U.S. Sens. Edward Markey (D-MA) and Mazie Hirono (D-HI) said a proposed rule by the Small Business Administration (SBA) would harm underserved small business owners and entrepreneurs.
In a comment letter to the SBA, the lawmakers said the 8(a) Business Development Program was created by Congress to level the playing field for small business owners and entrepreneurs facing discrimination in starting and operating their businesses. The proposed change ignores the existence of historic discrimination minority and underserved small businesses have faced and continue to face, the Congress members said.
The proposed rule change would amend regulations for the 8(a) Business Development Program by removing the rebuttable presumption that individuals belonging to certain designated groups are socially disadvantaged and set forth revised standards for individuals establishing social disadvantage.
“SBA’s proposed rule ignores present-day barriers that entrepreneurs from minority and underserved communities face. Discrimination is not dead; minority entrepreneurs continue to face reduced access to contracting opportunities and capital, as well as racial threats and targeting, including unequal treatment, refusal by others to work with minority-owned firms, being called racial slurs, and bias in the workplace,” the lawmakers wrote. “These barriers lead to wide underutilization of, and less revenue for, minority-owned businesses compared to majority-owned businesses, as supported by decades of disparity studies. The proposed rule diminishes the history of systemic racial and ethnic discrimination in the United States by claiming that remedies for discrimination create discrimination in and of themselves.”
According to the SBA, the current regulations contain an unconstitutional race-based Rebuttable Presumption that was struck down in 2023 when a federal court declared it unconstitutional. The agency also said a number of voices have begun to question whether the 8(a) program statute is itself a race-based classification for socially and economically disadvantages individuals which should be subject to scrutiny, and that similarly worded statutes have faced legal challenges.
Markey, the Ranking Member of the U.S. Senate Small Business and Entrepreneurship Committee, and Hirono, a committee member, disagreed.
“The program has always been open to anyone who can prove they have experienced prejudice or cultural bias in education, employment, entrepreneurship, and other facets of our society” they wrote. “Nonetheless SBA has moved forward with the proposed rule. It lacks a reasoned basis, purporting that the federal government has discriminated against White Americans, but offering no substantive qualitative or quantitative data or research in support. If the examples provided in the proposed rule are the only basis for what constitutes discrimination to the agency, they are woefully insufficient.”