[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
REGULATORY FLEXIBILITY IMPROVEMENTS
ACT OF 2013
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
REGULATORY REFORM,
COMMERCIAL AND ANTITRUST LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
ON
H.R. 2542
__________
JUNE 28, 2013
__________
Serial No. 113-29
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
HOWARD COBLE, North Carolina ROBERT C. ``BOBBY'' SCOTT,
LAMAR SMITH, Texas Virginia
STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio JUDY CHU, California
TED POE, Texas TED DEUTCH, Florida
JASON CHAFFETZ, Utah LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania KAREN BASS, California
TREY GOWDY, South Carolina CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, FLORIDA
JASON T. SMITH, Missouri
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on Regulatory Reform, Commercial and Antitrust Law
SPENCER BACHUS, Alabama, Chairman
BLAKE FARENTHOLD, Texas, Vice-Chairman
DARRELL E. ISSA, California STEVE COHEN, Tennessee
TOM MARINO, Pennsylvania HENRY C. ``HANK'' JOHNSON, Jr.,
GEORGE HOLDING, North Carolina Georgia
DOUG COLLINS, Georgia SUZAN DelBENE, Washington
JASON T. SMITH, Missouri JOE GARCIA, Florida
HAKEEM JEFFRIES, New York
Daniel Flores, Chief Counsel
James Park, Minority Counsel
C O N T E N T S
----------
JUNE 28, 2013
Page
THE BILL
H.R. 2542, the ``Regulatory Flexibility Improvements Act of
2013''......................................................... 3
OPENING STATEMENTS
The Honorable Spencer Bachus, a Representative in Congress from
the State of Alabama, and Chairman, Subcommittee on Regulatory
Reform, Commercial and Antitrust Law........................... 1
The Honorable Steve Cohen, a Representative in Congress from the
State of Tennessee, and Ranking Member, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law................ 33
WITNESSES
Karen R. Harned, Esq., Executive Director, National Federation of
Independent Business
Oral Testimony................................................. 36
Prepared Statement............................................. 39
Carl Harris, Vice President and General Manager, Carl Harris Co.,
Inc., on behalf of the National Association of Home Builders
Oral Testimony................................................. 47
Prepared Statement............................................. 49
Amit Narang, Regulatory Policy Advocate, Public Citizen
Oral Testimony................................................. 59
Prepared Statement............................................. 61
Rosario Palmieri, Vice President, Infrastructure, Legal and
Regulatory Policy, National Association of Manufacturers
Oral Testimony................................................. 71
Prepared Statement............................................. 73
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Material submitted by the Honorable Spencer Bachus, a
Representative in Congress from the State of Alabama, and
Chairman, Subcommittee on Regulatory Reform, Commercial and
Antitrust Law.................................................. 92
APPENDIX
Material Submitted for the Hearing Record
Prepared Statement of the Honorable Spencer Bachus, a
Representative in Congress from the State of Alabama, and
Chairman, Subcommittee on Regulatory Reform, Commercial and
Antitrust Law.................................................. 102
Prepared Statement of the Honorable Steve Cohen, a Representative
in Congress from the State of Tennessee, and Ranking Member,
Subcommittee on Regulatory Reform, Commercial and Antitrust Law 104
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, Ranking
Member, Committee on the Judiciary, and Member, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law................ 105
Material submitted by Public Citizen............................. 107
Statement of Administration Policy............................... 135
Response to Questions for the Record from Karen R. Harned, Esq.,
Executive Director, National Federation of Independent Business 137
Response to Questions for the Record from Amit Narang, Regulatory
Policy Advocate, Public Citizen................................ 138
REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2013
----------
FRIDAY, JUNE 28, 2013
House of Representatives,
Subcommittee on Regulatory Reform,
Commercial and Antitrust Law
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to call, at 9:10 a.m., in
room 2141, Rayburn House Office Building, the Honorable Spencer
Bachus (Chairman of the Subcommittee) presiding.
Present: Representatives Bachus, Holding, Collins, Smith,
Cohen, DelBene, and Jeffries.
Staff Present: (Majority) Daniel Flores, Chief Counsel;
Jennifer Lackey, Legislative Director, Office of Rep. Collins;
Justin Gibbs, Office of Rep. Smith of Missouri; Ashley Lewis,
Clerk; Matthew Alexander, Intern; (Minority) James Park,
Minority Counsel; Veronica Eligan, Professional Staff Member.
Mr. Bachus. The Subcommittee on Regulatory Reform,
Commercial and Antitrust Law hearing will come to order.
Without objection, the Chair is authorized to declare
recesses of the Committee at any time.
We welcome all our witnesses today. Now we will have
opening statements, and I will recognize myself for such time
as I may consider.
Most economic experts will agree that small businesses and
small business trade drive and shape our economy and our
ability to provide employment for American workers. In my view,
the health of small businesses is one of the most important
issues confronting our country. Small businesses are the source
for almost half of our workforce, and while I am concerned
about many economic factors, it is also my view that government
regulations have a disproportionate impact on small businesses.
While all businesses have to comply with State and local
regulations, Federal regulations can impose an even greater
burden because most small businesses simply do not have the
resources or the time to monitor and participate in the Federal
regulatory process or dispute new rules.
According to the Small Business Administration, businesses
with fewer than 20 employees spend on average 30 percent more
per employee than large firms to comply with Federal
regulations. The SBA also reports that these small employers
represent 99.7 percent of all businesses and have created well
over 60 percent of all new jobs for over the past 15 years.
Although our economy may be showing signs of improvement,
we are still suffering from job loss, lack of job creation and
long-term employment or underemployment. It only makes sense
that we look to small businesses and work to create an
environment that will help them prosper.
We all know the importance of small businesses in our
district, so certainly this should be an area for bipartisan
cooperation. It is my belief that the Regulatory Flexibility
Improvements Act of 2013 offers one such opportunity, and I am
pleased to be able to introduce legislation with my colleagues,
Congressman John Barrow; Congressman Jim Matheson; the chairman
of the Small Business Committee, Chairman Sam Graves; and
Former Judiciary Committee Chairman Lamar Smith.
It is my belief that improving the Regulatory Flexibility
Act and the Small Business Regulatory Enforcement and Fairness
Act will have a lasting impact on small businesses and help
support long-term small business growth. We have a
responsibility as legislators to ensure that regulations are
appropriately tailored and that our regulatory process is
effective.
We have an excellent panel today that will offer diverse
range of viewpoints on this legislation, and I want all of you
to know that your input will serve a very important role as
this legislation comes up for further consideration.
I now recognize Mr. Cohen from Tennessee and Ranking Member
of the Subcommittee for his opening statement.
[The bill, H.R. 2542, follows]:
__________
Mr. Cohen. Thank you, Mr. Bachus, and I want you to know,
in your absence, we went ahead and passed quite a few new
regulations. The Regulatory Flexibility Improvements Act
proposes some needlessly drastic measures that threaten to
undermine public health and safety and waste public resources.
I am open to ideas on tweaking the regulatory process in
modest ways to make regulatory compliance easier for small
businesses and perhaps even finding better ways for small
businesses to provide input to specific rules. As drafted,
though, this bill simply goes too far.
Wait a minute. I am having a flashback. I said the same
thing 2 years ago on this bill that was real similar to this in
the same Subcommittee. It is indeed Groundhog's Day, and I am
playing the part of Bill Murray. That is the role I have been
cast in by being made the Ranking Member here.
It is not necessarily Mr. Bachus' fault. He is doing what
he thinks is right, but the fact is we are repeating and
rehashing the same stuff over and over here. And the fact is
regulations do have a function and an important function in our
society, and regulations protect the American public from a
vast array of harms.
The reason we have regulations is because we have got to
clean up our air, our water, protect children from dangerous
toys, make sure our food is not going to cause us disease or
even death, that we don't have financial markets go haywire and
crazy and almost wreck the economy and have unsafe workplaces.
Not all this will be stopped with regulations, but most
regulations are for the purpose of protecting society, and that
is what they do. And for those who say all we need are
libertarian laissez-faire, no-regulation society, well, we will
have a whole bunch of deaths in the marketplace and deaths from
consumer products. The Bureau of Labor Statistics report in
2011 census of fatal occupational injuries said there were
4,693 workplace deaths in 2011.
According to researchers in the National Institute for
Occupational Safety and Health, American Cancer Society and
Emory University School of Public Health, 50,000 to 70,000
deaths from occupation-related diseases occurred in the United
States.
And while we are talking about regulatory cost, we should
consider the cost of insufficient regulation. According to a
joint study by Liberty Mutual Insurance Company and health
economists at UC Davis, the estimated cost of workplace-related
injuries is $250 billion, only 25 percent of which is covered
by Workers' Comp.
