Burdensome Regulations: Examining the Biden Administration's Failure to Consider Small Businesses (House Small Business Committee hearing, May 22, 2024)
Summary
Transcript of the House Committee on Small Business hearing Burdensome Regulations: Examining the Biden Administration's Failure to Consider Small Businesses, convened May 22, 2024 during the 118th Congress, Second Session, published as Small Business Committee Document Number 118-052 (GPO 55-530). Hon. Roger Williams and Hon. Sharice Davids gave opening statements. Witnesses were Paul J. Ray of The Heritage Foundation, Daniel Goldbeck of the American Action Forum, Robert T. Smith of the National Federation of Independent Business Small Business Legal Center, and Todd Phillips of Georgia State University. The appendix includes post-hearing responses to Hon. Mark Alford and Hon. Nydia Velázquez and texts of H.R. 8033, the Regulatory Transparency for Small Businesses Act, and the Accurate Accounting of Regulatory Impact Act.
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“Burdensome Regulations: Examining the Biden Administration's Failure to Consider Small Businesses (House Small Business Committee hearing, May 22, 2024).”
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BURDENSOME REGULATIONS: EXAMINING THE
BIDEN ADMINISTRATION’S FAILURE TO
CONSIDER SMALL BUSINESSES
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
HEARING HELD
MAY 22, 2024
Small Business Committee Document Number 118–052
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
55–530 WASHINGTON : 2024
HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
BLAINE LUETKEMEYER, Missouri
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
MARIA SALAZAR, Florida
TRACEY MANN, Kansas
JAKE ELLZEY, Texas
MARC MOLINARO, New York
MARK ALFORD, Missouri
ELI CRANE, Arizona
AARON BEAN, Florida
WESLEY HUNT, Texas
NICK LALOTA, New York
CELESTE MALOY, Utah
NYDIA VELÁZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MARIE GLUESENKAMP PEREZ, Washington
SHRI THANEDAR, Michigan
MORGAN MCGARVEY, Kentucky
HILLARY SCHOLTEN, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire
BEN JOHNSON, Majority Staff Director
MELISSA JUNG, Minority Staff Director
(II)
CONTENTS
OPENING STATEMENTS
Hon. Roger Williams ................................................................................................ 1
Hon. Sharice Davids ................................................................................................ 3
WITNESSES
Mr. Paul J. Ray, Director, Roe Institute for Economic Policy Studies, The
Heritage Foundation, Washington, DC .............................................................. 5
Mr. Daniel Goldbeck, Director of Regulatory Policy, American Action Forum,
Washington, DC ................................................................................................... 7
Mr. Robert T. Smith, Senior Attorney, NFIB Small Business Legal Center,
National Federation of Independent Business, Washington, DC ..................... 8
Mr. Todd Phillips, Assistant Professor, Georgia State University, Atlanta,
GA .......................................................................................................................... 10
APPENDIX
Prepared Statements:
Mr. Paul J. Ray, Director, Roe Institute for Economic Policy Studies,
The Heritage Foundation, Washington, DC ............................................... 28
Mr. Daniel Goldbeck, Director of Regulatory Policy, American Action
Forum, Washington, DC ............................................................................... 39
Mr. Robert T. Smith, Senior Attorney, NFIB Small Business Legal Cen-
ter, National Federation of Independent Business, Washington, DC ...... 45
Mr. Todd Phillips, Assistant Professor, Georgia State University, Atlanta,
GA .................................................................................................................. 89
Questions and Answers for the Record:
Questions from Hon. Alford to Mr. Paul Ray and Answers from Mr.
Paul Ray ........................................................................................................ 100
Questions from Hon. Alford to Mr. Robert Smith and Answers from
Mr. Robert Smith .......................................................................................... 103
Questions from Hon. Velázquez to Mr. Todd Phillips and Answers from
Mr. Todd Phillips .......................................................................................... 106
Additional Material for the Record:
H.R. 8033 - the Regulatory Transparency for Small Businesses Act ........... 115
The Accurate Accounting of Regulatory Impact Act ...................................... 118
To amend Title 5, United States Code, to make certain changes in how
agencies conduct periodic reviews of agency rules ..................................... 121
To amend Title 5, United States Code, to add the Department of Labor
to the covered agency definition for certain regulatory flexibility anal-
ysis requirements .......................................................................................... 123
The Assurance for Small Business Act of 2024 ............................................. 125
The Enhanced Regulatory Flexibility Assessment Act .................................. 127
The Regulatory Agenda Clarity Act ................................................................ 131
The Small Business Regulatory Challenge Act of 2024 ................................ 133
Associated Builders and Contractors (ABC) ................................................... 140
Competitive Carriers Association (CCA) ........................................................ 142
Job Creators Network ...................................................................................... 144
Regulatory Flexibility Act (RFA) Report: Agencies’ Noncompliance with
the RFA .......................................................................................................... 145
U.S. Chamber of Commerce ............................................................................. 196
(III)
BURDENSOME REGULATIONS: EXAMINING
THE BIDEN ADMINISTRATION’S FAILURE TO
CONSIDER SMALL BUSINESSES
WEDNESDAY, MAY 22, 2024
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 10:03 a.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams [chair-
man of the Committee] presiding.
Present: Representatives Williams, Luetkemeyer, Stauber,
Meuser, Molinaro, Bean, Davids, McGarvey, Gluesenkamp Perez,
Scholten, and Thanedar.
Chairman WILLIAMS. Okay. Before we get started I want to
recognize Congressman Luetkemeyer from the great state of Mis-
souri to lead us in the Pledge and a prayer.
Mr. LUETKEMEYER. Thank you, Mr. Chairman. Everybody
stand. Heavenly Father, this coming weekend is Memorial Day and
we want to ask your blessing on the lives of those who have served
our country and died in service. Especially bless their families and
give them strength to endure the hardships that they have to with
their loved ones gone and also to relieve the hardships of those vet-
erans who survive and are here among us today.
Please lead us today in our negotiations and in our endeavors
here as we work for the benefit of our constituents and great peo-
ple of this country. We have a lot of issues before us so we need
your help. We need your leadership. We will put our hand in your
hand as you lead us to make the right decisions and do your work.
And in Jesus name we pray, amen.
The Pledge, please put your hand over your heart.
I pledge allegiance to the flag of the United States of America.
And to the Republic for which it stands, one nation under God, in-
divisible, with liberty and justice for all.
Chairman WILLIAMS. Good morning, everyone, and I now call
the Committee on Small Business to order. Without objection, the
Chair is authorized to declare a recess of the committee at any
time. I now recognize myself for my opening statement.
Welcome to today’s hearing which will focus on how the Biden
administration’s burdensome regulatory agenda has negatively im-
pacted Main Street America. I would like to start off by thanking
our witnesses for being here with us today. Your input on these im-
portant issues is greatly appreciated.
(1)
2
One of the top priorities of this committee has been combating
the burdensome red tape and regulation that hamper small busi-
nesses across America. On the flip side, since day one, this admin-
istration has unleashed their regulatory onslaught on small busi-
nesses across the country.
Unfortunately, they have repeatedly shown that they do not con-
sider the best interests of small business owners when making
rules and making regulations. The Regulatory Flexibility Act was
created with the sole purpose of ensuring federal agencies consider
small businesses during the rulemaking process.
This committee conducted a 15-month investigation and found
most federal agencies are dodging the RFA’s requirements and fail-
ing to consider the interests of small firms in the rulemaking proc-
ess. All you need to do is to look at the numbers.
All final rules issued by this administration have cost over $1.4
trillion and will make over 230 million paperwork hours to comply
with it. Put simply, the RFA needs to be significantly improved.
Today, in the furtherance of that effort, the committee is releas-
ing a staff report detailing all of the problems the committee uncov-
ered and offering potential legislative solutions. I ask that unani-
mous consent to enter this report into the record, and so ordered.
Now, because the RFA is now operating as a shield like it should,
main street is suffering. Every business owner will tell you that
regulations don’t happen in a vacuum. They have a real world con-
sequence.
Complying with the mountains of regulations is no small task for
a small business. Just a couple of months ago we heard from a
small business manufacturer in this hearing room that his regu-
latory costs have gone up 460 percent in the last 8 years. And to
make matters worse, he testified that the regulations have not
made products better or safer.
This is unacceptable in every way and we aren’t giving our small
businesses and small firms a chance to be successful if we continue
down the road of regulation.
Small businesses do not have the luxury of large businesses with
dedicated compliance departments. When new regulations are fi-
nalized or changed it is up to the business owner themselves to
take away from their core responsibilities to understand the new
requirements.
In a time when businesses are still struggling with stubborn in-
flation, high interest rates, and a bleak labor market, we would not
be adding mountains of—we should not be adding mountains of
regulations as an additional challenge that they must overcome.
