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64–406 PDF 2011

‘‘REGULATORY FLEXIBILITY IMPROVEMENTS ACT 

OF 2011’’—UNLEASHING SMALL BUSINESSES TO 

CREATE JOBS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COURTS, COMMERCIAL 

AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

ON

H.R. 527 

FEBRUARY 10, 2011 

Serial No. 112–16 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM REED, New York 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

SEAN MCLAUGHLIN, Majority Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON COURTS, COMMERCIAL AND ADMINISTRATIVE LAW

HOWARD COBLE, North Carolina, Chairman 

TREY GOWDY, South Carolina, Vice-Chairman 

ELTON GALLEGLY, California 

TRENT FRANKS, Arizona 

TOM REED, New York 

DENNIS ROSS, Florida 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

MELVIN L. WATT, North Carolina 

MIKE QUIGLEY, Illinois 

DANIEL FLORES, Chief Counsel 

JAMES PARK, Minority Counsel 

(III) 

C O N T E N T S 

FEBRUARY 10, 2011 

Page 

THE BILL 

H.R. 327, the ‘‘Regulatory Flexibility Improvements Act of 2011’’ ...................... 8 

OPENING STATEMENTS 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Chairman, Subcommittee on Courts, Commercial 

and Administrative Law ...................................................................................... 1 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Ranking Member, Subcommittee on Courts, Commercial 

and Administrative Law ...................................................................................... 34 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 51 

WITNESSES 

Rich Gimmell, President, Atlas Machine & Supply, Inc. 

Oral Testimony ..................................................................................................... 55 

Prepared Statement ............................................................................................. 58 

Thomas M. Sullivan, Of Counsel, Nelson Mullins Riley Scarborough, LLP 

Oral Testimony ..................................................................................................... 65 

Prepared Statement ............................................................................................. 67 

J. Robert Shull, Program Officer, Worker’s Rights, Public Welfare Foundation 

Oral Testimony ..................................................................................................... 76 

Prepared Statement ............................................................................................. 78 

Karen R. Harned, Esq., Executive Director, National Federation of Independent Business, Small Business Legal Center 

Oral Testimony ..................................................................................................... 84 

Prepared Statement ............................................................................................. 87 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable Howard Coble, a Representative in 

Congress from the State of North Carolina, and Chairman, Subcommittee 

on Courts, Commercial and Administrative Law .............................................. 3 

Report submitted by the Honorable Steve Cohen, a Representative in Congress from the State of Tennessee, and Ranking Member, Subcommittee 

on Courts, Commercial and Administrative Law .............................................. 35 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary ................................................................................................... 53 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Post-Hearing Questions from Karen R. Harned, Esq., Executive 

Director, National Federation of Independent Business, Small Business 

Legal Center ......................................................................................................... 105 

(1) 

‘‘REGULATORY FLEXIBILITY IMPROVEMENTS 

ACT OF 2011’’—UNLEASHING SMALL BUSINESSES TO CREATE JOBS 

THURSDAY, FEBRUARY 10, 2011 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COURTS, 

COMMERCIAL AND ADMINISTRATIVE LAW, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 1:33 p.m., in room 

2141, Rayburn House Office Building, the Honorable Howard Coble 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Coble, Cohen, Conyers, Gowdy, Quigley, 

Reed, and Ross. 

Staff present: (Majority) Daniel Flores, Subcommittee Chief 

Counsel; Allison Rose, Professional Staff Member; Ashley Lewis, 

Clerk; and James Park, Minority Counsel. 

Mr. COBLE. Good afternoon. The Subcommittee on Courts, Commercial and Administrative Law will come to order. Good to have 

the panel with us. I’ll give my opening statement and recognize Mr. 

Cohen and also Mr. Conyers, I think he’s with us, as well. 

Most economic experts who argue that small businesses have 

small business trends drive and shape our economy which, in my 

view, is probably the most important issue confronting our country 

today. Small businesses are the source of almost half of our workforce and while I’m concerned about many economic factors, it’s 

also my view that the government regulations have an inordinate 

impact on small businesses particularly. 

While all businesses have to comply with municipal codes and 

permitting, county codes and permitting, state codes and permitting, Federal regulations can impose an even greater burden because most small businesses simply don’t have the resources or the 

time to dispute or participate in the Federal regulatory process. 

According to the Small Business Administration, businesses with 

fewer than 20 employees spent on average 36 percent more per employee than do larger firms to comply with Federal regulations. The 

SBA also claimed that these small employers represent 99.7 percent of all businesses that have created 65 percent of all new jobs 

over the past 50 years. 

Although it’s clear that our economy may be showing signs of improvement, we’re still suffering from job losses. Lack of job creation 

or however you like to describe it, it makes sense that we look to 

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small businesses and work to create an environment that will help 

them prosper or should I say try to improve the environment in 

which they’re currently struggling to survive? 

I know that everyone here today supports small businesses and 

that everyone in this hearing room also wants to enact something 

that will help create jobs and economic growth. I sponsored H.R. 

527 because I believe that improving the Small Business Regulatory Enforcement Fairness Act and the Regulatory Flexibility Act 

will have a lasting impact on small businesses that help support 

long-term small business growth. 

Small businesses want and need our help and it’s our responsibility, it seems to me, to ensure that our regulations are appropriate and in order and that our regulatory process is effective. Admittedly, I don’t claim to be an expert on regulatory law and am 

anxiously awaiting the testimony of today’s witnesses. 

Of the many questions I have for the witnesses, I want to know 

most whether this legislation will help or empower small businesses 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 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 my time. 

[The prepared statement of Mr. Coble follows:] 

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Mr. COBLE. I’m pleased to recognize the distinguished gentleman 

from Tennessee, the Ranking Member, Mr. Cohen. 

[The bill, H.R. 527, follows:] 


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Mr. COHEN. Thank you, sir. I appreciate the recognition. Small 

businesses have a significant part of our Nation’s economy and everybody knows they’re so important for our Nation’s health. 

According to a March 2010 Small Business Administration report, firms employing fewer than 500 employees employed over half 

of the private sector workers in 2006. Additionally, small businesses can be drivers of innovation and economic growth, as well. 

It’s interesting to note, though, that both of these facts, the 500 

employees, over half the growth, et cetera, have been true under 

the existing regulatory system that has been in place since 1980 

when the Regulatory Flexibility Act was enacted. 

Despite the testimony that we will hear today about how the 

RFA has been ineffective at stemming overbearing regulations that 

stifle small businesses, the fact is that small businesses have done 

well in the almost 36 years since the RFA, as amended in ’96 by 

the Small Business Regulatory Enforcement Fairness Act, has been 

in place. 

I’m concerned that the bill that’s the subject of today’s hearing, 

H.R. 527, the ‘‘Regulatory Flexibility Improvements Act of 2011,’’ 

may be a solution in search of a problem. In fact, it’s very similar 

to a bill introduced in 2003, apparently to get at the oppressiveness 

of the Bush Administration’s regulations on small business. 

