[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 102-000 deg.
RED TAPE REDUCTION: IMPROVING THE COMPETITIVENESS OF AMERICA'S SMALL
MANUFACTURERS
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC, MAY 19, 2004
__________
Serial No. 108-65
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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COMMITTEE ON SMALL BUSINESS
DONALD A. MANZULLO, Illinois, Chairman
ROSCOE BARTLETT, Maryland, Vice NYDIA VELAZQUEZ, New York
Chairman JUANITA MILLENDER-McDONALD,
SUE KELLY, New York California
STEVE CHABOT, Ohio TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina ENI FALEOMAVAEGA, American Samoa
SAM GRAVES, Missouri DONNA CHRISTENSEN, Virgin Islands
EDWARD SCHROCK, Virginia DANNY DAVIS, Illinois
TODD AKIN, Missouri GRACE NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia ANIBAL ACEVEDO-VILA, Puerto Rico
BILL SHUSTER, Pennsylvania ED CASE, Hawaii
MARILYN MUSGRAVE, Colorado MADELEINE BORDALLO, Guam
TRENT FRANKS, Arizona DENISE MAJETTE, Georgia
JIM GERLACH, Pennsylvania JIM MARSHALL, Georgia
JEB BRADLEY, New Hampshire MICHAEL MICHAUD, Maine
BOB BEAUPREZ, Colorado LINDA SANCHEZ, California
CHRIS CHOCOLA, Indiana BRAD MILLER, North Carolina
STEVE KING, Iowa [VACANCY]
THADDEUS McCOTTER, Michigan
J. Matthew Szymanski, Chief of Staff
Phil Eskeland, Policy Director
Michael Day, Minority Staff Director
(ii)
C O N T E N T S
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Witnesses
Page
Graham, Hon. John, Ph.D, Administrator, Office of Information and
Regulatory Affairs, Office of Management and Budget............ 4
Arnett, Mr. John, Government Affairs Counsel, Copper & Brass
Fabricators Council, Inc....................................... 14
Mason, Mr. B.J., President, Mid-Alantic Finishing................ 16
Bopp, Mr. Andrew, Director of Public Affairs, Society of Glass
and Ceramic Decorators......................................... 19
Appendix
Opening statements:
Manzullo, Hon. Donald A...................................... 30
Velazquez, Hon. Nydia........................................ 33
Tiahrt, Hon. Todd............................................ 35
Prepared statements:
Graham, Hon. John, Ph.D, Administrator, Office of Information
and Regulatory Affairs, Office of Management and Budget.... 39
Arnett, Mr. John, Government Affairs Counsel, Copper & Brass
Fabricators Council, Inc................................... 42
Mason, Mr. B.J., President, Mid-Alantic Finishing............ 54
Bopp, Mr. Andrew, Director of Public Affairs, Society of
Glass and Ceramic Decorators............................... 61
(iii)
RED TAPE REDUCTION: IMPROVING THE COMPETITIVENESS OF AMERICA'S SMALL
MANUFACTURERS
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WEDNESDAY, MAY 19, 2004
House of Representatives,
Committee on Small Business
Washington, D.C.
The Committee met, pursuant to call, at 2:34 p.m. in Room
2360, Rayburn House Office Building, Hon. Donald Manzullo
[Chairman of the Committee] presiding.
Present: Representatives Manzullo, Chabot, Velazquez,
Christensen and Tiahrt.
Chairman Manzullo. Good afternoon. We had a series of five
votes and so we are running late. We were advised that it will
be at least three hours before the next series of votes and we
should be out of here way before then.
Good afternoon. I want to especially welcome Dr. John
Graham, the Administrator of the Office of Information and
Regulatory Affairs or OIRA for being here to discuss the review
of manufacturing regulations. The initiative addresses an
often-lamented but rarely examined issue--the regulatory
burdens facing America's manufacturers and, in particular, its
small manufacturers.
Recent economic indicators demonstrate that the President's
economic policies are having a positive impact on
manufacturing. Production is up and firms have even begun to
hire new workers. But more must be done to ensure that the seed
of recovery in America's small manufacturers takes firm hold
and grows long. To do that, America's manufacturers must
maintain their edge in productivity and competitiveness against
firms throughout the world.
Yet, that remains markedly difficult when the regulatory
regime is far more complex and daunting than those in many
other parts of the world. The approximately 22 linear fee of
the Code of Federal Regulations is just the starting point for
regulatory compliance. Agencies then issue hundreds of
thousands of pages of supposedly ``non-mandatory'' guidance
documents. Further complicating the situation is the continued
updating and issuance of new regulations and guidance. And
while not all regulations and guidance documents apply to all
manufacturers or in all situations, deciphering this hoard of
information is more than a full-time job. For small businesses,
this is an arduous task where reaching the mountaintop of
compliance is met with an avalanche that puts these small
businesses back at the base of the mountain requiring them to
start the process again.
No person is suggesting a return to the Dickensian
nightmare of unending labor in dark factories amid soot-induced
nights at noontime and fetid pools of water surrounding
unceasing dilapidated tenements. That is almost poetic, isn't
it? Pretty good.
The question is not whether some regulation is necessary to
maintain--We have got to put some, you know, I mean we just
read these terse words all the time. It is important to get
this out.
The question is not whether some regulation is necessary to
maintain the standard of living and life that we enjoy in this
country. Rather the question is whether the marginal gains of
regulation come at too high a price. To anyone who has followed
the activities of this Committee, it comes as no surprise that
the high price may be the loss of America's small business
industrial base. Without a healthy small business industrial
base, this country will not be able to provide the high quality
jobs that allow people to buy homes, cars, eat in restaurants,
travel and purchase consumer goods that are part and parcel of
our standard of living. Dr. Christensen should notice I threw
in the world ``travel,'' slightly important to the Virgin
Islands, isn't it?
More importantly, without the underpinnings of a sound
manufacturing economy, it is highly unlikely that America will
have the resources to maintain the health of its people and
environment that it currently enjoys.
America's small manufacturers should not have to fight
their own government along with foreign competitors and foreign
governments. They can succeed if they only have to cope with
the market and not the predilections of federal regulatory
agencies.
I will recognize now the ranking member of the full
Committee, the distinguished young lady from New York for her
opening statement.
[Chairman Manzullo's statement may be found in the
appendix.]
Ms. Velazquez. Thank you, Mr. Chairman.
Small businesses, our main job creator, face a significant
number of challenges today, many more than those of their
corporate counterparts. And one of the biggest barriers that
they have to overcome is federal regulations. These are placing
a heavy burden on our nation's small enterprises, particularly
those in the manufacturing sector.
A recent study reported that for firms employing fewer than
20 employees the annual regulatory burden is nearly $6,975 per
employee, almost 60 percent more than that of firms with more
than 500 employees. This is not right and something needs to be
done to change it.
Although the Bush Administration has acknowledged this
unfairness and promised to help, nothing has been done. While
republicans claim that reducing the regulatory burden is a
priority, the Bush Administration holds the record for the
largest increase in federal paperwork in a single year. This
Committee is very aware of these regulatory burdens. We have
held several hearings on this topic. And I was fortunate to be
able to sit on Congressman Schrock's Subcommittee hearings on
this very issue.
In those hearings we learned that small businesses do not
have the proper points of contact within these agencies. And in
addition, a number of federal agencies are not complying with
current laws which intend to reduce the regulatory burden that
oftentimes affect these small firms. Through the convergence of
this failure to comply with current law and the sudden
explosion of paperwork, the Bush Administration has managed to
worsen the situation for small firms. This has created a paper
storm for our nation's small businesses, leaving them submerged
in paperwork and seeing no assistance from the federal
government.
Today we will look at the effects that the paperwork burden
is having on our economy, particularly within the manufacturing
sector. This sector cannot afford to be overwhelmed and
burdened by paperwork and regulations. Employment within the
manufacturing sector remains at a 53 year low with 2.7 million
manufacturing jobs lost over the past three years. It is
unclear at this point just how much of an impact these
increasing paperwork requirements are having on our nation's
small manufacturers. But clearly given the tenuous state of
this sector even minor impact can resonate throughout the whole
industry.
Under the direction of President Bush, Dr. John Graham has
undertaken an effort to identify those regulations that create
the most barriers for manufacturing and the process for
evaluating and developing less burdensome rules. To explore
this issue more we will be hearing from Dr. Graham, the
Administrator for the Office of Information and Regulatory
Affairs. This office is in charge of reviewing regulations and
then providing relevant feedback on how these regulations will
comply under current law.
The OIRA's primary responsibility is to reduce the
paperwork burden in small businesses that has resulted from the
federal government. Through this examination and discussion it
is my hope that we can find a balanced solution to reduce the
regulatory burden on our country's small manufacturers. There
has been an overwhelming spiral of paperwork that has been
thrown onto our small enterprises. And I hope that we will
specifically improve those regulations that are impacting small
businesses.
There is no reason that these vital businesses should be
carrying the disproportionate weight of these regulatory
burdens, wasting valuable time and money on paperwork
requirements. The strength and recovery of our economy depends
on the vitality of our nation's small businesses and small
manufacturers. And we must work to ensure that they are not
drowning in these regulations.
