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| <title> - ``REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011''--UNLEASHING SMALL BUSINESSES TO CREATE JOBS</title> | |
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| [House Hearing, 112 Congress] | |
| [From the U.S. Government Publishing Office] | |
| ``REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011''--UNLEASHING SMALL | |
| BUSINESSES TO CREATE JOBS | |
| ======================================================================= | |
| HEARING | |
| BEFORE THE | |
| SUBCOMMITTEE ON COURTS, COMMERCIAL | |
| AND ADMINISTRATIVE LAW | |
| OF THE | |
| COMMITTEE ON THE JUDICIARY | |
| HOUSE OF REPRESENTATIVES | |
| ONE HUNDRED TWELFTH CONGRESS | |
| FIRST SESSION | |
| ON | |
| H.R. 527 | |
| __________ | |
| FEBRUARY 10, 2011 | |
| __________ | |
| Serial No. 112-16 | |
| __________ | |
| Printed for the use of the Committee on the Judiciary | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Available via the World Wide Web: http://judiciary.house.gov | |
| ______ | |
| U.S. GOVERNMENT PRINTING OFFICE | |
| 64-406 PDF WASHINGTON : 2011 | |
| ----------------------------------------------------------------------- | |
| For sale by the Superintendent of Documents, U.S. Government Printing | |
| Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC | |
| area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC | |
| 20402-0001 | |
| COMMITTEE ON THE JUDICIARY | |
| LAMAR SMITH, Texas, Chairman | |
| F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan | |
| Wisconsin HOWARD L. BERMAN, California | |
| HOWARD COBLE, North Carolina JERROLD NADLER, New York | |
| ELTON GALLEGLY, California ROBERT C. ``BOBBY'' SCOTT, | |
| BOB GOODLATTE, Virginia Virginia | |
| DANIEL E. LUNGREN, California MELVIN L. WATT, North Carolina | |
| STEVE CHABOT, Ohio ZOE LOFGREN, California | |
| DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas | |
| MIKE PENCE, Indiana MAXINE WATERS, California | |
| J. RANDY FORBES, Virginia STEVE COHEN, Tennessee | |
| STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr., | |
| TRENT FRANKS, Arizona Georgia | |
| LOUIE GOHMERT, Texas PEDRO PIERLUISI, Puerto Rico | |
| JIM JORDAN, Ohio MIKE QUIGLEY, Illinois | |
| TED POE, Texas JUDY CHU, California | |
| JASON CHAFFETZ, Utah TED DEUTCH, Florida | |
| TOM REED, New York LINDA T. SANCHEZ, California | |
| TIM GRIFFIN, Arkansas DEBBIE WASSERMAN SCHULTZ, Florida | |
| TOM MARINO, Pennsylvania | |
| TREY GOWDY, South Carolina | |
| DENNIS ROSS, Florida | |
| SANDY ADAMS, Florida | |
| BEN QUAYLE, Arizona | |
| Sean McLaughlin, Majority Chief of Staff and General Counsel | |
| Perry Apelbaum, Minority Staff Director and Chief Counsel | |
| ------ | |
| Subcommittee on Courts, Commercial and Administrative Law | |
| HOWARD COBLE, North Carolina, Chairman | |
| TREY GOWDY, South Carolina, Vice-Chairman | |
| ELTON GALLEGLY, California STEVE COHEN, Tennessee | |
| TRENT FRANKS, Arizona HENRY C. ``HANK'' JOHNSON, Jr., | |
| TOM REED, New York Georgia | |
| DENNIS ROSS, Florida MELVIN L. WATT, North Carolina | |
| MIKE QUIGLEY, Illinois | |
| Daniel Flores, Chief Counsel | |
| James Park, Minority Counsel | |
| C O N T E N T S | |
| ---------- | |
| FEBRUARY 10, 2011 | |
| Page | |
| THE BILL | |
| H.R. 327, the ``Regulatory Flexibility Improvements Act of 2011'' 8 | |
| OPENING STATEMENTS | |
| The Honorable Howard Coble, a Representative in Congress from the | |
| State of North Carolina, and Chairman, Subcommittee on Courts, | |
| Commercial and Administrative Law.............................. 1 | |
| The Honorable Steve Cohen, a Representative in Congress from the | |
| State of Tennessee, and Ranking Member, Subcommittee on Courts, | |
| Commercial and Administrative Law.............................. 34 | |
| The Honorable John Conyers, Jr., a Representative in Congress | |
| from the State of Michigan, and Ranking Member, Committee on | |
| the Judiciary.................................................. 51 | |
| WITNESSES | |
| Rich Gimmell, President, Atlas Machine & Supply, Inc. | |
| Oral Testimony................................................. 55 | |
| Prepared Statement............................................. 58 | |
| Thomas M. Sullivan, Of Counsel, Nelson Mullins Riley Scarborough, | |
| LLP | |
| Oral Testimony................................................. 65 | |
| Prepared Statement............................................. 67 | |
| J. Robert Shull, Program Officer, Worker's Rights, Public Welfare | |
| Foundation | |
| Oral Testimony................................................. 76 | |
| Prepared Statement............................................. 78 | |
| Karen R. Harned, Esq., Executive Director, National Federation of | |
| Independent Business, Small Business Legal Center | |
| Oral Testimony................................................. 84 | |
| Prepared Statement............................................. 87 | |
| LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING | |
| Prepared Statement of the Honorable Howard Coble, a | |
| Representative in Congress from the State of North Carolina, | |
| and Chairman, Subcommittee on Courts, Commercial and | |
| Administrative Law............................................. 3 | |
| Report submitted by the Honorable Steve Cohen, a Representative | |
| in Congress from the State of Tennessee, and Ranking Member, | |
| Subcommittee on Courts, Commercial and Administrative Law...... 35 | |
| Prepared Statement of the Honorable John Conyers, Jr., a | |
| Representative in Congress from the State of Michigan, and | |
| Ranking Member, Committee on the Judiciary..................... 53 | |
| APPENDIX | |
| Material Submitted for the Hearing Record | |
| Response to Post-Hearing Questions from Karen R. Harned, Esq., | |
| Executive Director, National Federation of Independent | |
| Business, Small Business Legal Center.......................... 105 | |
| ``REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011''--UNLEASHING SMALL | |
| BUSINESSES TO CREATE JOBS | |
| ---------- | |
| THURSDAY, FEBRUARY 10, 2011 | |
| House of Representatives, | |
| Subcommittee on Courts, | |
| Commercial and Administrative Law, | |
| Committee on the Judiciary, | |
| Washington, DC. | |
| The Subcommittee met, pursuant to call, at 1:33 p.m., in | |
| room 2141, Rayburn House Office Building, the Honorable Howard | |
| Coble (Chairman of the Subcommittee) presiding. | |
| Present: Representatives Coble, Cohen, Conyers, Gowdy, | |
| Quigley, Reed, and Ross. | |
| Staff present: (Majority) Daniel Flores, Subcommittee Chief | |
| Counsel; Allison Rose, Professional Staff Member; Ashley Lewis, | |
| Clerk; and James Park, Minority Counsel. | |
| Mr. Coble. Good afternoon. The Subcommittee on Courts, | |
| Commercial and Administrative Law will come to order. Good to | |
| have the panel with us. I'll give my opening statement and | |
| recognize Mr. Cohen and also Mr. Conyers, I think he's with us, | |
| as well. | |
| Most economic experts who argue that small businesses have | |
| small business trends drive and shape our economy which, in my | |
| view, is probably the most important issue confronting our | |
| country today. Small businesses are the source of almost half | |
| of our workforce and while I'm concerned about many economic | |
| factors, it's also my view that the government regulations have | |
| an inordinate impact on small businesses particularly. | |
| While all businesses have to comply with municipal codes | |
| and permitting, county codes and permitting, state codes and | |
| permitting, Federal regulations can impose an even greater | |
| burden because most small businesses simply don't have the | |
| resources or the time to dispute or participate in the Federal | |
| regulatory process. | |
| According to the Small Business Administration, businesses | |
| with fewer than 20 employees spent on average 36 percent more | |
| per employee than do larger firms to comply with Federal | |
| regulations. The SBA also claimed that these small employers | |
| represent 99.7 percent of all businesses that have created 65 | |
| percent of all new jobs over the past 50 years. | |
| Although it's clear that our economy may be showing signs | |
| of improvement, we're still suffering from job losses. Lack of | |
| job creation or however you like to describe it, it makes sense | |
| that we look to small businesses and work to create an | |
| environment that will help them prosper or should I say try to | |
| improve the environment in which they're currently struggling | |
| to survive? | |
| I know that everyone here today supports small businesses | |
| and that everyone in this hearing room also wants to enact | |
| something that will help create jobs and economic growth. I | |
| sponsored H.R. 527 because I believe that improving the Small | |
| Business Regulatory Enforcement Fairness Act and the Regulatory | |
| Flexibility Act will have a lasting impact on small businesses | |
| that help support long-term small business growth. | |
| Small businesses want and need our help and it's our | |
| responsibility, it seems to me, to ensure that our regulations | |
| are appropriate and in order and that our regulatory process is | |
| effective. Admittedly, I don't claim to be an expert on | |
| regulatory law and am anxiously awaiting the testimony of | |
| today's witnesses. | |
| Of the many questions I have for the witnesses, I want to | |
| know most whether this legislation will help or empower small | |
| businesses enough in the regulatory process. If it does not, | |
| I'd be interested to know what needs to be done to change the | |
| bill to make it more effective. | |
| I'm also very interested to hear about any concerns that | |
| the witnesses have about this legislation. Look forward to | |
| hearing from our panel and reserve the balance of my time. | |
| [The prepared statement of Mr. Coble follows:] | |
| <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> | |
| __________ | |
| Mr. Coble. I'm pleased to recognize the distinguished | |
