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REGULATORY IMPEDIMENTS TO JOB CREATION

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

FEBRUARY 10, 2011

Serial No. 112–16

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

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C O N T E N T S

Page

Hearing held on February 10, 2011 ....................................................................... 1

Statement of:

Gattuso, James, senior research fellow in regulatory policy, the Heritage

Foundation; Sidney Shapiro, Center for Progressive Reform; Karen

Kerrigan, president and CEO, Small Business and Entrepreneurship

Council; and Jerry Ellig, senior research fellow, Mercatus Center,

George Mason University ............................................................................. 161

Ellig, Jerry ................................................................................................. 195

Gattuso, James .......................................................................................... 161

Kerrigan, Karen ........................................................................................ 184

Shapiro, Sidney ......................................................................................... 169

Timmons, Jay, CEO, National Association of Manufacturers; Tom Nassif,

president and CEO, Western Growers Association; Harry Alford, CEO,

Black Chamber of Commerce; Michael J. Fredrich, president, MCM

Composites, LLC; and Jack Buschur, Buschur Electric ............................ 9

Alford, Harry ............................................................................................. 36

Buschur, Jack ............................................................................................ 50

Fredrich, Michael J. .................................................................................. 42

Nassif, Tom ................................................................................................ 26

Timmons, Jay ............................................................................................ 9

Letters, statements, etc., submitted for the record by:

Alford, Harry, CEO, Black Chamber of Commerce, prepared statement

of ..................................................................................................................... 38

Amash, Hon. Justin, a Representative in Congress from the State of

Michigan, prepared statement of ................................................................. 284

Braley, Hon. Bruce L., a Representative in Congress from the State

of Iowa, prepared statement of .................................................................... 290

Burton, Hon. Dan, a Representative in Congress from the State of Indiana, prepared statement of .......................................................................... 281

Buschur, Jack, Buschur Electric, prepared statement of .............................. 52

Connolly, Hon. Gerald E., a Representative in Congress from the State

of Virginia, prepared statement of .............................................................. 288

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland:

Letter dated February 10, 2011 ...................................................................... 4

Letter from Mr. Stewart ........................................................................... 59

Prepared statement of ............................................................................... 7

Various prepared statements ................................................................... 264

Ellig, Jerry, senior research fellow, Mercatus Center, George Mason University, prepared statement of ..................................................................... 198

Fredrich, Michael J., president, MCM Composites, LLC, prepared statement of ........................................................................................................... 44

Gattuso, James, senior research fellow in regulatory policy, the Heritage

Foundation, prepared statement of ............................................................. 163

Issa, Hon. Darrell E., a Representative in Congress from the State of

California, information concerning regulations by agency ........................ 63

Kerrigan, Karen, president and CEO, Small Business and Entrepreneurship Council, prepared statement of ........................................................... 186

Kucinich, Hon. Dennis J., a Representative in Congress from the State

of Ohio, prepared statement of .................................................................... 287

Maloney, Hon. Carolyn B., a Representative in Congress from the State

of New York, letter dated February 8, 2011 ............................................... 94

Nassif, Tom, president and CEO, Western Growers Association, prepared

statement of ................................................................................................... 28

Page

IV

Letters, statements, etc., submitted for the record by—Continued

Shapiro, Sidney, Center for Progressive Reform, prepared statement of .... 171

Spierer, Hon. Jackie, a Representative in Congress from the State of

California:

Article dated December 8, 2010 ............................................................... 145

February 2011 Ceres report ..................................................................... 112

Timmons, Jay, CEO, National Association of Manufacturers, prepared

statement of ................................................................................................... 12

Towns, Hon. Edolphus, a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 285

Turner, Hon. Michael R., a Representative in Congress from the State

of Ohio, prepared statement of .................................................................... 282

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REGULATORY IMPEDIMENTS TO JOB

CREATION

THURSDAY, FEBRUARY 10, 2011

HOUSE OF REPRESENTATIVES, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The committee met, pursuant to notice, at 9:50 a.m., in room

2167, Rayburn House Office Building, Hon. Darrell E. Issa (chairman of the committee) presiding.

Present: Representatives Issa, Burton, Mica, Turner, McHenry,

Jordan, Mack, Walberg, Lankford, Amash, Buerkle, Gosar, Labrador, Meehan, DesJarlais, Gowdy, Ross, Guinta, Farenthold,

Kelly, Cummings, Towns, Maloney, Norton, Kucinich, Tierney,

Clay, Lynch, Connolly, Quigley, Welch, Yarmuth, and Speier.

Staff present: Ali Ahmad, deputy press secretary; Kurt Bardella,

deputy communications director and spokesman; Brien A. Beattie,

Tyler Grimm, Ryan M. Hambleton, and Kristin L. Nelson, professional staff members; Michael R. Bebeau and Gwen D. Luzansky,

assistant clerks; Robert Borden, general counsel; Molly Boyl, parliamentarian; Lawrence J. Brady, staff director; Joseph A.

Brazauskas, Hudson T. Hollister, Sery E. Kim, and Jessica L.

Laux, counsels; Sharon Casey, senior assistant clerk; Katelyn E.

Christ, research analyst; Benjamin Stroud Cole, policy advisor and

investigative analyst; Drew Colliatie and Kate Dunbar, staff assistants; John Cuaderes, deputy staff director; Adam P. Fromm, director of Member liaison and floor operations; Linda Good, chief clerk;

Peter Haller, senior counsel; Frederick Hill, director of communications; Christopher Hixon, deputy chief counsel, oversight; Seamus

Kraft, director of digital strategy and press secretary; Justin

LoFranco and Cheyenne Steel, press assistants; Mark D. Marin,

senior professional staff member; Kristina M. Moore, senior counsel; Laura L. Rush, deputy chief clerk; Krista Boyd and Brian

Quinn, minority counsels; Carla Hultberg, minority chief clerk; Lucinda Lessley, minority policy director; Dave Rapallo, minority staff

director; Suzanne Sachsman Grooms, minority chief counsel; Mark

Stephenson, minority senior policy advisor/legislative director;

Eddie Walker, minority technology director; and Alex Wolf, minority professional staff member.

Chairman ISSA. The committee will come to order.

I look forward to the hearing today and the witnesses fostering

a vigorous discussion. This hearing is intended to be a listening

session. We are not just saying we want to hear from you, we are

going to quickly get to you as quickly as possible. I want to be very

brief in my opening remarks.

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This is the, as most people know, the week of the hundredth anniversary of Ronald Reagan’s birth, so I think it is appropriate that

we remind us that regulatory impediments to job creation are not

a new phenomenon or a new challenge for America. To quote Ronald Reagan, ‘‘now, so there will be no misunderstanding, It is not

my intention to do away with government; it is, rather, to make it

work, work with us, not over us; to stand by our side, not ride on

our back. Government can, and must, provide opportunity, not

smother it; foster productivity, not stifle it.’’

There is nothing more important than putting today’s hearing in

the perspective that what was said more than 30 years ago by Ronald Reagan is true today, and we hope to find a way to have regulatory reform keep America safe, while at the same time giving

Americans opportunities to get competitive jobs here and in export

around the world.

With that, I yield to the ranking member for his opening comments.

Mr. CUMMINGS. Thank you very much, Mr. Chairman, and thank

you for this hearing. In my district there are portions of the district

where unemployment is probably somewhere around 20, 25 percent, so there is no one who is more concerned about the creation

of jobs than I am. And, as you know, I fully support a comprehensive, and I emphasize comprehensive, review of regulations to

make them effective and efficient.

Like every Memberm of Congress, we were elected to create jobs.

No doubt about it. But we also swore an oath to protect the health

and safety and welfare of the American people. In my opinion, an

effective regulatory review should include several basic elements: it

should examine both costs and benefits, develop conclusions based

on solid data, facts, statistics, and seek input from a wide variety

of sources.

I think President Obama took a good first step last month when

he issued an executive order requiring agencies to examine the

costs and benefits of regulations to the overall economy, to small

businesses, and to American workers and families. Unfortunately,

the approach adopted by the committee to date falls short of this

standard, and I believe we need to take three key steps to be most

effective and efficient.

First, we need to expand the scope of our inquiry to include the

benefits of regulation, as well as the costs. We cannot do a legitimate cost-benefit analysis by collecting information about the costs

alone. We also need to expand the groups we are seeking input

from beyond those who want the repeal of regulations.

For example, no letters were sent to the Council of Institutional

Investors, which supported financial protections in the Wall Street

reform bill, or to the American Businesses for Clean Energy, which

represents more than 60,000 small and large U.S. companies and

believes reducing pollution is a ‘‘wise investment for long-term economic growth.’’

Second, we need to base our conclusions on facts instead of rhetoric. The country lost 8 million jobs during this recession primarily

because the financial industry was inadequately regulated for decades, not because of over-regulation.

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Third, we need to separate genuine reform proposals from selfserving advocacy. Many corporations that submitted responses to

the committee had skyrocketing profits over the past 2 years. For

example, ConocoPhillips profits increased from $4.4 billion to $11.4

billion; Boeing profits increased from $1.3 billion to $3.3 billion;

American Express profits increased from $2.1 billion to $4 billion;

Chevron’s profits increased from $101⁄2 billion to $19 billion. That

is just over the last 2 years. Yet, a lot of the responses we received

had nothing to do with creating jobs.

Companies proposed repealing the following, they wanted to repeal these, Mr. Chairman: requiring CEOs to disclose their compensation; they wanted to repeal this, give shareholders greater

input on executive pay and golden parachutes; they wanted to repeal allowing the return of bonuses when corporate earnings are

inflated.

And this is one that you are interested in, Mr. Chairman. They

wanted to repeal this, encouraging whistleblowers to report abuses

to the SEC. And they wanted to do something else. They wanted

to repeal requiring all companies to disclose payments to foreign

governments.

The bottom line is this: we all, and I emphasize that, we all support a balanced review of regulations. But this committee won’t be

effective if its work is incomplete, highlights only costs, ignores the

benefits, and puts corporate interests above the health, safety, and

welfare of the American people.

To conclude, Mr. Chairman, I ask that we focus not just on regulations, but on broad bipartisan initiatives to promote economic

growth. On January 26th the president of the U.S. Chamber of

Commerce, Thomas Donahue, and the AFL–CIO head, Richard

Trumka, issued a rare joint statement. They applauded President

Obama’s proposal in the State of the Union to create jobs by investing in our Nation’s infrastructure.

I ask unanimous consent to place into the record a letter I sent

this morning requesting that our next hearing focus on this bipartisan proposal and asking that we invite the Chamber and the AFL–

CIO and the Transportation Secretary LaHood to testify before this

committee about creating jobs. By working together, we can help

create jobs while protecting the health, safety, and welfare of all

Americans.

And with that, Mr. Chairman, I yield back.

[The information referred to follows:]

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Chairman ISSA. And I ask unanimous consent. Any objections?

[No response.]

Chairman ISSA. Then your statement will be placed in the record.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

[The prepared statement of Hon. Elijah E. Cummings follows:]

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Chairman ISSA. I thank the gentleman.

Members will have 7 days to submit opening statements, including extraneous material, for the record.

We will now recognize our first panel. Mr. Harry Alford is president and CEO of the National Black Chamber of Commerce, an association representing 95,000 black-owned businesses and dedicated to the economic empowerment of the African-American communities.

Mr. Michael Fredrich is president of MCM Composites, LLC, limited liability corporation, I trust, in your State, a not to large conglomerate, if you will, doing custom thermal set molding shop in

Manitowoc, WI that employs 60 workers and has been in business

for 30 years.

Mr. Jack Buschur is president of Buschur Electric, a full-service

electrical contractor located in Minster, and I think that is Mr. Jordan’s, Ohio that serves residential, commercial, industrial, institutional, and farm markets.

Mr. Jay Timmons is president and CEO of the National Association of Manufacturers, which represents manufacturers in every industrial sector in all 50 States.

And Ambassador Tom Nassif is president and CEO of the Western Growers Association, an agricultural trade association with

3,000 members who grow, pack, and ship 90 percent of the fresh

vegetables and 70 percent of the fresh fruit in Arizona and California.

I thank the gentlemen and I ask that you all rise. As is the rule

of this committee, all witnesses are required to be sworn in. Would

you please raise your right hands?

[Witnesses sworn.]

Chairman ISSA. Let the record show they all answered in the affirmative. Please be seated.

I will eventually get to where I can do that by heart.

We want to allow time for all the Members here today to ask

questions after they have listened to you, so I would ask that all

witnesses try to limit, regardless of the length of their opening

statement in writing, to 5 minutes. Your entire statement will be

placed in the record when, as my predecessor, Mr. Towns, would

say, in America we all know that green means go, yellow means

caution, and red means stop. So please observe that.

Mr. Timmons.

STATEMENTS OF JAY TIMMONS, CEO, NATIONAL ASSOCIATION

OF MANUFACTURERS; TOM NASSIF, PRESIDENT AND CEO,

WESTERN GROWERS ASSOCIATION; HARRY ALFORD, CEO,

BLACK CHAMBER OF COMMERCE; MICHAEL J. FREDRICH,

PRESIDENT, MCM COMPOSITES, LLC; AND JACK BUSCHUR,

BUSCHUR ELECTRIC

STATEMENT OF JAY TIMMONS

Mr. TIMMONS. Chairman Issa, Ranking Member Cummings, and

members of the committee, the National Association of Manufacturers is the largest manufacturing trade association in the United

States and we represent 11,000 companies, 90 percent of which are

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small and medium sized enterprises, and we have 12 million Americans that we represent who are employed in manufacturing.

Manufacturing means jobs. This year, in January, manufacturing

added 49,000 jobs, the most in a single month since August 1998.

In 2010, the United States finished with a net gain of 136,00 manufacturing jobs. These are positive developments, indeed, but last

year’s employment gains still represented a return of just 6.2 percent of the 2.2 million manufacturing jobs that were lost during the

past recession. And even for our member companies who are investing and expanding, regulatory uncertainty and costs discourage

the addition of new employees.

We must always remember that manufacturers in the United

States face fierce competition from countries around the world.

Every million dollars or, what is more likely, billion dollars of new

regulatory costs that the Federal Government imposes on a manufacturer in California or in Maryland has a negative impact on

their competitiveness.

My written testimony goes into some detail, so please allow me

to just highlight a few examples. For example, OSHA, last year,

proposed a new plan to regulate workplace noise. Even if earplugs

effectively protected employees from hearing loss, OSHA wanted

companies to install new equipment and structures. In short, rather than spending thousands of dollars annually on hearing protection that actually worked, OSHA would have forced companies to

spend millions of dollars to achieve the same results. One of our

larger member companies estimated that their costs would have

reached $1 billion nationally, a billion dollars that could be more

productively used for research and development, capital investment, or jobs.

Now, thankfully, OSHA has withdrawn that particular plan in

response to strong opposition from employers, but in another example, more than any other agency, the Environmental Protection

Agency alarms manufacturers. Just 2 years after the EPA imposed

extremely stringent limits on ground level ozone emissions, the

agency proposed even more drastic rules. According to a recent

study by the Manufacturers Alliance, making the current standard

more stringent would cost 7.3 million jobs by 2020 and add $1 trillion in new regulatory burdens between 2020 and 2030. Many cities and counties in our Nation would instantaneously be in violation of the requirements of the Clean Air Act, choking off economic

growth in countless communities nationwide.

Another example: the EPA has targeted critical equipment for

manufacturers, the industrial boiler, for new emission limits that

are harsh, inflexible, and potentially unattainable. According to a

study by the Council of Industrial Boiler Owners, for every $1 billion spent on complying with these so-called Boiler MACT rules,

16,000 jobs would be put at risk and the U.S. gross domestic product could fall by $1.2 billion. Manufacturers of chemical, pulp, and

paper products would be especially hit hard.

And finally, of course, there is the extraordinary proposal by the

EPA to regulate greenhouse gas emissions. The EPA wants to ease

into this new regime by limiting CO50 emissions from refineries

and powerplants.

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Mr. Chairman, some people believe that massively higher energy

costs are a good thing, but manufacturers, who use a third of the

electricity generated in this country, tend to believe otherwise. We

understand that higher costs are passed on to consumers and higher costs makes the United States a less attractive place to do business. Jobs disappear; communities suffer. Our analysis of the Waxman-Markey cap-and-trade bill from the last Congress projected a

half trillion dollar decline in GDP through 2030 and the loss of 2

million jobs.

Manufacturers welcome President Obama’s recent Executive

order calling for a review of agency regulations for their costs and

effectiveness. We appreciate the administration’s recognition of the

impact of regulations on jobs, the economy, and small business.

The next step must be to act on this recognition, to withdraw or

modify burdensome regulations.

There is not one of us sitting here today who doesn’t want to expand private sector employment to create good jobs for every worker who wants one. Any differences that we may have had is really

in approach and in perspective. Today I give you the perspective

of manufacturers, the men and women responsible for 12 million

jobs in the United States, the employers who want to do more but

who operate in the real world of unceasing global competition. For

America and its manufacturers to succeed in this world, these regulatory burdens must be replaced by realism and their costs replaced by common sense.

I thank you very much, Mr. Chairman and members of the committee.

[The prepared statement of Mr. Timmons follows:]

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Chairman ISSA. I thank the gentleman.

Before I introduce or ask Mr. Nassif to speak, I think full disclosure is in order. Ambassador Nassif is a deacon in my church. He

was the Ambassador to Morocco and he is in fact a personal friend,

so I hope that won’t diminish the 70 percent of fresh fruits and

vegetables that he represents and the thousands of growers.

Ambassador.

STATEMENT OF TOM NASSIF

Mr. NASSIF. I hope that introduction didn’t set me up for failure.

Chairman ISSA. You can turn the mic on after you finish ripping

me back, please, Ambassador. [Laughter.]

Mr. NASSIF. Good morning, Mr. Chairman, Ranking Member

Cummings, and members of the committee. Thank you for the opportunity to appear before you today. In fact, our members produce

about one-half of all the fresh produce that is grown annually in

the United States.

Today, American agricultural production represents a $300 billion market, but we find ourselves in a regulatory environment

that is stifling job creation and economic opportunity. Regulations

are promulgated without benefit of the best available science and

experience. Significant stakeholder engagement is lacking.

As a result, current requirements are often inflexible and impractical. These include the Clean Water Act requirements of redundant pesticide permits, water quality standards which cannot be

met, clean air restrictions on particulate matter like dust, Endangered Species Act requirements, and actions taken by the National

Labor Relations Board and the Department of Labor, which has introduced uncertainty into our business models, constraining our

ability to invest in our businesses, our communities, and to increasing the size of our work force.

And when one out of every nine foreign capital dollars invested

goes toward meeting regulatory requirements, which in some cases

cannot be met, the picture of the regulatory burden becomes clear.

This morning I would like to highlight just two examples. The first

involves implementation of the Endangered Species Act.

California water needs are largely met by State and Federal

pumps operating in the San Sacramento-San Joaquin Delta. Litigation under the Endangered Species Act alleged that pumps harmed

federally protected fish species, including salmon and a 1-inch fish

known as the Delta Smelt. In 2008, the Fish and Wildlife Service,

the National Marine Fisheries Service, were compelled to develop

new biological opinions governing the pumps.

As a result, water delivered to farms and cities were severely restricted during one of California’s most severe droughts. The results were devastating. In 2009, only 10 percent of the Federal

water allocations were delivered. Nearly 500,000 acres of farmland

were fallowed. Economic harm is estimated between $340 and $370

million. The number of jobs lost runs into the thousands and several San Joaquin Valley farm communities suffered unemployment

of 40 percent.

Water users turned to the Federal Court. In May 2010, the court

repeatedly criticized the National Marine Fisheries Service’s salmon biological opinion as unsupported by reasonable explanation,

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simply indefensible, inexplicable, and not rational nor scientifically

justified. In a separate ruling on the Delta Smelt biological opinion,

the court held that the Fish and Wildlife Service did not comply

with the National Environmental Policy Act, which required the

Service to consider the impact of its regulations on the human environment, and that the specific restrictions on pumping operations

were not adequately justified by generally recognized scientific

principles.

Agencies implementing the ESA must consider the impact of

their decisions not only on species, but also upon the economy, employment, and communities. We ask this committee and others to

increase their oversight of ESA implementation and to focus especially on the quality of the scientific data used to justify regulatory

decisions and the degree to which the agencies meaningfully engage those economically impacted.

Next I would like to raise concerns about the H–2A guest worker

program. This program represents the only avenue for legally employing foreign agricultural workers in the United States. The process is unnecessarily complicated and labor intensive. Approvals are

often issued late, notwithstanding statutory deadlines. The delay is

compounded by Department of Labor’s continuous demands for

wording modifications, which often inconsistently apply or misapply the regulations. Compounded by visa processing delays, by

DHS, and visa appointment delays by the U.S. consulates, lengthy

delays in the arrival of guest workers are commonplace and costly.

Even brief delays can be disastrous to producers of perishable agricultural commodities.

We are especially concerned about the tremendous increase in

minor technical violations, people work violations being imposed by

the Department of Labor. The program is so complicated many

well-intended employers unintentionally commit technical violations. Nevertheless, the Department of Labor imposes maximum

penalties without regard to the seriousness of the infraction, the

size of the employer, or the employer’s good faith and mitigation

efforts. Such penalties, some approaching $500,000, are beyond

most farmers’ ability to pay and could force them out of business.