I look forward to hearing the testimony of the witnesses
today. Thank you, Mr. Chairman.
[Ranking Member Velazquez's statement may be found in the
appendix.]
Chairman Manzullo. Thank you.
We have invited to sit on our panel Congressman Todd Tiahrt
from Kansas. Todd leads the Task Force on Competitiveness. Our
hearing today is one of seven hearings that deal with this
issue of making America's businesses more competitive. And I
would recognize Congressman Tiahrt.
Mr. Tiahrt. Thank you, Mr. Chairman. It is very
appropriate, I think this is a debate that we should be having
in America. We have in Congress over the last generation
created barriers that keep us from bringing jobs back into
America. And I think that Congress needs to take on the
responsibility of undoing what has been done to some degree so
that we can free up people who keep and create jobs here in
America so that they can go out and do what they do best.
I think this administration is, if you look at the average
numbers of pages of regulations released is down from previous
administrations. And I am interested to hear the testimony that
we have.
But I think that the 8,000 pages of regulations that were
left behind by the previous administration and forced this Bush
43 to implement has been responsible for the increasing amount
of paperwork that has come from this administration. So I think
we look at the causes, root causes obviously in Congress, and
we need to address that. The administration though can multiply
the number of pages or reduce them. And I think these hearings
are going to help point out where we can reduce the paperwork
burden and make a difference for those people who want to keep
and create jobs.
I do have a formal testimony that I would like to submit
for the record if it is okay and then go ahead with the
witnesses.
Chairman Manzullo. That will be submitted without
objection.
[Representative Tiahrt's statement may be found in the
appendix.]
Mr. Tiahrt. Thank you, Mr. Chairman.
And just in closing, we have come up with eight issues
along with bureaucratic red tape that you are dealing with and
paperwork burden. Our Careers for the 21st Century also
addressed keeping healthcare costs down, lifelong learning,
trade fairness, tax relief and simplification, energy self-
sufficiency and security, research development and innovation
and, in conclusion, lawsuit abuse and litigation management.
All these things are issues that are driven by Congress. And
over the last generation Congress has raised the bar for small
businesses especially and it has made it difficult to keep and
create jobs in America because of that.
So as we go through these hearings that you have scheduled
and as we go through legislation on the House I hope that we
will find it in our heart to reduce the burden for people who
keep and create jobs. And this is a very good initiative and I
strongly support what you and the minority are doing here.
And with that I will just pass it back to you. Thank you.
Chairman Manzullo. Thank you, Congressman Tiahrt.
It is my pleasure to introduce Dr. John Graham who is the
head of the Office of Information and Regulatory Affairs. Dr.
Graham has appeared before our Committee I think at least two
or three different occasions. He has a reputation as a person
who likes to resolve disputes. And done a tremendous job off on
a journey to examine every regulation as it pertains to
manufacturing. And that is his own initiative.
So we are just really pleased and blessed to have him
working with us. And, Dr. Graham, we look forward to your
testimony.
STATEMENT OF THE HONORABLE JOHN D. GRAHAM, PH.D., OFFICE OF
INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND
BUDGET, WASHINGTON, D.C.
Dr. Graham. Thank you very much. Good afternoon, Mr.
Chairman, members of the Committee. It is an honor to be here
at a Committee hearing on regulatory reform of the
manufacturing sector, particularly with the Chairman himself
well-recognized as Mr. Manufacturing in the House of
Representatives, at least by some people. And we appreciate the
advocacy you have given to this cause for many years.
I am going to say a few words about what we have done in
the Administration to date in the area of regulatory reform.
What we have is a huge plate of unfinished business and there
certainly is a large portion of that. And then say a few words
about our recent manufacturing initiative.
The approach in this Administration toward regulatory
reform has been a hard look, science-based approach at
regulations. We do this through OMB enforcement of our
executive orders and our regulatory analysis requirements. And,
quite frankly, we are not interested in regulatory proposals
that do not have a sound basis in science, in engineering and
in economics.
We enforce that through OMB Circular A4 which now defines
state-of-the-art cost/benefit analysis for regulatory
proposals. As you know, Mr. Chairman, we work closely with Tom
Sullivan and his colleagues at the SBA Advocacy Office and they
help target for us proposals that are likely to be harmful to
small businesses and they help us generate alternatives that
can mitigate that burden while fulfilling important public
objectives of regulation.
While these are the process activities we have under way,
the question is do we have any evidence of any results from
this activity? Now I would like to talk with you about this
chart that is on my right here, to give you a historical
perspective on how the growth of the regulatory state has been
restrained under this administration and under this Congress.
If you look over the last 15 years or so at the unfunded
mandates these are the regulations imposed on the private
sector or on state and local government but for which the
federal government does not send a check to pay for them. So I
am excluding the whole budgetary part of the debate and will
let my OMB budget side colleagues have that discussion. But
this is the private sector unfunded mandate for growth that has
occurred over the last 17 years. And it is about $100 billion
per year total extra burden of regulation, of unfunded
mandates. And it is not distributed evenly across those
previous administrations.
There was a substantial amount during the Reagan years.
Those are only the last two years of Reagan for which we have
data. We are trying to dig back further and go all the way back
through the eight years of the Reagan Administration.
Then we have the Bush 41 years. And this is obviously not a
partisan chart because the most heavily regulation-oriented
administration in this period quite frankly is the Bush 41
years.
The Clinton Administration is quite substantial.
In this Administration we are adding regulatory burdens at
the level of about $1.8 billion per year.
When you say to me, Dr. Graham, how can you be here to say
that that is an accomplishment that we are adding $1.8 billion
a year? First point is, that is an 80 percent reduction in the
growth rate of major federal regulations in this
Administration. If you imagine if we had that success on the
budget side of this fiscal house where we would be today in
comparison to that chart.
The second point, which is a cautionary remark, is that we
are in the fourth year of this Administration. The data
historically show that it is the fourth year that is often the
worst from a standpoint of increasing regulatory costs on the
private sector and state and local governments.
Now, these are the new burdens of federal regulations.
Where is the unfinished business? The most significant area of
unfinished business is the sea of existing regulations that are
already out there from the previous 100 or so years of federal
regulatory activity. In fact, since OMB began taking records in
1981 there have been 100,000 new regulations cleared through
the Office of Management and Budget. About 1,000 of them were
estimated to cost the economy more than $100 million.
To the best of our knowledge most of these rules have never
been evaluated to determine what their actual effectiveness was
or what their costs were. In this Administration we have taken
the modest step of asking for public nominations of rules that
need to be reformed or modernized or outmoded rules that can
simply be eliminated.
In the year 2001 we received 71 nominations--excuse me, we
received 23 nominations from 71 commentors. In the year 2002,
after a greater outreach, we received 316 nominations from
1,700 commentors. This 2002 solicitation quite frankly
overwhelmed the meager staff of OMB to handle this exercise.
And we referred these proposals to the federal agencies for
evaluation. We have now roughly 100 of these regulatory reforms
under way or recently completed.
Let me conclude with a few remarks about our most recent
manufacturing initiatives. In our report to Congress this year
we have asked for public nomination of regulations, guidance
documents and paperwork requirements that impact the
manufacturing sector that need a hard look to determine whether
they are necessary or whether they can be made less burdensome.
Why have we selected the manufacturing sector of the
economy? The data show quite clearly when you compare the
different sectors of the American economy the one sector that
bears the disproportionate burden of regulatory costs is the
manufacturing sector. And as you have noted, Mr. Chairman, it
happens that this is the same sector that has been the slowest
from an employment perspective to move out of the recession we
were in. Though it is good news recently that we have seen
additional employment in this sector as well.
This hearing comes at a very good and interesting time. We
are due to receive the nominations from the public tomorrow on
reforms of the manufacturing sector. And we are looking forward
to a large number and substantial number of nominations that
will have merit.
We will then compare these nominations with the agencies,
evaluate them and develop a final report to both the president
and the Congress on which of these reforms should be
implemented and can make a difference. The good news is this
Administration is making progress in slowing the growth of the
regulatory state. It is a critical part of the President's Six-
Point Plan to stimulate the economy. While we are making
progress we have, as you know, a long way to go and we will
need your help in this Committee to give us the kind of support
we need to make this happen.
Thank you very much. And I look forward to comments and
questions.
[Dr. Graham's statement may be found in the appendix.]
Chairman Manzullo. Thank you, Dr. Graham.
When is the--let me rephrase that. I believe it was an
executive order of the president that asked you to undertake
this review?
Dr. Graham. Well, there was an executive order from the
president strengthening the role of small business evaluation
with regard to regulatory impacts. But actually this particular
initiative came out of a Commerce Department comprehensive
evaluation of the state of the manufacturing sector of the
economy and recommended a hard look by the Administration at
the existing regulatory systems impacting manufacturing.
So in fairness, I think the Commerce Department had a very
important role to play in the development of this.