As I said, I know Chairman Bachus and other proponents of
this bill sincerely share also my appreciation for the
importance of regulation in protecting us from a myriad of
harms, some of which I have mentioned. But I will emphasize the
importance of regulation to point out that this bill, if
enacted, could jeopardize these protections in the future. This
bill was only used for regulatory review panels by requiring
they apply the rules proposed by all agencies and by applying
to them all major rules, not just those that are the subject to
the Regulatory Flexibility Act.
Currently, such review panels are required for rules that
are subject to the Regulatory Flexibility Act and are proposed
by the Environmental Protection Agency, OSHA, or the Consumer
Financial Protection Bureau. These review panels, which consist
of the chief counsel for advocacy of small business
administration, a representative of the issuing agency and a
representative from the Office of OIRA, review the covered
rules and can send them back to the issuing agency. Clearly,
the process is intended to slow down rulemaking. By
dramatically expanding the use, this bill will effectively stop
most rules from going into effect.
The bill also burdens agencies with numerous additional
analytical requirements, including the requirement that
agencies assess the indirect economic effects of a proposed
rule. The requirement to assess indirect effects has almost no
limitation other than that such indirect effect should be
reasonably foreseeable, sounds like Palsgraf, which is not much
of a limitation. Under this fairly open-ended requirement,
agencies would be at a loss to determine how much is enough
when it comes to the regulatory analysis obligations.
For example, what is the reasonably foreseeable and direct
economic effect of a regulation requiring heightened security
measures at airports? Would the issuing agency have to take
into account the potential loss of business for the hotdog
stand that is located far past the security checkpoint or
better, the barbecue rib place, more appropriate for my
jurisdiction.
These are just two of the many concerns of the RFIA. We
will hear more in detail from Mr. Narang of Public Citizen
about the remaining concerns with the bill. There are things we
could do to help small entities, including measures to assist
small business with regulatory compliance. We ought to be able
to support such measures in a bipartisan basis.
I understand Mr. Narang may have a proposal to that effect.
I hope his fellow witnesses and the other Members of the
Subcommittee will give it true consideration for legislation
that we can pass in a bipartisan fashion in anticipation of the
Fourth of July. God bless America. I yield back the balance of
my time.
Mr. Bachus. Thank you. I thank the Ranking Member. One
thing I may tell the panel and--not the panel here, but I think
most of you probably know this, but I am not sure our Members
do. The Regulatory Flexibility Act was 1980. In 1996, President
Clinton said it wasn't being enforced and that it should be
extended to small businesses, which he did, and that was kind
of Groundhog Day, because a lot of what he said in 1996 is what
is in this act because it just didn't happen.
And you mentioned the EPA environmental standards. They are
actually required by the law to do a lot of what we are asking
them to do here, but they just simply hadn't done it, and I
know Public Citizen has in their written testimony, which I
read, said how this would slow things up. But I think the
argument may be with the 1996 act. But the EPA, it said they
were going to voluntarily comply with this and it just hadn't
done it except I think on 56 occasions, 40-something occasions.
Many times they just ignored the law, so I am not sure your
argument may be with what President Clinton----
Mr. Cohen. No. May I have a moment?
Mr. Bachus. Oh, absolutely.
Mr. Cohen. Yeah. I appreciate your bringing up who I
consider was a tremendous President and a dear friend, but 1996
wasn't necessarily his best year. That is also the year, you
know, it was election year, and he signed the Defense of
Marriage Act, and there were some of the things he did that
year he didn't really believe. He has admitted that.
Mr. Bachus. Well, you know, it is the law.
Mr. Cohen. Well, so was that.
Mr. Bachus. Until yesterday, right?
Mr. Cohen. Right.
Mr. Bachus. Day before yesterday. All right.
Thank you. ``It wasn't a good year;'' that is a great
argument.
We have got an esteemed panel today. Ms. Karen Harned
serves as executive director of the NFIB, National Federation
of Independent Business, Small Business Legal Center. As
executive director, she comments regularly on small business
cases before Federal and State courts as well as the U.S.
Supreme Court. Prior to joining the Legal Center, Ms. Harned
was an attorney at the Washington, D.C., law firm specializing
in food and drug law where she represented several small and
large businesses and their respective trade associations before
Congress and Federal agencies. She also served as the Assistant
Press Secretary of the U.S. Senator Don Nickles of Oklahoma,
which was a fine senator, fine person. Ms. Harned received her
BA from the University of Oklahoma in 1989 and her JD from the
George Washington University National Law Center in 1995. We
welcome you.
Mr. Carl Harris is co-founder of Carl Harris Company, a
construction company founded in Wichita, Kansas in 1985. Mr.
Harris' business engages in numerous residential and light
commercial construction applications. He serves as national
area chairman for the National Association of Homebuilders, a
trade association that helps promote policies that make housing
a national priority. NAHB strives to improve housing
affordability, availability, and choice. Mr. Harris serves as
the 2013 president of the Kansas Building Industry Association
and affiliate of NAHB. KBIA, and that is Kansas Building
Industry Association, serves as an advocate for Kansas Housing
Industry and has more than 2,000 members. It has been a rough
few years for the house--home building industry.
Mr. Harris. It has, Mr. Bachus.
Mr. Bachus. And hopefully, we are seeing some recovery, but
I know many of your colleagues have actually gone out of
business. I remember my father was a general contractor during
the Carter administration and many of his colleagues didn't
survive those high interest rates. But anyway.
Mr. Amit Narang; is that right?
Mr. Narang. Correct.
Mr. Bachus. Okay. Is a regulatory policy advocate for
Public Citizen, a nonprofit organization lobbying for citizen
interest in the government. Founded in 1971, Public Citizen
works on numerous issues, including the economic crisis,
healthcare reform and climate change. Mr. Narang is the
article's editor of the Administrative Law Review, a widely
circulated legal journal focused on regulatory law and policy.
He has been quoted in the New York Times and the Bureau of
National Affairs, and I guess that is BNA, is what most of us
call that. Mr. Narang received his bachelor's degree from the
University of Pennsylvania and his JD from American University,
Washington College of Law. We welcome you to our panel.
Mr. Rosario Palmieri? Okay. Good. Is vice president of
Infrastructure, Legal and Regulatory Policy for the National
Association of Manufacturers. In that capacity, he works with
manufacturers to develop and articulate the Association's
position on regulatory civil justice, antitrust,
transportation, and infrastructure issues. Mr. Rosario--
actually, it is Mr. Palmieri. It says ``Rosario'' on there. I
should probably read these things.
Also leads NAM's efforts----
Mr. Cohen. Take out all the excitement.
Mr. Bachus [continuing]. In product safety and chairs the
now CPSC coalition made up of manufacturers and retailers.
Previously he served as NAM's director of Energy and Resources
Policy.
Boy, that was a challenge, wasn't it.
Prior to joining the Association, Mr. Palmieri worked in
the U.S. House of Representatives as the deputy staff director
out of the Regulatory Affairs Subcommittee and the Committee on
Government Reform. He also served on the House Committee on
Small Business. He received his BA in political science from
American university. We have two American University graduates,
right? Did you all know each other?
Mr. Palmieri. No, sir.
Mr. Narang. Until today.
Mr. Bachus. It is time you all got acquainted, right?
Alright. We will now proceed with the--let's see. Actually,
we need to have the opening--the panelists have their opening
statements.
Mr. Bachus. So, Ms. Harned, we will start with you. And you
are recognized for 5 or more minutes. If you need 6 or 7
minutes, that is fine, too, right? We don't--we would rather--
we would rather you not rush and get it out.
TESTIMONY OF KAREN R. HARNED, ESQ., EXECUTIVE DIRECTOR,
NATIONAL FEDERATION OF INDEPENDENT BUSINESS
Ms. Harned. Thank you so much.
Good morning, Mr. Chairman Bachus and Ranking Member Cohen.
NFIB, the Nation's largest small business advocacy
organization, appreciates the opportunity to testify on the
burdensome effects of regulation on small business and how H.R.
2542, the ``Regulatory Flexibility Improvement Act of 2013,''
would address many of those concerns.
Two and a half years ago, I had the opportunity to testify
before the Committee on a need for regulatory reform. As I
stated at that time, overzealous regulation is a perennial
concern for small business owners, but that fact has not
changed. According to the June 2013 report of the NFIB Research
Foundation's ``Small Business Economic Trends,'' 23 percent of
small businesses say that government red tape is the most
important problem they face, second only to taxes.
To address the negative impact of regulations on small
business, NFIB launched Small Businesses For Sensible
Regulations in August 2011. Former Arkansas Senator Blanche
Lincoln shares that campaign, which is a national effort to
protect small businesses and American jobs from the impacts of
regulation.
NFIB believes that Congress must take action to level the
regulatory playing field for small business. Congress should
expand the Small Business Regulatory Enforcement and Fairness
Act and its small business advocacy review panels to all
agencies, including independent agencies. In so doing, all
agencies would be in a better position to understand how small
businesses fundamentally operate, how the regulatory burden
disproportionately impacts them, and how each agency can
develop simple and concise guidance materials.