So as a small business owner myself for over 52 years, I know
all too well the consequences that come with piles of regulations.
Every small business owner knows it, too.
It is my hope that this hearing those shed further light on the
issue at hand and that we use this hearing to advance solutions
that will help Main Street America. To that end, we have eight
pieces of legislation attached to this hearing, and I hope our con-
versation today will further shape these potential problems.
I want to thank you all again for being here with us and I am
looking forward to today’s conversation.
3
And with that, I yield to my distinguished Member from the
great state of Kansas, Ms. Davids.
Ms. DAVIDS. Thank you, Chairman.
Federal regulations provide the rules of the road for business na-
tionwide impacting the everyday lives of Americans. Throughout
this Congress this committee has heard testimony from witnesses
that have talked about some of the benefits of these regulations.
For example, the Environmental Protection Agency’s rules safe-
guard our nation’s air, lands, and waters. The Food and Drug Ad-
ministration regulates products to protect and promote public
health, and the Department of Labor keeps our workplaces safe.
With that said, we have also heard testimony from small busi-
nesses that certain regulations can be onerous and difficult to com-
ply with.
Part of our role as Members of the Small Business Committee is
to recognize the impact regulations have on small businesses and
work to find ways to balance the shared goal of minimizing the
burdens and achieving the intended effects of those regulations.
To that end, our committee passed the bipartisan One Stop Shop
for Small Business Compliance Act in the 117th Congress, which
was enacted into law. This bill gives small businesses nationwide
a clearinghouse for regulatory compliance guides when dealing
with federal rulemaking.
Democratic Members of this committee have also led on the
Small Business Regulatory Relief Act introduced by Mr. Mfume,
which would give the Office of the National Ombudsman the au-
thority to work with federal agencies and provide meaningful com-
pliance assistance and increase outreach to better serve our small
businesses.
Hearing more directly from small businesses affected by federal
regulations will greatly improve the rulemaking process, and this
administration has taken steps to broaden public engagement and
community participation in that rulemaking process.
As part of the President’s executive order to modernize regu-
latory review, agencies are encouraged to hold listening sessions, to
hear directly from impacted communities, and reduce barriers to
participation.
President Biden has also issued an executive order to promote
competition in the American economy. Americans have been frus-
trated in recent years by increased costs driven by a lack of com-
petition, hampered supply chains, and unfair price gouging. Cor-
porate consolidation is accelerating, which is hurting main street
businesses, including small grocers, local stores, and innovators in
the tech industry.
I am looking forward to hearing from our witnesses today about
the impact of these executive orders, especially on boosting com-
petition for entrepreneurs. And I firmly believe that smart, well-
crafted, commonsense regulations have the potential to unleash in-
novation and provide critical health, safety, and environmental pro-
tections.
My hope is that we strive to find the right balance today to pro-
mote solutions that are truly going to benefit small businesses and
not special interests. Thank you. I yield back.
Chairman WILLIAMS. The lady yields back.
4
And now I will introduce our witnesses. Now, the first witness
here with us today is the Honorable Paul Ray. Mr. Ray is the direc-
tor of the Roe Institute for Economic and Policy Studies at the Her-
itage Foundation located right here in Washington, D.C. At the
Heritage Foundation, Mr. Ray’s research focuses on administrative
law and policy and is a frequent speaker on the federal regulatory
system.
Prior to his current role, Mr. Ray served as the administrator of
the Office of Information and Regulatory Affairs within the White
House’s Office of Management and Budget. And as the adminis-
trator Mr. Ray supervised the review of hundreds of regulations
and led federal efforts on regulatory reform.
Mr. Ray is a graduate of Harvard Law School where he served
on the Harvard Law Review and holds a bachelor’s degree from
Hillsdale College. Thank you, Mr. Ray, for being with us now. I
look forward to your conversation with you, okay?
Our next witness here with us today is Mr. Dan Goldbeck. Mr.
Goldbeck is the director of regulatory policy at the American Action
Forum located here in D.C., and Mr. Goldbeck’s research focuses on
notable developments in the administrative state, the accumulation
of paperwork requirements, and executive and legislative regu-
latory reform efforts. His research and expertise have appeared in
a wide variety of media outlets, including the New York Times, The
Bloomberg News, The Washington Examiner, The Hill, Investor’s
Business Daily, and Federal News Network.
Mr. Goldbeck earned his bachelor of arts in political science with
a history minor from the University of California, Santa Barbara.
And thank you for joining us today, and we look forward to con-
versation with you.
Our next witness here with us today is Mr. Rob Smith. Mr.
Smith is senior attorney in the National Federation of Independent
Businesses, also known as the NFIB located here in Washington.
Since joining the NFIB, Mr. Smith has authored amicus briefs for
cases affecting small businesses, including in the Supreme Court,
written working papers on important issues to the small business
community, including the Regulatory Flexibility Act, and created
posts informing small businesses owners of new legal develop-
ments.
Mr. Smith earned his bachelor’s degree in criminal justice and
political science at the University of Michigan, Dearborn, and went
on to earn his J.D. from George Mason University’s Antonin Scalia
Law School. Thank you for joining us here today, and I am looking
forward to our conversation.
I now recognize Ms. Davids to briefly introduce our last witness
appearing before us today.
Ms. DAVIDS. Thank you, Chairman.
The minority witness today is Todd Phillips, who is an assistant
professor at Georgia State University and has a wealth of experi-
ence and knowledge in this area, and I appreciate you taking the
time today to come and testify before the committee. I yield back.
Chairman WILLIAMS. The lady yields back. Thank you.
And we appreciate, again, all of you being here today.
So I will remind all of you oral testimony is restricted to 5 min-
utes in length. And if you see the light turn red in front of you it
5
means you have concluded and you should wrap up your testimony.
And if you hear this, I am tapping to remind the red light that you
are done, okay?
And so with that being said, I now recognize the Honorable Paul
Ray for his 5-minute opening remarks.
STATEMENTS OF PAUL J. RAY, DIRECTOR, ROE INSTITUTE
FOR ECONOMIC POLICY STUDIES, THE HERITAGE FOUNDA-
TION; DANIEL GOLDBECK, DIRECTOR OF REGULATORY POL-
ICY, AMERICAN ACTION FORUM; ROBERT T. SMITH, SENIOR
ATTORNEY, NFIB SMALL BUSINESS LEGAL CENTER, NA-
TIONAL FEDERATION OF INDEPENDENT BUSINESS; AND
TODD PHILLIPS, ASSISTANT PROFESSOR, GEORGIA STATE
UNIVERSITY
STATEMENT OF PAUL RAY, DIRECTOR, ROE INSTITUTE FOR
ECONOMIC POLICY, THE HERITAGE FOUNDATION
Mr. RAY. Thank you, Mr. Chairman, Vice Chairman Luetke-
meyer, Ms. Davids, and distinguished Members of the committee,
it is a real honor to be here with you today. Thank you for the invi-
tation.
I am the director of the Heritage Foundation’s Roe Institute for
Economic Policy Studies where we focus on research and education
about economic and regulatory issues. As the Chair mentioned, pre-
viously from 2018 through 2021 I served in the Office of Informa-
tion and Regulatory Affairs within OMB.
For the last year of that period I had the honor to serve as ad-
ministrator of OIRA. In that capacity, I had the chance to form
views about many of the ways our regulatory system affects the
ability of small businesses to survive and thrive.
The views I express in this testimony are my own and should not
be construed as representing any official position of the Heritage
Foundation.
As this committee’s hearings have recently documented, Amer-
ica’s regulatory system fails small businesses. In particular, the
system does not provide a predictable pro-growth environment that
small businesses need.
Today I would like to focus on some legislative initiatives that
would help small businesses as they navigate the regulatory sys-
tem.
The most obvious place to begin is the Regulatory Flexibility Act,
but precisely because the RFA often garners so much attention in
discussions about small business and regulation, I am going to talk
about other potential statutory reforms that could help small busi-
nesses obtain the predictable pro-growth environment they need.
After all, our small businesses need all the help they can get. Mere-
ly admitting the RFA, while essential, won’t be enough.
One major problem with today’s regulatory system is that it al-
lows regulations to be issued, amended, and rescinded relatively
easily, so agencies change them often and in large numbers. These
frequent changes are tremendously disruptive for small business
which faces much greater difficulty than their larger peers in pre-
dicting and coping with alterations in governing law.
6
The reason for the frenetic pace of change is simply that the ex-
ecutive finds it much easier to issue regulations than Congress
does to legislate. One bill that would help curb the alarming pace
of regulatory change is the Regulations from the Executive in Need
of Scrutiny, or REINS, Act.
The REINS Act would require affirmative congressional approval
for the most economically significant regulations. This approach
would effectively import back into the regulatory process the delib-
erateness of Article I’s legislative process, stabilizing the regulatory
environment for our small businesses.