While employers who violate the law should be punished, the

punishment should be reasonable and proportionate. The fines imposed by the Department of Labor are unnecessarily punitive and

have the effect of discouraging farmers from using the program. In

fact, today H–2A makes up only 2 to 4 percent of the agricultural

work force. We ask this committee to examine the Department of

Labor’s administration of this program and its effect on the agricultural industry, culminating in a departmental report to this committee identifying the H–2A program problems and solutions.

We acknowledge the need and value of regulations. We merely

ask that they be fair, reasonable, and in accordance with the facts

and sound science.

Thank you very much.

[The prepared statement of Mr. Nassif follows:]

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Chairman ISSA. I thank the gentleman.

Mr. Alford.

STATEMENT OF HARRY ALFORD

Mr. ALFORD. Thank you, Mr. Chairman, Ranking Member

Cummings. You have my written testimony. I am going to give examples, also, of some problems.

BP is the outlier of the oil industry. The oil moratorium in the

Gulf hurts the entire U.S. oil industry. But BP is the only violator

of these OSHA, EPA, and Mineral and Mines Management violations. If you take all of the violations, the fines, the penalties of the

U.S. oil industry combined, it would be a fraction of what BP does

in violations. Deaths, injuries, fines by the many millions of dollars

are attributed to BP.

As a result of the oil moratorium, 20,000 oil jobs are gone;

150,000 related jobs with small businesses and supply chain oil industry are gone. BP is the outlier, not the U.S. oil industry. We

need to remove this oil embargo. We can put an embargo on BP;

they are the ones who are doing it.

Second, net neutrality. The Internet has been robust and has

been successful. It is probably the greatest invention since the telephone. But now the FCC wants to regulate it. It wants to put its

claws into the Internet and seize the billions of dollars that the

telecoms invest in the Internet and to spread its borders and increase more jobs. The FCC will stop the Internet in its tracks from

any further growth if this net neutrality is implemented.

The gainful employment rule by the Department of Education,

which wants to take away financial aid from for-profit colleges and

schools. Forty percent of the students of these for-profit schools are

minorities. How can small businesses have an educated work force

if they eliminate 40 percent of the jobs of the educations, degrees

that would go to these future employees? The gainful employment

rule is there simply because for-profit schools are non-union, and

they want to strike a blow against non-union schools, but also hurt

the students.

Four, project labor agreements. These are union-only construction jobs. President Bush put a ban on project labor agreements because unions discriminate, discriminated in a Jim Crow fashion.

President Obama has reinstated project labor agreements. So when

you put a project labor agreement on a project, you are saying

whites only; no Hispanics, no blacks, no females. The Department

of Labor has these statistics, but they won’t release them to the

public, and I ask this committee to subpoena the Bureau of Labor

Statistics, the racial demographics of construction unions. You get

beyond general labor and cement, and you will see Jim Crow discrimination. The Congressional Black Caucus should be very interested in this.

But when you get to electrical workers, carpenters, roofers, iron

workers, it is dismal. So if you have a project labor agreement, you

are saying no blacks and Hispanics allowed. The Washington baseball stadium is a beautiful example of that, if you study that. But

if you get those statistics from the Bureau of Labor Statistics, it

will show.

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Department of Defense. Major contractors play a game and the

Department of Defense is in cahoots with it. One, a floor corporation has a contract, a log cap 4 contract, which is for Iraq, Afghanistan; multi-billion dollar contract. Haliburton had it before them.

They will list and negotiate with black and Hispanic contractors to

work on these projects. They will do the scope of work, list it there,

and then the SBA will look at that report and say this is fine. Disabled veterans, minority businesses, women businesses, fine. The

only problem is when floor gets the contract, they will never, never

utilize those people. It’s a game and the SBA has no juice to make

them. So we have all this false hope going on.

Lockheed is another example. Then I will end. Lockheed had one

of my members who did the scope of work, did all the agreements,

went and got the contract. They actually moved their offices and

changed their phone numbers from them. He couldn’t even find

them afterwards. He complained to the Department of Defense,

complained to the SBA; they did nothing.

So if you could go back and just get that floor and examine that

and do an audit on that, I would appreciate it. Thank you, sir.

[The prepared statement of Mr. Alford follows:]

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Chairman ISSA. I thank the gentleman.

Mr. Fredrich.

STATEMENT OF MICHAEL J. FREDRICH

Mr. FREDRICH. Can you hear me?

Chairman ISSA. Yes, we hear you. All these mics have one thing

in common, and that is in order to not pick up background noise,

you have to get close; and that is how they were designed. So

please give us a little indulgence.

Mr. FREDRICH. OK. Our company was started in 1983. I bought

it in 2001. We actually closed 1 month after 9/11. When I bought

it, I took all the cash I had, which was $600,000, and I borrowed

$5 million. I personally guaranteed it and I collateralized that with

my home. So I crossed the financial rubicon. There is no going back

for me; this is either going to work or not work. If it doesn’t work,

I start over at the age of 59.

From a macro point of view, most of our customers, and our customers include big industrial companies like Rockwell, Eaton, Boeing, DRS, which is a defense contractor. All of these companies

have global sourcing departments and their mission is to buy components at the cheapest price they can. And most of these large

companies don’t make these components, they buy them. Boeing,

for example, they don’t make their engines. They build the aircraft,

but all the components that go in there somebody else makes, and

it is small companies like ours that make those components.

So what happens when we become not competitive? I will give

you a good example: Kohler Engines. We used to sell 1.2 million

head covers to Kohler Engines for their engines, 1.2 million. We did

that for years and we sold them for $1.43, and today we make

none. They still use them, but those are all sourced in Mexico for

$1.18, which doesn’t sound like much, you know, a few pennies, but

that is the kind of margin that companies like ours work on. There

isn’t a big margin, and the whole point behind that is regulation.

If you believe the numbers are not—you know, the SBA says it is

$11⁄2 trillion, The Heritage Foundation says $1 trillion cost of regulation. Somebody has to pay for that. Somebody. And that trickles

down or trickles up from whomever we use for services, whomever

we buy raw material from.

So the point on a macro basis is that burden is there, and we

can’t compete. We are competing, but it is difficult to compete if we

increase that burden. We ought to focus on lowering it.

I have 2 minutes. I want to make three points on three different

areas.

Healthcare. The 1099s. There is a requirement in the healthcare,

and this is a common topic. We sent out this year, we just did it,

11 1099s. We have 375 vendors. It took us 3 hours to send out 11

1099s, and if you extrapolate that to 375, it is 2 weeks worth of

work. That is about a $2,500 cost for us just to send out 1099s,

which produces no value in our company. And it may not seem like

a lot to you, but $2,500 is meaningful to me, and it is meaningful

to everybody that works at our place. That is one issue.

The Medicare part of the healthcare plan has a 3 percent tax on

individuals that make over $200,000. I wish somebody in Washington would please educate Members of Congress that small busiVerDate 11-MAY-2000 13:19 Aug 11, 2011 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67568.TXT KATIE PsN: KATIE
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nesses are organized as subchapter S corporations, LLCs, or LLPs.

They all pay taxes at the personal level. So when you raise taxes

on the so-called rich, you are raising taxes on small companies that

are organized in that manner. So this 3.8 percent that is in there

is a direct tax on our company if it comes to be.

The employee mandate. We have 60 employees and we are hiring

more. I think we will be at 70 by the end of the year. If this goes

through, this mandate goes through, we will have 49 employees

and we will not have more, because we are not going to be subject

to this law. We are just not going to do it.

OK, I am not getting through all my goodies here.

EPA, we talked about the EPA, that is an issue. But the OSHA

thing I want to comment on. For some reason this I2P2 thing,

there is an implication that companies do not properly provide a

safe work environment. We have a great incentive to do that. I

don’t know if you have ever heard of worker’s compensation insurance, but we are required to carry it; it costs more for us than our

healthcare. So we have a strong incentive to have a safe and productive workplace.

Sorry for going over here.

[The prepared statement of Mr. Fredrich follows:]

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Chairman ISSA. I thank the gentleman. I realize that much of

this will be covered in Q&A afterwards.

Mr. Buschur.

STATEMENT OF JACK BUSCHUR

Mr. BUSCHUR. Good morning, Chairman Issa and members of the

committee. I would like to thank you for giving me the opportunity

today to speak with you regarding the impact that the regulations

have had on small businesses. I am the owner of Buschur Electric.

We are a small electrical contracting business in Minster, OH. Currently we have 18 employees. We are down from 30 employees in

2009. My business works on commercial, industrial, institutional,

and residential properties.

There are three specific regulatory issues I want to bring to the

committee’s attention today: the EPA lead RRP rule, project labor

agreements, and prevailing wage rules. All three of these regulatory burdens have had a negative impact on small businesses and

our ability to create new jobs.

In 2008, the EPA finalized a rule requiring firms to be certified

and their employees trained on lead-safe practices during home

renovations on homes built before 1978. The EPA eventually revoked its flexible opt-out rule and required all home renovations in

pre-1978 homes to follow lead-safe practices, thus increasing the

cost of renovations for homeowners even those with no at-risk individuals. Such inflexible standards have the effect of driving down

demand for renovation services or worse; homeowners could seek to

have renovations performed by unlicensed underground contractors, which increase the safety risk to everyone.

I first found out about this burdensome rule on a recent project

of ours. An inspector from OSHA informed the project’s general

contractor that all subs were required to have on-the-job training

in order to be in compliance with the RRP rule. I had to have two

of my employees go through a 7-hour certified training course onsite.

In addition, the general contractor had to arrange expensive

training and testing, including a respirator clearance exam, a lead

assessment by a certified professional, which cost the general contractor $1,260 a day for 3 days. The overall cost to the general contractor was approximately $10,000. We eventually learned that we

in fact did not need to be certified or trained to do the work because the concentration of lead dust at the work site was not high

to pose a risk to anyone.

As I witnessed the amount of time and money the general contractor exhausted in effort to be compliant, I decided that my business would not become an RRP compliant company. The expenses

are outrageous, the amount of paperwork is far too burdensome

and the exposure liability is too great for my business to take on.

I am also very concerned about two labor regulations that also

adversely impact small business: project labor agreements [PLAs],

and prevailing wage. The Federal Government’s insistence on PLAs

makes it much more difficult for a business like mine to bid on

projects. Typical PLAs are pre-hire contracts that require projects

be awarded only to contractors and subcontractors that agree to

certain pro-union rules. The use of project labor agreements is a

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discriminatory tactic that prevents non-union construction companies from working on government construction projects. When you

consider the fact that the construction industry currently has an

unemployment rate of over 20 percent, it makes no sense to impose

PLAs or other regulations that serve as impediments to job creation.

We have not personally been directly affected by PLAs over the

past couple of years, as the projects have either been too large or

too far out of our area. However, I am very concerned that if a

right-size project with a PLA does come up for bid in our area, we

will be unable to compete for the work, making it even harder for

our company to get back on its economic feet.

Another area that has adverse impact on small business job creation is the prevailing wage rules. With a slow economy, the last

couple of years we have been forced to perform prevailing wage

work in order to survive. These projects—unfortunately, we have

seven of them going on right now—create a lot of additional recordkeeping.

At the time a prevailing wage project is awarded, my firm has

to issue employee notification forms to employees on the job advising the wage rate and applicable fringe benefits paid per hour.

Then every week we have to perform time-intensive reporting requirements such as certifying payroll reports for each prevailing

wage job and for the payment of fringe benefits to certified retirement plans.

And typically all this work has to be duplicated because at the

end of the project we will be harassed by unions requesting an

audit on our company, that we did not follow the rules, so we just

have to double all the time spent and effort on these paperwork requirements and then go through the hearing process. We have been

involved in two of those and have come out clean, but it is still extremely expensive and it is a very large inconvenience.

I would like to thank the committee for the opportunity to share

my concerns with you and I urge the committee to take a hard look

at how the regulatory environment can stifle small business job

creation and growth. Thank you.

[The prepared statement of Mr. Buschur follows:]

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Chairman ISSA. I thank the gentleman.

I now recognize myself for 5 minutes for questions.

Mr. Buschur, Mr. Alford really talked in terms of the same thing

you were, the project labor agreements, the fact that our mandating that only unions need apply in the trades, often creates a situation in which many of the businesses that he represents are effectively locked out of the process. Now, you don’t look like a black

minority owned business, so I am not sure he was talking about

you, but in a sense isn’t that beyond just a regulatory impediment?

Isn’t it simply the Federal Government agreeing and demanding

that something cost more, and then paying more?

And my point to it is, it is a self-inflicted wound. Government

may cost 15 or 20 percent more, but other than locking out Mr.

Alford’s people, locking you out of the process, since we are willing

to pay for all this bureaucracy and waste and excess overhead, isn’t

it in fact not losing a job, but creating just simply ineffective jobs?

Mr. BUSCHUR. Well, in my opinion, sir, the——

Chairman ISSA. My tongue is in my cheek, you understand.

Mr. BUSCHUR. Please?

Chairman ISSA. My tongue is in my cheek on that question.

Mr. BUSCHUR. We had a good example in the State of Ohio. The

Ohio School for the Deaf and Blind bid a project out in two manners, one with a PLA and one without a PLA. The project that was

bid without the PLA came in 22 percent lower and had six times

as many bidders as the job with the PLA. That is clearly documented; it was public bid opening, the numbers were read.

I guess taking my business hat off and being a taxpayer, I asked

the question why. Why would you exclude 85 percent of our construction market and our members, and not allow them to bid on

these projects? It just makes no sense to us that this goes on, because those 85 percent contractors are performing work on other

projects that are not government related on a daily basis without

PLAs and are very successful at it, and are saving customers

money.

Chairman ISSA. Obviously, from this part of the dais, I agree,

and particularly when I look at needing to crank more than 22 percent of the cost out of government if we are going to balance the

budget.

Let me go on to a line of questioning. As a former small business

man, I guess a current small business man, still LLCs and LLPs,

I have a question which hopefully each of you can relate. The regulatory cost overall for companies with more than 500 employees is

rated in this one trillion as about $7,635. But for companies under

500 it is estimated to be about $10,585 per employee.

Now, when I look at that and I look at the figure of one trillion

into a $17 trillion economy, it looks to me like between 5 and 10

percent is the cost of regulations overall. So I am going to ask each

of you a targeted question. Let’s assume that we could get rid of

just 2 percent of that 10 percent on the back of each of your businesses. What would happen if you could, each of you, whether it

is avocados from California, or your services on molded products

and thermal set products, or your contracting, what if you could

shave 2 or 3 percent off? Not the whole 10 percent. What happens

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if you shave 3 percent off of your cost of doing business, what does

it do to your typical winning or not winning a bid? Mr. Buschur.

Mr. BUSCHUR. Well, I guess in our situation, whether it is 1 percent, 2 percent, whatever we can take off our overhead account is

going to make us more competitive. An example, we had our general superintendent retire the middle of last year and we did not

replace him; we are doing the work with my vice president and myself. We didn’t have the funds, nor could we be competitive if we

put that back online. Right now I have a girl that spends about 30

hours a week taking care of prevailing wage reports.

Chairman ISSA. OK, let me get to everyone, because my time is

expiring. And I will start with Mr. Timmons and come back to Mr.

Fredrich.

For a national manufacturer competing globally, what does 2 or

3 percent do if they can lower the price of their overall product by

that amount?

Mr. TIMMONS. Well, Mr. Chairman, overall, it is 18 percent more

expensive to do business in the United States than it is in a country that is a developed economy. So any amount off of that 18 percent allows us to be more competitive. By the way, that 18 percent

is derived from the cost of regulation, also energy and tort cost; it

does not include labor.

Chairman ISSA. Right. I realize it ripples through.

Mr. TIMMONS. So every percentage decrease in the cost of doing

business allows a manufacturer to reinvest money into its company, it allows it to expand it, it allows it to create jobs, which is

our ultimate goal.

Chairman ISSA. And I am using the hypothetical number. You

can use your own numbers.

Mr. Nassif, assuming that you get water, what does that do for

avocados and other products competing against Mexico and the rest

of the world?

Mr. NASSIF. Well, clearly, if we have the adequate water supply,

we are going to be able to be more productive on the land, and the

more you can produce per acre, the less water you use and the less

fertilizers and insecticides and pesticides you use. In our industry,

we are not price makers, we are price takers, so the retail buyers

and the food service buyers tell us how much they are going to pay.

Obviously, if we can cut a couple percentage points, that helps

us to be more competitive. But because we are in a global market,

we are not competing against the other State, necessarily, or the

farmer next door, we are competing against the world, and in the

world they don’t have the same regulatory burdens we have. Therefore, even if 2 percent were cut, they could still look to another

country like China or Mexico or anywhere in the southern hemisphere and find a lower price. So then we have to compete on quality and food safety.

Chairman ISSA. OK.

Quickly, Mr. Alford.

Mr. ALFORD. Same question?

Chairman ISSA. Just the same genre. If we reduce this down to

the portion that Mr. Cummings and I might be able to provide in

regulatory relief, knowing you are not going to get all $10,000 per

employee off, what do those pieces of two or $3,000 per employee,

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what does that do for the businesses you represent, and then for

Mr. Fredrich, and we will have to wrap up?

Mr. ALFORD. It certainly makes it more competitive, makes them

more competitive. They would win more contracts, and winning

more contracts from that property would invest back into the company to grow or add jobs.

Chairman ISSA. Mr. Fredrich.

Mr. FREDRICH. I will give you a specific. We are bidding right

now on a water pump cover for Volkswagen. We don’t sell it directly to Volkswagen; we sell it to a company called Bocar. Bocar

is located in Mexico. That contract will be awarded on 1 or 2 percent on the price of that, and I think we are going to get it, I do,

because we are very close. But as you burden—and that, by the

way, in terms of jobs, that is five jobs, five full-time jobs to fulfill

that contract. If we get it, five new jobs; we don’t get it, Mexico.

Chairman ISSA. Thank you.

I now recognize the gentleman from Maryland, and I would ask

unanimous consent he be allowed to have two additional minutes.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

I want to thank all of you for your testimony. I don’t think it has

been unreasonable. I think that you have highlighted a number of

things. And I too know what it is, Mr. Fredrich, to run a small

business; I ran a small law firm for 20 years. I also know the struggles that small businesses go through. So I want to thank all of

you.

As I listened to you, particularly you, Mr. Timmons, I could not

help but—and perhaps this will be the subject for another hearing—but when I think about what I think it was—well, one of you

talked about Mexico. Was it you, Mr Fredrich? And I wonder when

those jobs go to Mexico, I wonder what Mexico’s standards are with

regard to, for example, child labor; with regard to, for example, pollution, things of that nature.

And perhaps it might be a good idea, Mr. Chairman, if we begin

to look at those things too, because America is better than that. We

are better. We set a high standard for the world. So that leads me

to talk about a witness that is not here today, and I wish he was.

His name is Stanley Stewart and he goes by the nickname of

Goose. He is not from my district, he is not from the inner city of

Baltimore; he is from West Virginia. And he was one of the few

coal miners to survive the explosion in the Upper Big Branch Mine

in West Virginia.

Mr. Stewart wrote to the committee to support a proposed regulation to require mining companies to create refuge alternatives

during emergencies. I ask unanimous consent that his letter be

placed into the record and I would like to read from it now.

Chairman ISSA. Without objection, so ordered.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

[The information referred to follows:]

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Mr. CUMMINGS. First, Mr. Stewart described the tragedy that

cost him 29 friends that day, and this is what he said. He said, I

had to stack their bodies and cover them with blankets. I can still

see their faces covered in layers of soot so black that I couldn’t tell

one man from another. Mr. Stewart went on to describe why refuge

alternatives are necessary, and he said this: Had they been in place

during the Sego disaster, those men would have lived. There is no

more miserable place to die, in my opinion, than a coal mine. The

coal operators can make tremendous amounts of money and still

ensure safety of the men and women who mine the coal for their

profit. I am just one man whose opinion is against many corporate

and industry experts. But I am a man who has seen things that

no man should ever see.

Mr. Stewart concluded his letter by saying this: These regulations that some say should be disregarded in place to ensure the

safety of millions of Americans. Regulations do not cut into profit,

they protect the people who work to create a profit for a company.

Mr. Chairman, I have said it repeatedly that, for this committee,

we cannot focus on just the cost of regulations, we must also focus

on the benefits and the health and the welfare of American people,

and I know that these gentlemen share it.

As I listened to you, Mr Fredrich, I could not help but think back

to my days in the Maryland legislature. I was the expert for 15

years on workman’s compensation, and I know the cost of workman’s comp. So we have a lot of things that go into why some jobs

do not stay here in America. So the question then becomes, at some

point, what will our standard be? Will we bend to a lower standard,

where children are being exploited, for example, so that we can

make more profit? I don’t know.

But let me go to you, Mr. Alford. I just want to set the record

straight. You said that BP was the only company cited for OSHA

violations?

Mr. ALFORD. No, sir.

Mr. CUMMINGS. All right. What did you say?

Mr. ALFORD. I said if you take the U.S. oil industry and their violations combined, it would only be a fraction of the total of BP’s

fines.

