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39–383 PDF 2007

FULL COMMITTEE HEARING ON

LEGISLATION TO IMPROVE THE

REGULATORY FLEXIBILITY ACT

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

DECEMBER 6, 2007

Serial Number 110-62

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax

MELISSA BEAN, Illinois, Chairwoman

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

DEAN HELLER, Nevada, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

LOUIE GOHMERT, Texas, Ranking 

LYNN WESTMORELAND, Georgia

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Chabot, Hon. Steve .................................................................................................. 2

Ellsworth, Hon. Brad ............................................................................................... 3

Clarke, Hon. Yvette ................................................................................................. 4

WITNESSES

PANEL I 

Sullivan, Hon. Thomas M., Chief Counsel, Office of Advocacy, U.S. Small 

Business Administration ..................................................................................... 5

PANEL II 

Freedman, Mark, U.S. Chamber of Commerce ..................................................... 14

Messinger, Dyke, Power Curbers, Inc. on behalf of the National Association 

of Manufacturers .................................................................................................. 17

Langer, Andrew, National Federation of Independent Businesses ..................... 18

Sewell, Charlie, National Community Pharmacists Association ......................... 20

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 29

Chabot, Hon. Steve .................................................................................................. 31

Ellsworth, Hon. Brad ............................................................................................... 33

Clarke, Hon. Yvette ................................................................................................. 34

Sullivan, Hon. Thomas M., Chief Counsel, Office of Advocacy, U.S. Small 

Business Administration ..................................................................................... 35

Freedman, Mark, U.S. Chamber of Commerce ..................................................... 44

Messinger, Dyke, Power Curbers, Inc. on behalf of the National Association 

of Manufacturers .................................................................................................. 53

Langer, Andrew, National Federation of Independent Businesses ..................... 60

Sewell, Charlie, National Community Pharmacists Association ......................... 75

Statements for the Record: 

Associated Builders and Contractors, Inc. ............................................................. 82

(V) 

(1)

FULL COMMITTEE HEARING ON 

LEGISLATION TO IMPROVE THE 

REGULATORY FLEXIBILITY ACT 

Thursday, December 6, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:06 a.m., in Room 

2360, Rayburn House Office Building, Hon. Nydia M. Vela ́zquez 

[chair of the Committee] Presiding. 

Present: Representatives Vela ́zquez, Gonza ́lez, Cuellar, Altmire, 

Clarke, Ellsworth, Chabot, and Akin. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

Chairwoman VELA ́ ZQUEZ. I call this hearing to order to address 

legislation to improve the Regulatory Flexibility Act. Today the 

committee is reviewing legislation to strengthen the Regulatory 

Flexibility Act, or Reg Flex. Passed into law in 1980, Reg Flex has 

played a critical role in ensuring that American small businesses 

are not overly burdened by Federal regulations. While the act has 

improved this process in many ways, small firms are still more affected by regulations than are their larger counterparts. The reality 

is that more must be done to address this problem that can hurt 

our overall economy. 

Last month, this committee took the first step in identifying 

ways to improve Reg Flex. We heard from small businesses representing a diverse group of industries on ways to craft legislation 

to strengthen the act. There was one clear thing present in the testimony. Agencies are not doing enough to consider the impacts of 

the rules and regulations of small businesses. And more effective 

statute can help reduce unnecessarily burdensome regulations. 

Working with the minority, the small business community and 

with input from the SBA Office of Advocacy, the committee has 

drafted legislation which addresses a number of the deficiencies of 

Reg Flex. One of the goals of the legislation is to address the problem of outdated regulations. The committee print will clarify when 

agencies need to review specific rules. It also gives small businesses a greater voice in the process and enhances transparency, 

helping to eliminate unnecessary burdens. The committee also 

wants to ensure that agencies are not ignoring the underlying requirements of Reg Flex. The act was never intended to completely 

eliminate or slow down regulations, but for agencies to consider if 

there are more effective alternatives to meet policy goals. Too often 

2

agencies avoid fully analyzing the impact of the rules on small 

businesses by certifying that a rule will have no significant consequences. This bill will strengthen the analysis requirements by 

compelling agencies to consider reasonably foreseeable, indirect 

economic impacts on small businesses when writing rules. 

One key recommendation from the Office of Advocacy was to codify Executive Order 13272, which is included in the legislation. 

This chain puts in the statute that there must be greater coordination between agencies and the SBA’s Office of Advocacy, ensuring 

that regulators fully consider the economic impacts on small firms. 

Earlier notification will provide Advocacy with a greater opportunity to assist agencies in Reg Flex compliance. 

This print we are reviewing today is by no means a final version. 

Today’s panelists will discuss how this language can help small 

businesses and identify ways it can be improved. I would like to 

thank all the witnesses today for coming to the committee and 

sharing their views. I look forward to continuing our work with 

Ranking Member Chabot to pass meaningful reform to the Regulatory Flexibility Act which will lessen burdens on small businesses 

and allow our Nation’s entrepreneurs to continue to move our economy forward. 

I would now like to yield to Ranking Member Chabot for his 

opening statement. 

OPENING STATEMENT OF MR. CHABOT 

Mr. CHABOT. Thank you, Madam Chairwoman, for holding this 

hearing on legislation to strengthen the Regulatory Flexibility Act. 

New small businesses open every year. Buffeted by a variety of economic and financial hardships, these businesses struggle mightily 

to achieve a profitable bottom line. Small businesses are particularly affected by unnecessary and burdensome regulations that require more money as a percentage of the money that the small 

businesses have to work with and time than their larger competitors to adequately comply. 

Small businesses, according to a study by the Office of Advocacy 

of the United States Small Business Administration, paid $2,000 

more per employee per year than large businesses to comply with 

the tornado of Federal regulation. In some sectors, such as manufacturing, the per employee cost is even higher than that average. 

The unfortunate but unexpected result is hundreds of thousands of 

small business are forced to shut their doors. 

More than 25 years ago Congress recognized there was a regulatory storm brewing and smartly reacted with legislation to force 

Federal regulators to examine the impact that their rules will have 

on small businesses before inadvertently putting them out of business. Congress’ answer to the regulatory problem was called the 

Regulatory Flexibility Act, or RFA. Enactment of the RFA forced 

a small but perceptible shift in the tact of Federal regulation. 

While some agencies were prompted to refocus their thinking and 

develop less burdensome regulation, many others treated the RFA 

as merely suggestion and were undeterred on their course for more 

and more burdensome and overlapping regulation. 

Congress attempted to strengthen the RFA in 1996 by enacting 

the Small Business Regulatory Enforcement Fairness Act. The act 

3

made agency compliance with the procedural requirements of the 

RFA judiciously reviewable, independent of any challenge to the 

underlying agency rule. With the threat of litigation hanging over 

them, Federal agencies began paying more attention to the RFA, 

but the added attention did little to increase cooperation for many 

agencies. 

The valiant efforts of Dr. John Graham and Mr. Tom Sullivan, 

one of our witnesses today, attempted to tame the tidal wave of 

Federal bureaucracy. And while they admirably eliminated many 

problems in the system, we have not seen the dramatic change 

small businesses require, as evidenced by many small firm owners 

that have come before this committee requesting help and by the 

many businesses forced to shut down each year. 

The efforts of Chief Counsel Sullivan have been hampered by the 

inadequacy of the RFA. Plagued by undefined terms and vague parameters, the RFA is far from an ideal statute. Existing loopholes 

permit agencies to circumvent the rules with negligible penalties. 

Last year I cosponsored H.R. 682, a bill designed to significantly 

strengthen the RFA so that agencies, as President Bush stated, 

quote, will care that the law is on the books, unquote. The bill 

under consideration today adopts some of the changes that were in 

H.R. 682 by requiring agencies to consider indirect effects, to provide a more detailed assessment of the impacts and to make the 

periodic review of rules more transparent. These changes will help 

to ensure that small businesses need only endure necessary regulations and that agencies will not be able to create new ones to harm 

or destroy these businesses. 

Whenever Congress considers altering the RFA, opponents argue 

that changes would destroy the regulatory process or overwhelm 

Federal courthouses. Examination of the Federal Register and 

courthouses show they remain strong, despite the supposed 

strength of the RFA hurricane. Ultimately, what is at stake is the 

ability of small businesses to stay in business based not on the 

whims and dictates of Federal bureaucrats but on their capacities 

in the marketplace. 

Better, sounder rules will be beneficial to the regulatory objectives of the agencies through increased compliance and lower costs 

to small businesses. No good reason exists to oppose the goals and 

objectives of this bill other than the fear of the unknown. I stand 

ready to work with the Chairwoman to see that we get a much 

stronger version of the RFA. I thank her for holding this hearing, 

and I will yield back the balance of my time. 

Chairwoman VELA ́ ZQUEZ. Thank you. Are there any other members who seek recognition for the purpose of making an opening 

statement? Mr. Ellsworth. 

OPENING STATEMENT OF MR. ELLSWORTH 

Mr. ELLSWORTH. Thank you, Madam Chair. I would like to take 

a moment to thank you for holding this important hearing. Ranking Member Chabot, thank you for your work on this also and then 

your statement that you just gave. I think this is a very important 

issue for this committee to undertake, and I look forward to what 

the member, Mr. Sullivan, what you have to say and the members 

who come in the next panel. 

4

A few weeks ago we had our first hearing on the Regulatory 

Flexibility Act. It became clear to me that the problems are serious 

the way the Federal Government is treating small businesses and 

that is—I have said this about every meeting I have spoke at. That 

is why I asked to join this committee, to make things easier for 

small businesses. 

