[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:]
__________
Mr. Coble. I'm pleased to recognize the distinguished
gentleman from Tennessee, the Ranking Member, Mr. Cohen.
[The bill, H.R. 527, follows:]
__________
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:]
----------
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:]
__________
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:]
__________
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:]
__________
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:]
__________
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
__________
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