Why Congress Won’t Fix the CPSIA

The post below is by Mark Riffey who is the author of Business is Personal (http://www.businessispersonalblog.com) where he blogs for small business owners about marketing, strategy, customer service, operations, technology and public relations. His new blog, http://www.SmallBusinessPolitics.com , delves into political and regulatory issues (like the CPSIA) that threaten small business owners on a daily basis.

There are many reasons why Congress should repeal, retrofit and reissue a “fixed” Child Product Safety Improvement Act.

A simple one that everyone can understand is to eliminate the CPSIA’s ability to destroy or bankrupt entire segments of several industries that produce products for children.

Grandma can’t make sock puppets anymore because she can’t afford to test and label them according to the law’s requirements. Work at home moms who started their businesses because they (ironically) wanted to provide kids with safer products are now forced to terminate lines for kids 12 and under.

If they are large enough and structured just so, they can work the testing and labeling costs into their product line. Higher prices are the norm for most handmade goods  – and we expect that. Pushing them higher with testing and complex labeling puts even more competitive pressure on these vendors, as well as additional paperwork time and expense.

As GM (and small business) goes, so goes the nation

A not quite so obvious impact of these changes is the ripple effect.

Let’s look at it from an easy to understand perspective first. President Obama and GM (much less the rest of the auto industry) are battling to keep the industry alive.

It’s obvious that a company as large as GM causes ripples throughout the economy. If they stop making pickup trucks, every vendor who makes components of that truck are affected. Every employee in those truck plants AND in each of the component supplier plants are also impacted.

Because GM (and thus, the numbers) are so big, the wave of closures across the economy is easy to see even for those who aren’t financial experts.

It’s no different for businesses impacted by the CPSIA.

In their case, the ripple effect starts when a business impacted by the CPSIA is forced to slow down their business, eliminate product lines and cut back on their use of local businesses for things like childcare, office cleaning, web design, marketing help, printing, shipping, product raw materials and so on.

It might not seem like much until you think about 1000 businesses in your state who suddenly don’t need these products and services. Or 10000 businesses across the U.S.

And then you consider that these slowdowns probably cause them to layoff employees. Those employees buy food, day care, clothing, automobiles, iPods, TVs and so on.

Each of those businesses using local (and not so local) businesses for products and services they need to make their business run.

Suddenly, the business world starts to spin out of control. Inertia and momentum simply do what Sir Isaac Newton said they would. In simpler terms, the problem snowballs.

Meanwhile, Congress and our President are trying to figure out why unemployment is up, why large multi-nationals are filing 10-K statements showing millions in write offs for thing thing called CPSIA and why they continue to lay off people and cut manufacturing orders.

Those businesses snowball even faster because their manufacturing orders are larger, their staffs are bigger and the supplier list is longer. Because of the CPSIA, big retail and small retail are “suddenly” spinning together toward the same undesirable place, and they take real estate and small business with them.

It might sound like a far-fetched doomsday scenario, but the evidence is there. Look at the SEC’s EDGAR site and search for CPSIA. You’ll find large companies with big financial writedowns because of CPSIA.

Treating the Symptom, not the Disease

Obviously, CPSIA is yet another example of treating the symptom instead of curing the disease. That’s standard operating procedure for Congress and probably for all representative governments.

They try something, and later they fix it once feedback tells them what they really should have done. Mostly.

It’s almost the same thing I teach my clients (small business owners) to do. Instead of doing nothing until its perfect, do something, then tweak it based on feedback and results.

The symptom was millions of recalled childrens’ products, most but not all of which were imported. Yes, some products made right here in the US have lead and phthalate problems, but they are in the minority.

Still, every product needs to be safe. Rather than writing hundreds of pages of exemptions, we got the CPSIA, which brought with it a mandate to test anything and everything as a finished product.

Not a completely bad idea on the surface, but the devil is in the details. Those details are what cripple small businesses and particularly vendors of handmade products.

Congress’  treatment of these symptoms appears designed (perhaps unintentionally) to cripple small businesses because the testing legislation left made no distinction between large businesses and small.

A small business who makes 10 to 100 items at a time (ie: a lot of 10 to 100) was now even more threatened by the per unit costs of testing, since their large multi-national competitors could bury the testing cost across a lot of 100,000 toys, books or pieces of clothing.

From a product testing perspective, the cure appears to be manufacturer-based component testing, which spreads the cost of testing across all vendors equally, based on the amount of raw materials they purchase to create their products.

At the moment, manufacturer-based component testing is not an option according to the law.

