and

grateful for your service. Let me just say this examination into the

independence of the Chief Counsel’s office shouldn’t be taken by

anybody as a reflection on your independence, because you brought

a period of stability and effectiveness to that office that had been

lacking, if I may say so, before you came on board. And I want to

thank you for your years of hard work on behalf of small business

and your appearance before the Committee today. So please proceed.

STATEMENT OF JERE W. GLOVER, CHIEF COUNSEL FOR ADVOCACY, UNITED STATES SMALL BUSINESS ADMINISTRATION

Mr. GLOVER. Thank you very much especially for those kind

words. I am certainly pleased to be here and talk about the Office

of Advocacy. As in the previous 36 times that I have testified before

Congress since becoming Chief Counsel for Advocacy, my testimony

is my own. It has not been shown to, cleared by, or reviewed by

anyone prior to submission to the Congress.

There are a number of unique things about being Chief Counsel

that makes this job fun and exciting. Let me just mention three of

those. The first is the hiring authority; the second is the ability to

make a difference; and third is the independence.

On the first, the Office of Advocacy was given special legal authority to hire and, quite frankly, fire its employees. This is unique

in the government. It allows us to make sure that we hire people

who are committed to small business, who share the Chief Counsel’s commitment. It also allows us to hire the right experts, the

right professionals to get the job done.

The second issue is the ability to make a difference. There are

far too many jobs in government where at the end of your tenure

you haven’t made a real difference. That certainly is not the case

with the Office of Advocacy. We have accomplished so much that

I can’t even keep up with all of it. The hardest thing that I have

had to do in this job is to get the recognition the office deserves.

You may recall that in 1995 Congress introduced legislation to zero

out the funding for the Office of Advocacy. It was supported by

some key leaders of this Congress. That attack on Advocacy was

5

turned away by a close vote, thanks especially to the former Chairwoman of this Committee, through her leadership.

A year later the office was strengthened, and new and exciting

power was added to the office. My deputy, Kay Ryan, and I have

worked for 10 Federal agencies. Five were commissions. I even

worked for the Office of Advocacy before as Deputy Chief Counsel,

and I have worked for this Committee. I have never worked in a

place where I have been able to accomplish as much as I have here.

How do you measure Advocacy’s accomplishments? Since that

unfortunate congressional episode in 1995, we have tried very hard

to measure our successes. Certainly the 22 letters attached to my

written testimony—and I have another 10 that came in after we

submitted our testimony yesterday—are indications of that.

I asked my staff on Friday if they would contact some of the folks

we have worked with on regulations to send us a letter discussing

the regulatory accomplishments that Advocacy and they together

have done together. I wanted factual statements. This meant that

the associations, their memberships, their organizations, thought

enough of the Office of Advocacy in 3 days to send a letter.

Is that an appropriate measure? No. We have better measures of

success. One of the most significant accomplishments for the Office

of Advocacy has been to actually determine the regulatory savings

from the Office of Advocacy’s actions and from the Regulatory

Flexibility Act. In 1 year, over $5 billion. This does not include regulations that were not proposed, nor does it include regulations

that were delayed and their impacts not felt by small business. The

fact that we are able to measure this is something we are very

proud of; not just that we did it but that we will be able to measure

it in the future.

Your Committee, this Committee, should be very proud of these

savings. Without judicial review of the Regulatory Flexibility Act,

without the SBREFA panels, and quite frankly without saving the

Office of Advocacy from being zeroed out, these savings would not

have occurred.

Back to why the job is fun and why I wanted to do this job. One

is great staff—and let me simply tell you I have the best staff in

government; the authority to get something done for small business, and, finally, independence. With the exceptions of the businesses that I started and ran, I have never had more independence

in a job than I have as Chief Counsel. Before taking this job, I was

happy in the private sector. And I wanted to make sure that the

SBA administrator, Erskine Bowles, and the President understood

the independence of the job and that I would be taking independent positions. My Senate confirmation made it very clear that

the Senate expected me to be independent, and I believe that I

have been. No administration official, no Administrator of SBA has

ever questioned or tried to compromise my independence.

How do you measure independence? Is that even the standard to

use to measure the Office of Advocacy’s accomplishments? I would

rather offer regulatory savings for small business as a far better

measure.

Returning to independence, is the measure the number of confrontations Advocacy has taken contrary to the administration? I

have personally testified 36 times as Chief Counsel. Rarely am I

6

asked to come up and support the administration’s position. To

date, I have taken 25 positions that were different from the administration. Is that the measure? Or is it the 10 or so times where

I have taken independent positions and later had the administration change its position and come over for small business? Is it the

number of times that we fought with Federal agencies, or is it the

number of times that we have had regulations changed to lessen

the burden for small business?

My job is not to yell, but to be listened to. The earlier I get into

a policy discussion at the agency or in Congress or in the administration, the better the outcome. My job is to provide data and information so that the agencies make informed decisions. Informed decisions virtually always come out to the benefit of small business.

Judicial review and the SBREFA panels have made a real difference. I have to achieve consensus at both ends of Pennsylvania

Avenue. There are times that I take positions that no one else supports initially. I have taken positions that no one in Congress—that

few in Congress, no one in the administration, and even most small

business groups didn’t support when I started taking those positions.

Bankruptcy and patent reform are issues where we got involved

very early. There is a theoretical argument that more independence

when supported from the executive branch is beneficial. But are we

substituting a perceived additional independence for a dependence

on a consensus within a collegial body, commissions, where a chairman must get at least one vote to sign off for every decision? Are

you guaranteeing that there will be dissenting opinions in almost

every decision? Are you creating a bureaucracy that is slow-moving

and expensive?

There are a number of questions that I think should be answered

before creating a new commission. And I have a number of questions which I would like to submit for the record concerning that.

In the Senate I testified, as I believe the other previous Chief

Counsels had, that they had been independent. Where is the factual basis for the finding in staff discussion draft legislation at

page 3 and 4, findings number 9 and 10, the current law does not

provide the Chief Counsel with sufficient independence to protect

the interest of small business, or that the Chief Counsel has not

been able to fully execute without undue and unreasonable constraints? Neither I nor, to my knowledge, have the other Chief

Counsels testified that they have been subject to such undue constraints.

There are a number of organizational problems which I think

should be addressed. One is the line-item budget. The second is

what happens between Chief Counsels. Clearly when the office is

vacant, when there is not a Chief Counsel in place, there is no

independence. You cannot ask a career employee to take the kinds

of positions that a Chief Counsel, Senate-confirmed, takes. And

that is clearly a problem. And of course, there is the question of

the ability to administer the Regulatory Flexibility Act.

This is one issue that the law should certainly clarify. I think the

most important thing about the Office of Advocacy is making sure

there is at least one person, and hopefully a whole staff like I have,

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that get up every day thinking, what can I do for small business

today?

Chairman TALENT. Thank you, Jere.

[Mr. Glover’s statement may be found in appendix.]

Chairman TALENT. Our next witness is Karen Kerrigan. Karen

is the President of the Small Business Survival Committee. Please,

Karen, go ahead.

STATEMENT OF KAREN KERRIGAN, PRESIDENT, SMALL

BUSINESS SURVIVAL COMMITTEE

Ms. KERRIGAN. I am chairman now.

On behalf of the Small Business Survival Committee and its

more than 60,000 members, I am pleased to have the opportunity

to testify in regard to this important issue for small business. Increasing the effectiveness of the Office of Advocacy will yield tremendous benefits to America’s small businesses and entrepreneurial sector as well as American taxpayers and consumers.

Again, I am Karen Kerrigan, Chairman of the Small Business

Survival Committee. We are a nonpartisan, nonprofit small business advocacy and watchdog organization, headquartered here in

the Nation’s capital.We remain very optimistic about advancing initiatives for small businesses that have yet to be taken up by the

Congress or signed into law by President Clinton, as well as accelerating an understanding within government about how it affects

the success of the small business sector through regulation and legislation.

Our optimism stems from the fact that this Committee has done

such a wonderful job in focusing its efforts on the issues that matter to small business. We are so pleased with your leadership,

Chairman Talent. You have made a real difference for small businesses by focusing on issues are significant areas of concern or opportunity for entrepreneurs and their work force.

And, Congresswoman Vela ́zquez, it has been a delight working

with you and your staff. Let me applaud you on your recent New

York Times op-ed to repeal the death tax. We sent that out to our

entire membership. Your support has been just critical in building

bipartisan support for repeal.

The topic of the hearing today is another example of your collected commitment to small business, and again we are pleased to

be a part of this. Our organization has testified on the Office of Advocacy in the past. We are in support of their activities and we are

eager to work with the Chairman and all members of the Committee and the Office itself to improve Advocacy with the goal of

making it a more effective voice and entity for small business. The

Office has been a positive voice for small business.

And the issue before us today is how do we best leverage their

presence, their mandate, their resources to best serve the interest

of small business, and is that possible working within their current

structure? There are numerous occasions that we have interacted

with the Office of Advocacy, from events such as the White House

Conference on Small Business to issues such as telecommunications access charge reform, or new rules governing the commercial mail-receiving agencies otherwise known as the ‘‘PO Box dispute,’’ and several environmental regs. Our interactions with AdvoVerDate 11-MAY-2000 06:08 Dec 08, 2000 Jkt 067488 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 E:\HR\OC\A488P2.XXX pfrm08 PsN: A488P2
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cacy have been positive experiences. They indeed have a tough job

on their hands as the Federal Government’s departments and

agencies continue to crank out new rules and regulations at a very

rapid pace, as noted in my written testimony, citing a report by the

Competitive Enterprise Institute that over 4,500 new rules and

regulations are in the pipeline this year. Of those, 963 will have

a notable impact on small business.

Upon a review of the statute that established the Office, I noted

that the Office had wide discretion in terms of their activities they

could implement or pursue for interests of small business within

the government. From conducting research as they currently do, to

making legislative and other proposals for alternate tax structure;

doing the same for eliminating excessive or unnecessary regulations, and developing proposals for changes in policies and activities of any agency of the Federal Government.

There really appears no limit—nonfinancial, that is; Jere is sitting right next to me here, so I have to watch what I say—to ensure that the Office of Advocacy carry out its mandate and goals

of helping small business.

From my review of the Office of Advocacy’s last annual report to

the Congress and President, as well as observing activities over the

past several years, it appears that their function has really tilted

heavily toward addressing small business concerns after a rule has

entered the pipeline and determining whether agencies are adhering to SBREFA. This certainly is their role, along with convening

panels to hear the concerns and receive input from affected small

businesses.

The Office has made a difference, albeit with varying results, in

the convening of these panels to ultimately impacting rules and

educating the agencies of their obligations under SBREFA. While

we believe this is productive work, our preference, and we believe

the preference of small business, would be to devote a share of the

staff’s time working on Capitol Hill to push for what small businesses really want, and that is regulatory reform and relief, expending more effort on the front end to enact meaningful reform.