Moreover, Congress and the office of advocacy should ensure
that agencies are following the spirit of SBREFA. There are
instances where agencies have declined to adopt the
recommendation of a SBAR panel or conduct a SBAR panel for
either a significant rule or a rule that would greatly benefit
from small business input. Congress should ensure that agencies
perform regulatory flexibility analyses and require them to
list all of the less burdensome alternatives that were
considered.
Each agency should provide an evidence-based explanation
for why it is more--why it shows a more burdensome versus a
less burdensome option and explain how their rule may act as a
barrier to entry for a new business. Section 610 reviews should
be strengthened. Agencies should be required to amend or
rescind rules where the 610 review shows that the agency could
achieve its regulatory goal at a lower cost to the economy.
NFIB also believes that Congress should explore requiring
agencies to provide updated information on how each agency
mitigates penalties and fines on small businesses as required
by SBREFA and require that such a report be conducted on an
annual basis. Regulatory agencies will often proclaim the
indirect benefits for regulatory proposals, but they decline to
analyze and make publicly available the indirect costs to
consumers, such as higher energy costs, jobs lost and higher
prices. Agencies should be required to make public a reasonable
estimate of a rule's indirect impact.
Agencies should be held accountable when they fail to give
proper consideration to the comments of the office of advocacy,
and a formal mechanism should be put in place for resolving
disputes regarding the economic cost of a rule between the
agency and advocacy. Because of the improvements that are
inherent in H.R. 2542, NFIB is hopeful that, if enacted, that
review of agency actions will be strengthened and the small
business voice will be more substantively considered throughout
the regulatory process or the rulemaking process.
NFIB is concerned that agencies are shifting from an
emphasis on small business compliance to an emphasis on
enforcement. Congress can help by stressing to agencies that
they devote adequate resources to help small businesses comply
with the complicated and vast regulatory burdens that they
face. Congress also should pass legislation waiving fines and
penalties for small businesses the first time they commit a
nonharmful error on regulatory paperwork.
Mistakes in paperwork are going to happen, but if no harm
is committed as a result of the error, agencies should waive
penalties for first-time offenses and help owners understand
the mistakes that they have made.
With main street still struggling to regain its footing,
Congress needs to take steps to address the growing regulatory
burden on small businesses. The proposed reforms in this
legislation are a good first step. Thank you for the
opportunity.
Mr. Bachus. Thank you. I appreciate that opening statement.
[The prepared statement of Ms. Harned follows:]
Prepared Statement of Karen R. Harned, Esq., Executive Director,
National Federation of Independent Business (NFIB)
__________
Mr. Bachus. Mr. Harris.
TESTIMONY OF CARL HARRIS, VICE PRESIDENT AND GENERAL MANAGER,
CARL HARRIS CO., INC., ON BEHALF OF THE NATIONAL ASSOCIATION OF
HOME BUILDERS
Mr. Harris. Chairman Bachus, Ranking Member Cohen and
distinguished Members of the Subcommittee, my name is Carl
Harris. I am cofounder of the Carl Harris Company, a
construction firm based in Wichita, Kansas with about 20
employees. I am also a member of the National Association of
Homebuilders and president of the Kansas Building Industry
Association. Thank you for the opportunity to be here today to
talk about ways to reform and improve the Regulatory
Flexibility Act.
I applaud this Subcommittee for considering H.R. 2542, the
``Regulatory Flexibility Improvement Act of 2013,'' and I
believe this legislation will go a long way in addressing the
issues I have observed in the rulemaking process. As a small
businessman operating in a heavily regulated industry, I
understand how difficult it can be for a small builder to
operate a successful thriving business that provides the
highest levels of health, safety and welfare for its employees.
The sheer volume of regulations isn't the only problem.
Often regulations are crafted without respect to the size of
the regulated entities or don't appropriately take into account
the true cost of compliance. Congress appropriately
acknowledged this dilemma when, in 1980, it passed the
Regulatory Flexibility Act, the RFA, and subsequently amended
that to include the Small Business Regulatory Enforcement
Fairness Act, SBREFA. With the RFA, Congress intended for
regulations to be crafted to the scale of businesses while
achieving the goals of the rule. This was an admirable aim.
However, in practice, it does not appear to be working as
intended.
I have had the fortune of representing the residential
construction industry on a number of small business review
panels over the years. I have seen firsthand how agencies treat
the RFA process as little more than a procedural check-the-box
exercise, or worse still, artfully avoid complying with certain
parts of it altogether.
For example, in 2008, OSHA proposed the Cranes and Derricks
Rule, which was intended to protect workers from hazards
associated with hoisting equipment in construction. I
participated as a small entity representative on a review panel
that followed. Several SERs, myself included, raised concerns
about the feasibility of various aspects of the rule that were
clearly designed for large commercial construction
applications. I personally put forward an effective commonsense
alternative that would save lives while keeping low the cost of
compliance for small entities. Unfortunately, it seems that my
feedback fell on deaf ears.
I believe the requirements in section 4 of H.R. 2542 for
agencies to state the disproportionate impact a rule may have
on small entities would lend additional focus to agency action
in accordance with Congress' original intent. At times, it
seems that agencies are not performing a rigorous analysis of
the impacts of proposed rules on small entities. The result is
often regulations that don't acknowledge the true cost to small
businesses.
This is the case, in 2010, when OSHA proposed revising its
occupational injury and illness recordkeeping requirements.
OSHA maintained that the additional recording requirements did
not amount to a significant burden on small business. They
certified it, and to that effect, and in doing so, avoided
analysis requirements contained in the RFA.
On teleconferences, I raised the point that OSHA hadn't
considered the true additional cost that small employers must
face. I believe that more stringent regulatory flexibility
analysis requirements contained in H.R. 2542 would have
addressed this issue.
Finally, the Small Entity Review Panel requirements in the
RFA offer a valuable opportunity for small businesses to
provide much needed input to ensure rules are appropriately
scaled to the size of the businesses that they will impact.
Unfortunately, there exists many ways for agencies to avoid
this critical step in the rulemaking process. In 2008, the
Environmental Protection Agency neglected to convene a review
panel when the agency sought to amend its lead renovation and
repair--repair and painting rule. This failure to convene a
review panel resulted in an amended rule that grossly
underestimated the impact on small businesses.
I support the extended review panel requirements included
in section 6 of H.R. 2542. I also suggest, for further
consideration and future consideration, that Congress look
toward a stronger enforcement mechanism for agency compliance
with section 609(b) of the RFA, the review panel requirements.
If the RFA allowed judicial review of section 609(b),
agencies would feel more pressure to comply with convening a
meaningful panel of SERs that could thoughtfully advise the
agency as Congress intended.
I appreciate this Subcommittee's effort to improve the RFA,
and I urge passage of the Regulatory Flexibility Improvements
Act of 2013. Thank you for the opportunity to testify today.
Mr. Bachus. Thank you very much, Mr. Harris.
[The prepared statement of Mr. Harris follows:]
__________
Mr. Bachus. Mr. Narang.
TESTIMONY OF AMIT NARANG, REGULATORY POLICY ADVOCATE, PUBLIC
CITIZEN
Mr. Narang. Thank you. Chairman Bachus, Ranking Member
Cohen and Members of this Committee. Thank you for the
opportunity to testify today on H.R. 2542, the ``Regulatory
Flexibility Improvements Act of 2013.'' I am Amit Narang,
regulatory policy advocate at Public Citizen's Congress Watch.
Public Citizen is a national public interest organization with
more 300,000 members and supporters.
For more than 40 years, we have successfully advocated for
stronger health, safety, consumer protection and other rules,
as well for a robust regulatory system that curtails corporate
wrongdoing and advanced the public interest.
I am here today to express significant concerns about the
Regulatory Flexibility Improvements Act of 2013. My concerns
can be broken down into two parts. First, like so many other
regulatory reform proposals, the RFIA adds more procedures,
more analyses and more requirements to a regulatory process
that badly needs less of each, without funding any of this
additional work for agencies.
Second, the RFIA forces agencies to find small business
impacts where there are none, giving big business a free pass
by slowing or blocking rules that in reality only affect large
corporations.
Turning to the first part. Important questions at the
outset are, one, what does the current regulatory process look
like; and two, is it a good idea to add more to it?
As Public Citizen's visual depiction of the regulatory
process shows, the current process is a model of inefficiency
with a dizzying array of duplicative and redundant requirements
that amounts to a virtual maze for agencies to navigate.
This has led to a state of paralysis by analysis at Federal
agencies. These agencies must contend with a broken regulatory
process that is too slow, too calcified and too inflexible to
respond to emerging health and safety threats. For example,
OSHA has finalized just one significant worker safety standard
since the beginning of 2010. As another example, it has been 2
and a half years since the Food Safety Modernization Act passed
on a bipartisan basis and still no food safety rules have been
finalized. In practical terms, it is as if the food safety law
doesn't exist. The list goes on.