We also heard from the operator of a small trucking firm who 

was here and I asked him what kind of impact the Uniform Federal Regulations had on his business. He told me it hurt his business and others like him. It was clear that big corporate trucking 

firms and their teams of lawyers and compliance officers had a leg 

up on the small business. I am all for big trucking companies, but 

we also have to look after the small trucking companies. As we all 

know, the small companies in our districts are facing the same burden. The Federal Government has ignored effects of our regulations 

on small businesses and refused to adjust to the needs of the vital 

employers. This is not a small business problem, and it is not a 

small problem at all. 1,250,000 workers are employed by small 

business in my home State of Indiana and they deserve to have 

their voices heard. To the bureaucrats in Washington, sometimes 

this doesn’t seem like a small problem. We lose sight of that. But 

to Hoosier small businesses it is. 

That is why I am glad we are addressing this issue, the draft of 

the bill before us today, and I look forward to hearing from today’s 

witnesses and working with everyone in the future to solve this 

problem. Thank you. With that, I yield back. 

Chairwoman VELA ́ ZQUEZ. Any other member who seeks recognition? Ms. Clarke. 

OPENING STATEMENT OF MS. CLARKE 

Ms. CLARKE. Thank you very much, Madam Chair and to Ranking Member Chabot, for holding this hear today to review legislation to improve the Regulatory Flexibility Act. There is no question 

that Reg Flex needs to be strengthened. Agency compliance with 

many parts of the act is of great concern to me and must be addressed immediately since most agencies currently view compliance 

as voluntary. I believe that we will develop solid provisions that 

will consider the indirect impact of regulations when calculating 

the impact of regulations on small businesses. 

I look forward to hearing from the Honorable Sullivan today so 

that we can work together for a solution that will enable our small 

businesses to prosper and not be inundated and snuffed out by 

undue harm that this act was put in place to prevent. 

Thank you very much, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Any other members? If not, now we 

will proceed with our first panel. And I want to welcome Mr. Thomas Sullivan, the Chief Counsel for the Office of Advocacy of the 

U.S. Small Business Administration. Prior to joining the SBA, he 

worked as the Executive Director of the National Federation of 

Independent Businesses Legal Foundation. Mr. Sullivan and the 

Office of Advocacy is charged with independently advancing the 

views, concerns and interests of small businesses before Congress, 

the White House, Federal regulatory bodies and State policymakers. Welcome, Mr. Sullivan. 

5

STATEMENT OF THE HON. THOMAS M. SULLIVAN, CHIEF 

COUNSEL, OFFICE OF ADVOCACY, U.S. SMALL BUSINESS ADMINISTRATION 

Mr. SULLIVAN. Thank you, Chairwoman Vela ́zquez, Ranking 

Member Chabot, and members of the committee. Thank you for allowing me the opportunity to appear this morning to address legislative improvements to the Regulatory Flexibility Act. With the 

chairwoman’s permission, I would like to briefly summarize my 

statement but ask that the entire statement be entered into the 

record. 

Chairwoman VELA ́ ZQUEZ. Without objection. 

Mr. SULLIVAN. Thank you. As the chairwoman said, in my position I am charged with monitoring Federal agencies’ compliance 

with the Regulatory Flexibility Act. And because my office is an 

independent one within SBA, the views that I express here this 

morning don’t necessarily reflect the views of the administration or 

of SBA. My statement was not circulated to the Office of Management and Budget for comment. 

Although the Reg Flex Act is doing a fairly good job, and I do 

want to emphasize the fact that the Reg Flex act is working pretty 

well, but despite it doing a fairly good job and achieving cost savings for small entities, more does need to be done to protect small 

entities from excessive regulatory burden. 

Two years ago, my office commissioned a study that was prepared by Mark Crain entitled the impact of regulatory costs on 

small firms. This is the third iteration of such a study and it determined that the overall cost of Federal regulation now totals $1.1 

trillion. I will say that again. $1.1 trillion with a T, a trillion dollars. The cost per employee for firms with fewer than 20 employees 

is $7,640 per employee per year. That is 45 percent higher than 

their larger counterparts with 500 or more employees. 

After 11 years of working with SBREFA, eight congressional 

hearings on the Regulatory Flexibility Act, my office has 

conferenced this past year on the Regulatory Flexibility Act, and 

several GAO reports and testimonies, now is a good opportunity to 

consider legislative improvements to the Regulatory Flexibility Act. 

At your hearing several weeks ago, many of the witnesses testified that the largest loophole is the Reg Flex Act failure to include 

the requirement that agencies consider indirect impacts. We agree 

with those witnesses before the committee and we do believe it is 

the biggest loophole. Agencies now are required to consider the direct economic impact, but that analysis may deprive policymakers 

here in Washington, D.C. Of the full understanding of the rule’s 

likely impact on small entities. 

In addition, many times, especially with environmental regulation, the duty of regulating is passed on to the States and it is 

passed on without any corresponding analysis or requirements for 

States to consider less burdensome alternatives for small business. 

Legislation being considered by this committee would cure that defect. 

Section 610 of the Regulatory Flexibility Act requires agencies to 

periodically review rules that are on the books. Small businesses 

often complain about the difficulties in dealing with layers of regulations that agencies issue over time. Although there are legal aveVerDate 0ct 09 2002 16:56 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39383.TXT LEANN
6

nues that can be pursued to have burdensome rules reviewed, legal 

recourse is costly and time consuming. The automatic review of 

rules afforded through section 610 can save small entities and Federal agencies the hassle of having to resort to the legal system to 

obtain relief. However, as is currently written, this review is limited to only those rules that an agency deems to have a significant 

economic impact at the time the rule is finalized. Since new rules 

are promulgated every year, the cumulative impact of rules on 

small entities can be staggering, even if individually the rules may 

not have a significant economic impact. 

My office and other witnesses before this committee have recommended that the Reg Flex Act be amended so that look back 

provision, section 610, will require agencies to review all rules periodically. This change would encourage agencies to revise their rules 

to ensure that regulations currently reflect current conditions and 

needs. 

Lastly and most importantly, the codification of an Executive 

order that was signed in this administration. My office believes 

that the Executive order has increased agency knowledge of and 

compliance with the Regulatory Flexibility Act. Annual reports that 

are published by my office and presented to this committee, to the 

White House and others in Congress document that this Executive 

order is working. Small entities would benefit from an amendment 

to the RFA that would codify the requirements of that Executive 

order ensuring that independent agencies are subject to the Reg 

Flex Act and, since it is just an Executive order, codification would 

create long-term certainty for small entities. 

My office has reviewed the committee print distributed last week, 

and the bill entitled the Small Business Regulatory Improvement 

Act of 2008 addresses the issues outlined in my testimony. I commend this committee for examining these issues, and I believe your 

legislation will go far to improve the RFA and, most importantly, 

help small entities. 

Thank you for allowing me to present these views, and I would 

be happy to answer any questions. 

[The prepared statement of Mr. Sullivan may be found in the Appendix on page 35.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Sullivan. You discussed section 610 of Reg Flex that requires agencies to periodically review existing rules. We all know that is not working. It has 

been reported that this is because the law gives agencies a large 

amount of discretion to decide which rules are covered by the review requirement. 

How should Reg Flex be amended to ensure agencies do a better 

job of periodically reviewing existing rules? 

Mr. SULLIVAN. Madam Chairwoman, I believe that the committee 

print addresses this perfectly, and what the committee print does 

is simply instruct agencies that they must look at a broader swath 

of rules, not just a narrow swath of those that at the time of promulgation were deemed significant. 

Chairwoman VELA ́ ZQUEZ. Mr. Sullivan, although on this committee we hear much about the burden Federal regulations impose 

on small businesses, it is important to keep in mind the Federal 

regulations also confer enormous benefits to our society. Clean air 

7

and water and safe working conditions are all examples of this. Opponents of Reg Flex have contended that it frustrates the rulemaking process. How many rules, Mr. Sullivan, have actually been 

halted by the courts because of Reg Flex? 

Mr. SULLIVAN. I believe that less than six rules have been struck 

down by agencies since 1996 in the courts and, if the Chairwoman 

would allow me, I would like to address this myth about the Reg 

Flex being a barrier to valuable regulatory protections. If you look 

at the number of rules that were promulgated by the Environmental Protection Agency before the Small Business Reg Enforcement Fairness Act and after, remember, SBREFA conferred a number of obligations upon EPA and this committee was faced with 

folks saying that this is terrible, this will stop EPA from promulgating valuable environmental protections. The average number of 

rules issued by EPA was 412 per year before SBREFA. The average number of EPA rules after SBREFA were 449. The average 

number of rules that would impact small businesses before 

SBREFA was 125 per year; after SBREFA, 181 rules per year that 

would impact small business. So the data does not support that 

myth that law, the Reg Flex Act, SBREFA, is a barrier to valuable 

protections, environmental, workplace safety and otherwise. 

Chairwoman VELA ́ ZQUEZ. Even if a rulemaking is adjudged to 

have violated Reg Flex, courts will permit the regulatory process to 

go forward if it is in the public interest. So can you discuss this 

and whether or not it creates substantial delays or obstacles to 

rulemaking? 

