Trump's 'Small Business' Office Solicits Update for Anti-Safeguards Propaganda

by James Goodwin

July 06, 2017

Late last Thursday, the Small Business Administration's (SBA) Office of Advocacy announced that it was soliciting proposals for "small business research" projects. The solicitation – and particularly the category of topics that the SBA Office of Advocacy has selected for potential research projects – offers one of the first clues on how this obscure but powerful office is likely to operate under the Trump administration. 

The SBA Office of Advocacy is a small and unusual office within the federal government that up until a few years ago largely flew under the radar. The singular event that brought them to broader attention among policymakers, the press, and members of the public interested in the U.S. regulatory system? Its sponsorship of a now-infamous piece of anti-safeguards propaganda that was produced in response to a solicitation of small business research just like the one from last Thursday. 

In 2010, the SBA Office of Advocacy sponsored a "study" by conservative economists Nicole Crain and Mark Crain that purported to find that in 2010 alone, federal regulations imposed a total cost on the U.S. economy of $1.75 trillion. To borrow a phrase from the brilliant thinker and social commentator Joey Lawrence: Whoa

It turns out, though, that the study was riddled with errant data, nonsensical assumptions, and flawed methodologies – all of which had the undeniable effect of producing the largest possible "cost" figure the study's authors could come up with. Most egregiously, the Crain and Crain "research" made no effort whatsoever to calculate the benefits of regulation – no attempt to gauge the lives saved, diseases averted, work days and hours not lost, pollution not emitted, unsafe products not manufactured, and unsafe drugs not sold. Those are all problems created by regulated industries, and they are in their way, costs inflicted on the rest of us, some of them quite heavy indeed. But the Crain and Crain study ignored all that, assuming instead that it is industry's right to inflict such burdens, and so focused entirely on what it costs industry to clean up its own messes. 

In February 2011, CPR published a report that thoroughly debunked the Crain and Crain study. Soon thereafter, the nonpartisan Congressional Research Service followed up with its own assessment, which was no less withering in its criticism. Before long, even the SBA Office of Advocacy was forced to kind-of, sort-of distance itself from the Crain and Crain study by putting a disclaimer next to it on the office's website. 

And the cascade of criticism didn't stop there. In July 2014, the Government Accountability Office (GAO) published a scathing audit of the SBA Office of Advocacy, singling out its research sponsorship program for special condemnation. In particular, the GAO's audit frequently referred to the Crain and Crain study episode to illustrate all of the problems with the program. 

With its latest research project solicitation, it appears the SBA Office of Advocacy may be on the verge of heading down this walk of shame again. Among the research topics it has solicited proposals for is one on "Research on the Burden of Regulations." The detailed solicitation asks for proposed studies that would "update and extend previous research from the Office of Advocacy on the cost to small businesses of regulations." Among that "previous research," the solicitation specifically cites – you guessed it – the 2010 Crain and Crain study. (It also cites three earlier iterations of that study, all of which relied on the same sort of flawed data and methodologies to generate absurd estimates of the total annual cost of federal regulation.) 

In the next few months, we'll know if anybody agrees to take on the research project. If so, the resulting research presents an important test for the office. It could show that the SBA Office of Advocacy did indeed learn from its earlier mistakes with the Crain and Crain study and has fully adopted the recommendations set forth in the GAO's 2014 audit. Or, if the research project turns out to be another example of anti-protections propaganda, it might indicate that the office will be joining the White House Office of Information and Regulatory Affairs (OIRA) as another strong anti-regulatory force in the Trump administration. 

I'll be watching the office's website closely. I hope that the GAO and concerned members of Congress with oversight authority will be watching, too.

Great dissection of the infamous Crain and Crain "study," which was even worse that you wrote: in addition to ignoring one side of the ledger altogether, their entire analysis of "costs" consisted of a bizarre correlation analysis of the per-capita GDP of about 20 countries against an "index" of regulation, an index they SAID measured total cost but more likely measured public confidence in regulatory quality-- so the "correlation" they "found" actually implied that increased regulatory quality "results" in lower GDP (?!) [this didn't stop peer reviewer Bob Litan from submitting this review, **quoted in its entirety" to SBA: "I looked it over and it's terrific. Nothing to add." All this to set up a bad pun of mine: "The Crain and Crain failed mainly to explain."
— Adam Finkel
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James Goodwin, J.D., M.P.P., is a Senior Policy Analyst with the Center for Progressive Reform. He joined CPR in May of 2008.

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