[House Report 112-461]
[From the U.S. Government Publishing Office]
112th Congress Rept. 112-461
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
REGULATORY FREEZE FOR JOBS ACT OF 2012
_______
April 27, 2012.--Ordered to be printed
_______
Mr. Smith of Texas, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 4078]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 4078) to provide that no agency may take any
significant regulatory action until the unemployment rate is
equal to or less than 6.0 percent, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
CONTENTS
Page
The Amendment.................................................... 2
Purpose and Summary.............................................. 3
Background and Need for the Legislation.......................... 3
Hearings......................................................... 8
Committee Consideration.......................................... 8
Committee Votes.................................................. 8
Committee Oversight Findings..................................... 14
New Budget Authority and Tax Expenditures........................ 15
Congressional Budget Office Cost Estimate........................ 15
Performance Goals and Objectives................................. 19
Advisory on Earmarks............................................. 20
Section-by-Section Analysis...................................... 20
Dissenting Views................................................. 21
The Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Regulatory Freeze for Jobs Act of
2012''.
SEC. 2. DEFINITIONS.
In this Act--
(1) the terms ``agency'' and ``rule'' have the meanings given
such terms under section 551 of title 5, United States Code;
(2) the term ``regulatory action'' means any substantive
action by an agency that promulgates or is expected to lead to
the promulgation of a final rule or regulation, including
notices of inquiry, advance notices of proposed rulemaking, and
notices of proposed rulemaking, but not including any
substantive action by an agency for repealing a rule;
(3) the term ``significant regulatory action'' means any
regulatory action that is likely to result in a rule or
guidance that may--
(A) have an annual cost to the economy of
$100,000,000 or more or adversely affect in a material
way the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or
safety, small entities, or State, local, or tribal
governments or communities;
(B) create a serious inconsistency or otherwise
interfere with an action taken or planned by another
agency;
(C) materially alter the budgetary impact of
entitlements, grants, user fees, or loan programs or
the rights and obligations of recipients thereof; or
(D) raise novel legal or policy issues; and
(4) the term ``small entities'' has the meaning given such
term under section 601(6) of title 5, United States Code.
SEC. 3. SIGNIFICANT REGULATORY ACTIONS.
(a) In General.--No agency may take any significant regulatory action
during the period beginning on the date of enactment of this Act and
ending on the date that the Secretary of Labor submits the report under
subsection (b).
(b) Determination.--The Secretary of Labor shall submit a report to
the Director of the Office of Management and Budget whenever the
Secretary determines that the Bureau of Labor Statistics average of
monthly unemployment rates for any quarter beginning after the date of
enactment of this Act is equal to or less than 6.0 percent.
SEC. 4. WAIVERS.
(a) In General.--Notwithstanding any other provision of this Act, an
agency may take a significant regulatory action only in accordance with
either subsection (b) or subsection (c) during the period described in
section 3(a).
(b) Presidential Waiver.--An agency may take a significant regulatory
action if the President determines by Executive order that the
significant regulatory action is--
(1) necessary because of an imminent threat to health or
safety or other emergency;
(2) necessary for the enforcement of criminal laws;
(3) necessary for the national security of the United States;
or
(4) issued pursuant to any statute implementing an
international trade agreement.
(c) Congressional Waivers.--
(1) Submission.--For any significant regulatory action not
eligible for a Presidential waiver pursuant to subsection (b),
the President may submit a written request to Congress for a
waiver of the application of section 3 to the significant
regulatory action.
(2) Contents.--A submission by the President under this
subsection shall--
(A) identify the significant regulatory action and
the scope of the requested waiver;
(B) give all reasons why the significant regulatory
action is necessary to protect the public health,
safety, or welfare; and
(C) explain why the significant regulatory action is
ineligible for a Presidential waiver pursuant to
subsection (b).
(3) Congressional action.--Congress shall give expeditious
consideration and take appropriate legislative action with
respect to any submission by the President under this
subsection.
SEC. 5. JUDICIAL REVIEW.
(a) Review.--Any party adversely affected or aggrieved by any
regulatory action taken in violation of this Act is entitled to
judicial review in accordance with chapter 7 of title 5, United States
Code. Any determination by either the President or the Secretary of
Labor under this Act shall be subject to judicial review under such
chapter.
(b) Jurisdiction.--Each court having jurisdiction to review any
significant regulatory action for compliance with any other provision
of law shall have jurisdiction to review all claims under this Act.
(c) Relief.--In granting any relief in any civil action under this
section, the court shall order the agency to take corrective action
consistent with this Act and chapter 7 of title 5, United States Code,
including remanding the significant regulatory action to the agency and
enjoining the application or enforcement of that significant regulatory
action, unless the court finds by a preponderance of the evidence that
application or enforcement is required to protect against an imminent
and serious threat to the national security of the United States.
(d) Reasonable Attorney's Fees for Small Businesses.--The court shall
award reasonable attorney's fees and costs to a substantially
prevailing small business in any civil action arising under this Act. A
small business may qualify as substantially prevailing even without
obtaining a final judgment in its favor if the agency that took the
significant regulatory action changes its position after the civil
action is filed.
(e) Limitation on Commencing Civil Action.--A party may seek and
obtain judicial review during the 1-year period beginning on the date
of the challenged agency action or within 90 days after an enforcement
action or notice thereof, except that where another provision of law
requires that a civil action be commenced before the expiration of that
1-year period, such lesser period shall apply.
(f) Definition.--In this section, the term ``small business'' means
any business, including an unincorporated business or a sole
proprietorship, that employs not more than 500 employees or that has a
net worth of less than $7,000,000 on the date a civil action arising
under this Act is filed.
Purpose and Summary
H.R. 4078, the ``Regulatory Freeze for Jobs Act of 2012''
(``the Freeze Act'' or ``the Bill''), would put a moratorium on
new significant regulations until the national unemployment
rate stabilizes at or below 6.0%. The President could waive the
moratorium by Executive Order and issue significant regulations
for certain specific reasons, such as national security. With
the consent of Congress, during the moratorium period the
President may take any other significant regulatory action
necessary to protect the public health, safety, or welfare. A
significant regulatory action taken during the moratorium would
be judicially reviewable, and a small business that
successfully challenges such a regulation could recover
attorney's fees.
Background and Need for the Legislation
A. OVERREGULATION IMPEDES JOB CREATION AND ECONOMIC GROWTH
Wasteful, excessive and unnecessary regulations impede job
creation and economic growth. A study for the Small Business
Administration found that Federal regulations cost the American
economy $1.75 trillion dollars annually, which is equal to
about 14% of the national income\1\ and ``nearly twice as much
as all individual income taxes collected last year.''\2\ ``Had
every U.S. household paid an equal share of the Federal
regulatory burden, each would have owed $15,586 in 2008.''\3\
Another study found that ``[e]ach million-dollar increase in
the regulatory budget costs the economy 420 private sector
jobs.''\4\ To extrapolate, ``[a]s the size of the regulatory
budget decreases, each lost regulator results in a gain of $6.2
million in annual GDP, and each lost regulatory position is
offset by 98 private sector jobs. Switching to the mindset of a
budget increase, we can conclude that the annual cost of a new
regulator is about $6.2 million in GDP and 98 private sector
jobs. In 2009, U.S. per-capita GDP was roughly $46,000, meaning
each regulator destroys the economic output equivalent of about
134 persons and eliminates the jobs of nearly as many. These
effects are sizeable.''\5\
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\1\See Nicole V. Crain & W. Mark Crain, The Impact of Regulatory
Costs on Small Firms, Small Business Administration, 6 & 48 (Sept.
2010), available at http://archive.sba.gov/advo/research/rs371tot.pdf
(last accessed Apr. 23, 2012).
\2\James L. Gattuso, Diane Katz & Stephen A. Keen, Red Tape Rising:
Obama's Torrent of New Regulation, Heritage Foundation (Oct. 26, 2010),
available at http://www.heritage.org/research/reports/2010/10/red-tape-
rising-obamas-torrent-of-new-regulation (last accessed Apr. 23, 2012).
\3\Crain & Crain, note 1 supra, at iv.
\4\T. Randolph Beard et al., Regulatory Expenditures, Economic
Growth and Jobs: An Empirical Study, Phoenix Center for Advanced Legal
& Economic Policy Studies, 5 (Apr. 2011), available at http://
www.phoenix-center.org/PolicyBulletin/PCPB28Final.pdf (last accessed
Apr. 23, 2012).
\5\Id. at 16.
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A recent Gallup Poll found that, among the 85% of U.S.
small business owners who are not hiring, nearly half (46%) of
these cited being ``worried about new government regulations''
as a reason they are not hiring.\6\ A New York Times poll
conducted in October 2011 found that ``half of the public
favors reducing or repealing regulations on businesses in the
United States.''\7\ And 63% of respondents to a poll conducted
for the National Federation of Independent Businesses said
``rules issued over the last 5 years have done more to hurt
than to help small businesses.''\8\
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\6\See Dennis Jacobe, ``Health Costs, Gov't Regulations Curb Small
Business Hiring,'' Gallup (Feb. 15, 2012), available at http://
www.gallup.com/poll/152654/Health-Costs-Gov-Regulations-Curb-Small-
Business-Hiring.aspx (last accessed Apr. 23, 2012).
\7\Jeff Zeleny & Megan Thee-Brenan, ``New Poll Finds a Deep
Distrust of Government,'' New York Times, Oct. 25, 2011, available at
http://www.nytimes.com/2011/10/26/us/politics/poll-finds-anxiety-on-
the-economy-fuels-volatility-in-the-2012-race.html (last accessed Apr.
23, 2012).
\8\See ``Survey: Majority of Americans Support Reforms to Federal
Regulatory Process,'' NFIB, Feb. 21, 2012, available at http://
www.sensibleregulations.org/wp-content/uploads/2012/02/Final-Final-
Final-SBSR-Poll-Press-release-0221.pdf (last accessed Apr. 23, 2012).
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President Clinton, for example, recognizes that over-
regulation is inimical to job creation, and has urged the
Federal Government to grant states waivers from environmental
regulations for construction projects.\9\ President Obama
rhetorically seconded this viewpoint in a Wall Street Journal
op-ed: ``Sometimes, those rules have gotten out of balance,
placing unreasonable burdens on business--burdens that have
stifled innovation and have had a chilling effect on growth and
jobs.''\10\ On August 31, 2011, President Obama asked several
cabinet secretaries each to identify three ``high-impact, job-
creating infrastructure projects that can be expedited through
outstanding review and permitting processes.''\11\ The
President described this as ``a common-sense step to speed job
creation in the near term while increasing our competitiveness
and strengthening the economy in the long term.''\12\ On
October 11, 2011, in the interest of job creation and economic
recovery the President announced 14 projects for expedited
environmental review and permitting.\13\ The President has
directed agencies to ``consider how best to promote
retrospective analysis of [economically significant] rules that
may be outmoded, ineffective, insufficient, or excessively
burdensome, and to modify, streamline, expand, or repeal them.
. . .''\14\ President Obama also urged independent agencies to
``consider how best to promote'' the same regulatory
review.\15\ Speaking to a joint session of Congress on
September 8, 2011, President Obama said, ``We should have no
more regulation than the health, safety and security of the
American people require. Every rule should meet that common-
sense test.''
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\9\Bill Clinton, It's Still the Economy, Stupid, Newsweek, June 19,
2011, available at http://www.thedailybeast.com/newsweek/2011/06/19/it-
s-still-the-economy-stupid.html (last accessed Apr. 23, 2012).
\10\Barack Obama, ``Toward a 21st Century Regulatory System,'' Wall
Street Journal,
Jan. 18, 2011, available at http://online.wsj.com/article/
SB10001424052748703396604576088272112103698.html (last accessed Apr.
23, 2012).
\11\Press Release, ``White House Announces Steps to Expedite High
Impact Infrastructure Projects to Create Jobs,'' Aug. 31, 2011,
available at http://www.whitehouse.gov/the-press-office/2011/08/31/
white-house-announces-steps-expedite-high-impact-infrastructure-
projects (last accessed Apr. 23, 2012).
\12\Id.
\13\Press Release, ``Obama Administration Announces Selection of 14
Infrastructure Projects to be Expedited Through Permitting and
Environmental Review Process,'' Oct. 11, 2011, available at http://
www.whitehouse.gov/the-press-office/2011/10/11/obama-administration-
announces-selection-14-infrastructure-projects-be-e (last accessed Apr.
23, 2012).
\14\See Exec. Order 13563, Sec. 6(a) (Jan. 18, 2011).
\15\See Exec. Order 13579, Sec. 2(a) (July 11, 2011).
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B. REGULATORY COSTS ARE INCREASING UNDER THE
OBAMA ADMINISTRATION
The national unemployment rate has not been below 6.0%
since July 2008--but under the Obama Administration, the cost
of regulations is increasing and the fear that yet another
regulatory wave is swelling continues to stifle economic
recovery. The need for regulatory restraint is apparent from
the fact that agencies presently are issuing more of the
regulations that are most costly to job creators.