To survive and succeed under a regulatory system as mutable as
the current one, businesses need to be able to predict future regu-
latory changes as far in advance as possible. But small businesses
often lack the resources to monitor future regulatory developments
as closely as their larger competitors.
One solution is the All Economic Regulations Are Transparent,
or ALERT, Act. The bill would require agencies to submit monthly
information to OIRA about each pending rule. This information
would include the agencies’ latest estimates of the completion dates
of the rulemakings.
The bill would require OIRA to post the information received
from agencies online. By requiring online publication of frequent
updates to anticipated rulemaking timelines, the ALERT Act would
level the playing field between large and small business, ensuring
that all businesses can plan efficiently in light of the most recent
developments in ongoing rulemakings.
Another major problem small businesses face is that today’s reg-
ulatory system fails to provide the pro-growth environment they
need to thrive. Federal agencies impose enormous costs on business
owners and consumers, as the Chair mentioned. One solution is for
politically accountable actors to set a regulatory budget.
The Renewing Efficiency in Government by Budgeting, or REG
Budgeting Act, would direct the OMB director to set an annual reg-
ulatory budget for the federal government as a whole and for each
agency.
It would forbid agencies to make a rule effective if doing so
would push the author agency over its budget unless the agency
first obtains permission from Congress. And it would require con-
gressional approval of any positive regulatory budget.
Issuing regulations is not the only way agencies shape private
sector conduct. They also issue guidance documents which, though
they lack the force and effect of law, can powerfully influence regu-
lated parties. Often, small businesses have trouble simply finding
agency guidance, which historically has been housed on websites or
even in filing cabinets scattered across the government.
The Guidance Out of Darkness, or GOOD, Act would ameliorate
the difficulties of small businesses by requiring each agency to post
its guidance on a single website. Guidance not featured on an agen-
cy’s guidance portal would be rescinded.
Finding guidance is not the only difficulty small businesses have.
Unlike more sophisticated competitors, they may not understand
the difference between non-binding guidance and binding regula-
tions. The Guidance Clarity Act would require agencies to provide
7
a disclaimer explaining the nonbinding quality of guidance on the
first page of each guidance document.
These are some of the measures that Congress could take to level
the playing field and give small businesses the stable, pro-growth
environment they need. Thank you.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Mr. Dan Goldbeck for his 5-minute opening re-
marks.
STATEMENT OF DAN GOLDBECK, DIRECTOR OF REGULATORY
POLICY, AMERICAN ACTION FORUM
Mr. GOLDBECK. Chairman Williams, Congresswoman Davids,
and Members of the committee, thank you for the opportunity to
discuss the economic impacts small businesses face from recent
rulemakings and ways agencies can improve how they examine and
adjust these rulemakings under the Regulatory Flexibility Act to
provide some degree of regulatory relief.
The following is a summation of points made in my written testi-
mony focusing on, one, the current overall regulatory environment;
two, rules that particularly affect small businesses; and three,
issues agencies should consider further under the RFA.
First, as of May 17, the total estimated cost for final rules under
the current administration adds up to more than $1.6 trillion. For
perspective, this sum exceeds the fiscal year 2024 federal budget
deficit by more than $100 billion and is roughly equivalent to the
GDP of Spain. What is more is that a sizable portion of these costs
have hit the books in only the past few weeks.
As of early April, the Biden regulatory cost total surpassed the
total imposed on the entire first term of the Obama administration.
Then, partially due to a single rule, the EPA Tailpipe Emissions
Rule with $870 billion in costs, the Biden total jumped well past
the entirety of the Obama administration into trillion-dollar terri-
tory. Ensuing weeks have seen dozens of notable rulemakings that
continue to push the total upward and upward at a rapid clip.
Second, in examining the cost of these rules on the administra-
tion I found 36 that contained some sort of partial acknowledgment
of small business impacts. The total of these rules adds up to ap-
proximately $235 billion.
The most significant rule here is the FinCEN rule on beneficial
ownership reporting requirements with more than $84 billion in
costs. FinCEN states that for purposes of estimating costs to small
businesses, all reporting companies are small businesses. Thus,
this rule is an example of regulation where small businesses bear
the entirety of the cost burden.
Another key example is the recent rule from CMS setting staff-
ing minimums for nursing homes. CMS estimates that the cost in-
volved with meeting these requirements will be more than $43 bil-
lion. The agency admits that, ‘‘ 95 percent of the healthcare entities
impacted are considered small businesses.’’
But since the cost versus revenue ratio, at roughly 2.3 percent,
is apparently just below the 3 percent threshold that CMS uses
under the RFA, the agency has declared that, ‘‘ This final rule will
not have a significant economic impact on a substantial number of
small entities.’’
8
Third and finally, and I go into more detail on these in my writ-
ten testimony, I believe these examples and others highlight the
need for improvements to the RFA. Agencies ought to consider cu-
mulative impacts more.
For instance, the nursing home rule may not cross the RFA
threshold on its own, but it is certainly not the only regulation
these facilities must respond to.
Any given rule may be well-intentioned and defensible as a
standalone measure, but in real-world practice multiple rules begin
to add up quickly, especially if such new requirements all become
effective within a relatively short timeframe.
Agencies also need to further examine indirect costs to busi-
nesses, small businesses. Take the EPA Tailpipe Rule. It doesn’t di-
rectly regulate small businesses, but given its magnitude there are
almost certainly downstream effects. If it leads to material price in-
creases on vehicles, which EPA’s analysis suggests is possible on
some level, then they now have an impact on small businesses like
construction companies that often have fleets of vehicles to man-
age.
Furthermore, agencies simply need to do better at implementing
the RFA. Last year in my analysis of the Office of Advocacy’s re-
port on our agency RFA and compliance, I found that agencies pro-
duced the lowest amount of small business savings in a decade.
This was despite high levels of rulemaking activity and high levels
of advocacy input into those rulemakings.
The RA has been around for more than 40 years across adminis-
trations and Congresses of both parties, serving as an important
tool in helping to better craft regulations by accounting for the in-
herent asymmetries small businesses face in complying with regu-
latory requirements versus large businesses.
Such adjustments are not exercises in wanton deregulation but
rather changes made at the margins providing targeted relief to
the entities that need it the most. Now in this current period of un-
precedented regulatory activity overall, it is even more important
that agencies refocus and expand their efforts in addressing these
concerns.
Thank you. I look forward to your questions.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Mr. Rob Smith for 5-minute opening remarks.
STATEMENT OF ROB SMITH, SENIOR ATTORNEY, NATIONAL
FEDERATION OF INDEPENDENT BUSINESSES
Mr. SMITH. Chairman Williams, Congresswoman Davids, and
Members of the committee, on behalf of the National Federation of
Independent Business, NFIB, thank you for inviting me to testify
today about the impact of burdensome regulations on small busi-
nesses.
My name is Rob Smith, and I am a senior attorney with the
NFIB Small Business Legal Center. NFIB is the nation’s leading
small business association consisting of nearly 300,000 small busi-
ness members.
NFIB’s mission is to protect the right of its members to own, op-
erate, and grow their businesses. The average NFIB member has
8 employees and the majority of them have been in business for
9
over 15 years. In the words of President Biden, they are ‘‘ the heart
and soul of our communities.’’
Small businesses employ almost half of this country’s private sec-
tor workforce and account for 99.9 percent of all American busi-
nesses. Thus, for America to succeed, small businesses must suc-
ceed. Helping small businesses is not a Republican or Democrat
issue. The Regulatory Flexibility Act demonstrates this bipartisan
understanding.
Republicans and Democrats have joined together to recognize
that one-size-fits-all government regulations are ineffective and in-
efficient. This was true over 40 years ago when Congress unani-
mously passed the RFA and President Carter signed it into law.
It was also true in 1996 when a Republican-led Congress up-
dated the RFA and President Clinton signed it into law. I hope
that same bipartisanship holds true today.
The RFA was meant to address the disproportionate impact of
federal regulations on small businesses. Unfortunately, many agen-
cies have figured out how to bypass the law’s requirements. With
my testimony today I would like to address two points: first, how
the regulatory burden disproportionately harms small businesses,
and second, NFIB’s work examining the RFA.
As discussed in my written statement, the regulatory burden on
small businesses has drastically increased since the RFA was
signed into law. This burden is now one of the biggest obstacles to
small business success.
NFIB members currently and historically have ranked unreason-
able government regulations as a top 10, if not a top 5, problem
in running their business.
According to one study, the total regulatory cost in 2022 exceeded
$3 trillion and businesses with less than 50 employees are paying
over $50,000 a year per employee. This current accumulation of
regulations and regulatory costs is unsustainable for small busi-
nesses.
