The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued a Discussion Paper (DP) entitled, “Leases: Preliminary Views.”  The DP invited public comments.  The comment period is open until July 17, 2009.

            The DP proposed capitalizing all leases, including “operating leases.”  The proposed capitalization of all leases would affect all small businesses that lease equipment or real estate, regardless of the monetary value or duration of the lease.  As an example of the wide-reaching scope of the proposed standard, even a small business that leased a $1,000 photocopy machine for a fixed period of two years would be required to change its financial statement and report the photocopier on its asset sheet as if the small business owned the photocopier. 

            Small business stakeholders that have been in contact with Advocacy have expressed concern with the proposed lease accounting standard contained in the DP.  First, small business stakeholders report that, because the DP would reclassify operating leases as capital leases, this would substantially increase the debt shown on small business lessees’ financial statements.  This would also cause these small companies to have financial statements that show reduced earnings and reduced capital. 

            Second, small business stakeholders advised that the proposed changed standard would add complexity and result in small business lessees with financial statements that are less understandable and comparable than they are under the current standards. 

            In a comment letter, Advocacy commended FASB and IASB for their efforts to create a common standard on lease accounting but recommended that the boards develop alternatives that would minimize the burden of the proposed standard on small businesses engaging in shorter-term, less-costly lease transactions.  In particular, Advocacy recommended that FASB and IASB create a de minimis exception to the standard that would exempt lease transactions of less than $250,000 from the proposed standard.

– Dillon Taylor, Assistant Chief Counsel

The Capitol Hill Connection will resume when Congress returns from recess.

            “Health Reform in the 21st Century: Proposals to Reform the Health System” was the title of a hearing held yesterday by the House Committee on Ways and Means.  The hearing opened with statements from Chairman Charles Rangel (D-NY) and Ranking Member Dave Camp (R-MI) who clearly drew the battle lines around which the two sides would debate.  Although both agreed on the necessity of reform, the main subject was clearly whether a public plan option was, or was not, a good idea.

            In Chairman Rangel’s opening remarks, he made the case for reform, and framed it as an absolute necessity.  However, Ranking Member Camp questioned whether the government can afford to create another liability, and whether the price tag for a public plan and for the current tri-committee healthcare reform draft legislation was feasible.  He noted that an independent analysis showed that the draft legislation would cost 3.5 trillion dollars, though he did not specify a time-period.

            The Representatives opposed to the draft argued that by passing it we would take off down the slope to socialized medicine, similar to England or Canada.  However, other Representatives argued that was a good thing, as Canada and England have better life expectancy, less infant mortality, and fewer deaths due to doctor error.

            The witnesses were clearly divided.  They ranged from an outspoken advocate in favor of a single payer system, to supporters of the public option in the draft legislation, to opposition of any sort of government sponsored health plan.  

            One panelist raised the argument that a public option was not fair competition against private insurers (including small insurers), because it had so many advantages granted by being a part of the government, primarily not being taxed and no capital requirements.  Rep. Paul Ryan (R-WI) had an interesting metaphor for this, saying it was like expecting his daughter’s lemonade stand to compete with McDonalds.

            Chairman Rangel made it clear that he believes the insurance industry exists to make money, not deliver the best or most efficient health results, and in his mind, the only way to do so was to introduce government into the equation.  

            Whether we can create an efficient and effective public-private healthcare partnership remains to be seen.

– Myles MacDonald, Advocacy Intern and Claremont McKenna College Student

            On Friday, June 19, I attended a healthcare roundtable at F3 Engineering, a small, women-owned manufacturing facility in Paterson, NJ, to discuss with women-owned firms the state of health insurance in the small business world. 

            The roundtable featured SBA Administrator Karen Mills and the Secretary of Health and Human Services, Kathleen Sebelius, and drew more than 50 business owners and employees came from all over New Jersey, as well as New York and Pennsylvania, to share their thoughts, concerns, and ideas for the future.  

            Administrator Mills opened the meeting by expressing to attendees that she and the President are aware that the costs of both healthcare and health insurance are increasing.  She also addressed the concern that small business owners do not have access to affordable health insurance plans for their employees.  Administrator Mills noted that every year more small businesses are no longer able to continue to provide coverage for their employees because of rising costs.

