[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                     BURDENSOME REGULATIONS: EXAMINING THE 
                      BIDEN ADMINISTRATION'S FAILURE TO 
                      CONSIDER SMALL BUSINESSES

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                              MAY 22, 2024

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                               

            Small Business Committee Document Number 118-052
             Available via the GPO Website: www.govinfo.gov
             
                              __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
55-530	                  WASHINGTON : 2024                    
          
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
                          CELESTE MALOY, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                  MARIE GLUESENKAMP PEREZ, Washington
                        SHRI THANEDAR, Michigan
                       MORGAN MCGARVEY, Kentucky
                       HILLARY SCHOLTEN, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jung, Minority Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

Hon. Roger Williams..............................................     1
Hon. Sharice Davids..............................................     3

                               WITNESSES

Mr. Paul J. Ray, Director, Roe Institute for Economic Policy 
  Studies, The Heritage Foundation, Washington, DC...............     5
Mr. Daniel Goldbeck, Director of Regulatory Policy, American 
  Action Forum, Washington, DC...................................     7
Mr. Robert T. Smith, Senior Attorney, NFIB Small Business Legal 
  Center, National Federation of Independent Business, 
  Washington, DC.................................................     8
Mr. Todd Phillips, Assistant Professor, Georgia State University, 
  Atlanta, GA....................................................    10

                                APPENDIX

Prepared Statements:
    Mr. Paul J. Ray, Director, Roe Institute for Economic Policy 
      Studies, The Heritage Foundation, Washington, DC...........    28
    Mr. Daniel Goldbeck, Director of Regulatory Policy, American 
      Action Forum, Washington, DC...............................    39
    Mr. Robert T. Smith, Senior Attorney, NFIB Small Business 
      Legal Center, National Federation of Independent Business, 
      Washington, DC.............................................    45
    Mr. Todd Phillips, Assistant Professor, Georgia State 
      University, Atlanta, GA....................................    89
Questions and Answers for the Record:
    Questions from Hon. Alford to Mr. Paul Ray and Answers from 
      Mr. Paul Ray...............................................   100
    Questions from Hon. Alford to Mr. Robert Smith and Answers 
      from Mr. Robert Smith......................................   103
    Questions from Hon. Velazquez to Mr. Todd Phillips and 
      Answers from Mr. Todd Phillips.............................   106
Additional Material for the Record:
    H.R. 8033 - the Regulatory Transparency for Small Businesses 
      Act........................................................   115
    The Accurate Accounting of Regulatory Impact Act.............   118
    To amend Title 5, United States Code, to make certain changes 
      in how agencies conduct periodic reviews of agency rules...   121
    To amend Title 5, United States Code, to add the Department 
      of Labor to the covered agency definition for certain 
      regulatory flexibility analysis requirements...............   123
    The Assurance for Small Business Act of 2024.................   125
    The Enhanced Regulatory Flexibility Assessment Act...........   127
    The Regulatory Agenda Clarity Act............................   131
    The Small Business Regulatory Challenge Act of 2024..........   133
    Associated Builders and Contractors (ABC)....................   140
    Competitive Carriers Association (CCA).......................   142
    Job Creators Network.........................................   144
    Regulatory Flexibility Act (RFA) Report: Agencies' 
      Noncompliance with the RFA.................................   145
    U.S. Chamber of Commerce.....................................   196

 
BURDENSOME REGULATIONS: EXAMINING THE BIDEN ADMINISTRATION'S FAILURE TO 
                       CONSIDER SMALL BUSINESSES

                              ----------                              


                        WEDNESDAY, MAY 22, 2024

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:03 a.m., in Room 
2360, Rayburn House Office Building, Hon. Roger Williams 
[chairman of the Committee] presiding.
    Present: Representatives Williams, Luetkemeyer, Stauber, 
Meuser, Molinaro, Bean, Davids, McGarvey, Gluesenkamp Perez, 
Scholten, and Thanedar.
    Chairman WILLIAMS. Okay. Before we get started I want to 
recognize Congressman Luetkemeyer from the great state of 
Missouri to lead us in the Pledge and a prayer.
    Mr. LUETKEMEYER. Thank you, Mr. Chairman. Everybody stand. 
Heavenly Father, this coming weekend is Memorial Day and we 
want to ask your blessing on the lives of those who have served 
our country and died in service. Especially bless their 
families and give them strength to endure the hardships that 
they have to with their loved ones gone and also to relieve the 
hardships of those veterans who survive and are here among us 
today.
    Please lead us today in our negotiations and in our 
endeavors here as we work for the benefit of our constituents 
and great people of this country. We have a lot of issues 
before us so we need your help. We need your leadership. We 
will put our hand in your hand as you lead us to make the right 
decisions and do your work. And in Jesus name we pray, amen.
    The Pledge, please put your hand over your heart.
    I pledge allegiance to the flag of the United States of 
America. And to the Republic for which it stands, one nation 
under God, indivisible, with liberty and justice for all.
    Chairman WILLIAMS. Good morning, everyone, and I now call 
the Committee on Small Business to order. Without objection, 
the Chair is authorized to declare a recess of the committee at 
any time. I now recognize myself for my opening statement.
    Welcome to today's hearing which will focus on how the 
Biden administration's burdensome regulatory agenda has 
negatively impacted Main Street America. I would like to start 
off by thanking our witnesses for being here with us today. 
Your input on these important issues is greatly appreciated.
    One of the top priorities of this committee has been 
combating the burdensome red tape and regulation that hamper 
small businesses across America. On the flip side, since day 
one, this administration has unleashed their regulatory 
onslaught on small businesses across the country.
    Unfortunately, they have repeatedly shown that they do not 
consider the best interests of small business owners when 
making rules and making regulations. The Regulatory Flexibility 
Act was created with the sole purpose of ensuring federal 
agencies consider small businesses during the rulemaking 
process.
    This committee conducted a 15-month investigation and found 
most federal agencies are dodging the RFA's requirements and 
failing to consider the interests of small firms in the 
rulemaking process. All you need to do is to look at the 
numbers.
    All final rules issued by this administration have cost 
over $1.4 trillion and will make over 230 million paperwork 
hours to comply with it. Put simply, the RFA needs to be 
significantly improved.
    Today, in the furtherance of that effort, the committee is 
releasing a staff report detailing all of the problems the 
committee uncovered and offering potential legislative 
solutions. I ask that unanimous consent to enter this report 
into the record, and so ordered.
    Now, because the RFA is now operating as a shield like it 
should, main street is suffering. Every business owner will 
tell you that regulations don't happen in a vacuum. They have a 
real world consequence.
    Complying with the mountains of regulations is no small 
task for a small business. Just a couple of months ago we heard 
from a small business manufacturer in this hearing room that 
his regulatory costs have gone up 460 percent in the last 8 
years. And to make matters worse, he testified that the 
regulations have not made products better or safer.
    This is unacceptable in every way and we aren't giving our 
small businesses and small firms a chance to be successful if 
we continue down the road of regulation.
    Small businesses do not have the luxury of large businesses 
with dedicated compliance departments. When new regulations are 
finalized or changed it is up to the business owner themselves 
to take away from their core responsibilities to understand the 
new requirements.
    In a time when businesses are still struggling with 
stubborn inflation, high interest rates, and a bleak labor 
market, we would not be adding mountains of--we should not be 
adding mountains of regulations as an additional challenge that 
they must overcome.
    So as a small business owner myself for over 52 years, I 
know all too well the consequences that come with piles of 
regulations. Every small business owner knows it, too.
    It is my hope that this hearing those shed further light on 
the issue at hand and that we use this hearing to advance 
solutions that will help Main Street America. To that end, we 
have eight pieces of legislation attached to this hearing, and 
I hope our conversation today will further shape these 
potential problems.
    I want to thank you all again for being here with us and I 
am looking forward to today's conversation.
    And with that, I yield to my distinguished Member from the 
great state of Kansas, Ms. Davids.
    Ms. DAVIDS. Thank you, Chairman.
    Federal regulations provide the rules of the road for 
business nationwide impacting the everyday lives of Americans. 
Throughout this Congress this committee has heard testimony 
from witnesses that have talked about some of the benefits of 
these regulations. For example, the Environmental Protection 
Agency's rules safeguard our nation's air, lands, and waters. 
The Food and Drug Administration regulates products to protect 
and promote public health, and the Department of Labor keeps 
our workplaces safe.
    With that said, we have also heard testimony from small 
businesses that certain regulations can be onerous and 
difficult to comply with.
    Part of our role as Members of the Small Business Committee 
is to recognize the impact regulations have on small businesses 
and work to find ways to balance the shared goal of minimizing 
the burdens and achieving the intended effects of those 
regulations.
    To that end, our committee passed the bipartisan One Stop 
Shop for Small Business Compliance Act in the 117th Congress, 
which was enacted into law. This bill gives small businesses 
nationwide a clearinghouse for regulatory compliance guides 
when dealing with federal rulemaking.
    Democratic Members of this committee have also led on the 
Small Business Regulatory Relief Act introduced by Mr. Mfume, 
which would give the Office of the National Ombudsman the 
authority to work with federal agencies and provide meaningful 
compliance assistance and increase outreach to better serve our 
small businesses.
    Hearing more directly from small businesses affected by 
federal regulations will greatly improve the rulemaking 
process, and this administration has taken steps to broaden 
public engagement and community participation in that 
rulemaking process.
    As part of the President's executive order to modernize 
regulatory review, agencies are encouraged to hold listening 
sessions, to hear directly from impacted communities, and 
reduce barriers to participation.
    President Biden has also issued an executive order to 
promote competition in the American economy. Americans have 
been frustrated in recent years by increased costs driven by a 
lack of competition, hampered supply chains, and unfair price 
gouging. Corporate consolidation is accelerating, which is 
hurting main street businesses, including small grocers, local 
stores, and innovators in the tech industry.
    I am looking forward to hearing from our witnesses today 
about the impact of these executive orders, especially on 
boosting competition for entrepreneurs. And I firmly believe 
that smart, well-crafted, commonsense regulations have the 
potential to unleash innovation and provide critical health, 
safety, and environmental protections.
    My hope is that we strive to find the right balance today 
to promote solutions that are truly going to benefit small 
businesses and not special interests. Thank you. I yield back.
    Chairman WILLIAMS. The lady yields back.
    And now I will introduce our witnesses. Now, the first 
witness here with us today is the Honorable Paul Ray. Mr. Ray 
is the director of the Roe Institute for Economic and Policy 
Studies at the Heritage Foundation located right here in 
Washington, D.C. At the Heritage Foundation, Mr. Ray's research 
focuses on administrative law and policy and is a frequent 
speaker on the federal regulatory system.
    Prior to his current role, Mr. Ray served as the 
administrator of the Office of Information and Regulatory 
Affairs within the White House's Office of Management and 
Budget. And as the administrator Mr. Ray supervised the review 
of hundreds of regulations and led federal efforts on 
regulatory reform.
    Mr. Ray is a graduate of Harvard Law School where he served 
on the Harvard Law Review and holds a bachelor's degree from 
Hillsdale College. Thank you, Mr. Ray, for being with us now. I 
look forward to your conversation with you, okay?
    Our next witness here with us today is Mr. Dan Goldbeck. 
Mr. Goldbeck is the director of regulatory policy at the 
American Action Forum located here in D.C., and Mr. Goldbeck's 
research focuses on notable developments in the administrative 
state, the accumulation of paperwork requirements, and 
executive and legislative regulatory reform efforts. His 
research and expertise have appeared in a wide variety of media 
outlets, including the New York Times, The Bloomberg News, The 
Washington Examiner, The Hill, Investor's Business Daily, and 
Federal News Network.
    Mr. Goldbeck earned his bachelor of arts in political 
science with a history minor from the University of California, 
Santa Barbara. And thank you for joining us today, and we look 
forward to conversation with you.
    Our next witness here with us today is Mr. Rob Smith. Mr. 
Smith is senior attorney in the National Federation of 
Independent Businesses, also known as the NFIB located here in 
Washington. Since joining the NFIB, Mr. Smith has authored 
amicus briefs for cases affecting small businesses, including 
in the Supreme Court, written working papers on important 
issues to the small business community, including the 
Regulatory Flexibility Act, and created posts informing small 
businesses owners of new legal developments.
    Mr. Smith earned his bachelor's degree in criminal justice 
and political science at the University of Michigan, Dearborn, 
and went on to earn his J.D. from George Mason University's 
Antonin Scalia Law School. Thank you for joining us here today, 
and I am looking forward to our conversation.
    I now recognize Ms. Davids to briefly introduce our last 
witness appearing before us today.
    Ms. DAVIDS. Thank you, Chairman.
    The minority witness today is Todd Phillips, who is an 
assistant professor at Georgia State University and has a 
wealth of experience and knowledge in this area, and I 
appreciate you taking the time today to come and testify before 
the committee. I yield back.
    Chairman WILLIAMS. The lady yields back. Thank you.
    And we appreciate, again, all of you being here today.
    So I will remind all of you oral testimony is restricted to 
5 minutes in length. And if you see the light turn red in front 
of you it means you have concluded and you should wrap up your 
testimony. And if you hear this, I am tapping to remind the red 
light that you are done, okay?
    And so with that being said, I now recognize the Honorable 
Paul Ray for his 5-minute opening remarks.