Mr. SULLIVAN. The chairwoman again brings up somewhat of a 

myth in that the Reg Flex Act stops valuable rules, and I think it 

is valuable for the committee and others to know that the Reg Flex 

Act foresaw this argument and wrote directly in that the alternatives that must be considered, and I quote, must be consistent 

with the stated objectives of the applicable statutes. So built into 

the Reg Flex Act, there is the requirement that any considerations 

of being sensitive to the unique needs of small entities not compromise the underlying statute. And it is because of that language 

that the chairwoman is correct, courts have not been activists in 

striking down rules. And, in fact, the majority of times, when the 

Reg Flex Act is brought into a court and the small entities prevail 

upon the court to mandate that an agency do a better job, many 

times the rule continues to be in effect but the agency then must 

go back and in public and in a transparent manner document the 

impact on small entities so that policymakers have a better understanding of the rule’s impact. 

Chairwoman VELA ́ ZQUEZ. Mr. Sullivan, some of the proponents of 

Reg Flex reform have called for legislation to direct the Chief 

Counsel for Advocacy to promulgate regulations governing agency 

compliance with Reg Flex. They state that currently the courts 

grant little or no difference to the Chief Counsel’s interpretation of 

Reg Flex and because of this Federal agencies do not defer to 

Advocacy’s view either. 

So let me ask you, what are the benefits and drawbacks to legislation that directs Advocacy to promulgate regulations governing 

agency compliance with Reg Flex? 

8

Mr. SULLIVAN. The benefits, as the chairwoman notes, in her 

question is that the courts are more likely to give the Office of Advocacy deference. The negative part of that is that it is a resource 

drain on our office that I am not sure we are prepared to meet. But 

if asked by the committee, I am supportive of regulatory authority, 

but there is a question mark on whether or not the resources of my 

office could support that type of effort. 

Chairwoman VELA ́ ZQUEZ. Mr. Sullivan, I am aware of concerns 

that requiring agencies to consider indirect economic impacts in 

rulemaking will bog down the regulatory process. Similar concerns 

were expressed during the consideration of SBREFA as the act provided for judicial review of agencies’ compliance with Reg Flex. 

However, these fears were not born out as courts have applied a 

reasonableness test to agency action. The legislation we are reviewing today requires only reasonably foreseeable indirect impacts to 

be considered. Is ′′reasonable foreseeable′′ the proper standard to 

ensure the regulatory process does not grind to a halt? 

Mr. SULLIVAN. In my opinion, Chairwoman, the term ′′reasonably 

foreseeable′′ does hit upon the appropriate standard to drive an 

analysis of indirect impact. I caution the committee of being more 

prescriptive because this is really a case of you have got to call 

them when you see them. There are rules that are so obviously deficient and indirect impacts. 

I think one of the most obvious is if the Federal Aviation Administration issues a rule that prohibits airplanes from landing at a 

specific airport. I think it is reasonably foreseeable that a number 

of small businesses operating at this airport would be impacted. 

And there are many other rules that meet that reasonably foreseeable standard. 

So I commend the committee for using that term and I think it 

is the appropriate standard. 

Chairwoman VELA ́ ZQUEZ. I have other questions, but at this 

point I will recognize the ranking member. 

Mr. CHABOT. Thank you, Madam Chair. Thank you for being 

here, Mr. Sullivan. My first question is if agencies are able to assess the indirect socioeconomic effects of their major rules and environmental impact statements, how hard would it be for those 

agencies to prepare an initial or final regulatory flexibility analysis 

for indirect effects? 

Mr. SULLIVAN. Well, Congressman Chabot, I cannot speak on behalf of the agencies. One, because I am not in their seat promulgating rules, but two, because of my office’s independence. We don’t 

exchange drafts of testimony prior to hearings like this. What I can 

inform the committee, though, is several years ago when the then 

called Immigration and Naturalization Service issued rules that 

would prohibit foreign visitors from extending their stays here in 

the United States and this committee, to its credit, brought in 

Commissioner Ziegler and myself and put him to task, to say, you 

know, this is so obvious that even though you are regulating travelers that you are going to impact the tourist community that is 

virtually all small businesses. How can you not have that type of 

transparent analysis? And I was sitting in the same place that I 

am today and to my right was the Commissioner and in front of 

9

the Commissioner was a piece of paper with every documentation 

of data of indirect impacts on specific parts of the tourist industry. 

So the reason I raise that is because to the agency’s credit, they 

are doing the indirect impact and I believe that the public and the 

stakeholders on these rules deserve to see it. It is a matter of 

transparency and I do believe much of that analysis is being done, 

but I can’t speak on behalf of the agencies on how much additional 

work it would be to bring transparency to the data and analysis 

that exists on indirect impact. 

Mr. CHABOT. My next question is if the Executive order is codified, how would the Chief Counsel get proposed or final rules from 

independent agencies such as the Federal Communications Commission, for example. 

Mr. SULLIVAN. There is really no guarantee once a law is on the 

books that it works. And so I believe as the committee does that 

codifying the Executive order would go far in helping guarantee 

that we get rules in a timely manner prior to promulgation. But 

if it doesn’t work I can assure the committee I will come up and 

testify and work with you from an oversight capacity to make sure 

that it does work and that the FCC abides by its obligations under 

the law. 

Mr. CHABOT. Thank you. Are there other agencies that you might 

recommend be included in the panel process in addition to the two 

agencies already included, the EPA and OSHA? 

Mr. SULLIVAN. Congressman Chabot, this has come up before. 

Specifically Chairwoman Vela ́zquez had asked shouldn’t all agencies do panels. I should say in my initial first years I responded 

in saying that yes and we can handle the workload. The chairwoman was very patient with me at the time and asked me a again 

a few years later could my office handle that type of workload and, 

with a few years more under my belt in the job I answered no, we 

could not. We average, I think, there are hundred—averages between 1 and 400 hours per panel. And so for the sense of resource 

constraints, I can’t recommend that any other agencies be brought 

under the panel process. I would, though, make sure the committee 

understands that the same benefits that are derived from the panels at EPA and OSHA can be derived from compliance with the 

Regulatory Flexibility Act, and I would posit that when you amend 

the Reg Flex Act the way you are proposing to, you get the benefits 

of the panel process, the guaranteed small business involvement 

without the resources of the panels. So you are actually achieving 

the benefits of the panels without necessarily the resource constraints that I now know are part and parcel of the panel process. 

Mr. CHABOT. My final question is, even if the Chief Counsel 

never filed an amicus brief, how would the so-called Chevron deference help the Office of Advocacy in their disputes with other Federal agencies? 

Mr. SULLIVAN. Right now, every lawsuit that includes a valid 

Regulatory Flexibility Act claim does serve as a wake up call to 

Federal agencies to awaken them to their responsibilities under the 

Regulatory Flexibility Act. And in the next panel specifically, you 

have Marc Freedman, who was part of the effort to file a lawsuit 

challenging a recent Homeland Security immigration enforcement 

bill. So I think he may be able to give an even greater firsthand 

10

account of how including a Reg Flex Act claim brings an agency’s 

attention to their responsibilities under the Reg Flex Act. 

In response to your question about Chevron deference, yes, I 

think agencies would certainly take their obligations more seriously if the Office of Advocacy or when the Office of Advocacy is 

afforded that type of deference by the courts. 

Mr. CHABOT. Thank you. I would yield back, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Ms. Clarke? 

Ms. CLARKE. Thank you, Madam Chair. And good morning to 

you, Honorable Tom Sullivan. On November 30th, the Food and 

Drug Administration issued a final rule for over-the-counter 

antitussive drug products. The FDA determined the final rule will 

not have a significant economic impact on a substantial number of 

entities and certify without any further analysis under Reg Flex. 

Do you believe that agencies can and/or are abusing Reg Flex when 

it comes to compliance requirements for issuing a final rule? 

Mr. SULLIVAN. I don’t think all agencies have it exactly right, 

Congresswoman. 

Ms. CLARKE. Very good answer. 

Mr. SULLIVAN. Thank you. 

Ms. CLARKE. What would you say is the solution under what we 

are trying to achieve here? 

Mr. SULLIVAN. I think there are a number of avenues to try to 

get to the solution, none of which are a silver bullet. The first part 

of the solution is certainly keeping my office to task in its oversight 

responsibilities to the Reg Flex Act. We try our best, we try to keep 

our ears to the rail to make sure we are attentive to small entities 

concerns. But we benefit from being informed of where our resources should be spent and where our priorities should be. 

So I think the first part of the solution is keeping my office on 

task. The second part of the solution is taking steps like this to 

amend the Reg Flex Act now that we have a greater long-term 

working knowledge of it to hopefully bring more agencies into the 

fold in getting their analysis correctly. 

The third is oversight. And I cannot overstate the importance of 

this committee’s role in the effectiveness of the Regulatory Flexibility Act. This isn’t just me. This is me and my four predecessors 

as the Chief Counsel of Advocacy and a number of predecessors of 

all of yours regardless of the party in charge who have sat on the 

Small Business Committee. It is through your oversight that has 

driven much of the success of the Regulatory Flexibility Act. So to 

the extent that there are flaws in an agency’s analysis, part of 

reaching a solution is bringing them before this committee and it 

is part of my job also to appear before this committee to perhaps 

instruct agencies on how they could do a better analysis when it 

comes to considering their burden on small entities. 

Ms. CLARKE. And when an agency certifies that a rule does not 

have a significant impact on a substantial number of small firms, 

they only provide the simplest reason for certification. Do you believe that parties are adversely aggrieved by this current process. 