And supporting Members of Congress who have sponsored legislation while publicly endorsing their efforts would relieve Advocacy

and, more importantly, small businesses from addressing these

issues on the back end.

We believe Advocacy’s support would carry tremendous weight on

the Hill and with the President in current attempts to pass broader

regulatory reform legislation. We believe it is entirely appropriate

and necessary for Advocacy to devote staff time and resources

working with the business community to advance the recommendations of the White House Conference on Small Business not only

as it relates to regulatory reform issues but also legislation that

was desired by delegates to the Conference on tax, labor—there is

a whole host of issues and health care. This list, at least the top

10, are a blueprint for what should be Advocacy’s agenda and priorities for the year.

Mr. Chairman, I list other recommendations for the office—some

of them managerial, some practical—in my written testimony, and

pose questions regarding Advocacy’s lack of action or activity on

some small business issues currently being debated on Capitol Hill.

9

I have also asked our small business leaders for their input and

recommendations about how to improve Advocacy, and that feedback is just coming back to our office. So I hope that we can have

the opportunity to forward those to you as well.

As a small organization ourself, we understand that resources

are an issue here. We grapple every day on how to target our resources to make a real difference for small business. But we also

realize that if we are always on the defense. We are basically losing

the game, which is why I encourage Advocacy to pursue a strategy

of offense as well.

Lastly, in terms of the draft proposal that would pull the office

out of the Small Business Administration and make Advocacy a

three-member commission, SBSC certainly supports efforts to make

the agency more independent. After all, most small businesses

aren’t thinking about Republicans versus Democrats when they are

trying to make payroll every day. The total independence of the Office of Advocacy has tremendous appeal to SBSC. Since we only recently have been able to review the draft proposal and the concepts

in general, we are only at the early stages of discussing what this

would mean for small businesses.

I cited questions in my written testimony that we are asking ourselves and that we are asking our small business leaders. Reaction,

initial reaction from our small business leadership has been from

extremely positive to somewhat cynical. I do have ardent supplysiders that belong to my organization. There is that cynical view

of government and what it actually can do for small businesses.

We certainly believe the proposal is worth our time and attention, and again we are exploring with our small business leaders

this option. Certainly the Office needs a higher profile. We are in

total agreement that politics should not restrain them from pursuing the interests of small business.

I look forward to discussing these issues with you and the Committee and to find solutions so that all of us may better serve those

who represent America’s small business sector. Thank you again,

Chairman Talent, for your ongoing leadership and creativity. I look

forward to answering any questions from you or other members of

the Committee. Thank you.

Chairman TALENT. Thank you, Karen. I am sure we’ll have lots

of questions.

[Ms. Kerrigan’s statement may be found in appendix.]

Chairman TALENT. Our next witness is Daniel Mastromarco who

is President of The Argus Group in Alexandria, Virginia. I am mixing up the order I am calling on people just to sort of surprise them

a little bit.

STATEMENT OF DAN R. MASTROMARCO, PRESIDENT, THE

ARGUS GROUP

Mr. MASTROMARCO. Okay, I will give Mr. Morrison’s testimony

for him. I thank you. With the legacy here left by Jere and Karen,

who yielded such time as they consumed, I should have plenty of

minutes remaining.

Chairman Talent and members of the Committee, I ask that my

full statement be admitted into the record. I appreciate your holding this hearing and thank you again, and your able staff, particuVerDate 11-MAY-2000 06:08 Dec 08, 2000 Jkt 067488 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 E:\HR\OC\A488P2.XXX pfrm08 PsN: A488P2
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larly Barry Pineles, for wanting to improve the environment for

Advocacy.

Let me begin by offering a rather blunt observation. It is doubtful we are going to read about this hearing in tomorrow’s Washington Post. It is even more doubtful that you would find that a

revelation. Daily battles which pit Federal agencies against small

firms are more fun to read about than procedures for good government that prevent these battles from occurring. But if observers

truly appreciated the potential of the Office of Advocacy, this hearing would dominate the front page.

As important as many individual fights are, they are merely skirmishes in a cavalcade of battles in an interminable war as government regulates more than any period in our history. I can see, for

example, on the chart, that Jere had pointed out, savings of $83

million from the Department of Treasury alone. This is approximately .4 percent of the amount of regulatory burden that the Internal Revenue Service imposes on the American people, approximately $250 billion.

We must never be so embroiled in a fight that we forget about

the battle plan, we forget how to fortify our defenses, and forget

what we need in our arsenal.

My comments do not critique any steward of Advocacy, although

I am kind of surprised that every letter that complimented the Office of Advocacy seems to be dated June 20th. On many issues Jere

has done a fine job. He has surrounded himself with able staff such

as Russ Orban, Charlie Ou, Ken Simonson, and others. These individuals are paid partly in inspiration.

Mr. Chairman, Advocacy serves a function that cannot be fully

served by the private sector. I know this because I have been an

advocate in the private sector and I have also spent 6 years on the

staff of the Office of Advocacy. But to perform it well, the Chief

Counsel should not have to choose between being a cheerleader on

critical issues, a humble plaintiff, or an unemployed political operative.

Does anyone really think he has true independence today? Start

with the fact that he or she is nominated by the President, serves

at his discretion, listens to recommendations made for his staff,

and is subservient to the administrator of the SBA fiscally and authoritatively, whose job is to enforce the President’s policies.

The counterargument is that an insider can better influence policy. It is like saying the fox is guarding the hen house, but the fox

can understand the way the other foxes think and therefore can

prevent the attacks. The chief advocate is a poor cousin influencing

broader administration policy, however.

To show the bipartisan nature of the problem, President Bush

went one step further than politicizing the Chief Counsel; he made

the equally political decision not to fill the slot with a confirmable

candidate for years. Shockingly, no one at the White House saw the

rush to have an independent advocate interfering with regulatory

policy. As a result, small business policy defense foundered, research lagged behind, talented people were replaced by appointees

who could not find a home in a ‘‘real agency’’. It lost direction, it

lost respect, it lost morale, and it damn near lost its appropriation,

11

as few in Congress could remember its capabilities or could

invisage its proper role.

Death by policitization is a bad fate for the Office, but death by

neglect may be worse.

So what do we have to do to make the Office a center of excellence where the best and the brightest go to advocate sound policies for small business; as Jere said, each day waking up and determining what they can do to help small firms? Your draft legislation

and that proposed by Senator Bond seek the right result: true independence. It is not a sufficient condition, but it is a necessary condition. Both recognize organic legislation on which the Office is now

built won’t serve to guarantee this result. But neither legislative

alternative is perfect. The Senate bill only shifts masters from the

administrator to the OMB, far from a firewall, as Senator Bond

said; it leaves the Advocate against the wall and in the line of fire.

Advocacy should be given legal authority to issue certifications or

determine if the Initial Regulatory Flexibility Analysis was adequate. Advocacy staff should also be physically separated from the

SBA. They share nothing except a common roof.

Moreover, whether a Commission or a Chief Counsel approach is

adopted, the Presidential appointments must be subject to Congressional oversight with a definitive term of office.

Point 2: Allow the Chief Counsel to hire professionals without

going through the normal competitive hiring procedures.

Point 3: Increase authorizations of funding for intramural and

extramural economic research and for Advocacy. Ironically, Members of this Committee, the Internal Revenue Service used to argue

with appropriators that with additional funding it could save taxpayers billions of dollars through better enforcement tools. It

worked. If the Congress agreed to fund the Office to the degree it

saves resources imposed in the private sector, it would be flush

with capital.

Point 4: Enact regulatory improvements. There is ardent interest

in giving Congress more authority to oversee rulemakings, increase

the review panels, and require public benefit-cost analyses. View

these regulatory changes as part of an overall package that

strengthens the weapons of Advocacy.

Point 5: Ensure better coordinated research functions. More creative means should be employed to leverage the resources of other

agencies, for example, through the use of fellowships. Economists

must be assigned to support advocates instead of performing research that is academic only.

Last, stop funding regional advocates. Ever wonder what a regional advocate does? They are like the three people standing at a

road construction site while one digs.

Pay the Office and its mission the highest compliment. Engross

yourselves not only in the question of how many dollars should be

spent, but in a more essential question: How might we structure

the Office to achieve its goal? Think of yourselves as authorizing

a defense bill, but this time it is the defense of the American entrepreneurs that is at stake.

Chairman TALENT. Thank you Mr. Mastromarco.

[Mr. Mastromarco’s statement may be found in appendix.]

12

Chairman TALENT. Jim Morrison and senior policy adviser of the

National Association for The Self-Employed. Jim.

STATEMENT OF JAMES MORRISON, SENIOR POLICY ADVISOR,

NATIONAL ASSOCIATION FOR THE SELF-EMPLOYED

Mr. MORRISON. Good morning. And thank you Mr. Chairman,

Ranking Member Vela ́zquez, for inviting me here to appear here

today. I am James Morrison, the Senior Policy Advisor for the National Association for the Self-Employed. On behalf of all our members and the Nation’s 15 million self-employed, we commend the

Committee for holding this hearing. We again commend the Committee for its distinguished record on regulatory oversight throughout the last several years on behalf of small business, including the

very thoughtful proposed legislation that is before us this morning.

Today’s hearing focuses on the Office of Advocacy. Can it become

more effective? Should it be more independent? By and large, the

Office has been quite effective when it has been led by strong Chief

Counsels. Most years it comments on dozens of proposed regulations, getting changes in many of them, and even getting some of

them withdrawn altogether. Its economic databases are the best

anywhere on small business. They have been very helpful in setting economic policy and developing legislation. Its technical studies have been invaluable in responding to regulations. Most small

business regulations that have dealt with the Office of Advocacy,

including our own, have a very high regard for it.

Can it be improved? Sure. Advocacy’s core mission is finding excessive and burdensome regulations. It gets its authority to do this

from the Reg Flex Act and SBREFA. Strengthen Reg Flex and

SBREFA, and Advocacy can do more. And I think the time has

come to do this, because in recent years we have been hitting

against some of the limitations of those laws.

In the recent American Trucking Association case, the appeals

court refused to give so-called deference to Advocacy’s views on how

an agency should comply with the Reg Flex Act. In fact, the court

ruled very much against Advocacy’s views on the issues in that

case. That is rooted in a technical problem with the way the Reg

Flex Act and SBREFA were drafted. The Committee’s proposed bill

I think very effectively solves that problem. It authorizes Advocacy

to issue regulations governing agency compliance with Reg Flex

and SBREFA and it requires agencies to give great weight to

Advocacy’s views, which means the courts will too. These are very

good provisions in the draft legislation and we urge the Committee

to approve them.

That recent ATA decision also highlighted a loophole in the Reg

Flex Act that we hope the Committee will be able to close. Agencies

are not required to weigh an indirect impact of their rules on small

business. So in this case, the EPA could hand its rule off to the

States to implement and ignore the subsequent effects on small

business because the results were ‘‘indirect.’’

