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