[House Report 112-461]
[From the U.S. Government Publishing Office]
112th Congress Rept. 112-461
HOUSE OF REPRESENTATIVES
2d Session Part 2
======================================================================
REGULATORY FREEZE FOR JOBS ACT OF 2012
_______
July 20, 2012.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Issa, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 4078]
[Including cost estimate of the Congressional Budget Office]
The Committee on Oversight and Government Reform, 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 amendments and
recommend that the bill as amended do pass.
CONTENTS
Page
Committee Statement and Views.................................... 3
Section-by-Section............................................... 6
Explanation of Amendments........................................ 7
Committee Consideration.......................................... 8
Rollcall Votes................................................... 8
Application of Law to the Legislative Branch..................... 8
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 8
Statement of General Performance Goals and Objectives............ 8
Federal Advisory Committee Act................................... 9
Unfunded Mandate Statement....................................... 9
Earmark Identification........................................... 9
Committee Estimate............................................... 9
Budget Authority and Congressional Budget Office Cost Estimate... 9
Minority Views................................................... 14
The amendments are 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. MORATORIUM ON FINAL SIGNIFICANT REGULATORY ACTIONS.
An agency may not take any final significant regulatory action during
the period beginning on the date of the enactment of this Act and
ending on the date that is the earlier of--
(1) two years after such date of enactment; or
(2) the date on which the national unemployment rate, as
published by the Bureau of Labor Statistics, is first equal to
or less than 6.0 percent.
SEC. 3. WAIVERS AND EXCEPTIONS.
(a) In General.--Notwithstanding any other provision of this Act, an
agency may take final significant regulatory action only in accordance
with subsection (b), (c), (d), or (e) during the period described in
section 2.
(b) Presidential Waiver.--An agency may take final significant
regulatory action if the President determines that the final
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) Deregulatory Exception.--An agency may take a final significant
regulatory action if the Administrator of the Office of Information and
Regulatory Affairs of the Office of Management and Budget certifies in
writing that the final significant regulatory action is limited to
repealing an existing rule.
(d) Exception for the Department of Defense and the Department of
Veterans Affairs.--The Department of Defense and the Department of
Veterans Affairs may take a final significant regulatory action if such
action affects the health or safety of members of the Armed Forces or
veterans.
(e) Exception for Equal Protection and Civil Rights.--An agency may
take a final significant regulatory action if such action is to
establish or enforce any statutory rights against discrimination on the
basis of age, race, religion, gender, national origin, or handicapped
or disability status except such final significant regulatory actions
that establish, lead to, or otherwise rely on the use of a quota or
preference based on age, race, religion, gender, national origin, or
handicapped or disability status.
SEC. 4. DETERMINATION OF MAJOR GUIDANCE.
Before the issuance of any guidance, the head of an agency shall
transmit any proposed guidance to the Administrator of the Office of
Information and Regulatory Affairs of the Office of Management and
Budget, who shall make a finding as to whether such proposed guidance
is a major guidance.
SEC. 5. JUDICIAL REVIEW.
(a) Review.--Any party adversely affected or aggrieved by any rule or
guidance resulting from a final significant 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 rule
or guidance resulting from a final 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 rule or guidance resulting from the final
significant regulatory action to the agency and enjoining the
application or enforcement of that rule or guidance, 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
final 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) Small Business Defined.--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.
SEC. 6. DEFINITIONS.
In this Act:
(1) Agency.--The term ``agency'' has the meaning given that
term under section 551 of title 5, United States Code, except
that such term does not include--
(A) the Federal Election Commission;
(B) the Board of Governors of the Federal Reserve
System;
(C) the Federal Deposit Insurance Corporation; or
(D) the United States Postal Service.
(2) Final significant regulatory action.--The term ``final
significant regulatory action'' means the promulgation of any
major rule or the issuance of any major guidance.
(3) Major guidance.--The term ``major guidance'' means any
guidance that the Administrator of the Office of Information
and Regulatory Affairs of the Office of Management and Budget
finds is likely to result in--
(A) an annual effect on the economy of $100,000,000
or more;
(B) a major increase in costs or prices for
consumers, individual industries, Federal, State, or
local government agencies, or geographic regions; or
(C) significant adverse effects on competition,
employment, investment, productivity, innovation, or on
the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and
export markets.