Mr. CUMMINGS. All right, I want to make it clear, on October 9,

2009, OSHA cited ConocoPhillips for repeat workplace safety and

health hazards. On that date, OSHA cited Conoco for three repeat

violations and four serious citations. June 2010 OSHA cited the

firm Infinium, a joint venture between Shell and Exxon, for 22

workplace safety violations, including exposing employees to chemical hazards.

And I am just going to stop there, but that is why I wanted—

and I think the chairman will agree that we have to hear the whole

story.

Mr. ALFORD. Sir——

Mr. CUMMINGS. I have another question for you, sir.

Mr. ALFORD. OK.

Mr. CUMMINGS. I would like to ask all the witnesses this. In the

State of the Union, the President proposed an initiative to promote

economic growth by modernizing the Nation’s infrastructure. On

January 26th, the U.S. Chamber of Commerce and the AFL–CIO

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issued a joint statement supporting this proposal. It is rare when

these two groups agree, but this is what they said: ‘‘Whether it is

building roads, bridges, high speed, broadband, energy systems,

schools, these projects not only create jobs and demand for business, they are an investment in building the modern infrastructure

our country needs to compete in a global society.’’

So, Mr. Alford, since your organization works closely with the

U.S. Chamber of Commerce, do you not?

Mr. ALFORD. I am on the board of the U.S. Chamber of Commerce, sir.

Mr. CUMMINGS. So I assume that you would support these proposals, would you not?

Mr. ALFORD. It depends on the particular proposal. I don’t want

project labor agreements. That is certain. Nor does the U.S. Chamber.

Mr. CUMMINGS. So we are talking about—you sit on the board?

Did that come before you, by the way, I am just curious, as a board

member?

Mr. ALFORD. Let me clarify something, please, on the U.S. Chamber.

Mr. CUMMINGS. Sure.

Mr. ALFORD. What the President has done, they were talking

about high speed rails. The U.S. Chamber agreed with AFL–CIO

that the Nation needs high speed rails. It was not a broad, general

statement saying all the infrastructure should go together or, as

you put it, we are in concert with the AFL–CIO. We are not. We

don’t believe in card check, we don’t believe in project labor agreements. We don’t believe in a lot of things.

Mr. CUMMINGS. Well, as my time runs out, I want to thank you

for what you just said, but I am just reading from the joint statement. It says whether it is building roads, bridges, high speed, high

speed, broadband, energy systems, schools, these projects not only

create jobs and demand for business, they are an investment in

building the modern infrastructure our country needs to compete in

a global society.

I see my time has run out, and I want to thank the chairman

for the additional 2 minutes.

Chairman ISSA. You are most welcome.

I would ask unanimous consent that Appendix 1 from our preliminary staff report on all of the submissions be placed in the

record at this time so that there is a complete list of all the complaints, not one of which was about mine safety. Without objection,

so ordered.

[The information referred to follows:]

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Chairman ISSA. I now recognize one of our two chairmen of this

committee present here today, Mr. Burton of Indiana.

Mr. BURTON. Thank you, Mr. Chairman. First of all, I would like

to just briefly respond to my good friend from Baltimore, for whom

I have great respect.

There is no question that we must have some regulation, because

we do have tragedies that occur because we haven’t really paid

enough attention to them. But the other side of that coin is, we

must be competitive if we are going to get market share in the

world. Right now our trade deficit is huge, and one of the reasons

that we have such a huge deficit trade deficit is in many areas we

cannot be competitive because regulation is strangling the private

sector. So we have to be very careful, when we regulate something,

that we don’t put ourselves in a noncompetitive situation, while at

the same time being concerned about the people that are in the

work force.

One of the things that concerns me is something that may come

down the road. We have been watching in Egypt and the Middle

East the problems over there, and we know that could explode into

a situation where the Persian Gulf and the Suez Canal might,

might, down the road, be blocked, and we get about 30 percent of

our energy from there. We get about 20 percent of our energy from

Venezuela or thereabouts. So we are dependent on foreign energy.

In the last session of Congress, we blocked the cap-and-trade regulation, and we did that because we felt it would put us in an uncompetitive situation. I would like to get your opinion about this

because right now we understand the Department of Energy and

the Environmental Protection Agencies are talking about passing a

regulation which would parallel the cap-and-trade that did not pass

the last session of Congress. In other words, they are going to try

to circumvent the Congress of the United States and put this into

effect.

So I would like to know, based upon your experience with regulation, what would that do to the private sector and production in

this country, and how would it affect our competition worldwide.

Any one of you can answer. Yes, sir.

Mr. ALFORD. I will start off with that. It would transfer private

industry to overseas. We would see a mass exodus of firms going

abroad because it costs too much to do business in the United

States. There would also be a transfer of wealth going from the

United States elsewhere. There is a national security problem with

this, too, in that the United States, which is No. 1 in the world

today, would probably fall to No. 5, 6, 7, or 8. If we fall to No. 8,

then we create more enemies who see us as being vulnerable. This

is cap-and-trade coming through the back door. We defeated it already; the American people don’t want it, and we need to check

EPA.

Mr. BURTON. I talked to one of my companies that manufactures

and does a lot of business overseas, and they told me that if capand-trade passed, the electric bill, the energy they need to generate

their product, would go up $100,000 a month.

Mr. Fredrich, you do business in other countries. How would this

affect your company if we had to add the cost of cap-and-trade to

your business?

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Mr. FREDRICH. We have a situation in Manitowoc where the city,

the city of Manitowoc owns the public utility, and they actually

generate power; they have a power plant and they use coal to fire

the boilers. Our monthly electric bill is about between $22,000 and

$25,000. Without question, we are pushing $30,000 if something

like that happens; it would be like $10,000 a month, $120,000 a

year for what? For what? We would buy the same amount of electricity; we produce the same product. It is just now we have another burden of $120,000.

Mr. BURTON. What would that do to your competitive situation?

You mentioned Mexico a while ago and you were within a few cents

of getting a contract. What would that do to business like that you

would get?

Mr. FREDRICH. It kills you. It kills you, because we cannot compete on wages, nor do we want to compete on wages. But we can

compete on efficiency and the productive use of capital. And the

projects that we bid on are so tight, 1 and 2 percent, so to the extent that we are 2 percent off, we don’t get the business.

Mr. BURTON. Let me just end up, Mr. Chairman, by saying that

the gentleman, Mr. Fredrich, just mentioned a while ago that the

health care bill would cut his employment from 60 to 49. So you

are looking at maybe a 10, 12, 14 percent reduction in employment

if the health care bill goes into effect, so I think that is another

thing that we ought to throw into this regulatory mix and issue.

Chairman ISSA. I thank the gentleman.

We now recognize the other chairman of this committee, Mr.

Towns.

Mr. TOWNS. Thank you very much. Let me thank you, Mr. Chairman, of course, and the ranking member for having this hearing.

Let me just sort of go down the line. When agencies propose new

regulations, there is a public comment period. Just go down the

line. I want to know whether or not you participated in that comment period. Starting with you, Mr. Timmons, and just go right

down the line.

Mr. TIMMONS. Sure. Thank you, Congressman. Yes, we often participate in the comment period, and not just as an association, but

our members oftentimes provide comments as well.

Mr. TOWNS. Was there a response? Did they respond back to you?

Mr. TIMMONS. It depends on the agency.

Mr. TOWNS. Depends on the agency?

Mr. TIMMONS. Sure. Sometimes the comment period is so truncated that there really isn’t enough time for meaningful dialog or

for response. Oftentimes the comment period is about 60 days, and

because of the massive amount of comments they receive, it is hard

for them to respond to all of the input that they receive.

Mr. TOWNS. Mr. Nassif.

Mr. NASSIF. As far as agriculture is concerned, we try to respond

to any proposed regulations rulemaking that goes out on any matter that is related to agriculture, and sometimes those are just that

are related to business as a whole. We have generally gotten very

good responses from the Department of Agriculture in this way, but

a lot of the agencies have not been responsive or limited in their

response.

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The problem is that the comments we make are, in most cases,

not included in the final draft of the regulations, and we have to

go up and argue specifically because most of the time agriculture

is forgotten when we are making regulations, just like health care.

No one even considered it, agriculture, the fact that we have a temporary migrant work force, in promulgating health care legislation.

So we have to fight very hard to be heard on those matters.

Mr. TOWNS. Mr. Alford.

Mr. ALFORD. Probably we have done 40 comments in the last

year, mainly to the SBA, FCC, Department of Interior, EPA. I can’t

recall ever getting any feedback from any of them.

Mr. TOWNS. So you feel that basically whatever your comments

are are totally ignored?

Mr. ALFORD. I don’t think they are ignored.

Mr. TOWNS. What do you think?

Mr. ALFORD. They talk about it and move on. Their mind is set,

basically.

Mr. TOWNS. OK.

Mr. ALFORD. You know, comments that differ from their opinion

are rarely effective or make a difference. But we do comment.

Mr. TOWNS. Mr. Fredrich.

Mr. FREDRICH. I am actually too busy to keep track of that stuff.

I really am. Fortunately, we have other entities like SBE Council,

and if something comes up that they think will affect a manufacturer, they will always call and say, Mike, you are on the front line

of the free market system, what is this going to do to you, and I

will give them an answer. So I always comment.

Mr. TOWNS. You feel that it makes a difference, whether you do

or don’t?

Mr. FREDRICH. Yes, I think it does. That is why I am here today.

I paid out of my own pocket to be in front of the committee, and

I absolutely do think it makes a difference.

Mr. TOWNS. Mr. Buschur.

Mr. BUSCHUR. I am kind of in the same boat. As small as we are,

I don’t have the time or resources to followup on all those types of

things, but I do comment on a regular basis back to our trade organizations, such as the NFIB or the Associated Builders and Contractors or the chambers, any time these issues come up and they

pose something in front of us. And I have full confidence in those

organizations that they do bring the message back to the proper

chambers and followup with those types of issues.

Mr. TOWNS. Let me ask you this before my time runs out. Are

there any areas that you feel that we should really push in terms

of regulations? Yes, Mr. Fredrich. And be brief, because I am running out of time.

Mr. FREDRICH. I will be very brief. Tort reform. It is a burden

on every producing company in this country and it is skimming

wealth.

Mr. TOWNS. Mr. Buschur.

Mr. BUSCHUR. Project labor agreements.

Mr. TOWNS. Project labor. OK.

Mr. Alford.

Mr. ALFORD. I agree with both those answers. They are equally

important.

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Mr. TOWNS. Mr. Nassif.

Mr. NASSIF. I would say making sure that regulations are——

Mr. TOWNS. I am sorry, I am having trouble hearing you. Push

your button.

Mr. NASSIF. I would say that making sure that the regulatory

process engages good sound science and peer review and engages

the stakeholders in these conversations so they understand the real

world side of business.

Mr. TOWNS. Thank you.

Mr. Timmons.

Mr. TIMMONS. Mr. Towns, I would echo all of those statements

and say that there are a number of regulations that need to have

some very thorough review to make sure that they do apply sound

science principles.

I did want to get back to your first question, though, because I

think there is an example of how the process has worked, at least

from our vantage point, and that is the OSHA noise proposal that

I mentioned earlier. There were a number of employer comments

that came back and OSHA did withdraw that proposal because,

frankly, it didn’t make sense. That said, the fact that the proposal

was promulgated in the first place gives us pause, so we are interested, obviously, in how the regulatory process is undertaken at

various levels of agencies. So I did want to comment that it sometimes does work when comments are made and when there is a

large outcry from the employer community.

Mr. TOWNS. Thank you very much.

Mr. Chairman, as I yield back, I am very interested in creating

jobs. My area has high unemployment. But I am also concerned

about throwing the baby out with the bath water. I am concerned

about that too. So I yield back.

Chairman ISSA. I thank the gentleman.

We now recognize the gentleman from Arizona, Mr. Gosar, for 5

minutes.

Mr. GOSAR. Gentlemen, coming from an area in Arizona that has

huge unemployment needs from Native Americans all the way

through the private sector, let me ask you the question. Of all the

regulatory burdens and agencies, which one is least based on sound

science?

Mr. TIMMONS. Well, I will start. I am not sure that I want to

handicap that, Congressman, but I will say that because the EPA

is promulgating probably more regulations than any other agency

impacting manufacturers, we find ourselves contesting a lot of the

measurements that are used as they draft their regulations. So

that is the one agency that I think we find ourselves trying to monitor the most closely.

Mr. NASSIF. For agriculture, I would say, in addition to the EPA,

that it is really the Department of the Interior and how they enforce things like defining the Endangered Species Act. We find, as

I testified, that in many cases they come up with their own scientific results, which, when they are challenged by peer review or

when they are challenged in court, they are found to be based on

poor science, and they need to redo the science. So I think what

happens is they develop a certain intellectual bias toward a certain

position. For example, if they work in there, perhaps they are more

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biased toward wildlife than they are toward the economy or the

human environment. And that is where we run into problems, because we don’t have that blend of interests.

Mr. ALFORD. I would say the EPA. We have been engaged with

the EPA on issues since 1996 and we have gone from global warming, then the winters came and the hurricanes came back; now it

is climate change. But it is the same dog and pony show. Senator

Inhofe is going to put out a book called The Hoax, and I am anxiously awaiting its release.

Mr. FREDRICH. EPA, without question. Two examples. Wind

farms. Wind farms are an absolute example of 21st century silliness. And ethanol. Ethanol. In coming from Wisconsin, we have

lots of farms. Why we produce corn to convert into ethanol, which

reduces gas mileage on automobiles, I will never understand.

Mr. BUSCHUR. I also would agree the EPA. I can’t say I am directly affected. The industry we work for, the customers we have

are directly affected and, therefore, it does hold them back from expanding or moving forward with projects that they would like to

add to their business base simply because of unreasonable and

unachievable regulations.

Mr. GOSAR. Second question. How much time do you spend in

trying to adhere to the regulatory burden in your businesses?

Mr. TIMMONS. Well, we have 11,000 members, Congressman, and

I can’t give you an average, but it could be anywhere from hours

to days. And I would defer to some of the individuals who are running companies directly.

Mr. NASSIF. I would say that at least 10 percent or more of the

time is spent just trying to comply with the regulatory burdens, because that is about the cost of complying with them.

Mr. ALFORD. It is a big trouble. Ninety-eight percent of our members are very small businesses with limited accounting and legal

support, and many times they get fined and get in trouble for being

late or inaccurate with their reporting.

Mr. FREDRICH. I will give you a real life example: EEOC complaints. We had two of them. One was from a Hispanic woman who

claimed that we terminated her because she was Hispanic, and another one was from a white male who claimed we terminated him

because he wasn’t an American. Now, each of those two cases, both

of which were not valid and we ended up winning, took at least 1

week of my time, my personal time, to just complete a response to

those and getting all the information and responding to the EEOC

and their documentation requests. And for the price of a 44 cent

stamp you can file one of those and we have to respond to it.

Mr. BUSCHUR. I would say in my business we are probably looking at at least 20 percent. But, most importantly, these regulations

are so in-depth and so large that we have to pay outsiders, whether

it is attorneys or business organizations or what, to really critique

these regulations and advise us as to what we can and what we

cannot do, and that takes money away from my company being

able to expand or hire additional people; I am spending it on the

attorneys or business groups helping us trying to understand the

regulations.

Chairman ISSA. I thank the gentleman.

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We now go to the gentlelady from New York, Mrs. Maloney, for

her questions. You are recognized for 5 minutes.

Mrs. MALONEY. Thank you very much, and I thank all the panelists for coming and your testimony. I would like to direct my questions to Mr. Timmons.

In your written report, on page 13, you express concerns about

the Consumer Product Safety Commission’s product safety information data base, and I would just like to add that this data base will

provide public access to critically important information for consumer safety, and my hope is that this committee will review this

regulation and listen to Mr. Timmons’ concerns and input.

However, before we can go forward, we really need to talk about

other people who should be part of this discussion, and that is the

consumers that benefit from this data base, and I would like to

speak about Michelle Witty, who wrote to this committee and told

us about waking up one morning, on December 12, 1997, and finding her son, Tyler Jonathan, strangled to death in a drop-side crib.

She said that she continued to go to stores for years and they were

selling this crib and saying it was their No. 1 safety product. Then

she inquired about whether or not they knew that children had

died in it, and they would say of course we wouldn’t sell it if we

knew that children had died in this crib. Unfortunately, many

other children died in this crib.

Another woman who is missing from the discussion today is Lisa

Olney. Lisa’s 13-month-old daughter Ellie died in a poorly constructed designed portable play yard, and she wrote to this committee and said that it took 9 months for the Consumer Product Safety

Commission to release the story of her daughter’s death, and she

wonders how many other stories are sitting in in-boxes and not getting out to the public.

So I believe their stories are important and I ask unanimous consent to place it in the record.

Chairman ISSA. Without objection, so ordered.

[The information referred to follows:]

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Mrs. MALONEY. Thank you.

Mr. Timmons, my question to you is when we review this regulation and talk about it and go into further discussion on it, do you

agree that testimony from consumers such as Michelle Witty and

Lisa Olney should be part of the discussion? OK, thank you very

much.

Mr. TIMMONS. I think those are very important points of information, Congresswoman. I have a 1-year-old daughter myself, so I am

very acutely aware of——

Mrs. MALONEY. Thank you. Thank you.

Mr. TIMMONS [continuing]. Some of these issues, and I think it

is important. We support the data base. We just want to make sure

it is done in a——

Mrs. MALONEY. Thank you. Thank you. And I also would like to

place in the record testimony from the Kids in Danger. This is a

not-for-profit dedicated to protecting children from faulty consumer

products. It was founded by parents who found their son dead in

a portable crib, and they want to work to get the information out.

I relay these stories because these regulations affect real people

and has real significant benefits in protecting consumers and people in our society that cannot be measured by merely a cost profit

side or a tally sheet. It is there to protect people and it should be

part of the discussion and part of the decisions.

These mothers, Mr. Chairman, and these families deserve an investigation and consideration that looks at both the costs and the

benefits of these regulations, and many of these regulations, such

as the Consumer Product Safety Commission’s data base, are there

to inform constituents, inform consumers, and really make our

country safer for our children. So I wanted to make sure that was

part of the discussion. I thank you.

Mr. TIMMONS. Thank you, Congresswoman. Clearly, we support

product safety; it is very important for the brand reputation of our

manufacturers. We have supported additional resources for the

CPSC and we look forward to working on a data base that makes

sense for all concerned.

Mrs. MALONEY. Thank you.

Chairman ISSA. The gentleman from Pennsylvania, Mr. Meehan,

is recognized for 5 minutes.

Mr. MEEHAN. Thank you, Mr. Chairman.

Mr. Timmons, let me ask you a question right from the outset,

please. The President issued regulations from the administration

stressing the importance of giving 60 days notice and comment. We

have heard some questions about this issue and we have heard a

lot about EPA. What has your experience been with EPA’s abiding

by that regulation, that request?

Mr. TIMMONS. Sixty days oftentimes is not adequate, first and

foremost. But the experience of manufacturers with the EPA has

not been a particularly harmonious one and, in all candor, it hasn’t

just occurred in this administration; the last administration was

very difficult to have meaningful conversations with. I was chief of

staff of a State government in the 1990’s, and one of the things

that we attempted to do was to have a collaborative relationship

with our regulating agencies, our environmental permitting and

regulating agency, with the business community because we all

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agreed that we wanted cleaner air and cleaner water, and we found

that the best way to achieve that was to work together to achieve

those goals.

Now, it didn’t always work and sometimes businesses had issues

that could not be resolved in a collaborative way, but we did find

that, when we worked together, we were able to resolve issues

quickly and achieve goals that did not harm the economic competitiveness of our State, and we would like to see that be the case

with EPA. We are happy to see the President’s regulatory Executive order. It doesn’t apply, necessarily, to the EPA, but we think

it is a step in the right direction.

Mr. MEEHAN. Well, if you could help me, to the extent that you

can, by asking some of your constituencies to give us a record on

that, because I know the issue arose today, and in preparation for

this I have a letter from Charles Drevna, who is the president of

the National Petroleum and Refiners Association, and I am quoting

his language: In relation to chemicals regulation, there has been

little transparency into the regulatory process in the EPA in recent

years. For example, EPA no longer holds public meetings when

crafting regulations. In the past they routinely held public meetings.

So I know this is an issue. I have two refineries, 2,000 direct jobs

in my backyard. We keep talking about sending jobs overseas. We

are competing with refineries overseas, and it is cheaper for them

to send oil refined from Nigeria into my backyard than it is for my

refineries to do that, and those 2,000 jobs are teetering on the line

by virtue of these EPA policies.

As I have talked to the folks down here, we are getting so many

mixed messages. One, you talked about working together. They are

giving regulations for greenhouse gases but vague guidelines. You

talked about BACT, which is the best available control technology.

They are delaying any kind of interpretation on this and then

opening the company to the extent that they put in something that

could be litigated later; that it wasn’t the best available technology

and it will require the company not only just to litigate this, but

they can lose the benefit of the investment that they have already

made.

Mr. TIMMONS. Well, that is an example of a regulatory process

that really doesn’t make sense, and one of the things that we have

advocated as the National Association of Manufacturers is that, as

I mentioned before, it is 18 percent more expensive to do business

here in the United States. Part of the reason for that is our regulatory burden. And we believe that our goal and the goal of policymakers should be that this is the best country in the world in

which to headquarter a corporation, that it is the best country in

the world in which to practice research and development, and that

we need to be, obviously, the best country in the world in which

to manufacture so that we can export our products.