Indirect impacts that agencies can readily foresee or that they

hear about as they draft their rules should be included in the analyses required by Reg Flex and SBREFA. The Advocacy review panels that were created by SBREFA have been a very helpful innovation. We hope that the Committee succeeds in its efforts to bring

13

the IRS under the review panel process. That would increase

Advocacy’s effectiveness.

Two other SBREFA innovations were the National Ombudsman

and the Regulatory Fairness Boards. These were placed under the

SBA administrator, which has proven awkward. The SBA administrator is not otherwise engaged in the overall Federal regulatory

process. Advocacy is. The Committee’s bill would shift those entities to Advocacy. That is a good idea and we support it.

We would also like to see a renewed emphasis on the Reg Flex

requirement that agencies review their existing regulations every

10 years. As the Committee knows from its hearings on this issue,

very few agencies have even lifted a finger to comply with this law.

Advocacy could be more effective if it had new tools to crack down

on this abuse.

And no discussion of Advocacy’s effectiveness would be complete

without consideration of its budget. Instead of rising to meet the

new obligations created by SBREFA, Advocacy’s budget actually

has declined. In 1991 the Office had 79 professionals. Today it has

47. They attempt to police about 80 Federal agencies. In 1999,

those agencies spewed out over 8,000 proposed and final rules that

were sprawled across 70,000 pages in the Federal Register.

Advocacy helps a broader swath of small business than anything

else that SBA does, but it gets less than one-half of 1 percent of

SBA’s budget. And that is down, too, by the way, from the 11⁄3 percent that Advocacy used to get, one-half of 1 percent.

Today the Committee is also considering the question of

Advocacy’s independence and whether it should approve draft legislation replacing the current Office with a three-member commission. The commission would have some advantages. We would

probably not see vacancies among the commissioners that last over

3 years, as we have seen with the Office of the Chief Counsel.

Advocacy’s clout might approach that of OMB’s, at least within the

subject area of small business.

Advocacy would have more freedom to set its own policies without reference to White House and administration preferences.

But there are also disadvantages. Advocacy increasingly gets into

the regulatory process early, before Federal Register publication

with many agencies; notably, EPA and OSHA, the review panel

agencies, but other agencies as well. To some extent, this reflects

a level of trust and mutual respect that comes from having senior

administration political appointees talking to one another. Taking

that away by removing Advocacy from the executive branch would

make the process a great deal more adversarial, a lot more formal

and full of lawyers, and a lot more time consuming. Crucially, it

would probably spell the end to informal Advocacy involvement in

agency rulemakings prior to the Federal Register publication except where that early contact was mandated by law.

If the commission exercised any sort of veto over executive

branch regulations, there would certainly be constitutional issues

raised regarding the separation of powers. Even without such a

veto, an independent commission’s involvement in Advocacy’s review panel process at EPA and OSHA could be legally problematic.

A commission might be less political than Advocacy, but political

influences would never be banished entirely. The commissioners

14

would be political appointees with allies and loyalties. They would

inevitably think about life after the commission, including future

political activities.

The setup of the commission raises other concerns. Under the

current setup, Advocacy needs one strong leader. Under the commission, it would need at least two. Most independent commissioners, most independent commissions that are effective in Washington, have large staffs dealing with highly technical regulations

that the commissioners themselves promulgate and administer,

covering specific industries. This is the pattern at the FCC, the

NRC and the SEC, for example. But such would not be the case

with this proposed commission. Rather, this commission would be

constantly trying to stay current with other agencies’ regulations

promulgated and administered by them, regulations that span the

entire range of American business and regulations that flow at firehose rates.

There is no parallel in government for such a commission. And

absent strong leadership, it could descend into confusion. Yet the

structure of the commission doesn’t really communicate decisiveness. Having every major decision determined by a majority vote

of three lawyers in a scheduled meeting does not to me suggest an

ability to set crisp priorities and to react rapidly. Add to this an

inherently adversarial relationship with the other agencies—well,

it might work. It is an interesting idea, but I think it is a stretch.

It would also be a stretch for many groups in the small business

communities to support a new agency. After years of calling for

smaller government, asking for a new agency because it suits small

business could expose these groups to charges of political hypocrisy.

Yet, ignoring the bill would make the small business group seem

uninterested in the problems of overregulation. Not a great position

to be in.

Our recommendation would be to enact incremental changes that

would strengthen Advocacy’s effectiveness now, without foreclosing

future options like the commission. And let’s keep working on the

commission idea.

The changes we suggest are giving Advocacy a separate authorization along the lines of the Senate-passed bill; mandating that

Advocacy’s views be given great weight by other agencies as in the

commission bill; authorizing Advocacy to issue regulations governing agency compliance with Reg Flex and SBREFA, as is also

in the commission bill; closing the indirect impact loophole; passing

H.R. 1882, which would put IRS under the review panel process;

placing the Ombudsman and Regulatory Fairness Boards under

Advocacy, as again in your commission bill; expanding Advocacy reviews of existing regulations under section 610 of the Reg Flex Act;

and assuring that Advocacy’s appropriations are adequate for its

mission.

Mr. Chairman, that completes my testimony. I will be happy to

take any questions.

Chairman TALENT. Thank you Jim.

[Mr. Morrison’s statement may be found in appendix.]

Chairman TALENT. And now the suspense. There are two witnesses left. Todd McCracken, President of National Small Business

United.

15

STATEMENT OF TODD McCRACKEN, PRESIDENT, NATIONAL

SMALL BUSINESS UNITED

Mr. MCCRACKEN. Thank you, Mr. Chairman, it is a pleasure to be here today. Again, my name is Todd McCracken, I am President

of National Small Business United. I am very happy to be here to

share our views about improving the SBA’s Office of Advocacy in ways that that office could be further improved and strengthened.

This office is, we have all said today, is crucial to the small business community and it has performed at A consistently high level,

particularly when a permanent Chief Counsel is in place. However,

we believe it is time to strengthen the Office of Advocacy and further raise its profile within the Federal bureaucracy and outside. The Chief Counsel for Advocacy has always been intended and perceived by most to be an independent voice for small business

housed within the SBA. But that independence doesn’t actually exist in the law. This tug between legal reality on one hand, and

perception and expectation on the other, is one way that the office

is a unique institution within the Federal Government. Certainly

maintaining this independent role while being a Presidential appointee within an agency is one of the ongoing difficulties of this

job.In the past, we have always believed that this balancing act pro- duced the best outcome for small business. In previous testimony

before this Committee, we have not advocated for increased independence for the Chief Counsel. After all, we believe Chief Counsels could be more effective in advocating for small business in the

regulatory process if they are perceived by agencies as part of the

administration rather than an outside bomb thrower.

Yet a very healthy degree of autonomy is also called for, for the Chief Counsel to have the confidence of Congress and to ensure

that the Chief Counsel does not feel pressured to just go along with

another agency within the administration.

Balanced properly, this situation can create a win-win scenario

that everyone seems to be after these days. But this balance is a

difficult one that every Chief Counsel must seek to maintain but

which they cannot maintain alone. They must have an engaged and

supportive partner in the SBA administrator. Over the last 25

years they seem to have done well in that regard.

We would be kidding ourselves to think that there haven’t been

tensions. We believe the past and present Chief Counsels have

managed to work through most potential problems in a reasonable

way. Nevertheless, events of the last few years have convinced us

that the balance we have relied upon may have moved too far away

from independence. The Office has had to fight to maintain funding

within the agency and has been potentially affected by personnel

freezes stemming from problems in the rest of the agency. Also,

SBREFA has given greater responsibilities to the Office, which

would put them in a somewhat more adversarial position with the

other agencies.

Given these and other developments, we have broken with our

past stand and feel it time to impart a greater degree of independence to the Office. The Senate Small Business Committee has included in the SBA reauthorization bill a proposal to give the Office

of Advocacy greater independence, primarily by requiring a sepaVerDate 11-MAY-2000 06:08 Dec 08, 2000 Jkt 067488 PO 00000 Frm 00015 Fmt 6633 Sfmt 6602 E:\HR\OC\A488P2.XXX pfrm08 PsN: A488P2
16

rate line-item appropriation for the Office. We fully support this

approach and hope this Committee will move forward this year to

also adopt this language while we continue to debate and explore

other alternatives for strengthening the Office. There is nothing in

the Senate proposal that would substantially contradict other proposals, should they be enacted some time in the future.

The Committee staff has furnished us with a copy of a draft bill

which would create a Small Business Advocacy Commission. To the

extent that the goal was to create a fully independent agency advocating for small businesses, this is an excellent bill. The lines of authority are clear and well thought out, and the creation of three

distinct bureaus is a very sensible step, recognizing the key importance of these roles within the Office.

But I believe the small business community should be very clear

about what its goals will be in embracing such a change. There is

little doubt that the agency’s job would become simpler with fewer

inherent conflicts, though as Jim pointed out, the commissioners

will have their own political axes to grind and these biases will undoubtedly affect commission decisions and fewer of the balancing

acts that I described before. This clarity of purpose might make us

all feel better and more confident that there is no, or at least less,

administration influence on the Office, but will it make the Office

more effective in carrying out its duties on behalf of small business?

We are not yet convinced that the benefits of full independence

completely outweigh the benefits of having an advocate within the

administration. The Senate approach would move the Office closer

to independence without this fundamental realignment. It would

seem to us wiser to begin with this more incremental approach,

while recognizing that a more fundamental overhaul could prove

beneficial in the future.

The SBA Office of Advocacy is one of those inspired functions of

government that actually works pretty well. However, it is now

time to improve and strengthen the Office. We believe that the

Senate bill is the best first step in this direction and should be enacted in the short term.

Chairman Talent’s bill has much to commend it as well, especially if we reach the conclusion that the more modest measures of

the bill have not worked. But first I believe we should give those

changes the trial period they need while continuing the debate

about how we can create a more effective Office, and how we weigh

the relative benefits of full independence. I thank you for the opportunity to be here this morning.

Chairman TALENT. Thank you, Todd.

[Mr. McCracken’s statement may be found in appendix.]

Chairman TALENT. And our final witness is Keith Cole who is a

partner—I am not going to try and pronounce everybody’s name in

the firm. Keith, thank you for being here.

STATEMENT OF KEITH COLE, PARTNER, SWIDLER BERLIN

SHEREFF FRIEDMAN

Mr. COLE. Thank you, Mr. Chairman, members of the Committee. My name is Keith Cole and I am a partner in the law firm

17

of Swidler Berlin Shereff Friedman, located here in D.C. I very

much appreciate the opportunity to testify at today’s hearing.

I would like to state for the record that I am not testifying today

on behalf of my law firm or any particular client but solely on my

own behalf. My testimony is based on my expertise as a former regulatory affairs counsel to the Senate Small Business Committee

and my experience in the private sector since leaving Capitol Hill.

While in the private sector I have followed closely the Office of

Advocacy’s efforts to implement and oversee agency implementation of the Regulatory Flexibility Act. Over the past 5 years I have

been involved in a number of rulemakings which the Office of Advocacy has actively participated in. These include both high-profile

rulemakings, like the EPA’s rule revising the Ozone and Particulate Matter Clean Air Standards, as well as other less controversial

rulemakings.