| gentleman from Tennessee, the Ranking Member, Mr. Cohen. | |
| [The bill, H.R. 527, follows:] | |
| <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> | |
| __________ | |
| Mr. Cohen. Thank you, sir. I appreciate the recognition. | |
| Small businesses have a significant part of our Nation's | |
| economy and everybody knows they're so important for our | |
| Nation's health. | |
| According to a March 2010 Small Business Administration | |
| report, firms employing fewer than 500 employees employed over | |
| half of the private sector workers in 2006. Additionally, small | |
| businesses can be drivers of innovation and economic growth, as | |
| well. | |
| It's interesting to note, though, that both of these facts, | |
| the 500 employees, over half the growth, et cetera, have been | |
| true under the existing regulatory system that has been in | |
| place since 1980 when the Regulatory Flexibility Act was | |
| enacted. | |
| Despite the testimony that we will hear today about how the | |
| RFA has been ineffective at stemming overbearing regulations | |
| that stifle small businesses, the fact is that small businesses | |
| have done well in the almost 36 years since the RFA, as amended | |
| in '96 by the Small Business Regulatory Enforcement Fairness | |
| Act, has been in place. | |
| I'm concerned that the bill that's the subject of today's | |
| hearing, H.R. 527, the ``Regulatory Flexibility Improvements | |
| Act of 2011,'' may be a solution in search of a problem. In | |
| fact, it's very similar to a bill introduced in 2003, | |
| apparently to get at the oppressiveness of the Bush | |
| Administration's regulations on small business. | |
| In the written testimony, the three majority witnesses all | |
| cite the same study by Nicole and Mark Crain that claims the | |
| Federal rulemaking imposes a cumulative cost of $1.75 trillion | |
| on the Nation's economy. Mr. Shull, one of our witnesses, will | |
| rebut the particulars of that study, I'm sure, but I will note | |
| that the Center for Progressive Reform, among others, has | |
| debunked the Crain study thoroughly, noting the study does not | |
| account for any benefits of regulation and it's relied on | |
| suspect methodology in reaching its conclusions. | |
| I would like to ask unanimous consent, Mr. Chairman, that | |
| the CPR Report entitled Setting the Record Straight: The Crain | |
| and Crain Report on Regulatory Costs be entered into the | |
| record. | |
| Mr. Coble. Without objection. | |
| [The information referred to follows:] | |
| <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> | |
| ---------- | |
| Mr. Cohen. Thank you, Mr. Chairman. Unfortunately for the | |
| proponents of H.R. 527, the Crain study appears to be the only | |
| statistical evidence that they can cite or can be cited in | |
| support of this notion that regulations impose undue cost on | |
| small business. | |
| While I don't dispute that regulations can impose costs and | |
| that can cost-benefit analysis is a valuable tool for ensuring | |
| that agencies promulgate good regulations, I remain skeptical | |
| as to the degree of the purported problem as the proponents of | |
| H.R. 527 suggest. | |
| I also take notion with the--take issue with the notion | |
| that the Federal regulations are to blame for what remains an | |
| unacceptably-high unemployment rate. If anything, current | |
| employment problems can be traced to a lack of adequate | |
| regulation of the financial services and housing industries | |
| which allowed for reckless private sector behavior that just | |
| about everybody recognizes as the cause of the Great Recession, | |
| the 2008 financial crisis, the most severe economic recession | |
| since the Great Depression. It was the lack of regulation that | |
| hurt us, not regulation. | |
| Almost anything that can stand--anything can stand to be | |
| improved and I'm open to suggestions on how we can improve our | |
| regulatory process, particularly how it relates to small | |
| business, but H.R. 527 proposes some needlessly drastic | |
| measures that threaten to undermine public health and safety | |
| and waste public resources. | |
| I point to three particular examples. First, I'm concerned | |
| about the requirement that as part of the Regulatory | |
| Flexibility Analysis, agencies must consider the indirect | |
| effect of a proposed or final rule. Although the bill attempts | |
| to put some sort of logical limit on this requirement by | |
| specifying that the required analysis be restricted to those | |
| indirect effects that are reasonably foreseeable, that | |
| qualification is insufficient. | |
| Asking what is indirect and what is reasonably foreseeable | |
| still requires highly-speculative analysis. Forcing agencies to | |
| devote limited staff and resources to engage in such type of | |
| unwieldy, indeterminate and speculative analysis which would | |
| constitute nothing more than a guessing game is a waste of | |
| taxpayer money, putting government workers more and more to | |
| work on issues that are not going to result in an aid to our | |
| economy or small business. | |
| Second, I'm troubled by the repeal of agencies' authority | |
| to waive or delay their Regulatory Flexibility Analysis in the | |
| event of an emergency. If we're truly concerned about | |
| flexibility in the rulemaking process, then at a minimum | |
| agencies ought to retain the ability to respond to an | |
| emergency. The rationale for appealing this emergency authority | |
| is not clear, at least not to me, other than as a general | |
| attack on rulemaking. | |
| Third, I'm concerned that H.R. 527's look-back provision is | |
| simply a backdoor way for special interests to undermine | |
| existing health and safety regulations. You know, the Clean Air | |
| Act was passed in the EPA created by a Republican president, | |
| Richard Nixon, one of his crowning achievements, other than | |
| making the trip to China. | |
| As Mr. Shull notes in his written testimony, agencies will | |
| be forced to rejustify longstanding rules ensuring the safety | |
| of the air we breathe, the water we drink, the food we eat, the | |
| products we buy, and the places we work, rules that most | |
| Americans support and rules that need to be maintained for the | |
| health and safety and welfare of the American public which is | |
| part of the government police powers that need to be | |
| maintained, enforced, and strengthened for the benefit of all. | |
| I'm 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, H.R. | |
| 527, a redraft of the 2003 law that's dusted off in the 2006 | |
| law, now introduced as the 2011 law, simply goes too far and | |
| hasn't changed much in 8 years. | |
| Thank you, Mr. Chairman. I yield back the remainder of my | |
| time. | |
| Mr. Coble. I thank the gentleman. The Chair recognizes the | |
| distinguished gentleman from Michigan, the Chairman Emeritus of | |
| the House Judiciary Committee, for an opening statement. | |
| Mr. Conyers. Thank you, Chairman Coble. I'm happy to be | |
| serving on this Committee and I repeat my congratulations to | |
| you for assuming the Chairmanship of this Committee. You're a | |
| senior Member of Judiciary and we respect that so very much. | |
| Now on January 24, our Subcommittee had hearings on the | |
| REINS Act. Now this was our colleague from Kentucky Jeff | |
| Davis's notion that all regulations ought to be approved or | |
| disapproved by the Congress and apparently the notion of the | |
| Separation of Powers Doctrine could be set aside in this | |
| instance. | |
| I don't know how in the world after we pass a law, obligate | |
| the appropriate Federal agency to deal with it, we then say | |
| that any regulation has to be approved by us. So we come back | |
| and we legislate on what they're doing to implement the law | |
| that we passed in the first place and your speed, Chairman | |
| Coble, is remarkable because you introduced this bill and here | |
| we are 2 days later holding hearings on it. I envy that. I | |
| tried to do that when I was Chair of this Committee and I was a | |
| miserable failure. We never could move with that kind of speed. | |
| Of course. I yield. | |
| Mr. Coble. I did not introduce it. I think the Chairman of | |
| the full Committee introduced it. | |
| Mr. Conyers. Oh, Smith. Oh, well, then that explains the | |
| speed then. | |
| Mr. Coble. I'm not as good as you think. | |
| Mr. Conyers. No. This Chairman is swifter than the previous | |
| Chairman and I will discuss this a little bit more, but here's | |
| what I'm looking at. | |
| In addition to what Steve Cohen just talked about, a | |
| credible cost that is alleged to be occurring, the whole notion | |
| that this will cost almost $2 trillion is--well, I'll just read | |
| the one quote from here. | |
| ``It's easy to see why the anti-regulatory critics have | |
| seized on the Crain and Crain Report and its findings.'' That's | |
| the one that Mr. Cohen just put in the record. ``The 1.75 | |
| trillion figure is a gaudy number that was sure to catch the | |
| ear of the media and the general public. Upon examination, | |
| however, it turns out that the 1.75 trillion estimate is the | |
| result of transparently unreliable methodology and is presented | |
| in a fashion calculated to mislead.'' | |
| I'd like to ask all of the four witnesses to be prepared to | |
| respond to this at any time during this hearing. | |
| The other matter is the OMB Watch Statement on the | |
| Regulatory Flexibility Improvements Act and there are five | |
| problems that deeply concern them about this proposed | |
| legislation. One, it adds yet another analytical layer to the | |
| rulemaking process, further complicating agencies' ability to | |
| implement statutes for full admissions and serve the public | |
| interests. | |
| This measure before us gives more power to the Small | |
| Business Administration, Office of Advocacy, which is in fact | |
| an office of taxpayer-subsidized industry lobbyists who funnel | |