Chairman Manzullo. Doctor, could you walk us through how
you evaluate these regulations? I know you are looking at
thousands of regulations and in the process you are trying to
at least call Congress' attention to the conflicting ones and
to try to resolve them. How do you manage that volume of
regulations?
Dr. Graham. Well, Mr. Chairman, quite candidly, you
referred to thousands. And even the hundreds that we are
evaluating now, the hundreds of new regulations being developed
by the agencies and sent to us, that work load is substantial
with regard to the several dozen people we have at OMB to
evaluate those rules.
So when we take a special initiative like this and say we
are also going to look at existing regulations that are
nominated, quite frankly we need to reach out to our agency
colleagues, whether they be in the Labor Department, whether
they be in the Environmental Protection Agency, to help us
evaluate these nominations. And, quite frankly, that is where
the tension begins because there are lots of people in the
agencies, quite frankly, who have a strong stake in those
existing regulations. Yet we are asking them to go in and look
at those and take a serious look at whether they can be made
less burdensome.
Chairman Manzullo. And then as you--let us take a look just
call it regulation X just for the heck of it, that a company
will I guess call it a nomination will say, Dr. Graham, this is
the burden is oppressive here. It is called regulation X and it
impacts two or three or four different agencies. Then do you
have team meetings on these with agencies? How does that work?
Dr. Graham. Well, I think the----
Chairman Manzullo. Without getting specific because I know
that you cannot.
Dr. Graham [continuing] Right. Well, we are in the process
of designing how we will handle the nominations this year. In
2001, which was the first year we engaged in this activity, we
had, as I mentioned, we had 23 nominations from 71 commentors.
That was a sufficiently manageable number of nominations that
my staff at OMB made an initial evaluation of those nominations
and we identified prior rules for reform. OMB designated
priority rules for reform.
In 2002 we had 316 nominations from 1,700 commentors. That
overwhelmed our ability to competently try to develop and OMB
designated priority list. So, quite frankly, we are going to
look very hard at the nominations we get this year, the quality
of them, the level of thought provided by the commentors. And
then we need to make a decision about whether we are going to
rely primarily on OMB evaluations first or whether we are going
to collaboratively work with the agencies to identify those
priorities.
Chairman Manzullo. What authority, if any, does OMB have to
take let us just call it an agricultural regulation that there
has been a lot of comment on, a lot of friction, and let us say
there is an agreement for some resolution; what do you do in a
case like that?
Dr. Graham. Well, the authority to ultimately make the
regulatory decisions in almost all instances resides in the
responsible regulatory agency. So our role is as a persuader, a
cajoler, in some cases an instructor to take a hard look at a
specific matter. But in the final analysis it is the agency
that makes that decision. And that is the role that we have had
at OMB for a substantial period of time.
Chairman Manzullo. So the office in the federal government
that would be best at calculating the cumulative cost of
regulations on manufacturers would be your office?
Dr. Graham. Well, actually there is a developing capability
in the Commerce Department I should add on that subject.
Chairman Manzullo. Could you develop that for us?
Dr. Graham. One thing I want to make clear is that the two
dozen professionals in OMB who review regulations they are
generalists. They are not specialists in small business. They
are not specialists in manufacturing. They are not specialists
in any particular kind of regulation, whether it be homeland
security or whatever. They have an overall generalist
background and they, of course, try to learn over time and with
experience how to evaluate these proposals.
But it is very critical when we get, for example, a rule
where there may be a small business impact we go right to the
SBA Advocacy Office to Tom Sullivan and his specialists and we
look for guidance from them on whether this is an important one
for the small business community?
What is encouraging about the Commerce Department
development is they are talking about developing a specialized
staff in the Commerce Department that has expertise, data and
experience on manufacturing related issues. That will be of
enormous value to OMB if they can follow through and make that
happen.
Chairman Manzullo. Congressman Velazquez?
Ms. Velazquez. Thank you, Mr. Chairman.
Dr. Graham, I commend you for your seeking regulatory
review from nominations that recommend improvements on
regulations that have an impact on manufacturing and small
businesses. My staff attended some of the sessions and they
were filled with businesses nominating regulations to be
reviewed.
We have looked at your previous solicitations in 2001 to
2003 and we note that you have had some 1,800 recommendations
over those two years. From what we can tell you categorized 23
recommendations in 2001 as new high priority projects and 34 in
2003 as new high priority projects with some carry-over from
2001. Almost most of these applied to four agencies:
Transportation, EPA, Labor and HHS. And I am really surprised
that the IRS had very few of those nominations.
Judging by what I hear from small businesses I would have
thought that IRS would have led the list. What is the
explanation for that?
Dr. Graham. That is an excellent question. We have looked
historically at the kinds of proposals that have been made for
reform of IRS to reduce paperwork burden, to reduce burden on
business. What you find when you look very carefully at a host
of IRS issues is that, quite frankly, the Congress through the
tax code has done most of the damage right in the way the tax
code is written. And once you have the tax code written in some
way, while IRS does have some discretion in how they write
their regulations and their interpretative regulations,
oftentimes that discretion is not large.
I think a lot of people in the business community realize
that in order to make major fundamental change in the burdens
from Treasury regulation and IRS regulation in particular you
are going to have to have a much simpler tax code than we have
today.
Ms. Velazquez. I understand the part that the Congress
played in terms of the tax code. But we conducted one of the
hearings in the Subcommittee on Small Businesses with Congress
Schrock and IRS was testifying, and some of the regulations did
not have anything to do or they were just it is their attitude
and disregard for the impact, the economic impact that those
regulations will have on those small businesses.
Dr. Graham, it is also surprising that you were able to get
1,700 nominations last year and ended up with only 34 new
reform projects. Do you feel you have the staff resources to
oversee current regulations, rules plus do all the reports and
studies that you are called upon to do and oversee these
projects?
Dr. Graham. Let me start by making sure we are talking
about the same numbers and the same facts. The way we look at
it, OMB did designate in 2001 23 of the reforms as high
priority.
In 2002 we never did designate any of the 316 as high
priority. We did notice that a number of those 316 were already
being looked at by federal agencies in various ways and, hence,
we simply have asked them to provide us status reports on
those. And it may be that you are referring to the others that
we asked them to evaluate.
Ms. Velazquez. And those various agencies like which ones,
for example?
Dr. Graham. I think the list of agencies that you gave
actually those are the busiest regulators in town. And it
should not surprise us that most of the reform nominations we
are getting are in Transportation, EPA, Labor and Health and
Human Services.
Ms. Velazquez. And then at the end of your testimony you
said that you needed support from Congress. That is in terms of
the laws that we pass or resources and the budget?
Dr. Graham. Well, I think it is important that we get
support in all of those dimensions. And even modest things like
this hearing we think this is very important to providing an
understanding for the public of why are we focusing on
manufacturing regulation. Because the rising cost of producing
goods and services in this country is in fact related to
employment, to jobs, to community welfare. We need at the most
modest level of hearings like this an understanding of why it
is that we are reforming manufacturing regulations.
Ms. Velazquez. It takes more than hearings, Dr. Graham.
Dr. Graham. It does.
Ms. Velazquez. It also takes resources and money.
Dr. Graham. Right.
Ms. Velazquez. We are voting on the budget today. Is the
budget adequate?
Dr. Graham. Well, we are going to look at the nominations
we get, which are due in tomorrow, and we will make a careful
determination. And if we cannot handle it all within OMB we
will recruit Commerce and SBA Advocacy and the agencies. And if
we determine that is not adequate I will be back here asking
the Congress for more resources, I can assure you of that.
Ms. Velazquez. That, if you do not get other directives
coming from the White House.
Thank you, Dr. Graham.
Chairman Manzullo. Congressman Tiahrt. Congressman Chabot
has no questions. Go ahead.
Mr. Tiahrt. Thank you, Mr. Chairman.
Dr. Graham, it seems like if I was going to focus on where
regulatory problems were the greatest I would look at which
agency was delivering the most regulations. And Transportation
according to CRS is way above most other agencies.
In 2003, for example, DOT released 1,141 regs. And the next
closest was Treasury which was 402 and then Department Commerce
was then 272. So there are a huge number of rules I should say,
not regs, rules that are released.
How do you determine where you are going to target your
efforts because you cannot take them all on? And is it what OMB
recommends or do you go targeting on your own and figure out
areas like hours of service? Hours of service is going to be a
big problem for small businesses. Small business trucking
companies and delivery companies. And it seems like that would
be one where, you know, we could target other transportation
issues they want to retire. How do you determine which ones you
are going to look at?
Dr. Graham. Well, the nomination process is wide open with
regard to any agency's regulations. And in both 2001 and 2002
we have received a significant number of nominations that
relate to the Department of Transportation. And there is a lot
of regulation coming out of the Department of Transportation.
So I think your basic premise of your question is correct.
Now, we will analyze the quality of the technical and
economic case that underpins each of these nominations in order
to determine which of the ones we ought to push the hardest on
agencies to move in the near term and which can be moved on a
more deliberate pace. So the case that these nominators make
for these particular reforms are very important.
Mr. Tiahrt. Do you do a cost/benefit analysis when you look
at rules and regulations?
