[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                  LIFTING THE WEIGHT OF REGULATIONS: 
              GROWING JOBS BY REDUCING REGULATORY BURDENS

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             JUNE 15, 2011

                               __________


                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               


            Small Business Committee Document Number 112-021
           Available via the GPO Website: www.fdsys.gov/house




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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York

               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director


                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page
Graves, Hon. Sam.................................................     1
Velazquez, Hon. Nydia M..........................................     2

                               Witnesses

Mr. Frank S. Swain, Baker & Daniels, Washington, DC..............     4
Ms. Jane C. Luxton, Pepper Hamilton, Washington, DC..............     5
Mr. Harry J. Katrichis, The Advocacy Group, Washington, DC.......     7
Dr. Adam Finkel, Fellow and Executive Director, Penn Program on 
  Regulation, University of Pennsylvania Law School, 
  Philadelphia, PA...............................................    10

                                Appendix

Prepared Statements:
    Mr. Frank S. Swain, Baker & Daniels, Washington, DC..........    31
    Ms. Jane C. Luxton, Pepper Hamilton, Washington, DC..........    38
    Mr. Harry J. Katrichis, The Advocacy Group, Washington, DC...    42
    Dr. Adam Finkel, Fellow and Executive Director, Penn Program 
      on Regulation, University of Pennsylvania Law School, 
      Philadelphia, PA...........................................    48

Statements for the Record:
    Tipton, Hon. Scott...........................................    60
    NFIB Small Business Economic Trends..........................    61
    U.S. Chamber of Commerce Economic Outlook Survey.............    84


LIFTING THE WEIGHT OF REGULATIONS: GROWING JOBS BY REDUCING REGULATORY 
                                BURDENS

                              ----------                              


                        WEDNESDAY, JUNE 15, 2011

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in room 
2360, Rayburn House Office Building. Hon. Sam Graves (chairman 
of the Committee) presiding.
    Present: Representatives Graves, Herrera Beutler, Coffman, 
Ellmers, Hanna, Chabot, Landry, West, Tipton, Velazquez, Chu, 
Schrader, Owens, Altmire.
    Chairman Graves. Good afternoon. We will call this hearing 
to order. I appreciate all of our witnesses being here.
    Regulations can have benefits. They can protect our food 
supply, ensure that drugs work, keep financial markets 
transparent, but regulations also have costs by erecting 
barriers to entry, destroying markets, and diverting scarce 
capital away from job creation. These costs are compounded for 
small businesses because a disproportionate impact of federal 
rules falls on their operations. Reasonable regulation requires 
agencies to balance the intended benefits against the economic 
costs for the new rules that they impose.
    Historically, federal agencies appear to be much better at 
uncovering the benefits of regulations than calculating the 
costs. Of course, this makes selecting the appropriate balance 
needed to protect the public much more difficult, particularly 
since most businesses subject to regulation are small 
businesses.
    In 1980, Congress decided to realign this agency's 
balancing effort. It enacted the Regulatory Flexibility Act or 
RFA which requires agencies to consider the effects of their 
rules on small businesses and other small entities.
    Since the RFA's enactment, President Clinton, President 
George W. Bush, and President Obama all have restated the 
importance of the RFA and the need to unburden small businesses 
from unnecessary and duplicative programs. And each president 
required federal agencies to perform a retrospective 
examination of federal rules even though such an examination 
already is mandated by the RFA. Despite these remonstrances 
from the head of the entire Executive Branch of government, 
federal agencies continue to ignore both the letter and the 
spirit of the RFA.
    Given the current state of the economy and the vital role 
that small businesses play in job creation, the time for words 
is now over. For too long, the RFA has been ignored by the 
federal agencies and that has got to stop. The legislation that 
is the subject of this hearing, H.R. 527, the Regulatory 
Flexibility Improvement Act of 2011 and H.R. 585, the Small 
Business Size Standard Act of 2011, are both designed to make 
sure that agencies will care that the RFA is on the books. The 
bills will close loopholes used by agencies to avoid compliance 
with the RFA, require a better assessment of the impacts that 
regulations will have on small businesses and other small 
entities, force agencies to perform better periodic review of 
rules, and grant the Chief Counsel for Advocacy at the Small 
Business Administration greater powers for enforcement of the 
RFA also.
    Again, I want to thank all the witnesses for taking the 
time to provide their insights into these bills and what 
changes, if any, might be necessary to make the agencies care 
that this law is on the books and most importantly that they 
follow the law.
    With that, I will recognize the ranking member and then we 
will go to our witnesses and introduce them.
    Ms. Velazquez. Thank you, Mr. Chairman.
    With the economic recovery proceeding in a very uneven 
manner, the contributions of small businesses are more 
important than ever. For us, that means making sure 
entrepreneurs are able to do what they do best--innovate, 
create, and grow without government getting in the way. 
Unfortunately for many small firms, the cost of regulatory 
compliance remains high. Businesses with less than 20 employees 
pay more than $10,500 per employee in compliance costs, an 
amount that is 36 percent higher than their larger 
counterparts.
    To address this, the Regulatory Flexibility Act was enacted 
in 1980, to give small businesses a louder voice in the 
regulatory process. It is apparent that it has been successful 
as regulatory costs were reduced by $15 billion in 2010. In the 
last three years, the EPA and OSHA also convened seven small 
business advocacy review panels providing small firms with 
greater participation and important environmental and 
occupational safety matters.
    Even though RFA has been successful, it could do better. 
The time has come for agencies to more broadly measure the 
effect of regulations on small businesses. After all, many 
regulations are aimed at states which means that agencies can 
ignore the downstream impact on small businesses. This has to 
stop. Steps must be taken to make RegFlex analysis more 
detailed so that they cannot ignore the RFA and simply certify 
that a rule has no significant economic impact on small 
businesses. Addressing this matter will ensure agencies are 
required to provide a more factual basis for such 
certifications, rather than just a sentence that dismisses the 
concerns of small firms.
    It is also important to give real teeth to section 610, 
which requires an agency to review outdated regulations that 
remain on the books yet continue costing small businesses 
money. While the RFA requires agencies to periodically review 
existing rules, these requirements are ambiguous and agencies 
often do not apply them consistently. As a result, these 
reviews have been much less effective than they should be. In 
addition, and as I have said before, any expansion of the panel 
process must be closely examined.
    I wholeheartedly support efforts to reign in agencies that 
are insensitive to small businesses, but we cannot simply flip 
a switch and add 50 new agencies to the panel process. 
Therefore, it is prudent for this Committee to fully examine 
the needs, costs, and appropriateness of such an expansion.
    While these types of changes can reduce their regulatory 
burden for small businesses, we should not box ourselves in and 
think that expanding RegFlex is the only means to accomplish 
these goals. There are other ways outside of RegFlex that can 
achieve these ends without eviscerating the very regulatory 
processes necessary to implement the laws passed by Congress. 
This includes providing higher quality education and technical 
assistance to businesses regarding regulatory compliance. In 
addition, broader reforms could raise size agency enforcement 
policies which could help ease this burden. By doing so, we can 
reduce the impact on small businesses without the costs and 
risks of wholesale regulatory restricting.
    Regardless of how we move forward, it is important to do so 
with one eye on the fiscal environment we are working within. 
While the SBA's Office of Advocacy plays a critical role, it 
has a budget of $9 million and 46 employees. It is already 
taxing with meeting its current role and expanding its powers 
significantly should be carefully considered. Given the current 
conditions, such statutory lifts may not be prudent. Smaller 
steps might prove more appropriate and effective. Doing so can 
yield many other positive benefits I think all of us on this 
Committee seek to provide but without the undue expense and 
bureaucratic upheaval.
    With this in mind, I look forward to today's discussion on 
how RFA can be modernized to better meet small businesses' 
needs. Since being signed into law more than three decades 
before, it has played an essential part in reducing regulatory 
burden. As we consider ways to improve it, we must move forward 
in a manner that is responsive to both small businesses and 
taxpayers. By doing so we can best ensure that entrepreneurs 
will be the job creating catalysts that our economy needs at 
this moment.
    I yield back. Thank you, Mr. Chairman.
    Chairman Graves. Thank you. If other Committee members have 
an opening statement I would ask that they submit it for the 
record.
    And I will take a real quick moment to explain the lights 
to you if you do not understand. You each have five minutes to 
give testimony. When it comes down to one minute left, the 
light will turn yellow and then red when you are over. If you 
go over a little bit it does not bother me.

STATEMENTS OF FRANK S. SWAIN, PARTNER, BAKER AND DANIELS; JANE 
   C. LUXTON, PARTNER, PEPPER HAMILTON; HARRY J. KATRICHIS, 
    PARTNER, THE ADVOCACY GROUP; ADAM M. FINKEL, EXECUTIVE 
 DIRECTOR, PENN PROGRAM ON REGULATION AND SENIOR FELLOW, PENN 
                           LAW SCHOOL

    Chairman Graves. So with that I will make my first 
introduction, which is Mr. Frank Swain. He is a partner in the 
Washington, D.C. office of the law firm of Baker and Daniels. 
During the Reagan administration, Mr. Swain served as the Chief 
Counsel for Advocacy.
    Mr. Swain, I appreciate you being here and I look forward 
to hearing your testimony.

