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New York Times: Rewriting Regulation? Small Businesses Have Suggestions

By Robb Mandelbaum, New York Times "You're the Boss" Blog

Last week, President Obama signaled  that he was ready to make the process of writing regulations friendlier to businesses, especially small businesses — and advocates for the nation’s small businesses are ready with suggestions.

Small-business lobbyists — from organizations that exclusively represent small concerns, as well as from trade groups with large and small members — greeted the Obama administration’s promise both warmly and warily. Warmly because, as Molly Brogan, vice president of public affairs at the National Small Business Association, put it, “taking a vocal stand against burdensome and unfair regulations hadn’t been top priority for them, as far as we’ve seen.”

Warily because most of Mr. Obama’s new regulatory vision, detailed in a broad executive order and a memorandum encouraging regulatory flexibility for small business *, is in fact already supposed to be standard operating procedure for the federal bureaucracy. † “If you look particularly at their memorandum on small business and job creation, that sort of restates what the Regulatory Flexibility Act does,” said Susan Eckerly, a senior vice president and head of the federal lobbying arm of the National Federation of Independent Business.

The Regulatory Flexibility Act is the chief tool for reducing the regulatory burden on small businesses, which generally find it more expensive to comply with government rules — particularly when those rules are designed to govern large companies. It requires agencies to consider whether the rules they make are likely to have a “significant economic impact on a substantial number of small entities.” If so, the agency must conduct analyses of alternative approaches that could accomplish the same end at less cost to small companies. Agencies are also supposed to take the counsel of the Small Business Administration’s Office of Advocacy, an independent arm of the agency that serves as an ombudsman for small business within the executive branch.

Too often, some small-business lobbyists say, government agencies give the Regulatory Flexibility Act short shrift. Instead of looking at alternatives, said Ms. Eckerly, they “only propose one way. The worst is that they say the rule will have no impact on small business.” Agencies often ignore the advice of the S.B.A.’s Advocacy Office, said Angelo Amador, vice president of labor and workforce policy for the National Restaurant Association. Both Ms. Eckerly and Mr. Amador say that ignoring obligations to small business is not a partisan prerogative. “It’s not just Obama,” said Mr. Amador. “We saw some of this with the Bush administration as well.”

The administration’s new regulatory orientation, however, coupled with changes in the recently passed small-business jobs act that strengthen the S.B.A.’s Office of Advocacy, may give that office new importance in rule-making, said Ms. Brogan. One change: the office will now get its own appropriation, instead of having to compete with other S.B.A. offices for resources. But what else can the administration do to make good on its pledge?

It could start by making sure the businesses that need to know about new regulations find out about them, said J. Craig Sherman, a vice president for the National Retail Federation. He cited a recently proposed rule that would require stores that sell gift cards to comply with the Bank Secrecy Act. “The way this was put forth publicly was that it was printed in the Federal Register, which nobody outside of the Beltway or attorneys in the compliance business look at. And the heading for this was ‘Amendments to the Bank Secrecy Act Regulation’s Definitions Concerning Prepaid Access.’

“Even if you were looking at the Federal Register, and you were a Main Street store of some sort, you’d say, ‘I’m not a banker, I don’t have to look at that.’ The government needs to have some better official notification than cryptically worded headlines in an obscure publication.”

It would also help, said the N.S.B.A.’s Ms. Brogan, if the regulations were easier to read. Last year, Congress passed a law that requires most government communication with citizens to be in “plain English,” she said, but the requirement was not extended to rule-making. “If you’re a small business affected by a regulation,” she said, “you should be able to find out without having to spend four hours reading through very complicated legalese.”

And Ms. Brogan would like to see the cost-benefit analyses that regulators undertake include indirect costs, such as the amount of time it takes business owners to read through the rules and figure out whether they have to comply, as well as the time it takes to comply. Currently, she said, agencies don’t take the cost of time into account.

The N.F.I.B.’s Ms. Eckerly, for her part, would like small businesses to have more input at more federal agencies. A second law, the Small Business Regulatory Enforcement Fairness Act, takes the Regulatory Flexibility Act one step further: It requires rule-makers to collect testimony from small businesses that would be affected by a new rule. Presently, though, this law only applies to the Occupational Safety and Health Administration and the Environmental Protection Agency. (It will also apply to the new Consumer Financial Protection Bureau created by the Dodd-Frank financial reform, thanks to the efforts of Senator Olympia Snowe, the Maine Republican.) Ms. Eckerly would like to see such panels at all agencies, but especially at the Department of Health and Human Services and the Internal Revenue Service. “If the health care law keeps moving forward, there are going to be numerous new regulations that are going to impact small business,” she said. “And the most burdensome paperwork impact on small business is tax compliance from the I.R.S.”

Finally, the National Association of Manufacturers would like to see regulations come with an expiration date, according to its vice president of regulatory policy, Rosario Palmieri. “We believe that there is value in regulations having an end date, as technology changes, as the markets change, as products change,” he said. “Regulations put in place three or four decades ago might no longer be necessary or might be out of date.”

These suggestions are about the regulatory process. Not surprisingly, small-business lobbyists also have specific grievances with the Obama administration’s rule-writers, which we’ll explore in the near future.