U.S. GOVERNMENT PRINTING OFFICE

71–864 WASHINGTON : 2001

IMPROVING AND STRENGTHENING

THE OFFICE OF ADVOCACY

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

WASHINGTON, DC, MARCH 22, 2001

Serial No. 107–1

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

DONALD MANZULLO, Illinois, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

JOHN THUNE, South Dakota

MIKE PENCE, Indiana

MIKE FERGUSON, New Jersey

DARRELL E. ISSA, California

SAM GRAVES, Missouri

EDWARD L. SCHROCK, Virginia

FELIX J. GRUCCI, JR., New York

TODD W. AKIN, Missouri

SHELLEY MOORE CAPITO, West Virginia

NYDIA M. VELAZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

WILLIAM PASCRELL, JR., New Jersey

DONNA M. CHRISTIAN-CHRISTENSEN,

Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

JAMES R. LANGEVIN, Rhode Island

MIKE ROSS, Arkansas

BRAD CARSON, Oklahoma

ANIBAL ACEVEDO-VILA, Puerto Rico

DOUG THOMAS, Staff Director

PHIL ESKELAND, Deputy Staff Director

MICHAEL DAY, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on March 22, 2001 ............................................................................ 1

WITNESSES

Swain, Frank, Former Chief Counsel, Baker & Daniels ...................................... 3

Kerester, Thomas, Former Chief Counsel, Caldwell Banker Stevens ................. 4

Cole, Keith, Swidler Berlin Shereff Friedman LLP .............................................. 6

Satagaj, John, President, Small Business Legislative Counsel ........................... 9

Coratolo, Giovanni, Small Business Center, U.S. Chamber of Commerce .......... 11

APPENDIX

Opening statements:

Manzullo, Hon. Donald .................................................................................... 23

Velazquez, Hon. Nydia ..................................................................................... 26

Prepared statements:

Swain, Frank .................................................................................................... 28

Kerester, Thomas ............................................................................................. 33

Cole, Keith ........................................................................................................ 39

Satagaj, John .................................................................................................... 43

Coratolo, Giovanni ............................................................................................ 51

Additional Information: Prepared testimony of Mary Ryan, Small Business

Administration ..................................................................................................... 54

(1)

IMPROVING AND STRENGTHENING THE

OFFICE OF ADVOCACY

THURSDAY, MARCH 22, 2001

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC.

The committee met, pursuant to call, at 10:12 a.m. in Room

2360, Rayburn House Office Building, Hon. Donald Manzullo

[chairman of the committee] presiding.

Chairman MANZULLO. Good morning and welcome to this hearing

of the Committee on Small Business. A special welcome to those

who have come some distance to participate and to attend this

hearing.

Since its inception in 1976, the Office of Advocacy has had the

difficult, but important, task of being an effective voice for small

business within the executive branch of the Federal government.

There have been a number of distinguished individuals who, as

Chief Counsel, have directed the Office of Advocacy and who have

left an admirable record of accomplishments, despite the lack of resources and limited authority.

Two of the former Chief Counsel are here with us today—Frank

Swain and Thomas Kerester. We welcome their participation and

the insight that they bring to this hearing.

Over time there have been various constructive suggestions to

strengthen the Office of Advocacy and to make it more effective

and independent. Some of these suggestions are contained in S.295,

‘‘The Independent Office of Advocacy Act of 2001,’’ which was introduced in the Senate by the Chairman and Ranking Member of the

Senate Committee on Small Business on February 27, of this year.

In the House of Representatives, we have drafted a bill for discussion that makes the Office of Advocacy more independent and

provides that Office with greater resources and more authority to

represent the interests of small businesses.

I want to work with my colleagues on both sides of Capitol Hill

to pass a bill that produces real results for main street America.

Some of the features of the House draft include: Empowering the

Chief Counsel to issue regulations under the Regulatory Flexibility

Act thereby putting teeth in the requirement that Federal agencies

accurately measure the economic consequences of their actions before regulating small businesses; transferring the Small Business

and Agriculture Regulatory Enforcement Ombudsman to the Office

of Advocacy thereby providing more muscle to protect small businesses from arbitrary and unconscionable enforcement actions by

Federal agencies; giving the Chief Counsel the right to file comVerDate 11-MAY-2000 10:20 Jun 06, 2001 Jkt 010199 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HEARINGS\71864 pfrm09 PsN: 71864
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ments in all rulemakings where the Federal agency has requested

comments and to intervene in on the record rulemakings [where no

fine or penalty is involved]; requiring that all Federal agencies publish the Chief Counsels comments about a proposed regulation,

that they give such comments substantial weight, and that they

make known any disagreements with the comments; concentrating

in the Office of Advocacy and under the leadership of the Chief

Counsel the responsibility for combating contract bundling and providing an augmented staff, at no additional cost, to do an effective

job.

In short, the House draft concentrates on strengthening the Office of Advocacy and the Chief Counsel to combat three major problems facing small businesses—preventing needless and burdensome

regulations, assisting small businesses that have been the victims

of Federal agencies’ unfair compliance and enforcement actions,

and being the focal point for combating contract bundling.

Again thank you all for participating in this hearing. And thank

you in the audience for attending this hearing.

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

[The following was submitted in place of Ms. Velazquez verbal

statement due to loss of the transcribers tapes.]

Ms. VELAZQUEZ. Thank you, Mr. Chairman.

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

to protect the interests of small business within the federal government.

Whether they were saving $3 billion dollars in regulatory reform

for small business or overseeing the SBREFA process at EPA—the

Office of Advocacy has done whatever is necessary to protect this

bedrock of our economy from sometimes over-reaching federal policies.

However, as Members of this Committee—it is our duty to review

options which can improve the way federal agencies conduct the

people’s business. In this case, we must review these options knowing any determinations we make are done so with the best interests of small businesses squarely in mind.

Today is the first step in what I believe will be a critical undertaking for this Committee—and for America’s small business community.

This hearing provides a unique opportunity for this Committee

to take a ‘‘first-mover’’ approach towards strengthening Advocacy—

providing a powerful and independent presence for small businesses in America.

As we begin our examination of how to make the Office of Advocacy more independent, it is crucial that we keep our ‘‘eye on the

ball’’ during this process. We must do everything to ensure that

small businesses have a voice and that their interests are given full

weight in the deliberations of the federal government.

Unfortunately, moves like simply providing Advocacy its own authorization line item and then calling that ‘‘independence’’ does absolutely nothing for small business.

So, then how do we measure whether or not we have been successful in creating a more independent Office of Advocacy? The answer to that question is simple—Have we reinforced the agency’s

ability to oversee the Reg Flex Act?