| the objections of businesses into agency decision-making. | |
| Three, it politicizes important decisions about public | |
| protections, potentially allowing economists and political | |
| offices to overrule agency scientists and other experts. | |
| Four, it would actually make it more difficult for agencies | |
| to review and revise existing regulations by forcing agencies | |
| to use a formula to decide which rules to review rather than | |
| reviewing the rules at their discretion. | |
| And finally, it's an unfunded mandate, asking much of | |
| agencies but authorizing no additional resources. | |
| Get the picture? I do, and that's why this is so important. | |
| I'm concerned that in this time of fiscal restraint, this bill | |
| will result in wasting public resources and there are several | |
| other reasons that I'd like to bring to your attention, but I | |
| think I can bring it up safely in the course of our | |
| discussions, and I thank Chairman Coble for his generosity in | |
| terms of time. | |
| Mr. Coble. I thank the gentleman and all other opening | |
| statements will be made a part of the record without objection. | |
| [The prepared statement of Mr. Conyers follows:] | |
| <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> | |
| __________ | |
| Mr. Coble. We're pleased to have an outstanding panel | |
| today. I will introduce them from my left to right. | |
| Mr. Richard Gimmel is the President and third-generation | |
| owner of Atlas Machine and Supply, Inc., based in Louisville, | |
| Kentucky. The company is a 104 years old and has branches in | |
| Ohio and Indiana. Mr. Gimmel says of his position, ``It's my | |
| responsibility to do all I can to grow, strengthen, and improve | |
| the company and then to pass it on,'' and his son Richard | |
| Gimmel III heads the company's Engineering Division. | |
| In addition to presiding at Atlas Machine and Supply, Inc., | |
| Mr. Gimmel sits on the Board of Directors at the National | |
| Association of Manufacturers and he received his MBA from | |
| Bellarmine University. Did I pronounce that correctly, Mr. | |
| Gimmel? Bellarmine in Kentucky. Good to have you with us. | |
| Mr. Thomas Sullivan is Of Counsel of Nelson Mullins Riley | |
| and Scarborough, LLP, in Washington. Mr. Sullivan also heads | |
| the Small Business Coalition for Regulatory Relief. In the | |
| past, Mr. Sullivan served as Chief Counsel for Advocacy at the | |
| Small Business Administration, worked with the National | |
| Federation of Independent Business, served on Congressional | |
| Affairs staff of the U.S. Environmental Protection Agency, and | |
| was an official of the University Department of Justice, | |
| Environment, and Natural Resources Division. | |
| Mr. Sullivan earned his Juris Doctorate Degree from Suffolk | |
| University School of Law. | |
| Mr. Robert Shull is our third witness and is a Program | |
| Officer for Worker's Rights at the Public Welfare Foundation in | |
| Washington, D.C. Prior to coming to the Public Welfare | |
| Foundation, Mr. Shull was the Deputy Director for Auto Safety | |
| and Regulatory Policy at Public Citizen and Director of | |
| Regulatory Policy at OMB Watch. | |
| Our fourth witness, Mr. Karen Harned, is the Executive | |
| Director of the National Federation of Independent Business, | |
| Small Business Legal Center. Prior to coming to NFIB, Ms. | |
| Harned worked as an associate at Olsson, Frank, and Weeda, PC, | |
| and on the staff of Senator Dodd Nichols of Oklahoma. | |
| She earned her BA Degree from the University of Oklahoma | |
| and her JD Degree from the George Washington University School | |
| of Law. | |
| Now I am told that there is a Floor Vote imminent. So we'll | |
| have to just wait until the bell rings. | |
| Ladies and gentlemen, we try to comply with the 5-minute | |
| rule and we try to apply that to us as well as to you all. So | |
| when you see the amber light appear in your face, you will know | |
| the ice on which you're skating is getting thinner but nobody | |
| will be keelhauled for violating but we would appreciate your | |
| staying within the 5-minute rule, if you could. When the red | |
| light appears, that is your warning that the 5 minutes have in | |
| fact expired. | |
| Good to have each of you with us. Mr. Gimmel, why don't you | |
| kick it off? | |
| TESTIMONY OF RIC GIMMEL, PRESIDENT, | |
| ATLAS MACHINE & SUPPLY, INC. | |
| Mr. Gimmel. Well, Mr. Chairman, I appreciate the | |
| opportunity to be here and I kind of feel a little out of | |
| place. I'm probably the only person up here that doesn't do | |
| this for a living. I mean, I run a machine shop, so I hope | |
| you'll bear with me---- | |
| Mr. Coble. We will, indeed. | |
| Mr. Gimmel [continuing]. In that regard. My company, Atlas | |
| Machine, is based in---- | |
| Mr. Coble. Mr. Gimmel, pull that mike a little closer to | |
| you, if you will. | |
| Mr. Gimmel. Yes. My company is Atlas Machine & Supply. | |
| We're based in Louisville. I have 200 employees, a 104-year-old | |
| company, third, actually fourth generation now with my son | |
| taking over in Engineering. | |
| I also serve on the Board of the National Association of | |
| Manufacturers and am pleased to testify on their behalf today. | |
| The United States is the world's largest manufacturing | |
| economy. It produces 1.6 trillion of value each year and | |
| employs 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 folks | |
| to know that we support your efforts to reform the RFA and to | |
| unleash the small manufacturers of this country to do what they | |
| do best which is to make things and create jobs and, I might | |
| also add, to pay taxes. | |
| Manufacturers have been deeply affected by the most recent | |
| recession. This sector lost 2.2 million jobs during this | |
| period. Our own company suffered the worst downturn since the | |
| Great Depression. So far, only 6.2 percent of these jobs have | |
| come back and the numbers show that American manufacturing is | |
| growing more slowly than in the countries we have to compete | |
| with. | |
| We have seen policies from Washington that will not help | |
| our economic recovery and can actually discourage job creation. | |
| Some have proposed policies that fortunately have not yet been | |
| enacted, such as huge increases in the individual income tax | |
| rate, the Employee Free Choice Act, the so-called cap and trade | |
| legislation. | |
| We still face threats from an EPA that we believe is out of | |
| control and a healthcare mandate that appears to make the | |
| business healthcare burden even worse. All of these will worsen | |
| our ability to compete as a Nation. To regain manufacturing | |
| momentum and to return to net job gains, we need improved | |
| economic conditions and we need improved government policies. | |
| In recent years, many of us in manufacturing have | |
| transformed our operations. We've adopted a Japanese principle | |
| some of you may have heard of. It's called ``lean thinking.'' | |
| The concept is very simple. You just identify everything in the | |
| organization that consumes resources, that adds no value to the | |
| customer. That's called ``muda'' or waste. Then you look for a | |
| way to eliminate the muda. | |
| Our modest proposal is that the government learns from | |
| manufacturing and incorporates lean thinking into the | |
| regulatory process. Many of the proposals that are being | |
| offered by this Subcommittee, including more detailed | |
| statements in the RFA process and requirements to identify | |
| redundant, overlapping, or conflicting regulations, will do | |
| just that. | |
| My written statement details our support for amendments to | |
| the periodic review requirements of the RFA, thus applying lean | |
| thinking and continuous improvement, another manufacturing | |
| principle, to the regulatory process. | |
| It's crucial that agency action be made mandatory when | |
| these inefficiencies are identified. The gains could be | |
| tremendous, as we found on the factory floor. | |
| My written remarks also detail examples of the damage to be | |
| done by runaway regulation at the agency level, including the | |
| EPA's ozone proposals. One estimate is that the most stringent | |
| standard under consideration would result in the loss of 7.3 | |
| million jobs by 2020 and one trillion per year in new | |
| regulatory costs, beginning 2020. | |
| Manufacturers hope that this legislation is just the | |
| beginning of a more thoughtful regulatory system built on | |
| common sense with an understanding of modern manufacturing. | |
| A few days ago, the President appeared before business | |
| leaders here in Washington. He urged us to ``get in the game,'' | |
| those were his words, and to invest in growth and job creation | |
| and I'm here to tell you we would love to do just that, but we | |
| don't invest our personal assets just because somebody, even | |
| the President, tells us we should. We do so because we believe | |
| the environment is right and that good opportunities exist for | |
| return on the investment and job creation. | |
| Many of the NAM's members are family businesses, like our | |
| own. We want to invest to grow. That's why we exist. But when | |
| our government creates policies, laws, and regulations that | |
| increase the cost of doing business, the natural reaction by | |
| small businesses, in particular, is to simply hunker down and | |
| wait things out. | |
| Manufacturers in the United States created the middle | |
| class. We can regain our momentum with the right policies in | |
| place. I'm confident that our Nation's leaders will take action | |
| to promote and not increase the risks of investment and job | |
| creation and the NAM stands ready to assist you in this effort. | |
| Thank you, and I'll look forward to any questions. | |
| [The prepared statement of Mr. Gimmel follows:] | |
| <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> | |
| __________ | |
| Mr. Coble. Mr. Sullivan? | |