Moving to the RFA, in 2023 NFIB examined the RFA compliance
during the 117th Congress. We exclusively relied on SBA Office of
Advocacy comment letters to determine if an agency complied.
Therefore, the determination did not come from NFIB but from the
administration itself.
This analysis revealed a few disturbing trends. First, agencies
routinely failed to comply with the RFA. There were at least 28 in-
stances of RFA noncompliance during the 117th Congress.
Second, certain agencies, such as the EPA and Department of
Labor, are consistent violators.
Third, agencies often bypass the RFA requirements by improp-
erly using the Section 605(b) certification to skip the small busi-
ness impact analyses. Nearly half of the 28 instances of RFA non-
compliance included an improper certification. Two examples are
the Waters of the United States rule and the Department of La-
bor’s Tip Credit rule.
Finally, agencies misrepresent the cost of regulations on small
businesses by ignoring the indirect costs of regulations and se-
verely underestimating the direct costs.
Now, how can Congress fix this problem? Congress should re-
quire that agencies consider both the direct and indirect costs of
10
regulations on small businesses. Many bills have sought to do this,
including a 2007 Democrat-led bill that I highlighted in my written
testimony. This should be a starting point.
Additionally, Congress should strengthen the SBA Office of
Advocacy’s role in upholding the RFA. The bipartisan Prove It Act
of 2024 achieves both aims. It has been approved by the Judiciary
Committee, and I hope that this committee will do the same.
On behalf of NFIB’s nearly 300,000 small business members,
thank you for holding this hearing and inviting me to speak. I look
forward to our discussion.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Mr. Todd Phillips for his 5-minute opening re-
marks.
STATEMENT OF TODD PHILLIPS, ASSISTANT PROFESSOR,
GEORGIA STATE UNIVERSITY
Mr. PHILLIPS. Chairman Williams, Ranking Member Davids,
and Members of the committee, thank you for the opportunity to
testify. I am Todd Phillips, assistant professor of legal studies at
Georgia State University.
I previously served as an attorney advisor working on adminis-
trative process in two federal agencies and as counsel with what
was then the House Oversight and Government Reform Committee.
My research focuses include administrative law and the rule-
making process. My testimony is my own and not of any organiza-
tion.
The Administrative Procedure Act provides for notice and com-
ment when agencies are writing regulations, but for too long agen-
cies have primarily heard from large businesses that hire high-
priced lobbyists and have lacked important input from entre-
preneurs and small businesses.
To address this disparity, President Biden signed Executive
Order 14094, Modernizing Regulatory Review, which requires
agencies to engage in expanded outreach to ensure the meaningful
participation of those affected by regulations, including small busi-
nesses.
Simply ensuring small business’ participation in rulemakings is
insufficient, however, and rules must be crafted to ensure that
small businesses survive and thrive. To that end, President Biden’s
OIRA updated Circular A-4 to require agencies to strive to reduce
small business’ compliance burdens.
Moreover, a centerpiece of President Biden’s regulatory agenda is
to increase competition in all areas of the economy so that small
businesses can effectively compete in the marketplace against their
larger competitors. Unfair methods of competition prevent small
businesses from hiring workers and obtaining fairly priced inputs,
from selling their goods and services or fairly advertising their
products to the public, and from contributing to a growing econ-
omy.
Among the administration’s many efforts are updated bank
merger guidelines to ensure continued lending to small businesses,
lawsuits against Amazon and Apple for unfairly favoring their own
products over small business competitors, regulations that prohibit
pay-for-play Internet fast lanes and noncompete agreements, and
11
actions to tackle junk fees that tilt the playing field against honest
businesses that are transparent with their customers and towards
their larger competitors that profit by hiding the ball from con-
sumers, leading to a race to the bottom.
I am concerned that two bills the committee is considering
would, if enacted, halt these efforts by unnecessarily slowing down
the regulatory process without providing corresponding benefits to
small businesses. The Prove It Act would unnecessarily lengthen
the rulemaking process, permit unnecessary litigation, and delay
rules’ effectiveness without consideration for the benefit small busi-
nesses receive from regulation.
I oppose this bill for many reasons that I articulate in my writ-
ten testimony, but among them are that the act would allow litiga-
tion over initial regulatory flexibility analyses for the first time, ig-
nore long-held principles of standing to allow large companies to
launder their complaints under the guise of promoting small busi-
nesses, and give courts broad latitude to retroactively impose anal-
ysis requirements on agencies that they cannot possibly anticipate.
In addition, the Prove It Act’s penalty for failing to conduct retro-
spective reviews prohibiting rules from being enforced against any
business, not just small businesses, is unnecessarily severe.
Next, the Regulatory Transparency for Small Businesses Act
would impose costs on agencies without any corresponding benefit
for small businesses. Again, I oppose this bill for reasons that I ar-
ticulate in my written testimony, including that it is simply a solu-
tion in search of a problem
The Regulatory Flexibility Act currently requires agencies to pro-
vide a factual basis for certifying that the rules will not have a sig-
nificant economic impact on a substantial number of small entities
and subjects those factual bases to judicial review.
Agencies must already demonstrate that they were not arbitrary
or capricious. Imposing new requirements on those analyses would
simply provide no benefit.
Contrary to those two bills, the committee is considering the
Small Business Regulatory Relief Act, legislation that would ben-
efit small businesses. This bill would provide the Small Business
Administration’s national ombudsman new authority to assist fed-
eral agencies with better helping small businesses, making govern-
ment work more effectively and efficiently.
Today, the ombudsman role is to assist small businesses when
they are being investigated or are the subject of compliance or en-
forcement activities, and the Small Business Regulatory Relief Act
would expand the authority of the ombudsman to work with small
businesses before they get into trouble, helping small businesses
avoid being the subject of investigations or enforcement actions in
the first place.
I wish to make one final point. Consideration of regulations’ costs
must include corresponding considerations of their benefits. The
American Action Forum’s assertions that the Biden administration
has finalized 930 rules imposing combined costs of $1.63 trillion
tells you nothing about the sensibility of those regulations as their
analyses lack a similar quantification of regulatory benefits.
Yet in a single rule, the EPA has finalized a policy that provides
quantified benefits of between $1.7 trillion and $2.1 trillion, far in
12
excess of the total cost AFF has claimed for all Biden administra-
tion rules.
Thank you and I am happy to answer any questions.
Chairman WILLIAMS. The gentleman yields back.
And I now move the Member questions under the 5-minute rule.
I recognize myself for 5 minutes.
Main street’s concerns should revolve around meeting payroll,
supporting their employees, and growing their businesses. Unfortu-
nately, like you all have highlighted today, America’s small busi-
nesses must spend valuable time and resources complying with
regulations meant to their slow success.
Over the last 15 months the committee has been sending infor-
mation requests to agencies rules they put out, and we have often
found that if an economic analysis took place it would often fail to
take into account the cumulative effect of their regulations coming
out of Washington.
So, Mr. Ray, given your past experience working on regulation in
the Trump administration, how would you recommend that we en-
sure agencies don’t only view their actions in a vacuum and turn
a blind eye to the other regulations harming small businesses?
Mr. RAY. Mr. Chairman, thank you for the question. I think ab-
solutely essential to remedying this problem which you highlight
and which is indeed a very grave problem, would be some sort of
regulatory budget. The budget should apply both at the level of in-
dividual agencies and at the level of the federal government as a
whole.
Any given family who is trying to make ends meet has to think
about all their expenses put together. Only federal agencies are
able to think just about the costs that they are imposing in par-
ticular rulemakings or, in the best case scenario, in a suite of
rulemakings.
Federal agencies and the federal regulatory system as a whole
should have to play by the same rules that American families do
when they engage in a holistic budgeting exercise.
Chairman WILLIAMS. Mr. Goldbeck, the numbers you stated in
your testimony are jarring and make it blatantly clear that the
Biden administration is pushing an agenda out of line with the
best interests of America’s job creators.
You highlight how some rules are hard to quantify or just below
the RFA threshold and thus do not require an analysis to be done,
despite having a clear impact on small business. So my question
is what changes can be made to make agencies be more accurate
in their assessment of a rule’s impact?
Mr. GOLDBECK. Thank you, Mr. Chairman. One aspect I think
that, again to my written testimony on with that, is that particu-
larly with the one I cite, you have the 3 percent threshold that has
just kind of become standard practice for CMS in this case. But you
have across agencies different thresholds for this cost-to-revenue
ratio.
And part of that is to be flexible for different industries having
different profit margins and everything, but I think it is important
to re-examine those ratios to see if they are truly accurate. It
seems like they have kind of settled into a basic practice rather
than really come up with a solid estimate there.
