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



 
                        FULL COMMITTEE MARKUP OF
                     H.R. 4458, THE SMALL BUSINESS
                       REGULATORY IMPROVEMENT ACT

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           DECEMBER 13, 2007

                               __________

                          Serial Number 110-64

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                                 ______
                                     
                    U.S. GOVERNMENT PRINTING OFFICE
39-552                      WASHINGTON : 2007
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½090001


                   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.............................................     4

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................     8
Chabot, Hon. Steve...............................................    10
Ellsworth, Hon. Brad.............................................    11

                                  (v)

  


                   FULL COMMITTEE MARKUP OF HR. 4458,
                     THE SMALL BUSINESS REGULATORY
                            IMPROVEMENT ACT

                              ----------                              


                      Thursday, December 13, 2007

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:13 a.m., inRoom 
2360, Rayburn House Office Building, Hon. Nydia M. VelaAE1zquez 
[chair of the Committee] Presiding.
    Present: Representatives Velazquez, Shuler, Larsen, 
Grijalva, Michaud, Cuellar, Altmire, Braley, Clarke, Ellsworth, 
Johnson, Sestak, Higgins, Hirono, Chabot, Bartlett, Graves, 
Akin, Shuster, Musgrave, King, Fortenberry, Westmoreland, 
Gohmert, Davis, Fallin, Buchanan, and Jordan.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    Chairwoman Velazquez. I am pleased to call this morning's 
markup to order. Today we are considering H.R. 4458, the Small 
Business Regulatory Improvement Act. This legislation, offered 
by Mr. Ellsworth, strengthens key sections of the Regulatory 
Flexibility Act to help alleviate the growing burdens facing 
small firms.
    Since 1980 RegFlex has served to ensure that America's 
entrepreneurs are not placed at a disadvantage by Federal 
regulations. However, as we approach 28 years of RegFlex on the 
books, it is clear that certain parts of the law are not 
working as well as they should be. Over the past several weeks, 
this Committee has examined ways to improve RegFlex. The bill 
before us represents the final result of that work.
    The Small Business Regulatory Improvement Act was developed 
with the input of the small business community, policymakers 
and the chief counsel for advocacy. In these discussions, one 
thing that was abundantly clear was a concern of the growing 
regulatory burden on small businesses and its impact on 
entrepreneurship. Tens of thousands of pages of regulations 
continue to flow from agencies annually. In fact, just this 
Monday, the Federal Register exceeded the 70,000-page mark for 
the year.
    It is time to rein in the rapidly increasing regulatory 
costs facing America's entrepreneurs. Although critics of 
RegFlex have long labeled it as an impediment to the regulatory 
process, this is simply not the case. For the nearly three 
decades the law has been on the books, the volume of 
regulations continue to grow. By making certain that regulators 
consider the needs of small businesses when they write and 
review regulations, the law actually enhances transparency and 
makes for a better informed regulatory process.
    The legislation we are marking up today will significantly 
strengthen RegFlex by addressing the weaknesses that were 
identified in our recent discussions. Many of the witnesses 
expressed concerns that agencies were not living up to their 
obligations to review the burdens of existing rule on small 
business.
    The General Accounting Office has reported on numerous 
occasions that agency compliance with this requirement was 
poor. The legislation holds the agencies more accountable by 
requiring them to report the results of their reviews to 
Congress annually.
    The Small Business Regulatory Improvement Act also 
addresses what the chief counsel for advocacy has described as 
the biggest loophole in the law, the fact that agencies do not 
have to consider the full economic impact of the rules and 
regulations on small businesses. By fixing this problem, the 
Small Business Regulatory Improvement Act will require agencies 
to consider the indirect impacts of the rule on small 
businesses.
    The Federal Government should be using its resources to 
make sure that regulations accomplish their goal without adding 
unnecessary costs to small businesses. This bill will increase 
the role of the Office of Advocacy in helping agencies identify 
ways to achieve this. The goal here is not to limit 
regulations. It is to create a regulatory process that is 
balanced and fair to small businesses. Regulations should be 
designed to ensure protections are in place without creating 
burdens that do nothing to further policy objectives. As the 
regulatory burden increases, small businesses are finding it 
harder to keep up.
    A study recently commissioned by the Small Business 
Administration Office of Advocacy determined that regulatory 
costs for small businesses are 45 percent greater than for 
larger firms. These costs amount to over $7,600 annually. 
Having consulted with the minority, the Office of Advocacy, and 
the small business community on this bill, I believe we have 
drafted commonsense legislation that will improve this 
important law and ensure that small businesses are not 
overlooked in the regulatory process. By strengthening and 
clarifying many aspects of RegFlex, this legislation can help 
stop the growth of complying costs.
    I would like to thank Mr. Ellsworth for introducing this 
legislation as well as thanking the Ranking Member Mr. Chabot 
and his staff for their efforts in working with us on marking 
this bill. I now would like to yield to Mr. Chabot for his 
opening remarks.