| TESTIMONY OF THOMAS M. SULLIVAN, OF COUNSEL, | |
| NELSON MULLINS RILEY SCARBOROUGH, LLP | |
| Mr. Sullivan. Thank you, Mr. Chairman, Members of the | |
| Subcommittee. | |
| I'm pleased to present testimony in strong support of H.R. | |
| 527, the ``Regulatory Flexibility Improvements Act of 2011.'' | |
| I'd like to briefly summarize, so I ask that my full | |
| written statement be made part of the record. | |
| Mr. Coble. Without objection. | |
| Mr. Sullivan. There are three basic reasons for the | |
| Regulatory Flexibility Act. One size fits all Federal mandates | |
| do not work when applied to small business; second, small | |
| business face higher costs per employee to comply with Federal | |
| regulation than their larger competitors, and, third, small | |
| business is critically important to the American economy. | |
| The Regulatory Flexibility Act has not worked as well as it | |
| can to address regulatory challenges faced by small business. | |
| That's why I support H.R. 527 and how it will improve the law's | |
| effectiveness. | |
| Before I get into detail about the provisions in the bill | |
| that are particularly important, I want to point out why | |
| there's an immediate need for these reforms. In the last 2 | |
| years, the Federal Government issued 132 economically- | |
| significant regulations. Rulemakings are not slowing down | |
| either. There are a 181 more new regulations underway now than | |
| there were last year, representing a 5-percent increase in | |
| activity. | |
| According to plans issued recently by regulatory agencies, | |
| there is a 20 percent increase in significant regulations | |
| currently under development. | |
| As far as H.R. 527 and its benefits on how it will improve | |
| the Regulatory Flexibility Act, currently, the law requires | |
| agencies to analyze the direct impact a rule will have on small | |
| entities. Unfortunately, limiting the analysis to direct | |
| impacts does not accurately portray how small entities are | |
| affected by a new Federal rule. | |
| For instance, when EPA's greenhouse gas regulations impose | |
| a direct cost on electric utility, EPA should make public how | |
| its proposal will likely affect the cost of electricity for | |
| small businesses. I believe the rulemaking process is | |
| shortchanged by not including discussion about the obvious | |
| ripple effects of regulations on small business and H.R. 527 | |
| tries to correct this. | |
| All agencies should utilize small business advocacy review | |
| panels. When I was Chief Counsel for Advocacy, I did not think | |
| that the Regulatory Flexibility Act needed to be amended to | |
| force every agency to convene small business panels the way | |
| that EPA and OSHA do under the Small Business Regulatory | |
| Enforcement Fairness Act. I thought that agencies could do a | |
| good enough job soliciting input from small businesses on their | |
| own. Now, I realize some agencies will resist formally | |
| soliciting help from small entities prior to issuing proposed | |
| rules. | |
| Requiring the Consumer Financial Protection Bureau that was | |
| created out of the Dodd-Frank Financial Reform Law to have to | |
| use the small business panel process made sense. That's why it | |
| was passed into law. The same logic applies across the board to | |
| all Federal agencies and that's why the small business panel | |
| process, under the Small Business Regulatory Enforcement | |
| Fairness Act, should become the norm, not the exception. | |
| The Small Business Administration's Office of Advocacy | |
| should clarify definitions in the Regulatory Flexibility Act. | |
| The disputes over whether an agency's proposal will ``impose a | |
| significant economic impact on a substantial number of small | |
| entities'' have limited the effectiveness of the Regulatory | |
| Flexibility Act. | |
| H.R. 527 addresses this problem by giving the Office of | |
| Advocacy rulemaking authority. The rules promulgated by the | |
| Office of Advocacy will better define how agencies are to | |
| properly consider small business impacts and that will benefit | |
| the process in two ways. | |
| First, it will minimize confusion over whether agencies are | |
| properly considering small business impact, and, second, | |
| rulemaking authority by the Office of Advocacy will confirm the | |
| primacy by the Chief Counsel for Advocacy when courts | |
| ultimately render opinions on the Regulatory Flexibility Act. | |
| The periodic review of regulations under the Reg Flex Act | |
| should be improved. H.R. 527 will bolster the effectiveness of | |
| the look-back provision by broadening the number of rules | |
| agencies will review, requiring transparency of those reviews, | |
| and by better defining the process through the Office of | |
| Advocacy's rulemaking. | |
| There are additional reforms that Congress can consider to | |
| benefit small business. I'm happy to work with this Committee | |
| to explore additional legislative efforts beyond amending the | |
| Reg Flex Act that will help create an economic climate so small | |
| businesses have an easier time growing and creating jobs. | |
| Thank you. | |
| [The prepared statement of Mr. Sullivan follows:] | |
| <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> | |
| __________ | |
| Mr. Coble. Thank you, Mr. Sullivan. | |
| Mr. Shull, I was in law school long, long ago with a chap | |
| whose surname was Shull. Do you have Carolina kin? | |
| Mr. Shull. That's not--you know, I don't know. There's a | |
| large network of Shulls out there whose connection with our | |
| Shulls we don't know yet. | |
| Mr. Coble. Well, he was a good fellow. He had high honors | |
| in law school. | |
| You're recognized, Mr. Shull. | |
| TESTIMONY OF J. ROBERT SHULL, PROGRAM OFFICER, WORKER'S RIGHTS, | |
| PUBLIC WELFARE FOUNDATION | |
| Mr. Shull. Well, then I have quite an act to live up to. | |
| I want to thank you for the opportunity to testify. These | |
| are very important issues for small business owners, for their | |
| families, for their communities, for their customers, for their | |
| workers, for really all of us. | |
| I want to start with the proposition that agencies don't | |
| regulate for the sake of regulating. They regulate because they | |
| have been charged by Congress with the task of getting things | |
| done to protect the public and to protect the public's health, | |
| its safety, the environment, the air we breathe, the water we | |
| drink, the food we eat, the products we buy, the traffic | |
| conditions in which we all drive, the jobs that we go to. These | |
| are important tasks, and there are new regulations in the | |
| works. There will always be new regulations in the works | |
| because the world is changing--and as the world changes, we | |
| discover that there are unmet needs for public protection. | |
| I'll give you an example. In the world of auto safety, | |
| thanks to important regulations, like the mandates for | |
| seatbelts, mandates for airbags, mandates for side impact | |
| protection, even as simple a rule as the fact that the steering | |
| column collapses now whereas it used to be a solid piece of | |
| metal that would impale the driver in some crashes: Now, all of | |
| that means that people are coming away surviving crashes that | |
| just years ago they wouldn't have been able to survive. But | |
| we're increasingly discovering because people's lives are being | |
| saved, that there are still new needs to protect vehicle | |
| occupants in crashes. For example, because they are now | |
| surviving a larger number of crashes, we're increasingly | |
| discovering that they're coming away with injuries to their | |
| lower extremities, to their legs and their feet, which opens | |
| the door to the fact that there may not be sufficient | |
| protection at the bottom of the car, the tire wheel well, and | |
| intrusion into that part of the survival zone of the vehicle, | |
| and so the National Highway Traffic Safety Administration | |
| should be looking at that and should be developing new | |
| regulations in that regard. | |
| Automakers have increasingly computerized motor vehicles. | |
| They're becoming more and more like the computers on wheels. A | |
| new research report found that some of these computer systems | |
| which control, in some cases, really critical functions of an | |
| automobile, like the brakes, can be hacked by folks outside of | |
| the car and so it really behooves NHTSA to start looking into | |
| whether or not the performance of these computerized components | |
| is adequately protecting vehicle occupants. | |
| So the fact that there are new regulations on the book | |
| doesn't necessarily mean that we have runaway agencies. It just | |
| means that we have agencies that are doing what they're | |
| supposed to do, assessing the public's unmet needs and | |
| assessing what needs to be done to protect the public. | |
| I also want to start with the proposition that small | |
| businesses, I think we all agree, are vital. Small businesses | |
| also are owned by small business owners who have families, who | |
| live in communities, who have employees, who have coworkers and | |
| neighbors, who themselves are breathing this air, drinking the | |
| water, eating the food, buying products, getting out on the | |
| road and going to work every day. They receive the benefits of | |
| regulation, not just shoulder the burden of its costs. | |
| And we hear a lot about costs today, but one of the | |
| assumptions that seems to be here in the RFIA is that analysis | |
| and review and all the new layers of process that would be | |
| mandated by this bill are somehow costless. But the fact is all | |
| of this is going to require money or agency time and diversion | |
| of agency resources away from the task of assessing the | |
| public's unmet needs and toward the task of reviewing in many | |
| cases protections that we know beyond a shadow of a doubt are | |
