[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]





    REGULATORY REFORM INITIATIVES AND THEIR IMPACT ON SMALL BUSINESS

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                      WASHINGTON, DC, JUNE 7, 2000

                               __________

                           Serial No. 106-60

                               __________

         Printed for the use of the Committee on Small Business



                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
67-560                     WASHINGTON : 2000


                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M.C. CHRISTENSEN, Virgin 
DAVID M. McINTOSH, Indiana               Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 7, 2000.....................................     1

                               WITNESSES

Spotila, John D., Administrator, Office of Management and Budget.     4
Coyne, James, President, National Air Transportat Association....    33
Thomas, Duncan, President & CEO, Q-Markets, Inc..................    37
Selzer, Kenneth, National Association of Home Builders...........    41

                                APPENDIX

Spotila, John D..................................................    51
Coyne, James.....................................................    65
Thomas, Duncan...................................................    71
Selzer, Kenneth..................................................    80

 
    REGULATORY REFORM INITIATIVES AND THEIR IMPACT ON SMALL BUSINESS

                              ----------                              


                        WEDNESDAY, JUNE 7, 2000

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:05 a.m., in room 
2360, Rayburn House Office Building, Hon. Jim Talent (chair of 
the committee) presiding.
    Chairman Talent. The committee will come to order. The 
ranking member and I would like to welcome Mrs. McCarthy. Thank 
you for attending. I am sure other members will come in as we 
proceed.
    Our hearing today is the first in a series of hearings that 
will be held by the full committee and Subcommittee on 
Regulatory Reform in preparation for this committee's 
reauthorization of the Paperwork Reduction Act in the year 
2001. This hearing will focus on a topic of interest to all 
members of the committee: The regulatory burdens imposed on 
small business; whether the administration's regulatory relief 
efforts have effectively reduced not just the number of 
government regulations, but the cumulative regulatory burdens, 
including reporting and recordkeeping requirements in small 
business.
    I have called today's hearing to review these efforts, hear 
from small businesses that are in the trenches when it comes to 
regulatory compliance, and explore what changes are needed in 
the Paperwork Reduction Act, the Reg Flex Act or other statutes 
in order to ensure that Federal regulators only impose those 
burdens necessary on small business in order to satisfy the 
mandates given them by the Congress.
    On September 30, 1993, President Clinton stated, ``The 
American people deserve a regulatory system that works for 
them, not against them, a regulatory system that improves the 
performance of the economy without imposing unacceptable or 
unreasonable costs on society, the regulations that are 
effective, consistent, sensible and understandable.''
    During my tenure as chairman of this committee, I have not 
seen a regulatory system that works for small business nor have 
I seen a regulatory system that has eliminated regulations to 
spur economic growth for small business. Instead, I have seen a 
system that continues to impose burdens on small businesses 
whether by regulation codified in the code of Federal 
regulations, through guidance masking as regulation or in the 
instructions to various forms that must be submitted to the 
government.
    During the past 3 years, this committee and its various 
subcommittees have examined the significant adverse impact on 
small businesses of the following proposed rules: the proposed 
changes to the competition standard and the Federal acquisition 
regulation; the proposed comprehensive health and safety 
program; proposed modifications to OSHA's injury and illness 
reporting and recordkeeping requirements; EPA's proposed 
changes to the national ambient air quality standards for 
ozone; and numerous other regulations as well.
    And these only begin to skim the surface. The April 24th, 
2000, issue of the Federal Register alone contains 
approximately 1,300 pages of proposed and final regulatory 
actions. I do not believe a small business owner given the 
scope of this semiannual agenda would say that their regulatory 
burdens are ebbing. Nor does the data from OMB indicate as 
much. In its latest draft report to Congress, OMB noted that 
the total annualized cost of regulation on the economy is 
anywhere between $174 and $234 billion.
    Many regulatory actions in the name of interpretive 
guidance, instructions for completing various reporting 
requirements and executive orders impose substantial costs on 
small business. For example, the IRS published in that 
periodical to which all small business owners subscribe, the 
Internal Revenue Bulletin, a revenue procedure modifying the 
use of cash accounting. This committee examined the substantial 
adverse impact of that revenue procedure. Nevertheless, these 
costs would not be included in OMB's report to Congress on the 
costs and benefits of Federal regulation; because it wasn't put 
in the context of a rule.
    Even more problematic is that these regulatory actions 
issued under the rubric of guidance are issued without going 
through the analytical requirements mandated by the APA, the 
Reg Flex Act or Executive Order 12866. Agencies may then miss 
cheaper and more efficient mechanisms to accomplish compliance 
with their regulations.
    The guidance is not the problem. Rather, it is how the 
agency uses the guidance that can have a severe impact on small 
business. If the agency uses compliance with guidance as the 
measure of compliance with the underlying regulation, then the 
guidance becomes a de facto regulation itself, imposing 
substantial costs on small businesses. We need to recognize 
this problem, determine its scope and ensure that guidance 
remains just that.
    Today's hearing will examine these issues. We will be 
hearing testimony from John Spotila, Administrator of the 
Office of Information and Regulatory Affairs in the Office of 
Management and Budget. He will be addressing the efforts of the 
administration to reduce regulatory burdens on small business, 
and I expect to examine ways to ensure that the regulatory 
process does not impose unnecessary costs on small business.
    We will also hear from representatives of the small 
business community, who will tell their story about the 
administration's efforts to reduce unnecessary regulatory 
burdens on small business. I also will be interested in hearing 
from the small business representatives whether they feel the 
current regulatory process, including those associated with the 
Paperwork Reduction Act, adequately measure the cumulative 
regulatory burdens on their business.
    I will now recognize the ranking member, the distinguished 
gentlelady from New York, for whatever statement she may wish 
to make.
    Ms. Velazquez. Thank you, Mr. Chairman.
    We are here today on a very important matter, one that goes 
to the heart of small business concerns. The burden of 
regulations for small business can sometimes be overwhelming. 
The time spent sorting through all the requirements takes away 
from productivity, and complying with regulations can add 
significant costs. What is more, regulations can be confusing 
and even contradictory, and yet we know that in a growing and 
sophisticated economy a certain number of regulations are 
necessary. While they may be burdensome, many regulations offer 
needed protections to workers, consumers and even small 
business owners themselves. And it is not that small business 
is opposed outright to regulations; sometimes it even requests 
a regulation to address a need or to save money.
    But the bottom line for small business owners is that they 
want regulations to be clear and well thought out. They want to 
be included in the process, and we in government bear the 
responsibility for making that happen. As with many things in 
life, the key is finding the right balance, and I think this 
administration has done a good job of trying to find that 
middle groundbetween onerous, confusing, conflicting and 
unnecessary regulations and sound, reasonable protections for all 
parties involved. It has systematically examined regulations and opened 
up the process to small business, and certainly Congress has also tried 
to do its part.
    So I think we can agree that a lot has been done to reduce 
the regulatory burden on small business, but I think we can 
also agree that a lot more needs to be done. While complaints 
from small business are down, the number of regulations are up 
by 3 percent last year alone, and it is important to keep in 
mind that the Internal Revenue Service fuels this bill here, 
being as it is responsible for 90 percent of the paperwork 
associated with regulations. That is why Congress needs to pass 
H.R. 1882, which will bring the IRS under the panel review 
process and give small business a seat at the regulatory table.
    Regulatory analysis is nothing new to Federal agencies. 
Because of the costs imposed by Federal agencies, every 
President from Carter to the current administration has 
established a formal system to review new regulations before 
they are issued.
    Today, we will examine the process this administration has 
used to further this reduction and reform. First, we will look 
at how we can continue to make the Office of Information and 
Regulatory Affairs, or OIRA, more effective. OIRA is the 
division of the Office of Management and Budget that is charged 
with helping agencies simplify and reduce excessive 
regulations.
    Second, we will consider how to keep the pressure on 
agencies to listen and respond to small business concerns.
    And third, we will be looking for ways to ensure the 
regulations are clear and understandable.
    Reform efforts during the last 8 years have done a lot to 
move us toward a balanced process. This is another opportunity 
for us to fine-tune the system. It is also an opportunity to 
enhance the openness and communication fostered by this 
administration. I think we can agree that this has resulted in 
a more thoughtful analysis of the impact of regulations on 
small businesses.
    Thank you, Mr. Chairman, and I look forward to hearing from 
our panelists.
    Chairman Talent. I thank the gentlelady, and we will go 
right to our first panel, which consists of one witness, the 
Honorable John D. Spotila, who is administrator of the Office 
of Information and Regulatory Affairs of the Office of 
Management and Budget.
    Thank you for being here, Mr. Spotila. You can give us your 
statement.

  STATEMENT OF THE HONORABLE JOHN D. SPOTILA, ADMINISTRATOR, 
    OFFICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF 
                     MANAGEMENT AND BUDGET

