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Government watchdog under fire for allegedly backing corporate interests

During a congressional hearing on Thursday, The Center for Progressive Reform’s Rena Steinzor urged federal investigators to look into whether the SBA Office of Advocacy broke the law by lobbying on behalf of large corporations. (Chip Somodevilla/GETTY IMAGES)

Government officials charged with advocating on behalf of small businesses have come under fire for allegedly shifting their attention to the interests of large corporations.

Rena Steinzor, a law professor at the University of Maryland and president of the Center for Progressive Reform, a nonprofit research and advocacy group, suggested at a congressional hearing Thursday that the Small Business Administration’s Office of Advocacy has “consciously diverted its limited, taxpayer-funded resources away from helping truly small businesses.”

Steinzor urged the Government Accountability Office to investigate whether officials broke the law by lobbying against new regulations on behalf of some of the nation’s largest firms.

“The SBA Office of Advocacy has systematically consorted with big business to pursue an agenda of undercutting health, safety and environmental agencies without considering at any point whether the way its staff spend their time confers any benefit on small business,” she told members of a House Small Business subcommittee.

Winslow Sargeant, director of the office, also testified at the hearing but was on an earlier panel and did not have a chance to directly address the criticism.

In an e-mail to The Washington Post, he called the allegations “inaccurate” and insisted that he and his staff “have not violated any laws.”

“I admire Ms. Steinzor’s passion, but I think she and the Center for Progressive Reform have a fundamental misunderstanding of our office,” Sargeant wrote, adding that he believes regulations serve an important role in strengthening the economy. He said his office’s goal “is not to block rules and regulations or make them less effective; rather, our role is to work with regulators and Congress to get the same result they want from the regulation, while easing that regulation’s burden on small businesses.”

Created by the Regulatory Flexibility Act in 1976, the SBA Office of Advocacy is charged with assessing the impact of regulations on small firms and ensuring that their interests are taken seriously by lawmakers and regulators.

At the hearing, Sargeant said his team’s efforts have paid dividends for small-business employers. He directed attention to his most recent annual report to Congress, which showed the office’s efforts last year saved small firms $2.4 billion in initial-year regulatory costs and $1.2 billion in recurring costs.

Steinzor contends that not all the “small” businesses benefitting would be considered small by most standards. Citing documents obtained through the Freedom of Information Act and published in a report by her group, she noted the Office of Advocacy appears to consider oil refineries with up to 1,500 employees and chemical plants with up to 1,000 employees small enough to warrant department support.

Steinzor said the documents also show that the staff routinely sought comments from “large company lobbyists” on proposed regulations.

Subcommittee Chairman David Schweikert (R-Ariz.) disputed her claim that those conversations steer the department’s agenda. “I don’t think there’s any actuarial data that says that,” he said.

Still, CPR’s report asserts that “blocking regulations has become the Office of Advocacy’s de facto top priority.”

Acknowledging employers often object to red tape, Steinzor said some regulations support economic interests.

Health-care rules and emissions standards, for example, are meant to keep Americans healthy, and a healthier workforce means greater business productivity, said Steinzor, who previously led the environmental practice at Spiegel & McDiarmid in Washington.

The Office of Advocacy should be more judicious about its assessment of regulations, she said.

Former senator Blanche Lincoln (D-Ark.), chair of the National Federation of Independent Business’s regulatory coalition, defended the SBA, saying small-
business employers do want “commonsense, sensible regulatory reforms” but that attacks on the agency’s work are “being driven by special interests who want to preserve an unaccountable, overreaching regulatory system.”

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.



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