| incredibly important, like the removal of lead in gasoline. You | |
| can measure the value of that in our children's IQ points. | |
| I am concerned that this bill would paralyze the regulatory | |
| agencies we need to protect the public and keep them from | |
| getting things done to protect the public. | |
| I'll wrap up with the suggestion that we do want our | |
| businesses to compete with China but we don't want this Nation | |
| to become China with the dirty air and the unsafe workplaces | |
| they have. | |
| [The prepared statement of Mr. Shull follows:] | |
| <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> | |
| __________ | |
| Mr. Coble. Thank you, Mr. Shull. | |
| Ms. Harned, we'll be glad to hear from you. | |
| TESTIMONY OF KAREN R. HARNED, ESQ., EXECUTIVE DIRECTOR, | |
| NATIONAL FEDERATION OF INDEPENDENT BUSINESS, SMALL BUSINESS | |
| LEGAL CENTER | |
| Ms. Harned. Thank you. Good afternoon, Chairman Coble and | |
| Ranking Member Cohen. | |
| NFIB, the Nation's largest small business advocacy | |
| organization, appreciates the opportunity to testify on the | |
| burdens and effects of regulation on small business and how | |
| H.R. 527 would address many of those concerns. | |
| Overzealous regulation is a perennial cause of concern for | |
| small business owners and is particularly burdensome in times | |
| like these when the Nation's economy remains sluggish. | |
| According to a recent study, regulation costs the American | |
| economy 1.75 trillion every year and, more concerning, small | |
| businesses face an annual regulatory cost of $10,585 per | |
| employee which is 36 percent more than the regulatory cost | |
| facing businesses with more than 500 employees. | |
| Recently, the Administration did acknowledge that excessive | |
| and duplicative regulation has damaging effects on the American | |
| economy. NFIB believes that it has been a long time coming for | |
| small business owners to hear the Administration emphasize the | |
| harmful effects of over-regulation on small business and job | |
| creation. We will be watching closely to see if last month's | |
| directive leads to real regulatory reform. | |
| In the meantime, NFIB believes that Congress must take | |
| actions to level the playing field. 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's advocacy should ensure that agencies | |
| are following the spirit of SBREFA. There are instances where | |
| EPA and OSHA have declined to conduct a SBAR panel for | |
| significant rule and/or rule that would greatly benefit from | |
| small business input. Congress should ensure 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 | |
| chose the more burdensome versus 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. H.R. 527 would | |
| require agencies to amend or rescind the rules where the 610 | |
| reviews show 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 currently | |
| required by SBREFA but also require that such a report be | |
| completed on an annual basis. | |
| Regulatory agencies often proclaim indirect benefits for | |
| regulatory proposals but decline to analyze the 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 affordable mechanisms should be considered for resolving | |
| disputes regarding economic costs of a rule between the agency | |
| and advocacy. | |
| NFIB believes that the Office of Advocacy needs to be | |
| strengthened. The office should have the ability to issue rules | |
| governing how agencies should comply with Regulatory | |
| Flexibility requirements. Because of improvements inherent | |
| within H.R. 527, NFIB is hopeful that review of agency actions | |
| will be strengthened and the small business voice will be more | |
| substantively considered throughout the regulatory process. | |
| NFIB is concerned that many agencies are shifting from an | |
| emphasis on small business compliance assistance to an emphasis | |
| on enforcement. Congress can help by stressing to agencies that | |
| they devote adequate resources to help small businesses who do | |
| not have the benefit of inside counsel and HR people to 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 | |
| non-harmful error on regulatory paperwork. Mistakes in | |
| paperwork will happen. If no harm is committed as a result of | |
| the error, agencies should waive penalties for first-time | |
| offenses and help owners to understand the mistakes they make. | |
| With high rates of unemployment continuing, Congress needs to | |
| take steps to address the growing regulatory burdens on small | |
| business. The proposed reg reforms in H.R. 527 are a good first | |
| step. | |
| Thank you. | |
| [The prepared statement of Ms. Harned follows:] | |
| Prepared Statement of Karen R. Harned | |
| <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> | |
| __________ | |
| Mr. Coble. Thank you, Ms. Harned. Thanks to all of you. | |
| As I said at the outset, we try to apply the 5-minute rule | |
| to us, as well. So if you all could keep your responses terse, | |
| we would appreciate that. | |
| And at the outset, I want to apologize for my raspy voice. | |
| I am coming down with my annual midwinter cold, so I know this | |
| doesn't sound good. So you all bear with me. | |
| Mr. Sullivan, Elizabeth Warren, the Consumer Advocate and | |
| head of the new Consumer Financial Protection Bureau, has | |
| embraced and, I've been told, has warmly embraced the new | |
| obligations to comply with Regulatory Flexibility requirements. | |
| Now most oftentimes regulatory discussions involve to the | |
| right of center or to the left of center, depending upon the | |
| position of the advocate, and I would assume that it is not | |
| believed that Ms. Warren would probably to the left of center. | |
| If she can embrace these proposals, it seems to me all | |
| agencies should be comfortable doing likewise. What do you say | |
| to that, Mr. Sullivan? | |
| Mr. Sullivan. Mr. Chairman, I agree with you. Elizabeth | |
| Warren, who traveled up to Maine a few weeks ago with Senator | |
| Snowe, actually embraced the amendment that was part of the | |
| Dodd-Frank Financial Regulatory Reform Bill, saying that she | |
| would have done the type of analysis that we're talking about | |
| here today, even if it weren't required by law. | |
| So if you had Federal regulators with that attitude at | |
| every agency, they would be embracing the idea of having small | |
| business advocacy review panels because it is through those | |
| panels you get constructive input on how agencies can regulate | |
| better, meet their objectives while minimizing costs on small | |
| firms. | |
| So perhaps after Professor Warren sets up the Consumer | |
| Financial Protection Bureau, we can all work to get her in | |
| front of other regulatory agencies to preach that type of | |
| gospel. | |
| Mr. Coble. I applaud you, sir. And, folks, I don't want to | |
| in any way imply that I'm advocating compromising safety. I | |
| don't want that to come out of this hearing because I don't | |
| want to do that. | |
| Mr. Gimmel, what challenges do Federal regulations present | |
| to your company today as it attempts to create additional jobs | |
| in this economy? | |
| Mr. Gimmel. Well, the first one is simply understanding | |
| what they are. We're a small company. We're a machine shop, and | |
| there are literally tens and tens and tens of thousands of | |
| pages of regulations that we have to not just comply with but | |
| understand and I just have to tell you that the burden of that | |
| is really overwhelming for any single business to effectively | |
| do. | |
| We have had--in our case, we have people, two people full | |
| time that are dedicated to compliance. Much of this is dealing | |
| with compliance that is fruitful. Regulations are not something | |
| that we are speaking against here, Mr. Chairman. We believe | |
| regulation is necessary. We believe protection of the worker, | |
| protection of the environment, fair taxation, et cetera, are | |
| certainly necessary. | |
| What we're talking about here is a process that we feel has | |
| resulted in redundant and inefficient network of sometimes | |
| overlapping regulations and there seems to be a lot of support | |
| for that regardless of what your political orientation is. We | |
| have the same objective. | |
| Mr. Coble. Thank you, sir. Mr. Shull, you suggest that H.R. | |
| 527 would wrap Federal programs up in costly, time-consuming, | |
| and unnecessary red tape, putting consumers, and working | |
| families at risk of harm. | |
| If the regulation, for example, discourages small business, | |
| would not the working family that lost his job be in a box? | |
| Mr. Shull. Well, you know, I think that that would be a | |
| concern if that were the case, but there's not really any proof | |
| that regulation harms competitiveness of industry, harms jobs, | |
| harms trade flows. There's a document I'd be happy to submit | |
| for the record that OMB Watch produced in the mid 2000's called | |
| Regulation and Competitiveness as well as an article by an | |
| economist, Frank Ackerman, called The Unbearable Lightness of | |
| Regulatory Costs. | |
| Both of these are documents that exhaustively go through | |
| the studies that have been conducted and found that there | |
| really is no evidence that regulations have harmed the U.S. | |
| competitiveness or have harmed jobs. | |
| Now, I mean, when it comes to, say, jobs, OSHA, for | |
| example, is not in the business of destroying jobs. It's in the | |
| business of making sure that jobs don't destroy workers, and | |
| those are really critical concerns. | |
| Mr. Coble. The red light has illuminated, so I will yield | |
| to the gentleman from Tennessee, Mr. Cohen. | |
| Mr. Cohen. Thank you, Mr. Coble. | |
| First of all, Mr. Gimmel, I know you come here with a heavy | |
| heart for I saw the overtime and it wasn't pretty. You are a | |
| Louisville fan, as well, I presume. | |
| Mr. Gimmel. Well, I'd prefer to think that we are not | |
| adversaries, Congressman Cohen, except when it comes to maybe | |