13
Chairman WILLIAMS. There is not much a business owner can
do once a regulation has gone final. They have already spent the
time and resources to understand the regulation and how they plan
on complying and while some things can be undone in future ad-
ministrations, the whipsaw back and forth is not beneficial for
small business. So this is why it is so important to get the appro-
priate safeguards in place to protect small business on the front
end.
So, Mr. Smith, in the time we have left, both NFIB’s and this
committee’s investigations found that agencies treat the RFA like
a check-the-box exercise rather than a way to protect small busi-
nesses from the worst regulations coming from D.C. It is my sin-
cere hope that Members on this committee can come together to
find a bipartisan solution to address the shortcomings of the RFA.
So what do you believe are the first steps Congress should take
in reforming the RFA and ensuring it works for small businesses
like it is intended?
Mr. SMITH. Thank you, Chairman, for the question. I think
there are a couple of steps that I would recommend. First, agencies
must be forced to consider the indirect costs of the regulations on
small businesses. Okay. To allude to a point that Mr. Ray men-
tioned, it is when the normal person thinks of what they are spend-
ing they are thinking of direct costs and indirect costs. They are
thinking of the whole picture.
Without thinking of indirect costs, which is the current environ-
ment, you are only looking at half the picture and small businesses
oftentimes are hurt worse by the indirect costs than the direct
costs.
And I could cite a multitude of rules for this point, the Waters
of the United States rule where EPA claimed it wasn’t even regu-
lating businesses, but businesses that own land would, obviously,
be subject to that rule. And there are other rules as well, such as
interchange fee rules from the Federal Reserve. Anything that can
harm a small business needs to be taken into account.
Second and very important, that I am sure your report probably
touches on that ours found as well, the certification is being
abused, the 605(b) certification. Agencies are abusing that to try
and get out of having to perform small business impact analyses
that the RFA requires.
I am not going to say that they are doing it in bad faith, but it
appears, based on what we have looked at, that they are just trying
to check the box. And whenever they can they are ignoring their
requirements and the certification is the way that they can do that.
So those would be the two things I would recommend.
Chairman WILLIAMS. Okay, thank you.
And now I yield my time to Ms. Davids for her questions.
Ms. DAVIDS. Thank you, Chairman.
And thank you again to all of our witnesses for being here to tes-
tify and share your recommendations and expertise.
I want to check in real quick on something. Yesterday afternoon
I know that committee majority uploaded eight regulatory reform
bills ranging from, like, two to seven pages to the committee’s re-
pository. I am just curious for each witness, can you tell me when
14
you received a copy of the bills that were made available on the
committee repository yesterday?
Mr. RAY. I cannot.
Ms. DAVIDS. Okay.
Mr. GOLDBECK. I haven’t received.
Mr. SMITH. I don’t know what bills you are referring to.
Mr. PHILLIPS. I only saw them yesterday afternoon when they
were posted online.
Ms. DAVIDS. Oh, okay. Okay. Just thank you, checking in on
that. Like, I appreciate the chance for us to get to talk about regu-
latory burdens and what can sometimes be onerous for small busi-
ness owners for sure, but regulations can also be an important tool
to improve our nation’s air and water, to ensure that food and
medicines are safe and effective, and make sure that consumer
products are not harmful.
The Small Business Committee plays an important role in ensur-
ing that federal guidance doesn’t burden small businesses but al-
lows them to thrive and compete certainly with major corporations.
And a key part of that is the Regulatory Flexibility Act, and for the
last several decades this law has required federal agencies to con-
sider their effects on entrepreneurs.
It has also given small businesses nationwide additional opportu-
nities to, hopefully, participate in the rulemaking process, includ-
ing small business advocacy review panels for certain agencies.
Mr. Phillips, I was curious, in your opinion, can you tell us a bit
about what might be working well with the Regulatory Flexibility
Act and what might not be? What do we need to do to——
Mr. PHILLIPS. Sure.
Ms. DAVIDS.—improve some of the process for our small busi-
nesses out there?
Mr. PHILLIPS. One of the things to remember is that the Regu-
latory Flexibility Act was enacted to allow small businesses to real-
ly participate in the rulemaking process. And to that end, they
have been able to do so.
They have been able to do so effectively. SBREFA panels do
allow small businesses to participate. Initial and final regulatory
flexibility analyses, allow small businesses information that helps
them provide effective comments to the agencies.
I am especially proud that this administration has increased its
effort to go out into the country to solicit the opinions of small busi-
nesses. I think that one of the things that could be improved here
is really helping small businesses end up complying with the regu-
lations once they have been enacted.
To that end, that is why I appreciate the Small Business Regu-
latory Relief Act. It would allow the SBA’s ombudsman to help
small businesses figure out how to comply with these regulations
that do, yes, impose costs, but also do provide benefits to them. So
that is my recommendation.
Ms. DAVIDS. And can you maybe talk a little bit more about
what are some of the specifics? You said that in your opinion the
current administration is doing a bit more outreach to try to en-
gage.
I know we heard—I believe Mr. Smith mentioned, you know, in-
viting people to join is not the same thing as actively taking the
15
thoughts, opinions, and impacts of our small business owners. Can
you talk a little bit about what are some of the specific things you
are seeing that you think constitute improvement?
Mr. PHILLIPS. The President signed Executive Order 14094 on
modernizing regulatory review that I spoke about. His OIRA has
issued guidance on broadening public participation and community
engagement in the rulemaking process.
The Administrative Conference of the United States under Presi-
dent Biden released a collection of 16 principles for ensuring public
engagement and many of these things that they encourage agencies
to do or are requiring agencies to do is hosting Internet and social
media forums, using focus groups, using advisory committees, hold-
ing public meetings, hearings, listening sessions out in the country,
stuff like that.
Ms. DAVIDS. Okay. Well, thank you so much, and I know entre-
preneurs nationwide don’t always have time to give feedback to the
SBA.
But I yield back.
Chairman WILLIAMS. The lady yields her time back.
I now recognize Congressman Luetkemeyer from the great state
of Missouri for 5 minutes.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
I would like to sort of set the stage for my discussion this morn-
ing. Here is the Wall Street Journal from today. On the second
page we find a headline that says, ‘‘ Survey finds parents suffer fi-
nancially.’’
In the article it says that, ‘‘ The parents living with children
under the age of 18 said they were doing all right financially in
2023. That number is down 5 percent from 2022, and more than
a third of the survey respondents, including the parents or people
who did not have children, cited inflation as their biggest financial
challenge.’’
So what are we talking about this morning? We are talking
about rules and regulations and the cost of complying with that.
And, Mr. Goldbeck, your colleague at the American Action
Forum, Mr. Holtz-Eakin, was here a while back, about a year ago,
and indicated to us that one of the four main drivers of inflation
are the rules and regulations. So that is we are talking about today
the impact of rules and regulations and increased cost, number 1,
causing inflation; and number 2, the cost of complying with that
with the small businesses itself.
So one of the things that we are talking about here, and I have
got a bill, the Regulatory Transparency Small Business Act, what
Mr. Phillips doesn’t seem to like, but it is a great bill from the
standpoint that what it does is it would encourage an agency to in-
clude information that a rule will not have a significant economic
impact on a sustainable number of small businesses. And in its cer-
tification process that it will estimate the total cost of compliance
for a small entity affected by the measure.
Mr. Goldbeck, what do you think about that rule or that bill?
Mr. GOLDBECK. I think any sort of legislation that helps to
strengthen the process of determining a significant impact on small
businesses is welcome. I think there is clear evidence from both the
16
Office of Advocacy and some of my panel mates here that agencies
are not meaningfully responding to these requirements.
Mr. LUETKEMEYER. You know, we talked a little about the
cost of these things, and I think a cost-benefit analysis to show
what the benefit is versus the cost of it. This is why every single
rule needs to be looked at very carefully. They may think it is okay,
but the overall cost indicates it is going to cost more than the ben-
efit.
It may be well-intentioned, but the cost is going to override the
actual benefit of what you are trying to do here. This is why it is
important that you have these cost-benefit analysis done on every
single rule.
Now, we talked about thresholds a little bit of how it is imple-
mented. I think we need to have a—I don’t think we need to have
a threshold on any of these things when it comes to cost-benefit
rules. They need to have every single rule have a cost-benefit anal-
ysis on it.
What do you think about that, Mr. Smith?
Mr. SMITH. I would agree, Congressman. Agencies should be
forced to consider all costs along with benefits of each rule that
they——
Mr. LUETKEMEYER. Yeah, I do. That is a fair way to go about
it. If the rule is worthwhile let’s have it. If it is not, get it fixed
or change it to where it is not going to cost more than the benefits
of it.
So, Mr. Goldbeck, you talked about regulations being one of the
biggest problems of small businesses here and the agencies not
complying with the RFA. How do we enforce the RFA? How do we
enforce the rules and regulations, this situation that we are talking
about this morning here of forcing them to do their job of esti-
mating costs?