Mr. SULLIVAN. I don’t like saying that going to court is a solution 

for many things when it comes to small business. In my previous 

job I headed a legal foundation that in fact did go to court. The cost 

of a district court challenge can be half a million dollars. You go 

11

up to the appellate, the appellate level is 1-1/2 million dollars. I 

have not encountered any small businesses in my tenure as Chief 

Counsel that have 1-1/2 million dollars in reserve to challenge an 

agency action. So I have got to downplay the courts as being the 

solution. However, from a certification process, the courts have 

been very clear that have said the requirement that a factual basis 

underlie the certification is something that the courts take very seriously and the agencies should take very seriously, and I think 

that precedent has helped drive agencies to better comply with how 

they document their certification. It must—according to the courts, 

it must be accompanied by a factual basis. 

Ms. CLARKE. I yield back. Thank you very much, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Madam Chair. Mr. Sullivan, could 

you tell me in my allotted time about the R-3 program, how it 

works, who participates, how you forward that information on to 

the agencies, how you reach your findings in that program? 

Mr. SULLIVAN. Congressman, thank you for asking about the R3 program. R-3 stands for Regulatory, Review and Reform, and the 

initiative which calls for nominations for—by small entity groups 

to nominate rules that they believe should be reviewed to be updated, streamlined or removed. The birth of this program recently 

is mostly because of what we are talking about today, and that is 

the failure of part of the Regulatory Flexibility Act to really have 

agencies do a spring cleaning. 

So with that type of gap, I want to both work with this committee to fix that gap legislatively, but I also want to work through 

an initiative to make sure that we can do everything we can even 

without additional legislation to bring agencies into compliance 

with section 610 of the Regulatory Flexibility Act. 

So the R-3 initiative calls for nominations for rules that can be 

reviewed and reformed. We are picking the top 10 nominations for 

reform and we will forward those to the agencies for action in early 

spring in conjunction with our annual report to Congress on implementation of the Regulatory Flexibility Act. This initiative has 

been underway for about 2 months. We have received over 30 

nominations for reform. We have narrowed that down and are very 

close to having a top 10. And I want to make sure that the committee knows and other stakeholders know that even though some 

ideas for our office’s involvement in rules may not fit neatly into 

a top 10 list, that doesn’t mean that they go into the trash can or 

the shredder. We will continue to work on the issues that are important. 

Health care, taxes are the two issues important to small businesses. We will continue working on those, but we have heard from 

small businesses that we should prioritize a spring cleaning by 

Federal agencies to look at rules that can be updated or streamlined. The classic case on this is in the 1990s a small business 

owner, Bill Farren, out in Arkansas owned a number of gas stations, and he had to fill out a form that told his local fire chief that 

he had gas on the premise. Well, Mr. Farren thought this was absurd and he contacted Members of Congress. He contacted this 

committee. He contacted my predecessor and collectively you all 

contacted Administrator Carol Browner and she agreed with Mr. 

12

Farren. And because of his initiative, you removed that requirement, you removed that paperwork. There have got to be other Bill 

Farrens out there and that is why we are undergoing this R-3 program. 

So I am very optimistic of its success and I ask the committee 

to keep my office on task for its successful implementation and that 

when we do issue our top 10 rules in need of review and reform, 

I welcome the opportunity to come to this committee with the agencies who we identify to work together so that we can ease the burden on small business. 

Mr. ELLSWORTH. How do you come up with the top 10—if the 

11th one was pretty good, would you then put that in next year’s 

or how do you discern the 10 from No. 11? 

Mr. SULLIVAN. Well, Congressman, I am hoping that we have to 

discern 10 from the top 18. And, yes, those next 8 will go right into 

the next year’s batch. 

Mr. ELLSWORTH. Thank you very much. And I yield back. 

Chairwoman VELA ́ ZQUEZ. Thank you. Mr. Gonza ́lez. 

Mr. GONZA ́LEZ. Thank you very much, Madam Chair. And welcome, Mr. Sullivan. And for everyone’s edification, we met yesterday and had a very good discussion regarding what you are doing 

in being proactive and making sure that you gather the information that may address the shortcomings that an agency or department may have regarding identifying those regulations, rules or 

anything else that need some updating or actually just do away 

with them totally. This is two areas. If you really think in terms 

of an agency or department prior to the promulgation and adoption 

of a rule you would think that, yes, they have an obligation to go 

out there and see what the consequences might be. I don’t think 

they do. I don’t think that really happens. You have comment periods, but how many people really comment unless you are part of 

an association or organization. And the other, of course, is the periodic review, as you have already said, to go through there and do 

away with that which is no longer applicable or serves its purpose 

or you could actually improve on it. I don’t think that goes on either. I don’t think there is the real incentive, and that is what we 

are trying to develop here. 

Statutorily how do we create a greater degree of accountability 

and the incentive? I would like to think first as you take away the 

excuses to the departments and the agencies that they are not 

aware of the impact of their regulatory scheme. Now, I also believe 

that this usually happens after the adoption, not prior to or during 

the discussion or comment period and only when we have those 

consequences that negatively impact small businesses. My point is 

what you are doing now with your own effort, I would like to see 

on a grander scale and charging somehow the individual agencies 

and departments of also being proactive on their own. You are an 

advocate for small business. I understand that. But for you to actually be going out to a huge universe and try to gather that information which I think you need to be doing, I just would just like to 

see that being replicated at every department and agency level 

and—whether that is possible or not. 

The last hearing we had and the meeting we had yesterday was 

the result of course of my suggestion of having Nydia’s hotline or 

13

her Web site. I don’t think she volunteered to do that. But I am 

really quite serious. I want the small businessman and woman in 

America to somehow know there is a way to plug into some sort 

of a system where they are able to lodge their complaint, that how 

it is impacting them. 

And I always use the simple experiences that I have had with 

constituents about why does the form have to be 12 pages when 

you can reduce this thing to 2 pages. But try to find someone that 

will listen to you and even a Member of Congress doesn’t get really 

listened to by the bureaucracy. They will wait us out and they will 

wear us out, and it is Senator Nelson from Nebraska said when 

you are talking to these guys they will say we were before you and 

we will be here after you. I really think that is the attitude out 

there. 

The question is accountability. Is there something we can do first 

of all to assist you in your effort in the program that Congressman 

Ellsworth was discussing with you, and beyond that is there something that this committee can do to spread that responsibility to 

the individual agencies and departments? 

Mr. SULLIVAN. Congressman Gonza ́lez, thank you for your question. Thank you for meeting with me yesterday to talk about many 

of these things. I think first of all there is an acknowledgement 

that agencies are doing hundreds of reviews of their rules. So it 

would be untruthful for me to say that they are not doing anything. 

They are. I think the question is, from my perspective, do they 

need especially in prioritizing what they are looking at to see that 

they can focus specifically on those measures that would help small 

business, and that is really what R-3 is about. I pledge to you that 

I will work with you and this committee to take whatever types of 

steps we can not only to make R-3 an initiative but I like your suggestion of seeing if there are ways to broaden that, and I think that 

will become clear after our first year of running with this R-3 to 

see how it works. 

But I do agree with you, the accountability is a huge issue. And 

in small businesses not feeling lost in the bureaucracy is a big 

issue that we—that it is good that we are trying to take on. 

Chairwoman VELA ́ ZQUEZ. Will the gentleman yield? 

Mr. GONZA ́LEZ. Yeah, as a matter of fact, I yield back. Thank 

you, ma’am. 

Chairwoman VELA ́ ZQUEZ. Mr. Sullivan, when he asked you how 

can we assist you and your office, I think codifying section 3 of Executive Order 13272 would allow for you to come to the rulemaking 

process at an early stage and I believe that will be a tool important 

to your office. 

Mr. SULLIVAN. I agree with the chairwoman. The codification of 

13272 would not only help us get small businesses’ views into the 

process earlier, it would also empower this committee because it 

then becomes law not exclusively the purview of the executive 

branch. So I agree with the chairwoman. 

Chairwoman VELA ́ ZQUEZ. Mr. Chabot? With that we end this 

panel. But, Mr. Sullivan, I have all the questions that I will be submitting to you in writing for the record. 

Mr. SULLIVAN. Thank you. It will be a pleasure to respond. 

Thank you. 

14

Chairwoman VELA ́ ZQUEZ. And the committee is in recess until we 

complete votes on the floor. 

[Recess.] 

Chairwoman VELA ́ ZQUEZ. The committee is called to order and 

we are going to proceed with our second panel. We have Mr. Marc 

Freedman. He is the Director of Labor Law Policy of the U.S. 

Chamber of Commerce. Prior to joining the U.S. Chamber of Commerce, he was the Regulatory Counsel for the Senate Small Business Committee. At the U.S. Chamber of Commerce, Mr. Freedman 

is responsible for developing and advocating the Chamber’s response to a variety of labor and workplace issues. The U.S. Chamber of Commerce represents over 3 million businesses. 

Welcome, sir. 

STATEMENT OF MR. MARC FREEDMAN, DIRECTOR OF LABOR 

LAW POLICY, U.S. CHAMBER OF COMMERCE 

Mr. FREEDMAN. Thank you, Madam Chairwoman. Now that you 

have read my introduction, let me just point out that during my 

time at the Senate Small Business Committee, my role was to oversee agency compliance with the Regulatory Flexibility Act and 

make suggestions about ways that it could be improved. So I have 

been around this discussion for quite some years. 