            Secretary Sebelius discussed her background in the health insurance industry as a former State Insurance Agency head for the state of Kansas.  She stated that as a nation we pay $2 trillion per year for healthcare related costs and that nearly 47 million people are without health insurance.  She told the audience how she is working closely with the President to find solutions that will make health insurance available and affordable for small business and that cost is the major aspect of the President’s reform efforts.

            Many of the business owners shared their stories and anecdotes of high deductibles, coverage and procedure denial, and fighting unexplained bills for procedures.  A common theme among the owners was that they have to spend significant time annually researching new policies for their employees in an effort to keep the costs from escalating too rapidly.  Although some expressed regret for having to pass costs on to employees as the policies have become too expensive, I heard a united voice in that these small business owners felt it was a necessity for their business to remain competitive to offer affordable health insurance to the backbone of their businesses, their employees.

–Christine Glassner, Region II Advocate

            Each week while Congress is in session the Office of Advocacy will post a highlights schedule of congressional hearings and committee markups that we think will be of interest to stakeholders in the small business community.  For further information on the hearings in question please contact the relevant congressional committee.

3:00 pm    Markup

Senate Health, Education, Labor and Pensions Committee markup of draft legislation, S. ____, Affordable Health Choices Act.

Bill Text:     S. ___,  http://help.senate.gov/BAI09A84_xml.pdf

Where:        325 Russell                  

Webcast:     http://help.senate.gov/

Tuesday, June 23, 2009

9:30 am    Hearing

House Energy and Commerce Subcommittee on Health hearing on draft proposal for comprehensive health care overhaul.  Note: draft language is the result of the concerted efforts of three House committees: the House Energy and Commerce Committee; House Education and Labor Committee; and House Ways and Means Committee. 

Bill Text:  http://energycommerce.house.gov/Press_111/20090619/healthcarereform_discussiondraft.pdf

Bill Summary:  http://energycommerce.house.gov/Press_111/20090619/healthcarereform_summary.pdf

                 Where:        2123 Rayburn

                 Webcast:     http://energycommerce.house.gov/

10:00 am  Markup

Senate Health, Education, Labor and Pensions Committee markup of draft legislation, S. ____, Affordable Health Choices Act.

Bill Text:     S. ___,  http://help.senate.gov/BAI09A84_xml.pdf

Where:        325 Russell

Webcast:     http://help.senate.gov/

12:00 pm  Hearing

House Education and Labor Committee hearing on draft healthcare overhaul legislation.  Note: draft language is the result of the concerted efforts of three House committees: the House Energy and Commerce Committee; House Education and Labor Committee; and House Ways and Means Committee. 

 Bill Text:     H.R. ____, http://edlabor.house.gov/documents/111/pdf/publications/DraftHealthCareReform-BillText.pdf

Bill Summary:  http://edlabor.house.gov/documents/111/pdf/publications/DraftHealthCareReform-BillSummary.pdf

3:00 pm    Hearing

House Select Energy Independence and Global Warming Committee hearing on “The Climate Threat to the Planet”

Where:        2318 Rayburn

Webcast:     http://globalwarming.house.gov/

5:30 pm    Markup

House Homeland Security Committee markup of pending legislation, H.R. 2868, The Chemical Facility Antiterrorism Act of 2009

Where:  311 Cannon

Webcast:  http://hsc.house.gov/

Wednesday, June 24, 2009

9:30 am    Hearing

House Energy and Commerce Subcommittee on Health hearing on draft proposal for comprehensive health care overhaul

                 Where:        2123 Rayburn

                 Webcast:     http://energycommerce.house.gov/

10:00 am  Markup

Senate Health, Education, Labor and Pensions Committee markup of draft legislation, S. ____, Affordable Health Choices Act.

Bill Text:     S. ___,  http://help.senate.gov/BAI09A84_xml.pdf

Where:        325 Russell

Webcast:     http://help.senate.gov/

10:00 am  Hearing

House Ways and Means Committee hearing on draft healthcare overhaul legislation.  Note: draft language is the result of the concerted efforts of three House committees: the House Energy and Commerce Committee; House Education and Labor Committee; and House Ways and Means Committee. 

