[Senate Hearing 118-116]
[From the U.S. Government Publishing Office]
S. Hrg. 118-116
ONE SIZE DOES NOT FIT ALL:
UNDERSTANDING THE IMPORTANCE OF
RIGHTSIZING REGULATIONS
FOR SMALL BUSINESSES
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FIELD HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
OF THE
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
AUGUST 23, 2023
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Printed for the use of the Committee on Small Business and
Entrepreneurship
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
53-543 WASHINGTON : 2024
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED EIGHTEENTH CONGRESS
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BENJAMIN L. CARDIN, Maryland, Chairman
JONI ERNST, IOWA, Ranking Member
MARIA CANTWELL, Washington MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts RAND PAUL, Kentucky
CORY A. BOOKER, New Jersey TIM SCOTT, South Carolina
CHRISTOPHER A. COONS, Delaware TODD YOUNG, Indiana
MAZIE K. HIRONO, Hawaii JOHN KENNEDY, Louisiana
TAMMY DUCKWORTH, Illinois JOSH HAWLEY, Missouri
JACKY ROSEN, Nevada TED BUDD, North Carolina
JOHN W. HICKENLOOPER, Colorado
Sean Moore, Democratic Staff Director
Meredith West, Republican Staff Director
C O N T E N T S
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AUGUST 23, 2023
Opening Statements
Page
Joni Ernst, Ranking Member, U.S. Senator from Iowa............... 1
Witnesses
Mr. Major L. Clark, III, Acting Chief Counsel, Office of
Advocacy, U.S. Small Business Administration, Washington, DC... 4
Prepared Statement........................................... 6
Rep. Shannon Latham (R-55th) Iowa House of Representatives, Des
Moines, IA..................................................... 33
Prepared Statement........................................... 35
Mrs. Megan Green, Counsel and Engineering Manager, Weiler
Products, Knoxville, IA........................................ 41
Prepared Statement........................................... 43
Additional Letters/Statements for the Record
Competitive Enterprise Institute
Statement dated August 23, 2023.............................. 52
Goldbeck, Daniel
Comments submitted August 23, 2023........................... 58
Job Creators Network (JCN)
Statement dated August 23, 2023.............................. 61
National Automobile Dealers Association (NADA)
Statement dated August 1, 2023............................... 64
National Federation of Independent Business (NFIB)
Letter dated August 23, 2023................................. 65
SBA Office of Advocacy Chief Counsel Report on the Regulatory
Flexibility Act, FY 2022
Report dated April 2023...................................... 70
Small Business and Entrepreneurship Council
Letter dated August 31, 2023................................. 157
U.S. Chamber of Commerce
Letter dated August 23, 2023................................. 159
Wall Street Journal Editorial Board ``Regulators Gone Wild''
Article dated August 14, 2023................................ 163
ONE SIZE DOES NOT FIT ALL:
UNDERSTANDING THE IMPORTANCE OF RIGHTSIZING REGULATIONS
FOR SMALL BUSINESSES
----------
WEDNESDAY, AUGUST 23, 2023
United States Senate,
Committee on Small Business
and Entrepreneurship,
Des Moines, IA.
The committee met, pursuant to notice, at 1:00 p.m. CDT, at
Iowa Economic Development Authority, 1963 Bell Avenue, Des
Moines, Iowa, Hon. Joni Ernst presiding.
Present: Senator Ernst [presiding].
OPENING STATEMENT OF SENATOR ERNST
Senator Ernst. Well, welcome everybody. We are going to go
ahead and get started, so those that need chairs, if you can
find one.
The hearing is called to order. Good afternoon and thank
you all for joining us today in beautiful Iowa. I know that
some of you have traveled from out of state to be here today.
As the Ranking Member of the Senate Small Business and
Entrepreneurship Committee I want to specifically thank our
witnesses for joining us as well as Sean Moore, the Committee's
Democratic staff director, representing Chairman Ben Cardin.
The issues facing small businesses continue to be the rare area
of bipartisanship in Washington, and I appreciate the hard work
Chairman Cardin, Sean, and their staff put in.
Today's hearing is focused on rightsizing regulations for
small businesses because one size does not fit all. Our goal is
to examine the challenges small businesses face when they are
forced to comply with the same regulatory requirements as much
larger competitors. We will also discuss the benefits to small
businesses when agencies adjust their regulatory demands
accordingly.
Small businesses today are drowning in red tape and
unnecessary regulatory costs. In less than 3 years, the Biden
administration has imposed almost $400 billion in regulatory
costs on American businesses. By comparison, the previous two
administrations combined, over the same time period, imposed
$258 billion in regulatory costs, including during the
implementation of Obamacare, with its hundreds of accompanying
rules. In other words, the Biden administration has already
imposed almost $140 billion more in regulatory costs than the
previous two administrations did, combined. By one estimate,
Biden's out-of-control regulatory agenda has imposed over
$5,000 per household in costs, and I would like to submit for
the record a Wall Street Journal editorial entitled
``Regulators Gone Wild,'' showing the full scale of the
overreach.
Senator Ernst. How can any small business keep up, and
folks, sadly they cannot. And while those numbers are truly
staggering, they do not even begin to tell a whole story of
just how complex the Federal regulatory climate is for small
businesses in Iowa and across the country.