In the written testimony, the three majority witnesses all cite the 

same study by Nicole and Mark Crain that claims the Federal rulemaking imposes a cumulative cost of $1.75 trillion on the Nation’s 

economy. Mr. Shull, one of our witnesses, will rebut the particulars 

of that study, I’m sure, but I will note that the Center for Progressive Reform, among others, has debunked the Crain study thoroughly, noting the study does not account for any benefits of regulation and it’s relied on suspect methodology in reaching its conclusions. 

I would like to ask unanimous consent, Mr. Chairman, that the 

CPR Report entitled Setting the Record Straight: The Crain and 

Crain Report on Regulatory Costs be entered into the record. 

Mr. COBLE. Without objection. 

[The information referred to follows:] 

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Mr. COHEN. Thank you, Mr. Chairman. Unfortunately for the 

proponents of H.R. 527, the Crain study appears to be the only statistical evidence that they can cite or can be cited in support of this 

notion that regulations impose undue cost on small business. 

While I don’t dispute that regulations can impose costs and that 

can cost-benefit analysis is a valuable tool for ensuring that agenVerDate Aug 31 2005 12:37 May 02, 2011 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\021011\64406.000 HJUD1 PsN: 64406

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cies promulgate good regulations, I remain skeptical as to the degree of the purported problem as the proponents of H.R. 527 suggest. 

I also take notion with the—take issue with the notion that the 

Federal regulations are to blame for what remains an unacceptably-high unemployment rate. 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 2008 financial crisis, the most severe economic recession since the Great Depression. It was the lack 

of regulation that hurt us, not regulation. 

Almost anything that can stand—anything can stand to be improved and I’m open to suggestions on how we can improve our regulatory process, particularly how it relates to small business, but 

H.R. 527 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 indirect and what is reasonably foreseeable still 

requires highly-speculative analysis. Forcing agencies to devote 

limited staff and resources to engage in such type of unwieldy, indeterminate and 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 agencies’ authority to waive 

or delay their Regulatory Flexibility Analysis in the event of an 

emergency. If we’re truly concerned about flexibility in the rulemaking process, then at a minimum agencies ought to retain the 

ability to respond to an emergency. The rationale for appealing this 

emergency authority is not clear, at least not to me, other than as 

a general attack on rulemaking. 

Third, I’m concerned that H.R. 527’s look-back provision is simply a backdoor way for special interests to undermine existing 

health and safety regulations. You know, the Clean Air Act was 

passed in the EPA created by a Republican president, Richard 

Nixon, one of his crowning achievements, other than making the 

trip to China. 

As Mr. Shull notes in his written testimony, agencies will be 

forced to rejustify longstanding rules ensuring the safety of the air 

we breathe, the water we drink, the food we eat, the products we 

buy, and the places we work, rules that most Americans support 

and rules that need to be maintained for the health and safety and 

welfare of the American public which is part of the government police powers that need to be maintained, enforced, and strengthened 

for the benefit of all. 

I’m open to ideas on tweaking the regulatory process in modest 

ways to make regulatory compliance easier for small businesses 

51 

and perhaps finding better ways for small business to provide input 

to specific rules. As drafted, though, H.R. 527, a redraft of the 2003 

law that’s dusted off in the 2006 law, now introduced as the 2011 

law, simply goes too far and hasn’t changed much in 8 years. 

Thank you, Mr. Chairman. I yield back the remainder of my 

time. 

Mr. COBLE. I thank the gentleman. The Chair recognizes the distinguished gentleman from Michigan, the Chairman Emeritus of 

the House Judiciary Committee, for an opening statement. 

Mr. CONYERS. Thank you, Chairman Coble. I’m 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 Judiciary and we respect that so very much. 

Now on January 24, our Subcommittee had hearings on the 

REINS Act. Now this was our colleague from Kentucky Jeff Davis’s 

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 in this instance. 

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 

regulation 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 your speed, Chairman Coble, is remarkable because you introduced this bill and here we are 2 days later holding 

hearings on it. I envy that. I tried to do that when I was Chair of 

this Committee and I was a miserable failure. We never could 

move with that kind of speed. 

Of course. I yield. 

Mr. COBLE. I did not introduce it. I think the Chairman of the 

full Committee introduced it. 

Mr. CONYERS. Oh, Smith. Oh, well, then that explains the speed 

then. 

Mr. COBLE. I’m not as good as you think. 

Mr. CONYERS. No. This Chairman is swifter than the previous 

Chairman and I will discuss this a little bit more, but here’s what 

I’m looking at. 

In addition to what Steve Cohen just talked about, a credible cost 

that is alleged to be occurring, the whole notion that this will cost 

almost $2 trillion is—well, I’ll just read the one quote from here. 

‘‘It’s easy to see why the anti-regulatory critics have seized on 

the Crain and Crain Report and its findings.’’ That’s the one that 

Mr. Cohen just put in the record. ‘‘The 1.75 trillion figure is a 

gaudy number that was sure to catch the ear of the media and the 

general public. Upon examination, however, it turns out that the 

1.75 trillion estimate is the result of transparently unreliable methodology and is presented in a fashion calculated to mislead.’’ 

I’d like to ask all of the four witnesses to be prepared to respond 

to this at any time during this hearing. 

The other matter is the OMB Watch Statement on the Regulatory Flexibility Improvements Act and there are five problems 

that deeply concern them about this proposed legislation. One, it 

adds yet another analytical layer to the rulemaking process, further complicating agencies’ ability to implement statutes for full 

admissions and serve the public interests. 

52 

This measure before us gives more power to the Small Business 

Administration, Office of Advocacy, which is in fact an office of taxpayer-subsidized industry lobbyists who funnel the objections of 

businesses into agency decision-making. 

Three, it politicizes important decisions about public protections, 

potentially allowing economists and political offices to overrule 

agency scientists and other experts. 

Four, it would actually make it more difficult for agencies to review and revise existing regulations by forcing agencies 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 authorizing no 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 are several other reasons 

that I’d like to bring to your attention, but I think I can bring it 

up safely in the course of our discussions, and I thank Chairman 

Coble for his generosity in terms of time. 

Mr. COBLE. I thank the gentleman and all other opening statements will be made a part of the record without objection. 

[The prepared statement of Mr. Conyers follows:] 

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Mr. COBLE. We’re pleased to have an outstanding panel today. I 

will introduce them from my left to right. 

Mr. Richard Gimmel is the President and third-generation owner 

of Atlas Machine and Supply, Inc., based in Louisville, Kentucky. 

The company is a 104 years old and has branches in Ohio and Indiana. Mr. Gimmel says of his position, ‘‘It’s my responsibility to do 

all I can to grow, strengthen, and improve the company and then 

to pass it on,’’ and his son Richard Gimmel III heads the company’s 

Engineering Division. 