                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. Thank you, Madam Chairwoman, for yielding. And 
the bill that we are considering today has some useful 
improvements, the Regulatory Flexibility Act. I would like to 
thank the Chairwoman and Mr. Ellsworth for their hard work in 
bringing this bill forward and working on it. While I will vote 
for the bill, I do believe the bill needs some enhancements to 
be truly effective in reducing the regulatory burdens on our 
small businesses.
    More than a quarter of a century ago the growth of the 
regulatory state was imposing undue burdens on the capacity of 
small businesses to compete. The situation was exacerbated by 
the Federal agencies issuing a one-size-fits-all rule that may 
work for large firms but fail small businesses, which often 
lack the financial and legal resources to interpret and comply 
with these regulations.
    Senator John Culver, a Democrat who was quite liberal, 
responded by drafting a statute, the Regulatory Flexibility 
Act, or RFA, that forced agencies to consider the impacts on 
their rules on small businesses in the same way that the 
Federal Government considers the environmental impact when 
building a dam or a road or that type of thing.
    The RFA represents a simple yet profound change to the 
Administrative Procedure Act which requires that rulemaking be 
conducted rationally. To conduct rational rulemaking, an agency 
must understand the scope of the problem. Since the vast 
majority of entities regulated by the Federal Government are 
small businesses, the Regulatory Flexibility Act plays a key 
role in helping agencies understand the scope of the problem 
and ultimately conduct rational rulemaking. It is important to 
understand that the RFA affects the process by which an agency 
issues regulations, not the substance of the rule. No changes 
we are considering today or that have been considered in the 
past will force an agency to reduce burdens on small 
businesses. Instead, it will provide the agency with evidence 
that its regulatory objective can be attained in a more cost-
effective manner. Logic would then dictate that the agency take 
the more cost-effective approach in reaching its objectives.
    The bill we are considering today will improve the process 
by which agencies consider the impacts of their proposed and 
final rules on small businesses and other small entities, 
including rules that have been in effect for 10 years. The bill 
also codifies an executive order, granting the chief counsel 
for advocacy certain authority. I am concerned that the 
codification of the executive order conflicts with the 
requirements of the government in the Sunshine Act. That act 
requires independent collegial bodies like the FCC or SEC to 
adopt their regulation in open meetings. Authorizing these 
agencies to provide such rules to the chief counsel prior to an 
open meeting violates, in my view, the government and Sunshine 
Act. And I would ask the Chairwoman to work with us to resolve 
this issue as the bill moves forward in the legislative 
process.
    While these changes in the bill are necessary, they are not 
sufficient to really force agencies to consider the impact of 
their rules on small businesses. The only way to do that is to 
empower the chief counsel for advocacy to write governmentwide 
regulations that all agencies would follow in implementing the 
RFA. This would bring regularity to a process now fraught with 
the idiosyncratic views of each agency. More importantly, 
agencies and courts would give deference to the opinions of the 
chief counsel in the same way that the rules of the Council for 
Environmental Quality are given deference in the drafting of 
environmental impact statements.
    I would ask the Chairwoman to assist us in making sure that 
the chief counsel has not only the necessary powers but 
sufficient powers to see the agencies will care that the RFA is 
on the books.
    And with that, I will yield back.
    Chairwoman Velazquez. Well, let me just say, Mr. Chabot, 
that you have got my commitment to continue to work in trying 
to move the process forward.
    Mr. Chabot. Thank you very much.
    Chairwoman Velazquez. And now I would like to recognize the 
lead sponsor of this legislation, Mr. Ellsworth, for his 
statement on the legislation.