STATEMENTS OF PAUL J. RAY, DIRECTOR, ROE INSTITUTE FOR ECONOMIC 
   POLICY STUDIES, THE HERITAGE FOUNDATION; DANIEL GOLDBECK, 
DIRECTOR OF REGULATORY POLICY, AMERICAN ACTION FORUM; ROBERT T. 
   SMITH, SENIOR ATTORNEY, NFIB SMALL BUSINESS LEGAL CENTER, 
NATIONAL FEDERATION OF INDEPENDENT BUSINESS; AND TODD PHILLIPS, 
         ASSISTANT PROFESSOR, GEORGIA STATE UNIVERSITY

  STATEMENT OF PAUL RAY, DIRECTOR, ROE INSTITUTE FOR ECONOMIC 
                POLICY, THE HERITAGE FOUNDATION

    Mr. RAY. Thank you, Mr. Chairman, Vice Chairman 
Luetkemeyer, Ms. Davids, and distinguished Members of the 
committee, it is a real honor to be here with you today. Thank 
you for the invitation.
    I am the director of the Heritage Foundation's Roe 
Institute for Economic Policy Studies where we focus on 
research and education about economic and regulatory issues. As 
the Chair mentioned, previously from 2018 through 2021 I served 
in the Office of Information and Regulatory Affairs within OMB.
    For the last year of that period I had the honor to serve 
as administrator of OIRA. In that capacity, I had the chance to 
form views about many of the ways our regulatory system affects 
the ability of small businesses to survive and thrive.
    The views I express in this testimony are my own and should 
not be construed as representing any official position of the 
Heritage Foundation.
    As this committee's hearings have recently documented, 
America's regulatory system fails small businesses. In 
particular, the system does not provide a predictable pro-
growth environment that small businesses need.
    Today I would like to focus on some legislative initiatives 
that would help small businesses as they navigate the 
regulatory system.
    The most obvious place to begin is the Regulatory 
Flexibility Act, but precisely because the RFA often garners so 
much attention in discussions about small business and 
regulation, I am going to talk about other potential statutory 
reforms that could help small businesses obtain the predictable 
pro-growth environment they need. After all, our small 
businesses need all the help they can get. Merely admitting the 
RFA, while essential, won't be enough.
    One major problem with today's regulatory system is that it 
allows regulations to be issued, amended, and rescinded 
relatively easily, so agencies change them often and in large 
numbers. These frequent changes are tremendously disruptive for 
small business which faces much greater difficulty than their 
larger peers in predicting and coping with alterations in 
governing law.
    The reason for the frenetic pace of change is simply that 
the executive finds it much easier to issue regulations than 
Congress does to legislate. One bill that would help curb the 
alarming pace of regulatory change is the Regulations from the 
Executive in Need of Scrutiny, or REINS, Act.
    The REINS Act would require affirmative congressional 
approval for the most economically significant regulations. 
This approach would effectively import back into the regulatory 
process the deliberateness of Article I's legislative process, 
stabilizing the regulatory environment for our small 
businesses.
    To survive and succeed under a regulatory system as mutable 
as the current one, businesses need to be able to predict 
future regulatory changes as far in advance as possible. But 
small businesses often lack the resources to monitor future 
regulatory developments as closely as their larger competitors.
    One solution is the All Economic Regulations Are 
Transparent, or ALERT, Act. The bill would require agencies to 
submit monthly information to OIRA about each pending rule. 
This information would include the agencies' latest estimates 
of the completion dates of the rulemakings.
    The bill would require OIRA to post the information 
received from agencies online. By requiring online publication 
of frequent updates to anticipated rulemaking timelines, the 
ALERT Act would level the playing field between large and small 
business, ensuring that all businesses can plan efficiently in 
light of the most recent developments in ongoing rulemakings.
    Another major problem small businesses face is that today's 
regulatory system fails to provide the pro-growth environment 
they need to thrive. Federal agencies impose enormous costs on 
business owners and consumers, as the Chair mentioned. One 
solution is for politically accountable actors to set a 
regulatory budget.
    The Renewing Efficiency in Government by Budgeting, or REG 
Budgeting Act, would direct the OMB director to set an annual 
regulatory budget for the federal government as a whole and for 
each agency.
    It would forbid agencies to make a rule effective if doing 
so would push the author agency over its budget unless the 
agency first obtains permission from Congress. And it would 
require congressional approval of any positive regulatory 
budget.
    Issuing regulations is not the only way agencies shape 
private sector conduct. They also issue guidance documents 
which, though they lack the force and effect of law, can 
powerfully influence regulated parties. Often, small businesses 
have trouble simply finding agency guidance, which historically 
has been housed on websites or even in filing cabinets 
scattered across the government.
    The Guidance Out of Darkness, or GOOD, Act would ameliorate 
the difficulties of small businesses by requiring each agency 
to post its guidance on a single website. Guidance not featured 
on an agency's guidance portal would be rescinded.
    Finding guidance is not the only difficulty small 
businesses have. Unlike more sophisticated competitors, they 
may not understand the difference between non-binding guidance 
and binding regulations. The Guidance Clarity Act would require 
agencies to provide a disclaimer explaining the nonbinding 
quality of guidance on the first page of each guidance 
document.
    These are some of the measures that Congress could take to 
level the playing field and give small businesses the stable, 
pro-growth environment they need. Thank you.
    Chairman WILLIAMS. The gentleman yields back.
    I now recognize Mr. Dan Goldbeck for his 5-minute opening 
remarks.

