[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
THE ADMINISTRATION'S PROGRAM TO REDUCE UNNECESSARY REGULATORY BURDEN ON 
                  MANUFACTURERS--A PROMISE TO BE KEPT?

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

                                HEARING

                               before the

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                     WASHINGTON, DC, APRIL 28, 2005

                               __________

                           Serial No. 108-14

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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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
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri                  ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania           DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado           DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
STEVE KING, Iowa                     MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan          RAUL GRIJALVA, Arizona
RIC KELLER, Florida                  MICHAEL MICHAUD, Maine
TED POE, Texas                       LINDA SANCHEZ, California
MICHAEL SODREL, Indiana              JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska           MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania    GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas

                  J. Matthew Szymanski, Chief of Staff
          Phil Eskeland, Deputy Chief of Staff/Policy Director
                  Michael Day, Minority Staff Director


            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

W. TODD AKIN, Missouri Chairman      MADELEINE BORDALLO, Guam
MICHAEL SODREL, Indiana              ENI F. H. FALEOMAVAEGA, American 
LYNN WESTMORELAND, Georgia           Samoa
LOUIE GOHMERT, Texas                 DONNA CHRISTENSEN, Virgin Islands
SUE KELLY, New York                  ED CASE, Hawaii
STEVE KING, Iowa                     LINDA SANCHEZ, California
TED POE, Texas                       GWEN MOORE, Wisconsin

       Nelson Crowther, General Counsel/Subcommittee Coordinator

                                  (ii)






















                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Graham, Honorable John D., Administrator, Office of Information 
  and Regulatory Affairs, Office of Management and Budget........     4
Will, Mr. Howard, President, Caldwell Group......................     5
Stidvent, Honorable Veronica Vargas, Assistant Secretary for 
  Policy, Department of Labor....................................     7
Greenblatt, Mr. Drew, Owner, Marlin Steel Wire Products..........     9
Daigle, Honorable Stephanie, Acting Associate Administrator, 
  Policy, Economics and Innovation, Environmental Protection 
  Agency.........................................................    10
Sullivan, Honorable Thomas M., Chief Counsel for Advocacy, Office 
  of Advocacy, Small Business Administration.....................    12
Schull, Mr. Robert, Senior Analyst, Director of Regulatory 
  Policy, OMB Watch..............................................    14

                                Appendix

Prepared statements:
    Graham, Honorable John D., Administrator, Office of 
      Information and Regulatory Affairs, Office of Management 
      and Budget.................................................    26
    Stidvent, Honorable Veronica Vargas, Assistant Secretary for 
      Policy, Department of Labor................................    29
    Daigle, Honorable Stephanie, Acting Associate Administrator, 
      Policy, Economics and Innovation, Environmental Protection 
      Agency.....................................................    39
    Sullivan, Honorable Thomas M., Chief Counsel for Advocacy, 
      Office of Advocacy, Small Business Administration..........    49
    Schull, Mr. Robert, Senior Analyst, Director of Regulatory 
      Policy, OMB Watch..........................................    61
Attachments:
    Twarog, Mr. Daniel L., President, North American Die Casting 
      Association................................................    77

                                 (iii)

















THE ADMINISTRATION'S PROGRAM TO REDUCE UNNECESSARY REGULATORY BURDEN ON 
                  MANUFACTURERS--A PROMISE TO BE KEPT?

                              ----------                              


                        THURSDAY, APRIL 28, 2005

                  House of Representatives,
   Subcommittee on Regulatory Reform and Oversight,
                                Committee on Small Business
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:32 a.m. in 
Room 311, Cannon House Office Building, Hon. W. Todd Akin 
[chairman of the Subcommittee] presiding.
    Present: Representatives Akin, Kelly, Poe and Bordallo. 

    Mr. Akin. The meeting will come to order. It is a pleasure 
to see some witnesses. We have a lot of witnesses today. We are 
going to have to try to keep on time and all, but welcome 
everybody. Thank you so much for taking the time to join us.
    Minority Member Bordallo, it is also great to have you 
here.
    We were just chatting a moment beforehand on a subject of 
red tape and paperwork. It is sort of a peculiar subject for me 
to be chairing a meeting on this because I would like to get 
rid of all of it if I could. I have already expressed a 
political opinion. I try to stay away from that to some degree.
    I would like to say good morning and welcome to the hearing 
of the Subcommittee on Regulatory Reform and Oversight. A 
special welcome to those of you who have come some distance to 
participate and attend this meeting.
    We are holding the hearing in light of a disturbing 
reality: In the past five years the United States has lost over 
two million jobs in the manufacturing sector. Small 
manufacturers, which make up the core of the industrial base of 
our country, have been struggling.
    I am happy to say that in the recent months the economy and 
manufacturing specifically have shown signs of improvement. 
Much of that can be attributed to the tax reductions proposed 
by the President and enacted by this Congress and of course to 
the hard work, creativity and initiative of the American 
workforce.
    A number of factors have been cited in causing the loss of 
manufacturing jobs. They include the tax burden, overvaluation 
of the dollar, low wage rates in countries such as China, 
outsourcing to foreign countries of jobs formerly performed 
here in the United States, governmental paperwork and red tape, 
and needless bureaucratic regulations.
    I want to make it very clear that we are not talking here 
about eliminating regulations that are essential to maintaining 
the public health, safety and necessary protection to the 
environment. To eliminate such regulations would be bad 
business and detrimental to the nation as a whole.
    The Administration has heard the plea of manufacturers, 
especially small manufacturers, to eliminate needless and 
burdensome regulations. In February 2004, the Office of 
Management and Budget, OMB, asked for recommendations from the 
public as to those regulations affecting the manufacturing 
sector that should be modified or otherwise reformed to reduce 
the costly regulatory burden. Comments were received from over 
40 businesses and nonprofit organizations that nominated 189 
regulations, guidelines and paperwork requirements for reform.
    In December 2004 OMB submitted the 189 nominations to the 
federal agencies for their review. In March of this year the 
Administration announced that, ``Federal agencies will be 
taking practical steps to reduce the cost burden on 
manufacturing firms operating in the United States by acting on 
76 public nominations to reform federal regulations.''
    It was further announced that, ``OMB has directed agencies 
to take the most appropriate action to ease the excessive 
burden for the manufacturing industry while maintaining health, 
safety and environmental protections for the public.''
    This is a good start, but there are a number of questions 
that need to be asked. Will this program be implemented and 
completed as advertised? Are the 76 proposals, of the 189 
nominated for reform, the ones that will have the most 
beneficial effect on manufacturers and our country's economy?
    These are the critical questions we are seeking to have 
answered today, and we appreciate all of you who have agreed to 
testify to that end. Thanks again to all of our witnesses for 
coming, and now I will turn to our distinguished Ranking 
Member, Mrs. Bordallo, for her opening remarks. Thank you.