                  STATEMENT OF FRANK S. SWAIN

    Mr. Swain. Thank you very much, Mr. Chairman. It is a 
pleasure to be here in front of you and Ms. Velazquez and the 
other members of the Committee.
    I must say that I was greatly cheered when I came in the 
room about 12:45 and there was a line out the door for a 
hearing on regulatory flexibility, declaring an importance that 
I had forgotten that it had in the public eye. But it is really 
important that you are holding this hearing. It is really 
important that you are considering these two bills.
    I had the opportunity to participate when I worked for the 
NFIB years and years ago in the original congressional 
discussions about regulatory flexibility in 1980. I want to 
emphasize some of the points that were made by Ms. Velazquez 
because in 1980, the Senate and the House were both controlled 
by the Democrats. This was a bill that was passed with strong 
support from both sides of the aisle, strong support from the 
chairman of the Senate Administrative Law Subcommittee, then 
Senator John Culver from Iowa. But it was a bit of a walk into 
the unknown. There was really only one other bill that was 
slightly like it and that was the National Environmental Policy 
Act, which had been passed in 1970. That law said when we make 
rules, when we take actions as a government, we have to think 
about what the impact of those actions is on the environment.
    So this was really the first time that they tried to take 
that principle of regulatory review and twist it to a different 
focus. And that focus is when we make rules for all sorts of 
important reasons--safety of the food system, protection of the 
environment, whatever--we have to take a look at the impact of 
those rules on small business and--and I think this is the real 
virtue of the regulatory flexibility--and we have to go 
further. We have to think about whether there are other ways of 
getting to the same regulatory goal, more flexible ways besides 
the one size fits all approach, which is typically the starting 
approach for most agencies.
    Again, as the opening statement suggests, the problem with 
regulation is a particular problem for small business because 
small business does not have the broad economic or employee 
base to spread the relatively fixed costs of regulation. So it 
is important to attempt to tailor the regulation to small 
businesses.
    My statement mostly addresses issues relating to the 
regulatory flexibility analysis, which is what was the state of 
the law when I served as chief counsel. I do not have 
personally as much experience with the panel review process and 
so I will defer to others on the panel that are more 
experienced with that. But it is really important to note that 
we do achieve a balance between a better Regulatory Flexibility 
Act that is less easily avoided by agencies and the very real 
dynamics of getting regulatory decisions made in some sort of 
prompt and efficient way. That is becoming an issue, 
particularly an issue involving science and technology, drug 
and medical device development.
    And so we do have to maintain a balance but I think that if 
we can swing the balance of the current law more towards 
tightening up some of the ambiguities that were inevitable 30 
years ago when we were sort of guessing at what might work, 
that that will make a real difference as far as small business 
is concerned.
    I detailed in my statement five or six specific issues. 
This is a complex subject and I would be happy to take 
questions or submit comments on any other specific issues that 
the Committee may want my perspective on. But the need for 
these reforms after three decades of experience with the 
regulatory flexibility is very plain. Small businesses continue 
to be under any economic assessment the job creator, and we 
have to do our best as a society and as a government to 
eliminate or lessen to the extent possible to fix costs of 
regulation which is such a serious drag on that job creation 
process.
    I ask that my statement be received in the record, and I 
would be happy to submit any further comments and respond to 
questions. Thank you very much.
    [The statement of Mr. Swain follows on page 31.]
    Chairman Graves. Thank you, Mr. Swain.
    The next witness is Ms. Jane Luxton, who is a partner in 
the Washington, D.C. office of the law firm, Pepper Hamilton. 
Prior to this, Ms. Luxton served as the general counsel of the 
National Oceanic and Atmospheric Administration regularly 
dealing with that agency's implementation of the RFA.
    So Ms. Luxton, I appreciate you being here. Thanks for 
coming.

                  STATEMENT OF JANE C. LUXTON

    Ms. Luxton. Thank you very much. I appreciate the 
opportunity to testify regarding H.R. 527 and 585.
    As you mentioned, and I appreciate that introduction, my 
legal career has included public service and also private 
sector experience. And during the course of both of those types 
of experience, I have had a fair amount of exposure to small 
business issues, the Office of Advocacy, and the workings of 
the RegFlex Act and also SBREFA, which is another--the panel 
process that Mr. Swain referred to.
    Although my government service does not include having 
worked--like some others here--for the Office of Advocacy, I am 
one of its biggest fans and I support the proposed bill's 
efforts to strengthen the role and ability of that office in 
protecting small business in the regulatory arena. In 
particular, H.R. 527 addresses some of the major concerns that 
have gotten in the way of effective help to small business 
entities.
    In discussion after discussion on the RFA, including 
SBREFA, the one problem that comes up most often is the lack of 
consideration of indirect effects. And you mentioned that, Ms. 
Velazquez, in your introduction as well. It is probably no 
accident that H.R. 527 tackles this issue in the first 
substantive section of the bill. The clear statement that 
indirect effects must be taken into account is necessary to 
overcome an interpretation in the case law that unfortunately 
cut this type of real-world, substantial impacts on small 
business out of the equation. To get an accurate gauge of the 
actual effects of regulation, those indirect effects must be 
restored to the analysis.
    Similarly, in today's difficult economic times, many have 
spoken out strongly about the unacknowledged cost of cumulative 
regulatory burden. Small businesses are most likely to feel and 
least able to afford these extra burdens. Section three of the 
bill requires rulemaking agencies to conduct more detailed 
analysis of several important factors, but among the most 
needed are the requirements for greater consideration of other 
rules that may overlap or conflict with and add cumulative 
economic impact to small entities.
    Section 5 of the bill would expand the SBREFA panel process 
to all agencies proposing rules that would have a significant 
economic impact on a substantial number of small entities, 
which is the key phrase, or would trip the threshold of a major 
role under the Congressional Review Act. In my experience, 
SBREFA panels have proven time and again that they improve 
rules, make them more cost-effective, and substantively 
stronger and lessen the adverse impacts on small business. They 
provide a unique opportunity for small business representatives 
to become involved at the formative stage of the rule before 
positions harden. I have seen the positive contribution of 
SBREFA panels in numerous EPA rules. I have also been engaged 
in discussions relating to the development of the SBREFA panel 
process for the new Consumer Financial Protection Bureau 
created under last year's Dodd-Frank Act. And I am aware that 
bringing a new agency within the SBREFA panel process can be a 
large undertaking. There are helps that can make this 
transition easier, including the Office of Advocacy's training 
programs and I strongly believe there are significant benefits 
to bringing more of the big impact rules within the SBREFA 
panel process.
    Section 5 of the act--of the bill rather--would also 
require agencies subject to the SBREFA panel process to do a 
better job of making available as much information as possible 
about a proposed rule as early as possible. I think this is 
another point Ms. Velazquez made and it is very important. This 
would address problems with inadequate information that have 
arisen in some rules, especially recently, and they have 
undermined the ability of the small entity representatives or 
SERs to offer effective suggestions to the rulemaking agency 
for minimizing burden on small business while still achieving 
the agency's goals.
    The final section I would like to highlight today is the 
bill's requirement in Section 6 for periodic review of the 
rules. As I have previously said, the cumulative impact--and we 
have all recognized this--the cumulative impact of each new 
rule adds heavy burdens to small businesses. Those are the 
least equipped to absorb an unending flow of extra costs. 
Requiring agencies to review existing regulation is one idea on 
which the Obama administration and Congress seem to agree. This 
legislation would ensure that this beneficial process continues 
in periodic reviews of impacts on small business, by imposing 
mechanisms to ensure the job gets done.
    These bills serve the important purpose of addressing some 
shortcomings of previous legislation that have come into focus 
over time. They will strengthen the ability of the Office of 
Advocacy to fulfill its mission of serving as the voice of 
small business in the regulatory process in ways that are 
particularly needed in our current era of serious economic 
challenges. The RegFlex Act and SBREFA offer a strong 
foundation for protecting small business against excessive 
regulatory burden, but as I think we can probably all agree, 
they could still use a little improvement.
    I appreciate the opportunity to offer these comments and 
hope that my written testimony can be put into the record. I 
look forward to your questions.
    [The statement of Ms. Luxton follows on page 38.]
    Chairman Graves. Absolutely, without objection. Thank you, 
Ms. Luxton.
    Our next witness is Mr. Harry Katrichis, who is a partner 
at the Advocacy Group here in Washington, D.C. Mr. Katrichis 
was a former chief counsel of this Committee and was 
instrumental in shepherding the amendments to the RFA through 
the Small Business Regulatory Enforcement Fairness Act, which 
Ms. Luxton referred to, or SBREFA, shepherding that through the 
House of Representatives in 1995.
    Mr. Katrichis, I appreciate you being here and I know you 
have got about as much expertise on this as anybody does. And I 
look forward to hearing what you have to say.