   STATEMENT OF DAN GOLDBECK, DIRECTOR OF REGULATORY POLICY, 
                     AMERICAN ACTION FORUM

    Mr. GOLDBECK. Chairman Williams, Congresswoman Davids, and 
Members of the committee, thank you for the opportunity to 
discuss the economic impacts small businesses face from recent 
rulemakings and ways agencies can improve how they examine and 
adjust these rulemakings under the Regulatory Flexibility Act 
to provide some degree of regulatory relief.
    The following is a summation of points made in my written 
testimony focusing on, one, the current overall regulatory 
environment; two, rules that particularly affect small 
businesses; and three, issues agencies should consider further 
under the RFA.
    First, as of May 17, the total estimated cost for final 
rules under the current administration adds up to more than 
$1.6 trillion. For perspective, this sum exceeds the fiscal 
year 2024 federal budget deficit by more than $100 billion and 
is roughly equivalent to the GDP of Spain. What is more is that 
a sizable portion of these costs have hit the books in only the 
past few weeks.
    As of early April, the Biden regulatory cost total 
surpassed the total imposed on the entire first term of the 
Obama administration. Then, partially due to a single rule, the 
EPA Tailpipe Emissions Rule with $870 billion in costs, the 
Biden total jumped well past the entirety of the Obama 
administration into trillion-dollar territory. Ensuing weeks 
have seen dozens of notable rulemakings that continue to push 
the total upward and upward at a rapid clip.
    Second, in examining the cost of these rules on the 
administration I found 36 that contained some sort of partial 
acknowledgment of small business impacts. The total of these 
rules adds up to approximately $235 billion.
    The most significant rule here is the FinCEN rule on 
beneficial ownership reporting requirements with more than $84 
billion in costs. FinCEN states that for purposes of estimating 
costs to small businesses, all reporting companies are small 
businesses. Thus, this rule is an example of regulation where 
small businesses bear the entirety of the cost burden.
    Another key example is the recent rule from CMS setting 
staffing minimums for nursing homes. CMS estimates that the 
cost involved with meeting these requirements will be more than 
$43 billion. The agency admits that, `` 95 percent of the 
healthcare entities impacted are considered small businesses.''
    But since the cost versus revenue ratio, at roughly 2.3 
percent, is apparently just below the 3 percent threshold that 
CMS uses under the RFA, the agency has declared that, `` This 
final rule will not have a significant economic impact on a 
substantial number of small entities.''
    Third and finally, and I go into more detail on these in my 
written testimony, I believe these examples and others 
highlight the need for improvements to the RFA. Agencies ought 
to consider cumulative impacts more.
    For instance, the nursing home rule may not cross the RFA 
threshold on its own, but it is certainly not the only 
regulation these facilities must respond to.
    Any given rule may be well-intentioned and defensible as a 
standalone measure, but in real-world practice multiple rules 
begin to add up quickly, especially if such new requirements 
all become effective within a relatively short timeframe.
    Agencies also need to further examine indirect costs to 
businesses, small businesses. Take the EPA Tailpipe Rule. It 
doesn't directly regulate small businesses, but given its 
magnitude there are almost certainly downstream effects. If it 
leads to material price increases on vehicles, which EPA's 
analysis suggests is possible on some level, then they now have 
an impact on small businesses like construction companies that 
often have fleets of vehicles to manage.
    Furthermore, agencies simply need to do better at 
implementing the RFA. Last year in my analysis of the Office of 
Advocacy's report on our agency RFA and compliance, I found 
that agencies produced the lowest amount of small business 
savings in a decade. This was despite high levels of rulemaking 
activity and high levels of advocacy input into those 
rulemakings.
    The RA has been around for more than 40 years across 
administrations and Congresses of both parties, serving as an 
important tool in helping to better craft regulations by 
accounting for the inherent asymmetries small businesses face 
in complying with regulatory requirements versus large 
businesses.
    Such adjustments are not exercises in wanton deregulation 
but rather changes made at the margins providing targeted 
relief to the entities that need it the most. Now in this 
current period of unprecedented regulatory activity overall, it 
is even more important that agencies refocus and expand their 
efforts in addressing these concerns.
    Thank you. I look forward to your questions.
    Chairman WILLIAMS. The gentleman yields back.
    I now recognize Mr. Rob Smith for 5-minute opening remarks.

STATEMENT OF ROB SMITH, SENIOR ATTORNEY, NATIONAL FEDERATION OF 
                     INDEPENDENT BUSINESSES

    Mr. SMITH. Chairman Williams, Congresswoman Davids, and 
Members of the committee, on behalf of the National Federation 
of Independent Business, NFIB, thank you for inviting me to 
testify today about the impact of burdensome regulations on 
small businesses.
    My name is Rob Smith, and I am a senior attorney with the 
NFIB Small Business Legal Center. NFIB is the nation's leading 
small business association consisting of nearly 300,000 small 
business members.
    NFIB's mission is to protect the right of its members to 
own, operate, and grow their businesses. The average NFIB 
member has 8 employees and the majority of them have been in 
business for over 15 years. In the words of President Biden, 
they are `` the heart and soul of our communities.''
    Small businesses employ almost half of this country's 
private sector workforce and account for 99.9 percent of all 
American businesses. Thus, for America to succeed, small 
businesses must succeed. Helping small businesses is not a 
Republican or Democrat issue. The Regulatory Flexibility Act 
demonstrates this bipartisan understanding.
    Republicans and Democrats have joined together to recognize 
that one-size-fits-all government regulations are ineffective 
and inefficient. This was true over 40 years ago when Congress 
unanimously passed the RFA and President Carter signed it into 
law.
    It was also true in 1996 when a Republican-led Congress 
updated the RFA and President Clinton signed it into law. I 
hope that same bipartisanship holds true today.
    The RFA was meant to address the disproportionate impact of 
federal regulations on small businesses. Unfortunately, many 
agencies have figured out how to bypass the law's requirements. 
With my testimony today I would like to address two points: 
first, how the regulatory burden disproportionately harms small 
businesses, and second, NFIB's work examining the RFA.
    As discussed in my written statement, the regulatory burden 
on small businesses has drastically increased since the RFA was 
signed into law. This burden is now one of the biggest 
obstacles to small business success.
    NFIB members currently and historically have ranked 
unreasonable government regulations as a top 10, if not a top 
5, problem in running their business.
    According to one study, the total regulatory cost in 2022 
exceeded $3 trillion and businesses with less than 50 employees 
are paying over $50,000 a year per employee. This current 
accumulation of regulations and regulatory costs is 
unsustainable for small businesses.
    Moving to the RFA, in 2023 NFIB examined the RFA compliance 
during the 117th Congress. We exclusively relied on SBA Office 
of Advocacy comment letters to determine if an agency complied. 
Therefore, the determination did not come from NFIB but from 
the administration itself.
    This analysis revealed a few disturbing trends. First, 
agencies routinely failed to comply with the RFA. There were at 
least 28 instances of RFA noncompliance during the 117th 
Congress.
    Second, certain agencies, such as the EPA and Department of 
Labor, are consistent violators.
    Third, agencies often bypass the RFA requirements by 
improperly using the Section 605(b) certification to skip the 
small business impact analyses. Nearly half of the 28 instances 
of RFA noncompliance included an improper certification. Two 
examples are the Waters of the United States rule and the 
Department of Labor's Tip Credit rule.
    Finally, agencies misrepresent the cost of regulations on 
small businesses by ignoring the indirect costs of regulations 
and severely underestimating the direct costs.
    Now, how can Congress fix this problem? Congress should 
require that agencies consider both the direct and indirect 
costs of regulations on small businesses. Many bills have 
sought to do this, including a 2007 Democrat-led bill that I 
highlighted in my written testimony. This should be a starting 
point.
    Additionally, Congress should strengthen the SBA Office of 
Advocacy's role in upholding the RFA. The bipartisan Prove It 
Act of 2024 achieves both aims. It has been approved by the 
Judiciary Committee, and I hope that this committee will do the 
same.
    On behalf of NFIB's nearly 300,000 small business members, 
thank you for holding this hearing and inviting me to speak. I 
look forward to our discussion.
    Chairman WILLIAMS. The gentleman yields back.
    I now recognize Mr. Todd Phillips for his 5-minute opening 
remarks.

