Hill Feels The Big Clout Of Small Business
By David Hosansky, CQ Staff Writer
When President Clinton vetoed product liability legislation in 1996, he
said that capping damage awards against companies would "endanger the
safety of the public."
But small businesses and their premier lobby, the National Federation
of Independent Business (NFIB), are so powerful that Clinton has taken a
step back. Breaking ranks with consumer advocates, the administration
supports draft legislation that would limit punitive damage awards against
"The NFIB, when they insert themselves into an issue, they make a
difference," said Sen. John D. Rockefeller IV, D-W.Va., a key player in the
product liability negotiations.
The product liability debate is just one example of the federation's
expanding muscle -- and penchant for stirring controversy. With a growing
economic presence across the country, and with such former small
businessmen as House Majority Whip Tom DeLay, R-Texas, and Senate Majority
Whip Don Nickles, R-Okla., overseeing legislation, the group has scored
impressive tax and regulatory victories. For example:
Last year's omnibus tax bill (PL 105-34) contained so many tax breaks
for small businesses -- including home office deductions and a reduction in
the estate tax -- that Small Business Administration (SBA) lawyer Jere W.
Glover summarized it as "probably more targeted tax reductions for small
business than anything in our nation's history."
The 104th Congress gave small-business owners the power to sue federal
agencies that fail to consider the impact of new regulations. Agencies must
now consult the SBA before promulgating rules that could burden small
Even the federation's biggest loss -- the enactment of a minimum wage
increase in 1996 (PL 104-188) -- was softened when lawmakers added a
package of small-business tax breaks to the legislation. (1996 Almanac,
The federation's growing profile and decided Republican tilt has
implications that go far beyond narrowly focused economic issues. The
600,000-member, $70 million organization, ranked in a recent Fortune
magazine survey as Washington's most powerful business lobby, is mounting
an all-out offensive to rewrite the nation's tax code from scratch and pare
back health care and labor regulations, even as it attempts to rev up its
influence by getting more small-business owners elected to Congress.
Such an ambitious agenda is roiling the nation's political currents. GOP
leaders want to tap the "Mom and Pop" romanticism and economic expansion of
small business to whip up popular support for conservative priorities. But
Democrats warn that millions of workers would suffer.
"I applaud [NFIB] efforts," said House GOP Conference Chairman John A.
Boehner of Ohio. "Their priorities are fairly well in line with Republican
positions, because most of their members are small-business people who
think the government in Washington is too big, too bureaucratic, too
Mobilizing in opposition, however, an array of organizations warn that
what is portrayed as a Main Street small-business agenda could undermine
the health and safety of millions of Americans. Labor unions, trial
lawyers, environmentalists and state government officials say proposals to
end the federal unemployment system and exempt small businesses from
environmental and health care requirements would weaken worker protections,
foul the water and air and undo decades of health care regulations.
"We're very concerned," said Joanne Doroshow, a lawyer for the consumer
group Public Citizen, who is lobbying against efforts to limit lawsuits
against small businesses. "The solution is not to take peoples' rights
Some local government officials are also wading into the fray. They
believe the NFIB and other business groups, by blocking new procurement
procedures, are thwarting attempts to save taxpayers money.
But NFIB members, contending that government regulations could imperil
millions of jobs created by small businesses, are determined to stay the
Twelve years ago, for example, investment banker Kent P. Swanson bought
a temporary nursing service because he was tired of working for somebody
else. Now that Swanson has built a profitable Baltimore business with an
administrative staff of 10, the last thing he wants is new government
rules. "We're trying to run businesses and all the government does is give
us more paperwork to fill out, and take us away from trying to earn a
living and employ people," he said. "That's the stupidity of the
bureaucrats. . . . There's just too much regulation."
By the NFIB's reckoning, a majority of lawmakers in both chambers
regularly support its agenda. In the 104th Congress, 247 representatives
and 51 senators -- mostly Republicans and conservative Democrats -- backed
the federation on at least 70 percent of its key votes, earning the title
of NFIB "guardian."
Small surprise that the lobbying group and its allies in the
small-business community, such as the National Association for the
Self-Employed, have won several landslide victories. By margins such as
408-0 and 381-44 in the House, and 83-0 and 100-0 in the Senate, lawmakers
in the 104th Congress advanced legislation that was ultimately enacted
(sometimes after being added to other measures) to expand health insurance
tax deductions for the self-employed (PL 104-191), make it easier for
small businesses to sue federal agencies (PL 104-121) and revamp a
government program guaranteeing bank loans to small businesses (PL 104-208).
Enacted laws aside, the NFIB is scoring other legislative gains. Both
Democrats and Republicans have signed off on preliminary proposals to limit
legal damages against small businesses involved in hazardous waste cleanup
and product liability litigation.
And the long reach of small business extends into the White House.
Following the 1995 White House Conference on Small Business, federal
agencies -- sometimes working with Congress -- moved to implement 86
percent of the recommendations advocated by small business delegates,
according to the Small Business Administration.