                STATEMENT OF HARRY J. KATRICHIS

    Mr. Katrichis. Chairman Graves, Ranking Member Velazquez, 
and members of the Committee. My name is Harry Katrichis and I 
appear here today----
    Chairman Graves. We have got mics now. I know. I know.
    Mr. Katrichis. Motor vehicles, too.
    I appear here today to discuss my experience in several 
regulatory reform efforts that have been undertaken by this 
Committee over more than a quarter century and to lend my 
strong support for Committee and Congressional action on H.R. 
527 and H.R. 585.
    First of all, I want to thank the Committee for inviting me 
to testify today. As you mentioned, for me this is like old-
home week. For approximately 10 years, or about one-sixth of my 
life, I had the privilege and honor of serving as the 
Republican chief counsel of this Committee. I served under 
three different chairmen and two different ranking members 
during the 1990s. I look back on my time with this Committee as 
a true high point in my career.
    For the freshman members of this Committee, I want you to 
know that your time on this Committee will prove to be some of 
the best time you will have as a member of the House. This has 
always been a committee where partisan acrimony has been mostly 
left at the front door. Throughout the 1990s and continuing to 
this day, I enjoy excellent working relationships with my peers 
and former peers on the Democratic staff of this Committee and 
with the Committee's Democratic members.
    This rich history of bipartisanship stands out most in the 
area of the many regulatory reform efforts undertaken by this 
Committee going back to its very creation as a standing 
Committee of the House in the 1970s.
    Former members of this Committee make up a virtual who's 
who of the legislative branch. Several current and former U.S. 
senators have served on this Committee when they were in the 
House, such as Rob Portman, Ron Wyden, and John Thune, just to 
name a few. House Speaker Boehner was a member of this 
Committee. John Dingell was a member of this Committee for 
several years, and Dave Camp, currently the chairman of the 
Ways and Means Committee, served on this Committee during his 
early years in the House.
    While several regulatory reform efforts were undertaken by 
this Committee's historical predecessor--the Select Committee 
on Small Business which existed from 1941 to 1974, the real 
heavy work of regulatory reform began with those Committee 
members that were first elected in 1976. Two freshman members 
of that class stand out in my memory as two of the hardest 
working advocates for true regulatory reform. They are Andy 
Ireland, then a democratic member from Florida, who later 
switched parties, and Ike Skelton, a democratic member from 
Missouri. Andy Ireland is actually here today and I am very, 
very pleased that he could attend.
    These two members, along with many others, were the driving 
force behind what came to be the Regulatory Flexibility Act of 
1980. Another driving force that has been mentioned in this 
effort was Senator John Culver. As a member of the Senate 
Judiciary Committee, Senator Culver was instrumental in pushing 
the RFA to eventual passage. I am proud to say that John Culver 
is a friend of mine also and we actually worked together for 
over six years at Arent Fox. I still see him regularly. He is a 
great human being.
    H.R. 527 is the closest thing I have seen to addressing the 
gaps in true regulatory oversight that were left after the 
passage of the original Regulatory Flexibility Act and the 
efforts to improve the RFA with the passage of SBREFA and I 
commend the Committee for having this hearing on this important 
issue.
    While I was not involved in the early work that led to the 
passage of the original Regulatory Flexibility Act, I was 
involved in the early efforts to implement while working with 
Frank Swain at the Office of Advocacy in the 1980s. Back then, 
many regulatory agencies paid only lip service to the 
requirements. For many agencies, the automatic default was to 
certify that a pending rule would not affect small entities. 
They learned very early in the day that to do so held no 
downside for them. The Office for Advocacy had no meaningful 
recourse.
    By the time the White House Conference on Small Business 
came about in 1986, the small business community had come to 
realize that we needed some genuine ``beefing up'' of the RFA. 
Legislation to amend and strengthen the RFA during the late 
1980s and early 1990s came and went without final action. In 
the early 1990s, the 102nd and 103rd Congresses to be exact, we 
had several Small Business Committee Hearings on regulatory 
reform efforts. In addition to official Committee and 
Subcommittee hearings, the House Republican Policy Committee, 
through its subcommittee on small business, held hearings on 
reforming and strengthening the RFA. These hearings were 
chaired by Susan Molinari, the Subcommittee's chairman.
    One of the truly memorable hearings of the Small Business 
Committee during that timeframe was a Subcommittee hearing by 
the Subcommittee on Regulation of this Committee, which was 
then chaired by Ron Wyden. This hearing focused on OSHA and its 
apparent inability to understand what the RFA required it to 
do. Back then, OSHA was probably one of the worst actors on the 
regulatory front as far as small businesses were concerned. 
Part of what was revealed in that hearing ultimately led to the 
creation of regulatory review panels that were included in 
SBREFA some four years later.
    Speaking of SBREFA, let us take another short stroll down 
memory lane. Upon the change in control of the House in the 
1994 election, much of the information that was gleaned from 
hearings of this Committee and other sources was placed in 
legislative form for quick congressional action. The amendments 
to the RFA would eventually find their way into SBREFA a year 
later, move swiftly through this Committee, and the Judiciary 
committee, and were passed by the full House in March of 1995.
    While some of the congressional champions of small business 
regulatory reform have changed since the efforts of the 1970s, 
some were still here fighting on. Andy Ireland retired in 1992; 
John Culver lost his reelection bid in 1980; but some of the 
``old guard'' remained. Ike Skelton was still in the House and 
Ron Wyden was a brand new Senator. Others that joined the fray 
included Jim Talent, first elected in 1992; Norm Sisisky, first 
elected in 1980; and Tom Ewing, who took the torch of RFA 
reform from Andy Ireland as Andy was headed toward retirement.
    As often happens, the other body took a little longer to 
get through their legislation for meaningful regulatory reform 
for small business. But those efforts, led in large part by the 
Chairman of the Small Business Committee in the Senate and its 
ranking member, Senators Kit Bond and Dale Bumpers, resulted in 
what came to be SBREFA. The passage of SBREFA not only gave us 
most of the reforms and enhancements to the RFA, it also gave 
us pre-regulatory review panels for OSHA and EPA rulemakings 
and it also gave us the Congressional Review Act. These and 
other components were great enhancements to what the House had 
already done a year earlier.
    The bad news is that regulators oftentimes make a few 
adjustments and find new or some of the old ways to obviate 
compliance with the letter and spirit of both the RFA and the 
amendments to the RFA contained in SBREFA. While many in this 
town refer to the press as the 4th Estate, I have always 
believed that regulatory agencies are the true 4th Estate of 
Federal Government.
    I firmly believe that the improvements to the RFA and 
SBREFA contained in H.R. 527 will go a long way in taming the 
4th Estate of the Federal Government to the benefit of small 
businesses.
    As for H.R. 585, I completely support it. While 
professionally I have never been involved in the ebb and flow 
of the size standards, I do believe that the Office of Advocacy 
needs to be the final arbiter of what a small business is for 
purposes of Federal regulatory action.
    Thank you again for allowing me to be part of this hearing, 
and I look forward to your questions.
    [The statement of Mr. Katrichis follows on page 42.]
    Chairman Graves. Thank you, Mr. Katrichis. Ranking member.
    Ms. Velazquez. Thank you, Mr. Chairman. It is my pleasure 
to introduce Mr. Adam Finkel and I want you to know, Mr. 
Finkel, that Harry did not use your time. So you still have 
five minutes.
    Mr. Finkel is the executive director of the University of 
Pennsylvania program on regulation. He is one of the nation's 
leading experts in the field of risk assessment and cost 
benefit analysis regarding occupational safety and 
environmental hazards. From 1995 to 2000, he was director of 
Health and Standards programs at the U.S. Occupational Safety 
and Health Administration and was responsible for promulgating 
and evaluating regulations to protect the nation's workers or 
chemical, radiological, and biological hazards. Welcome.