My overall impression is the Office of Advocacy does a good job

raising with the various Federal Government agencies the deficiencies of the Reg Flex analyses prepared by these agencies. I

have observed as a current advocate, Mr. Glover, has pursued some

of these issues to the very highest levels of the executive branch

in an effort to make the voice of small business heard, and I believe

we should thank Mr. Glover for those efforts. However, I have also

observed that the Office of Advocacy must to some extent pick and

choose its battles. Part of this is due to resource constraints which

face any organization, but resource constraints alone are not the

full story.

As an office within the Small Business Administration, the Office

of Advocacy is part of the administration team. And, as others have

noted, there is no current statutory basis for the independence of

the Office.

When other players on the administration team propose regulations that run counter to the interest of small business, or shirk

their duties under the Reg Flex Act, the Advocate faces conflicting

pressures. Does his loyalty lie with small businesses or with the

administration team? And even if his loyalty is truly with small

businesses, without a statutory basis to protect the advocate’s independence, each advocate must consider the long-term effects of

pushing too hard on behalf of small businesses in any particular

rule making.

As an advocate from within the team, the Office of Advocacy’s

powers depend to some extent on remaining part of the team. Will

the other players on the administration team continue to agree to

work with the advocate in future rulemakings if the advocate goes

beyond what the administration considers to be a ‘‘reasonable’’

amount of advocacy for small business.

Looked at from this perspective, it may be in the best interests

of small businesses for the advocate to occasionally pull some

punches. According to this view, in the long run, the interest of

small businesses generally will be maximized if the advocate would

not push too hard or too often for the interests of particular small

businesses.

While SBREFA has increased the tools available to Advocacy, it

has not reduced the conflicting pressures facing the Office. In fact,

the strength and tools provided by SBREFA may in some ways act

18

to increase the pressures on Advocacy. Especially in high-profile

situations, the advocate continues to risk a long-term loss of influence on the administration team if he or she pushes the small business agenda beyond a certain point.

The chief lesson that I have learned over the last 5 years is that

given the lack of statutorily defined independence of the Office of

Advocacy, and its hybrid role in trying to be an independent advocate while remaining a team player, there are always going to be

tensions between the interest of small businesses affected by a

pending rulemaking and the long-term interest of the small business community in having an effective advocate in executive

branch rulemakings.

Let me now turn to comment on the discussion draft. First, Mr.

Chairman, let me commend you and your staff on the work that

has gone into this document. The draft clearly reflects many hours

of research into the formulation of other independent commissions

and earlier examples of the transfer of functions between governmental agencies. There are many lessons to be learned from these

examples and the draft, I believe, does an excellent job of incorporating that experience into this effort.

As to the reorganization of the Office of Advocacy as proposed in

the draft, I believe that with two important caveats, enactment of

this legislation could bring significant benefits to the small business community. I don’t believe we would see drastic changes overnight, since the Office of Advocacy functions fairly well today. However, over the long term I believe the benefits will be readily apparent, provided two conditions are met: First is adequate funding,

and second is finding the right people to serve on the commission

and its staff.

Let me elaborate on my reasoning in a little more detail. First,

I believe that the structure of an independent commission will go

a long ways towards eliminating the conflicting pressures felt by

the current Office of Advocacy. The discussion draft would provide

the statutory independence for the commission that the Office of

Advocacy currently lacks.

With its independence firmly established in the statute, the commission will be free to zealously advocate the cause of small business in all rulemakings, subject only, of course, to resource constraints. By removing the advocacy functions from the Small Business Administration, the draft allows the SBA to focus on what it

is good at, while providing the commission with a more focused

mission on behalf of small business advocacy.

Second, the draft establishes several new important functions for

the commission, and I can go into those in more detail during questions.

Third, I believe that the transfer of the duties of the regulatory

enforcement ombudsman to the commission is appropriate. The ombudsman was established with great hopes by SBREFA in 1996;

however, I must say that I have been disappointed by the effectiveness, or lack thereof, of the ombudsman to date. I view this as a

troubled program in need of reform, and I believe the changes

made by the draft would bring new life and energy to the position

of ombudsman as well as to the Regulatory and Enforcement Fairness Boards.

19

Lastly, I believe that the expanded rights of the commission to

file comments and participate in agency adjudications will allow

the small business community’s voice to be heard in areas where

it has not been heard before.

While there are a number of minor issues that I would want to

work on with staff prior to its enactment, overall I think the discussion draft is a big step in the right direction. I think the concern

about the commission’s access to information and ability to engage

early on in agency decision-making can be resolved through proper

drafting of the provisions of this legislation.

I would urge you to introduce it and move for its early enactment. However, I want to reiterate that resources and people will

be keys to making the commission a real success. I don’t know of

any way for Congress to legislate the quality of the people who

serve on the commission, but I want to stress the issue of resources.

First, I would suggest working with the Parliamentarian and the

Appropriations Committees to ensure that the commission is funded from the same Appropriations Subcommittee, that is, Commerce-State-Justice, that currently funds the Office of Advocacy

within SBA. This would minimize but not eliminate the find, quote,

‘‘new funding’’ for the commission.

Second, I would work to get a strong buy-in by the appropriators

on the concepts of the commission. And finally, I would consider

whether any independent funding mechanisms could assist in providing the commission with the resources adequate to fulfill its

mission.

Thank you very much, Mr. Chairman.

Chairman TALENT. Thank you, Keith.

[Mr. Cole’s statement may be found in appendix.]

Chairman TALENT. We will go to questions now. I appreciate all

the testimony and the comments, some of which were very provocative.

Let me go a little bit into this. Jere, how many Chief Counsels

were there during the Bush administration?

Mr. GLOVER. There were two Chief Counsels that served at some

time. There were a number of acting Chief Counsels that wandered

through.

Chairman TALENT. Wandered through. I think I should have said

‘‘acting chiefs or Chief Counsels.’’ I think there are—staff tells me

there were five. It is interesting that if we ask people who were

around in that period of time, they probably would have a difficult

time. They would probably disagree as to exactly how many there

were because, as you said, they just wandered through.

Mr. GLOVER. We chose not to put their pictures on the wall in

the office. The budget for frames didn’t permit for that.

Chairman TALENT. So basically the whole administration, that

there really wasn’t a Chief Counsel for Advocacy.

Mr. GLOVER. Frank Swain held over for a period of time, and the

last 6 months there was someone appointed.

Chairman TALENT. Frank was a good fellow, and he was only in

there in the first few months and then he was gone.

Now let’s go over amicus briefs. I understand your point about

if you negotiate hard with the Department of Justice, you often

20

don’t need to file an amicus brief. And in all these areas I want

to reiterate what I said at the beginning: that you, with your independence and strength, have brought real meaning I think to the

Office. But obviously you see—you are going to see the line I am

getting at here. The question is whether you have done it despite

the institutional arrangement, whether you have overcome that; or

done it because of the institutional arrangement. My argument is

that you have done it despite it, really. Amicus briefs, you filed one

in the Northwest Mining case; 1998, right?

Mr. GLOVER. Right.

Chairman TALENT. Before then, there was one other instance in

1994 when you threatened to file one. It did get some changes from

the Department of Justice. That was in 1994.

Mr. GLOVER. From the Federal Communications Commission.

Chairman TALENT. That is right, the FCC. Then according to our

research, there was one other time when the Chief Counsel was

going to file an amicus brief, that was in 1986. What happened?

Mr. GLOVER. There are people who know more about that than

I do. My understanding is he got a lot of pressure and pulled back.

Chairman TALENT. He withdrew it under mysterious circumstances. But what we were told is that he was informed he

could either file the amicus brief or continue as Chief Counsel, but

not both. And surprisingly I guess, or not, he decided to withdraw

the amicus brief, which I don’t blame him for that.

Mr. GLOVER. The Department of Justice certainly raised similar

arguments with me. And I said—they raised some very interesting

arguments. I said, those are wonderful arguments; why don’t you

brief them?

Chairman TALENT. Exactly. I think if you have a strong enough

person and he has close enough ties to the White House, that almost any institutional arrangement—it doesn’t matter whether we

have—because, see, if you have—your objections to a commission,

for example, that it would be hard to pull people together and you

would have to have the other commission members to go along—

well, if you have a strong person as president of the commission,

that goes.

Mr. GLOVER. I have worked for a bunch of commissions. And I

will tell you that the talent of commissioners varies, and the ability

to make decisions is something that is frightful.

Chairman TALENT. What I am getting at, after looking at this,

is the things that make the current arrangement work tolerably

would make a commission arrangement work very well. On the

other hand, when you don’t get a strong Chief Counsel or even if

they are a strong person, if they don’t have the necessary ties to

the White House, then this current arrangement doesn’t work at

all, whereas a more independent arrangement would work. The

fact of the matter is that even under your stewardship, only one

amicus brief has been filed.

Mr. GLOVER. That is correct.

Chairman TALENT. Now the Department of Justice is always, I

mean, by hypothesis, going to be defending the government’s position. So they are always going to be arguing or trying to mediate

you out of filing an amicus brief.

Mr. GLOVER. Absolutely.

21

Chairman TALENT. The very fact that there is a mediation arrangement seems to me to be a compromise, to some extent, of your

independence, the fact that you have to go through this mediation,

even if you don’t want to.

Mr. GLOVER. Let me make this clear. There is a mediation procedure for other Federal agencies. We don’t go through that. I have

simply said that is not appropriate for us. We do notify the Justice

Department after we have made a decision to go forward. As any

lawyer of the court, you have an obligation to try to resolve disputes short of litigation and as efficiently as you can. And we try

to do that. And we have told the Justice Department, and we have

told the Federal agencies about our decision to go forward—we will

then discuss it with them, and if we can resolve it, we will. But

we do not go through the mediation procedure, we don’t think that

is appropriate.

Chairman TALENT. The statement you made in your testimony,

which I think is a little bit revealing, and the fact that you make

it because, as I said before, you have had a very strong voice, an

independent voice on behalf of small business, you say at any

time—I should add further that any time the Chief Counsel has to

disagree publicly with the Administration or the Congress, the disagreement must lack acrimony to ensure that the doors remain

open to future policy deliberations, often on the same issue.

Now I certainly agree, when you have to disagree publicly with

the Congress, it should always be that way. We are, in no way,

here debating the Office of the Advocacy from the Congress. That

is an entirely different thing. But I am not sure, Jere, I always

want your disagreement to lack acrimony. I hear what you are saying. We had a hearing, I guess, now a month or 2 ago where Mr.

Mikrut came here from the Treasury Department to defend the Department’s position regarding installment sales and regarding the

cash versus accrual basis. And we had—the members of the committee on both sides of the aisle had a number of disagreements

with Mr. Mikrut, which did not lack acrimony, and appropriately

so.

