Wednesday, December 31 is the deadline for the 2009 r3 Top 10 Rules for Review and Reform nominations. In an earlier post we noted:

            The American City Business Journals recently ran an article by Kent Hoover, their Washington Bureau Chief, summarizing the Regulatory Review and Reform (r3) initiative’s call for nominations of federal rules that should be reviewed and reformed.

This is the second year the Small Business Administration’s Office of Advocacy has solicited regulatory review nominations. Last year’s top 10 list generated some action, including the Environmental Protection Agency’s redefinition of solid waste. This rule change enabled small businesses to recycle more materials instead of disposing them as hazardous wastes.

 

Simplifying the home office tax deduction also made last year’s top 10.  Legislation was introduced this year in both the House and Senate to create a standard deduction for home offices.

            Nominations for the 2009 Top 10 should be submitted by December 31, 2008 to www.sba.gov/advo/r3.

            I was invited to serve as a discussant for a luncheon seminar hosted by the Hudson Institute and the Dingman Center for Entrepreneurship on Dec. 9, 2008.  Antony Ni, a Visiting Professor at Shanghai Jiao Tong University, and an entrepreneur both in China and in United States presented an update of data on doing business in China (the CIA Factbook contains a wealth of this information).  I was impressed by Dr. Ni’s statistics about China’s economic growth: 50 million people have incomes between $40,000 and $140,000 and the top 5 million wealthiest have an income over $140,000.

            I made two points during my discussion: (1) China’s astonishing economic history is a history of unleashing entrepreneurship; (2) China can learn from American experience in fostering entrepreneurship and business ownership so that China can maintain sustainable development and growth.

            China’s economic growth has been astounding: total GDP in 1978 was 364 billion Chinese Yuan, which increased to 25 trillion in 2007, a net average annual growth rate above 8 percent for 30 years.  Yet, while China’s GDP surged about 50 fold between 1978 and 2007, GDP per capita increased only 12 times, according to China’s Bureau of Statistics.  China’s GDP per capita was less than $3,000 in 2007.

            Research shows that in America, widespread entrepreneurship and business ownership has proven to be an important too for improving people’s economic wellbeing.  In 2002, the business density (number of businesses owned per 1000 persons) for Asian-Americans was 95, for Whites 86, for Hispanics 40, and for African-American 33.  The corresponding average household income for these groups was $57,129, $50,911, $35,934, and $31,509.  Further, women business ownership had a very powerful explanatory relationship with average household income.

            Even though business density for various groups has a clear correlation with household income and economic wellbeing, that is not to say that all entrepreneurship can be positive for society.  As William Baumol’s research points out, entrepreneurship can be directed toward unproductive or destructive ends such as rent-seeking, or organized crime.  The challenge for China is to steer its citizens’ entrepreneurial energies toward owning businesses and improving economic wellbeing rather than unproductive ends.

            In 2002, the business density for America as a whole was 83, but only 25 for China.  If China could learn American know-how (both experience and lessons) in fostering entrepreneurship and business ownership and double its business density, China would enjoy further economic achievements and social progress.

– Ying Lowrey, Senior Economist

            Dr. Chad Moutray, Chief Economist for the Office of Advocacy, will chair the National Economics Club the Washington, D.C., chapter of National Association for Business Economics, serving for 2009.

            The most recent issue of the NABE newsletter profiles Chad and outlines what he sees for NABE, the NEC, Advocacy, and small business in 2009.

– John McDowell

            A recent article in the Washington Post details how trade associations and membership organizations are feeling the effects of the recession as their members earn less or even go out of businesses.  The Post reports: 

Reflecting the economic turmoil of the industries they represent, many national trade associations based in Washington are hemorrhaging members who either have lost their jobs, run a financially distressed business or said they need to spend their dwindling discretionary dollars on necessities rather than dues.

 

As a result, associations are struggling to fill budget gaps — trimming staffs, downsizing national conventions and trade shows, replacing meetings with “webinars,” and either slashing dues to prevent a further membership slide or raising them to replace lost revenue.