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But allow me to make one point crystal clear—success is not just

in providing the tools—it is how effective you are in using those

tools.

In fact, as is the case with this agency—it is success can be

traced directly to simplicity itself. Advocacy has been so incredibly

effective because it has stayed true to its core mission of providing

support to small businesses and entrepreneurs.

Indeed, it is this ‘‘simplicity’’ that has been its guiding force and

greatest strength.

However, as this process moves forward today, many of the proposals we will hear would force Advocacy into a much greater

role—which would lead to a decline in its effectiveness as an agency.

While some of these proposals, including having Advocacy take

a more active role in the issues of federal procurement, are examined—I would caution Members that these enhancements should

not come at a reduction in its responsibilities under the Reg Flex

Act.

We also need to have a frank discussion of resource allocation for

a new and improved Advocacy.

Unfortunately, with the current budgetary situation, which has

seen SBA’s operating budget slashed by 43%, is it realistic for any

of us here today to assume that this Administration will support

any new ventures—when they have clearly demonstrated an unwillingness to meet even their current commitments.

My colleagues, these issues of funding and focus are absolutely

crucial that it will take the partnership of this Committee, our

counterparts in the Senate as well as the President and his Administration. But, this partnership should also include elements that

are simply not in place as of yet—those elements are the SBA Administrator and the Chief Advocate.

For us to give this matter proper deliberation, these pieces are

absolutely essential to our case—to be perfectly frank, we have to

do this with their support and input. Without it, we are engaging

in a ‘‘cart before the horse’’ type of action—which will lead us right

back to where we are now.

And believe me, in doing so, we reduce our own effectiveness—

which is not something we can afford to do in the current economic

and political climate.

Mr. Chairman, in closing, I would like to thank you for convening this hearing today on such a critically important issue to

small business owners. I would also like to extend my appreciation

to the panelists for their testimony today. Their commitment to the

protecting small businesses in this country deserves to be acknowledged and commended.

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

[Missing portion of hearing due to loss of transcribers tape.]

STATEMENT OF FRANK SWAIN, A PARTNER IN THE LAW FIRM

OF BAKER & DANIELS

[The first section of Mr. Swain’s statement is missing due to loss

of transcribers tape.]

Mr. SWAIN. Now it is not always contrary to the position of the

administration, but the norm has been that the Office of Advocacy

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is the—and it is the only presidential appointee that I am aware

of that has this privilege—comes up here and testifies without having their statement reviewed for consistency of administration policy by the Office of Management and Budget. That has been the

situation since 1978, and it’s continued through every chief counsel

as far as I know.

The other area that is strikingly independent is that through the

original Regulatory Flexibility Act and now much more strongly

under SBREFA, the Chief Counsel has the ability to participate

formally in judicial level regulatory proceeding without the permission of other federal agencies and without the permission of the

Justice Department.

This is unique. I do not think that there is any other office within the executive branch of the government that can appear against

another federal executive agency into court. And this is truly independent and truly unique.

The question is whether this is enough or whether the office

ought to be doing more and made more independent from the SBA.

My own view is that you give up something when you make it

more independent. And what you give up is the ability to go in behind the scenes and work with regulators that are your colleagues

in that Administration to try to work better decisions before they

are ever published in the Federal Register.

It is clear that if an Administration official believes that the

Chief Counsel for Advocacy is coming out of the same group and,

to a degree, part of the same team, they are going to be more interested in working with them than if they are a wholly independent

agency. And I think the $64 question is whether that is too much

to give up if you make the Chief Counsel totally independent and

a separate agency.

I will just address one other issue. It was alluded to by Congresswoman Velazquez. Even with the original statutory list of functions

of the SBA Office of Advocacy, quite candidly, we had to pick and

choose which we could and which we could not do.

The Congress really had us doing everything for small business,

and we had, at our high point, probably 85 people in the office. And

even with 85 people working full-time, we could not do everything

that the law told us to do.

So we had to do some picking and choosing, and in cases where

it was important to the Congress, we tried to discuss why we were

not doing certain things. But I have a concern that we do not ask

the office to do too much and spread it too thin.

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

Chairman MANZULLO. Thank you very much. Our next witness

is Tom Kerester. I think I pronounced it correctly. And the next

five minutes of testimony is yours, Mr. Kerester.

STATEMENT OF THOMAS KERESTER, A REAL ESTATE CONSULTANT ON RESIDENTIAL AND COMMERCIAL PROPERTIES

WITH COLDWELL BANKER STEVENS, REALTORS IN NORTHERN VIRGINIA

Mr. KERESTER. Thank you, Mr. Chairman and members of the

Committee.

5

I am Tom Kerester. I served as chief counsel for advocacy from

May 1992 to January of 1993, which was a very short period, under

former president Bush. And even though it was short and demanding, it was very rewarding, very fulfilling, and very stimulating.

And what it did was it renewed my faith in small business, in the

entrepreneurial spirit, and in my belief that, as small business

goes, so goes the nation.

I appreciate the Committee’s invitation, and I applaud the Committee for taking this action. I want to make the record clear that

I am testifying as a former advocate and not on behalf of any other

person, group, company, or association.

Currently, I am a real estate consultant on residential and commercial properties with Caldwell Banker Stevens Realtors in

Northern Virginia. And I say that because, as an independent contractor, I continue to face the small business issues that small businesses face across the country.

We all know that for the past 20 years plus, advocacy has served

a very, very useful role. And, because of our complex society, I

think advocacy is needed more now. And I am a firm believer that

its role, authority, and stature should be elevated, if that is the

proper term; and it would be under this bill.

As I said in my testimony before this Committee in April 1995,

the greatest challenge facing small business today, as it has been

during all that time, is gaining the public recognition at all levels

of all governments, that small business is the engine that drives

this economy. And this Committee and the Members know better

than anybody else, that they are the engine that drives this economy. I think that the draft bill by the Committee goes a long way

to achieving those objectives.

When I look at the background paper on the Office of Advocacy

prepared by Jerry Glover, the most recent Advocate, I think they

did a terrific job with the limited amount of professional and dedicated staff.

On seeing Frank Swain, I should give homage to him and to Milt

Stewart for their efforts on behalf of small business over their term

of office as Advocate.

Because of limited time, I want to focus my comments on the bill

under three headings.

One is the power and functions of the chief counsel, the other is

the budget line requirement, and the third is the new office location.

I had a good working relationship with Pat Saiki, the Administrator. When I came on board, she told me two things, ‘‘Be independent as you should be, but keep me advised,’’ and we had a

good working relationship.