    Ms. Bordallo. Thank you very much, Mr. Chairman, and I 
would like to thank you for calling this important hearing 
today. I think it is an important first step to call for 
regulations that I believe to be outdated and overly burdensome 
and review them.
    In that respect I am encouraged by the actions of the 
Office of Information and Regulatory Authority, the Office of 
Advocacy, the Department of Labor and the EPA. However, I am 
somewhat discouraged at the time it has taken to move forward 
with such a program and at the lack of resources available to 
conduct such reviews.
    One of the key conclusions we have reached is that more 
needs to be done to help small businesses with the federal 
regulatory and paperwork burden. In the four hearings that we 
have held on this issue in the last month, every small business 
witness and every major association that has testified before 
the Small Business Committee has put regulatory burden at or 
near the top of their priority list.
    It is clear something is definitely wrong, and in spite of 
promises to rectify this problem made in recent years the 
regulatory burden has only increased for our nation's 23 
million small businesses. Federal agencies need to be held 
accountable for their agencies' performance, and I hope that a 
connection is being made between the federal red tape and 
paperwork burden and national competitiveness.
    As you know, I represent Guam, the Territory of Guam, which 
is located on the doorstep of China, Japan, South Korea and 
many other Asian countries, some of the most competitive 
economies in the world. Our small businesses need to be 
efficient and competitive as they can be to succeed. Action on 
regulatory reduction starts with setting standards for agency 
performance and then following through from the highest to the 
lowest level.
    I know that during the term of President Clinton he put the 
Vice President in charge of a government-wide effort to review 
and renew our commitment to regulatory overhaul and compliance. 
During this Administration there was a dramatic reduction in 
small business dissatisfaction about red tape that has 
recently, I am sorry to say, bottomed out. I hope that high 
priority level has not been lost.
    The U.S. should avoid a race for the bottom, and by that I 
mean we should maintain our high standards. We must instead 
adopt the attitude that innovative and effective solutions 
exist to achieve our regulatory goals without jeopardizing our 
ability to maintain worldwide competition.
    The Committee has been careful in the past to ensure that 
small businesses are not simply used as a mantra to dismantle 
regulations, but rather that we find intelligent ways to 
provide protection to health, safety and fair competition, and 
the best way to do this in my view is with the cooperation of 
the small business community, as well as state and local 
governments like Guam to review problems in our present system 
and reduce outmoded and redundant regulations.
    I look forward to hearing about your efforts to review 
previous regulations, and I do hope that small businesses form 
a major part of that effort.
    Thank you, Mr. Chairman.

    Mr. Akin. Thank you so much. I am looking forward to 
comments.
    One of the things I have tried to do in my Subcommittees is 
to try to keep things on time, so it is my job to make sure 
that we keep the opening comments at five minutes per witness.
    We have, I think, from most of you written statements that 
you have submitted for the record. So, I think probably for the 
purposes of our proceeding it might be best if you just 
summarize what you came here to say. Congressmen get chased to 
all different kinds of Committees and directions, so if you 
think of the one or two things that you really want to 
communicate, maybe that is the easiest way to proceed.
    I like to run things fairly informally, and we are not 
overwhelmed with people. There are so many different Committees 
meeting at the same time that we will be able to get through 
things in a good amount of time I think.
    The first person I would like to call is the Honorable John 
Graham from OMB. Perhaps, John, you can touch on that one set 
of numbers that I mentioned, that there were I think 189 
nominations, and we picked 76.
    You know the old 80/20 rule. Sometimes 80 percent of the 
trouble comes from 20 percent of the regulations. I hope that 
we have picked some of the real juicy ones, but I look forward 
to your testimony.

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


    Mr. Graham. Thank you, Mr. Chairman. Good morning to you 
and to other Members of the Subcommittee.
    Let me start with some good news and bad news on the 
subject of regulatory burden. During the first full year of the 
President's Administration we slashed the growth of new 
regulations by about 70 percent compared to the 20 year 
previous average, so we have been making progress and slowing 
the growth of the burden of regulation.
    The bad news is that we at OMB are humbled by the sea of 
existing federal regulations that have accumulated over the 
last dozens of years of the republic. Since OMB began to keep 
records in 1981, there have been 115,000 new federal 
regulations adopted. Twenty thousand of them we at OMB cleared 
and allowed to be published in the Federal Register. Of those, 
1,100 of them were estimated to cost the economy more than $100 
million when they were enacted.
    Sad as it is to say, most of these regulations have never 
been reviewed to determine whether they accomplished their 
intended purpose, how much they actually cost or what their 
benefits are.
    Mr. Chairman, as you mentioned in your opening remarks, we 
have taken a modest step in this Administration in 2004 to 
identify a particular sector of the American economy, the 
manufacturing sector, which compared to all of the other 
various sectors is estimated to bear the largest burden 
measured as cost per employee for a business in terms of 
regulatory burden.
    We received, as you mentioned, 189 nominations from 41 
commenters, and we have identified in collaboration with the 
agencies 76 of them that we feel we can make practical progress 
without new legislation, simply with actions of our federal 
regulatory partners.
    I want to thank the collaboration we had not only from our 
regulatory agencies, but from the Advocacy Office of the Small 
Business Administration and the Commerce Department, the new 
Manufacturing Unit of the Commerce Department, that helped us 
identify these targets for practical progress.
    Let me conclude my oral statement by just giving you a 
sense of the global economy that we work in and how even the 
most regulated segments of the world economy in the European 
Union today, they are aggressively seeking efforts to reduce 
the burden on European businesses in order to make them more 
competitive in the global economy. While we certainly hear 
about China, and that is a very significant concern, let me 
tell you what is happening in Europe.
    Financial Times dated Monday, April 25, 2005, Bonfire of 
Red Tape Planned for Brussels. ``As many as 50 European laws 
could be scraped by this summer as Gunter Verheugen, the new EU 
Enterprise Commissioner, tries to signal a new era of lighter 
regulation from Brussels. Mr. Verheugen has ordered a bonfire 
of legislation that was proposed under the former 
administration of Commissioner Prodi in one of the most 
thorough cleanouts of red tape ever conducted by the European 
Commission.''
    The article continues, ``The Commission has suggested it 
would withdraw or radically simplify a string of existing laws 
in such areas as medical devices, waste disposal, the approval 
of motor vehicles, company law and taxation.''
    I draw your attention to this reality, Mr. Chairman, 
because we not only need to do this in this country 
aggressively in order to reduce the current burdens, but we 
need to recognize the global competitive environment that our 
workers and our businesses are operating under.
    There are other parts of the world that are dramatically 
taking steps to make themselves more competitive. That is why I 
am very encouraged that you are here this morning helping us 
and drawing attention to our modest effort to streamline these 
76 manufacturing regulations. Thank you very much.
    [The Honorable John Graham's statement may be found in the 
appendix.]

    Mr. Akin. You get the extra points for being 45 seconds 
under time. Good work. Thank you very much, Administrator.
    Our second witness is going to be Howard Will, and I 
believe that Howard is the president of the Caldwell Group, if 
that is correct.

    Mr. Will. Correct.

