[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]




                      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

                    U.S. GOVERNMENT PRINTING OFFICE
71-864                      WASHINGTON : 2001




                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               WILLIAM PASCRELL, Jr., New Jersey
STEVEN J. CHABOT, Ohio               DONNA M. CHRISTIAN-CHRISTENSEN, 
PHIL ENGLISH, Pennsylvania               Virgin Islands
PATRICK J. TOOMEY, Pennsylvania      ROBERT A. BRADY, Pennsylvania
JIM DeMINT, South Carolina           TOM UDALL, New Mexico
JOHN THUNE, South Dakota             STEPHANIE TUBBS JONES, Ohio
MIKE PENCE, Indiana                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            DAVID D. PHELPS, Illinois
DARRELL E. ISSA, California          GRACE F. NAPOLITANO, California
SAM GRAVES, Missouri                 BRIAN BAIRD, Washington
EDWARD L. SCHROCK, Virginia          MARK UDALL, Colorado
FELIX J. GRUCCI, Jr., New York       JAMES R. LANGEVIN, Rhode Island
TODD W. AKIN, Missouri               MIKE ROSS, Arkansas
SHELLEY MOORE CAPITO, West Virginia  BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director




                            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

 
           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 comments 
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?
    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 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.
    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 
independentcontractor, 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, 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 participate 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 
bypending rule-making, 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.
    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.
    [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.
    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.]
    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, 
smallbusinesses 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. 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.
    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.''
    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 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 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.
    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.
    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 rule-making 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 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----
    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.
    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.
    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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