The real disease attacks the foundation

Before you think that the CPSIA is all about products and testing and so on, you should be aware that the real disease requiring treatment has 3 prongs: a lack of effort and accountability by the CPSC, a lack of funding from Congress, and a lack of cooperation between the Bush administration and Congress regarding CPSC commissioner appointees.

I imagine that it’s no surprise that the implementation of the CPSIA is a political issue. Hold that thought.

The foundation of business in America and across the globe is small business. We hire more people than Fortune 500 businesses do and we impact every community on this planet.

The politicians appear to know how important small business is.

If you catch them in an interview, in a stump speech and on the floor of the Congress, you will hear them talk about how important the jobs and tax revenue are which small business creates.

In fact, Congress figured it out well enough that they realized that small businesses needed a law to protect them from Congress itself and thus created the Regulatory Flexibility Act.  Unfortunately the act allows agency heads to exempt their agency from the Act (more politics), but it was a good idea.

Actions are stronger than words.

Home field advantage

Neither Congress nor the press hears a growing and substantial storm of protest from a broad base of their constituents.

It’s that simple.

Remember that Congress and the press are kept quite busy dealing with things like Wall Street, AIG bonuses, the bailout, digital tv converters, Iraq, Afghanistan, DVDs for the UK Prime Minister, TOTUS, Octomom, Tea Parties and so on.

When the press and Congress can more or less ignore tens of thousands at tea parties across the US, what in the world makes us think they’ll listen to a few thousand emails? What makes us thing that having a few thousand people at a rally will suddenly focus their attention and keep it there long enough to get the CPSIA changed?

In addition, the elongation of election seasons has made our ability to seek a fix even more difficult. Fundraising has already started for campaigns across the nation.

Getting sustained traction with a media focused on Octomom and the Hollywood red carpet is difficult at best. Likewise, getting focused attention from Congress in a non-partisan atmosphere is just about impossible.  Doing so when they are focused on reelection is just about impossible, so time is of the essence.

Meanwhile, we continue to blog, tweet and email as if anyone inside the Beltway is really, truly paying attention.
When you look at the big picture, you’re left with no doubt that we simply have to get serious if we are going to play their game on their home field.

Splinters

First, we have to get the various splintered groups together with one message, spending valuable time and money to create one solution that works for everyone.

Right now, everyone is worried about their little corner of town, their little sliver of the industry and the ways they can get Congress to write one piece of legislation that exempts their little corner of paradise.

The motorcycle industry, libraries, apparel makers, handmade toys manufacturers, you name it. Each has their own faction working towards a solution with a lawmaker they’ve managed to gain access to.
While this may be how Congress functions, this is exactly the wrong approach. Why? It fractures the power of small business owners into a handful of little factions, none of whom are strong enough on their own to make a serious long-lasting impact.

Rallying as One

Until the Amend the CPSIA rally was conceived, these groups were all working in parallel. Often, this meant wasting time and money performing the same duties.  It meant different messages from different groups, when in fact, everyone really wants the same thing: Equitable testing and label rules across all sizes of business.

The rally has helped bring the groups together and has garnered a fair amount of media attention, but we have to be smarter as we move forward. We have to be more efficient. We have to be better.

We have to come to Congress as one. A sustained effort that grows stronger with each day is the only way to resolve this.

With the success of the Amend the CPSIA rally today, it should be clear that our various factions working individually simply don’t wield enough clout to make things happen, but that as one, we have a shot.

Living in Rome

August 2009 is right around the corner. It has been almost 2 months since the CPSIA took effect.
What has happened? Congress and Commissioner Nord are in a political letter writing battle. Meanwhile numerous amendments languish in committee, weighed down by partisan politics.

As entertaining as that might be for political junkies, it is nothing more than Nero fiddling while Rome burns.

Folks, we live in Rome. They do not.

We need a single cohesive effort that not only keeps dangerous products off the market, but also provides equitable commercial opportunities for large, multinational corporations, grandmas knitting on the front porch and everyone in between.

No one wants a blanket exemption. They just want the law to be equitable and fair across all sizes and types of businesses.

Unfortunately, this important issue has been transformed into “socialist Democrats against business” vs. “evil Republicans for nothing but profit”.  You can see it in the politicians who are lined up to participate, and sometimes  in the media that covers the story.

Enough.

The us vs. them mentality not only splinters the group by industry, but not does so by political party. Before long, the message, cause and effort is so diluted that our ability to <buzzword alert> make change is substantially weakened.

We must work together as one group with one voice and one message that grows louder and stronger with each day.

To that end, our other challenge is the media. While we have had some successes, it isn’t enough without the same single voice whose message grows louder and stronger each day.