Mr. GOLDBECK. Yes, Congressman. In my testimony I talked
about the most recent Office of Advocacy report on RFA compli-
ance, and what I found when I looked at it.
Compared to past reports, the agencies came up with only about
$73 million in savings, which was far lower than any year in the
decade preceding it. In the preceding decade I think it averaged
about $1.7 billion in small business savings per year from Office of
Advocacy input to agencies.
And so I think that that shows a clear pattern that agencies are
not meaningfully responding to this input and not making the nec-
essary adjustments to these rules, even though you keep seeing
more and more rules come across the transom.
Mr. LUETKEMEYER. You know, Mr. Holtz-Eakin testified last
year when he was here that this administration was costing about
$150 billion per year to businesses in new regulations that they
were putting out. And now that estimate is for the first 4 months
of this year a trillion dollars in costs.
And I think all of you alluded to that number. That is staggering.
It is staggering especially when you figure that it has got to go to—
you know, regulations are like a tax increase. It takes money out
of the system so businesses have less money to spend on employ-
ees, research, expansion, whatever it may be and as a result it is
very, very anti-economic.
17
It actually harms and that is a case that is not usually taken
into consideration. Is that right, Mr. Smith?
Mr. SMITH. That is correct. I actually spoke to a Member of ours
earlier this month who said she spends half of each day on regu-
latory compliance.
Mr. LUETKEMEYER. That is not making her any money, is it?
Mr. SMITH. No, sir, it is not.
Mr. LUETKEMEYER. Well, I thank all of you for being here this
morning. My time is about to expire and I yield back to the Chair-
man.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative McGarvey from the great state of
Kentucky for 5 minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman.
I appreciate everyone being here today. You know, I will say this
is our fifth hearing so far since we have been on this committee
that is focused on what we call burdensome regulations.
And before I got to Congress I was an attorney and part of my
practice was representing small businesses. I have seen rules and
regulations that can be burdensome for small businesses. I have
also seen rules and regulations that have helped small businesses
in my hometown of Louisville, Kentucky.
And so I think just like anything when we talk about it, maybe
it is the lawyer in me, but we are freaked out by words like ‘‘
never’’ and ‘‘ always’’ . But, you know, you can’t say that all regula-
tions are good. You cannot say that all regulations are bad, and it
is finding some balance here.
So, like, I will give you an example of some things we have
talked about in this. Last week we talked about—we had Adminis-
trator Frost here. We had a constructive discussion about lending
to small businesses and how we get more capital in the hands of
small businesses.
And, of course, I have heard people here talk today about making
money. Mr. Luetkemeyer just talked about businesses making
money. So let’s talk about small businesses making money and how
we can do that through this committee and through rules and regu-
lations.
Each federal agency is required, required of course by rule or
regulation, to have a small business contracting goal of 23 percent.
And agencies must cover each of the subcategory goals like women-
owned businesses, service-disabled veteran-owned small busi-
nesses, HUBZones.
Guess what the impact is? The impact of this rule and regulation
is that the federal government awarded 26.5 percent of federal con-
tract dollars to small businesses, 26.5 percent. That is that is near-
ly a quarter of contracting. It might not seem like a lot, but it is
$162.9 billion that are going to our small businesses.
So in the interest of that sort of spirit of balance, and we are
talking about rules and regulations, I want to know a little bit, too,
about what happens if we deregulate some of these things?
So, Mr. Phillips, are there costs of deregulation that are borne
by small businesses and their employers?
Mr. PHILLIPS. Absolutely. Every regulation has some costs and
also has benefits. When you roll back regulations that businesses
18
have already been complying with, rolling regulations back places
additional burdens on them. They need to understand what the
new requirements are. This flip-flopping is just very, very difficult
for businesses. It imposes significant costs.
Mr. MCGARVEY. You know, and I think all of us on this com-
mittee would agree small businesses make up the backbone of our
economy. They are a wonderful part of the fabric of my community
in Louisville and, of course, we do hear complaints from small busi-
nesses in things that they have to deal with.
One of the complaints I hear, and my guess is that many other
Members of this committee hear the same thing, is that they don’t
like the inconsistency. And so would you say that setting those reg-
ulations or rolling them back every election cycle is something that
is confusing, good or bad for small business owners?
Mr. PHILLIPS. No. It is definitely bad. Small businesses, just
like all businesses, need consistency and when there is inconsist-
ency—when there is flip-flopping, rolling back and putting in place
new regulations—it imposes costs on everyone.
One of my issue areas is banking and financial regulation, and
small banks really, really, really dislike when a new administration
comes in and starts rolling back everything. They need to update
their software. They need to get new software. It is just very bur-
densome to comply with such changes.
Mr. MCGARVEY. Yeah, and, you know, I like that we are here
talking about the RFA, right? The RFA put in place in 1980 was
meant to say what are the impacts of these on our small busi-
nesses. But rather than just attacking the RFA, I would like to see
us come together to show that commitment to our small businesses
of America, to set these regulations where we want them, where
our small businesses can have them make consistent manner that
is good and is fair.
And I worry sometimes with hearings like this that we get fo-
cused more on the theater and not actually what is going to impact
and help our small businesses.
So there have been some claims that the Office of Advocacy has
found the Biden administration frequently violates the RFA. Mr.
Phillips, do you agree with that assessment? Do you agree that
these are truly violations or are they more policy disagreements?
Mr. PHILLIPS. No. The Office of Advocacy is not an adjudicator.
They are not a court. What they do is provide comments to the
agencies during the rulemaking process. Their role is to ensure
that the participation of small businesses occurs.
When SBA Deputy Chief Counsel Major Clark was last here be-
fore the committee, he made clear that these were comment letters
and not adjudications.
Mr. MCGARVEY. Thank you, Mr. Chairman. I yield back.
Chairman WILLIAMS. The gentlemen yields back.
I now recognize Representative Stauber from the great state of
Minnesota for 5 minutes.
Mr. STAUBER. Thank you, Mr. Chair, and Ranking Member for
holding this hearing today.
This past Congress we have held many hearings examining the
regulatory burdens placed on American small businesses by this
administration across 17 different agencies. The rulemaking proc-
19
ess has grown out of control and has restricted growth on Main
Street America.
This committee has had the opportunity to hear directly from
small business owners, many of them who feel the federal govern-
ment is not listening to their concerns.
I have been on this Small Business Committee since 5-1/2 years
and not one small business owner, not one, said we need more reg-
ulations. Not one raised their hand and said please, please, govern-
ment put more regulations on us, not one.
I would like to ask unanimous consent to enter into the record
a letter from U.S. Chamber of Commerce, Mr. Chair. In this letter,
Traci Tapani, the co-president of Wyoming Machine, outlines her
concerns over costly and restrictive federal regulations and the lack
of transparency in the rulemaking process.
She also points to the loopholes in the Regulatory Flexibility Act,
the RFA. The RFA requires agencies to ‘‘ consider the impact of
their rules on small businesses, but agencies often did not properly
consider the cost.’’
Mr. Ray, to what extent does the current RFA achieve its goal
of reducing burdens on small businesses in federal rulemaking?
Mr. RAY. Thank you for the question, Mr. Stauber. I would say
the Regulatory Flexibility Act, while tremendously well-intended
and beneficial as far as it goes, is generally ineffective at driving
down costs for small businesses.
We can talk about a few ways in which it is ineffective. One pro-
vision to which I would like to draw the committee’s attention that
has not come up so far is Section 610 of the RFA, which requires
retrospective review of certain rulemakings.
Retrospective review is widely acknowledged within the regu-
latory community as one of the principal and most effective ways
to update for real-world changes to regulations and allow for more
sensible and cost effective compliance, including especially by small
entities.
Section 610 reviews are notoriously ineffective at actually driving
regulatory change.
Mr. STAUBER. And I know that small businesses under the
Biden administration, the small businesses are struggling. In this
letter that I put forward for small businesses with 50 or fewer em-
ployees, the costs in the manufacturing sector, small manufactur-
ers incur costs of $34,671 per employee per year. $34,671 per em-
ployee per year. You have got to be kidding me.
This is the regulations that are put on our manufacturing and
small business. Nobody is going to convince me that that is good
for that small business.
Mr. Goldbeck, how does the economic impact of regulations
issued by the Biden administration compare to previous adminis-
trations?
Mr. GOLDBECK. Congressman, to date the total costs accumu-
lated by agencies under the current administration is more than
five times that of the Obama administration’s total at this point in
time.
Mr. STAUBER. More than five times——
Mr. GOLDBECK. Yeah.
20
Mr. STAUBER.—the Biden administration’s rule and regs have
put forth five times the amount than the Obama administration.
Mr. GOLDBECK. To this point in their administration.