While regulatory costs hit all businesses, they are
particularly damaging to small businesses, which is why, since
1980, the Regulatory Flexibility Act has required agencies to
rightsize regulations by providing less-costly alternatives.
When writing a new rule, the only way agencies can evade
the rightsize requirement is by checking a box to certify that
the regulation will not significantly impact small businesses.
And folks, we know that any time Washington is creating a new
regulation, chances are our small businesses will be severely
impacted.
Unfortunately, this has become a loophole for agencies to
not put in the work to rightsize the regulation and provide
flexibility to small businesses. The SBA's Office of Advocacy
is an independent entity in the Federal Government that is
charged with policing the Reg Flex Act, and we appreciate that
the leader of this critical office, Mr. Major Clark, is with us
today.
When regulators significantly underestimate the real costs
of regulations it results in very real consequences for small
businesses. To illustrate let's look at just two regulations
with broad impacts on Iowa small businesses that Advocacy found
were improperly certified.
First, the Federal Trade Commission recently underestimated
the costs a regulation would place on auto dealer small
businesses by almost $70 billion. Iowa franchised auto
dealerships employ over 15,000 Iowans, and most are small
businesses. I would like to submit for the record a one-pager
from the Iowa and National Automobile Dealers Associations
illustrating the problem.
Second, the Environmental Protection Agency improperly
claimed a rule defining Waters of the United States would not
significantly impact small businesses despite the fact that it
would likely affect every farmer and small businesses that
wished to build a new barn or expand their business.
In Iowa, 98 percent of agriculture businesses, 99 percent
of construction businesses, and 89 percent of manufacturers are
small businesses, and collectively employ over 46,000 Iowans.
That is why I supported a resolution to repeal the WOTUS rule
that passed the Senate, but unfortunately it was vetoed by the
President.
So what happens when small businesses or the SBA make it
known to these regulators that their costs are underestimated
and they should find alternatives to protect small businesses?
Unfortunately, right now agencies can simply ignore them. This
is why I introduced the PROVE IT Act of 2023, to prevent
agencies from simply checking the box and empowering the SBA
Office of Advocacy to require these agencies to show their
work.
My PROVE IT Act would require Federal agencies to prove
they are not avoiding the Reg Flex Act and demonstrate that any
new regulation is actually compliant with existing laws. It
would also, for the first time, consider both the direct and
indirect costs placed on small businesses, which would directly
push back on the Biden administration's efforts to use far-
reaching global benefits to justify imposing any costs.
Finally, my bill would give Advocacy the tools they need to
require, rather than ask, agencies to consider less-costly
alternatives for small businesses.
I am proud to see that over 10,000 small businesses around
the country and 75 small businesses in Iowa have sent letters
to Congress showing support for my legislation.
As you can clearly see, it matters when agencies simply
check the box and avoid rightsizing regulations. One-size-fits-
all regulations do not suit Iowa's entrepreneurs, and that is
why I am fighting to ensure our small businesses are heard and
considered in future regulatory mandates from Washington. I
look forward to hearing from our witnesses on this issue and
how to address it.
Now we will introduce our witnesses, and again thank you to
our witnesses for being here today. First we have Major L.
Clark III. He is the Deputy Chief Counsel, Small Business
Administration Office of Advocacy. He currently serves as the
Deputy Chief Counsel for SBA's Office of Advocacy. The SBA
Office of Advocacy is the independent voice for small
businesses within the Federal Government to advance the views
and interests of small firms with Federal agencies. In fiscal
year 2021 and 2022 alone, Mr. Clark and his staff engaged with
Federal agencies on almost 40 regulations that led to almost
$3.4 billion in estimated regulatory cost savings.
Prior to joining the Small Business Administration, Mr.
Clark was the Senior Corporate Officer for the Maxima
Corporation and served as the Chief Administrative Officer for
the House Small Business Committee. Thank you again for joining
us today, Mr. Clark.
Next we have Representative Shannon Latham. Shannon is the
Representative for Iowa's 55th Legislative District in the Iowa
House of Representatives, serving since 2021, and it covers
parts of Wright, Franklin, and Hamilton Counties. During her
time in the Iowa House, Representative Latham has been a strong
advocate for Iowa small businesses and has been a staunch ally
in Governor Reynolds' efforts to modernize the regulatory
system and make Iowa the best place in the country to do
business.
In addition to serving in the Iowa House, Representative
Latham also co-owns Latham Hi-Tech Seeds, a family-owned seed
company headquartered in Alexander, Iowa. A fellow graduate of
my alma mater, Representative Latham received her BS in Ag
Journalism and Public Service and Administration in Agriculture
from Iowa State University, and her MBA from the University of
Iowa.
And finally we have Mrs. Megan Green. She currently serves
as the Counsel and Engineering Manager for Knoxville-based
Weiler Products, which designs, engineers, and manufactures
equipment for the paving market. Mrs. Green is a member of the
senior leadership team and serves as the President of the
Weiler Foundation for Charitable Giving. She was also recently
appointed as a member of the People's Bank Board of Director.
Prior to joining her current employment, Mrs. Green served
as an in-house counsel for the State Farm in Bloomington,
Illinois, counseling clients in multiple states on regulatory,
legislative, and public policy issues. Mrs. Green also attended
my alma mater, receiving her bachelor's degree in finance from
Iowa State University and her JD from the University of Iowa.