    Mr. Spotila. Good morning, Mr. Chairman and members of the 
committee. Thank you for inviting me to appear before you today 
to discuss regulatory reform and paperwork reduction.
    I would ask that my entire statement be submitted to the 
record, and I have a shorter version here. We appreciate your 
interest and welcome the opportunity to work closely with the 
committee on additional constructive efforts at reform.
    The President has often emphasized his belief that small 
business is vital to our economy. Small business owners have 
generated millions of new jobs, leading the way with their 
energy, creativity and hard work. We share the goal of reducing 
the burden imposed on them by Federal reporting, recordkeeping 
and regulatory requirements. We need to adopt common-sense 
measures, promoting the public good while reducing the costs of 
compliance wherever possible.
    This is a subject of particular interest to me. Prior to my 
service in Washington, I was a small business owner myself for 
many years in New Jersey. As general counsel of the SBA for 5 
years, I led its efforts to reduce the regulatory and paperwork 
burden on small businesses. I know the importance and the 
difficulty of achieving meaningful reform.
    In cooperation with the Congress and with the help of small 
business owners, the administration has made real progress. 
Much more needs to be done, however, and we can only be 
successful if we work together in a constructive way.
    The administration has made a significant effort to listen 
to small business and consider its needs. The President has 
been aware from the beginning that Federal regulations and 
paperwork can seem daunting to small business owners. At his 
request, agencies have reached out to small business owners and 
asked them what changes were needed most. The message came back 
that small business wants an early voice in regulatory 
development, clarity and consistency in regulations, compliance 
assistance, and less red tape and paperwork.
    We have listened to this message and have followed up on 
each point, working within the administration to implement new 
policies that respond to small business needs. While the job is 
not finished, these approaches have proven successful and have 
made significant contributions to the American people.
    The President addressed the regulatory process in 1993 when 
he issued Executive Order 12866 on regulatory planning and 
review. As the Chairman noted, there he directed Federal 
agencies to create a regulatory system that works for, not 
against, the American people. Pointing out that good 
regulations are essential to protecting the public's health, 
safety environment and well-being, he emphasized that agencies 
must follow sound regulatory principles, issuing rules only 
when necessary and assessing the costs and benefits of 
available regulatory alternatives in order to maximize net 
benefits.
    He gave my office at OMB specific responsibility to review 
all significant Federal rules before publication and to oversee 
compliance with the order. We currently review more than 500 
significant rules each year to ensure their compliance with the 
order. We also work closely with the agencies to help them 
improve their development efforts.
    In March 1994, OIRA and SBA launched an interagency Small 
Business Forum on regulatory reform, engaging EPA, OSHA, IRS, 
the FDA, DOT and other agencies in examining the aggregate 
impact of Federal regulation on five small business industry 
groups: chemicals and metals; restaurants; food processing; 
trucking and environmental disposal; and recycling services. A 
second working group focused on tax-related issues that 
affected all of the designated industry sectors. More than 230 
small business representatives and agency employees 
participated, discussing new ways to reduce the regulatory and 
paperwork burden on small businesses.
    After a series of roundtables and work sessions with the 
small business representative, the forum released a report in 
July 1994 with some 140 recommendations. Many were specific to 
the industries studied, while others had a broader focus. They 
supported early involvement by small business owners in the 
development of rules, greater use of electronic docket, broader 
use of information technology to disseminate information, and 
an emphasis on compliance assistance efforts rather than harsh 
enforcement. The participating agencies took these 
recommendations seriously and began work on implementing them.
    In late 1994, the Vice President led an agency effort to 
consider new approaches in the regulatory area. SBA 
participated throughout this process, drawing on the insight 
gained in the forum process to draw attention to the needs of 
small business owners. On February 21st, 1995, the President 
lent public support to this effort, directing regulatory 
agencies to do four key thingsin the regulatory area: cut 
obsolete regulations; reward results not red tape; create grass-roots 
partnerships; and negotiate, rather than dictate.
    On March 4th, 1995, he called on the agencies to conduct a 
page-by-page, line-by-line review of all of their existing 
regulations to determine which might be revised or eliminated. 
The agencies responded with an enormous effort, revising or 
eliminating thousands of pages of regulations in the ensuing 
months.
    On May 22nd, 1995, the President signed into law the 
Paperwork Reduction Act of 1995, a statute he strongly 
supported.
    In June of that year, the President and the Vice President 
welcomed some 1,600 delegates to Washington for the White House 
Conference on Small Business. Acknowledging the tremendous 
contributions of America's small business owners, the President 
emphasized again the importance of reducing paperwork and 
regulatory burdens on small business. The delegates later 
approved 60 policy recommendations and sent them to the 
President and to congressional leaders. Several of these 
recommendations dealt with regulatory reform.
    The President asked SBA to coordinate implementation of the 
recommendations. And as SBA's chief counsel for advocacy has 
reported, the administration and Congress have taken meaningful 
action on more than 85 percent of those recommendations.
    In the regulatory area, we have responded to the key needs 
identified by the small business community.
    In the past, small businesses have often felt that they 
were left out of the regulatory process until it was too late. 
The Small Business Regulatory and Enforcement Fairness Act of 
1996, SBREFA, which the President strongly supported, codified 
one of the important recommendations made by small business 
participants in both the 1994 Small Business Forum and the 1995 
White House conference.
    SBREFA created special panels, consisting of SBA's chief 
counsel for advocacy and officials from OIRA and either EPA or 
OSHA, that now discuss regulations under development by EPA and 
OSHA with small business representatives from the industries 
affected. The panels meet at an early stage. OIRA, the chief 
counsel, and both agencies have worked hard to make the panels 
a success. To date, the results have been enormously helpful in 
improving EPA and OSHA regulations. Nearly every panel has 
identified potential changes that have improved the proposed 
regulation and benefited small businesses.
    Another concern voiced by small businesses at both the 1994 
forum and the 1995 White House conference was the need for 
judicial review of the Regulatory Flexibility Act. Early in the 
administration, President Clinton and Vice President Gore 
endorsed the concept of allowing a right of judicial review for 
any failures to comply with the act. With their support, 
Congress included a right of reg flex judicial review in SBREFA 
and affirmed the chief counsel for advocacy's authority to file 
briefs in any small business appeals regarding agency actions. 
There is now much more sensitivity to the importance of 
regulatory flexibility analysis, and we are seeing much better 
results.
    The President and Vice President have also set out to 
change the culture of regulatory enforcement from an 
adversarial approach to one that emphasizes working closely 
with the regulated community. They have emphasized the benefits 
of partnership, encouraging agencies to reward good-faith 
efforts to reach outcome-based goals such as safer workplaces 
or clean air, while reserving the traditional enforcement for 
the worst actors.
    On April 21st, 1995, President Clinton directed Federal 
agencies, where appropriate, to waive fines for first 
violations of regulations by small businesses, if the violation 
was inadvertent and the violation could be corrected within a 
reasonable period of time. SBREFA later codified the 
President's directive.
    SBREFA also established a new small business ombudsman at 
SBA, with regulatory fairness boards in 10 regions across the 
country. Small business owners now have a new place to turn if 
they feel an agency has acted unfairly during an enforcement 
action.
    Each year, the ombudsman and the boards hold hearings 
around the country so small business owners may present their 
stories in person. The ombudsman then files an annual report 
with Congress. A review of these ombudsman reports suggests 
that a fundamental change has taken place in the way most 
agencies relate to small businesses. According to the latest 
report, the ombudsman in fiscal year 1999 received only five 
complaints each against OSHA and EPA.
    OSHA has seen the value of increasing compliance assistance 
to fulfill its mission, rather than relying exclusively on 
enforcement. By partnering with management and labor, OSHA has 
since improved workplace safety for the vast majority of 
employers who want to do the right thing. This has freed the 
agency to target enforcement resources where they are most 
needed.
    OSHA's consultation program, which operates totally 
separate from enforcement is available to small businesses in 
most parts of the country. An OSHA consultant will inspect a 
business site at an owner's request and provide a confidential 
safety and health assessment. The President's budget for 2001 
includes funding to place one of these specialists in every 
OSHA area office, to give every business a local OSHA official 
to call for help.
    EPA also is using voluntary partnership approaches as part 
of its efforts to encourage compliance and prevention to 
address environmental problems. Working together with business 
and industry, EPA is finding that strong economic performance 
and strong environmental performance often go hand in hand.
    The use of plain English, particularly in guidance 
materials to help small businesses understand their regulatory 
obligations, was a strong recommendation of both the 1994 forum 
and the 1995 White House Conference on Small Business. At the 
direction of the President and with strong support from the 
Vice President, agencies increasingly have been using plain 
language in their drafting of new regulations and supporting 
guidance.
    We have found that plain language writing leads to 
substantively better rules. To write clearly, one must think 
clearly, identifying and answering all relevant questions. When 
proposed rules are clear, the public can more readily 
understand them and suggest ways in which they might be 
improved further.
    Some agencies report that when they carefully draft 
regulations and required regulatory guidance, using plain 
language, regulated businesses understand what they have to do 
and there is less need for any additional guidance.
    These efforts at regulatory reform form a backdrop to our 
work on paperwork reduction. My office works with the agencies 
to improve performance in this area. We review some 3,000 
information collections a year to ensure better compliance with 
the Paperwork Reduction Act.
    The Federal Government collects and uses information so 
that it can better serve the public. Agencies can only deliver 
services to individuals and businesses if they know who they 
are, what they need and what they want. Better information can 
help agencies make better decisions about how well the 
government is working, whether new services are needed, and 
whether existing programs are still necessary. Indeed, the 
government's provision of information to its citizens can be an 
important service in its own right.
    In the Information Age, the public needs timely, accurate 
information. Investors need quick and easy access to public 
filings at the SEC. Residents want to know if they have 
exposure topollutants in their community. Taxpayers expect 
quick responses from the IRS and fast income tax refunds.
    Although agencies are working hard to minimize collection 
burdens, success in burden reduction is often overcome by new 
information collections that are required by new statutory and 
program responsibilities. Most of the information needs of the 
Federal Government arise from statutes passed by Congress. Some 
requirements reflect agency decisions on what information they 
need to implement programs. The Taxpayer Relief Act of 1997 and 
the Tax and Trade Relief Extension Act of 1998, for example, 
made numerous changes to the Internal Revenue Code. These and 
other legislation required the IRS to add and revise reporting 
requirements that increased paperwork burden for taxpayers by 
approximately 150 million hours in fiscal year 1999.
    While we have achieved a number of successes in this area, 
we understand that more must be done to alleviate small 
business burden. As part of our continuing efforts, OIRA has 
joined with other agencies this spring in launching a new 
initiative to look at how we might improve the quality and 
usefulness of the information the Federal Government collects 
while reducing the burden involved in supplying that 
information.
    Together, we are working with small business 
representatives and other interested parties to identify 
problems and develop workable and constructive solutions. We 
are genuinely hopeful that this information initiative will 
lead to tangible improvements. We are examining best practices 
and listening carefully to the ideas and suggestions of our 
private sector participants.
    We know that agencies must change business processes, 
streamline legacy systems, develop technical standards, protect 
privacy and security, and adopt new ways of interacting with 
customers. We welcome constructive ideas from others outside 
government on how we might best accomplish these goals.
    In closing, we strongly support the goal of easing 
regulatory compliance costs and the paperwork burden on small 
business owners. The key to doing so is to find a way to reduce 
burden while still meeting the needs of the American people. We 
are open to considering new approaches for addressing the 
concerns of small business owners. We look forward to working 
with the committee and others in the Congress in a cooperative 
effort to achieve meaningful progress in this area.
    Thank you.
    [Mr. Spotila's statement may be found in appendix.]
    Chairman Talent. Thank you for your statement, Mr. Spotila. 
I am going to get to the heart of one of my big concerns and 
then defer to the members who are arriving, so they can ask you 
some questions.
    Let me preface by saying, what I try to do when I focus on 
regulatory burdens with the committee is to advance what I 
think is a consensus on the committee, that we don't want 
regulations that hurt or oppress small business people and that 
accomplish little or nothing. It is one thing if you have a 
legitimate conflict between an OSHA rule and, you have to pay 
more to comply, but you really do get worker safety. I mean, 
that is one thing.
    It is another thing when you have got a burden that is 
imposed and the person on the ground who has credibility comes 
to you and says, look, it is nothing, it is like crossing the 
Ts or dotting the Is. On that at least, we have a consensus.
    And it seems to me that for all of your efforts, there is 
some sense in which this system is still broken; and I think 
everybody here on the committee has had the experience of 
having people from their district or from associations come to 
them complaining about regulatory conduct that is not only 
unreasonable, but often just arbitrary, and there seems to be 
no form of relief. It is the kind of stuff that you would 
expect that when a normal person found out about it and was in 
authority to do something about it, it would stop because it is 
just stupid.
    And then you tell me what we can do to sort of fix this 
thing because I would like to know. We have passed all these 
laws and you all are doing all this stuff, and I have some 
specific questions I am going to ask you later, but you tell me 
how we are going to fix this thing.
    We had a hearing a few weeks ago on the IRS's current 
policy of going back and making small contractors who have 
typically used the cash method of accounting use the accrual 
method of accounting.
    Are you familiar with this controversy?
    Mr. Spotila. I haven't been involved with it, but I am 
generally aware there is this controversy.
    Chairman Talent. I think you were a lawyer, weren't you, in 
private life?
    Mr. Spotila. Yes.
    Chairman Talent. So you will be able to pick this up. So 
they go to somebody who does paving or painting or something 
and say your paint is merchandise, as if you were a paint 
store, so you have to use the accrual method; and not only do 
you have to use the accrual method, but we are going to go back 
3 years and we are going to audit you, and if we find any time 
when you mistimed the payment of the taxes, we are going to 
say, you owe interest and penalties for the last 3 years.
    And so these contractors, who may have been audited 5 or 6 
years in the past and then the Service signed off on their 
using the cash method, now they are confronted with $1- or 
$200,000 in liability, and there is simply no way a reasonable 
person could have known that they were supposed to use the 
accrual method and, in fact, probably they were. If this ever 
gets litigated, the courts will probably sustain the taxpayer.
    So we have this big hearing here and the guy from Treasury 
comes over, and on both sides of the aisle we are sitting there 
saying, why are you doing this to these people, and it goes on.
    Now, what can we do in the system? And I really mean this, 
this goes on administration after administration. I think the 
last President who viewed himself as the administrator of the 
government the way you viewed yourself as the head of your law 
firm or the way my brother runs his tavern; he cares about what 
goes on--was maybe Harry Truman. I think if Harry Truman got up 
and read about this in the paper, he would have called up the 
Commissioner of the IRS and said, okay, stop doing this.
    Now, Presidents since then haven't done it. Is it just as 
simple as that, that maybe we all ought to encourage Presidents 
to run the government again and not worry about all the rules 
and red tape? Tell me how we can do something about that kind 
of situation. What would you do?
    Mr. Spotila. I guess I should say, first of all, that every 
now and then this President--I think all Presidents do--read 
things in the newspaper and call people up and say, what is 
this?
    Chairman Talent. I am really not being critical. There is a 
generation of Presidents that have not viewed themselves in 
that kind of a role.
    Mr. Spotila. This is a serious question. Treasury sets tax 
policy at the Department of Treasury. The IRS often gets the 
blame when set policy is unpopular. I think they try to balance 
a number of considerations. We are not typically involved in 
the setting of that policy.
    We do have some capability, the White House certainly has 
some capability to try to facilitate broader discussions; and I 
think, in part, the issue that you have raised, which has not 
been brought to my attention formally before--I have heard 
about this from small business peoplewho have told me about 
it--is one that, it sounds to me, bears some further discussion. I am 
not familiar with the merits, but as I understand it, this is something 
that perhaps bears further discussion; and I would certainly be willing 
to work with the committee and try to help encourage further 
discussions with Treasury about it.
    In the broader sense, how do we prevent stupid things from 
happening? I think that--the starting point, I believe and 
based on my experience, is communication. One of the reasons 
stupid things happen from time to time is that people actually 
in decision-making roles are unaware that they are happening, 
and bringing it to the attention of more senior people is the 
first step in trying to take a fresh look.
    Sometimes, also, the problem is that in order to resolve 
it, you need a creative solution, and that means you need to 
bring the, if you will, ``best minds'' to bear on how to best 
solve the problem. That is part of the function of information 
and a willingness to reform or look at new ways. It is partly a 
matter of an exchange of views and sometimes compromise as to 
how it might be done.
    As you can imagine, that is hard to do for the entire 
government. This is like moving a supertanker. So we look for 
our areas of success, and we try to prioritize: What is most 
important? What do we do?
    Several years ago there was a substantial controversy in 
the small business community about HCFA rules, for example, 
which affected many small business providers.
    Chairman Talent. Another classic example.
    Let me just interrupt because we are having a serious 
discussion here. I am not talking about something that an 
agency does either because it has a very strong, and the top-
level political leaders of the administration have a very 
strong policy orientation they are carrying out; or even, dare 
I say it, politics. Okay, I am not talking about something 
where I can look and say, I understand why they are doing that, 
because this particular interest group really wants it. Those 
are fairly rare.
    Most of the time this is just--it is happening and nobody 
really can explain it in terms that political authorities can 
understand; and it is hurting people.
    I wouldn't care if it was just sort of something for a law 
review article. But these contractors come before us, and some 
are going out of business. And some of these are family 
businesses that I have had--I am expressing indignation about 
the problem, but not at you; I am really not.
    There has got to be some way of getting a handle on these 
kinds of problems.
    Mr. Spotila. I would agree. In the case of HCFA, we had a 
situation where--again, I wasn't directly involved in it, but 
learned something about it afterwards--a statute was passed, 
the agency was very busy, had a deadline facing it, pushed out 
rules, I think, without understanding the full implications. It 
caused a lot of concern in the small business community that 
was expressed through the SBREFA panels and in other ways.
    Ultimately, the agency engaged in discussions I know with 
the Chief Counsel for Advocacy at SBA and has now been doing 
some things that are much more sensitive to small business than 
before. The communication--the realization that a problem had 
been created and that there was a need to fix it, and the 
insight that that reflected a broader need for better 
communication and closer cooperation, I think led to some 
improvements.
    Part of what we need is for small business owners to 
express themselves as early as possible and get word to SBA, 