            STATEMENT OF HOWARD WILL, CALDWELL GROUP


    Mr. Will. Chairman Akin, Ranking Member Bordallo, Members 
of the Committee, I am Howard Will. I am here on behalf of the 
U.S. Chamber of Commerce and the Associated Wire Rope 
Fabricators.
    I am the CEO/owner of Caldwell Group, a 70 employee small 
manufacturer located in Rockford, Illinois. I purchased this 
company in 1976, so I have been at it for about 30 years. 
Caldwell manufactures below-the-hook lifting products, and the 
Caldwell Company was one of two firms that invented the web 
slings back in the 1950s using MIL spec web.
    I have been active in technical aspects of trade 
associations for almost all of my professional life, first with 
the Web Sling Association as past chair of their technical 
committee and past president of that organization and currently 
with the Associated Wire Rope Fabricators as a past board 
member, a member of the technical committee and chair of their 
testing committee for the past 10 years.
    These associations have conducted a number of technical 
activities. The Web Sling Association back in the 1970s 
developed a web sling standard which is the basis for Chapter 5 
in the ASME B30.9 standard. They did UV and saltwater testing 
of web slings to determine deterioration of boat slings, and 
mostly recently they have done UV testing of web slings to see 
how slings hold up in a construction environment.
    The Associated Wire Rope Fabricators is the most active 
testing committee in the industry with 10 to 12 test programs 
completed. Many of the problems they have tested are web 
slings, heat effects on web slings, braided wire rope slings, 
fatigue of round slings and cuts in web slings.
    The point I am making is these trade associations, 
particularly their members, and many of their members are the 
chief engineers of these companies, and these companies are 
small companies. They have the technical expertise. They do the 
testing. They provide the input to draft and update the ASME 
standards, specifically the B30.9 standard, which is updated 
every three years.
    This standard, ASME B30.9, is the recognized safety 
standard for slings. It covers six types of slings--chain, wire 
rope, metal, mesh rope, web, round slings--and is updated every 
three years.
    The OSHA position, they use and promote an old standard. 
Back in the 1970s B30.9, the 1971 version, was the basis for 
OSHA's rules which were published in the Federal Register and 
adopted in 1975. There has been no change or update in this 
regulation in 30 years.
    They have also published a booklet, 3072, and there has 
been no update since 1996 on that. The problem is there are new 
slings, new technical info, and there are errors in the 
booklet. AWRF in particular has pointed out problems with the 
booklet.
    Changing the OSHA standard is one of the 76 items pointed 
out by OMB for action, and nothing has happened. The basic 
problem is the industry uses the B30.9 standard. They create 
operating instructions for their products. They use warnings on 
their products, and they conduct training in the field based on 
that standard.
    O.S.H.A. relies on its outdated rules, and obviously there 
is a conflict when there is something newer. There is potential 
for more conflict. It pops up in another area, and that is 
court cases where you have product liability. You have two sets 
of rules/interpretations in a court of law.
    In conclusion, please follow OMB's recommendation and adopt 
the B30.9 standard as the safety standard for slings. OSHA, 
please use an accelerated ruling process and adopt this new 
updated standard and update your 1971 rules.
    Thank you.

    Mr. Akin. Thank you very much. Do you have one of those 
little counters over there? You had that timed perfectly.

    Mr. Will. Three seconds.

    Mr. Akin. I appreciate your testimony. Thank you.
    The third witness is going to be the Honorable Veronica 
Stidvent, the Assistant Secretary for Policy for the Department 
of Labor. You can proceed, Veronica. Thank you.

STATEMENT OF THE HONORABLE VERONICA VARGAS STIDVENT, DEPARTMENT 
                            OF LABOR


    Ms. Stidvent. Thank you. Chairman Akin and distinguished 
Members of the Subcommittee, thank you so much for the 
opportunity to appear before you today to discuss the 
Department of Labor's ongoing efforts to strengthen worker 
protections while reducing unnecessary regulatory burdens on 
the economy, particularly on the manufacturing sector and on 
small businesses. This hearing is especially timely coming as 
it does during Small Business Week.
    As requested by the Subcommittee, my testimony will address 
the Department's overall progress in responding to the public's 
reform nominations in OMB's report. The Department takes very 
seriously its responsibility to protect worker safety and 
health, retirement security, pay and equal access to jobs and 
promotions.
    Over the years, advances in safety, health, science and 
technology, as well as changes in the law, have rendered a 
number of Department regulations outdated or even unnecessary. 
As a result, these advances have required us to revise or 
eliminate regulations and to consider and adopt new rules and 
approaches that ensure strong protections for workers without 
imposing unnecessary and costly burdens on the economy.
    The Department recognizes the costs that regulations place 
on the regulated community, particularly the small business 
community. We have pursued alternatives to rulemaking whenever 
feasible and have attempted to minimize the costs of any 
regulations while ensuring that strong worker protections are 
in place.
    The Department also recognizes that employers often need 
help understanding their rights and responsibilities under 
federal labor laws and regulations. That is why Secretary Chao 
launched the Compliance Assistance Initiative in June of 2002. 
The initiative aims to provide businesses, employees, unions 
and other regulated entities with the knowledge and tools they 
need to comply with the Department's rules.
    As part of the initiative, we have developed a variety of 
free tools, often tailored to small business, to provide 
employers with access to clear and accurate information when 
and where they need it. The initiative also involves working 
with other government agencies such as the Small Business 
Administration and partnering with private organizations to 
help educate business owners and workers about available 
compliance assistance tools and resources.
    Our multifaceted approach to regulatory reform, compliance 
assistance and vigorous enforcement is working. Due in part to 
these activities, the rate of workplace fatalities and the 
injury and illness rate are at the lowest levels in OSHA 
history. In 2004, the Mine Safety and Health Administration 
reported the fewest number of fatalities since 1910 when 
records were first kept.
    As this Subcommittee recognizes, one important regulatory 
tool in the process is addressing the public's reform 
nominations that are included in OMB's annual report to 
Congress on the costs and benefits of federal regulations. 
OMB's 2005 report included 11 reform nominations for the 
Department of Labor, including recommendations addressing the 
Family and Medical Leave Act, permanent labor certification and 
nine OSHA regulations and guidance documents.
    The Department either has or will be taking action on each 
of these reform nominations. For example, a commenter 
recommended that the Department finalize the new labor 
certification application process to bring permanent alien 
workers into the United States. The Department's Employment and 
Training Administration published this final rule on December 
27, 2004.
    To conclude my testimony, I would like to briefly describe 
two of the regulatory actions listed on the Department's spring 
2005 regulatory agenda. First, OSHA will complete its 
respiratory protection standard by publishing its assigned 
protection factors final rule.
    The protection factors are numbers that describe the 
effectiveness of various classes of respirators in reducing 
employee exposure to airborne contaminants. This action will 
reduce compliance confusion among employers and provide 
employees with consistent and appropriate respiratory 
protection.
    Second, and consistent with the Secretary's priority for 
ensuring pension and health benefits security, the Employee 
Benefits Security Administration will finalize its rules to 
protect and preserve retirement assets of workers who are 
covered by 401[k] plans that have been abandoned by their 
employers.
    These rules will empower financial institutions that hold 
assets of abandoned plans to help workers gain access to their 
retirement benefits, benefits that might otherwise be depleted 
as a result of ongoing administrative costs.
    Mr. Chairman, the Department is proud of its achievements 
in streamlining its regulatory agenda since 2001. In doing so, 
we have provided clarity in our regulations for employers, 
workers and the public at large. We value the important input 
we receive from the public during the rulemaking process, OMB's 
reform nomination process and the feedback we receive through 
other outreach efforts.
    We are dedicated to reducing the regulatory costs and 
burdens for employers which will help them create jobs while at 
the same time continuing our commitment to strengthen 
protections for the American workforce.
    Mr. Chairman, this concludes my testimony, and I would be 
happy to respond to any questions you may have.
    [The Honorable Veronica Vargas Stidvent's statement may be 
found in the appendix.]

    Mr. Akin. Thank you, Veronica. We are going to do the 
questions after we have a chance to have the opening 
statements. Some people have come a long distance. We want to 
make sure everybody gets a chance.
    Our next witness please would be Drew Greenblatt. You are 
with Marlin Steel Products I believe?

    Mr. Greenblatt. That is correct.

   STATEMENT OF DREW GREENBLATT, MARLIN STEEL PRODUCTS, LLC.