What I am trying to point out to you, and maybe some of the

other witnesses here, as you know, while mediation and compromise and negotiation is a good thing, sometimes it is good to

show a little fang, too. And you can do that, I agree with you, it

is very difficult for you to do that if you are in the same administration subject to the same authority. Even you, much less a weaker person. Go ahead and comment.

Mr. GLOVER. Well, there is certainly a number of instances, and

you mentioned one in which, shortly before your hearing, there was

lack of acrimony between my conversation with him, and quite

frankly, with his bosses. Certainly that was not acrimonious at all.

It is, quite frankly, quite poignant and quite specific. We do have

those conversations, obviously, with the head of OSHA. For example, we make sure that in the fight for ergonomics and for the

health and safety rule, we have been very tenacious and we are

very tenacious. We are not mean spirited. We try to always be fair

in our presentations. We try to argue from a factual basis, from a

legal basis. And we, quite frankly, don’t issue a lot of press releases

22

when we win because that doesn’t help the next battle, the next

fight.

So, to some extent, when we talk about recognition of Advocacy’s

accomplishments, we don’t go and brag when we finish a fight. But

there are tenacious fights, those that are on my staff know there

is probably no one more tenacious in a battle than Kevin Bromberg

with the Environmental Protection Agency. So I don’t want to overstate the fact that we wish to have good, pleasant relationships.

That is not always possible, and quite frankly, we often do end up

very, very tough.

Chairman TALENT. I will say this also to the other representatives of the small business associations here, I’d like a Chief Counsel who is in a strong enough statutory position that the heads of

these agencies want to avoid acrimony with you. I like the position

where they say to themselves, you know, what if we go ahead with

this without calling in Jere Glover, and maybe modifying it if he

asks us to, he is going to call a press conference and rip us up one

end and down the other, and we are going to look pretty bad.

And we don’t have that situation now because as a practical matter—I believe you have pushed it as far as you can push independence, Jere. I think you have done about as good a job as you can

do. You had a list of accomplishments, and I am not going to quibble with them. I just am very concerned, and historically, there are

times we have not had strong Chief Counsels, and we have all seen

what has happened there. Even when you do, there is a limit to

what you can accomplish, that is what I am getting at.

The bone I have got to pick with you is when you say there is

no evidence and no testimony to support the commission idea. We

have had some here today. I could come up with evidence if I wanted to call a whole bunch of witnesses over, to some extent, with

this Administration and the past administrations as well, about

how people get appointed and how decisions are made. And I want

to have a series of hearings hauling out all the dirty linen.

I guarantee you, and I think you know I could get that stuff on

the record. That isn’t my style. I don’t want to embarrass people.

And I like to recognize when people do a good job as you have done.

Everybody familiar with this agency knows the extent to which

there has been interference, especially by past administrations.

I just went through what happened in the Bush administration.

We went a whole administration without a Chief Counsel, basically. So that evidence is there. The question is my judgment,

whether this idea, the commission idea for fixing it, introduces

more problems in terms of depriving you of flexibility and the rest

of it than it does assisting it.

Mr. GLOVER. I mentioned I prepared a number of questions and

comments which I would like to submit for your staff, because I

think it is a staff discussion draft, and I think it is important to

resolve some of those issues if we go forward with the commission.

But I think—and if I thought a commission were better—for small

business, I would be very comfortable and very happy to say so.

Perhaps I am, by nature, by personality, too independent to the

idea of me having to get other people to agree with what is right

for small business, I think would be terribly frustrating for me. Because I already have, in some cases, Congress in some cases, the

23

administration in virtually every case, the agencies to fight. If I got

to fight to get another vote, that is one fight I don’t want to have

to take.

Mr. Mastromarco, let me ask you a question. Let’s go to the regional advocates. Okay. Now, your experience, as you watched the

agency over the years, is how much of them have a political background as opposed to a small business background?

Mr. MASTROMARCO. Close to 100 percent.

Chairman TALENT. Have a political background. And that is administration after administration.

Mr. MASTROMARCO. Yes. Well, they are just political plumb positions. That is their purpose.

Let me, if I can, extend a little bit of the remarks that Jere

made. Sometimes it is not necessarily the positions that the Chief

Counsel takes that is as important as those he does not take. It is

a question of when he gets involved in issues. On the legislative

front, for example, the Congresswoman had mentioned earlier her

support for the elimination of death taxes, which amounts to a Federal-leveraged buyout of family businesses. I am not aware that

Jere has taken a strong position for repeal on the Hill. It is those

types of issues, where they have a decision between getting involved, and not getting involved that is very important. I agree

with Jere that, he is, of course, a lovable guy. That is part of the

reason why he can be convincing. He also tends to be independent

when needed. I don’t think ‘‘acrimony’’ is quite the right word. I

think ‘‘aggressiveness’’ might be, perhaps, a better word.

Chairman TALENT. You know, Dan, let me end run you for a second. I hear everything that you are saying. But sometimes some of

these agencies just go after small business people.

Mr. MASTROMARCO. Absolutely.

Chairman TALENT. What if they went off the environment? Let’s

say the Sierra Club would be acrimonious, okay. If they went after

a lot of these other special interests, they would be acrimonious

and I don’t blame them. I think for us to institutionalize people,

this Committee has tried to do this, we get a little acrimonious

when we have to, and the gentlelady maybe a little more than I

do sometimes. And, you know, it works. If they know you are willing to do that, it works a little bit. So let’s not shy away. I hear

what you are saying. There is never an excuse for being uncivil. We

have tried always to be civil.

Mr. MASTROMARCO. That is what I was saying. It does work. Aggressiveness worked. It is part of my essential DNA and why we

were successful when I was with the Office of Advocacy, we took

very aggressive stances on unpopular issues.

Chairman TALENT. Jere, we will let you have a comment to that

if you want. But let me ask today something first. Today you mentioned something—well, maybe we can take just to the line item

now and see how that works and then do a commission idea later

on. Let me tell you why I disagree with that. There is a window

to do this sort of thing. When that window closes as a political matter, it—and you are getting a new administration, no matter which

party wins, because then it is not a political thing.

I mean, if we establish this commission this year, we have no no

idea whether it is going to benefit a Republican or Democratic

24

president. In other words, if you are a Democrat sitting here, you

are thinking, well, if we establish this commission, there will be

greater independence, and then from my perspective, saying to the

same thing about the Democrats. So once we get a new president,

there is no way we are going to get this done, because whoever that

administration is going to say I don’t want this new commission

out there fighting my appointees.

There is a pretty decent chance that I think an outgoing president might sign it. So respond to that, would you?

Mr. MCCRACKEN. You make a good point in terms of the political

timing of when you can do this kind of thing. But my deeper concern is we are just now starting this debate. As you know, we got

July and a little bit of September and that is it. I would be surprised if we could reach a high degree of consensus between the

House and the Senate and getting this whole thing done this year

in time. And I would hate to see the Congress miss the opportunity

to at least do the improved independence through the appropriations process while waiting for that kind of consensus to develop.

Chairman TALENT. I am just disinclined to have something

which continues in name but not in substance, unless you have an

extraordinarily strong person as Chief Counsel, in which case you

don’t need the line item either, do you? All the arguments against

the commission, the only grounds that you can do it collegially, and

you have a strong-person thing, it is all arguments against the line

item. If you got a strong enough person, they will go and fight for

fun as Jere has done.

The line item, on the other hand, to the extent that you have a

problem getting visibility and the rest, it was, you know, I don’t

know that it changes anything. And I don’t know that I want to

be a party to something that, you know, you will go out and brag

about what enhances the independence of the Chief Counsel when

it really doesn’t.

Jere, did you want to respond to what Dan said? You can if you

want.

Mr. GLOVER. Just to be factually correct, we have taken a number of positions on estate taxes beginning in 1995 when we supported the estate tax provisions in the Contract with America. We

sent letters to the Ways and Means, House Small Business Committee, Senate Small Business Committee. We supported NFIB’s

proposal in previouse years on the estate taxes. We have taken

three different positions on estate taxes, always in support of estate tax reform. By and large, we respond when Congress asks us

to, and every time that we have been asked on the estate tax, we

have been very supportive of reform.

Chairman TALENT. I will recognize the gentlelady and thank her

for her patience.

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. I think that we

might be able to get the Senate to act on this legislation before

they act on the reauthorization bill. Mr. Glover, we currently have

a process whereby the SBA has procurement goals with other agencies. I am a little concerned that an agency such as the Department

of Energy has a small business goal of 5 percent for Fiscal Year

2000, while the U.S. Department of Agriculture has a small business goal of 43 percent. I think the way it is structured with a midVerDate 11-MAY-2000 06:08 Dec 08, 2000 Jkt 067488 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 E:\HR\OC\A488P2.XXX pfrm08 PsN: A488P2
25

level career SBA employee going to these big agencies makes it unclear whether the SBA is dictating the terms to an agency, or

whether an agency is dictating the terms to SBA. And more often

than not, it appears that the agency is dictating the terms to SBA.

It seems to me that if we create an independent Office of Advocacy,

many of the tools that you already use to get agencies to comply

with SBREFA could be applied to get agencies to comply with Federal small business procurement requirements. Could you please

comment on that?

Mr. GLOVER. As most of this committee knows, the procurement

battle is one I think I have lost every step of the way from opposing

some of the reform legislation that went through, to trying to get

originally goals for women and other things through. We won some

things, but we have lost a lot more than we have won. The goal

process, I only recently fully understood it and how it works, and

it is certainly not functioning. Whether it is in the Office of Advocacy or whether it is someplace else in the SBA, it needs to be at

a much higher level and needs to have much more senior commitment to it.

These goals should drive significant dollars to small business,

and I am surprised that it is being decided as low down as it is.

It clearly has to be at a very high level, the Administrator has

fought for the top goal, raising it to 23 percent, for example. But

when you drop below that, it needs to be raised up to a much,

much higher level somewhere, whether it is Advocacy or within the

SBA.

Ms. VELA ́ ZQUEZ. Would you feel comfortable with the Office of

Advocacy becoming an independent agency office to do the job that

SBA is not doing?

Mr. GLOVER. I have always believed that I will do the best I can

with whatever task, and whatever resources that are provided to

me. If I am tasked to increase government procurement, I will fight

for it very hard. When we lost the fight, we created PRO–Net and

we had a whole plan to force agencies to use PRO-Net that weren’t

meeting their goals. There are things that need to be done in the

procurement area. But I think that is up to you folks and the administration to decide where it is housed.

Ms. VELA ́ ZQUEZ. Mr. Glover, the SBA has never won a department appeal on contract bundling. Do you think the Independent

Office of Advocacy with jurisdiction over this issue will be able to

change this?

Mr. GLOVER. I don’t know. The laws have changed. Bundling is

one of the worst problems that we have seen. We have tried to document it. We know how bad it is. Technically, can we win a fight?