get word to the committee, get word to the White House when 
there are areas that really matter, so that we can distinguish 
between purely anecdotal and sort of individual circumstances 
and broader problems that do warrant review and perhaps change.
    Chairman Talent. I am coming from the perspective where--
you mentioned HCFA; there is a classic example. I am sure 
everybody on this committee has talked to providers in the 
health care business, and it is beyond anecdotal. That is an 
agency that is just hurting people.
    And I am not saying anybody who is running it is bad. If it 
were, I would be relieved if it was a person who was just a 
jerk, and then you get rid that of that person and it changes.
    But one other thing then, because it seems to me that in 
order to try and change this you have got to get a handle on 
it, and there is a trend which we need to stop and that is a 
trend towards circumventing the rules that you have put in 
place in Executive Order 12866, and that we have put in place 
in the APA and SBREFA by calling regulations guidance--by 
taking actions that should be taken in a formal process that 
would be subject to these executive-mandated rules or 
restraints and congressionally mandated restraints; and doing 
it in the form of guidance instead, so that in fact you don't 
have to go through the APA, you don't have to be answerable to 
anybody. So if you are OSHA, you just say, we are not going to 
promulgate the rule, we are just going to give guidance to our 
inspectors in terms of what they call a fine.
    Now, you mentioned small businesses have got to get out and 
communicate to us. Well, they don't even know this is coming, 
because this isn't in some manual back in somebody's office.
    You see, the IRS item I mentioned is a classic example. 
That was never promulgated as a rule; somebody just told the 
auditors out there to start making people use the accrual 
rather than the cash method.
    How can we make certain that they do promulgate rules as 
rules, that we have law instead of just some sort of 
interpretive guidance or guidelines in the background that are 
not subject to 12866 or our rules?
    Mr. Spotila. I think this is again a very important 
question.
    Let me start by saying, I think that clear guidance is 
something that is very important to everyone in the regulated 
community, and it is particularly important to small business 
owners.
    We have done a lot to encourage agencies to put out 
guidance, and I think it is very important to keep that in mind 
so that concerns such as those you have expressed don't become 
an attack on the idea of guidance.
    The solution is not for agencies to stop giving guidance. 
The solution is for agencies to make good decisions about what 
belongs in a rule, to go through a notice-and-comment process 
and what legitimately does form guidance.
    You know, though there may be recent concern about this, 
this is actually not a new issue. The APA has been in existence 
for 60 years, and for 60 years people have been arguing about 
what is a rule and what isn't. We turn to the courts, litigants 
turn to the courts to get good decisions about that. They often 
turn on fact-based circumstances.
    I haven't seen, in a broad sense, a lot of instances that 
have come to me of situations in which agencies have used 
guidance where they should have used rules. If they do come to 
me, or if I become aware of them, I have some ability at OIRA 
to intervene. So we tend not to be involved on the IRS side, 
but for the other agencies that is the case.
    And so when I say, I haven't seen a lot of these, they have 
certainly not been brought to my attention that we have a broad 
and growing problem. That is not to say we don't.
    I would be interested in learning more about specific areas 
of concern in that regard, again to be able to work with the 
committee and my staff to work with the committee staff to try 
to look for ways to improve this.
    We do engage in discussions with agencies about what should 
be in a rule and what need not be in a rule. We try to apply, I 
think in good faith, the standards the courts have laid down; 
and as I say, I think that there is much to be said for 
encouraging agencies to put out guidance so that people know 
what it is that is expected of them.
    Chairman Talent. The thing, though, I think you have to 
keep in mind is that there are institutional tendencies within 
agencies to attempt to avoid restraints that are put upon them 
by their political masters either in the executive branch or 
the Congress. This is documented as a matter of bureaucratic 
science, and they will tend to do this.
    Now, it is fine to say small businesspeople need to come 
forward and communicate, et cetera, that they can go to the 
courts. But you see, you are dealing with a situation where, as 
a practical matter, a court remedy 99 times out of 100 is not a 
remedy for a small businessperson. It is too cumbersome. It 
takes too long. It costs too much. And in the meantime, they 
have gone out of business while they are waiting for some 
answer.
    And I know you know this. To some extent, you being here is 
sort of like the choir we are preaching to. But if I can come 
away with a message to you--and I am trying to make this as 
impartial and as nonpartisan as I can, because ultimately, if 
we are going to resolve this, it is going to have be done on a 
bipartisan basis or we will never get it done. They will defeat 
in the agencies any partisan-type measure.
    The Republicans and Democrats have different attitudes 
toward government, but I think we have the same sense of the 
dangers of concentrated power, whether in public life or 
private life; and I am concerned, I will just tell you--and I 
am leaving this body--I am concerned about the tendency in the 
agencies to slip their leash, and go off on the basis of what 
really isn't even law anymore. It is guidance, or in the guise 
of flexibility, it is arbitrariness; or decisions are being 
made out there in the field by somebody who is not really 
subject to anybody. And real people who are trying to make a 
living and support their families are getting hurt by it. And I 
just--from our perspective, or my perspective anyway, I see a 
lot more of it maybe than even you see; and I hope we find some 
way to work together to restrain it because I am concerned 
about the impact on the economy and the society if we don't.
    And I will be happy to--I want to recognize the ranking 
member.
    Mr. Spotila. If I may respond just for a moment?
    Chairman Talent. Sure.
    Mr. Spotila. I share that desire that you have expressed to 
work in a nonpartisan or bipartisan way to look at and assess 
the nature of the problem and see what, if anything, more can 
be done about it. As with you, I view this also in 
institutional concerns. As with you, I am working hard now, but 
I won't be here past this administration in this position in 
all likelihood.
    So I think it is important to think in institutional terms, 
how do we institutionalize what I think has been a very, very 
positive change in attitude and in approach over the last 7 
years? How is it that we build on the progress that has been 
made to go forward? And I think that is very important.
    I would also mention, though, I think that one of the 
reasons we are seeing, that you may be seeing some of these 
concerns is that there has been progress, there has been more 
transparency and there are better lines of communication; and 
that to some degree, we are hearing complaints that may not 
only have existed, but been more of a problem in the past. But 
we are hearing more of it now. That is not to say we shouldn't 
be sensitive, quite the contrary; but it is important to keep 
in mind that progress has been made, and we should build on 
that progress, and we should encourage those in the agencies 
who are acting in good faith and trying to do the right thing.
    Chairman Talent. My friend will, of course, have as much 
time as she wants. I think she knows and the committee knows, 
this is a subject of interest to me. I don't go on with 
questions unless it is.
    Let me suggest that you consider also, as much as we try to 
institutionalize things, some kind of a sincere executive-
legislative partnership where notwithstanding whatever 
restraints we put in place, something gets through where all of 
us look at it and after 15 minutes we say, this is a problem. 
Like this cash versus accrual thing, you haven't had a chance 
to study it, but you seem like a reasonable person; I 
guarantee, when you study it, you are going to say, this is a 
problem.
    There has got to be some means of also putting out the 
fires that get started, notwithstanding our restraint, and we 
tried here a little bit in SBREFA when we set up this, what do 
they call it--the Corrections Day; we have some expedited 
process for fixing or overruling regulations that on a 
bipartisan basis we didn't like. It hasn't worked well here 
institutionally; people are too sensitive about maybe we will 
overrule too many regulations or something.
    But, see, if we can get an agreement on that, it would be 
helpful.
    I am just concerned about these people who are trying to 
build America and their communities and often find the 
government to be a problem. It undermines the credibility of 
the good work that the government is doing when people get 
alienated in this fashion.
    I guess I wasn't willing to let you have the last word. I 
will recognize the gentlelady from New York.
    Ms. Velazquez. Thank you, Mr. Chairman. I have to say that 
it has been really a pleasure working with the chairman for the 
last 18 months, and again today you demonstrate your sense of 
responsibility in addressing the fact that it is not a 
Republican or Democratic approach when we deal with the issue 
of regulatory reform and how this impacts the community, the 
small business community.
    The fact of the matter is that we need to see the different 
factors that are affecting this, are preventing Federal 
agencies for doing their work in a constructive way, either 
because there is a human factor to it or because there is a 
congressional mandate that has driven more regulations.
    But--we need to strike a balance that will benefit the 
small business community, but at the same time that we have the 
responsibility to make sure that regulations are there, in 
place, that will protect consumers, small businesses and the 
many people that are involved.
    Mr. Spotila, I am going to be here next year. The chairman, 
I wish him well, but I want to continue to work on this issue, 
because it is an issue that I really consider to be very 
important to small businesses.
    And so I want you to help me understand the whole process 
of your office. We understand that the Federal agenda that each 
agency publishes every year, that they still appear to be very 
lengthy. How do they compare to past administrations?
    Mr. Spotila. Well, actually, the Unified Agenda is a 
publication, as you mentioned, that comes out twice a year, and 
it consists not only of rules that are about to come out, but 
actually anything in a regulatory arena that agencies are 
working on. We emphasize to the agencies that in the interest 
of disclosure they should tell everyone everything that they 
might even be working on or that--some of these may be over a 
10-year period, so we inform the public.
    When one looks at the--and this includes many--a vast 
majority of them are actually routine, very routine things, 
everything from the schedule for hunting season to various 
kinds of other smaller permanent requirements.
    Within there, perhaps 3 percent of those are really more 
important, big rules that will be coming out that will affect 
everyone. If one looks at those agenda, I think what one would 
find is that the number of entries was going up and up. It 
probably peaked in the late-Bush/early-Clinton years. It has 
come down, I think, since '94, perhaps by 15 percent. I don't 
think that is as extraordinary a statistic or as important a 
statistic as some others in that there are so many routine 
matters that are mixed in with it, but I think it is clear that 
we do a lot of regulating.
    The American people benefit because important regulations 
are put out in the areas of health and safety and the 
environment and consumer protection, but we have to be very 
sensitive to the aggregate impact of those regulations. We need 
to make certain that they are done properly and the burden is 
minimized.
    Ms. Velazquez. After you reviewed the agenda, did you offer 
to sit down with the agency and give them your insight 
regarding the new regulations?
    Mr. Spotila. We sit down with agencies on an ongoing basis.
    You asked how my office is set up. We have actually at my 
office about 50 people that do accommodation of regulatory 
policy, information policy--we have substantial 
responsibilities there--and statistical policy. So there are a 
couple of dozen that do regulatory work. They each have 
agencies that they work with, and they do engage with the 
agencies proactively to discuss what things are coming, how the 
agency may be going about it.
    We also work certainly at my level at trying to work with 
senior policy officials and to look for opportunities on a 
broader basis to pursue review form.
    So there are discussions of this sort that will vary based 
on the agency, and we try to prioritize based on the areas 
where we think it matters the most.
    Ms. Velazquez. Do you think it is helpful?
    Mr. Spotila. I think it is helpful. I think it is very 
important that we not view this strictly on a case-by-case 
individual basis, but that we work with the agencies in a 
constructive, cooperative way. We find we get much better 
results that way than if we are adversarial, and I think 
ultimately the American people benefit much more.
    Ms. Velazquez. Let us talk a little bit about the IRS, and, 
you know, every time that we mention the IRS, people open their 
eyes. It seems that the IRS accounts for the majority of the 
new regulations coming from the Federal Government.
    Mr. Spotila. Well, in terms of the IRS, the IRS puts out a 
lot of interpretive regulations. Those actually are not 
typically reviewed by my office.
    We do get information collection. The IRS is a huge 
collector of information, as you know.
    Ms. Velazquez. Can you tell me how much of this regulation 
coming out from the IRS is driven as a result of congressional 
legislative action?
    Mr. Spotila. Well, we track--let me talk about paperwork 
burden for a moment because of information collection.
    The IRS generates about 80 percent of the burden hours that 
we track in the information collection area and generates--it 
is the greatest, the big gorilla, if you will; and we do work 
with them on trying to reduce that and streamline that, and 
they have made significant progress there, but nearly all of 
that is driven by the complexity of the Tax Code. And as I 
mentioned in my testimony, we have had a lot of efforts to try 
to streamline paperwork, and then two statutes were passed for 
good and important reasons that generated 150 million new 
hours.
    So this is not strictly a matter of what the agency does or 
doesn't do. It is a matter of they have to enforce the law and 
implement it.
    On the regulatory side, their regulations again are 
designed to implement statutes. So we might look at whether, or 
someone might look at whether those regulations are wise or 
properly done or whether there has been enough consultation or 
discussion, but they are certainly all driven by efforts to 
implement the Code.
    Ms. Velazquez. Thank you, Mr. Spotila.
    Chairman Talent. Mr. Bartlett.
    Mr. Bartlett. Thank you very much.
    I would like to return for a moment to the IRS problem that 
Mr. Talent brought up. The witness was asked, at the end of the 
day when the business is liquidated, will any more or less 
taxes have been collected, depending on whether the owner used 
the cash method or the accrual method; and he agreed that there 
would be no difference in the amount of taxes collected. It is 
not whether they will pay the tax; it is only when they pay the 
tax.
    Now, you have been an observer of the thought processes of 
these agency people, and as Mr. Talent said, this new procedure 
is very, very hurtful to a lot of our small businesses. Since 
not another dime comes into the Federal coffers by forcing them 
to go to the accrual method, at the end of the day the tax 
revenues will be exactly the same. As a matter of fact, because 
there are more people working, harassing our poor small 
businesses, the cost to the taxpayer is actually greater. The 
taxpayer loses by this.
    Why would they do this when no more taxes are collected? 
Can you understand why they would want to do this at all?
    Mr. Spotila. As I mentioned, I am really not familiar with 
the reasons behind the decision. I have made a note of it, and 
I will look into it.
    I start by being very sympathetic to the plight of small 
business. I was a small business owner. I was on the cash 
method, I must tell you, and I don't want to prejudge what 
Treasury may or may not have done here, but I am happy to look 
into it.
    Mr. Bartlett. I appreciate that, but this is a really 
excellent example of the kind of regulation the chairman was 
talking about, which didn't accomplish anything, that was just 
hurtful with no basis. Because no additional taxes are 
collected; exactly the same amount of money is collected.
    It is not whether you collect the tax, whether you will pay 
it as a small business, only when you will pay the tax; and 
this is an enormous burden that they are placing on our small 
businesses, and they are putting them out of business.
    How can this possibly be to the benefit of the taxpayer? 
This appears to be a totally arbitrary and capricious and 
mindless implementation.
    The chairman also mentioned a lot of regulations out there 
that don't appear to accomplish much. I remember several years 
ago the EPA would rather not have the administrator sit at a 
Cabinet-level position than be required to do a cost-benefit 
analysis for their regulations. In other words, they didn't 
care that the implementation of a regulation cost us more than 
we benefited by it.
    As the old farmer said, ``I don't think I would do that; 
the juice ain't worth the squeezing.'' well, there are many, 
many of our regulations where the juice ain't worth the 
squeezing.
    Is there an incentive on the part of the administration to 
look at our regulations to see which of those are worth the 
effort and which of them are simply a burden on our people that 
accomplish less than the cost imposed on them?
    Mr. Spotila. I believe there is, and let me address that in 
two ways. We have, I think, been doing an increasingly good 
job, speaking now from my viewpoint at OIRA, at working with 
the agencies, including EPA, on assessing the benefits and 
costs of prospective regulations and alternative approaches.
    Mr. Bartlett. How about the ones in existence already?
    Mr. Spotila. I will get to that in just a moment. I want to 
put this in the context.
    Our sense is that it is very important, as any new 
regulations come down, that we work with the agencies, in part 
so that decisions are better and in part to increase the 
capability within agencies to do this type of analysis and to 
change the culture so that their approach takes these factors 
into account.
    When it comes to looking back at past regulations that are 
already in effect, actually the Regulatory Flexibility Act 
calls on the agencies to do this on a periodic basis, and we 
have instituted some measures to track agencies that are doing 
it, to try to put that information in the regulatory agenda. We 
have a separate page now that lists that. We try to encourage 
the agencies to do so.
    Candidly, there are resource constraints, and the agencies 
tell us that it can be very time-consuming and resource-
intensive to try to go back to existing regulations. And 
although many of them have good intentions, my experience has 
been that some of them just simply indicate they lack the 
effective capacity to do as much of this as perhaps you and I 
might like them to do.
    That could well be an area of opportunity going forward 
because I share with you the sense that it is productive to 
look back at important regulations to try to assess how they 
are doing and to make certain that the approaches that were 
adopted in the past reflect the best ways of accomplishing 
goals that perhaps we would all share.
    So, again, I would welcome the opportunity to work with the 
committee to identify areas that may perhaps need more 
attention. I think we would need to prioritize our efforts, but 
we are certainly not averse to discussing that further.
    Mr. Bartlett. Thank you, Mr. Chairman. My time is up.
    I would just like to note that in reading the Declaration 
of Independence, I came upon something that would appear to be 
a pretty good definition of our current regulatory agencies:
    ``he has erected a multitude of new offices and sent hither 
swarms of officers to harass our people and eat out their 
substance,'' was one of the reasons for our Revolution, and I 
suggest that it might be a reason for a revolution at the 
ballot box now.
    Thank you very much.
    Chairman Talent. Well, I thank the gentleman for his 
comments. Let me pick up on one thing he said.
    I mentioned before one trend that I am concerned about is a 
gradual elimination of law in the sense that you and I, as 
lawyers and as we have always understood it either in the form 
of statutes or regulations that tell people what their legal 
responsibilities are--I mean, law is restrictive, but also it 
has a liberating side because what isn't illegal under a law is 
then allowed. But the more that you make the actual legislative 
process in the form of guidance or regulations that appear to 
be flexible, but require things that are basically arbitrary 
standards, the more possibility for arbitrariness or, really, 
kind of tyrannical activity; and I have sensed this out there, 
and I wanted to flag on that.
    The other point you mention in terms of cost-benefit, and 
this is what is really perverse about some of this, and I want 
your comment on it, if you would. If you don't do this process 
right, you can end up spending scarce enforcement resources, 
basically harassing people who aren't doing anything wrong, and 
then the corner-cutters out there love it.
    I get a feeling that HCFA spends all their time, for 
example, going after basically honest providers, and the ones 
who are defrauding Medicare, they love that because they know 
HCFA is never going to have an opportunity to go after them 
because they are spending all their--so you get neither, you 
get neither more freedom for people nor more accomplishment of 
the regulatory agenda. And I can give you so many examples. 
Maybe we should have been working with you for the last 4 years 
more than we have been, because I can give you so many 
examples. Will you comment on that? Are you seeing that at all?
    Mr. Spotila. Actually, let me start by saying, to kind of 
echo a theme I had mentioned earlier, that I think there has 
been a sea change in many of the regulatory agencies in their 
approach to enforcement, in their emphasis on compliance 
assistance, rather than harsh, sort of ``gotcha'' enforcement. 
They are not perfect, but they have come a very long way, I 
think. When we look at agencies like OSHA and EPA, which had 
very bad records in the small business community, I think they 