The RFIA makes this situation worse in many respects, but
let me just focus on two in the short time I have.
First, the RFIA establishes a vague, indirect effects test.
If agencies find their rules result in indirect effects on
small businesses that are ``reasonably foreseeable,'' they must
treat those rules in the same exact way as rules that have a
direct effect on small businesses. Since this ill-defined test
gives agencies no guidance as to what constitutes, or more
importantly, does not constitute an indirect effect, agencies
will feel strong pressure to send their rules through the much
longer process reserved for rules that actually do impact small
businesses.
Second, the RFIA makes all agencies conduct SBREFA Small
Business Advisory panels on all of their major rules, even if
the rule will have no effect on real small businesses. This new
mandate, without any commensurate funding, represents a massive
expansion over the current system and is in no way targeted at
rules that have small business impacts. These panels are time
and resource intensive, and yet the RFIA simply asks agencies
to ignore small business impacts and go through the SBREFA
review panel process every time they issue a major rule. That
would have meant 83 SBREFA panels for rules issued last year
alone at a time when agencies are cutting back and furloughing
staff.
Since small businesses don't benefit from delay or blocking
of rules that do not apply to them anyway, who does benefit?
The obvious answer is big businesses, who are let off the hook
when it comes to commonsense new health and safety standards.
An example here is helpful.
Late last year, Public Citizen issues a report looking into
whether the Volcker Rule would affect small banks, and if so,
how. The yet to be finalized Volcker Rules is a critical Dodd-
Frank financial reform that would prohibit federally insured
banks from engaging in the kind of risky proprietary trading
which led to the financial collapse. Our report showed that of
7,181 banks in the U.S., 7,175 would be unaffected by the
Volcker Rule. In other words, the Volcker Rule would only apply
to the six largest banks in the U.S. that engage in proprietary
trading.
Even though the Volcker Rule is only directed at the big
banks, the RFIA would have forced financial agencies to treat
the rule as if it does affect small businesses. Do we want our
financial agencies to be spending taxpayer money studying the
Volcker Rule's supposed indirect effects on small businesses?
The RFIA would have required financial agencies to put the
Volcker Rule through small business advisory panels. Who would
those panels have included to represent small businesses for a
rule that only applies to big banks?
If Congress wants to clarify how agencies should identify
rules that may apply to small businesses, then it should do so
in a clear, direct, and unambiguous manner. Instead, the RFIA
creates more uncertainty for agencies when it comes to small
business impacts.
Over the years, Congress has repeatedly tried to address
small business regulatory relief by adding more procedures,
analyses, and requirements. If this hearing is any indication,
it hasn't worked. It is time for a new approach.
We all agree that we need to help real small businesses.
One consensus approach would be to enhance small business
regulatory compliance assistance. This provides direct
compliance assistance targeted only to legitimate small
businesses while preserving critical health and safe
protections for the public's benefit.
Congress has taken first steps in this direction, but more
can and should be done. I look forward to working with Members
of Congress on this consensus path forward. Thank you.
Mr. Bachus. I appreciate that, Mr. Narang, and I do hope we
will all work together on this.
[The prepared statement of Mr. Narang follows:]
__________
Mr. Bachus. Mr. Palmieri.
TESTIMONY OF ROSARIO PALMIERI, VICE PRESIDENT, INFRASTRUCTURE,
LEGAL AND REGULATORY POLICY, NATIONAL ASSOCIATION OF
MANUFACTURERS
Mr. Palmieri. Thank you, Mr. Chairman, Members of the
Subcommittee, thank you for the opportunity to testify today
about reform of the Regulatory Flexibility Act.
The United States is the world's largest manufacturing
economy. It produces more than $1.8 trillion of value each year
and employs nearly 12 million Americans working directly in
manufacturing. On behalf of the NAM and the millions of men and
women working in manufacturing in the United States, I want you
to know that we support your efforts to reform the RFA to
unleash the small manufacturers in this country to do what they
do best, makes things and create jobs.
Manufacturers have been deeply affected by the most recent
recession. This sector lost 2.2 million jobs during the period,
and the numbers show that American manufacturing is growing
more slowly than in competitive countries. We have seen
policies from Washington that will not help our economic
recovery and can actually discourage job creation. To regain
manufacturing momentum and to return to net job gains, we need
improved economic conditions and improved government policies.
Many of the proposals being offered by the Subcommittee,
including more detailed statements in the RFA process and
requirements to describe redundant overlapping or conflicting
regulations, will help us do just that. My written statement
details our support for amendments to the periodic review
requirements of the RFA. Those reforms address the challenges
of the cumulative burden of regulations that are no longer
serving our modern needs.
But I would also like to spend some time on some of the
critiques of the reforms in your legislation, including one
that Mr. Narang just mentioned, the analysis of indirect
effects in the RFA. So courts have found that agencies must
only consider the direct effects of the regulations on small
entities under this law. That is one of the reasons we are
taking a look at this, and that is, despite the fact that
Senator John Culver, a Democrat from Iowa and one of the lead
authors of the RFA in 1980, declared otherwise in the
legislative history, and there was a lot of confusion about
this at the very beginning.
The RFA was basically a good government, bipartisan law
signed by President Carter and modeled after the National
Environmental Policy Act, or NEPA. And under NEPA, the Council
For Environmental Quality developed the implementing guidelines
and regulation that all agencies must follow. They declared
NEPA reviews to include both direct and indirect effects.
Agencies have had to comply with these requirements for more
than 30 years.
Additionally, President Clinton's executive order on
regulatory review requires the consideration of all costs and
benefits, not just direct costs and benefits but all, and the
implementing regulation OMB Circular A-4, which explains to
agencies how they must comply with those analytical
requirements of the executive order, states that agencies must
identify the undesirable side effects and ancillary benefits of
the rule.
A review of indirect effects is already included in all the
surrounding analysis of a regulation. It only makes sense to
extend this review of indirect effects to the RFA as well. A
simple example of why this is so important is EPA's forthcoming
``National Ambient Air Quality Standards, or NAAQS, for
Ozone,'' a study we published with MAPI, estimates the most
stringent ozone standard under consideration could result in
the loss of 7.3 million jobs by 2020 and add a trillion dollars
in new regulatory costs per year between 2020 and 2030, and yet
this rule will never undergo a regulatory flexibility analysis.
Why you might ask? Because EPA's NAAQS regulations don't
have a direct impact on small entities. They regulate States,
and the States in turn regulate small businesses and small
communities, and since a State is not a small entity, it
exempts the rule from coverage. This provision should not be
controversial. No matter where you want to see the next ozone
standard, you should want a fair accounting of its impact on
small businesses, small nonprofits, small churches, and small
local governments. Manufacturers hope this proposed legislation
is just the beginning of a more thoughtful regulatory system
built on common sense with an understanding of modern
manufacturing.
Mr. Chairman, thank you for the opportunity to testify
today, and I will be happy to respond to questions.
Mr. Bachus. Thank you very much.
[The prepared statement of Mr. Palmieri follows:]
__________
Mr. Bachus. Let me say this. And this isn't one of my
questions. But I think all four opening statements were
excellent, and they really had a lot of substance in them. And
so I appreciate it.
At this time, Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman.
Again, I come back to this because this is one of the
issues that I believe is dominant in the issue, and I
appreciate the testimony that is being given. I do, however,
you know, believe that this is an issue that we continue to
need to look at.
Mr. Harris, I want to go to you first because I believe so
many times, and no disrespect to the other witnesses, their
views, you are a business owner who comes on behalf of. And I
think we lose that face sometimes. We are here up here a good
bit and we talk to each other, but when you bring that face to
it, I think it is important.
You know, in the issue, and I read your testimony and I
also listened to you, probably would not surprise you to learn
that a recent study found that every American family pays about
$15,000 in hidden regulatory tax annually when you calculate it
out. It is amazing what you could buy with that.
What else other than passing this legislation can Congress
do to help you do what you do best, create jobs and grow the
economy? I would just love to hear your opinion on that.
Mr. Harris. Well, thank you, Mr. Collins. I really
appreciate the question.
This is a first step. Again, we are not talking about
specific regulation, only the process in which we should come
up with regulations. As a small business owner, the uncertainty
of the market is plenty, without having to deal with the
uncertainty in the regulatory framework or governmental. Gone
are the times when governmental agencies used to be consultive
and now they are more punitive. Let's work together to find out
what is better for all our employees and better for our
community. That is what we need.
Mr. Collins. From what I am hearing and you saying and I
have heard the other witnesses as well, you are just looking
for some certainty. So tell me what I have got to do, you know,
is sort of the bottom line whether you like it or not, and this
is the part of the issue, that certainty issue that we lack
sometimes.