               OPENING STATEMENT OF MR. ELLSWORTH

    Mr. Ellsworth. Thank you, Madam Chairwoman, thank you 
Ranking Member Chabot. I practiced this week after last week's 
hearing to get that right again.
    Mr. Chabot. Thank you very much, Mr. Ellsworth.
    Mr. Ellsworth. Thank you both very much for scheduling this 
markup on this bill. I want to thank the members of the Small 
Business Committee as well as staff who worked so closely with 
the Committee to ensure we could develop the bipartisan bill 
that we have with us today.
    As we discussed before this Committee, small businesses are 
too often put on a competitive disadvantage as a result of 
Federal regulations. Big corporations who have teams of 
lawyers, accountants, and compliance officers have a much 
easier time with small competitors when it comes to complying 
with complex regulations and paperwork. In fact, on a per-
employee basis, as the Chairwoman said, it costs about 45 
percent more for small companies to comply with Federal 
regulations than their larger competitors. That is why American 
small businesses need the Regulatory Flexibility Act.
    For over 25 years, this act has required Federal agencies 
to take into account the negative impact of their regulations 
on small businesses. In fact, under the Regulatory Flexibility 
Act, in many cases agencies are required to adjust their 
regulations to ease the burden on small companies. 
Unfortunately, some bureaucrats ignore the spirit of this law 
by finding loopholes that allow them to push on without 
considering the effects of new regulation on American small 
businesses. And that is why we are here today. The Small 
Business Regulatory Improvement Act closes these loopholes and 
brings small businesses back to the table when regulations are 
written.
    There is no doubt that this bill is going to help small 
businesses. The list of organizations who have endorsed this 
bill continues to grow. I would like to list a few of those who 
have already endorsed this plan. They are the U.S. Chamber of 
Commerce, the Farm Bureau, the American Medical Association, 
the American Dental Association, the American Hospitals 
Association, the Food Marketing Institute, the National 
Association of Manufacturers, the National Association of Wheat 
Growers, the National Electrical Contractors Association, the 
National Council for Farmers Cooperatives, the National Retail 
Federation, the National Roofing Contracting Association, the 
Owner-Operator Independent Driver Association, and, just in, is 
the Association of General Contractors. These groups have 
apparently heard the same thing from theirs members as I have 
heard from small business owners: It is time for the Federal 
Government to stop ignoring the unique negative impacts of 
certain regulations on small businesses. I am glad we are here 
today to address this issue. I urge all my colleagues to help 
ease the burden for the small businesses in their districts and 
support this important bill.
    Thank you, Madam Chair. I yield back my time.
    Chairwoman Velazquez. Thank you. Are there any other 
members that wish to be recognized on the legislation?
    The Committee now moves to consideration of the bill, H.R. 
4458. The clerk will report the title of the bill.
    The Clerk. A bill to amend chapter 6 of title 5, United 
States Code, commonly known as the Regulatory Flexibility Act, 
to ensure complete analysis of potential impacts on small 
entities of rules, and for other purposes.
    Chairwoman Velazquez. I ask unanimous consent that the bill 
in its entirety be open for amendments at this time. Does any 
member seek recognition for the purpose of offering an 
amendment?
    Seeing no amendments, the question is on passing and 