The only way to do that is to have lower costs for manufacturers,

including regulatory burdens, and common sense regulatory processes that don’t have manufacturers saying it doesn’t make sense

to do business in this country anymore.

I know that Boeing is one of your constituents as well, Congressman, and every day they have to spend a tremendous amount of

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their resources trying to ensure that they comply with regulations

and they spend an enormous amount of resources in doing that.

Mr. MEEHAN. You used the language common sense——

Mr. TIMMONS. Yes.

Mr. MEEHAN [continuing]. And it is something that we all care

about——

Mr. TIMMONS. We do.

Mr. MEEHAN [continuing]. Quality, to be sure; we need to focus

on it. But CAA regulations right now, in my very refineries, are requiring the facilities to install advanced technologies. But by virtue

of doing that they are going to use more energy than they currently

do for the process, then they are going to be penalized for the

greenhouse gas that is associated with the very technologies that

they are being required to put in by the EPA. Where is the common sense in that process that the result of that means that those

jobs are going to be competing with the Nigerian oil that doesn’t

have the same requirement that is going to take that market away

from the workers in my district?

Mr. TIMMONS. Yes. I don’t think you would see me defending that

as a common sense move.

Mr. MEEHAN. May I just ask one last question, Mr. Chairman?

Winners and losers. They have picked two industries when they decided EPA——

Mr. TIMMONS. So far.

Mr. MEEHAN [continuing]. Refineries, when they were required to

do the new source performance standards. How can agencies pick

winners and losers in the private market with regard to which

regulations——

Chairman ISSA. The gentleman can answer briefly.

Mr. TIMMONS. Well, I think the bottom line, Congressman, is

they shouldn’t, and the free market should be allowed to determine

who is going to succeed in our economy, and by so doing I think

we will end up creating long-term economic growth.

Chairman ISSA. Thank you.

The gentleman from Cleveland, OH, Mr. Kucinich, for 5 minutes.

Mr. KUCINICH. Thank you, Mr. Chairman.

In a recent letter in the Wall Street Journal, a group of powerful

utility companies, including Pacific Gas & Electric, Exelon Corp.,

and Constellation Energy Group, stated that, in their experience,

‘‘regulations can yield important economic benefits, including job

creation, while maintaining reliability.’’ As we are looking for innovative ways to create more jobs, we should consider that regulations can create jobs.

According to the economist Evan Goldstein, ‘‘The one comprehensive estimate available suggests that in 1992 just under 4 million

jobs were directly or indirectly related to pollution abatement and

environmental protection in the United States.’’ In addition, a report issued this week by Serius and the Political Economy Research Institute found that certain EPA rules proposed under the

Clean Air Act ‘‘will lead to a net job gain’’ in 36 eastern States

evaluated and studied. The report also finds that between 2010 and

2015 capital investments in pollution controls and new power generation will result in 1.46 million jobs.

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Mr. Timmons, in your testimony you express concern about the

high cost of pollution abatement. I understand that these costs are

difficult for a company, especially a small one, but there are studies

now that say that the ultimate effect is a net increase in jobs.

Would you dispute that as a possibility?

Mr. TIMMONS. Well, I would say that when we evaluated the capand-trade bill from the last Congress, our study was a net study

and it showed a 2 million job loss.

Mr. KUCINICH. What about these other studies? Do you dispute

that these studies have any validity at all?

Mr. TIMMONS. Well, I can tell you what our study said.

Mr. KUCINICH. But what about these other studies? Do you look

at any other study or do you only know your study?

Mr. TIMMONS. I haven’t seen those particular studies.

Mr. KUCINICH. OK. Well, would you be interested in those studies?

Mr. TIMMONS. Send them along; I would love to see them.

Mr. KUCINICH. Good. I will.

A 2009 study conducted by the Center for American Progress

found that, compared to overall spending in the economy, on a per

dollar basis, spending on environmental protection and cleanup employs more than twice as many workers in construction, 11 percent

versus 4 percent, and 25 percent more in manufacturing, 20 percent versus 16 percent. This year, the Bureau of Labor Statistics

2011 Employment Survey Data shows that the manufacturing sector added 49,000 jobs in January, up from 9,000 in January of last

year.

I bring this up because I think it is important that we have a

serious discussion about job creation while factoring in studies that

are available that show that, in some cases, regulations can create

jobs. And I don’t think we can have a serious debate about the cost

of regulations, including EPA regulations, without acknowledging

their positive impact.

There is another element here that doesn’t get much discussion,

and that is when we are talking about the benefits of regulation

and the positive effect, job-creating effects of regulation, I think if

you are looking at the cost of regulations, you need to monetize the

benefits of regulation, particularly with respect to public health, because if an industry is creating pollution that ruins someone’s

health, that, in effect, is a payment that individual person is making to that industry with their health. That is a cost shifted on to

the society.

So I hope that as we get into this discussion about regulation,

we take a broader view about cost-benefit, and I yield back the balance of my time. Thank you.

Chairman ISSA. I thank the gentleman.

The Chair now recognizes Mr. Gowdy for 5 minutes.

Mr. GOWDY. Thank you, Mr. Chairman.

Mr. Fredrich, how are you?

Mr. FREDRICH. Dandy.

Mr. GOWDY. If my information is correct, your company was able

to come back from the brink. Can you tell us how you accomplished

that; whether government was helpful or not helpful? Tell us about

your odyssey back.

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Mr. FREDRICH. Well, the government was helpful in putting us

to the brink, but not helpful in getting us out. I dispute this whole

financial regulation issue about why the financial sector crashed.

I mean, it was bad loans that were made which ultimately triggered this whole thing, and that is what caused a problem for us

in 2009. We were running 2 days a week, 3 days a week. Our salaried people found out what it was like to get paid for 2 days a week

and not their full salary.

But it was just sheer, the ability to cut back our internal costs,

and we did it on the backs of everybody, including myself. I still

haven’t raised my draw back to where it was in 2008 because I

can’t afford it. So everybody felt the pain. But it was all labor. And,

really, when you want to cut something in a hurry, that is what

you have to cut; there is no way around that. And what you cannot

cut is what we are talking about here today, which is burden, regulatory burden. That is a fixed cost. It is so fixed that you can’t even

identify it to cut it.

So we did it through guts. Guts. And we didn’t lose any people.

The economy was so bad that we didn’t have people leave and go

somewhere else; there was nowhere to go. So, fortunately, we kept

our core group together.

Mr. GOWDY. Well, thank you and we commend you.

Mr. Timmons, I come from a State, South Carolina, that while

we have a lot of manufacturing jobs, we have lost a lot of manufacturing jobs, and particularly in the upstate of South Carolina. Can

you give me some specific examples of particularly pernicious regulations that are impacting the manufacturing sector? I know about

tax, I know about litigation. Help me with the regulatory side.

What can we change to help create manufacturing jobs or keep the

ones we have in the upstate of South Carolina?

Mr. TIMMONS. I think the most important thing we can do at this

juncture is to ensure that additional regulations that are costly do

not get imposed on manufacturers, because, as I have stated earlier

and you have just mentioned as well, the overall cost of doing business in the United States is 18 percent more expensive than it is

among our major trading partners and developed economies. That

cost does not include the cost of labor because we believe that a

higher standard of living is desirable. It does include, however, in

addition to energy cost and tort cost, it does include regulatory

costs as well.

I welcome the President’s Executive order because it asks all

agencies to look at the regulatory burden overall and evaluate each

existing regulation’s impacting on jobs and the economy, and I

think that study will help us determine exactly where changes can

be made. When I was in State government, one of the things that

we chose to do was to evaluate, literally, each and every regulation.

It was the State of Virginia and we were constantly competing

against the State of South Carolina to see who could be the most

competitive, and we chose to look at every regulation on the books,

and 75 percent of our regulations over this 3 year period were either amended or eliminated so as to make the economic environment more conducive in Virginia for investment.

So I think the first step is this Executive order, and we will see

what that produces. I have indicated several regulations that we

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have concerns with in my written testimony. I would be happy to

provide another copy of that, but it is a rather lengthy list, and we

can also get you some specific costs.

Mr. GOWDY. I only have 30 seconds. Let me ask you more questions. My constituents are in one accord that regulations are stifling their ability to create jobs. They are about equally divided on

whether or not those are unintended consequences or whether it is

part of a broader scheme to get through regulatory mechanisms

which you cannot get through legislative mechanisms. What is your

judgment on that? Are these unintended consequences or is this

getting through regulation which you can’t get in elections?

Mr. TIMMONS. There are many regulations on the books that

have come about through the regulatory process and not through

congressional action, that is for sure. The Environmental Protection Agency has a proposal to regulate greenhouse gases. That

clearly did not make it through the legislative process, and it would

be an example of legislating through regulation.

Mr. GOWDY. Thank you, Mr. Chairman.

Chairman ISSA. I thank the gentleman.

The gentleman from Chicago, Mr. Quigley.

Mr. QUIGLEY. Thank you, Mr. Chairman. Mr. Chairman, in the

112th Congress, this is now my third meeting already that I have

participated in regarding regulation, and I appreciate that because

regulation is important. We are starting to see themes in these

meetings, though, that regulation is important, but it is a process

and there is a balance involved, and I too, Mr. Chairman, agree

with the President’s Executive order and his movement toward a

balanced approach.

I just think the tenor and tone comes across so differently across

the aisle that we need to try to strike a more subtle balance. I defy

anyone in this room to not think about regulation the next time

they get on a commuter airliner. How much sleep did that pilot get

last night? And if you come to my hometown, Chicago, I defy you

not to think about regulation when you drink tap water. We have

now found chromium not in the lake, but in the tap water three

times what most people consider to be a healthy level. And if you

don’t want to think about it now or then, think about it in the

morning when you have your eggs. A million cases of salmonella.

So I understand the balance you are talking about because jobs

are at stake, but you have to recognize lives are at stake. The only

thing I have learned in these three meetings has reinforced with

me it is a complicated world now. I think people yearn for a day

gone by when things weren’t so complicated. But we weren’t flying

then; we weren’t trying to go into space; we didn’t have nuclear reactors; and we didn’t have the chemical industry, which has many

benefits. We didn’t have those back then. So we are trying to strike

this balance and it is a process, and it doesn’t work and we are not

always in agreement. And I am glad Mr. Kucinich brought out the

energy companies that are in favor of the global warming, as you

call it, regulations that are being discussed.

But let me just go back in history, Mr. Timmons, to point out—

and I understand we all don’t get it right. You recall in 1990 we

passed the Clean Air Act amendments under George H.W. Bush

and the National Association of Manufacturers said at the time,

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‘‘We will have, when this passes, the dubious distinction of moving

the United States toward the status of a second class industrial

power by the end of the century.’’ The Business Roundtable Commission did a study on that law and said that we are going to lose

at least 200,000 jobs, and perhaps as many as 2 million. Four years

later, only 2,363 displaced workers, all of them coal miners, applied

for aid in the belief their unemployment had been caused by the

act.

Looking back on the first 10 years of the Nation’s experience

with the 1990 program, the agency found a total loss of 4,000 coal

miner jobs. The great majority of the losses, it was concluded, were

the result of mechanization and productivity increases, not regulation.

So I understand what if they had been right is important, but

I at least give some benefit to those attempting to regulate, because

we could also have a panel here talking about lives lost on any sort

of industry as a result of not regulating appropriately.

Mr. TIMMONS. So I have been on the job 1 month, so I am hoping

that you won’t ask me to talk in detail about those 1990 comments.

But what I can say, Congressman, is we are not disputing that regulation can be beneficial. That is not really the issue, as I see it,

at hand. I think the issue is making sure that regulations make

sense, making sure that they are balanced, and, frankly, making

sure that regulating agencies don’t overreach.

There is a cost of doing business. I have talked about the 18 percent. Some of that cost we understand is going to be necessary, but

we should always have a very careful review of every regulation to

any thoughtful analysis is going to include all benefits, but also all

costs. So I am not sitting here saying that we should only look at

cost. I can’t imagine any manufacturer would say that either.

But I do think that we have to—as Members of Congress, you

have so many competing demands that you have to deal with. The

prism that we need to look through as an association is the prism

of jobs, and creating jobs for Americans and ensuring that every

American who wants a job has the ability to get a job. And the way

we do that is by growing our enterprises, by investing capital into

new facilities and providing more opportunities. So that is the

prism that I am going to look at things through, and I am sure that

there are prisms that others look through, and I want to work with

those folks in making sure that we have meaningful regulations

that make economic sense and that are not overly burdensome.

Mr. QUIGLEY. Toward all those ends, I look forward to working

with you.

Mr. TIMMONS. Thank you.

Mr. NASSIF. If I could just make a comment on that. In many

cases it is not the regulation which is so problematic; in some cases

it is. But for us it is the action of the regulators in interpreting and

implementing the regulations, and that is where I think we need

the government oversight.

Chairman ISSA. I thank the gentleman.

The Chair recognizes the gentleman from Florida, Mr. Ross.

Mr. ROSS. Thank you, Mr. Chairman.

Mr. Timmons, as I was a kid growing up, I remember that manufacturing was the muscle that drove the American economy; that

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we were No. 1 in this country producing natural resources but,

more importantly, manufacturing here and doing a wonderful job

at it.

My father, when I grew up, was in a tile manufacturing plant in

Florida. The home base in my hometown was called Florida Tile.

Florida Tile no longer exists in the State of Florida as a manufacturer, and the reason is for a myriad of reasons, whether it be regulations, whether it be taxes, whether it be the labor market. But

it did have to do with exports; trying to compete globally.

And I notice that the Manufacturing Association has indicated

that the export control regulations have adversely impacted manufacturing in the United States. How would you recommend that we

address that and what could be done to modernize this so that we

can have a balance with our export control regulations?

Mr. TIMMONS. I appreciate your story, Mr. Ross. I have a similar

story. My grandfather stood in line for 6 months during the Great

Depression to get a job at a manufacturing facility. He finally was

offered that job because the managers there were just sick and

tired of seeing him, so his persistence paid off. But his goal was

the goal of manufacturers today, and that was to provide a better

quality of life for his family, and he gave me many opportunities,

he gave my family many opportunities that so many others didn’t.

As far as export controls, our goal is to—and this is another area,

by the way, where the administration has been working very cooperatively with the manufacturing sector, but there have been some

bumps in the road, and it is really in terms of implementation, trying to ensure that there are not multiple lists that have to be reviewed, but one list; that there are not multiple processes or multiple permitting processes for the same product being exported, just

being able to have one permit that can carry the day for the future.

So it is really more of a process question; it is not so much the

goal. The goal obviously is to make sure that we have an export

policy that makes sense and protects our national security, but on

items that, frankly, don’t have that much of a national security

concern or that are being produced by other countries around the

world and those countries are freely exporting that product, we

really need to ensure that American businesses have the ability to

export those products very quickly and without a lot of paperwork.

Mr. ROSS. Thank you.

Mr. Alford, in your opening remarks you hit on something that

kind of struck a chord with me, and it had to do with gainful employment rules. When you talk about gainful employment rules, it

is interesting coming from the chamber’s perspective because that

is something that is impacted by the Department of Education, not

a traditional regulation that would impact industry. But it also impacts employers who are seeking to find educated high school laborers that cannot get their education because the government prevents them from getting funding to do that because of these gainful

employment rules. Could you expand on that a little bit and tell

me more of how we can change that?

Mr. ALFORD. Yes. And the funny thing is, not really funny, but

the Federal Government took over Sallie Mae student loans and

here we are, the Federal Government is saying we are going to

deny your students student loans because the payback record in

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the last few years is not as good as the students at Harvard or

Ohio State and what have you. These are inner city kids, they are

disadvantaged; they are broke, they are poor. Of course their credit

is not going to be as pristine as an upper middle-class person

would be. You should expect that. There is a risk factor. Tack on

a little more interest, cover your risk.

But don’t deny them the right to finance their education. Many,

it is their last chance. It is their last chance. They can go get a job

at one of the members of National Association of Manufacturers or

they can sell cocaine. One or the other, they are going to make a

living, so why not encourage them to get educated and to live a

gainful life? This rule is mean and cruel. And what I really like

about it, we put out an ad in the Washington Post with Reverend

Jesse Jackson, who we and he don’t always agree on many things,

but Reverend Jesse Jackson and Congressman Alcee Hastings. It

is just common sense when you look at this thing.

Mr. ROSS. I agree.

One quick question I want to ask Mr. Buschur; I have 6 seconds.

In 1978 you started your business. You have maintained it for 43

years. Would you do it all over again, knowing what the regulatory

environment is today?

Mr. BUSCHUR. No, sir, I would not.

Mr. ROSS. Thank you.

Mr. BUSCHUR. No, sir, I would not. I discussed it earlier.

Mr. ROSS. Thank you.

Chairman ISSA. The gentleman from Kentucky, who has been

very patient, Mr. Yarmuth.

Mr. YARMUTH. Thank you, Mr. Chairman. We are very patient

in Kentucky.

I will throw out a question which is somewhat rhetorical, but I

would like to hear your answer. There was obviously not a lot of

love lost with the EPA and this panel. Do any of you want to see

the EPA eliminated? Anyone want to see the Clean Air Act repealed? OK. Just wanted to get that on the record. It shows that

no one indicated either one of those.

I need to set the record straight a little bit, at least offer a different perspective on the impact of Waxman-Markey. I come from

a district, Mr. Fredrich, probably more reliant on coal-generated

electricity than yours. Ninety-two percent of the power in Kentucky

is generated by coal; we take a lot of it out of the ground. I also

happen to have in my district the consumer products division of

General Electric, a large manufacturing facility, Mr. Timmons, one

of your most esteemed members; two Ford manufacturing facilities;

and we also are the global hub of UPS.

And during the debate on Waxman-Markey, after the bill was

modified in such a way that the actual permits for emitting carbon

dioxide would not cost anything, we would give them out, I went

to the people at Ford, the people at GE, UPS. The people at GE

were very enthusiastic about the bill, they supported it; the people

at Ford were very enthusiastic about it, they supported the bill;

and UPS was neutral on the bill.

I talked to the University of Louisville, city government, Jefferson County public school system, which is 100,000 students, all of

them big users of electricity. Not one of them opposed the bill, they

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were fine with it. Then I went to our Kentucky energy cabinet,

asked them what they thought. They said ‘‘we think this bill, if enacted, will create tens of thousands of new jobs.’’ We asked our

local power company what the impact on consumers would be, and

they said we believe that—and this was 2009, of course—we believe

that if a consumer does nothing else, so they don’t make any energy efficiencies, they don’t insulate, they don’t replace their light

bulbs, they don’t do anything, that the cost will be $15 a month per

household in 2019, 10 years later, so $180 a year.

So I just wanted to get a different perspective on the impact of

that legislation, because the reason EPA is acting now is because

the Congress failed to act and the Supreme Court mandated that

the Clean Air Act be respected. I just wanted to get that on the

record.

Mr. Fredrich, you talked about and, Mr. Alford, you echoed that

one of your primary priorities would be tort reform?

Mr. FREDRICH. Correct.

Mr. YARMUTH. What would you like to see us do?

Mr. FREDRICH. Loser pays. That simple.

Mr. YARMUTH. Loser pays.

Mr. Alford, is that——

Mr. ALFORD. Yes. And a good example would be Mississippi. Governor Halee Barber helped enact some anti-tort reform—not antitort, but tort reform in Mississippi and the result has been a big

growth in business in Mississippi. Companies are moving to Mississippi.

Mr. YARMUTH. And that was a State-implemented rule and the

Federal Government has never been involved in tort law in 220

years, isn’t that correct, 230 years? I mean, it has always been a

State matter. So you would want to see us in Congress enact a national law in that area, is that what you are saying, Mr. Fredrich?

Mr. FREDRICH. Yes.

Mr. YARMUTH. OK. And what would you do to someone who, because, obviously, when a big company, whether it is General Electric or Ford, I am sure they never do anything wrong, but large

companies have access to incredible legal resources and an average

citizen—we heard about babies in cribs; we know that this has

happened—how would they get access to adequate legal help when

they actually are damaged severely?

Mr. FREDRICH. Well, they would continue to get access if the case

was valid. But right now there are cases filed that are filed only

for the sake of shaking somebody down because it is cheaper to pay

than to carry it through to trial.

Mr. YARMUTH. Well, it is a shame that Mr. Braley isn’t here, because he would have a wonderful conversation on that score.

Just before I close my time, would you make any comment, Mr.

Timmons, Mr. Alford? Has your organization or any of yours ever

advocated some alternative approach to dealing with carbon emissions, or you just don’t think that is a legitimate need?

Mr. TIMMONS. Well, actually, yes, we have. And I do think that

the story of manufacturing is a great one, because since 1990 energy consumption by manufacturers, by the industrial sector, has

only increased 1 percent. That has been achieved through efficiency

measures, and those measures are some that we support. We beVerDate 11-MAY-2000 13:19 Aug 11, 2011 Jkt 000000 PO 00000 Frm 00112 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67568.TXT KATIE PsN: KATIE
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lieve, generally speaking, at the 30,000 foot level, that it makes

more sense to incent the private sector to conserve and to become

more energy efficient, and we think that is a more effective method

of achieving our mutual goals of cleaner air and a cleaner environment than penalties are. So the brief answer to your question is

yes, we do think that there are things that we can do.