And I will also mention, while it was not in his biography,
Major Clark also attended the University of Iowa. So we all
have those Iowa connections.
I do want to thank our witnesses very much for being here
today.
We will go ahead and proceed with the testimony, and Mr.
Clark, we will start with you please, sir.
STATEMENT OF MAJOR L. CLARK III, ACTING CHIEF COUNSEL, OFFICE
OF ADVOCACY, U.S. SMALL BUSINESS ADMINISTRATION, WASHINGTON,
D.C.
Mr. Clark. Good afternoon, Ranking Member Ernst and
distinguished guests. I am honored to be able to return to
Iowa. It has been a while since I have been here, but fond
memories during my period here. Iowa taught me how to be a good
lawyer, not one of the bad lawyers, so I am very honored with
that.
Congress recognized the importance of small business to our
nation's economy. As such, Advocacy was created in 1976, to be
an independent voice for small businesses within the Federal
Government, particularly during the Federal regulatory process.
But that is not all that we do. Our legal team works to ensure
regulations do not unduly burden small businesses, our regional
advocates and our information team provide outreach to small
business stakeholders across the country, and our economic
research team conducts important research on small business and
their roles, some of that which you have just heard from the
Ranking Member.
Advocacy's research demonstrates that small businesses
continue to be a critical part not only of the nation's economy
but also local economies, as here in Des Moines and in the
total state of Iowa. We released a new small business profile
series, which is available on the table behind you. It is the
2022 Small Business Profile, which focuses specifically on this
great state of Iowa.
This research confirms that small businesses are a vital
component of Des Moines' and Iowa's economy. Small businesses
account for 47 percent of Iowa's employment, which exceed the
national share. Here in Des Moines metropolitan area, 98
percent of all businesses are small and account for about 41
percent of employment.
Our research also shows that small businesses play an
important role in rural areas. For example, small businesses
provide 54 percent of rural jobs in the United States.
Advocacy's economic research also inform agencies on the small
business economic impacts of their regulations, which is
critical. It is also our hope that this now helps stakeholders,
many of you who are here today, understand the critical role
that you play as small business owners in the local economy.
After hearing from small businesses like those here in the
state of Iowa, Congress passed what is called the Regulatory
Flexibility Act to ensure Federal regulations are not, as the
Chairman said, one size fits all. Rather, Federal agencies must
consider the impacts of their regulations on small business,
analyze effective alternatives that minimize small entity
impacts, and make their analysis available for you, the public.
As the watchdog for small businesses, Congress charged
Advocacy with ensuring agency compliance with the RFA. Advocacy
is required to report to Congress every year on agency
compliance with the RFA, and our report for fiscal year 2022
was submitted to the Committees, House and Senate, in May of
this year. Advocacy continues to remain active during fiscal
year 2022. On behalf of our nation's small businesses, we
submitted a record 37 comment letters to Federal agencies and
hosted a record 30 roundtables on regulatory concerns facing
small businesses.
We also achieved numerous victories for small businesses by
working with agencies on RFA compliance, including what was
mentioned earlier, the $73.5 million in cost savings for our
small businesses across the country. And these numbers were
due, in large part, I think, to new methods that we implemented
to reach more stakeholders, to reach outside of the Washington,
D.C., area, including holding virtual meetings, roundtables,
and events as we are having today, and also our site visits.
In this current fiscal year, Advocacy has continued to be
productive, and since October 1, of 2022, we have already
submitted over 40 letters and held 23 roundtables this year.
Advocacy has increasingly argued that Federal agencies need
to conduct more outreach to small entities during the
rulemaking process and improve the quality of their small
business data. Advocacy relies on stakeholders, primarily you,
to provide input in the regulatory process by writing comment
letters, directing to Federal agencies, and by sending us their
concerns. It is critical for all small businesses, including
those here, to express concerns to Federal agencies on
regulations that may impact their economic survival. Our
success, in Advocacy, depends on you, our stakeholders.
Madam Chair, this concludes my oral testimony, and I
request that Advocacy's RFA report for fiscal year 2022 be
included in the hearing record.
Thank you for this opportunity to testify today, and you
know that I am happy to answer any questions that you may have,
so thank you.
[The prepared statement of Mr. Clark follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Ernst. Thank you very much, Mr. Clark, and we will
submit that, without objection, so thank you.
[The information follows:]
Senator Ernst. Representative Latham, thank you.
STATEMENT OF REP. SHANNON LATHAM, IOWA HOUSE OF
REPRESENTATIVES, DES MOINES, IA
Ms. Latham. Thank you. Good afternoon, Ranking Member
Ernst, members of the Committee, and distinguished guests. It
is a real honor to be here as a representative of Latham Hi-
Tech Seeds to provide insights about difficulties faced by
small businesses when complying with regulatory requirements.
Latham Hi-Tech Seeds is a third-generation, family-owned
seed company that is headquartered on our family's Century Farm
in north central Iowa. Latham brand hybrid seed corn, soybeans,
and alfalfa products are sold across the Upper Midwest,
primarily through a farmer-dealer network.
We are proud to have celebrated our company's 75th
anniversary in 2022, but our success did not come without
overcoming obstacles, and some of the obstacles we face today
include gene editing, antitrust enforcement, and trucking.