STATEMENT OF TODD PHILLIPS, ASSISTANT PROFESSOR, GEORGIA STATE 
                           UNIVERSITY

    Mr. PHILLIPS. Chairman Williams, Ranking Member Davids, and 
Members of the committee, thank you for the opportunity to 
testify. I am Todd Phillips, assistant professor of legal 
studies at Georgia State University.
    I previously served as an attorney advisor working on 
administrative process in two federal agencies and as counsel 
with what was then the House Oversight and Government Reform 
Committee. My research focuses include administrative law and 
the rulemaking process. My testimony is my own and not of any 
organization.
    The Administrative Procedure Act provides for notice and 
comment when agencies are writing regulations, but for too long 
agencies have primarily heard from large businesses that hire 
high-priced lobbyists and have lacked important input from 
entrepreneurs and small businesses.
    To address this disparity, President Biden signed Executive 
Order 14094, Modernizing Regulatory Review, which requires 
agencies to engage in expanded outreach to ensure the 
meaningful participation of those affected by regulations, 
including small businesses.
    Simply ensuring small business' participation in 
rulemakings is insufficient, however, and rules must be crafted 
to ensure that small businesses survive and thrive. To that 
end, President Biden's OIRA updated Circular A-4 to require 
agencies to strive to reduce small business' compliance 
burdens.
    Moreover, a centerpiece of President Biden's regulatory 
agenda is to increase competition in all areas of the economy 
so that small businesses can effectively compete in the 
marketplace against their larger competitors. Unfair methods of 
competition prevent small businesses from hiring workers and 
obtaining fairly priced inputs, from selling their goods and 
services or fairly advertising their products to the public, 
and from contributing to a growing economy.
    Among the administration's many efforts are updated bank 
merger guidelines to ensure continued lending to small 
businesses, lawsuits against Amazon and Apple for unfairly 
favoring their own products over small business competitors, 
regulations that prohibit pay-for-play Internet fast lanes and 
noncompete agreements, and actions to tackle junk fees that 
tilt the playing field against honest businesses that are 
transparent with their customers and towards their larger 
competitors that profit by hiding the ball from consumers, 
leading to a race to the bottom.
    I am concerned that two bills the committee is considering 
would, if enacted, halt these efforts by unnecessarily slowing 
down the regulatory process without providing corresponding 
benefits to small businesses. The Prove It Act would 
unnecessarily lengthen the rulemaking process, permit 
unnecessary litigation, and delay rules' effectiveness without 
consideration for the benefit small businesses receive from 
regulation.
    I oppose this bill for many reasons that I articulate in my 
written testimony, but among them are that the act would allow 
litigation over initial regulatory flexibility analyses for the 
first time, ignore long-held principles of standing to allow 
large companies to launder their complaints under the guise of 
promoting small businesses, and give courts broad latitude to 
retroactively impose analysis requirements on agencies that 
they cannot possibly anticipate.
    In addition, the Prove It Act's penalty for failing to 
conduct retrospective reviews prohibiting rules from being 
enforced against any business, not just small businesses, is 
unnecessarily severe.
    Next, the Regulatory Transparency for Small Businesses Act 
would impose costs on agencies without any corresponding 
benefit for small businesses. Again, I oppose this bill for 
reasons that I articulate in my written testimony, including 
that it is simply a solution in search of a problem
    The Regulatory Flexibility Act currently requires agencies 
to provide a factual basis for certifying that the rules will 
not have a significant economic impact on a substantial number 
of small entities and subjects those factual bases to judicial 
review.
    Agencies must already demonstrate that they were not 
arbitrary or capricious. Imposing new requirements on those 
analyses would simply provide no benefit.
    Contrary to those two bills, the committee is considering 
the Small Business Regulatory Relief Act, legislation that 
would benefit small businesses. This bill would provide the 
Small Business Administration's national ombudsman new 
authority to assist federal agencies with better helping small 
businesses, making government work more effectively and 
efficiently.
    Today, the ombudsman role is to assist small businesses 
when they are being investigated or are the subject of 
compliance or enforcement activities, and the Small Business 
Regulatory Relief Act would expand the authority of the 
ombudsman to work with small businesses before they get into 
trouble, helping small businesses avoid being the subject of 
investigations or enforcement actions in the first place.
    I wish to make one final point. Consideration of 
regulations' costs must include corresponding considerations of 
their benefits. The American Action Forum's assertions that the 
Biden administration has finalized 930 rules imposing combined 
costs of $1.63 trillion tells you nothing about the sensibility 
of those regulations as their analyses lack a similar 
quantification of regulatory benefits.
    Yet in a single rule, the EPA has finalized a policy that 
provides quantified benefits of between $1.7 trillion and $2.1 
trillion, far in excess of the total cost AFF has claimed for 
all Biden administration rules.
    Thank you and I am happy to answer any questions.
    Chairman WILLIAMS. The gentleman yields back.
    And I now move the Member questions under the 5-minute 
rule. I recognize myself for 5 minutes.
    Main street's concerns should revolve around meeting 
payroll, supporting their employees, and growing their 
businesses. Unfortunately, like you all have highlighted today, 
America's small businesses must spend valuable time and 
resources complying with regulations meant to their slow 
success.
    Over the last 15 months the committee has been sending 
information requests to agencies rules they put out, and we 
have often found that if an economic analysis took place it 
would often fail to take into account the cumulative effect of 
their regulations coming out of Washington.
    So, Mr. Ray, given your past experience working on 
regulation in the Trump administration, how would you recommend 
that we ensure agencies don't only view their actions in a 
vacuum and turn a blind eye to the other regulations harming 
small businesses?
    Mr. RAY. Mr. Chairman, thank you for the question. I think 
absolutely essential to remedying this problem which you 
highlight and which is indeed a very grave problem, would be 
some sort of regulatory budget. The budget should apply both at 
the level of individual agencies and at the level of the 
federal government as a whole.
    Any given family who is trying to make ends meet has to 
think about all their expenses put together. Only federal 
agencies are able to think just about the costs that they are 
imposing in particular rulemakings or, in the best case 
scenario, in a suite of rulemakings.
    Federal agencies and the federal regulatory system as a 
whole should have to play by the same rules that American 
families do when they engage in a holistic budgeting exercise.
    Chairman WILLIAMS. Mr. Goldbeck, the numbers you stated in 
your testimony are jarring and make it blatantly clear that the 
Biden administration is pushing an agenda out of line with the 
best interests of America's job creators.
    You highlight how some rules are hard to quantify or just 
below the RFA threshold and thus do not require an analysis to 
be done, despite having a clear impact on small business. So my 
question is what changes can be made to make agencies be more 
accurate in their assessment of a rule's impact?
    Mr. GOLDBECK. Thank you, Mr. Chairman. One aspect I think 
that, again to my written testimony on with that, is that 
particularly with the one I cite, you have the 3 percent 
threshold that has just kind of become standard practice for 
CMS in this case. But you have across agencies different 
thresholds for this cost-to-revenue ratio.
    And part of that is to be flexible for different industries 
having different profit margins and everything, but I think it 
is important to re-examine those ratios to see if they are 
truly accurate. It seems like they have kind of settled into a 
basic practice rather than really come up with a solid estimate 
there.
    Chairman WILLIAMS. There is not much a business owner can 
do once a regulation has gone final. They have already spent 
the time and resources to understand the regulation and how 
they plan on complying and while some things can be undone in 
future administrations, the whipsaw back and forth is not 
beneficial for small business. So this is why it is so 
important to get the appropriate safeguards in place to protect 
small business on the front end.
    So, Mr. Smith, in the time we have left, both NFIB's and 
this committee's investigations found that agencies treat the 
RFA like a check-the-box exercise rather than a way to protect 
small businesses from the worst regulations coming from D.C. It 
is my sincere hope that Members on this committee can come 
together to find a bipartisan solution to address the 
shortcomings of the RFA.
    So what do you believe are the first steps Congress should 
take in reforming the RFA and ensuring it works for small 
businesses like it is intended?
    Mr. SMITH. Thank you, Chairman, for the question. I think 
there are a couple of steps that I would recommend. First, 
agencies must be forced to consider the indirect costs of the 
regulations on small businesses. Okay. To allude to a point 
that Mr. Ray mentioned, it is when the normal person thinks of 
what they are spending they are thinking of direct costs and 
indirect costs. They are thinking of the whole picture.
    Without thinking of indirect costs, which is the current 
environment, you are only looking at half the picture and small 