are doing a far better job today, and we need to encourage 
that, and we need to urge them to do more of that.
    It is important that we give guidance, because by giving 
clear guidance, people understand what it is that is expected 
of them. They don't have to hire lawyers to explain very 
complicated or dense rules; they can see what is needed and 
they can try to comply. And the strong message we have gotten 
consistently from small business owners is that they want to 
know what it is they are supposed to do. They want the rules to 
be sensible, and then they want to understand them easily so 
that they can do the right thing and get on with their 
business. Having said all of that, they don't want their 
competitors to have an unfair advantage.
    So they do want enforcement for the people that, as you 
say, are cutting corners or whatever, because otherwise those 
people get a cost advantage and they suffer. So we have tried 
to shift the agency's approach, and the President has 
emphasized this over and over again to one which helps people 
who act in good faith to understand what is required of them, 
gives them help in complying and targets enforcement resources 
on the people who know what the rules are and just deliberately 
choose to avoid them to gain an economic advantage.
    We are not doing it perfectly yet, but there has been 
progress.
    Chairman Talent. Let me understand. That is not--it is 
important to me that you see this, even if we don't necessarily 
agree on how big a problem it is, but you recognize that this 
is a problem. There is a difference between being flexible and 
saying, okay, we want to work with you so that we achieve 
voluntary compliance, which is a good principle but sometimes--
here's how that manifests itself. It manifests itself in vague 
regulations or guidance that say we want you to do everything 
that you reasonably can do, let us say, to have a good safety 
and health program at the workplace. Now on the surface this 
appears, oh, yeah, we want you to do everything that you 
reasonably can do. But you see the guideline or the regulation 
is so arbitrary that in effect almost anything is potentially 
illegal and then it is simply a question of the discretion of 
the inspector. You can see how something that was designed--
started off to be flexible can end up being even more 
tyrannical because now there is no law to protect you. You can 
never be certain that your safety and health program complies 
with the law because the standard is so vague. It is almost 
Orwellian. In the beginning of 1994 they say, well, there 
aren't any more laws anymore because if there are laws people 
know what they can and can't do. I am not accusing this of 
being necessarily vast. I am saying this is a tendency I see 
growing up in these agencies and I am really wanting you to 
agree with me that at least this is out there.
    Mr. Spotila. There are occasions when that happens clearly. 
We work pretty hard in reviewing the significant rules to 
identify areas like that and try to add clarity. We rely a 
great deal on public comments that we get from people who 
understand sometimes the implications of language more than we 
might, and when I said earlier that it is important that people 
comment, it is because that is how we find out.
    Chairman Talent. I agree with you. Otherwise we don't know. 
There is no other means of knowing.
    Mr. Spotila. I would completely agree with you that we 
ought not to have those situations where we have very unclear, 
ambiguous regulations that then will vary with enforcement.
    Chairman Talent. This has an impact far beyond--even if it 
is more limited than I think it is, because what it does is it 
destabilizes and frightens people. They never know when the 
next one may be coming so it has this--it is worse really than 
even a tax burden because that at least they know but the 
regulatory burden they don't know when it will come down and 
they are afraid that somebody can walk and do something 
terrible to them and they didn't know about it and couldn't 
know about it.
    Others are waiting. I thank the committee for its 
indulgence. I have Mr. Barrett next. He is not here. Mr. 
Pascrell.
    Mr. Pascrell. I always looked at the FEMA-SBA team when 
they go into an area after a natural storm or catastrophe of 
some sort and the response team is sent all over the place. I 
think we have some great people leading SBA and FEMA. I notice 
how many times we have been able to cut through red tape and I 
often wonder why don't we do that all the time. Why don't we 
begin by thinking in our minds that there is always a natural 
catastrophe of some sort. The red tape wasn't necessary in the 
first place and there is never enough being done.
    Let's face it. Let's be honest. Regardless of what 
administration, regardless who the governor is of a state, 
which party they belong to or who the President is, it is the 
second level management that makes these regulations and makes 
our life miserable, whether it is EPA, whether it is the Small 
Business Administration or whether it is FEMA. I often wonder 
if we go and cut to the chase and think of this thing as always 
an emergency because people need help all the time. I don't 
need a flood to need help.
    Chairman Talent. Weren't you a mayor, Bill?
    Mr. Pascrell. Yes, I was.
    Chairman Talent. Will the gentleman yield for a minute.
    Mr. Pascrell. Sure.
    Chairman Talent. You ran the city. I am sure if somebody 
came to you with something that somebody was doing in the city 
administration or bureaucracy that you thought was senseless, 
you took care of it, didn't you?
    Mr. Pascrell. We tried to. Many times you dealt with 
agencies that you yourself appointed the people to, whether it 
is a planning board or a board of adjustment. You could put one 
of your parents there and once they get into that position and 
they read those regulations, this is how it has to be done, and 
this is the other thing, we are not asking--and we are not 
assuming nor are we recommending anybody breaking the law. That 
is not what we are saying. What we are saying is much of this 
is not needed. You talk about 80 percent of the regulation of 
the IRS being promulgated through our actions here in the 
Congress is probably true, but what about the other agencies. 
How do you suggest that we implement laws--that is not our 
job--but how do we implement those laws that we make in this 
Congress? Who stands between the Congress and your job and many 
other jobs in implementing the very laws that lead to the 
regulations, that lead to the requirements that many Federal 
bureaucrats--I don't mean that in a negative sense--need to 
apply? Shouldn't we have oversight as to how these laws are 
going to be implemented? Shouldn't there be a review to the 
Congress at every new Congress; this is what was passed in the 
106th and this is what happened for the Federal agencies in 
implementing this. Don't we have a right to know whether or not 
the intent of the law exists or whether or not we simply added 
on the frills in order to keep a lot of other people working?
    I am not assuming any answer. I am just saying through the 
Chair we are never doing as good as we should do. I have had to 
deal with it. When you are a mayor, you have to deal with a 
hands-on situation every day, Saturdays and Sundays are not 
excluded. The Federal bureaucracy they are for the most part. 
But every day. So what you try and do is cut through red tape. 
You know, we set up enough red tape to cut the red tape and we 
never get to the objective. We never get to the end result. We 
really don't. I know there has been a lot of effort. There have 
been many pages written about what this present administration 
has done in cutting red tape. Jobs have been cut. Red tape has 
been cut and yet I still get the same complaints. I still--
maybe I am different than any folks that are here--about 
whether we are EPA.
    I mean, that is a nightmare and a half. I fret when I 
vote--I have got a pretty good environmental record, but I fret 
when I vote about environmental bills because I know how they 
are going to grow and mushroom by the time the first person 
comes through the door and says I have got a nightmare to talk 
to you about, Congressman, and I am really concerned about 
that. What is our oversight? What are our duties and 
responsibilities to basically say, hey, we didn't intend this. 
Why did you set up all these regulations? We passed this rule--
or we passed this law. You established this rule. How did we 
get to all of these rules in terms of the intent of this 
legislation?
    I think every Congress we should have a review of what was 
done the Congress before, before we start to even put in bills. 
Maybe this would prevent us from putting in this plethora of 
legislation that everybody knows on both sides of the aisle is 
never going to get passed. Maybe we should have a review in 
January of each new Congress. This is the laws. This is what we 
have done since. Nothing has been done.
    Now, I am looking back at what the Clinton administration, 
quote-unquote, did since it came into business in 1993 to now, 
certain things that OMB did, certain things--executive orders, 
right down the list, 1993, 1995, 1996, the presidential 
memorandums, the Small Business Regulatory Enforcement Fairness 
Act. What is our box score on these? Who keeps the report card? 
Are these being implemented? Who do I go to? Through the Chair, 
who do I go to?
    Mr. Spotila. You made a wide range of points there, but let 
me address some of them. I will try to be as helpful as I can. 
Let me first of all start by agreeing there are two key aspects 
that you have touched on, one that agencies have a 
responsibility individually to implement in a proper way with 
common sense measures the laws that are passed that affect them 
and that Congress has a responsibility and a right to oversee 
how agencies operate in that respect. Those are givens that I 
agree with completely.
    What may be a--because this is a Small Business Committee I 
think it would be worth touching upon an effort that SBA 
engaged in when I was there as general counsel not only because 
it is of interest to you because of small business but because 
there may be a lesson there that has a broader application 
also.
    I have outlined a number of the measures that were taken to 
try to increase contact with small business owners. At SBA we 
identified from the very beginning that access to capital was 
one of the most important needs to small business then as it is 
now. And what we try to doin speaking to small business owners 
and to resource partners, lenders, and others is to identify the 
obstacles that were preventing SBA from helping improve access to 
capital to the extent necessary, even within the context of limited 
resources. And from the general counsel's role that you had at the 
time, we were very much aware that just as lawyers can be facilitators 
of change, they can also be great obstacles to change. We made a 
commitment to try to do all that we could to remove obstacles and to 
help the agency perform its mission better here. So we identified 
things in our own regulations that we thought interfered with the 
delivery of capital to small business. Sometimes they interfered 
because they added cost and they made programs ineffective. You all 
heard about the LODOC program where we reduced a very cumbersome loan 
package for small loans of under $100,000 to one page; the SBIC program 
where we completely revamped both the operating regulations and the 
substantive regulations so that that program could be basically kick 
started, and it has blossomed into a terrific program for small 
business now. We completely reinvented the 504 program from the 
standpoint of streamlining processes, changing the regulations, making 
things clearer.
    The real answer as to how we did that was to engage career 
employees at the agency in an effort--they wanted these 
programs to be successful. They needed leadership and they 
needed it to be given priority but these jobs were done by 
career people here and all across the country. We set up teams 
of people who really started from scratch, looked at each of 
these programs, took the comments we had gotten from small 
business and rethought the way SBA was approaching this. And by 
getting them energized and by getting them to not only 
understand the importance of it but to free them up, to 
actually provide solutions, I think we were able to achieve 
extraordinary results. We took 100 percent of the agencies' 
regulations and in less than a year, in 10 months we were able 
to transform them.
    We then moved into the standard operating procedures. We 
eliminated thousands--we had operating procedures, books and 
books of it on the wall that no one used, no one read because 
we all knew they were obsolete. The only people that had to pay 
attention to them were the small business owners and the people 
the agency dealt with who had to try to master these things 
that the agency didn't pay any attention to. We had regulations 
when we sat down to write more clearly. We had regulations that 
our own people disagreed, and in Washington our own people 
disagreed about what they meant. We were the people giving 
advice. Depending on who you talked to, you got different 
advice. We fixed all that. We changed it all because we 
identified the questions, we supplied clear answers, we tried 
to look at it from the standpoint of users and resource 
partners and we tried to get out of the way so that the agency 
could get capital to small business more effectively and more 
efficiently. This could not have been done without energizing 
career employees and empowering them to make these changes.
    I think, as I say, there is a broader lesson here and I 
think from the standpoint of the committee when an agency like 
SBA takes steps along those ways it is very important, I think, 
that the committee on a bipartisan basis acknowledge that 
progress and encourage it because it sends a very important 
message to the career employees that this was worth doing, that 
we are not politicizing and similarly when we are dealing with 
other agencies in other areas, I think it is perfectly 
reasonable to ask other agencies why don't you try something 
like this. If it worked here why can't it work with you. That 
is something we will do from my standpoint, but it doesn't hurt 
if the Congress asked those questions also.
    Mr. Pascrell. Mr. Chairman, I am sorry I am extending my 
time but I just wanted to get into one other point if I may.
    Chairman Talent. Yes.
    Mr. Pascrell. I am glad you said what you did because I 
think it is important that we hear it and now we have got to 
see it. We are looking for tangible evidence. I want to leave 
the committee and the witness with one example. It has nothing 
to do with small business, but I think it leaves a sour taste 
in my mind about what we do down here and many times we place 
obstacles unbeknownst. We pass laws that are going to encourage 
obstacles, as you just displayed. It is like immigration 
policy. We have placed so many obstacles, so much bureaucracy.
    We debate flat tax on the floor. We ought to debate flat 
immigration policy to encourage people to be documented coming 
into the country. We established all of these. We pass these 
laws and then the INS has all these rules and regulations. Just 
one aspect of it, fingerprinting, if you had the history of 
fingerprinting in the INS in the past 4 years since the 
Immigration Act of 1996, you would rather take the chance of 
being undocumented than go through the hassles that we caused, 
that this Congress caused and that the bureaucrats and INS put 
together. Who is going to determine the fingerprints? The FBI, 
the Vermont offices of the INS, which led to 6 months, 12 
months delays, even in the very elementary reviews of 
immigration applications. And I use that as an example.
    We need to get flat on our rules and our regulations, Mr. 
Chairman, if I can use that term ``flat'' here. We need to get 
flat and we ought to do it together and we ought to insist upon 
it and every administration never does enough to do it. There 
is never going to be enough. And I am glad you have been very 
frank and I appreciate the opportunity. Thank you.
    Chairman Talent. I recognize the gentlelady from New York, 
Ms. Kelly.
    Mrs. Kelly. Thank you. Mr. Chairman, because we have 
another panel, I am going to ask if you will be holding this 
open for a period of days following the----
    Chairman Talent. Sure.
    Mrs. Kelly. Thank you very much because I have several 
questions and too many questions to get in. I just want to 
start by asking you how many total regulations have you 
eliminated? Because we have very little time, if you can just 
give me a number, that would be sufficient. If you don't know, 
please say so and you can answer that later.
    Mr. Spotila. I think--I am happy to answer it in more 
length later but what I would suggest respectfully is that it 
is not the number of regulations that we should be counting in 
terms of past regulations because it is too easy to lead to 
misleading results.
    Mrs. Kelly. I am interested just in that number.
    Mr. Spotila. I understand that. Let me explain what I mean 
by this. When we look at a particular title in the Code of 
Federal Regulations, it isn't broken down by the number of 
regulations. If one eliminates a provision, the chapter is 
still there, the title is still there, the program is still 
delivered. The issue is not whether the regulation is 
eliminated, but whether the regulations that implement a 
program or that affect a program have been improved or 
clarified or streamlined.
    Mrs. Kelly. No, I ask about elimination.
    Mr. Spotila. I understand that. I am saying it is not a 
number that is tracked because it is not a number that is 
meaningful.
    Mrs. Kelly. Maybe we could work with you to try to find 
some----
    Mr. Spotila. I would be happy to explore that further.
    Mrs. Kelly. I find it very interesting that you use the 
Federal Motor Carrier Safety Administration as an example of an 
agency that successfully streamlined their regulations when 
this agency has received a lot of public criticism for the 
impact of the proposed hours of servicerule and the impact it 
will have on the small motor coach operators. I believe there was an 
article in the business section of the Washington Post yesterday about 
this. The bus industry says that DOT hasn't done any research and has 
done no studies to better understand the industry. Is the DOT devoting 
resources to streamline while they are ignoring the duty to properly 
analyze new regulatory revisions and what effect are you going to have 
on this?
    Mr. Spotila. First of all, DOT is devoting effort, it is 
streamlining and I think that has been a good thing. The hours 
of service rule, which we have had some involvement in, we 
reviewed it before the rule was proposed. We met with parents 
of children who had been injured or in some cases killed by 
tired truckers causing accidents. There is a lot of concern out 
in the community about this. We ultimately put out a proposal 
for comment and there were areas, and motor coaches is a good 
example of one, where we did not feel, we or the agency, knew 
enough about the impact of a change in hours of service rules 
on that industry. We heard a lot about truckers, particularly 
long distance carriers. We had frankly concerns about the 
impact on local truck deliveries from people who do local 
trucks. We were concerned about motor coaches. We have a public 
comment period and we decided to try to take advantage of that 
comment period to learn more about this area.
    Mrs. Kelly. How did you publicize the public comment 
period, how many responses did you get, and what was the length 
of time of that comment period?
    Mr. Spotila. First of all, the comment period is still 
open. It is the agency that published the proposal in the 
Federal Register.
    Mrs. Kelly. Only the Federal Register?
    Mr. Spotila. I would be happy--I don't have that 
information off the top of my head because we don't do that 
specifically. We will find out.
    Mrs. Kelly. It seems to me that this is really an--this is 
an example of a real sort of an agency blatant failure to 
comply with the Reg Flex act.
    Mr. Spotila. I think that what it actually reflects, 
respectfully, is an agency that is interesting in hearing more 
about what the impact might be so that it can make better 
decisions, and there hasn't been a final decision as to what 
this rule should contain. I actually was very encouraged by the 
publicity that these provisions got and I would hope that we 
would hear more from people so that ultimately if there is a 
final rule that it would be crafted as well as possible.
    Mrs. Kelly. Is there any other way that you see yourself 
advertising what is happening so that the small motor coach 
operators are going to be able to know that this is actually 
happening? Not everybody reads the Washington Post or the 
Federal Register.
    Mr. Spotila. I understand that. I think that we can always 
do a better job at communication. The agency in fairness has 
done some things, uses its Web site and tries to get out 
information to trade associations and others it understands it 
will be impacting, but it has been a classic problem for small 
business owners to find out about rules and prospective rules. 
That problem hasn't gone away. There have been some 
improvements, but there is still need for more opportunities 
there.
    Mrs. Kelly. You earlier stated that the small business 
owners need to express themselves earlier in the process. I am 
quoting you, words that I wrote down here. In fact, it is 
almost impossible for many small business owners because they 
are one or two person shops and they don't read the Federal 
Register. Do you consider that part of what your job is at 
OIRA?
    Mr. Spotila. Let me start by saying individually, 
personally, I am very sympathetic to the concerns that you are 
raising. I have been a small business owner and I know how 
difficult it is.
    Mrs. Kelly. You know how we are drowning in red tape.
    Mr. Spotila. I know what it is like to be on both sides of 
the fence, if you will. But having said that, the agencies have 
the primary responsibility--the Department of Transportation 
has gone out in the field. They have held listening sessions. 
They have tried to have public meetings and the like. They are 
not going to reach everyone when they do that. I would hope 
that they reach enough people so that at least the views are 
expressed. It is not necessary that every small business owner 
comment on this. It is necessary that every view is expressed 
by someone so that we know what the alternatives are and we 
know what the impact would be. And we would be happy to work 
with you further and with the committee on how additional steps 
might be taken to improve these lines of communication. I agree 
completely they are very important.
    Mrs. Kelly. My time is up and, Mr. Chairman, I have quite a 
number of questions here but we actually are going to have 
another followup hearing tomorrow so perhaps some of these 
questions will be able to get through tomorrow. Thank you.
    Chairman Talent. I know I have taken up time airing my 
concerns. Mr. Phelps, any questions?
    Mr. Phelps. Real brief, Mr. Chairman. Thank you. Thank you 
for coming and sharing with us. I hadn't caught all of your 
remarks, but very enlightening. Let me just express--I may have 
a couple of questions here--some frustrations that not only as 