So I will begin with gene editing. Sustainable agriculture
and food production require a range of innovative solutions,
including the latest precision plant breeding tools, like gene
editing. These tools allow plant breeders to develop better
crops, in less time, with more accuracy than other methods. And
because our seed company has a corn breeding program, we are
greatly concerned with EPA's recent final rule on plant
incorporated protectants. The EPA's precautionary and process-
based policy imposes non-risk-based regulatory hurdles for
certain plant characteristics created using the latest
precision breeding tools.
And antitrust enforcement. Consolidation in agriculture,
livestock, fertilizer, chemicals, and seed is reducing
competition, and we know that reduced competition leads to
increased costs. The United States Department of Agriculture,
in March 2023, issued a competition report that issued
recommendations of being a voice for farmers and plant breeders
as well as interagency coordination to promote fair
competition.
And trucking, I could have gone on a while for trucking.
The U.S. Department of Transportation's Federal Motor Carrier
Safety Administration Entry Level Driver Training final rule
went into effect in February of 2022. The additional coursework
costs between $1,000 and $4,000, depending on the course and
the provider. This is a really large investment for small
businesses. Whenever you add time and money it discourages
people from actually getting their CDL.
In addition to decreasing regulatory costs, one policy
change that can help address trucking shortages is lifting
interstate weight limits and making them uniform nationwide.
Increasing interstate weight limits would create added
efficiencies to transporting goods.
During the 2023 session, the Iowa legislation passed a
resolution encouraging Congress to increase weight limits on
interstate highways in Iowa. Iowa allows higher weight limits
on our state highways during the business times for
agriculture. And because drivers can operate heavier loads on
road that are under state jurisdiction they often avoid
interstates. If the interstate system allowed heavier loads,
truck drivers could take the most direct route, they would save
driving time, and reduce fuel usage.
And finally, electronic logging devices, or ELDs, are time-
consuming and expensive for small businesses. It is especially
challenging for businesses like ours that serve rural America.
Electronics are prone to error, plus there are just a lot of
areas in our trade territory where we lose phone service and we
cannot get satellite signals.
Another downfall is that these logs start clocking your
time as soon as the truck moves. So it is problematic for a
company like ours, like when we are trying to just load seed
from a dock, because it will begin to clock the time. And then
we have had instances where the driver forgot to log out, and
then it made it look like the truck was parked and he was
there. Yeah, you can overcome those, but it takes time and
energy, and it just detracts from your day-to-day business.
One solution for the overburdensome ELD regulations is to
exempt companies with five trucks or fewer. Another solution is
to just simply exempt anyone who carries 100 percent of their
own products. This solution offered for ELDs is an example of
how one-size regulations do not fit all businesses. Small
businesses frequently encounter challenges stemming from
regulations that were designed for larger enterprises. Examples
include burdensome paperwork, expensive compliance measures,
and intricate reporting requirements.
These issues all impede growth, discourage innovation, and
often lead to disproportionate costs that hinder small business
success. I encourage this Committee to consider the
recommendations presented here.
The written document I submitted also includes comments
that I gathered from other small business owners throughout my
district and across the state. As a member of the Iowa House of
Representatives, I visit regularly with business owners, and it
is my honor to represent them.
Thank you for your attention. Together I know that we can
help Federal regulations become a catalyst rather than a
hindrance for small business success. And you know I would be
happy to answer questions.
[The prepared statement of Ms. Latham follows:]
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Senator Ernst. Wonderful, and thank you Representative
Latham.
And Mrs. Green.
STATEMENT OF MEGAN GREEN, COUNSEL AND ENGINEERING MANAGER,
WEILER PRODUCTS, KNOXVILLE, IA
Ms. Green. Thank you. Good afternoon and thank you to
Ranking Member Ernst for inviting me to testify today. My name
is Megan Weiler Green and I am Counsel and Engineering Manager
for Weiler Products in Knoxville. We are a heavy equipment
manufacturer. We do everything from design to taking raw steel
all the way to a finished product. We make heavy equipment,
primarily for the asphalt paving industry.
I am also a second-generation business owner. Our business
was started in 2000, with 4 employees and we have 615--or 618
or 620, depending on the day--employees now. What started as a
small business in a 40,000-square-foot spec building is now
625,000 square feet under roof. Our equipment is sold into all
50 states and 15 countries.
We are the market leader because we listen to our
customers. We are proactive. We move quickly. We are innovative
and find innovative solutions. And we are hands on. These core
values describe many small businesses and many Iowa success
stories. But they are often at odds with government regulators
and government regulations. Entire industries are born out of
interpreting government regulations for small businesses.
We know from our experience that every minute one of our
employees spends trying to decipher new regulations, creating
reports to respond to regulations, purchasing new systems that
add no value to our organization other than compliance with a
new regulation is a minute taken away from what we do best:
serve our customers and design industry-leading equipment.
As we react to new regulations, small businesses are often
left wondering ``who is this benefitting?'' The purpose of
regulations is often nonobvious from the perspective of those
who are asked to comply. We have also seen several instances of
regulations being announced alongside the deadline for
compliance. While we, as a business, work diligently to
decipher unreadable regulatory jargon, announcements from the
government are released days before that compliance deadline
hits, saying we are going to move that date back. There is no
recognition of the wasted time and duplicative effort that that
puts on our business.