businesses oftentimes are hurt worse by the indirect costs than 
the direct costs.
    And I could cite a multitude of rules for this point, the 
Waters of the United States rule where EPA claimed it wasn't 
even regulating businesses, but businesses that own land would, 
obviously, be subject to that rule. And there are other rules 
as well, such as interchange fee rules from the Federal 
Reserve. Anything that can harm a small business needs to be 
taken into account.
    Second and very important, that I am sure your report 
probably touches on that ours found as well, the certification 
is being abused, the 605(b) certification. Agencies are abusing 
that to try and get out of having to perform small business 
impact analyses that the RFA requires.
    I am not going to say that they are doing it in bad faith, 
but it appears, based on what we have looked at, that they are 
just trying to check the box. And whenever they can they are 
ignoring their requirements and the certification is the way 
that they can do that.
    So those would be the two things I would recommend.
    Chairman WILLIAMS. Okay, thank you.
    And now I yield my time to Ms. Davids for her questions.
    Ms. DAVIDS. Thank you, Chairman.
    And thank you again to all of our witnesses for being here 
to testify and share your recommendations and expertise.
    I want to check in real quick on something. Yesterday 
afternoon I know that committee majority uploaded eight 
regulatory reform bills ranging from, like, two to seven pages 
to the committee's repository. I am just curious for each 
witness, can you tell me when you received a copy of the bills 
that were made available on the committee repository yesterday?
    Mr. RAY. I cannot.
    Ms. DAVIDS. Okay.
    Mr. GOLDBECK. I haven't received.
    Mr. SMITH. I don't know what bills you are referring to.
    Mr. PHILLIPS. I only saw them yesterday afternoon when they 
were posted online.
    Ms. DAVIDS. Oh, okay. Okay. Just thank you, checking in on 
that. Like, I appreciate the chance for us to get to talk about 
regulatory burdens and what can sometimes be onerous for small 
business owners for sure, but regulations can also be an 
important tool to improve our nation's air and water, to ensure 
that food and medicines are safe and effective, and make sure 
that consumer products are not harmful.
    The Small Business Committee plays an important role in 
ensuring that federal guidance doesn't burden small businesses 
but allows them to thrive and compete certainly with major 
corporations. And a key part of that is the Regulatory 
Flexibility Act, and for the last several decades this law has 
required federal agencies to consider their effects on 
entrepreneurs.
    It has also given small businesses nationwide additional 
opportunities to, hopefully, participate in the rulemaking 
process, including small business advocacy review panels for 
certain agencies.
    Mr. Phillips, I was curious, in your opinion, can you tell 
us a bit about what might be working well with the Regulatory 
Flexibility Act and what might not be? What do we need to do 
to----
    Mr. PHILLIPS. Sure.
    Ms. DAVIDS.--improve some of the process for our small 
businesses out there?
    Mr. PHILLIPS. One of the things to remember is that the 
Regulatory Flexibility Act was enacted to allow small 
businesses to really participate in the rulemaking process. And 
to that end, they have been able to do so.
    They have been able to do so effectively. SBREFA panels do 
allow small businesses to participate. Initial and final 
regulatory flexibility analyses, allow small businesses 
information that helps them provide effective comments to the 
agencies.
    I am especially proud that this administration has 
increased its effort to go out into the country to solicit the 
opinions of small businesses. I think that one of the things 
that could be improved here is really helping small businesses 
end up complying with the regulations once they have been 
enacted.
    To that end, that is why I appreciate the Small Business 
Regulatory Relief Act. It would allow the SBA's ombudsman to 
help small businesses figure out how to comply with these 
regulations that do, yes, impose costs, but also do provide 
benefits to them. So that is my recommendation.
    Ms. DAVIDS. And can you maybe talk a little bit more about 
what are some of the specifics? You said that in your opinion 
the current administration is doing a bit more outreach to try 
to engage.
    I know we heard--I believe Mr. Smith mentioned, you know, 
inviting people to join is not the same thing as actively 
taking the thoughts, opinions, and impacts of our small 
business owners. Can you talk a little bit about what are some 
of the specific things you are seeing that you think constitute 
improvement?
    Mr. PHILLIPS. The President signed Executive Order 14094 on 
modernizing regulatory review that I spoke about. His OIRA has 
issued guidance on broadening public participation and 
community engagement in the rulemaking process.
    The Administrative Conference of the United States under 
President Biden released a collection of 16 principles for 
ensuring public engagement and many of these things that they 
encourage agencies to do or are requiring agencies to do is 
hosting Internet and social media forums, using focus groups, 
using advisory committees, holding public meetings, hearings, 
listening sessions out in the country, stuff like that.
    Ms. DAVIDS. Okay. Well, thank you so much, and I know 
entrepreneurs nationwide don't always have time to give 
feedback to the SBA.
    But I yield back.
    Chairman WILLIAMS. The lady yields her time back.
    I now recognize Congressman Luetkemeyer from the great 
state of Missouri for 5 minutes.
    Mr. LUETKEMEYER. Thank you, Mr. Chairman.
    I would like to sort of set the stage for my discussion 
this morning. Here is the Wall Street Journal from today. On 
the second page we find a headline that says, `` Survey finds 
parents suffer financially.''
    In the article it says that, `` The parents living with 
children under the age of 18 said they were doing all right 
financially in 2023. That number is down 5 percent from 2022, 
and more than a third of the survey respondents, including the 
parents or people who did not have children, cited inflation as 
their biggest financial challenge.''
    So what are we talking about this morning? We are talking 
about rules and regulations and the cost of complying with 
that.
    And, Mr. Goldbeck, your colleague at the American Action 
Forum, Mr. Holtz-Eakin, was here a while back, about a year 
ago, and indicated to us that one of the four main drivers of 
inflation are the rules and regulations. So that is we are 
talking about today the impact of rules and regulations and 
increased cost, number 1, causing inflation; and number 2, the 
cost of complying with that with the small businesses itself.
    So one of the things that we are talking about here, and I 
have got a bill, the Regulatory Transparency Small Business 
Act, what Mr. Phillips doesn't seem to like, but it is a great 
bill from the standpoint that what it does is it would 
encourage an agency to include information that a rule will not 
have a significant economic impact on a sustainable number of 
small businesses. And in its certification process that it will 
estimate the total cost of compliance for a small entity 
affected by the measure.
    Mr. Goldbeck, what do you think about that rule or that 
bill?
    Mr. GOLDBECK. I think any sort of legislation that helps to 
strengthen the process of determining a significant impact on 
small businesses is welcome. I think there is clear evidence 
from both the Office of Advocacy and some of my panel mates 
here that agencies are not meaningfully responding to these 
requirements.
    Mr. LUETKEMEYER. You know, we talked a little about the 
cost of these things, and I think a cost-benefit analysis to 
show what the benefit is versus the cost of it. This is why 
every single rule needs to be looked at very carefully. They 
may think it is okay, but the overall cost indicates it is 
going to cost more than the benefit.
    It may be well-intentioned, but the cost is going to 
override the actual benefit of what you are trying to do here. 
This is why it is important that you have these cost-benefit 
analysis done on every single rule.
    Now, we talked about thresholds a little bit of how it is 
implemented. I think we need to have a--I don't think we need 
to have a threshold on any of these things when it comes to 
cost-benefit rules. They need to have every single rule have a 
cost-benefit analysis on it.
    What do you think about that, Mr. Smith?
    Mr. SMITH. I would agree, Congressman. Agencies should be 
forced to consider all costs along with benefits of each rule 
that they----
    Mr. LUETKEMEYER. Yeah, I do. That is a fair way to go about 
it. If the rule is worthwhile let's have it. If it is not, get 
it fixed or change it to where it is not going to cost more 
than the benefits of it.
    So, Mr. Goldbeck, you talked about regulations being one of 
the biggest problems of small businesses here and the agencies 
not complying with the RFA. How do we enforce the RFA? How do 
we enforce the rules and regulations, this situation that we 
are talking about this morning here of forcing them to do their 
job of estimating costs?
    Mr. GOLDBECK. Yes, Congressman. In my testimony I talked 
about the most recent Office of Advocacy report on RFA 
compliance, and what I found when I looked at it.
    Compared to past reports, the agencies came up with only 
about $73 million in savings, which was far lower than any year 
in the decade preceding it. In the preceding decade I think it 
averaged about $1.7 billion in small business savings per year 
from Office of Advocacy input to agencies.
    And so I think that that shows a clear pattern that 
agencies are not meaningfully responding to this input and not 
making the necessary adjustments to these rules, even though 
you keep seeing more and more rules come across the transom.
    Mr. LUETKEMEYER. You know, Mr. Holtz-Eakin testified last 
year when he was here that this administration was costing 
about $150 billion per year to businesses in new regulations 
that they were putting out. And now that estimate is for the 