Mr. YARMUTH. OK, my time is up.

Chairman ISSA. I thank the gentleman.

Mr. YARMUTH. Thank you, Mr. Chairman.

Chairman ISSA. I now recognize the gentleman from New Hampshire, Mr. Guinta, and would ask him if he would yield to me for

10 seconds.

Mr. GUINTA. Of course I would.

Chairman ISSA. I thank the gentleman.

I might note for the record that Ketam cases, the seven or 800

people who have been sued simply because they failed to remove

a patent that was expired off their product that has led to those

cases costing millions of dollars, that is a tort case, it is clearly

Federal. We do have a big stake in tort reform.

Yield back.

Mr. GUINTA. Thank you very much, Mr. Chairman. To add to

that point, I would say two things. First, in my State of New

Hampshire, to show the fact that there is a bipartisan willingness

to address these liability and tort issues, I would like the committee and these members to know that with regard to liability caps,

New Hampshire, in a bipartisan way, passed those liability caps to

ensure that we could have productive employers and job creation

in the State of New Hampshire.

Second, I would note that the President of the United States, in

his State of the Union Address, addressed the need for medical liability reform. I would argue that we need to expand that into having thoughtful discussions in a bipartisan way to ensure that employers in our country, small business owners in our country can

be more productive.

What I am hearing today is that you want to be empowered to

create more jobs, to have greater certainty for your business plans,

and to pass on, maybe in your circumstance, sir, a company that

you created from the ground up; and I commend that and I appreciate that, and I think that we ought to inspire that in our Nation.

I want to go back to PLAs. I know that it has been discussed

quite a bit, but in New Hampshire we have a $35 million project

that has been held up for over 2 years because of the PLA issue.

It is a Job Corps Center. A Job Corps Center has the ability to do

two things: not only employ several hundred people, but it takes

up to 500 people a year in New Hampshire, who otherwise wouldn’t

be on the path to get a standard high school education, and give

them a skill supported by some of the members of your association,

who would put in high tech equipment, in this circumstance some

defense-related equipment, who can then be productive members of

society. I think that is important. And what is holding that up is

the PLA. And I hopeful that, in working with the Department of

Labor, we can address that particular issue.

So you do have support. I think the country has support. My

hope is that we look at this in a more common sense way and try

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to level the playing field, and I think that is the point that you

were trying to make. If you want to just comment on that.

Mr. BUSCHUR. Yes. Yes, it is. I hear a lot of discussion about the

safety issues and the environment and things like that, and I guess

in our industry those issues are extremely important to us. I look

at a project labor agreement. It does nothing with any of that; all

it does is eliminate 85 percent of the work force from being able

to work on those projects. And history has shown it raises the cost

of the project anywhere from 18 to 22 percent, and typically that

is always taxpayers’ money. It is not private funds, it is the taxpayers that are footing this bill for an unreasonable regulation.

Mr. GUINTA. I would add to that municipalities. For example, for every million dollars they bond, it costs them about $100,000 a

year. So if you think about a $5 to $10 million project, what that

impact would be to a local taxpayer; and that is something that we

should always consider.

Second, relative to OSHA, in 1970 OSHA was established for

many reasons, but one of their prime objectives was to educate.

This is an organization, I believe, that has moved from educating,

which is, in my view, a partnership with employers, to nothing

more than a gotcha agency. And I don’t think anybody here at the

table wants to be unsafe. I think all of you have a responsibility

to be safe and I think you take that seriously. What I would like

to see in the reform, regulatory-wise, OSHA be returned more to

an education-based organization who can help both employer and

employee for safety in the workplace.

And I would ask Mr. Timmons if you would just comment on

that, please.

Mr. TIMMONS. I think you are exactly right that partnership

should be paramount. If partnerships don’t work, then there is the

legislative process and, if necessary, the regulatory process. But

when businesses and government and regulatory agencies work together for a common goal, which is to make us more competitive

to create jobs, everyone ends up succeeding most of the time.

Mr. GUINTA. Thank you, sir.

Thank you, Mr. Chairman.

Chairman ISSA. I now recognize the gentlelady from California,

Ms. Speier, for 5 minutes.

Ms. SPEIER. Thank you, Mr. Chairman, and thank you all for

your participation in this hearing. Let me say at the outset, Mr.

Chairman, that I want to join with you in scrubbing our bureaucracy of outdated regulations. Unfortunately, I don’t think that we

have had that opportunity here to kind of pinpoint what some of

those regulations are. If you would like to provide for us in the

committee those kinds of outdated regulations that may be 10, 20,

30 years old that have no relevance anymore, I am certain that

many of us would like to look at it.

I would also like to add, Mr. Chairman, that the hearing title has

an inbred bias: how do regulations block private sector job growth.

I would have recommended that it would have been preferable to

say how do regulations affect private sector job growth. And let me

start by submitting for the record the Ceres report, which I ask all

of you to read, which basically suggests that the EPA air pollution

rules will generate 11⁄2 million new jobs and that this group is not

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some Hoboken nonprofit; it is a coalition of investors, environmental groups, and other public interest organizations, a group of

95 institutional investors and financial firms from the United

States and Europe managing nearly $10 trillion in assets.

Chairman ISSA. Without objection, so ordered, with a reserve

from the people of Hoboken.

Ms. SPEIER. OK.

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Ms. SPEIER. Next, Mr. Chairman, I would like to submit for the

record a Wall Street Journal letter to the editor that was signed

by the chairman and president and CEO of PG&E Corp., Calpine,

and many others, and in that Wall Street Journal article they say,

contrary to claims that the EPA’s agenda will have negative economic consequences, our companies’ experience complying with air

quality regulations demonstrates that regulations can yield important economic benefits, including job creation, while maintaining

reliability. That too I would like to——

Chairman ISSA. Without objection, if it is delivered to the desk,

it will be included.

[The information referred to follows:]

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Ms. SPEIER. And finally I would like to submit to the committee

and for the record letters from Chrysler, Ford, and General Motors,

all of whom recommend that they embrace the greenhouse gas and

fuel economy announcements by the EPA, again, I think a reflection that America’s businesses are interested in cleaning the air,

making sure it is safe for all Americans, and creating jobs as well.

Having said that, let me start off by saying eight people in my

district died in an explosion in September, fathers and sons, mothers and daughters, a horrific incident that underscored the problem

we have in this country relative to regulations, because, as more

and more is being discovered by the National Transportation Safety

Board—and, I might add, they better not get defunded or reduced

funding in this continuing resolution—what we are finding is that

a specific utility gamed the system so that they would not be subject to greater regulation and the kind of assessment necessary to

test a particular pipe.

So I think that when we look at regulation, we have to look at

it in the context of is it saving lives; is it protecting Americans; is

it cleaning the air; is it cleaning the water. And when we can answer those questions yes, we have to be willing to step up to the

plate.

The truth of the matter is that Germany has a tougher cap-andtrade law than was being considered by this Congress, and while

our exports have been reduced in the last 10 years, the exports as

a percentage of market share in Germany have increased.

So having said all of that, Mr. Chairman, I do have a question,

and it is for Mr. Fredrich. You indicated, Mr. Fredrich, that with

the health care reform legislation you would actually be reducing

the number of jobs in your company, is that correct?

Mr. FREDRICH. Yes. We will lower it to whatever is under the

limit.

Ms. SPEIER. All right. So you would go from 62 to 49 intentionally so that you would not be subject to health care reform, is

that correct?

Mr. FREDRICH. Correct. That is correct.

Ms. SPEIER. Now, you do not offer health insurance to your employees now, I gather?

Mr. FREDRICH. Yes, we do.

Ms. SPEIER. And what do you offer?

Mr. FREDRICH. We offer a high deductible HSA.

Ms. SPEIER. So that is a savings account.

Mr. FREDRICH. Health savings account.

Ms. SPEIER. So they get how many thousands of dollars a year?

Mr. FREDRICH. What do you mean they get?

Ms. SPEIER. Do you put money into their health savings account?

Mr. FREDRICH. No.

Ms. SPEIER. So you really don’t provide any money from the company in terms of making sure that your employees are insured.

Mr. FREDRICH. Sure we do. Our monthly premium for family cov- erage is $1,000, and we pay 70 percent of it.

Ms. SPEIER. So you pay 70 percent.

Mr. FREDRICH. Of the premium.

Ms. SPEIER. Of the premium. So is it a catastrophic policy? I am

trying to understand.

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Mr. FREDRICH. No. No, it is actually a very good policy because

for normal things like annual checkups or mammograms or

colonoscopies, it pays 100 percent with no deductible at all. But

what it eliminates is people going to the emergency room because

they have a cold, which is just a very expensive way. What it does

try and do is put some consumerism into purchasing medical services, and I feel that is the problem with the system right now; it

is a third-party payor system where people don’t even ask what it

costs. The last time you went to the doctor, did you ask how much

does this cost?

Ms. SPEIER. Well, I actually——

Chairman ISSA. The gentlelady’s time has expired.

Mr. FREDRICH. Oh.

Ms. SPEIER. Thank you, Mr. Chairman.

Chairman ISSA. I thank you.

The gentleman from Texas, Mr. Farenthold.

Mr. FARENTHOLD. Thank you very much, Mr. Chairman.

I wanted to followup on a couple of things that I heard earlier.

I was a small business owner before I came to Congress. I think

the fourth employee I hired was an employee to help me deal with

paperwork; and I was in a service industry that isn’t that highly

regulated. So it starts as simple as filling out the forms for your

first employee and meeting your tax returns, so I understand it

gets in the way of doing what you are passionate about, building

what you want to build or serving the people you want to serve.

We have heard several people say that regulations actually create jobs. I ponder how many of those are bureaucrats and lawyers,

or how many of those just add to the cost of doing business. But

my real question was, Mr. Timmons, I think you said it is 18 percent more expensive to open a factory in the United States, is that

an accurate number?

Mr. TIMMONS. To do business in the United States, yes.

Mr. FARENTHOLD. Does it have to be exactly equal or are your

members willing to pay a slightly higher cost to——

Mr. TIMMONS. To do business in the United States of America?

Absolutely. The question really is where is that sweet spot. I can’t

answer that. Every company has to make that decision on their

own. But what we do know is that we have lost manufacturing

jobs. It wasn’t just during this last recession; it has been over the

last 12, 14 years. And what we are seeing is manufacturers looking

at other industrialized nations and other emerging economies and

saying it makes more sense economically——

Mr. FARENTHOLD. And so as you look at, for instance, environmental regulations, you go over to Mexico, China, wherever you go

that don’t have the same regulations, and it gets into the same air

we breathe anyway.

Mr. TIMMONS. Or they have the same outcome, but their regulations are perhaps administered in a different way and are less costly to administer. I do want to point out, and I have said this several times, but that 18 percent number does not include the cost

of labor. We believe that it makes sense to pay employees more in

the United States because we believe in a higher standard of living

here.

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Mr. FARENTHOLD. And, Mr. Nassif, I think you hit on something

that I wanted to talk a little bit more about too, and I would appreciate the rest of the panel’s input on this. You look at some companies in the travel and entertainment industry. Their employees are

basically threatened with getting fired if they say no to a customer.

When you are dealing with a Federal agency, do you find that the

attitude is we are from the Government, we are here to help you,

how can we find a way for you to come into compliance with these

regulations, or it is just a you are out of compliance with this regulation, you are shut down? Whoever wants to take that.

Mr. NASSIF. Each regulatory agency handles it differently. As I

say, when we are dealing with the Department of Agriculture, we

have a very close relationship and they have a very strong understanding of what our needs are, so there is always a nice honest

dialog. When we are dealing with agencies like the Department of

Labor, there is no such thing as we are your friend, we are here

to help you. We are here to regulate you, we are here to enforce

things, and we are here to punish you if you make even technical

violations.

Mr. ALFORD. That is one of my best bar jokes. You know, where

are you from? I am from Washington, DC, and I have come to help

you. It is guaranteed laughter there. But we are for regulations,

good regulations. We are not against regulations; we are against

onerous, nonsensical, punitive regulations that do not end up in a

solution manner. And if we were to evaluate all our regulations,

pare out the bad regulations, keep the good regulations, we would

be a better country and we would be without 70 percent of the regulations.

Mr. BUSCHUR. Congressman, the example I cited about the lead

paint ruling by the EPA, we had acquired all the necessary permits

for that particular project, State permits, local permits, everything

required was onsite, in place, and the actual field inspector walked

on the job site and said I think this falls underneath the lead RRP

rule and needs to be investigated.

At that point we had no comeback to an OSHA inspector to say,

no, we don’t think so, all the permits, everything is in place. He

saw the paperwork, he signed the paperwork. But he also stopped

the job. The general contractor, as I explained, had to spend approximately $10,000 in suits and gear and training, stopped the

job, slowed the job down down the road, and we find out that the

OSHA inspector was wrong.

Mr. FARENTHOLD. Well, thank you very much. It is almost lunchtime, so I will yield back the short amount of time I have left.

Chairman ISSA. All of us thank you.

We now recognize the gentleman from Massachusetts, Mr.

Tierney, for 5 minutes.

Mr. TIERNEY. Thank you, Mr. Chairman.

This is all very interesting. I think that what we established

early on is everybody here believes in a balanced economy. We

think that there has to be capitalism, but there has to have some

regulation. We want the regulation to be fair, we want it to be

about necessary things, we want it to be balanced. So we have just

spent a couple hours and we will probably spend a couple more

beating that dead horse around and around. But to the extent that

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we are all here to talk about hyperbole, these over-the-top allegations that regulations are just, in and of themselves, bad or whatever, I don’t think it makes a lot of sense.

We had an economic collapse in 2007 that was right on the heels

of probably what was an era known mostly for its excessive deregulation. So that didn’t work very well, and particularly with respect

to the financial services of Wall Street, but it was broader than

that. And now here we are looking at business. In the third quarter

of 2010, U.S. corporate profits were $1.66 trillion, trillion dollars,

up 60 percent. So if we are talking about, oh my God, over-regulation the last 2 years, somebody is going to have to explain to me

how, in spite of all that onerous regulation and the dearth of jobs

and corporate success, they managed to make a 60 percent increase

and $1.66 trillion.

So I think what we want to do is weed out the hyperbole, get

down to it. If we want to have hearings on specific regulations that

we think are onerous or bad, let’s have the hearings. I mean, I

come from a community that can tell you story after story about

the fishing regulations from NOAA. So I am not opposed at all to

looking at those regulations, and we passed regulations and laws

that we proposed to deal with what we think was excessive enforcement, excessive application and bad regulations. So that is what

this committee should be about, not this general hyperbole about

all regulations, and somebody supposedly likes regulations and

somebody doesn’t. It amounts to a bunch of nonsense.

But just to make a point on some of this, the talking points that

we get from some industries on an area that I happen to know

something about that on that, and I don’t want to seem like, Mr.

Alford, I am coming at you, but you were the loudest and the most

aggressive about this, and I want to maybe give you some information that apparently you don’t have, because it seems to me you

were getting the private college talking points back to us.

You made a point about student loans not being taken away from

Sallie Mae and groups like that. We saved $60 billion in taxpayer

money, $60 billion. And what do we do with it? Besides paying

down some on the debt, which is a problem that we all have, we

increased Pell Grants for students who needed to have access to

college; we reduced the interest rates on student loans for students

that need to be able to get through school; we had an increasebased repayment program so that now students can get out of

school and have a set amount of money they pay down their loans,

knowing that it won’t be a barrier to entry and that it can be a

way for them to take a job that they want when they get out and

to stay going on that; and we put money into community colleges

so that they can cooperate with industry and labor and the work

force investment board’s public sector to make sure people have the

skills and education ready to take jobs. Maybe we should have a

hearing about that and go forward.

But you talked also, Mr. Alford, about the student loan default

regulations and private for-profits, so let me tell you a little bit of

information we have had on hearings in the Education Committee

and the information that comes from that. It is set up to protect

students from taking on unsustainable debt. It is a debt that they

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can’t repay. It is to protect the taxpayers from high loan default

rates.

The Higher Education Act specifically put in a provision, and we

wrote it, so we know, career education programs that receive Federal aid must prepare students for a gainful employment in a recognized occupation. Now, regulation doesn’t just target the for-profits; it applies to all of the institutions. It doesn’t affect students’

ability to get a loan; it talks about the universities and the colleges.

Students, they are held accountable for life. If they get a loan to

an institution that doesn’t provide them with the education or

skills to get a job, they can’t shake it. It affects whether they can

buy a house; it affects whether or not they ever have to go into

bankruptcy, which is very difficult for them. It affects every decision they make, their credit rating and so on down the line.

Colleges, however, aren’t generally held accountable at all. So

this regulation doesn’t even target the whole college; it just targets

those programs within the college that have a very low repayment

rate and a very high debt burden to those students. The college eligibility for student aid is tied to a specific credit default rate. You

might want to know that the Cohort default rate for for-profits is

the highest; it is double the national average, it is 25 percent of

the students that go to those institutions default on that. Private

not-for-profits is 7.6 percent, and the public is only 10.8 percent.

For-profits enroll 1 out of every 10 students, but they get $1 out

of every $4 in Federal aid.

So this is all about protecting the taxpayers’ money and protecting those students who end up with a big debt and no job in a place

that they can get it on that.

Now, in 2007, 92 percent of the undergraduates in the for-profits

borrowed——

Chairman ISSA. The gentleman’s time has expired. Is there a

question?

Mr. TIERNEY. No, there is not a question. There is an educational

process going on here since we were talking about the education,

and maybe a suggestion to the chairman that instead of all this hyperbole, we talk about specific regulations that might be a problem

that we can all agree on ought to be addressed. But I am happy

to yield back.

Chairman ISSA. I thank the gentleman.

We will now recognize the gentleman from Pennsylvania who, for

57 years, he and his family have been small business people; I

think that comes out to be since 5 years old he has been a small

businessman, for 5 minutes, Mr. Kelly.

Mr. KELLY. Thank you, Mr. Chairman. First of all, I want to

thank all the panel for being here. It is interesting to get a lesson

from people that are running a business. It is $11⁄2 trillion in the

red each year, year after year, and I am sure you are going to take

that home and really learn from that.

But for people who really do have skin in the game and people

who do survive by doing it on both knees and looking into the

abyss, I have done it myself and I know how close we come each

day to not having our businesses anymore, so would you please, if

you could, just take a few minutes. Because the true trick is not

pulling a rabbit out of the hat, it is putting the rabbit in the hat

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to begin with. And I think that this body needs to understand that

where small business comes from, where business comes from is

not from government, it is from the private sector.

Mr. Buschur, I know what you are going through; I go through

the same thing. My business is down over 35 percent. Mr. Fredrich,

I understand what it is like to look into the abyss, I have done it

many times myself. The magic hours, the bewitching hours, which

most Members of Congress have never had to face because they

don’t sign the front of these checks, is between 2 and 4 a.m., when

your body may be fatigued, but your mind won’t let you sleep.

So, if you could, just walk us through some of the things that you

have had to do to keep your businesses open, keep jobs alive in

your community, and what you have had to do. So each of you if

you could just take a few minutes and maybe educate us on what

we need to hear and what the country has to hear from the people

who truly do lead this country, and that is the small business people.

Mr. BUSCHUR. I guess one of my largest experiences last year

was in order for my company to bid public work and continue to

receive bonding, because of the previous year being extremely poor,

I had to financially put additional six figure dollars into the business so I could secure bonding, which, again, allowed us to bid

those jobs but prevented us from replacing trucks, from replacing

bending equipment, things like that we should have to be more efficient and be on top of our game.

It has just been a real tough battle to survive the problems and

the regulations being slapped on us. In all honesty, I respect what

is being said and I am not anti-safety or anti anything like that;

I just think it needs to be done as a team, and not as someone telling you here is what you are going to do and here is what you have

to do, and there is no explanation for reasons why.

Mr. FREDRICH. Well, you will laugh when you hear this, but one

of the things that I have done is I built, well, I call it the penthouse

in our plant. I live 70 miles from our facility; our facility is in

Manitowoc and I live in Fond du Lac. So I leave on Monday morning from home and I stay in our plant every night, Monday, Tuesday, Wednesday, and Thursday night; then I go home on Fridays.

I used to stay in the fashionable Comfort Inn, but that is $70 a

night and that adds up, so now I am living large; I have a bed, I

have a recliner, I have a 36-inch flat screen TV, and I sleep in the

plant with my dog.

Monetarily, the hardest thing for any business is cash-flow.

When you run out of cash-flow, you are dead; you can’t go anywhere. And I would hear talking about the recovery, we need to get

the banks to lend money so companies can make payroll and hire

people. If you have to borrow money to make your payroll, you are

dead, usually. Maybe there are rare occasions, but you are dead.

So there have been times when I have had—and when we first

started, I said we closed our business 1 month after 9/11 and we

went into a recession, and we almost went out of business; and we

would have had we not been with a privately held bank who knew

us. He knew us as people and we weren’t going to run away from

it; and we never missed an interest payment or a principal payment, but we lost money. And there were many times when I

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would have to write a check on my personal savings to cover payroll. Had to do it.