President Obama's Fall 2011 Unified Agenda of Regulatory
and Deregulatory Activity lists 133 economically significant
regulations in the proposed or final stage of the rulemaking
process (5 more are in the pre-rule stage).\16\ By comparison,
the Fall 2003 Unified Agenda--issued in the third year of the
first term of the Bush Administration--listed 62 such
economically significant regulations.\17\ ``In the past decade,
the number of economically significant rules in the agenda has
increased by more than 137 percent, rising from 56 in spring
2001 to 133 in fall 2011.''\18\ These 133 rules each represent
at least $100 million in annual economic effects. This is
consistent with the Obama Administration's tactic of bypassing
Congress and taking unilateral Executive action to advance its
agenda.\19\
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\16\See James L. Gattuso & Diane Katz, ``Red Tape Rising: Obama-Era
Regulation at the Three-Year Mark,'' Heritage Foundation (Mar. 13,
2012), at 5, Chart 2, available
at http://www.heritage.org/research/reports/2012/03/red-tape-rising-
obama-era-regulation-at-the-three-year-mark (last accessed Apr. 23,
2012).
\17\See id.
\18\Id. at 6.
\19\See, e.g., Peter Baker, ``Obama Making Plans to Use Executive
Power,'' New York Times, Feb. 12, 2010 (Dan Pfeiffer: ``In 2010,
executive actions will also play a key role in advancing the
agenda.''); David Nakamura & Felicia Sonmez, ``Obama appoints Richard
Cordray to head consumer watchdog bureau,'' Washington Post, Jan. 4,
2012 (President Obama: ``When Congress refuses to act and as a result
hurts our economy and puts people at risk, then I have an obligation as
president to do what I can without them.'').
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The regulatory burden on the American economy undeniably
increased between 2001 and 2009. The Heritage Foundation
estimates that President Bush added approximately $60 billion
in annual regulatory costs over 8 years.\20\ But in just 3
years, President Obama adopted 106 major rules that impose on
the private sector nearly $11 billion in one-time
implementation costs and $46 billion in additional annual
regulatory costs. By comparison, in his first 3 years President
Bush adopted 28 major rules that impose $8.1 billion in
additional annual private sector costs. In 2011, the largest
portion of these 106 major rules was made to implement Dodd-
Frank. The most expensive were from the EPA, which issued five
major rules costing more than $4 billion annually.\21\
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\20\See James L. Gattuso, Obama's Red Tape: Tsunami or Ripple?,
Heritage Foundation (Nov. 8, 2011), available at http://
www.heritage.org/Research/Reports/2011/11/Obamas-Regulations-Red-Tape-
Tsunami-or-Ripple (last accessed Apr. 23, 2012).
\21\See Gattuso & Katz, note 16 supra, at 3.
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The threat of even more significant regulations, to
implement the Patient Protection and Affordable Care Act\22\
and the Dodd-Frank Wall Street Reform and Consumer Protection
Act\23\, is another impediment to economic recovery. The
President's signature health care law, for example, ``provides
for the creation of nearly 160 boards, bureaus, bureaucracies,
and commissions. . . . Overall, the Federal Government is
expected to issue roughly 10,000 pages of new regulations to
govern the implementation of the new law.''\24\ And ``the Dodd-
Frank Act is the most farreaching financial regulatory
undertaking since the 1930's, authorizing or requiring agencies
to enact 447 new rules and complete 63 reports and 59
studies.''\25\ Agencies already have missed more than two-
thirds (69.8%) of Dodd-Frank's rulemaking deadlines, and more
than one-third of the rules required by the Act have not even
been proposed yet.\26\ Consequently, ``uncertainty reigns and
nearly $2 trillion in cash sits in corporate coffers.''\27\
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\22\111 P.L. 148 (Mar. 23, 2010).
\23\111 P.L. 203 (July 21, 2010).
\24\ObamaCare: A Budget-Busting, Job-Killing Health Care Law, Jan.
6, 2011, at 7-8, available at http://www.speaker.gov/UploadedFiles/
ObamaCareReport.pdf (last accessed Apr. 23, 2012).
\25\Michael J. Ryan, Jr., U.S. Capital Markets Competitiveness: The
Unfinished Agenda, Summer 2011, at 3, available at https://
www.uschamber.com/sites/default/files/reports/
1107_UnfinishedAgenda_WEB.pdf (last accessed Apr. 23, 2012).
\26\Davis Polk LLP, ``Dodd-Frank Progress Report,'' Apr. 2012,
available at http://www.davispolk.com/Dodd-Frank-Rulemaking-Progress-
Report/(last accessed Apr. 24, 2012).
\27\George P. Shultz, et al., ``Principles for Economic Revival,''
Wall Street Journal, Sept. 16, 2010, available at http://
www.hoover.org/news/daily-report/48571 (last accessed Apr. 23, 2012).
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C. THE NEED FOR A REGULATORY MORATORIUM
A September 16, 2010, op-ed by a group of Hoover
Institution economists recommended a general regulatory freeze
as part of a strategy for economic recovery:
[E]nact a moratorium on all new regulations for the
next 3 years, with an exception for national security
and public safety. Going forward, regulations should be
transparent and simple, pass rigorous cost-benefit
tests, and rely to a maximum extent on market-based
incentives instead of command and control. Direct and
indirect cost estimates of regulations and subsidies
should be published before new regulations are put into
law.\28\
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\28\Id.
Dr. Allan Meltzer, a co-author of the op-ed, separately called
for ``a 5-year moratorium on new regulation except for national
security.''\29\ Wayne Crews, Vice President for Policy and
Director of Technology Studies at the Competitive Enterprise
Institute, has endorsed ``a year-long moratorium on
`significant' rules, typically defined as those expected to
cost $100 million annually.''\30\ Analyzing the above-cited
poll results, Gallup's Chief Economist Dennis Jacobe, Ph.D.,
observed that ``lawmakers could place a moratorium on new
regulations for some period of time. In turn, this might
provide the extra push needed to get small-business owners to
decide to hire the employees they actually need and get the
economy growing at a pace the average American can recognize as
an economic recovery.''\31\
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\29\``Get a Job!,'' Reason, Nov. 11, 2011, available at http://
reason.com/archives/2011/10/18/get-a-job/singlepage (last accessed Apr.
23, 2012).
\30\``Time Out for Federal Regulation,'' Forbes Blog, Oct. 13,
2011, available at http://www.forbes.com/sites/waynecrews/2011/10/03/
time-out-for-federal-regulation/(last accessed Apr. 23, 2012).
\31\Jacobe, note 6 supra.
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D. LEGISLATIVE HISTORY OF H.R. 4078
On February 27, 2012, the Committee on the Judiciary's
Subcommittee on Courts, Commercial and Administrative Law held
a hearing on the Freeze Act.\32\ At this hearing, the
Subcommittee received testimony from three witnesses:
Professors Allan H. Meltzer and John B. Taylor; and, Mr. Robert
Weissman, President of Public Citizen, Inc. Professors Meltzer
and Taylor testified in support of the Bill. In his testimony,
Professor Meltzer explained that economic recovery and growth
are stunted because ``investors and producers are uncertain
about regulation and taxation.''\33\ According to Professor
Meltzer, the Bill would prioritize employment and recovery by
giving job creators greater confidence about future regulatory
events.\34\ Professor Taylor testified that the economy has
recovered at a much slower pace than it did from the recession
of the early 1980's ``due to poor economic policy, including,
among other things, a large increase in both the number of
significant regulations and the regulatory uncertainty related
to new legislation,'' such as Dodd-Frank.\35\ In Professor
Taylor's view, this approach is based upon the misperception
that the financial crisis and recession were caused by
inadequate regulatory authority.\36\ Mr. Weissman testified
against the Bill. Although he described the current
unemployment rate as ``scandalously'' and ``shamefully''
high,\37\ Mr. Weissman testified that ``excessive regulation is
neither the cause of the jobs crisis nor a meaningful
impediment to job creation''; a lack of regulation contributed
to the financial crisis and economic recession; ``regulatory
protections make our country stronger, safer and more just'';
and, the Bill could have the unintended consequence of blocking
desirable regulations.\38\
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\32\Regulatory Freeze for Jobs Act of 2012: Hearing before the
Subcomm. on Courts, Commercial and Administrative Law of the H. Comm.
on the Judiciary, 112th Cong. (Feb. 27, 2012).
\33\Id. at 15.
\34\See id. at 16.
\35\Id. at 25.
\36\Ibid.
\37\Id. at 30, 31.
\38\Id. at 30, 34-37, 37 and 41-43.
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In addition to the Freeze Act, several regulatory
moratorium bills have been introduced in the 112th Congress.
Senator Johnson's (R-WI) bill, S. 1438, would prohibit any
Federal agency from enacting a new significant regulation, as
defined by President Clinton in Executive Order 12866, until
the national unemployment rate is at or below 7.7% (it was 7.8%
when President Obama took office). S. 1438 allows the President
to waive the freeze and issue a new significant regulation ``on
the basis of national security or a national emergency,'' or
with the consent of Congress. On September 12, 2011, Mr. Ribble
introduced the House companion, H.R. 2898, to Senator Johnson's
bill. Other Members sponsoring regulatory freeze bills are: Mr.
Young (H.R. 213 and H.R. 3181); Mr. Ribble (H.R. 1281 and H.R.
2898); Mr. Carter (H.R. 1235); Mr. Rogers (H.R. 3518); Mr.
Hanna (H.R. 3257); and, Mr. Griffin (H.R. 3194). H.R. 3400, the
``Jobs Through Growth Act,'' contains a regulatory moratorium
section under Title II. The Freeze Act utilizes concepts and
language from these bills.
In the 104th Congress, the House passed the Regulatory
Transition Act of 1995 (``RTA''). In brief, the RTA would have
put a moratorium on all rules--not just certain significant
rules, as the Freeze Act does--until the earlier of either
December 31, 1995, or a law was enacted requiring agencies to
perform cost-benefit and risk-assessment analysis on all new
regulations. The RTA excepted rules ``necessary because of an
imminent threat to health or safety or other emergency'' or to
enforce civil rights laws, and also did not cover rules related
to the military, foreign affairs, international trade, agency
administration, the IRS, the Federal Reserve or FDIC, or to any
agency action repealing, narrowing or streamlining a rule.
Unlike the Freeze Act, the RTA did not allow for judicial
review. After passing the House with bipartisan support, the
RTA did not advance out of the Committee on Governmental
Affairs in the Senate.
Hearings
On Monday, February 27, 2012, the Committee on the
Judiciary's Subcommittee on Courts, Commercial and
Administrative Law held a hearing on H.R. 4078. Testimony was
received from Professor John B. Taylor, George P. Shultz Senior
Fellow in Economics at the Hoover Institution and the Mary and
Robert Raymond Professor of Economics at Stanford University;
Professor Allan H. Meltzer, Distinguished Visiting Fellow at
the Hoover Institution and the Allan H. Meltzer University
Professor of Political Economy at the Tepper School of
Business, Carnegie Mellon University; and, Mr. Robert Weissman,
President of Public Citizen, Inc. Without objection at the
hearing, Mr. Coble entered into the record a letter from the
U.S. Chamber of Commerce endorsing the Bill; Mr. Cohen
submitted for the record a letter from the Coalition for
Sensible Safeguards in opposition to the Bill.
Committee Consideration
On March 20, 2012, the Committee on the Judiciary met in
open session and ordered the bill H.R. 4078 favorably reported,
with an amendment, by a vote of 15 to 13, a quorum being
present.
Committee Votes
By unanimous consent, an amendment in the nature of a
substitute offered by Mr. Griffin was considered the base text
for purposes of markup. In compliance with clause 3(b) of rule
XIII of the Rules of the House of Representatives, the
Committee advises that the following rollcall votes occurred
during the Committee's consideration of H.R. 4078.
1. Amendment #1, offered by Mr. Conyers, to amend the
definition of ``significant regulatory action'' to exclude any
rule or guidance intended to protect the privacy of Americans.
Not agreed to by a vote of 12 to 17.
ROLLCALL NO. 1
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................ X
Mr. Coble.................................... X
Mr. Gallegly................................. X
Mr. Goodlatte................................ X
Mr. Lungren.................................. X
Mr. Chabot................................... X
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks...................................
Mr. Gohmert.................................. X
Mr. Jordan................................... X
Mr. Poe......................................
Mr. Chaffetz................................. X
Mr. Griffin.................................. X
Mr. Marino...................................
Mr. Gowdy.................................... X
Mr. Ross..................................... X
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei...................................
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren.................................. X
Ms. Jackson Lee..............................
Ms. Waters................................... X
Mr. Cohen....................................