In addition to presiding at Atlas Machine and Supply, Inc., Mr. 

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of Manufacturers and he received his MBA from Bellarmine University. Did I pronounce that correctly, Mr. Gimmel? Bellarmine in 

Kentucky. Good to have you with us. 

Mr. Thomas Sullivan is Of Counsel of Nelson Mullins Riley and 

Scarborough, LLP, in Washington. Mr. Sullivan also heads the 

Small Business Coalition for Regulatory Relief. In the past, Mr. 

Sullivan served as Chief Counsel for Advocacy at the Small Business Administration, worked with the National Federation of Independent Business, served on Congressional Affairs staff of the U.S. 

Environmental Protection Agency, and was an official of the University Department of Justice, Environment, and Natural Resources Division. 

Mr. Sullivan earned his Juris Doctorate Degree from Suffolk University School of Law. 

Mr. Robert Shull is our third witness and is a Program Officer 

for Worker’s Rights at the Public Welfare Foundation in Washington, D.C. Prior to coming to the Public Welfare Foundation, Mr. 

Shull was the Deputy Director for Auto Safety and Regulatory Policy at Public Citizen and Director of Regulatory Policy at OMB 

Watch. 

Our fourth witness, Mr. Karen Harned, is the Executive Director 

of the National Federation of Independent Business, Small Business Legal Center. Prior to coming to NFIB, Ms. Harned worked 

as an associate at Olsson, Frank, and Weeda, PC, and on the staff 

of Senator Dodd Nichols of Oklahoma. 

She earned her BA Degree from the University of Oklahoma and 

her JD Degree from the George Washington University School of 

Law. 

Now I am told that there is a Floor Vote imminent. So we’ll have 

to just wait until the bell rings. 

Ladies and gentlemen, we try to comply with the 5-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’re skating is getting thinner but nobody will be 

keelhauled for violating but we would appreciate your staying within the 5-minute rule, if you could. When the red light appears, that 

is your warning that the 5 minutes have in fact expired. 

Good to have each of you with us. Mr. Gimmel, why don’t you 

kick it off? 

TESTIMONY OF RIC GIMMEL, PRESIDENT, 

ATLAS MACHINE & SUPPLY, INC. 

Mr. GIMMEL. Well, Mr. Chairman, I appreciate the opportunity 

to be here and I kind of feel a little out of place. I’m probably the 

only person up here that doesn’t do this for a living. I mean, I run 

a machine shop, so I hope you’ll bear with me—— 

Mr. COBLE. We will, indeed. 

Mr. GIMMEL [continuing]. In that regard. My company, Atlas Machine, is based in—— 

Mr. COBLE. Mr. Gimmel, pull that mike a little closer to you, if 

you will. 

Mr. GIMMEL. Yes. My company is Atlas Machine & Supply. We’re 

based in Louisville. I have 200 employees, a 104-year-old company, 

56 

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 am pleased to testify on their behalf today. 

The United States is the world’s largest manufacturing economy. 

It produces 1.6 trillion of value each year and employs 12 million 

Americans working directly in manufacturing. 

On behalf of the NAM and 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 RFA and to unleash the small manufacturers of this country to do what they do 

best which is to make things and create jobs and, I might also add, 

to pay taxes. 

Manufacturers have been deeply affected by the most recent recession. This sector lost 2.2 million jobs during this period. Our 

own company suffered the worst downturn since the Great Depression. So far, only 6.2 percent of these jobs have come back and the 

numbers show that American manufacturing is growing more slowly than 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 

have 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 from an EPA that we believe is out of control and a healthcare mandate that appears to make the business 

healthcare 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 policies. 

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 

‘‘muda’’ or waste. Then you look for a way to eliminate the muda. 

Our modest proposal is that the government learns from manufacturing and incorporates lean thinking into the regulatory process. Many of the proposals that are being offered by this Subcommittee, including more detailed statements in the RFA process 

and requirements to 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 RFA, thus 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 detail examples of the damage to be 

done by runaway regulation at the agency level, including the 

EPA’s ozone proposals. One estimate is that the most stringent 

standard under consideration would result in the loss of 7.3 million 

57 

jobs by 2020 and one trillion per year in new regulatory costs, beginning 2020. 

Manufacturers hope that this 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 NAM’s members are family businesses, like our own. 

We want to invest to grow. That’s why we exist. But when our government creates policies, 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 risks of investment and job creation and the NAM 

stands ready to assist you in this effort. 

Thank you, and I’ll look forward to any questions. 

[The prepared statement of Mr. Gimmel follows:] 

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Mr. COBLE. Mr. Sullivan? 

TESTIMONY OF THOMAS M. SULLIVAN, OF COUNSEL, 

NELSON MULLINS RILEY SCARBOROUGH, LLP 

Mr. SULLIVAN. Thank you, Mr. Chairman, Members of the Subcommittee. 

I’m pleased to present testimony in strong support of H.R. 527, 

the ‘‘Regulatory Flexibility Improvements Act of 2011.’’ 

I’d like to briefly summarize, so I ask that my full written statement be made part of the record. 

Mr. COBLE. Without objection. 

Mr. SULLIVAN. There are three basic reasons for the Regulatory 

Flexibility Act. One size fits all Federal mandates do not work 

when applied to small business; second, small business face higher 

costs per employee to comply with Federal 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 

to address regulatory challenges faced by small business. That’s 

why I support H.R. 527 and how it will improve the law’s effectiveness. 

Before I get into detail about the provisions in the bill that are 

particularly important, I want to point out why there’s an immediate need for these reforms. In the last 2 years, the Federal Government issued 132 economically-significant regulations. 

Rulemakings are not slowing down either. There are a 181 more 

new regulations underway now than there were last year, representing a 5-percent increase in activity. 

According to plans issued recently by regulatory agencies, there 

is a 20 percent increase in significant regulations currently under 

development. 

As far as H.R. 527 and its benefits on how it will improve the 

Regulatory Flexibility Act, currently, the law requires agencies to 

analyze the direct impact a rule will have on small entities. Unfortunately, limiting the analysis to direct impacts does not accurately 

portray how small entities are affected by a new Federal rule. 

For instance, when EPA’s greenhouse gas regulations impose a 

direct cost on electric utility, EPA should make public how its proposal will likely affect the cost of electricity for small businesses. 

I believe the rulemaking process is shortchanged by not including 

discussion about the obvious ripple effects of regulations on small 

business and H.R. 527 tries to correct this. 

All agencies should utilize small business advocacy review panels. When I was Chief Counsel for Advocacy, I did not think that 

the Regulatory Flexibility Act needed to be amended to force every 

agency to convene small business panels the way that EPA and 

OSHA do under the Small Business Regulatory Enforcement Fairness Act. I thought that agencies could do a good enough job soliciting input from small businesses on their own. Now, I realize some 

agencies will resist formally soliciting help from small entities prior 

to issuing proposed rules. 