Still, no single interest group -- no matter how influential -- can
hope to score regular victories in Congress. Even with the assistance of
allies in the broader business community, the federation has been unable to
overcome labor union opposition to proposals that would make it easier for
businesses to contract out work and reduce overtime costs.
Democrats and pro-labor Republicans say such plans would strip health
care coverage, overtime pay and other benefits from millions of workers.
"Wholesale changes are not going to occur all at once in a Congress that
is this divided between the two parties," conceded the NFIB's top lobbyist,
Dan Danner. "You have to deal in the art of the doable."
Capitol Hill Influence
From the day that Republicans took control of Congress in 1994, small
business has occupied a central position on Capitol Hill. "The Republican
Party is the party of small business, not big business; the party of Main
Street, not Wall Street," declared then-Republican National Committee
Chairman Haley Barbour on Election Night 1994.
The GOP embrace of small business stems partly from a political debt. In
1993, the NFIB, elbowing aside better-known business groups such as the
U.S. Chamber of Commerce, took the lead in battling Clinton's massive
health care overhaul initiative. The federation's aggressive stance helped
checkmate the administration and ultimately topple Democratic control of
Just as important, however, lawmakers acknowledge that an alliance with
small business can pay big political dividends.
Small-business owners are the nation's predominant economic force.
While large companies went through rounds of layoffs, smaller businesses
(defined as those with 500 or fewer employees) created virtually all the
nation's 11.2 million net new jobs in recent years. They now employ more
than half the nation's private work force, according to data cited by the
Besides such economic might, small business possesses something shared
by few powerhouse industries: an aura of goodness. Both NFIB supporters and
opponents agree that small-business owners have a reputation for honesty
and enterprise, and federation polls indicate that an overwhelming number
of Americans like small business.
"I think small business is to people and government today what the small
farmer was during the time of Jefferson," said Sen. Phil Gramm, R-Texas.
"Small business is really the face of American prosperity."
The NFIB also profits from recent Washington trends. With Congress
increasingly fractured and chairmen holding a weakened grip on their
committees, lobbying organizations are moving away from the old days of
clubby veterans cutting deals with top leaders over drinks and cigars.
Instead, organizations like the NFIB are finding that their grass roots
are their best weapon, because such a broad-based constituency can reach
every member of Congress.
"Politics here in Washington have fundamentally changed," Danner said.
"Instead of listening to the chairman of their committee or the head of
their party, as was the case years ago, what they listen to now are the
grass roots -- and that's what we're all about."
Indeed, a recent Fortune magazine survey of lawmakers and other
officials concluded that the NFIB is the most powerful business lobby in
Washington, and the fourth most powerful lobby overall. (The American
Association of Retired Persons ranked first, followed by the American
Israel Public Affairs Committee and the AFL-CIO.)
Prominent lawmakers are so supportive of small business that Senate
Small Business Committee Chairman Christopher S. Bond, R-Mo., could not
cite a single disagreement between himself and the NFIB. A Bond spokesman,
Kenneth E. Bricker, summed up the senator's dealings with the federation
this way: "The phone conversations between Sen. Bond and [NFIB President]
Jack Faris are very brief. It's like: 'I agree with everything you say.'"
Not content with their current margin of support, NFIB officials are
pouring money into campaigns to reinforce their congressional majorities.
Their political action committee (PAC) contributions to federal candidates
jumped from $372,000 in the 1993-94 election cycle to more than $1
million in the 1995-96 cycle, according to the non-partisan Center for
Responsive Politics. NFIB Political Director Jeff Butzke expects to
contribute twice as much in this election cycle.
The NFIB steers 94 percent of its federal contributions to the GOP -- a
higher percentage than any other major independent organization, according
to the center. The federation also is putting a greater emphasis on state
races, because of the many regulatory battles occurring on the state level.
Other small-business groups seek to chart a somewhat more bipartisan
course. The 65,000-member National Small Business United, for example,
contributes about 25 percent of its money to Democrats.
Some Democrats warn the NFIB is becoming so partisan that it could be
mortgaging its future. "I think they're putting all their eggs in one
basket, and that can be very dangerous for them," said Karl Struble, a
Democratic political consultant.
Butzke, however, said the NFIB is simply rewarding its legislative
allies. His goal is to elect at least 260 NFIB supporters to the House and
60 to the Senate, which could enable the federation to overcome labor
opposition in the House and Democratic parliamentary maneuvers in the
He also wants to establish a "farm system" of small-business owners who
run for state and federal political office. About three dozen present or
former NFIB members now serve in Congress, according to a federation count.
Buttressing the federation's clout are its members -- averaging 1,400 in
every congressional district -- who weigh in passionately on issues that
could affect them. "They [lawmakers] listen, because they recognize that
we're the strongest part of the economy," said Missouri dental lab owner
Scott George, who opposes certain workplace safety regulations. "If it's
good for small business, it's good for America."
The Growing Opposition
Across the political divide from Butzke is longtime labor activist
Edward Wytkind, now the top transportation lobbyist with the AFL-CIO.
Wytkind has nothing against small businesses making a profit, but he draws
the line when they try to strip away workers' rights. To Wytkind's
thinking, the NFIB agenda would undercut decades of labor gains, scaling
back such basic rights as overtime pay for extra work.