reporting the bill H.R. 4458.
    All those in favor say aye.
    All those opposed, no.
    Mr. Chabot. Recorded vote, please, Madam Chair.
    Chairwoman Velazquez. A recorded vote has been requested. 
And The clerk will call the vote.
    The Clerk. Ms. Velazquez.
    Ms. Velazquez. Aye.
    The Clerk. Ms. Velazquez votes aye.
    Mr. Schuler.
    Mr. Schuler. Aye.
    The Clerk. Mr. Schuler votes aye.
    Mr. Gonzalez.
    [No response.]
    The Clerk. Mr. Larsen.
    [No response.]
    The Clerk. Mr. Grijalva.
    Mr. Grijalva. Aye.
    The Clerk. Mr. Grijalva votes aye.
    Mr. Michaud.
    Mr. Michaud. Aye.
    The Clerk. Mr. Michaud votes aye.
    Ms. Bean.
    [No response.]
    The Clerk. Mr. Cuellar.
    Mr. Cuellar. Aye.
    The Clerk. Mr. Cuellar votes aye.
    Mr. Lipinski.
    [No response.]
    The Clerk. Ms. Moore.
    [No response.]
    The Clerk. Mr. Altmire.
    Mr. Altmire. Aye.
    The Clerk. Mr. Altmire votes aye.
    Mr. Braley.
    Mr. Braley. Aye.
    The Clerk. Mr. Braley votes aye.
    Ms. Clarke.
    Ms. Clarke. Aye.
    The Clerk. Ms. Clarke votes aye.
    Mr. Ellsworth.
    Mr. Ellsworth. Aye.
    The Clerk. Mr. Ellsworth votes aye.
    Mr. Johnson.
    Mr. Johnson. Aye.
    The Clerk. Mr. Johnson votes aye.
    Mr. Sestak.
    Mr. Sestak. Aye.
    The Clerk. Mr. Sestak votes aye.
    Mr. Higgins.
    Mr. Higgins. Aye.
    The Clerk. Mr. Higgins votes aye.
    Ms. Hirono.
    Ms. Hirono. Aye.
    The Clerk. Ms. Hirono votes aye.
    Mr. Chabot.
    Mr. Chabot. Aye.
    The Clerk. Mr. Chabot votes aye.
    Mr. Bartlett.
    Mr. Bartlett. Aye.
    The Clerk. Mr. Bartlett votes aye.
    Mr. Graves.
    Mr. Graves. Aye.
    The Clerk. Mr. Graves votes aye.
    Mr. Akin.
    Mr. Akin. Yes.
    The Clerk. Mr. Akin votes aye.
    Mr. Shuster.
    [No response.]
    The Clerk. Mrs. Musgrave.
    Mrs. Musgrave. Yes.
    The Clerk. Mrs. Musgrave votes aye.
    Mr. King.
    [No response.]
    The Clerk. Mr. Fortenberry.
    Mr. Fortenberry. Yes.
    The Clerk. Mr. Fortenberry votes aye.
    Mr. Westmoreland.
    [No response.]
    The Clerk. Mr. Gohmert.
    Mr. Gohmert. Yes.
    The Clerk. Mr. Gohmert votes aye.
    Mr. Heller.
    [No response.]
    The Clerk. Mr. Davis.
    Mr. Davis. Aye.
    The Clerk. Mr. Davis votes aye.
    Ms. Fallin.
    Ms. Fallin. Aye.
    The Clerk. Ms. Fallin votes aye.
    Mr. Buchanan.
    Mr. Buchanan. Aye.
    The Clerk. Mr. Buchanan votes aye.
    Mr. Jordan.
    Mr. Jordan. Yes.
    The Clerk. Mr. Jordan votes aye.
    Chairwoman Velazquez. Are there any other members present 
seeking to change or record their vote? Mr. Westmoreland?
    Mr. Westmoreland. Yes.
    The Clerk. Mr. Westmoreland votes aye.
    Chairwoman Velazquez. The Clerk will report the vote.
    The Clerk. Twenty-five ayes, zero noes.
    Chairwoman Velazquez. The ayes have it, and H.R. 4458 is 
adopted and ordered reported.
    I ask unanimous consent that the Committee be authorized to 
correct section numbers, punctuation, and cross-references, and 
to make other necessary technical and conforming corrections on 
the bills considered today. Without objection, so ordered.
    Mr. Chabot. Madam Chair, I ask unanimous consent that the 
gentleman's vote be recorded.
    Chairwoman Velazquez. Mr. Larsen, how do you want to be 
recorded?
    Mr. Larsen. Thank you, Mr. Chabot. Yes.
    Chairwoman Velazquez. This markup is adjourned.
    [Whereupon, at 10:30 a.m., the Committee was adjourned.]

    [GRAPHIC] [TIFF OMITTED] T9552.001
    
    [GRAPHIC] [TIFF OMITTED] T9552.002
    
    [GRAPHIC] [TIFF OMITTED] T9552.003
    
    [GRAPHIC] [TIFF OMITTED] T9552.004
    
    [GRAPHIC] [TIFF OMITTED] T9552.005
    
                                 