                  STATEMENT OF ADAM M. FINKEL

    Mr. Finkel. Thank you very much. I am glad to be here. As 
you said, I am a big supporter of analysis, particularly cost-
benefit analysis to look at regulations. I had the pleasure of 
co-chairing, I think, the very first SBREFA panel in 1996 on 
our ill-fated tuberculosis standard. And as I said in my 
testimony, I owe all of my educational opportunities to my dad 
who worked for 47 years in a small furniture company.
    I do think we need to do better than to clash about these 
subjective and very overbroad and I think some factually 
suspect accusations about the whole regulatory system as it 
affects small business. If we cannot get past that we are not 
going to save lives, create jobs, and save money.
    In this hearing, and I read some of the testimony from the 
March 30 hearing, a litany of complaints that I have heard as 
an academic and a regulator for many years is still front and 
center, about the yoke of regulation, the stringency and 
exaggeration of regulation, the lack of access to the process 
by small business, and the cavalier attitude of agencies to 
dismiss their concerns. And I have to say again as an academic 
and a former regulator I just do not recognize those 
complaints. I think if I had more than five or six minutes I 
could convince you that these premises are just not factually 
correct.
    If there is legitimate groaning, and I do not profess that 
there is not some out there, but we have to remember these are 
in some part the groans of those who bear the costs that are 
returned to society in the form of larger benefits. Now, my own 
research career has had a lot to do with this claim that risk 
assessment exaggerates risk. And I think my colleagues and I 
have pretty much demolished that. It was invented by people who 
had no training in the field many years ago. What we are 
learning, however, is that the track record of regulatory 
economics in estimating costs is really the weak link and that 
is where the exaggeration is endemic and rampant.
    As far as adequacy of small business access, in my 
experience at OSHA and working around EPA, on their own and 
with, of course, very enthusiastic prodding from OIRA, they 
take very seriously suggestions that can reduce small business 
costs without foregoing even more societal benefits.
    Two examples from my own experience. After I left OSHA but 
I have followed the rule and read up on it, the chromium 
standard that OSHA issued in 2006, by my count there were 38 
recommendations from the SBREFA panel and 34 of them were 
accepted. But I hasten to add I was involved in a grandfathered 
rule in the mid-90s, right after SBREFA passed, OSHA's 
methylene chloride rule and even though we were exempt from 
SBREFA at that point, we made some very creative and I think 
very successful accommodations to small business just by 
directly working with them. And I am not suggesting that we 
should abandon these panels. I am concerned about expanding 
them to other agencies, but they work well. But also things 
worked well occasionally even before that.
    So my basic message is that there are many other more 
pressing needs in regulatory analysis and risk management than 
these attempts, however well meaning they are, to do yet more 
for one of the most favored constituencies in the process.
    I think my main concerns about H.R. 527 are really twofold. 
One is that I am an analyst but analyses cost money and they 
take time. And I think a bill like this which requires some 
very ambitious, very vague and very difficult analyses, some of 
which I might in theory support but in practice, if I am being 
asked to support them intellectually knowing there will be no 
resources to carry them out, I think that is a set up. I think 
that is a bad idea.
    I also think that any good idea can be ruined by fixating 
on one little piece of it. So through these statutes and 
through executive orders the agencies are now supposed to think 
hard in each rulemaking about roughly 30 different ways in 
which over-regulation or under-regulation can 
disproportionately affect some part of society. And it is not 
just small business out there at the tail of the cost 
distribution. There are local governments, property holders, 
energy suppliers. They all have their own statute or executive 
order. And then at the tail of the risk distribution there are 
orders and statutes about children's health, environmental 
justice, and lots of other very important issues on the 
benefits side.
    The GAO report from 2000, I think, very convincingly looked 
at the empirical record and said that of all of these ancillary 
analyses, the agencies are doing much more on small business 
than on any others.
    Again, as an analyst, I would like to see more done on the 
others but as a realist with fiscal restraint, I think we 
should be very careful about increasing the best part of this 
at the expense of the others.
    I want to make two quick points about analysis and then 
close with one more point if I could have an extra minute or 
so.
    Indirect effects. Costs come in two flavors. Positive and 
negative. And Congress seems to be instructing the agencies 
here to look only at one and not the other. What about the 
existing small businesses that would profit from regulation or 
gain revenue? What about the small businesses that do not exist 
and are waiting for markets to be created by regulation? These 
are important indirect effects and it expands the analysis even 
further. But I think if the analyses were done right they would 
show more need for some regulation.
    Secondly, I think we have to be very careful about treating 
different risks differently. I will give an example from my 
testimony. Greenhouse gas emissions, well-mixed in the world's 
atmosphere, I have a real sympathetic point of view about small 
businesses contributing a very small amount of that huge, well-
mixed problem. But if you think about hotspots, like mercury 
emissions or the worker risks that I am so concerned about, 
these are real people and you cannot trade one for the other. 
If a small business is employing five people, I think those 
people have as much right to safety and health as in a large 
business. If we can give them that at less burden, that is 
fine. But I do not think we should be under the illusion that 
the small companies are a small part of the problem. In fact, 
in the OSHA context, they are a large part of the problem.
    And then so I made a few suggestions for some process 
improvement but I just want to close for a second with a real 
concern I have from my days as a regulator. I think the 
agencies have to be cautioned by Congress not to give small 
business relief to all business. And again, I go back to the 
OSHA chromium standard that I have talked about as one of the 
most shameful standards ever issued by a federal agency. It is 
tragically weak. And the reason it is weak is that a couple of 
thousand small businesses out of half a million establishments 
needed some relief. And rather than giving it targeted to them, 
OSHA let the exposure limit go up from the proposal by a factor 
of five, and from what I thought as a risk assessor it should 
have been by a factor of 20. Two sizes sometimes fit all and we 
ought to be creative enough to give small business relief where 
it is due.
    Thank you.
    [The statement of Mr. Finkel follows on page 48.]
    Chairman Graves. We will now move into questions. And I 
will start with Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    I have a question for each member of the panel. And that is 
how much responsibility do you give Congress versus the 
agencies with rulemaking authority in terms of placing the 
burdens on small business? Do you think it is poorly written 
legislation? Too broad directives given to the regulatory 
authorities? You know, obviously when we look at the recent 
Health Care Affordability Act, it had a 1099 provision in it 
that we found was incredibly burdensome to small businesses but 
the Congress then stepped in and repealed that particular 
provision. Talk about that line of responsibility between 
Congress in terms of writing legislation and the rulemaking 
authority. Can the Congress of the United States do a better 
job? Are we giving far too much discretion?
    Mr. Swain.
    Mr. Swain. That is a key question, Congressman. And I do 
not have a single answer on it. I think it is almost inevitable 
given some of the complexity of some of the subjects that the 
Congress is dealing with that you have to essentially kick the 
can over to the agencies and say come up with the specific 
details. It is very hard as you would know much better than I, 
to achieve closure sometimes on merely general principles, let 
alone the highly specific details.
    That said, I think that the Congress can give direction, 
can through Committee reports and other mechanisms advise the 
agency of its general intentions as to what it would like the 
agency to do and what it wants the agency to be aware of. And 
Congress could probably do more along those lines. I will not 
get into the details about whether courts pay attention to that 
sort of non-legislative direction. Sometimes they do, sometimes 
they do not. But I think to the extent that in the real world 
we have complex problems and the Congress cannot inevitably 
make every detailed decision on every issue, you will have to 
always give some discretion to agencies but you can certainly 
always give them your intentions as to how they should exercise 
that discretion.
    Mr. Coffman. Thank you.
    Ms. Luxton.
    Ms. Luxton. Thank you, Congressman.
    It is by its nature an iterative process. When a problem 
comes up and requires a solution, you only have the information 
available at that time. The legislation we are looking at today 
is an example of this. Problems have emerged over time partly 
through just the natural way the statute and regulations have 
been implemented. So I think we just have to assume it is going 
to be imperfect. It is easier to do iterations in regulation 
than it is to pass a new act, but occasionally it will be 
necessary to pause and look at new legislation to cure some of 
the problems that could not have been anticipated.
    Mr. Coffman. Thank you.
    Mr. Katrichis. One of the things that we kicked around in 
the early '90s was whether or not Congress should have 
something similar to the Regulatory Flexibility Act applied to 
them. And a good example of how it would look is what we have 
now in committee reports where there has to be a statement that 
there are no unfunded mandates, you know, in the particular 
piece of legislation. You cannot do that on the cheap though. I 
mean, we have the Congressional Budget Office. We have GAO. And 
trying to have that kind of assessment before you actually move 
legislation would slow down the legislative process, I think.
    But it has been something that has been discussed. A former 
member of this Committee, Sue Kelly from New York, came up with 
an idea back in the mid to late '90s of having a regulatory 
review mechanism in-house, I think, over at the Library of 
Congress that would serve a parallel function to the 
Congressional Budget Office to look at what kind of regulations 
would flow from particular kinds of legislation. And this is 
something that is worth exploring and worth exploring with, I 
guess, the Rules Committee about whether or not you could have 
that kind of requirement before you go forward.
    Mr. Coffman. Thank you.
    Mr. Finkel. As a regulator, I always thought that, and I 
worked at an agency, OSHA, that had an old statute that has not 
been subsequently amended in many years and EPA has many more. 
But they are broad, discretionary statutes. I always felt that 
between the statutes, the appropriations riders, the reports, 
and the judicial review, we had the right kind of circumscribed 
discretion. I think ultimately you want agencies to be 
subjected to judicial review but to have the discretion to do 
some of the things that you are asking them to do today, which 
is to look carefully at more nuanced impacts than the broad 
statutes really allow them to do.
    Mr. Katrichis. Another final point, one of the problems 
historically has been the IRS calling everything that they have 
an interpretive rule. If you have some mechanism within the 
legislative process that would lay out the regulatory 
balancing, I think that would cut off the ability of the IRS to 
go to that default of everything is an interpretative role.
    Mr. Coffman. Thank you, Mr. Chairman. I yield back.
    Chairman Graves. Ranking Member Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman. Let me take this 
opportunity to thank all the witnesses for your testimony.
    Mr. Swain, in 2004, this Committee had a hearing on similar 