Similarly, our team works together to gather complicated
reports and data to respond to various mandatory surveys and
government requests for information. While the demand for this
information is firm, there is no discernible benefit to us, as
a company, or explanation as to how the collection of this
information is moving the greater good forward.
In business, we operate in cost/benefit analyses. In order
to come out with an accurate assessment, we need information
that we can rely on. When new regulations are announced, we are
often in a position to ask ourselves: Does this apply to our
business? What does this mean for our business? Can I find
anyone in this government agency who can answer my questions?
And maybe most importantly, what happens if I do this wrong?
When the rules are unknown, or the rules change in the
middle of the game, we cannot trust that we are making
decisions in the best interest of our customers and our
employees.
Entrepreneurs and small business owners created their
companies out of a passion for a product, a passion for serving
customers, or a passion for improving the status quo. No one
starts their own business out of a passion for the paperwork.
Dedicating resources to regulatory compliance makes it more
difficult for small businesses to compete with large companies,
who can depend on big staff and healthy budgets dedicated to
outside experts who can assist with information gathering,
compliance, and audits.
The bottom line is this: small businesses want to do the
right thing. The Senate Committee on Small Business and
Entrepreneurship can assist by helping small businesses in the
following ways. Help small businesses understand regulatory
requirements and the why behind new regulations. Leverage data
that is already required, rather than creating new reporting
requirements. Be flexible on what the output looks like for
small businesses. Provide resources and access to people who
can help navigate changing rules.
We appreciate the attention that Senator Ernst and her
office is bringing to this issue, and I welcome any questions
that you have and appreciate your time.
[The prepared statement of Ms. Green follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Ernst. Thank you. Thank you, Megan, and a big
thank-you to all of you for being here today and serving as our
witnesses. It has been very informative testimony, and we
appreciate your unique perspectives on today's hearing.
Mr. Clark, we will start with you, sir, and thank to you
and your staff for the great work that you do on behalf of our
small businesses in Iowa and across the country. I also want to
thank Darcella Craven, who is the regional advocate serving
Iowa and the Midwest. Thank you for being here and for being a
resource for Iowans.
Mr. Clark, Federal agencies often improperly certify that a
regulation will not significantly impact small businesses to
avoid the Regulatory Flexibility Act, such as the EPA's WOTUS
rule. Can you share why this happens and the significance of
this issue for our small businesses?
Mr. Clark. Thank you for your question, and yes, I can give
you our insight as to why it may happen--well, not may happen.
It does happen in some of the situations.
One of the things--and I enjoyed the testimony from the
other two distinguished guests because everything that was said
kind of fit into what we look and see and do. But one of the
things that is missing in this equation, extensively, is
adequate data on small businesses. One of the things that we
attempt to do when we worked with agencies is to get agencies
to understand, as this hearing is talking about, one size does
not fit all. So we want agencies to be able to break down their
small business data to better respond to the types of small
businesses that are being impacted, the small business that is
1 to 5 member employees, or 10 member employees, or 20 members
employees, because that analysis has a different impact on each
one of those groups. So that is one of the issues that goes on
with this certification.
The other issue is with training. Executive order--I cannot
remember the executive order. Gray hair makes me forget
executive orders. But there was an executive order that
requires us to train agencies on the compliance with the
Regulatory Flexibility Act. And we, in our RFA report, talk
about the amount of training that we have done. That training
has been very instrumental, I think, in getting some of these
agents to better understand the significance of why it is
important to analyze small businesses. So we have to do more
training.
And I think the other part of it is really the overall just
education that goes on with this whole process. And that is,
some of the agencies simply think that they are not going to be
called to task in some of these situations. And what our office
is designed to do, by statute, is to bring this to their
attention when they fail to comply with these requirements.
Senator Ernst. And Mr. Clark, so when an agency then
improperly certifies a rule under the RFA, and you do bring it
to their attention, you are notifying them in a timely manner,
what then happens if that agency just simply chooses to ignore
you?
Mr. Clark. Well, several things happen in that situation.
First, some of the agencies attempt to provide this
certification when the rule is in its proposed stage. And when
it is in that particular stage one of the things that we bring
out to them is that depending on what that rules is really
saying and depending on how they have provided the information
we will bring out to them that they did not provide an
adequate, factual basis for this particular rule.
And in that regard, we will basically provide them with an
alternative, and the alternative is to either provide a better
factual basis to comply with the certification requirement or
to conduct what is called an IRFA, an Initial Regulatory
Flexibility Analysis, which goes into a little more detail in
terms of the impact of that rule on small businesses. That IRFA
looks at alternatives that the agency could come up with, and
so forth.
So in that regard, as a proposal, we are watching that
process. If that rule actually goes final one of the things
that his required, again, by another executive order, is that
agency has to, in its final regulation, specifically mention
what Advocacy has shared with them, told them about that
process. And that then becomes--the next level for that clearly
is the basis for litigation once that rule goes final.
Senator Ernst. Okay. So just bottom line up front then, an
agency, they do not have to change the rule, even if presented
alternatives by Advocacy. Would that be correct?
