most economic experts and argue that small businesses have small business plans drive and shape our economy which in my view is probably the most important issue confronting our country today small business you know the source of almost half of our workforce and while i'm concerned about many economic factors is also my view that the government regulations have it in order to impact small businesses it particularly businesses have to comply close and permitting the county cozen permitting state cozen permit a federal regulations can impose an even greater burden because most small businesses simply don't have the resources all the time  to dispute all participate in the federal regulatory process according to the small business administration of businesses with fewer than twenty employees spend on average thirty six percent more per employee then do larger for us to comply with federal regulations the s b a also claimed that these small employers represent not in that point seven percent of all businesses that have created sixty five percent of all new jobs over the past fifty years although it's clear that our our economy may be showing signs of improvement we're still suffering from job losses lack of job creation where we like to describe it it makes sense that we look to small businesses and work to create an environment that will help them prosper or should i say try to improve the environment in which with their currently struggling to survive i know that everyone here today supports small businesses and that everyone in this hearing room also lost something that will help create jobs and economic growth sponsored h r five to seven because i believe that improving the small business regulatory  and the regulatory flexibility act will have a lasting impact on small businesses that help support small business growth small businesses want and need our help but it's our responsibility it seems to be to ensure that our regulations are appropriate and in order that our regulatory process is affected admittedly i don't claim to be an expert on all regulatory awaiting the testimony of today's of the many questions i have for the witnesses i want to know most whether this legislation will help or empower small business enough in the regulatory process if it does not i'd be interested to know what needs to be done to change the bill to make it more effective i'm also i'm also very interested to hear about any concerns that the witnesses have about this legislation look forward to hearing from our panel and reserve the balance of the time and i'm pleased to recognize the distinguished gentleman from t thank you sir appreciate the recognition small businesses have significant part of our nation's economy and everybody knows they're so important for our nation's health cordin to a march twenty gratian rip firms employing fewer than five hundred employees point over half of the private sector workers in two thousand and six display small businesses can be drivers of innovation and economic growth as well it's interesting to note though that both of these facts that the five hundred employees the over half the growth of cetera have been true under the existing regulatory system that is in a place since one thousand nine hundred eighty when the regulatory flexibility act was enact despite the testimony that we will hear today about how the r f a has been ineffective and stemming overbearing regulations to stifle small businesses the fact is that small businesses have done well in the almost thirty six years since the as amended in ninety six by the small business regulatory and forstmann fairness act has been in place i'm concerned that the bill that's the subject at today's hearing h r five twenty seven the regulatory flexibility improvements act of two thousand and eleven may be a in search of a problem in fact it's very similar to a bill introduced in two thousand and three apparently to get at the oppressiveness of the bush administration's regulations on small business and the written testimony the three majority witnesses all cite the same study will note that the center for progressive reform among others has debunked the crane study thoroughly noting the study does not account for any benefits of regulation and its relied on suspect methodology in reaching its conclusions i would like to ask unanimous consent mr chairman that the c p r report entitle setting the record straight the crane a crane report on regulatory cost be entered into the record without objection thank you mr chairman unfortunately for the proponents of h r five twenty seven the crane study appears to be the only statistical evidence that they insider can be cited in support of this notion that regulations pose and do cost on small business while i don't dispute that regulations can impose costs and that cost benefit analysis is a valuable tool for ensuring that agencies promulgated good regulations are remain skeptical as to the degree of the quarter problem as the proponents of h r five twenty seven suggest also take notion with that take issue with the notion that the federal regulations are to blame for what remains and unacceptably high employment right if anything current employment problems can be traced to a lack of adequate regulation of the financial services and housing industries which allowed for reckless private sector behavior that just about everybody recognizes as the cause of the great recession the two thousand and eight financial crisis that most severe economic recession since the great depression it was the lack of regulation that hurt us not regulation almost anything they can stand any good we stand to be improved and i'm open to suggestions on how we can improve our regulatory process particularly hard reisa small business but h r five twenty seven proposes some needlessly drastic measures that threaten to undermine public health and safety and waste public resources i point to three particular examples first