legislation and at that time a former chief counsel said that 
it will cost between $2.5 and $3 million per year. We also 
received a letter from the then current chief counsel stating 
that external consultants and additional economists will need 
to be hired at a potential cost of more than $400,000 a year.
    Now, if we expand the panel process government-wide, we 
will bring in more than 50 new agencies, not just the three 
that were contemplated in 2004. At that time he said that it 
would cost between $2.5 and $3 million. Given this, bringing in 
50 new agencies, what is your rough estimate of the annual 
costs for applying the panel process government-wide?
    Mr. Swain. Congresswoman, I am not trying to be coy but I 
do not think I was any of those people that you quoted because 
I have not had----
    Ms. Velazquez. No, you were not.
    Mr. Swain. I have not had any direct personal experience 
with the panel process. It did not begin until after my tenure 
was up.
    There will be significant costs. Obviously, if you extend 
it to all agencies, and there is a fixed cost for doing the 
panel, but not all agencies have such a busy legislative 
regulatory agenda as OSHA and EPA. There may be agencies that 
theoretically it could be extended to that only issue one or 
two rules a year that are significant to small business.
    Ms. Velazquez. But what about IRS, CMS? They issue rules.
    Mr. Swain. They most certainly do. And I think that IRS is, 
as I stated in my written statement, and as I stated in the 
hearings in 2004, I think IRS is a special issue----
    Ms. Velazquez. Let me ask. Given the legislation that we 
have in front of us, considering today in this hearing, and the 
budget that the chief--the Advocacy office has of only $9 
million and 46 employees, do you think, and this legislation 
does not provide for more money, how do you think it will 
undertake the new responsibilities that are given?
    Mr. Swain. I cannot speak to how the agencies are going to 
fund it. They would have to find the money somewhere. And I am 
confident that although agencies will not like this answer, 
that there is room in agency administrative budgets to put on 
an important process to bring greater sunlight to the 
regulatory process. Maybe not on all conceivable rulemakings.
    But as far as the Office of Advocacy is concerned, my 
perspective when I was chief counsel in the Reagan 
administration, is that you worked--I worked with what I had. 
And if I had X millions of dollars, I had to triage and work on 
what was most important. And every chief counsel going forward 
will have to do that.
    Ms. Velazquez. To the other three witnesses, given the new 
expansion, along with rulemaking authority and the new power 
that the Office of Advocacy is going to have, do you think that 
$9 million, because none of those agencies will have to provide 
money. The money has to come out of the Office of Advocacy.
    Mr. Katrichis. I think that----
    Ms. Velazquez. Do you think it is sufficient with the 
current budget? Because this does not provide for new money.
    Mr. Katrichis. I do not think you necessarily have to take 
the panel review process to all federal agencies. We can start 
down that road and try to get there eventually. There are 
certain agencies that really do not write a lot of rules as 
Frank said. There are more adjudicatory agencies and an example 
would be the Federal Trade Commission. It is much more of an 
adjudicatory agency. Yes, they do have some rules but I do not 
think people are going to be kept up at night by whether or not 
the mattress labeling, you know, regulation is----
    Ms. Velazquez. Harry, you were here for a long time.
    Mr. Katrichis. A long time. Yeah.
    Ms. Velazquez. You know how this institution works.
    Mr. Katrichis. Yes.
    Ms. Velazquez. My question is simple, and you know how much 
respect I have for you. And let me just say as chief counsel of 
this Committee you were not only the chief counsel for the 
Republicans, you provided counsel for everyone. And you were 
fair and we really appreciated that and we welcome you back.
    But if we are going to give--we are going to create a 
superpower agency here with all this new authority that is 
given to the Office of Advocacy. And bringing all these new 
agencies into the panel review process, my question to you is 
if 46 employees and $9 million will do it.
    Mr. Katrichis. I do not think 46 employees and $9 million 
will do it.
    Ms. Velazquez. Okay. Thank you.
    Mr. Finkel. Yeah, I think it is clear----
    Ms. Velazquez. Mr. Finkel.
    Mr. Finkel [continuing]. That Advocacy would have to 
provide more staff and more money if they were going to do it 
well. As far as what Mr. Swain said, I agree, yeah, there are 
little bits of wiggle room in all budgets. The question is what 
should those little extra bits be used for? When I hear 46 
employees, I cannot help but think of the staff I used to have, 
which was just about that much. And we, in our heart of hearts 
and with a lot of scientific evidence, believed that our 
mission involved the premature mortality of about 60,000 
Americans a year in the workplace from chronic exposures. And 
we worked with what we had. I wish as a citizen that that 
office had more. I do not think there is going to be new money 
but if there is I would not put it in Small Business Advocacy. 
I think the panels themselves can be done selectively and each 
marginal panel would not be that expensive. But wholesale 
expansion is going to cost the agencies money and SBA money.
    Ms. Velazquez. H.R. 527 effectively expands upon the 
process government-wide. And some have recommended expanding 
the panel process in a more incremental manner. Doing so could 
reduce costs while focusing initially on the agencies that have 
the greatest track record of burdening small businesses. If we 
took such an approach, which three agencies would you at first?
    Mr. Katrichis. I would probably start with the IRS. We 
tried to add them in 1998, I believe, to the panel review 
process. It was mostly a fight between this Committee and the 
Ways and Means Committee. And we all know how that usually 
turns out. And possibly some of the component agencies at the 
Department of the Interior just in terms of, you know, water 
issues and land use issues. Those are two that come to mind off 
the top of my head.
    Ms. Velazquez. Mr. Finkel, you work at OSHA on some of the 
review panels. What do you think works and what missed the 
mark?
    Mr. Finkel. Again, my experience was that whether it was 
through a panel, through notice and comment, which the agencoes 
always have. The agencies always have. It is a second bite of 
the apple as it were. You know, or through pre-settlement 
discussions after litigation has been filed. It was always 
frustrating to be accused of not listening when the reality was 
once in a while we simply just did not agree.
    And I think one of the things that did not work well from 
both sides was the insistence of the small entity reps in 
turning these panels into sort of a science court where they 
would argue about a chemical being carcinogenic or not. And 
there is plenty of room for that in notice and comment. It was 
frustrating for me as a regulator to have that time spent 
arguing about biochemistry when we could have been working 
together creatively to talk about reducing burden.
    Ms. Velazquez. Thank you. Thank you, Mr. Chairman.
    Chairman Graves. Ms. Ellmers.
    Ms. Ellmers. Thank you, Mr. Chairman.
    Mr. Finkel, my questions are for you, and I would like to 
thank the entire panel for being here today for this.
    I am a little confused, Mr. Finkel, about where we are at 
and where your position is. I mean, I think you are stating 
wholeheartedly that you believe in regulation as it is. Is that 
correct? In that the opportunity to try to fine tune some of 
that is not necessarily what you think of. Is that correct?
    Mr. Finkel. No. I think, I mean, I believe in smart 
regulation. I believe we have a lot of unfinished business to 
do to protect consumers and workers and the environment. But I 
believe that--I am an analyst so I believe that we ought to be 
looking more carefully and harder at not just total cost and 
total benefit but at real people who are affected both 
economically and----
    Ms. Ellmers. Are you aware that we have had an unemployment 
rate of 9.1 percent that has been sustained for about 23 months 
now?
    Mr. Finkel. I know where you are going with that and I 
think the evidence that at any significant amount that rate has 
anything whatsoever to do with health, safety, and 
environmental regulation is thinner than thin ice.
    Ms. Ellmers. Well, let me just tell you my own experience 
then. Over and over again we have heard from our small business 
owners, businesses across the country, regardless. I say small 
business because that is the Committee we are on. But all 
business alone is saying that government regulation is the 
number one problem that they are faced with and that the fear 
of the unknown, the fear of more regulation, the fear of the 
taxes going up, the fear of all the uncertainty that is out 
there is keeping them from hiring right now.
    Now, this is the position that we are faced with and we are 
obtaining that information over and over again and it is just 
compiling. But what you are telling me is that you think more 
along the line of, for instance, let me just see if I pulled 
out a quote from your opening statement that small businesses--
that you feel that there will be small businesses that will be 
created because of regulation and that they are just waiting to 
be created. So in other words, you know, we are creating a 
problem which then might actually spark a business growth 
environment? Is that what I am understanding you to say?
    Mr. Finkel. Yeah, I am surprised that would be at all 
controversial. The problems that are created through what 
economists call externalities, the pollution, the safety 
hazards, when you solve those sometimes businesses who create 
the problems are hurt economically, and very often other 
businesses come in and take advantage of the market to provide 
the safe equipment, the pollution control technology. All I am 
saying is if you want to think about indirect effects far 
upstream, those come in two flavors. And there are some 
positive and indirect effects as well.
    Ms. Ellmers. That is true. That is true. But basically what 
you are saying is there is a winner and then there is a loser. 
I personally do not believe that that is true in business. I 
think that the innovation in this country is outstanding and 
that we all grow as we move along.
    I also--I have a question, too. You had said that you did 
not necessarily feel that it was just large corporations, that 
small businesses are sometimes the bigger culprit of some of 
these. Can you expand on that?
    Mr. Finkel. Well, again, in my area there are studies that 
suggest that in a lot of industrial sectors the occupational 
fatality rate is six or eight times higher in small 
establishments than in large ones. That does not say we should 
come down like a ton of bricks on small establishments, but the 
reality is these are dangerous places to work. In some cases 
they are contributing to pollution in others and I just tried 
to distinguish between yes, efficiency is a great idea and you 
go for the big sources. But it is a different problem if 
everybody is putting CO2 in the atmosphere, you go after the 
bigs first because you get most of your benefit there. But if 
everybody is causing grave risk to their employees, you do not 
necessarily only care about big employees--employers.
    Ms. Ellmers. Last question. Do you believe in global 
warming?
    Mr. Finkel. I am not a climate scientist but I have worked 
among them for many years. And yes, of course I do.
    Ms. Ellmers. Okay. Thank you. Thank you. I yield back, Mr. 
Chairman.
    Chairman Graves. Mr. Owens.
    Mr. Owens. Thank you, Mr. Chairman.
    We have had some discussion about the Internal Revenue 
Service today and the regulations that it generates. And in a 
former life I had some experience with that.
    Is not the solution there a revamping of the Tax Code and a 
lessening and potentially the removal of the various tax 
expenditures which probably results in substantial amount of 
regulation issuance? And if we did that we would both simplify 
the Tax Code and reduce the number of regulations? I will throw 
that out to whoever would like to take the opportunity to 
answer that.
    Mr. Swain. Congressman, I would be a fan of simplification 
of the Tax Code. And you are correct that a lot of the 
regulatory issues come up because the particular 
interpretations of all of the statutes, and as you know, the 
IRS actually makes most of its decisions in a slightly less 
formal way involving so-called private letter rulings and other 