"That organization's legislative agenda is one of the most sinister in
Washington when it comes to affecting the working man," he said. "It
would destroy longstanding protections in federal law; it would bring more
safety hazards to the worksite, and it would continue what's already been a
two or three-decade erosion in the standard of living for workers."
Wytkind is hardly alone. NFIB's enhanced stature has brought with it a
growing notoriety, with unions and consumer advocates scrambling to stop
the federation's initiatives, and liberal Democrats accusing federation
lobbyists of caring more about advancing the GOP agenda than about the
economic needs of small businesses. "A lot of these things they do, they've
got no credibility," said Rep. Jerrold Nadler, D-N.Y. "I don't even bother
reading their stuff anymore."
Some of the most controversial issues on the NFIB agenda include:
Health care purchasing. The NFIB supports legislation (HR1515) that
would enable small businesses nationwide to pool their resources, buying
health care coverage at reduced rates through special associations. NFIB
lobbyist Danner said this would let small employers provide high quality
health care for their employees, in much the way that large corporations
and unions use purchasing plans.
But health care advocates sharply oppose the plan as an attempt by small
businesses to evade state insurance regulations and limit employees to
substandard coverage. The proposal "will not provide basic consumer
protections," North Dakota Insurance Commissioner Glenn Pomeroy told
lawmakers in 1997.
Independent contractors. Republicans, backed by the NFIB and other
business groups, added language to the omnibus tax bill (PL 105-34) that
would have revised the legal distinction between an employee and an
independent contractor. The House version would have replaced the Internal
Revenue Service's 20-part classification with a three-part test -- a
simpler approach that NFIB said would save small business owners who make
mistakes from thousands of dollars in penalties.
But Clinton persuaded Republican leaders to remove the language. He
sided with labor lobbyists who feared that the provision would reclassify
as many as 2 million employees as independent contractors, costing them
Compensatory time. The NFIB and other business groups want companies
to be able to give employees time off for extra hours worked, rather than
overtime pay. Such a proposal (HR1, S4), currently blocked by Senate
Democrats, would allow companies and workers to negotiate flexible
arrangements, NFIB lobbyists contend.
Labor advocates, however, say the plan would give an opening for
companies who want to deny their workers overtime pay. "In essence, it
lengthens the work week without a corresponding increase in pay," said Lou
Gerber, chief lobbyist for the Communications Workers of America.
Apart from such high-profile battles, the NFIB is engaged in skirmishes
over legal and regulatory issues. For example, small business owners are
mobilizing against a preliminary plan by the Occupational Safety and Health
Administration (OSHA) that would require all companies to set up detailed
programs for managing workplace safety and health.
OSHA officials, eager to avoid a showdown with the small business
community, concede that the plan could place an undue burden on smaller
companies. "Small businesses may get a partial or complete exemption,"
predicted Arthur DeCoursey, OSHA's small business liaison.
Besides debates over labor standards and health purchasing, the NFIB is
likely to find itself in the center of at least three battles that could
spill over into the 1998 and 2000 elections.
One will likely take place this year over health care. The Clinton
administration and its congressional allies are girding for an attempt to
expand health care coverage, possibly by mandating longer hospital stays
for certain procedures or prescribing detailed standards for health plans.
Staff aides to House Speaker Newt Gingrich of Georgia, Senate Majority
Leader Trent Lott of Mississippi and other top GOP leaders reportedly are
urging the NFIB to help stop those proposals. An Oct. 22, 1997, memo by the
Health Insurance Association of America, leaked to the news media, stated
that the aides asked the NFIB to "implement heavy grass roots during
recess" and "write the definitive piece of paper trashing all these bills."
A second battle may erupt over expected attempts by pro-labor Democrats
to again increase the minimum wage. The NFIB lost that fight in 1996, but
its lobbyists say this time they will be more prepared.
The third, and possibly most extensive fight could break out over NFIB's
aggressive support of legislation (HR2490, S1225) that would sunset the
Internal Revenue Service (IRS) tax code in 2001. NFIB President Faris is
leading a nationwide drive to collect 1 million signatures to replace the
tax code with a simpler system, not yet defined, that could save
small-business owners considerable time and money.
The idea of shutting down the entire code, even temporarily, may appear
overly ambitious. After all, Democrats contend that the revenue-collecting
system supports such vital functions as the nation's armed services, and
the NFIB-backed plan could jeopardize national security. "It's kind of
irresponsible," said Rep. Robert T. Matsui, D-Calif., a veteran Ways and
Means Committee member.
But GOP leaders say such a grass-roots effort is needed if they are ever
to succeed in overhauling the complex tax code. And Faris, launching his
petition drive in Missouri, predicted that small business has such clout
that it will prevail in what may be its most audacious undertaking yet.
"NFIB is the catalyst that will urge Congress to abolish the IRS code,"
he said. "Nothing is impossible when you have the grass-roots support of
millions of small-business owners."
© 1998 Congressional Quarterly Inc. All rights reserved.