    Mr. Greenblatt. Mr. Chairman, Members of the Regulatory 
Reform and Oversight Subcommittee, my name is Drew Greenblatt, 
and I am the owner of Marlin Steel Wire in Baltimore, Maryland. 
I am before you representing the views of the National 
Association of Manufacturers or the NAM.
    The National Association of Manufacturers is the nation's 
largest industrial trade association representing small and 
large manufacturers in every industrial sector and in all 50 
states. Headquartered in Washington, D.C., the NAM has 10 
additional offices across the country. Three-quarters of the 
NAM's members are manufacturers with small to medium sized 
operations. Visit the NAM's award winning website at 
www.nam.org for more information about manufacturing and the 
economy.
    N.A.M. president John Engler testified about the impact of 
regulations on manufacturing earlier this month before the 
Regulatory Affairs Subcommittee of the House Committee on 
Government Reform. Since his testimony is so recent and on the 
same topic, the Subcommittee staff agreed that it would make 
sense to submit that written testimony for the record of this 
hearing.
    Briefly, Governor Engler's April testimony noted that 
regulations, especially environmental and workplace 
regulations, impact the manufacturing sector more than any 
other sector. In addition, regulations impact small 
manufacturers in terms of cost per employee more than twice as 
much as larger manufacturers, nearly $17,000 for firms with 
fewer than 20 employees versus $7,000 for firms with more than 
500 employees.
    Thus, it is appropriate for last year OMB's annual report 
to Congress on the costs and benefits of regulatory programs to 
focus on regulations that impact manufacturing. In particular, 
the NAM submitted several small technical suggestions and 
strongly urged OMB to improve seven regulations that have a 
broad effect on manufacturing.
    On March 9 of this year, after consultation with the 
agencies about these regulations, OMB listed 76 regulations 
that agencies were directed to consider improvements for. I 
would like to note that any substantive changes to any of the 
regulations on this list will be subject to notice and comment 
requirements of the Administrative Procedures Act, so any such 
changes to be made will be transparent and open.
    Turning to my company, these regulations may seem like 
abstract concepts, but they have a major impact on Marlin. 
Marlin makes wire baskets, shelves, wire forms and hooks for 
U.S. companies like Baxter, Boeing, Caterpillar, Honeywell, 
Johnson & Johnson and Rubbermaid. We make 100 percent of our 
products in Baltimore, and we import nothing. We do not 
outsource our employees from overseas.
    We were established in 1968, and we have 20 employees. We 
are an example of the American job growth machine. Growing my 
company in a profitable manner is my goal, and as I grow I am 
going to need smart people and I am going to need to hire them. 
I am going to need to buy more equipment. Some of that 
equipment is made in Rockford, Illinois. The congressman on the 
other Committee is in that area. I buy from Lewis, Ideal and 
Schlotter, three major manufacturers in Rockford.
    For the record, all my employees get great health 
insurance, vacation, holiday pay, 401[k], 100 percent college 
reimbursement, but there are government caused obstacles to my 
growth. For me and many of my peers, it is just not one or two 
regulations that are troublesome. It is a cumulative effect of 
many regulations. We follow the regulations. Some are good, but 
the bad ones need to go.
    Let us discuss a few of the bad ones that directly affect 
Marlin and my employees. The first is taxes. Small and medium 
sized firms are burdened with high expenses. We fill out lots 
of paperwork and file taxes. It costs my company over $17,000 
for outsiders to comply with all these rules.
    In addition, I have to pay $30,000 just for internal 
bookkeeping costs. This makes no sense. That money could be 
redeployed to more productive purposes like purchasing that 
robot over there. We bought one of these two months ago so now 
we can weld as fast as four on welded Mustangs.
    If we bought a second one, which I would love to do, we 
could reduce our costs, narrowing the price difference between 
me and China. We could make higher quality parts. That would 
improve the quality difference between me and China, and we 
could ship faster. Thereby I would win more jobs.
    I assure you a Chinese factory does not pay $47,000 a year 
for this kind of paperwork. This improvement will increase my 
revenue, which will let me hire more well paid people. This is 
a win/win solution.
    In summary, I think it is a good idea for us to keep the 
good regulations, get rid of the bad regulations, and what will 
occur is a renaissance in American manufacturing.
    Thank you very much.

    Mr. Akin. Drew, thank you very much for your comments.
    Our next witness is going to be the Honorable Stephanie 
Daigle is it?

    Ms. Daigle. Yes, it is.

    Mr. Akin. You are with the EPA?

    Ms. Daigle. Yes.

    Mr. Akin. Thank you, Stephanie.

STATEMENT OF THE HONORABLE STEPHANIE DAIGLE, OFFICE OF POLICY, 
   ECONOMICS AND INNOVATION, ENVIRONMENTAL PROTECTION AGENCY


    Ms. Daigle. Good morning, Mr. Chairman and Members of the 
Subcommittee. My name is Stephanie Daigle, and I am the Acting 
Associate Administrator of the Office of Policy, Economics and 
Innovation at the Environmental Protection Agency.
    Thank you for inviting me here today to discuss the report 
on regulatory reform of the U.S. manufacturing sector. This 
report includes 42 wide-ranging reforms to be undertaken by the 
Agency. I would also like to highlight a few of the Agency's 
activities that address the needs of small business.
    Each year EPA publishes hundreds of regulations and 
guidance documents. While these actions are necessary to 
protect public health and the environment, they can pose 
challenges to small business. In recent years, my office has 
overseen several reforms to strengthen the credibility and 
quality of our regulations. At EPA we are fully committed to 
creating a regulatory system that works for small business.
    I am confident that we can achieve this goal because EPA 
has a long history of working with small business to identify 
their unique needs and concerns. One of our most recent actions 
is the development of a small business strategy. The overall 
goal of the plan is to improve our regulations so that they are 
easy to understand and practical to implement.
    An important element of the small business strategy is to 
rigorously implement the Small Business Regulatory Enforcement 
Fairness Act or SBREFA as we like to call it. EPA is a 
government leader in implementing SBREFA.
    Over 450 small business, small government and small 
nonprofit representatives have provided regulatory advice to 
the Agency through participation on our small business advocacy 
review panels. Twenty-seven notices of proposed rulemakings 
have been published following completion of a panel process, 
and each regulatory proposal reflected the advice and 
recommendations of the panel.
    I would like to give you one example of a successful panel. 
In May 2004, EPA finalized a clean air non--road diesel rule, a 
rule that was strongly supported by industry, health advocates, 
states, territories and local governments. Since the non--road 
diesel rule will affect many small entities, EPA convened a 
SBREFA panel to solicit information and comments from these 
industries.
    Several of the participants expressed concerns with the 
projected impacts of meeting the new requirements. To 
accommodate these concerns, the final rule includes a number of 
provisions to reduce the impact of the rule on small business 
such as providing additional time and temporary exemption for 
small volume equipment sales. This is just one example that 
shows EPA's commitment to addressing small regulatory issues.
    Now let me turn to the manufacturing sector report. Each 
year OMB is required to submit a report to Congress that 
estimates the total annual cost, benefits and impacts of 
federal rules and paperwork. While I discuss a number of 
reforms in my written testimony, I would like to highlight one 
in particular because it demonstrates the value of the reform 
process initiated by the report. It concerns a recycling of 
solid waste.
    In the nomination process leading to the manufacturing 
report, eight industry trade associations, the Chamber of 
Commerce and SBA requested that the Agency revised its 
definition of solid waste to exclude certain types of recycling 
from regulatory coverage. Commenters told us that EPA's current 
regulatory system for classifying waste materials actually 
discourages recycling instead of encourages it.
    We listened to their concerns, and in October 2003 the 
Agency proposed revisions to the definition of solid waste to 
enable certain types of materials be more easily recycled. In 
response to the manufacturing initiative, the Agency has 
committed to finalizing the rule on an expedited schedule. It 
is our intent to publish a rule by the fall of 2006.
    In reaching this conclusion, EPA actively and rigorously 
sought out the perspective of small business. As part of the 
outreach effort for the proposed rule change, EPA met with the 
SBA Advocacy Environmental Roundtable twice, and we plan to 
participate on a panel at the 2005 Small Business Ombudsman/
Small Business Assistance Program National Conference this 
June.
    The solid waste initiative shows how it is possible to 
protect public health and the environment and meet the needs of 
the small business community.
    Mr. Chairman, Members of the Subcommittee, under this 
Administration the EPA has taken significant steps towards 
improving the quality and credibility of our regulations. The 
reforms we have outlined in the manufacturing initiative are an 
important part of that improvement process.
    Thank you for inviting me here today.
    [The Honorable Stephanie Daigle's statement may be found in 
the appendix.]