(4) Major rule.--The term ``major rule'' means any rule that
the Administrator of the Office of Information and Regulatory
Affairs of the Office of Management and Budget finds is likely
to result in--
(A) an annual effect on the economy of $100,000,000
or more;
(B) a major increase in costs or prices for
consumers, individual industries, Federal, State, or
local government agencies, or geographic regions; or
(C) significant adverse effects on competition,
employment, investment, productivity, innovation, or on
the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and
export markets.
(5) Rule.--The term ``rule'' has the meaning given that term
under section 551 of title 5, United States Code.
Amend the title so as to read:
A bill to provide that no agency may take any final
significant regulatory action for two years or until the
unemployment rate is equal to or less than 6.0 percent,
whichever occurs earlier, and for other purposes.
Committee Statement and Views
PURPOSE AND SUMMARY
H.R. 4078, the Regulatory Freeze for Jobs Act, aims to
stabilize the economy by establishing a moratorium on the
finalizing of significant regulatory actions (i.e., regulations
and guidance) for a period of two years. The moratorium would
terminate sooner, however, if the unemployment rate were to
fall to 6.0 percent or less before the two years have passed.
The President may waive the moratorium for purposes of an
imminent threat to health or safety, the enforcement of
criminal laws, national security, or pursuant to an
international trade agreement. A significant regulatory action
finalized during the moratorium period is subject to judicial
review, and a small business may recover attorney's fees if
successful.
BACKGROUND AND NEED FOR LEGISLATION
Since the beginning of the 112th Congress, the Oversight
and Government Reform Committee has shone a spotlight on the
manner in which regulations impact the economy and job
creation. On this topic, the Committee has held seven full
committee hearings and nearly 20 subcommittee hearings, issued
two staff reports,\1\ and sent numerous letters to agencies.
The Administrator of the Office of Management and Budget Office
of Information and Regulatory Affairs (OIRA), Cass Sunstein,
has called the Committee's work on this subject
``constructive'' and ``important.''\2\
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\1\H. Comm. on Oversight & Gov't Reform Preliminary Staff Report,
Assessing Regulatory Impediments to Job Creation, 112th Cong. (2011)
available at http://oversight.house.gov/wp-content/uploads/2012/02/
Preliminary_Staff_Report_Regulatory_Impediments_to_Job_Creation.pdf.;
H. Comm. on Oversight & Gov't Reform Staff Report, Broken Government:
How the Administrative State has Broken President Obama's Promise of
Regulatory Reform, 112th Cong. (2011) available at http://
oversight.house.gov/wp-content/uploads/2012/01/
9.13.11_Broken_Government_Report1.pdf.
\2\``How a Broken Process Leads to Flawed Regulations'': Hearing
Before the H. Comm. on Oversight & Gov't Reform, 112th Cong. (2011)
(testimony of Cass Sunstein, Administrator, Office of Information and
Regulatory Affairs).
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Several regulations that regulated entities brought to the
Committee's attention were subsequently struck down by the
courts or significantly scaled back by federal agencies. For
example, federal courts vacated a Securities and Exchange
Commission (SEC) ``proxy access rule'' because the court found
the SEC acted ``arbitrarily'' in its analysis of costs and
benefits,\3\ overturned the Environmental Protection Agency's
(EPA) decision to revoke a mining permit in West Virginia
because the court found the EPA's action was ``contrary to the
language, structure, and legislative history of section 404 [of
the Clean Water Act],''\4\ and delayed implementation of a
notice posting rule because it was found the National Labor
Relations Board (NLRB) ``lack[ed] authority . . . to promulgate
the rule.''\5\ Moreover, the Department of Transportation
altered its hours of service rule to cut the costs nearly in
half,\6\ the Department of Agriculture scrapped the most
controversial parts of its ``GIPSA rule,''\7\ and the
Department of Interior reduced the number of species proposed
to be covered by the Lacey Act, which will help limit the
impact on small businesses specializing in the reptile
industry.\8\ It is unfortunate that litigation and
congressional oversight were needed to put a halt to these
excessive regulations.
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\3\Business Roundtable and Chamber of Commerce of the United States
v. SEC, No. 10-1305 (D.C. Cir. July 22, 2011).