Mr. Clark. They do not have to change the rule but they
have to provide a factual basis for that rule, such as we were
talking about with the trucking here. They are going to have to
show how that particular rule, what is the factual basis for
that rule, how that rule impacts small businesses so that in
that proposal stage that information can then be shared with
the public for comment. Because if that certification does not
have that factual basis then we are not able to get testimony
from a Latham Seed or anyone else in terms of the impact that
regulation is having.
So the critical piece of that is the factual basis and then
being able to get public input as to the impact.
Senator Ernst. Right. And so you stated then that the
organizations do have that right to judicial review of those
improper certifications. You cannot bring the lawsuit until
after the rule is finalized. And can you talk about why that is
an issue and whether review of the certification prior to the
finalization could give small entities some real relief?
Mr. Clark. Well, the review prior to the certification
would actually give small entities--we say small entities but
we are really saying small businesses--would really give small
businesses the opportunity to better dissect that rule in terms
of impact. And it would also give small businesses a better
opportunity to propose alternatives to what is being proposed.
I mean, for example, we just heard from dealing with
trucking. Would exempting small businesses from one to five
employees be better than just a blanket covering of that
situation? So that is why it becomes important to have that
factual basis, and that is why it becomes important for
stakeholders, here today and across the state of Iowa, to be
able to provide us with comments so that we can better
challenge the agency in terms of what they are proposing.
Senator Ernst. Very good. Thank you, sir.
Representative Latham, thank you for joining us as well and
the great work that you do serving the 55th District of Iowa.
And I would like to start by asking you about the state-led
efforts here in Iowa to reduce the regulatory burden on small
businesses.
So can you share what you think are the greatest success
stories and whether there are any lessons that I could take
from your examples back to Washington?
Ms. Latham. Sure. I would be glad to share what I think are
a couple of our successes at the state level. Three examples of
recently passed legislation come to mind. One is updating the
Iowa code on youth employment, another one is realigning state
government, and then prohibiting local regulations on home-
based businesses.
So when we were working on updating youth employment it was
not without controversy. But what we did is we just stuck to
the facts. We also made sure we listened to Iowans and small
businesses who are living this day-to-day, and that is really
what guided our decision-making. We believe that youth
employment can help. It is not going to totally solve the
workforce crisis, but it is certainly going to help, especially
in businesses that need help at night, on the evenings,
weekends, and during the summer.
One of the things that was outdated--and I am smiling as I
even think about this--is why should teenagers in the workplace
not be able to use a microwave? I mean, that was one of the
questions we asked because they were prohibited from doing
that. As someone who grew up in a family restaurant and bar,
there were times when there were two of us working, and we were
swamped, but I could not help in ways like grabbing the
alcoholic beverage off the bar and taking it to a table I was
already serving. She would have to walk all the way around.
That is a change that has been made. If an adult is present,
the parents approve it, you are in full sight, why not let that
17-year-old just simply deliver the alcoholic beverage.
The third one is why should teenagers not be able to work
past 7 p.m.? That is the heart of the dinner rush hour. They
were prohibited from working past 7:00. As a mom of an athlete
who played four sports, I mean, I would have loved him to be
home at 7 p.m., but there were times when games started after
that and buses did not get home until late. So why are we
penalizing teenagers who want to work?
So we removed those barriers while still keeping the
requirements for safety and training and supervision in place.
So that is one.
Another one that I think is worth exploring is passing
prohibitions on local regulations. We did that for home-based
businesses. It pertained to requiring applications, permits,
fees, zoning. Basically what it would do is allow startups to
grow up a little bit before they had to comply with all of the
regulations of a storefront business.
The other thing that the realignment did that we passed
this session was really to simplify the regulatory process so
now it is almost one-stop location from the Iowa Department of
Inspection and Appeals for licensing, building permits, safety.
I think the more we can simplify processes for small
businesses, the better. I mean, I agree with Mrs. Green when
she said small businesses really want to comply, so let's not
make it overly cumbersome, so we can help them do the right
thing.
And then I think I would also be remiss if I did not
mention childcare. It is a huge workforce issue. We know that
there are people who cannot go to work because they cannot find
quality childcare. And the last 3 years I have served in the
Iowa legislature we have sent 11 childcare-related bills that
the governor has signed. Many of these came from her task
force. I think whenever people hear ``task force'' they think,
oh, that is just somebody checking the box, but really, there
were recommendations that were implemented that are making a
difference.
And again, I truly believe that is just key to economic
growth, is helping get those highly skilled, highly qualified
people back in the workforce. So those are just a few of the
highlights.
Senator Ernst. Wonderful. No, that is fabulous, and I am
very excited that our Iowa House and Senate and the Governor's
Office have been able to find a way forward on these issues.
And thank you for mentioning, as well, childcare. We did just,
in the recent package that we put through, the Senate Small
Business Committee did include a provision within that package
for childcare, expanding opportunities for childcare, and
thanking Senator Jacky Rosen for working me on that issue, and
Senator Ben Cardin for including that in this recently passed
package.
We have some work to do with the House, but still great
effort moving forward. It is key to getting people back into a
place of employment if they know that they have safe and low-
cost childcare available to them. So thank you.
Mrs. Green, for you. Again, thank you for being with us and
for sharing your story as well because it is really an
incredible Iowa success story, so thank you. Iowa is very, very
lucky to have Weiler Products in our state.
In your testimony you discussed the difficulty of trying to
grow a small business, manufacturing business, in a field with
many, many large competitors. So why do you believe it is hard
for a company like Weiler to face the same regulations and
costs as larger manufacturers?