Or I would have to pay a supplier, because there are some suppliers, you guys don’t know this, but there are some suppliers

which can kill you and others which you can push off. We always

push off like attorneys and accountants and those guys, because

they are not going to get anything from us anyway unless we stay

in business. But raw material suppliers? No, can’t do it. You have

to pay your taxes, you have to pay all your employment taxes. You

don’t do that, you go to jail. And we can’t print any money like you

guys; we can’t turn on the press——

Mr. KELLY. Not all you guys, OK?

Mr. FREDRICH. OK, some of you.

Mr. KELLY. I am with you.

Mr. FREDRICH. Anyway, so it is—and somebody asked the question would you do it all over again. You said no. I would. I love it.

I absolutely love it. It is like a great rush every day. It is full of,

full of frustration, but I love it, and I wouldn’t do anything else.

Mr. KELLY. Well, God bless you for what you are doing. I understand. I have 110 people that rely on me to make sure that every

2 weeks they can cash a check, so I am with you.

Chairman ISSA. I thank the gentleman.

We now recognize the very affable, happy gentleman from Missouri, Mr. Clay.

Mr. CLAY. Thank you, Mr. Chairman, and thanks for conducting

this hearing. You know, I think it is important that our committee’s work be based on fact rather than rhetoric. Recently there

have been many statements asserting that over-regulation has resulted in massive job losses. But, in fact, it was deficient and sometimes nonexistent regulation of the financial sector that resulted in

the financial collapse and loss of more than 8 million jobs. Alan

Greenspan testified before this committee in 2008 about regulation.

Here is what he said: ‘‘I made a mistake in presuming that the

self-interest of organizations, specifically banks and others, were

such that they were best capable of protecting their own shareholders and their equity in their firms.’’ That is why it is so important

that Congress passed the Wall Street reform bill last year to increase transparency and accountability.

Now, a lot of the letters that the committee received from major

companies criticized the Wall Street reform bill, but the provisions

they criticized had little to do with jobs, and let me give you a few

examples. The companies complained about having to disclose CEO

compensation; they complained about having to return bonuses

when corporate earnings were inflated; and they complained about

requiring all companies to disclose payments to foreign governments.

This is a panel-wide question. You know, these provisions are all

about disclosure and transparency, so let’s start with Mr. Buschur.

Do you think disclosing CEO compensation prevents a company

from creating jobs?

Mr. BUSCHUR. I am not sure, sir, it would prevent a company

from creating jobs. I assume you are talking public companies, not

private companies?

Mr. CLAY. Public companies.

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Mr. BUSCHUR. Public companies? As a stockholder of public companies, I think I have that right to have that disclosure, and I

wouldn’t be objectionable to it, and I can’t see what harm it would

do.

Mr. CLAY. OK.

What about you, Mr. Fredrich? Does disclosing CEO

compensation——

Mr. FREDRICH. I think it is no one’s business. It is already disclosed to the Internal Revenue Service. And what I do with my

company, since I take 100 percent of the risk, is my business, not

anybody else’s. And you made one point which I must ask you

about, returning bonuses related to overstated earnings.

Mr. CLAY. Yes.

Mr. FREDRICH. Fannie Mae had that situation, overstated earnings. Bonuses were paid. Were they returned?

Mr. CLAY. Well, they were caught, weren’t they?

Mr. FREDRICH. They were not returned.

Mr. CLAY. They were caught, weren’t they?

How about you, Mr. Alford?

Mr. ALFORD. I have no problems with it, sir. I think it is rather

snoopy, but I have no problems with it.

Mr. CLAY. OK.

How about you, Mr. Nassif?

Mr. NASSIF. Our business is as an association, we are not forprofit, but we run several for-profit corporations. I believe that people who are involved in public corporations should disclose all compensation; people in government should disclose all compensation;

people who are taking Federal funds based upon needs may need

to disclose that same compensation because they need to justify the

need for the loan.

Mr. CLAY. Thank you for your response.

Mr. Timmons.

Mr. TIMMONS. Yes, Mr. Clay. All the issues that you brought up

are not ones that were addressed in our letter, and you also talked

about the financial services reform legislation. Obviously, that is

not the industry that we represent, so we did not oppose or support

that legislation. I think that arguments can be made on both sides

of the question, on the question that you asked specifically, and one

thing that I think is very important is that any regulatory requirements not create a situation where a political argument could be

made or a populist argument could be made against a company and

take the company off of its mission to create the products that they

are trying to create. And sometimes I think that type of information can cause that.

Mr. CLAY. Mr. Timmons, since we are on the subject of job creation, what are your thoughts and NAM’s on the outsourcing of

American jobs?

Mr. TIMMONS. One of the points that I made earlier, sir, was that

it is 18 percent more expensive to do business in the United States

when you don’t factor in the cost of labor, but you are looking at

the cost of regulation, you are looking at the cost of energy in this

country, and you are looking at tort costs. And what we see is that

many companies are having to make very painful decisions to locate elsewhere not only to be closer to their customer base, but to

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be able to compete and succeed in a very competitive international

marketplace. We want jobs to be created here in this country; that

is why we exist. We want to see manufacturing flourish in the

United States and we want it to continue to grow and to be a vital

part of economic growth and job creation here.

Mr. CLAY. And that is why you fought so hard in closing tax incentives, to stop outsourcing? Your association has fought hard to

stop tax incentives——

Mr. TIMMONS. To stop what?

Mr. CLAY [continuing]. For outsourcing. For outsourcing jobs.

Mr. TIMMONS. What specific piece of legislation are you talking

about?

Mr. CLAY. Well, last year you opposed the payroll tax holiday

and then——

Mr. TIMMONS. I am not sure that is correct, sir.

Mr. CLAY. Yes you did.

Mr. TIMMONS. But I would be happy to——

Mr. CLAY. You fought closing tax incentives to stop outsourcing

of American jobs.

Mr. TIMMONS. We may have some disagreements on exactly what

issue you are talking about,——

Mr. CLAY. OK, well——

Mr. TIMMONS [continuing]. But I would be happy to talk to you

afterwards.

Mr. CLAY. Yes. I will share it with you.

Mr. TIMMONS. Thank you.

Mr. CLAY. Thank you.

I yield back.

Chairman ISSA. Would the gentleman yield? Were the gentleman’s questions on pay compensation? I have the actual report. Are

you speaking to the two letters that came in from American Express and the Business Roundtable, out of over 300 letters, that referred to the golden parachute compensation and the pay ratio in

the Dodd-Frank bill? Are those the items you were referring to?

Mr. CLAY. Yes.

Chairman ISSA. OK, so it is two out of three hundred and some

letters, 2,000 pages. OK, I thank the gentleman.

We now recognize the gentleman from Michigan, Mr. Walberg.

Mr. WALBERG. Thank you, Mr. Chairman, and thank you to the

panelists for being here. Appreciate your candidness, appreciate

your willingness to come and deal with these issues of concern.

Mr. Timmons, I thank you for your testimony. It is clear that we

both share some key concerns over how OSHA is carrying out its

regulatory responsibilities and how it can be dealt with, particularly as subcommittee chair for work force protections on the Education and Workforce Committee. I am interested in your comments. I will be hosting or conducting a hearing next week investigating OSHA’s particular regulatory agenda and its impact on job

creation, so I appreciate in your testimony you pointing out how a

single company could be burdened with a $1 billion price tag for

compliance costs with the proposed noise regulation.

Could you describe in more detail, if possible, what administrative or engineering controls your members would have to create in

order to comply with that noise proposal?

155

Mr. TIMMONS. I think each company looks at what they would

have to do, so I can’t say specifically. But what I can say is that—

and I was in one of our companies just about a month ago, and

they were not aware of this particular regulation that was being

considered, and they have noise abatement procedures, the little

foam earplugs you have probably seen, and they actually have a

medical facility on campus to ensure that—well, for many reasons,

but one of the things that facility does is to make sure that those

devices are working appropriately. I don’t know what the cost of

those are, but they are probably less than a quarter a day per

worker.

And when I asked that particular company what they would

have to do to get their noise level down to about 90 decibels, which

is, I believe, what the regulation was calling for, that is also about

the sound of a flute being played over a prolonged period of time,

they nearly hit the floor when they started thinking about it and

what they would have to do, and whether technology even existed

to be able to do that.

So it was a stark realization on their part that the investment

they would have to make would be very severe, would make them

less competitive and potentially cost jobs. But I can try to get you

some specific information on the components and what those components would be for representative manufacturing facilities.

Mr. WALBERG. I would appreciate that. Thank you.

Mr. Fredrich, thank you for your testimony and thank you for

using your dime to come on out here; I appreciate it.

Mr. FREDRICH. You are welcome.

Mr. WALBERG. I assume that your employee lead compliance efforts are effective in preventing injuries and illnesses. Could you

expand on the steps you take to ensure employee safety?

Mr. FREDRICH. We have a safety committee and it is, I think, 8

or 10 people from all over our plant. We have some management

people, people who run machines, supervisors, and what we do

every month is we walk around the plant, 65,000 square feet, and

we look for problems. We look for areas that could cause an injury.

Then we document those and then we give any changes or the fixes

that are required to our maintenance people, and that is their first

priority to fix that.

In addition to that, once a quarter our worker’s comp carrier

comes into our plant. Somebody mentioned OSHA being more of an

educator. Well, the worker’s comp carriers do the same thing. I

mean, they are an educator, and it is always good to have somebody else look at your plant, because they see things that you overlook. It always happens.

Mr. WALBERG. And you do this voluntarily, what you are telling

us?

Mr. FREDRICH. Oh, absolutely. Yes. The last thing we want to do

is have somebody hurt. I mean, the worst thing that happened to

us was we had one fellow cut two fingers off, and he did it by wrapping a rubber band around a safety switch on a press. So he circumvented the safety mechanism and he cut his fingers off. I

mean, that was bad, but I don’t know what you do to protect yourself against something like that.

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But it is a big cost for us and we have a strong, strong incentive

to reduce that cost because it literally costs more than our health

insurance. And we have the ability to manage it, and that is the

key; we can manage it and we can reduce our rating. You are familiar with the MOD ratings for manufacturers. Our MOD rating

is .93. If we can get that down to 0.7 or 0.6, then our premium is

down and we save money, and we can only do that by having a safe

environment.

Mr. WALBERG. Do you pay out incentives? Do you pay out incentives for——

Mr. FREDRICH. We do. Absolutely. If we don’t have a work-related injury, a loss time injury, we pay $15 a month cash to everybody. If we do have a work-related injury, it kind of starts over;

you start at zero, then it goes to $5, then $10, and then $15.

Mr. WALBERG. Thank you.

And thanks for the extended time.

Chairman ISSA. I thank the gentleman.

The very patient gentleman from Oklahoma, Mr. Lankford, for 5

minutes.

Mr. LANKFORD. Thank you, Mr. Chairman.

Since it is lunchtime, let me start by talking about food and

fiber. Can we do that? And let’s talk about an agriculture question.

Mr. Nassif, thank you for being here and, for all of you, thank you

for being here.

Would you guess, and just give me a ballpark guess, based on the

regulations that are coming down and that had been coming down

onto the agricultural industry, on the effect it would have on the

cost of food and also the number of jobs that are affected, based on

the regulations that have happened? And you can pick any time period, the last 10 years, 5 years, whatever it may be.

Mr. NASSIF. Well, clearly, the cost of adhering to the regulations

limits the amount of capital that is available for investment in

technology, in conservation, in the environment, and in adding

more jobs to the work force. Because agriculture is so diverse, there

is no way to say what it is for agriculture. I represent the fresh

produce people. We grow fresh fruits, vegetables, and tree nuts like

almonds and walnuts; and each of those industries is different. We

have about 300 different commodities that we represent. Each commodity is different.

And the effect on regulations and the profitability is different depending on what growing region you are from and what the climate

is during that particular growing region. But I think the thing people have to understand is that for the growers the margin of profit

may be 2 percent, so there is not a lot of room for that. And as I

stated earlier, we don’t set prices, so the more cost we have added,

the less likely we are going to be competitive, which means that

the retailers and the food service companies are less likely to buy

our products.

Mr. LANKFORD. So would you say that the regulatory environment is increasing the number of jobs in agriculture or decreasing

the number of jobs in agriculture?

Mr. NASSIF. Only administrative jobs.

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Mr. LANKFORD. OK. So if you had the choice of hiring another

compliance officer or hiring another person to actually handle product, which would you choose?

Mr. NASSIF. Well, we would much rather hire people to handle

product, but sometimes we are forced to do the other.

Mr. LANKFORD. Right. Jobs are being created, but they are in

compliance officers, basically fulfilling regulatory requirements, is

what you are saying on that.

Mr. NASSIF. Yes. Big increase in employment in that sector.

Mr. LANKFORD. OK.

Just as a random question for everybody, if you had to, right

now, make a decision based on the regulatory environment, to hire

a person or to put a robot in that place to do it, it is an interesting

thought to think. If you could just avoid all the regulations, not

have to deal with all the regulations, I am just going to put a robot

in that spot to do that same job, would there be a tendency among

anyone to say it is almost safer to put a robot there than it is a

person, because then I wouldn’t have all the OSHA requirements,

all the additional stuff that is added to it as well?

Mr. NASSIF. I think there is certainly a move toward increased

technology because of the problems created by the regulatory burdens in hiring more people, so it is a disincentive to hire those people and an incentive to do more technology and——

Mr. LANKFORD. Just to do it in mechanized so I don’t have to

deal with all that regulation.

Mr. NASSIF. Yes.

Mr. LANKFORD. Were you going to say something as well, Mr.

Fredrich, or someone else?

Mr. FREDRICH. We are installing a robot right now.

Mr. LANKFORD. OK. And that is somewhat just to avoid all the

regulatory requirements that are there. Obviously, you have a onetime purchase for that person, then you don’t have to deal with all

the long-term costs and things with that, or is there some other

reason for that?

Mr. FREDRICH. Productivity.

Mr. LANKFORD. OK.

Mr. FREDRICH. It is productivity.

Mr. LANKFORD. OK.

Mr. FREDRICH. But, you know, if we didn’t have the robot, we

would have to have two people on one press, so now we have one.

But, you know, we don’t get rid of that person; we hopefully have

another job for him.

Mr. LANKFORD. Right.

Mr. TIMMONS. Productivity gives you the ability to enhance your

operations elsewhere and hopefully hire more people.

Mr. LANKFORD. Hopefully so. Let me ask something of you. The

predictability of the regulations that are coming. I would assume

you don’t wake up every morning, read the newspaper, and then

go read the government Web site to find out new regulations are

coming onboard; you have trade agencies and such that are helping

you take care of that. Is there a predictable schedule that you can

look at and say I know every 6 months or every year I am going

to get some new list, or do they seem to come all the time? And

anyone can respond to that.

158

Mr. ALFORD. With this administration, it is lightning speed and

always a surprising group or mass of new regulations. It is wild.

It is a runaway freight train.

Mr. LANKFORD. Would it help you to have some sort of predictability to say new regulations come out at a certain moment, and

that way you are not having to worry about every day the rules are

changing on me or the rumor the rules are changing?

Mr. ALFORD. That would be very helpful, sir.

Mr. LANKFORD. OK. For anyone else would that be helpful to

you, to have some sort of predictability?

Mr. BUSCHUR. It would be tremendously helpful. In our industry,

in the construction industry, we are fighting the same issues; there

are rules and regulations coming out every day that you hope you

are within the guidelines of, but there is no way you can practically

keep up with what is happening at the speed it is happening right

now.

Mr. LANKFORD. OK. And you are dealing with both State regulations, I assume, and also Federal regulations. Do you deal with

Federal regulations that the State and the Federal are in conflict

or they are trying to regulate the same thing or the same practice?

Mr. BUSCHUR. Absolutely.

Mr. LANKFORD. Anyone else dealing with that as well?

Mr. NASSIF. Yes, we are.

Mr. LANKFORD. OK.

Mr. TIMMONS. Sure, you always deal with that. On your question

of certainty, let’s look at the EPA regulations that were set 5 years

ago, or 2 years ago, pardon me, and they were supposed to be in

effect for a number of years, and the agency decided to reopen

those regulations.

I think that is another thing to look at. If a regulation is set, it

needs to be set, because, from the manufacturing sector, we try to

align our businesses with the regulatory regime that we know.

Now, if we are trying to look at every regulation and see what

makes sense from a competitiveness standpoint, and we are going

to increase competitiveness, then that makes sense. But if it is just

simply to increase the regulatory threshold, that really doesn’t

make sense and it harms our ability to respond appropriately to

the regulatory regime.

Mr. LANKFORD. Terrific. Thank you.

Mr. NASSIF. When I became president of Western Growers, one

of the things I vowed to do was to be more proactive and not so

reactive, because that is what agriculture had been. I can tell you

I failed at that miserably, because there is so much to have to react

to, so many new rules and regulations constantly, from across the

board, State, Federal, local regulations, that it is impossible to be

as proactive as is necessary to achieve the economic goals of an association.

Mr. LANKFORD. Terrific. Thank you. Thank you very much, gentlemen.

Chairman ISSA. I thank the gentleman.

I now recognize the ranking member.

Mr. CUMMINGS. I want to thank the chairman for yielding. Mr.

Chairman, I just would like to correct the record on an important

issue.

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Earlier in the hearing we heard about a letter from Stanley

‘‘Goose’’ Stewart, a coal miner injured in the Upper Branch Mine

in West Virginia. His letter was very compelling and he argued in

favor of greater regulation of coal mining companies. The chairman, you made a statement, and I want to just clarify it. You said

that mine safety was not raised in any of the responses the committee received. In support of this statement you entered into the

record the appendix of the report your staff prepared for today’s

hearing.

Mr. Chairman, the fact is that one of the witnesses here today,

the Mercatus Center, did criticize the proposed mining regulation

in its submission to the committee. In addition, the appendix you

entered into the record states on page 82 that the Business Roundtable also raised concerns with rules that require mining companies to disclose information about mine safety and health standards. So Mr. Stewart’s letter was right on point.

And just for clarification sake, Mr. Chairman, you were talking

to Congressman Lacy Clay and you mentioned that there were 2

of the 300 responses from the Business Roundtable that represents—but we want to keep in mind that they represent more

than—and I think this was with regard to compensation, executive

compensation. They represent 13 million employees, $6 trillion in

annual revenue, and member companies comprise nearly one-third

of the total value of the U.S. stock market. So just wanted to just

for clarification sake.

Chairman ISSA. I thank the gentleman.

Mr. CUMMINGS. Appreciate it.

Chairman ISSA. And I will be brief in my closing here. Mercatus

we will hear from later. The Business Roundtable, I guess maybe

I missed the fact that was the group the President asked for for

input from. But having said that, just briefly, Mr. Fredrich, are you

ISO 9001, 9002? Do you subscribe to that?

Mr. FREDRICH. Yes. We were first certified in 2003 and then recertified in 2009.

Chairman ISSA. And that allows you to sell in Europe without

the Europeans inspecting you because a voluntary standard of

quality and so on? You are certified, basically, so that they don’t

come and secondarily inspect you the way so often other agencies

here in the United States do, is that correct?

Mr. FREDRICH. The toughest inspections we have are from customers. Customers will send in their quality people and they will

give us a really good exam. But then we also have internal audits

and then we have the external quality audit.

Chairman ISSA. Mr. Timmons, sort of right in the mainstream of

NAM, Boiler MACT, M-A-C-T, isn’t it true that the EPA finding

that it was an unachievable goal, asked for additional time, went

to the court basically because of their failed regulatory policy? They

made it a rule, then went to the Federal court trying to delay it,

and eventually have been told no; essentially fix your own problem,

we are not going to delay implementation of a bad law that currently can’t be achieved, is my understanding? Isn’t that true?

Mr. TIMMONS. That is correct.

Chairman ISSA. OK. So perhaps how do regulations block private

sector job creation may not be the best, but it certainly seems that

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there is one or more that are real impediments to job creation in

each of your industries.

I want to thank all of you for being here today. We have a second

panel that is going to start promptly at quarter to 1. I would keep

you all here for round after round. I suspect that the specifics that

you have been able to give here today could be enhanced many

times fold. None of it was hyperbole; all of it was in fact what I

thought were good responses to real questions when they were

given. And for the small businesses that came here on their own

dime and make sacrifices every day to make sure their employees

are safe, have health care, and they get paychecks before you do,

thank you again.

We stand in recess until 12:45.

[Recess.]

Chairman ISSA. The hearing will now reconvene. I would like to

recognize our second panel of witnesses and thank you for your patience. Hopefully, it was as educational for you on the first panel

as it was for the rest of us.

Our first witness, Mr. James Gattuso is a senior research fellow

at Heritage Foundation, a research and education institution whose

mission is to formulate and promote conservative public policies.

Mr. Sidney Shapiro is associate dean for research and development at Wake Forest University School of Law and vice president

of the Center for Progressive Regulation.

Ms. Karen Kerrigan is the president of the Small Business and

Entrepreneurship Council, an advocacy and research organization

with over 100,000 dedicated members protecting over 100,000

small businesses and promoting entrepreneurship.

Dr. Jerry Ellig is senior research fellow at Mercatus Center at

George Mason University, a research center dedicated to using

market-oriented ideas to bridge the gap between academic ideas

and the real world.

Pursuant to the rules, all witnesses will be sworn in before testifying. Would you please rise, raise your right hands?