mechanisms that are not even regulatory in the legal nature but 
still are a pretty clear indication of what the IRS thinks. And 
there is absolutely no public review process on that mechanism.
    So if Congress were to make a very simplified tax code, it 
should be followed up with clear, small business analytic 
requirements for the minimal regulations that would be 
necessary under that new tax code.
    Mr. Owens. Thank you. When we talk about small business and 
we talk about size, determination of what represents or is a 
small business, do we not also have another factor and that 
goes to whether or not that business may be located in a rural 
or an urban setting in terms of its impact on the local 
economy, on the local ecology? And if you--I would be 
interested to hear the thoughts about how we deal with that 
breakdown as well as the size of the businesses.
    Mr. Katrichis. I do not think there are any distinctions in 
the rulemaking process for rural-based businesses versus urban-
based businesses.
    Mr. Owens. Should there be?
    Mr. Katrichis. Well, one might suggest that, you know, in 
certain rule settings, trying to get the expertise engaged to 
respond to a rulemaking might be a little bit more difficult.
    Mr. Owens. As you might guess, I come from a rural 
community.
    Mr. Katrichis. Yes.
    Mr. Owens. And that is a big issue for us.
    Mr. Katrichis. Yes.
    Mr. Owens. And I do see a distinction between a small 
business located in an urban setting and a small business 
located in a rural setting. We have this issue ongoing all the 
time on many levels.
    The last question maybe is more of a statement than a 
question. But Mr. Finkel stated that sometimes business grows 
as the result of regulation. One example that I would ask if 
you concur with is whether or not when we moved to a best 
abatement, that that did not, in fact, grow in industry.
    Mr. Finkel. Boy, that is a controversial, touchy example, 
that I have written about a little bit. I think it did create 
some winners and losers, both, I think, on the economic front 
and on the health and safety front. That was not a star-studded 
effort and I think we have learned from some of the 
overreaction and some of the overreaching on that.
    I do want to say I think you have got a really good point 
about the urban rule distinctions. I mean, lots of other 
distinctions. I am not sure. I think that SBA should not 
necessarily get involved in creating subcategories alongside 
their size standards. But I think it gets to what I was saying 
earlier about these 29 other things that ADs are supposed to 
think about and there is environmental justice and there are 
lots of other executive orders. And maybe there should even be 
more to encourage agencies to think about not just this one 
constituency who everyone here is very interested in, but there 
are lots of others.
    Mr. Owens. I will finish with this. Do you think it is 
possible to create a body of analytics that in fact would 
permit an in-depth analysis of each regulation that would give 
you a truly accurate cost-benefit analysis?
    Mr. Finkel. Well, I certainly hope so. And I think I have 
seen the field get a lot better, and of course, a lot of that 
needs to come from outside the government but limited 
governmental resources. That is what a lot of people are trying 
to do. The signs and the economics only take you so far and it 
should not be determinative. But we have gotten an awful lot 
better in 30 years and their ways to go. Especially, I think, 
on the call side where we just wait until the end of the 
process and come up with numbers.
    Mr. Owens. Thank you very much. I yield back.
    Chairman Graves. Mr. Landry.
    Mr. Landry. Mr. Chairman.
    Dr. Finkel, let me tell you about a conversation I had last 
week with a very successful business owner in my district. He 
had sold his business. He had created hundreds of jobs and he 
was under a non-compete. When that non-compete ended, him and 
his partner decided to go back in the drilling business. And 
when they sat down and put their profile together on how they 
wanted to put their business and move it forward, they decided 
that they were going to build the largest shallow water 
drilling barge in the world and one of the most advanced. And 
when they looked at the cost--because we have a lot of fab 
yards in my district--at the cost and amount of regulations and 
red tape that they had to do to build that barge, they decided 
that they were going to build that barge in Singapore. And 
while they were contemplating the construction of this barge 
and then where they were going to implement this barge, where 
they were going to put it out for contract, they got a proposal 
to purchase a drilling company, an American drilling company, 
for about 60 percent of the cost of the drilling barge that 
they were going to build. And they made a determination that 
they did not want to do business in America anymore. That they 
were going to build this barge in Singapore and they were going 
to float it and send it to Nigeria to drill because it is more 
business friendly in Nigeria than it is in this country.
    And I can tell you that the OSHA regulations are destroying 
our fabrication yards down there. So we are not on thin ice; we 
are on thick ice. In fact, it is so ridiculous that during the 
BP oil spill, they would make the shrimpers come in during the 
daytime because it was too hot for them to collect oil on the 
water. And when the shrimpers said, you know, it makes more 
sense for us to collect this oil at night, they said 
regulations do not allow that.
    Now, tell me how regulations are not smothering our 
economy. I have got to tell you. We just have to agree to 
disagree but you are going to have to put more real life 
examples in front of me as how those OSHA regs are trumping the 
unemployment or not causing the unemployment rate to be nine 
percent or greater, which is really not nine percent. It is 
really 14 percent or greater. It is just that those people are 
not looking for work anymore.
    Mr. Finkel. Look, there is no way that--look, I know you do 
not want me to respond with anecdotal cherry picked examples on 
the other side because that is not my role as a witness to tell 
you of all the stories I used to hear and still hear of people 
who have lost their loved ones because of lapses, negligences, 
mistakes. It is a balance. Of course, there are going to be 
poignant stories of businesses who have had difficulty 
complying with what----
    Mr. Landry. But is not that the role of the legal system? 
Is that not the role of the legal system to determine whether 
or not businesses are operating in a fair, safe environment for 
their workers? If people are getting injured and deaths are 
being caused, is not that what the plaintiffs' lawyers do? And 
when they go in and they impact those small businesses, those 
small businesses have a choice of whether they want to pay 
those types of fines and settlements or whether or not they 
want to make their work environment safer.
    I mean, look, OSHA just issued a regulation where our 
welders are now going to have to wear long sleeve, Nomex 
outfits that do not breathe, and it is 110 degrees in the shade 
in Louisiana. How do we keep working under those conditions? 
There is no waiver for that. What do we do?
    Mr. Finkel. If I were still there I could look into that 
for you. And there are always really difficult things that 
government has to do where they cannot satisfy both one risk 
and another. But again, I have got to say the plaintiffs' bar 
and the tort system, that is after the fact. And there are 
agencies that exist----
    Mr. Landry. But wait a minute. I have got----
    Mr. Finkel [continuing]. In order to prevent that from 
happening.
    Mr. Landry. Three people have passed out this summer in one 
yard complying with OSHA regs. Now, tell me how is there any--
what is the safety there?
    Mr. Finkel. I know that OSHA just put out last week--I do 
not follow them week to week, but this week or two weeks ago 
they put out a whole set of interpretations and guidance on 
heat stress. They are very aware that it is hard to be safe and 
cool at the same time. It is hard to be wearing a respirator to 
protect your lungs and have to breathe through a dusty 
respirator. There are all kinds of very difficult choices where 
if we had a little more technological innovation we could solve 
some of these problems. But again----
    Mr. Landry. It is hard to work and earn a living under 
those regulations. That is what it is hard to do.
    Mr. Finkel. And it is hard to earn a living if you have 
been amputated or passed away, too.
    Chairman Graves. Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman. And I would like to 
thank our panel for being here as well.
    I guess I would like to start out with a little more of a 
generic sort of a question. You know, when we look at the RFA 
it was supposed to be supported by sound economic analysis in 
terms of impacts on businesses. Mr. Swain, have the 
bureaucracies, the regulatory agencies, have they complied with 
that mandate?
    Mr. Swain. I think in too many cases, Congressman, they 
have not because they have attempted to define away their 
obligation to do so by stating that a particular proposed rule 
does not or would not have a significant economic impact on a 
substantial number of small businesses. Those are the words in 
the law. And now to be sure they are doing it more than they 
were 30 years ago and I think one of the factors was alluded to 
by Mr. Finkel. There is more economic data out there now that 
allows people to do analysis. But if an agency does not want to 
do an analysis, even though all the data in the world is there, 
they do not have to do it in the sense that the downside, the 
legal downside for not doing the analysis is not very 
significant. And that is one of the reasons that the law needs 
to be strengthened. If they essentially thumb their nose at 
their obligation to do an analysis, it is very difficult to get 
that decision to not do an analysis challenged through court.
    Mr. Tipton. Well, now, you know, I think that that is an 
excellent point. In fact, we have just heard testimony that we 
are able to observe over at Energy and Commerce when the EPA 
was specifically asked have you done cost benefit analysis and 
the answer is no, ultimately.
    Mr. Finkel, I am kind of curious. You had had an experience 
with OSHA. Can you give me some examples where OSHA went in to 
help rather than fine and punish? Or did it always be 
accompanied by a fine?
    Mr. Finkel. No. In addition to being in charge of health 
rulemaking, I was out in Denver for three years as a regional 
enforcement administrator. And our staff always went out with a 
dual mission--to see to it that problems, especially imminent 
danger ones were corrected, but also to provide information, 
compliance assistance, consultation. Those programs have grown 
by leaps and bounds and a lot of us think that they are taking 
too much attention away from enforcement. But the fact of the 
matter is in this climate and the climate that existed when I 
was there 10 years ago there was a tremendous perceived need to 
provide good information. I think in many cases that 
information----
    Mr. Tipton. So there are no examples where it was not 
accompanied by a fine?
    Mr. Finkel. Oh, there are plenty of examples where OSHA has 
an entire consultation program that is not permitted to levy 
fines.
    Mr. Tipton. That is voluntary to come in. When they do an 
inspection, is that always accompanied by a fine?
    Mr. Finkel. No, consultation is separate and it is employer 
driven.
    Mr. Tipton. It is separate.
    Mr. Finkel. And they can ask for it for free anytime they 
want. And there is--not only can they not fine but they cannot 
pick up the phone and call OSHA and say----
    Mr. Tipton. No, I am talking about when they actually come 
in to do an inspection, not with voluntary compliance when you 
invite them.
    Mr. Finkel. Well, about 25 percent of OSHA inspections now 
result in no fines. Now, that should be because there are no 
problems. But if you are asking me are there places where OSHA 
looks the other way? No, I hope not. There are instances where 
fines are reduced by 90 percent for small business, where fines 
are extended off in time, where willful citations are 
reclassified as non-willful in order to get some abatement and 
get some cooperation.
    Mr. Tipton. Okay. Can you give me an example where an OSHA 
regulation has helped a business grow?
    Mr. Finkel. I think every one of them has in some way. The 
vinyl chloride rule way back in the '80s caused pollution 
control technology.
    Mr. Tipton. Did it help those businesses grow?
    Mr. Finkel. Well, actually, in that case it actually, you 