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu...................................... X
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis.................................... X
--------------------------
Total.................................... 12 17
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2. Amendment #2, offered by Mr. Nadler, to amend the
definition of ``significant regulatory action'' to exclude
nuclear reactor safety standards. Not agreed to by a vote of 13
to 17.
ROLLCALL NO. 2
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................ X
Mr. Coble.................................... X
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot................................... X
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert.................................. X
Mr. Jordan................................... X
Mr. Poe......................................
Mr. Chaffetz.................................
Mr. Griffin.................................. X
Mr. Marino...................................
Mr. Gowdy.................................... X
Mr. Ross..................................... X
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren.................................. X
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen....................................
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu...................................... X
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis.................................... X
--------------------------
Total.................................... 13 17
------------------------------------------------------------------------
3. Amendment #5, offered by Ms. Jackson Lee, to amend the
definition of ``significant regulatory action'' to exclude a
rule or guidance issued by the Secretary of Homeland Security.
Not agreed to by a vote of 12 to 15.
ROLLCALL NO. 3
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................ X
Mr. Coble.................................... X
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot................................... X
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert.................................. X
Mr. Jordan...................................
Mr. Poe......................................
Mr. Chaffetz.................................
Mr. Griffin.................................. X
Mr. Marino...................................
Mr. Gowdy....................................
Mr. Ross..................................... X
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren.................................. X
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen....................................
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley..................................
Ms. Chu...................................... X
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis.................................... X
--------------------------
Total.................................... 12 15
------------------------------------------------------------------------
4. Amendment #3, offered by Ms. Jackson Lee, to amend the
definition of ``significant regulatory action'' to exclude a
rule or guidance made under the Dodd-Frank Wall Street Reform
and Consumer Protection Act. Not agreed to by a vote of 11 to
14.
ROLLCALL NO. 4
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................ X
Mr. Coble.................................... X
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot................................... X
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks...................................
Mr. Gohmert.................................. X
Mr. Jordan...................................
Mr. Poe......................................
Mr. Chaffetz.................................
Mr. Griffin.................................. X
Mr. Marino...................................
Mr. Gowdy.................................... X
Mr. Ross.....................................
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen....................................
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley..................................
Ms. Chu...................................... X
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis.................................... X
--------------------------
Total.................................... 11 14
------------------------------------------------------------------------
5. Amendment in the Nature of a Substitute, offered by Mr.
Griffin. Agreed to by a vote of 13 to 12.
ROLLCALL NO. 5
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble.................................... X
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot................................... X
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert.................................. X
Mr. Jordan...................................
Mr. Poe......................................
Mr. Chaffetz.................................
Mr. Griffin.................................. X
Mr. Marino...................................
Mr. Gowdy....................................
Mr. Ross.....................................
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren.................................. X
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen....................................
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley..................................
Ms. Chu...................................... X
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis.................................... X
--------------------------
Total.................................... 13 12
------------------------------------------------------------------------
6. Motion to report H.R. 4078, as amended, favorably to the
House. Agreed to by a vote of 15 to 13.
ROLLCALL NO. 6
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble.................................... X
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot................................... X
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert.................................. X
Mr. Jordan...................................
Mr. Poe......................................
Mr. Chaffetz.................................
Mr. Griffin.................................. X
Mr. Marino...................................
Mr. Gowdy.................................... X
Mr. Ross..................................... X
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren.................................. X
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen....................................
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu...................................... X
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis.................................... X
--------------------------
Total.................................... 15 13
------------------------------------------------------------------------
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 4078, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 20, 2012.
Hon. Lamar Smith, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4078, the
``Regulatory Freeze for Jobs Act of 2012.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Sarah Anders,
who can be reached at 226-9010.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 4078--Regulatory Freeze for Jobs Act of 2012.
As ordered reported by the House Committee on the Judiciary on
March 20, 2012.
SUMMARY
H.R. 4078 would prohibit Federal agencies from taking most
significant regulatory actions until the unemployment rate
falls to 6 percent or less. The legislation would affect many
regulatory actions that vary greatly in nature and scope. CBO
and the staff of the Joint Committee on Taxation (JCT) cannot
determine the budgetary effects of delaying significant
regulatory actions, but we expect that enacting H.R. 4078 would
have effects on both direct spending and revenues. Pay-as-you-
go procedures apply because enacting the legislation would
affect direct spending and revenues.
CBO expects that implementing H.R. 4078 also could have a
significant impact on spending subject to appropriation,
although we cannot determine the magnitude of that effect.
CBO expects that H.R. 4078 would impose no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act (UMRA).
ESTIMATED COST TO THE FEDERAL GOVERNMENT
Background
H.R. 4078 would prohibit agencies from taking significant
regulatory actions until the average of monthly unemployment
rates for any calendar quarter is 6 percent or less. H.R. 4078
would allow exemptions for certain significant regulatory
actions if the President determines via an executive order that
the action is necessary for one of four reasons: (1) to respond
to an imminent threat to health or safety, (2) to enforce
criminal laws, (3) to protect national security, or (4) to
implement an international trade agreement.
Further, under the bill, the Congress would have to
expeditiously consider and act on any additional waivers the
President requests for significant regulatory actions that do
not meet one of the four criteria listed above. If an agency
were to pursue a significant regulatory action in violation of
H.R. 4078, any party adversely affected by that action would be
entitled to judicial review.
H.R. 4078 defines a significant regulatory action as any
Federal regulatory action that is likely to result in a rule or
guidance that may:
LHave an annual cost to the economy of $100
million or more or adversely affect in a material way
the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or
safety, small entities, or State, local, or tribal
governments or communities;
LCreate a serious inconsistency or otherwise
interfere with an action taken or planned by another
agency;
LMaterially alter the budgetary impact of
entitlements, grants, user fees, or loan programs or
the rights and obligations of recipients thereof; or
LRaise novel legal or policy issues.
The term significant regulatory action was originally
defined in 1993 by Executive Order 12866, and is used to
determine whether a regulatory action is subject to regulatory
review by the Office of Information and Regulatory Affairs
(OIRA).\1\ H.R. 4078 largely uses the same definition
established by that executive order, but expands the scope to
include guidance as well as rulemaking, and also to include
independent regulatory agencies.\2\
---------------------------------------------------------------------------
\1\See http://www.reginfo.gov/public/jsp/Utilities/EO_12866.pdf,
pg. 4.
\2\In addition, the definition of significant regulatory action in
Executive Order 12866 applies to regulatory actions that have an annual
effect on the economy of $100 million or more, whereas H.R. 4078
applies to regulatory actions that have an annual cost to the economy
of $100 million or more. However, a regulatory action that saves $100
million or more would likely still be classified as a significant
regulatory action under H.R. 4078 because such actions are likely to
fall under the other clauses of the bill's definition as described
above.
---------------------------------------------------------------------------
Looking to recent regulatory actions as a way to estimate
the number of future regulatory actions that would be affected
by H.R. 4078 is uncertain because agencies can change course
following the enactment of the bill. However, historical data
shows that OIRA reviewed 740 significant regulatory actions in
2011 and 657, on average, over the past five calendar years.\3\
Examples of those regulatory actions in 2011 include: required
warnings for cigarette packages and advertisements, Medicare
payment rates for inpatient psychiatric facilities, and
national emission standards for hazardous air pollutants from
industrial, commercial and institutional boilers.
---------------------------------------------------------------------------
\3\See http://www.reginfo.gov/public/do/
eoCountsSearchInit?action=init. The number of significant regulatory
actions under H.R. 4078 in a given year may exceed the number reviewed
by OIRA because, unlike Executive Order 12866, H.R. 4078 applies to
guidance and independent regulatory agencies.
---------------------------------------------------------------------------
H.R. 4078 would delay significant regulatory actions until
the average of monthly unemployment rates for any quarter is
6.0 percent or lower. Under CBO's most recent economic
forecast, the unemployment rate is expected to remain elevated
for at least the next few years; in those projections the
unemployment rate would remain above 6.0 percent until late
2016.\4\ However, many developments could cause economic
outcomes to differ substantially, in one direction or the
other. For example, the economy could grow more rapidly--or
more slowly--with a consequent acceleration (or reduction) in
the pace of employment. Furthermore, changes in fiscal policy
that diverge from the path assumed in CBO's baseline could have
a significant impact on economic growth and, by extension, the
unemployment rate.
---------------------------------------------------------------------------
\4\See Congressional Budget Office, The Budget and Economic
Outlook: Fiscal Years 2012 to 2022 (January 2012), Appendix E.
---------------------------------------------------------------------------
Impact on Direct Spending
The budgetary consequences of preventing significant
regulatory action also would vary tremendously because the
budgetary impact of different rules varies considerably. For
example, of the three rules mentioned above, only one--Medicare
payment rates for inpatient psychiatric facilities--has a
significant Federal budgetary impact.
Delaying or preventing some significant regulatory actions
would result in costs to the Federal Government, while delaying
or preventing others would result in savings. On net, CBO
estimates that enacting H.R. 4078 would have a significant
effect on direct spending, but we cannot determine the
magnitude or sign of those changes. Short-term effects would be
driven by: (1) preventing annual updates to payment schedules
for certain Medicare services and other routine revisions to
aspects of selected government programs, (2) preventing payment
rate reductions scheduled to take place under the Medicare
physician fee schedule, and (3) altering the implementation of
new Federal programs with substantial budget effects.
Routine Updates to Government Programs. Many routine
significant regulatory actions are health-related and in
particular pertain to Medicare. Some examples include rules
that establish annual updates to payment rates for services
provided by hospitals, physicians, and other Medicare
providers. Enacting H.R. 4078 would freeze payment structures
for those providers at current levels. Similarly, payment rates
(such as the annual benefit amount for each individual) under
some other Federal programs may also be temporarily frozen
under the bill. CBO cannot estimate the net impact of all such
changes.
Many programs, like Social Security, make annual
adjustments in the benefits that are paid, often referred to as
a cost-of-living adjustment. The new amounts are published in
the Federal register, but do not rise to the level of
significant regulatory action. Thus, under the bill, CBO
expects that these types of programs would continue to operate
as they normally do, though agencies would not be able to make
significant changes to the program while the moratorium was in
effect.
Delay Implementation of Legislation. Enacting H.R. 4078 may
also affect the implementation of new laws. For example,
additional rules and guidance related to the implementation of
the Affordable Care Act are expected in coming months. Many of
these anticipated regulatory actions are consequential for
health insurance exchanges, which are to become operational in
2014 under current law. Delaying those regulatory actions could
delay implementation of health insurance exchanges, which would
in turn result in significant savings to the Federal budget,
relative to spending expected under current law.
This bill also could delay the implementation of new
initiatives aimed at making more electromagnetic spectrum
available for wireless services. As required by title VI of the
Middle Class Tax Relief and Job Creation Act of 2012, the
Federal Communications Commission (FCC) is developing proposed
rules for what are known as ``incentive auctions,'' for private
firms to voluntarily relinquish some or all of their existing
spectrum rights in exchange for a payment from the FCC. That
spectrum would then be available for new licensed uses.
Provisions in that act regarding the use of spectrum by Federal
agencies and the development of a wireless network for public
safety users are being implemented by the Department of
Commerce. A delay in the implementation of those programs would
increase net direct spending (by reducing expected auction
receipts) by several billion dollars over the 2013N2022 period,
relative to current law.
Impact on Revenues
Enacting H.R. 4078 also would affect revenues, and JCT
expects that delaying significant regulatory actions of the
Internal Revenue Service could reduce collections of revenues
in some cases and increase collections in other cases. JCT
cannot determine the sign or magnitude of the possible effects
on revenues.
Enacting H.R. 4078 would also directly affect revenues
through the operations of the Federal Reserve, which remits its
net earnings to the Treasury; those remittances are classified
as revenues in the Federal budget. H.R. 4078 would prevent the
Federal Reserve from writing rules and regulations to implement
enacted legislation or to change any such rules and regulations
currently in place if the rules or regulations would be
considered significant regulatory action. The bill also would
limit the ability of the Federal Reserve to conduct monetary
policy because some parameters, such as the discount rate and
the interest rate paid on reserves, are specified in
regulations. However, H.R. 4078 probably would have no effect
on the Federal Reserve's purchases and sales of securities.
Preventing some rules and regulations from going into effect
could reduce Federal Reserve remittances in some cases and
increase remittances in other cases. CBO cannot determine the
sign or magnitude of the possible effects on revenues.