\4\Alan Kovski, Federal Court Strikes Down EPA Decision To
Retroactively Veto Dredge-and-Fill Permit, BNA (Mar. 26, 2012)
available at http://www.bna.com/federal-court-strikes-n12884908597/.
\5\Chamber of Commerce of the United States and South Carolina
Chamber of Commerce v. National Labor Relations Board, Order, No. 2:
11-cv-02516-DCN (SC Dist. Ct. Apr. 13, 2012).
\6\News Release, U.S. Department of Transportation Takes Action to
Ensure Truck Driver Rest Time and Improve Safety Behind the Wheel, Dec.
22, 2011.
\7\Capital Update, New GIPSA Rule Issued, National Pork Producers
Council, Dec. 9, 2011.
\8\News Release, Salazar Announces Ban on Importation and
Interstate Transportation of Four Giant Snakes that Threaten
Everglades, Jan. 17, 2012.
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Disturbingly, burdensome regulations continue to plague the
economy. A recent Gallup poll found that nearly half of small
businesses are not hiring because they are ``worried about new
government regulations,''\9\ and 44 percent of likely voters
believe EPA regulations and actions hurt the economy.\10\
According to the National Federation of Independent Business,
``regulations and red tape'' is the ``single most important
problem'' for small business.\11\ Meanwhile, the federal
regulatory state under the Obama Administration continues to
grow. From 2010 to 2011, the number of final rules issued by
federal agencies rose from 3,807 to 3,573--a 6.5 percent
increase. During the same time frame, the number of proposed
rules increased 18.8 percent.\12\ Moreover, according to the
Heritage Foundation, the Obama Administration issued 106 new
major rules in its first three years that collectively cost
taxpayers more than $46 billion annually.\13\ To compare, this
is nearly four times the number and higher than five times the
cost of major rules issued by the George W. Bush Administration
during its first three years.\14\ Further, in the past decade,
the number of economically significant rules--those that could
cost $100 million or more annually--published in the Unified
Agenda of Regulatory and Deregulatory Activity has increased by
more than 137 percent, rising from 56 in the spring of 2001 to
133 in the fall of 2011.\15\ These numbers make claims by the
Obama Administration that it is issuing fewer regulations than
did the George W. Bush Administration misleading.\16\
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\9\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.
\10\44% Think EPA Actions Hurt The Economy, Rasmussen Reports, Apr.
10, 1012 available at http://www.rasmussenreports.com/public_content/
politics/current_events/environment_energy/
44_think_epa_actions_hurt_the_economy.
\11\William C. Dunkelberg and Holly Wade, NFIB Small Business
Economic Trends, NFIB Research Foundation (May 2012).
\12\Wayne Crews, Ten Thousand Commandments: An Annual Snapshot of
the Federal Regulatory State, Competitive Enterprise Institute (2012).
\13\James Gattuso and Diane Katz, Red Tap Rising: Obama-Era
Regulation at the Three-Year Mark, The Heritage Foundation (Mar. 13,
2012).
\14\Id.
\15\Id.
\16\See Josh Hicks, Who has the better regulatory record--Obama or
Bush?, The Washington Post, Mar. 27, 2012.
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OIRA Administrator Sunstein has said that expensive
regulations can ``increase prices, reduce wages, and increase
unemployment (and hence poverty).''\17\ Indeed, OIRA's 2012
Draft Report to Congress on Federal Regulations reports that
``regulations . . . can place undue burdens on companies,
consumers, and workers, and may cause growth and overall
productivity to slow.''\18\ In the draft report, OIRA admits
that ``evidence suggests that domestic environmental regulation
has led some U.S. based multinationals to invest in other
nations, and in that sense such regulation may have an adverse
effect on domestic growth.''\19\ OIRA also admits that
``regulations can also impose significant costs on businesses,
potentially damaging economic competition and capital
investment,'' if not carefully designed.\20\
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\17\Robert W. Hahn & Cass R. Sunstein, A New Executive Order for
Improving Federal Regulation? Deeper and Wider Cost-Benefit Analysis,
150 U. Pa. L. Rev. 1489 (2002).
\18\U.S. Office of Mgmt. & Budget, Office of Information and
Regulatory Affairs, Draft 2012 Report to Congress on the Benefits and
Costs of Federal Regulations and Unfunded Mandates on State, Local, and
Tribal Entities (March 2012).
\19\Id.
\20\Id.