Ms. Green. Well thank you for the question. I think it
really comes down to resources. It is hours in the day.
Workforce continues to be an issue for us. And even if we were
fully staffed, we want our employees to focus on what moves our
company forward, which is taking care of our customers.
I think what we are seeing in many government regulations
is uncertainty and things being passed that may never be
implemented or things being implemented that may later change.
And uncertainty is really expensive for businesses, in general,
and it is increasingly expensive for small businesses. And if
you think about even in your personal life, uncertainty is
expensive, it is a distraction, and it takes our focus away
from where it needs to be, which is customers and innovation on
the business front.
Senator Ernst. That is very good. I was doing a county
visit earlier today in Taylor County, and that was brought up
by a number of the farmers, the contractors, the state workers.
It was at a conservation project that had been done in some
farmland. And they mentioned just the changes in rules and
regulations from one administration to the next, and that
uncertainty, how it affects the decision-making process of
those that are investing in their farmland, in their
businesses. That is a very, very good point.
Representative Latham, going off of Mrs. Green's comments,
I am going to ask you to take off your legislative cap and
focus on your business cap and ask the same question as well.
Can you please talk about why it is so important to ensure
regulations are rightsized so that your family-owned seed
business is not burdened by the same costs as much larger
companies in the grain industry?
Ms. Latham. Sure. So family-owned businesses like ours are
operating on much smaller margins, so regulations that might
just be considered maybe inconvenient for a larger competitor
could essentially shut down our business. It could put smaller
businesses just simply out of business.
You know, larger companies have resources that we do not
have. You know, we do not have anybody on staff with a legal
background. We rely a lot on trade associations to help keep us
abreast of regulations. There are companies who cannot even,
because of the economy they are in today, cannot even afford to
pay for those associations. So they are trying to navigate
through these regulations, and it really does have that ripple
effect. You wind up with lower competition, increased costs.
And it does have a ripple effect on the small communities
too. Like I am just thinking at Latham Seeds we invest not only
in our people but I mentioned we market through farmer-dealer
networks, and those people are invested in their communities.
They are the ones that are helping support the local league,
the prom, the whatever. So as you get larger competitors who
are not located in those communities, you have got out-of-state
or out-of-country, they just do not have that same commitment
to community. And then, ultimately, that affects the whole
culture in the state of Iowa. We are a state of many small
businesses, many small communities. That is really the backbone
and the heart of who we really are, as Iowans.
Senator Ernst. I really appreciate that context as well
because we do have so many visitors that are here from out of
state. The makeup of Iowa is large, in part, small, rural, Ag-
based communities where those small businesses really do
reinvest back into their communities. You mentioned prom and
things of that nature. But yes, that is how our communities
survive is by assisting one another. So whether it is here in
Iowa, whether it is in Maryland, wherever it might happen to
be, all of these little, small communities made up of small
businesses and people reinvesting in the livelihoods of others.
So thank you for that perspective.
Mr. Clark, we will turn back to you. The Biden
administration recently changed how agencies calculate the
costs and benefits of their regulations. According to the Wall
Street Journal article I referenced in my opening statement,
those changes have given agencies the ability to justify
regulatory costs on Iowans by claiming the rules could provide
global benefits.
What are your thoughts on this change, and do you believe
agencies should be required to consider indirect costs if they
are going to consider indirect benefits?
Mr. Clark. Madam Chair, I am not sure what global really
means in terms of small business because as you just said,
small businesses are really very localized. One of the things
that we--as I said earlier in my testimony, one of the things
that we strive to do is to provide and to solicit and to gain
data on the various impacts on small business. So changing the
cost-benefit analysis, I am not sure really deals with the
essence of what happens with a regulation in terms of its
impact on small business.
We just heard from Representative Latham and Mrs. Green
that it is the margins. So when you start looking at cost-
benefit analysis, and you are not able to break that analysis
down into the detail it has to be broken down into in terms of
the small business itself, it is hard to get a true cost-
benefit analysis in terms of the impact.
We had a regulation some years ago with the Department--not
some years ago but a few years back--Department of Defense on
what is called RFI, radio frequency, and the Department of
Defense did not want to do a cost-benefit analysis on small
business. We were able to get them to do one, and what we found
was that the small business that only had a contract with the
Department of Defense for one or two items paid a great cost as
opposed to that regulation than a business that had 10 or 15
contracts.
So it is very important, in Advocacy, when we look at this
issue that we look at it from the context of who is being
impacted, what size business is being impacted, and what are
the margins, and what are the other parameters that impact of
that situation.
So when we go to whether it is direct or indirect, right
now we are primarily looking at direct costs. But there are
arguments to be made for looking at indirect costs. And the
only situation that really occurs with looking at indirect
costs is how far down that chain do you go to find the real
impact, and continuing to go down that chain may force a
missing of the family seed farm and other entities in that
process.
So we need to be careful as to how far we go down that
chain, looking at indirect costs. But definitely look at direct
costs and look at some baseline for indirect costs makes a lot
of sense, yes.
Senator Ernst. Thank you, and I had the same thoughts about
global benefits. I was not sure exactly what the definition of
``global benefit'' was. Thank you.