Bill Text:     H.R. ____, http://waysandmeans.house.gov/media/pdf/111/HRdraft1xml.pdf

Bill Summary:  http://edlabor.house.gov/documents/111/pdf/publications/DraftHealthCareReform-BillSummary.pdf

10:00 am  Hearing

House Small Business Subcommittee on Regulations and Healthcare hearing on Health IT Adoption and the New Challenges Faced by Solo and Small Group Healthcare Practices”

Where:        2360 Rayburn

Webcast:     http://www.house.gov/smbiz/

10:00 am  Hearing

House Financial Services Committee hearing on “Regulatory Restructuring:  Enhancing Consumer Financial Products Regulation”

Where:        2128 Rayburn

Webcast:     http://www.house.gov/financialservices/

10:30 am  Markup

House Education and Labor Committee markup of draft legislation, H.R. 1984, 401(k) Fair Disclosure for Retirement Security Act of 2009

Bill text: http://edlabor.house.gov/documents/111/pdf/markup/HELP/HR1984/ANDREW_012.pdf

                 Where:        2175 Rayburn

                 Webcast:     http://edlabor.house.gov/

Thursday, June 25, 2009

9:30 am    Hearing

House Energy and Commerce Subcommittee on Health hearing on draft proposal for comprehensive health care overhaul

                 Where:        2123 Rayburn

                 Webcast:     http://energycommerce.house.gov/

10:00 am  Markup

Senate Health, Education, Labor and Pensions Committee markup of draft legislation, S. ____, Affordable Health Choices Act.

Bill Text:     S. ___,  http://help.senate.gov/BAI09A84_xml.pdf

Where:        325 Russell

Webcast:     http://help.senate.gov/

11:00 am  Hearing

House Transportation and Infrastructure Committee hearing on “Recovery Act:  120-Day Progress Report for Transportation Programs”

Where:        2167 Rayburn

Webcast:     http://www.house.gov/financialservices/

2:00 pm    Markup

House Appropriations Subcommittee on Financial Services and General Government markup of draft Fiscal Year 2010 Appropriations for programs under its jurisdiction (including the Small Business Administration)

Where:        2358-A Rayburn

Webcast:     http://appropriations.house.gov/

3:30 pm    Hearing

Senate Environmental and Public Works Committee hearing on “The Impacts of Mountaintops Removal Coal Mining on Water Quality in Appalachia”

Where:        406 Dirksen

Webcast:     http://epw.senate.gov/public/?CFID=16750270&CFTOKEN=16672232

Friday, June 26, 2009

10:00 am  Markup

Senate Health, Education, Labor and Pensions Committee markup of draft legislation, S. ____, Affordable Health Choices Act.

Bill Text:     S. ___,  http://help.senate.gov/BAI09A84_xml.pdf

Where:        325 Russell

Webcast:     http://help.senate.gov/

10:00 am  Markup

Senate Judiciary Committee markup of pending legislation, including S. 257, Consumer Credit Fairness Act, legislation to amend federal bankruptcy law to require the bankruptcy court to disallow any claim arising from a “high cost consumer credit transaction.”

Where:  226 Dirksen

Webcast:  http://judiciary.senate.gov/

            Last Wednesday, Advocacy attorneys attended the American Bar Association’s 5^th Annual Administrative Law & Regulatory Practice Institute meeting.  All of the panels over the course of the daylong event focused on new directions in agency rulemaking following the transition into a new administration. 

            Topics included the role that technology is playing in increasing transparency and accountability in the regulatory process, new methods that agencies are exploring to make the public comment process more effective, tools that agencies have at their disposal to increase flexibility in rulemaking, and oversight of rulemaking by Office of Information and Regulatory Affairs (OIRA) and OMB. 

            The Office of Advocacy often works closely with OIRA and other federal agencies to examine the impacts of proposed regulations on small businesses and forward the concerns and input of the small business community to the Administration and its regulatory decision makers.