I don’t know. But there is no question that the hearings that this

committee has held, your involvement and your commitment, have

been important to raise that issue. It needs to be raised. And it

needs to be addressed, whether through litigation or through regulation. It needs to be very clear that what they are doing is not

working for small business.

Ms. VELA ́ ZQUEZ. Under the commission concept as proposed, how

do you see that impact being the traditional role Advocacy has

played in such areas as the White House Conference on Small

Business?

26

Mr. GLOVER. That is an interesting question, because a national

commission, the commission is more of an—as I see it structured,

is more of an adjudicative adversary regulatory body doing more in

that regard than a lot of the other things we can do, such as more

long-range research, more long-range working with the groups. I

think it could work. I think it could work. I would have to think

through it a little bit better.

Ms. VELA ́ ZQUEZ. Mr. Morrison, would you like to comment on

that?

Mr. MORRISON. Putting the Advocacy in charge of the White

House think it is a little awkward. Obviously, something that is

billed as a White House conference is intended to be an Executive

branch activity, but I think you could solve it. Certainly, you could

just arrange it in the law.

Ms. VELA ́ ZQUEZ. Today——

Mr. MCCRACKEN. Seeing is—the quadrennial conference is—it is

not necessarily a White House conference. It strikes me as being

entirely appropriate if there is a commission to have them staff it

rather than going through this whole process of hiring all these

temporary people and letting them all go every few years.

Ms. VELA ́ ZQUEZ. Mr. Mastromarco.

Mr. MASTROMARCO. I think a commission——

Ms. VELA ́ ZQUEZ. I have a question for you. Sorry.

Mr. MASTROMARCO. Thank you.

Ms. VELA ́ ZQUEZ. It is my understanding that you are here to testify on your experiences at Advocacy, correct?

Mr. MASTROMARCO. Yes.

Ms. VELA ́ ZQUEZ. In your current position, do you represent any

small business concerns?

Mr. MASTROMARCO. Oh, sure, many.

Ms. VELA ́ ZQUEZ. Can you please list some.

Mr. MASTROMARCO. Our firm has represented a host of small

business organizations, for example, I am Executive Director of a

group called the Travel Council for Fair Competition which is travel industry group consisting of the United American Motorcoach

Association, American Bus Association, American National Park

Hospitality Association, National Tour Association, and the list

goes on from there. So yes.

Ms. VELA ́ ZQUEZ. During your work at Advocacy, you seem to allude that the Chief Counsel lacked independence. You stated that.

Was this lack of independence because of the structure of the Office

or because of the stream of acting Chief Counsels?

Mr. MASTROMARCO. Well, I think the first point is that no matter

what Chief Counsel is in that position, even if they are an extremely independent person by heart and by nature, we need to

create an environment in which they can exercise the independence

expected of them. The personalities don’t matter all that much.

During the Bush administration, they were clearly not independent. No question about it. In fact, the Office was almost run

at times by the Director of Congresssional Affairs for the agency

who knew nothing about small business. But Frank Swain was a

very independent Chief Counsel and did a fine job. The moral is:

We shouldn’t depend strictly on the personality of the occupant, we

should create the environment.

27

Ms. VELA ́ ZQUEZ. That plays an important role?

Mr. MASTROMARCO. Yes.

Ms. VELA ́ ZQUEZ. We have been here listening to Jere Glover’s accomplishments, and some of them have been not in—it has been in

contradiction with the White House and the administration. And it

happened because of the strong personality and independence of

Mr. Jere Glover. So that brings a—it plays an important role there

having an effective advocate.

Mr. MASTROMARCO. I think that role is served by the Senate.

They are to be reminded yearly during the confirmation process

that is the type of person they want. But here, what we are talking

about, is creating the environment, creating the organic legislation

that would ensure that result. That is what I am most concerned

about. And also, it is not necessarily the positions as I mentioned

that the advocate takes. I mean, in every public position, they have

got to disagree, otherwise, it doesn’t make that chart over there.

But it is also what positions they choose to take versus not choose

to take.

And thirdly, it is the issue of what research they fund, whether

they fund innocuous academic research in the true sense of the

term, or whether they really fund research, for example, that

shows how many family firms are destroyed by the death tax or by

how the ergonomics rule affects small business, or about the many

other issues affecting small business, including fundamental tax reform.

Ms. VELA ́ ZQUEZ. Mr. Morrison, do you think that agencies will

view the Office of Advocacy any differently if it were an independent office or a commission?

Mr. MORRISON. Absolutely. I think that is the purpose of the legislation. The relationship does change. And there are advantages

and disadvantages. As we have heard here at some great degree

today, if the objective is to create this environment that really,

from the get-go, communicates strong independence, it will do that,

but I think that there is also a loss in terms of an informality in

the relationship, which I think will probably disappear.

Ms. VELA ́ ZQUEZ. Mr. Cole, you are here today to testify before the

committee based on your expertise as a former Senate staff, correct?

Mr. COLE. And as an attorney representing small business clients in agency rulemakings, yes.

Ms. VELA ́ ZQUEZ. So you represent some small businesses organization. Thank you.

Mr. Cole, the essence of a commission like FCC, SEC or FTC is

to administer a very complex set of government regulations. If we

were to set up Advocacy as a commission, its role would be very

different. How would that fit with the traditional investigatory role

that most commissions play?

Mr. COLE. It is a different role. We don’t have a perfect model.

In some respects, the Office of Advocacy should act like an Inspector General’s office. In some respects, it should act like counsel for

small businesses in various rulemakings. So I don’t think that

there is a perfect parallel anywhere in government that we can

look to.

28

The question is, what type of structures could we create that

would enhance the effectiveness of the organization. I agree that

the real measure is the effectiveness of the office with respect to

small business, not some artificial measure of independence. But

the roles of agencies like the FCC are not wholly dissimilar. The

commission would be doing a more aggressive job of writing regulations on how agencies should comply with the Regulatory Flexibility Act, which is actually a fairly complex process. I would envision that regulatory program to be a series of guidances on how the

agencies operate, and that is going to have to be pretty complex.

There isn’t one easily-written piece of guidance that can apply the

Reg Flex act to all agencies.

So actually you are going to have a fairly complex, but differentiated series of guidances for different Federal agencies. And so in

that sense, the commission is going to be overseeing a regime of

guidance or regulation very similar to, although not on the scale

of the FCC but not be that dissimiliar from the FEC. I think the

parallels to the adjudicative functions of the agencies is one that

we can draw on, but we shouldn’t make too much of it. The commission does not have to interact with other Federal agencies purely in an adjudicative role. I don’t see the informal discussions ending simply because we move to a commission. There is nothing to

stop those discussions from continuing. That is going to be up to

the people who inhabit the agency.

In my testimony, I focused on getting the right people, and part

of that is getting people who will continue the best traditions of the

Office of Advocacy. Overall, I see this as adding new tools to the

tools available to Jere today.

Ms. VELA ́ ZQUEZ. Mr. Morrison, would you please comment on

this.

Mr. MORRISON. Well, in terms of whether the informal relationship would continue, I would hope they would. But I think I would

respectfully disagree with Mr. Mastromarco on that. I am not nearly as optimistic, no matter who you put in there, because I think

the structure is intended to be essentially adversarial. It is intended to create an essential clash between the commission and

other Federal agencies. But he might be right. This is, you know,

new ground that we are plowing here. I am not sure, just my take

on it would be a little different.

Ms. VELA ́ ZQUEZ. Thank you.

Ms. Kerrigan, the Small Business Survival Committee has consistently been a voice that speaks out against additional Federal

spending. So I think your input on how this committee advocates

critical funding is important. Could you comment on the cost of the

commission, which could be as high as some estimates of $20 million? Would your members be comfortable in supporting such a

price tag for expanding the program?

Ms. KERRIGAN. You are correct. One of the biggest concerns and

priorities of the Small Business Survival Committee is to limit both

the size and scope of government. And we have been very vocal and

aggressive, and what are some of the other words we are using

here today, ‘‘acrimonious,’’ that is right, relative to those issues.

What many of our leaders in our organization are currently grappling with is if you have this money—it is hard for them to believe

29

that if you are spending this money in Washington, will it go down

a black hole or can it be used for something good? On the other

hand, there have been many of our leaders who have said we do

need this type of structure in Washington, and it will work simply

because of the size of the regulatory state. That is why we are looking at doing something like this.

The question in our mind is, and what some of the members are

looking at is gee, if we spend money on a commission, is this really

going to be a net benefit for small business? Does this mean that

if we spend 20 million a year, does that mean 50-, or a 100 billion

less in terms of what we have to spend for regulatory costs? And

so, you know, you are right. It is a tough thing to address from our

perspective because——

Ms. VELA ́ ZQUEZ. What is it that you are telling me? You are not

sure if you are going to be——

Ms. KERRIGAN. No, hopefully this is just the beginning of the debate. There are some issues pretty cut and dry for SBSC. We are

opposed to the expanse of the size and scope of government. We are

against it if it expands government, we are for it if it doesn’t. The

current environment makes that assessment much different because of the 4,538 new regulations that are in the pipeline. I mean,

we do need some type of entity, an independent body that is going

to be a watchdog and do all the types of things that the commission

intends to do.

So we want to give more feedback to the committee and the

Chairman on this, because we do have mixed reviews right now.

Chairman TALENT. I thank the gentlelady. Mr. Bartlett has been

very patient. I am pleased to recognize my friend, the gentleman

from Maryland.

Mr. BARTLETT. Thank you. Mr. Glover, I really would like to echo

the position of the Chairman. I think that the accomplishments of

your office have been in spite of the way it is structured, not because of it—I think it is because you are there and we are lucky

to have you there, but you won’t always be there, so it is very appropriate that we are looking at a way to structure the office so

that it will be effective in the future. I would like to see the Office

of Advocacy at least as strong as the agencies that you are overseeing, the EPA and OSHA, and hopefully we are going to add IRS

to that list.

I would like to see your office so strong that when they were

coming out with a rule that you felt was going to hurt small business, that you could say you can’t do that because that is going to

hurt small business. In fact, you could have a veto. You could stop

them. Now all you can do is to hopefully shame them into doing

the right thing by pointing out how stupid their new regulations

are. That sometimes works and sometimes it doesn’t work. Now, if

your agency, if your office is to have that kind of power, one could

make the argument that you would then, in effect, be writing the

regulations, because the regulations that would get through were

those that you approved.

So in effect, you would be writing the regulations. That might be

seen as giving your Office of Advocacy too much power. I would certainly like to see you have a veto that at least required a review.

Now, if we could structure your Office of Advocacy that way, how

30

would a difference of opinion between you and the IRS be adjudicated? Obviously, we need some regulations, a whole lot less than

we are getting, a whole lot less than we have but we may need

some. We wouldn’t want an obstreperous advocate just stopping all

regulations. Can you envision a mechanism whereby this could be

adjudicated?

Chairman TALENT. The gentleman, if I could just interrupt the

gentleman, has just happened on the perfect, what we have been

searching for, ‘‘obstreperousness.’’ That’s what we want.