know, you want to talk about how wrong economic analyses can 
be. Not only did that regulation and others like it help other 
businesses, it actually helped the affected entities grow 
because they were so wrong about whether it would cost them 
money. They saved money in recovered product that was greater 
than the installation of the equipment to recover the product. 
Sometimes business needs a little wake up call. I mean, once in 
awhile it works out that there are $20 bills lying around that 
people are not picking up.
    Mr. Tipton. I will tell you, just kind of personal 
experience, when OSHA came into my business we had a tipping 
hazard, pallets were stacked one on top of another, and the 
regulator had said that they were stacked 15 feet high and she 
was the expert. Unfortunately, the ceiling was eight foot high, 
so that was some of the actual experience that we have had.
    You know, really when we are looking at some of the 
regulatory process, and I guess I would open this up to anyone 
on the panel, do you think Congress needs to be more hands-on? 
That we see the regulatory process exceeding the legislative 
intent of Congress overreaching and that we need to be able to 
roll up our sleeves as Congress and get far more engaged, 
making the regulatory bodies responsive to that legislative 
intent?
    Mr. Finkel. I would like to say yes, Congressman, and let 
me also mention while you are on OSHA, one of the problems in 
my view that typifies OSHA and it is not the only agency, is 
that many of the regulatory actions that we sort of think of as 
regulatory in the big picture sense are determined by OSHA not 
to be regulatory but to be enforcement actions and enforcement 
protocols. They will put out a statement saying we are going to 
enforce this kind of violation and we are not going to enforce 
this kind of violation. Those statements are completely exempt 
from any analytic requirement. And in fact, I read a case, a 
federal case involving the steel foundry business in which the 
court probably accurately from a legal perspective said this 
particular practice by OSHA is not challengeable in court 
because it is not a regulatory challenge; it is simply an 
enforcement practice so go complain to the agency or go 
complain to the Congress.
    Chairman Graves. Before I move to Mr. West I want to 
clarify one thing. This question is for Mr. Finkel and then I 
would like for Mr. Katrichis to follow up.
    We talk or you talk as if implementing this legislation and 
requiring the agencies to follow the Regulatory Flexibility Act 
and examine how this is going to examine small business, that 
somehow this is going to prevent the regulation from going into 
effect. My question to you is does this in any way prevent an 
agency from implementing a rule or regulation as a result of 
studying it?
    Mr. Finkel. Well, again, I think, you know, with all due 
respect, I think a lot of this is a solution in search of a 
problem. I do not see the thumbing of the nose at the RegFlex 
Act the way other people do but that is just a matter of 
interpretation. Again, as an analyst, I cannot sit here and say 
that I do not silently applaud the idea of looking more 
carefully at some of these--I do not want to say nuance but 
effects that will otherwise be given short shrift. But the idea 
of judicial review of some of these things, you know, the Chief 
Counsel for Advocacy picking the panelists and writing the 
report, I have got to say I have read the hearing memo that you 
put out and I do not begrudge at all your view about the 
dynamics here but it struck me as a punitive--you have said it 
yourself, the reining in of the agencies. So as a former 
regulator reading that I think this is a recipe for delay, and 
delay in the service of something is not a problem. Delay 
needlessly is a problem and I think that some of the analyses 
could proliferate and cause enormous delay in a process that is 
already, of course, people say ossified. I do not see it quite 
that dire a situation but, you know, things are stretched very 
thin. And indirect effects that are highly speculative, you 
know, the economists are having enough trouble in the agencies 
getting good estimates of total cost and benefit. I wish it 
were better but it is the way it is.
    Chairman Graves. I will go to Mr. Katrichis again. It is a 
simple question. Does it prevent an agency from implementing a 
regulation whatsoever?
    Mr. Finkel. Yes.
    Mr. Katrichis. I do not think it does. I think that it may 
slow things down.
    Chairman Graves. Hit your mic, would you?
    Mr. Katrichis. I think it might slow things down. We have 
had executive orders, regulatory executive orders issued by 
every president going back to Gerry Ford. The president is the 
head of all these departments where all these executive branch 
agencies are. I mean, they have not paid attention. That is why 
RegFlex was needed in 1980. That is why SBREFA was needed in 
1996. I think small businesses want some certainty out there. 
And certainty does not necessarily come with the hand of a new 
regulatory regime. Sometimes the not regulating is more scary 
than the regulating.
    I will give a couple of examples of that. For the longest 
time, EPA was considering regulating milk spillage in dairies 
as something that would be covered as an oil spill because 
there is a small percentage of animal fat in milk. And it was 
not until some serious prodding by both authorizers and the 
appropriators that now a few weeks ago EPA has finally said, 
well, we are not going to do that.
    We have this other thing on the horizon, and that is 
something that is already regulated in California under their 
Clean Air Act, and that is, you know, bovine gas. I mean, you 
know, we are going to have a situation where EPA may go in. In 
California, if you are running a dairy, you get a bill every 
month which is determined by some mad scientist that sits in a 
windowless office and calculates how many, you know, cows you 
have and what your assessment is for that month. And there is 
no science that goes into this. There is no comment. But if 
this is pushed to other parts of the country behind California, 
I mean, how are, you know, dairy folks supposed to deal with 
that uncertainty?
    Chairman Graves. Mr. West.
    Mr. West. Thank you, Mr. Chairman, and also ranking member. 
Thank you panel for being here today.
    I am going to try to have the simple man approach here. 
Yesterday was the Army birthday, 236 years for the United 
States Army, a little gang that I spent a few days with in my 
life, 22 years to be matter of fact. In that time of 22 years I 
was a paratrooper and I was also an artilleryman. And one of 
the things that we had in our military was that if something 
were to come down from the institution of the Airborne School 
or the Artillery School, a new regulation, a new piece of 
doctrine, what have you, before it was implemented they would 
send it out into the field as we would call it to make sure 
that the people who would have to implement this new 
regulation, new doctrine, new piece of equipment, what was 
their assessment of it? I mean, would this be something that 
would work?
    Now, my question is simple. Is that the type of process 
that we have here with regulation whereby we send these things 
out to the field to get a bottom-up assessment before we 
implement it?
    Mr. Katrichis. The whole notion of the SBREFA review panels 
was so that we could have a conversation with a regulatory 
agency before pen was put to paper. The concern was that there 
would be some pride of authorship once we went to a preliminary 
rule stage or proposal of a rulemaking. And I think that that 
is similar to what you are suggesting here.
    Mr. West. But are we doing that?
    Mr. Katrichis. We are doing it----
    Mr. West. Yes or no?
    Mr. Katrichis. We are doing it at OSHA and EPA because it 
is required of them.
    Ms. Velazquez. Will the gentleman yield?
    Mr. West. I certainly will. You are the ranking member.
    Ms. Velazquez. Yes.
    Mr. West. I follow chain of command.
    Ms. Velazquez. I am glad to hear that.
    Mr. West. I take orders well, ma'am.
    Ms. Velazquez. Yes, there is communication once a 
regulation is going to be an agency. It is known as notice and 
comment, is it not?
    Mr. Katrichis. Right.
    Ms. Velazquez. Thank you. Thank you for yielding.
    Mr. West. Thank you. So this is once this regulation is 
identified or is it going to be implemented?
    Mr. Katrichis. There are different ways. There could be an 
advanced notice of proposed rulemaking which occurs in very 
large undertakings. It can just be a notice of changes we are 
making. You know, for people that are in, you know, law firms, 
accounting firms, et cetera, they have the resources to see 
these things coming. Your average small business, they do not 
have the resources to see these things coming. They might 
belong to a trade association that does, et cetera. I mean, the 
gentleman on the other side of the aisle, his suggestion of 
some distinction between rural-based businesses and urban-based 
businesses is a good one in that regard because somebody out 
there in a rural community is not going to have, unless they 
have access to the Internet, et cetera, they are not going to 
have access necessarily to a library where they can go look at 
the Federal Register and see what is being contemplated.
    Mr. West. Well, and I think that the gentleman brought up a 
good point. I mean, is there an evaluative criteria that is out 
there? Because not all things are alike or equal. I mean, a 
rural community is different from an urban community or, you 
know, you do have these trade associations. Or what are some of 
the economic impacts? So, I mean, do we have these type of 
things out there that preclude this preponderance of, you know, 
top-down driven edicts and mandates that come down on small 
business? The next thing to know, once it hits there is nothing 
they can do. And I think it comes back to this, you know, 
predictability, uncertainty-thing that you talked about.
    Ms. Luxton. If I may address that. The distinction, I 
think, is very important between what a SBREFA panel does and 
the later time when a rule is proposed. The distinction, and I 
had it in my testimony, is by that time positions have 
hardened. The value of a SBREFA panel is that the small entity 
representatives are selected from all of the diverse areas that 
would be affected--rural, urban--of any kind of effect that 
would be felt. And the whole point of it is to bring those 
people in early to explain what the impacts would be on them. 
The agency is required and this bill would strengthen the 
requirement that the rule alternatives be laid out.
    And the whole point of this is not to evade the rule or 
prevent a rule from becoming effective but to find ways to 
tailor it so that the impacts on small business could be less. 
And it by no means is always the case that the only answer is 
``do not do the rule'' or ``do not let it apply to small 
business.''
    Mr. West. So my final question because I just had a small 
business forum back in my district last week, where is the 
breakdown? Because the small businesses are hurting. So 
somewhere there is a breakdown and I think that is what we have 
to identify. We have all these systems and panels and 
organizations and things in place. There is a breakdown 
somewhere and the people that are being affected are the 
economic engine that will drive a turnaround in this country, 
and those are the small business owners.
    Ms. Luxton. I could not agree more. My point, I guess, 
would be that there are only three agencies currently subject 
to the SBREFA panel process, so the others never get the 
benefit of that early input from those small entities.
    Mr. West. Thank you. And I yield back.
    Chairman Graves. Ms. Chu.
    Ms. Chu. Dr. Finkel, you developed several product 
stewardship partnerships involving government large 
manufacturers and small businesses who purchase a hazardous 
product and expose their workers to it. And you also talked 
about how when you were at OSHA you partnered with the 
Insulation Manufacturers Association so a rule on fiberglass 
insulation was not necessary. I think it is really great when 
the public and private sector can work together like that. How 
do we promote more of these product stewardship partnerships so 
that government and businesses can work together?
    Mr. Finkel. You know, I wish I knew the answer to that. I 
was very frustrated that some of the ideas that my colleagues 
and I had at that period of time, frankly, they seemed a 
little--were viewed with some suspicion by--I was a career 
person but they were viewed with some suspicion by the 
political appointees in the Clinton administration, but I was 
involved and I survived the transition, of course, to George W. 