Impact on Spending Subject to Appropriation
H.R. 4078 also would affect programs for which spending is
subject to the annual appropriations process. However, CBO
cannot determine the magnitude of that effect. For example, if
the Environmental Protection Agency were prohibited from
issuing final rules while the unemployment rate exceeds 6
percent, there could be reductions in spending for the agency,
subject to appropriation action. A second example involves
annual calculations made by the Department of Housing and Urban
Development (HUD) of the fair-market rents that it uses to
determine rental subsidies for low-income individuals. We
expect that the bill would prohibit those calculations from
being made and implemented, which would prevent the rental
subsidy from adjusting for changes in market conditions. Any
increase in rents would be paid for by the tenant and not by
HUD and if tenants were unable to pay the increased rent, some
landlords would likely leave the program.
PAY-AS-YOU-GO CONSIDERATIONS
The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting
direct spending or revenues. Pay-as-you-go procedures apply to
H.R. 4078 because enacting the legislation would affect direct
spending and revenues. CBO and JCT cannot determine the sign or
magnitude of those effects.
INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT
CBO expects that H.R. 4078 would impose no
intergovernmental or private-sector mandates as defined in
UMRA. By delaying significant regulatory actions, the bill
could affect public or private entities in a number of ways,
including slowing reimbursements and eliminating or changing
regulatory requirements. While the costs and savings tied to
those individual effects could be significant, CBO has no basis
for estimating either the overall direction or magnitude of
those effects on public or private entities because of
uncertainty about the nature and number of regulations
affected.
ESTIMATE PREPARED BY:
Federal Costs: Sarah Anders
Impact on State, Local, and Tribal Governments: Elizabeth Cove
Delisle
Impact on the Private Sector: Paige Piper/Bach
ESTIMATE APPROVED BY:
Holly Harvey
Deputy Assistant Director for Budget Analysis
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
4078, will help create jobs by putting a moratorium on
unnecessary significant regulatory actions until the
unemployment rate stabilizes at or below 6.0 percent.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 4078 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.
Section-by-Section Analysis
The following discussion describes the bill as reported by
the Committee.
Section 1: Short Title. This section designates the Bill as
the ``Regulatory Freeze for Jobs Act of 2012.''
Section 2: Definitions. This section defines the terms
``agency'' and ``rule'' per the Administrative Procedure Act, 5
U.S.C. Sec. 551; ``regulatory action'' per Executive Order
12866, but not including a regulatory action that repeals an
existing rule; ``significant regulatory action'' per Executive
Order 12866, except that the bill only covers a regulatory
action with ``costs to the economy of $100 million or more,''
while Executive Order 12866 speaks to ``effects on the economy
of $100 million or more''; and, ``small entity'' per the
Regulatory Flexibility Act of 1980, 5 U.S.C. Sec. 601(6).
Section 3: Significant Regulatory Actions. Together,
Sections 3(a)-(b) prohibit agencies from taking any significant
regulatory action until the Secretary of Labor certifies to the
Director of the Office of Management and Budget that the
average national monthly unemployment rate for the last quarter
is at or below 6.0%.
Section 4: Waivers. Section 4(a) states that an agency may
take a significant regulatory action during the moratorium
period only pursuant to either Section 4(b) or Section 4(c).
Using the same waiver criteria as H.R. 10, the REINS Act,
Section 4(b) allows the President to waive Section 3 by an
Executive Order certifying that the significant regulatory
action is necessary because of an imminent threat to health or
safety or other emergency; for the enforcement of criminal
laws; for national security; or, was issued to implement an
international trade agreement. Section 4(c) allows the
President to submit to Congress a written request for a waiver
to take a significant regulatory action during the moratorium
period when the significant regulatory action is ``necessary to
protect the public health, safety and welfare'' but is not
eligible for a Presidential waiver under Section 4(b).
Section 5: Judicial Review. This section authorizes
judicial review for any person aggrieved by a regulatory action
taken in violation of the Act. Section 5(c) allows a court to
forgo enjoining a significant regulatory action taken in
violation of the Act if the court finds by a preponderance of
the evidence that the regulation is required to protect against
an imminent and serious threat to the national security of the
United States. Section 5(d) allows small businesses to collect
reasonable attorney's fees in some cases; Section 5(f) draws
upon the definition of ``small business'' given by the Equal
Access to Justice Act, 24 U.S.C. Sec. 2412(d)(2)(B)(ii).
Section 5(e) requires suit to be brought within 1 year, or
within 90 days for an agency enforcement action (unless another
law imposes a statute of limitations shorter than 1 year).
Dissenting Views
INTRODUCTION
H.R. 4078, the ``Regulatory Freeze for Jobs Act of 2012,''
is the fifth time during this Congress that the Judiciary
Committee has marked up legislation aimed at hobbling the
ability of Federal agencies to promulgate regulations.\1\ This
latest measure is based on the false assumption that
regulations inhibit job creation. With only limited exceptions,
H.R. 4078, as amended, would prohibit an agency from taking any
``significant regulatory action''\2\ until the average of
monthly unemployment rates for any quarter is six percent or
less. The Congressional Budget Office (CBO) observes that the
unemployment rate may remain above this threshold ``until late
2016.''\3\
---------------------------------------------------------------------------
\1\See H.R. 10, the Regulations From the Executive in Need of
Scrutiny Act of 2011, 112th Cong. (2011); H.R. 527, Regulatory
Flexibility Improvements Act of 2011, 112th Cong. (2011); H.R. 3010,
the Regulatory Accountability Act of 2011, 112th Cong. (2011); H.R.
3862, the Sunshine for Regulatory Decrees and Settlements Act, 112th
Cong. (2012).
\2\The bill defines ``significant regulatory action'' as any
regulatory action that is likely to result in a rule or guidance that
may have an annual cost to the economy of $100 million or more or have
a material adverse effect on the economy, as explained in greater
detail infra.
\3\Congressional Budget Office Cost Estimate, H.R. 4078, the
Regulatory Freeze for Jobs Act of 2012, at 3 (Apr. 20, 2012), available
at http://www.cbo.gov/sites/default/files/cbofiles/attachments/
hr4078.pdf [hereinafter CBO Cost Estimate]. The CBO notes, however,
that ``many developments could cause economic outcomes to differ
substantially, in one direction or the other.'' Id.
---------------------------------------------------------------------------
H.R. 4078 is bad policy because it: (1) is based on the
false premise that regulations and job creation are linked; (2)
is a blunt instrument that needlessly jeopardizes public health
and safety; (3) ignores the benefits of regulation; (4) fails
to account for the extensive procedural requirements of the
rulemaking process; (5) is unworkable and will create more, not
less, business uncertainty; (6) may undermine job creation by
increasing the risk of regulatory failure; and (7) may present
separation of powers concerns. As the Administrator of the
Office of Information and Regulatory Affairs has observed, a
rulemaking moratorium would be ``like a nuclear bomb in the
sense that it would prevent regulations that . . . cost very
little and have very significant economic or public health
benefits.''\4\ Accordingly, H.R. 4078 is opposed by the
Coalition for Sensible Safeguards, a coalition of more than 70
organizations, including the AFL-CIO, BlueGreen Alliance,
Center for Food Safety, Consumer Federation of America,
Consumers Union, Friends of the Earth, League of Conservation
Voters, National Women's Law Center, Natural Resources Defense
Council, OMB Watch, Public Citizen, Service Employees
International Union, Union of Concerned Scientists, and the
UAW.\5\ Noting the legislation's ``overly broad scope and
impact,'' the Coalition warns that H.R. 4078 would ``halt new
standards to protect workplace safety, the environment, food
safety and consumer product safety.''\6\ For these reasons, and
those described below, we respectfully dissent and urge our
colleagues to reject this seriously flawed bill.
---------------------------------------------------------------------------
\4\How a Broken Process Leads To Flawed Regulations: Hearing Before
the H. Comm. on Oversight and Government Reform, 112th Cong. 181 (2011)
(testimony of Cass Sunstein, Administrator, Office of Information and
Regulatory Affairs, Office of Management and Budget).
\5\Letter from Katherine McFate, President and CEO, OMB Watch, &
Robert Weissman, President, Public Citizen, Co-Chairs of the Coalition
for Sensible Safeguards, to Rep. Lamar Smith (R-TX), Chair, and Rep.
John Conyers, Jr. (D-MI), Ranking Member, House Committee on the
Judiciary (Mar. 16, 2012), available at http://
www.sensiblesafeguards.org/assets/documents/css-letter-re-4078.pdf.
\6\Id. at 2.
---------------------------------------------------------------------------
DESCRIPTION AND BACKGROUND
H.R. 4078, as amended, would impose a moratorium on any
regulatory action that is likely to result in a rule or
guidance that may have an annual cost to the economy of $100
million or more, or meets other specified criteria until the
Bureau of Labor Statistics average of monthly unemployment
rates for any quarter is six percent or less.
Introduced by Rep. Tim Griffin (R-AR) on February 17, 2012,
the bill was referred to the Committee on Oversight and
Government Reform, and the Judiciary Committee. Currently, H.R.
4078 has 17 cosponsors, all of whom are Republicans. On
February 27, 2012, the Courts, Commercial and Administrative
Law Subcommittee (Subcommittee) held a hearing on H.R. 4078.\7\
The Minority witness was Robert Weissman, President of Public
Citizen. Mr. Weissman identified numerous flaws with the bill,
including its highly limited exceptions. Noting that H.R. 4078
was ``misguided'' and ``dangerous,'' he warned that the bill
would effectively ``block for five years with almost no
relevant exceptions the issuance of new health, safety,
environmental, and financial protections.''\8\
---------------------------------------------------------------------------
\7\Regulatory Freeze for Jobs Act of 2012: Hearing on H.R. 4078
Before the Subcomm. on Courts, Commercial Admin. Law of the H. Comm. on
the Judiciary, 112th Cong. (2012).
\8\Id. at 28, 48 (testimony of Robert Weissman, President, Public
Citizen).
---------------------------------------------------------------------------
A section-by-section explanation of the reported version of
the bill's principal provisions follows. Section 2 defines
various terms used in the measure. First, it imports the
definitions of ``agency'' and ``rule'' from the Administrative
Procedure Act (APA).\9\ The APA defines ``agency'' as ``each
authority of the Government of the United States, whether or
not it is within or subject to review by another agency,'' with
certain exceptions.\10\ Therefore, ``agency'' as used in this
measure includes independent regulatory agencies, and not just
the Executive Branch agencies subject to Presidential control.
The APA defines ``rule'' as ``an agency statement of general or
particular applicability and future effect designed to
implement, interpret, or prescribe law or policy or describing
the organization, procedure, or practice requirements of an
agency.''\11\
---------------------------------------------------------------------------
\9\5 U.S.C. Sec. Sec. 551-59, 701-06, 1305, 3105, 3344, 5372, 7521
(2012).
\10\5 U.S.C. Sec. 551(1) (2012).
\11\5 U.S.C. Sec. 551(4) (2012).
---------------------------------------------------------------------------
Second, section 2 defines ``regulatory action'' to mean
``any substantive action by an agency that promulgates or is
expected to lead to the promulgation of a final rule or
regulation. . . .'' Such action includes various notices, such
as notices of inquiry, advance notices of proposed rulemaking,
and notices of proposed rulemaking. This definition is derived
from President Clinton's Executive Order 12,866.\12\ Unlike
this Executive Order, however, section 2 excepts any
substantive action by an agency for repealing a rule.
---------------------------------------------------------------------------
\12\Exec. Order No. 12,866, 58 Fed. Reg. 51735 (Oct. 4, 1993).
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Third, section 2 defines ``significant regulatory action''
broadly as any regulatory action that is likely to result in a
rule or guidance that may have: (1) at least a $100 million
cost to the economy; or (2) adversely affect in a material way
the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety,
small entities, or state, local, or tribal governments or
communities. ``Significant regulatory action'' also can include
a rule or guidance that may: (1) create a serious inconsistency
or interfere with another agency's action; (2) materially alter
the budgetary impact of entitlements, grants, user fees, or
loan programs or the rights and obligations of their
recipients; or (3) raise novel legal or policy issues.
Although this definition is largely derived from the
definition of ``significant regulatory action'' contained in
President Clinton's Executive Order 12866, it departs from that
definition in several significant ways. First, the bill's
definition is broader than its counterpart in the Executive
Order in that it includes agency guidance and is not limited to
rules. In addition, the Amendment's definition includes ``small
entities,'' whereas the Executive Order does not. Further, the
bill's definition with respect to ``novel legal or policy
issues'' does not include the Executive Order's provision
limiting these issues ``arising out of legal mandates, the
President's priorities, or the principles'' set forth in the
Executive Order. Finally, the bill's definition is narrower
than the one in the Executive Order in that the $100 million
threshold is limited to economic ``cost'' as opposed to
economic ``effect.''
Fourth, section 2 imports the definition of ``small
entity'' contained in section 601(6) of the Regulatory
Flexibility Act (RFA). The RFA defines ``small entity'' as a
small business\13\, small organization\14\, or small
governmental jurisdiction\15\.