Mr. GLOVER. Let me share with you something that has been

working recently that I don’t think anybody expected. And again,

it is the regulatory review process in the White House. We have

had a number of panels in which we brought small business people

in. They have raised the concerns under the SBREFA law. They

have raised concerns, they have raised questions about data and

information. We continue that fight on through the regulatory process and go into the Office of Information and Regulatory Affairs at

the White House where the person heading that office up happens

to be the former general counsel of the Small Business Administration who was involved in regulations. We carry the fight there and

we carry the discussions there. Amazingly, we have won a number

of regulatory fights with that office and had some regulations that

have actually been killed. I can certainly provide some of those examples to you.

Now, that is not the perfect solution because that office is

under—if we question Jere’s independence, and the Office of

Advocacy’s independence—that office is directly in the White

House, but they are able, in a regulatory situation, to make some

changes.

So the process, the mechanism that you have identified, does

have some merit. And there are examples of where it has worked

quite well. In a more formal—that is an interesting question of

where it would be. The Office of OIRA has had a likewise checkered past as to how effective it has been in terms of solving regulatory problems. It doesn’t seem to make much difference who the

President is. But the process that you are identifying exists now

but in an imperfect world. And I think that you raise an interesting question. And I think that some version of what we are

doing know with OIRA may strain that process, because it would

have to be somebody in the executive branch that would make that

review.

Mr. BARTLETT. Would it have to be somebody in the executive

branch? It is really affecting not the executive branch, regulations

are going to affect the small business community. I think that the

adjudication should come, perhaps, from an ad hoc group. If you

had that kind of power, you would have to, very seldom, come to

the point, you would have to adjudicate, because they would be reasonable in formulating the regulations, because they would know

if they weren’t reasonable, you were going to shut them down and

it would go to adjudication. I think the challenge is to find a mechanism of adjudication that everybody could buy into, a binding-arbitration kind of thing that everybody could buy into. I am not sure

what that could be. I can think of several possible mechanisms.

31

Mr. GLOVER. Obviously, the courts, in having judicial review authority under the Regulatory Flexibility Act, I think some of the

suggestions Mr. Morrison made about strengthening that, the ultimate hammer is going into court, is having your reg thrown out.

I think that the courts have done some of that. I think that if we

use the example of the Environmental Protection Act, which was

passed back in the 1970’s, the courts threw regulations out for

many years that did not comply with environmental impact analysis. You know that long history. Well, that kind of challenge in

the courts for small business has been something we have talked

about for a long time. We got some of that now with judicial review, but there are a couple, I think, technicalities that Mr. Morrison identified that I think keep us from making it as effective as

we would like for it to be.

But ultimately, the threat of going to court, the threat of us filing

an amicus brief all are the reason that we are seeing agencies coming to us now early in the process asking for our help, asking how

do we avoid this. And quite frankly, in many cases, we are seeing

agencies write their regulations just to exempt small business entirely, because they don’t want to even touch this whole process.

They don’t want us involved, they don’t want to have to do a reg

flex analysis; they would rather exempt all small businesses from

it. So it is working, but it could work better.

Mr. BARTLETT. It is working because you are there. Our concern

is that we need to set up a mechanism that is going to work with

less effective people in the office. If we just took your present office

and gave it an independent status and gave you veto authority that

would be adjudicated in some appropriate way, would that be more

preferable to you than the commission?

Mr. GLOVER. Sure. Sure. That is a lot more power than anything

in the commission proposal.

Mr. BARTLETT. This is what I would opt for, is real autonomy

with a veto power, and I think very seldom, you would have to use

that, because now, all you have got is some charm and haranguing

and still you are being very effective. If you could add to that a

veto power, just think how conciliatory they would be and how seldom you would have to use that veto power.

Mr. GLOVER. I appreciate those kind comments. I will tell you,

most agencies don’t find me charming. I will tell you that I know

of no agency official that would use that characterization of me,

and quite frankly, of any of my office. But we do have some interesting things. I don’t want to discount the things that Congress

gave us in 1996. Clearer judicial review authority, clear amicus authority, and the panel process, all of these things are really making

a dramatic and significant difference.

So when you change the law, when you tune and tweak it, you

are getting good results. Those results would happen whether it is

Jere Glover as Chief Counsel or anybody else, because the agencies

are afraid they are going to lose in court. The panel process we

have made that work better than I think the law intended to work,

and perhaps we have done some things there, but once having done

that, I think it will continue on. And the panel is working better

than I think any of us envisioned it ever would.

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Mr. BARTLETT. To the rest of the members of the panel, is there

some evil thing that would happen if we were to give the Office of

Advocacy veto power that could then be adjudicated in some way

if they wouldn’t reach agreement? Right now it is generally charm

and cajoling and threats, you know, from an office that really

doesn’t have many teeth because of the way we have structured it.

What evil thing would happen if Jere had veto power that would

then force an adjudication and——

Mr. COLE. Congressman, my fear is that if you propose giving

veto power to the Advocate, whether it is Jere’s current office or

an independent commission, you are not going to get any legislation passed during the very critical window that the Chairman has

mentioned.

You asked two questions about providing a firm independent

basis for the Office, and the second was about the issue of veto

power. I believe that the current statutory authorities for the Office

to file amicus briefs, if an agency refuses to go along with the Office of Advocacy, coupled with what is in this draft will provide a

firm statutory basis for the independence of the Advocacy function.

A third important feature is the ability of the Commission to issue

regulations to implement the Regulatory Flexibility Act. Those

three pieces will form a very powerful tool for the commission to

use.

I really see it more as an amicus brief, the tool as the amicus

brief. The courts are going to give much more deference to the

views of the commission based on the language in this draft and

the fact that the agency, the commission would be issuing guidance, and would be the agency of expertise in implementing the

Reg Flex Act. That is tough of a hammer. And I think you could

get that through this year. I just fear if you write into legislation

that says that we are going to set up an independent commission

that can veto any regulation by any agency of the executive, we are

going to end up with nothing, and that is the perfect being the

enemy of the good.

Mr. BARTLETT. What I am talking about, a veto that just stops

the process. What you are saying is that under the current proposal, that the court would be the final arbiter that you could file

the brief that then would have to be adjudicated in court, is that

what you are saying?

Mr. COLE. Yes. Under the current proposal, the mechanism is filing an amicus brief in litigation that one of us private lawyers

brings against an agency for ignoring the Reg Flex Act, in other

words, and the court would, under this act, give much more deference to the advice of Advocacy to make that amicus brief a very

powerful document. The court would be the final arbiter.

Mr. BARTLETT. But can an action make the point that they have

thought about the effect on small business? And they have considered that and they don’t consider that effect to be severe enough

to limit them in making this rule? As I understand SBREFA, it

simply requires them to take a look at how badly they would hurt

small business. My understanding is that they could, in effect, kill

small business if they have considered the effect on small business.

It is okay for them to go ahead and enact the rule.

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And Jere is shaking his head yes that that is true. What we need

is an advocate with more teeth than that. Maybe we can’t get it

through, but goodness knows we need to try. And you know, we

need to try to do the right thing. Here we have agencies out there

who have been harassing small businesses almost to the point of

extinction, and we certainly ought to have somebody there who is

their advocate with at least enough authority to bring this to some

adjudication.

Mr. COLE. What you are really asking for is a slight change in

the Regulatory Flexibility Act. Right now it says the agency, as you

correctly pointed out, has to consider the impacts of the regulation

on small business. It also has to consider various options to change

that. What you could do is amend the Reg Flex Act to say that the

agency must come up with an approach that achieves its regulatory

ends with the least impact on small business possible. So you could

strengthen the Reg Flex Act to add a substantive dimension that

is currently lacking. However, the issue of what requirements an

agency must comply with under the Reg Flex Act is, I think, separate from the strengthing the Office of Advocacy to be independent

and to advocate its views as obstreperously as it wishes to in every

single agency rulemaking.

Mr. BARTLETT. Thank you, Mr. Chairman. I think that before we

come up with final legislation, that we need to explore various options for not only making the Office of Advocacy independent, but

giving it the kind of teeth it needs to do its job. Right now, the pendulum has almost got through the side of the clock on the other

side. We need to bring it back somewhere near the center. What

I am proposing would hopefully do that. Thank you very much.

Chairman TALENT. I thank the gentleman for his questions. I am

pleased now to recognize the gentleman from Illinois, Mr. Manzullo.

Mr. MANZULLO. Thank you, Mr. Chairman. One of the bright

lights of this very complicated area of unreturned phone calls, incompetent administrators, and rules and regulations that are hard

to understand, is the Office of Advocacy. I can cite, I don’t know

how many instances where, because Jere was the head of the office,

we were able to help small business. Let me give an example. We

have a hospital called Dixon KSB Hospital just outside our district,

but serves a lot of my constituents. They are one of eight hospitals

nationwide that were subjected to some very unusual rules. I asked

Jere to come into the office and meet with our constituents, and

this was one of those problems that could have cost the hospital attorneys fees that it could not have afforded.

I think even before my constituents got back to Illinois, Jere had

cut through the web and was able to get immediate relief to the

hospital. What impressed me about this office is I think that the

Office of Advocacy of the Small Business Administration should be

very close to the heart of the Small Business Administration and

to the Small Business Committee. If it is autonomous and independent of these two bodies then it might not be close to small

business. We serve on this committee, not because it is glamorous

and we have very little jurisdiction, but because we have a heart

for the small businesses throughout the Nation that are being essentially hammered by the Federal Government.

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And the relationship that I have enjoyed with Jere all these

years is the fact that he is tucked into the Small Business Administration. Quite frankly, I don’t see how that has ever hindered the

zeal, with which he represents small businesses.

It is interesting that more times than not, he has gone up

against the very president who appointed him. Now, I think that

is good because of whether it is ergonomics, whether it is EPA,

whether it is HCFA. HCFA is the worst Federal organization and

is not subject to any judicial review. They have an inordinate number of incompetent people running the organizations, and they have

books of regulations that no one understands. You will note however, that Office of Advocacy has been in there.

I have a couple of suggestions. I would suggest that the Office

of Advocacy be beefed up to allow that office to bring a class action

in court representing businesses obviously impacted by legislation

or proposed regulation without having to certify as a class. That is

pretty simple. To be able to go in there and to fight a rule, some

of the most stupid rules that we have seen. My brother owns a

small family restaurant. And some guy came along and said where

is your sign? This is 13 tables in this restaurant! The bar holds 10

people. My dad and brother built the bar themselves because they

couldn’t afford $10,000 to build it. And this guy just started

screaming at my brother on a Friday night when the restaurant

was full of people coming down for fish. And my brother turned to

him and said who in the hell are you? And he said, well, I am such

and such, a Federal inspector, you don’t have a sign over the bar

there warning pregnant women about the dangers of alcohol, and

I am going to write you up.

