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Small Business Small Office Big Deal

Published Friday, August 20, 2010 7:00 am
by Tom Sullivan

Yesterday President Obama announced the recess appointment for a little-known position, the Chief Counsel for Advocacy at the U.S. Small Business Administration.  Winslow Sargeant will be travelling from Madison, Wisconsin to Washington, DC to assume the role.
What is truly amazing about this appointment has less to do with the controversy of a non-lawyer appointed as Chief Counsel and more to do with the Office of Advocacy's unique role in government and its grave responsibility to fight for the little guy.
The Chief Counsel for Advocacy must represent the interests of small business independent of the views of the White House, the SBA Administrator, Secretary Geithner, and others.  This role is easy when an administration announces tax cuts and reductions in paperwork burden.  The Chief Counsel's independence gets tricky when EPA is issuing dozens of regulations designed to curb greenhouse gas emissions that may cripple small firms.  The role gets even more tricky as IRS gears up to implement the new 1099 reporting requirements that passed with the new health care law and OSHA is finalizing its proposal that mirrors part of the Clinton-era ergonomics rulemaking.
Winslow Sargeant will need strong shoulders to carry the weight of responsibility conveyed with representing small business in a rulemaking system that is stacked against entrepreneurs.   Research from his new office shows that small business face regulatory costs that are 45 percent higher than their larger business competitors.  This makes sense when you visualize a couple going over the annual tax return for the wife's business at the kitchen table after their kids are in bed.  The wife does not have an accounting department to keep up with the tax code changes, revised schedules, phased-in and phased-out deductions, and other annual headaches.  Nor does she have a Health & Safety Department, a Personnel Department, an Engineering Department, CFO, or a Billing Department.  This simple reality is why Mom and Pop business owners pay roughly $7,647 per employee per year compared to the $5,282 per employee cost that large corporations spend to comply with federal rules and regulations. 
The disproportionate burden on small firms when it comes to regulation is not front page news the way that Fortune 500 bankruptcies are.  However, the annual cost of federal regulations in the United States exceeds $1.1 trillion which is more per household than what families pay for healthcare.  That burden is stifling small businesses' ability to hire employees which we need for an economic recovery. 
Winslow Sargeant is taking the reins of a highly effective office (yes, I am biased as a former Chief Counsel for Advocacy).  For over 30-years, SBA's Office of Advocacy has published needed research on the economic and societal importance of entrepreneurship.  The Office of Advocacy has leveraged its internal economic expertise with the scholarship of dozens of outside academics and researchers who demonstrate the importance of a small business economy.  Organizations of women business owners, veterans, community bankers, home-based businesses, and others continually applaud the research published by SBA's Office of Advocacy and its impact on public policy.
So too has the Office of Advocacy plunged into the swamp of regulatory policy development and courageously fought for the interests of small enterprises.  Knowing that small business owners can ill-afford to read the federal register, attorneys in the Office of Advocacy pour through regulatory drafts and engage with agencies to ensure that the concerns of small business are not left out.  The Office of Advocacy has filtered out billions of dollars in unnecessary regulatory costs without sacrificing the protections intended by regulatory proposals.  It is undoubtedly that success that prompted Congress to require the Consumer Financial Protection Bureau to check with the Office of Advocacy prior to issuing regulations under the Dodd-Frank Financial Reform Law.
Winslow Sargeant takes over the Office of Advocacy at a time when small business needs a voice in federal rulemaking more than ever before.  Small business is fearful of greenhouse gas regulations, rules that will be issued under the new health care law, and the creation of a new consumer financial regulatory enforcement bureau.  Now is the time for Winslow Sargeant to flex the Office of Advocacy's independence and protect the part of our economy we need most to dig ourselves out of this recession. 
Tom Sullivan is an attorney with the law firm of Nelson Mullins Riley & Scarborough where he runs the Small Business Coalition for Regulatory Relief.  He served as Chief Counsel for Advocacy from 2002-2008.
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