Senator METCALF. Our first witness this morning is our very distinguished colleague from Wisconsin, Senator Gaylord Nelson, who is going to tell us a little bit about his experience with small business and the representation of small business on some of the advisory committees.

We are delighted to have you here, Senator Nelson. You have a prepared statement, so go right ahead.

TESTIMONY OF HON. GAYLORD NELSON, A U.S. SENATOR FROM THE STATE OF WISCONSIN

Senator NELSON. Mr. Chairman, I would ask that my full statement, which isn't very long, be printed at the end of my remarks. I will only need about 3 minutes of the committee's time.

S. 3085 would amend the Federal Advisory Committee Act of 1972 and the Federal Reports Act of 1942 to direct that small business be fairly represented on Federal advisory committees, boards, commissions, panels, and task forces.

We don't try to maybe we should have but we don't try to set forth a formula for what "fairly represented" means. But, certainly, on many of these committees in those areas where the business community is affected and small business is affected, there should be a substantial ratio or percentage of small business members on any of these committees, in our judgment.

The objective of this bill is to give the small business community a greater voice in formulating actions of the Federal departments and agencies which affect the economy.

In a study that was sponsored by the Office of Management and Budget entitled "Small Business Reporting Burden," the Peat, Marwick, Mitchell & Co. accounting firm stated in one part of that report, and I quote:

Small business has very limited representation on the Council (Business Advisory Council on Federal Reports). In practice the panels, too, have tended to be dominated by representation from large business—a natural consequence of the difficulty experienced by small business in giving the time and absorbing the expense involved in sitting on (such) panels.

Indeed, the statement about the very limited small business representation is, I think, a substantial understatement. There are 13 corporations represented on BACFR. One is a small business corporation having $1 million in sales and 45 employees. The remaining 12 corporations have an average of $5.5 billion in sales and 167,000 employees. Of the 10 associations represented, only one could be characterized as a small business organization.

Obviously, according to the standard in the bill we have introduced, this one company with $1 million in sales would not constitute "fair representation," at least in my judgment.

It is the intent of this proposal to require all such agencies that are advisory in the business area to have fair representation for small enterprise on them.

In fact, in the Internal Revenue Service just last year, a small business advisory committee to the Commissioner was establishedthat was 1975-by Commissioner Alexander. That committee has

gotten very high marks from its participants despite the inevitable growing pains. This happens to be a small business advisory committee to the IRS itself.

So the proposal is quite simple. I think the merit of it is clear. One of the problems in this area would be to assure that the small business representatives receive expense payments for their participation. As a matter of fact, in many of these cases it will have to be a representative from one of the small business organizations. since a small businessman running a small business can't commit a lot of time away from the business to participate in any of these lengthy proceedings such as from time to time occur.

Furthermore, I think the Small Business Administration should be a participant in these various advisory councils.

I would ask that some material I have appended to my statement, Mr. Chairman, also be printed in full in the record.1 That completes my testimony.

Senator METCALF. Thank you very much, Senator Nelson. Your statement in its entirety and the material you have submitted will be printed in the record at the conclusion of your testimony.

We will also incorporate your bill, S. 3085, which you are introducing along with Senator Nunn and Senator Brock, both of whom have worked very hard on this committee, and Senator Weicker who is now a member of our subcommittee.

You mentioned Business Advisory Council on Federal Reports, with the acronym of BACFR. This is the committee that advises the OMB on Federal forms.

It has been the complaint of many of the Members of the Congress over the years that this committee stops essential questionnaires because of business objection and, at the same time, BACFR has no representation from small business.

When Senator Nunn and I conducted a paperwork burden hearing last year, I discussed this matter with Mr. Oaxaca who is here today. He told us about the Peat, Marwick, and Mitchell study that you mentioned on reporting and it pointed out the very things that you have suggested and that we suspected, that big business was dominating the BACFR organization.

For $85,000 we received confirmation that big business was stopping questionnaires and big business was the only one that was represented.

As I understand it, BACFR is self-appointed. OMB does not decide the membership.

My question is, after this preliminary, Senator, couldn't we solve this by making a more balanced representation and having it appointed by or having it at least monitored by OMB rather than BACFR being a self-executing sort of an organization?

Senator NELSON. I didn't realize they were self-appointed. Is that correct?

Mr. LYNN. Yes. That is correct, Mr. Chairman. We can make suggestions, but under their charter, they make the actual appointments. And they do take our suggestions, as I understand it, from time to time.

1 See p. 33.

Senator METCALF. Hurray!

But here is sort of a special organization composed, at the present time, according to the Peat-Marwick study that you have mentioned, of just big business people, who are self-perpetuating by continuing to appoint big business; and the small business people you are talking about, Senator Nelson, have not been represented and have no voice in that council.

Senator NELSON. I agree with you. I assumed they were appointed from outside of that committee.

The small business representation, as I pointed out, is very minor. Quite obviously, if they were voting on a one-man-one-vote basis, small business would be outvoted 12-to-1 on any issue that was raised.

Furthermore, a corporation with $5.5 billion in sales, which is the average, can afford to engage the finest expertise there is, and have them participate full time, if necessary, because the matter of forms and what is reported and what is not reported is very important. But the small business can't afford that.

That is why it seems to me that when you talk about fair representation on forms-the small businesses have to make out all of the forms, too-so at least half of them ought to be small business. Two: It seems to me you should have representation of the Small Business Administration somehow involved in this directly. If they need some funding for expertise in that area, we ought to do it.