    Mr. Akin. Thank you for your testimony, Stephanie.
    Our next witness, speaking from the endowed chair of the 
SBA, is the Honorable Thomas Sullivan. Have you missed any 
hearings in the last year or two, Thomas?

    Mr. Sullivan. I sure hope not, Mr. Congressman.

   STATEMENT OF THE HONORABLE THOMAS M. SULLIVAN, OFFICE OF 
            ADVOCACY, SMALL BUSINESS ADMINISTRATION


    Mr. Sullivan. Thank you, Mr. Chairman, Members of the 
Committee. It is a pleasure to be here again to testify on the 
public regulatory reform nominations.
    Because my office is independent I think I should start out 
by saying that the views that I express are not the official 
views of SBA or the Administration. Rather than go through in 
some detail my written statement I would like to just summarize 
a few points.
    We have heard certainly from a case example how individual 
businesses help the American economy, but I would like to shed 
some light on how manufacturing overall helps the American 
economy. Quite frankly, it keeps the American economy afloat.
    I am lucky enough to have economists in my office who 
produce data spoken about by Mr. Greenblatt, and this other 
data will certainly be welcome news for this Committee. The 
economic data from 2002 indicate that nearly 99 percent of all 
manufacturing firms are small business. Put another way, the 
small businesses employ over 42 percent of the more than 14 
million Americans who are manufacturing employees.
    Additionally, small firms innovate more than large ones do, 
producing 13 to 14 more patents per employee than larger firms 
do. Finally, small manufacturing firms are more likely than 
large companies to produce specialty goods and custom demand 
items. For these reasons, manufacturing is very important to 
the small business sector of the United States economy, and 
small business is important to U.S. manufacturing.
    I think just that little segment from my written testimony 
highlights why small business analysis and in particular small 
business flexibility is so important in the way that agencies 
conduct their business and draft rules and regulations.
    I want to make sure that this Subcommittee realizes that 
when we talk about reform nominations this is a completely 
public and transparent process, much to the credit of John 
Graham's team at OIRA. Additionally, I also want to make sure 
that the Subcommittee realizes that the responsibility for 
these reforms rests with the individual agencies.
    That is an important starting point because where OIRA 
makes sure that there is scientific and economic peer reviewed 
data that is the underpinnings for regulations and my office 
makes sure that there is small business impact analysis and 
flexibility for the alternatives that make any regulation less 
burdensome for small business, the ultimate authority for those 
regulatory decisions do rest with the agencies like EPA, OSHA, 
IRS, Department of Transportation and others.
    The reason that this public reform nomination process is so 
important is that the agencies themselves have stepped up to 
the plate and said these are the rules that we have reviewed 
that may be outdated, may be duplicative or may simply be 
unnecessary and so that bears note that the agencies are 
ultimately responsible.
    Lastly, I want to shed some light and disparage on any type 
of discussion that calls small business flexibility a political 
process. It is not. My office was created under a Democratic 
President. The Regulatory Flexibility Act was a Republic 
President with a heavy Democrat Congress. The Reg Flex Act was 
amended under President Clinton, and most recently President 
Bush signed an Executive Order giving the Office of Advocacy 
even more authority to compel small business flexibility in the 
way that agencies regulate.
    In order for America to remain competitive, and I believe 
Dr. Graham really hit on this about not only is China looking 
over our shoulders, but European companies as well are 
breathing down our necks. In order to make sure that we 
maintain this country's competitiveness we must make sure the 
economic engine which is small business is not stifled by 
overburdensome or unnecessary regulations.
    Thank you, Chairman.
    [The Honorable Thomas Sullivan's statement may be found in 
the appendix.]

    Mr. Akin. Thank you very much.
    We have been called for a vote. I think we have time, 
Robert, for your testimony for five minutes, and then I think 
what we will do is stand in recess. I do not know how many 
votes we have, but probably several. I would guess in about 20 
minutes maybe we could take up the time for some questions.
    Would you proceed, please, Robert?

STATEMENT OF ROBERT SCHULL, DIRECTOR OF REGULATORY POLICY, OMB 
                             WATCH


    Mr. Schull. Certainly. I am Robert Schull. I am the 
Director of Regulatory Policy for OMB Watch, which is a 
nonprofit, nonpartisan research and advocacy center promoting 
an open accountable government responsive to the public's 
needs. I want to thank you, Mr. Chairman, and Members of the 
Subcommittee, for inviting me to testify.
    We definitely agree that small businesses should not be an 
excuse for weakening or eliminating the regulatory protections 
of the public health, safety and environment that we definitely 
need.
    We are concerned because the project being promoted today 
by OMB is a project that we see as nothing less than a hit list 
of regulatory protections to be weakened or eliminated and a 
give away of the public's valuable protections to benefit not 
small business, but large corporate special interests.
    Now, one of the keys to identifying how this hit list will 
not serve small businesses is to look at the fact that it is 
targeted at manufacturers. According to Census data, at best 
2.5 to five percent of America's small businesses are 
manufacturers, and if you look at the items on this hit list, 
the 76 items, and you go through and count up those that were 
either recommended by the SBA on its list of high priority 
items or if you look at those whose description mentioned 
specifically alleviating a small business burden you will find 
that only 11 out of those 76 items on the hit list meet those 
criteria.
    Additionally, I would like to point out that there were 
numerous attacks on workers' rights to family and medical leave 
in this hit list. In fact, of all the suggestions for weakening 
or eliminating family and medical leave rights that were 
originally submitted in the 189 suggestions, all but one of 
those FMLA suggestions were added to the 76 items on the final 
hit list. I wanted to point this out because the FMLA already 
by law exempts employers with fewer than 50 employees. This is 
not a list to benefit small business.
    The fact is small business wants to be a responsible member 
of the public. Small business owners and their families live in 
the very communities that will be affected by this hit list, 
but we have to recognize that small business does contribute, 
just as every other business does, to workplace health and 
safety injuries, to pollution, to the things, the very problems 
that we need regulations to protect us from.
    So the answer is not a free pass or the elimination of 
valuable safeguards. The answer, especially if you are 
considering the needs of small business, is to help small 
business comply with the regulations so that they can compete 
on a level playing field with the big corporations that they 
are competing against.
    Give them free compliance assistance that is well funded. 
Continue the laudable efforts of the Department of Labor and 
EPA to work with small businesses on SBREFA panels with 
compliance assistance. The answer is not a free-for-all that 
forces the agencies to stop everything and consider an 
onslaught of recommendations handed to them by OMB.
    Now, my written statement has I think just been 
distributed. I have to warn you the level of vitriol in it is 
probably a little high, but then again the stakes are high.
    I want to point out one item in particular, the listeria 
rule. This is one of the items that OMB actually proudly touted 
back in December as a regulatory reform accomplishment. Just 
the same, that rule is on this 76 item hit list of protections 
to be weakened or eliminated.
    This is important because listeria is a deadly foodborne 
pathogen that causes close to 2,500 cases of food poisoning 
every year. Over 90 percent of the victims are hospitalized and 
20 percent die. This foodborne pathogen is particularly 
dangerous to women, to pregnant women, because women who 
contract listeriosis almost inevitably will miscarry or bear 
children with significant birth defects.
    Why is this rule that was proudly touted as a regulatory 
reform accomplishment on the hit list of rules to be weakened 
or eliminated? It is hard to know in part because we do not 
have enough transparency in this process. I mean, this hit list 
is arguably an expanded version of a petition for rulemaking 
under the APA.
    Normally with a petition for rulemaking we send those 
petitions to the agencies and the agencies directly respond to 
us with their reasons for accepting or rejecting the petition. 
We do not have the agency responses here. I mean, the agencies, 
as was just pointed out, will be responsible for implementing 
these reforms, but we do not know why the listeria rule was 
accepted as a regulatory reform nomination.