Requiring the Consumer Financial Protection Bureau that was 

created out of the Dodd-Frank Financial Reform Law to have to 

use the small business panel process made sense. That’s why it 

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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 Fairness Act, 

should become the norm, not the exception. 

The Small Business Administration’s Office of Advocacy should 

clarify definitions in the Regulatory Flexibility Act. The disputes 

over whether an agency’s proposal will ‘‘impose a significant economic impact on a substantial number of small entities’’ have limited the effectiveness of the Regulatory Flexibility Act. 

H.R. 527 addresses this problem by giving the Office of Advocacy 

rulemaking authority. The rules promulgated by the Office of Advocacy will better define how agencies are to properly consider small 

business impacts and that will benefit the process in two ways. 

First, it will minimize confusion over whether agencies are properly considering small business impact, and, second, rulemaking 

authority by the Office of Advocacy will confirm the primacy by the 

Chief Counsel for Advocacy when courts ultimately render opinions 

on the Regulatory Flexibility Act. 

The periodic review of regulations under the Reg Flex Act should 

be improved. H.R. 527 will bolster the effectiveness of the look-back 

provision by broadening the number of rules agencies will review, 

requiring transparency of those reviews, and by better defining the 

process through the Office of Advocacy’s rulemaking. 

There are additional reforms that Congress can consider to benefit small business. I’m happy to work with this Committee to explore additional legislative efforts beyond amending the Reg Flex 

Act that will help create an economic climate so small businesses 

have an easier time growing and creating jobs. 

Thank you. 

[The prepared statement of Mr. Sullivan follows:] 

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Mr. COBLE. Thank you, Mr. Sullivan. 

Mr. Shull, I was in law school long, long ago with a chap whose 

surname was Shull. Do you have Carolina kin? 

Mr. SHULL. That’s not—you know, I don’t know. There’s a large 

network of Shulls out there whose connection with our Shulls we 

don’t know yet. 


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Mr. COBLE. Well, he was a good fellow. He had high honors in 

law school. 

You’re recognized, Mr. Shull. 

TESTIMONY OF J. ROBERT SHULL, PROGRAM OFFICER, 

WORKER’S RIGHTS, PUBLIC WELFARE FOUNDATION 

Mr. SHULL. Well, then I have quite an act to live up to. 

I want to thank you for the opportunity to testify. These are very 

important issues for small business owners, for their families, for 

their communities, for their customers, for their workers, for really 

all of us. 

I want to start with the proposition that agencies don’t regulate 

for the sake of regulating. They regulate because they have been 

charged by Congress with the task of getting things done to protect 

the public and to protect the public’s health, its safety, the environment, the air we breathe, the water we drink, the food we eat, the 

products we buy, the traffic conditions in which we all drive, the 

jobs that we go to. These are important tasks, and there are new 

regulations in the works. There will always be new regulations in 

the works because the world is changing—and as the world 

changes, we discover that there are unmet needs for public protection. 

I’ll give you an example. In the world of auto safety, thanks to 

important regulations, like the mandates for seatbelts, mandates 

for airbags, mandates for side impact protection, even as simple a 

rule as the fact that the steering column collapses now whereas it 

used to be a solid piece of metal that would impale the driver in 

some crashes: Now, all of that means that people are coming away 

surviving crashes that just years ago they wouldn’t have been able 

to survive. But we’re increasingly discovering because people’s lives 

are being saved, that there are still new needs to protect vehicle 

occupants in crashes. For example, because they are now surviving 

a larger number of crashes, we’re increasingly discovering that 

they’re coming away with injuries to their lower extremities, to 

their legs and their feet, which opens the door to the fact that there 

may not be sufficient protection at the bottom of the car, the tire 

wheel well, and intrusion into that part of the survival zone of the 

vehicle, and so the National Highway Traffic Safety Administration 

should be looking at that and should be developing new regulations 

in that regard. 

Automakers have increasingly computerized motor vehicles. 

They’re becoming more and more like the computers on wheels. A 

new research report found that some of these computer systems 

which control, in some cases, really critical functions of an automobile, like the brakes, can be hacked by folks outside of the car 

and so it really behooves NHTSA to start looking into whether or 

not the performance of these computerized components is adequately protecting vehicle occupants. 

So the fact that there are new regulations on the book doesn’t 

necessarily mean that we have runaway agencies. It just means 

that we have agencies that are doing what they’re supposed to do, 

assessing the public’s unmet needs and assessing what needs to be 

done to protect the public. 

77 

I also want to start with the proposition that small businesses, 

I think we all agree, are vital. Small businesses also are owned by 

small business owners who have families, who live in communities, 

who have employees, who have coworkers and neighbors, who 

themselves are breathing this air, drinking the water, eating the 

food, buying products, getting out on the road and going to work 

every day. They receive the benefits of regulation, not just shoulder 

the burden of its costs. 

And we hear a lot about costs today, but one of the assumptions 

that seems to be here in the RFIA is that analysis and review and 

all the new layers of process that would be mandated by this bill 

are somehow costless. But the fact is all of this is going to require 

money or agency time and diversion of agency resources away from 

the task of assessing the public’s unmet needs and toward the task 

of reviewing in many cases protections that we know beyond a 

shadow of a doubt are incredibly important, like the removal of 

lead in gasoline. You can measure the value of that in our children’s IQ points. 

I am concerned that this bill would paralyze the regulatory agencies we need to protect the public and keep them from getting 

things done to protect the public. 

I’ll wrap up with the suggestion that we do want our businesses 

to compete with China but we don’t want this Nation to become 

China with the dirty air and the unsafe workplaces they have. 

[The prepared statement of Mr. Shull follows:] 

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Mr. COBLE. Thank you, Mr. Shull. 

Ms. Harned, we’ll be glad to hear from you. 

TESTIMONY OF KAREN R. HARNED, ESQ., EXECUTIVE DIRECTOR, NATIONAL FEDERATION OF INDEPENDENT BUSINESS, 

SMALL BUSINESS LEGAL CENTER 

Ms. HARNED. Thank you. Good afternoon, Chairman Coble and 

Ranking Member Cohen. 


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NFIB, the Nation’s largest small business advocacy organization, 

appreciates the opportunity to testify on the burdens and effects of 

regulation on small business and how H.R. 527 would address 

many of those concerns. 

Overzealous 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 sluggish. According to a recent 

study, regulation costs the American economy 1.75 trillion every 

year and, more concerning, small businesses face an annual regulatory cost of $10,585 per employee which is 36 percent more than 

the regulatory cost facing businesses with more than 500 employees. 