The Chamber unequivocally supports improvements of Regulatory Flexibility Act to expose loopholes and clarify various terms 

that have led to agencies avoiding the requirements of the act. We 

therefore are pleased to support your bill, the Small Business Regulatory Improvement Act of 2008, and I commend you for pursuing 

this issue and holding this hearing today. 

If we needed a reminder—and let me just start off. The DHS ′′no 

match′′ reg has already been mentioned, and I would like to cite 

to it for a moment to give the committee an example of the length 

to which agencies will go to avoid the Reg Flex compliance. In that 

reg, as you may remember, the DHS did not address any of the 

complications and subtleties of trying to determine whether their 

regulation would have a significant economic impact on a substantial number of small entities. They basically blew right through 

that and went right to a legal conclusion that it did not disturb the 

underlying obligation of an employer to determine the work authorization of the employees and therefore there was no new burden. 

As you have heard, the Chamber intervened in a case brought by 

an array of unions specifically to raise the Reg Flex issue. Unfortunately, the U.S. District in the Northern District of California saw 

through DHS’s neglect of its rulemaking obligations and found that 

the agency had not supported certification with the adequate factual basis as required in the act. 

I want to make a point about this, too. DHS’s reasoning if left 

unchallenged would have set a very dangerous precedent. Consider 

how that same logic, that the underlying obligation of the employer 

is not changed by obligation, could be applied by other agencies 

such as OSHA. The Occupational Safety and Health Act mandates 

that employers provide a workplace, quote, free from recognized 

hazards that are causing or are likely to cause death or serious 

physical harm. All of OSHA’s regulations are merely detailed examples of these hazards and how employers must protect their emVerDate 0ct 09 2002 16:56 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39383.TXT LEANN
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ployees from them. If OSHA was to adapt DHS’ logic that any regulation did not change the underlying obligation of the employer, 

the agency would never have to determine the impact of a proposed 

regulation on small businesses and therefore would never conduct 

a SBREFA panel review taking input from actual small businesses 

and never have to produce small entity compliance guides, the requirements for which were recently enhanced in the minimum 

wage package passed earlier in the session. 

Against this backdrop, the Chamber believes making the RFA as 

effective as possible is imperative. While we are often associated 

with our large members, the truth is that 96 percent of U.S. Chamber members are actually small businesses with 100 employees or 

less. As we have already heard this morning, everyone acknowledges that regulations impact small businesses more harshly than 

large businesses. If we are serious about keeping our small businesses competitive with global competition, we must make sure 

this act has the impact Congress intended when it passed it more 

than 25 years ago and then amended it with SBREFA in 1996. 

Your bill would make several important improvements to the 

Regulatory Flexibility Act. Perhaps the most significant is requiring agencies to consider the indirect impact of regulations when 

calculating the impact of regulations on small businesses. We have 

heard about this a lot already this morning. 

Let me just point out that that is particularly helpful with respect to the EPA regulations where the agency claims that because 

their regulations are actually enforced by the States, these regulations only have an indirect impact and therefore do not trigger the 

full range of RFA activities. Another important problem your bill 

addresses is improving agency compliance with section 610, the 

provision that requires agencies to review the regulations after 10 

years. Your bill makes clear that the agency is to determine whether the regulation has a significant economic impact on a substantial number of small entities at the time of the review. The Government Accountability Office concluded that the original text of the 

legislation was not clear whether this impact applied to the time 

the regulation was issued or when it was being reviewed. This confusion has allowed agencies to legitimately claim that they were 

unsure how to proceed. Indeed, the Government Accountability Office has done quite a few studies on the Regulatory Flexibility Act, 

showing how agencies have failed to comply with it and repeatedly 

citing lack of clarity in the law’s terms as a key reason. 

One quote that I was able to uncover from the testimony says 

that GAO’s reports indicate that the full promise of RFA may never 

be realized until Congress revisits and clarifies elements of the act, 

especially its key terms, or provides an agency or office with clear 

authority and responsibility to do so. They go on to point out that 

there is a domino effect that if an agency’s initial determination of 

whether RFA is applicable to rulemaking has on the other statutory requirements such as the compliance guide and the periodic 

reviewing of regulations. 

Madam Chair, I agree with the GAO that if we are serious about 

improving the Regulatory Flexibility Act, the most important thing 

would be for Congress to make clear what it means by the key 

term ′′significant economic impact′′ and ′′substantial number of 

16

small entities.′′ These two phrases drive the overall question of 

whether an agency must apply the RFA to any given regulation. 

The agencies have taken maximum advantage of the flexibility in 

the Regulatory Flexibility Act to define these terms differently as 

they choose for any given regulation, with the goal being that the 

regulation is regarded as not having the subtle impact and thus 

avoid having to complete the requirements of the RFA. While these 

two terms cannot be defined the same for all regulations or even 

for all regulations within a specific agency, it is possible to establish the parameters and the elements that must be considered. 

Doing so would not only help agencies apply the RFA more consistently, it would also set benchmarks so that those of us who monitor 

agencies’ compliance with the RFA would have some way to tell if 

they had done what they were supposed to do. 

As we have heard already, one way to accomplish the goal would 

be to authorize the Chief Counsel of Advocacy to promulgate a rulemaking defining these terms along with other requirements of 

agency compliance with the RFA. And as we have also heard, this 

idea has been included in legislation previously, most recently H.R. 

682 through the Regulatory Flexibility Act, and I might add also 

by Senator Bond back in the 107th Congress in a bill he introduced 

call the Agency Accountability Act. 

In the alternative, Congress could specify what it meant by these 

key terms and instruct agencies that they are to incorporate these 

elements as they apply these terms to the regulations. One other 

suggestion I would like to offer the committee is that for those regulations when an agency’s certification is still not adequately supported, I think it would be most helpful to permit the judicial review of an agency’s certification decision at a time closer to when 

that decision is made rather than the current law, which says you 

have to wait until the regulation goes final to bring your judicial 

review. This would preserve the ability of small businesses to get 

their input into the rulemaking at a time when it can still have an 

impact. 

An excellent example of where this would have been particularly 

helpful is the recent case brought by the Aeronautical Repair Station Association, ARSA, for purposes of conversation, against the 

Federal Aviation Administration’s regulation requiring contractors 

and subcontractors at any tier to establish mandatory drug and alcohol testing programs for employees performing maintenance 

functions in the aviation industry. 

Chairwoman VELA ́ ZQUEZ. Mr. Freedman—

Mr. FREEDMAN. I am sorry. 

Chairwoman VELA ́ ZQUEZ. Your time is up. So maybe during the 

question and answer period you will be able to make any other—

Mr. FREEDMAN. By all means. Forgive me, Madam Chairwoman. 

Just let me say we look forward to helping you move this bill. 

[The prepared statement of Mr. Freedman may be found in the 

Appendix on page 44.] 

Chairwoman VELA ́ ZQUEZ. Thank you. Thank you very much. Our 

next witness, Mr. Dyke Messinger, is the President and CEO of 

Power Curbers, Inc. He is testifying on behalf of the National Association of Manufacturers. Founded in Salisbury, North Carolina, 

Power Curbers sells products across the globe in more than 70 

17

countries. The National Association of Manufacturers represents 

multinational firms, small and medium manufacturers, and 350 allied associations throughout the country. Welcome, sir. 

STATEMENT OF DYKE MESSINGER, PRESIDENT AND CEO, 

POWER CURBERS, INC. ON BEHALF OF THE NATIONAL ASSOCIATION OF MANUFACTURERS 

Mr. MESSINGER. Thank you, Chairwoman Vela ́zquez. It is a 

pleasure to be here. Ranking Member Chabot and Congressman 

Akin, it is a pleasure to see you, sir. I want to thank you for giving 

me the opportunity to talk about the Regulatory Flexibility Act. 

As you know, NAM is the largest trade association representing 

large and immediate—small and medium manufacturers in all 50 

States. Just another note about my business. We make mechanized 

construction equipment for paving concrete roads and curbs and 

sidewalks. We employ 104 people in North Carolina, Iowa, and 

Tennessee, and we sell our equipment in over 80 countries, and I 

am also a board member of a National Association of Manufacturers. I won’t repeat the statistics that have been shared with the 

committee before about the report by Mark Crain for the SBA on 

the cost of regulation, but I will share some data on manufacturing. 

In manufacturing, the disparity between large and small firms 

was the widest. The cost per employee for the smallest firms was 

over $21,000, or over 150 percent higher than the over $8,700 cost 

per employee for the largest firms. 

In 2006, the NAM released an update to its report on how U.S. 

structural costs hurt our competitiveness in this country. It examined structural costs borne by manufacturers in the United States 

compared to our nine largest trading partners. The principal finding was that structural costs were almost 32 percent higher in the 

U.S. than for our foreign competitors. The structural costs included 

a regulatory compliance, corporate taxation, health and pension 

benefits, litigation and rising energy costs. 

As a result, we welcome the leadership, Chairwoman Vela ́zquez, 

and of this Congress in making improvements to the RFA. Our review of your proposed legislation leads us to conclude that your improvements to the RFA are sound and the NAM and its members 

are supportive of your efforts. 

First, let me do emphasize you need to include the indirect economic effects in a regulatory flexibility analysis. A timely example 

of agencies not being able to consider the impact that they are 

truly having on small businesses is the EPA’s national ambient air 

quality standards for ozone. Because the implementation of NAAQ 

standards is done through the regulation and approval of State implementation plans, there are said to be no direct effects on small 

entities because States are not small entities. Well, this is clearly 

contrary to what Congress intended when it passed the RFA. Periodic review of legislation, section 610, has always been an underperforming provision of the RFA. There is great hope that it would 

rationally reduce or eliminate some of the burdens on small businesses that had outlived their usefulness. 