i'm concerned about the requirement that as part of the regulatory flexibility analysis agencies must consider the indirect effect of a proposed or final rule although the bill attempts to put some sort of logical limit on this requirement by specifying that the required analysis be restricted to those indirect effects that are reasonably foreseeable that qualification is insufficient asking what is and directed what is reasonably foreseeable still requires highly speculative analysis forcing agencies to devote limited staff or resources to engaging such type  such type of unwieldy indeterminate speculative analysis which would constitute nothing more than a guessing game is a waste of taxpayer money putting government workers more and more to work on issues that are not going to result  in an aid to our economy or small business second i'm troubled by the repeal of agency's authority to waive or delayed their regulatory flexibility analysis in the event of an emergency if we are truly concerned about flexibility in the rule making process that a minimum agencies ought to retain the ability to respond to an emergency the rationale for appealing this emergency authority not clear at least not to me other than as a general attack on the rule my third i'm concerned that h r five twenty seven look back provision is simply a backdoor way for the special interests to undermine existing health and safety regulations you know the clean air act was passed in the p a created by a republican president richard nixon one of his crowning achievements other than making the trip to china as mr shaw has notes in his written testimony agencies would be forced to read justify a long standing rules ensuring the safety of the air we breathe the water we drink the food we eat the products we buy the places we work rules that most americans support and rules that need to be maintained for the health safety and welfare of the american public which is part of the government police powers that need to be maintain and forced and strengthened for the benefit of all i'm open to ideas on tweaking the regulatory process and modest ways to make regulatory compliance easier for small businesses and perhaps finding better ways for small businesses to provide input to specific rules as drafted though h r five twenty seven or a draft of a two thousand and three law that's dusted off with a two six thousand six law now introduced as a two thousand and eleven law simply goes too far hasn't changed much in eight years happy to be serving on this committee and i repeat my congratulations to you for assuming the chairmanship of this committee you're a senior member of judicia from kentucky jeff davis notion that all regulations ought to be approved or disapproved by the congress and  apparently the notion of the separation of powers doctrine could be set aside and in this instance because i don't know how in the world after we pass a law obligate the appropriate federal agency to deal with it we then say that any regulations ha has to be approved by us so we come back and we legislate on what they're doing to implement the law that we passed in the first place and  good smith this is all of that well then that explains the speed then this chairman is swifter than the know this this chairman is swifter than the previous a number that was sure to catch the media and the general public upon examination however it turns out that the one point seven five million estimate is the result oh watch statement on the regulatory flexibility improvements and they list five problems that deeply concerned them about this proposed legislation one as yet another analytical layer to the rule making process further complicating agency's ability to implement statutes fulfill their missions and serve public interest this measure before us gives more power to the small business administration office of advice which is in fact an office of important decisions about public protections potentially allowing economists and political offices to overrule agencies scientists and other experts for it would actually make it more difficult for agencies to review and revise existing regulations by forcing it to use a formula to decide which rules to review rather than reviewing the rules at their discretion and finally it's an unfunded mandate asking much of agencies but authoriz additional resources get the picture i do and that's why this is so important  i'm concerned that in this time of fiscal restraint this bill will result in wasting public resources  and there's several other reasons i'd like to bring to your attention but i think i can bring it up safely in the course of our discussion will says of his position is my responsibility to do all i can to grow strike to improve the company and then to pass it all and his son which again with a third has the company's engineering division and addition to preside at less machine is suppl officer for workers rights at the public welfare foundation in washington d c prior to coming to the public welfare foundation mr deputy director for auto safety and regulatory policy at public university of the george washington university school of law i am told that there is a floor vote on that so we'll have to wait until the bell right right ladies and gentlemen we try to comply with the five minute rule and we try to apply that to us as well as to you all so when you see the amber light appear in your face you will know the ice on which you are getting better but nobody will company third actually fourth generation now with my son taking over in engineering i also serve on the board of the national association of manufacturers and i'm pleased to testify on their behalf today the united states is the world's largest manufacturing economy it produces one point six trillion of value each year and employees twelve million americans working directly in manufacturing they have the namin the millions of men and women working in manufacturing