[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                       FULL COMMITTEE HEARING ON
                       LEGISLATION TO IMPROVE THE
                       REGULATORY FLEXIBILITY ACT

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 6, 2007

                               __________

                          Serial Number 110-62

                               __________

         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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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DEAN HELLER, Nevada
YVETTE CLARKE, New York              DAVID DAVIS, Tennessee
BRAD ELLSWORTH, Indiana              MARY FALLIN, Oklahoma
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania             TODD AKIN, Missouri
                                     MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)

  
?

           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


RICK LARSEN, Washington              LYNN WESTMORELAND, Georgia, 
DAN LIPINSKI, Illinois               Ranking
MELISSA BEAN, Illinois               BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin                STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma
                                     VERN BUCHANAN, Florida
                                     JIM JORDAN, Ohio

                                 ______

            Subcommittee on Urban and Rural Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DEAN HELLER, Nevada
HANK JOHNSON, Georgia                DAVID DAVIS, Tennessee

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLIE GONZALEZ, Texas              LOUIE GOHMERT, Texas, Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)

  
?

                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2
Ellsworth, Hon. Brad.............................................     3
Clarke, Hon. Yvette..............................................     4

                               WITNESSES


PANEL I
Sullivan, Hon. Thomas M., Chief Counsel, Office of Advocacy, U.S. 
  Small Business Administration..................................     5


PANEL II
Freedman, Mark, U.S. Chamber of Commerce.........................    14
Messinger, Dyke, Power Curbers, Inc. on behalf of the National 
  Association of Manufacturers...................................    17
Langer, Andrew, National Federation of Independent Businesses....    18
Sewell, Charlie, National Community Pharmacists Association......    20

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    29
Chabot, Hon. Steve...............................................    31
Ellsworth, Hon. Brad.............................................    33
Clarke, Hon. Yvette..............................................    34
Sullivan, Hon. Thomas M., Chief Counsel, Office of Advocacy, U.S. 
  Small Business Administration..................................    35
Freedman, Mark, U.S. Chamber of Commerce.........................    44
Messinger, Dyke, Power Curbers, Inc. on behalf of the National 
  Association of Manufacturers...................................    53
Langer, Andrew, National Federation of Independent Businesses....    60
Sewell, Charlie, National Community Pharmacists Association......    75


Statements for the Record:
Associated Builders and Contractors, Inc.........................    82

                                  (v)

  


                       FULL COMMITTEE HEARING ON
                       LEGISLATION TO IMPROVE THE
                       REGULATORY FLEXIBILITY ACT

                              ----------                              


                       Thursday, December 6, 2007

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:06 a.m., in Room 
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez 
[chair of the Committee] Presiding.
    Present: Representatives Velazquez, Gonzalez, Cuellar, 
Altmire, Clarke, Ellsworth, Chabot, and Akin.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    Chairwoman Velazquez. I call this hearing to order to 
address legislation to improve the Regulatory Flexibility Act. 
Today the committee is reviewing legislation to strengthen the 
Regulatory Flexibility Act, or Reg Flex. Passed into law in 
1980, Reg Flex has played a critical role in ensuring that 
American small businesses are not overly burdened by Federal 
regulations. While the act has improved this process in many 
ways, small firms are still more affected by regulations than 
are their larger counterparts. The reality is that more must be 
done to address this problem that can hurt our overall economy.
    Last month, this committee took the first step in 
identifying ways to improve Reg Flex. We heard from small 
businesses representing a diverse group of industries on ways 
to craft legislation to strengthen the act. There was one clear 
thing present in the testimony. Agencies are not doing enough 
to consider the impacts of the rules and regulations of small 
businesses. And more effective statute can help reduce 
unnecessarily burdensome regulations.
    Working with the minority, the small business community and 
with input from the SBA Office of Advocacy, the committee has 
drafted legislation which addresses a number of the 
deficiencies of Reg Flex. One of the goals of the legislation 
is to address the problem of outdated regulations. The 
committee print will clarify when agencies need to review 
specific rules. It also gives small businesses a greater voice 
in the process and enhances transparency, helping to eliminate 
unnecessary burdens. The committee also wants to ensure that 
agencies are not ignoring the underlying requirements of Reg 
Flex. The act was never intended to completely eliminate or 
slow down regulations, but for agencies to consider if there 
are more effective alternatives to meet policy goals. Too often 
agencies avoid fully analyzing the impact of the rules on small 
businesses by certifying that a rule will have no significant 
consequences. This bill will strengthen the analysis 
requirements by compelling agencies to consider reasonably 
foreseeable, indirect economic impacts on small businesses when 
writing rules.
    One key recommendation from the Office of Advocacy was to 
codify Executive Order 13272, which is included in the 
legislation. This chain puts in the statute that there must be 
greater coordination between agencies and the SBA's Office of 
Advocacy, ensuring that regulators fully consider the economic 
impacts on small firms. Earlier notification will provide 
Advocacy with a greater opportunity to assist agencies in Reg 
Flex compliance.
    This print we are reviewing today is by no means a final 
version. Today's panelists will discuss how this language can 
help small businesses and identify ways it can be improved. I 
would like to thank all the witnesses today for coming to the 
committee and sharing their views. I look forward to continuing 
our work with Ranking Member Chabot to pass meaningful reform 
to the Regulatory Flexibility Act which will lessen burdens on 
small businesses and allow our Nation's entrepreneurs to 
continue to move our economy forward.
    I would now like to yield to Ranking Member Chabot for his 
opening statement.

                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. Thank you, Madam Chairwoman, for holding this 
hearing on legislation to strengthen the Regulatory Flexibility 
Act. New small businesses open every year. Buffeted by a 
variety of economic and financial hardships, these businesses 
struggle mightily to achieve a profitable bottom line. Small 
businesses are particularly affected by unnecessary and 
burdensome regulations that require more money as a percentage 
of the money that the small businesses have to work with and 
time than their larger competitors to adequately comply.
    Small businesses, according to a study by the Office of 
Advocacy of the United States Small Business Administration, 
paid $2,000 more per employee per year than large businesses to 
comply with the tornado of Federal regulation. In some sectors, 
such as manufacturing, the per employee cost is even higher 
than that average. The unfortunate but unexpected result is 
hundreds of thousands of small business are forced to shut 
their doors.
    More than 25 years ago Congress recognized there was a 
regulatory storm brewing and smartly reacted with legislation 
to force Federal regulators to examine the impact that their 
rules will have on small businesses before inadvertently 
putting them out of business. Congress' answer to the 
regulatory problem was called the Regulatory Flexibility Act, 
or RFA. Enactment of the RFA forced a small but perceptible 
shift in the tact of Federal regulation. While some agencies 
were prompted to refocus their thinking and develop less 
burdensome regulation, many others treated the RFA as merely 
suggestion and were undeterred on their course for more and 
more burdensome and overlapping regulation.
    Congress attempted to strengthen the RFA in 1996 by 
enacting the Small Business Regulatory Enforcement Fairness 
Act. The act made agency compliance with the procedural 
requirements of the RFA judiciously reviewable, independent of 
any challenge to the underlying agency rule. With the threat of 
litigation hanging over them, Federal agencies began paying 
more attention to the RFA, but the added attention did little 
to increase cooperation for many agencies.
    The valiant efforts of Dr. John Graham and Mr. Tom 
Sullivan, one of our witnesses today, attempted to tame the 
tidal wave of Federal bureaucracy. And while they admirably 
eliminated many problems in the system, we have not seen the 
dramatic change small businesses require, as evidenced by many 
small firm owners that have come before this committee 
requesting help and by the many businesses forced to shut down 
each year.
    The efforts of Chief Counsel Sullivan have been hampered by 
the inadequacy of the RFA. Plagued by undefined terms and vague 
parameters, the RFA is far from an ideal statute. Existing 
loopholes permit agencies to circumvent the rules with 
negligible penalties.
    Last year I cosponsored H.R. 682, a bill designed to 
significantly strengthen the RFA so that agencies, as President 
Bush stated, quote, will care that the law is on the books, 
unquote. The bill under consideration today adopts some of the 
changes that were in H.R. 682 by requiring agencies to consider 
indirect effects, to provide a more detailed assessment of the 
impacts and to make the periodic review of rules more 
transparent. These changes will help to ensure that small 
businesses need only endure necessary regulations and that 
agencies will not be able to create new ones to harm or destroy 
these businesses.
    Whenever Congress considers altering the RFA, opponents 
argue that changes would destroy the regulatory process or 
overwhelm Federal courthouses. Examination of the Federal 
Register and courthouses show they remain strong, despite the 
supposed strength of the RFA hurricane. Ultimately, what is at 
stake is the ability of small businesses to stay in business 
based not on the whims and dictates of Federal bureaucrats but 
on their capacities in the marketplace.
    Better, sounder rules will be beneficial to the regulatory 
objectives of the agencies through increased compliance and 
lower costs to small businesses. No good reason exists to 
oppose the goals and objectives of this bill other than the 
fear of the unknown. I stand ready to work with the Chairwoman 
to see that we get a much stronger version of the RFA. I thank 
her for holding this hearing, and I will yield back the balance 
of my time.
    Chairwoman Velazquez. Thank you. Are there any other 
members who seek recognition for the purpose of making an 
opening statement? Mr. Ellsworth.