Mr. Harris. Before I make investments in additional
employees, before I make investment in additional capital for
manufacturers, before I give some certainty to other small
business subcontractors, I really have to feel better about the
market in which I am dealing with and some certainty in regard
to the regulations that affect that market and the things that
go into the cost of our product.
I mean, our studies have shown that in the cost of any
house 25 percent of it can be directly linked to the cost of
regulations, 25 percent of the house. I am here today to make
sure that doesn't get any higher. I am not talking about doing
less than that. Let's just see what we can do about stemming
the tide of increased unnecessary regulation.
Mr. Collins. And you actually, it is amazing, I think you
are reading my notes up here, because I actually flagged that
in your testimony here, this 25 percent issue. And look, I
could talk to each one of you witnesses for hours on this issue
because it is something, but I want to go back to that. Flesh
that out a little bit for me. Because one of the things was
mentioned, I think, in, Mr. Narang, your testimony about Dodd-
Frank, which, frankly, in my area, has been a disaster for
community banks. It is just absolutely a disaster because a lot
of what it is, is it has tied up the money flowing, it has tied
up people like you not being able to get to it to actually
create jobs. Talk about that 25 percent just a little bit more.
Mr. Harris. Well, 25 percent comes in a number of ways.
One, the regulations on subcontractors that I employ in the
production of anything that we are building, whether it is a
residential property, whether it is a home for a small
business. I mean, all of those are in there.
And then you take into account the cost to manufacture the
products we are going to put in the house, the cost of
transportation, and all the regulation that goes into that. As
you go back the link, it seems like government regulation has
their hand in the pocket of everything we do, and I am not sure
that those things, if given the right process, would have been
flushed out.
Mr. Collins. I am going to actually, because we are on a
tight timeframe today, so I am just going to sort of end with
this and just say, you believe that some regulations are
necessary in what we do.
Mr. Harris. Absolutely.
Mr. Collins. And you and most--you know, and the vast, vast
majority of business owners and all have no desire to hurt
employees, to see them injured, to see them endangered or
anything else. Would that be an honest statement from you as a
business owner?
Mr. Harris. Absolutely. And if I could tell you about my
employee mix, we could start with my office, which is my wife,
my sister, my father. I go to the field, it is my brother-in-
law, my nephew, my sister's nephew.
Mr. Collins. Sounds like Thanksgiving table.
Mr. Harris. I am just telling you, we know our employees,
we know their birthdays, we know their wives' and children's
names, why on earth would you think that I would want to hurt
those employees, because they are members of my family?
Mr. Collins. I understand. Thank you for your testimony.
And to the other witnesses, thank you. I could go on.
Mr. Chairman, I yield back.
Mr. Bachus. All right. Thank you.
Mr. Cohen.
Mr. Cohen. Thank you, Mr. Bachus.
Mr. Narang, you said that the compliance assistance to
small business hasn't been as extensively made available by the
Federal Government, that that hadn't been an emphasis. I think
Ms. Harned said the same thing. Do you all kind of in agreement
on that area, do you think? Did you listen to her testimony?
Mr. Narang. I did, and I do agree that what Ms. Harned said
is critical. Compliance assistance is part of the conversation
that, frankly, you know, has not really attracted much
attention and it deserves much more attention.
Mr. Cohen. What else in her testimony or in Mr. Harris' or
Mr. Palmieri's did you find that you could agree on?
Mr. Narang. Well, I mean, I agree that small businesses
share a higher proportion of compliance cost with respect to
their expenses than of course large businesses. And so I think
that this is, you know, a critical reason to provide direct
compliance assistance to small businesses.
Large corporations, they don't need the compliance
assistance. They have big compliance departments. Small
businesses need the compliance assistance.
Mr. Cohen. So that would involve, I guess, Ms. Harned,
would that involve having more appropriations for Small
Business Administration to have people that could help with
compliance. Is that what you need?
Ms. Harned. Right, within the agencies. And what we have
actually seen over the last few years is agency budgets have
diverted resources from their compliance assistance programs to
in, like, the case of OSHA, for example, to enforcement. And
that is where we are hoping that those funds can be protected
and not diverted so that small business owners can really get,
you know, the help they need from regulators to know what they
are supposed to be doing.
Mr. Cohen. Would you support additional appropriations to
the different agencies to help in compliance and specify that
it would be for compliance for small business, to help them?
Ms. Harned. Well, we definitely think that there should be
significant resources for compliance assistance. You know,
whether that is additional money or, you know, a rebudgeting of
an agency is left to the legislators. But that is an
important----
Mr. Cohen. But you have got to have both compliance, which
is--and I agree with you that there is a whole bunch of mazes,
and small business could use the help and we could supply it--
but you have got to enforce it, too. If you don't enforce
things, then why, you know, comply, if you don't have to. So
you have got to have that, and I don't know if they just don't
have enough money where they could do both. And if they need
more money to do the compliance assistance, would you, would
the NFIB support that?
Ms. Harned. I mean, we want more resources for compliance
assistance, like I said. That is what I would say.
Mr. Cohen. Okay. Thank you.
The analysis of indirect effects, how could that be dealt
with, Mr. Narang?
Mr. Narang. Well, I think it is crucial first to make sure
that indirect effects, if they are going to be a part of agency
analyses, and I don't agree that it is necessary, but if they
are going to be a part, that they be well defined. We need to
know exactly----
Mr. Cohen. Like a number, a threshold?
Mr. Narang. That is right. We need to know exactly what
agencies must consider an indirect effect, what agencies should
not consider an indirect effect. And, frankly, I think the most
important thing is to not make it judicially reviewable. Once
you drag an agency into court over a standard that is this
ambiguous, it is going to be very hard for them to say, you
know, we considered all the indirect effects. You know,
litigants can very easily point to indirect effects that exist
that, frankly, the agencies couldn't consider because indirect
effects are nebulous, you know, they have no boundaries. And so
I think it is very dangerous to have courts essentially
overseeing this very ambiguous issue.
Mr. Cohen. Your response is like some of the folks that are
called here as witnesses by the majority, and they don't like
that either, so it is interesting kind of coming together. And
I think maybe you and Ms. Harned and Mr. Palmieri and you all
could get together. You all could probably come up with a bill
we could pass. I mean, there are some things we ought to do,
but we just need to narrow in on what we can accomplish. And I
think one of them is the compliance area and how we get them to
do more compliance and not necessarily take away from
enforcement.
Do you believe that they are over-enforcing or do you
believe they just don't have enough funds.
Mr. Narang. First of all, I think it is extremely important
that agencies be funded, fully funded, when they are conducting
compliance assistance, that they don't shift around shrinking
budgets to try to create compliance systems that reaps great
benefits to smaller businesses.
I do agree with Ms. Harned that in certain instances we
don't want compliance assistance to be a front for gotcha
enforcement, for example. We don't want companies thinking that
they are seeking compliance assistance and then having agencies
bring enforcement actions. But that is a very narrow issue,
maybe only relevant to a few agencies, and I think that
compliance assistance, as it has been fashioned in the first
steps Congress has taken, is not going to result in the kind of
enforcement issues.
Enforcement is critical. You know, we can't have
responsible companies following regulations, you know, and
irresponsible companies not following regulations, cheating,
and not enforcing, you know, the wrongdoers and not placing
enforcement mechanisms on them. That harms, you know, the small
businesses that are following the rules.
Mr. Cohen. If I can have 30 seconds additional.
Mr. Bachus. Sure.
Mr. Cohen. Thank you.
Ms. Harned, you said that first-time paperwork errors, that
there is no way to kind of get a second chance. That is not
provided for, that they can waive the fine in the law?
Ms. Harned. Right. There is really no flexibility there.
And that is something that again, for the small business
owners, I mean, regulatory paperwork is a real----
Mr. Cohen. That seems like a very simple thing we could
agree on and get some kind of--maybe we could pass something
just to say that on a first-time offense for paperwork, you
can, you know, waive the penalty.
Mr. Palmieri. Ranking Member Cohen, could I just mention
that Congresswoman Tammy Duckworth, a Democrat from Illinois,
has actually introduced legislation, the Small Business
Paperwork Relief Act, to waive penalties for just paperwork
violations, not something that is imminent for health or
safety, and we are very supportive of that legislation and
would encourage you to support it as well.
Mr. Cohen. Thank you. We will look at it and probably do
it.
Are you related to Rafael.
Mr. Palmieri. No, sir.
Mr. Cohen. Okay. Just checking. Thank you.
Mr. Bachus. Thank you.
Mr. Jason Smith, our newest Member from Missouri, is now
recognized.
Is this your first investigative hearing?
Mr. Smith of Missouri. It is, Mr. Chairman.
Mr. Bachus. It is. So all eyes are on Mr. Smith from
Missouri.
Mr. Smith of Missouri. Don't have high expectations.