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Placing a temporary moratorium on finalizing the most
expensive rules injects ``predictability'' and ``certainty''
into the regulatory system--features that even the Obama
Administration admits are ``highly desirable.''\21\ The
moratorium in this legislation achieves predictability and
certainty by ensuring regulated entities get a reprieve from
the most costly rules until the economy improves. According to
economists, a healthy U.S. economy would feature a 5.0 percent
to 6.0 percent unemployment rate.\22\ The unemployment rate
today stands at 8.1 percent.\23\ In March 2012, analysts
expected that employers would add over 200,000 jobs; yet, only
120,000 were added.\24\ This particular moratorium on rules is
a balanced approach because it will allow federal agencies to
proceed with the rulemaking process. Agencies will be permitted
to engage in a meaningful and thorough dialogue with regulated
industries and impacted parties--they will simply be unable to
finalize any significant regulatory action until the end of the
moratorium period.
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\21\Id.
\22\Alisa Roth, What's a realistic `normal' unemployment rate?,
Marketplace, Nov. 24, 2010.
\23\Economic News Release, The Employment Situation--April 2012,
Bureau of Labor Statistics, May 4, 2012.
\24\Mark Memmott, Just 120,000 Jobs Added, But Jobless Rate Dips to
8.2 Percent, NPR, Apr. 6, 2012.
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LEGISLATIVE HISTORY
H.R. 4078, the Regulatory Freeze for Jobs Act of 2012, was
introduced on February 17, 2012, by Representative Tim Griffin
(R-AR) and referred to the Committee on Oversight and
Government Reform and the Committee on the Judiciary. On
February 27, 2012, the Committee on the Judiciary's
Subcommittee on Courts, Commercial and Administrative Law held
a hearing on the bill. On March 30, 2012, the Committee on the
Judiciary marked up H.R. 4078 and ordered it to be reported, as
amended, by a vote of 15-13. On April 26, 2012, the Committee
on Oversight and Government Reform marked up H.R. 4078 and
ordered it to be reported favorably, as amended, by a vote of
21-16.
On July 28, 2011, Senator Ron Johnson (R-WI) introduced S.
1438, the Regulation Moratorium and Jobs Preservation Act of
2011, a companion bill to H.R. 4078.
Section-by-Section
Section 1. Short title
This Act may be cited as the ``Regulatory Freeze for Jobs
Act of 2012.''
Section 2. Moratorium on final significant regulatory actions
This section provides that an agency may not finalize any
significant regulatory action (i.e., rule or guidance) for 2
years or until the unemployment rate falls to 6.0 percent or
less, whichever occurs first.
Section 3. Waivers and exceptions
This section provides that an agency may finalize a
significant regulatory action during the time period described
above if the President determines that it is necessary for
purposes of an imminent threat to health or safety, the
enforcement of criminal laws, national security, or pursuant to
an international trade agreement. This section also provides
that an agency may finalize a significant regulatory action if
the Administrator of the Office of Information and Regulatory
Affairs (OIRA) determines that the significant regulatory
action is deregulatory in nature.
Section 4. Determination of major guidance
This section provides that before an agency issues guidance
it must first submit it to the OIRA Administrator, who shall
determine whether the guidance is major guidance.
Section 5. Judicial review
This section provides that the bill shall be subject to
judicial review.
Section 6. Definitions
This section provides that a significant regulatory action
is a major rule or guidance that the OIRA Administrator finds
is likely to result in the following:
(A) an annual effect on the economy of $100,000,000
or more;
(B) a major increase in costs or prices for
consumers, individual industries, Federal, State, or
local government agencies, or geographic regions; or
(C) significant adverse effects on competition,
employment, investment, productivity, innovation, or on
the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and
export markets.
This section defines agency to include executive branch and
independent agencies. Exempted from the definition are the
Federal Election Commission, the Federal Reserve, the Federal
Deposit Insurance Corporation, and the United States Postal
Service.
Explanation of Amendments
An amendment in the nature of a substitute (ANS) offered by
Chairman Issa was adopted. The provisions of the ANS are
described in the section-by-section.