               OPENING STATEMENT OF MR. ELLSWORTH

    Mr. Ellsworth. Thank you, Madam Chair. I would like to take 
a moment to thank you for holding this important hearing. 
Ranking Member Chabot, thank you for your work on this also and 
then your statement that you just gave. I think this is a very 
important issue for this committee to undertake, and I look 
forward to what the member, Mr. Sullivan, what you have to say 
and the members who come in the next panel.
    A few weeks ago we had our first hearing on the Regulatory 
Flexibility Act. It became clear to me that the problems are 
serious the way the Federal Government is treating small 
businesses and that is--I have said this about every meeting I 
have spoke at. That is why I asked to join this committee, to 
make things easier for small businesses.
    We also heard from the operator of a small trucking firm 
who was here and I asked him what kind of impact the Uniform 
Federal Regulations had on his business. He told me it hurt his 
business and others like him. It was clear that big corporate 
trucking firms and their teams of lawyers and compliance 
officers had a leg up on the small business. I am all for big 
trucking companies, but we also have to look after the small 
trucking companies. As we all know, the small companies in our 
districts are facing the same burden. The Federal Government 
has ignored effects of our regulations on small businesses and 
refused to adjust to the needs of the vital employers. This is 
not a small business problem, and it is not a small problem at 
all. 1,250,000 workers are employed by small business in my 
home State of Indiana and they deserve to have their voices 
heard. To the bureaucrats in Washington, sometimes this doesn't 
seem like a small problem. We lose sight of that. But to 
Hoosier small businesses it is.
    That is why I am glad we are addressing this issue, the 
draft of the bill before us today, and I look forward to 
hearing from today's witnesses and working with everyone in the 
future to solve this problem. Thank you. With that, I yield 
back.
    Chairwoman Velazquez. Any other member who seeks 
recognition? Ms. Clarke.

                OPENING STATEMENT OF MS. CLARKE

    Ms. Clarke. Thank you very much, Madam Chair and to Ranking 
Member Chabot, for holding this hear today to review 
legislation to improve the Regulatory Flexibility Act. There is 
no question that Reg Flex needs to be strengthened. Agency 
compliance with many parts of the act is of great concern to me 
and must be addressed immediately since most agencies currently 
view compliance as voluntary. I believe that we will develop 
solid provisions that will consider the indirect impact of 
regulations when calculating the impact of regulations on small 
businesses.
    I look forward to hearing from the Honorable Sullivan today 
so that we can work together for a solution that will enable 
our small businesses to prosper and not be inundated and 
snuffed out by undue harm that this act was put in place to 
prevent.
    Thank you very much, Madam Chair.
    Chairwoman Velazquez. Any other members? If not, now we 
will proceed with our first panel. And I want to welcome Mr. 
Thomas Sullivan, the Chief Counsel for the Office of Advocacy 
of the U.S. Small Business Administration. Prior to joining the 
SBA, he worked as the Executive Director of the National 
Federation of Independent Businesses Legal Foundation. Mr. 
Sullivan and the Office of Advocacy is charged with 
independently advancing the views, concerns and interests of 
small businesses before Congress, the White House, Federal 
regulatory bodies and State policymakers. Welcome, Mr. 
Sullivan.