You know, as I sat here, I have been here 23 days, and I
think of the phrase that I have heard numerous times, that if
it is moving the government will tax it, and if it continues to
move they will regulate it, and if it stops moving they will
subsidize it. And that is what we clearly see with the
regulation that is here.
Ms. Harned, I would maybe like to ask you if you know
offhand an estimate of how many different Federal regulations
there are that is affecting small businesses.
Ms. Harned. Yeah, it is thousands, and that is really again
the issue, because small business owners like, you know, Mr.
Harris, they do not have an in-house person that can keep up
with all that. The person that is doing it is Mr. Harris, and
that is what we see with our small business owners, and that is
why the regulatory state really is a problem for them.
Mr. Smith of Missouri. You know, in the State of Missouri,
we reformed all rules and regulations. It was actually my bill
that put a systematic review process. Originally we tried to
sunset every rule every 5 years. And we were upset that we had
over 6,281 rules.
From the last I have monitored at the Federal level, there
is over 170,000 pages of rules and regulations. These are rules
and regulations that directly affect small businesses and
family farmers and individuals.
And, Mr. Narang, I have a question from you. In your
written testimony, you made this statement. It says, ``Experts
from across the political spectrum have acknowledged that
arguments linking regulations to job losses are nothing more
than mere fiction.'' Could you state where you get that
information?
Mr. Narang. So, I believe I was referring to a particular
study called the ``Crain and Crain'' study, commissioned by the
SBA Office of Advocacy. It has been criticized both by former
OIRA Administrator Cass Sunstein as deeply flawed and nothing
more than an urban legend; and interestingly, also by John
Graham--now, that is the former OIRA Administrator under George
W. Bush--who indicated that a previous version of the study
would not meet OMB information quality guidelines. I believe I
also cited Bruce Bartlett, an ex-economist--well, an economist
from the Reagan administration who did not agree that
regulations lead to job losses.
Mr. Smith of Missouri. So maybe it is just because I have
been out in the district for the last 6 months, but we have a
company that cited losing 475 jobs moving to Mexico because of
government regulation in Butler County, Missouri, Poplar Bluff.
Those are real jobs, real people that are being affected, and
the reason they are moving to Mexico is because the regulations
we have here--it is a manufacturing business--are more
burdensome than what they are in Mexico. Those are real
families that no longer will have income and that are going to
be relying on government, and that is the last thing, in my
opinion, that we need.
We have another business. Because of new EPA regulations
they are closing the last lead smelter in the United States in
our area. That is 300 jobs. That is serious problems. And
whenever you see these burdensome regulations that the
executive branch just continues to promulgate, there are no
checks and balances.
And I think we need a true systematic approach that reforms
all rules and regulations and to make sure that they don't
cause an undue burden on businesses or individuals or family
farmers, to make sure that these rules are narrowly tailored to
actually carry out the true purpose and to make sure that rules
are absolute.
We had rules on the books in Missouri that said that every
small business had to have a land line phone. It is not
necessary. Times are changing. And that is what we need to see
at the Federal Government. We need to get with the times and
reduce these burdensome regulations. And I gladly support this
legislation.
Mr. Bachus. Thank you.
I thought that was excellent for his first hearing. And I
think what Mr. Smith says, you know, he has been in the
district. He has been living in the district full-time and he
has been hearing it even more than we who travel back and
forth, so bring it down to jobs.
Ms. DelBene from Washington State, recognized for 5
minutes, very capable Member of our Subcommittee.
Ms. DelBene. Thank you, Mr. Chair.
And thanks to all of you for taking the time to be here
today.
I just want to start with you, Mr. Palmieri. You talk in
your testimony about agencies continually engaging in a
retrospective review of rules, and we are talking a little bit
about funding and how that will happen. So would you also
support that we fund agencies so they can conduct those
retrospective reviews?
Mr. Palmieri. So currently President Obama asked all
agencies to undergo retrospective review after his executive
order in 2011, and they have been implementing with current
resources and even fewer resources to accomplish the task.
All I think we would say is that if they are able to do it
with current resources today and if we all think this is a good
thing--and we do--that agencies should continuously look back,
we should be continuously improving our regulatory system, and
as Congressman Smith noted, getting rid of regulations that
don't make sense, that on a going-forward basis we should make
sure this is institutionalized and Congress should put its
imprint on retrospective review and use the mechanism that is
typically used, and many others, including in the RFA, section
610, look back and sunsetting where regulations actually have a
point at which they must undergo an additional review before
they move forward.
And so we think whatever way that is done, it should
continue to be done and that there should not be kind of a one-
time exercise or activity that this Administration has
undergone.
Ms. DelBene. And one of the things that I hear, have
definitely heard in my State, just differing definitions and
terms, sometimes within individual bills, et cetera. So how
much of it is also just having some commonality so that there
is a little more awareness on what a certain term might mean
and knowing that that is consistent even sometimes across
agencies so that it helps businesses understand the playing
field? How important is that, do you believe?
Mr. Palmieri. And I think one of the tenets of this
legislative proposal is kind of a review of requirements across
agencies. And I agree with you, I don't think that is done
enough, because there are conflicting, duplicative, all sorts
of challenges among different requirements that businesses
face.
And if you are in an individual regulatory agency, at EPA
say, you don't have a really good sense of what OSHA is doing
today or what the Federal Trade Commission might be thinking
about in the next 6months or others in a variety of areas. And
so better coordination, better interagency review. And part of
this process requires that you actually talk to a small
business, to sit down with them, representatives of small
business, in advance of your rulemaking and ask how would this
affect you and how does it interact with all the other
requirements that you are currently facing and makes a specific
note to look at the cumulative burden of regulation.
So just like President Obama's executive order that
identified the emerging threat of kind of the cumulative burden
of regulation, this legislation would make sure that that is a
part of the analysis that agencies have to do for small
entities.
Ms. DelBene. And Ms. Harned, you said that the NFIB's
research foundation reports that 23 percent of small businesses
said that red tape is the most important problem that they
face. How much of that do you think is Federal versus State and
local? Because I know, you know, from a business you are
looking at a combination of rules, and they are not all Federal
rules. A lot of them sometimes are State and local rules. What
do you think the challenges are on the entire landscape, if you
can take a look at that and separate those out a little bit?
Ms. Harned. Right. I mean, your point is a good one,
because it isn't just Federal rules, it is State rules, too.
But that being said, our research for the past, you know,
decades has shown that specifically Federal regulations have
been in the top 10 list of concerns that small business owners
have. So we have a survey called ``Problems and Priorities''
that we release every 4 years. And I apologize, because I can't
remember the exact ranking right now, but I know in that survey
we do separate out the State and local versus the Federal. But
again, our research continues to show that Federal is a real
problem.
Ms. DelBene. Well, I also assume that you have got a
businesses who are in more than one State, and so that
compounds the problem a little bit, or in multiple localities
within a State. And so the different points of presence
sometimes it might increase that challenge, too, for
businesses.
Ms. Harned. Right. Except I would say with NFIB's
membership most of our members are intrastate, so that is not
as much of an issue for our members as it might be for other
business associations.
Ms. DelBene. I know with more folks having kind of an
online presence, it has kind of created a slightly different
playing field than there has been in the past. I was just
curious. Thank you very much. My time has expired.
I yield back, Mr. Chair.
Mr. Bachus. Thank you.
The Chair now recognizes myself for questions. One thing I
will tell you, that we had a hearing just 2 or 3 months ago,
and I think Members on both sides of the aisle were shocked at
Marathon Steel, which was a small company in Baltimore that had
been praised highly by the Congress on Racial Equality, and
several civil rights groups, and by the City of Baltimore for
establishing businesses in inner city Baltimore, and they
started a profit sharing plan. And they were exporting to like
31 countries and had hired, you know, I think over a hundred
employees. And jobs right where we needed them the most. And
they were fined by the Treasury Department for missing a
signature line on their profit sharing plan, although when they
came in and fined them, they had totally complied with that.
And they were actually sharing their profits with their
employees.
And I noticed one of you said Tammy Duckworth has proposed
legislation--I don't know if that was you--to be able to waive
that. And the Treasury Department adjusted it down to $20,000.
But still, you know, it was just Members on both sides said,
you know, that shouldn't happen. We have seen examples of that.
Let me, Mr. Narang, and I am going to ask the others, but,
you know, one of the things that does strike me is the agencies
compute indirect benefits, which also can be harder to assess.
And I know Ms. Harned in her testimony, and I think Mr. Harris
and Mr. Palmieri, they all mentioned that they are--they
compute those. And it seems like if they are going to compute
benefits, indirect benefits, they ought to compute indirect
costs just in a balance. And I think her testimony, and it is
the last paragraph of page five on her testimony, says that
actually that President Clinton issued an executive order
mandating consideration of a rule's indirect impact. Are you
aware of that executive order?
Mr. Narang. I am.
Mr. Bachus. And but you disagree with it, I guess, right?