Dr. Graham. Our role at OMB is actually review the cost/
benefit case that agencies make for a regulation or for a
reform of a regulation. So my two dozen staff we are engaged in
reviewing those cost/benefit analyses.
Mr. Tiahrt. According to data I got from CRS, the source
was OMB, they say the last ten years between October 1, 1993
and September 30, 2003, the benefit from rules and regulations
versus the cost of all agencies, and they put a range, so the
benefit was from $62 billion to $168 billion. The costs were
from $34 billion to $39 billion. So if you take care of the
midpoint of those two ranges it says that you get a $3 benefit
for $1 cost.
I don't know exactly how you estimated benefit for
regulation because if this is true all we have got to do is
write, you know, another $200 billion worth of--$100 billion
worth of rules and regulations then we will get enough benefit
to balance the budget. So I am not sure we can really regulate
our way into benefits. I am not sure where the concept of, you
know, the benefit that we get by it comes from or how you
estimate that. And I would be curious, how to you estimate a
benefit from a rule or regulation?
Dr. Graham. Well, if every regulation proposed had the same
ratio of benefit to cost as the ones that you are describing
then the logic of what you are saying would be infallible. But
in fact we know that regulations vary enormously in how much
benefit they have and what their burdens are.
And in fact the majority of those $100-plus billion in
benefits are attributable to a handful of regulations from one
office in one agency, the Clean Air Office within EPA that is
reducing the amount of diesel exhaust and other forms of
particulate pollution in the air. That is where most of those
benefits are from.
If you look at all the other regulations that are covered
in that report the benefit/cost case is much murkier.
Mr. Tiahrt. So it is not as clear?
Dr. Graham. That is right.
Mr. Tiahrt. One of the things we addressed yesterday on the
Floor when we voted in trying to clean up some of the
regulatory problems are just the frequency of reports. Some
small businesses are burdened with quarterly reports. And, you
know, is there some breakpoint like 200 employees, 150
employees, 100 employees where we can say this data really is
not that essential that we have a quarterly report? Perhaps an
annual report would be better. In doing so we could reduce
their regulatory burden on that particular rule or regulation
by 75 percent.
Is that part of the scenario you looked at is frequency of
rules and regulations?
Dr. Graham. Yes. And that is the kind of a proposed reform
that one of the commentors might suggest in a particular
regulation. Maybe the reporting requirements should be annual
rather than quarterly. Those would be quite sensible kinds of
suggestions.
Mr. Tiahrt. We wish you the best of luck.
Dr. Graham. I will be needing your help, sir.
Mr. Tiahrt. Please call.
Thank you, Mr. Chairman.
Chairman Manzullo. Thank you. Congresswoman Christensen,
who was a physician, knows something about regulations. I look
forward to your questions.
Ms. Christensen. I have been on the bad side of it when I
was in practice. I hope we will have CMS, the new CMS
administrator come in also.
Good afternoon, Dr. Graham. There was a study done by I
guess it was the Committee on Government Reform that says that
total government paperwork had increased substantially under
the Bush Administration to an estimated 8.1 billion hours in
fiscal year 2003. How much--And last year Americans spent over
700 million more hours filling out government paperwork than in
the last year of the Clinton Administration. So it also says
the largest annual increase in paperwork burden ever measured
occurred under this Bush Administration in fiscal year 2002.
How do you reconcile that with what we see on the graph?
Dr. Graham. Right. Paperwork burdens are an important cost
of regulation but they are only one element of the cost. So,
for example, if you require a manufacturing enterprise to
install new equipment or new machines in order to address an
issue that is also a cost of the regulation.
This chart shows the total extra cost of major rules, not
just the paperwork. What is driving your numbers is changes in
the tax code, okay, which cause more people to have to fill out
more detailed tax forms. Okay. Whereas this is including all
the regulatory costs whether they be paperwork, equipment,
capital or labor or whatever.
Ms. Christensen. So when Congresswoman Velazquez asked you
about IRS and you said that, well, Congress is the one that
created all of that paperwork----
Dr. Graham. Not all of it but a good chunk of it.
Ms. Christensen [continuing] Well, a good chunk of it. So
you do not automatically or periodically do a review regardless
of where those regulations emanate from?
Dr. Graham. Yes, to give you a feel for it, of the total
paperwork in the American economy that you are referring to if
you look at all agencies, 80 percent of it is attributable to
the Treasury Department. Most of that----
Ms. Christensen. And you do not review it?
Dr. Graham [continuing] Most of that is due to IRS. And
most of that is attributable to the way the tax code is written
itself.
We do review in the cases where IRS has discretion on
exactly how to frame a regulation based upon the tax code we do
review those paperwork burdens. But let us not confuse big
versus small issues. The big issue is you have got a
complicated tax code, you make it more complicated through tax
cuts sometimes, and you will increase paperwork burden.
Ms. Christensen. Okay. I am not sure, I was trying to get
an answer to this. Those graphs are in 2001 dollars?
Dr. Graham. Correct.
Ms. Christensen. Would it look the same--would not that
blue line, the last Bush 43 be higher if you did it in today's
dollars?
Dr. Graham. All of the, all of the charts would go up a
little bit if you used today's dollars because they are all
being expressed in 2001 dollars.
Ms. Christensen. Yes.
Dr. Graham. So it would not affect the relative heights of
the chart.
Ms. Christensen. It would not affect the relative.
Dr. Graham. Right.
Ms. Christensen. Seems to me it would.
You also said in response to the Chairman that you make the
recommendations to the agency. What are you expectations of
that agency when you make those recommendations?
Dr. Graham. Our expectations either----
Ms. Christensen. Yes. And what action do you take, what
follow-up kind of action would you take after those
recommendations are made if there is no response from the
agency?
Dr. Graham [continuing] We are looking for either
implementation on behalf of the agency of the recommendation
or, alternatively, a cogent rationale for why it is they have
chosen not to implement the recommendations.
In our report to Congress we publish each year a rule by
rule explanation of what happened to each of the reform
nominations that we have been discussing in this hearing so
far. And, quite frankly, in some cases the agencies come back
to us, CMS for example, thank you, Dr. Graham, we were very
interested in your reform nomination but we do not think it is
a particularly good idea.
And I will let you be the judge if you want to look through
some of those examples whether you thought the merits of that
argument were with the commentor, with OMB or with the agency.
Ms. Christensen. So after you make the recommendations
there is nothing that you can to enforce?
Dr. Graham. In some cases we will go further and we will
have a comment--we will invite the agency over to OMB, we will
have a more detailed discussion of that issue and try to
persuade them that in fact that is appropriate. But when you
are dealing with 316 nominations you are only going to be able
to have a detailed inquiry with regard to a modest number.
Ms. Christensen. And do you prioritize? I do not know where
my time is. And do you prioritize these so that you would maybe
focus on the ones that have been deemed for whatever reason to
be more important?
Dr. Graham. In 2001 we did. In 2002 we had so many we
simply referred them to the agencies for their evaluation. We
have tried it both ways. This year with the manufacturing
reforms we are going to look at what we have and we are going
to take whatever strategy we think would be most effective in
getting the work done by the agencies.
Ms. Christensen. Okay. Thank you.
Chairman Manzullo. Dr. Graham, thank you for coming this
afternoon. We are always excited about the way you go after all
this paperwork.
I recall about three years ago when--actually it was longer
than that, during the Clinton Administration when the Hope
Scholarship was passed this gives a $1,500 per child tax credit
to families earning under X amount of dollars per year for
higher education purposes. And the Senate asked I believe it
was Treasury Secretary Rubin about a particular provision that
required 7,000 colleges, universities, trade schools and
community colleges within our country to report as to the
source of the money that was coming to the school, I guess for
the purpose of verifying that it was coming from the student.
And he said, well, the cost of verification would be the
cost of a stamp. Not criticizing the secretary, but that
provision got written into the bill. And IRS took a look at it.
And we were contacted by Northern Arizona University. The cost
is about $100 million a year in regulatory compliance.
And Charles Lazotti and I from the IRS and I sat down and
he said this is not good. And for four years IRS withheld
permanent regulations until we could come up with a legislative
fix that eliminated that burden.
And I think this is what happens when members of Congress
say, well, let us just throw this provision in. Sometimes it is
a last minute amendment and it causes that type of regulatory
nightmare.
So just when you said that Congress causes a lot of
problems in the IRS code I will concur with you on that.
Again thank you for your testimony. Your complete statement
will be made part of the record. And thanks again for coming,
Doctor.
Dr. Graham. Thank you. Appreciate it.
Chairman Manzullo. Appreciate it so much.
If we could get the next panel to come up.
Our second panel, we welcome the second panel here. The
first witness is John Arnett, Government Affairs Counsel,
Cooper and Brass Fabricators Council. And, John, look forward
to your testimony.
STATEMENT OF JOHN ARNETT, COPPER & BRASS FABRICATORS COUNCIL,
INC.