Two additional amendments to the ANS were adopted. An
amendment by Mr. Yarmuth was adopted by voice vote to exempt
from the moratorium final significant regulatory actions by the
Department of Defense and the Department of Veterans Affairs
that affect the health or safety of members of the Armed Forces
or veterans. Another amendment, by Ms. Maloney, was adopted by
voice vote to exempt a final significant regulatory action if
such action establishes or enforces any statutory rights
against discrimination on the basis of age, race, religion,
gender, national origin, or handicapped or disabled status,
unless such action establishes, leads to, or otherwise relies
on the use of a quota or preference based on age, race,
religion, gender, national origin, or handicapped or disability
status. The Committee intends this amendment to encompass
regulatory actions that enforce existing statutory rights
against discrimination concerning pay disparities, retaliatory
discharge, hostile work environments, sexual harassment, voting
rights, or access to education.
Committee Consideration
On April 26, 2012, the Committee met in open session and
ordered reported favorably the bill, H.R. 4078, as amended, by
a roll call vote of 21-16, a quorum being present.
Rollcall Votes
1. Mr. Cummings offered an amendment to the Issa ANS
regarding exception for the health or safety of children. The
amendment was defeated by a recorded vote of 16 Yeas to 20
Nays.
Yeas: Cummings, Towns, Norton, Kucinich, Tierney, Clay,
Lynch, Cooper, Connolly, Quigley, Davis, Braley, Welch,
Yarmuth, Murphy and Speier.
Nays: Issa, Burton, Turner, Jordan, Chaffetz, Mack,
Walberg, Lankford, Amash, Buerkle, Gosar, Labrador, Meehan,
DesJarlais, Walsh, Gowdy, Ross, Guinta, Farenthold and Kelly.
2. Mr. Kucinich offered an amendment to the ANS regarding
exception for limiting oil speculation. The amendment was
defeated by a recorded vote of 16 Yeas to 20 Nays.
Yeas: Cummings, Towns, Norton, Kucinich, Tierney, Clay,
Lynch, Cooper, Connolly, Quigley, Davis, Braley, Welch,
Yarmuth, Murphy and Speier.
Nays: Issa, Burton, Turner, Jordan, Chaffetz, Mack,
Walberg, Lankford, Amash, Buerkle, Gosar, Labrador, Meehan,
DesJarlais, Walsh, Gowdy, Ross, Guinta, Farenthold and Kelly.
3. The bill, H.R. 4078, was ordered reported favorably to
the House, as amended, by a recorded vote of 21 Yeas to 16
Nays.
Yeas: Issa, Burton, Mica, Turner, Jordan, Chaffetz, Mack,
Walberg, Lankford, Amash, Buerkle, Gosar, Labrador, Meehan,
DesJarlais, Walsh, Gowdy, Ross, Guinta, Farenthold and Kelly.
Nays: Cummings, Towns, Norton, Kucinich, Tierney, Clay,
Lynch, Cooper, Connolly, Quigley, Davis, Braley, Welch,
Yarmuth, Murphy and Speier.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to the terms and conditions of
employment or access to public services and accommodations.
This bill establishes a moratorium on the finalizing of
significant regulatory actions for a period of two years. As
such this bill does not relate to employment or access to
public services and accommodations.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are reflected in the descriptive portions
of this report.
Federal Advisory Committee Act
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., Section 5(b).
Unfunded Mandate Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandates Reform Act, P.L. 104-4) requires a statement as to
whether the provisions of the reported include unfunded
mandates. In compliance with this requirement the Committee has
received a letter from the Congressional Budget Office included
herein.
Earmark Identification
H.R. 4078 does not include any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Committee Estimate
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
H.R. 4078. However, clause 3(d)(3)(B) of that rule provides
that this requirement does not apply when the Committee has
included in its report a timely submitted cost estimate of the
bill prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act.
Budget Authority and Congressional Budget Office
Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause (3)(c)(3) of rule XIII of the Rules
of the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for H.R. 4078 from the Director of
Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 20, 2012.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
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.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure.
H.R. 4078--Regulatory Freeze for Jobs Act of 2012
Summary: H.R. 4078 would prohibit most federal agencies
from taking most final significant regulatory actions until
either the unemployment rate falls to 6.0 percent or less or
two years pass after enactment of the legislation. 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 final 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 the provisions of 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 final
significant regulatory actions until the earlier of: (1) the
date on which the national unemployment rate is 6.0 percent or
less, or (2) two years after the enactment of the legislation.