STATEMENT OF THE HON. THOMAS M. SULLIVAN, CHIEF COUNSEL, OFFICE 
        OF ADVOCACY, U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Sullivan. Thank you, Chairwoman Velazquez, Ranking 
Member Chabot, and members of the committee. Thank you for 
allowing me the opportunity to appear this morning to address 
legislative improvements to the Regulatory Flexibility Act. 
With the chairwoman's permission, I would like to briefly 
summarize my statement but ask that the entire statement be 
entered into the record.
    Chairwoman Velazquez. Without objection.
    Mr. Sullivan. Thank you. As the chairwoman said, in my 
position I am charged with monitoring Federal agencies' 
compliance with the Regulatory Flexibility Act. And because my 
office is an independent one within SBA, the views that I 
express here this morning don't necessarily reflect the views 
of the administration or of SBA. My statement was not 
circulated to the Office of Management and Budget for comment.
    Although the Reg Flex Act is doing a fairly good job, and I 
do want to emphasize the fact that the Reg Flex act is working 
pretty well, but despite it doing a fairly good job and 
achieving cost savings for small entities, more does need to be 
done to protect small entities from excessive regulatory 
burden.
    Two years ago, my office commissioned a study that was 
prepared by Mark Crain entitled the impact of regulatory costs 
on small firms. This is the third iteration of such a study and 
it determined that the overall cost of Federal regulation now 
totals $1.1 trillion. I will say that again. $1.1 trillion with 
a T, a trillion dollars. The cost per employee for firms with 
fewer than 20 employees is $7,640 per employee per year. That 
is 45 percent higher than their larger counterparts with 500 or 
more employees.
    After 11 years of working with SBREFA, eight congressional 
hearings on the Regulatory Flexibility Act, my office has 
conferenced this past year on the Regulatory Flexibility Act, 
and several GAO reports and testimonies, now is a good 
opportunity to consider legislative improvements to the 
Regulatory Flexibility Act.
    At your hearing several weeks ago, many of the witnesses 
testified that the largest loophole is the Reg Flex Act failure 
to include the requirement that agencies consider indirect 
impacts. We agree with those witnesses before the committee and 
we do believe it is the biggest loophole. Agencies now are 
required to consider the direct economic impact, but that 
analysis may deprive policymakers here in Washington, D.C. Of 
the full understanding of the rule's likely impact on small 
entities.
    In addition, many times, especially with environmental 
regulation, the duty of regulating is passed on to the States 
and it is passed on without any corresponding analysis or 
requirements for States to consider less burdensome 
alternatives for small business. Legislation being considered 
by this committee would cure that defect.
    Section 610 of the Regulatory Flexibility Act requires 
agencies to periodically review rules that are on the books. 
Small businesses often complain about the difficulties in 
dealing with layers of regulations that agencies issue over 
time. Although there are legal avenues that can be pursued to 
have burdensome rules reviewed, legal recourse is costly and 
time consuming. The automatic review of rules afforded through 
section 610 can save small entities and Federal agencies the 
hassle of having to resort to the legal system to obtain 
relief. However, as is currently written, this review is 
limited to only those rules that an agency deems to have a 
significant economic impact at the time the rule is finalized. 
Since new rules are promulgated every year, the cumulative 
impact of rules on small entities can be staggering, even if 
individually the rules may not have a significant economic 
impact.
    My office and other witnesses before this committee have 
recommended that the Reg Flex Act be amended so that look back 
provision, section 610, will require agencies to review all 
rules periodically. This change would encourage agencies to 
revise their rules to ensure that regulations currently reflect 
current conditions and needs.
    Lastly and most importantly, the codification of an 
Executive order that was signed in this administration. My 
office believes that the Executive order has increased agency 
knowledge of and compliance with the Regulatory Flexibility 
Act. Annual reports that are published by my office and 
presented to this committee, to the White House and others in 
Congress document that this Executive order is working. Small 
entities would benefit from an amendment to the RFA that would 
codify the requirements of that Executive order ensuring that 
independent agencies are subject to the Reg Flex Act and, since 
it is just an Executive order, codification would create long-
term certainty for small entities.
    My office has reviewed the committee print distributed last 
week, and the bill entitled the Small Business Regulatory 
Improvement Act of 2008 addresses the issues outlined in my 
testimony. I commend this committee for examining these issues, 
and I believe your legislation will go far to improve the RFA 
and, most importantly, help small entities.
    Thank you for allowing me to present these views, and I 
would be happy to answer any questions.
    [The prepared statement of Mr. Sullivan may be found in the 
Appendix on page 35.]
    Chairwoman Velazquez. Thank you, Mr. Sullivan. You 
discussed section 610 of Reg Flex that requires agencies to 
periodically review existing rules. We all know that is not 
working. It has been reported that this is because the law 
gives agencies a large amount of discretion to decide which 
rules are covered by the review requirement.
    How should Reg Flex be amended to ensure agencies do a 
better job of periodically reviewing existing rules?
    Mr. Sullivan. Madam Chairwoman, I believe that the 
committee print addresses this perfectly, and what the 
committee print does is simply instruct agencies that they must 
look at a broader swath of rules, not just a narrow swath of 
those that at the time of promulgation were deemed significant.
    Chairwoman Velazquez. Mr. Sullivan, although on this 
committee we hear much about the burden Federal regulations 
impose on small businesses, it is important to keep in mind the 
Federal regulations also confer enormous benefits to our 
society. Clean air and water and safe working conditions are 
all examples of this. Opponents of Reg Flex have contended that 
it frustrates the rulemaking process. How many rules, Mr. 
Sullivan, have actually been halted by the courts because of 
Reg Flex?
    Mr. Sullivan. I believe that less than six rules have been 
struck down by agencies since 1996 in the courts and, if the 
Chairwoman would allow me, I would like to address this myth 
about the Reg Flex being a barrier to valuable regulatory 
protections. If you look at the number of rules that were 
promulgated by the Environmental Protection Agency before the 
Small Business Reg Enforcement Fairness Act and after, 
remember, SBREFA conferred a number of obligations upon EPA and 
this committee was faced with folks saying that this is 
terrible, this will stop EPA from promulgating valuable 
environmental protections. The average number of rules issued 
by EPA was 412 per year before SBREFA. The average number of 
EPA rules after SBREFA were 449. The average number of rules 
that would impact small businesses before SBREFA was 125 per 
year; after SBREFA, 181 rules per year that would impact small 
business. So the data does not support that myth that law, the 
Reg Flex Act, SBREFA, is a barrier to valuable protections, 
environmental, workplace safety and otherwise.
    Chairwoman Velazquez. Even if a rulemaking is adjudged to 
have violated Reg Flex, courts will permit the regulatory 
process to go forward if it is in the public interest. So can 
you discuss this and whether or not it creates substantial 
delays or obstacles to rulemaking?
    Mr. Sullivan. The chairwoman again brings up somewhat of a 
myth in that the Reg Flex Act stops valuable rules, and I think 
it is valuable for the committee and others to know that the 
Reg Flex Act foresaw this argument and wrote directly in that 
the alternatives that must be considered, and I quote, must be 
consistent with the stated objectives of the applicable 
statutes. So built into the Reg Flex Act, there is the 
requirement that any considerations of being sensitive to the 
unique needs of small entities not compromise the underlying 
statute. And it is because of that language that the chairwoman 
is correct, courts have not been activists in striking down 
rules. And, in fact, the majority of times, when the Reg Flex 
Act is brought into a court and the small entities prevail upon 
the court to mandate that an agency do a better job, many times 
the rule continues to be in effect but the agency then must go 
back and in public and in a transparent manner document the 
impact on small entities so that policymakers have a better 
understanding of the rule's impact.
    Chairwoman Velazquez. Mr. Sullivan, some of the proponents 
of Reg Flex reform have called for legislation to direct the 
Chief Counsel for Advocacy to promulgate regulations governing 
agency compliance with Reg Flex. They state that currently the 
courts grant little or no difference to the Chief Counsel's 
interpretation of Reg Flex and because of this Federal agencies 
do not defer to Advocacy's view either.
    So let me ask you, what are the benefits and drawbacks to 
legislation that directs Advocacy to promulgate regulations 
governing agency compliance with Reg Flex?
    Mr. Sullivan. The benefits, as the chairwoman notes, in her 
question is that the courts are more likely to give the Office 
of Advocacy deference. The negative part of that is that it is 
a resource drain on our office that I am not sure we are 
prepared to meet. But if asked by the committee, I am 
supportive of regulatory authority, but there is a question 
mark on whether or not the resources of my office could support 
that type of effort.
    Chairwoman Velazquez. Mr. Sullivan, I am aware of concerns 
that requiring agencies to consider indirect economic impacts 
in rulemaking will bog down the regulatory process. Similar 
concerns were expressed during the consideration of SBREFA as 
the act provided for judicial review of agencies' compliance 
with Reg Flex. However, these fears were not born out as courts 
have applied a reasonableness test to agency action. The 
legislation we are reviewing today requires only reasonably 
foreseeable indirect impacts to be considered. Is "reasonable 
foreseeable" the proper standard to ensure the regulatory 
process does not grind to a halt?
    Mr. Sullivan. In my opinion, Chairwoman, the term 
"reasonably foreseeable" does hit upon the appropriate standard 
to drive an analysis of indirect impact. I caution the 
committee of being more prescriptive because this is really a 
case of you have got to call them when you see them. There are 
rules that are so obviously deficient and indirect impacts.
    I think one of the most obvious is if the Federal Aviation 
Administration issues a rule that prohibits airplanes from 
landing at a specific airport. I think it is reasonably 
foreseeable that a number of small businesses operating at this 
airport would be impacted. And there are many other rules that 
meet that reasonably foreseeable standard.
    So I commend the committee for using that term and I think 
it is the appropriate standard.
    Chairwoman Velazquez. I have other questions, but at this 
point I will recognize the ranking member.
    Mr. Chabot. Thank you, Madam Chair. Thank you for being 
here, Mr. Sullivan. My first question is if agencies are able 
to assess the indirect socioeconomic effects of their major 
rules and environmental impact statements, how hard would it be 
for those agencies to prepare an initial or final regulatory 
flexibility analysis for indirect effects?
    Mr. Sullivan. Well, Congressman Chabot, I cannot speak on 
behalf of the agencies. One, because I am not in their seat 
promulgating rules, but two, because of my office's 
independence. We don't exchange drafts of testimony prior to 
hearings like this. What I can inform the committee, though, is 
several years ago when the then called Immigration and 
Naturalization Service issued rules that would prohibit foreign 
visitors from extending their stays here in the United States 
and this committee, to its credit, brought in Commissioner 
Ziegler and myself and put him to task, to say, you know, this 
is so obvious that even though you are regulating travelers 
that you are going to impact the tourist community that is 
virtually all small businesses. How can you not have that type 
of transparent analysis? And I was sitting in the same place 
that I am today and to my right was the Commissioner and in 
front of the Commissioner was a piece of paper with every 
documentation of data of indirect impacts on specific parts of 
the tourist industry.
    So the reason I raise that is because to the agency's 
credit, they are doing the indirect impact and I believe that 
the public and the stakeholders on these rules deserve to see 
it. It is a matter of transparency and I do believe much of 
that analysis is being done, but I can't speak on behalf of the 
agencies on how much additional work it would be to bring 
transparency to the data and analysis that exists on indirect 
impact.
    Mr. Chabot. My next question is if the Executive order is 
codified, how would the Chief Counsel get proposed or final 
rules from independent agencies such as the Federal 
Communications Commission, for example.
    Mr. Sullivan. There is really no guarantee once a law is on 
the books that it works. And so I believe as the committee does 
that codifying the Executive order would go far in helping 
guarantee that we get rules in a timely manner prior to 
promulgation. But if it doesn't work I can assure the committee 
I will come up and testify and work with you from an oversight 
capacity to make sure that it does work and that the FCC abides 
by its obligations under the law.
    Mr. Chabot. Thank you. Are there other agencies that you 
might recommend be included in the panel process in addition to 
the two agencies already included, the EPA and OSHA?
    Mr. Sullivan. Congressman Chabot, this has come up before. 
Specifically Chairwoman Velazquez had asked shouldn't all 
agencies do panels. I should say in my initial first years I 
responded in saying that yes and we can handle the workload. 
The chairwoman was very patient with me at the time and asked 
me a again a few years later could my office handle that type 
of workload and, with a few years more under my belt in the job 
I answered no, we could not. We average, I think, there are 
hundred--averages between 1 and 400 hours per panel. And so for 
the sense of resource constraints, I can't recommend that any 
other agencies be brought under the panel process. I would, 