 

            Trade associations and membership organizations are the primary way that small business owners make their voice heard in Washington.  Most mall business owners don’t have the resources to hire in-house legal teams or Washington lobbyists.  They have to run their businesses and rely on their association representatives to deliver their concerns to Congress and federal agencies.

            Advocacy also takes its direction from its interaction with small businesses and their Washington representatives.  So, it will be interesting to see what role Advocacy can play in helping small businesses overcome the challenges they face bringing their concerns to Washington.

– John McDowell

            I am pleased to report the successful conclusion of a major environmental effort by our office.  In response to an effort that Advocacy initiated in 2004, the Environmental Protection Agency issued a second rule governing oil spill prevention, preparedness, and response in December.

            EPA realized that its original SPCC (spill prevention, control, and countermeasure) rule put an unnecessary burden on firms that did not significantly contribute to the oil spill problem that the agency was attempting to address.  The revised rule takes up issues raised by Advocacy in a June 2004 comment letter and report, and contains many of the changes later suggested by us in February 2006 comments.  This result demonstrates how rules can be improved by collaboration between Advocacy, the regulated community, and EPA.  The collaboration was like a Small Business Regulatory Enforcement Fairness Act panel proceeding, with many of the benefits of that kind of collaboration, without the formal procedures of a panel. 

            The reformed SPCC program (including the 2006 and 2008 reforms) provides relief to small facilities that handle small amounts of oil by allowing them to use streamlined requirements and avoid the expense of retaining a professional engineer.

            Advocacy worked with a large community of trade associations in this effort to craft regulatory alternatives for EPA’s consideration.  A small facility coalition, led by Doug Greenhaus of the National Automotive Dealers Association, was instrumental in developing the “small facility” concept that the agency ultimately adopted. Dee Gavora, representing the American Forest and Paper Association; Bill Weissman of Venable LLP, representing the Utility Solid Waste Activities Group; and the National Rural Electric Cooperative Association were the sparkplugs in the small facility coalition. 

            I also commend EPA Assistant Administrator Susan Bodine, who is largely responsible for pushing the concept of streamlining the rule for small firms.  In addition, Debbie Dietrich, Craig Matthiessen, Mark Howard, and the entire SPCC team worked tirelessly for thousands of hours to develop two proposed rules and two final rules in a very short period of time – a highly unusual accomplishment.

            More information about SPCC can be found on EPA’s website.  A chronology of Advocacy’s four-year effort on behalf of small business is available on ours.

–Kevin Bromberg, Assistant Chief Counsel

            Recently, I attended Gerard Boychuk’s presentation on Is Canadian Healthcare a Model for the U.S.? at the Hudson Institute in Washington DC.  Dr. Boychuk is Director of Global Governance at the Basillie School of International Affairs at the University of  Waterloo, Ontario.  The presentation was based on his new book, National Health Insurance in the United States and Canada: Race, Territory and the Roots of Difference (Georgetown University Press 2008). 

            He noted that in the debate about U.S. health care, Canada’s single-payer health care system is often viewed as a model.  Canada provides universal availability of public-administered health insurance for access to all medically necessary hospital and physician services.  He discussed whether Canada’s system is actually a good model and the lessons that might apply for U.S. healthcare reform.  The Canadian system has no mandate that individuals carry public insurance and individuals are allowed to opt out of public coverage (in various provinces). 

            Further information about the presentation and book can be found at http://www.hudson.org/index.cfm?fuseaction=hudson_upcoming_events&id=634#.

– Jules Lichtenstein, economist

            The American City Business Journals recently ran an article by Kent Hoover, their Washington Bureau Chief, summarizing the Regulatory Review and Reform (r3) initiative’s call for nominations of federal rules that should be reviewed and reformed.

            The 2008 Top 10 Rules for Review and Reform have has already resulted in some success, as Kent notes:

 This is the second year the Small Business Administration’s Office of Advocacy has solicited regulatory review nominations. Last year’s top 10 list generated some action, including the Environmental Protection Agency’s redefinition of solid waste. This rule change enabled small businesses to recycle more materials instead of disposing them as hazardous wastes.