in the united states i want you folks to know that we support your efforts to reform the r f a and to one small manufacturers of this country to do what they do best which is to make things and create jobs and i might also add manufacturers have been deeply affected by the most recent recession this sector lost two point two million jobs during this period our own company suffered the worst downturn since the great depression so far only six point two percent of these jobs have come back and the numbers show that american manufacturing is growing more slowly and in the countries we have to compete with we have seen policies from washington that will not help our economic recovery and can actually discourage job creation some are proposed policies that fortunately have not yet been enacted such as huge increases in the individual income tax rate the employee free choice act the so called cap and trade legislation we still face threats that we believe is out of control and a health care mandate that appears to make the business health care burden even worse all of these will worsen our ability to compete as a nation to regain manufacturing momentum and to return to net job gains we need improved economic conditions and we need improved government polic in recent years many of us in manufacturing have transformed our operations we've adopted a japanese principle some of you may have heard of it's called lean thinking the concept is very simple you just identify everything in the organization that consumes resources that adds no value to the customer that's called mood or waste then you look for a way to eliminate the mood of our modest proposal is that the government learns from manufacturing and incorporate lean thinking into the regulatory process many of the proposals that are being offered by this subcommittee including more detailed statements in the r f a process and requirements  identify redundant overlapping or conflicting regulations will do just that my written statement details our support for amendments to the periodic review requirements of the r m those applying lean thinking and continuous improvement another manufacturing principle to the regulatory process it's crucial that agency action be made mandatory when these inefficiencies are identified the gains could be tremendous as we found on the factory floor my written remarks also detailed examples of the damage to be done by runaway regulation at the agency level including the proposals one estimate is that the most stringent standard under legislation is just the beginning of a more thoughtful regulatory system built on common sense with an understanding of modern manufacturing a few days ago the president appeared before business leaders here in washington he urged us to get in the game those were his words and to invest in growth and job creation and i'm here to tell you we would love to do just that but we don't invest our personal assets just because somebody even the president tells us we should we do so because we believe the environment is right and that good opportunities exist for return on the investment and job creation many of the names members or family businesses like our own we want to invest a growth that's why we exist but when our government creates laws and regulations that increase the cost of doing business the natural reaction by small businesses in particular is to simply hunker down and wait things out manufacturers in the united states created the middle class we can regain our momentum with the right policies in place i'm confident that our nation's leaders will take action to promote and not increase the small business space higher cost per employee to comply with better regulation than their larger competitors and third small business is critically important to the american economy the regulatory flexibility act has not worked as well as it can  address regulatory challenges and that's why i support h r five twenty seven and how it will improve the laws affecting this or i get into detail about the provisions in the bill that are particularly important i want to point out why there is an immediate need for these reforms in the last two years the federal government issued one hundred thirty two economically significant regulations rule makings are not slowing down either there are one hundred eighty one more regulations under way now than there were last year representing a five percent increase in activity according to plans issued recently by regulatory agencies there is a twenty percent increase in significant regulations currently under development as far as h r five twenty seven and its benefits on how it will improve the regulatory flexibility act currently a lot requires agencies to analyze the direct impact a rule will have on small  cost on electric utilities e p a should make public how it's proposal likely affect the cost of electricity for small business i believe the rule making process is shortchanged by not including discussion about the obvious ripple effect of regulations on small business and h r five twenty seven tries to correct this all agencies should utilize small business advocacy review panels when i was for advocacy i did not think that the regulatory flexibility needed to be amended to force every agency to convene small business panels the way that resist formally help from small prior to issuing propose rules requiring the consumer financial protection bureau that was created by the dodd financial reform to have to use the small business panel process that's why it was passed into law the same logic applies across the board to all federal agencies and that's why the small business panel process under the small business regulatory enforcement should become the norm not the exception the small business administration's office of advocacy should clarify definitions in the regulatory flexibility act disputes over whether an agency's proposal will significantly economic impact