first 4 months of this year a trillion dollars in costs.
    And I think all of you alluded to that number. That is 
staggering. It is staggering especially when you figure that it 
has got to go to--you know, regulations are like a tax 
increase. It takes money out of the system so businesses have 
less money to spend on employees, research, expansion, whatever 
it may be and as a result it is very, very anti-economic.
    It actually harms and that is a case that is not usually 
taken into consideration. Is that right, Mr. Smith?
    Mr. SMITH. That is correct. I actually spoke to a Member of 
ours earlier this month who said she spends half of each day on 
regulatory compliance.
    Mr. LUETKEMEYER. That is not making her any money, is it?
    Mr. SMITH. No, sir, it is not.
    Mr. LUETKEMEYER. Well, I thank all of you for being here 
this morning. My time is about to expire and I yield back to 
the Chairman.
    Chairman WILLIAMS. The gentleman yields back.
    I now recognize Representative McGarvey from the great 
state of Kentucky for 5 minutes.
    Mr. MCGARVEY. Thank you, Mr. Chairman.
    I appreciate everyone being here today. You know, I will 
say this is our fifth hearing so far since we have been on this 
committee that is focused on what we call burdensome 
regulations.
    And before I got to Congress I was an attorney and part of 
my practice was representing small businesses. I have seen 
rules and regulations that can be burdensome for small 
businesses. I have also seen rules and regulations that have 
helped small businesses in my hometown of Louisville, Kentucky.
    And so I think just like anything when we talk about it, 
maybe it is the lawyer in me, but we are freaked out by words 
like `` never'' and `` always'' . But, you know, you can't say 
that all regulations are good. You cannot say that all 
regulations are bad, and it is finding some balance here.
    So, like, I will give you an example of some things we have 
talked about in this. Last week we talked about--we had 
Administrator Frost here. We had a constructive discussion 
about lending to small businesses and how we get more capital 
in the hands of small businesses.
    And, of course, I have heard people here talk today about 
making money. Mr. Luetkemeyer just talked about businesses 
making money. So let's talk about small businesses making money 
and how we can do that through this committee and through rules 
and regulations.
    Each federal agency is required, required of course by rule 
or regulation, to have a small business contracting goal of 23 
percent. And agencies must cover each of the subcategory goals 
like women-owned businesses, service-disabled veteran-owned 
small businesses, HUBZones.
    Guess what the impact is? The impact of this rule and 
regulation is that the federal government awarded 26.5 percent 
of federal contract dollars to small businesses, 26.5 percent. 
That is that is nearly a quarter of contracting. It might not 
seem like a lot, but it is $162.9 billion that are going to our 
small businesses.
    So in the interest of that sort of spirit of balance, and 
we are talking about rules and regulations, I want to know a 
little bit, too, about what happens if we deregulate some of 
these things?
    So, Mr. Phillips, are there costs of deregulation that are 
borne by small businesses and their employers?
    Mr. PHILLIPS. Absolutely. Every regulation has some costs 
and also has benefits. When you roll back regulations that 
businesses have already been complying with, rolling 
regulations back places additional burdens on them. They need 
to understand what the new requirements are. This flip-flopping 
is just very, very difficult for businesses. It imposes 
significant costs.
    Mr. MCGARVEY. You know, and I think all of us on this 
committee would agree small businesses make up the backbone of 
our economy. They are a wonderful part of the fabric of my 
community in Louisville and, of course, we do hear complaints 
from small businesses in things that they have to deal with.
    One of the complaints I hear, and my guess is that many 
other Members of this committee hear the same thing, is that 
they don't like the inconsistency. And so would you say that 
setting those regulations or rolling them back every election 
cycle is something that is confusing, good or bad for small 
business owners?
    Mr. PHILLIPS. No. It is definitely bad. Small businesses, 
just like all businesses, need consistency and when there is 
inconsistency--when there is flip-flopping, rolling back and 
putting in place new regulations--it imposes costs on everyone.
    One of my issue areas is banking and financial regulation, 
and small banks really, really, really dislike when a new 
administration comes in and starts rolling back everything. 
They need to update their software. They need to get new 
software. It is just very burdensome to comply with such 
changes.
    Mr. MCGARVEY. Yeah, and, you know, I like that we are here 
talking about the RFA, right? The RFA put in place in 1980 was 
meant to say what are the impacts of these on our small 
businesses. But rather than just attacking the RFA, I would 
like to see us come together to show that commitment to our 
small businesses of America, to set these regulations where we 
want them, where our small businesses can have them make 
consistent manner that is good and is fair.
    And I worry sometimes with hearings like this that we get 
focused more on the theater and not actually what is going to 
impact and help our small businesses.
    So there have been some claims that the Office of Advocacy 
has found the Biden administration frequently violates the RFA. 
Mr. Phillips, do you agree with that assessment? Do you agree 
that these are truly violations or are they more policy 
disagreements?
    Mr. PHILLIPS. No. The Office of Advocacy is not an 
adjudicator. They are not a court. What they do is provide 
comments to the agencies during the rulemaking process. Their 
role is to ensure that the participation of small businesses 
occurs.
    When SBA Deputy Chief Counsel Major Clark was last here 
before the committee, he made clear that these were comment 
letters and not adjudications.
    Mr. MCGARVEY. Thank you, Mr. Chairman. I yield back.
    Chairman WILLIAMS. The gentlemen yields back.
    I now recognize Representative Stauber from the great state 
of Minnesota for 5 minutes.
    Mr. STAUBER. Thank you, Mr. Chair, and Ranking Member for 
holding this hearing today.
    This past Congress we have held many hearings examining the 
regulatory burdens placed on American small businesses by this 
administration across 17 different agencies. The rulemaking 
process has grown out of control and has restricted growth on 
Main Street America.
    This committee has had the opportunity to hear directly 
from small business owners, many of them who feel the federal 
government is not listening to their concerns.
    I have been on this Small Business Committee since 5-1/2 
years and not one small business owner, not one, said we need 
more regulations. Not one raised their hand and said please, 
please, government put more regulations on us, not one.
    I would like to ask unanimous consent to enter into the 
record a letter from U.S. Chamber of Commerce, Mr. Chair. In 
this letter, Traci Tapani, the co-president of Wyoming Machine, 
outlines her concerns over costly and restrictive federal 
regulations and the lack of transparency in the rulemaking 
process.
    She also points to the loopholes in the Regulatory 
Flexibility Act, the RFA. The RFA requires agencies to `` 
consider the impact of their rules on small businesses, but 
agencies often did not properly consider the cost.''
    Mr. Ray, to what extent does the current RFA achieve its 
goal of reducing burdens on small businesses in federal 
rulemaking?
    Mr. RAY. Thank you for the question, Mr. Stauber. I would 
say the Regulatory Flexibility Act, while tremendously well-
intended and beneficial as far as it goes, is generally 
ineffective at driving down costs for small businesses.
    We can talk about a few ways in which it is ineffective. 
One provision to which I would like to draw the committee's 
attention that has not come up so far is Section 610 of the 
RFA, which requires retrospective review of certain 
rulemakings.
    Retrospective review is widely acknowledged within the 
regulatory community as one of the principal and most effective 
ways to update for real-world changes to regulations and allow 
for more sensible and cost effective compliance, including 
especially by small entities.
    Section 610 reviews are notoriously ineffective at actually 
driving regulatory change.
    Mr. STAUBER. And I know that small businesses under the 
Biden administration, the small businesses are struggling. In 
this letter that I put forward for small businesses with 50 or 
fewer employees, the costs in the manufacturing sector, small 
manufacturers incur costs of $34,671 per employee per year. 
$34,671 per employee per year. You have got to be kidding me.
    This is the regulations that are put on our manufacturing 
and small business. Nobody is going to convince me that that is 
good for that small business.
    Mr. Goldbeck, how does the economic impact of regulations 
issued by the Biden administration compare to previous 
administrations?
    Mr. GOLDBECK. Congressman, to date the total costs 
accumulated by agencies under the current administration is 
more than five times that of the Obama administration's total 
at this point in time.
    Mr. STAUBER. More than five times----
    Mr. GOLDBECK. Yeah.
    Mr. STAUBER.--the Biden administration's rule and regs have 
put forth five times the amount than the Obama administration.
    Mr. GOLDBECK. To this point in their administration.
    Mr. STAUBER. To this point, right. I mean you have got--I 
mean, can you--the small businesses in our country are being 
crushed by this administration. Having been a small business 
owner for 31 years, every single rule or regulation costs 
money. Every single rule or regulation costs money. Go ahead. 
You wanted to comment?
    Mr. GOLDBECK. Yeah. I think it is important to note just 
the magnitude and how even if these rules aren't necessarily 
applicable to the RFA in their current form, however that may 