I think that the small business organizations representing small business ought to have an input into it. This is about the only way you can create an infrastructure within small business that would be adequate to at least evaluate the impact of these various forms and regulations upon smaller and new businesses.

Obviously, when you create a form, there are lots of provisions asking all kinds of questions of big business and little business that are totally unnecessary. I would guess in my own mind looking at them about 80 percent of the information government asks, or 90 percent, from businesses and individuals is duplicative or unnecessary. But in any event, a large business is equipped to handle that. Senator METCALF. Stick around until we pass the lobbying act and see how many forms there are.

Senator NELSON. In any event, large businesses have all the technical expertise and computers that at least can handle a whole lot more unnecessary forms than a small business can handle. Thank you, Mr. Chairman.

Senator METCALF. Thank you very much, Senator Nelson.
Senator Percy?

Senator PERCY. I have just two questions, Mr. Chairman. Senator Nelson, I agree that fair representation for small business is in accord with the central theme of the Advisory Committee Act.

What do you, first of all, see as the cause? Why do you believe there is an underrepresentation of small business on the Nation's Federal advisory committees?

Senator NELSON. I don't know that I can answer what the cause is. I have begun to look at that question in the past year since I

became chairman. I have been by no means an expert on these advisory committees or the impact of their advice upon small business.

But I would guess that a good part of it is for the same reason that the voice of small business isn't heard very well in the Congress; because who is their voice except individual members? That is in contrast with the large corporations who have full-time offices and the finest lawyers in the United States.

I conducted the pension hearings on the Pension Reform Act in the Finance Committee. We heard-and very good testimony; I don't quarrel with it at all-we heard from the representatives of every major association and corporation in America, pointing out technical problems with the pension plan, and some of them substantive, arguing about them. It was very compelling testimony by first-rate witnesses who are this country's pension experts.

But on all of these little things that affect the little fellow we didn't hear very much because, No. 1, he isn't any expert himself. No. 2, he has problems in hiring and paying the expert to represent him.

Now, we conscientiously looked at the questions of impact on small business. We made some exemptions in the Pension Act for small business. But nevertheless, the voices that were heard the strongest, because they are the best prepared and had the most resources, are the voices of large business.

It is the same, I think, in any agency representation, whether it is the Food and Drug Administration or any regulatory body that we have; just by virtue of the fact that the little fellow can't afford to be here and, if he comes, doesn't have the expertise.

Senator PERCY. Maybe it pays not to have representation, then, because my own impression from here in the Senate is that there is really gross discrimination in favor of small business.

We have just increased the income tax exemption so as to lower rates applying to small business-the first $50,000 instead of the first $25,000, or reduced 20 to 22 percent; where a large business pays 48 percent.

Certainly the President's action the other day in enunciating the $155,000 exemption from the action of our estate taxes is a strong, favorable thing for small business. I support it. I have supported the exemption for every piece of legislation that has come along requiring reporting and accountability by larger business.

On the floor of the Senate just the end of last year we had one amendment, which I strongly supported, which exempted all small business from the application to the Consumer Protection Agency, or Agency for Consumer Advocacy. It wiped out 90 percent of all business from coverage. That Agency has no jurisdiction or cognizance over it whatsoever. But it does apply to big business.

So I don't think we have discriminated against small business particularly. I think because the Small Business Committee, which I am not member of, has been very active, I think they have a very strong voice.

I want to see small business represented in these advisory committees, but I don't think we have been really ruling against them.

If anything, it seems to be going the other way-beat the big guy because he is big and he has been successful and exempt the small fellow.

If we make a special provision for small business, then how about the environmentalists? Will they want to require a certain number of seats on every advisory committee? How about consumer groups that come in and say they want representation? How about specialized business groups? Will we start to get into a quota system? How do we say that small business is peculiar and particularly should be protected, but these other groups-environmentalists, specialized business groups, consumer groups should not then have a quota on every advisory committee? How could we protect ourselves against this?

Senator NELSON. This proposal only applies to advisory committees that are giving advice in areas that affect the economy. So if it does not affect the economy and small business, then the provisions that would require representation of small business are not involved.

So, all we are saying is that the advisory committees created for purposes of making recommendations that affect the economy are going to have business representation on them. That is what they are made up of. We are saying they must be made up of a fair proportion of small business and not just big business.

Senator PERCY. Wouldn't the environmentalists and consumers have the same argument and say: "If it affects the economy, that is us?"

We have consumers certainly who would want to have something to say about it. Shouldn't they have representation?

I am just a little worried about our structuring these things by statute, because then every group is going to come in and exert pressure to get their specific rights embodied in the statute rather than urging and encouraging a broad enough representation to make committees really representative.

Senator NELSON. It may be that you have to take a hard look. The problem now is that the only representation for all practical purposes is big business. The bill focuses on committees created for purposes of giving advice on some aspect of the economy.

All we are saying is that if you are going to have a business advisory committee, let's have fair representation of small business as well as large business.

Senator METCALF. I think that during our discussion, Senator Percy, with Mr. Lynn and tomorrow with Professor Steck, we will have a development on this matter of balance. It is a very difficult matter to talk about.

You have discussed it in your full statement, Senator Nelson. I don't know whether you can just say quota system. But I would certainly resist such a quota system that we would have one member of organized labor, and one member of some environmental organization, and one member of a consumer group, and so forth, on every advisory committee, because some of them are very specialized, such as this Business Advisory Council on Federal Reports.