Mr. Clark. Well, I am not sure it relates to small
business, and that is our statutory authority, to look at small
business.
Senator Ernst. Right. Thank you very much.
Mrs. Green, one important piece of the PROVE IT Act is that
it would ensure small businesses like Weiler can easily access
agency guidance documents and allow small businesses to comment
on these documents to seek clarification or suggest
improvements. Can you discuss your experience with guidance
documents and whether this provision would help you and other
small businesses?
Ms. Green. I think the concept is wonderful, and if it is
implemented effectively it has great potential to be really
useful. The concerns that I would have are being sure that
whoever the comments are going to have the ability to respond
quickly to those comments and that whoever is on the other end
of responding to those comments has the authority to buy into
whatever agency that are responding on behalf of.
I have a law degree so I am the one who ends up, on behalf
of the company, calling a lot of these agencies, saying, ``What
does this mean?'' And a lot of times the agency, either they
are not really sure or we have not really gotten there yet, or
I am not sure how that is going to apply to you yet. But all of
the time when you call, what I am about to tell you is just my
interpretation, this is not binding on this agency. I mean, if
I were to answer a question to my customer in that way, think
about how that would go.
So I think that is just really important, that whatever
advice we are getting from that agency, we have to be able to
rely on it, because again, that uncertainty is so expensive, so
distracting, and just makes it so difficult to run a business.
Senator Ernst. Okay. That is a very important point, Mrs.
Green. And you have the legal background. But when you are
calling an agency they will state that ``This is just my
interpretation. It is not binding on the agency that I
represent.''
Ms. Green. Yes.
Senator Ernst. So again, why the call in the first place
then, because it could change in the future. You may start to
act on a rule or regulation and not actually have that be the
right interpretation then.
Ms. Green. Correct. And again, we would not be calling if
we were not trying to do the right thing. We want to play by
the rules, but we have to understand what they are.
Senator Ernst. Okay. Very important point. Thank you.
And for all of our witnesses--and again, thank you so much
for this incredible testimony--I would like to finish today's
hearing by asking one question to each of you, and we will
start with Mr. Clark and then we will go on down the table.
Mr. Clark, if you could leave one message for Federal
regulators about the importance of truly considering how their
regulatory costs hurt small businesses, what would it be?
Mr. Clark. You are asking a lawyer to leave one message.
[Laughter.]
Mr. Clark. Well, the message to the regulatory community
has to be that small businesses are the economic backbone of
our nation, and if we do not have small businesses then this
global environment that they are talking about does not exist.
So we have to find ways to ensure that our small businesses
continue to survive, but more so than continue to survive we
have to find ways to ensure that they continue to grow and to
expand and become multigenerational businesses because that is
where wealth is built for many of our small businesses.
So from a regulatory standpoint, it is clearly what we have
pushed, and that is that one size does not fit all, that we
must look at a deeper dive, take a deeper dive into the impact
of the regulation on our small businesses.
Senator Ernst. Thank you so much. And one of my favorite
phrases, Mr. Clark, is ``not just survive but thrive.'' We
really want them to thrive. Thank you very much.
And Representative Latham, the same question to you. What
would your message be?
Ms. Latham. So if I could just leave them with one message
it would be just because you can does not mean you should. And
as a business owner, whenever we are starting a new project or
somebody proposes a new idea, my very first question is what is
the objective?
So I think we need to ask, is it going to make it easier
for small businesses, less confusing, easier for compliance?
Does it increase safety? I think every regulation, every
administrative rule should really be scrutinized to make sure
it is even needed or is it vitally important.
Again, less is more. The smaller the code is, the fewer the
regulations, the more small businesses can thrive. Thank you.
Senator Ernst. Wonderful. Thank you, Representative Latham.
And Mrs. Green.
Ms. Green. I would echo both thoughts. I think regulators
need to take a step back and figure out what the end goal is,
what is the actual objective that they are trying to
accomplish, and then say is this actually moving the ball
forward or are we regulating for the sake of regulating. And
then just to continue with my theme of anything that we can do
to reduce uncertainty and make it easier to run a business for
the long term I think will be very effective.
Senator Ernst. Wonderful. Thank you. Once again, thanks to
all of you for joining us today, and a special thank you to our
witnesses for their enlightening testimony.
Before we conclude the hearing I would like to add to the
record the following: an op-ed from John Sorensen, President
and CEO of the Iowa Bankers Association, who published in the
Des Moines Register. Thank you for that very much. We are very
lucky to have you with us today. And also a statement from the
U.S. Chamber of Commerce, who I am thankful has sent Tom
Sullivan, the Chamber's Vice President for Small Business
Policy, to join us today. As well, a letter from Alfredo Ortiz,
the President and CEO of the Job Creators Network, who we are
also lucky to have join us today. Thank you, Mr. Ortiz. And
then a statement from the National Federation of Independent
Businesses; a letter from Dr. James Berlau, a senior fellow and
regulatory economist with the Competitive Enterprise Institute;
a letter from Daniel Goldbeck, the Director of Regulatory
Policy at the American Action Forum; and a statement from Karen
Kerrigan at the Small Business and Entrepreneurship Council.
[The information follows:]
Senator Ernst. And with that today's hearing has concluded.
I want to thank everyone for joining us today.
[Whereupon, at 1:57 p.m., the hearing was adjourned.]
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