be, just the magnitude has to have downstream effects and it 
goes through the entire economy basically.
    Mr. STAUBER. Yeah, to the--exactly.
    I think we talked about Representative Finstad's bill, H.R. 
7198, that this can help strengthen the RFA to avoid agency 
evasions by allowing small businesses to directly challenge an 
agency certification and by requiring agencies to be fully 
transparent about how regulations will impact the small 
business community.
    I will just tell you that three of the four I agree with 
you here on the panel, what is happening. The punishment that 
this administration is putting forth in our small businesses is 
devastating to our local economy.
    And our local communities, our small businesses are the 
engine of our economy and when you have them being attacked on 
a daily basis because of rules and regulations, we are going to 
find ourselves as a country in deep trouble. And these 
entrepreneurs that want to get involved with the American dream 
and own their own home and company are going to find out it is 
very difficult. We cannot continue down this path.
    And I yield back.
    Chairman WILLIAMS. The gentleman yields back.
    I now recognize Representative Glusenkamp Perez from the 
great state of Washington for 5 minutes.
    Ms. GLUESENKAMP PEREZ. Thank you, Chairman. Thank you, 
Ranking Member. And thank you to the witnesses for being here 
today.
    Mr. Phillips, I am interested in exploring which kinds of 
small businesses are considered when agencies are addressing 
the potential impacts of any given regulation on small 
businesses through the Regulatory Flexibility Act process.
    Earlier this Congress I spoke with Mr. Frank Knapp, a small 
business owner, about how agencies should do a better job of 
reaching out to small businesses across the country and not 
just those with Washington-based trade associations.
    So in your opinion, how are agencies doing now in making 
sure that they are getting feedback from a representative 
sample of businesses, from like mom-and-pop, not just people 
with hundreds of employees and, you know, groups with, you 
know, trade associations?
    Mr. PHILLIPS. This administration has done very well with 
that. As I said in my opening testimony, the President signed 
an executive order effectively requiring agencies to go out 
into the country and solicit information from small businesses.
    If you look at the Federal Trade Commission's recent 
regulation on noncompete agreements, there are pages and pages 
and pages of testimony from small businesses talking about how 
they have been harmed by noncompete agreements. This 
administration is doing a very effective job at reaching out to 
small businesses rather than simply relying on D.C.-based trade 
associations that generally can speak for the largest of 
companies.
    Ms. GLUESENKAMP PEREZ. What do you think that Congress 
should do to conduct more engagement and outreach throughout 
the country to make sure that we really are reaching small 
businesses in the rulemaking process?
    Mr. PHILLIPS. I think that what this administration is 
doing by really requiring agencies to go out is very effective. 
To the extent that Congress does want to legislate something, 
Congress could legislate that kind of outreach, could legislate 
hosting forums, focus groups, and things like that.
    That being said, one thing I am very concerned about 
generally is although agencies try very, very hard to comply 
with the law, there are courts who are willing to overturn 
months and months and months of work on the part of agencies 
for failing to comply with just one de minimis part of a 
statue. I am very cautious about Congress allowing judicial 
review over failing to perhaps do one of those small things.
    Ms. GLUESENKAMP PEREZ. When Mr. Frank was here he said it 
would be helpful for agencies to project costs for different 
size small businesses. In your view, would that work? How could 
it work?
    Mr. PHILLIPS. I think one of the problems with the RFA 
today is that the term `` small business'' can apply to firms 
that have tens of millions of dollars in revenue and 1,000 or 
more employees. One of the purposes of the RFA really was to 
ensure the participation of the smallest of the small 
businesses.
    To the extent that Congress wanted to really focus 
agencies' attention on those smallest of the small, the 
businesses that have 8 or 10 employees, I think that would be 
absolutely appropriate.
    Ms. GLUESENKAMP PEREZ. You also talk in your testimony 
about excessive market concentration and how unfair methods of 
competition hurt small businesses. What do you think should be 
done to help level the playing field?
    Mr. PHILLIPS. I think that what this administration is 
doing is very effective. Bringing lawsuits to enforce the 
antitrust laws is absolutely appropriate. Issuing regulations 
to prohibit junk fees to ensure competition is very important. 
I would want to see the administration just keep on doing that 
work.
    Ms. GLUESENKAMP PEREZ. Thank you to all of our witnesses 
for being here. I yield back.
    Chairman WILLIAMS. The lady yields back.
    I now recognize Representative Meuser from the great state 
of Pennsylvania for 5 minutes.
    Mr. MEUSER. Thank you, Mr. Chairman.
    Thank you to our witnesses. So perhaps the largest burden 
facing small businesses are regulations. I think if anyone 
spends any time with local chambers, as I do, walks the streets 
of main street, visits with small businesses, retailers, 
manufacturers, distributors, I think that they would learn 
pretty fast, and if they had an open mind and didn't think they 
knew better than the small business that has been there for 2 
years, 5 years, 10 years, 20 years in our government, that they 
would realize that taxes, excessive taxes are not a good thing 
for small business. Okay?
    Competitive tax rates, there are taxes that have to be paid 
but excessive taxes like eliminating the so-called Tax Cuts and 
Jobs Act that was for the rich, let's face it, every small 
business in America benefited by it and continues to benefit by 
it. And if we eliminate it we are going to add burdens to them.
    But still the regs are that much more significant. This 
inflation, okay, that we call Bidenomics and we call 
greedflation and all this utter nonsense that is being spewed 
by the left regarding our economy, the assault on American 
energy, the inflation is hurting really three groups: small 
business, those on fixed income which tend to be elderly, and 
low- to middle-income families. That is who gets hurt primarily 
by it.
    Meanwhile, we have an SBA that is focused on registering 
voters in the state of Michigan, okay? So it is not really 
within their scope and it is a real problem to this committee--
the SBA leadership, I should clarify.
    So, Mr. Ray, with the general state of small business, you 
know, right now small business, by the way, tax revenues are 
way down. I mean, like, tens of billions, hundreds of billions 
of dollars.
    And the reason for that is because their profitability is 
down so therefore there is less tax revenues to pay for all the 
things that our government pays for. What do you think is the 
general state of small business right now?
    Mr. RAY. Congressman, as far as I can tell it is pretty 
dire facing the onslaught of regulations. I remember when I was 
serving in OIRA speaking with a Member, a leader of the small 
business community and asking what regulation was most helpful 
for your business and those of others to thrive? And he said, 
well, it wasn't any one regulation. It was just having 
certainty in the regulatory environment. It was just knowing 
that we are not going to get buried under new regulations in a 
few months.
    Mr. MEUSER. Exactly. I hear the same thing. Rules over 
ideology, which is the vagueness that they get hit with.
    Mr. Goldbeck, the regs of the $1.6 trillion, could you try 
to get us a list of those? I mean, and do they include the 
beneficiary ownership rule, the CFBP's 1071s, the climate rule 
of Basel III, which isn't in effect yet, but go ahead, please.
    Mr. GOLDBECK. So, yes, Congressman. The number I ascribed 
is basically I go through and catalog all regulations that have 
some sort of quantified cost or paperwork estimate and we have 
that available on our website. And I can provide that----
    Mr. MEUSER. Right. Yeah. I would love to get that, thanks.
    Mr. Smith, you represent NFIB. How many members in your 
organization, small business members?
    Mr. SMITH. Almost 300,000.
    Mr. MEUSER. All right, over 300,000. What do you think that 
group would say to Mr. Phillips' here assertion that regs 
actually help these small businesses create a stronger economic 
climate for them and in the end raise--somehow raise money for 
them as well as the economy? What do you think your members 
would say to that?
    Mr. SMITH. Thank you, Congressman. I don't have to say what 
I think because I know. I have talked to the members and I 
could not even begin to count how many members have told me 
what I am about to tell you.
    The number one thing I hear from members on this issue is 
do people in Washington not know what it takes to run a small 
business? Do they not know the impact of these regulations on 
me running my business?
    So to Mr. Phillips' point, I do not believe they would 
agree with him.
    Mr. MEUSER. Yeah.
    Mr. SMITH. I know they would not.
    Mr. MEUSER. Yeah.
    Mr. Phillips, did you spend any time running a small 
business?
    Mr. PHILLIPS. I currently run a small consulting firm.
    Mr. MEUSER. You do?
    Mr. PHILLIPS. I do.
    Mr. MEUSER. Oh, okay. I would like take a look at that 
because it doesn't show up and you have a pretty extensive 
background, but you don't include that.
    Mr. PHILLIPS. It is in my written testimony, sir.
    Mr. MEUSER. I see. Okay, that is great. So let me ask you 
guys this, you witnesses this. Wouldn't it be great if our SBA 
rather than trying to register primarily those who benefit 
their party in Michigan, maybe we enjoined in a group where we 
went line by line and did everything we could to weigh the pros 
and cons of these massive regulations? Of course, it would take 
a long time and line item them out along the way and then have 
the SBA present such a report to this committee? What would you 