though, make sure the committee understands that the same 
benefits that are derived from the panels at EPA and OSHA can 
be derived from compliance with the Regulatory Flexibility Act, 
and I would posit that when you amend the Reg Flex Act the way 
you are proposing to, you get the benefits of the panel 
process, the guaranteed small business involvement without the 
resources of the panels. So you are actually achieving the 
benefits of the panels without necessarily the resource 
constraints that I now know are part and parcel of the panel 
process.
    Mr. Chabot. My final question is, even if the Chief Counsel 
never filed an amicus brief, how would the so-called Chevron 
deference help the Office of Advocacy in their disputes with 
other Federal agencies?
    Mr. Sullivan. Right now, every lawsuit that includes a 
valid Regulatory Flexibility Act claim does serve as a wake up 
call to Federal agencies to awaken them to their 
responsibilities under the Regulatory Flexibility Act. And in 
the next panel specifically, you have Marc Freedman, who was 
part of the effort to file a lawsuit challenging a recent 
Homeland Security immigration enforcement bill. So I think he 
may be able to give an even greater firsthand account of how 
including a Reg Flex Act claim brings an agency's attention to 
their responsibilities under the Reg Flex Act.
    In response to your question about Chevron deference, yes, 
I think agencies would certainly take their obligations more 
seriously if the Office of Advocacy or when the Office of 
Advocacy is afforded that type of deference by the courts.
    Mr. Chabot. Thank you. I would yield back, Madam Chair.
    Chairwoman Velazquez. Ms. Clarke?
    Ms. Clarke. Thank you, Madam Chair. And good morning to 
you, Honorable Tom Sullivan. On November 30th, the Food and 
Drug Administration issued a final rule for over-the-counter 
antitussive drug products. The FDA determined the final rule 
will not have a significant economic impact on a substantial 
number of entities and certify without any further analysis 
under Reg Flex. Do you believe that agencies can and/or are 
abusing Reg Flex when it comes to compliance requirements for 
issuing a final rule?
    Mr. Sullivan. I don't think all agencies have it exactly 
right, Congresswoman.
    Ms. Clarke. Very good answer.
    Mr. Sullivan. Thank you.
    Ms. Clarke. What would you say is the solution under what 
we are trying to achieve here?
    Mr. Sullivan. I think there are a number of avenues to try 
to get to the solution, none of which are a silver bullet. The 
first part of the solution is certainly keeping my office to 
task in its oversight responsibilities to the Reg Flex Act. We 
try our best, we try to keep our ears to the rail to make sure 
we are attentive to small entities concerns. But we benefit 
from being informed of where our resources should be spent and 
where our priorities should be.
    So I think the first part of the solution is keeping my 
office on task. The second part of the solution is taking steps 
like this to amend the Reg Flex Act now that we have a greater 
long-term working knowledge of it to hopefully bring more 
agencies into the fold in getting their analysis correctly.
    The third is oversight. And I cannot overstate the 
importance of this committee's role in the effectiveness of the 
Regulatory Flexibility Act. This isn't just me. This is me and 
my four predecessors as the Chief Counsel of Advocacy and a 
number of predecessors of all of yours regardless of the party 
in charge who have sat on the Small Business Committee. It is 
through your oversight that has driven much of the success of 
the Regulatory Flexibility Act. So to the extent that there are 
flaws in an agency's analysis, part of reaching a solution is 
bringing them before this committee and it is part of my job 
also to appear before this committee to perhaps instruct 
agencies on how they could do a better analysis when it comes 
to considering their burden on small entities.
    Ms. Clarke. And when an agency certifies that a rule does 
not have a significant impact on a substantial number of small 
firms, they only provide the simplest reason for certification. 
Do you believe that parties are adversely aggrieved by this 
current process.
    Mr. Sullivan. I don't like saying that going to court is a 
solution for many things when it comes to small business. In my 
previous job I headed a legal foundation that in fact did go to 
court. The cost of a district court challenge can be half a 
million dollars. You go up to the appellate, the appellate 
level is 1-1/2 million dollars. I have not encountered any 
small businesses in my tenure as Chief Counsel that have 1-1/2 
million dollars in reserve to challenge an agency action. So I 
have got to downplay the courts as being the solution. However, 
from a certification process, the courts have been very clear 
that have said the requirement that a factual basis underlie 
the certification is something that the courts take very 
seriously and the agencies should take very seriously, and I 
think that precedent has helped drive agencies to better comply 
with how they document their certification. It must--according 
to the courts, it must be accompanied by a factual basis.
    Ms. Clarke. I yield back. Thank you very much, Madam Chair.
    Chairwoman Velazquez. Mr. Ellsworth.
    Mr. Ellsworth. Thank you, Madam Chair. Mr. Sullivan, could 
you tell me in my allotted time about the R-3 program, how it 
works, who participates, how you forward that information on to 
the agencies, how you reach your findings in that program?
    Mr. Sullivan. Congressman, thank you for asking about the 
R-3 program. R-3 stands for Regulatory, Review and Reform, and 
the initiative which calls for nominations for--by small entity 
groups to nominate rules that they believe should be reviewed 
to be updated, streamlined or removed. The birth of this 
program recently is mostly because of what we are talking about 
today, and that is the failure of part of the Regulatory 
Flexibility Act to really have agencies do a spring cleaning.
    So with that type of gap, I want to both work with this 
committee to fix that gap legislatively, but I also want to 
work through an initiative to make sure that we can do 
everything we can even without additional legislation to bring 
agencies into compliance with section 610 of the Regulatory 
Flexibility Act.
    So the R-3 initiative calls for nominations for rules that 
can be reviewed and reformed. We are picking the top 10 
nominations for reform and we will forward those to the 
agencies for action in early spring in conjunction with our 
annual report to Congress on implementation of the Regulatory 
Flexibility Act. This initiative has been underway for about 2 
months. We have received over 30 nominations for reform. We 
have narrowed that down and are very close to having a top 10. 
And I want to make sure that the committee knows and other 
stakeholders know that even though some ideas for our office's 
involvement in rules may not fit neatly into a top 10 list, 
that doesn't mean that they go into the trash can or the 
shredder. We will continue to work on the issues that are 
important.
    Health care, taxes are the two issues important to small 
businesses. We will continue working on those, but we have 
heard from small businesses that we should prioritize a spring 
cleaning by Federal agencies to look at rules that can be 
updated or streamlined. The classic case on this is in the 
1990s a small business owner, Bill Farren, out in Arkansas 
owned a number of gas stations, and he had to fill out a form 
that told his local fire chief that he had gas on the premise. 
Well, Mr. Farren thought this was absurd and he contacted 
Members of Congress. He contacted this committee. He contacted 
my predecessor and collectively you all contacted Administrator 
Carol Browner and she agreed with Mr. Farren. And because of 
his initiative, you removed that requirement, you removed that 
paperwork. There have got to be other Bill Farrens out there 
and that is why we are undergoing this R-3 program.
    So I am very optimistic of its success and I ask the 
committee to keep my office on task for its successful 
implementation and that when we do issue our top 10 rules in 
need of review and reform, I welcome the opportunity to come to 
this committee with the agencies who we identify to work 
together so that we can ease the burden on small business.
    Mr. Ellsworth. How do you come up with the top 10--if the 
11th one was pretty good, would you then put that in next 
year's or how do you discern the 10 from No. 11?
    Mr. Sullivan. Well, Congressman, I am hoping that we have 
to discern 10 from the top 18. And, yes, those next 8 will go 
right into the next year's batch.
    Mr. Ellsworth. Thank you very much. And I yield back.
    Chairwoman Velazquez. Thank you. Mr. Gonzalez.
    Mr. Gonzalez. Thank you very much, Madam Chair. And 
welcome, Mr. Sullivan. And for everyone's edification, we met 
yesterday and had a very good discussion regarding what you are 
doing in being proactive and making sure that you gather the 
information that may address the shortcomings that an agency or 
department may have regarding identifying those regulations, 
rules or anything else that need some updating or actually just 
do away with them totally. This is two areas. If you really 
think in terms of an agency or department prior to the 
promulgation and adoption of a rule you would think that, yes, 
they have an obligation to go out there and see what the 
consequences might be. I don't think they do. I don't think 
that really happens. You have comment periods, but how many 
people really comment unless you are part of an association or 
organization. And the other, of course, is the periodic review, 
as you have already said, to go through there and do away with 
that which is no longer applicable or serves its purpose or you 
could actually improve on it. I don't think that goes on 
either. I don't think there is the real incentive, and that is 
what we are trying to develop here.
    Statutorily how do we create a greater degree of 
accountability and the incentive? I would like to think first 
as you take away the excuses to the departments and the 
agencies that they are not aware of the impact of their 
regulatory scheme. Now, I also believe that this usually 
happens after the adoption, not prior to or during the 
discussion or comment period and only when we have those 
consequences that negatively impact small businesses. My point 
is what you are doing now with your own effort, I would like to 
see on a grander scale and charging somehow the individual 
agencies and departments of also being proactive on their own. 
You are an advocate for small business. I understand that. But 
for you to actually be going out to a huge universe and try to 
gather that information which I think you need to be doing, I 
just would just like to see that being replicated at every 
department and agency level and--whether that is possible or 
not.
    The last hearing we had and the meeting we had yesterday 
was the result of course of my suggestion of having Nydia's 
hotline or her Web site. I don't think she volunteered to do 
that. But I am really quite serious. I want the small 
businessman and woman in America to somehow know there is a way 
to plug into some sort of a system where they are able to lodge 
their complaint, that how it is impacting them.
    And I always use the simple experiences that I have had 
with constituents about why does the form have to be 12 pages 
when you can reduce this thing to 2 pages. But try to find 
someone that will listen to you and even a Member of Congress 
doesn't get really listened to by the bureaucracy. They will 
wait us out and they will wear us out, and it is Senator Nelson 
from Nebraska said when you are talking to these guys they will 
say we were before you and we will be here after you. I really 
think that is the attitude out there.
    The question is accountability. Is there something we can 
do first of all to assist you in your effort in the program 
that Congressman Ellsworth was discussing with you, and beyond 
that is there something that this committee can do to spread 
that responsibility to the individual agencies and departments?
    Mr. Sullivan. Congressman Gonzalez, thank you for your 
question. Thank you for meeting with me yesterday to talk about 
many of these things. I think first of all there is an 
acknowledgement that agencies are doing hundreds of reviews of 
their rules. So it would be untruthful for me to say that they 
are not doing anything. They are. I think the question is, from 
my perspective, do they need especially in prioritizing what 
they are looking at to see that they can focus specifically on 
those measures that would help small business, and that is 
really what R-3 is about. I pledge to you that I will work with 
you and this committee to take whatever types of steps we can 
not only to make R-3 an initiative but I like your suggestion 
of seeing if there are ways to broaden that, and I think that 
will become clear after our first year of running with this R-3 
to see how it works.
    But I do agree with you, the accountability is a huge 
issue. And in small businesses not feeling lost in the 
bureaucracy is a big issue that we--that it is good that we are 
trying to take on.
    Chairwoman Velazquez. Will the gentleman yield?
    Mr. Gonzalez. Yeah, as a matter of fact, I yield back. 
Thank you, ma'am.
    Chairwoman Velazquez. Mr. Sullivan, when he asked you how 
can we assist you and your office, I think codifying section 3 
of Executive Order 13272 would allow for you to come to the 
rulemaking process at an early stage and I believe that will be 
a tool important to your office.
    Mr. Sullivan. I agree with the chairwoman. The codification 
of 13272 would not only help us get small businesses' views 
into the process earlier, it would also empower this committee 
because it then becomes law not exclusively the purview of the 
executive branch. So I agree with the chairwoman.
    Chairwoman Velazquez. Mr. Chabot? With that we end this 
panel. But, Mr. Sullivan, I have all the questions that I will 
be submitting to you in writing for the record.
    Mr. Sullivan. Thank you. It will be a pleasure to respond. 
Thank you.
    Chairwoman Velazquez. And the committee is in recess until 
we complete votes on the floor.
    [Recess.]
    Chairwoman Velazquez. The committee is called to order and 
we are going to proceed with our second panel. We have Mr. Marc 
Freedman. He is the Director of Labor Law Policy of the U.S. 
Chamber of Commerce. Prior to joining the U.S. Chamber of 
Commerce, he was the Regulatory Counsel for the Senate Small 
Business Committee. At the U.S. Chamber of Commerce, Mr. 
Freedman is responsible for developing and advocating the 
Chamber's response to a variety of labor and workplace issues. 
The U.S. Chamber of Commerce represents over 3 million 
businesses.
    Welcome, sir.