will impose a significant economic impact on a substantial number of small have limited the effectiveness of the regulatory r five twenty seven addresses this problem by giving the office of advocacy role making authority the rules promulgated by the office of advocacy will better define how agencies are to properly consider small business impact and that will benefit the process it will minimize confusion over whether agencies are properly considering small business and second rule making authority by the office because  he will confirm the premise of the cheap counsel for advocacy when courts ultimately render opinions on the regulatory if you're aeonic review of regulations under the regs should be improved are additional reforms that congress can benefit that congress can consider to benefit small business i'm happy to work with this committee to explore additional legislative efforts beyond amending the regs that will help create an economic climate where small be the nation's largest small business advocacy organization appreciate the opportunity to testify on the burdensome effect of regulation on small business and how h r five twenty seven would address many of those concerns over zealous regulation is a perennial cause of concern for small business owners and is particularly burdensome in times like these when the nation's economy remains according to a recent study regulation costs every cost the american economy one point seven five trillion every year more concerning small businesses face an annual regulatory cost of ten thousand five hundred eighty five dollars per employee which is thirty six percent more than the regular regulatory cost facing businesses with more than five hundred employees recently the administration did acknowledge that excessive and regulation has a damning effect on the american economy and a five day believe that has been a long time coming for small business owners to hear the administration emphasize the harmful effects of overregulation on small business and job creation we will be watching closely to see if last month's directive leads to real regulatory reform in the meantime  believe that congress must take action level the playing field congress should expand the small business regulatory enforcement and fairness act and it's small business advocacy review all agencies including independent agenc in so doing all agencies would be in a better position to understand how small businesses fundamentally operate how the regulatory burden disproportionately impact them and how each agency can develop simple and concise guidance material moreover congress and advocacy should ensure that agencies are following the spirit of separate but there are instances where e p a and osha have declined to conduct a subpar panel for a significant role and or role that would greatly benefit from small business and congress should ensure agencies perform regulatory flexibility analyses and require them to list all of the less burdensome alternatives that were considered each agency should provide an evidence based explanation for why it chose a more burdensome vs less burdensome option and explain how their role may act as a barrier to entry for a new business section six ten review should be strengthened h r five twenty seven would require agencies to a min or rescind rule where the six ten review show that the agency could achieve its regulatory goal at a lower cost to the economy in a five b also believe that congress should explore requiring agencies to provide updated information on how to mitigate penalties and fines on small businesses as currently required by so brief but also require that such a report be completed on an annual basis regulatory agencies often proclaim indirect benefits for regulatory proposals but declined to analyze the make publicly available the a direct cost to consumers such as higher energy costs job loss and higher prices agencies should be required to make public level estimate of a role in direct impact agencies should be held accountable when they fail to give proper consideration to the comments of the office of advocacy and a for mechanism should be considered for resolving disputes regarding economic cost of a rule between the agency and advocacy and if i believe that the office of advocacy needs to be strengthened the office should have the ability to issues rule s rules governing agencies to comply with regulatory flexibility requirements because of improvements in here and within h r five twenty seven in a five b is hopeful that review of agency actions will be strengthened and the small business will be more substantively considered throughout the regulatory process in the five years concerned that many agencies are shifting from an emphasis on small business compliance assistance to an emphasis on enforcement congress can help by stressing to agencies that they devote adequate resources to help small businesses who do not have the benefit of inside counsels and h r people to comply with a complicated and vast regulatory burden  congress also should pass legislation waiving fines and penalties for small businesses the first time they commit a non harmful error on regulatory paperwork mistakes some paperwork will happen if no harm is committed as a error penalties for first time offenses and help owners understand the mistakes they make with high rates of unemployment continuing congress needs to take steps to address the growing regulatory burdens who traveled up to maine a few weeks ago with senator snowe actually embraced the amendment that was part of the dodd frank financial regulatory reform bill saying that she would have done the type of analysis that we're talking about here today even if it weren't required by law so if you had better all regulators with that attitude at every agency they would be embracing the idea of having small business advocacy review panels because it is through those panels you get constructive input