Recently, the Administration did acknowledge that excessive and 

duplicative regulation has damaging effects on the American economy. NFIB believes that it has been a long time coming for small 

business owners to hear the Administration emphasize the harmful 

effects of over-regulation 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, NFIB believes that Congress must take actions 

to level the playing field. Congress should expand the Small Business Regulatory Enforcement and Fairness Act and its Small Business Advocacy Review Panels to all agencies, including independent agencies. In so doing, all agencies would be in a better position to understand how small businesses fundamentally operate, 

how the regulatory burden disproportionately impacts them, and 

how each agency can develop simple and concise guidance materials. 

Moreover, Congress’s advocacy should ensure that agencies are 

following the spirit of SBREFA. There are instances where EPA 

and OSHA have declined to conduct a SBAR panel for significant 

rule and/or rule that would greatly benefit from small business 

input. 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 the more burdensome 

versus less burdensome option and explain how their rule may act 

as a barrier to entry for a new business. 

Section 610 reviews should be strengthened. H.R. 527 would require agencies to amend or rescind the rules where the 610 reviews 

show that the agency could achieve its regulatory goal at a lower 

cost to the economy. 

NFIB also believes that Congress should explore requiring agencies to provide updated information on how each agency mitigates 

penalties and fines on small businesses as currently required by 

SBREFA but also require that such a report be completed on an 

annual basis. 

Regulatory agencies often proclaim indirect benefits for regulatory proposals but decline to analyze the make publicly available 

the indirect costs to consumers, such as higher energy costs, jobs 

lost, and higher prices. Agencies should be required to make public 

a reasonable estimate of a rule’s indirect impact. 

Agencies should be held accountable when they fail to give proper consideration to the comments of the Office of Advocacy and afVerDate Aug 31 2005 12:37 May 02, 2011 Jkt 000000 PO 00000 Frm 00089 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\021011\64406.000 HJUD1 PsN: 64406
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fordable mechanisms should be considered for resolving disputes 

regarding economic costs of a rule between the agency and advocacy. 

NFIB believes that the Office of Advocacy needs to be strengthened. The office should have the ability to issue rules governing 

how agencies should comply with Regulatory Flexibility requirements. Because of improvements inherent within H.R. 527, NFIB 

is hopeful that review of agency actions will be strengthened and 

the small business voice will be more substantively considered 

throughout the regulatory process. 

NFIB is 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 counsel and HR people to comply with 

the complicated and vast regulatory burdens that they face. 

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 in paperwork will happen. If no 

harm is committed as a result of the error, agencies should waive 

penalties for first-time offenses and help owners to understand the 

mistakes they make. With high rates of unemployment continuing, 

Congress needs to take steps to address the growing regulatory 

burdens on small business. The proposed reg reforms in H.R. 527 

are a good first step. 

Thank you. 

[The prepared statement of Ms. Harned follows:] 

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Mr. COBLE. Thank you, Ms. Harned. Thanks to all of you. 

As I said at the outset, we try to apply the 5-minute rule to us, 

as well. So if you all could keep your responses terse, we would appreciate that. 


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And at the outset, I want to apologize for my raspy voice. I am 

coming down with my annual midwinter cold, so I know this 

doesn’t sound good. So you all bear with me. 

Mr. Sullivan, Elizabeth Warren, the Consumer Advocate and 

head of the new Consumer Financial Protection Bureau, has embraced and, I’ve been told, has warmly embraced the new obligations to comply with Regulatory Flexibility requirements. 

Now most oftentimes regulatory discussions involve to the right 

of center or to the left of center, depending upon the position of the 

advocate, and I would assume that it is not believed that Ms. Warren would probably to the left of center. 

If she can embrace these proposals, it seems to me all agencies 

should be comfortable doing likewise. What do you say to that, Mr. 

Sullivan? 

Mr. SULLIVAN. Mr. Chairman, I agree with you. Elizabeth Warren, 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 Federal 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 Warren sets up the Consumer Financial Protection Bureau, we can all work to get her in front of other 

regulatory agencies to preach that type of gospel. 

Mr. COBLE. I applaud you, sir. And, folks, I don’t want to in any 

way imply that I’m advocating compromising safety. I don’t want 

that to come out of this hearing because I don’t want to do that. 

Mr. Gimmel, what challenges do Federal regulations present to 

your company today as it attempts to create additional jobs in this 

economy? 

Mr. GIMMEL. Well, the first one is simply understanding what 

they are. We’re a small company. We’re a machine shop, and there 

are literally tens and tens and tens of thousands of pages of regulations that we have to not just comply with but understand and I 

just have to tell you that the burden of that is really overwhelming 

for any single business to effectively do. 

We have had—in our case, we have people, two people full time 

that are dedicated to compliance. Much of this is dealing with compliance that is fruitful. Regulations are not something that we are 

speaking against here, Mr. Chairman. We believe regulation is necessary. We believe protection of the worker, protection of the environment, fair taxation, et cetera, are certainly necessary. 

What we’re talking about here is a process that we feel has resulted in redundant and inefficient network of sometimes overlapping regulations and there seems to be a lot of support for that regardless of what your political orientation is. We have the same objective. 

Mr. COBLE. Thank you, sir. Mr. Shull, you suggest that H.R. 527 

would wrap Federal programs up in costly, time-consuming, and 

95 

unnecessary red tape, putting consumers, and working families at 

risk of harm. 

If the regulation, for example, discourages small business, would 

not the working family that lost his job be in a box? 

Mr. SHULL. Well, you know, I think that that would be a concern 

if that were the case, but there’s not really any proof that regulation harms competitiveness of industry, harms jobs, harms trade 

flows. There’s a document I’d be happy to submit for the record 

that OMB Watch produced in the mid 2000’s called Regulation and 

Competitiveness as well as an article by an economist, Frank Ackerman, called The Unbearable Lightness of Regulatory Costs. 

Both of these are documents that exhaustively go through the 

studies that have been conducted and found that there really is no 

evidence that regulations have harmed the U.S. competitiveness or 

have harmed jobs. 

Now, I mean, when it comes to, say, jobs, OSHA, for example, 

is not in the business of destroying jobs. It’s in the business of 

making sure that jobs don’t destroy workers, and those are really 

critical concerns. 

Mr. COBLE. The red light has illuminated, so I will yield to the 

gentleman from Tennessee, Mr. Cohen. 

Mr. COHEN. Thank you, Mr. Coble. 

First of all, Mr. Gimmel, I know you come here with a heavy 

heart for I saw the overtime and it wasn’t pretty. You are a Louisville fan, as well, I presume. 

Mr. GIMMEL. Well, I’d prefer to think that we are not adversaries, Congressman Cohen, except when it comes to maybe basketball and football. 

Mr. COHEN. We’re not. I like Louisville and I was cheering for 

them last night and they had a terrible overtime. 

Mr. GIMMEL. I am a Louisville fan, so don’t put me in that category with those guys down the road there. 

Mr. COHEN. Okay. You mentioned in your—— 

Mr. COBLE. If Mr. Cohen would yield? I missed it. What was the 

game in question? 