| basketball and football. | |
| Mr. Cohen. We're not. I like Louisville and I was cheering | |
| for them last night and they had a terrible overtime. | |
| Mr. Gimmel. I am a Louisville fan, so don't put me in that | |
| category with those guys down the road there. | |
| Mr. Cohen. Okay. You mentioned in your---- | |
| Mr. Coble. If Mr. Cohen would yield? I missed it. What was | |
| the game in question? | |
| Mr. Cohen. Louisville and Notre Dame. | |
| Mr. Coble. Well, Carolina and Duke were playing yesterday, | |
| so I missed Louisville. | |
| Mr. Cohen. Should I ask who won? | |
| Mr. Coble. I don't want you to do that. | |
| Mr. Cohen. I won't ask who won. | |
| Mr. Gimmel. Memphis won, though, I know that. | |
| Mr. Cohen. Let me ask you this, Mr. Gimmel. The EPA, you | |
| mentioned in your opening remarks, what parts of the EPA would | |
| you keep and what parts of the EPA would you not want to keep? | |
| Mr. Gimmel. As it relates to manufacturing, what we see is | |
| an overlapping series of, for instance, air quality rules, | |
| Federal versus local in our case. In Jefferson County in | |
| Louisville, we have two different sets of qualifications that | |
| we have to comply with, both of which are very, very complex. | |
| Part of that, of course, is a local problem. | |
| In the case of EPA, I think what we would like to see is a | |
| system that addresses the efficiency of each of the regulations | |
| in place, much like President Clinton started in 1993. I | |
| believe he called it the National Performance Review, and it | |
| wound up eliminating, as it sought out redundancy, as it sought | |
| out duplicative and no longer necessary regulation or | |
| inefficient application of regulation, we were able to | |
| eliminate some 16,000 pages of regulations that they | |
| determined, the Clinton Administration determined was | |
| unnecessary at the time. | |
| We would like to see that same approach. We are certainly | |
| in favor of clean water and clean air, but we think that a lean | |
| approach to the process could yield tremendous savings because | |
| our competition is not just with how our economy used to be | |
| here any more. Our competition is global right now and we're | |
| competing against people that operate on a different set of | |
| rules and in some cases more efficient regulatory processes | |
| than we have. | |
| Mr. Cohen. I noted in your remarks, you did comment that we | |
| need to have clean air and clean water, et cetera, and I | |
| appreciate that understanding. | |
| Mr. Gimmel. And as you point out, we're beneficiaries of | |
| that, sir. | |
| Mr. Cohen. Right. All of us are. The Chinese, of course, as | |
| Mr. Shull pointed out, don't have this government regulation in | |
| this area. They have it in other areas and so they have the | |
| worst water and air quality possible but the highest | |
| productivity and I don't know about the Japanese. You mentioned | |
| them. I think they're--Mr. Shull, you might know and somebody | |
| else here might know, but I don't think the Japanese have got | |
| the best air quality. I think they've got some problems there | |
| with that. | |
| Mr. Shull, let me ask you this. You talked about the--we | |
| talked about the indirect effects that are in the proposed | |
| rule. Would you elaborate on your concerns and tell us if you | |
| think that anything dealing with indirect effects could result | |
| in industry going to court to challenge decisions there? | |
| Mr. Shull. Sure. So the bill would amend the Regulatory | |
| Flexibility Act requirements of these analyses for the effects | |
| on small entities by requiring agencies not just to look at the | |
| impacts on the regulated small entities that would be covered | |
| by a regulation but also any small entity outside of the world | |
| of regulated small entities for whom there would be reasonably | |
| foreseeable economic consequences, adverse or beneficial. | |
| It's hard to know where that stops. So, for example, if | |
| NHTSA really gets on the ball and starts regulating to improve, | |
| say, protection of vehicle occupants' lower extremities, NHTSA | |
| would probably have to, under this legislation, look at the | |
| consequences not just for the automakers, not just for the | |
| suppliers who make the parts that go into motor vehicles but | |
| also the car dealers. | |
| Now under recent revisions to the SBA size standards, most | |
| new car dealers in this country, somewhere between 83 to 93 | |
| percent of them, would be counted as small businesses and that | |
| includes even a car dealer who makes up to, say, a $120 million | |
| in receipts. So these are actually not terribly small, not | |
| terribly inexpensive--these are not economically-struggling | |
| entities. | |
| Then when you think about--if you're thinking about the | |
| impacts on, say, those auto dealers, they conceivably hire | |
| payroll services to handle their payroll. They conceivably hire | |
| janitorial services to clean their facilities. They | |
| conceivably--they do buy ads from local TV and radio and | |
| newspapers. | |
| Now, all of those small entities---- | |
| Mr. Coble. Mr. Shull, if you could wrap up pretty---- | |
| Mr. Shull. Oh, of course. It's turtles all the way down. | |
| There's really no conceivable limit to what agencies would be | |
| forced to assess and the point at which wealthy corporate | |
| special interests could sue them for having failed to consider. | |
| Mr. Cohen. Thank you, sir, and I will--even though the | |
| first minute of my time was dedicated to Sports Center, I will | |
| yield back the remainder of my time. | |
| Mr. Coble. The Chair recognizes the distinguished gentleman | |
| from South Carolina, Mr. Gowdy, for 5 minutes. | |
| Mr. Gowdy. Thank you, Mr. Chairman, and thank you for | |
| conducting these hearings. | |
| Mr. Sullivan, I'm going to put your legal acumen on | |
| display. Rules and regulations, the violations thereof, can | |
| they be evidence of negligence in a civil suit? | |
| Mr. Sullivan. Could you ask the question one more time? | |
| Mr. Gowdy. Violations of rules and regulations, can they be | |
| used as evidence of negligence if Mr. Gimmel is sued in a civil | |
| suit? | |
| Mr. Sullivan. I don't know. | |
| Mr. Gowdy. Do you know whether or not any of the rules and | |
| regulations have criminal provisions where Mr. Gimmel could in | |
| theory suffer criminal consequences because of a rule or | |
| regulation that is not promulgated by Congress but is by | |
| someone who's unelected, yet he stands to face criminal | |
| sanctions if he violates it? | |
| Mr. Sullivan. There are some strict liability provisions | |
| within statute that are then implemented through rulemakings | |
| that do convey strict liability and criminal sanctions, yes. | |
| Mr. Gowdy. Mr. Shull made a comment, and I tried to write | |
| it down, that there is no evidence, which is a phrase that does | |
| strike the attention of a former prosecutor, no evidence that | |
| the regulatory schemes have impacted productivity or trade in | |
| this country, and judging by your body language, you may have | |
| had a different view of that. Do you agree or disagree with his | |
| comment? | |
| Mr. Sullivan. Congressman Gowdy, I disagree with the | |
| comment. We're living in a global competitive environment right | |
| now and we're seeing different countries trying to both protect | |
| the air and the land and the safety of their workers while | |
| minimizing further burden on manufacturers and small | |
| businesses, and those countries that really do try to strike | |
| that balance correctly end up with more employment and more | |
| growth and I fear that the overwhelming amount of regulations | |
| that do not take into account how they impact small business | |
| will drive businesses away from the United States. | |
| So I believe it's a competitive question and the answer is | |
| we can't afford to simply look for evidence on a piece of paper | |
| that says, oh, we went too far and we're losing businesses. We | |
| have to act now to make sure that that doesn't happen. | |
| Mr. Gowdy. Mr. Gimmel, you made the comment that the EPA | |
| was out of control. That was one agency that you cited with | |
| specificity that is out of control. Can you give me a specific | |
| example of that? And also, if you were to get a call from a | |
| regulator, the perception, because you embody small business, | |
| the perception that you have as a small businessman, is it one | |
| of we are to help you or we are here to get you? | |
| Mr. Gimmel. Well, first of all, Congressman, with regard to | |
| the EPA, the ozone regulatory functions the EPA seems to be | |
| taking on, we believe, are overstepping. There's no question | |
| about that. | |
| The second--what was the second part of your question? | |
| Mr. Gowdy. Whether or not there's a perception among small | |
| business owners that the regulatory entities in this country | |
| are there to provide help or there to lay in wait to catch you | |
| doing something wrong? | |
| Mr. Gimmel. That's more than a perception, sir. I think | |
| that's a reality, particularly when it comes to the new | |
| attitude at OSHA. Workplace injuries have been at record lows, | |
| historic lows for the last several years in this country | |
| because of, I think largely, a cooperative relationship between | |
| businesses and the regulatory agencies. | |
| We could call them in, ask them for advice, ask them to | |
| take a look at part of our plant that we're reconfiguring or | |
| that we may have questions about and get their input without | |
| fear of consequences. Now, the attitude at OSHA is we're going | |
| to get you and you invite us in and we find something, you're | |
| going to get a big fine. So it's more of an adversarial | |
| relationship now as opposed to a cooperative relationship. | |
| Mr. Gowdy. Last question. Mr. Shull, the President himself | |
| has acknowledged that there are regulations that have an | |