Let me give you an example. Many of our members and businesses across this country use aerial work platforms or cherry pickers. They also use scissor lifts in their facilities to perform mainteVerDate 0ct 09 2002 16:56 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39383.TXT LEANN
18

nance or to do a specific task. Well, there are fall protection standards that are very important that are attached to these devices. 

After all, putting somebody up in the air so many feet from the 

ground is important. The regulation—some of the regulations for 

these are 30 years old and they don’t apply separately to each machine. So that you don’t—depending on which machine arrives in 

your facility, you have different regulations. You don’t know what 

to comply with and of course when OSHA comes in and takes a 

look, they are going to tick off what you did or didn’t do. 

So that is something that I have noted in my business and the 

people that bring this equipment in don’t really understand the 

OSHA regulations. They are there to execute a piece of work. So 

we believe that enhanced reporting requirements will create the 

necessary environment for better retrospective review. 

There are also circumstances where an individual rule is not particularly burdensome or a challenge to many small business, but 

the cumulative effect of that rule and many others affecting a particular sector or type of business can be crushing. Cumulative effects are not always easy to quantify, but the current loophole of 

providing this analysis, quote, to the extent practicable, gives agencies too large of an opportunity to walk away from this responsibility and the use of, quote, where feasible, unquote, is a limitation 

to the review of the number of small entities affected seriously 

weakens the requirement. Changes to this limiting language in 

several parts of the RFA will go a long way to improving agency 

compliance and analysis. 

The NAM was also supportive of former Chairman Manzullo’s 

H.R. 682 in the previous Congress. We believe there are a few provisions of that bill that would strengthen your legislation, and I 

have included those suggestions in my prepared testimony. 

Thank you again, Madam Chairwoman, for this opportunity to 

testify. 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Messinger. 

[The prepared statement of Mr. Messinger may be found in the 

Appendix on page 53.] 

Chairwoman VELA ́ ZQUEZ. Our next witness is Mr. Andrew 

Langer, he’s the senior manager of the regulatory affairs at the National Federation of Independent Businesses. Prior to joining NFIB, 

he was associate director of the development for the Competitive 

Enterprise Institute. The National Federation of Independent Business represents over 600,000 small businesses before Congress and 

all 50 States. Thank you and welcome. 

STATEMENT OF MR. ANDREW LANGER, SENIOR MANAGER, 

REGULATORY AFFAIRS, NATIONAL FEDERATION OF INDEPENDENT BUSINESSES 

Mr. LANGER. Thank you very much, Chairwoman Vela ́zquez, 

Ranking Member Chabot and Congressman Akin. Thank you very 

much for allowing me the opportunity to testify here today on behalf of the hundreds of thousands of small businesses owners represented by NFIB. 

I am happy to be here to discuss with you the burden of regulatory paperwork and to offer our insights on how to find a way to 

reduce the amount of paperwork filled out by America’s small busiVerDate 0ct 09 2002 16:56 Jan 08, 2008 Jkt 033615 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39383.TXT LEANN
19

nesses each year. I attended your hearing on regulatory burden 

several weeks ago and I really appreciate the invitation to come 

here and discuss these burdens in greater detail. NFIB is the Nation’s largest small business association, and it is fairly unique 

amongst trade associations in Washington D.C. 

NFIB represents truly small businesses. Ninety percent of our 

members have fewer in that 20 employees and our average member 

size is 10 employees. I know we have discussed at great detail the 

difference between small and large businesses here, and I won’t restate those issues here today. But if there is any message I hope 

to convey today, it is that agencies cannot create regulations in a 

vacuum. Agencies have to take into account how each and every little rule adds up to literally weeks worth of a small businesses time. 

We must consider what I have taken to calling the context of regulation. 

We spent a tremendous amount of time focusing on the big picture, and the big picture of regulatory burdens is important, it sets 

out the most general context in which to consider the problem of 

regulatory burdens. As Tom Sullivan said, our regulatory State 

costs over a trillion dollars annually. Americans spent 8 billion 

hours, billion with a B, filling out paperwork last year at a cost of 

over $400 billion. These are vast figures, they are almost too large 

for any person to really comprehend. 

Let me put it to you this way: For an adult population of 210 

million people, that is 210 million people over the age of 18 in 

America, that is 38 hours for every adult. Almost the equivalent of 

a workweek’s worth of time spent filling out paperwork for the Federal Government. This is what I mean by context, the assessment 

of each rule’s individual impact and how that impact adds to the 

Agency’s current regulatory burden, taken by itself a rule might 

create very little burden. 

For example, in a hearing last year on a proposed EPA regulation on home renovation, a lot of talk focused on a mandate requiring agency training of 1 day, per quarter, per employee. Many people dismissed this as a simple request, what is 1 day every 3 or 

4 months after all. But that is 3 or 4 days per employee, per year, 

and this is on top of all the other training, paperwork and other 

regulatory burdens that a small business and those employees 

might be required to jump through. 

We believe at NFIB that the agencies ought to keep track of each 

of those mandates, quantifying them and adding them up each and 

every year. And then when new regulations are proposed, calculate 

the burdens being added and then restate the overall burden being 

opposed by the agency. It is really only in this way that we can 

really assess what is being added and consider whether or not such 

additions are necessary and in that framework. 

And in context cuts both ways as well, understanding that it isn’t 

a single regulation that creates this burden, but thousands of them 

underscores the necessity for not only making incremental changes 

to the regulatory state, but supporting the agencies when they do 

so as well. When EPA comes out with a regulatory change that reduces the burden on small business of 15 hours, we can’t dismiss 

that. Fifteen hours is 2 days, 2 days here and 2 days there over 

the thousands of regulations that are on the books, and pretty soon 

20

you are talking about real time. Time, after all, is a small 

business’s most precious and most finite resource. 

We also believe that accountability and transparency are important, and we believe that these two concepts can be effectively 

joined with the efforts to reduce regulatory burdens that gets to 

what Congressman Gonzalez was talking about before. In addition 

to our recommendations on regulatory compliance guides, we believe that all regulations and their associated documents should 

have a name and direct dial phone number of the regulation’s principal author attached. Some might balk at this, but we believe that 

it gets to the heart of government responsiveness. 

One of the most problematic parts of figuring out how to be in 

compliance with regulations is getting answers to basic questions 

about them. Rarely do single agency points of contact have the detailed knowledge about a particular regulation to actually provide 

the meaningful information necessary. 

And small business owners spend countless hours working their 

way through agency offices in order to find the right person to answer their question. But who better really to answer a question 

about a regulation than the person in the agency who is responsible for bringing that regulation through the promulgation process? Moreover, if an agency employee is required to attach his or 

her name to a regulation, we believe that more care might be taken 

to ensure that a regulation is as clear as possible and doesn’t burden small business any more than it has to. 

Thank you, again, for the opportunity to testify. In our written 

remarks we have offered a series of 10 separate recommendations, 

several of which have been adopted and included in your legislation. We look forward to working with you and answering any 

questions that you might have. 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Langer. 

[The prepared statement of Mr. Langer may be found in the Appendix on page 60.] 

Chairwoman VELA ́ ZQUEZ. Welcome again, Mr. Charlie Sewell. He 

is the senior vice president of government affairs at the National 

Community Pharmacists Association. Prior to joining, NCPA, he 

was the president of ACG Enterprises. National Community Pharmacist Association represents 24,000 independent pharmacists and 

50,000 community pharmacists and their patients across the country, welcome. 

STATEMENT OF MR. CHARLIE SEWELL, SENIOR VICE PRESIDENT, GOVERNMENT AFFAIRS, NATIONAL COMMUNITY 

PHARMACISTS ASSOCIATION 

Mr. SEWELL. Thank you, Madam Chair, and thank you Ranking 

Member Chabot and the other members of the committee for having us here today. I would like to say that we still represent 24,000 

pharmacies, but actually we only represent 23,000 pharmacies now 

because we lost 1,152 pharmacies in the last year because we got 

a new business partner, with the advent of Part D we now have 

Uncle Sam as a business partner and we found out he’s not a very 

good business partner as said before. That is why we are happy to 

be here today. 

21

Most importantly, we represent not only the 23,000 pharmacies, 

and their over 300,000 employees, but millions of patients that we 

serve day in and day out. We help them in terms of improving their 

adherence to their drug regimens. We help them avoid adverse 

drug interactions, we even provide home delivery for free in most 

of our pharmacies, which is almost unheard of in this day and 

time. It is really because of our face-to-face relationship with a 

local independent pharmacy that patients are more likely to take 

medicines on time and more likely to take them properly and more 

likely to refill their meds when they need to. 

And frankly, more likely to get the care that they need because 

we spend more time with most of our patients than their doctors 

do, especially in rural America and the urban centers. We are 

happy to be here today to say that we strongly support the small 

business Regulatory Improvement Act. It is much needed, long 

overdue, and the sooner the better from our perspective. 

We would ask, though, that actually you consider strengthening 

it even more. Specifically we would recommend that no agency can 

issue a final regulation unless it specifically analyzes the significant impact that implementation of the rule will have on small 

business. Agencies shouldn’t be allowed to hide behind lack of evidence which is what they always cite. 

In order to proceed, agencies must affirmatively demonstrate 

that there is no significant adverse impact on small businesses. 