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\13\The RFA defines ``small business'' as having the same meaning
as ``small business concern'' under section 3 of the Small Business Act
unless an agency, after consultation with the Small Business
Administration's Office of Advocacy, establishes a different
definition. 5 U.S.C. Sec. 601(3) (2012). The Small Business Act defines
``small business concern'' as ``one which is independently owned and
operated and which is not dominant in its field of operation: Provided,
That notwithstanding any other provision of law, an agricultural
enterprise shall be deemed to be a small business concern if it
(including its affiliates) has annual receipts not in excess of
$750,000.'' Pub. L. No. 85-536.
\14\The RFA defines ``small organization'' as ``any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field, unless an agency establishes, after opportunity
for public comment, one or more definitions of such term which are
appropriate to the activities of the agency and publishes such
definition(s) in the Federal Register.'' 5 U.S.C. Sec. 601(4) (2012).
\15\The RFA defines ``small governmental jurisdiction'' as
governments of cities, counties, towns, townships, villages, school
districts, or special districts, with a population of less than fifty
thousand, unless an agency establishes, after opportunity for public
comment, one or more definitions of such term which are appropriate to
the activities of the agency and which are based on such factors as
location in rural or sparsely populated areas or limited revenues due
to the population of such jurisdiction, and publishes such
definition(s) in the Federal Register.'' 5 U.S.C. Sec. 601(5) (2012).
---------------------------------------------------------------------------
Section 3(a) of the bill provides that no agency may take
any significant regulatory action until the Secretary of Labor
submits a report required by subsection (b). Section 3(b)
requires the Secretary of Labor to submit a report to the
Office of Management and Budget whenever the Secretary
determines that the Bureau of Labor Statistics average monthly
unemployment rate for any quarter is equal to or less than six
percent after the Amendment's enactment date.
Section 4(a) provides that an agency may take a significant
regulatory action only in accordance with subsection (b) or (c)
of this measure. Subsection (b) provides that an agency may
take a significant regulatory action if the President
determines by executive order that such action is: (1)
necessary because of an imminent threat to health or safety or
other emergency; (2) necessary for the enforcement of criminal
laws; (3) necessary for national security reasons; or (4)
issued pursuant to any statute implementing an international
trade agreement.
With respect to any significant regulatory action not
eligible for a Presidential waiver under subsection (b),
subsection (c) provides that the President may submit a request
to Congress for a waiver of this measure. The President's
submission to Congress must: (1) identify the significant
regulatory action and the scope of the requested waiver; (2)
set forth all reasons why such action is necessary to protect
the public health, safety, or welfare; and (3) explain why such
action is ineligible for a Presidential waiver under subsection
(b). The Amendment requires Congress to give ``expeditious
consideration'' and to take appropriate legislative action with
respect to such submission.
Section 5(a) provides that any party adversely affected or
aggrieved by a regulatory action taken in violation of this Act
is entitled to judicial review. Additionally, any determination
by the President or the Secretary of Labor is subject to
judicial review. Section 5(b) provides that any court having
jurisdiction to review a significant regulatory action for
compliance with any other law has jurisdiction to consider
claims under this measure.
Section 5(c) requires a court to order corrective action by
the agency, including remanding the significant regulatory
action to the agency and enjoining the application or
enforcement of such action, unless the court finds by a
preponderance of the evidence that application or enforcement
is required to protect against an imminent and serious threat
to national security.
Section 5(d) requires a court to award reasonable attorneys
fees and costs to a ``substantially prevailing'' small business
in connection with any civil action under this measure. A small
business qualifies as ``substantially prevailing'' even if such
entity failed to obtain a final judgment in its favor if the
agency changes its position after the civil action is filed.
Unless another provision of law requires filing suit in
less than one year, section 5(e) permits a party to seek and
obtain judicial review within one year following the date of
the challenged agency action or or within 90 days after an
enforcement action or notice thereof.
Section 5(f) defines, for purposes of this section, a
``small business'' that is different from how the term is
defined in the RFA (and, by reference, in the rest of H.R.
4078). As used in section 5 of the Amendment, ``small
business'' means any business that employs no more than 500
employees or has a net worth of less than $7 million on the
date that a civil action is filed under this Act.
CONCERNS WITH H.R. 4078
I. H.R. 4078 IS BASED ON THE FALSE PREMISE THAT REGULATIONS AND JOB
CREATION ARE LINKED
There is no credible evidence establishing that regulations
have any substantive impact on job creation. Nonetheless,
proponents of deregulatory measures such as H.R. 4078 wrongly
and without any proof insist that regulations impose burdensome
compliance costs on businesses and thereby stifle job creation.
For instance, House Judiciary Committee Chairman Lamar Smith
(R-TX) asserts:
The American people urgently need jobs that only
economic growth can give. Standing in the way of growth
and job creation is a wall of Federal regulation.
* * *
New regulatory burdens and uncertainty about the
economy have helped to keep trillions of dollars of
private sector capital on the sidelines. Companies
cannot safely invest if they cannot tell whether
tomorrow's regulations will make their investments
unprofitable.\16\
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\16\The Regulatory Accountability Act of 2011: Hearing on H.R. 3010
Before the Subcomm. on Courts, Commercial and Admin. Law of the H.
Comm. on the Judiciary, 112th Cong. (2011) [hereinafter H.R. 3010
Hearing] (remarks of Rep. Lamar Smith (R-TX), Chair, H. Comm. on the
Judiciary).
The focus on a purported link between regulations and job
creation is, in fact, a red herring. Bruce Bartlett, a senior
policy analyst in the Reagan and George H.W. Bush
Administrations, offers this explanation for why these
arguments are fully embraced by conservatives as part of their
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deregulatory mantra:
Republicans have a problem. People are increasingly
concerned about unemployment, but Republicans have
nothing to offer them. The G.O.P. opposes additional
government spending for jobs programs and, in fact,
favors big cuts in spending that would be likely to
lead to further layoffs at all levels of government. .
. .
These constraints have led Republicans to embrace the
idea that government regulation is the principal factor
holding back employment. They assert that Barack Obama
has unleashed a tidal wave of new regulations, which
has created uncertainty among businesses and prevents
them from investing and hiring.
No hard evidence is offered for this claim; it is
simply asserted as self-evident and repeated endlessly
throughout the conservative echo chamber.\17\
---------------------------------------------------------------------------
\17\Bruce Bartlett, Op-Ed., Misrepresentations, Regulations and
Jobs, N.Y. Times Economix, Oct. 4, 2011, available at http://
economix.blogs.nytimes.com/2011/10/04/regulation-and-unemployment/.
The Majority's own witness clearly debunked the myth that
regulations stymie job creation during his testimony at a
legislative hearing held last year on an anti-regulatory bill
authored by Chairman Smith. Christopher DeMuth, with the
conservative think tank American Enterprise Institute, stated
in his prepared testimony that the ``focus on jobs . . . can
lead to confusion in regulatory debates'' and that ``the
employment effects of regulation, while important, are
indeterminate.''\18\ A recently released study supports Mr.
Demuth's statement, finding that the effects of regulation are
uncertain.\19\
---------------------------------------------------------------------------
\18\H.R. 3010 Hearing (prepared statement of Christopher DeMuth,
American Enterprise
Institute); see also Jia Lynn Yang, Does Government Regulation Really
Kill Jobs? Economists Say Overall Effect Minimal, Wash. Post, Nov. 13,
2011, available at
http://www.washingtonpost.com/business/economy/does-government-
regulation-really-kill-jobs-economists-say-overall-effect-minimal/2011/
10/19/gIQALRF5IN_story.html?hpid=z1 (``In 2010, 0.3 percent of the
people who lost their jobs in layoffs were let go because of
`government regulations/intervention.' By comparison, 25 percent were
laid off because of a drop in business demand. . . . Economists who
have studied the matter say that there is little evidence that
regulations cause massive job loss in the economy, and that rolling
them back would not lead to a boom in job creation.'').
\19\See Regulation, Jobs, and Economic Growth: An Empirical
Analysis, The George Washington University Regulatory Studies Center
Working Paper, at 27 (Mar. 2012) (finding that the ``macroeconomic
effects of regulation are uncertain'' and that the study's ``results
reveal no impact'' when considering either the impact of regulations on
the ``total economy or strictly the private sector''), available at
http://regulatorystudies.gwu.edu/images/pdf/032212_
sinclair_vesey_reg_jobs_growth.pdf
---------------------------------------------------------------------------
If anything, regulations can promote job growth and put
Americans back to work. For instance, the BlueGreen Alliance,
notes:
Studies on the direct impact of regulations on job
growth have found that most regulations result in
modest job growth or have no effect, and economic
growth has consistently surged forward in concert with
these health and safety protections. The Clean Air Act
is a shining example, given that the economy has grown
204% and private sector job creation has expanded 86%
since its passage in 1970.\20\
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\20\Letter to Rep. Lamar Smith (R-TX), Chair, & Rep. John Conyers,
Jr. (D-MI), Ranking Member, H. Committee on the Judiciary, from David
A. Forster, Executive Director, BlueGreen Alliance, at 2 (Nov. 2, 2011)
(on file with the H. Committee on the Judiciary, Democratic Staff).
Also in reference to the Clean Air Act, the White House
Office of Management and Budget (OMB) observed that 40 years of
success with this measure has ``demonstrated that strong
environmental protections and strong economic growth go hand in
hand.''\21\ Similarly, the Natural Resources Defense Council,
the United Auto Workers, and the National Wildlife Federation
jointly issued a report finding that vehicle emissions
standards and clean vehicle research, development and
production are already responsible for 155,000 jobs at 504
facilities in 43 states and the District of Columbia.\22\
According to the same report, 119,000 jobs have been created in
this industry since 2009 alone.\23\
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\21\Executive Office of the President--Office of Management and
Budget, Statement of Administration Policy on H.R. 2401, Transparency
in Regulatory Analysis of Impacts on the Nation Act of 2011 (Sept. 21,
2011).
\22\Natural Resources Defense Council et al., Supplying Ingenuity:
U.S. Suppliers of Clean, Fuel-Efficient Vehicle Technologies (2011),
available at http://www.nrdc.org/transportation/autosuppliers/files/
SupplierMappingReport.pdf
\23\Id.
---------------------------------------------------------------------------
In February 2012, The New York Times noted in an editorial
that a pending rule under the Clean Air Act requiring power
plants to reduce mercury and other toxic emissions by 90
percent in the next five years, which was approved by the Obama
Administration in December, would result in 45,000 temporary
construction jobs over the next five years and possibly 8,000
permanent jobs because of the upgrades required by the new
rule.\24\ This job growth would be in addition to the rule's
expected benefit of preventing 11,000 deaths from heart attacks
and respiratory diseases like asthma.\25\
---------------------------------------------------------------------------
\24\Editorial, The Job-Creating Mercury Rule, N.Y. Times, Feb. 22,
2012, available at http://www.nytimes.com/2012/02/23/opinion/the-job-
creating-mercury-rule.html.
\25\Id.
---------------------------------------------------------------------------
Additionally, a report by Northeast States for Coordinated
Air Use Management (NESCAUM) demonstrates a direct correlation
between environmental regulations and job growth in the
Northeast. It found that by enacting stricter fuel economy
standards and pursuing cleaner forms of energy, more jobs would
be created.\26\ Specifically, NESCAUM found that stricter fuel
economy standards and regulations governing cleaner forms of
energy would increase employment from 9,490 to 50,700 jobs;
increase gross regional product, a measure of the states'
economic output, by $2.1 billion to $4.9 billion; and increase
household disposable income increases by $1 billion to $3.3
billion.\27\
---------------------------------------------------------------------------
\26\Northeast States for Coordinated Air Use Management (NESCAUM),
Economic Analysis of a Program to Promote Clean Transportation Fuels in
the Northeast/Mid-Atlantic Region (2011) (on file with Natural
Resources Defense Council) available at http://switchboard.nrdc.org/
blogs/ngreene/CFS%20Economic%20Analysis%20Report%20INTERNAL.PDF
\27\Id.
---------------------------------------------------------------------------
H.R. 4078's proponents rely on an equally flawed corollary
argument that regulatory uncertainty creates a disincentive for
businesses to add jobs. Once again, Bruce Bartlett, the senior
economic official from the Reagan and Bush Administrations,
observed that:
[R]egulatory uncertainty is a canard invented by
Republicans that allows them to use current economic
problems to pursue an agenda supported by the business
community year in and year out. In other words, it is a
simple case of political opportunism, not a serious
effort to deal with high unemployment.\28\
---------------------------------------------------------------------------
\28\Bruce Bartlett, Op-Ed., Misrepresentations, Regulations and
Jobs, N.Y. Times Economix Blog, Oct. 4, 2011, available at http://
economix.blogs.nytimes.com/2011/10/04/regulation-and-unemployment/
?scp=4&sq=bartlett&st=cse.