 STATEMENT OF MR. MARC FREEDMAN, DIRECTOR OF LABOR LAW POLICY, 
                    U.S. CHAMBER OF COMMERCE

    Mr. Freedman. Thank you, Madam Chairwoman. Now that you 
have read my introduction, let me just point out that during my 
time at the Senate Small Business Committee, my role was to 
oversee agency compliance with the Regulatory Flexibility Act 
and make suggestions about ways that it could be improved. So I 
have been around this discussion for quite some years.
    The Chamber unequivocally supports improvements of 
Regulatory Flexibility Act to expose loopholes and clarify 
various terms that have led to agencies avoiding the 
requirements of the act. We therefore are pleased to support 
your bill, the Small Business Regulatory Improvement Act of 
2008, and I commend you for pursuing this issue and holding 
this hearing today.
    If we needed a reminder--and let me just start off. The DHS 
"no match" reg has already been mentioned, and I would like to 
cite to it for a moment to give the committee an example of the 
length to which agencies will go to avoid the Reg Flex 
compliance. In that reg, as you may remember, the DHS did not 
address any of the complications and subtleties of trying to 
determine whether their regulation would have a significant 
economic impact on a substantial number of small entities. They 
basically blew right through that and went right to a legal 
conclusion that it did not disturb the underlying obligation of 
an employer to determine the work authorization of the 
employees and therefore there was no new burden.
    As you have heard, the Chamber intervened in a case brought 
by an array of unions specifically to raise the Reg Flex issue. 
Unfortunately, the U.S. District in the Northern District of 
California saw through DHS's neglect of its rulemaking 
obligations and found that the agency had not supported 
certification with the adequate factual basis as required in 
the act.
    I want to make a point about this, too. DHS's reasoning if 
left unchallenged would have set a very dangerous precedent. 
Consider how that same logic, that the underlying obligation of 
the employer is not changed by obligation, could be applied by 
other agencies such as OSHA. The Occupational Safety and Health 
Act mandates that employers provide a workplace, quote, free 
from recognized hazards that are causing or are likely to cause 
death or serious physical harm. All of OSHA's regulations are 
merely detailed examples of these hazards and how employers 
must protect their employees from them. If OSHA was to adapt 
DHS' logic that any regulation did not change the underlying 
obligation of the employer, the agency would never have to 
determine the impact of a proposed regulation on small 
businesses and therefore would never conduct a SBREFA panel 
review taking input from actual small businesses and never have 
to produce small entity compliance guides, the requirements for 
which were recently enhanced in the minimum wage package passed 
earlier in the session.
    Against this backdrop, the Chamber believes making the RFA 
as effective as possible is imperative. While we are often 
associated with our large members, the truth is that 96 percent 
of U.S. Chamber members are actually small businesses with 100 
employees or less. As we have already heard this morning, 
everyone acknowledges that regulations impact small businesses 
more harshly than large businesses. If we are serious about 
keeping our small businesses competitive with global 
competition, we must make sure this act has the impact Congress 
intended when it passed it more than 25 years ago and then 
amended it with SBREFA in 1996.
    Your bill would make several important improvements to the 
Regulatory Flexibility Act. Perhaps the most significant is 
requiring agencies to consider the indirect impact of 
regulations when calculating the impact of regulations on small 
businesses. We have heard about this a lot already this 
morning.
    Let me just point out that that is particularly helpful 
with respect to the EPA regulations where the agency claims 
that because their regulations are actually enforced by the 
States, these regulations only have an indirect impact and 
therefore do not trigger the full range of RFA activities. 
Another important problem your bill addresses is improving 
agency compliance with section 610, the provision that requires 
agencies to review the regulations after 10 years. Your bill 
makes clear that the agency is to determine whether the 
regulation has a significant economic impact on a substantial 
number of small entities at the time of the review. The 
Government Accountability Office concluded that the original 
text of the legislation was not clear whether this impact 
applied to the time the regulation was issued or when it was 
being reviewed. This confusion has allowed agencies to 
legitimately claim that they were unsure how to proceed. 
Indeed, the Government Accountability Office has done quite a 
few studies on the Regulatory Flexibility Act, showing how 
agencies have failed to comply with it and repeatedly citing 
lack of clarity in the law's terms as a key reason.
    One quote that I was able to uncover from the testimony 
says that GAO's reports indicate that the full promise of RFA 
may never be realized until Congress revisits and clarifies 
elements of the act, especially its key terms, or provides an 
agency or office with clear authority and responsibility to do 
so. They go on to point out that there is a domino effect that 
if an agency's initial determination of whether RFA is 
applicable to rulemaking has on the other statutory 
requirements such as the compliance guide and the periodic 
reviewing of regulations.
    Madam Chair, I agree with the GAO that if we are serious 
about improving the Regulatory Flexibility Act, the most 
important thing would be for Congress to make clear what it 
means by the key term "significant economic impact" and 
"substantial number of small entities." These two phrases drive 
the overall question of whether an agency must apply the RFA to 
any given regulation. The agencies have taken maximum advantage 
of the flexibility in the Regulatory Flexibility Act to define 
these terms differently as they choose for any given 
regulation, with the goal being that the regulation is regarded 
as not having the subtle impact and thus avoid having to 
complete the requirements of the RFA. While these two terms 
cannot be defined the same for all regulations or even for all 
regulations within a specific agency, it is possible to 
establish the parameters and the elements that must be 
considered. Doing so would not only help agencies apply the RFA 
more consistently, it would also set benchmarks so that those 
of us who monitor agencies' compliance with the RFA would have 
some way to tell if they had done what they were supposed to 
do.
    As we have heard already, one way to accomplish the goal 
would be to authorize the Chief Counsel of Advocacy to 
promulgate a rulemaking defining these terms along with other 
requirements of agency compliance with the RFA. And as we have 
also heard, this idea has been included in legislation 
previously, most recently H.R. 682 through the Regulatory 
Flexibility Act, and I might add also by Senator Bond back in 
the 107th Congress in a bill he introduced call the Agency 
Accountability Act.
    In the alternative, Congress could specify what it meant by 
these key terms and instruct agencies that they are to 
incorporate these elements as they apply these terms to the 
regulations. One other suggestion I would like to offer the 
committee is that for those regulations when an agency's 
certification is still not adequately supported, I think it 
would be most helpful to permit the judicial review of an 
agency's certification decision at a time closer to when that 
decision is made rather than the current law, which says you 
have to wait until the regulation goes final to bring your 
judicial review. This would preserve the ability of small 
businesses to get their input into the rulemaking at a time 
when it can still have an impact.
    An excellent example of where this would have been 
particularly helpful is the recent case brought by the 
Aeronautical Repair Station Association, ARSA, for purposes of 
conversation, against the Federal Aviation Administration's 
regulation requiring contractors and subcontractors at any tier 
to establish mandatory drug and alcohol testing programs for 
employees performing maintenance functions in the aviation 
industry.
    Chairwoman Velazquez. Mr. Freedman--
    Mr. Freedman. I am sorry.
    Chairwoman Velazquez. Your time is up. So maybe during the 
question and answer period you will be able to make any other--
    Mr. Freedman. By all means. Forgive me, Madam Chairwoman. 
Just let me say we look forward to helping you move this bill.
    [The prepared statement of Mr. Freedman may be found in the 
Appendix on page 44.]
    Chairwoman Velazquez. Thank you. Thank you very much. Our 
next witness, Mr. Dyke Messinger, is the President and CEO of 
Power Curbers, Inc. He is testifying on behalf of the National 
Association of Manufacturers. Founded in Salisbury, North 
Carolina, Power Curbers sells products across the globe in more 
than 70 countries. The National Association of Manufacturers 
represents multinational firms, small and medium manufacturers, 
and 350 allied associations throughout the country. Welcome, 
sir.

STATEMENT OF DYKE MESSINGER, PRESIDENT AND CEO, POWER CURBERS, 
  INC. ON BEHALF OF THE NATIONAL ASSOCIATION OF MANUFACTURERS