Mr. STAUBER. To this point, right. I mean you have got—I
mean, can you—the small businesses in our country are being
crushed by this administration. Having been a small business
owner for 31 years, every single rule or regulation costs money.
Every single rule or regulation costs money. Go ahead. You wanted
to comment?
Mr. GOLDBECK. Yeah. I think it is important to note just the
magnitude and how even if these rules aren’t necessarily applicable
to the RFA in their current form, however that may be, just the
magnitude has to have downstream effects and it goes through the
entire economy basically.
Mr. STAUBER. Yeah, to the—exactly.
I think we talked about Representative Finstad’s bill, H.R. 7198,
that this can help strengthen the RFA to avoid agency evasions by
allowing small businesses to directly challenge an agency certifi-
cation and by requiring agencies to be fully transparent about how
regulations will impact the small business community.
I will just tell you that three of the four I agree with you here
on the panel, what is happening. The punishment that this admin-
istration is putting forth in our small businesses is devastating to
our local economy.
And our local communities, our small businesses are the engine
of our economy and when you have them being attacked on a daily
basis because of rules and regulations, we are going to find our-
selves as a country in deep trouble. And these entrepreneurs that
want to get involved with the American dream and own their own
home and company are going to find out it is very difficult. We can-
not continue down this path.
And I yield back.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Glusenkamp Perez from the
great state of Washington for 5 minutes.
Ms. GLUESENKAMP PEREZ. Thank you, Chairman. Thank
you, Ranking Member. And thank you to the witnesses for being
here today.
Mr. Phillips, I am interested in exploring which kinds of small
businesses are considered when agencies are addressing the poten-
tial impacts of any given regulation on small businesses through
the Regulatory Flexibility Act process.
Earlier this Congress I spoke with Mr. Frank Knapp, a small
business owner, about how agencies should do a better job of reach-
ing out to small businesses across the country and not just those
with Washington-based trade associations.
So in your opinion, how are agencies doing now in making sure
that they are getting feedback from a representative sample of
businesses, from like mom-and-pop, not just people with hundreds
of employees and, you know, groups with, you know, trade associa-
tions?
Mr. PHILLIPS. This administration has done very well with
that. As I said in my opening testimony, the President signed an
21
executive order effectively requiring agencies to go out into the
country and solicit information from small businesses.
If you look at the Federal Trade Commission’s recent regulation
on noncompete agreements, there are pages and pages and pages
of testimony from small businesses talking about how they have
been harmed by noncompete agreements. This administration is
doing a very effective job at reaching out to small businesses rather
than simply relying on D.C.-based trade associations that generally
can speak for the largest of companies.
Ms. GLUESENKAMP PEREZ. What do you think that Congress
should do to conduct more engagement and outreach throughout
the country to make sure that we really are reaching small busi-
nesses in the rulemaking process?
Mr. PHILLIPS. I think that what this administration is doing by
really requiring agencies to go out is very effective. To the extent
that Congress does want to legislate something, Congress could leg-
islate that kind of outreach, could legislate hosting forums, focus
groups, and things like that.
That being said, one thing I am very concerned about generally
is although agencies try very, very hard to comply with the law,
there are courts who are willing to overturn months and months
and months of work on the part of agencies for failing to comply
with just one de minimis part of a statue. I am very cautious about
Congress allowing judicial review over failing to perhaps do one of
those small things.
Ms. GLUESENKAMP PEREZ. When Mr. Frank was here he said
it would be helpful for agencies to project costs for different size
small businesses. In your view, would that work? How could it
work?
Mr. PHILLIPS. I think one of the problems with the RFA today
is that the term ‘‘ small business’’ can apply to firms that have tens
of millions of dollars in revenue and 1,000 or more employees. One
of the purposes of the RFA really was to ensure the participation
of the smallest of the small businesses.
To the extent that Congress wanted to really focus agencies’ at-
tention on those smallest of the small, the businesses that have 8
or 10 employees, I think that would be absolutely appropriate.
Ms. GLUESENKAMP PEREZ. You also talk in your testimony
about excessive market concentration and how unfair methods of
competition hurt small businesses. What do you think should be
done to help level the playing field?
Mr. PHILLIPS. I think that what this administration is doing is
very effective. Bringing lawsuits to enforce the antitrust laws is ab-
solutely appropriate. Issuing regulations to prohibit junk fees to en-
sure competition is very important. I would want to see the admin-
istration just keep on doing that work.
Ms. GLUESENKAMP PEREZ. Thank you to all of our witnesses
for being here. I yield back.
Chairman WILLIAMS. The lady yields back.
I now recognize Representative Meuser from the great state of
Pennsylvania for 5 minutes.
Mr. MEUSER. Thank you, Mr. Chairman.
Thank you to our witnesses. So perhaps the largest burden fac-
ing small businesses are regulations. I think if anyone spends any
22
time with local chambers, as I do, walks the streets of main street,
visits with small businesses, retailers, manufacturers, distributors,
I think that they would learn pretty fast, and if they had an open
mind and didn’t think they knew better than the small business
that has been there for 2 years, 5 years, 10 years, 20 years in our
government, that they would realize that taxes, excessive taxes are
not a good thing for small business. Okay?
Competitive tax rates, there are taxes that have to be paid but
excessive taxes like eliminating the so-called Tax Cuts and Jobs
Act that was for the rich, let’s face it, every small business in
America benefited by it and continues to benefit by it. And if we
eliminate it we are going to add burdens to them.
But still the regs are that much more significant. This inflation,
okay, that we call Bidenomics and we call greedflation and all this
utter nonsense that is being spewed by the left regarding our econ-
omy, the assault on American energy, the inflation is hurting really
three groups: small business, those on fixed income which tend to
be elderly, and low- to middle-income families. That is who gets
hurt primarily by it.
Meanwhile, we have an SBA that is focused on registering voters
in the state of Michigan, okay? So it is not really within their scope
and it is a real problem to this committee—the SBA leadership, I
should clarify.
So, Mr. Ray, with the general state of small business, you know,
right now small business, by the way, tax revenues are way down.
I mean, like, tens of billions, hundreds of billions of dollars.
And the reason for that is because their profitability is down so
therefore there is less tax revenues to pay for all the things that
our government pays for. What do you think is the general state
of small business right now?
Mr. RAY. Congressman, as far as I can tell it is pretty dire facing
the onslaught of regulations. I remember when I was serving in
OIRA speaking with a Member, a leader of the small business com-
munity and asking what regulation was most helpful for your busi-
ness and those of others to thrive? And he said, well, it wasn’t any
one regulation. It was just having certainty in the regulatory envi-
ronment. It was just knowing that we are not going to get buried
under new regulations in a few months.
Mr. MEUSER. Exactly. I hear the same thing. Rules over ide-
ology, which is the vagueness that they get hit with.
Mr. Goldbeck, the regs of the $1.6 trillion, could you try to get
us a list of those? I mean, and do they include the beneficiary own-
ership rule, the CFBP’s 1071s, the climate rule of Basel III, which
isn’t in effect yet, but go ahead, please.
Mr. GOLDBECK. So, yes, Congressman. The number I ascribed
is basically I go through and catalog all regulations that have some
sort of quantified cost or paperwork estimate and we have that
available on our website. And I can provide that——
Mr. MEUSER. Right. Yeah. I would love to get that, thanks.
Mr. Smith, you represent NFIB. How many members in your or-
ganization, small business members?
Mr. SMITH. Almost 300,000.
Mr. MEUSER. All right, over 300,000. What do you think that
group would say to Mr. Phillips’ here assertion that regs actually
23
help these small businesses create a stronger economic climate for
them and in the end raise—somehow raise money for them as well
as the economy? What do you think your members would say to
that?
Mr. SMITH. Thank you, Congressman. I don’t have to say what
I think because I know. I have talked to the members and I could
not even begin to count how many members have told me what I
am about to tell you.
The number one thing I hear from members on this issue is do
people in Washington not know what it takes to run a small busi-
ness? Do they not know the impact of these regulations on me run-
ning my business?
So to Mr. Phillips’ point, I do not believe they would agree with
him.
Mr. MEUSER. Yeah.
Mr. SMITH. I know they would not.
Mr. MEUSER. Yeah.
Mr. Phillips, did you spend any time running a small business?
Mr. PHILLIPS. I currently run a small consulting firm.
Mr. MEUSER. You do?
Mr. PHILLIPS. I do.
Mr. MEUSER. Oh, okay. I would like take a look at that because
it doesn’t show up and you have a pretty extensive background, but
you don’t include that.
Mr. PHILLIPS. It is in my written testimony, sir.
Mr. MEUSER. I see. Okay, that is great. So let me ask you guys
this, you witnesses this. Wouldn’t it be great if our SBA rather
than trying to register primarily those who benefit their party in
Michigan, maybe we enjoined in a group where we went line by
line and did everything we could to weigh the pros and cons of
these massive regulations? Of course, it would take a long time and
line item them out along the way and then have the SBA present
such a report to this committee? What would you think about that?