Secondly, once there is a finding of significant impact upon small 

business, an agency should not be allowed to implement a rule for 

the small business sector that it affects. And lastly, a private person or any entity or any government entity for that matter once a 

rule is released, that person or entity should be able to bring up 

a regulatory challenge when they believe there has been a violation 

of the RFA, and frankly, what we would like to see is an SBA process created where that action could be adjudicated in a fairly efficient manner and fairly expedited manner by the SBA. 

I want to cite one specific example that we have talked about before that really is really our major concern, that is a recent rule 

that was promulgated by CMS. The GAO did a study and said that 

under the new Medicaid reimbursement proposal we would be reimbursed 36 percent below our cost. The OIG did a study and said 

that from 19 of the 25 drugs that they examined we would be reimbursed below our cost. If you take into account that you actually 

have to pay the pharmacists who work in our pharmacies, you actually have to pay a rent or a mortgage, you actually have to pay 

for the utilities, 24 of the 25 drugs they examined we would be losing money on, it really is a horrendous situation. 

When it came time to perform the regulatory flexibility analysis 

in their final rule, frankly they said, we are going to ignore the 

GAO findings, we are going to ignore the OIG findings and then 

they told us that we need to provide more documented evidence. 

We actually used SBA standards and we showed them directly that 

we would lose, our net margins would sink to the tune of about 80 

percent, when you are only make 2.6 percent net margin to begin 

with, almost 80 percent reduction in that margin doesn’t work, it 

just don’t keep us in business. 

22

We can’t believe that CMS totally neglected the RFA in the fashion that they did. Something needs to be done. The more teeth that 

we can put to the RFA the better. Agencies need to be required to 

actually do real economic analysis, and when there is significant 

impact, they have to actually stop what they are doing before they 

promulgate the rule. They certainly need to take into account the 

small business sectors that will be impacted. Thank you very much, 

Madam Chair. 

[The prepared statement of Mr. Sewell may be found in the Appendix on page 75.] 

Chairwoman VELA ́ ZQUEZ. Thank you. I would like to address my 

first question to Mr. Freedman. And you spoke about the fact that 

the Regulatory Flexibility Act does not define significant economic 

impact and, in fact, the Government Accountability Office concluded that the lack of clarity regarding this term has reduced the 

effectiveness of the law. And also courts have ruled that agencies 

did not have to consider the indirect impact of a rule on small businesses. The legislation we are examining today requires agencies to 

contemplate reasonably foreseeable indirect economic impacts. 

How will this improve the regulatory process for small businesses and will it result in a more accurate assessment of the two 

economic impacts on small businesses? 

Mr. FREEDMAN. Thank you, Madam Chairwoman, for the question. I think you actually hit one of the several nails on the head, 

the indirect impact, as I have mentioned, and as others have discussed, is one of the ways that agencies avoid taking into account 

certain impacts on small businesses. The aeronautical repair station case I was about to mention, I think, brings that out very 

clearly. The FAA said that the impacts were merely on contractors, 

and therefore, not direct impacts. The court found differently and 

said that these impacts, in fact, should be included. 

I think the indirect impact question has been one of those holy 

grails in the pursuit of better reg flex compliance. Your legislation, 

I think, does a very good job of trying to capture the levels of indirect impact. I think that is where the debate lies. 

You talk about reasonably foreseeable. That is about, I think, as 

good a line as one can draw around this. Let us be honest, I think 

that will trigger litigation, but you do have to draw a line and I 

think that is a good way to draw that line. So basically, the answer 

to your question is yes, it would help greatly and it would definitely make a difference in a lot of regulations in terms of the impacts that have been discussed this morning and in other iterations 

that we all have dealt with. 

Chairwoman VELA ́ ZQUEZ. Mr. Langer, would you like to comment? 

Mr. LANGER. Well, no. I have no disagreement with Marc on this. 

I like to think of the regulatory State as almost an organic creature, and that you make a change somewhere it will have a ripple 

effects down the road and effect other things. Industries in our 

economy are not independent entities, they are all interconnected 

in many ways. And so when government makes a change somewhere it is going to have an impact down the road and sometimes 

very serious and very problematic ones. 

23

I think Chief Counsel Sullivan underscored a great one when he 

was talking about the hemispheric travel restrictions issue and the 

impacts that is going to have industry wide in multiple industries 

and how that wasn’t taken into account. I think that is one of the 

great problems we will run into. 

The greatest growth in regulation is happening in Homeland Security and we are seeing all sorts of impacts down the road for 

things that DHS simply isn’t contemplating. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Messinger, I understand that the disparity on regulatory 

costs between large and small businesses is widest in the manufacturing sector, can you talk to us about how certain regulations or 

agencies do more to address the unique concern? They could do 

more to address the unique concerns of a small business manufacturer and do you hire legal consultants to assist in compliance? 

Mr. MESSINGER. Yes, we hire legal consultants to help us when 

needed. It is not on retainer or anything, we just use them when 

we need them, but quite frequently we do. I don’t know if I can 

comment on specific agency regulations. I have to check with my 

staff. What I do know is what we have all said is just the cumulative burden of the variety of things we are asked to do makes it 

where you sit down and look at this stuff and you say, of what real 

need and use does this have? We can all appreciate the need for 

a clean environment, for safe working conditions and those sorts of 

things, but when it appears to be paperwork, appears, then people 

begin to distrust the system and that is what we don’t want to 

have happen. 

Mr. LANGER. Congresswoman, if I could just add to that, because 

there are some good examples that are out there, OSHA in the last 

few years has taken a particularly different approach—the Department of Labor itself has taken a different approach in many ways 

in dealing with small business and working closely with a number 

of entities out there. 

OSHA has developed what they call their OSHA consultation 

process, which we have been invested in for some time where they 

will go out and they will provide expertise to come into businesses, 

to not inspect but assess and then offer recommendations as to how 

they might improve their workplace safety and health programs. A 

number of entities out there a number of insurance companies are 

offering incentives to the small businesses that partake in that program and get certified and small businesses are saving money 

while protecting their employees. So that is one I would recommend. 

Chairwoman VELA ́ ZQUEZ. Mr. Sewell, let us talk about the AMP 

rule, CMS did not consider any alternatives to minimize the impact 

of the rule on small businesses, instead they concluded that out of 

State did not require it to examine any other alternatives. Can you 

talk to us, do you have any alternatives or ways to implement the 

rule that will be less burdensome to community pharmacists? 

Mr. SEWELL. We have made recommendations and there is legislation being considered both here in the House and Senate at the 

moment to address this. We are afraid given the congressional calendar, it will be difficult to make anything happen this year. 

24

So the latest discussion with Senator Baucus and now Mr. Stark 

here in the House is in regards to a delay, the hope is that they 

would at least delay until people would see the AMP data. When 

we submitted our comments to CMS, they never give us the AMP 

data, so it was impossible for us to comment on the specific harm. 

The only two entities that actually received the data were OIG and 

GAO and they are the ones who came up with the number showing 

that we will be reimbursed below cost. CMS criticized us for not 

offering specific comments, but yet wouldn’t provide us the data. 

They have still not provided the data to Congress. We don’t see 

how they can go forward with this rule when no one has the data, 

including the Congress. 

Chairwoman VELA ́ ZQUEZ. Another issue related to CMS is the 

Medicaid generic prescription drug reimbursement rule and its impact again on small pharmacists. Why do small pharmacists face 

a particular severe economic impact from this rule compared to 

larger counterparts and what are the consequences from community pharmacists if this new formula is implemented? 

Mr. SEWELL. The average Medicaid business that an independent 

pharmacy does is 14 percent of their total business, for chain pharmacies it is about 7 percent, so twice as much business. We have 

over 10 percent of our pharmacies, or about 2,300 pharmacies, over 

50 percent of their business is Medicaid. If this goes through, those 

23 pharmacies will close almost overnight. We have been in constant contact with our members, and that is what they have told 

us, there is just no way they can stay in business. Any pharmacy 

with a disproportionate share of Medicaid business is going to be 

in trouble, and most Medicare business tends to be concentrated in 

rural and the urban centers, and that is where most independent 

pharmacies are located. 

Chairwoman VELA ́ ZQUEZ. Mr. Chabot. 

Mr. CHABOT. Thank you very much, Madam Chair. I first want 

to commend the panel for something, all four of you have done your 

homework, you pronounced my name correctly, all four of you. That 

is the first time that has happened all year. When I first ran for 

office back in 1979 so it has been 28 years ago, I ran for Cincinnati 

city council as an independent, didn’t have much money so we had 

a 10 second ad and that is all we could afford. And so we had my 

yard sign on there, it just said Chabot, and we had a woman’s voice 

and a man’s voice and it kind of went back and forth. And one said, 

Chabot, one said Chabot, Chabot, Cabot. And then the voice over 

said, although nobody agrees on how to pronounce his name, everybody agrees he will make a fine city council. That was our ad and 

we lost. We finally did win, but it was a few years later, but in any 

event, thank you for that, not that I really care how you pronounce 

my name, but in any event we do pronounce it Chabot. It is a 

French name, most French men pronounce it Chabot. 

We will begin with you Mr. Freedman, if I can. Agency determinations of no significant impact at the proposed rule stage are 

not currently reviewable. If such decisions were reviewable, would 

this not undermine the ability of the agency to learn from the rulemaking process and correct its mistakes, the overarching premise 

of notice and comment rule making? 