Under the power and functions of the chief counsel heading, in

my paper I mentioned four categories. One is that the bill clarifies

the intent of Congress, and it lets the small business community

know that this Congress will not tolerate costly and burdensome

regulations and rules imposed by some overzealous bureaucrats.

Second, it ensures compliance with these rules by giving advocacy extended power and also gives them more oversight authority.

And then it says to the chief counsel, ‘‘We are giving you all this,

6

but we want you to be held accountable to us and to the administration.’’ And it provides rules within which they could do it.

And, as under present law, the chief counsel would be prohibited

from distributing his reports, any of his reports that are laid out

and specified in the bill, to anybody, any other agency, department,

or any person first other than the President and the Congress. It

prohibits him from distributing it to anybody before they distribute

it to the Congress and the President.

With respect to the budget line item requirement, I think it accomplishes a number of congressional objectives. First, it showcases

congressional intent to elevate the level and the stature of this new

office. Second, it demonstrates to the small business community

that it is doing these things. And, third, it signals to the new chief

counsel’s office that we the Congress are going to provide you with

the authority, with the power, to accomplish all your objectives.

One other item that I want to touch briefly on is the new office

location. I think it would be desirable, and I think it would be appropriate to do so.

Sharing the same office space with the Administrator may leave

some with the impression that the chief counsel does report to the

Administrator, which has not been the case and would not be the

case under the bill. So I think it would simplify any misunderstanding and make it clear that that is not the case in this situation.

I lay out in my speech a number of issues that the Committee

should take into account in deciding where it should locate, but I

will not bore the Committee with those details right now because

they are in my paper.

Mr. Chairman, those are about the only oral comments I have.

They are very quick. I have been away from the chief counsel in

office for a long time, and it is hard to recall some of the issues,

okay. But I do appreciate your bringing some of us old gray hairs

back to the table.

In conclusion, let me just say that I think the draft bill would

make it better for Advocacy to accomplish its objectives as outlined

by the Congress.

And I want to thank you again for inviting me. I also want to

note that I am grateful to former President Bush for the opportunity to serve as the third chief counsel.

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

Chairman MANZULLO. Gray hairs are a sign of wisdom.

Thank you very much for your testimony, Mr. Kerester. Our next

witness is Keith Cole. He is a partner in the law firm of Swidler

Berlin Shereff Friedman. Mr. Cole?

STATEMENT OF KEITH COLE, A PARTNER IN THE LAW FIRM

OF SWIDLER BERLIN SHEREFF FRIEDMAN, LLP

Mr. COLE. Thank you, Mr. Chairman and members of the Committee.

To begin with, 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.

Next week, on March 29th, it will be the fifth anniversary of the

enactment of SBREFA, legislation that—I was lucky enough to parVerDate 11-MAY-2000 10:20 Jun 06, 2001 Jkt 010199 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HEARINGS\71864 pfrm09 PsN: 71864
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ticipate in its drafting. Over the last five years, I have been involved in several rule-makings in which the Office of Advocacy actively participated. These include both high profile rule-makings

like EPA’s rule to revise the ozone and particulate matter NAACS

standards, as well as less controversial rule-makings.

My overall impression is that the Office of Advocacy continues to

do a good job raising with the various federal agencies the deficiencies of the Reg Flex analyses prepared by those agencies.

I have observed as the Advocate has pursued some of these

issues to the highest level of the executive branch in an effort to

make the voice of small business heard. However, I have also observed that the Office of Advocacy must, in some cases, pick and

choose its battles.

When the SBA or other federal agencies propose regulations that

run counter to the interests of small business or shirk their duties

under the Reg Flex Act, the Advocate faces conflicting pressures.

While SBREFA has increased the tools available to the Advocate,

it has not reduced the pressures facing that office. In fact, the

strengthened tools provided by SBREFA may actually increase the

pressures on the Advocate.

Especially in high profile situations, the Advocate continues to

risk a long-term loss of influence within the administration team

if he or she pushes the small business agenda beyond a certain

point.

The chief lesson that I take away from this is that, given the position of the Office of Advocacy, there will always be tensions between the interests of small businesses affected by pending rulemaking, and the long-term interests of the small business community in having an effective advocate in the executive rule-making.

There is no simple answer to this dilemma. The question is, can

we strengthen the position of the Office of Advocacy in dealing with

these pressures?

Let me turn to my comments on the discussion draft. To begin

with, Mr. Chairman, let me compliment you and your staff on the

work that is gone into the discussion draft. I believe that with

some minor modifications the enactment of this legislation could

provide significant benefits to the small business community.

First, the discussion draft would provide greater statutory independence for the Office of Advocacy. With the independence of the

office more firmly established in statute, the Advocate will, I believe, have a strengthened hand to develop and advance the cause

of small business in federal agency rulemakings. I might go even

further to make the advocacy removable in his position only for

cause.

Second, the draft establishes important new functions for the Office of Advocacy. I believe that the authority to issue regulations

governing compliance with the Reg Flex Act is particularly important. No one in the federal government knows more about what is

needed as part of a well done Reg Flex analysis than the staff of

the Office of Advocacy.

Agencies throughout the executive branch would benefit greatly

from the experience of the staff in the form of government-wide

guidance on compliance with Reg Flex. This is a good government

reform that is long overdue.

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Third, I believe that the transfer of duties of the Regulatory Enforcement Ombudsman to the Office of Advocacy is appropriate.

The Ombudsman was established with great hopes by SBREFA

in 1996. However I have been somewhat disappointed by the effectiveness, or lack thereof, of the Ombudsman. 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 the Regulatory Enforcement Fairness Boards.

Fourth, I believe the abolition of the regional advocates and the

transfer of these positions to the Office of Advocacy is appropriate

and will provide a needed boost in revenues available to the Advocate. This, again, is a good government reform that is long overdue.

Lastly, I believe that expanded rights of the Office to participate

in agency adjudications will allow the small business community’s

voice to be heard in areas where it has not been heard before.

Now let me turn to a couple of issues where I think we could see

some improvements. First, as Congresswoman Velazquez mentioned, there is benefit to simplicity. And, by focusing the statutory

mission of the Office of Advocacy, I believe you will give the Advocate a stronger mandate in dealing with other federal agencies and

give small businesses a better chance to have their voices heard.

The draft currently lists some 14 functions, plus 5 additional

functions of the Office of Advocacy, and many of these functions

have multiple sub parts.

I am concerned that this diffuse mission will hamper the effectiveness of the office, and I strongly urge you to rewrite this portion of the bill to more narrowly focus the mission of the advocate.

I believe the primary mission of the Office should be to enhance

the environment for small business success by ensuring federal

agency compliance with the Reg Flex Act.