If an agency were to pursue a final 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 includes several exemptions. The legislation
would exempt final significant regulatory actions taken by the
Federal Election Commission, Board of Governors of the Federal
Reserve System, Federal Deposit Insurance Corporation, and
United States Postal Service. Further, H.R. 4078 would exempt
certain final significant regulatory actions related to the
health and safety of members of the Armed Forces or veterans,
equal protection and civil rights, and the repeal of existing
rules. Finally, H.R. 4078 would exempt final significant
regulatory actions that the President determines are 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.
H.R. 4078 defines a final significant regulatory action as
the promulgation of any major rule or the issuance of any major
guidance that the Office of Management and Budget (OMB) finds
is likely to result in:
An annual effect on the economy of
$100,000,000 or more;
A major increase in costs or prices for
consumers; individual industries; federal, state, or
local government agencies; or geographic regions; or
Significant adverse effects on competition,
employment, investment, productivity, innovation, or
the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and
export markets.\25\
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\1\H.R. 4078 adopts the definition of major rule originally set by
the Congressional Review Act of 1996 (see 5 USC Sec. 804(2)) and
defines major guidance using the same criteria.
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Looking to recent major rules as a way to estimate the
number of future final significant regulatory actions that
would be affected by H.R. 4078 is difficult because the
legislation applies to guidance in addition to rules, some
major rules would fall under one of the exemptions listed
above, and agencies might change course following the enactment
of the bill. However, historical data shows that federal
agencies published 80 major rules in 2011 and 84 major rules,
on average, for the past five full calendar years.\2\ Examples
of major rules published 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.
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\2\See GAO Federal Rules Database, http://www.gao.gov/legal/
congressact/fedrule.html.
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H.R. 4078 would delay final significant regulatory actions
until either two years pass following enactment of the
legislation or the unemployment rate is 6.0 percent or lower.
Under CBO's most recent economic forecast based on current law,
the unemployment rate would remain above 6.0 percent until late
2016.\3\ Therefore, under CBO's current projections, final
significant regulatory actions would be delayed for two years
after enactment of the legislation (assuming enactment later
this year). However, final significant regulatory actions could
be delayed by less than two years if the unemployment rate
drops much more rapidly than CBO projects.
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\3\See Congressional Budget Office, The Budget and Economic
Outlook: Fiscal Years 2012 to 2022 (January 2012), Appendix E.
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Impact on direct spending
The budgetary consequences of delaying final significant
regulatory actions, as defined by H.R. 4078, 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 final 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, including payment rate
reductions scheduled to take place under the Medicare physician
fee schedule, and (2) altering the implementation of new
federal programs with substantial budget effects.
Routine Updates to Government Programs. Many final
significant regulatory actions that occur routinely 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 might also be
temporarily frozen under the bill. CBO cannot estimate the net
impact of all such changes.
Many programs, such as 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 final
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 programs while the moratorium was in
effect.
Implementation of New Federal Programs. Enacting H.R. 4078
might also affect the implementation of new programs. 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.
H.R. 4078 might also delay the issuance of non-major
guidance because the legislation would require applicable
agencies to submit all guidance to OMB prior to issuance so
that OMB may determine whether the guidance is major or not.
This additional step of review, which does not exist under
current law, might slow the implementation of new laws or
updates to existing programs.
Impact on revenues
Enacting H.R. 4078 also would affect revenues, and JCT
expects that delaying final 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.
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 for the lesser of two years or while the
unemployment rate exceeds 6.0 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 the provisions of H.R. 4078 would impose no
intergovernmental or private-sector mandates as defined in
UMRA. By delaying final significant regulatory actions, the
bill could affect public or private entities in a number of
other ways, including slowing reimbursements and eliminating
regulatory requirements. Such effects would not be mandates as
defined in UMRA because they would not impose enforceable
duties on public or private entities. Depending on the types
and number of regulations affected, the costs and savings of
those effects could be significant. However, 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 that
would be affected.
Previous CBO estimate: On April 20, 2012, CBO transmitted a
cost estimate for H.R. 4078, as ordered reported by the House
Committee on the Judiciary on March 20, 2012. There are several
notable differences between the version ordered reported by the
House Committee on Oversight and Government Reform and the
Judiciary Committee's version:
First, the Oversight Committee's version uses a
definition of significant regulatory action that is narrower in
scope than the definition of significant regulatory action
adopted by the Judiciary Committee's version.