    Mr. Akin. Robert, your time has expired now.

    Mr. Schull. Certainly.
    [Mr. Schull's statement may be found in the appendix.]

    Mr. Akin. We will stand in recess for probably about 20 
minutes I would expect.
    [Recess.]

    Mr. Akin. The meeting will return to order. Thank you all 
for your forbearance. Fortunately it was just one vote, so it 
will be okay to get going and get you out in time for lunch 
hopefully.
    I guess I had quite a number of questions. As you all 
testified, it raised some other questions as well. I guess 
maybe one of the things that might be appropriate after 
Robert's testimony would be some kind of a response from 
someone else I think.
    Mr. Sullivan, would you like to take a crack at a couple?

    Mr. Sullivan. Mr. Chairman, I would. First I should say 
that had I seen Robert Schull's testimony ahead of time like I 
did all the other witnesses' I probably would have been able to 
help him out with pointing out some of the inaccuracies in his 
statement, but now I will just take the opportunity to do it 
with your question.
    Mr. Schull talked about how only 11 of the public reform 
nominations were recommended by my office. Unfortunately, that 
is inaccurate. Twenty-eight were, so roughly half of the 
recommendations that we put forward will be part of the 
agency's commitment.
    I also want to assure this Subcommittee in particular that 
the other recommendations that did not make it into the 
manufacturing report, if my office can convince agencies to 
look again at these rules to see whether or not they can be 
reformed we most certainly will. That is certainly the job of 
the Office of Advocacy, and we will certainly pursue those.

    Mr. Akin. Can I interrupt just a second? The 76 that you 
chose would not take legislative action to make reforms. Is 
that correct?

    Mr. Sullivan. Actually there are two that would take 
legislative action.

    Mr. Akin. Okay.

    Mr. Sullivan. One was the permanent expensing, Section 179 
expensing, and the other is the Do Not Fax rule that 
unfortunately was misinterpreted by the Federal Communications 
Commission, and that is being taken care of.

    Mr. Akin. So it was not necessarily a parameter for the 
reforms that we were looking at here that they did not require 
legislative action; they were chosen for other reasons as well 
then?

    Mr. Sullivan. Yes, Mr. Chairman, and Mr. Schull did talk 
about the listeria rule. That was one of ours. Mr. Schull is 
absolutely correct that food safety is of paramount importance, 
but is it more important to designate and require a specific 
irradiation machine than to make sure that the food is safe?
    That is really what is at stake here with this listeria 
rule because as of now you are required to operate irradiation 
equipment. What small businesses say is that yes, the meat must 
be safe, but does it not make sense to have flexibility if you 
cannot afford the equipment or if you get the equipment and it 
does not work or if you get the equipment and you do not get 
training on how to operate it correctly?
    Would it not make sense to go to a system that is flexible 
for small business where you would allow for personal 
inspection to make sure of its safety? When you talk about 
listeria and you talk about regulatory reform that is what we 
are talking about here.
    I should just close with the fact that the laws that my 
office oversee, the Small Business Regulatory Enforcement 
Fairness Act and the Reg Flex Act, specifically require that 
agencies not compromise their missions of environmental 
protection, workplace safety, road safety, air safety in order 
to build in flexibilities to small business.
    That is the law and so when we encourage agencies to be 
flexible the law says that they can be flexible but without 
compromising the important public safety measures.

    Mr. Akin. The basic mission that they were assigned to do?

    Mr. Sullivan. Yes, Mr. Chairman.

    Mr. Akin. Ms. Bordallo?

    Ms. Bordallo. Thank you very much, Mr. Chairman.
    My first question is to Mr. Sullivan. You mentioned a study 
performed for advocacy that found two regulatory areas where 
regulatory compliance is dramatically higher for small 
manufacturers than large--environmental compliance and tax 
compliance.
    Small business cost is 4.5 times higher in these areas, so 
I look at the 76 recommendations and I see 42 at EPA but only 
one from Treasury. Can you explain that?

    Mr. Sullivan. Yes, Congresswoman. Actually the Chairman 
referred to this a few moments ago. Many of the provisions 
imposed by IRS and burdensome for small businesses are 
statutory in nature, and the complexity, the sheer complexity 
of the Code primarily is what is driving the high cost.
    When the President's bipartisan Tax Advisory Panel comes 
out with recommendations later on this summer I think this 
Subcommittee certainly will take great interest in what 
legislative options exist to reduce that burden.
    Now, you pointed out that the environmental regulations are 
very high, and you are right. The Crain Hopkins study does 
point out that on environmental regulations there is a severely 
disproportionate negative impact and so I commend the EPA for 
looking at those situations where they can reduce impact, but 
at the same time maintain environmental protections.

    Ms. Bordallo. All right. I have a follow up for Dr. Graham. 
You heard that Mr. Greenblatt's first recommendation for 
regulatory reform was tax regulations. I think that is what he 
mentioned. However, only one tax regulation made your list so 
can you go on to explain that?

    Mr. Graham. Yes. I think it would be useful to actually go 
back and look at the entire 189 nominations that we received 
from largely the business community about regulations they 
sought to be changed, and I think you will find that there are 
a relatively small number of tax regulations compared to 
environmental regulations or labor regulations.

    Ms. Bordallo. How many recommendations were there?

    Mr. Graham. We would have to go back and do the actual 
count, but there were 189 total. Then we would have to count 
the number that were in Treasury.

    Ms. Bordallo. So you have no idea how many?

    Mr. Graham. I think there were under 10 is my guess, but I 
can get those exact numbers for you.
    I think the answer lies in Tom Sullivan's answer, which is 
there is so much of tax regulation that is actually embedded in 
the Tax Code that Congress specifies that it is very hard to 
identify things that agencies can do without actually having 
new legislation pass through the Congress.
    Now, Mr. Chairman, on your point I want to emphasize and 
elaborate on Tom's answer. We were looking and gave emphasis to 
reforms that could be adopted without requiring new 
legislation. It was not an absolute criterion. We did not say 
we were not going to consider anything, but as a practical 
matter we felt we wanted to give emphasis to those kinds of 
reforms.
    Tom mentioned two that may require legislation, and in one 
of those cases, the FCC example, we at OMB are not convinced it 
requires legislation. We think that FCC could make that change 
and fix that problem even without it, but we certainly will not 
argue if Congress is going to fix it through legislation.

    Ms. Bordallo. One more, Mr. Chairman. Thank you. This is 
for Mr. Graham.
    Last year you told this Subcommittee that environmental 
regulations impose the largest burden on small firms followed 
by economic regulations, tax compliance and then workplace 
rules.
    That sounds fairly balanced to me, but I look at your list 
and I notice that 42 of your 76 recommended rules are for EPA 
and nine are from OSHA. That seems somewhat lopsided.
    Is there a reason that your choices are concentrated so 
heavily in environment, health and safety standards?

    Mr. Graham. I think actually it would be good to direct 
those questions to each of the agencies. The agencies were 
evaluating these nominations that we referred to them, and the 
Labor group--Ms. Stidvent is here, and her group evaluated 
theirs. Ms. Daigle and her team evaluated those at EPA.
    They made a merits evaluation, and we took into account in 
that dialogue input we got from SBA Advocacy. I do not think 
there was any effort to draw a certain percentage from each 
agency. We just looked on the merits at how strong the case was 
for these various proposals, and that is the distribution that 
resulted.