a new member but someone who served in the Illinois legislature 
and have our own state bureaucracies to deal with, as a former 
teacher and a former small business owner, one of the most 
frustrating things is for someone who has been given, quote, 
the authority to pass down judgments and requirements and 
regulations that really haven't walked in the shoes. Let me 
just pass that along. If there would be bureaucracies, 
agencies, departments that had more staff--and I know many 
times we read about how they were recruited from the field of 
small business owners and so forth in this case what we are 
talking about, but other regulatory agencies that have been 
mayors, that have been those people in the grass roots level 
that bring the mentality to the agencies and say, look, before 
you do this, let me just tell you what happens from the 
standpoint of this size of city or this size of community. It 
is like--as a former teacher you have--some of the professors I 
had at Southern Illinois University teaching me how to teach 
have never been in the classroom and the administrators that we 
were doing the evaluations of who is a good teacher never 
taught a day in their life.
    So it seemed to me like that mentality is somewhat 
perpetuated from the standpoint of who decides on the intent of 
the law, how it is implemented, and sets up the rules because 
if we had--for example, if you were, I guess, able to prepare a 
chart simply for me or other members that would help justify 
some of the positive changes rather than answering questions 
from a negative standpoint of the differences between then and 
now, so to speak, that you address some, a chart that just 
skims some of it like this was a few years ago, this is now, 
this is how we have streamlined, and I know we are still going 
to as members harbor and emphasize on those that still seem 
like common senseless regulations that still exist no matter 
how good a job you've done, but it just seems like that would 
be a simple way to hand out sheets saying before you get on 
these other things that we haven't--that still needs to be 
improved, here's a list of good stuff that we have changed from 
a positive standpoint. But I guess I just want to--because what 
happened, as Members of Congress already see, is that when we 
can't answer a question from the common sense standpoint when 
we are in a town meeting or a constituent contacts us in our 
office about can you tell me why this is, and I am thinking 
most laws, I want to rather think, were actually made from 
responses or inquiries or suggestions from groups, interest 
groups, from individual citizens. They just didn't appear on 
the books because someone dreamed up an ideaand wanted to be 
great. I am sure there are a few of those but for the most part they 
are here because people brought them to our attention. So how did they 
get from this intent to where you don't even recognize what it was 
designed for.
    I don't want to be in the shift blaming type mode of 
service where I am as a government official saying, oh, it is 
not us; this was a rule making process because people are 
essentially--they are not dumb. They are saying, well, who has 
the ultimate authority and if we can't answer common sensical 
why certain things are being in a regulatory mode that doesn't 
go back and reflect to a specific law or recognize what the 
specific intent was, that puts us in a real bad light, and you 
understand that. So I don't know, do you have a then and now 
chart?
    Mr. Spotila. Let me actually respond to two things you have 
said. The first point is I would agree with you about the 
importance of recruiting into public service people who have 
some understanding of the impact of government on private 
citizens and small businesses. I think that when I look back, I 
had known the President a long time personally and he asked me 
to come to the SBA because he wanted to upgrade its 
performance, and I joined it in 1993. I think we did a pretty 
good job at SBA and in a lot of others and he asked me to come 
to the White House to do this job because he understood that I 
would bring with me this perspective and it is what he wanted 
in this job and I think that is to his credit.
    Mr. Phelps. By the way, I want to commend you, but do you 
recognize people that work within the agency share some of the 
backgrounds?
    Mr. Spotila. Many of them and as I mentioned earlier I 
think there has been a much more cultural change and much more 
sensitivity to this area, but this is not a process that is 
done. This is a dynamic process and the need will remain to 
continue to bring in people like this and to sensitize people 
who are career employees that mean well and just need to learn 
more about what the impact of what they are doing might be.
    On the issue of charts I don't have charts for you but I am 
happy to go back and work with you and others on the committee 
if there are things that we can provide. As we are going to be 
answering questions, we can see what we can provide.
    Mr. Phelps. I will follow up on the same thing. It just 
seemed like someone--for example, in the transportation 
regulation that Congresswoman Kelly mentioned to you, if 
someone that was an over-the-road truck driver in past years 
and had somehow evolved in the agency that is looking at what 
we are talking about from the standpoint of road safety for 
over-the-road trucks common sense would tell you someone has 
got to relieve drivers after a certain matter of time before 
they become such a threat, especially as our vehicles get 
bigger and our railroads get smaller and our roadways and 
interstates carry more responsibility. Somebody ought to be 
able to say, look, this is pushing it before----
    Mr. Spotila. There is and I can tell you I have heard this 
from people who have their lives transformed negatively because 
of tired truckers. There is a problem. There is a safety 
problem here. How we go about fixing that problem or addressing 
that problem is a fair question but there clearly is a risk 
here to the public safety and I think everyone who has looked 
at it acknowledges that.
    Mr. Phelps. Thank you. Thank you, Mr. Chairman.
    Chairman Talent. Let me just ask a couple of questions for 
the purpose of the committee's deliberations on paperwork 
reduction and some other things to get your opinion on a couple 
of things for the record.
    When an agency submits a proposed reporting requirement to 
you for review, does your review check for consistency between 
the instructions and the underlying regulation to make certain 
that they are not putting things in the instructions that go 
beyond what they are supposed to be doing from a regulatory 
standpoint? If you don't do that, do you think that that is a 
sensible idea and something we ought to consider in 
reauthorizing the Paperwork Reduction Act?
    Mr. Spotila. Let me start by saying I think it is a good 
thing to do and we do attempt to do that. I think we do it 
reasonably well. As I mentioned earlier, we review 3,000 
information collection proposals a year and so it is an 
imperfect process but our people work very conscientiously to 
try and make certain this is done correctly. It helps--this is 
a process that actually has two public comment periods for each 
information collection proposal. So we are very dependent on 
people coming back to us if they spot a problem that we didn't 
see. Then we can react to it. So I think that is also a very 
important aspect of this.
    Chairman Talent. That is something you think should be--
that we may want to consider when we reauthorize.
    Mr. Spotila. We are happy to discuss with you how this 
might be done. I think actually it is being done now. We review 
these things done now but we can certainly work with you 
further and would like to if any language improvements are 
needed, how that might be done.
    Chairman Talent. The panel process----
    Ms. Velazquez. Mr. Chairman, I would just like for you to 
yield for a second because it is related to the previous 
question you just asked.
    Chairman Talent. I will yield to the gentlelady.
    Ms. Velazquez. Can you state for the record what is OIRA's 
annual budget and staff size because you mentioned that you 
review over 300?
    Mr. Spotila. We have, as I mentioned, about 50 people on 
our entire staff and they do--they have responsibilities in a 
number of areas. We do the review of all significant 
regulations. We do the review of all--the 3,000 information 
collections. We do information technology policy, including the 
IT acquisition process in the government tied to the budget. We 
do statistical policy coordinating it for the government. So we 
have a very wide range of aspects here. We have a relatively--
we are part of the Office of Management and Budget, which of 
course has a budget, so there is an allocation within the OMB 
budget for us which is probably something in the area of maybe 
3 or $4 million.
    Ms. Velazquez. Do you have the manpower necessary to do 
your job?
    Mr. Spotila. I think that everyone would always like more 
resources if they could. We work with what we have and we 
prioritize well, I think. OMB is very sensitive to using its 
resources very effectively. We are, I think, deliberately lean 
if you will and we get very good people and they work very 
well. I think resources for OIRA have to be reviewed in the 
context of resources for OMB.
    Ms. Velazquez. Thank you.
    Chairman Talent. One thing we might need to do, staff tells 
me they don't always submit the instructions with proposed 
reporting requirement. Maybe we need to make certain that they 
do that.
    The SBREFA panel process has proven useful in finding 
alternatives that lower regulatory burdens to small businesses. 
Do you think that we should extend that process for any agency 
that proposes significant rulemaking either as that term is 
described in the executive order, the Congressional Review Act 
and let me before you answer so you know everything that is out 
there on this, we have been trying to include the IRS in this. 
As you noted, they do an enormous amount of regulations that 
affect small business. They have been fighting us on it and it 
is hung up in the Ways and Means Committee, and a whole other 
problem is these little cabals that existbetween some of the 
agency people and staff and certain committees here. But do you think 
we should extend that panel process more to other agencies?
    Mr. Spotila. Let me start by reaffirming that I think that 
the SBREFA panel process has worked very well for EPA and OSHA. 
It is a resource intensive process. That is something that 
certainly affects the Office of Advocacy at SBA, it affects 
OIRA, to some degree the agencies, although they probably have 
greater resources available to it. This is something that bears 
further discussion. I think the agencies, we would have to 
identify where it was needed and what the circumstances were, 
and IRS perhaps is a good example. They have raised--I am aware 
they have raised concerns about confidentiality, about people 
taking advantage and the like and without trying to address the 
merits, what it suggests to me is that if we were in good faith 
having further discussions, one should look to see whether the 
panel process should be adjusted or refined, whether there is 
some modified approach that would add value and still address 
those kinds of concerns.
    Chairman Talent. One of the things I have emphasized to 
these agencies and I agree with you, I think OSHA in particular 
has benefited from doing this and we have had some pretty good 
response from OSHA over the years, it is idle to assume that 
you can do something that hurts small businesses and nothing 
happens. I mean, they come here and they complain. They come to 
you and they complain and you end up spending a lot more time 
and effort having to defend a rule after the fact than you 
would if you did this panel process in the first place. To me 
that is something I have been trying to drum in their heads. I 
think it would make a lot more sense if you talk about it 
beforehand with people, at least give them the opportunity, 
tell them about it and if they don't want it, fine, but I would 
like to extend the panel process. You think it is possibly a 
valid idea that warrants further discussion?
    Mr. Spotila. I think it warrants further discussion. I 
think there are concerns that have been raised, they are 
serious concerns and I think they need to be addressed. If 
there is a way to address them, then let's see what that might 
be.
    Chairman Talent. Is there a practical way of measuring the 
cumulative burden of regulations at least per industry? You 
take them on a one-by-one basis now. Is there a practical way 
of sort of adding it up and--I remember, for example, there was 
a period of a couple of years and we just seemed to be, every 
time the restaurant owners turned around they were getting 
nailed with something new and whether by coincidence or 
whatever, is there some way of measuring that on a cumulative 
basis?
    Mr. Spotila. I would say yes or no. Let me explain that. 
When we do individual rules, when a new rule comes in, the EPA 
just put out a rule that affects diesel, the level of sulfur in 
diesel and the like. It will have a huge impact. We looked 
actually at doing a cost-benefit analysis, working with EPA on 
assessing benefits and cost. We look at the baseline. What is 
the impact on the refinery industry, which includes small 
refineries, because there are a lot of things affecting that 
industry now because of other important measures. We actually I 
think do a reasonable job of assessing what the world would be 
like with or without a particular regulation.
    Having said that, if one were to look at the refinery 
industry and say what is the sum total aggregate cost of all 
regulation, Federal, state and local presumably, on the 
refinery industry, I don't think we have that information. I 
don't know that it actually can be done no matter how well 
intentioned we might be. It may not be necessary to do that. By 
that I mean one doesn't have to have a precise number, I think, 
to try to improve decision making, and when one looks at where 
the key priorities would be, what are the big things that are 
affecting that industry, my experience has been if you talk to 
the refinery industry, they will tell you. They will tell you 
what they think has the biggest cost impact and often they will 
tell you what they think makes the least sense, and that is a 
starting point.
    Chairman Talent. Here's another point. I feel strongly 
about this and would be interested in knowing what you think. 
We have mandated the preparation of regulatory impact analyses 
in a number of cases and the executive order does similar types 
of things. But we haven't told the agencies how they are to 
prepare those in any consistent fashion. They each sort of do 
it their own way. Now, there is a precedent for this. In the 
late 70's President Carter had the Council for Environmental 
Quality issue guidance governmentwide on how you prepare 
environmental impact statements. I more and more think as we 
work through rules on a rule-by-rule basis that it would be 
good to have some kind of governmentwide guidance for those reg 
flex analyses or regulatory impact analyses for the things that 
the executive order requires. Do you think it would be 
appropriate for either OMB or maybe Office of Advocacy, and you 
are in a good position because you have served in both the SBA 
and this, to prepare some kind of governmentwide guidelines 
either just as required by the executive branch or for us to 
put it in a statute?
    Mr. Spotila. Actually, there are some guidelines out there. 
That should be the starting point. We have put out guidance for 
benefit-costs analyses, which is the key part of regulatory 
impact analyses. I would be happy to supply that to the 
committee. We actually just amended that guidance recently. The 
Office of Advocacy has put out guidance since it has special 
responsibility for oversight of the Regulatory Flexibility Act. 
It has a set of guidelines that it has put out for the agencies 
that is 80 pages long that tries to help agencies in doing the 
reg flex analyses. I mentioned that that should be the starting 
point because if there is further guidance that is needed, if 
there is clarification that is needed, then we certainly would 
be open to discussing with you----
    Chairman Talent. Staff wrote a note saying it is not 
binding on them. I guess what I am saying, should we do 
something either from an executive standpoint or legislative 
standpoint saying these are the guidelines, you need to follow 
them as you prepare this so we get some uniformity and people 
know what to expect?
    Mr. Spotila. What we are finding from the standpoint of the 
benefit-cost guidelines we put out, we in our centralized 
review of the regulations do ask the agency to follow those. 
Sometimes there are differences of opinion about the 
applications of the guidelines. There are some areas where 
economists differ about how one should treat things. What we 
do, actually do in that regard is ask the agencies to follow 
these guidelines. If there are areas that we recognize where we 
think there is a problem, then we try to do more. I would leave 
that open. That is to say if there are areas that you or other 
members of the committee feel need to be enforced, I think that 
is a starting point. That is even before one would look to 
codify it in law.
    Chairman Talent. I am going to wrap it up. I appreciate 
your testimony. I just----
    Ms. Velazquez. I just have----
    Chairman Talent. I would be happy to recognize the 
gentlelady.
    Ms. Velazquez. We are here to see what is working and what 
is not working. Previously you mentioned that there has been a 
cultural change, OSHA, EPA, and again the chairman asked a 
question about the panel review process regarding IRS, if we 
should extend it to include the IRS, and you raised the issue 
of confidentiality, that that is a major concern. But isn't it 
true also that SEC has an issue of confidentiality and yet they 
participate on the SBREFA panel review process?
    Mr. Spotila. The Securities and Exchange Commission?
    Ms. Velazquez. Yes.
    Mr. Spotila. I don't know that we are involved in exactly 
these types of review panels.
    They may have instituted one on their own that is similar 
to it. I am not that familiar with it.
    Ms. Velazquez. My staff is telling me that they have.
    Mr. Spotila. I would reaffirm what I said earlier that I 
think this is a subject that certainly bears further 
discussion.
    Ms. Velazquez. Thank you.
    Chairman Talent. I was really enlightened by your comments 
about engaging the high level career people, and I think we 
have to from our perspective not think of this as necessarily 
an adversarial type thing where the mid level and high level 
career people aren't going to want to do this and we have to go 
out and get them all the time and we have an adversarial 
system. They will probably frustrate any attempts to do it if 
we accomplish that.
    I would ask you in a closing comment what you think of 
this. It is important that they see that, look, this is the 
direction on a unified basis that political authorities want 
them to go because in SBA, whose job after all is to advance 
small business, it is probably much easier to get career people 
to say this would be good for small business because it is part 
of what they view as their core mission. The IRS views their 
core mission as get as much money as they can out of people. 
EPA is regulating for the environment. OSHA is regulating for 
worker safety. We want them to be zealous in pursuit of those 
missions. Unless we really in a unified way say to them we want 
this to be part of your mission to do this in a way that 
engages most small business people, does it--once we do that 
then it seems to me it would be easier to recruit them. If they 
believe by postponing and delaying action, Spotila will go and 
the next guy will come in and we will be able to work around 
him, then we are never going to get their cooperation. You see 
what I am saying?
    Mr. Spotila. Absolutely. Perhaps I can respond with an 
anecdote, a true anecdote, because I think it is an example of 
why I believe so strongly that career employees actually are--
they can be the solution and need to be.
    When we were doing that regulatory reform effort I 
mentioned at SBA where we were trying to streamline all of our 
regulations in 10 months, we had a deadline. We either could 
get the regulations to the Federal Register by a date certain 
or we would miss for a whole year having it published in the 
Code of Federal Regulations. We knew that was very important 
for small business. One of our key senior career employees 
working on the project in kind of an overview fashion was Dave 
Kohler, who is now the Deputy General Counsel, had been there 
for 20 something years and would probably be your classic, if 
you will, career lawyer bureaucrat. You may remember these dark 
days that we had two government shutdowns and then we had a 
huge snowstorm that shut the city down the end of January of 
1996. And Dave was in charge of the final reviews in getting it 
to the Federal Register and the morning of the huge snowfall 
when government was shut down, the guard at SBA's building, 
noticed--he looked out the window and he saw footprints in the 
snow, and it was deep snow, a foot and a half or whatever we 
had gotten and he followed it into the building. He saw wet 
footprints. He was worried from a security standpoint and he 
followed the footprints into the building and found Dave 
Kohler. He lived in Maryland and he rented a hotel room that 
night on his own with his personal expense, rented a hotel room 
so he could walk through the snow the next morning, go to his 
office, finish the job because it had to be at the Federal 
Register the next day and he didn't want to miss it.
    That kind of dedication to me is an example of what we need 
all our people to do and they will respond to leadership when 
they get it.
    Chairman Talent. I will tell you also that the Small 
Business Committee staff during that similar time showed a 
similar amount of dedication in making sure they made it to the 
Irish Times every night.
    We have some good witnesses coming up in the next package. 
You probably need to go but I hope somebody from your office--
--
    Mr. Spotila. I am going to leave someone from my office 
here.
    Chairman Talent. Because you'll hear exactly the kind of 
thing we hear all the time and all these trends that I have 
mentioned to you, you are going to hear coming--and this is 
not--the eerie thing about it to me is none of them are going 
to be talking about areas where there is some political 
imperative that is moving the political actors to do something 
that may be difficult for small business. In each case it is 
like--well, it is HUD, it is FAA, it is late night safety at 
convenience stores with OSHA. It is not stuff that is hot 
political topics. It is just cases where small business people 
really feel very insecure, and I am glad you are leaving 
somebody from your office and if we do a memo I hope you will 
take a look at it. I appreciate your coming back. I thank you 
for your patience.
    As Mr. Spotila leaves we will have the next panel come up.
    I thank the second panel members for their patience and we 
will begin with the testimony and begin with our former 
colleague, Congressman James Coyne, who is the President of the 
National Air Transportation Association here in Alexandria. 
Jim, thank you for coming.