Mr. Arnett. Thank you, Mr. Chairman, members of the
Committee, and good afternoon. I am, as the Chairman states,
John Arnett, Government Affairs Counsel for the Copper and
Brass Fabricators Council. The Council's 21 member companies
were listed in our submission. And we would like to thank you
for inviting us to participate in this hearing today.
The Council's member companies collectively account for
about 80 to 85 percent of the brass milled products produced in
the United States each year. These consist of copper plate,
sheet, strip, foil, rod, bar, pipe and tube. And these products
are used mainly in the automotive construction and electrical/
electronic industries. Many of the Council's members meet the
definition of small business, but not all, under the Small
Business Administration standards.
The costs of regulatory compliance on manufacturers in the
U.S. are, by any reasonable estimate, an enormous burden. As
the Manufacturing Alliance recently concluded in a 2003 study,
the compliance costs in the economy are in the order of $850
billion, $160 billion of that falls on manufacturing alone. And
the burden is growing larger. The net result is that, as the
Manufacturing Alliance artfully stated, ``compliance costs for
regulations can be regarded as the `silent killer' of
manufacturing competitiveness,'' particularly when you compare
it to an industrial trade and some of the regulatory burden
reductions that are being undertaken in other countries.
In March of 2002 when the Office of Management and Budget
and OIRA asked for public nominations of regulatory reforms the
Council enthusiastically responded by submitting seven
regulations that it deemed to be costly with little or no
benefit. As Dr. Graham testified, and as outlined in OIRA's
2003 Report to Congress or OMB's report, they received a total
of 316 distinct reform nominations and submitted 161 of those
for agency review. The Counsel was heartened that five of their
seven nominations were referred to EPA and to OSHA.
Of the five Council nominations referred, one was deemed by
EPA to be worthy of action and two were cast into the undecided
category for further review. The Council is encouraged that
three of the nominations were targeted for reform or additional
study. However, we were disappointed that two--are disappointed
that two years later, two years after the process began that
none of the regulations have been changed in any way. Indeed,
it is our understanding that of the 161 rules and regulations
in total referred to the agencies, none of the referrals has
resulted in any substantive changes to this point. Clearly, the
goal of eliminating wasteful regulations has yet to be
achieved.
What then can explain the apparent encouraging procedure
but the lack of substantive results. It is the Council's view
that the following problems with the procedures may have short-
circuited the completion of reforms. And I think these problems
need to be addressed in the current round of submissions:
The method used by OMB and OIRA during the initial
screening process is unknown, and there is no opportunity for
input and clarification during this process from those of us
who nominated the regulations;
Once referred to agencies, there is no opportunity for the
nominating entity to answer questions that may arise in the
agency's mind. If the agency is unclear on what we are saying
there is no opportunity to contact us, there is no dialogue;
There is no explanation for the agency decisions that they
finally make, especially when the decision is not to pursue
reform and the agency is completely in its right to make that
decision;
The agencies, finally, the agencies appear to be able to
make any decision regarding referred regulations without
justifying that decision or even explaining how they arrived at
it.
To correct this greater transparency in the screening
process, some explanations by the agencies in support of their
decisions, and a requirement that agencies justify a decision
not to consider a proposed reform might help resolve these
problems to some extent. Further, communications between the
nominating entity and the agency and OIRA after the regulation
is referred to the agency might improve the agency's
understanding of the problems cited and suggested solution.
In spite of our reservations, the Council commends OMB and
OIRA and the agencies for their execution of the initial 2002
process. We believe the process has the potential for
illuminating regulatory provisions that create burdens with
little or no gains. OMB this year seeks public nominations of
regulations affecting manufacturing in particular. And tomorrow
we will submit a list of eight regulations for consideration.
Just very quickly, if adopted some of these eight would
help, for example, eliminate unnecessary testing for pollutants
in water discharges when it can be demonstrated that there is
zero chance that the pollutants are in the water;
Could remove from the definition of ``volatile organic
compound'' those compounds that are not volatile. And it is
true that the VOC has no--the definition of VOC has no
volatility component;
Third, focus the attention of the SPCC, the Spill
Prevention, Control, and Countermeasure rule on larger
facilities and away from the very small risks that have never,
it has never been demonstrated they create a risk;]
Fourth, focus storm water regulations on effective but
inexpensive best practices, rather than focusing on
construction of facilities for capturing and basically treating
rainwater;
Eliminate the ``double'' waste treating of water discharges
due to lack of removal credits to Publicly Owned Treatment
Works;
Permit the concentration of hazardous waste through
evaporative dryers, thereby reducing shipping volume to waste
treatment facilities and resulting transportation and energy
savings;
And permit the use of ships stairs and spiral stairs
instead of rung ladders in certain manufacturing situation with
an improvement of safety in plant sites.
We appreciate the Committee's attention to inefficient and
unnecessary regulations that are the silent killers of
manufacturing processes and look forward to OIRA's response to
our submissions.
Thank you, Mr. Chairman.
[Mr. Arnett's statement may be found in the appendix.]
Chairman Manzullo. Thank you.
Our second witness is B.J. Mason, President, Mid-Atlantic
Finishing out of Capitol Heights, Maryland, on behalf of
himself and the National Association of Metal Finishers. We
look forward to your testimony.
STATEMENT OF B.J. MASON, MID-ATLANTIC FINISHING
Mr. Mason. Thank you, Mr. Chairman. Thank you to the
Committee.
Chairman Manzullo. B.J., do you want to pull the mike a
little bit closer to you?
Mr. Mason. There you are. Is this better?
Mid-Atlantic Finishing in Capitol Heights, Maryland, is a
corporation that I started about 28 years ago. We now have 35
employees down from four years ago of about 75. We have been
providing gold, silver, nickel, tin, copper, conversion
coatings for the defense industry, the medical, tooling,
telecommunications, computer, electronics and a whole host of
other industries.
On the regulatory front my industry has worked closely with
agencies like the EPA and the state and local regulators as
well as environmental groups on many voluntary, cooperative
projects to reduce the industry's environmental footprint to
the greatest extent possible.
Before I go on I might just say too that it sounds to me
like I am what everybody has been talking about here today, a
small, a small industry. So I guess I feel kind of special.
Thank you.
Chairman Manzullo. You are special. That is why you are
here.
Mr. Mason. Thank you, sir.
We are pleased that in the late 1990s former President Gore
formally recognized the finishing industry's environmental
leadership with his `Reinventing Government'' award in response
to our demonstration that it is indeed possible to reconcile
environmental and economic and competitive goals.
This experience, however, pointed out to me that there is
much more room for improvement on how the federal government
evaluates its own regulations and that it is absolutely
essential to have a process in the big picture, can flag and
change regulatory requirements that do not add value to either
the environment, public health or the economy, and can identify
with some reasonable level of accuracy the costs and benefits
of regulations at every stage of the rulemaking process.
I would point out that for my industry there are heavy
consequences that ensue from not having rigorous, systematic
review of a wide range of regulations, whether they are major
rules or not.
I would like to briefly illustrate with a specific example.
In the past several years the metal finishing industry
committed over $1 million to challenge the rule called MP&M.
This was an EPA regulatory issue which was imposed on top of
already restrictive wastewater controls based and we felt the
rule was based on improper science analyses. After a continuous
series of deliberations over several years, EPA ultimately
concluded that no further regulations was warranted for the
metal finishing industry.
In the end, while this was good news, I was troubled by two
things:
First, by the fact that even with a well run early SBREFA
process to assess small business impact, the proposed rule's
estimates of costs and benefit was highly erroneous. In fact,
EPA's costs are vastly underestimated. And estimates of
pollutants likely to be reduced from the industry were off by a
few orders of magnitude.
Second, I was troubled by the fact of one senior EPA
official who I happen to respect very much--that was written
for me--noted after completion of the rule that but for the
fact that the metal finishing industry had to spend one million
dollars on analysis, the regulatory process worked for this
rulemaking.
Mr. Chairman and members of the Committee, surely there is
a better way to spend a million dollars. And that was a million
dollars that was spent by owners of small businesses in a very
troubling economic time the last three to four years which is
the worst that I have seen in the 25 years that I have been in
the business. And we were not making money to be able to spend
that kind of money, but we did.
In light of this experience the industry has reviewed
several regulations that can be modified without causing
adverse environmental or health impacts. We have focused more
intently on the cost of these measures for several reasons, one
being the fact that many of our competitors in the global
economy do not carry the same obligations and responsibilities
that we do. At the same time, we are not looking for
environmental rollbacks or a ticket to pollute.
In my written testimony I provided a brief sketch of the
several regulatory reform nominations that we made to Dr.
Graham and the White House Office of Management and Budget.
They happen to cut across all major programs at EPA--air,
water, waste--and if implemented could potentially achieve over
$100,000 in savings for companies like mine with annual sales
of between $2 and $3 million. These changes in the written
testimony are: streamline the EPA's wastewater pretreatment
program, allow an exemption for federal air permitting
procedural requirements if companies are already complying with
stringent federal air emission controls, and update the federal
hazardous waste framework to allow recycling of our metals
under certain conditions.
I happened to be at another of these Committee meetings
when one of my colleagues reported about the metals that are
being forced to be put into landfills. As I have said for 12
years to EPA, we will mine those landfills one day when we run
out of resources.