    Ms. Bordallo. Do any of the agencies want to answer that?

    Ms. Daigle. Sure. I would be happy to. We received well 
over 90 nominations from the different submitters. They were 
not from any one particular sector.
    What we did is we took a close look at it. We accepted 42 
of them because we thought they could be done in a reasonable 
timeframe and that they could be done without harming either 
health or the environment.

    Ms. Stidvent. That is similar to the process that we 
followed. We looked at the nominations that the public sent in 
to OMB, evaluated them on their merits. In many instances we 
were already underway with a reform process, and we continued 
that.
    There were a few instances in which we decided we needed 
more information to pursue a decision on those particular 
nominations, but I will say, and I will reiterate this for Dr. 
Graham and Mr. Sullivan. We really value this process.
    It is incredibly resource intensive to try and review all 
possible regulations that are currently existing and so it is 
very helpful to us when the public comes forward and suggests 
some possibilities for reform and improvement in regulations.

    Ms. Bordallo. Mr. Chairman, I have a concluding statement.

    Mr. Akin. Yes, if you will.

    Ms. Bordallo. Yes. Actually, we are talking today about 
difficult problems that Congress must resolve and agencies 
together. I am from Guam, and in my travels I have seen factory 
conditions all over Asia, including China, Taiwan, Korea. You 
name it, I have been there. Steel factories, manufacturing 
companies of all kinds.
    How do we set a balance and where do we draw the line in 
setting our standards so that we can protect public health and 
safety, but still compete with these countries and continue to 
do business with them?
    In the short time that I have been a Member of Small 
Business, every public hearing we have had are the saddest 
stories you will ever want to hear about small businesses that 
have been in families for generations are collapsing. How can 
they survive?
    Perhaps if we discontinued some of our business with some 
of these countries, but they do not have to comply with 
anything. People that work in steel factories do not even have 
safety shoes or anything. I mean, it is incredible.
    I am not saying that we should cut down on our regulations. 
We need them there for the protection of people, but we have to 
come to some kind of a balance, and I think this is what we are 
asking so that it is not so difficult for small businesses.
    It is bad enough they are losing. They are shutting down, 
and then they have to have all these burdens of regulations, 
surveys or whatever goes on and so we have to cut the red tape. 
Mr. Chairman, I am just feeling that we have to look at this 
very seriously so that we can discontinue the erosion of small 
businesses in our nation.
    Thank you.

    Mr. Akin. Thank you very much. I appreciate your comments 
and am very sympathetic to what you are saying.
    Let me just back up a little bit here if I could, John, to 
your comments from the very beginning. I got the impression 
from what you were saying that we are just merely scratching 
the surface of what we have basically accumulated through years 
of legislation and rulemaking. First of all, am I right in that 
assumption?

    Mr. Graham. Yes, sir.

    Mr. Akin. Second of all, it is also my impression that in 
each one of these specific recommendations, if you cut through 
the red tape, you come down to sort of a common sense balance 
between certain things that we want in terms of our society, in 
terms of health and welfare and taking care of people and at 
the same time not creating some sort of a monster nightmare of 
federal regulations, which makes it so we are not competitive 
as an industry. Every one of these things is kind of a balance 
question.
    That is I guess a long wind-up for my main question, and 
that is let us say that you were king for a day and you really 
had to take on this problem, Doctor. How would you proceed to 
try to make us more competitive internationally with dealing 
with the whole red tape situation? What sort of mechanical 
procedure would you put in place?

    Mr. Graham. Mr. Chairman, I want to start by saying that I 
do not think we actually have to have a balancing determination 
in many of these reforms. In many cases we can achieve the same 
amount of worker protection, the same amount of environmental 
protection, but at the same time allow the businesses to pursue 
those goals through more cost effective, more efficient means.
    Hence, when you write a regulation that specifies as a 
small business you must adopt this particular technology and 
you cannot consider any other alternatives, even equally 
effective and less costly alternatives, then you have written a 
regulation that is going to put us in an economic disadvantage.

    Mr. Akin. And certainly it is a time bomb because over 
time, technology is going to say that there may be a better way 
to solve the same problem.

    Mr. Graham. So another concrete example. We all want leaks 
of pollution in factories detected and cleaned up, but do we 
have to have a separate leak detection and repair report on 
each pollutant submitting to the federal government? Would it 
be all right if we had one report permitted for all of the 
leaks of all the various pollutants and that report submitted?
    That does not change the amount of cleanup that occurs. It 
reduces the amount of recordkeeping and red tape in the 
process. That is not a question of balance. That is just a 
question of cutting out unnecessary regulatory activity.
    Now, in some cases you are right. You sort of have to make 
a balancing judgment. I think it is fascinating that in most of 
the 76 cases no one is calling for the removal of the 
regulation. They are simply calling to allow more flexible and 
less costly alternatives to achieve the same objective.

    Mr. Akin. I appreciate you sharpening that point, but still 
the basic question is, are you are saying we are scratching the 
surface?
    I guess the concern I have is that I started in the 
business world, and we have this 20 or 30 employer business, 
and it is a little bit like letting leaking water into some 
sort of a chamber. At a certain point the water gets high 
enough that the guy drowns and the same thing happens 
economically.
    We raise the cost of doing business high enough in this 
country one of two things happens. They go out of business, or 
they ship the business overseas, one or the other. Those are 
your two choices.
    My question is seeing a lot of jobs going overseas, let us 
say we focus on this problem. How do you proceed if we want to 
do more than scratch the surface? How do we get into all of 
this stuff?
    I am saying say we want to accelerate the pace of really 
looking over the red tape that we are--

    Mr. Graham. I think that is a fundamental question. I am 
not going to pretend I have the answer to it because we have 
20,000 of these regulations that were adopted in 1981 when OMB, 
my office, was first created. How in the world do we have 
enough people at OMB or the agencies to even begin to scratch 
the surface of these existing regulations?
    One little nugget that I will give you that has helped us. 
At the Department of Transportation they had a regulation that 
governed how consumers would get airline tickets. In their 
wisdom the Clinton Administration included a sunset provision 
in that regulatory program that said that if it is not 
affirmatively renewed in a new rulemaking within a certain 
period of time it goes away.
    Let me tell you how valuable that little sunset provision 
was adopted by the Clinton Administration for this 
Administration because we worked with the Department of 
Transportation for over a year on do we really need to have a 
regulation to help people get airline tickets. Can people not 
get on the Internet and get their own airline tickets? It is 
not that hard.
    After a year of debate we finally agreed that maybe we 
really did not have to have this. Frankly, if it was not for 
that little sunset provision I do not know where that debate 
would have ended up. That is a concrete example of a tool, but 
it has to be used very carefully and very specifically in order 
to be constructively used.

    Mr. Akin. I want to open that question now up to everybody 
else on the panel, whoever. Put your hand up and run down if 
you have some thoughts as to how do you proceed.

    Mr. Sullivan. Mr. Chairman, I think doing what is 
effective, finding out what works and doing it over and over 
again certainly deserves to be considered. The agencies deserve 
credit for taking leadership on, stepping up to the plate and 
saying we are going to reform some of these rules.
    I would encourage this Subcommittee in particular to make 
sure to follow up on a regular basis to see where those reforms 
are, so the oversight. I cannot overstate the importance of 
oversight on these nominations.
    A second legislative option is look at what is working with 
Executive Order 12866, which is primarily the responsibilities 
that John Graham is responsible for in OIRA.
    Additionally, look at the responsibilities of Executive 
Order 13272 and work with your colleagues in the House and the 
Senate to see whether or not some of those provisions can be 
enacted into law so that some of these efforts can become the 
way that government operates.
    Last, but not least, any time you do have these oversight 
committee hearings please bring in small businesses to give 
even more suggestions on reform because as soon as small 
businesses are asked amazingly small business common sense from 
Main Street makes a huge impact.