Second, the two bills differ in the types of
exemptions allowed. For example, the Oversight Committee's
version includes exemptions for regulations affecting certain
populations or specific agencies, such as the Board of
Governors of the Federal Reserve System, that are not included
in the Judiciary Committee's version. However, unlike the
Judiciary Committee's version, the Oversight Committee's
version does not include an avenue through which Congress could
expeditiously consider exemptions requested by the President
for significant regulatory actions that do not fall into one of
the four exemption categories discussed above.
Finally, the Oversight Committee's version delays
final significant regulatory actions for a maximum of two years
after enactment, whereas the Judiciary Committee's version
delays significant regulatory actions until the unemployment
rate is 6.0 percent or less. Under CBO's latest economic
forecast, the Judiciary Committee's version of H.R. 4078 would
delay significant regulatory actions for a longer period than
the version ordered reported by the Oversight Committee.
As a result of these differences, while both versions of
H.R. 4078 would affect direct spending and revenues, the
budgetary effects could be very different.
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.
MINORITY VIEWS
H.R. 4078, the Regulatory Freeze for Jobs Act of 2012, is
based on the false premise that business investment and hiring
is being held back by uncertainty over future regulations. The
bill disregards evidence from economists on both sides of the
political spectrum that regulations do not negatively impact
the economy or job growth.\1\
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\1\See, e.g., Economic Policy Institute, Regulatory Uncertainty: A
Phony Explanation for Our Jobs Problem (Sept. 27, 2011) (online at
www.epi.org/publication/regulatory-uncertainty-phony-explanation/);
House Committee on Education and Workforce, Testimony of Jared
Bernstein, Hearing on Expanding Opportunities for Job Creation, 112th
Cong. (Feb. 1, 2012) (citing evidence that it is weak demand rather
than regulation that is preventing faster job creation.);
Misrepresentations, Regulations and Jobs, New York Times (Oct. 4, 2011)
(``regulatory 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'') (online at
www.economix.blogs.nytimes.com/2011/10/04/regulation-and-unemployment/
?smid=tw-nytimes& seid=auto).
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Supporters of this bill argue that regulation is impeding
job creation and injuring small businesses, but small
businesses have directly disputed this premise. Recent surveys
by the American Sustainable Business Council, the Main Street
Alliance, and the Small Business Majority show that the vast
majority of small business owners believe weak demand is the
primary problem their businesses currently face.\2\
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\2\House Committee on the Judiciary, Subcommittee on Courts,
Commercial and Administrative Law Written Testimony of Robert Weissman,
President, Public Citizen, Hearing on H.R. 4078, the Regulatory Freeze
for Jobs Act of 2012 (Feb. 27, 2012).
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The regulatory moratorium included in this legislation is
misguided and will produce terrible results for the American
people. As Cass Sunstein stated at an Oversight Committee
hearing last September:
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 . . . cost very little,
and have very significant economic or public health
benefits.\3\
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\3\Senate Committee on the Budget, Testimony of Douglas Elmendorf,
Congressional Budget Office, Hearing on Policies for Increasing
Economic Growth and Employment in 2012 and 2013, 112th Cong. (Nov. 15,
2011) (online at budget.senate.gov/democratic/index.cfm/files/serve?
File_id=795c2267-9349-4c2c-a488-262dfd346a2c).
The Congressional Budget Office (CBO) has found that the
bill would freeze routine updates to government programs. For
example, payment rates for services provided by hospitals,
physicians, and Medicare providers would be frozen at current
levels, interfering with access to quality healthcare for
seniors.
Although the Committee has held more than 20 hearings on
regulations so far this Congress, the majority has emphasized
the costs of regulation while disregarding the much more
significant benefits that have resulted from all major rules
issued over the past ten years.\4\
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\4\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 (June 24, 2011) (online at
www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/
2011_cba_report.pdf).
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Freezing all significant regulatory activity would do great
harm to our economy and the health and safety of millions of
Americans. It is critical that agencies have the ability to
issue protections that carry out the laws Congress passes.
Regulations save lives, protect the health and safety of
hundreds of millions of Americans, and provide protections that
are critical to the functioning of a healthy economy.
Elijah E. Cummings,
Ranking Member.