[Witnesses sworn.]

Chairman ISSA. Let the record indicate all responded in the affirmative.

Mr. Gattuso, as you may have heard on the first round, 5 minutes for your opening statements. We realize your opening statements are much more thorough, and they will be included in the

record fully. I won’t cut you off exactly at 5 minutes, but I will

start circling my fingers. Please.

Mr. GATTUSO. I will do my best.

Chairman ISSA. Thank you.

161

STATEMENTS OF JAMES GATTUSO, SENIOR RESEARCH FELLOW IN REGULATORY POLICY, THE HERITAGE FOUNDATION; SIDNEY SHAPIRO, CENTER FOR PROGRESSIVE REFORM; KAREN KERRIGAN, PRESIDENT AND CEO, SMALL

BUSINESS AND ENTREPRENEURSHIP COUNCIL; AND JERRY

ELLIG, SENIOR RESEARCH FELLOW, MERCATUS CENTER,

GEORGE MASON UNIVERSITY

STATEMENT OF JAMES GATTUSO

Mr. GATTUSO. Chairman Issa, Ranking Member Cummings and

members of the committee, thank you for the opportunity to testify

today on this important topic.

The American people deserve a regulatory system that works for

them, not against them; a regulatory system that protects and improves their health, safety, environment, and well being, and improves the performance of the economy without imposing unacceptable or unreasonable costs on society. Regulatory policies that recognize the private sector and private markets are the best engine

for economic growth. These words come from Executive Order

12866, issued in 1993 by President Bill Clinton. The statement concludes that the regulatory system falls short of these goals. That

is truer today than it was 18 years ago.

From the lighting in their homes to the volume of their television

sets to the cars they buy, Americans today are facing an unprecedented tide of red tape in their lives; red tape that is increasing

prices, reducing innovation, and destroying jobs.

Last fiscal year, the number and cost of new regulations imposed

by Federal agencies reached unprecedented levels. Based upon reports from the Government Accountability Office, in fiscal year

2010 alone, some 43 major new rules increasing regulatory burdens

were issued by Federal agencies. That is higher than any other

year on record. The total annual cost for these rules, based on estimates by the regulators themselves, tops $261⁄2 billion, the highest

level since at least 1981, the earliest date for which records are

available. Many more on the way.

The costs imposed by these rules vary as much as the regulations

themselves. One cost, perhaps surprisingly to many, can be in

terms of decreased safety. Several Members mentioned safety concerns, as they should, in the discussion during the first panel, and

certainly many, many regulations are essential to preserving safety. But we shouldn’t forget that safety can also be decreased by

regulations; it can be a cost. I point specifically to cafe rules, fuel

economy rules that have forced Americans into smaller, less safe

vehicles, causing many deaths; and even airline safety, where specifically such rules as child safety seats have induced Americans to

drive rather than fly, moving them to a less safe mode of transportation.

Our specific subject here today is the cost in terms of jobs. You

have heard from many other witnesses how many jobs may be destroyed or not created because of particular regulations. But no

businessman needs an academic study to know how regulations affect their bottom line and can stop them from hiring new workers.

A couple of points I want to stress, though. First, economic studies can only capture effects on existing industries, or at least preVerDate 11-MAY-2000 13:19 Aug 11, 2011 Jkt 000000 PO 00000 Frm 00165 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67568.TXT KATIE PsN: KATIE
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dictable industries and technologies. The dogs that don’t bark are

not counted. New technologies that are stunted, new products that

are never brought to market, and ideas that never are acted upon

don’t make it into the statistics that these are real costs of regulation.

Also, I want to point out that regulations can create jobs as well

as eliminate them, but this is not always a good thing. For instance, a new regulation can, and in fact usually does, create more

demand for lawyers, lobbyists, and even regulators themselves.

This may increase the job rolls, but is not an increase in wealth

or prosperity for society.

For the same reason, policymakers should be wary of claims

about new rules creating green jobs. Green jobs can be productive,

can increase wealth in society, but not if those jobs are based on

artificial mandates or restrictions that are not otherwise justified.

If they are justified only in terms of creating the job, they add

nothing to prosperity, so that is something for policymakers to

watch out for.

The bottom line: it is critical that policymakers increase scrutiny

of new and existing rules to ensure that each is necessary and that

costs are minimized. President Obama has recognized this and has

taken a welcomed first step toward reform by announcing that he

and his administration would look harder at existing rules that are

already in the books. I am a little bit concerned, however, that review is not stringent enough.

In fact, if you look at the language of the Executive order issued

by the President, it only asks agencies to come up with a preliminary plan for regulations to review, rather than to come up with

actions directly. It is a very small first step. And the fact that it

does not include independent agencies, which are some of the primary producers of new regulations and regulations on the books,

is a matter of concern and a loophole in this review.

Let me just say, to followup, I am encouraged by the actions of

this committee and the work in focusing attention on this important problem and in identifying and asking for information from

businesses who are affected by regulation and by the public in getting information.

Last, I have several legislative proposals I think the committee

should look at. Let me just list them. I think the Congress should

be required to approve all new rules in order to increase accountability; I think that there should be a regulatory impact statement

prepared by a new congressional regulation office to allow Congress

to get more information about rules; and, last, there should be a

sunset period for all rules after, say, 5 or 6 years, in order to ensure that they are doing their job and that bad rules are taken off

the books.

With that, again, I want to thank you for the opportunity to testify today.

[The prepared statement of Mr. Gattuso follows:]

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Chairman ISSA. I thank the gentleman.

Mr. Shapiro.

STATEMENT OF SIDNEY SHAPIRO

Mr. SHAPIRO. Thank you, Mr. Chairman.

Regulatory critics contend the cost of regulation has kept the

U.S. business community from participating more fully in our Nation’s economic recovery. Upon examination, however, it turns out

that a focus on regulatory costs is a flawed way to examine the

usefulness and necessity of government regulation, or to determine

whether or not regulatory costs are hindering the Nation’s economic recovery.

The focus on regulatory costs is misguided for four reasons. First,

as we heard discussed in the last panel this morning, the cost of

regulation in isolation proves nothing because it ignores the benefits the regulation brings to the public and the economy. The best

measure of this is the OMB report submitted annually to Congress.

The last one, covering the last 10 years of major Federal regulations, found total benefits of between $128 and $616 billion and

costs of no more than $43 to $55 billion.

Now, this finding refers to aggregate net benefits, which means

that some individual regulations may not have benefits that exceed

costs. But, in our experience, this result usually results from the

difficulty of monetizing regulatory benefits rather than the lack of

any such benefits.

Second, retrospective studies show that industry estimates of

regulatory costs submitted to agencies for purposes of rulemaking

are often too high. This result should not be surprising; regulated

entities have strong incentives to overstate potential costs to regulators and to Congress. As Representative Quigley pointed out, the

National Association of Manufacturers had dire predictions for the

Clean Air Act, none of which were borne out.

Third, a recent study on regulatory costs authored by Nicole and

Mark Crane for the SBA Office of Advocacy, which claims regulation had an annual cost of $1.75 trillion in 2008, is unreliable evidence concerning regulatory costs. I discuss this study in detail in

my written testimony. Let me mention only one problem. About 70

percent of the regulatory costs estimated by Crane and Crane are

based largely on a decidedly unusual data source for economists,

public opinion polling, the results of which Crane and Crane massage into a massive, but unsupported, estimate of the costs of economic regulation.

Because Crane and Crane have refused to make their underlying

data or calculations public, apparently even withholding them from

the Small Business Administration office that contracted for the

study, it is difficult to know precisely how they arrived at the result that economic regulation has a cost of $1.2 trillion. Nevertheless, based on what we know, we should be wary of their claim. As

mentioned, their estimate of economic regulatory costs is based on

the results of public opinion polling, specifically, polls concerning

the business climate of countries that has been collected in a World

Bank report. The authors of the World Bank report warned that its

results should not be used for exactly the type of extrapolations

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made by Crane and Crane because their underlying data are too

crude.

Finally, like any spending, the costs of regulation generate economic activity because the money is spent on goods and services,

thereby generating jobs. As also pointed out this morning, the literature does not support the conclusion that regulation regards

economic recovery. In my written testimony I describe some of the

study’s findings that regulation does not lead to a net job loss. One

of these studies, by Resources for the Future, concludes that the

claim that regulatory spending, ‘‘reduces employment in heavily

polluting industries is not supported by the data.’’ I might note

that this includes petroleum refining, which was discussed this

morning as being disadvantaged by regulation.

I would also like to point out that studies by Evan Goldstein,

also mentioned this morning talking about pollution havens and

why jobs are sent overseas, Dr. Goldstein found that the large

amount of the percentage of difference in costs between manufacturing jobs here and in places like India and China are related to

wages, and that only maybe 1 or 2 percent of the difference in costs

between manufacturing abroad and manufacturing here can be related to regulation.

So I thank you for the opportunity to testify. Although it is clear

that regulated entities do not always like regulation, this does not

mean that regulation is the cause or even a contributor for economic and unemployment woes. The evidence to back up this claim

is simply not there.

[The prepared statement of Mr. Shapiro follows:]

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Chairman ISSA. I thank the gentleman.

Ms. Kerrigan.

STATEMENT OF KAREN KERRIGAN

Ms. KERRIGAN. Good afternoon, Chairman Issa, Ranking Member

Cummings, and members of the committee. We appreciate the opportunity to be part of this hearing today and we thank you for

your leadership in drawing attention to the issue of regulatory impediments to job creation.

Over the past several years, the regulatory pendulum has swung

in a direction that is of great concern to small businesses. During

the most challenging period of the recession, where business owners were experiencing very weak sales, tight credit, along with

other competitive business pressures, Washington churned out an

array of costly policies that served to compound the poor competence and outlook that was so pervasive in the small business

community. The fear associated with economic stability, along with

a highly active government where such actions create uncertainty

and new costs, has not been conducive to investment and job creation.

Now, with some improvement in the economy, there are signs the

business outlook is also improving, somewhat. Certainly, the new

tone and recent initiatives from the White House, including the

new regulatory strategy, is a welcome sign, but we must remember

that the regulatory agencies will remain highly active and in areas

with economy-wide impact. For example, they are at work implementing the new health care law, which many small business owners are concerned about with respect to its cost.

There are other significant regulations and activities underway

at the EPA, the Department of Labor, and other agencies. So given

the fact that existing regulatory initiatives are in motion and small

businesses remain concerned about their costs, they will also remain skittish about hiring. They have real concerns about direct

and indirect costs associated with these regulations that are currently in the pipeline.

I have noted in my testimony the specific concerns about the new

health care law, the Affordable Care Act, both the known and the

unknowns that will impact hiring decisions in the short- and longterm. With respect to the cost of energy, business owners are worried about gas and electricity prices. Along with new EPA regulations that will raise prices, they see what is occurring with offshore

drilling bans, delayed permits, and how various players in our energy industry are being affected by the Federal Government

switching course on production projects, which will affect the supply and price of energy. I also would mention that this will affect

the many small players that operate in the energy industry and the

thousands of small businesses whose livelihoods are dependent

upon a vibrant energy sector.

Over at the Department of Labor there is a departure away from

helping businesses comply with the law toward an approach that

seems more focused on generating complaints and grievances and

collecting penalties and fines. The Department’s new Plan/Protect/

Prevent regulatory initiatives has the potential to add vast amount

of paperwork and time-consuming work for small businesses.

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So as a small business owner, you will not only continue to look

at the uncertainty of the economy; you are also looking at new regulation and costs that will permeate your entire business: labor,

energy, financial services, the costs and availability of credit and

capital, the costs of raw materials and supplies, health coverage,

and a boatload of new paperwork. And this is on top of a regulatory

framework that is already burdensome for small businesses. And

make no mistake, small businesses are disproportionately impacted

by regulation. This has been documented by the fine work and the

peer reviewed work of the Small Business Office of Advocacy, showing that the per employee cost of regulation for small business is

36 percent higher than for larger firms.

The cumulative cost of regulation is putting U.S. businesses at

a competitive disadvantage. Particularly in this tough economic period, it is deterring job creation. President Obama wants to make

the United States the best place in the world to do business, and

we do share that goal. But the United States will not maintain or

improve its status under the current regulatory approach. So we

look forward to working with the committee and Congress on solutions to improve the regulatory system and help small businesses

do what they do best, and that is to innovative, add value, and create jobs. Thank you.

[The prepared statement of Ms. Kerrigan follows:]

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Chairman ISSA. Thank you.

Mr. Ellig.

STATEMENT OF JERRY ELLIG

Mr. ELLIG. Thank you, Chairman Issa, Ranking Member

Cummings, members of the committee. Thank you for the opportunity to testify today. My name is Jerry Ellig. I am a senior research fellow at the Mercatus Center at George Mason University.

I have also served in two out of three branches of the U.S. Government; I was a senior economist at the Joint Economic Committee

on Capitol Hill some years ago and served as a deputy director of

the Office of Policy Planning at the Federal Trade Commission.

I don’t envy the members of this committee or staff of this committee trying to grapple with this issue. You have recently received

about 2,000 pages of submissions in response to Chairman Issa’s

initial requests, and it looks like more is on the way via the Web

site. You have already heard a lot of conflicting claims, and you are

going to hear more conflicting claims. You are going to hear conflicting claims from advocates who say that regulation is all benefit

and no cost, and you are going to hear claims from people who say

that regulation is all cost and no benefit. Particularly the committee staff, I want to say, having been in government, I have walked

a mile in your moccasins and I feel your pain.

You have heard a lot of conflicting claims. You will hear more.

Well, as Senator Daniel Patrick Moynihan was reputed to have

said, everybody is entitled to his own opinion, but not to his own

facts. So how do we actually get the facts about the effects of regulation, both the benefit side and the cost side? How do we get a better grip on what regulation produces that we like and also the

things we have to give up in order to get that?

Well, the Federal Government already has a longstanding method for doing this; it is laid out in President Executive orders. President Obama’s recent Executive order reiterated and reaffirmed

these standards for assessing the effects of regulations. It is also

laid out in guidance from the Office of Management and Budget in

a document called Circular A–4. Presidents of both parties have

issued these executive orders, laid out procedures for agencies to

analyze regulations, laid out processes for regulatory review. And

this has been going on for decades, so this is not new.

A good regulatory impact analysis, which is what these documents are about, a good regulatory impact analysis gives us answers to questions like what outcomes of direct value to the public

does the regulation produce. Not just compliance, not just enforcement, but what actual results that the public benefits from are produced. What failure of the private market or failure of previous policy or other systemic problem is the regulation likely to solve? Systemic problems, not just are there a few anecdotes or are there a

few bad actors that could be dealt with on a case-by-case basis.

What are the alternative solutions? Because regulation is rarely a

yes/no, on/off switch; there are alternative ways to do things that

we should be looking at. And, finally, what are the pros and cons

of the alternatives or, in economic jargon, costs and benefits?

These are the kinds of things that people are arguing about in

front of this hearing and this creates kind of a puzzle because if

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Federal regulatory agencies are already supposed to be assessing

the effects of regulation, why do businesses, why do advocacy organizations, why do other kinds of interested parties feel like they

have to come to Congress for redress? Why didn’t the agency sort

this all out when they issued the regulations? Part of the answer,

I think, is that agencies often don’t do the kind of comprehensive,

high-quality analysis that fully identifies all of a regulation’s effects. Experience shows that it takes more than words and an executive order to get good analysis done or for good analysis to get

used when agencies issue regulations.

Since 2008, some of my colleagues and I at the Mercatus Center

have had a project that we call the Regulatory Report Card, where

we assess the quality of analysis that Federal agencies do when

they issue regulations and the extent to which the agencies claim

to use that when they make their decisions. This is a project on assessing the quality and completeness of the analysis, not a project

on evaluating whether we like or don’t like the regulations. Our

criteria are drawn from Executive Order 12866, OMB Circulate A–

4. Essentially the question we are trying to answer is how well are

agencies doing the things that presidents have been telling them

to do for more than 30 years. Those are our criteria.

We found some reasonably good analyses. We found a lot more

that are seriously incomplete. If these analyses were student papers, the best grade would be a B-, the average would be an F. I

don’t think that is good enough to guide decisions that affect our

health, that affect our safety, and affect our economy.

Here are some of the common problems we find. A lot of times,

believe it or not, regulations don’t do a good job of explaining what

outcomes the regulation is supposed to produce. A lot of times we

find that there is rarely an explanation or evidence of the existence

of market failure or a systemic problem; the agency just says, well,

Congress passed this law and told us to issue this regulation, so

this is what we are going to do. In about half of the cases, the

agencies don’t identify alternative regulatory options or they don’t

give them anything more than cursory analysis. And only a minority of these analyses offer a really comprehensive look at costs and

benefits or explain how the regulation actually affected a decision

the agency made.

Now, we also find a lot of best practices that could substantially

improve regulatory analysis if they were more widely shared.

Clearly, the knowledge of how to do good regulatory analysis exists

and is spread throughout the Federal Government. The problem is

the incentives. There are institutional incentives that reduce agencies’ incentive to produce good analysis and also reduce agency incentive to use the analysis when they do it.

I have a lot of ideas in my written testimony for reforms that

could help solve this problem. A few possible ideas: require the

agencies to actually explain how they use their analysis in the Federal Register notice when they propose regulations; require agencies to publish the analysis before they write the regulation and

make decisions, instead of writing the analysis after they wrote the

regulation; requiring them to publish the data and the models so

that independent scholars or other outside folks who are interested

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could do their own analysis as a quality check on what the agency

did.

Now, I have a lot of other ideas in my written testimony. The

common——

Chairman ISSA. In the Q&A we will give you plenty of opportunity to talk about them.

Mr. ELLIG. Oh, OK. No, don’t worry, I wasn’t going to give you

another list. The bottom line is this, that in order to get good regulatory analysis and get it used, we need institutional reforms that

will put teeth in the executive order.

[The prepared statement of Mr. Ellig follows:]

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Chairman ISSA. Thank you. I now recognize myself for 5 minutes.

Mr. Gattuso, in your opening statement you talked about President Obama’s latest executive order. I have a concern. As I understand the executive order, it doesn’t cover independent agencies. Is

that correct?

Mr. GATTUSO. That is correct.

Chairman ISSA. So FCC, SEC. I mean, the list is——

Mr. GATTUSO. The Consumer——

Chairman ISSA. What, two-thirds of government regulations are

in independent agencies. If you leave the EPA out, maybe more

than that?

Mr. GATTUSO. In terms of actually calculated cost, EPA is by far

the largest, but a lot of the independent agencies, especially at the

FCC, do not calculate costs, do not do a cost-benefit analysis, but

it is the Federal Communications Commission, the Federal Trade

Commission, the Securities and Exchange Commission. So it is a

long list.

Chairman ISSA. The industry that I came from, the electronics

industry, FCC was king. And I didn’t get to say this in the first

round, but maybe because we have such a scholarly round, the

FCC’s failure to supply bandwidth solutions for more data capability that the market wants, that Mr. Cummings wants, that my constituent want, is that an impediment? I mean, are those some of

the impediments where we see the FCC passing rules, but we don’t

see them using their assets to provide the expansion of the economy?

Mr. GATTUSO. It certainly is an impediment. The FCC actually

has improved its policies over the past decade or so, allowing more

flexible use of spectrum, but there is a lot still to be done. If I mention also in independent agencies that some reports have shed that

the President is unable, legally, to involve the independent agencies in his review.

Chairman ISSA. So what you are saying is the President can’t,

but we could?

Mr. GATTUSO. No, what I am saying is that those reports are

wrong.

Chairman ISSA. Oh.

Mr. GATTUSO. In 1991——

Chairman ISSA. So he could and we could require this.

Mr. GATTUSO. In fact, it has been done before. In 1992, while

President Bush had a regulatory review and moratorium in which

every independent agency participated, all that was required was

for the president to ask the chairman of each agency to participate.

Everyone said yes. And I think President Obama could get the

same result if he were to ask.

Chairman ISSA. Thank you. The earlier panel talked about a particular new regulation in EPA, a Boiler MACT, M-A-C-T. How

often do you, in your analysis, see regulations where they create a

regulation, then have to go to the court to try to delay it because

in fact it can’t be implemented like that one, where I guess in 3

days it is going to become law without there actually being technology to make it work, and they have admitted that in their own

statements? Is that something that you see in other areas?

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Mr. GATTUSO. I can’t think of a case where that has happened

before. I am sure it has, but I think it would be extremely rare for

an agency to reverse itself that significantly.

Chairman ISSA. But they haven’t reversed themselves; they have

just gone to the court for relief from their own rule.

Mr. GATTUSO. That is true, although they reversed themselves in

the sense that they apparently did think the rule was justified and

now they are having second thoughts.

Chairman ISSA. Well, I am going to ask a specific question to Mr

Shapiro. You are on record as saying, about cost-benefit analysis,

‘‘it is neither sound in theory nor useful in practice.’’

Now, when the President wants a cost-benefit analysis, does that

mean that you disagree with President Obama when he is looking

for regulatory relief that looks at cost-benefit, or is it in your testimony today basically that you want to figure out when something

is a law, if it has a benefit, then you should do a cost-benefit, but

if you are going to make it, you shouldn’t consider it? I am a little

confused because it appears as though basically you are very happy

not having cost-benefit when they put the regulation on, and then

when industry says it is costing us billions or millions, etc., that,

as you said, they ‘‘exaggerate,’’ that basically they have to prove

that it is killing them or you don’t want the regulation removed.