Mr. Narang. I don't disagree with the executive order. And
I would like to take a closer look at the examples that were
cited in terms of indirect benefits against the actual specific
rules mentioned. What I would say is I think that is an
excellent example of a kind of basic methodological fundamental
flaw with the whole notion of cost-benefit analysis. One
person's benefits is another person's costs. This is something
that----
Mr. Bachus. And I agree. I agree. But, you know, if you are
going to consider one person's benefit, indirect benefit, you
ought to consider one person's indirect costs, I would think
just in fairness.
Mr. Narang. You know, I believe if that is happening, I
will take a closer look at those instances. You know, again, I
think that the problem here is an overreliance on cost-benefit
analysis. Congress mandates that agencies carry out certain
responsibilities, fashion certain rules. When it comes to cost-
benefit analysis, we shouldn't be making this something that is
second-guessing congressional mandates.
Mr. Bachus. Okay. Mr. Palmieri?
Mr. Palmieri. Yeah, love to comment. I think something that
Mr. Narang and I would probably agree on is, say, if we were
looking at government fuel efficiency rules, if you only looked
at kind of the direct impacts you would look at the impact of
the fuel efficiency rules on automobile manufacturers and kind
of the costs they impose and where the benefits they impose for
automobile manufacturers.
It would require a review of the indirect impacts to see
what the benefits to consumers would be of higher fuel
efficiency in their vehicles and cost savings over time.
So we are already doing this type of analysis in a range of
other rules. For whatever reason, the courts just looked at
this law after it was passed in 1980 and decided that it wasn't
clear enough and the legislative history wasn't clear enough.
So this is just a correction. The RFA is a transparency law. It
just says we are looking at impacts. It doesn't tell the agency
what they have to do after they have considered that impact.
But they have to consider it. So, to us, a review of indirect
effects makes complete sense and is consistent with how
Congress has operated for a long time.
And Ranking Member Cohen mentioned foreseeability as an
issue. And I think there are some ways to look at that are
perhaps less complicated than Palsgraf. And products, you know
consumer products manufacturers already comply with the
Consumer Products Safety Act, which requires us to kind of
anticipate foreseeable use and misuse of the products for
consideration of product safety standards and making sure that
they are right. So foreseeability I think is a completely
reasonable definition for us to use.
Mr. Bachus. Thank you. And let me just close by stating--
and then Mr. Jeffries, we are going to go to you--Mr. Smith
mentioned a lead smelter which will close in his district. I
don't know, but I would imagine that it may result in lead
being smelted right across the border in Mexico. And I know the
EPA, when they proposed new regulations on our cement plant,
they actually said that this cement, it will eliminate a
certain capacity in the United States, but we can get that
cement from Mexico and China. Well, I asked, well, in Mexico,
the environmental standards are much more lax, and like that
lead smelter, what if it moves right across the border? We know
that a lot of our lead and arsenic in the air actually comes
from Mexico, particularly in our Gulf Coast States. I mean,
that is the source of them. If you look at a map, the West
Coast has the largest--a lot of particulate matters--they have
the largest concentration, even though the plants may be in the
east, and that is because it comes from China in the jet
stream. So we shut something down here, it results in more
pollution here. And I asked the EPA, and they said, they could
not consider--they didn't have any control over Mexico. Well,
they certainly ought to compute that if it is going to result
in more cement or more lead smelting across the border in
Mexico, which then comes over in the air, they ought--to me,
they ought to consider that. It is only fair. At this time, I
recognize Mr. Jeffries from New York is free to ask any
questions.
Mr. Jeffries. Thank you very much, Chairman Bachus. And let
me also thank the witnesses. Certainly the issue of small
business success and vitality in America should be a
nonpartisan issue. And I think everyone on this panel and
within this Congress wants to ensure that small businesses can
be successful, given the importance of your success to our
economy, to the constituents that I represent, to those that
all of us represent throughout this great country.
But I did have some questions that I wanted to ask, you
know, related to this concept of regulation as well as what is
really hurting the pace of the recovery. And I will start with
Mr. Harris. It appears that, based on some studies that I have
taken a look at, homeownership in the United States and
homeowners since the first quarter of 2006 have suffered
approximately $7 trillion in home equity loss. Is that correct?
Mr. Harris. That is--I don't know exact numbers, but we
have seen significant decrease in equity positions on
residential homes, yes.
Mr. Jeffries. Right. So certainly there has been a
staggering loss of home equity that has greatly impacted
working families in middle class America throughout this
country connected to the events surrounding--connected to the
events related to the great recession of 2008. Is that fair to
say?
Mr. Harris. Yes, that is fair.
Mr. Jeffries. And there are many explanations as it relates
to the collapse of the economy in 2008, but a lot had to do
with activity that was taking place in the housing market. Is
that fair to say?
Mr. Harris. I am not sure what you mean by activity in the
housing market in regard to the downturn.
Mr. Jeffries. Okay. To be specific, you are familiar with
the term mortgage-backed securities, correct?
Mr. Harris. Oh, absolutely.
Mr. Jeffries. And mortgage-backed securities were being
bundled in ways that were ultimately difficult to untangle,
sold and resold, and directly related to the collapse of the
economy in 2008. Is that fair to say?
Mr. Harris. Yes. Agreed.
Mr. Jeffries. And is it also fair to say that predatory
lending activity related to the circumstances leading up to the
collapse of the economy in 2008? Is that fair to say?
Mr. Harris. I would think that the way in which loans were
made in areas that they were made to people who obviously could
not repay had a great deal to do with the downswing in that
market, yes.
Mr. Jeffries. Absolutely. And that would essentially
capture what you just described sort of subprime lending to
individuals who clearly did not have a capacity to sustain the
ability to pay loans on a moving forward basis.
Mr. Harris. That is correct.
Mr. Jeffries. And would it be fair to say that your
business, or other similarly situated businesses suffered
tremendously as a result of the collapse of the economy and the
downturn of the housing market given the events of 2008?
Mr. Harris. Absolutely.
Mr. Jeffries. And would it also be fair to say that some of
the activity that we just discussed related to predatory loan
activity, mortgage-backed securities, credit default swaps that
were connected to those mortgage-backed securities all operated
in a context where they were not as regulated pre-2008 as they
clearly should have been with the hindsight of 20/20 vision? Is
that a fair statement?
Mr. Harris. Well, I think it is fair, but again, we are
talking about regulating other than small businesses, when you
start talking about regulating the large banks that had the no
doc lending, the negative amortization lending, those did not
come from small community banks in small communities that would
be affected in this ruling.
Mr. Jeffries. I agree with that point.
Mr. Harris. Okay.
Mr. Jeffries. One of the concerns that we have here,
however, and Mr. Narang has articulated it, is that in our
desire, which is a legitimately held one, to support small
businesses and their ability to move forward, we may actually
create opportunities for some of the larger corporations and/or
businesses, and Mr. Narang gave an exact example, to escape the
reach of regulation in a manner that in the past has proven to
be harmful not just to American homeowners, but to your
businesses and others that are similarly situated. Is that a
fair observation?
Mr. Harris. I think that is a fair observation. But again,
if I could add, some of us who are in areas that weren't
affected did not have the opportunity to have, nor did we want,
no doc, negative amortization, pie-in-the-sky lending that
occurred in various areas. We were penalized because of that
activity, not because our members either benefited from that or
not. It was just that was part of the outflow of that
situation.
Mr. Jeffries. I agree. And I know my time has expired. But
I think we share a similar concern that you didn't necessarily
benefit from the lack of regulation and you were hurt by the
subsequent behavior that took place.
And with that, I yield back. Thank you.
Mr. Bachus. All right. Thank you. I appreciate those
questions and the responses of our panel.
At this time, I would like unanimous consent to submit the
statement of Chairman Bob Goodlatte, our Chairman of our
Committee in support of this bipartisan bill, and also a letter
from the Associated Builders and Contractors in support of this
comprehensive legislation, bipartisan.
[The information referred to follows:]
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Mr. Bachus. And I am going to leave the record open if
other Members, Mr. Conyers or others, wishes to submit a
statement or documents in support or opposition to the
legislation. And also I would ask the witnesses, Members may
want a follow-up question, to send you a follow-up question.
I do want to commend the Members, I think this is the very
type of hearing that we can try to build some consensus.
Because I think we all realize that with the House and the
Senate we have to try to work together or we are not going to
accomplish anything. And we have to do that by listening to all
stakeholders.
We are not going to bring the Members back. We have got a
series of votes. But this concludes today's hearing. Thanks to
all our witnesses for attending, for their excellent
statements.
Without objection, all Members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record. This hearing is adjourned.
[Whereupon, at 10:24 a.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Prepared Statement of the Honorable Steve Cohen, a Representative in
Congress from the State of Tennessee, and Ranking Member, Subcommittee
on Regulatory Reform, Commercial and Antitrust Law
The Regulatory Flexibility Improvements Act ``proposes some
needlessly drastic measures that threaten to undermine public health
and safety and waste public resources.''