Mr. COHEN. Louisville and Notre Dame. 

Mr. COBLE. Well, Carolina and Duke were playing yesterday, so 

I missed Louisville. 

Mr. COHEN. Should I ask who won? 

Mr. COBLE. I don’t want you to do that. 

Mr. COHEN. I won’t ask who won. 

Mr. GIMMEL. Memphis won, though, I know that. 

Mr. COHEN. Let me ask you this, Mr. Gimmel. The EPA, you 

mentioned in your opening remarks, what parts of the EPA would 

you keep and what parts of the EPA would you not want to keep? 

Mr. GIMMEL. As it relates to manufacturing, what we see is an 

overlapping series of, for instance, air quality rules, Federal versus 

local in our case. In Jefferson County in Louisville, we have two 

different sets of qualifications that we have to comply with, both 

of which are very, very complex. Part of that, of course, is a local 

problem. 

In the case of EPA, 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 in 1993. I believe he called it 

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the National Performance Review, and it wound up eliminating, as 

it sought out redundancy, as it sought out duplicative and no 

longer necessary regulation or inefficient application of regulation, 

we were able to eliminate some 16,000 pages of regulations that 

they determined, the Clinton Administration determined was unnecessary at the 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 any 

more. Our competition is global right now and we’re competing 

against people that operate on a different set of rules and in some 

cases more efficient regulatory processes than we have. 

Mr. COHEN. I noted in your remarks, you did comment that we 

need to have clean air and clean water, et cetera, and I appreciate 

that understanding. 

Mr. GIMMEL. And as you point out, we’re beneficiaries of that, 

sir. 

Mr. COHEN. Right. All of us are. The Chinese, of course, as Mr. 

Shull pointed out, don’t have this government regulation in this 

area. They have it in other areas and so they have the worst water 

and air quality possible but the highest productivity and I don’t 

know about the Japanese. You mentioned them. I think they’re— 

Mr. Shull, you might know and somebody else here might know, 

but I don’t think the Japanese have got the best air quality. I think 

they’ve got some problems there with that. 

Mr. Shull, let me ask you this. You talked about the—we talked 

about the indirect effects that are in the proposed rule. Would you 

elaborate on your concerns and tell us if you think that anything 

dealing with indirect effects could result in industry going to court 

to challenge decisions there? 

Mr. SHULL. Sure. So the bill would amend the Regulatory Flexibility Act requirements of these analyses for the effects on small 

entities by requiring agencies not just to look at the impacts on the 

regulated small entities that would be covered by a regulation but 

also any small entity outside of the world of regulated small entities for whom there would be reasonably foreseeable economic consequences, adverse or beneficial. 

It’s hard to know where that stops. So, for example, if NHTSA 

really gets on the ball and starts regulating to improve, say, protection of vehicle occupants’ lower extremities, NHTSA would probably have to, under this legislation, look at the consequences not 

just for the automakers, not just for the suppliers who make the 

parts that go into motor vehicles but also the car dealers. 

Now under recent revisions to the SBA size standards, most new 

car dealers in this country, somewhere between 83 to 93 percent 

of them, would be counted as small businesses and that includes 

even a car dealer who makes up to, say, a $120 million in receipts. 

So these are actually not terribly small, not terribly inexpensive— 

these are not economically-struggling entities. 

Then when you think about—if you’re thinking about the impacts on, say, those auto dealers, they conceivably hire payroll 

services to handle their payroll. They conceivably hire janitorial 

97 

services to clean their facilities. They conceivably—they do buy ads 

from local TV and radio and newspapers. 

Now, all of those small entities—— 

Mr. COBLE. Mr. Shull, if you could wrap up pretty—— 

Mr. SHULL. Oh, of course. It’s turtles all the way down. There’s 

really no conceivable limit to what agencies would be forced to assess and the point at which wealthy corporate special interests 

could sue them for having failed to consider. 

Mr. COHEN. Thank you, sir, and I will—even though the first 

minute of my time was dedicated to Sports Center, I will yield back 

the remainder of my time. 

Mr. COBLE. The Chair recognizes the distinguished gentleman 

from South Carolina, Mr. Gowdy, for 5 minutes. 

Mr. GOWDY. Thank you, Mr. Chairman, and thank you for conducting these hearings. 

Mr. Sullivan, I’m going to put your legal acumen on display. 

Rules and regulations, the violations thereof, can they be evidence 

of negligence in a civil suit? 

Mr. SULLIVAN. Could you ask the question one more time? 

Mr. GOWDY. Violations of rules and regulations, can they be used 

as evidence of negligence if Mr. Gimmel is sued in a civil suit? 

Mr. SULLIVAN. I don’t know. 

Mr. GOWDY. Do you know whether or not any of the rules and 

regulations have criminal provisions where Mr. Gimmel could in 

theory suffer criminal consequences because of a rule or regulation 

that is not promulgated by Congress but is by someone who’s 

unelected, yet he stands to face criminal sanctions if he violates it? 

Mr. SULLIVAN. There are some strict liability provisions within 

statute that are then implemented through rulemakings that do 

convey strict liability and criminal sanctions, yes. 

Mr. GOWDY. Mr. Shull made a comment, and I tried to write it 

down, that there is no evidence, which is a phrase that does strike 

the attention of a former prosecutor, no evidence that the regulatory schemes have impacted productivity or trade in this country, 

and judging by your body language, you may have had a different 

view of that. Do you agree or disagree with his comment? 

Mr. SULLIVAN. Congressman Gowdy, I disagree with the comment. We’re living in a global competitive environment right now 

and we’re seeing different countries trying to both protect the air 

and the land and the safety of their workers while minimizing further burden on manufacturers and small businesses, and those 

countries that really do try to strike that balance correctly end up 

with more employment and more growth and I fear that the overwhelming amount of regulations 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 

afford to simply look for evidence on a piece of paper that says, oh, 

we went too far and we’re losing businesses. We have to act now 

to make sure that that doesn’t happen. 

Mr. GOWDY. Mr. Gimmel, you made the comment that the EPA 

was out of control. That was one agency that you cited with specificity that is out of control. Can you give me a specific example of 

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ception, because you embody small business, the perception that 

you have as a small businessman, is it one of we are to help you 

or we are here to get you? 

Mr. GIMMEL. Well, first of all, Congressman, with regard to the 

EPA, the ozone regulatory functions the EPA seems to be taking 

on, we believe, are overstepping. There’s no question about that. 

The second—what was the second part of your question? 

Mr. GOWDY. Whether or not there’s a perception among small 

business owners that the regulatory entities in this country are 

there to provide help or there to lay in wait to catch you doing 

something wrong? 

Mr. GIMMEL. That’s more than a perception, sir. I think that’s a 

reality, particularly when it comes to the new attitude at OSHA. 