    Mr. Messinger. Thank you, Chairwoman Velazquez. It is a 
pleasure to be here. Ranking Member Chabot and Congressman 
Akin, it is a pleasure to see you, sir. I want to thank you for 
giving me the opportunity to talk about the Regulatory 
Flexibility Act.
    As you know, NAM is the largest trade association 
representing large and immediate--small and medium 
manufacturers in all 50 States. Just another note about my 
business. We make mechanized construction equipment for paving 
concrete roads and curbs and sidewalks. We employ 104 people in 
North Carolina, Iowa, and Tennessee, and we sell our equipment 
in over 80 countries, and I am also a board member of a 
National Association of Manufacturers. I won't repeat the 
statistics that have been shared with the committee before 
about the report by Mark Crain for the SBA on the cost of 
regulation, but I will share some data on manufacturing.
    In manufacturing, the disparity between large and small 
firms was the widest. The cost per employee for the smallest 
firms was over $21,000, or over 150 percent higher than the 
over $8,700 cost per employee for the largest firms.
    In 2006, the NAM released an update to its report on how 
U.S. structural costs hurt our competitiveness in this country. 
It examined structural costs borne by manufacturers in the 
United States compared to our nine largest trading partners. 
The principal finding was that structural costs were almost 32 
percent higher in the U.S. than for our foreign competitors. 
The structural costs included a regulatory compliance, 
corporate taxation, health and pension benefits, litigation and 
rising energy costs.
    As a result, we welcome the leadership, Chairwoman 
Velazquez, and of this Congress in making improvements to the 
RFA. Our review of your proposed legislation leads us to 
conclude that your improvements to the RFA are sound and the 
NAM and its members are supportive of your efforts.
    First, let me do emphasize you need to include the indirect 
economic effects in a regulatory flexibility analysis. A timely 
example of agencies not being able to consider the impact that 
they are truly having on small businesses is the EPA's national 
ambient air quality standards for ozone. Because the 
implementation of NAAQ standards is done through the regulation 
and approval of State implementation plans, there are said to 
be no direct effects on small entities because States are not 
small entities. Well, this is clearly contrary to what Congress 
intended when it passed the RFA. Periodic review of 
legislation, section 610, has always been an underperforming 
provision of the RFA. There is great hope that it would 
rationally reduce or eliminate some of the burdens on small 
businesses that had outlived their usefulness.
    Let me give you an example. Many of our members and 
businesses across this country use aerial work platforms or 
cherry pickers. They also use scissor lifts in their facilities 
to perform maintenance or to do a specific task. Well, there 
are fall protection standards that are very important that are 
attached to these devices. After all, putting somebody up in 
the air so many feet from the ground is important. The 
regulation--some of the regulations for these are 30 years old 
and they don't apply separately to each machine. So that you 
don't--depending on which machine arrives in your facility, you 
have different regulations. You don't know what to comply with 
and of course when OSHA comes in and takes a look, they are 
going to tick off what you did or didn't do.
    So that is something that I have noted in my business and 
the people that bring this equipment in don't really understand 
the OSHA regulations. They are there to execute a piece of 
work. So we believe that enhanced reporting requirements will 
create the necessary environment for better retrospective 
review.
    There are also circumstances where an individual rule is 
not particularly burdensome or a challenge to many small 
business, but the cumulative effect of that rule and many 
others affecting a particular sector or type of business can be 
crushing. Cumulative effects are not always easy to quantify, 
but the current loophole of providing this analysis, quote, to 
the extent practicable, gives agencies too large of an 
opportunity to walk away from this responsibility and the use 
of, quote, where feasible, unquote, is a limitation to the 
review of the number of small entities affected seriously 
weakens the requirement. Changes to this limiting language in 
several parts of the RFA will go a long way to improving agency 
compliance and analysis.
    The NAM was also supportive of former Chairman Manzullo's 
H.R. 682 in the previous Congress. We believe there are a few 
provisions of that bill that would strengthen your legislation, 
and I have included those suggestions in my prepared testimony.
    Thank you again, Madam Chairwoman, for this opportunity to 
testify.
    Chairwoman Velazquez. Thank you, Mr. Messinger.
    [The prepared statement of Mr. Messinger may be found in 
the Appendix on page 53.]
    Chairwoman Velazquez. Our next witness is Mr. Andrew 
Langer, he's the senior manager of the regulatory affairs at 
the National Federation of Independent Businesses. Prior to 
joining NFIB, he was associate director of the development for 
the Competitive Enterprise Institute. The National Federation 
of Independent Business represents over 600,000 small 
businesses before Congress and all 50 States. Thank you and 
welcome.

  STATEMENT OF MR. ANDREW LANGER, SENIOR MANAGER, REGULATORY 
     AFFAIRS, NATIONAL FEDERATION OF INDEPENDENT BUSINESSES

    Mr. Langer. Thank you very much, Chairwoman Velazquez, 
Ranking Member Chabot and Congressman Akin. Thank you very much 
for allowing me the opportunity to testify here today on behalf 
of the hundreds of thousands of small businesses owners 
represented by NFIB.
    I am happy to be here to discuss with you the burden of 
regulatory paperwork and to offer our insights on how to find a 
way to reduce the amount of paperwork filled out by America's 
small businesses each year. I attended your hearing on 
regulatory burden several weeks ago and I really appreciate the 
invitation to come here and discuss these burdens in greater 
detail. NFIB is the Nation's largest small business 
association, and it is fairly unique amongst trade associations 
in Washington D.C.
    NFIB represents truly small businesses. Ninety percent of 
our members have fewer in that 20 employees and our average 
member size is 10 employees. I know we have discussed at great 
detail the difference between small and large businesses here, 
and I won't restate those issues here today. But if there is 
any message I hope to convey today, it is that agencies cannot 
create regulations in a vacuum. Agencies have to take into 
account how each and every little rule adds up to literally 
weeks worth of a small businesses time. We must consider what I 
have taken to calling the context of regulation.
    We spent a tremendous amount of time focusing on the big 
picture, and the big picture of regulatory burdens is 
important, it sets out the most general context in which to 
consider the problem of regulatory burdens. As Tom Sullivan 
said, our regulatory State costs over a trillion dollars 
annually. Americans spent 8 billion hours, billion with a B, 
filling out paperwork last year at a cost of over $400 billion. 
These are vast figures, they are almost too large for any 
person to really comprehend.
    Let me put it to you this way: For an adult population of 
210 million people, that is 210 million people over the age of 
18 in America, that is 38 hours for every adult. Almost the 
equivalent of a workweek's worth of time spent filling out 
paperwork for the Federal Government. This is what I mean by 
context, the assessment of each rule's individual impact and 
how that impact adds to the Agency's current regulatory burden, 
taken by itself a rule might create very little burden.
    For example, in a hearing last year on a proposed EPA 
regulation on home renovation, a lot of talk focused on a 
mandate requiring agency training of 1 day, per quarter, per 
employee. Many people dismissed this as a simple request, what 
is 1 day every 3 or 4 months after all. But that is 3 or 4 days 
per employee, per year, and this is on top of all the other 
training, paperwork and other regulatory burdens that a small 
business and those employees might be required to jump through.
    We believe at NFIB that the agencies ought to keep track of 
each of those mandates, quantifying them and adding them up 
each and every year. And then when new regulations are 
proposed, calculate the burdens being added and then restate 
the overall burden being opposed by the agency. It is really 
only in this way that we can really assess what is being added 
and consider whether or not such additions are necessary and in 
that framework.
    And in context cuts both ways as well, understanding that 
it isn't a single regulation that creates this burden, but 
thousands of them underscores the necessity for not only making 
incremental changes to the regulatory state, but supporting the 
agencies when they do so as well. When EPA comes out with a 
regulatory change that reduces the burden on small business of 
15 hours, we can't dismiss that. Fifteen hours is 2 days, 2 
days here and 2 days there over the thousands of regulations 
that are on the books, and pretty soon you are talking about 
real time. Time, after all, is a small business's most precious 
and most finite resource.
    We also believe that accountability and transparency are 
important, and we believe that these two concepts can be 
effectively joined with the efforts to reduce regulatory 
burdens that gets to what Congressman Gonzalez was talking 
about before. In addition to our recommendations on regulatory 
compliance guides, we believe that all regulations and their 
associated documents should have a name and direct dial phone 
number of the regulation's principal author attached. Some 
might balk at this, but we believe that it gets to the heart of 
government responsiveness.
    One of the most problematic parts of figuring out how to be 
in compliance with regulations is getting answers to basic 
questions about them. Rarely do single agency points of contact 
have the detailed knowledge about a particular regulation to 
actually provide the meaningful information necessary.
    And small business owners spend countless hours working 
their way through agency offices in order to find the right 
person to answer their question. But who better really to 
answer a question about a regulation than the person in the 
agency who is responsible for bringing that regulation through 
the promulgation process? Moreover, if an agency employee is 
required to attach his or her name to a regulation, we believe 
that more care might be taken to ensure that a regulation is as 
clear as possible and doesn't burden small business any more 
than it has to.
    Thank you, again, for the opportunity to testify. In our 
written remarks we have offered a series of 10 separate 
recommendations, several of which have been adopted and 
included in your legislation. We look forward to working with 
you and answering any questions that you might have.
    Chairwoman Velazquez. Thank you, Mr. Langer.
    [The prepared statement of Mr. Langer may be found in the 
Appendix on page 60.]
    Chairwoman Velazquez. Welcome again, Mr. Charlie Sewell. He 
is the senior vice president of government affairs at the 
National Community Pharmacists Association. Prior to joining, 
NCPA, he was the president of ACG Enterprises. National 
Community Pharmacist Association represents 24,000 independent 
pharmacists and 50,000 community pharmacists and their patients 
across the country, welcome.