In support of this mission, there are a number of activities that

the office should be directed to take. First, to examine the role of

small business in the U.S. economy. Second, to measure the effects

of regulation on small business, including tax regulations. Third, to

commenting on proposed agency regulations and agencies’ review of

their regulations. Finally, to develop proposals for changes in agency policies to enhance small business success. That list of four missions is a much more focused mission statement than what is currently in the draft.

Second, I believe additional personnel are needed at the new Office of Advocacy. I do not know if I would define the structure of

the positions within the Advocate’s office in as detailed a fashion

as the draft does.

Third, and without defining the internal structure of the Office,

I would ensure that the economic research functions of the Office

are conducted to serve the overall mission, particularly in support

of ensuring agency compliance with Reg Flex.

Finally, with regard to the role of the Office in setting small

business size standards for agencies that choose not to use the

standards in their rule-makings, I would suggest that you ensure

judicial review of these decisions take place within any litigation

over the underlying rule-making.

With that, I thank you for the opportunity to testify and look forward to your questions.

9

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

Chairman MANZULLO. Thank you very much. Our next witness

is Mr. John Satagaj, president of the Small Business Legislative

Counsel.

STATEMENT OF JOHN SATAGAJ, PRESIDENT, SMALL

BUSINESS LEGISLATIVE COUNSEL

Mr. SATAGAJ. Good morning, everybody. When you have children,

and they are growing up, you often wonder what they are going to

look like when they become adults. Well, you are looking at the

child of the Office of Advocacy grown up.

My career started for better or worse—I do not know what it

comes out, started in the Office of Advocacy in 1978. So I have

lived with the office. I have grown up with the office and now continue to serve the small business community. I got the bug when

I went to the Office of Advocacy, and I have lived that ever since.

So I think I have a unique perspective on the office that is a little different than the two chief counsels and, of course, the other

folks who work in the small business community.

It comes down to this. Being an advocate for small business is

an art. And like all art, you cannot create art purely by painting

by the numbers. It is something that is part of the person as well

as it is the position.

So, as we go forward, the most important thing we are going to

do is probably select a chief counsel because it is the person more

than the position that truly makes the office.

But like any great artist, we have to give them the tools to be

a great artist. You have got to have the paint, you have got to have

the supplies in order to be an artist. And that is what this legislation is all about, is giving the tools to the chief counsel to perform

the art of advocacy.

And already you are hearing things amongst my colleagues here,

and I am sure Giovanni, as well, will hit the same theme, that the

draft headed in the right direction of giving us that, giving the

chief counsel the ability to perform the art because, ironically, the

one thing we are doing here is we are saying to the chief counsel,

‘‘We are putting you between the rock and a hard

place. That is your job. You have to go out there, and you have to

advocate for small business, but you have to do it in a way that

you have to make progress within an administration.’’

Jere, Tom and Frank and Milt Stewart before them worked as

artists. They could do that. And that is what we need to do, is give

the chief counsel the ability to perform the art.

I think they are all issued, and I think if you check Frank’s pocket, you will see some smoke to go along with the mirror he’s carried

all the time because that is part of the job.

The second point I want to hit is economic research. It is one of

the most important things the Office of Advocacy does.

As the chairman knows, last year we had a good little tussle with

the IRS about cash accounting when they came in here. And some

of you will remember the hearing when they were throwing out all

kinds of numbers about how many businesses are already okay

under the cash accounting method.

10

I was able to take some data from the State of Small Business

report and some SOI, statistics of income, data and counteract

that. And the chairman and I, we exchanged a bunch of letters

back and forth with the Treasury.

If it was not for some of the data that we got out of the Office

of Advocacy, we would not have made the progress we made there.

We still have a way to go. We have legislation to correct the cash

accounting problem, I might note. But it is that data that helps us.

Frequently, for example, I am asked about financing a small

business. What is small business doing with their money? Where

do they use it?

I am still using, thanks to Frank Swain over there, a 1984 copy

of the State of Small Business that had the last good report that

broke it down on the data on financing in a way, in terms of retained earnings and how you use depreciation. And it was Frank’s

great work at that time that helped that.

I do not know when the most recent one of these was published.

I happen to have the 1995 addition, the Catalog of Small Business

Research. I go through this thing all the time, looking for data that

I can use because we all can tell horror stories. But providing the

factual data is incredibly important. And giving the Office of Advocacy the tool for basic small business research as well as public policy research is very important.

And, finally, my third point is about the regulatory function. I

support bringing the ombudsman in, consolidating.

It is important that we speak with a strong voice, those of us

who represent small business, whether it is us in the private sector, you on the Hill here, or in the agencies.

Keith knows. I kept calling him up while he was drafting the legislation on SBREFA and said, ‘‘We have got to clone Karen Brown,

the EPA advocate.’’ I think it was certainly our hope that SBREFA would do some

of that, that we would get the strong advocates in the agency if we

created a structure. We probably should have invested more in

cloning than we did in that because we probably would be further

along.

And Keith has addressed some issues. I think we need to tighten

that whole area up, and so I support it.

Finally, I wanted to return where I began my remarks, as much

as we do in terms of the legislation, it is the new chief counsel who

is most important to us. And I am sure the administration is working hard on bringing us a permanent chief counsel.

In the interim, we need a strong chief counsel who understands

small business, has a lot of experience, who can keep this running

until we get to that point—I am confident that is going to happen—

and then get us a permanent chief counsel who has a depth of

knowledge, good technical skills, good legal skills, good communications skills, and, most importantly, a passion for small business.

That is why I was so thrilled that the chairman is here because

when we had the hearing last year on cash accounting, I said,

‘‘There is a guy I really want to work with because he brings some

passion to the table.’’

And thank you very much.

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

11

Chairman MANZULLO. Thank you very much. Our next witness

is Giovanni Coratolo. Mr. Coratolo is at the Small Business Center

of the United States Chamber of Commerce.

STATEMENT OF GIOVANNI CORATOLO, SMALL BUSINESS

CENTER, U.S. CHAMBER OF COMMERCE

Mr. CORATOLO. Thank you, Chairman Manzullo, ranking member

Velazquez, other members of the Small Business Committee.

I am Giovanni Coratolo, director of Small Business Policy for the

U.S. Chamber of Commerce. The Chamber commends this Committee for its dedication and interest in having this hearing to explore ways to improve the Office of Advocacy.

Like the others here today, I truly believe the passion of small

business is important. With the right person and with a well-defined mission and armed with the tools to work effectively on behalf of small business within the administration, the chief counsel

can have a profound impact on the regulatory process.

In many cases, the ability to interact with an agency at the earliest stages of rule-making and nip a problem in the bud before the

agency becomes staunchly committed to a concept that would have

dramatically negative consequences for small businesses. Understanding unintended consequences of the regulation before it goes

into effect will help protect small businesses before flawed rules are

published.