Likewise, Minority witness Professor Sidney Shapiro testified
last year, ``All of the available evidence contradicts the
claim that regulatory uncertainty is deterring business
investment.''\29\ This may explain the findings of a July 2011
Wall Street Journal survey of business economists, which found
that the ``main reason U.S. companies are reluctant to step up
hiring is scant demand, rather than uncertainty over government
policies.''\30\ Not surprisingly, a September 2011 National
Federation of Independent Business survey of its members found
that ``poor sales''--not regulation--is the biggest
problem.\31\ Indeed, the Main Street Alliance, a small business
organization, observes:
---------------------------------------------------------------------------
\29\H.R. 3010 Hearing (prepared statement of Prof. Sidney Shapiro,
Wake Forest School of Law).
\30\Phil Izzo, Dearth of Demand Seen Behind Weak Hiring, Wall St.
J., July 18, 2011, available at http://online.wsj.com/article/
SB10001424052702303661904576452181063763332.html.
\31\Press Release, Nat'l Federation of Independent Businesses,
Small Business Confidence Takes Huge Hit: Optimism Index Now in Decline
for Six Months Running (Sept. 13, 2011) (``Of those reporting negative
sales trends, 45 percent blamed faltering sales, 5 percent higher labor
costs, 15 percent higher materials costs, 3 percent insurance costs, 8
percent lower selling prices and 10 percent higher taxes and regulatory
costs.''), available at http://www.nfib.com/press-media/press-media-
item?cmsid=58190.
In survey after survey and interview after interview,
Main Street small business owners confirm that what we
really need is more customers--more demand--not
deregulation. Policies that restore our customer base
are what we need now, not policies that shift more risk
---------------------------------------------------------------------------
and more costs onto us from big corporate actors.
* * *
To create jobs and get our country on a path to a
strong economic future, what small businesses need is
customers--Americans with spending money in their
pockets--not watered down standards that give big
corporations free reign to cut corners, use their
market power at our expense, and force small businesses
to lay people off and close up shop.\32\
---------------------------------------------------------------------------
\32\Letter to Rep. Lamar Smith (R-TX), Chair, & Rep. John Conyers,
Jr. (D-MI), Ranking Member, H. Committee on the Judiciary, from Jim
Houser, Co-Chair, The Main Street Alliance, et al., at 1-2 (Nov. 2,
2011) (on file with the H. Committee on the Judiciary, Democratic
Staff).
In sum, there is no credible evidence that regulations depress
job creation.
II. H.R. 4078'S REGULATORY MORATORIUM JEOPARDIZES PUBLIC HEALTH AND
SAFETY
A. The Bill Takes a Thoughtlessly Blunt Approach To Rulemaking
In imposing a moratorium, H.R. 4078 does not distinguish
between genuinely burdensome or duplicative regulations and
those that ensure that the air we breathe, the automobiles we
drive, the food we eat, or the planes on which we travel are
safe. It is essentially a ``one-size-fits-all'' measure that
jeopardizes the public health and safety of Americans as a
result.
Cass Sunstein, the Administrator of the Office of
Information and Regulatory Affairs, addressed the ramifications
of a regulatory moratorium during a hearing before the House
Committee on Oversight and Government Reform last year. He
warned:
[A] moratorium would sweep up deregulatory measures
which we are pretty enthusiastic about expediting,
because they are regulatory actions. And . . . , and
this is an important point, a moratorium would not be a
scalpel or a machete. It would be more like a nuclear
bomb in the sense that it would prevent regulations
that, let's say, cost very little and have very
significant economic or public health benefits. So a
moratorium would have the disadvantage of defying what
every President since President Reagan has endorsed,
which is cost-benefit analysis.\33\
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\33\How a Broken Process Leads To Flawed Regulations: Hearing
Before the H. Comm. on Oversight and Government Reform, 112th Cong. 181
(2011) (testimony of Cass Sunstein, Administrator, Office of
Information and Regulatory Affairs, Office of Management and Budget).
B. H.R. 4078's Exceptions Are Woefully Deficient
Furthermore, the bill's limited exceptions to its
moratorium fail to address our concerns. While section 4(b) of
the bill permits the President to determine by Executive Order
whether a regulation should be exempted from the moratorium,
such exemptions are extremely narrow and would apply only if
the regulation is: (1) necessary because of an imminent threat
to health or safety or other emergency; (2) necessary for the
enforcement of criminal laws; (3) necessary for national
security reasons; or (4) issued pursuant to any statute
implementing an international trade agreement. With respect to
the requirement that threats to health or safety or other
emergency be ``imminent'' before a regulation could qualify for
the exception, the president of Public Citizen observed,
Imminent threat means immediate, right now, something
that has to be done to prevent something that is
otherwise going to happen in a very near term with a
high degree of certainty. That is just why most
regulation takes place. Take the example of food
safety, we issue food safety rules usually because
there has just been an outbreak of some problem, but
not because we think it is about to happen again.
You can go down the case of crib safety or auto
safety or environmental protection or preventing
another financial crisis, on and on, you go down the
list it will almost never meet the standard of an
imminent threat to health or safety or other
emergencies. I believe the proper interpretation of
this bill is that [there] will be a roughly 5-year
moratorium on all health, safety, environmental,
financial, et cetera, protections.\34\
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\34\Regulatory Freeze for Jobs Act of 2012: Hearing on H.R. 4078
Before the Subcomm. on Courts, Commercial Admin. Law of the H. Comm. on
the Judiciary, 112th Cong. 51 (2012) (testimony of Robert Weissman,
President, Public Citizen).
To illustrate the shortcomings of these exceptions,
Democratic Committee Members offered a series of amendments
specifically excepting various types of regulations. For
example, Ranking Member John Conyers, Jr. (D-MI) offered an
amendment that would have exempted any rule or guidance
intended to protect the privacy of Americans.\35\ This
amendment, however, failed by a vote of 12 to 17. Likewise,
Representative Jerrold Nadler (D-NY) offered an amendment that
would have exempted nuclear reactor safety standards from the
bill's definition of ``significant regulatory action.'' That
amendment failed by a vote of 13 to 17.\36\ Representative
Sheila Jackson Lee (D-TX) offered an amendment that would have
excepted a rule or guidance issued by the Secretary of Homeland
Security from the bill. That amendment failed by a vote of 12
to 15.
---------------------------------------------------------------------------
\35\Unofficial Tr. of Markup of H.R. 4078, the Regulatory Freeze
for Jobs Act of 2012, by the Comm. on the Judiciary, 112th Cong. 30
(2012) [hereinafter Markup].
\36\Id. at 70.
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C. H.R. 4078's Congressional Waiver Is Effectively Illusory
Representative Griffin, the author of this legislation,
offered an Amendment in the Nature of a Substitute at the
Committee's markup that ostensibly sought to expand the bill's
exception provisions.\37\ The Amendment authorizes the
President, with respect to any significant regulatory action
not eligible for a Presidential waiver, to submit a request to
Congress to waive the moratorium. The President's submission to
Congress must: (1) identify the significant regulatory action
and the scope of the requested waiver; (2) set forth all
reasons why such action is necessary to protect the public
health, safety, or welfare; and (3) explain why such action is
ineligible for a Presidential waiver under subsection (b). The
Amendment requires Congress to give expeditious consideration
and to take appropriate legislative action with respect to such
submission, which as we all know, is not likely to occur.
---------------------------------------------------------------------------
\37\Id. at 27.
---------------------------------------------------------------------------
The benefits of this Amendment, however, are largely
pyrrhic and effectively illusory. It provides no meaningful
standards governing when Congress can or should grant a waiver
and fails to provide for any expedited procedures for
consideration of a Congressional waiver. Thus, left to languish
in the regular legislative process, no Congressional waiver
would ever realistically be granted in a timely manner.
There are innumerable instances where noncontroversial
bills were passed by one house of Congress only to die in the
other house because of unrelated or political concerns. One
need only consider the legislative history of the so-called
``comma bill,'' which was passed by the House over the course
of three Congresses before it became law.\38\ This measure,
which made a purely technical correction to title 9 of the
United States Code, was first introduced during the 105th
Congress.\39\ The House passed it in 1997, but the Senate--on
the last day of the Congress--passed the bill with a
controversial and unrelated amendment. The following Congress,
the bill was reintroduced in the House, but it was passed with
a controversial amendment and, therefore, died in the
Senate.\40\ Thereafter, the bill was again reintroduced in the
107th Congress in 2001.\41\ Representative James F.
Sensenbrenner, Jr. (R-WI), then-Chairman of the House Judiciary
Committee, made the following plea:
---------------------------------------------------------------------------
\38\See, e.g., Nancy Benac, Congressional Conundrum Leaves ``Comma
Bill'' in Coma, Associated Press, Apr. 17, 2002, available at http://
news.google.com/
newspapers?nid=1696&dat=20020417&id=Ev4aAAAAIBAJ&sjid=IEgEAAAAIBAJ&pg=69
21,1940594
\39\H.R. 2440, 105th Cong. (1997).
\40\H.R. 916, 106th Cong. (1999).
\41\H.R. 861, 107th Cong. (2001).
Some may try to diminish the importance of this bill,
but one should never underestimate the importance of a
comma.
To paraphrase the late Everett Dirksen, a comma here,
a comma there, and pretty soon you have got a full
sentence.
Let us be honest with ourselves, when used properly,
a comma can be devastatingly effective. For those,
especially school children, who think that grammar and
punctuation do not matter and tune themselves out
during English class, today's action shows clearly that
it does.
Thankfully, not every grammar mistake, not every
misplaced comma takes an act of Congress to correct,
but this particular section of the United States Code
does.
This bill has been passed by each of the past two
Congresses, only to be held hostage by unrelated issues
in the other body.
To my colleagues here and on the other side of the
Capitol who have previously loaded up this bill with
unrelated legislation, I say free the comma, and I urge
my colleagues to pass H.R. 861.\42\
---------------------------------------------------------------------------
\42\147 Cong. Rec. H901 (daily ed. Mar. 14, 2001).
The legislation was finally enacted in 2002, five years after
introduction.\43\ Likewise, any congressional waiver under H.R.
4078 would be subject to the same political stalling and
procedural hurdles.
---------------------------------------------------------------------------
\43\Pub. L. 107-169 (2002).
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III. H.R. 4078 IGNORES THE BENEFITS OF REGULATIONS
H.R. 4078 would impose a moratorium on a significant
regulatory action, which it defines, in pertinent part, as a
rule or guidance that may have an annual cost to the economy of
$100 million or more.'' In addition to falsely claiming that
regulations ``kill'' jobs, supporters of anti-regulatory
measures such as H.R. 4078 contend that regulations impose
burdensome costs on businesses. For example, in nearly every
hearing before the House Judiciary Committe regarding
regulatory issues this Congress,\44\ Majority witnesses have
cited the same widely discredited study by economists Mark and
Nicole Crain (Crain Study), which claims that Federal
regulation imposes an annual cost of $1.75 trillion on
business.\45\
---------------------------------------------------------------------------
\44\See, e.g., Hearing on H.R. 3010; Formal Rulemaking and Judicial
Review: Protecting Jobs and the Economy with Greater Regulatory
Transparency and Accountability: Hearing Before the Subcomm. on Courts,
Commercial and Admin. Law of the H. Comm. on the Judiciary, 112th Cong.
(2011); Cost-Justifying Regulations: Protecting Jobs and the Economy by
Presidential and Judicial Review of Costs and Benefits: Hearing Before
the Subcomm. on Courts, Commercial and Admin. Law of the H. Comm. on
the Judiciary, 112th Cong. (2011); Raising the Agencies' Grades--
Protecting the Economy, Assuring Regulatory Quality and Improving
Assessments of Regulatory Need: Hearing Before the Subcomm. on Courts,
Commercial and Admin. Law of the H. Comm. on the Judiciary, 112th Cong.
(2011); The APA at 65--Is Reform Needed to Create Jobs, Promote
Economic Growth, and Reduce Costs?: Hearing Before the Subcomm. on
Courts, Commercial and Admin. Law of the H. Comm. on the Judiciary,
112th Cong. (2011).
\45\Nicole V. Crain & W. Mark Crain, The Impact of Regulatory Costs
on Small Firms, Rep. No. SBAHQ-08-M-0466 (Sept. 2010), available at
http://archive.sba.gov/advo/research/
rs371tot.pdf.
---------------------------------------------------------------------------
The Crain Study has been thoroughly and repeatedly
criticized for exaggerating regulatory costs. For example, the
Center for Progressive Reform (CPR) notes that the $1.75
trillion cumulative burden cited by the study fails to account
for any benefits of regulation.\46\ In addition, the study's
methodology is seriously flawed with respect to how it
calculated economic costs. The study, which relied on
international public opinion polling by the World Bank on how
friendly a particular country was to business interests,
ignored actual data on costs imposed by Federal regulation in
the United States.\47\
---------------------------------------------------------------------------
\46\Sidney Shapiro et al., Setting the Record Straight: The Crain
and Crain Report on Regulatory Costs, Center for Progressive Reform
White Paper #1103 (Feb. 2011).