    STATEMENT OF CONGRESSMAN JAMES COYNE (RET.), PRESIDENT, 
    NATIONAL AIR TRANSPORTATION ASSOCIATION, ALEXANDRIA, VA

    Mr. Coyne. Thank you, Mr. Chairman. It is a real honor to 
be with you today. I have prepared a written testimony which I 
would, with your permission I would like to have submitted for 
the record and perhaps be allowed to summarize any comments a 
little more personally.
    By way of background, the National Air Transportation 
Association might very well be considered the most heavily 
regulated industry in the country and I say that somewhat 
cautiously because before coming to Congress, I was a member of 
the chemical industry and many of the other industries that are 
referred to by the previous witness as being the focus of much 
Federal regulation, but when you think about the burden of 
regulation on small businesses, I submit that the air 
transportation service industry is the most heavily regulated 
industry in the history of the government.
    Every single one of our products have to have a Federal 
certificate to operate. Each of our individual companies 
operate with a Federal license. The vast majority of our 
employees have to have a Federal license to work for us. Each 
of our companies has a full-time Federal inspector who presents 
to us a directory, a manual of how we should operate our 
businesses. In fact, we cannot begin to work until we have 
completed this federally blessed manual, and then finally all 
of these Federal products, Federal employees and federally 
certificated companies operate in a federally controlled 
airspace system where literally each and every one of our 
actions has to be taken only after a Federal employee approves 
it. So I truly submit that we are the most heavily regulated 
set of businesses in the country.
    And you asked me very pointedly some specific questions 
that I would like to address as simply as I can. Besides being 
the most heavily regulated industry by the Federal Government, 
I think we are also the one where those regulations produce the 
greatest negative benefit because when you think about what 
aviation is, we are in the business of saving time for our 
customers. That is what we sell. We sell time because our 
transportation, speedy transportation is designed to save time 
and when our regulatory burden creates delays, creates 
inefficiencies, it not only adds to our costs but it degrades 
the ability of us to meet the needs of our customers.
    Last week many of you saw here in Washington a story about 
an 8-hour delay from a United Airlines flight that came from 
Chicago, supposed to go to Dulles, and people were sitting on 
the ground for 8 hours. Much of that delay in the press was 
alluded to because of weather, but the reality is most of that 
delay was because of a regulatory burden imposed by flight and 
down time limits on that crew. They could not find the crew 
quickly enough and many of those--even though the crew was 
capable of flying, two pilots and so forth, the Federal 
regulations made all those passengers sit on the ground for 
hours and hours and hours. And we are seeing this more and more 
today across the spectrum of aviation.
    I am here to tell you quite bluntly that we are facing 
regulatory gridlock in aviation in the next 10 years if we do 
not relieve the tremendous paperwork and regulatory burden that 
exists on aviation today.
    You have asked me specifically 5 years after President 
Clinton's review of the Code of Federal Regulations has there 
been a reduction or an increase in regulatory burden on the 
member companies in our industry. NATA represents over 2,000 of 
the 10,000 small businesses across America, 99 percent of which 
are classified as small businesses. We are the backbone of 
aviation in America. There is a few dozen large airlines but 
these thousands and thousands of small businesses are really 
what make aviation work in this country, and I would submit 
that if I went to each and every one of those 2,000 member 
companies, I could not find a single one who could honestly say 
that the paperwork burden or the regulatory burden has 
decreased, not one. Every single one of them would say that 
over the past 5 years despite the well meaning intentions of 
the administration, the empathy that we hear from 
representatives from the White House and others about the 
concerns that they have, the sympathy that they give to us, the 
simple fact of the matter is that regulations are increasing 
faster now than ever before.
    If I had to put it in a very simple way, I would say I have 
called many of our members and tried to have them explain it in 
terms of--in ratios that you all might understand. The result 
ranged of course because every company was a little bit 
different, but generally speaking these businesses felt that 
for every hour their planes are in the air, for private charter 
operators, flight schools, small scheduled airlines and others, 
for every hour that they are in the air, the paperwork burden 
alone represents between 2 and 17\1/2\ hours per hour of flight 
time, and this is growing dramatically today.
    You have also asked me very specifically whether NATA has 
noticed that informal regulatory burdens have increased. You 
have really put your finger on perhaps the greatest burden that 
our industry is facing, the informal regulations that come 
under the guise of what the FAA calls handbook guidance. There 
is a lot of oxymorons in Washington these days, but I submit 
that one of them we have to put at the top of the list is the 
concept of a handbook. Handbook should be something that you 
can carry in your hand. Well, there aren't too many people that 
can carry this load of thousands of pages that make up the 
Federal guidance handbook. This handbook today is five times as 
big as it was 10 years ago.
    More and more guidance is coming out of the regulatory 
workforce without giving the industry the opportunity to have 
public hearings or discussions or debates about this guidance 
and, worst of all, this guidance produces not only more 
paperwork but it produces tremendous new delays because at the 
same time that the level of mandatory guidance and regulations 
and paperwork have gone up, the ability of the administration, 
the FAA to turn around that paperwork has declined. We have 
stories of where it has sometimes taken as long as 2 years, 2 
years for the FAA to get back providing answers or returning 
the forms that we have submitted before we can get a 
certificate or a license. This is especially hazardous to the 
aviation community.
    Right now aviation is going through one of the most 
exciting technological revolutions in its history as the 
computer industry has started to produce dramatic new products 
and equipment to go into our airplanes, and yet routinely, 
routinely it is taking between 1 and 2 years for a simple 
operator of an airplane to get this new equipment certificated 
so he can put it in his plane. The FAA has not only the 
paperwork burden but they control the entire timeline of the 
implementation. As that happens, we are flying with less safe, 
less modern equipment and the new equipment is being delayed 
week after week.
    Chairman Talent. So a charter service might want to buy 
some new safety or guidance mechanism for its plane and it has 
to ask the FAA for permission to install that in the planes?
    Mr. Coyne. It has to get a special type certificate 
amendment or supplemental type certificate so that the original 
airplane can be, quote, modified with this new box. The 
modification may be simply taking out an old 30-year-old what 
they call an NDB, for example, an old fashion kind of 
navigational device and replacing it with a new state of the 
art GPS equipment using our satellites, and yet it will take 
literally months and months and months for these new pieces of 
equipment to get the approval to be installed because frankly 
the FAA's inspector workforce is not familiar with this new 
equipment and so their lack of familiarity delays them from 
trying to come up with a procedure to install it, and when they 
do become familiar with it, they don't have the manpower to 
deal with all these locations across the country. We really are 
facing regulatory gridlock.
    You also asked me whether these informal burdens, these 
handbook guidance has increased. As I mentioned before 
dramatically but even more importantly it has led to confusion. 
There is no other word for it out in the real world. We have a 
concept in aviation of course of being able to move our planes 
from one location to another and typically many of our company 
members will have locations in different parts of the country, 
but they are dealing with different FAA regions or FAA 
inspectors in their different regions and in one region the 
inspector will say that it is--the answer is black. In the 
other region the answer will be white. They will have 
completely different interpretations of the rules, and what we 
have ended up doing is something called forum shopping, which 
you have heard of in the legal world, where companies will try 
to find an area that will either give them a favorable ruling 
but most especially give them an answer quickly because more 
and more we are finding these tremendous delays.
    You asked for some specific examples of the abuse we think 
of in our industry. There was some brief discussion of the 
question of fatigue in the highway operators community. This 
has led to a similar regulatory proposal from the FAA this past 
year, something that is called flight and duty time 
regulations, which are proposals to regulate when a pilot can 
work, how many hours of rest he must have before he has gone to 
work, how long his duty day may be and so forth. These 
regulations are being proposed in a ``one size fits all'' 
proposal from the FAA essentially designed to meet the 
objectives of the airline pilots union, who have perhaps 
aseparate economic agenda with regard to these work rules, but 
nevertheless the rules are being promulgated to affect every other 
operator in the country equally.
    For example, a charter, a medical charter pilot who has to 
be there much like an ambulance driver ready to take a sick 
person or an organ transplant literally on a minute's notice, 
these rules are being proposed for those same types of pilots. 
If ever there was an example of apples and oranges, this is it. 
It is as though the Federal Government is saying we are going 
to put the same rules for bus drivers as we are for ambulance 
drivers and that is effectively what has happened. When the 
proposal was submitted for comment, the FAA in their own wisdom 
said we have no idea what the economic impact of this will be 
on the industry. They simply said the impact is unknown, 
whereas we have calculated the impact could be as much as $6 
billion. So we are very strongly concerned that the regulatory 
authority of the FAA is being advanced without giving even lip 
service, even lip service to the responsibility that they have 
to come up with economic justification for the rules that they 
propose.
    In addition, you also asked me to describe any changes that 
are needed in the regulatory process. Frankly, I only have a 
few seconds left but we could go on for hours on this topic. 
One of the obvious changes is to move toward some measure of 
uniformity and public information awareness about 
interpretations of rules both within the promulgated rule body 
and within the guidance. We seem to be ignoring the benefits 
that can come from the computer age in the rulemaking world. 
You and I know that we can go onto most computer sites and get 
frequently asked questions or facts and get answers to the 
things that most ordinary people have about a new software 
program or a new company or whatever, but can you go to the 
Federal Government and ask is there a Web site where we can get 
frequently asked questions answered about a regulatory 
environment? No.
    What could be simpler than to mandate that these Federal 
agencies are required to produce standard answers that apply 
nationwide to the frequently asked questions about the rules 
that all of us have and make it available on the Internet so 
that we don't have to hire a lawyer, that small businesses have 
an easy way to find out what is expected of them so they can 
meet the responsibility. In addition, of course, I think we 
have a tremendous obligation, especially in technologically 
complex rulemaking areas like aviation, to insist--I think one 
of you made the point earlier--that we have people in the 
regulatory workforce who know what they are doing.
    Aviation is a very diverse area, and unfortunately right 
now there is a tremendous shortage of technical people in all 
areas of aviation. Sadly, one of the areas that is losing the 
best people the fastest is the Federal Government inspector 
workforce. Twenty years ago people would be proud to call 
themselves a Federal safety inspector in aviation because that 
would have a certain level of prestige and status and people 
would know that you knew what you were talking about. Today we 
have daily horror stories of people who don't virtually know 
one end of an airplane from another merely coming out to our 
offices to go through reams and reams of paperwork to make sure 
that each box has been checked but not understanding the 
fundamental technical issues that underpin all of this.
    I could go on at great length about my other concerns that 
we have, but I want to commend the committee for undertaking 
this hearing. We have a long ways to go and I hope that we can 
continue this dialogue in the weeks and months ahead. Thanks 
very much.
    [Mr. Coyne's statement may be found in appendix.]
    Chairman Talent. Thank you. That is compelling testimony.
    Our next witness is Mr. Duncan Thomas, who is the President 
and Chief Executive Officer of Q-Markets, Inc., from Richmond, 
Virginia, on behalf of the National Association of Convenience 
Stores. Mr. Thomas.