Recently, we have seen the Clinton administration finalize

29,000 pages of regulations. We are seeing the current administration struggling to understand them and attempt to either affirm or

to find a way to reverse and mitigate them. A truly independent

chief counsel for advocacy would prove invaluable in this process.

Unfortunately, we are sitting here today without a chief counsel

when we need him or her the most.

Now let me turn to the draft proposal and some of the fixes that

it purports to advise.

First, like others, we feel that the continuity of leadership for the

office is important. Having the chief counsel continue serving until

the successor is in place reduces the likelihood of gaps in the leadership of the office. This can have profound impacts on the morale

within the office and the momentum.

Second, specifying a line item for funding is also important. Certainly, in order to have a chief counsel that can provide a strong,

independent voice for small business, separate line item funding is

a must.

Funding for the office must be directly related to the checks and

balances of the budget process and not subject to the political pressures of agency initiatives and pet projects.

Thirdly, it needs the tools to make the difference in the regulatory process. With the passage of the original Regulatory Flexibility Act of 1980 and its broadening under SBREFA, small businesses were given expanded rights in dealing with federal agencies,

both in the rule-making process and the regulatory enforcement environment.

In a recent appeals decision, we have seen this authority erode

under the National Ambient Air Quality Standards issued by EPA.

12

Advocacy’s views expressed in an amicus curiae brief were not

given deference. This draft legislation proposes to cure that.

Fourth, providing the chief counsel with adequate funds to commission economic research projects—and you have heard John

mention this. This is very important to small business. We feel that

much is gained by the research that advocacy performs on behalf

of small business.

When Congress and policy makers better understand the role

that small enterprises play in our economy and the impact that

their decisions have on the vitality of smaller employers, they become more sensitive to the concerns of the small business community.

Although this is not contained in the draft legislation, we would

encourage the continuation of the line item for economic research.

This way there can be no doubt as to the amount Congress will allocate toward the important function of the chief counsel’s office.

And fifth, consolidating the Regulatory Fairness, the RegFair

program, under the chief counsel’s direction. This has been mentioned before by some of my colleagues. We too feel this could be

very important, certainly in this era of budget constraints. Having

these two functions—which they are simultaneous in their missions

at times—consolidated under chief counsel could be very, very important.

So, again, to just reemphasize, I think the mission has to be

tightened, and, certainly, under the right person, with the passion

of small business, I think we can have very effective leadership.

Thank you.

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

Chairman MANZULLO. Thank you very much. We are going to go

into recess until we come back from the floor, if you do not mind.

Hopefully, it will not be too long, but the first vote is a motion to

adjourn. That does not sound too promising.

[Recess.]

Chairman MANZULLO. We could reconvene. Congressman Velazquez?

Ms. VELAZQUEZ. Thank you, Mr. Chairman.

Mr. Chairman, several of my questions that I wanted to ask

today were for Ms. Ryan. And then last night around 9:00 or 1:00

we found out that that changed and that Susan Walthall would be

the person testifying. And I agree with you, that given the lateness,

it would be unfair to the members who have not time to review her

testimony to have her testify today.

But I hope that before we move to markup the bill, we could

have someone from the Advocacy office to be here to share with us

the administration’s view on this legislation so that we could have

their input.

And I would also like to see someone from the Office of Advocacy

to be here because, under your bill, we are going to move that office

into the Advocacy office—the ombudsman, yeah.

So I would hope that we could have another hearing where we

could have the administration input and then the ombudsman’s office to have their input.

13

And I would like to ask for Mr. Frank Swain and Thomas

Kerester, your indulgence in answering questions that I was planning to make to the Office of Advocacy.

So my first question is to Mr. Cole. Last year you came before

this Committee, and you testified that the best direction will be to

create a commission. Is that your position today?

Mr. COLE. My position is that we need legislation to increase the

independence and firmly establish the independence of the advocate.

I think there are a variety of ways to go about achieving that.

We could do it through a commission. We could do it through forming an independent office.

I think there are trade-offs with each of these, and one of the

benefits of the commission is it is a model that is more firmly established. We have commissions for federal trade, federal elections,

consumer product safety. This is a model that is well understood.

So I still think that a commission might be the ideal solution, but

I am not someone who lets the perfect be the enemy of the good.

If this bill is the way the Committee chooses to move forward this

year, I think it makes a contribution to small business by grounding the independence of the office in the statute.

Ms. VELAZQUEZ. So your position, in terms of the creation of the

commission change, I guess, in light of the new legislation that we

have before us?

Mr. COLE. No, it does not change. I believe that it is still the best

solution.

Ms. VELAZQUEZ. Mm-hmm.

Mr. COLE. But I believe that this independent office is an improvement over the current situation. So I would support the enactment of this legislation and with the changes we have talked about,

specifically, the kind of narrowing and focusing of the mission.

Ms. VELAZQUEZ. Okay. Thank you. Mr. Swain and Mr. Kerester,

how important a role do you see the administrator and the chief

counsel playing in the move to make Advocacy more independent?

Mr. SWAIN. Ms. Velazquez, I served with four different administrators, actually, five if you count the first administrator in the

Bush administration. All of those people were supportive, gave me

the budget support that I needed when I needed it.

But I think that the administrator’s key role right now, the way

the current system works, is basically to pass on the administrative

requirement to the office. The administrator can either give or take

away research money. They can either give or take away slots for

personnel. And that is quite an influential role or could be quite

an influential role.

It was not my experience that the administrator took any role at

all in trying to adjust or moderate any of the positions that I took

on the policy issues. Somebody mentioned before we had an informal understanding that I would keep the administrators informed

of what I was doing, but they never said, ‘‘Do not do this.’’

You know, the OMB director called me up. And, in fact, the director did call Jim Sanders up several times and yell at me

through him. But, you know, Mr. Sanders said, ‘‘That is the job of

the advocate.’’

14

But I’ll tell you, when you have the nominee for administrator

up here, you will say to that person, ‘‘What do you want to be?’’

And, undoubtedly, that person will say, ‘‘I want to be the chief advocate for small business.’’ And I do not think that any of them

ever mean they want to be a chief counsel for Advocacy.

Ms. VELAZQUEZ. Mm-hmm.

Mr. SWAIN. But they want to be the point person for small business. So there is a lot of confusion built into the system, as Keith

said.

The part of the bill that is really important—one part of the bill

that ’s really important is to get the budget out, separate, and I

think that will make a huge difference. Otherwise, I think the administrator always has at least the potential of holding authority

over the advocate’s office.