Mr. Chairman, we determined that modest changes for these
three regulations could provide significant savings of costs,
could mean the difference between being profitable and being
forced to shut down operations or lay off workers.
I would like to close with an example of yet another
critical regulation in the pipeline for my industry which
raises the importance of an informed, rigorous review process.
This is OSHA's PEL proposal that will be proposed in October.
The industry has presented a detailed analysis in the SBREFA
panel process last month with analysis and documentation
showing that all facilities with annual sales of $1.5 million
and 20 employees, would have to spend 60 times that, or over
$300,000 per facility, to achieve the very low limits to be
proposed by OSHA. We have submitted data that we are not
opposed to lower limits, we are just opposed to anything that
is really not necessary and ask them to look at our analyses.
I hope that some of the issues I have raised today will
point out the need for and the potential value of an improved
process for regulatory review and oversight of federal agency
actions. I believe this can be done responsibly and in a way
that minimizes the regulatory burdens, protects human health
and environment, and allows small businesses the opportunity to
compete successfully in the global market.
Thank you, Mr. Chairman and members of the Committee for
the opportunity to appear today.
[Mr. Mason's statement may be found in the appendix.]
Chairman Manzullo. Well, thank you very much.
Our next witness is Andrew Bopp. I have been given a
phonetic.
Mr. Bopp. Yes.
Chairman Manzullo. Obviously people mispronounce your last
name.
Mr. Bopp. It looks like ``bop.''
Chairman Manzullo. On a few occasions.
Andrew is the Director of Public Affairs for the Society of
Glass and Ceramic Decorators in Alexandria, Virginia, been with
them since 1995. And we look forward to your testimony.
STATEMENT OF ANDREW BOPP, SOCIETY OF GLASS AND CERAMIC
DECORATORS
Mr. Bopp. Thank you, sir. And thank you, members of the
Committee.
The Society of Glass and Ceramic Decorators represents
manufacturers that decorate glass----
Chairman Manzullo. Andrew, could you pull the mike a little
bit closer to you?
Mr. Bopp [continuing] Sure.
Chairman Manzullo. And then maybe tip it up a little. There
you are. You have to speak directly into it. Go ahead.
Mr. Bopp. The Society of Glass and Ceramic Decorators
represents manufacturers who decorate glass and ceramic mugs,
tumblers and similar items. Things like this, pretty basic
things. There are 300 member companies nationwide that decorate
these types of items and they are facing severe competition
from overseas, primarily from China. The Chinese were first
with ceramics, that is why it is called China.
Most SGCD members are small, often family-owned companies.
These companies cannot afford to hire staff to focus on
regulatory compliance. In fact, many of these companies are
unable to employ engineers at their facilities let alone
environmental, safety or other experts. Regulatory burdens
often fall on the owner or other key staff who are also
responsible for production, purchasing, marketing, sales and
other business functions.
Burdensome and unnecessary regulations significantly
contribute to the cost of doing business in the U.S. This leads
to the loss of manufacturing jobs to overseas competition. It
is critical that existing regulations undergo careful review to
determine whether regulatory goals can be achieved in a less
burdensome way.
I am here today to encourage this Committee to support OIRA
in its efforts to review burdensome regulations that have a
major impact on small business. To illustrate, we believe OIRA
has been and hopefully will continue to be helpful in reviewing
EPA's Toxic Release Inventory Lead Rule. This rule has proven
to be extremely burdensome for small glass and ceramic printers
and other small manufacturers. Some of the colors used in glass
and ceramic decoration cannot be produced without lead. This
does not create environmental risk and very little ends up as
waste.
When fired, the colors become chemically part of the glass
or ceramic mug. Almost all of these colors are used to produce
the ware. SGCD member companies work closely with FDA and other
federal and state agencies to guarantee the safety of all these
wares.
In spite of this, hundreds of these small companies as well
as small companies in other manufacturing sectors were
entangled in EPA's January 2001 lead rule changes that lowered
the annual reporting threshold from 10,000 pounds to 100
pounds. I want to emphasize that that is lead used, not
released to the environment. The TRI program is burdensome,
especially for the 75 percent of lead filers that are small
businesses due to the complicated analysis and calculations
that are required to comply. Classic paperwork burden.
However, when lowering the reporting threshold, EPA
disallowed existing burden relief options for small business
such as a simplified Form A and de minimis allowance that are
available for other TRI substances. A massive effort is being
undertaken by small business operators to comply with this
rule. A review of 2001 TRI data, which is the latest available
for this new rule, indicates that over 2,600 manufacturing
companies reported zero environmental release of lead or lead
compounds. All this work to show zero.
In SIC 32, which includes glass and ceramic printers, 532
complicated Form Rs--and complicated, I should have brought in
the book but it is a very big book, it is a very complex form.
Think about your most complex IRS form and start there. Five
hundred thirty-two complicated Form Rs were filed in 2001. The
cost was estimated by EPA to be $7,400 per facility. Of these
forms, 46 percent of companies reported on-site release to the
environment of less than one pound in SIC 32. In a fairly
typical case, a small decorator reported zero on-site release
after spending more than 180 hours to compile data and complete
a TRI Form R.
This is a type of program where you have to compile the
information as you move through the year and then file the
paperwork. You cannot just pay somebody to do it, which happens
in a lot of IRS cases.
Even after the forms are filed, the burdens continue. In
December 2003, a glass decorator received a Notice of
Significant Error from EPA for its 2002 TRI report. One week
later, the company received a second copy of the same notice
that finally listed the error which was then corrected. In
February 2004, the company received yet another notice listing
12 new technical errors. Let me emphasize, this company was
reporting zero environmental lead release. In addition to
burdening small manufacturers, this appears to me to be
inefficient use of EPA's time also.
It is encouraging, however, that EPA is now reviewing
options, through its Stakeholder Dialogue, to simplify TRI
reporting. Two elements under review are critical to reducing
the reporting burden. A simplified Form NS for insignificant
lead reporters is needed for companies that have shown on-site
lead release of ten or fewer pounds. In addition, Form A, range
reporting and de minimis allowances should be reinstated for
lead reporters. Useful public information would not be lost,
small business burden would be eased. It seems like a very good
thing to do.
This week, SGCD like many of the others is submitting
comments to OIRA in response to their request for information
on specific regulatory burdens. OIRA in our opinion is ideally
positioned to review these regulations given their vantage
point as an outside observer. An agency that is implementing a
regulation, and the businesses or others who must comply, do
not have this perspective.
We believe this review process should be ongoing at OIRA so
that the Administration can follow through on efforts to
achieve burden reduction. In addition, I urge Congress to
address staffing shortages at OIRA. Lack of adequate staff is
obviously a major obstacle to enabling the agency to fulfill
its burden reduction mission.
I appreciate the opportunity to address the Committee
today. And I do believe that a cooperative effort by OIRA, EPA
and stakeholders can lead to completion of the TRI burden
reduction process within a year. I also believe that OIRA can
be of great help in addressing the other rules that others have
raised.
Thank you very much.
[Mr. Bopp's statement may be found in the appendix.]
Chairman Manzullo. Well, thank you for your testimony.
Mr. Arnett, I would like to call your attention to page 2
of your testimony. Do you have it in front of you?
Mr. Arnett. Yes, sir.
Chairman Manzullo. It is if you go down to the second full
paragraph where you state ``indeed'' at the bottom, ``Indeed,
it is our understanding, that of the 161 rules and regulations
in total referred to agencies by the OMB, none of the referrals
has resulted in any substantive changes.'' Did you want to
comment on that?
Mr. Arnett. Yes, sir. If you are wondering where I got
that, I got that from the National Association of
Manufacturers' analysis I think----
Chairman Manzullo. Okay.
Mr. Arnett [continuing] In the comments that they, the
draft comments that I reviewed from the NAM. That was a
statement that they made and I took it from there.
I think there were a lot of referrals to the agencies but I
do not think any conclusive action, nothing has concluded on
any of the measures that were referred, as I understand it.
Chairman Manzullo. I think that parrots Dr. Graham's
statement that he can only do so much.
Mr. Arnett. Exactly.
Chairman Manzullo. But here we have an outstanding public
servant that obviously has the interests of business people at
heart, reviews these regulations, kicks it back to the agencies
and nothing happens. What suggestions would you have there?
Mr. Arnett. As we said in the comments here, I think
opening up a line of communications. I think what happens
possibly with some of these regulations--and I hope I have not
given the impression in these comments that we are not
appreciative of the efforts that OIRA and OMB in general made
the last three years in gathering these and submitting to the
agencies. We are very appreciative of that. And that is why we
participated in 2002 and are doing so again this time because
we think the system represents the potential for really shining
a light on some ridiculous regulations.
Once the regulations gets reviewed by OIRA and gets sent to
the agencies this seems to be where it breaks down. And I think
the problem is the communications. I would love to see a
communications link from the agency to the entity that
nominated the regulation so that perhaps it isn't totally clear
from a one or two page description of the problem and a
recommended solution exactly what the nominating entity is
proposing or is suggesting that it is a problem and a solution.