   STATEMENT OF DUNCAN THOMAS, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, Q-MARKETS, INC., RICHMOND, VA, ON BEHALF OF THE 
           NATIONAL ASSOCIATION OF CONVENIENCE STORES

    Mr. Thomas. Thank you, Mr. Chairman. I will try to give you 
a summary of my testimony which has been submitted.
    As representatives of small business, both the association 
and myself appreciate this opportunity to present our views on 
the regulatory burdens imposed on our industry by the Federal 
Government and on attempts by the Clinton administration to 
reduce some of these burdens. While not directly on point with 
the committee's reauthorization of the Paperwork Reduction Act, 
the National Association of Convenience Stores would like to 
offer related comments on the Small Business Regulatory 
Enhancement and Fairness Act.
    At the onset, let me just offer my general conclusion that 
my cumulative regulatory burdens, as well as those on the 
convenience store operators, have increased since President 
Clinton ordered Federal agencies to reduce the paperwork 
burdens by 25 percent over 5 years ago. Neither the National 
Association of Convenience Stores nor I see the situation 
improving in the near future. Simply put, while some of the 
paperwork requirements may have eased, there is more and more 
that convenience store marketers such as myself need to know in 
order to remain in compliance with the complex array of 
Federal, as well as State and local, regulations.
    EPA and OSHA are just two of the Federal agencies which 
affect convenience store operators on a daily basis. While I am 
sure that others at this hearing will have testified about the 
burdens imposed by the Internal Revenue Service, NACS and I 
echo these views. Convenience store operators also have had to 
deal with new rules over the past few years from the Food and 
Drug Administration, such as restrictions on the sale of 
certain goods, such as No-Doz, that could be used in the 
manufacture of drugs, as well as the Department of 
Transportation's hazardous materials registration program.
    These are just a handful of examples of how regulatory 
burdens affecting Q-Markets and other similar, small 
convenience store operators have increased over the past 5 
years. It is important for the committee to remember that these 
additional mandates do not occur in a vacuum. Our NACS Members 
and others are dealing with a range of other regulatory 
programs, such as compliance with EPA's underground storage 
tanks regulations. All of these regulatory requirements have 
costs that often place me, as well as other small business 
marketers, at a competitive disadvantage when trying to assure 
and maintain compliance.
    As members of the committee know, most compliance is 
demonstrated through keeping and producing records. There have 
been earnest attempts by the Federal agencies to reduce some of 
the paperwork burdens associated with the compliance. For 
example, the EPA recognized that there was little value in 
requiring gasoline retailers to keep the product transfer 
documents for 5 years to demonstrate compliance with the 
agency's new fuels regulations. The agency correctly did 
eliminate this requirement. The DOT is allowing small 
businesses required to register under the hazardous materials 
program to pay the annual fee for several years at a time, 
reducing the time needed to comply and giving a small discount.
    However, such efforts at paperwork reductions have not had 
any significant effect on reducing my company's regulatory 
compliance costs. For example, when I began my company in 1994, 
I filled out all the necessary paperwork myself or in-house. 
Since that time, my managers spendan additional two hours per 
week filling out paperwork. I also have been forced to hire an outside 
agency to assist my company with recordkeeping at an annual cost of 
$3,000 per store. For my 10 stores that is at least 1,000 additional 
hours and $33,000 that I did not have to incur 6 years ago. These 
totals do not include my personal time in reviewing and sitting with 
the various outside organizations and signing these forms. My personal 
per store average is typical for other NACS members like me.
    To assist its petroleum marketer members, NACS compiled its 
petroleum marketers' book of Federal compliance forms, which I 
have right here. This book includes all forms which petroleum 
marketers need to fill out in order to assure compliance with 
Federal regulations. This book has nearly 300 pages and it 
includes 46 forms. And that is a fact, we counted. When you 
look at the index page, it includes 46 forms. However, to fully 
understand and properly fill out these 46 forms, one must read 
hundreds and hundreds of pages of supporting materials, 
including the rules themselves.
    Informal regulatory burdens have also increased for 
convenience store operators like myself. This really is a 
double-edged sword. On one side, the EPA and OSHA and other 
Federal agencies are making good faith efforts to assist small 
businesses in understanding and complying with regulations. 
These agencies publish plain English guidance and other 
documents to simplify what I need to know about compliance. EPA 
often asks NACS to review and comment on the drafts.
    Chairman Talent. Excuse me a second. Would you just mind if 
I could take a look at your handbook there.
    Mr. Thomas. Yes.
    Chairman Talent. Thank you. I want to take a look at one of 
these. Go ahead.
    Mr. Thomas. EPA often asks NACS to review and comment on 
the drafts. The Internet has made access to these materials 
faster and cheaper. NACS would give most Federal agencies high 
marks for these easier to read materials. However, despite such 
compliance assistance, it still remains necessary to read the 
rules in their entirety.
    On the other side, there are concerns that guidance 
documents and similar materials are being substituted for 
traditional notice and comment rulemaking or are establishing 
standards of care that can be used against the small business 
in lawsuits. For example, OSHA's guideline on late night 
retailing is not a regulation. However, OSHA can use the 
guideline for an enforcement action under the agency's general 
duty clause. Moreover, the guideline can be used as evidence of 
industry practice if I were to be sued in a tort or wrongful 
death action, even though the document has been widely 
criticized by the convenience store industry.
    It is difficult to answer the committee's question on 
whether facility inspections have increased. Many of the 
Federal regulations affecting convenience stores are enforced 
by State and local governmental officials. The levels of 
enforcement vary widely among the States. Small businesses like 
mine, who have spent considerable sums to comply with the law, 
support even-handed and consistent enforcement. Unfortunately, 
this is not the case in some regulatory programs.
    EPA's underground storage tank program is a case in point. 
The agency relies primarily on State enforcement laws. It was 
recently reported that just the State of New Jersey had some 
170 tanks that were not in compliance with the December 22, 
1998, requirement to upgrade. Yet at the same time the State 
itself imposed huge penalties on small petroleum marketers who 
missed the deadline. When questioned, the State said that it 
did not need to penalize itself because there was no deterrence 
value. What happened to the protection of the environment? 
There is no difference when the State's tank leaks compared to 
one from a convenience store operator's tanks.
    In terms of improving the regulatory process NACS has two 
suggestions to make. First, the association has been a long-
standing advocate of the Small Business Regulatory Enhancement 
and Fairness Act. NACS has been involved with numerous panels 
convened by EPA. While this act has led to the greater 
sensitivity to small business regulatory impacts, the process 
is far from perfect. These panels and reviews should be 
required at the outset of any rulemaking.
    It is NACS' opinion that by the time most of these panels 
are convened EPA staff working on rulemaking are already well 
entrenched with their opinions on the regulatory options. 
Sadly, much of this process simply becomes throwing a bone to 
small business.
    Many of the panels only address what I would call the Tier 
I impacts. For example, under EPA's diesel fuel desulfurization 
rule, the agency focused on regulatory impacts on small 
refineries, who would be required to make substantial equipment 
upgrades. There should also have been a substantive review for 
the Tier II, such as supply storage issues for small businesses 
like mine that retail the gasoline and fuel.
    Second, as part of the Paperwork Reduction Act Federal 
agencies should be required to identify complementary or 
conflicting reporting forms and justify why these forms cannot 
be consolidated when seeking renewal of control numbers from 
the Office of Management and Budget. A similar process should 
be imposed on permit applications. Given the increasing and 
widespread use of the Internet, there is no reason why many of 
these forms and applications cannot be combined and streamlined 
and then the data can be used in the relevant agency's program.
    From Q-Markets' paperwork experience, as I mentioned 
earlier, the annual burden on the convenience store industry is 
significant and expensive. While the computer software and the 
Internet have made many routine tasks simpler and easier to 
track, the convenience store industry has not seen an 
improvement since 1995. If anything, some of the efforts by the 
Federal agencies may have merely slowed the rate of increase in 
overall regulatory burdens.
    In conclusion, Mr. Chairman, NACS and I believe a mixed bag 
exists on the questions posed by the committee for this 
hearing. While there have been good faith and actual efforts to 
reduce paperwork burdens generated by federally mandated 
regulations, they have not made a dent. The larger problem 
remains that the flow of new regulations has not let up for the 
convenience store industry. There simply is more to know about 
and this leads often to confusion, inadvertent noncompliance 
and considerable expense. The association recommends changes to 
the Small Business Regulatory Enhancement and Fairness Act and 
the Paperwork Reduction Act to keep the process of burden 
reduction moving in the right direction.
    It has been a privilege to share NACS' and my views with 
the committee, and I will be happy to answer as many questions 
as you might have. Thank you. [Mr. Thomas' statement may be 
found in appendix.]
    Chairman Talent. It looks like you would have to actually 
fill out most of those forms except the tax forms, which I can 
see that maybe you wouldn't have to fill out all those. It 
looks like you have to fill out most of these forms.
    Mr. Thomas. That is correct, Mr. Chairman.
    Chairman Talent. The next witness, Mr. Kenneth O. Selzer of 
the Kenneth O. Selzer Construction Company, Cedar Rapids, Iowa, 
and he is testifying on behalf of the National Association of 
Home Builders. Thank you, Mr. Selzer.

STATEMENT OF KENNETH O. SELZER, KENNETH O. SELZER CONSTRUCTION 
CO., CEDAR RAPIDS, IA, ON BEHALF OF THE NATIONAL ASSOCIATION OF 
                         HOME BUILDERS