Ms. VELAZQUEZ. Mr. Swain, do you believe we should wait to get

their input before we finalize the proposal?

Mr. SWAIN. Unless you have to wait too long, and, hopefully, that

will not be the case, I think it would be useful to get the input of

the new Chief Counsel and the Administration.

I happen to know the person that has just been designated as the

acting Chief Counsel, and she is a very capable individual. I would

hope though that the Administration will soon nominate a Chief

Counsel, that person will be confirmed, and you will be able to

work directly with that person on legislation.

Ms. VELAZQUEZ. Mr. Thomas Kerester.

Mr. KERESTER. Although I was in office a short time, as I mentioned earlier, I did have a good working relationship with Pat

Saiki, the administrator. And I can just relate a story to you about

my independence, as she suggested I be.

At my public debut at the White House on May 2nd, the President announced a number of new IRS regulations with respect to

depositing funds, taxes, by small business. I went back to the office, and I brought my staff together. We talked with a lot of small

business people in the area and around the country, and we found

these proposed regulations would be very, very disadvantageous to

small business. So we wrote a very diplomatic letter to the Treasury, criticizing those regulations, which happened to make Wall

Street Journal.

The administrator was advised of what we were doing, but we

did not clear the letter with the administrator, nor with OMB.

Shortly after the letter arrived at the IRS, I had a call from a

high level Treasury official saying, ‘‘How could you do this to the

President for whom you work.’’ I reminded them that I no longer

worked for the President. I work for small business, and that is

where we were.

Ms. VELAZQUEZ. Thank you. Mr. Cole, you your testimony, you

are opposed to——

Chairman MANZULLO. We are beyond the five minutes.

Ms. VELAZQUEZ. Can I ask one more question?

Chairman MANZULLO. Sure.

Ms. VELAZQUEZ. Thank you. You indicate that you are opposed

to the proposal of adding federal procurement duties to the Office

of Advocacy. Can you please explain to me why do you not believe

15

that advocacy could be a useful tool in helping small businesses in

the federal procurement process?

Mr. COLE. You began the hearing by talking about the need for

focus in the mission of the office, and I am concerned that the current draft contains a listing of functions of the office that is so extensive as to dilute the direction. Frank Swain began his testimony

talking about how, even in his day there were so many conflicting

desires of people having for the office, that he had to pick and

chose.

I know very well that there are problems in procurement that

small business has faced. Perhaps it is my history with working on

SBREFA that my focus has really been on how do we strengthen

agency compliance with the Regulatory Flexibility Act.

I believe it would be most valuable to small business if we could

get the Advocate to have a more focused mission. I have made

some suggestions as to how to focus that, and my belief is that the

mission should be focused on assessing the impact of regulations on

small business.

Procurement is an important issue, but it would not be my top

issue. I understand other folks may disagree, but in an effort to

focus the Independent Office of Advocacy on a few core missions,

I think it ought to be limited to agency compliance with Reg Flex.

Ms. VELAZQUEZ. Thank you.

Chairman MANZULLO. Thank you very much. I have got one

question here. The Office of Advocacy statute says there is established within the Small Business Administration and Office of Advocacy. The management of the office shall be vested in the chief

counsel for advocacy who shall be appointed from civilian life by

the President with the advice and consent of the Senate.

Anybody want to try to answer me this question? Define what ‘‘appointed from civilian life’’ means? Does that mean somebody

who has never served in government service, or somebody who

served, left day one, then got appointed one day later? Does anybody know or want to try to define that?

Mr. SWAIN. I guess it is somebody that is not in the military.

Chairman MANZULLO. I do not think that is what that means.

Mr. SWAIN. I do not know. It may be a term of art. John.

Mr. SATAGAJ. We looked at this fact. As I alluded in my testimony, I did a few executive order drafts early on when I was at

the office to try to fix it.

I think the thinking a the time—and I am putting words in

somebody else’s mouth—was more the interest in getting the experience of someone who had private sector experience.

Chairman MANZULLO. That is all I was saying.

Mr. SATAGAJ. Think it is, you know, the military. But someone

from government, really, with no experience in the private sector.

So I—that was the intent, but I have never seen any true definition of it. We have been all operating on that assumption, is that

we would like to see somebody with private sector experience.

Chairman MANZULLO. Thank you. We would change the statute,

in our House draft, to the private sector. I am concerned about it

because I think we will need the Senate to agree with that position.

We want the Chief Counsel to be a tiger for the small business people, someone who dislikes government perhaps and is distrustful of

16

government. I am serious. Small business people do not like government. And the person who occupies that position has to have a

small business mentality. Otherwise, I am not interested in he or

she filling that position.

As Ms. Velazquez said we want a tiger in that office, somebody

that is going to take the government to task.

Ms. VELAZQUEZ. But I like the government.

Chairman MANZULLO. We love America. But in terms of precisely

the situation Mr. Kerester brought up, someone passes a regulation

dramatically impacting small businesses in a Republican administration without taking the time even to talk to the small business

people about it. Do you want to comment on what you said?

Mr. KERESTER. Mr. Chairman, I am happy to say that small

businesses are not that type. IRS did change their rules. And I understand there is still a problem with IRS rules and regulations.

I interpreted that to mean the private sector also.

Chairman MANZULLO. The private sector.

Mr. KERESTER. Without any basis, that was just my conclusion.

Chairman MANZULLO. Oh, okay. And that is the reason for it.

Okay. Mr. Pascrell?

Mr. PASCRELL. A couple of areas, Mr. Chairman. First of all, I

understand that when we do have a chief counsel, that we can

bring the chief counsel back here and ask him about legislation

that——

Chairman MANZULLO. Ms. Velazquez and I do not truly intend

to move this bill until we have all of our homework done and all

of the input from the administration.

Mr. PASCRELL. Thank you.

Ms. VELAZQUEZ. I promise you that.

Mr. PASCRELL. A couple of points. Mr. Coratolo, I am always interested in the Chamber of Commerce and its advocacy for small

business and big business, whatever the case may be. And for the

amount of legitimate criticism at times, harping at other times— my perception—about regulation, the House proposal gives the new

office authority to exercise the right to intervene chief counsel in

any adjudication or on on-the-record rule-making procedures.

Now how do you interpret the word ‘‘intervene?’’ How do you see

that?

Mr. CORATOLO. Well, firstly—— Mr. PASCRELL. Excuse me. This is before any federal agency, not

just in front of us. This could be in front of any agency. How do

you see that?

Mr. CORATOLO. Well, firstly, under SBREFA, they have the authority with the SBREFA panels, and that certainly only applies to

OSHA and EPA.

But intervening, I would think, would be applied to making sure

that the Reg Flex analysis is done and done properly. And I think

that is very important for small business.