            Current OIRA associate administrator Michael Fitzpatrick participated on a panel discussion regarding OIRA oversight in the Obama administration, saying that centralized review of proposed agency regulations under the Obama administration “continues to be robust and active.”  Fitzpatrick said that OIRA has completed reviews of 136 proposed rules since the start of the new administration.

            Former OIRA Administrator Susan Dudley also participated in the panel and defended OIRA’s oversight role.  Dudley stated that the Regulatory Impact Analyses that OIRA reviews not only provide the public and the President with the facts necessary to determine whether proposed agency actions will increase the public welfare, but also provide a transparent view of the inherent trade-offs that regulatory decision-makers must balance when creating new regulations. 

–Jamie Belcore Saloom, Assistant Chief Counsel

DHS Delays Implementation of E-Verify Employment Eligibility System

            The Department of Homeland Security (DHS) agreed to delay until September 8, 2009 implementation of a new rule that would require federal contractors to use the federal government’s E-Verify employment eligibility system.  This rule applies to employers with federal contracts worth more than $100,000 and a performance period of 120 days or more.  The extension was granted after several business groups, including the U.S. Chamber of Commerce, Associated Builders and Contractors, and the Society for Human Resource Management filed a lawsuit challenging the legality of the federal contractor rule. 

FTC Grants Three-Month Delay for “Red Flags” Rule

            The Federal Trade Commission (FTC) will delay enforcement of the new “Red Flags Rule” until August 1, 2009.  This rule will require creditors, financial institutions and businesses that extend credit to customers to develop and implement identity theft prevention programs to detect “red flags.”  The rule was set to take effect on May 1, 2009. 

            Ben Bernanke, Chairman of the Federal Reserve, has become one of the most famous men in America over the last year.  Rising from relative obscurity as the Princeton professor who became Alan Greenspan’s successor, he has appeared to handle both the financial crisis and oversight from Congress with the equanimity of a seasoned pro.

            This quality was on display again last week as he sat before the House Budget Committee for two hours, being both grilled and praised by its members.  While Chairman John Spratt (D-SC) and Ranking Member Paul Ryan (R-WI) asked concise questions about policy, Rep. Niki Tsongas (D-Mass) had the sharpest questions for Chairman Bernanke.

            However, the real meat of the meeting was about the current state of the economy, and the greatest concern of the committee members was the burgeoning fiscal deficit.  Chairman Bernanke spent a great deal of time emphasizing that although the deficit is a very worrying long term problem, in the short run, we must continue to take whatever steps we can to end the recession and re-enter our long term growth pattern.  He also made clear that as Chairman of the Federal Reserve, although he can express opinions on the budget deficit and growing national debt, his institution is responsible for monetary policy.  Short of monetizing the debt (printing dollars to buy the debt, thus creating inflation and reducing the real value of the debt), he has no control over fiscal policy.  Without being overly accusatory, he put that job squarely on Congress’s shoulders, letting the Budget Committee know that their actions would determine the long-term growth of the national debt, not his.

            Although he delivered some sobering news, Bernanke stayed positive while remaining reserved about the timeframe for a recovery.  Although he emphasized that the labor market may continue to suffer for many months, he believed that recovery would be in full swing by the end of this year. He also stated firmly that both Troubled Asset Relief Program and the American Recovery and Reinvestment Act played a great deal in creating financial stability and halting the downturn.

            The question of inflation was also of great concern to the House Budget Committee.  After Bernanke issued a flat out denial of any intention of monetizing the debt, the committee was still concerned that natural economic pressures might create intense inflation as the economy regains steam.  However, Bernanke reiterated that the Fed was committed to price stability and would use open market operations as needed to preserve it.

            Chairman Bernanke did not announce any dramatic shifts in policy, though his statement regarding price stability was of the most interest to me.  He went to great lengths to point out that stability means neither inflation nor deflation, a statement intended to reassure a jittery public and world about fears of inflation. However, as many economists believe, a small amount of inflation is preferable to none, in order to raise the cost of holding money (as opposed to investing it) and to build a buffer zone against deflation.  But, Bernanke’s words appeared to oppose this, so it will be interesting to see what policies the Fed pursues.