    Mr. Selzer. Good morning, Mr. Chairman and members of the 
subcommittee. My name, as you mentioned, is Kenneth O. Selzer. 
I am owner of Kenneth O. Selzer Construction and four related 
real estate companies and have been in the home building 
business since 1954. I have served as President of the Greater 
Cedar Rapids Area Home Builders Association and the Home 
Builders Association of Iowa. I have also served as an Area 10 
national vice president of the National Association of Home 
Builders, of which I have been a member since 1976, and am 
currently an NAHB Life Director and member of the Federal 
Governmental Affairs Committee. Thank you for giving me the 
opportunity to testify on an issue of great importance to the 
home building industry, regulatory barriers and their impact on 
housing affordability.
    NAHB and its 200,000 members believe that homeownership is 
the cornerstone of family security, stability and prosperity. 
It strengthens the Nation by encouraging civic participation 
and involvement in schools and communities. It provides a solid 
foundation from which Americans can work to provide for their 
families, enhance their communities and achieve their personal 
goals, and yet it continues to be besieged by a torrent of 
government regulation.
    The common notion of a home builder tends to be that of a 
high volume constructor, someone who can spread production and 
regulatory costs across many projects. This is simply not true. 
Over half of NAHB's members build fewer than 10 homes per year 
and close to 75 percent build 25 or fewer homes or less. 
Myself, I never had more than four employees and the most homes 
I ever built in 1 year was five. A typical NAHB member firm is 
truly a small business employing less than 10 workers.
    So while low interest rates and a booming economy have 
contributed to the recent growth in homeownership, many 
families are still denied the opportunity to buy a home 
because, despite reform efforts, no growth policies and regular 
costs of home building are expanding and pushing housing 
further out of the reach of thousands of Americans. Right 
today, about 25 percent of the people who bought a home 10 
years ago would get in their car and drive around the block and 
come home. With today's income, today's cost of that home, they 
could not afford the home that they are living in today.
    Most Americans do not fully realize the extent to which 
overregulation drives up new home prices. The issue is complex 
and difficult to quantify, and the impact of regulation can 
vary significantly even within the same State or region. Yet, 
government at all levels continues to blanket every aspect of 
the housing industry with layers of regulation. This is not to 
say of course that housing or any other industry should be left 
completely unregulated. What we need are sensible, appropriate, 
balanced guidelines at all levels of government. At home right 
now, the town I live in, our building inspector for the last 10 
years mowed grass and cleaned sewers. Now he is inspecting 
construction, plumbing, heating and electrical, and he is the 
authority. We need to identify unnecessary and repetitive 
regulation, eliminate them and make sure the new regulations 
are absolutely necessary before they are proposed. It is clear 
that without a serious effort to make sweeping changes in the 
way that construction of new homes is regulated costs will 
continue to rise, stifling the ability of builders to provide 
affordable housing and expand homeownership opportunities for 
families throughout the country.
    NAHB appreciates your interest in addressing this issue, 
Mr. Chairman, and we are pleased to present testimony before 
you and your committee today.
    Efforts to reform the regulatory process in the U.S. are 
not new. Unfortunately, in many instances, past attempts have 
only led to increased layers of regulation and more 
bureaucracy. While the building industry recognizes the need 
for certain regulations, we believe that even the most 
necessary regulations should be administered in a fair and 
efficient manner. Over the last several years, as increased 
Federal regulations have been layered upon existing State and 
local requirements, the cost of regulation has been 
increasingly felt by the new home buyer.
    An NAHB survey, conducted in the summer of 1998, found that 
about 10 percent of the cost of building a typical new home can 
be attributed to unnecessary regulation and regulatory delays, 
fees associated with building, plumbing, electrical, and tree 
removal permits, disposal of construction wastes. This one has 
just gone off the chart for the cost of disposing of material 
from the site. We are no longer allowed to burn it on site as 
we had for many years. In fact there are some 60 categories of 
fees and regulations altogether. In some highly regulated 
markets the costs can total 20 percent or more of the sales 
price of a typical home.
    In addition to increasing fees, builders also face 
obstacles such as increasingly stringent design codes, the 
latest being the change in the rise in the run in stairways. It 
has eliminated every plan that we know for the last 100 years.
    Chairman Talent. Let me just ask you to suspend for a 
minute. Here is what I am going to suggest because I want to be 
certain we have time for questions. I read your testimony last 
night, and I commend it to all the members of the committee. I 
really want the committee to focus on what you have to say 
about wetlands regulation. Would you do me a favor and skip to 
the wetlands part of your testimony? It is a page or so ahead 
of where you are now, and it isn't that the rest isn't 
important. That is mostly local stuff. It is important the 
committee understand that what we do federally is on top of all 
this stuff locally, which for home builders particularly is 
very significant, but I want the committee to hear what is 
going on with wetlands regulation and the history of that. So 
you have about three or four pages on that. I want to be 
certain we hear that. Would you skip to that, please?
    Mr. Selzer. I would be happy to do that. Wetland 
regulation. A striking example of burdensome regulation is the 
wetlands permitting process, which has become increasingly 
onerous over the years. In fact, NAHB feels so strongly that 
the Corps', referring to the Army Corps of Engineers, new 
restrictions are unfounded and will result in a bloated 
bureaucracy rather than a streamlined permitting process that 
we have had to resort to legal action against the Corps. This 
action comes as a last resort after many attempts to find a 
reasonable solution to the conflict between a workable 
permitting process and the reach of Federal regulators.
    Here is some background on the issue. Section 404 of the 
Clean Water Act requires permits for the discharge of dredged 
or fill material into waters of the United States, a definition 
regulators have steadily expanded to include wetlands. Wetlands 
are defined broadly to include countless isolated pockets of 
land that oftentimes are too dry to meet the common sense 
definition of the word ``wetlands.'' .
    The U.S. Army Corps of Engineers and the Environmental 
Protection Agency jointly administer the program. The Corps 
issues the permit, while EPA maintains an oversight with power 
to veto any permit.
    There are two kinds of permits available under the section 
404 program: Individual and general. Individual permits are 
issued for a specific activity in a specific location. 
Individual permits require extensive scrutiny, the preparation 
of reports and the completion of an alternatives analysis. 
Individual permits typically take over a year to obtain. That 
would be very fast to get one in a year. General permits on the 
other hand are meant to provide an expeditedpermitting process. 
These permits allow developers around the country to perform similar 
activities without the delay that usually accompanies the issuance of 
individual section 404 permits.
    In 1977, the Nationwide Permitting Program, NWP, became 
part of the Clean Water Act under the 1977 Clean Water Act 
amendments, showing that Congress endorsed the program as a way 
to provide administrative efficiency in activities that have 
minimal environmental impact. The most common nationwide 
permits used by the development industry are 12, this covers 
utility lines; 14, minor road crossings; 26, filling of 
isolated or headwater wetlands which are unconnected to rivers, 
streams and waterways. The earliest version of 26 allowed 
discharge in up to 10 acres of wetlands.
    In 1978, the Corps removed the acreage limitation on NWP 26 
as a result of President Carter's executive order to make 
regulations less burdensome. Almost immediately, the National 
Wildlife Federation filed suit against the Corps, arguing that 
removing the acreage limitation would harm the environment.
    In 1982, as a result of that lawsuit, the Corps issued new 
regulations: The maximum acreage limitation of 10 acres was 
reinstated; agencies such as the U.S. Fish and Wildlife 
Service, the Environmental Protection Agency and the National 
Marine Fisheries were required to be part of the decision 
making process; the builders and developers using NWP 26 were 
told to file a predischarge notification with the Corps 20 days 
prior to filing for fills between one and 10 acres.
    In 1996 the use of NWP 26 was modified again: Acreage 
limits were reduced to between one-third of an acre and three 
acres; predischarge notification was increased to 45 days; 
wetland mitigation was made mandatory--if you have a question I 
will explain that--26 could not be used in tandem with any 
other NWPs. The Corps also announced that NWPs would be phased 
out and would be replaced with a set of so-called successor 
permits in 1998.
    In 1998 the Corps announced a series of activity-based 
wetland development permits or successor permits to 26. One of 
the more notable permits allowed some limited flexibility on 
wetlands fills in master-planned communities which utilize 
considerable environmental and land use planning. Soon after 
its introduction, however, the Corps revoked the master-planned 
permit. The Corps also placed restrictions on the use of NWPs 
in flood plains and certain waters of the U.S.
    On July 21, 1999, the Corps published in the Federal 
Register a notice of intent to issue five new and six modified 
NWPs to replace the existing 26 when it expires.
    In the fiscal Year 2000 Energy and Water Development 
Appropriations bill, Congress required the Corps to complete a 
study of the change in permitting workload and regulatory costs 
that would result if the replacement package, as proposed, were 
implemented.
    They estimated that the cost would be about $48 million 
annually, which NAHB believes is a gross underestimate. These 
direct costs reflect out of pocket expenses incurred by the 
regulated community to complete permit applications and comply 
with permit conditions. The replacement package would also 
impose indirect or opportunity costs on the regulated community 
that are not reflected in the out-of-pocket expenses.
    In addition, the Corps analysis indicates the average time 
it takes the Corps to process an SP--SP is a standard permit--
application and the number of the end-of-year pending, that is 
the backlog they haven't gotten to, applications awaiting Corps 
processing would rise steadily each year under the replacement 
package.
    Nevertheless, on March 2000, the Corps announced new and 
modified NWPs to replace NWP 26 as well as some notable new 
restrictions, including one-half acre limit on the use of most 
new and modified nationwide permits and a preconstruction 
notification requirement on any activity affecting more than 
one-tenth of an acre, all of this despite a lack of evidence to 
substantiate the need for the new acreage limits to protect 
wetlands.
    That pretty well summarizes up the wetlands problem.
    [Mr. Selzer's statement may be found in appendix.]
    Chairman Talent. What I would like to do, Mr. Selzer, is in 
the interest of time just to commend to the members of the 
committee the housing impact analysis in your testimony, an 
idea which agencies would have to consider the impact of new 
regulations on homeownership, which was incorporated in the 
bill the House passed almost unanimously earlier this year, and 
thank you for your testimony.
    I would like to make certain we have plenty of time for 
questions, and if I could start I would like to start with the 
wetlands. Now you are a developer?
    Mr. Selzer. I have done some developing. Only in one 
instance was I involved in this. I backed off and used an 
engineering firm named Hall and Hall. The two people in the 
agency that I worked with was Monica Wannamuk and Ubo Agena. 
They worked very little with me but they worked directly with 
my engineers, and what we were doing is taking the top of the 
hill out of a wetland when the bottom of the hill was not in a 
wetland.
    Chairman Talent. Give me an idea of how this works. Let us 
take a typical home builder. Let us say that he gets six or 
seven acres of land, he wants to put in some houses, okay. Now 
the problem occurs, does it not, when some part of that parcel 
he finds is a wetlands? So how much of it has to be a wetland 
before it triggers these permit applications?
    Mr. Selzer. One-tenth of one acre.
    Chairman Talent. And what is the working definition of a 
wetlands that you use in the home building business? How do you 
know something is a wetland?
    Mr. Selzer. If it has nonpoint water.
    Chairman Talent. So it has water standing on it, if it is 
wet part of the year; is that right?
    Mr. Selzer. Part of the year.
    Chairman Talent. How many days does it have to be wet?
    Mr. Selzer. In 1993 our area normally gets 36 inches of 
rain. In nine months we got 85 inches of rain. The entire State 
was a wetland by this definition. You couldn't build a house 
any place.
    Chairman Talent. I have heard that said, that my backyard, 
for example, would be a wetland. I have a third acre lot and 
the backyard's kind of wet a lot of times. Is that really true? 
It is funny as a joke. Is it true? I mean the average 
development that a developer tries to undertake with a 
property, is it likely that he or she is going to have a 
wetlands on that property?
    Mr. Selzer. No. The prudent builder before they purchase 
the land would investigate to see if there's a wetland on it.
    Chairman Talent. And of course would not develop it if 
there is a wetland on it?
    Mr. Selzer. No. Just due to the time and efficiency and 
cost of money they would stay away from it. They would go to 
more expensive land to buy, which I suppose tit for tat runs 
the cost up just as much.
    Chairman Talent. So as a practical matter, there is not a 
whole lot of people out there even bothering to go through 
this?
    Mr. Selzer. Not anymore. They are struggling with it, but 
when we get down to Louisiana, Mississippi, Florida, it is a 
huge problem there compared to Iowa. Under the wetland 
regulations, Washington, D.C., would not be sitting here.
    Chairman Talent. It would be a wetland, wouldn't it? 
Suppose you had eight or 10 acres you were trying to develop 
and let us say a tenth of an acre was a wetland. Could you in 
developing that property leave that area undeveloped and then 
not have to go through the permit process, I mean build houses 
around it but that is the retaining pond or something like 
that?
    Mr. Selzer. You could do that or you could do what I 
alluded to, the mitigating problem. I could go over to Joe over 
here, I could buy a tenth of an acre of wetland that is going 
to forever and ever and ever be a wetland, then get permission 
to fill mine in because I have replaced it with another.
    Chairman Talent. But you would have to go through the whole 
permitting process then to do that?
    Mr. Selzer. Oh, absolutely, sir, yes.
    Chairman Talent. I am trying to figure out how you get 
around that permitting process. I guess you just don't develop 
that. If you have got a little piece of wetland in the middle 
of a development property and you leave it alone, you don't 
develop that, are you safe then? Or do you have to get a 
permit? Does anybody know?
    Mr. Selzer. As long as you have the Army Corps of Engineers 
they will designate the wetland and you can stake around that 
so you stay out of it.
    Chairman Talent. But you have got to go to the court to get 
them to do that?
    Mr. Selzer. Oh, yes.
    Chairman Talent. If you are just developing dry land, you 
don't have to go to the court, do you? You just develop it 
then, right?
    Mr. Selzer. Well, dry land sometimes is called wetland. 
That is the bugger.
    Chairman Talent. All right. That has got to be different 
than what the Congress intended, doesn't it? I suppose--I 
wasn't here when they passed that originally. I suppose 
probably people were thinking of like the Everglades. Were you 
here when the thing passed?
    Mr. Coyne. No. That was shortly after mine, but I was at 
the White House at the time and followed it pretty closely. I 
think you are right. I think the intention was much more 
restricted. George Bush's view of the wetlands were really 
places that were wet all year around and had duck life and 
things like that.
    Chairman Talent. Part of the ecosystem of some body of 
water is really what was thought of.
    Mr. Coyne. And has been expanded by the Army Corps.
    Chairman Talent. Let me move to you, Congressman Coyne, 
because with the first panel I went into great length about my 
concern over the elimination of laws. In other words, you have 
regulations but you don't have laws. That is really what you 
are talking about with this handbook thing, isn't it?
    Mr. Coyne. Absolutely. I could give you hundreds and 
hundreds of examples where the FAA has really created a new 
regulation, you know, without going through the mandated 
regulatory process, giving those of us in the industry an 
opportunity to say that is wrong for at least my part of the 
industry.
    A good example might be a handbook regulation that is 
developed for an airline operator or an airline manufacturer, a 
huge company, and yet that handbook regulation is then applied 
on the field to companies that have two or three or four 
employees, and if it had gone through the normal regulatory 
process, we would have had the right to question the 
justification of the rule that broadly, and more than likely 
the FAA would have exempted certain categories of companies 
from the application, but when it is done in the handbook, it 
is not only done in sort of the stealth of night but it is also 
done in a way that the handbook, the inspectors out in the 
field feel a kind of authority that really doesn't belong to 
them. It gives them a kind of almost Gestapo right to go in and 
say this is my handbook and I will do whatever I want with it. 
It is a very frustrating environment.
    Chairman Talent. Have you ever sued on behalf of your 
members to challenge this overall process? If not, why not?
    Mr. Coyne. Well, in my own case, it is largely because I 
really don't believe that the litigation route is the right 
way. It really fundamentally gives to the courts a 
responsibility that belongs with our legislatures and I would 
believe and hope to continue to believe that our legislatures 
will look at this and exercise the appropriate legislative 
authority that they have to expedite--now, we have made appeals 
within the FAA from time to time on the most egregious 
examples, but lots of times we just don't know about them 
because as you can see this is so mammoth that it is really 
hard to know.
    Chairman Talent. And of course, your individual members, 
first of all, it is very costly to sue, it is time consuming to 
sue, and secondly, you mentioned something in your testimony 
that I want to bring up for the record and did not bring up 
during the first panel and probably should have. There is also 
a fear about suing, isn't there, because if you sue the FAA, 
that same inspector is back the next month and he is not 
appreciating being sued over his decision, is he?
    Mr. Coyne. Not even a question of being sued, if you just 
try to go to the level up, I mean I was interested by your sort 
of philosophical discussion with the earlier panel, as though 
this was all being debated in a college seminar, but in the 
real world, no matter how intelligent the people here in 
Washington might be and how open minded and speaking all the 
right empathetic, we want to work, out in the field there are 
some petty bureaucrats, there is just no doubt about it, who as 
soon as they find out you have gone over their head to 
Washington to try to overturn something, then you have a bull's 
eye in the back of your wallet for the rest of your life.
    Mr. Selzer. That is what I was referring to as the local 
building inspector at home. I forgot more than that man will 
ever know, and when he came on a job and picked up a nail and 
asked me is this a 16 penny spike, I told him if he didn't know 
what the hell a 16 penny spike was he didn't have any business 
inspecting my work, which was probably a very ignorant thing to 
do but----
    Chairman Talent. Maybe a little impolitic to say that, Mr. 
Selzer. All right. I will recognize the gentlelady from New 
York.
    Ms. Velazquez. Thank you. Congressman Coyne, I don't need 
for you to answer this question because you answered it before. 
I would like to ask the other two gentlemen. You have all 
mentioned regulations that you felt were burdensome or 
obsolete, and I am sure that you are aware but I know that if 
you are not the association that you represent or belong to 
are, that under the Administrative Procedures Act you are 
allowed to request review of any regulation that has an impact 
on your business. To your knowledge, have you or your 
association or any member of your association requested such a 
review on any regulation of any of the agencies?
    Mr. Selzer. Well, on the Paperwork Reduction Act I used to 
do a lot of FHA and VA building, and one day I was a little bit 
tired of the paperwork and I called in and asked where do I 
send this to. Nobody could tell me where to send it. They said 
you have to fill it out. I said, well, what do I do with it 
then. Well, then you turn it in. Who do I turn it in to? To 
this day they have notanswered where I send it. The only thing 
they know is you do the paperwork and if we want it we will get ahold 
of you.
    Ms. Velazquez. Are you aware of any formal requests from 
your association to a specific agency regarding a regulation?
    Mr. Selzer. On wetlands, yes. On wetlands we have asked 
them.
    Ms. Velazquez. What was the outcome?
    Mr. Selzer. It is still up in the air. We haven't got a 
finalization on it.
    Ms. Velazquez. Mr. Thomas.
    Mr. Thomas. I am not aware of any particular one but I will 
look into that, and we do have opportunities I am aware of that 
we have. Several times we have raised and asked questions and 
there are several instances that we have been able to present 
our concerns and our views and as an association have done 
that.
    Ms. Velazquez. Mr. Selzer, representing New York City, I am 
very concerned about the lack of affordable housing. So when 
you spoke about the fact that regulations account for 20 
percent of the cost to new homes, really I got concerned. Could 
you provide this committee with where the estimate came from, 
the 20 percent? How can you come up to that number?
    Mr. Selzer. It goes all the way back to the start of the 
timber industry being regulated, the Canadian import duty, 
which I think is wrong. We pay more for the lumber because 
after you get 14 billion feet in from Canada you pay a higher 
import duty so you pay more for that right there. It takes 
tremendous energy to burn cement in its process. They are being 
regulated because they are dirty, they are raising the cost of 
cement. Insulation, it takes tremendous heat to burn 
fiberglass. They are being regulated tremendously. Fiberglass 
is going up. Sheetrock has better than tripled in price due to 
regulations. So every component part coming into the house from 
its inception is being regulated and the ultimate consumer pays 
the bill.
    Ms. Velazquez. Sir, out of the 20 percent what percentage 
is related to State regulations?
    Mr. Selzer. To safety regulations?
    Ms. Velazquez. No, to State regulations.
    Mr. Selzer. To State regulations. There would be more. On 
local government, it is time delay. You buy this piece of 
ground, you go in to get it rezoned, it takes six, eight, 10 
months, then it takes three readings. You have to start in July 
so you are ready by spring. If you start in spring, you are 
ready in December. We have to protect the 46 inches of frost in 
Iowa. You lose the whole winter then.
    Ms. Velazquez. So 20 percent is a big number, but I would 
just like for you to help me to understand how much of that 
percentage, because this has a big impact on the cost of 
housing, how much is related. Half of that 20 percent is 
related to State or local regulations or what?
    Mr. Selzer. It is probably half and half, half related to 
State and local regulations, impact fees for hooking on to 
sewers. You have to pay to hook on to a sewer but in the last 
10, 20 years the cost of hooking on to a sewer has gone up 
maybe 20 times what it was before and yet the line is still 
there.
    Ms. Velazquez. The 20 percent was as a result of a study 
that was conducted?
    Mr. Selzer. Yes. It was a survey and 52 percent of the 
people that received the survey responded, and we felt that 52 
percent was a big enough representative that we could use it.
    Ms. Velazquez. Thank you. Congressman Coyne, I share your 
pain with the three handbooks that you have there. I just would 
like to ask you, to the best of your knowledge, does the FAA 
have a small business office or some kind of ombudsman that 
helps some of the 10,000 small businesses in this field?
    Mr. Coyne. Not to my knowledge, no.
    Ms. Velazquez. And I think the chairman and I would agree 
that these type of offices have been successful in helping 
small businesses like the small business office, business 
affairs at the IRS. Would you think that this type of office 
could be of any benefit?
    Mr. Coyne. Well, you know, it sounds like it might help but 
there is a tendency within bureaucracies for offices like that 
to really not have much power, and the question is how much 
authority it would have. I have seen agencies create special 
offices at the direction of Congress, and then I have seen the 
entrenched bureaucracy, which we were talking about before, 
essentially give those people only lip service, and I would be 
concerned, but if the top management--I mean, this is the issue 
you were raising before--if the top management really felt that 
these concerns of small business were a priority of theirs and 
were directed in that way, either from the White House or 
Congress, then I think that agency would be improved if it had 
that kind of small business ombudsman.
    Ms. Velazquez. But in the process don't you think that if 
you have someone there that would help alert top management 
that a regulation is having an impact?
    Mr. Coyne. It is a positive step. We feel there has got to 
be an appeals process within the FAA to go to when you feel 
that the concerns of small business have been ignored. It 
doesn't exist now, and we have recommended that in my written 
testimony, but I don't want to say that this is a panacea 
because the instincts of a bureaucracy is to grow and to 
basically have the view that every problem can be solved with 
more regulation. This is endemic in our society today, and I 
worked in the Reagan White House 15 years ago directing 
something called the Office of Private Sector Initiative, and 
President Reagan had the view that a lot of the problems that 
are presented to the Federal Government as needing new rules 
maybe don't need a new rule after all, that the private sector 
on its own could in fact develop solutions, and I think that is 
in fact as true today as it was then.
    Ms. Velazquez. Thank you, Mr. Chairman. I don't have any 
other questions.
    Chairman Talent. Well, that is all I have, too, and I 
appreciate your patience and your explanations and thank the 
committee for its patience as well and I will adjourn the 
hearing.
    [Whereupon, at 1:55 p.m., the committee was adjourned.]

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