 

Simplifying the home office tax deduction also made last year’s top 10. Legislation was introduced this year in both the House and Senate to create a standard deduction for home offices.

            Nominations for the 2009 Top 10 should be submitted by December 31, 2008 to www.sba.gov/advo/r3.

– John McDowell

            Providing health care coverage for employees has become increasing difficult for small business owners.  To address the issue, on December 4^th the Colorado Consumer Health Initiative hosted the Colorado Voices for Coverage conference.  It was designed to bring a diverse group of stakeholders together to discuss how to move healthcare reform forward in Colorado. 

After an overview of healthcare reform across the nation and a review of a recent affordability study, the group used breakout sessions to explore the following:

1)      How to increase access to healthcare coverage for all Coloradans

2)      How to increase transparency of healthcare costs and quality

3)      How to promote improved efficiency in the healthcare system, and

4)      How to educate healthcare consumers so that they will take an active role in their own health and in the healthcare reform process.

            Anyone interested in becoming more involved in healthcare reform efforts in Colorado can learn more about Colorado Voices for Coverage at www.cohealthinitiative.org .

– Jim Henderson, Rocky Mountain Regional Advocate (Region VIII)

            I recently attended a one-day symposium entitled “Confronting Concentrated Poverty: A Policy Forum” at the Federal Reserve Board here in DC.  I was disappointed but also excited at the close of the meeting.  The disappointment was due to the absence of small business and entrepreneurship in the discussion.  The excitement was generated from my deep faith in the role of entrepreneurship and small business in creating economic wellbeing in general, and bringing our nation out of the economic downturn in particular.

            I was pleased to see the Federal Reserve System collaborate with the Brookings Institution to examine the issue of concentrated poverty.  However, it would have been nice for the program to have investigated the importance of entrepreneurship and widespread business ownership in reducing poverty.

            Entrepreneurial energy is embodied in every human being (even if they are currently living in poverty) and that drives the development and growth of the economy, as discussed in a paper of mine.  Starting and operating a business is the best and most convenient way to utilize one’s entrepreneurial energy.  In addition, my research shows that a one percent increase in business density (number of businesses per unit of people) can raise personal income, household income, and tax revenue by more than one percent.

            Unleashing human entrepreneurial energy and channeling that energy toward business ownership is key to reducing poverty.  The U.S. Small Business Administration (SBA) has accumulated more than 50 years of experience and lessons in fostering entrepreneurship and business ownership.  It is my hope that SBA would reach out and join people in confronting poverty and revitalizing our nation’s economy, and continue to play an important role in improving people’s economic wellbeing by fostering entrepreneurship and business ownership.

– Ying Lowrey, Senior Economist

            The announcement by the National Bureau of Economic Research declaring that a recession began in December 2007 did not surprise many people.  Many economists, including Moody’s Economy.com Chief Economist Mark Zandi, have suggested this for much of the year, and certainly many Americans have long sensed this reality, as well.  Especially in light of the extremely active involvement of the U.S. Treasury and Federal Reserve Board over the past few months, I suspect that there are not many Americans who are unaware of the U.S.’s (and much of the world’s) economic problems.

            Indeed, I have long argued that the level of pessimism in the economy reflects a public that is extremely anxious about the future (to put it mildly).  This is borne out by record-low consumer confidence and sub-par poll readings from small business owners from the National Federation of Independent Business, the National Association for the Self-Employed, and others.

            None of this news is new.  I have discussed ways for small businesses to better weather the economic downturn,” and I have written about the challenges of small business owners on a regular basis this year in my Quarterly Indicators.  Next up: when will our current recession end?  At a speech at the National Economists Club (NEC) in September, Mark Zandi predicted that the U.S. economy would pick up steam in the second half of 2009; that, of course, was just at the beginning of the financial meltdown, and he might have altered his view since then.  We will have to see.

– Chad Moutray, Chief Economist