– Myles MacDonald, Advocacy Intern and Claremont McKenna College Student

One of the most technically complex issue-areas in the Office of Advocacy’s workload is telecommunications. We regularly advocate on behalf of small telecom companies before the Federal Communications Commission and Congress. Understanding the different needs of small telecom providers in the U.S. market has always been a challenge, given their diversity and the highly technical nature of the field. For example, what works for a small wireless carrier in terms of regulation and federal policies may in effect be adverse for small cable company or a rural ILEC (an incumbent local exchange carrier or local telephone company).  

Advocacy is in constant communication with different telecom industry representatives and the FCC to analyze how specific regulations affect their business models. Over the years, we have worked closely with the American Cable Association, the trade organization that represents the needs of small and medium-size independently owned cable companies. ACA has been instrumental in helping our office to better understand the challenges that small cable companies face in the provision of telecom services. In May, we decided to expand Advocacy’s “cable education” a bit further. 

As a part of our “cable education” we wanted to see firsthand how a small cable company’s headend differs from other carriers’ central offices. So, on May 18^th, in honor of National Small Business Week, a few members of our office, including Acting Chief Counsel Shawne McGibbon, visited the Metrocast cable system. Metrocast is part of a family-owned cable company that primarily provides service in parts of Maryland, Virginia and Pennsylvania. Metrocast is one of the small cable providers that has deployed advanced voice, video, and broadband networks throughout rural America.

Joined by representatives from ACA, our group toured Metrocast’s local headend, the brick building that houses the sophisticated array of equipment needed to supply local subscribers with hundreds of video channels, high-quality digital phone service, and broadband Internet access. Even more impressive than the network itself was this small business’s level of customer service and community involvement. Listening to stories about Metrocast’s customers and the company’s community-oriented projects made it easy for our group to realize the value and importance of small firms. Companies like Metrocast, that have worked to connect rural America, will be essential in helping us to complete our national broadband strategy. We need more small businesses to push innovation, to create jobs, and to care about their local communities. Thanks to ACA and Metrocast for their hard work at making this happen.

Cheryl Johns

Assistant Chief Counsel for Telecom

Nothing seems more important to Congress right now than healthcare reform. Who better qualified to debate the issue than the previous administration’s Health and Human Services Secretary, Michael Leavitt, and the former Senate Minority Leader, Tom Daschle? At a National Press Club Newsmaker Program this week, the debate was suspiciously polite, bordering on outright cuddly, and a great deal of intelligent discussion occurred as well.

The earliest and easiest agreement was that there is a problem, and it can be broken down into three simple parts: lack of access, low quality, and absurd cost growth. Both debaters agreed to these points readily, and the rest of the discussion was oriented toward which particular solution would be both politically viable and likely to create progress.

Leavitt’s recurring theme was “government should guide the system, not own it.” He argued that government must change the setting to create better incentives. While our current system prioritizes quantity over quality, illness treatment over prevention, and misjudges the value of outcomes, he admitted that the solution is not simple. Leavitt believes that the progress would come through incremental changes over a number of years, and that the system we aim for may not be the one we end up with. He adamantly argued against a public plan, labeling it a Trojan horse that would invite government to take over the healthcare system.

In contrast, Daschle fervently advocated for the public option, arguing that it offered a higher quality, more efficient solution that would create competition and force the health insurance industry to offer more effective and affordable plans. But more importantly, Daschle emphasized that the American system focuses heavily on treating people once their illnesses have approached serious levels, rather than trying to keep them healthy to begin with. Daschle also emphasized that the technology of the health care system must be updated, especially in the back office operations. As he put it, we’ve got “21^st century treatment and 20^th century services.”

Although it became clear over the course of the event where each side stood, it was their agreement on a few key issues that was most striking. Both emphasized wellness over illness treatment and the need for reform, and both recognized that the cost structure of American health care is creating much lower value per dollar than in the rest of the industrialized world. Each expressed concern that the healthcare system had become inaccessible to a sizable minority of Americans. As long as both sides agree on the need for reform, we can be certain that the system will be changed.

Myles MacDonald

Advocacy Intern and

   Claremont McKenna College Student