Mr. PASCRELL. Do you think that has been done there? Under

the present situation, under the present system, do you think that

the chief counsel is carrying out this mandate?

Mr. CORATOLO. I think he attempts to carry it out. I think there

is a lot of federal agencies that ignore their responsibilities and duties under the Reg Flex law that was strengthened under SBREFA.

17

Mr. PASCRELL. So you support a greater advocacy on behalf of

small business, if we took a look at these rules before they became

permanent on the record, that we could avoid a lot of the bureaucracy that exists and hurts business?

Mr. CORATOLO. Absolutely. I think there is a pride of authorship

that occurs in rule-making. Once the rule is published and comes

before the general public, I think there is a staunch uncompromising position taken by many of the agencies. Whereas, advocacy’s

best efforts have been working behind the scenes with the federal

government and with federal agencies. And, hopefully, they have

provided situations where flawed rules have not been pushed forward.

Mr. PASCRELL. Now my antennae go up whenever I hear of, you

know 29,000 pages of regulations. That sounds very impressive.

And I am not trying to be a wise guy here, but there are many regulations that need to be on the books, and many regulations need

to be off the books. And that is what we are here for, trying, you

know, to make some judgments.

But when you bundle—talk about bundling—all these regulations together and say this is, you know, the government at it’s

worst, and that is why we need to get the government off our back,

it sends the wrong impression to the American people.

There are some areas that we deregulated because of your concurrence and other’s concurrence. And now my folks in my district

and many districts around America, ‘‘What the heck did you characters do up there in Washington?’’ Whether you are talking about

telephones or whether you are talking about energy, a lot of things

people are questioning.

We are saying, ‘‘Well, do not we want less government? Is not

this the age of less government?’’ So we have got to deal with the—

you know, the very, very specifics about what is and what is not

and what should be.

And the second area I wanted to ask you about is, in what ways

could an independent Office of Advocacy—if you can give me some

specifics, I would appreciate it—have addressed certain issues in

the past?

I mean, could you give an example of, if we had an advocacy office, a general counsel as you would like to describe it, define it,

we could have presented something from happening? Could you

give me an example?

Mr. CORATOLO. In other words, if we had an independent office

that had specific line items?

Mr. PASCRELL. Correct, as you desire it.

Mr. CORATOLO. It would be hard to comment without giving due

deference to the existing office and existing people.

I think the office having the flexibility of not being a tool of either administration, whether it is Republican or Democrat—and I

think there are problems on both sides. I think Small Business has

to have a voice that reflects the passion of small business and is

not controlled by an aggressive administration, whether it is Democrat or Republican because there are abuses on both sides. And I

apologize for not getting into specifics, but there could be abuses

on both sides.

18

Mr. PASCRELL. The President, in the future, may not look to ABA

for recommendations on judges, etcetera. Do you think we should

establish it based—following up on what the chairman mentioned,

that maybe should ask for a commission to recommend to the

President some names as to who would fulfill general counsel’s position? Might not that be a good idea?

Mr. CORATOLO. I am not enamored by the commission. I think

the Office of Advocacy should work within the administration,

within the executive branch. I think there is a great deal to be had,

especially when you talk about the separation of powers issue.

When you take it outside of the executive branch, you do not have

the ability for the chief counsel to be plugged into the early rulemaking authority.

Mr. PASCRELL. You are not suggesting that it does not belong

outside of the President’s office?

Mr. CORATOLO. It belongs inside.

Mr. PASCRELL. It belongs inside.

Mr. CORATOLO. But it should be an independent voice.

Mr. PASCRELL. It should be an independent voice. Now how do

we get an independent voice? How would you suggest we do that?

You know, what should our recommendations be of getting this

independent voice?

Mr. CORATOLO. Well, it should have a very tightly controlled mission. We should have, definitely, a line item for funding. There is

no line item for funding right now. There is a line item for economic research, which is good. We would like to retain that line

item for economic research. We would like to consolidate some of

the programs. Certainly, I think all of these go to making it more

independent.

Mr. PASCRELL. Well, would it be a bad idea if the business community recommended three names to the President, four names,

five names, president select, not unlike the ABA?

Mr. CORATOLO. Certainly the recommendations, I think, are

going to be there.

Mr. PASCRELL. And one last area, Mr. Chairman. I have to take

exception with doing away, physically doing away with the regional

offices, the regional advocates.

If anything, in the past four years, this committee has tried to

get the government as close to the folks as possible. So either folks

can get their hands around somebody’s neck, or they can talk to

somebody. And I am serious about that.

You know, to remove, physically remove the regional advocates,

to me, does not in any way facilitate what we are attempting to do,

hopefully, on both sides of this aisle. I do not know how you feel

about that.

Mr. CORATOLO. We did not comment on that aspect of the legislation, and, to this point, we do not have a comment as far as doing

away with regional advocates.

Mr. PASCRELL. Okay. Thank you very much.

Mr. CORATOLO. Thank you.

Chairman MANZULLO. Ms. Velazquez.

Ms. VELAZQUEZ. I thought that you did not let bureaucrats in

Washington, so I do not understand. It is like, ironic to bring your

19

regional offices into Washington. We need to bring government

close to the people. So you are right, Mr. Pascrell.

I would like to ask both gentlemen, Mr. Swain and Kerester, the

following question.

The proposal we have under consideration today has many of the

same positions as the legislation introduced by Mr. Connor last

year. It physically removes the advocacy out of SBA, give autonomy

to compliance regulations and consolidates the regulatory ombudsman into SBA.

In addition to that, it gives advocacy new authority over site

standards and moves much of the contracting monetary authority

from SBA into the Office of Advocacy.

The estimated cost last year, that we discussed last year, was $20 million. Because this includes most of Mr. Connor’s bill and

then some, it will probably cost, at minimum, $20 million.

My question to you and to the rest of the panel, how likely, given

the fiscal climate that has seen SBA’s own budget slashed by 43

percent, would the administration be willing to put up the increased funding for advocacy?

Mr. SWAIN. Well, of course, Congresswoman, I do not know the

answer, so you are asking me to speculate, so I will.

Ms. VELAZQUEZ. Sure. Mr. Swain, if the office is out there as a

totally independent agency, so it has to seek its own budget, it is

going to be, candidly, a lot easier to have it suffer in the administration’s request, this administration or any administration, and

the Appropriations Committee.

I think it is going to be very easy to say, ‘‘Okay. The authorizing Committees think this ought to be a $22 or a $24 million agency.

We are going to give it $12 million. Do the best you can.’’ And then

the $12 million gets cut back to $8 million and so on and so forth.