\47\Id.
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CRS also conducted an extensive examination of the Crain
Study and found much of its methodology to be flawed.\48\
Moreover, CRS noted that the authors of the Crain Study
themselves acknowledged that their analysis was ```not meant to
be a decision-making tool for lawmakers or Federal regulatory
agencies to use in choosing the `right' level of regulation. In
no place in any of the reports do we imply that our reports
should be used for this purpose. (How could we recommend this
use when we make no attempt to estimate the benefits?)'''\49\
CRS concluded that ``a valid, reasoned policy decision can only
be made after considering information on both costs and
benefits'' of regulation.\50\ The Economic Policy Institute
reached a similar conclusion.\51\
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\48\Curtis W. Copeland, Analysis of an Estimate of the Total Costs
of Federal Regulations, Congressional Research Service Report for
Congress, R41763 (Apr. 6, 2011).
\49\Id. at 26 (quoting an e-mail from Nicole and W. Mark Crain to
te author of the CRS report).
\50\Id. The Economic Policy Institute also issued a critique of the
Crain study outlining additional concerns with the study's methodology
and data. See John Irons & Andrew Green, Flaws Call for Rejecting Crain
and Crain Model: Cited $1.75 Trillion Cost of Regulations Is Not Worth
Repeating, Economic Policy Institute, July 19, 2011, available at
http://w3.epi-data.org/temp2011/IssueBrief308.pdf.
\51\John Irons & Andrew Green, Flaws Call for Rejecting Crain and
Crain Model: Cited $1.75 Trillion Cost of Regulations Is Not Worth
Repeating, Economic Policy Institute, July 19, 2011, available at
http://w3.epi-data.org/temp2011/IssueBrief308.pdf.
---------------------------------------------------------------------------
OMB annually estimates the costs and benefits of
regulations. Its Draft 2012 Report to Congress on Benefits and
Costs of Federal Regulations finds that the net benefits of
regulations through the third fiscal year of the Obama
Administration exceed $91 billion, which is 25 times more than
the net benefits during the first three years of the George W.
Bush Administration.\52\ Similarly, the 2011 report concluded
that for fiscal year 2010, Federal regulations cost between
$6.5 billion and $12.5 billion, but generated between $18.8
billion and $86.1 billion in benefits.\53\ According to OMB,
the costs of regulations during the ten-year period from FY
1999 through FY 2009 were between $43 billion and $55 billion,
while their benefits ranged from $128 billion to $616
billion.\54\ Therefore, even if one uses OMB's highest estimate
of costs and its lowest estimate of benefits, the regulations
issued over the past ten years have produced net benefits of
$73 billion to our society. Such estimates were consistent
across Democratic and Republican administrations.\55\ Given
that the benefits of regulations consistently exceed the costs,
the need for any legislation that would make the issuance of
regulations more difficult or time consuming is certainly in
question.
---------------------------------------------------------------------------
\52\Office of Management and Budget, Draft 2012 Report to Congress
on the Benefits and Costs of Federal Regulations and Unfunded Mandates
on State, Local, and Tribal Entities 21, available at http://
www.whitehouse.gov/sites/default/files/omb/oira/
draft_2012_cost_benefit_
report.pdf.
\53\Office of Management and Budget, 2011 Report to Congress on the
Benefits and Costs of Federal Regulations and Unfunded Mandates on
State, Local, and Tribal Entities 21, available at http://
www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/
2011_cba_report.pdf
\54\See REINS Act--Promoting Jobs and Expanding Freedom by Reducing
Needless Regulations: Hearing Before the Subcomm. on Courts, Commercial
and Admin. Law of the H. Comm. on the Judiciary, 112th Cong. (2011)
(statement of Sally Katzen, former OIRA Administrator).
\55\Id.
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The benefits of regulation are also apparent when viewed
through the lens of prevention. For example, a 2011
Environmental Protection Agency report found that the public
health benefits of clean air regulations far outweigh the
compliance cost to industry.\56\ The report concluded that
restrictions on fine particle and ground-level ozone pollution
mandated by the 1990 Clean Air Act amendments would prevent
230,000 deaths and produce benefits of about $2 trillion by
2020.\57\
---------------------------------------------------------------------------
\56\Environmental Protection Agency, Benefits and Costs of the
Clean Air Act, Second Prospective Study--1990 to 2020 (2011) available
at http://www.epa.gov/air/sect812/prospective2.html
\57\Id. See also Editorial, The Job-Creating Mercury Rule, N.Y.
Times, Feb. 22, 2012, available at http://www.nytimes.com/2012/02/23/
opinion/the-job-creating-mercury-rule.html (noting that an estimated
11,000 deaths will be prevented by pending mercury rule under the Clean
Air Act).
---------------------------------------------------------------------------
IV. H.R. 4078 FAILS TO ACCOUNT FOR THE ALREADY-EXTENSIVE RULEMAKING
PROCESS
As we have discussed over the course of a series of anti-
regulatory hearings during the past year,\58\ regulations are
not promulgated in a vacuum. The Constitution provides that the
government may not deprive anyone of life, liberty, or property
without ``due process of law.''\59\ This constitutional mandate
of fair procedure applies to the Federal regulatory rulemaking
and adjudicatory processes, the impact of which can be
extensive.
---------------------------------------------------------------------------
\58\See, e.g., H.R. 3010 Hearing; Formal Rulemaking and Judicial
Review: Protecting Jobs and the Economy with Greater Regulatory
Transparency and Accountability: Hearing Before the Subcomm. on Courts,
Commercial and Admin. Law of the H. Comm. on the Judiciary, 112th Cong.
(2011) [hereinafter Formal Rulemaking Hearing]; Cost-Justifying
Regulations: Protecting Jobs and the Economy by Presidential and
Judicial Review of Costs and Benefits: Hearing Before the Subcomm. on
Courts, Commercial and Admin. Law of the H. Comm. on the Judiciary,
112th Cong. (2011); Raising the Agencies' Grades--Protecting the
Economy, Assuring Regulatory Quality and Improving Assessments of
Regulatory Need: Hearing Before the Subcomm. on Courts, Commercial and
Admin. Law of the H. Comm. on the Judiciary, 112th Cong. (2011); The
Regulations From the Executive in Need of Scrutiny Act of 2011: Hearing
on H.R. 10 Before the Subcomm. on Courts, Commercial and Admin. Law of
the H. Comm. on the Judiciary, 112th Cong. (2011); The APA at Six--Is
Reform Needed to Create Jobs, Promote Economic Growth, and Reduce
Costs?: Hearing Before the Subcomm. on Courts, Commercial and Admin.
Law of the H. Comm. on the Judiciary, 112th Cong. (2011); Regulatory
Flexibility Improvements Act of 2011''--Unleashing Small Businesses to
Create Jobs: Hearing on H.R. 527 Before the Subcomm. on Courts,
Commercial and Admin. Law of the H. Comm. on the Judiciary, 112th Cong.
(2011 The REINS Act--Promoting Jobs and Expanding Freedom by Reducing
Needless Regulations: Hearing Before the Subcomm. on Courts, Commercial
and Admin. Law of the H. Comm. on the Judiciary, 112th Cong. (2011).
\59\U.S. Const. amend. XIV, Sec. 1.
---------------------------------------------------------------------------
The APA, enacted in 1946, establishes the minimum
rulemaking\60\ and formal adjudication requirements for all
Federal agencies. The APA also sets forth standards for
judicial review of final agency actions. While the APA sets
minimum standards, many agency actions may involve procedures
that depart from or go beyond APA requirements. As one academic
noted, ``[T]he American administrative system, by evolution and
design, is characterized by a considerable degree of
informality, agency discretion and procedural
flexibility.''\61\ The APA's baseline procedural requirements
are designed to maintain a balance between this type of agency
flexibility and the requirements of due process. As more than
50 leading administrative law academics observed, ``The APA has
served for 65 years as a kind of Constitution for
administrative agencies and the affected public--flexible
enough to accommodate the variety of agencies operating under
it and the changes in modern life.''\62\
---------------------------------------------------------------------------
\60\The APA defines ``rulemaking'' as the ``agency process for
formulating, amending or repealing a rule.'' 5 U.S.C. Sec. 551(5)
(2012). A ``rule,'' in turn, is defined as ``an agency statement of
general or particular applicability and future effect designed to
implement, interpret, or prescribe law or policy or describing the
organization, procedure, or practice requirements of an agency.'' 5
U.S.C. Sec. 551(4) (2012).
\61\Gary J. Edles, Lessons from the Administrative Conference of
the United States, 2 Eur. Pub. L. 571, 572 (1996).
\62\Letter from 52 administrative law academics to House Judiciary
Committee Chair Lamar Smith and House Judiciary Committee Ranking
Member John Conyers, Jr., at 1 (Oct. 24, 2011) (on file with the H.
Committee on the Judiciary, Democratic Staff).
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Agencies follow the informal notice-and-comment process for
promulgating rules as outlined in section 553 of the APA in
most instances. Notice-and-comment rulemaking, while flexible,
is also subject to many procedural and analytical requirements,
including those imposed by statutes other than the APA.\63\ In
fact, the current process may already be too``ossified.'' As
Harvard Law School Professor Matthew C. Stephenson testified
last year:
---------------------------------------------------------------------------
\63\See, e.g., Regulatory Flexibility Act, 5 U.S.C. Sec. Sec. 603,
604 (2012) (requiring assessments of regulatory impact of proposed and
final rules on small entities); Unfunded Mandates Reform Act, 2 U.S.C.
Sec. Sec. 1531-1538 (2012) (requiring assessments of regulatory impact
on state and local government entities of proposed and final rules).
It turns out, however, that the term `informal
rulemaking' is misleading. Nominally `informal' notice-
and-comment rulemaking is in fact heavily
proceduralized, to the point where many commentators
describe this process as a kind of ``paper hearing.''
Agencies must provide a fairly detailed and specific
proposal, or set of alternatives, in their initial
published notice of proposed rulemaking. This notice
must also disclose the scientific or evidentiary basis
of the proposal, so that the agency's evidence can be
subjected to critical scrutiny. Any interested party
(indeed, any member of the public) may submit written
comments on the agency's proposal. These submissions
may criticize the agency's analysis and evidence, and
may also suggest alternatives. Under Executive Order
12866, executive branch agencies must also submit
proposed rules, along with a detailed cost-benefit
analysis, to the Office of Management and Budget for
review. If the agency decides to promulgate a final
rule, it must provide a detailed written explanation
that includes responses to all material comments
submitted by interested parties. If an agency fails to
respond adequately to criticisms or proposed
alternatives submitted by commenters, the agency risks
judicial reversal. This creates powerful incentives for
agencies to take comments seriously and to provide
detailed responses. Furthermore, if the agency decides
to change its policy substantially in response to
comments, it may have to initiate a new round of
notice-and-comment so that all parties have a fair
opportunity to critique the new proposal. . . . Indeed,
the more common criticism of notice-and-comment
rulemaking is that it is too demanding of agencies. . .
.\64\
---------------------------------------------------------------------------
\64\Formal Rulemaking Hearing (statement of Matthew C. Stephenson,
Harvard Law School) (citations omitted); see also H.R. 3010 Hearing
(statement of Sidney Shapiro, Wake Forest Law School) (``The regulatory
system is already too ossified, and H.R. 3010 would only exacerbate
this problem.'').
Additionally, agencies may choose or may be required by statute
to use other rulemaking procedures, including formal
rulemaking, negotiated rulemaking, and hybrid or expedited
approaches, which generally tend to have greater procedural
requirements and be subject to stricter judicial review than
section 553 notice-and-comment rulemaking.
Admittedly, the regulatory process in the United States is
not beyond perfection. President John F. Kennedy, in 1961,
observed that ``the steady expansion of the Federal
administrative process during the past several years has been
attended by increasing concern over the efficiency and adequacy
of department and agency procedures.''\65\ With Federal
agencies issuing ``more than 4,000 final rules each year on
topics ranging from the timing of bridge openings to the
permissible levels of arsenic and other contaminants in
drinking water,''\66\ the current Federal regulatory process
faces some significant challenges.
---------------------------------------------------------------------------
\65\Exec. Order No. 10,934, 26 Fed. Reg. 3233 (Apr. 13, 1961).
\66\Curtis W. Copeland, Electronic Rulemaking in the Federal
Government, Congressional Research Service Report for Congress,
RL34210, at 2 (May 16, 2008).
---------------------------------------------------------------------------
Nonetheless, opponents of regulation have made unsupported
assertions that the rulemaking process failed properly to
account for compliance costs and industry input, which were the
subject of a series of hearings before the Subcommittee and
full Committee last year. Testimony and other evidence
presented by Minority witnesses at these hearings, however,
clearly demonstrated that these assertions were completely
unfounded.