    Mr. Akin. Thank you.
    Anybody else? Yes, Robert?

    Mr. Schull. Well, I want to say that if the question is how 
do we improve our global competitiveness then we cannot just 
look at regulation in isolation. There are many other factors, 
among them the current trade environment.
    I mean, the free trade agreements that we have with China 
and Africa, with Mexico, I mean we are forcing American 
manufacturers to compete with manufacturers in nations where 
people can go to work with no shoes, people have no overtime 
rates, no collective bargaining.
    I mean, there is a much bigger picture so that if the 
question really is how do we improve competitiveness we really 
have to look at the big picture so that we can make sensible 
policy decisions that look at everything in the bigger context.

    Mr. Akin. Thank you. I think all of us recognize there are 
a lot of different components to competitiveness, and certainly 
the red tape is one that this Committee is charged with paying 
particular attention to, so that is why the focus on that 
point.
    Let me toss out an idea. What would happen, and I do not 
know politically whether this could ever be done, but you take 
one of these federal agencies that has grown for so many years, 
and as congressmen one of the problems we have is our time is 
divided so much. I used to be a part-time legislator as a state 
rep. I am even more of a part-time legislator as a congressman 
because we have multiple Committee hearings going on even right 
now.
    I do not really have a lot of confidence that Congress, 
although we perhaps initially created a lot of these 
regulations by the laws that we passed, have the ability to 
really review them and reform them and to make sure that they 
are up to date.
    What would happen if we were to take some sort of a large 
systems integrator, some big corporation, a glorified 
consultant, and say look, they do not have a political dog in 
the fight. We are going to turn them loose inside a particular 
agency, and we are going to go through department or section or 
whatever it is by section.
    We list out all of the products that each particular 
department creates, and we also list out how many people are 
employed to produce those particular reports or oversight or 
whatever it is that these departments are doing. Then we 
systematically go through it and say first of all can it be 
reorganized or are these things really necessary.
    You come back to Congress and say look, you have 15 people 
all tasked with the same thing so we have grouped them together 
so this is an organizational shift. Here are the different 
things that are being produced, and here is what each one costs 
you. Okay, Congressman. You decide. How much do you really want 
to pay for this?
    Has that ever been tried? Has anybody thought about using 
that sort of a large systems integrator to do that research? 
Perhaps you could make the case that that is a more objective 
way of kind of wading into these things. That is a thought 
anyway.
    Response?

    Mr. Graham. Just one quick response in terms of sympathy 
for the logic behind the suggestion, and that is that after 
four years of being in the role I am in and seeing the 
interaction between the various federal agencies and the 
Congress on regulation, one thing I have noticed is that for a 
lot of regulatory agencies there is more enthusiasm and 
excitement for creating new regulatory programs than there is 
for going back and looking at that existing sea of regulation 
and doing the hard work of modernizing, rescinding, refining 
and so forth.
    The heart of your idea is to try to find some other force, 
some institutional force in that dynamic, whether it be the 
example you gave or another type of agency or something that 
has the resources and expertise to really force a re--look at 
this substantial body of regulation.
    I do not know exactly how to do that, but I want to make it 
clear to you that in spite of the best leadership of these 
various agencies by their own psychology as institutions they 
want to create new regulations. They do not want to spend their 
time working on these existing regulations.
    Thank the Lord I have the two colleagues to my right from 
two agencies who are sympathetic enough to work with us to try 
to just look at a modest number of these affecting the 
manufacturing sector.

    Mr. Akin. That has been my observation as a past engineer 
coming to this place; that we have created a system which 
continues to churn this out, but from a political point of view 
it does not make us look good if we say I went back and looked 
in these old, moldy books of regulations and got rid of 10 of 
them or something. I mean, you do not get any brownie points 
back in your district.
    We do not really have a way of getting back into and taking 
a look, particularly some of these things that are written with 
the mindset of a particular time period where now a lot of 
things have moved on and it maybe should be approached in a 
different way.

    Mr. Greenblatt. Mr. Chairman, if I may?

    Mr. Akin. Yes, Drew?

    Mr. Greenblatt. I wonder if it makes sense and a more 
direct approach would be to have a sunset provision on all 
existing regulations and another rule is that any future 
legislation must be sunset. If it is a good idea we will 
reenact it. If it is a bad idea, it will die.
    That way in a couple years--three, five years from now--we 
will not have 20,000 regulations on the books. We will have 
7,000 really good ones that really are effective that are 
really helpful. The 13,000 regulations small business will not 
have to review, monitor, be unsure of if they are complying, do 
the paperwork for.
    They are adding no value, so if we could just constantly be 
sunsetting all future regulations and all existing regulations, 
the good ones will stay. The bad ones will go away.

    Mr. Akin. Thank you for the thought. Sunsetting is a useful 
tool. No doubt about that. The trick is how do you go back to 
however many thousands of these things there are?
    Any other comments? I prefer if I can to run Committee 
hearings more like a discussion than like an official hearing, 
so people jump in if you want to.

    Ms. Bordallo. Mr. Chairman, if I could? Getting back to, 
you know, dealing with the foreign countries and all of that I 
am just curious.
    Have any of you ever sat down with your counterparts in 
these countries to check on regulations, rules and regulations? 
Has there ever been an effort on the part of our government to 
discontinue trade with some of these that are absolutely not 
paying any attention to any kind of rules and regulations in 
their factories and manufacturing companies?
    I know there is such a thing as the free trade and foreign 
countries do not like others interfering, but I just wonder has 
there ever been anything in the past in the way of this, and do 
you meet with your counterparts to discuss this because we 
continue to trade with these people?
    In essence our small businesses are going bankrupt, going 
out of business, and here they are. We are competing with all 
these rules and regulations that we have, and we are still 
trading with these countries.

    Mr. Sullivan. Congresswoman, the answer is yes. Yes, there 
is a regular meeting of counterparts in other countries.
    Dr. Graham referred to the bonfire in Brussels. I meet with 
folks from Sweden, from Norway, from northern Ireland, from the 
U.K., Ireland in general, Australia, Canada. Each one of these 
countries that I mentioned is aggressively looking on how to 
build in flexibilities to reduce regulatory costs so that they 
can up their competitive ante in the global marketplace.
    This effort that is ongoing, the public reform nominations, 
is not at all done in isolation, and if we do not make sure to 
stay on track with this annual public transparent process then 
the other agencies--excuse me. The other countries will do it. 
They will do a better job, and they will be more aggressive, 
and our competitive edge then becomes compromised.

    Ms. Bordallo. You mentioned all European countries. Have 
you ever been to Asia?

    Mr. Sullivan. I have not. My travel budget does not allow 
for me to get out there, but if I do, Congresswoman, I am going 
to stop by Guam on the way.

    Ms. Bordallo. I will tell you. No. Really seriously, you 
should get to Asia. This is where you are going to find your 
eye opener.
    I think it is about time we sit down, since we do so much 
trade with this part of the world, you know, that you must make 
that. Talk to whomever, budget people, and set some money aside 
for Asian travel.
    Thank you, Mr. Chairman.

    Mr. Akin. Thank you.
    If there are no further questions or comments here then we 
will go ahead and close the hearing, and I will have fulfilled 
my promise of getting you out in time for a good lunch.

    Mr. Graham. Thank you, Mr. Chairman.

    Mr. Akin. The meeting is adjourned.
    [Whereupon, at 12:07 p.m. the Subcommittee was adjourned.]



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