Workplace injuries have been at record lows, historic lows for the 

last several years in this country because of, I think largely, a cooperative relationship between businesses and the regulatory agencies. 

We could call them in, ask them for advice, ask them to take a 

look at part of our plant that we’re reconfiguring or that we may 

have questions about and get their input without fear of consequences. Now, the attitude at OSHA is we’re going to get you and 

you invite us in and we find something, you’re going to get a big 

fine. So it’s more of an adversarial relationship now as opposed to 

a cooperative relationship. 

Mr. GOWDY. Last question. Mr. Shull, the President himself has 

acknowledged that there are regulations that have an unintentionally deleterious impact on job creation in industry. Got about 45 

seconds left. 

Can you list me four or five regulations that you would concede 

have had unintended pernicious deleterious consequences on industry? 

Mr. SHULL. You know, I’ve been waiting for the President to offer 

some specifics. 

Mr. GOWDY. In lieu of his presence, would you give me some? 

Would you give me just a handful of regulations that you concede, 

out of the myriad of ones out there, you concede have had an 

unintendedly-pernicious impact on job creation? 

Mr. SHULL. Actually, yes. The fuel economy standards are set too 

low and have stayed too low for too long, until just recently, and 

that meant that the U.S. automakers were not prepared to compete 

when gas prices spiked and they had these heavy gas-guzzling 

SUVs—— 

Mr. COBLE. Mr. Shull, I’m not buggy-whipping you but wrap it 

up, if you will, because the red light’s on. 

Mr. SHULL. All right. Well, then that’s one that I would list, in 

addition to the failure of the automakers to make SUVs that perform well in crashes. They really suffered significantly when the 

Ford Firestone debacle came to light. 

Mr. GOWDY. Thank you, Mr. Chairman. 

Mr. COBLE. The gentleman’s time has expired. The distinguished 

gentleman from Illinois, Mr. Quigley. 

Mr. QUIGLEY. Thank you, Mr. Chairman, and again congratulations on your new position. 

Mr. COBLE. Thank you. 

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Mr. QUIGLEY. We appreciate your cordiality and accommodations. 

Mr. Conyers has talked about how quickly this bill has come to 

a hearing. What’s interesting, this is, I think, my fifth meeting already between my two Committees on the issue of regulations. If 

we could squeeze one more in this week, they tell me I get a set 

of steak knives. 

But here’s what’s interesting, folks. We’re basically saying the 

same things, as the Chairman said, just on either side of this middle ground line. We all recognize the need for regulation, we just 

want it to do a better job. I think that’s what the President talked 

about and like 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, right? 

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. 

I recognize that for some, this is even more offensive because 

non-elected officials are actually part of the enforcement mechanisms, but we recognize that under Democratic and Republican Administrations, our laws and our regulations have always had criminal penalties to them out of absolute necessity, enforced by nonelected officials. 

If you take it to its extreme, Assistant State’s Attorneys aren’t 

elected. Their bosses are. Well, the same is true with the Executive 

Branch, FBI 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—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 sort of the same point and we 

have to do better. We have to avoid duplication and 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 this, what I’m trying to get from both sides is why one set 

of figures are better than the other and why we only have a few 

minutes today, let me just ask the first because it’s such a prominent number that’s being thrown out there. 

Mr. Shull, the Crain study threw out the biggest number so far, 

so it wins, but can you tell me, beyond what you said in your written documents, what you see the concerns are with that report? 

Mr. SHULL. So the concerns, and these are concerns, by the way, 

which have been identified by a range of folks, the Center for Progressive Reform on the one hand and President Bush’s former Administrator of the Office of Information and Regulatory Affairs on 

the other hand, folks from a variety of viewpoints have recognized 

that this study and its previous iterations are deeply flawed. And 

it comes out with this number that is so easy to cite and memorize 

and use and repeat and understandably because it’s so large, folks 

are going to quote it and be alarmed, but it seems to be the result 

of a garbage-in/garbage-out process. 

100 

I mean, the Crain and Crain or Crain and Hopkins or Hopkins 

studies have repeatedly used really shaky methodologies. For example, the key formula using the Regulatory Quality Index from 

the World Bank is based on public opinion surveys. The costs of environmental regulations depend in large part on a 20-year-old 

study by Hahn and Hird which itself used 30-year-old studies produced by conservative economists to produce its numbers. 

There’s a really strange study by Joseph Johnson on the costs of 

occupational safety and health regulations which nobody can figure 

out quite why he did what he did and how he got to the numbers 

he got. It’s a very opaque document that actually takes some old 

numbers and then multiplies them by 5.5. 

You know, at the core of this is a presumption that regulatory 

costs are always the same year after year after year, even after 

businesses learn how to adapt to the new climate and innovate and 

discover new ways of doing business that are actually far cheaper 

than they realize going in. 

Mr. QUIGLEY. Because we’re running out of time, we do recognize 

there’s a cost and we try to keep those to a minimum. What I’m 

trying to get both sides to do is to work with the same numbers. 

The hyperbole exists on both sides of the world here. So if anyone 

on these panels, Mr. Chairman, have the opportunity to submit further evidence arguing, footnoting the best research as possible toward their ends of what numbers we really should be dealing with, 

it’s useless if we’re not dealing with real numbers in the real world. 

Whatever they are, they’re important. 

So I’d just respect that we could work in the same ballpark and 

same universe of reality. 

Mr. COBLE. Thank the gentleman from Illinois. Thank you. I 

didn’t have to cut you off that time, Mr. Shull. 

The distinguished gentleman from New York, Mr. Reed, is recognized for 5 minutes. 

Mr. REED. Well, thank you very much, Mr. Chairman. 

Mr. Shull, I’m trying to understand your testimony, but what 

strikes me is, you know, I listened to my colleagues on the other 

side. I listened to and reading the testimony from our side. I listened to the President acknowledging. Everyone seems to agree 

regulations are causing a negative impact on small business America, yet when I read your testimony, what I’m coming away with 

is you talk about there being a better way than H.R. 527 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 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 keeps moving, regulate it, 

and then if it stops, subsidize it? I mean, do you agree that the regulation problem is causing the negative impact on small business? 

Mr. SHULL. Well, I suppose I’m afraid of the other Ronald 

Reagan problem, which is delaying regulations to the point that 

children are dying or people are at risk. I mean, for example, the 

Reagan White House delayed a simple warning label on aspirin 

products to notify parents not to give this to young children when 

101 

they have flu or flu-like symptoms because of the risk of Reyes 

Syndrome. 

The Reagan White House delayed that standard and in the 

course of that thousands of children were afflicted by Reyes Syndrome and suffered irreversible brain damage, liver damage, and 

some of them died. 

You know, I suppose I’m also afraid of the other Reagan problem 

which is, you know, the cutting things to the bone and running 

major deficits and, you know, leaving the public at risk—— 

Mr. REED. Mr. Shull, I’m not talking about Reagan’s problem. 