And if we could get some line of communications with the
agencies--and this could be breakdown on our end as well.
Perhaps we need to step up to the plate better and be the
aggressor here in contacting the agency, I don't know. As this
process unfolds this year we plan to be more aggressive.
But I just think a communication to the agency. And then
some method of holding the agency more accountable for the
answer and for their analysis and the timing of their analysis.
I mean maybe the agencies are still reviewing some of the ones
from 2002. But it just seems like it is a pretty lengthy period
of time and there should have been a response by now.
Chairman Manzullo. And I have a question for Mr. Bopp with
regard to the--I will have to be frank with you, Society of
Glass and Ceramic Decorators is a new one to me. We have a lot
of associations in town. But these, these are companies,
Andrew, that will either get a domestically made mug or mug
made in China and then put, for example, what you have on
there?
Mr. Bopp. Yeah, that is correct.
Chairman Manzullo. What is the process of putting that, the
eagle on there, how do they do that?
Mr. Bopp. In this case this would be actually a decal
process. It is either done through screen printing directly
onto the mug using ceramic colors or a decal is printed which
is then either hand applied or machine applied to the mug. And
that decal is printed with ceramic colors so basically it is
the same as if it were screen printed. And that is generally
for things like this with tighter registration, where the
colors come closer.
Interesting to say where they get the mug from, 95 to 98
percent come from China. Cost of labor, that is the way that
market is going. It is very difficult to get a mug that would
be made in the United States. A good deal of the decorated mugs
still come from this country but that is something that is
shifting pretty quickly also.
Chairman Manzullo. I guess my question, you anticipated my
question, is that I am sure China does not have the same
regulations that we do with regard to the environmental
protection required of the people in your industry. That is not
saying that we want to lower the standards. But if you can go
back, if it is a decal of a company just pressing on a decal
there would be no----
Mr. Bopp. Right.
Chairman Manzullo [continuing] Emission of any type; would
that be correct?
Mr. Bopp. Exactly.
Chairman Manzullo. Okay. Now, does your association also
represent the companies that make the decals?
Mr. Bopp. Yes, we do.
Chairman Manzullo. So you do both steps?
Mr. Bopp. Right.
Chairman Manzullo. So it would be in the companies that
make the decals that would have the emissions?
Mr. Bopp. In theory. There really are no emissions that you
would think of with smokestacks with fumes going up.
Chairman Manzullo. Okay. Give me a better word?
Mr. Bopp. Yes. It would be really just excess material----
Chairman Manzullo [continuing] Okay.
Mr. Bopp.--which would be held until it is used again. I
mean the colors are fairly expensive. If they are disposed of
it is more in the way of rags and things like this. It is not--
that is why almost half of the companies do not emit any, any
excess lead to the environment, which is what makes this rule
so burdensome.
I mean it is paperwork, again it is comparing, this
industry is really fiercely competing with China. Obviously it
is very labor intensive so quite a few of the larger plants
have already gone to China. Either Chinese competition or
Western European and, American companies moving plants there. I
mean it is the fact of the costs of doing business. And this is
one more very costly step for companies that makes it that much
harder to compete. And if you are a large company, that much
more of a factor in deciding, well, where do we put our next
plant?
Chairman Manzullo. I looked at the price of some mugs out
there, some decorated mugs. And there are some that are still
made in America.
Mr. Bopp. Absolutely. There definitely are. And----
Chairman Manzullo. But on the shelf the ones that come from
China are not any cheaper.
Mr. Bopp [continuing] That is true.
Chairman Manzullo. Why is that? What is going on there?
Mr. Bopp. Interestingly, the vast majority like I said do
come from China. It may say ``made in China'' on the bottom
because the mug is made in China but it was still decorated in
the U.S. So there are some variables that occur there.
As far as pricing, that could be built into our members are
not the ones who then sell, they sell through distributor
chains and things like this. So it would not necessarily hold
that the wares sold in this country whether it is decorated
here or in China would be that much of a different cost. The
difference is in the cost in actually producing the mug.
And of interest, one of the major manufacturers of domestic
ceramic mugs is located actually in Arizona. And they are
looked at quite often by groups who buy bulk mugs, let us say
House of Representatives, that want it to say ``made in the
United States,'' or let us say a labor union that wants it to
say that. And they, they pay more.
Chairman Manzullo. What is the name of the company?
Mr. Bopp. Catalina China.
Chairman Manzullo. Catalina China?
Mr. Bopp. Right. It is in Tucson.
Chairman Manzullo. And they are, they are the only
manufacturers of mugs in the United States?
Mr. Bopp. They are the only large, significant, yes.
Now, I do not want to confuse that with tableware
companies. There are still companies like Homer Laughlin China-
-is a large company that does make tableware in this country.
But as far as blank mugs that are then sold to the small
printers, Catalina is pretty much it.
Chairman Manzullo. There are a lot of charitable and
political organizations.
Mr. Bopp. Yes.
Chairman Manzullo. I put on a golf event, that is the
political side of being a member of Congress, and we order out
hats and towels and keys and everything and I insist that it be
made in America. And we found quite interesting in the first
order of hats that came in I said wanted these made in America.
And the vendor said, well, they are not made in America.
Mr. Bopp. Right.
Chairman Manzullo. And so they came and they were shredded.
And then we got a hold of Michelle Goodwin in Phoenix.
What is the name of her company, Dan? Who makes hats and
the same things that you have been having, we were trying to
find out as to who is left in the industry in order to let
people know who want to buy American that these companies
should be patronized.
Mr. Bopp. Absolutely. There are quite a few of them. In
fact, previous testimony before the Subcommittee on Reg. Reform
one of the decorators who actually does a lot of the House of
Representatives mugs that you will find in the gift shop is
from Baltimore, Maryland. So when you are buying from her you
are buying an American decorated mug.
However, when you would order something like that you
should specify to her or whoever you order them from that their
materials should come from the U.S. Because they, they are
doing the work here but that blank mug itself very likely is
coming from China, although it does not have to. Although, like
I said, the vast majority of it does because it is a fairly
labor intensive, fairly low tech process.
Chairman Manzullo. Okay. Mr. Mason, you have got an
industry, the plating industry that gets creamed on everything.
And your industry absolutely is necessary to manufacturing.
Could you give us just a couple of examples of how your
industry, the chemicals that you use? How does it, show us the
processing of manufacturing as to how companies like yours come
into play?
Mr. Mason. Well, think about an aluminum machined housing
that in my particular case is for the infrastructure of the
telecommunication industry. The infrastructure is what is in
the little shed or the little house underneath the cell tower
that you see along the highways. And the towers themself pick
up the signals, transport them down to the little room and then
the frequencies start to change and the signals go out, whether
it is Motorola or AT&T or Cingular, whoever it is.
That particular little house contains filters and
resonators and all these things that make all this work. And
they are silver plated. And the reason they are silver plated,
Mr. Chairman, is because the frequency travels very well on the
silver surface because silver, even though it may tend to
oxidize, it does not lose its electrical characteristics.
Whereas gold, another noble metal, will lose its
characteristics where silver does not as it starts to tarnish.
Chairman Manzullo. So your company would be involved in the
silver plating of that housing?
Mr. Mason. That is one particular instance.
Chairman Manzullo. Okay.
Mr. Mason. And the chemicals that we have to use is to make
this whole process work because we have a blank piece of
aluminum that needs silver on it. But you cannot just take that
blank piece of aluminum and dip it into the silver tank because
nothing will happen to it.
So you go through these various processes which we call
pretreatment. And in our industry pretreatment is about 95
percent of what happens. The silver plating that we ultimately
use is just the last step. But in that process going to the
silver plating tank you have alkaline solutions, acid
solutions, cyanide solutions, just about every nasty chemical
that you can imagine or think of we use them all. And we use
them all with caution and with understanding and knowing that
we know what we are doing there. We take, obviously, safety
precautions, and environmental precautions.
I mean I am eight miles from right here so I cannot hide
from EPA. In fact, I am very proactive, I have them in my
facility as often as they will come so I can show them what we
do. You know, the very idea of them writing regulations and not
ever seeing an industry that they are writing regulations for,
to me has always been silly. So we invite them to come and
look.
Chairman Manzullo. Do they come?
Mr. Mason. Yes, they do. It started about 12 years ago
under a program called CSI, the Common Sense Initiative under
Administrator Browner. And we started working very closely with
the industry. Yes, they do come. They pay attention. And we
have, I feel, a very good relationship generally with the
agency.
The problem, and I think it was said very clearly here
today, the problem with the agency is that you have a lot of
people within that particular agency that write regulations
because that is what they want to do. And even though, I mean I
testified that our industry spent a million dollars for a
faulty regulation. I mean that regulation probably would have
put 50 percent of us out of business. It was absolutely not
necessary, it was done with poor science, yet it was ready to
pass.
And I would tell you, Mr. Chairman, if you would ask me
what can you do? I hope we all do not have to spend a million
dollars to stop a ridiculous regulation that would have meant
nothing to anyone, not our industry, not the public, not the
environmental people, no one. Yet that is what it took.