| unintentionally deleterious impact on job creation in industry. | |
| Got about 45 seconds left. | |
| Can you list me four or five regulations that you would | |
| concede have had unintended pernicious deleterious consequences | |
| on industry? | |
| Mr. Shull. You know, I've been waiting for the President to | |
| offer some specifics. | |
| Mr. Gowdy. In lieu of his presence, would you give me some? | |
| Would you give me just a handful of regulations that you | |
| concede, out of the myriad of ones out there, you concede have | |
| had an unintendedly-pernicious impact on job creation? | |
| Mr. Shull. Actually, yes. The fuel economy standards are | |
| set too low and have stayed too low for too long, until just | |
| recently, and that meant that the U.S. automakers were not | |
| prepared to compete when gas prices spiked and they had these | |
| heavy gas-guzzling SUVs---- | |
| Mr. Coble. Mr. Shull, I'm not buggy-whipping you but wrap | |
| it up, if you will, because the red light's on. | |
| Mr. Shull. All right. Well, then that's one that I would | |
| list, in addition to the failure of the automakers to make SUVs | |
| that perform well in crashes. They really suffered | |
| significantly when the Ford Firestone debacle came to light. | |
| Mr. Gowdy. Thank you, Mr. Chairman. | |
| Mr. Coble. The gentleman's time has expired. The | |
| distinguished gentleman from Illinois, Mr. Quigley. | |
| Mr. Quigley. Thank you, Mr. Chairman, and again | |
| congratulations on your new position. | |
| Mr. Coble. Thank you. | |
| Mr. Quigley. We appreciate your cordiality and | |
| accommodations. | |
| Mr. Conyers has talked about how quickly this bill has come | |
| to a hearing. What's interesting, this is, I think, my fifth | |
| meeting already between my two Committees on the issue of | |
| regulations. If we could squeeze one more in this week, they | |
| tell me I get a set of steak knives. | |
| But here's what's interesting, folks. We're basically | |
| saying the same things, as the Chairman said, just on either | |
| side of this middle ground line. We all recognize the need for | |
| regulation, we just want it to do a better job. I think that's | |
| what the President talked about and like I've said before, I | |
| dare anyone in this room not to think of regulation the next | |
| time you get on a commuter airline or if you come to my | |
| hometown and you drink tap water, right? | |
| Chicago, not the lake water, the water from the tap which | |
| has levels of chromium, not healthy for you, three times what's | |
| been judged to be a healthy standard. So we get we're not | |
| perfect and it has to improve. | |
| I recognize that for some, this is even more offensive | |
| because non-elected officials are actually part of the | |
| enforcement mechanisms, but we recognize that under Democratic | |
| and Republican Administrations, our laws and our regulations | |
| have always had criminal penalties to them out of absolute | |
| necessity, enforced by non-elected officials. | |
| If you take it to its extreme, Assistant State's Attorneys | |
| aren't elected. Their bosses are. Well, the same is true with | |
| the Executive Branch, FBI agents, police officers. | |
| So I think we need to recognize it's important to let the | |
| public know there's a balance here. If we come off that the | |
| only message here is that regulation is what's killing people-- | |
| killing jobs, we forget that a lack of regulation can kill | |
| people. So I sense in these now five meetings that we're all | |
| getting sort of the same point and we have to do better. We | |
| have to avoid duplication and redundancy and to make the--if we | |
| want to get to the same goal, there might be more efficient | |
| ways to do that. So to the extent that we can do all that, | |
| that's fine. | |
| I just ask that we try to use the same numbers. So when we | |
| talk about this, what I'm trying to get from both sides is why | |
| one set of figures are better than the other and why we only | |
| have a few minutes today, let me just ask the first because | |
| it's such a prominent number that's being thrown out there. | |
| Mr. Shull, the Crain study threw out the biggest number so | |
| far, so it wins, but can you tell me, beyond what you said in | |
| your written documents, what you see the concerns are with that | |
| report? | |
| Mr. Shull. So the concerns, and these are concerns, by the | |
| way, which have been identified by a range of folks, the Center | |
| for Progressive Reform on the one hand and President Bush's | |
| former Administrator of the Office of Information and | |
| Regulatory Affairs on the other hand, folks from a variety of | |
| viewpoints have recognized that this study and its previous | |
| iterations are deeply flawed. And it comes out with this number | |
| that is so easy to cite and memorize and use and repeat and | |
| understandably because it's so large, folks are going to quote | |
| it and be alarmed, but it seems to be the result of a garbage- | |
| in/garbage-out process. | |
| I mean, the Crain and Crain or Crain and Hopkins or Hopkins | |
| studies have repeatedly used really shaky methodologies. For | |
| example, the key formula using the Regulatory Quality Index | |
| from the World Bank is based on public opinion surveys. The | |
| costs of environmental regulations depend in large part on a | |
| 20-year-old study by Hahn and Hird which itself used 30-year- | |
| old studies produced by conservative economists to produce its | |
| numbers. | |
| There's a really strange study by Joseph Johnson on the | |
| costs of occupational safety and health regulations which | |
| nobody can figure out quite why he did what he did and how he | |
| got to the numbers he got. It's a very opaque document that | |
| actually takes some old numbers and then multiplies them by | |
| 5.5. | |
| You know, at the core of this is a presumption that | |
| regulatory costs are always the same year after year after | |
| year, even after businesses learn how to adapt to the new | |
| climate and innovate and discover new ways of doing business | |
| that are actually far cheaper than they realize going in. | |
| Mr. Quigley. Because we're running out of time, we do | |
| recognize there's a cost and we try to keep those to a minimum. | |
| What I'm trying to get both sides to do is to work with the | |
| same numbers. The hyperbole exists on both sides of the world | |
| here. So if anyone on these panels, Mr. Chairman, have the | |
| opportunity to submit further evidence arguing, footnoting the | |
| best research as possible toward their ends of what numbers we | |
| really should be dealing with, it's useless if we're not | |
| dealing with real numbers in the real world. Whatever they are, | |
| they're important. | |
| So I'd just respect that we could work in the same ballpark | |
| and same universe of reality. | |
| Mr. Coble. Thank the gentleman from Illinois. Thank you. I | |
| didn't have to cut you off that time, Mr. Shull. | |
| The distinguished gentleman from New York, Mr. Reed, is | |
| recognized for 5 minutes. | |
| Mr. Reed. Well, thank you very much, Mr. Chairman. | |
| Mr. Shull, I'm trying to understand your testimony, but | |
| what strikes me is, you know, I listened to my colleagues on | |
| the other side. I listened to and reading the testimony from | |
| our side. I listened to the President acknowledging. Everyone | |
| seems to agree regulations are causing a negative impact on | |
| small business America, yet when I read your testimony, what | |
| I'm coming away with is you talk about there being a better way | |
| than H.R. 527 to deal with this issue, and my interpretation of | |
| your testimony is that it's essentially--it's a way--we should | |
| be increasing regulation, subsidizing small businesses to allow | |
| them to comply with that regulation, and then tax the people to | |
| pay for that subsidy for small businesses. | |
| Isn't that the classic Ronald Reagan situation, you know, | |
| where it's essentially if it moves, tax it, if it keeps moving, | |
| regulate it, and then if it stops, subsidize it? I mean, do you | |
| agree that the regulation problem is causing the negative | |
| impact on small business? | |
| Mr. Shull. Well, I suppose I'm afraid of the other Ronald | |
| Reagan problem, which is delaying regulations to the point that | |
| children are dying or people are at risk. I mean, for example, | |
| the Reagan White House delayed a simple warning label on | |
| aspirin products to notify parents not to give this to young | |
| children when they have flu or flu-like symptoms because of the | |
| risk of Reyes Syndrome. | |
| The Reagan White House delayed that standard and in the | |
| course of that thousands of children were afflicted by Reyes | |
| Syndrome and suffered irreversible brain damage, liver damage, | |
| and some of them died. | |
| You know, I suppose I'm also afraid of the other Reagan | |
| problem which is, you know, the cutting things to the bone and | |
| running major deficits and, you know, leaving the public at | |
| risk---- | |
| Mr. Reed. Mr. Shull, I'm not talking about Reagan's | |
| problem. I'm talking about your concept that what we need to do | |
| to cure this problem is create more regulation and then the | |
| people that can't comply with the regulation, let's give them a | |
| tax subsidy in order to allow them to comply. I guess I just | |
| don't see how more regulation is going to correct this | |
| situation. | |
| Mr. Shull. Well, first of all, the subsidize concept was | |
| one that was jointly authored by Senator Snowe and Senator | |
| Kerry for legislation that would actually not subsidy small | |
| businesses but the small business development centers, I | |
| believe that's what they're called, to provide technical | |
| assistance to small businesses so that they can actually comply | |
| with the law. | |
| I mean, if the challenge is that they don't know what the | |
| laws are and they need help learning what they are so that they | |