on how agencies can regulate better meet their objectives while minimizing costs on small firms so perhaps after professor w sets up the consumer financial protection bureau we can all work to get her in front of other regulatory agencies to to preach that type of folks i don't want to i of thousands of pages of regulations that we have to not just comply with but understand and have to tell you the burden of that really overwhelming for any single business effectively we have had in our case we have people to people full time that are dedicated to compliance much of  r five to seven would wrap programs up in costly time consuming and unnecessary red tape putting consumers and working families at risk of harm rules federal versus local in our case in jefferson county in oil we have two different sets of qualifications that we have to comply with both of which are very very complex part of that force is a local problem  in the case of i think what we would like to see is a system that addresses the efficiency of each of the regulations in place much like president clinton started time we would like to see that same approach we are certainly in favor of clean water and clean air but we think that a lean approach to the process could yield tremendous savings because our competition is not just with how our economy used to be here anymore our competition is global right now and we're competing people that operate on a different set of rules and in some cases more efficient regulatory processes than we have  don't have this government regulation in this area they have another they have the worst water and they are probably possible but the highest productivity and i don't know about the japanese you mentioned them i don't think there mr show you might know but i did and somebody some strict liability provisions within statute that are then implemented through rule making is that do strict liability in criminal sanctions mr shulman to comment not try to write it down that there is no evidence strike that balance correctly and with more employment and more growth and i fear that the overwhelming amount of regulation that do not take into account how they impact small business will drive businesses away from the united states so i believe it's a competitive question and the answer is we can't simply look for evidence on a piece of paper that says we went too far and we're losing business we have to act now to that there are regulations that have unintentionally on job creation and industry got about forty five seconds left can you list four or five regulations that you would concede have had unintended pernicious dilatory its consequences on industry you know i've been waiting for the president to offer some specifics in lieu of his presence would you give me would you give me just a handful of regulations that you can see out of the myriad ones out there you concede have had an talked about how quickly this bill has come to a hearing what's interesting is this is i think my fifth meeting already between my two committees on the issue of regulations and if we can squeeze one more in this week they tell me i get a set of steak knives  what here's what's interesting folks were basically saying the same things as the chairman said just on the other side of middle ground line we all recognize the need for regulation we just want to do a better job but i think that's what the president talked about and as i've said before i dare anyone in this room not to think of regulation the next time you get on a commuter airline or if you come to my hometown and you drink tap water  chicago not the lake water the water from the tap which has levels of chromium not healthy for you three times what's been judged to be a healthy standard so we get we're not perfect and it has to improve and i recognize that for some this is even more fences because not elected officials are actually part of the enforced mechanisms but we recognize that under democratic and republican ministration our laws and regulations as always had criminal penalties to them out of absolute necessity enforced by non elected officials if you take it to its extreme assistant states attorneys are elected their bosses are well that same is true with the executive branch f b i agents police officers so i think we need to recognize it's important to let the public know there's a balance here if we come off that the only message here is that regulation is what's killing people we  that killing jobs we forget that a lack of regulation can kill people so i sense in these now five meetings that we're all getting the sort of the same point and we have to do better we have to avoid  redundancy and to make the if we want to get to the same goal there might be more efficient ways to do that so to the extent that we can do all that that's fine i just ask that we try to use the same numbers so when we talk about these  what i'm trying to get from both sides is why one figures are better than the other and while we only have a few minutes today let me just ask the first because it's prominent now it's being thrown out there to show the crane study throughout the biggest number self when can you tell me beyond what you said in your written document what you see the concerns are with that report so the concerns are concerns by the way which have on both sides of the world here so if anyone of the palace mr chairman i have the opportunity to submit further evidence arguing footnoting research is possible toward their answer what numbers we really should with we're not dealing with real numbers in the real world whatever they are they're important so i just respect that we could work in the same ballpark and same universe of reality not always like you i did have to listen to my colleagues on the other side i listen to and read the testimony from from our side i listen to the president acknowledging that and one seems to agree regulations are causing a negative impact on small