Did I understand that correctly, Mr. Shapiro?

Mr. SHAPIRO. I am not quite sure of your understanding, but

perhaps——

Chairman ISSA. But you have said cost-benefit analysis in that

quote——

Mr. SHAPIRO. Of course.

Chairman ISSA [continuing]. Is not a useful practice, and yet the

President thinks it is; Democrats here on the dais thought it should

be.

Ms. Kerrigan, should we in fact have a cost-benefit analysis——

Mr. SHAPIRO. Excuse me, Mr. Chairman, may I answer the question?

Chairman ISSA. Well, you didn’t seem to be interested in answering it, but I will come back to you.

Ms. Kerrigan, should we in fact, as a body, make sure that there

is a cost-benefit analysis done by government, open to scrutiny before regulation occurs, as Mr. Ellig had suggested?

Ms. KERRIGAN. Oh, absolutely. And I think that is particularly

important for small businesses, because there is a disproportionate

impact on small businesses and I think that rigorous analysis

needs to be done. So it is vitally important and it would of tremendous value to small businesses and the business communities if the

agencies were required to do that.

Chairman ISSA. Thank you.

My time has expired, but I don’t want to short-change Mr. Shapiro. Would you answer whether you still stand behind your 2009

White Paper, January, in which you said the problem with, so on

and so on, cost-benefit analysis is neither sound in theory nor useful in practice? Do you still stand behind that?

Mr. SHAPIRO. I do. What we were talking about——

Chairman ISSA. Thank you.

I now recognize the ranking member.

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Mr. CUMMINGS. In courtesy to you, and I apologize for the chairman, I would like to hear your answer to his question.

Mr. SHAPIRO. Thank you. If you look at al the major laws that

involve the protection of people and the environment, with only two

exceptions that I know about, Congress does not require that a regulation pass a cost-benefit test in order to implement the regulation. There is very good reason for that: in all of these laws Congress wanted to be protective; it wanted to protect the American

people and the environment to the extent that was practicable and

reasonable, and it has therefore set the laws in having this aspirational goal.

Now, that doesn’t mean we shouldn’t be interested in cost-benefit

analysis, because we should analyze the efficiency costs of this aspirational goal, and that is what we do in cost-benefit analysis. Unfortunately, it is difficult to apply cost-benefit analysis because

many, many of the benefits are difficult to monetize.

So while you have heard proposals here today that we should

have additional analysis, we should study these things more, I

don’t object to that except for the caveat that we recognize going

in of the great difficulty of monetizing the value of the benefits.

What is a life worth? What is a fish worth? We can talk about it,

but there are really severe limitations in using the methodology.

Mr. CUMMINGS. Let me ask you this. It is interesting. These regulations have been put forth by both Republican and Democratic

administrations, and as a former small business person, I sympathize, I really do, with small business, and any business that has

to go through some of these things. But as I listen to what you just

said, is it your theory, I want to make sure I am saying this right,

when the government puts forth these regulations, are you saying

that they are more concerned about the general protection of the

public? Is that what you are trying to say?

Mr. SHAPIRO. Yes, that is correct. Many, although not all, of

these regulations basically work as technology-based regulations.

So what Congress has said to the agencies is we want to do the

best we can to protect the American public taking costs into account, so what we would like you to do is go out and find the best

available technology which would not cause severe financial dislocation for an industry, and we want you to require them to use

the best available technology to protect the public. That is essentially how many of these laws work.

Mr. CUMMINGS. All right, let me ask you this. A little bit earlier

I described how some of the major corporations we heard from had

skyrocketing profits over the last 2 years. For example, Chevron’s

profits soared from $101⁄2 billion in 2009 to $19 billion in 2010, and

ConocoPhillips’ profits went from $4.4 billion to $11.4 billion, more

than doubling in a year. But when we looked at the responses, a

lot of these companies wanted to repeal corporate transparency

provisions in the Wall Street reform bill, and these seem to have

nothing to do with job creation. Let me ask you about one example.

The first regulation identified by ConocoPhillips was a requirement that all companies and other resource extraction issuers disclose their payments to foreign governments to access oil, gas, and

minerals. Senator Richard Lugar, a well respected Republican,

good friend, was one of the primary proponents of this provision

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and he said, the essential issue at stake is a citizen’s right to hold

its government to account. We cannot force foreign governments to

treat their citizens as we hope, but this amendment would make

it much more difficult to hide the truth.

So my first question is why would ConocoPhillips want to keep

their payments to foreign governments secret? And as I understand

the point of today’s hearing, we are trying to identify regulations

that impair job creation, so here is my second question. If we agree

with ConocoPhillips and repeal this provision, would that create

any jobs in America? Mr. Shapiro?

Mr. SHAPIRO. I think this shows the reason why we need to

broaden our focus beyond regulatory costs. This is a regulatory cost

to those companies, so besides whatever embarrassment might

come out of revealing this information, there are paperwork and

other costs to the company. And there could be a debate over

whether that is necessary, as you have heard before, but in order

to evaluate whether that is necessary, we have to look at the

broader picture of the benefits as well as the costs, benefits which

are monetized or not.

Mr. CUMMINGS. Thank you.

Chairman ISSA. In order to be fair, I am going to try and do a

little quick second round.

I am from the private sector, so maybe I see things differently.

Mr. Shapiro, I took your yes, you still stand by it for an answer,

so I was glad that the ranking member allowed you to elaborate.

Mr. SHAPIRO. Of course.

Chairman ISSA. But let me understand this. You think it is a

good idea for a U.S.-flagged business to disclose what it pays, remembering we are one of the few countries in the world that does

not allow, if you will, bribes. We make it a crime to pay a commission to somebody to get a deal. But the details of a contract, let’s

say in Kazakhstan or, you know, you name the country, if the details have to be made public by a U.S.-flagged company while BP,

which is not U.S.-flagged, or a Russian company doesn’t, then, if

I understand, you think it is just fine for that legal but private

transaction to be made available to their competitors while the

other isn’t, meaning they always know what price they have to

beat from us, while in fact we don’t know what price they are paying. And, meantime, the French, the Russians, and all the others,

on top of we don’t know what they are paying, are able to pay

bribes with impunity. You really think that naively on global business, is that correct?

Mr. SHAPIRO. Mr. Chairman, I was trying to make a broader

point. My area of academic specialty——

Chairman ISSA. OK, so in this particular case you are not speaking to those kinds of issues, you are thinking more broadly of regulatory compliance, is that right?

Mr. SHAPIRO. I think we need to have the conversation that the

chairman indicated he would like to have, and that is looking at

both benefits and costs.

Chairman ISSA. OK. Because I am very concerned that the ranking member has repeatedly, throughout this hearing, talked about

Chevron and Conoco and other companies. I guess what he misses

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side-the-U.S. operations. They are growing very fast on profits

made by buying overseas and selling overseas, and then those look

like profits in the United States, while in fact in the first panel,

and I think we are hearing it broadly in the second panel, we realize that American jobs are not being created through American

mining, manufacture, and agriculture, and we are here today, and

I would like to have everyone make a closing statement as to this,

we are here because it appears as though part of the impediment

to U.S. job creations—not U.S. profits by doing business globally

and making in China and selling to Europe, but U.S. jobs, those

kinds of jobs we all grew up being proud of, working at the auto,

steel, and rubber plants, working at the stamping operation, those

are jobs are the jobs we think may be disappearing.

Go down the panel. And this is a fairly simple question, although

you can elaborate. Do you believe there is any credence to looking

for at least one impediment to U.S. job creation here? Is that frivolous or in fact are we on the right track to try to get those mining,

agriculture, and manufacturing jobs back in America?

Mr. GATTUSO. I think you are definitely on the right track. There

are costs. Now, that does not mean that every regulation is bad.

That does not mean that no regulations are needed. But there are

many that are bad; there are many that are necessary and many

that are harmful. It is not an easy task to identify those, but that

is what makes the project more important. Frankly, it is the easiest thing in the world for an agency to come up with a new regulation, to get it through, and certainly all the incentives for an agency head or agency staffer are to expand their jurisdiction.

Chairman ISSA. Thank you.

Mr. GATTUSO. We need to be vigilant to make sure that bias is

overcome.

Chairman ISSA. Thank you.

Mr. Shapiro, to that question.

Mr. SHAPIRO. This is an important aspect of congressional oversight, and I think everyone appreciates that you are doing it, but

we also need to look at the evidence. Stephen Meyer of MIT has

done two studies; he compared economic performance in States

with strict environmental regulation and economic performance in

States with lesser environmental regulation, and he found that

States with stronger environmental regulation had little difference

in economic performance from those States with weaker standards.

There was an intervening recession, so he went back and did it

again to see whether the recession made a difference, and he concluded the results were the same; stronger environmental standards have not limited the relative pace of economic growth and development among the States over the past 20 years.

Chairman ISSA. Thank you.

Ms. Kerrigan.

Ms. KERRIGAN. I think we are definitely on the right track. I do

think we need to be looking at this. Labor and capital is highly mobile in our global economy. I have traveled around the world, working with governments and business leaders and business associations in developing and emerging countries who are looking at

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tor. So there are other countries out there that know that they

need to work on their internal processes in order to attract investment and it is very competitive and, quite frankly, they do want

to eat our lunch. So I think it is important that we do, yes, absolutely.

Chairman ISSA. Thank you.

Mr. Ellig.

Mr. ELLIG. Two points On the cost side, regulatory uncertainty,

there is evidence that uncertainty does deter business investment,

which may deter job creation. My colleague, Dr. Richard Williams,

27-year veteran of the Food and Drug Administration, made that

point in his submission in response to your request.

Second, the broader point is regulation reallocates resources. We

get more of some things as a result of regulation; we get less of

other things. The less of other things is the cost side. That may

show up as lower employment than we would otherwise have; that

may show up as lower wages; that may show up as higher prices

for consumers; or it may show up as less investment if we regard

regulation as something that just comes out of profit. That is the

cost of saying, well, we will take it out of profit; we have less incentives for investment. Typically, those effects will be different for

different industries and for different types of regulation, which is

why it is so hard to generalize.

Chairman ISSA. I thank the gentleman.

And I note the attendance of the gentlelady from New York. I

apologize for not catching you earlier, Ms. Buerkle, for 5 minutes.

Ms. BUERKLE. Thank you, Mr. Chairman. Since the beginning of

the formation of this committee and my membership on it, our

chairman has charged us to go out and begin a conversation with

all entities, businesses, small businesses, large businesses, and our

constituents to talk with them and listen to their concerns regarding regulations and how these regulations impede their success and

how those regulations really snuff out the entrepreneurial spirit

that has made this country the great Nation that she is. So I am

delighted to be here today and have the opportunity to greet all of

you today, and I thank you for being here.

My first question is a general question, and I will start with Mr.

Gattuso, but then if anyone else would like to comment, I would

certainly welcome that. At his State of the Union address, we

heard the President speak about regulations and the need to get

regulations under control so that we do not impede jobs and getting

this economy back on track. I would like to hear from you whether

or not you think that is a serious initiative that is going to be

taken or what your thoughts are about that.

Mr. GATTUSO. I would like to think that it is a serious initiative

and I would welcome a serious initiative along those lines. I have

considerable concerns, however, from what actually has been done

so far. The Executive order released by the President, issued by the

President only calls for preliminary plans for a review of regulation

sometime in the future, it is not the governmentwide review that

he has stated it was; it does not apply to independent agencies,

who are some of the largest producers of regulations; and it seems

each time he talks about this initiative there is less and less on

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tions. So the tenor of the initiative seems to be perhaps fading already, which is a matter of great concern.

Just to cap it off, I was very disappointed in his speech to the

U.S. Chamber, where he seemed to rely upon cajoling business to

hire, to claim moral imperatives, appeals to patriotism, basically

job owning, as opposed to real policy change. He even went so far

in actually a humorous note and said he wish he had brought a

fruit cake over to the Chamber of Commerce when he moved into

the neighborhood to welcome them and establish a friendship. And

that is good, we should have good relations between different factions in politics, but fruit cakes won’t do it. We need more than

fruit cake economics to get this problem solved.

Ms. BUERKLE. Thank you. Would any other members like to answer? Yes, sir.

Mr. SHAPIRO. Thank you for this opportunity to answer your

question. I think the President is seriously interested in this, but

he also feels the responsibility to do it in a balanced way; that

these regulations and these laws are important because they also

protect people and they protect the environment. And at least regarding some of the aspects of that, we also need to move ahead.

Agencies have limited resources, and to the extent they are pulled

off on look-backs, of course, that also limits their ability to go forward.

Finally, I think the President knows, to the extent we have done

these look-backs in the past, we have generally found that costs are

less than projected at the time and benefits are about the same as

we thought. There have been very few look-backs that have found

that we are chasing after problems that are really not serious societal problems.

Ms. BUERKLE. Just if I could comment on your response. I think

that everyone on the committee is very concerned and interested in

always maintaining the balance between public safety and safety

in the job place, or whatever the issue is, but also the need to get

this economy back on track and create jobs, so thank you.

Ms. KERRIGAN. I think time will tell. We are hopeful and we will

take part in the initiative with the White House. The key, though,

is that the initiative, the spirit of the initiative, also going to be

implemented with the existing regulations that are moving through

the system right now. With the new health care, the financial service overhaul laws, some of the things that are moving through the

Department of Labor right now; not only just to look back, but are

we in fact looking at the costs on small business and what we can

do to—if they are going to move forward with these regulations, are

they taking small businesses into account; you know, will they be

exempted, is there going to be an alternative that perhaps makes

it easier and less burdensome for them to comply?

But with these initiatives it is a lot of time, energy, and passion

that is going to be needed from the White House and, again, time

will tell. We will see.

Ms. BUERKLE. Thank you. I believe we are out of time, unless I

can——

Mr. MCHENRY [presiding]. I appreciate. The gentlelady’s time

has expired.

Ms. BUERKLE. Thank you.

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Mr. MCHENRY. With that, I recognize the ranking member of the

committee, Mr. Cummings, of Maryland.

Mr. CUMMINGS. Thank you very much.

I want to thank the witnesses for excellent testimony. As I was

sitting here, I could not help but think about 40 years ago, when

I sat as an employee of Bethlehem Steel in Baltimore, and it was

interesting back then that we spent a whole day just on safety regulations before we could do anything. But there was something

that makes me feel very emotional as I am sitting here, and I did

not realize the significance of it then, but I understand it now.

At the end of the day, if you blew your nose, matter of fact, if

you were on the premises for an hour and you blew your nose,

black stuff would come out. Not trying to ruin your lunch, but that

meant that we were inhaling. We were making a decent salary, Mr.

Shapiro and Ms. Kerrigan. We had a summer job, which we really

needed, one of the highest paying jobs that we could get, really, as

a student, after my eleventh grade and twelfth grade year.

But we were also inhaling stuff that would kill us. And it was

even more evident and I have evidence of that because a lot of the

gentlemen that I worked with, who were making a lot of money,

died early. They are dead. They are no longer there for their children; didn’t even get a chance to see many of their grandchildren.

They are dead. And I think that what we have to constantly keep

in mind is this whole balancing act.

Mr. Shapiro, I think you said something that I haven’t heard any

other witness talk about, and that is it sounds like you were saying

that when these regulations are made, the government bends on

the side of protecting human life, bends toward human safety and

the welfare of people. I think that is what you are saying. And this

keeps going on in my mind when I think of Bethlehem Steel and

I think about those people who are dead and I think about the ones

who called me when I was in college to tell me that they were suffering from cancer and all kinds of problems because of what they

inhaled. So I think that later on, when things came around and

OSHA began to look at some of that, I think they began to require

certain other things like a mask, like a simple mask over one’s

face.

So regulations do have a significant role to play with regard to

life and death situations, so I just want us to always keep that in

mind. Some people want to try to make it look as if it is one side

or the other. I think it is a balancing act. It really is. No one wants

to overburden business, but it is one thing to have a job; it is another thing to be able to go home at the end of the day and not

be shipped off in a coffin. That is real. So I think we have to maintain that.

Now, let me go back to something else. We were talking about

Conoco, and I want to make it clear, Mr. Shapiro, that Senator

Lugar is no wacko. He is a brilliant man who I admire tremendously; well respected Republican. He said, when he was talking

about this provision, he said the essential issue at stake is a citizen’s right to hold his government to account. We cannot force foreign governments to treat their citizens as we would hope, but this

amendment would make it much more difficult to hide the truth.

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You can comment on that in a minute, but I need to get one

thing in, Mr. Chairman, before I do that. I want to get some letters

in real quick. I ask unanimous consent to enter into the record

three additional letters we received for this hearing. These letters

are from Robert and Susan Serigliano, who lost their son Bobby

when he was suffocated by a drop-side crib; another letter from the

majority of Small Business Advocacy Organization that supports

the Patient Protection and Affordable Care Act; and, finally, the

Main Street Alliance, an organization that represents small businesses and supports the Patient Protection and Affordable Care

Act. I ask that they be part of the record, Mr. Chairman.

Mr. MCHENRY. Without objection.

[The information referred to follows:]

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Mr. CUMMINGS. I see I still have 21 seconds. Mr. Shapiro, do you

want to comment very quickly, because I have run out of time, just

about?

Mr. SHAPIRO. Representative Cummings, there is a very good

reason that the agencies bend toward the protection of people, trying to prevent injuries, cancers, so on and so forth: that is what

Congress told them to do in the OSHA act and these other laws.

Mr. CUMMINGS. Thank you very much.

Mr. MCHENRY. I thank the ranking member and I recognize myself for 5 minutes.

Ms. Kerrigan, so in terms of small business, you say in your testimony that small businesses, first, they are important to the

American economy, and I agree, and I think most Americans, middle America agrees as well. But you stated that small businesses

bear a regulatory burden that is greater than a large business. Explain that. Just flesh that out for me.

Ms. KERRIGAN. Well, it is quite simple, and it is common sense

that when a new regulation is imposed on a business, whether it

is a new tax requirement, a new reporting requirement, when there

is compliance involved, that they just do not have the scale to

spread the costs around, and they many of them don’t an accounting department or they don’t have a compliance person or they

don’t have a vice president of safety.

So it is the business owner, it falls on them to deal with that new

regulation. They may have to hire a consultant, perhaps bring on

an accountant as a consultant or perhaps give them more hours or

what have you. They just do not have, they can’t absorb those costs

as easily as a large enterprise, so that is the spirit behind, in 1980,

the Regulatory Flex Act, that there was the common sense premise

that regulation does have a disproportionate impact on small business and, therefore, the agencies do need to take that into account

in terms of their regulatory actions.

Mr. MCHENRY. Thank you. Thank you.

Mr. Ellig, the Mercatus Institute does a report card of this regulatory burden. Can you mention that?

Mr. ELLIG. Oh, yes, sure. Our project is essentially looking at the

quality of analysis that Federal agencies do when they issue regulations, and then looking at to what extent do they actually seem

to use it in making decisions. And we are not trying to suggest that

agencies ought to be in a straightjacket, where they have some

quantitative formula, that they can only issue a regulation if the

monetized benefits exceed the monetized costs, but, rather, we are

looking for whether agencies actually seriously considered regulatory alternatives. Did they actually define the problem they are

trying to solve and explain the barrier that gets in the way of

achieving whatever it is the regulation is supposed to achieve? Did

they demonstrate that this problem exists and so forth. So that is

the kind of thing we are looking at.

Mr. MCHENRY. Thank you. Thank you.

With that, I yield the balance of my time to my colleague from

New York.

Ms. BUERKLE. Thank you, Mr. Chairman.

Mr. Ellig, this question is for you. In your written testimony you

mention that interviews with agency economists often reveal that

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they faced pressure to modify their analysis of the regulations in

order to support decisions that were already made. I wonder if you

can expound on that for the committee and just tell us what agencies you were referring to.

Mr. ELLIG. Oh, sure. That is based on a study. There was a series of structured interviews of Federal economists in various

health and safety agencies that was actually conducted by one of

my colleagues, Dr. Richard Williams, shortly after he left the FDA,

and that was one of the generalizations that he drew from his

interviews.

Personally, I have heard stories of agency economists saying that

they were told things like, on a Friday, come back and put more

benefits in this analysis or don’t bother showing up for work on

Monday. And I think among economists who do this kind of thing

for a living in Federal agencies it is well known that they are going

to get some pressure to come up with an analysis that supports

whatever the agency has decided to do, whether it is an increase

in regulation or a decrease in regulation.

Ms. BUERKLE. Thank you.

Mr. Chairman, I yield back.

Mr. MCHENRY. Thank you. I certainly appreciate it and I certainly appreciate the chairman giving me the opportunity to sit in

the chair. It is a mighty big chair for a guy my size.

With that, there are no more questions today, so, with that, the

committee stands adjourned.

[Whereupon, at 1:46 p.m., the committee was adjourned.]

[The prepared statements of Hon. Dan Burton, Hon Michael R.

Turner, Hon. Justin Amash, Hon. Edolphus Towns, Hon. Dennis J.

Kucinich, Hon. Gerald E. Connolly, and Hon. Bruce L. Braley follow:]

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