think about that?
    Mr. RAY. I would certainly support that, sir.
    Mr. MEUSER. Okay.
    With that, Mr. Chairman, I yield back.
    Chairman WILLIAMS. The gentleman yields back.
    I now recognize Representative Thanedar from the great 
state of Michigan for 5 minutes.
    Mr. THANEDAR. Thank you, Chair. Thank you, Ranking Member, 
for this hearing.
    And I thank all of our witnesses here. I ran a technology 
small business for over 25 years, so I understand, you know, 
the struggles small businesses have in coping with 
understanding the regulations and complying with.
    My question to you, Professor Phillips, is in your 
testimony you mentioned that many small businesses simply need 
help understanding what the law expects of them from a 
regulatory compliance standpoint. The Small Business Regulatory 
Relief Act that I and many of my Democratic colleagues co-
sponsored, would allow the SBA to establish programs that would 
help small businesses comply with federal regulations.
    How large of an impact would the Small Business Regulatory 
Relief Act would have on small businesses seeking assistance to 
meet regulatory requirements?
    Mr. PHILLIPS. Congressman, I think it would be huge. The 
RFA currently requires small business guides to help small 
businesses comply with regulatory requirements, and that is an 
excellent first start.
    However, this bill that you co-sponsored would allow SBA's 
ombudsman to really work with small businesses to help them 
understand what is happening. It would give them a point of 
contact with SBA and with the regulatory agencies to help them 
understand how to effectively comply with the law.
    As I said, small businesses want to comply with the rules 
of the road. They want to do the right thing. Congress and the 
agencies need to give them the resources to help them with 
that.
    Mr. THANEDAR. Thank you, Professor. And today the SBA can 
help small businesses when they experience federal regulatory 
enforcement actions. How often does the SBA assist small 
businesses when they are subject of investigations, and how 
would the Small Business Regulatory Relief Act further help 
small businesses thrive in the United States?
    Mr. PHILLIPS. Sure. I don't have exact numbers but I will 
tell you so the national ombudsman serves as a point of contact 
for small businesses that will help facilitate communication 
between them and regulatory agencies.
    And I think that is an excellent service that they provide. 
However, it is just insufficient. We need to help small 
businesses before they become the subject of investigations or 
enforcement actions. We need to help them, again, figure out 
how to comply with the law, so that they don't end up on the 
other side of the table in the first place.
    Mr. THANEDAR. Makes sense, yeah. Professor Phillips, you 
also mentioned that the Biden administration has focused much 
of its efforts on promoting transparency to ensure that small 
businesses with upfront pricing can compete fairly by 
eliminating hidden fees and junk fees which attempt to conceal 
the true cost.
    As a result, the Consumer Financial Protection Bureau, the 
Federal Trade Commission, and the Department of Transportation 
have all acted to ensure small businesses can fairly compete 
and to protect consumers from deceiving prices. Can you explain 
how the Biden administration's push for transparency has 
benefited consumers and small businesses?
    Mr. PHILLIPS. Absolutely. I think everyone in this room can 
appreciate the experience of going online and searching for a 
plane ticket or a concert ticket or something like that and as 
you check out, you are hit with fees that double the price. We 
all hate that. Everyone hates that experience.
    What the administration is doing is to make this pricing 
transparent so that people can understand just looking at the 
menu prices what the price will be and can comparison shop that 
way. It helps small businesses be able to compete. Small 
businesses tend to have lower cost than their larger 
competitors, and really showing that all-in price when people 
are doing cost comparison helps small businesses have a 
fighting chance at obtaining the customer's business.
    Mr. THANEDAR. Thank you so much. My time is up and I yield 
back, Mr. Chair.
    Chairman WILLIAMS. The gentleman yields back his time.
    I now recognize Representative Bean from the great state of 
Florida for 5 minutes.
    Mr. BEAN. A very good morning, Mr. Chairman. Thank you for 
holding the fifth hearing on overregulation.
    And to our All Star panel, welcome. We are glad to have you 
here. Five meetings means it is a big deal.
    You know, it reminds me I used to play a game when my kids 
were toddlers. We called it the block game. We would just take 
blocks and stack them up until the tower collapsed, the whole 
blocks collapsed.
    It seems as if the Biden administration--that Joe Biden is 
playing this game with America's small business, just thinking 
that small businesses are strong enough to handle an endless 
supply of overregulations.
    As Chairman Williams has said, the fact that there was $875 
million--billion dollars with a B, billion, in new costs from 
final rules issued in 1 week, it is hard to fathom even for 
this President.
    Some have said that the Biden administration doesn't fully 
appreciate what the rule--what the burden does to small 
business and that they just check a box when they are trying to 
comply with the Regulatory Flexibility Act, which Congress 
created to help protect small business.
    Would you agree? Mr. Paul Ray, would you agree that they 
fully don't understand what the impact is to small businesses?
    Mr. RAY. Absolutely, Congressman. You know, every agency 
tends to want to maximize achievement of whatever its special 
goal is, right? And they tend to----
    Mr. BEAN. Just check in that box.
    Mr. RAY. Yeah, just disregard the costs that they incur 
along the way.
    Mr. BEAN. Right. You know, the blocks, is it true, Mr. 
Goldbeck, the blocks that they already have to carry even 
before the Biden administration starts putting more blocks on, 
they are dealing with inflation? That is a very heavy block 
that businesses have to carry.
    We know that the average household is spending over $1,000 
a month just to keep up with what they purchased 2 years ago, 
$1,000 more. They have also got supply chain issues. They have 
also got trying to hire people.
    I am in another committee, Education and Workforce, and we 
are trying to protect this whole new classification of 
independent contractors. They want to put independent 
contractors on the banks of some small businesses.
    So would you agree, too, Mr. Goldbeck, that they don't 
fully understand what is happening to small businesses?
    Mr. GOLDBECK. Yeah. I think one of the aspects is they 
analyze these rules in a vacuum as a standalone basis, but as 
you allude to with the block example, if you keep stacking the 
cumulative impact maybe 1 rule is justifiable in its own right, 
but if three rules fall on top of you then it is a different 
story.
    Mr. BEAN. Yeah, I got you. You know, one of the--Mr. 
Chairman, you had a great hearing on energy and we had energy 
companies, some of the energy companies were about to keel over 
from the sheer weight of all the regulations.
    So, Mr. Ray, what if I just say I am a small business owner 
and I just say I don't want to comply? I can't comply. What is 
the cost of just saying I can't do it anymore? What are the 
consequences to the small businesses?
    Mr. RAY. Well, absolutely devastating. I mean you could be 
facing millions of dollars in fines or, for regulations 
involving criminal penalties, jail time.
    Mr. BEAN. So it is serious.
    Mr. RAY. It is, sir.
    Mr. BEAN. It is serious weight on there.
    Mr. RAY. Absolutely.
    Mr. BEAN. Very good.
    Mr. Smith, you represent thousands of businesses with NFIB. 
I have asked multiple businesses that have sat in the same 
chairs that you have sat, how is the regulatory environment 
right now on a scale from 1 to 10, 1 being you know what, it is 
just the cost of doing business. Ten is just we have never seen 
it like this before. What would you rate the current 
environment?
    Mr. SMITH. Thank you, Congressman. I would rate it as a 10 
and, in fact, there are recent numbers that April had the most 
significant--economically significant rules dating all the way 
back to the 1980s in that month alone. And that this 
administration is currently pushing through an unprecedented 
rate of economically significant rules on small businesses.
    Mr. BEAN. Got you. No, I am with you. We have heard 9s and 
10s consistently throughout the five hearings that it is 
serious business.
    Now, you also represent, again, NFIB, thousands of 
businesses. We already heard from Mr. Ray you can't ignore 
these things. You have got to comply or there is jail time, 
there is fines, there is all kinds of stuff.
    What about the actual hours to comply? What about trying to 
do the paperwork and trying to comply? Is that taking its toll 
as well on small business, Mr. Smith?
    Mr. SMITH. Thank you, Congressman. Absolutely. As I 
mentioned earlier, I spoke to one of our members out in Oregon 
earlier this month about a rule, and she told me that the 
cumulative burden, hours, is half of every day, each day. Half 
of a week, half of a month----
    Mr. BEAN. Too many.
    Mr. SMITH. Yeah.
    Mr. BEAN. Too many. Eventually we have to learn from that 
toddler game. You put enough blocks, small businesses just 
can't cope.
    With that, Mr. Chairman, thank you for your leadership. I 
yield back.
    Chairman WILLIAMS. The gentleman yields back.
    And I would like to thank our witnesses today for the 
testimony for you appearing with us.
    And without objection, Members have 5 legislative days to 
submit additional materials and written questions for the 
witnesses to the Chair which will be forwarded to the 
witnesses. I would ask the witnesses to please respond 
promptly.
    So with that in mind, there is no further business and so, 
without objection, the committee is adjourned. Thank you.
    [Whereupon, at 11:18 a.m., the committee was adjourned.]
                            
                            
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