    STATEMENT OF MR. CHARLIE SEWELL, SENIOR VICE PRESIDENT, 
 GOVERNMENT AFFAIRS, NATIONAL COMMUNITY PHARMACISTS ASSOCIATION

    Mr. Sewell. Thank you, Madam Chair, and thank you Ranking 
Member Chabot and the other members of the committee for having 
us here today. I would like to say that we still represent 
24,000 pharmacies, but actually we only represent 23,000 
pharmacies now because we lost 1,152 pharmacies in the last 
year because we got a new business partner, with the advent of 
Part D we now have Uncle Sam as a business partner and we found 
out he's not a very good business partner as said before. That 
is why we are happy to be here today.
    Most importantly, we represent not only the 23,000 
pharmacies, and their over 300,000 employees, but millions of 
patients that we serve day in and day out. We help them in 
terms of improving their adherence to their drug regimens. We 
help them avoid adverse drug interactions, we even provide home 
delivery for free in most of our pharmacies, which is almost 
unheard of in this day and time. It is really because of our 
face-to-face relationship with a local independent pharmacy 
that patients are more likely to take medicines on time and 
more likely to take them properly and more likely to refill 
their meds when they need to.
    And frankly, more likely to get the care that they need 
because we spend more time with most of our patients than their 
doctors do, especially in rural America and the urban centers. 
We are happy to be here today to say that we strongly support 
the small business Regulatory Improvement Act. It is much 
needed, long overdue, and the sooner the better from our 
perspective.
    We would ask, though, that actually you consider 
strengthening it even more. Specifically we would recommend 
that no agency can issue a final regulation unless it 
specifically analyzes the significant impact that 
implementation of the rule will have on small business. 
Agencies shouldn't be allowed to hide behind lack of evidence 
which is what they always cite.
    In order to proceed, agencies must affirmatively 
demonstrate that there is no significant adverse impact on 
small businesses. Secondly, once there is a finding of 
significant impact upon small business, an agency should not be 
allowed to implement a rule for the small business sector that 
it affects. And lastly, a private person or any entity or any 
government entity for that matter once a rule is released, that 
person or entity should be able to bring up a regulatory 
challenge when they believe there has been a violation of the 
RFA, and frankly, what we would like to see is an SBA process 
created where that action could be adjudicated in a fairly 
efficient manner and fairly expedited manner by the SBA.
    I want to cite one specific example that we have talked 
about before that really is really our major concern, that is a 
recent rule that was promulgated by CMS. The GAO did a study 
and said that under the new Medicaid reimbursement proposal we 
would be reimbursed 36 percent below our cost. The OIG did a 
study and said that from 19 of the 25 drugs that they examined 
we would be reimbursed below our cost. If you take into account 
that you actually have to pay the pharmacists who work in our 
pharmacies, you actually have to pay a rent or a mortgage, you 
actually have to pay for the utilities, 24 of the 25 drugs they 
examined we would be losing money on, it really is a horrendous 
situation.
    When it came time to perform the regulatory flexibility 
analysis in their final rule, frankly they said, we are going 
to ignore the GAO findings, we are going to ignore the OIG 
findings and then they told us that we need to provide more 
documented evidence. We actually used SBA standards and we 
showed them directly that we would lose, our net margins would 
sink to the tune of about 80 percent, when you are only make 
2.6 percent net margin to begin with, almost 80 percent 
reduction in that margin doesn't work, it just don't keep us in 
business.
    We can't believe that CMS totally neglected the RFA in the 
fashion that they did. Something needs to be done. The more 
teeth that we can put to the RFA the better. Agencies need to 
be required to actually do real economic analysis, and when 
there is significant impact, they have to actually stop what 
they are doing before they promulgate the rule. They certainly 
need to take into account the small business sectors that will 
be impacted. Thank you very much, Madam Chair.
    [The prepared statement of Mr. Sewell may be found in the 
Appendix on page 75.]
    Chairwoman Velazquez. Thank you. I would like to address my 
first question to Mr. Freedman. And you spoke about the fact 
that the Regulatory Flexibility Act does not define significant 
economic impact and, in fact, the Government Accountability 
Office concluded that the lack of clarity regarding this term 
has reduced the effectiveness of the law. And also courts have 
ruled that agencies did not have to consider the indirect 
impact of a rule on small businesses. The legislation we are 
examining today requires agencies to contemplate reasonably 
foreseeable indirect economic impacts.
    How will this improve the regulatory process for small 
businesses and will it result in a more accurate assessment of 
the two economic impacts on small businesses?
    Mr. Freedman. Thank you, Madam Chairwoman, for the 
question. I think you actually hit one of the several nails on 
the head, the indirect impact, as I have mentioned, and as 
others have discussed, is one of the ways that agencies avoid 
taking into account certain impacts on small businesses. The 
aeronautical repair station case I was about to mention, I 
think, brings that out very clearly. The FAA said that the 
impacts were merely on contractors, and therefore, not direct 
impacts. The court found differently and said that these 
impacts, in fact, should be included.
    I think the indirect impact question has been one of those 
holy grails in the pursuit of better reg flex compliance. Your 
legislation, I think, does a very good job of trying to capture 
the levels of indirect impact. I think that is where the debate 
lies.
    You talk about reasonably foreseeable. That is about, I 
think, as good a line as one can draw around this. Let us be 
honest, I think that will trigger litigation, but you do have 
to draw a line and I think that is a good way to draw that 
line. So basically, the answer to your question is yes, it 
would help greatly and it would definitely make a difference in 
a lot of regulations in terms of the impacts that have been 
discussed this morning and in other iterations that we all have 
dealt with.
    Chairwoman Velazquez. Mr. Langer, would you like to 
comment?
    Mr. Langer. Well, no. I have no disagreement with Marc on 
this. I like to think of the regulatory State as almost an 
organic creature, and that you make a change somewhere it will 
have a ripple effects down the road and effect other things. 
Industries in our economy are not independent entities, they 
are all interconnected in many ways. And so when government 
makes a change somewhere it is going to have an impact down the 
road and sometimes very serious and very problematic ones.
    I think Chief Counsel Sullivan underscored a great one when 
he was talking about the hemispheric travel restrictions issue 
and the impacts that is going to have industry wide in multiple 
industries and how that wasn't taken into account. I think that 
is one of the great problems we will run into.
    The greatest growth in regulation is happening in Homeland 
Security and we are seeing all sorts of impacts down the road 
for things that DHS simply isn't contemplating.
    Chairwoman Velazquez. Thank you.
    Mr. Messinger, I understand that the disparity on 
regulatory costs between large and small businesses is widest 
in the manufacturing sector, can you talk to us about how 
certain regulations or agencies do more to address the unique 
concern? They could do more to address the unique concerns of a 
small business manufacturer and do you hire legal consultants 
to assist in compliance?
    Mr. Messinger. Yes, we hire legal consultants to help us 
when needed. It is not on retainer or anything, we just use 
them when we need them, but quite frequently we do. I don't 
know if I can comment on specific agency regulations. I have to 
check with my staff. What I do know is what we have all said is 
just the cumulative burden of the variety of things we are 
asked to do makes it where you sit down and look at this stuff 
and you say, of what real need and use does this have? We can 
all appreciate the need for a clean environment, for safe 
working conditions and those sorts of things, but when it 
appears to be paperwork, appears, then people begin to distrust 
the system and that is what we don't want to have happen.
    Mr. Langer. Congresswoman, if I could just add to that, 
because there are some good examples that are out there, OSHA 
in the last few years has taken a particularly different 
approach--the Department of Labor itself has taken a different 
approach in many ways in dealing with small business and 
working closely with a number of entities out there.
    OSHA has developed what they call their OSHA consultation 
process, which we have been invested in for some time where 
they will go out and they will provide expertise to come into 
businesses, to not inspect but assess and then offer 
recommendations as to how they might improve their workplace 
safety and health programs. A number of entities out there a 
number of insurance companies are offering incentives to the 
small businesses that partake in that program and get certified 
and small businesses are saving money while protecting their 
employees. So that is one I would recommend.
    Chairwoman Velazquez. Mr. Sewell, let us talk about the AMP 
rule, CMS did not consider any alternatives to minimize the 
impact of the rule on small businesses, instead they concluded 
that out of State did not require it to examine any other 
alternatives. Can you talk to us, do you have any alternatives 
or ways to implement the rule that will be less burdensome to 
community pharmacists?
    Mr. Sewell. We have made recommendations and there is 
legislation being considered both here in the House and Senate 
at the moment to address this. We are afraid given the 
congressional calendar, it will be difficult to make anything 
happen this year.
    So the latest discussion with Senator Baucus and now Mr. 
Stark here in the House is in regards to a delay, the hope is 
that they would at least delay until people would see the AMP 
data. When we submitted our comments to CMS, they never give us 
the AMP data, so it was impossible for us to comment on the 
specific harm. The only two entities that actually received the 
data were OIG and GAO and they are the ones who came up with 
the number showing that we will be reimbursed below cost. CMS 
criticized us for not offering specific comments, but yet 
wouldn't provide us the data. They have still not provided the 
data to Congress. We don't see how they can go forward with 
this rule when no one has the data, including the Congress.
    Chairwoman Velazquez. Another issue related to CMS is the 
Medicaid generic prescription drug reimbursement rule and its 
impact again on small pharmacists. Why do small pharmacists 
face a particular severe economic impact from this rule 
compared to larger counterparts and what are the consequences 
from community pharmacists if this new formula is implemented?
    Mr. Sewell. The average Medicaid business that an 
independent pharmacy does is 14 percent of their total 
business, for chain pharmacies it is about 7 percent, so twice 
as much business. We have over 10 percent of our pharmacies, or 
about 2,300 pharmacies, over 50 percent of their business is 
Medicaid. If this goes through, those 23 pharmacies will close 
almost overnight. We have been in constant contact with our 
members, and that is what they have told us, there is just no 
way they can stay in business. Any pharmacy with a 
disproportionate share of Medicaid business is going to be in 
trouble, and most Medicare business tends to be concentrated in 
rural and the urban centers, and that is where most independent 
pharmacies are located.
    Chairwoman Velazquez. Mr. Chabot.
    Mr. Chabot. Thank you very much, Madam Chair. I first want 
to commend the panel for something, all four of you have done 