``I am open to ideas on tweaking the regulatory process in modest
ways to make regulatory compliance easier for small businesses and
perhaps finding better ways for small business to provide input to
specific rules. As drafted, though, [the bill] . . . simply goes too
far.''
If these statements sound familiar, it is because I am quoting
myself from two and half years ago when we considered what appears to
be an almost identical bill in this Subcommittee.
Yet notwithstanding the concerns that I expressed and my hope that
we instead consider more modest and meaningful assistance for small
businesses, this latest measure simply rehashes the shortcomings of the
bill from last Congress.
Once again, this is the movie Groundhog Day, and I am Bill Murray's
character.
Although I say this at every regulatory hearing, it is worth
repeating as we consider the merits of the bill before us today.
Regulations are critical to protecting the American people from a vast
array of harms, including dirty air and water, dangerous toys, reckless
financial behavior, and unsafe workplaces.
This is not an abstract notion. On the question of workplace
safety, for instance, the Bureau of Labor Statistics reports in its
2011 Census of Fatal Occupational Injuries that there were 4,693
workplace deaths in 2011.
According to researchers from the National Institute for
Occupational Safety and Health, the American Cancer Society, and Emory
University's School of Public Health, there are an estimated 50,000 to
70,000 deaths from occupation-related diseases in the United States
annually.
And, while we are talking about regulatory costs, we should also
consider the costs of insufficient regulation. According to a joint
study by Liberty Mutual Insurance Company and health economists at the
University of California at Davis, the estimated costs of workplace-
related injuries is $250 billion, only 25% of which is covered by
workers' compensation.
I do not doubt that Chairman Bachus and the other proponents of the
RFIA sincerely share my appreciation for the importance of regulation
in protecting all of us from a myriad of harms. I emphasize the
importance of regulation only to point out that this bill, if enacted,
could jeopardize these types of protections in the future.
For example, this bill will expand the use of regulatory review
panels by requiring that they apply to rules proposed by all agencies
and by applying them to all major rules, not just those that are
subject to the Regulatory Flexibility Act.
Currently, such review panels are required only for rules that: (1)
are subject to the Regulatory Flexibility Act; and (2) are proposed by
the Environmental Protection Agency, the Occupational Safety and Health
Administration, or the Consumer Financial Protection Bureau.
These review panels, which consist of the Chief Counsel for
Advocacy of the Small Business Administration, a representative of the
issuing agency, and a representative from the Office of Information and
Regulatory Affairs, review the covered rules and can send them back to
the issuing agency.
Clearly, the process is intended to slow down rulemaking. By
dramatically expanding their use, this bill will effectively stop most
rules from going into effect.
The bill also burdens agencies with numerous additional and
amorphous analytical requirements, including the requirement that
agencies assess the indirect economic effects of a proposed rule.
The requirement to assess indirect effects has almost no
limitation, other than that such indirect effects should be
``reasonably foreseeable,'' which is not much of a limitation.
Under this fairly open-ended requirement, agencies would be at a
loss to determine how much is enough when it comes to their regulatory
analysis obligations. For example, what is the ``reasonably foreseeable
indirect economic effect'' of a regulation requiring heightened
security measures at airports? Would the issuing agency have to take
into account the potential loss of business for the hot dog stand that
is located far past the security checkpoint?
These are just two of the many concerns with the RFIA. We will hear
in more detail from Amit Narang of Public Citizen about the remaining
concerns with the bill.
There are things we can do to help small entities, including
measures to assist small businesses with regulatory compliance. We
ought to be able to support such measures on a bipartisan basis. I
understand that Mr. Narang may have a proposal to that effect and I
hope his fellow witnesses and the other members of this Subcommittee
will give it real consideration.
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, Ranking Member, Committee on
the Judiciary, and Member, Subcommittee on Regulatory Reform,
Commercial and Antitrust Law
Under the guise of protecting small businesses from burdensome
regulatory requirements, the ``Regulatory Flexibility Improvements
Act'' is actually yet another attempt to--
prevent regulatory agencies from promulgating
regulations that protect the health and safety of Americans;
overwhelm regulatory agencies with unnecessary and
costly analyses; and
give well-financed businesses and anti-regulatory
organizations greater opportunities to thwart the rulemaking
process.
Not surprisingly, similar legislation considered in the last
Congress was opposed by the Obama Administration, which issued a veto
threat, stating that the bill ``would seriously undermine the ability
of agencies to execute their statutory mandates'' and '' impede the
ability of agencies to provide the public with basic protections.''
And, many of the Nation's leading consumer, labor, and
environmental organizations have expressed similar concerns about this
``dangerous'' measure, including--
--the AFL-CIO,
--the American Lung Association,
--the Consumer Federation of America,
--Consumers Union,
--the Natural Resources Defense Council,
--Public Citizen,
--the United Auto Workers, and
--the National Women's Law Center, just to name a few.
One of my principal concerns about this bill is that it could
jeopardize Americans' health and safety.
Our federal agencies are charged with promulgating regulations that
impact virtually every aspect of our lives, including the air we
breathe, the water we drink, the food we eat, the cars we drive, and
the play toys we give our children.
Small businesses, like all businesses, provide services and goods
that also affect our lives. So, it makes no difference to a victim who
breathes contaminated air or drinks poisoned water, whether the hazards
were caused by a small or large business.
The far-reaching legislation before us today would undermine the
ability of federal agencies to quickly respond to emergent health and
safety concerns.
Section 5 of the bill, for example, repeals the authority under
current law that allows an agency to waive or delay the initial
analyses required under the Regulatory Flexibility Act ``in response to
an emergency that makes compliance or timely compliance . . .
impracticable.''
Instead, the bill empowers the Chief Counsel for Advocacy to issue
regulations about how agencies in general should comply with the Act.
So, imagine if there is an epidemic E. coli or listeria infection
caused by some item in our Nation's food distribution network, or an
imminent environmental disaster that could be addressed systemically
through regulation, this bill says ``Don't worry. Don't rush. Let's
have the Chief Counsel for Advocacy decide.''
This override of an agency's authority to respond to emergencies
without having first go through the arduous and time-consuming task of
review and analysis is simply wrong.
Another problem with this bill is that it will result in the
wasteful expenditure of taxpayer dollars by forcing agencies to
redirect their scarce resources to meet the bill's needlessly
burdensome compliance requirements.
Section 6 of the bill, for example, would require agencies to
review not only all rules, but, in addition, all guidance documents
currently in effect as of the bill's date of enactment.
We are talking about thousands of pages of regulations in the Code
of Federal Regulations and several hundred thousands of guidance
documents.
This requirement even applies to regulations that have provided
long-proven health safeguards, such as regulations banning lead in
gasoline.
It's no wonder that the Congressional Budget Office estimates that
it will cost $80 million over a five-year period to implement these new
requirements.
We understand that some small businesses often have limited
resources and that they can be more vulnerable to unnecessary,
redundant, or conflicting regulations than their larger counterparts.
But, we are not talking about your typical Mom and Pop small
businesses under this bill. No, this bill applies to businesses that
employ up to 500 workers.
And, the answer is not to burden the agencies that are responsible
for protecting public health and safety. Rather, our goal should be to
help small businesses comply with these regulations.
By overburdening the very agencies charged with protecting us, this
bill clearly prioritizes corporate special interests.
What a waste of scarce taxpayer dollars.
A further concern I have about this bill is that it will result in
paralysis by analysis and give corporate interests too much control
over the rulemaking process.
Section 2 of the bill, for example, would task agencies with the
duty to examine the indirect economic effects of proposed regulations
on small businesses, which would be in addition to their current
obligation to assess the direct effects of these regulations.
Now I ask you: what is an ``indirect economic effect'' of a
regulation? Just think of the litigation that well-funded businesses
and anti-regulatory organizations could fund to stop a rulemaking.
This bill, if ever enacted, would force agencies to conduct highly
speculative and labor-intensive assessments, all of which could be
subject to litigation by well-financed business interests.
Agencies would be required to engage in a virtual guessing game to
divine the indirect effects of a proposed regulation, which, of course,
would be subject to judicial review.
Other ways in which the bill will result in regulatory paralysis
are the following:
It greatly expands the types of rules subject to
analysis under the Regulatory Flexibility Act;
It mandates that agencies prepare excessively
detailed analyses for proposed rules; and
It requires review panels to ensure that certain
rules issued by all agencies--not just the three agencies under
current law, namely, Environmental Protection Agency, OSHA, and
the CFPB--consider the interests of small businesses.
Glaringly missing from the bill is any provision requiring
consideration of public interest concerns and of the benefits of
regulations.
This is a harmful bill that could potentially put the health and
safety of all Americans at risk while adding nothing to the efficiency
or cost-effectiveness of agency rulemaking. I strongly oppose this
bill.
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