My brother, who has been known to have my temper, could have

picked him up and thrown him out, but the man was probably protected in the same manner as a Federal chicken inspector under

the Crime Act of 1993. If you lay your hand on a Federal employee,

you are going to be subject to a felony. And fortunately, he just let

this guy rant and rave and finally left. The guy didn’t even order

a fish dinner. I guess what I would like to see here is to give more

powers to the office of Advocacy to act at the suggestion of people

within the SBA and the Small Business Committee. I would like

to see the members of the Small Business Committee continue to

be able to sit down with the Office of Advocacy and say there is

a real problem there. And these small businesses that are affected

need somebody to actually lead the charge in court to be able to

go into court, because they are getting killed and they can’t afford

to hire an attorney.

But I do have a couple of questions here. I don’t like the word

‘‘commission’’ because with all deference to the Chairman who drew

it up, ‘‘commission’’ to me means that there is nobody in charge.

And to have three commissioners means that at any given time,

one is on the golf course, one is out to lunch, and the other one is

in Europe with nobody responsible. That has been my experience

with these commissions.

I’d rather have somebody who is in charge and truly accountable.

We have been blessed with a Chief Counsel who answers phone

calls, who shows up at the office immediately if there is a problem,

who is there acting in a very appropriate manner. But Jere, would

35

you suggest what legislative changes are still needed in the proposal to ensure that if the commission is set up, that it would not

become too bureaucratic and slow in responding to regulatory proposals?

Mr. GLOVER. One of the problems with commissions, and you

have hit that point, it is one that gives me a great deal of concern.

Since most of the times I have been asked to testify or asked to

submit a position to Congress, than has been very quick turnaround, a day or two. Collegial bodies tend to not agree very often

and once being appointed and sworn in, they begin to have their

own ideas and viewpoints.

The first thing they want is staff. They want to have their own

special assistants who can tell them what the issues are. There is

a real concern on how quickly you can make decisions, and most

of the decisions affecting small business come to us either from the

agencies or from the Congress very, very late in the process. We

have to act very quickly.

So have you to find a way to make sure those commissioners

don’t hold things up. I think that you are going to have problems

with bipartisan commissions, one person feeling they have to write

a dissenting opinion on everything that happens. I think that there

are some ideas and suggestions that I think are very useful for the

Office of Advocacy. There are a number of changes that are proposed in there that under the current structure, would make it a

lot better for the Office of Advocacy.

The one problem that I hear very clearly from everybody and

which we had discussions with the Senate on is how do you deal

with the fact when there are vacancies—when there is no Chief

Counsel. One of the early Senate versions basically made the Chief

Counsel serve like a judge until removed. I raised some concerns

because I think you could get a bad Chief Counsel and you could

be stuck with that person and never get them out. They tried a variety of different things and came up with one provision that requires notice before removal, to Congress to give the Office some

more permanency.

Other discussions are a fixed term, or even serve until replaced.

There are a lot of things you can do to overcome the questions of

what do you do when there is no Chief Counsel. The confirmation

process is important. But I think that a collegial body, if we look

at the history, Congress finally shut down a bunch of those collegial bodies that had been around for a long time. They tend to get

bureaucratic, they tend to slow down, they tend to deliberate

things. And I don’t know how you change that— I believe I run my

office very entrepreneurial. I make decisions, the decision tree is

very quick. I don’t know how you do that in a commission.

Mr. MANZULLO. Do you have 43 people on the staff?

Mr. GLOVER. 47.

Mr. MANZULLO. 47 people. What is different about your office is

the quick turnaround in and the willingness to get involved in so

many different issues. And I have to scratch my head and say you

know, he really works for the Federal Government. And he is a

friend of small business and he is in this position. So Mr. Chairman, I would be willing to work with Mr. Glover and whoever it

is to beef up the powers of this office to clarify it. The thought of

36

creating an independent commission, I am not sure about that. It

is something that certainly we want to think about. But Mr. Chairman, if the advocate was independent, would he really be answerable to the Small Business Committee or the Small Business Administration? What if he would just be a bureaucrat that doesn’t

like small business and gets appointed and there is no oversight.

What would you do in a case like that?

Chairman TALENT. I don’t think our relationship would be affected any more than, for example Commerce exercises oversight

over a number of independent agencies, because they still have to

get their budget from them. I think that would remain virtually the

same. In fact, if anything, it would probably be a little bit closer

because they probably feel a greater dependence on the Congress

relative to the—in other words, as the dependence on the executive

branch lessened, the preponderance of control Congress exercised

would probably loom larger. That is just my sense of it. I don’t

think that is a problem. I respect the concern about the commission

being able to move quickly. I think maybe we can address that by

doing something with the powers the Chairman would have to act

unilaterally, for example, if the others were not available.

Mr. MANZULLO. The reason that I ask this question is that his

office moves so quickly now. They do things the other Federal agencies don’t do such as returning phone calls. You have had the same

problem I have had with it in the Federal Government. But his organization is always there on the cutting edge and willing to take

up a cause and do whatever is necessary.

Chairman TALENT. I should pause to see what my counsel here

can finish his suggestion which he is writing on there. See what

it says here. No, I think Jere is pretty independent. I am not going

to say that. Often I just subside and play Charlie McCarthy to

their Edgar Bergen, but sometimes the puppet comes to life here

anyway.

Thank you guys, anyway. I will just say what has always struck

me about this debate, we always emphasize the importance of independence for the Chief Counsel. That is the reason we have the

amicus power. That is the reason we have the review powers. That

is the reason we have the special hiring. That is the reason we are

proposing a special line item. Then when somebody talks about

making them truly independent, then somebody comes up with all

the problems with it.

I just think we ought to consider, I have been terribly impressed

over the last 4 years by the fact that when we get away from shortterm issues, there is this really strong consensus on this committee, and I would say in the Congress as well, that what is good

for small business people is good for the country. And if we could

institutionally—the extent we can institutionalize that in the government, I think we are reflecting a tremendous consensus in the

Congress, which is why this idea is attractive to me. Albeit, I understand the problems.

I think it would probably decrease some of the flexibility or informality. Query whether that would be replaced by the fact that

whether they liked it or not, they would want that commission on

their side. I think I probably couldn’t move as quickly. On the other

hand, what is it that the Chief Counsel does that requires typically

37

like a 24-hour turnaround? The decision to file an amicus brief, you

normally have a couple weeks to make that decision. Same thing

about, you know, opposing or comments against; usually you have

a window period.

So if you had a strong chairman, I wouldn’t anticipate that would

be a big problem. But I am happy to work with you on ways to try

and deal with that. I am not positive that we should move forward

with this. But I will tell you from my part in conceding all the

points in opposition to it, this hearing has pushed me in the direction of continuing to push this. And I do think if we don’t do this

this year, it isn’t going to happen. Because next year, whoever is

sitting here and whoever is President, you are going to have one

party, all of a sudden deciding that it doesn’t like this idea. And

that is going to be the party that miraculously is the party of the

President. Because whoever is President isn’t going to like this.

And if I have the President’s counsel, I would tell him to come up

with all kinds of ways against it. So I think it is this year or not

for at least four more years.

Mr. MANZULLO. I did have one question. I think I will ask it both

to Mr. Glover and to the Chairman. Is it possible that this legislation could contain everything it has—I am talking about the enhanced powers—but not create an independent commission? In

other words, that the emphasis would be based upon the enhanced

powers but leaving the structure the way it is?

Chairman TALENT. Sure. We can adopt measures short of that.

We could go with the Senate’s view. It is going to be a question of

what the Committee wants to do and whether we can come up with

an agreement. The gentlelady and I have been talking about it. I

am happy to work with you. There are halfway measures that we

could do. I would like to urge everybody who cares about small

business, I think, that is, everybody in this room, to think for a second what it would be like if we had faith that year after year, there

was a commission that, yes, it began to adopt its own inertia, its

own momentum, so no matter what issue it was and what administration was in control, there would be a baseline there, somebody

in there representing small business. And I think that is what we

were aiming at with the Chief Counsel. So why don’t we just do

it?

Mr. MANZULLO. The problem that I have——

Chairman TALENT. Then Jere, no matter who gets elected, I will

recommend you for chairman. How is that?

Mr. MANZULLO. The difference between——

Chairman TALENT. If it is the Vice President, you won’t need my

recommendation, and it will probably be the kiss of death. If it is

Governor Bush, we will see.

Mr. MANZULLO. But the difference between the Office of Advocacy and any other organization or commission or agency that you

work with is he serves a unique function of being a highly skilled

articulate attorney who can cut his way through the administrative

nightmare that stymies each of us as Members of Congress. I don’t

know how many times I have called him, he serves in the role as

a personal counselor to——

38

Chairman TALENT. Well, if the gentleman will yield a second. As

long as we are talking about anecdotal things, I have said many

times how much I respect——

Mr. MANZULLO. But that would be stopped if you had a commission, if they had to agree on whether or not they get involved in

something.

Chairman TALENT. Let’s just remember the opposite side of this.

I have not called witnesses and tried to embarrass them. But if the

gentleman will talk with people, I am sure you have someone who

has been around this process for awhile, there have also been instances where Chief Counsels have been directed to hire people, for

example, as regional advocates because of their personal connections with administrators. I mean, there is a whole lot of evidence

in the record and not exclusively, or mostly I will say with this administration, which has been better at these things, I think, indicating that that independence is not there.

And I think that would not happen with the commission, because

you have people who have statutory independence and would take

it seriously. I am not arguing that there aren’t things on the other

side. I will let the gentleman have the last word. If we mark this

bill up, we can have the debate then. But let’s not forget the facts

that the existing structure at the end of the day allows a compromise of independence that the commission structure would not,

whether that is enough to outweigh other things I think is the

issue.

Mr. MANZULLO. But this bill eliminates these regional advocates.

Chairman TALENT. I think that is one of the major strengths of

it. If we went through the background of the regional advocates

over administration after administration, we would find that they

are one of the biggest abusers of this process right now. And that

is 10 more positions I could give you right now for Jere, for research, or whatever. It is a good way to fund the bill too, Karen,

would be to eliminate those positions.

Maybe that would be appealing to your members. I thank the

gentleman for his interest and advocacy.

Gentlelady, have you any further questions?

Ms. VELA ́ ZQUEZ. Last week the committee held a hearing, Mr.

Glover, on the Ombudsman 2000 report, and the U.S. Chamber of

Commerce made a recommendation about combining the Office of

the Ombudsman with the Advocacy. What are your views on that?

Mr. GLOVER. I think that is a decision for the Congress to make.

I think that there was some discussion about where it should be

when it was originally passed. And I think that there are some

economies of scale and efficiencies. We have certainly been working

more closely with the new ombudsman than we have in the past.

We are facilitating some areas of cooperation. Again, we will deal

with—we will work with whatever task and whatever resources we

are provided.

Ms. VELA ́ ZQUEZ. Thank you.

Chairman TALENT. Thank the witnesses for their patience. We

will adjourn the hearing. Thank you, Jere.

[Whereupon, at 12:35 p.m., the subcommittee was adjourned.]

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