So back to your issue with chemicals, yes, we work with
them all. We treat them with the respect they deserve. We do
not put them in the ground, the air or anything. We put them
nowhere that we are not allowed to do. And our industry does a
pretty good job.
Chairman Manzullo. Appreciate that.
Congresswoman Velazquez?
Ms. Velazquez. Thank you, Mr. Chairman.
This question is really for any of you if you have followed
the regulatory panel system that is run by OIRA and the Office
of Advocacy, as you may know, there is a proposal before this
Committee to increased the use of this process. And we may mark
up the bill H.R. 2345 and vote on it in a few weeks. So if you
or any of your industry have followed the panel process I would
like for you to comment on these questions.
Have you found the panel process useful? Is it costly to
your members in terms of resources? Do you find that agencies
do or do not do their homework in preparation for these panels?
In other words, do they just rely on the panels to sort out the
numbers and, therefore, do not do their homework? Has advocacy
and/or OIRA been helpful to you in this process? Are there ways
they can be more helpful? Do you think it is better for us and
for you to spend the money up front when the regulation is
promulgated in having a panel process or instead create a
system that requires us to look back at a regulation after
three, five or ten years when we have actual costs on which to
base our review?
Mr. Arnett?
Mr. Arnett. Yes. We have not participated. I assume you are
talking about the regulatory or Flexibility Act SBREFA panel?
Ms. Velazquez. Correct.
Mr. Arnett. And we have not had an opportunity as of yet to
participate in any of those panels. I have been and
participated with coalitions in a number of regulations where
there had been panels. I came in toward the end. So I cannot--I
am not in a very good position really to address the questions
that you have raised on that.
Ms. Velazquez. Yes. Mr. Mason?
Mr. Mason. I know our industry has participated. I
personally have not. I know our lobbyists have and other
members of our industry.
If you would like we can get comments to you after the
meeting and would be happy to.
Ms. Velazquez. That would be helpful.
Mr. Mason, I was interested in your industry's job
participation in the pilot process on the Regulatory
Flexibility Act. In your case it was for the OSHA PEL rule?
Mr. Mason. Yes, ma'am.
Ms. Velazquez. It surprises me that OSHA's estimate of the
cost for complying was off by a multiple of 60. It sounds as
though that was not even helpful and it cost you a lot of money
to hire analysts to help make your case. Is that common in your
members dealing with federal agencies?
Mr. Mason. Well, this was on top of just going through
MP&M, the metal, products and machinery rule where we spent a
million dollars. I would say it is getting more common because
we are challenging today rules and regulations that will affect
us going forward as opposed to maybe not having done that in
years past, so.
Ms. Velazquez. Can you recommend any action that will help
bring the estimates back to reality without causing all these
costs for your businesses?
Mr. Mason. The only thing that I would say is
communications. If we have an opportunity to address a proposed
rule before it is proposed, and we have gotten a lot of that
help with EPA, if we have that opportunity I think that would
help a lot.
Ms. Velazquez. Okay.
Mr. Mason. But it takes a lot of work, a lot of time. And
most of us who do this still have a business to run and a job
to do at that business, so it is very difficult to be able to
do that.
Ms. Velazquez. Mr. Arnett, let us talk about OIRA. And I
heard you when you said that of the recommendations that you
submitted after two years no action has been taken. What would
you recommend in terms of giving some teeth to this process to
make it more than just window dressing?
Mr. Arnett. Yeah, the breakdown appears to be at the point
after the referral has been made to the agency. I think OIRA
and in consultation with the Small Business Administration
Office of Advocacy does a very thorough analysis of the
submissions. The only thing I would add there would be is
participation by the nominating entity should come into play
there in some way.
The same when the submissions were made we did not hear
anything for about a year and then we got the 2003 report and
then we learned that we had pretty good success in getting
referrals. Because not all submissions to OIRA were referred.
Out of the 316 I think only 162.
So at that point that is the only thing I would suggest at
that point.
Now, in terms of I am not sure how you give OIRA more
authority to force the agencies to take action and to take
action in a particular length of time. I suppose it may involve
some statutory changes. Congress may have to address that
issue. In the Regulatory Right to Know Act I suppose it could
be strengthened at that point because that I think is the
vehicle that authorized OIRA to make these submissions to the
agency. And I have not reviewed that act. A thorough review of
that act might reveal some mechanism in there to give OIRA more
authority.
But I think it is clear that OIRA makes the submission and
then I do not think they even feel that they have any recourse
at that point to force the agency to take some kind of action.
And they may not in all cases. It would require review and
probably more manpower than OIRA presently has because I think
they would have to determine in their own minds whether maybe
the agency was realistic in its response not to take action.
So it requires some judgment on their part.
Ms. Velazquez. I, you know, it just really when you come to
OMB and OIRA being under OMB, heads of agencies are so fearful
of OMB. So maybe the budget process might be an avenue.
Mr. Bopp, you mentioned in you statement Congress needs to
address staff shortages at OIRA. How do you know that?
Mr. Bopp. We are aware that OIRA right now is below what it
has been, its assigned staff level.
Ms. Velazquez. How are you aware? Who told you?
Mr. Bopp. I believe I heard that through a meeting at
National Association of Manufacturers perhaps.
Ms. Velazquez. So OIRA is telling that to the association?
Mr. Bopp. I am not sure where they heard that. But someone
at NAM brought that up.
Ms. Velazquez. There has to be a staffing problem when two
years later no action has been taken. And the problem that we
have is that when we bring agencies to come before us and
testify regarding the adequacy of the budget submitted by the
president they say that everything is fine and that they can
operate with that budget.
So it is surprising for me to read or to listen to your
testimony talking about the lack of staffing because when they
come before us and we ask them, Do you have the resources? they
say, Yes, we do. So if they are telling me that they do not
need more money I am not going to fight with them to give them
more money.
Mr. Bopp. That is true. I mean they would have to ask.
Ms. Velazquez. Thank you, Mr. Chairman.
Chairman Manzullo. This Small Business Committee has
oversight jurisdiction over any regulation or law impacting
small businesses. So we are going to send a letter to all these
agencies asking them to respond to us within 14 days as to
what, if anything, they have done with regard to the
recommendations that were made.
John, if you want to work with Barry Pineles on that to
help us bring together or have any other suggestions. And then
we are going to send them over there and say we want you to
answer. And then we will have a hearing and just bring them in,
line them all up, What have you done? Seems to be the only
thing that works around this place.
I have a final question. Did any of you get involved in the
ergonomics debate in 1990 when OSHA greatly underestimated the
cost of that? Or was it--What did I say?
Mr. Arnett. I worked on that issue with the National
Coalition on Ergonomics. And were you talking about the--there
was a SBREFA panel I think on it.
Chairman Manzullo. Yes.
Mr. Arnett. But I was not involved in that.
Chairman Manzullo. Were any of you involved in that SBREFA
panel?
Mr. Bopp. No.
Chairman Manzullo. Okay. We had the head of OSHA at the
time come out to Rockford, Illinois. I cannot think of his
name. He had testified here. John Crenshaw or something like
that, whatever his name was. And he came to Rockford. In fact,
one of our manufacturers invited him and said why don't you
take a look at what we are doing. I told the manufacturer, I
said you invite OSHA to come out. He said yes.
So he came out and Cedric Blazer at Zenith Cutter and Tool
showed him what he was doing. And then the administrator by
coincidence was testifying before our Committee the next week.
And he said it was very interesting because, he said, we just
saw the most amazing thing at a constituent's place.
I said, What happened? Well, he said, they were working on
some big piece on one bench and he said instead of picking it
up and carrying it over to another bench for another machine
application he said they put it on a cart and they shoved it
off one table, put it on the cart, rolled it to another table
and then did their sequential machine process there.
And I said, Well, that is the reason we had you out there
was to show that he does not need your ergonomics regulation,
he in fact was doing everything possible himself to come up
with these different plans. I said, how could you ever come up
with some type of a plan to regulate that?
I said, let me give you a hypothetical. I said, my brother
has a restaurant and, I said, under this plan if somebody
washing dishes develops carpal tunnel, I said, then Frank would
have to file a report with the Department of Labor. And I said,
how else could you wash dishes?
He said, well, he said,--No, wait a minute, he did not give
the answer. He refused to answer it. I only know of one way to
wash dishes.
And Congressman Bill Pascrell who was on the Committee at
that time and a great friend of ours looked at me and he said,
Don, he says, instead of washing dishes this way, he said, wash
them this way. They can go in the opposite direction. And we
had made our point.
Well, listen, we appreciate your testimony. Would have been
helpful with regard to today's hearing from this panel is the
fact that we will be sending a follow-up letter with a drop
dead date on it as to why these agencies have not complied with
these regulations or with the recommendations from OIRA from
two years ago. I know that that will make them move faster on
the new set of regulations that come about. That is the purpose
of this hearing.
Again we want to thank you for coming and the hearing is
adjourned.
[Whereupon, at 4:15 p.m., the Committee was adjourned.]
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