Mr. RAY. I would certainly support that, sir.
Mr. MEUSER. Okay.
With that, Mr. Chairman, I yield back.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative Thanedar from the great state of
Michigan for 5 minutes.
Mr. THANEDAR. Thank you, Chair. Thank you, Ranking Mem-
ber, for this hearing.
And I thank all of our witnesses here. I ran a technology small
business for over 25 years, so I understand, you know, the strug-
gles small businesses have in coping with understanding the regu-
lations and complying with.
My question to you, Professor Phillips, is in your testimony you
mentioned that many small businesses simply need help under-
standing what the law expects of them from a regulatory compli-
ance standpoint. The Small Business Regulatory Relief Act that I
and many of my Democratic colleagues co-sponsored, would allow
the SBA to establish programs that would help small businesses
comply with federal regulations.
24
How large of an impact would the Small Business Regulatory Re-
lief Act would have on small businesses seeking assistance to meet
regulatory requirements?
Mr. PHILLIPS. Congressman, I think it would be huge. The RFA
currently requires small business guides to help small businesses
comply with regulatory requirements, and that is an excellent first
start.
However, this bill that you co-sponsored would allow SBA’s om-
budsman to really work with small businesses to help them under-
stand what is happening. It would give them a point of contact
with SBA and with the regulatory agencies to help them under-
stand how to effectively comply with the law.
As I said, small businesses want to comply with the rules of the
road. They want to do the right thing. Congress and the agencies
need to give them the resources to help them with that.
Mr. THANEDAR. Thank you, Professor. And today the SBA can
help small businesses when they experience federal regulatory en-
forcement actions. How often does the SBA assist small businesses
when they are subject of investigations, and how would the Small
Business Regulatory Relief Act further help small businesses thrive
in the United States?
Mr. PHILLIPS. Sure. I don’t have exact numbers but I will tell
you so the national ombudsman serves as a point of contact for
small businesses that will help facilitate communication between
them and regulatory agencies.
And I think that is an excellent service that they provide. How-
ever, it is just insufficient. We need to help small businesses before
they become the subject of investigations or enforcement actions.
We need to help them, again, figure out how to comply with the
law, so that they don’t end up on the other side of the table in the
first place.
Mr. THANEDAR. Makes sense, yeah. Professor Phillips, you also
mentioned that the Biden administration has focused much of its
efforts on promoting transparency to ensure that small businesses
with upfront pricing can compete fairly by eliminating hidden fees
and junk fees which attempt to conceal the true cost.
As a result, the Consumer Financial Protection Bureau, the Fed-
eral Trade Commission, and the Department of Transportation
have all acted to ensure small businesses can fairly compete and
to protect consumers from deceiving prices. Can you explain how
the Biden administration’s push for transparency has benefited
consumers and small businesses?
Mr. PHILLIPS. Absolutely. I think everyone in this room can ap-
preciate the experience of going online and searching for a plane
ticket or a concert ticket or something like that and as you check
out, you are hit with fees that double the price. We all hate that.
Everyone hates that experience.
What the administration is doing is to make this pricing trans-
parent so that people can understand just looking at the menu
prices what the price will be and can comparison shop that way.
It helps small businesses be able to compete. Small businesses tend
to have lower cost than their larger competitors, and really show-
ing that all-in price when people are doing cost comparison helps
25
small businesses have a fighting chance at obtaining the customer’s
business.
Mr. THANEDAR. Thank you so much. My time is up and I yield
back, Mr. Chair.
Chairman WILLIAMS. The gentleman yields back his time.
I now recognize Representative Bean from the great state of Flor-
ida for 5 minutes.
Mr. BEAN. A very good morning, Mr. Chairman. Thank you for
holding the fifth hearing on overregulation.
And to our All Star panel, welcome. We are glad to have you
here. Five meetings means it is a big deal.
You know, it reminds me I used to play a game when my kids
were toddlers. We called it the block game. We would just take
blocks and stack them up until the tower collapsed, the whole
blocks collapsed.
It seems as if the Biden administration—that Joe Biden is play-
ing this game with America’s small business, just thinking that
small businesses are strong enough to handle an endless supply of
overregulations.
As Chairman Williams has said, the fact that there was $875
million—billion dollars with a B, billion, in new costs from final
rules issued in 1 week, it is hard to fathom even for this President.
Some have said that the Biden administration doesn’t fully ap-
preciate what the rule—what the burden does to small business
and that they just check a box when they are trying to comply with
the Regulatory Flexibility Act, which Congress created to help pro-
tect small business.
Would you agree? Mr. Paul Ray, would you agree that they fully
don’t understand what the impact is to small businesses?
Mr. RAY. Absolutely, Congressman. You know, every agency
tends to want to maximize achievement of whatever its special goal
is, right? And they tend to——
Mr. BEAN. Just check in that box.
Mr. RAY. Yeah, just disregard the costs that they incur along the
way.
Mr. BEAN. Right. You know, the blocks, is it true, Mr. Goldbeck,
the blocks that they already have to carry even before the Biden
administration starts putting more blocks on, they are dealing with
inflation? That is a very heavy block that businesses have to carry.
We know that the average household is spending over $1,000 a
month just to keep up with what they purchased 2 years ago,
$1,000 more. They have also got supply chain issues. They have
also got trying to hire people.
I am in another committee, Education and Workforce, and we are
trying to protect this whole new classification of independent con-
tractors. They want to put independent contractors on the banks of
some small businesses.
So would you agree, too, Mr. Goldbeck, that they don’t fully un-
derstand what is happening to small businesses?
Mr. GOLDBECK. Yeah. I think one of the aspects is they analyze
these rules in a vacuum as a standalone basis, but as you allude
to with the block example, if you keep stacking the cumulative im-
pact maybe 1 rule is justifiable in its own right, but if three rules
fall on top of you then it is a different story.
26
Mr. BEAN. Yeah, I got you. You know, one of the—Mr. Chair-
man, you had a great hearing on energy and we had energy compa-
nies, some of the energy companies were about to keel over from
the sheer weight of all the regulations.
So, Mr. Ray, what if I just say I am a small business owner and
I just say I don’t want to comply? I can’t comply. What is the cost
of just saying I can’t do it anymore? What are the consequences to
the small businesses?
Mr. RAY. Well, absolutely devastating. I mean you could be fac-
ing millions of dollars in fines or, for regulations involving criminal
penalties, jail time.
Mr. BEAN. So it is serious.
Mr. RAY. It is, sir.
Mr. BEAN. It is serious weight on there.
Mr. RAY. Absolutely.
Mr. BEAN. Very good.
Mr. Smith, you represent thousands of businesses with NFIB. I
have asked multiple businesses that have sat in the same chairs
that you have sat, how is the regulatory environment right now on
a scale from 1 to 10, 1 being you know what, it is just the cost of
doing business. Ten is just we have never seen it like this before.
What would you rate the current environment?
Mr. SMITH. Thank you, Congressman. I would rate it as a 10
and, in fact, there are recent numbers that April had the most sig-
nificant—economically significant rules dating all the way back to
the 1980s in that month alone. And that this administration is cur-
rently pushing through an unprecedented rate of economically sig-
nificant rules on small businesses.
Mr. BEAN. Got you. No, I am with you. We have heard 9s and
10s consistently throughout the five hearings that it is serious
business.
Now, you also represent, again, NFIB, thousands of businesses.
We already heard from Mr. Ray you can’t ignore these things. You
have got to comply or there is jail time, there is fines, there is all
kinds of stuff.
What about the actual hours to comply? What about trying to do
the paperwork and trying to comply? Is that taking its toll as well
on small business, Mr. Smith?
Mr. SMITH. Thank you, Congressman. Absolutely. As I men-
tioned earlier, I spoke to one of our members out in Oregon earlier
this month about a rule, and she told me that the cumulative bur-
den, hours, is half of every day, each day. Half of a week, half of
a month——
Mr. BEAN. Too many.
Mr. SMITH. Yeah.
Mr. BEAN. Too many. Eventually we have to learn from that
toddler game. You put enough blocks, small businesses just can’t
cope.
With that, Mr. Chairman, thank you for your leadership. I yield
back.
Chairman WILLIAMS. The gentleman yields back.
And I would like to thank our witnesses today for the testimony
for you appearing with us.
27
And without objection, Members have 5 legislative days to sub-
mit additional materials and written questions for the witnesses to
the Chair which will be forwarded to the witnesses. I would ask the
witnesses to please respond promptly.
So with that in mind, there is no further business and so, with-
out objection, the committee is adjourned. Thank you.
[Whereupon, at 11:18 a.m., the committee was adjourned.]
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