your homework, you pronounced my name correctly, all four of 
you. That is the first time that has happened all year. When I 
first ran for office back in 1979 so it has been 28 years ago, 
I ran for Cincinnati city council as an independent, didn't 
have much money so we had a 10 second ad and that is all we 
could afford. And so we had my yard sign on there, it just said 
Chabot, and we had a woman's voice and a man's voice and it 
kind of went back and forth. And one said, Chabot, one said 
Chabot, Chabot, Cabot. And then the voice over said, although 
nobody agrees on how to pronounce his name, everybody agrees he 
will make a fine city council. That was our ad and we lost. We 
finally did win, but it was a few years later, but in any 
event, thank you for that, not that I really care how you 
pronounce my name, but in any event we do pronounce it Chabot. 
It is a French name, most French men pronounce it Chabot.
    We will begin with you Mr. Freedman, if I can. Agency 
determinations of no significant impact at the proposed rule 
stage are not currently reviewable. If such decisions were 
reviewable, would this not undermine the ability of the agency 
to learn from the rule-making process and correct its mistakes, 
the overarching premise of notice and comment rule making?
    Mr. Freedman. Thank you, Mr. Ranking Member. I guess my 
feeling there is that I would rather see an agency get it right 
the first time and get an analysis out that makes sense and 
covers all the various factors that need to be included, rather 
than rely on a rule-making process, which my experience is 
while there are changes that are possible in a rule-making 
process, when you see the proposed rule, you are seeing what 
the agency wants to put out. As I like to say, it may not be 
carved in stone, but the concrete is wet. And so I would rather 
them get it right the first time than to have to rely on a 
comment process to correct them.
    Mr. Chabot. Mr. Messinger, given the fact that your company 
already has sunk significant capital costs into complying with 
existing regulations, is it more important to focus on 
preventing new burdensome regulations or eliminate existing 
burdensome regulations?
    Mr. Messinger. Can we work on both?
    Mr. Chabot. Good suggestion, yeah.
    Mr. Messinger. I guess it would depend on what the issue 
is, but surely you have to stop or slow down the unnecessary 
new regulations, but we just got a field of issues to deal with 
today. I don't know, that would be tough, but I would leave it 
up to those that are involved in the details of those issues a 
little more. I guess if I had to pick, it would be the existing 
regulations.
    Mr. Chabot. Thank you.
    Mr. Langer, even if an agency does not enumerate cumulative 
impacts, should the cumulative impact of regulations be taken 
into account when an agency makes the threshold decision of 
whether to perform an initial regulatory flexibility analysis.
    Mr. Langer. I think it has to. I mean, the problem is right 
now we have a situation where when we assess regulatory burdens 
in the case of garbage in, garbage out, the executive branch 
understate regulatory costs consistently, they understate 
cumulative regulatory costs vastly. If we were to go only on 
the basis of what the Office of Information & Regulatory 
Affairs and don't get me wrong, I have nothing but respect for 
Director Dudley and the work that she is doing over at OIRA, 
but annually, we, get this reporting of the costs and benefits 
of regulations and the State that cost and regulations are up 
$44 billion. We know that is not the case. They are looking at 
a dozen rules.
    And so the agencies have to do a better job if they are not 
going to assess the incremental costs, they have to do a better 
job at assessing their overall costs. We need to get a better 
handle on this because there is a fundamental misunderstanding 
of just what the burdens are. We are looking at a regulatory 
burden which roughly equals the entire Federal budget, and that 
just is an unsustainable situation for American business.
    Mr. Chabot. Thank you.
    Mr. Sewell, in your opinion, does FDA accurately assess the 
economic consequences of its regulatory issuances of small 
pharmacies and suppliers?
    Mr. Sewell. In a word, no. I will give you a specific 
example, right now they are considering imposing track and 
trace technology, something that we support to protect the drug 
supply from manufacturer all the way down to the pharmacy 
level. However, the cost of this technology could be anywhere 
between 10 and $40,000, that is a lot of money for a small 
business. That would be an unfunded mandate that would be 
basically placed on the back of pharmacies. And that is not 
taking into account the time to actually do track and trace 
technology, that is to track and trace the individual drugs. In 
fact, some of the discussions as we understand it would be 
looking at a situation where it would be almost as cumbersome 
as tax compliance, it could take an extraordinary amount of 
time. So the answer in a word is no.
    Mr. Chabot. Thank you, very much. Madam Chair, I yield back 
the balance of my time.
    Chairwoman Velazquez. Mr. Ellsworth.
    Mr. Ellsworth. Thank you, Madam Chairwoman. I just have to 
tell you, I have been practicing the ranking member's name and 
for a year now, and now that he has given me those others 
options, I have forgotten how to pronounce it. So if I say 
Chabot, I apologize. I had Chabot down, there it is again.
    Gentlemen, thank you very much. I appreciate you being 
here, I could ask you questions all day. I appreciate you being 
here. First, if you don't mind, in what we are talking about 
today, if the chairwoman had the magic wand and was giving away 
Christmas presents today and you had one thing you could say, I 
walked out of there and I won this for my constituents, could 
you go down the line and tell me what that would be if you 
walked out today and got it done?
    Mr. Freedman. That is a hard question, I guess I would 
probably point to the indirect impact in language in the bill. 
If you are talking about one specific provision, other than 
just saying I walked out of here and got the bill done, I would 
focus on indirect impact language in the bill. I think that was 
the one that would probably make the greatest impact on the 
regulatory process.
    Mr. Ellsworth. Mr. Messinger.
    Mr. Messinger. I am not schooled in the legislation, I am a 
businessman.
    Mr. Ellsworth. One thing that would make your life easier 
as a businessman that this committee could do.
    Mr. Messinger. Well, Mr. Langer talked about how OSHA has 
really done some good things and become more responsive. I 
think if we could apply that to EPA, I think this country has 
become more green, certainly this last year we have seen that. 
I think people in government don't realize that all Americans, 
most Americans are very supportive of what we need to do to 
have a sustainable future, but the EPA's regulations on smaller 
businesses are terribly burdensome, I don't want to get into 
that, but I would move in that area.
    Mr. Langer. If the chairwoman has already given Marc his 
present of indirect impacts, I get a different one. I will keep 
hammering on the issue of phone numbers of the agency 
personnel, the principal office of regulations. I know it may 
sound gimmicky, but I think, frankly, down the road it could 
have a sea change effect. I mean, every time I talk to my 
members, I talk to our field personnel, I talk to folks who 
deal with the regulated entities, they look at me like, boy, 
that is an interesting idea. The idea that you can actually 
pick up and call the person who wrote the regulation. So if 
Marc is already getting direct impacts, I will go with the 
phone number issue.
    Mr. Sewell. Certainly indirect impact is important to us as 
well, but we would like to add that we would like to be able to 
make regulatory challenges to go through an abbreviated process 
and be adjudicated by the SBA, we think that would really make 
a big difference.
    Mr. Ellsworth. Thank you very much.
    Mr. Freedman, I notice that the SBA releases a report 
grading the agencies on their responsiveness on regulatory 
fairness, compliance, and I love the word that some identified 
as suboptimal, I am guessing there are other words for that.
    Mr. Freedman. One wonders what Chairman Greenspan would 
have to say about the regulatory world.
    Mr. Ellsworth. Right. But suboptimal, I will use that word, 
I can think of others, Department of Ag, Defense, Justice, 
Education, Treasury. In your work with small business, are any 
of our other departments doing well above optimal, or let us 
just say optimal.
    Mr. Freedman. Actually, that is a fair question, I think in 
constant refrains about what needs to be done to improve the 
regulatory flexibility, we do tend to overlook where agencies 
have made, I guess, at least a conscientious effort, in some 
cases, hit the mark.
    I would cite too, it is ironic because we keep sort of 
discussing it in negative terms, but EPA, I think, does a very 
conscientious effort at trying to assess the impacts. Now, in a 
number of cases, I don't think they get all the impacts in 
there that they should have. But I do know they have a matrix 
that they work from in terms of what level of impact is 
considered significant and how to assess the number of small 
entities.
    So I am not going to give them the pat, but I will cite 
them as an agency that does more on this than other agencies.
    Similarly, I think OSHA has, over the years, done a much 
better job at making sure that they capture those impacts and 
do what they are supposed to do. Now again, I am not going to 
say that they always get it right, but they do recognize the 
burden and go through the process more contentiously than 
others.
    Mr. Ellsworth. Mr. Langer, I think if I remember correctly 
in your testimony, you talked about the burden of paperwork, 
how it continues to grow. Which one has caused you the most 
angst to you and your members, are there ones that just are 
most costly and cause the most angst.
    Mr. Langer. Well, it is well documented that tax paperwork 
is the biggest burden out there. It is 80 percent of the 
paperwork burden that anybody faces. Part of the problem is 
complexity of the code. We can get into the difference between 
beneficial paperwork and non beneficial paperwork and the 
benefits that accrue from it. Really, with paperwork overall, 
it gets back to my earlier point, which is it is all 
incremental, it is never one big regulation that is out there; 
we are always looking for magic bullets, and there is no magic 
bullet here. It is 15 minutes here, the 2 hours here, 3 hours 
there, it all adds up to literally a week's worth of time for 
every adult American.
    Mr. Freedman. If I could just add. These regulations don't 
happen in a vacuum as we have heard. The thing I think about is 
the people who have to deal with these, small business owners, 
yes, their businesses are affected, but it is also a matter of 
their private lives and the time that they would be spending 
time outside of their business. The people I think about have 
multiple roles within that business and adding more regulatory 
complexities to those roles means that is less time they have 
to do other things that we all think about in terms of family 
life and work outside of business.
    Mr. Langer. See, that is why I think these incremental 
costs are so important to assess and get a handle on. Because 
if the agent is already requiring a small business owner to 
spend a week of paperwork, adding more days, it is very serious 
stuff here. So annually, at the end of the year, the EPA could 
come back and say, we have added an hour of paperwork for 
everybody, or we have subtracted a few hours. Across the board, 
you start whittling away at it and you are really getting 
somewhere.
    Mr. Ellsworth. Thank you very much. I yield back, Madam 
Chair.
    Chairwoman Velazquez. Mr. Chabot.
    Mr. Chabot. No.
    Chairwoman Velazquez. With that we conclude this hearing. 
And again, I want to thank all of you for your time here and 
for your contribution to this important issue for small 
businesses. I ask unanimous consent that members will have 5 
days to submit a statement and supporting materials for the 
record. Without objection so ordered, this hearing is now 
adjourned.
    [Whereupon, at 12:05 p.m., the committee was adjourned.]

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