Bush, and immediately the same ideas were seen as way too 
aggressive. So they never really got, I think, their due. That 
particular partnership with the fiberglass people lasted for 
six or seven years and basically fizzled out because government 
did not give it the respect and support that I think the 
industry deserved by having come to us at that time with a 
really good idea that I think saved money and saved lives. And 
they are still doing some of that stuff but without--at one 
point they even came into our offices. This was actually--I 
should correct--a different partnership but one of the user 
groups came into our OSHA offices and said we are doing pretty 
well with this voluntary code of practice but we have some 
recalcitrant users who are clearly flouting this. Could you do 
some enforcement there? And our own lawyers were a little 
nervous about enforcing something that we thought was, in fact, 
the general duty of these employers to do. So it is an idea 
maybe whose time will come again.
    Ms. Chu. And what elements would be needed to make it 
successful?
    Mr. Finkel. I think a more aggressive, more enthusiastic 
participation by government. And this was a unique set of three 
or four circumstances at work but there are plenty of others 
where the manufacturers know well that it is in their best 
interest to help the small users of their products use them 
properly. And sometimes they do that just through informal 
means but in this case with government as a partner saying we 
enthusiastically support what you are doing, maybe we do not 
have to do rulemaking because the problem is being solved 
through business relationships that we can sit back and watch 
work.
    Ms. Chu. You also mentioned in your testimony that 
government agencies already analyze how regulations affect 
small businesses and you suggest that there is an adequate 
analysis available for small businesses. In your opinion, would 
this bill add another layer of government bureaucracy?
    Mr. Finkel. Yeah, I am concerned about the delay and the 
bureaucratization if that is a word, of the process. But I am 
also concerned about, again, two things. Some analyses are 
simply not value-added. They are make-work analyses. Not that, 
again, as an analyst you cannot come up with a little bit extra 
to do but just as a sense of perspective, again, I understand I 
am in a room talking to the Small Business Committee but it is 
not the only constituency out there that has disparate effects, 
both economic and health and safety, from regulation. And I do 
think objectively of all these constituencies--children's 
health, environmental injustice, other economic actors--it is 
this one that has been getting the most attention. And maybe it 
is time to give them a little more attention but also look at 
the rest of the whole pallete and see where the agencies are 
falling down in terms of analyzing the real world impacts of 
these things.
    Mr. Swain. Congresswoman, if I could just comment. I 
fundamentally disagree with Mr. Finkel's response to that 
question. This law would not add another layer of bureaucracy. 
The Congress, led by Senator Culver and Congressman Ireland in 
1980 added another layer of bureaucracy. This law would make 
sure that that 1980 law works better but this layer of 
bureaucracy has been here for 30 years. It has worked sometimes 
and sometimes not so well. So this is basically a remedial 
statute to a process that has been in place for 30 years.
    Mr. Finkel. Well, I have got to say it is a very broad bill 
and there are certainly sections that do exactly what you say. 
But expanding it from three agencies to 50 is a new layer of 
something for those 47. Changing who picks the panelists and 
who writes the report is a change. You can't argue whether it 
causes delay or causes more analyses to be done.
    Ms. Chu. I see my time is up. I yield back.
    Chairman Graves. Mr. Hanna.
    Mr. Hanna. No, sir.
    Chairman Graves. Ms. Velazquez.
    Ms. Velazquez. I just would like to make a comment about 
the comment made by the gentlelady from North Carolina. And I 
am sorry she is not here but I just would like to ask her where 
does she see that regulations are the number one issue for 
small businesses? Because the last I checked, NFIB, every week 
they measure, they survey, they poll their members. And the 
latest poll coming out from NFIB has the number one issue for 
small businesses is not regulations. And it is sales. Okay? 
That is the number one issue from NFIB. And then the U.S. 
Chamber of Commerce's later survey showed that also regulations 
come in three. And for NFIB, number three. So if we are going 
to come here and say that the number one issue for small 
businesses is regulation, based on the facts I do not think 
that it really reflects the reality.
    Two weeks ago, members were saying that CDFI is--FDIC is an 
office under the jurisdiction and responsibility of the 
Department of Treasury. It is an independent agency and that 
should be on the record.
    I would like to ask unanimous consent to enter into the 
record the two surveys conducted by NFIB and U.S. Chamber of 
Commerce.
    Chairman Graves. Without objection.
    Ms. Velazquez. Thank you.
    Mr. Finkel, the legislation gives Chevron deference to 
Advocacy's rulemaking regarding RegFlex and this will likely 
extend to Advocacy's opinion as to whether an agency has, in 
fact, complied. Are there any drawbacks to giving such immense 
power to Advocacy?
    Mr. Finkel. With the caveat that I hope you are not 
confused by my being--that I have a law degree or know anything 
particularly about the law. But since you asked me I cannot 
resist. What troubles me really about this idea is that I guess 
I may be ignorant but I do not know of other parts of 
government where there--not to say there is not--was not and is 
not a need for a person whose job title is the chief counsel 
for advocacy for small business granted but to have that person 
in that office clearly delineated as only caring about one side 
of a complicated issue. Having Chevron deference, it just 
strikes me as not good government to say someone who is paid to 
be in an advocacy role, you know, should have any special 
deference. There is no chief counsel for Children's Health and 
maybe there should be. But I think the idea of letting that 
person have access, have panels, have input to the process that 
he or she does, you know, ought to be sufficient if, as Frank 
Swain says, the agencies are complying with the law. In my 
experience they are more than they are not but it is old 
experience at this point.
    Ms. Velazquez. Mr. Finkel, what are the more significant 
indirect costs to small businesses? And most importantly, the 
economic benefits to small businesses from regulations?
    Mr. Finkel. Well, this gets back to what the congressperson 
from North Carolina seemed so quizzical about but I think when 
you--there have not been such studies done recently. But when 
you look at studies of all business and people look at the 
effects of regulation, when you only look at half of the cost, 
the costs that accrue to people who pay versus when you look at 
the whole change in the economy pre- and post-regulation, when 
you do not count the job creation, the new markets that are 
created by regulation, sometimes those are small and do not 
make much difference in the total costs. Sometimes they are 
huge and turn something that was supposed to be a net loss for 
the economy into something that was a net gain for the economy. 
Am I in favor of agencies having to look at those impacts on 
balance? I think not, because it is, you know, they are not 
doing a good job when they have infinite time and sometimes 
sources of money. For free and quickly you are not going to get 
good answers.
    Ms. Velazquez. Thank you.
    Mr. Swain, in 2004, the chief counsel, and you were not--I 
want to make it clear--testified before this Committee saying, 
and I quote, ``that vesting the authority to determine size 
standards to advocacy may cause confusion over which SBA office 
determines size standards.'' He followed by saying that he did 
not, and I quote, ``believe the proposed language will benefit 
small entities.'' As a former chief counsel yourself, do you 
agree or disagree with these concerns?
    Mr. Swain. There is no issue that I have met in Washington 
that has so many people on so many different sides than size 
standards. And, you know, it is like giving somebody a job. For 
every one person you make happy, you make 10 mad. And the same 
is true with size standards.
    I think I agree with the chief counsel's statement. I think 
that, and I should say that I am not personally aware of--I am 
not personally acquainted with how this dilemma arises in the 
real world. I accept that it does but I do not have any 
personal knowledge of experience. But in theory, I think the 
chief counsel has plenty to do without being in the size 
standard business. I think that they ought to be consultative 
with the SBA Size Standards office when these issues come up. 
But to give the chief counsel this authority is not the most 
important part of this bill.
    Ms. Velazquez. Thank you. Thank you.
    Mr. Swain. Could I make one brief statement on the Chevron 
deference issue?
    Ms. Velazquez. Yes.
    Mr. Swain. Because I think it is a very important issue and 
I understand the hesitancy on it. I think it is really 
important that I point out that as I understand it, and better 
lawyers on the panel than me can correct me, the Chevron 
deference would be the court could defer to the chief counsel's 
opinion as to whether the proper small business regulatory 
analysis has taken place, but the court can still say whether 
it is an OSHA case or an EPA case, we are going to find that 
this rule should go into effect because it is an important rule 
and it is not arbitrary. The only thing that they have to say 
is, well, the chief counsel said they did not do a good job so 
maybe they did not do a good job. But even though--the court 
can say even though they did not do a good job we still will 
allow this rule to go into effect. So it is a deference as to 
the procedural step; it is not deference about the chief 
counsel's position as to what finally should happen to the 
rule.
    Ms. Velazquez. Okay. Mr. Finkel, my last question to you is 
should agencies be encouraged to seek input during the panel 
review process from those affected workers and consumers by 
those proposed regulations?
    Mr. Finkel. Yeah. I mean, my agency friends will not be 
happy because they will see it as one more being stretched 
thin. But fundamentally, yeah, I believe that it was a good 
idea to have these SBREFA panels. I think they have worked 
well. They have added good value in my experience. But it just 
seems fundamentally not fair and symmetric to me that we invite 
in one constituency who has some built-in hope that the 
regulations will not get promulgated or will get promulgated 
differently and the constituency who is out there waiting to be 
protected do not get in. I mean, they get in the notice and 
comment, obviously, but the whole point of this is an early 
bite at the apple.
    Ms. Velazquez. Thank you.
    Ms. Luxton. If I could just add, I believe the way it works 
now is it is small entity representatives. It is not entirely 
small business. So there have been recent panels at EPA where 
environmental groups have been brought forward for this. 
Communities, small governments. So it is not exclusively small 
business.
    Ms. Velazquez. Okay. Thank you, Mr. Chairman.
    Chairman Graves. Thank you. This has been a very 
interesting hearing. I am very frustrated by some of the 
aspects of what was said today and obviously some of that being 
that one of the benefits of regulation is that it creates new 
industries and the idea that we are going to create regulation 
that could put industries out of business and create new 
industries is engineering that I think is wrong for a 
government to be doing that. And it could be interpreted that 
way very, very easily.
    My number one goal in this legislation is to make darn sure 
that the government determines and evaluates what it is doing 
to small business and how it is affecting small business. And 
there is absolutely nothing in this legislation that prevents 
an agency from implementing any one of the regulations that 
they put forth. Not one single thing. It will slow down the 
process and I darn sure hope it slows down the process. And 
that is exactly what I am trying to go through here.
    So with that I would ask that all members have five 
legislative days to extend and revise their remarks. And with 
that this hearing is adjourned.
    [Whereupon, at 2:41 p.m., the Committee hearing was 
adjourned.]

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