| comply, it seems to me that the solution's not to get rid of | |
| the law that there's to protect people, including the small | |
| business owners and their families, but the solution is to help | |
| them learn more about it. | |
| Mr. Reed. That's what we hear from the government. We're | |
| going to take care of you. | |
| Mr. Shull. Or, I mean, if they would rather hire, you know, | |
| private industrial hygienists or, you know, other folks to help | |
| them comply, I suppose that's fine. It's probably cheaper if | |
| they---- | |
| Mr. Reed. The taxpayers have to foot that bill. I mean, I | |
| guess I'm a small business guy. I come from a small business | |
| and I've just dealt with these regulations and I can just tell | |
| you firsthand that, you know, there's a real cost and that | |
| destroys businesses that otherwise could use that money to | |
| invest, to capitalize their markets, to move on to the next | |
| innovation of tomorrow, and I guess, Mr. Gimmel, I mean, you're | |
| a small businessman. | |
| What's your response to his proposal to--where do you see | |
| that going? | |
| Mr. Gimmel. I would ask him if he's ever run a business | |
| that had to comply with any of the array of regulations. I'd be | |
| surprised if he would make a statement like that in having a | |
| background of actually running a business. | |
| Mr. Reed. Mr. Shull, have you ever ran a business? | |
| Mr. Shull. My time has been spent in advocacy, working with | |
| families who've suffered incredible losses because of the lack | |
| of regulation. | |
| Mr. Reed. And I understand that. I mean, we live in a real | |
| world and I understand that many people come to this table, | |
| come to this hall for good intentions. We don't want to hurt | |
| people. As the Chairman said, nobody wants--you know, we want | |
| clean air, we want clean water, and I think I echo my colleague | |
| over on the other side that said, you know, we want the | |
| regulations to have a good effect, but what the problem is is | |
| by creating more and more regulations, we're losing sight, in | |
| my opinion, as to what we're trying to do and all it becomes | |
| is, you know, guaranteeing a way to--more regulations so that | |
| if it's good for one situation, it must be good for all and | |
| that's my concern because, you know, as a small business guy | |
| myself, this gentleman here, people are suffering. Those are | |
| real jobs and those are real Americans. | |
| I see that my time has expired. I'll yield back. | |
| Mr. Coble. I thank the gentleman from New York. | |
| I just confirmed with Mr. Cohen, Mr. Ross will be the final | |
| witness, final examiner, and if no one else shows, in the | |
| interest of your schedule, we will adjourn after we hear from | |
| Mr. Ross. | |
| Mr. Ross, the distinguished gentleman from Florida. | |
| Mr. Ross. Thank you, Mr. Chairman. | |
| Mr. Sullivan, the question for you. When we talk about | |
| regulation for small business, I'm reminded of the Americans | |
| With Disabilities Act, the ADA, which has had some unintended | |
| consequences, but nevertheless which put a requirement on | |
| business for accessibility for those with disabilities, but in | |
| that ADA Act, it had what was known as a reasonable | |
| accommodation standard. | |
| For example, if I was CEO of a Fortune 500 company, a | |
| reasonable accommodation for an employee with one type of | |
| disability may be something that I can afford to do with a | |
| modification of the workplace or access to the workplace, but | |
| if that same employee with that same disability came to me and | |
| I was an employer of four or five employees, that reasonable | |
| accommodation probably could not be made. | |
| And so my question to you is, under the RFA, is there any | |
| such standard of a reasonable accommodation that would fit the | |
| regulatory environment to allow small businesses to meet the | |
| regulatory burden without having to have a broad brush approach | |
| for the larger ones? | |
| Mr. Sullivan. Congressman, the situation that you laid out | |
| is exactly what H.R. 527 is trying to address because what we | |
| found is if agencies alone look at what constitutes reasonable | |
| accommodation, they may not get it right. But if they are | |
| forced through this law to sit down with small business owners, | |
| disclose what the direct impact of the proposal will be, | |
| disclose what the ripple effect of that proposal will be, and | |
| then actually listen to the input from small businesses and | |
| constructive ideas on how to get the regulation right, then | |
| that final rule that they come out with is much more likely to | |
| be a balance. | |
| Mr. Ross. Right. And it is about a balance, isn't it? | |
| Mr. Sullivan. Yes, it is about that process and that's | |
| really what this bill does, is it forces that process. | |
| Mr. Ross. Thank you. Mr. Shull, when you talked about, in | |
| your opening statement, about how, if it were not for the | |
| regulatory environment, the auto industry thought it would not | |
| have had seatbelts or collapsible steering wheels, and you seem | |
| to indicate to me that if there not had been a regulatory | |
| environment, that some of the safeguards that consumers now | |
| enjoy would not be in place, but yet I have to look back to | |
| even the founding of our country when there was no regulatory | |
| environment and when Benjamin Franklin was one of the investors | |
| of the first fire insurance company. | |
| In order to manage that risk, they created the first fire | |
| department and as we've seen throughout history that our market | |
| forces have allowed us to find that balance and in fact in the | |
| auto industry we've seen a balance because of insurance | |
| companies insuring a product requiring certain manufacturer | |
| specifications, otherwise they wouldn't insure it, otherwise | |
| they wouldn't give you the appropriate coverage to manage that | |
| risk, and so my question to you is, is that, as a businessman, | |
| if I were going out there and wanting to start a business and I | |
| wanted to make sure that I could meet the needs and have a | |
| profit, I would want to look at such factors, such as the | |
| demand, and if there was no demand out there for my product, | |
| then I probably shouldn't go into business, is that correct? | |
| Mr. Shull. Sure. | |
| Mr. Ross. And if there were no natural resources or | |
| whatever it was I wanted to sell, if I could not produce the | |
| product, even though there was a demand, it would probably be | |
| indicative of the fact that I shouldn't be in business, would | |
| that be correct? | |
| Mr. Shull. Or it might be indicative of the fact that you | |
| haven't found the right buyers. | |
| Mr. Ross. Okay. But would you go into business if you | |
| didn't have--I mean, if you could not make a profit at it? | |
| Mr. Shull. Well, I've spent all of my time in the nonprofit | |
| sector, so it's not a fair question to ask me. I'm sorry. | |
| Mr. Ross. Well, then, the question to ask you would be if I | |
| were a business that---- | |
| Mr. Shull. Sure. | |
| Mr. Ross [continuing]. That was burdened by regulation to | |
| the extent that I could no longer turn a profit, is that | |
| indicative of the fact that maybe I shouldn't be in business at | |
| all? | |
| Mr. Shull. Well, it might be a sign that you were under- | |
| capitalized to begin with or that---- | |
| Mr. Ross. If I was under-capitalized, would that be because | |
| I could not afford to comply with the regulatory environment, | |
| despite the demands of the consumers for my product? | |
| Mr. Shull. Well, you know, this is a hypothetical, but, I | |
| mean, if you put this in the concrete terms, if a small | |
| automaker is trying to get in the business of producing | |
| vehicles but doesn't have the wherewithal to produce a vehicle | |
| that's actually safe and crashworthy on the Nation's highways, | |
| that's not necessarily an automaker we necessarily want in the | |
| business. | |
| Mr. Ross. So, in other words, irrespective of the market | |
| forces, the regulatory forces would be a good judge of why we | |
| should even be in business in the first place? | |
| Mr. Shull. You know, I guess I have to take issue with the | |
| concept that markets are conceptually and historically prior to | |
| government. I mean, they exist---- | |
| Mr. Ross. Not a bad thing. | |
| Mr. Shull. Governments create markets and create the | |
| vehicles, the infrastructure that allow markets to flourish, | |
| from our roads to the fact of the legal status of corporations. | |
| Mr. Ross. One--I see my time's up. I must yield back. | |
| Mr. Coble. Thank the gentleman. | |
| Mr. Ross. Everything's fine, and I thank you, Mr. Chairman. | |
| I want to just thank the panel. It was excellent and while it | |
| wasn't reality TV, it was good. | |
| Mr. Coble. I want to thank the panel, as well. Mr. Ross, | |
| I'll say to you, if you had another question, we will keep this | |
| open. Members will have 5 legislative days to submit to the | |
| Chair additional written questions for the witnesses which we | |
| will forward and ask the witnesses to respond as promptly as | |
| they can so that their answers may be part of the record. | |
| Without objection, all Members will have 5 legislative days | |
| to submit any additional materials for inclusion in the record. | |
| With that again, we thank you all. As Mr. Cohen said, it's | |
| been a good hearing. Thank you for your contributions, and | |
| we're letting you all leave early, as well. | |
| The Subcommittee stands adjourned. | |
| [Whereupon, at 2:50 p.m., the Subcommittee was adjourned.] | |
| A P P E N D I X | |
| ---------- | |
| Material Submitted for the Hearing Record | |
| Response to Post-Hearing Questions from Karen R. Harned, Esq., | |
| Executive Director, National Federation of Independent Business, Small | |
| Business Legal Center | |
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