25

Mr. FREEDMAN. Thank you, Mr. Ranking Member. I guess my 

feeling there is that I would rather see an agency get it right the 

first time and get an analysis out that makes sense and covers all 

the various factors that need to be included, rather than rely on a 

rule-making process, which my experience is while there are 

changes that are possible in a rule-making process, when you see 

the proposed rule, you are seeing what the agency wants to put 

out. As I like to say, it may not be carved in stone, but the concrete 

is wet. And so I would rather them get it right the first time than 

to have to rely on a comment process to correct them. 

Mr. CHABOT. Mr. Messinger, given the fact that your company already has sunk significant capital costs into complying with existing regulations, is it more important to focus on preventing new 

burdensome regulations or eliminate existing burdensome regulations? 

Mr. MESSINGER. Can we work on both? 

Mr. CHABOT. Good suggestion, yeah. 

Mr. MESSINGER. I guess it would depend on what the issue is, 

but surely you have to stop or slow down the unnecessary new regulations, but we just got a field of issues to deal with today. I don’t 

know, that would be tough, but I would leave it up to those that 

are involved in the details of those issues a little more. I guess if 

I had to pick, it would be the existing regulations. 

Mr. CHABOT. Thank you. 

Mr. Langer, even if an agency does not enumerate cumulative 

impacts, should the cumulative impact of regulations be taken into 

account when an agency makes the threshold decision of whether 

to perform an initial regulatory flexibility analysis. 

Mr. LANGER. I think it has to. I mean, the problem is right now 

we have a situation where when we assess regulatory burdens in 

the case of garbage in, garbage out, the executive branch understate regulatory costs consistently, they understate cumulative regulatory costs vastly. If we were to go only on the basis of what the 

Office of Information & Regulatory Affairs and don’t get me wrong, 

I have nothing but respect for Director Dudley and the work that 

she is doing over at OIRA, but annually, we, get this reporting of 

the costs and benefits of regulations and the State that cost and 

regulations are up $44 billion. We know that is not the case. They 

are looking at a dozen rules. 

And so the agencies have to do a better job if they are not going 

to assess the incremental costs, they have to do a better job at assessing their overall costs. We need to get a better handle on this 

because there is a fundamental misunderstanding of just what the 

burdens are. We are looking at a regulatory burden which roughly 

equals the entire Federal budget, and that just is an unsustainable 

situation for American business. 

Mr. CHABOT. Thank you. 

Mr. Sewell, in your opinion, does FDA accurately assess the economic consequences of its regulatory issuances of small pharmacies 

and suppliers? 

Mr. SEWELL. In a word, no. I will give you a specific example, 

right now they are considering imposing track and trace technology, something that we support to protect the drug supply from 

manufacturer all the way down to the pharmacy level. However, 

26

the cost of this technology could be anywhere between 10 and 

$40,000, that is a lot of money for a small business. That would 

be an unfunded mandate that would be basically placed on the 

back of pharmacies. And that is not taking into account the time 

to actually do track and trace technology, that is to track and trace 

the individual drugs. In fact, some of the discussions as we understand it would be looking at a situation where it would be almost 

as cumbersome as tax compliance, it could take an extraordinary 

amount of time. So the answer in a word is no. 

Mr. CHABOT. Thank you, very much. Madam Chair, I yield back 

the balance of my time. 

Chairwoman VELA ́ ZQUEZ. Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Madam Chairwoman. I just have to 

tell you, I have been practicing the ranking member’s name and for 

a year now, and now that he has given me those others options, 

I have forgotten how to pronounce it. So if I say Chabot, I apologize. I had Chabot down, there it is again. 

Gentlemen, thank you very much. I appreciate you being here, 

I could ask you questions all day. I appreciate you being here. 

First, if you don’t mind, in what we are talking about today, if the 

chairwoman had the magic wand and was giving away Christmas 

presents today and you had one thing you could say, I walked out 

of there and I won this for my constituents, could you go down the 

line and tell me what that would be if you walked out today and 

got it done? 

Mr. FREEDMAN. That is a hard question, I guess I would probably 

point to the indirect impact in language in the bill. If you are talking about one specific provision, other than just saying I walked 

out of here and got the bill done, I would focus on indirect impact 

language in the bill. I think that was the one that would probably 

make the greatest impact on the regulatory process. 

Mr. ELLSWORTH. Mr. Messinger. 

Mr. MESSINGER. I am not schooled in the legislation, I am a businessman. 

Mr. ELLSWORTH. One thing that would make your life easier as 

a businessman that this committee could do. 

Mr. MESSINGER. Well, Mr. Langer talked about how OSHA has 

really done some good things and become more responsive. I think 

if we could apply that to EPA, I think this country has become 

more green, certainly this last year we have seen that. I think people in government don’t realize that all Americans, most Americans 

are very supportive of what we need to do to have a sustainable 

future, but the EPA’s regulations on smaller businesses are terribly 

burdensome, I don’t want to get into that, but I would move in that 

area. 

Mr. LANGER. If the chairwoman has already given Marc his 

present of indirect impacts, I get a different one. I will keep hammering on the issue of phone numbers of the agency personnel, the 

principal office of regulations. I know it may sound gimmicky, but 

I think, frankly, down the road it could have a sea change effect. 

I mean, every time I talk to my members, I talk to our field personnel, I talk to folks who deal with the regulated entities, they 

look at me like, boy, that is an interesting idea. The idea that you 

can actually pick up and call the person who wrote the regulation. 

27

So if Marc is already getting direct impacts, I will go with the 

phone number issue. 

Mr. SEWELL. Certainly indirect impact is important to us as well, 

but we would like to add that we would like to be able to make 

regulatory challenges to go through an abbreviated process and be 

adjudicated by the SBA, we think that would really make a big difference. 

Mr. ELLSWORTH. Thank you very much. 

Mr. Freedman, I notice that the SBA releases a report grading 

the agencies on their responsiveness on regulatory fairness, compliance, and I love the word that some identified as suboptimal, I am 

guessing there are other words for that. 

Mr. FREEDMAN. One wonders what Chairman Greenspan would 

have to say about the regulatory world. 

Mr. ELLSWORTH. Right. But suboptimal, I will use that word, I 

can think of others, Department of Ag, Defense, Justice, Education, 

Treasury. In your work with small business, are any of our other 

departments doing well above optimal, or let us just say optimal. 

Mr. FREEDMAN. Actually, that is a fair question, I think in constant refrains about what needs to be done to improve the regulatory flexibility, we do tend to overlook where agencies have made, 

I guess, at least a conscientious effort, in some cases, hit the mark. 

I would cite too, it is ironic because we keep sort of discussing 

it in negative terms, but EPA, I think, does a very conscientious 

effort at trying to assess the impacts. Now, in a number of cases, 

I don’t think they get all the impacts in there that they should 

have. But I do know they have a matrix that they work from in 

terms of what level of impact is considered significant and how to 

assess the number of small entities. 

So I am not going to give them the pat, but I will cite them as 

an agency that does more on this than other agencies. 

Similarly, I think OSHA has, over the years, done a much better 

job at making sure that they capture those impacts and do what 

they are supposed to do. Now again, I am not going to say that 

they always get it right, but they do recognize the burden and go 

through the process more contentiously than others. 

Mr. ELLSWORTH. Mr. Langer, I think if I remember correctly in 

your testimony, you talked about the burden of paperwork, how it 

continues to grow. Which one has caused you the most angst to you 

and your members, are there ones that just are most costly and 

cause the most angst. 

Mr. LANGER. Well, it is well documented that tax paperwork is 

the biggest burden out there. It is 80 percent of the paperwork burden that anybody faces. Part of the problem is complexity of the 

code. We can get into the difference between beneficial paperwork 

and non beneficial paperwork and the benefits that accrue from it. 

Really, with paperwork overall, it gets back to my earlier point, 

which is it is all incremental, it is never one big regulation that is 

out there; we are always looking for magic bullets, and there is no 

magic bullet here. It is 15 minutes here, the 2 hours here, 3 hours 

there, it all adds up to literally a week’s worth of time for every 

adult American. 

Mr. FREEDMAN. If I could just add. These regulations don’t happen in a vacuum as we have heard. The thing I think about is the 

28

people who have to deal with these, small business owners, yes, 

their businesses are affected, but it is also a matter of their private 

lives and the time that they would be spending time outside of 

their business. The people I think about have multiple roles within 

that business and adding more regulatory complexities to those 

roles means that is less time they have to do other things that we 

all think about in terms of family life and work outside of business. 

Mr. LANGER. See, that is why I think these incremental costs are 

so important to assess and get a handle on. Because if the agent 

is already requiring a small business owner to spend a week of paperwork, adding more days, it is very serious stuff here. So annually, at the end of the year, the EPA could come back and say, we 

have added an hour of paperwork for everybody, or we have subtracted a few hours. Across the board, you start whittling away at 

it and you are really getting somewhere. 

Mr. ELLSWORTH. Thank you very much. I yield back, Madam 

Chair. 

Chairwoman VELA ́ ZQUEZ. Mr. Chabot. 

Mr. CHABOT. No. 

Chairwoman VELA ́ ZQUEZ. With that we conclude this hearing. 

And again, I want to thank all of you for your time here and for 

your contribution to this important issue for small businesses. I 

ask unanimous consent that members will have 5 days to submit 

a statement and supporting materials for the record. Without objection so ordered, this hearing is now adjourned. 

[Whereupon, at 12:05 p.m., the committee was adjourned.]

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