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 regulation, let’s give them a tax subsidy in order 

to allow them to comply. I guess I just don’t see how more regulation is going to correct this situation. 

Mr. SHULL. Well, first of all, the subsidize concept was one that 

was jointly authored by Senator Snowe and Senator Kerry for legislation that would actually not subsidy small businesses but the 

small business development centers, I believe that’s what they’re 

called, to provide technical assistance to small businesses so that 

they can actually comply with the law. 

I mean, if the challenge is that they don’t know what the laws 

are and they need help learning what they are so that they comply, 

it seems to me that the solution’s not to get rid of the law that 

there’s to protect people, including the small business owners and 

their families, but the solution is to help them learn more about 

it. 

Mr. REED. That’s what we hear from the government. We’re 

going to take care of you. 

Mr. SHULL. Or, I mean, if they would rather hire, you know, private industrial hygienists or, you know, other folks to help them 

comply, I suppose that’s fine. It’s probably cheaper if they—— 

Mr. REED. The taxpayers have to foot that bill. I mean, I guess 

I’m a small business guy. I come from a small business and I’ve 

just dealt with these regulations and I can just tell you firsthand 

that, you know, there’s a real cost and that destroys businesses 

that otherwise could use that money to invest, to capitalize their 

markets, to move on to the next innovation of tomorrow, and I 

guess, Mr. Gimmel, I mean, you’re a small businessman. 

What’s your response to his proposal to—where do you see that 

going? 

Mr. GIMMEL. I would ask him if he’s ever run a business that 

had to comply with any of the array of regulations. I’d be surprised 

if he would make a statement like that in having a background of 

actually running a business. 

Mr. REED. Mr. Shull, have you ever ran a business? 

Mr. SHULL. My time has been spent in advocacy, working with 

families who’ve suffered incredible losses because of the lack of regulation. 

Mr. REED. And I understand that. I mean, we live in a real world 

and I understand that many people come to this table, come to this 

hall for 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 think I echo my colleague over on the 

102 

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 

regulations, we’re losing sight, in my opinion, as to what we’re trying to do and all it becomes is, you know, guaranteeing a way to— 

more regulations so that if it’s good for one situation, it must be 

good for all and that’s my concern because, you know, as a small 

business guy myself, this gentleman here, people are suffering. 

Those are real jobs and those are real Americans. 

I see that my time has expired. I’ll yield back. 

Mr. COBLE. I thank the gentleman from New York. 

I just confirmed with Mr. Cohen, Mr. Ross will be the final witness, final examiner, and if no one else shows, in the interest of 

your schedule, we will adjourn after we hear from Mr. Ross. 

Mr. Ross, the distinguished gentleman from Florida. 

Mr. ROSS. Thank you, Mr. Chairman. 

Mr. Sullivan, the question for you. When we talk about regulation for small business, I’m reminded of the Americans With Disabilities Act, the ADA, which has had some unintended consequences, but nevertheless which put a requirement on business 

for accessibility for those with disabilities, but in that ADA Act, it 

had what was known as a reasonable accommodation standard. 

For example, if I was CEO of a Fortune 500 company, a reasonable accommodation for an employee with one type of disability 

may be something that I can afford to do with a modification of the 

workplace or 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 not be made. 

And so my question to you is, under the RFA, is there any such 

standard of a reasonable accommodation that would fit the regulatory environment to allow small businesses to meet the regulatory burden without having to have a broad brush approach for 

the larger ones? 

Mr. SULLIVAN. Congressman, the situation that you laid out is 

exactly what H.R. 527 is trying to address because what we found 

is if 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 the proposal will be, disclose 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. 

Mr. ROSS. Right. And it is about a balance, isn’t it? 

Mr. SULLIVAN. Yes, it is about that process and that’s really what 

this bill does, is it forces that process. 

Mr. ROSS. Thank you. Mr. Shull, when you talked about, in your 

opening statement, about how, if it were not for the regulatory environment, the auto industry thought it would not have had seatbelts or collapsible steering wheels, and you seem to indicate to me 

that if there not had been a regulatory environment, that some of 

the safeguards that consumers now enjoy would not be in place, 

but yet I have to look back to even the founding of our country 

when there was no regulatory environment and when Benjamin 

103 

Franklin was one of the investors of the first fire insurance company. 

In 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 manufacturer specifications, otherwise 

they wouldn’t 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 the demand, and if there was no demand out there for my 

product, then I probably shouldn’t go into business, is that correct? 

Mr. SHULL. Sure. 

Mr. ROSS. 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, would that be correct? 

Mr. SHULL. Or it might be indicative of the fact that you haven’t 

found the right buyers. 

Mr. ROSS. Okay. But would you go into business if you didn’t 

have—I mean, if you could not make a profit at it? 

Mr. SHULL. Well, I’ve spent all of my time in the nonprofit sector, 

so it’s not a fair question to ask me. I’m sorry. 

Mr. ROSS. Well, then, the question to ask you would be if I were 

a business that—— 

Mr. SHULL. Sure. 

Mr. ROSS [continuing]. 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? 

Mr. SHULL. Well, it might be a sign that you were under-capitalized to begin with or that—— 

Mr. ROSS. If I was under-capitalized, would that be because I 

could not afford to comply with the regulatory environment, despite 

the demands of the consumers for my product? 

Mr. SHULL. Well, you know, 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 in the business. 

Mr. ROSS. So, in other words, irrespective of the market forces, 

the regulatory forces would be a good judge of why we should even 

be in business in the first place? 

Mr. SHULL. You know, I guess I have to take issue with the concept that markets are conceptually and historically prior to government. I mean, they exist—— 

Mr. ROSS. Not a bad thing. 

Mr. SHULL. Governments create markets and create the vehicles, 

the infrastructure that allow markets to flourish, from our roads to 

the fact of the legal status of corporations. 

Mr. ROSS. One—I see my time’s up. I must yield back. 

Mr. COBLE. Thank the gentleman. 

104 

Mr. ROSS. Everything’s fine, and I thank you, Mr. Chairman. I 

want to just thank the panel. It was excellent and while it wasn’t 

reality TV, it was good. 

Mr. COBLE. I want to thank the panel, as well. Mr. Ross, I’ll say 

to you, if you had another question, we will keep this open. Members will have 5 legislative days to submit to the Chair additional 

written questions for the witnesses which we will forward and ask 

the witnesses to respond as promptly as they can so that their answers may be part of the record. 

Without objection, all Members will have 5 legislative days to 

submit any additional materials for inclusion in the record. 

With that again, we thank you all. As Mr. Cohen said, it’s been 

a good hearing. Thank you for your contributions, and we’re letting 

you all leave early, as well. 

The Subcommittee stands adjourned. 

[Whereupon, at 2:50 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Post-Hearing Questions from Karen R. Harned, Esq., Executive Director, National Federation of Independent Business, Small Business Legal Center 

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