business america yet when i read your testimony what what i'm what i'm coming away with is that you talk about there being a better way than h r five to seven to deal with this issue and my interpretation of your testimony is that it's essentially it's a way we should be increasing regulation subsidizing small businesses to allow them to comply with that regulation and then tax the people to pay for that sedation subsidy for small businesses isn't that the classic ronald reagan situation you know where it's essentially if it moves tax it if it if it keeps moving regulate it and then if it stops subsidize it i mean that we the regulation problems causing the negative impact on small business i suppose i'm afraid of the other ronald reagan problem which is delaying regulation i'm not talking about i'm talking about your concept that what we need to do to cure this problem is create more regulation and then the people that can't comply with the regulations let's give them a tax subsidy in order to allow them to comply i  good intentions we don't want to hurt people as the chairman said nobody wants you know we want clean air we want clean water and i and i and i think my colleague over on the other side that said you know we want the regulations to have a good effect but what the problem is is by creating more and more the question for you when i we talk about regulation for small business i'm reminded of the americans with disabilities act which has had some unintended consequences but nevertheless which put a requirement on business for accessibility for those with disabilities but in that it had what was known as a reasonable accommodation standard for example if i was of a fortune five hundred company a reasonable accommodation for an employer with one type of disability may be something that i can afford to do with a modification of the workplace or for access to the workplace but if that same employee with that same disability came to me and i was an employer of four or five employees that reasonable accommodation probably could be made so my question to have a broad brush approach as for the for the larger ones congressman this situation that you laid out is exactly what h r five twenty seven is trying to address because what we found is  agencies alone look at what constitutes reasonable accommodation they may not get it right but if they are forced through this law to sit down with small business owners disclose what the direct impact of a proposal will be disclosed what the ripple effect of that proposal will be and then actually listen to the input from small businesses and constructive ideas on how to get the regulation right then that final rule that they come out with is much more likely to be a balance and it is about a balance isn't it yes that it is without that process and that's really what this bill does is it forces that process thank you michel when you talked about in your opening statement about how if we were not for the regulatory environment the auto industry probably would not have had seatbelts or collapsible steering wheels and you seem to indicate to me that if they're not had been a regulatory environment that some of the safeguards that consumers now enjoy would not be in place but you have to look back to to the of the founding of our country when there were no regulatory environment and when benjamin franklin was one of the investors of the first fire insurance company and order to manage that risk they created the first fire department and as we've seen throughout history that our market forces have allowed us to find that balance and in fact in the auto industry we've seen a balance because of insurance companies insuring a product requiring certain manufacture specifications otherwise they would insure it otherwise they wouldn't give you the appropriate coverage to manage that risk and so my question to you is is that as a businessman if i were going out there and wanting to start a business and i wanted to make sure that i could meet the needs and have a profit i would want to look at such factors such as demand and if there was no demand out there for my product then i probably shouldn't go in business is that correct and if there were no natural resources or whatever it was i wanted to sell if i could not produce the product even though there was a demand it would probably be indicative of the fact that i shouldn't be in business where that be correct or it might be indicative of the fact that you haven't found the right the right buyer  i would you go into business if you didn't have those if i mean if you could not make a profit out of well i spent all my time in the nonprofit sector so it's not a question to ask me i'm sorry well then the question to ask you would be if i were a business that was burdened by regulation to the extent that i could no longer turn a profit is that indicative of the fact that maybe i shouldn't be in business at all boy it might be a sign that you were under capitalized to begin with or that if i was under capitalized that because i could not afford to comply with the regular regulatory environment despite the demands of the consumers for my product this is a hypothetical but i mean if you put this in the concrete terms if a small automaker is trying to get in the business of producing vehicles but doesn't have the wherewithal to produce a vehicle that's actually safe and crashworthy on the nation's highways that's not necessarily an automaker we necessarily want a business and so in other words respect of the market forces the regulatory forces would be a good judge of why we should even be in business in the first place i guess i have to take issue with the with the concept that markets are conceptually historically prior to government  they exist on about them and governments create markets and create the vehicles the infrastructure that allow markets to flourish from our roads to the fact that the legal status of corporations