V. H.R. 4078 IS UNWORKABLE AND WILL CREATE MORE,
NOT LESS, UNCERTAINTY
A. H.R. 4078 Is Inherently Unworkable
Besides being based on false premises, H.R. 4078 also would
impose an unworkable process on agencies. Section 3 of the bill
specifically provides that the moratorium applies for ``any
quarter'' where the Bureau of Labor Statistics average of
monthly unemployment rates is equal to or less than six
percent. In light of the fact that unemployment rates can
fluctuate from quarter to quarter, this means that agencies
would have to stop and restart the promulgation of a rulemaking
depending on the average unemployment rate, including the
period for public notice and comment. For example, the average
unemployment rate in 2003 was below six percent for the first
quarter, but then exceeded that threshold in the second and
third quarters.\67\ It then was below six percent in the last
quarter of 2003.\68\ Moreover, the bill is silent as to whether
the agency would have to re-notice or simply suspend the
comment period. Either way, the moratorium as conceived in H.R.
4078 would be totally unpredictable and unnecessarily
disruptive to the enforcement of Federal policy.
---------------------------------------------------------------------------
\67\U.S. Dep't of Labor, Bureau of Labor Statistics--Labor Force
Statistics from the Current Population Survey (data extracted Feb. 21,
2012; 4:15 pm), available at http://data.bls.gov/timeseries/
LNS14000000.
\68\Id.
---------------------------------------------------------------------------
B. H.R. 4078 Promotes More, Not Less Uncertainty
Given the intermittent nature of the bill's regulatory
moratorium, as explained in the preceding section, the clear
import of H.R. 4078 will be to create uncertainty. Businesses
would have no ability to predict when a rule would ever be
finalized, especially given the impact of events that could
occur, but over which the Federal Government has no control,
e.g., a worldwide fuel shortage, an international virus
outbreak, or other far-ranging crisis. In addition, the period
during which a person may seek judicial review of a challenged
agency action under the bill can be in excess of one year,\69\
which put businesses in the unfortunate position of having to
expend funds to comply with a rule that is later successfully
set aside under this bill.
---------------------------------------------------------------------------
\69\Section 5(f) provides that the judicial review period is one
year from the date of the challenged agency action or 90 days after an
enforcement action.
---------------------------------------------------------------------------
To illustrate the bill's deleterious effects,
Representative Mel Watt (D-NC), during the Committee markup of
H.R. 4078, discussed how H.R. 4078 would affect regulations
required to be promulgated pursuant to the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd Frank).\70\ He
explained:
---------------------------------------------------------------------------
\70\Pub. L. No. 111-203 (2010).
My concern with this bill is that it adds to the
level of uncertainty because what most of my
constituents are saying is we need to get on with
adopting and finalizing the regulations under Dodd-
Frank so that we know what the rules of the road are
going forward.
And it is that uncertainty that is causing us not to
be able to plan and not to be able to adapt our
business plans to what is necessary going forward so
that we don't have another economic, financial services
meltdown like we had in the past. We know that we need
to make adjustments, but we need to have the final
regulations in place to be able to do that.
The problem I have with this bill is that it does not
add to the level of certainty that businesses have
because, apparently, whatever those regulations are in
process under Dodd-Frank will be put on hold now,
waiting for the unemployment rate to drop below 6
percent. If it drops below 6 percent for a little
while, maybe they can gear up again and start writing
the regulations again and publishing them.
But if it happens to go back over 6 percent during
that period . . . then they have to suspend again,
apparently, under this bill. So we may get to a degree
of certainty. . . .\71\
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\71\Markup at 39-40.
Representative Sheila Jackson Lee (D-TX) thereafter offered
an amendment that would have excluded any rule or guidance
issued pursuant to the Dodd-Frank Act. This amendment, however,
failed by a vote of 11 to 14.
C. H.R. 4078 Does Not Specify Who Will Make the Determination That a
Regulatory Action is ``Significant''
While section 2 of H.R. 4078 defines ``significant
regulatory action,'' the bill fails to identify who would
determine whether a rule or guidance is covered by such
definition and how such determination would be made.
Ostensibly, the bill appears to lift this definition largely
from Executive Order 12866, but it does so in a vacuum. For
example, the Executive Order specifies a protocol requiring
agencies to submit to OIRA a ``list of its planned regulatory
actions, including those which the agency believes are
significant regulatory actions within the meaning of this
Executive order.''\72\ Under the Executive Order, OIRA is given
supervisory authority over agencies to ensure their compliance.
In contrast, H.R. 4078 is silent as to who would make this
determination and whether such determination is subject to
challenge.
---------------------------------------------------------------------------
\72\Exec. Order No. 12,866, 58 Fed. Reg. 51735, 51741 (Oct. 4,
1993) (emphasis supplied).
---------------------------------------------------------------------------
D. H.R. 4078's Definition of Significant Regulatory Action Is Vague
As noted above, H.R. 4078's definition of ``significant
regulatory action'' is largely derived from Executive Order
12866. By taking the language of the Executive Order out of
context, however, H.R. 4078 fails to clarify how this
definition should be interpreted and applied. For example, when
would a proposed rule ``adversely affect in a material way the
economy, a sector of the economy, productivity, competition,
jobs, the environment, public health or safety, small entities,
or State, local, or tribal governments or communities''? What
degree of materiality is contemplated by this provision?
E. H.R. 4078 Mandates Unreasonable Standards for the Award of Fees and
Costs
Section 5(e) of the bill requires a court to award
reasonable attorneys fees and costs to a ``substantially
prevailing'' business in any civil action arising under this
legislation. This provision is problematic for two reasons.
First, it conflicts with most Federal fee-shifting provisions
that give the courts discretion with regard to such awards. Of
those statutes that mandate the award of fees and costs,
usually there is a requirement that the court find the action
of the litigant was in bad faith, frivolous, or otherwise
lacking in merit. H.R. 4078, however, imposes a strict
liability mandate, even if the agency acted in good faith.
Second, the bill requires such awards be made even if the small
business fails to obtain a final judgment where the agency
changes its position after the civil action is filed. The
measure, however, fails to require any causal link between the
agency's action and the small business's lawsuit. Agencies may
change their position for any number of reasons, none of which
may have any connection to a pending civil action, such as
newly discovered evidence, changed circumstances, or reordered
priorities pursuant to a new Administration's assumption of
power. This provision would result in unjust enrichment for
private parties at the expense of the American taxpayer.
F. Not Even the Congressional Budget Office Can Determine the Budgetary
Impacts of H.R. 4078
CBO, in its analysis of the budgetary impact of H.R. 4078,
discussed a series of problematic aspects presented by the
measure. While the bill ``could have a significant impact on
spending subject to appropriation,'' it could not determine the
``magnitude of that effect.''\73\ Part of the difficulty in
analyzing the impact of H.R. 4078, CBO observed, is the fact
that it would delay significant regulatory actions until the
average of monthly unemployment rates for any quarter is six
percent or lower. As CBO explained:
---------------------------------------------------------------------------
\73\CBO Cost Estimate at 1.
Under CBO's most recent economic forecast, the
unemployment rate is expected to remain elevated for at
least the next few years; in those projections the
unemployment rate would remain above 6.0 percent until
late 2016. However, many developments could cause
economic outcomes to differ substantially, in one
direction or the other. For example, the economy could
grow more rapidly--or more slowly--with a consequent
acceleration (or reduction) in the pace of employment.
Furthermore, changes in fiscal policy that diverge from
the path assumed in CBO's baseline could have a
significant impact on economic growth and, by
extension, the unemployment rate.\74\
---------------------------------------------------------------------------
\74\Id. at 3.
With respect to direct spending, CBO cited examples of how
the legislation could adversely impact Medicare service
providers and American taxpayers. CBO explained that the bill,
if enacted, would freeze annual updates to payment schedules
applicable to hospitals, physicians, and other Medicare service
providers. On the other hand, H.R. 4078 would also prevent
payment rate reductions scheduled to take place under the
Medicare physician fee schedule.\75\
---------------------------------------------------------------------------
\75\Id.
---------------------------------------------------------------------------
In addition, the CBO observed that the bill may affect the
implementation of new laws, including the Affordable Care Act,
and other initiatives. As to the latter, CBO cited title VI of
the Middle Class Tax Relief and Job Creation Act of 2012, which
authorizes the Federal Communications Commission to develop
proposed rules for incentive auctions. By delaying these
initiatives, H.R. 4078 could reduce expected auction receipts
``by several billion dollars over the 2013-2022 period,
relative to current law.''\76\
---------------------------------------------------------------------------
\76\Id. at 4.
---------------------------------------------------------------------------
Finally, the CBO noted that the legislation, by ``delaying
significant regulatory actions of the Internal Revenue
Service,'' could reduce collections of revenues in some cases
and increase the collections in other cases.\77\ The bill
``would also directly affect revenues through the operations of
the Federal Reserve'' by limiting its ability ``to conduct
monetary policy because some parameters, such as the discount
rate and the interest paid on reserves, are specified in
regulations.''\78\
---------------------------------------------------------------------------
\77\Id.
\78\Id.
---------------------------------------------------------------------------
VI. H.R. 4078 May Undermine Job Creation By Increasing the Risk of
Regulatory Failure
During recessionary times, unemployment rates increase.
Major financial distress in American history has often been
triggered by a regulatory failure of some type. The Great
Depression largely resulted from the failure of severely
uncapitalized banks that engaged in imprudent lending practices
and other speculative activities. The current Great Recession
was largely fueled by an unregulated home mortgage industry and
securitization market.
Rather than promoting employment, however, H.R. 4078 would
foster more unemployment by tying the hands of the government
from instituting regulatory reforms that are most needed to
address the causes of the major financial distress. For
example, it is very likely that H.R. 4078, if it was enacted,
would prevent regulators, such as the Securities and Exchange
Commission, from instituting corrective regulations intended to
prevent another Great Recession.
VII. Judicial Review of Executive Orders May Present Separation of
Powers Concerns
Section 4(a) of the bill authorizes an agency to take a
significant regulatory action if the President makes a
determination that such action qualifies under one of the
enumerated waivers set forth in section 4(b). Section 5(b) of
the bill, in turn, specifies that ``[a]ny person who is
adversely affected or aggrieved'' by any such determination by
the President is subject to judicial review under the APA. In
effect, this provision would permit a private individual to
apply to a court, which could then second-guess the President's
determination that a waiver was necessary to address national
security or public health concerns under the various standards
set forth in the APA. Under these standards, a court may set
aside actions found to be:
(A) arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege,
or immunity;
(C) in excess of statutory jurisdiction, authority, or
limitations, or short of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case
subject to sections 556 and 557 of this title or
otherwise reviewed on the record of an agency hearing
provided by statute; or
(F) unwarranted by the facts to the extent that the
facts are subject to trial de novo by the reviewing
court.\79\
---------------------------------------------------------------------------
\79\5 U.S.C. Sec. 706 (2012).
In making this determination, the court must review the entire
record.\80\
---------------------------------------------------------------------------
\80\Id.
---------------------------------------------------------------------------
The Supreme Court has held that the ``President is not an
agency within the meaning of the [Administrative Procedure]
Act.''\81\ To make the President subject to the APA, the Court
stated that it ``would require an express statement by Congress
before assuming it intended the performance of the President's
statutory duties to be reviewed for abuse of discretion.''\82\
It is unclear, however, whether the requirements of H.R. 4078
presents an unwarranted intrusion into the President's
constitutional authority to ``take Care that the Laws be
faithfully executed.''\83\
---------------------------------------------------------------------------
\81\Franklin v. Massachusetts, 505 U.S. 788, 796 (1992).
\82\Id. at 801.
\83\U.S. Const. art. II, sec. 3.
---------------------------------------------------------------------------
CONCLUSION
We oppose H.R. 4078 because it is based on the false
premise that regulations stifle job creation and cause business
uncertainty. By placing a moratorium on significant regulatory
actions and by including insufficient exceptions and an
illusory congressional waiver provision, H.R. 4078 ignores the
benefits of regulation and threatens public health and safety.
H.R. 4078 is also unworkable because it relies on an
indeterminate standard for establishing when a regulatory
moratorium should begin and end and is full of other
ambiguities. These ambiguities will only lead to greater
uncertainty and societal harm through regulatory failure.
Finally, H.R. 4078 may raise separation of powers concerns
because of its interference with the judicial role in reviewing
regulatory action. For these reasons, we respectfully dissent
and urge our colleagues to oppose this bill.
John Conyers, Jr.
Howard L. Berman.
Jerrold Nadler.
Robert C. ``Bobby'' Scott.
Melvin L. Watt.
Sheila Jackson Lee.
Steve Cohen.
Henry C. ``Hank'' Johnson, Jr.
Mike Quigley.
Ted Deutch.