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Posted at 06:41 PM ET, 01/13/2012

Some fear small businesses could lose in agency merger

The Obama administration is billing its agency-restructuring proposal as easing the regulatory burden on businesses and saving $3 billion over 10 years. However, some trade groups are wary about the execution of the proposed plan, saying they fear the move might strip resources from entrepreneurs rather than amplify the needs of small businesses.

In a phone call with reporters, Jeff Zients, deputy director of the Office of Management and Budget, said the proposed merger between six trade- and commerce-related agencies, “would serve small businesses much better,” by streamlining the current tangle of offices and agencies into, “one Web site, one phone number...and one mission.”

Zients said the Obama administration is seeking a fast-track up-or-down vote from Congress for the authority to begin the restructuring process. The administration has proposed combining the functions and staff of the Small Business Administration; the Office of the U.S. Trade Representative; the Export-Import Bank; the Overseas Private Investment Corporation; and the Trade and Development Agency.

Such a massive reorganization will face hurdles getting approved in an election year — especially because Congress has been unable to decide on much of anything lately, said Robert Litan, the vice president for research at the Kauffman Foundation in Kansas City, Mo., which advocates on behalf of entrepreneurs. He added that Congress would be even less likely to go for it because several of the affected agencies currently report to different Congressional committees.

“When you’re upsetting the apple cart, there are a lot of players that are affected,” he said. “These agencies are all under different committees, and some of the committees are gonna lose power. People who lose power like to block change.”

Litan said that while there’s a chance such an agency could indeed streamline the exporting process for small businesses (the SBA would be in the same organization as OPIC and the Export/Import bank), there’s also a chance that the new “super-commerce” department could end up a poorly structured monolith. As an example, he points to the 2002 formation of the Department of Homeland Security, which has since been the subject of criticism over waste and inefficiency.

For their part, small business groups largely applauded SBA Administrator Karen Mills’s promotion to the cabinet, which was also announced Friday, saying it signals the importance of small businesses in the economic recovery.

At the same time, some business groups say they are anxious that the merger will take resources away from small-business programs. Several of the other agencies in the proposed consolidation concern themselves with large firms, and the Obama administration said that the new, combined agency would employ between 1,000 and 2,000 fewer staff members.

“On the one hand, we’re always interested in efforts to streamline government,” said John Arensmeyer, chief executive of the Small Business Majority advocacy group based in California and Washington.

He added that while small businesses tend to be skeptical of government in general, they have a favorable impression of the SBA and don’t want its influence diminished. “To the extent that the SBA gets subsumed in a bigger department that independence will be harmed, and we would not want to see that happen,” he said.

Kristie Arslan, president of the National Association for the Self-Employed, said a key question is not just how prominent a role the former SBA would play in the new agency, but whether the new agency’s head would prioritize the interests of small companies.

“Who will be the new secretary and what is their background?” she said. “Leadership plays a key role, because the mission direction comes from the top.”

Dona Storey, a small-business contractor and government contracting consultant, said she worried that small contractors would be disoriented by the change. With fewer resources, the new agency might not be able to adequately educate small contractors on how to pursue government dollars, she said.

“If you change an entire agency, how are they going to put together the outreach? Where is that money? The confusion it’s going to cause in the market place is my number one concern,” she said.

In the conference call, Zeints rejected the idea that small business interests might be overlooked in the re-shuffling.

“This department will be about serving America’s businesses — the very essence of this will be about improving how we serve small, medium and large businesses across the country,” he said.

By  |  06:41 PM ET, 01/13/2012

 
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