I think that that is more difficult to do, frankly, if it is within

the umbrella of the SBA. That is just my speculation. I do not believe that this administration is going to be any harder on the

SBA’s salary and expense budget than any other administration. It

just reflects the times that we are in and the budget rules that we

have today. But that will be a continuing issue in any administration.

Ms. VELAZQUEZ. Mr. Kerester.

Mr. KERESTER. I am not familiar with the particular bill you are

referring to, but I concur with Frank’s comments.

Ms. VELAZQUEZ. It is the budget for SBA, you know, being cut

by 43 percent.

Mr. KERESTER. The only comment I have is that small business

is opposed to a larger and larger government, and now we are

doing the opposite under the bill. We are creating more government. And I am not sure how the business community as a whole

would respond to that, but I do support an independent office.

Ms. VELAZQUEZ. Thank you. Mr. Coratolo and Satagaj, would you

be willing to go on record supporting a $20 million bill for the creation of an independent advocacy office?

Mr. CORATOLO. Well, as far as funding for the Office of Advocacy,

we have not looked at any funding levels. And, at this time we

would have to pass on going on record until we could actually look

at what type of funding levels would be required in order to——

20

Ms. VELAZQUEZ. So, Mr. Coratolo, how could you come before our

Committee and support a legislation without knowing, at least, the

estimated cost of that legislation, especially coming from the U.S.

Chamber of Commerce?

Mr. CORATOLO. Well, we philosophically looked at the legislation,

and, there was no funding levels set within the legislation. Now we

have lobbied every year to increase economic funds, along with

John’s group, for the Office of Advocacy. We have been very strong

supporters. We have letters that have gone to the Appropriations

Committee that have asked for full funding for the last two years.

Ms. VELAZQUEZ. But we are talking here, at a minimum, $20 million. So if that is what it takes, you will be willing, and you will

engage your organization to encourage the administration to support $20 million for this?

Mr. CORATOLO. We have not looked at funding levels. Certainly,

there is going to be a level of funding that is necessary in order

to engage the mission. And we would be looking at supporting that

level based on what we could review.

Mr. SATAGAJ. Well, the life of an advocate for small business is

always chasing after dollars while holding government in line, and

it is a challenge we face day in and day out. And I am going to

tell you it is not easy to do it because, you know, as we go out, the

part of the President’s speech that he made before all you that resonated most with my members was restraining government, that

we have been spending too much. So, you know, I hear that all the

time on this.

On the other hand, we do need a voice for small business. If it

takes $20 million, I hope we can find a way to find the $20 million

if that is what it is going to take. But I am not going to kid you

that it is a tough decision to even go back to my own members and

say, ‘‘Listen, we want to restrain government.’’ And, indeed, I have been through the cuts in the SBA a thousand

times and some of us that have been doing this a long time. And

we take our whack in the small business community every time because our members believe in smaller government. So we will take

the whack, but we also have to make sure the programs that we

do fund for small business work.

It is not going to be an easy choice, and I know it creates some

contradictions. But that is what we all get paid the big bucks for,

is to make those decisions. And we are here to support small business. Let us do it.

And you know, we talk around things a lot here, but the cat is

out of the bag in terms of we have an acting chief counsel coming

on board, Susan Walthall, and Frank has mentioned it.

I think all of you on this Committee are going to be delighted to

work with Ms. Walthall. I have known her for 23 years, and I can

tell you that no one is as passionate about small business as she

is, and as knowledgeable about the office. I think a lot of the questions you want to ask of advocacy you are going to get answers,

and you are going to be thrilled regardless of whether you are a

Democrat or Republican. We have an advocate for small business

there in place. I think you are going to be delighted to work with

her.

Chairman MANZULLO. Mr. Pascrell.

21

Ms. VELAZQUEZ. Thank you.

Mr. PASCRELL. I just had one comment, listening. We do not get

the chamber in front of us that many times, and when you do, you

want to ask too many questions, so I apologize.

Maybe this is not a question, but I was—I watched very carefully

when this blueprint was printed and given out two weeks ago, a

little over two weeks ago. And I did not hear one peep or read one

word—and I try to read all the business magazines—of the associations that many of you represent responding to the proposed huge

cut in small business.

Now we all want smaller government. We talk about it, and how

you talk about it, we could make a case. We have got less federal

employees now than we had eight years ago. I did not hear anything from the business community about that. But I understand

the politics of the situation.

But, you know, I was driving down Main Street in Bloomfield in

my district, Bloomfield, New Jersey, and I drove by the Bloomfield

Rug and Carpet Company. It was a small store, and I remember

going there with SBA folks two and a half years ago and, within

two or three days, providing a small loan, $50,000, obviously guaranteed to help that company bid on projects it could not have bid

on before. So not only was it sustaining itself, it was growing.

So why do we want less government? There is a very, very important role to be played—and I am not trying to proselytize here— for loans to people none of us have even heard about on back

streets and front streets.

And for the business community to be quiet, you know, I am

really—you know, who’s ox is gored? If this is what this is going

to be all about, then we are going to have a very cantankerous year

ahead of us. There needs not to be any of that. We can work out

things.

But this umbrella idea that government is evil or bad and is the

source of all of our problems, you tell that to the carpet guy on

Main Street in Bloomfield and a lot of people I can mention, small

businesses, which is our backbone really, and how they are helped

by the federal government because the SBA guaranteed a loan

which they ordinarily could not have gotten.

What is your answer to the President about that? I am asking

it rhetorically. But what is your answer to the President about

that. Are these loans that we put together the last four years that

have moved the women entrepreneurs and African-Americans and

Hispanics—what is your word to them of what is to come down the

pike at a time when they are going to need us more than ever

maybe, the federal government, that is? What do you say to them.

And Mr. Chairman, you know, I prevail upon your good graces

again.

Chairman MANZULLO. If the gentleman would yield, once the

new administrator is confirmed by the Senate, then we are going

to have a hearing on the budget, all the programs will be looked

at. And the administration will have to defend whatever levels that

is put in there.

Is there a question pending, or was that just a rhetorical question?

Mr. PASCRELL. Rhetorical.

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Chairman MANZULLO. We want to thank everyone for coming.

And it is going to take at least two more hearings in order to get

the bill that we want. Mr. Cole, I appreciate your emphasis upon

focus. You do not want a shotgun approach here. You want to be

able to focus this office to make sure it accomplishes its intended

purpose. And those of us here on the Committee appreciate the

comments from everybody.

And everybody’s comments will definitely be taken and weighed

and taken into consideration as we continue to work on the draft

of the bill. Thank you very much for coming.

[Whereupon, at 12:10 p.m., the committee was adjourned.]

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