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67–792 2011

LIFTING THE WEIGHT OF REGULATIONS: 

GROWING JOBS BY REDUCING REGULATORY 

BURDENS 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD 

JUNE 15, 2011 

Small Business Committee Document Number 112-021 

Available via the GPO Website: www.fdsys.gov/house 


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(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 


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C O N T E N T S 

OPENING STATEMENTS

Page 

Graves, Hon. Sam .................................................................................................... 1 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 2 

WITNESSES

Mr. Frank S. Swain, Baker & Daniels, Washington, DC ..................................... 4 

Ms. Jane C. Luxton, Pepper Hamilton, Washington, DC ..................................... 5 

Mr. Harry J. Katrichis, The Advocacy Group, Washington, DC .......................... 7 

Dr. Adam Finkel, Fellow and Executive Director, Penn Program on Regulation, University of Pennsylvania Law School, Philadelphia, PA ...................... 10 

APPENDIX

Prepared Statements: 

Mr. Frank S. Swain, Baker & Daniels, Washington, DC .............................. 31 

Ms. Jane C. Luxton, Pepper Hamilton, Washington, DC ............................. 38 

Mr. Harry J. Katrichis, The Advocacy Group, Washington, DC .................. 42 

Dr. Adam Finkel, Fellow and Executive Director, Penn Program on Regulation, University of Pennsylvania Law School, Philadelphia, PA ........... 48 

Statements for the Record: 

Tipton, Hon. Scott ............................................................................................. 60 

NFIB Small Business Economic Trends ......................................................... 61 

U.S. Chamber of Commerce Economic Outlook Survey ................................ 84 


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LIFTING THE WEIGHT OF REGULATIONS: 

GROWING JOBS BY REDUCING REGULATORY BURDENS 

WEDNESDAY, JUNE 15, 2011 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in room 2360, 

Rayburn House Office Building. Hon. Sam Graves (chairman of the 

Committee) presiding. 

Present: Representatives Graves, Herrera Beutler, Coffman, 

Ellmers, Hanna, Chabot, Landry, West, Tipton, Vela ́zquez, Chu, 

Schrader, Owens, Altmire. 

Chairman GRAVES. Good afternoon. We will call this hearing to 

order. I appreciate all of our witnesses being here. 

Regulations can have benefits. They can protect our food supply, 

ensure that drugs work, keep financial markets transparent, but 

regulations also have costs by erecting barriers to entry, destroying 

markets, and diverting scarce capital away from job creation. These 

costs are compounded for small businesses because a disproportionate impact of federal rules falls on their operations. Reasonable 

regulation requires agencies to balance the intended benefits 

against the economic costs for the new rules that they impose. 

Historically, federal agencies appear to be much better at uncovering the benefits of regulations than calculating the costs. Of 

course, this makes selecting the appropriate balance needed to protect the public much more difficult, particularly since most businesses subject to regulation are small businesses. 

In 1980, Congress decided to realign this agency’s balancing effort. It enacted the Regulatory Flexibility Act or RFA which requires agencies to consider the effects of their rules on small businesses and other small entities. 

Since the RFA’s enactment, President Clinton, President George 

W. Bush, and President Obama all have restated the importance 

of the RFA and the need to unburden small businesses from unnecessary and duplicative programs. And each president required federal agencies to perform a retrospective examination of federal 

rules even though such an examination already is mandated by the 

RFA. Despite these remonstrances from the head of the entire Executive Branch of government, federal agencies continue to ignore 

both the letter and the spirit of the RFA. 

Given the current state of the economy and the vital role that 

small businesses play in job creation, the time for words is now 


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over. For too long, the RFA has been ignored by the federal agencies and that has got to stop. The legislation that is the subject of 

this hearing, H.R. 527, the Regulatory Flexibility Improvement Act 

of 2011 and H.R. 585, the Small Business Size Standard Act of 

2011, are both designed to make sure that agencies will care that 

the RFA is on the books. The bills will close loopholes used by 

agencies to avoid compliance with the RFA, require a better assessment of the impacts that regulations will have on small businesses 

and other small entities, force agencies to perform better periodic 

review of rules, and grant the Chief Counsel for Advocacy at the 

Small Business Administration greater powers for enforcement of 

the RFA also. 

Again, I want to thank all the witnesses for taking the time to 

provide their insights into these bills and what changes, if any, 

might be necessary to make the agencies care that this law is on 

the books and most importantly that they follow the law. 

With that, I will recognize the ranking member and then we will 

go to our witnesses and introduce them. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

With the economic recovery proceeding in a very uneven manner, 

the contributions of small businesses are more important than 

ever. For us, that means making sure entrepreneurs are able to do 

what they do best—innovate, create, and grow without government 

getting in the way. Unfortunately for many small firms, the cost 

of regulatory compliance remains high. Businesses with less than 

20 employees pay more than $10,500 per employee in compliance 

costs, an amount that is 36 percent higher than their larger counterparts. 

To address this, the Regulatory Flexibility Act was enacted in 

1980, to give small businesses a louder voice in the regulatory process. It is apparent that it has been successful as regulatory costs 

were reduced by $15 billion in 2010. In the last three years, the 

EPA and OSHA also convened seven small business advocacy review panels providing small firms with greater participation and 

important environmental and occupational safety matters. 

Even though RFA has been successful, it could do better. The 

time has come for agencies to more broadly measure the effect of 

regulations on small businesses. After all, many regulations are 

aimed at states which means that agencies can ignore the downstream impact on small businesses. This has to stop. Steps must 

be taken to make RegFlex analysis more detailed so that they cannot ignore the RFA and simply certify that a rule has no significant 

economic impact on small businesses. Addressing this matter will 

ensure agencies are required to provide a more factual basis for 

such certifications, rather than just a sentence that dismisses the 

concerns of small firms. 

It is also important to give real teeth to section 610, which requires an agency to review outdated regulations that remain on the 

books yet continue costing small businesses money. While the RFA 

requires agencies to periodically review existing rules, these requirements are ambiguous and agencies often do not apply them 

consistently. As a result, these reviews have been much less effective than they should be. In addition, and as I have said before, 

any expansion of the panel process must be closely examined. 


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I wholeheartedly support efforts to reign in agencies that are insensitive to small businesses, but we cannot simply flip a switch 

and add 50 new agencies to the panel process. Therefore, it is prudent for this Committee to fully examine the needs, costs, and appropriateness of such an expansion. 

While these types of changes can reduce their regulatory burden 

for small businesses, we should not box ourselves in and think that 

expanding RegFlex is the only means to accomplish these goals. 

There are other ways outside of RegFlex that can achieve these 

ends without eviscerating the very regulatory processes necessary 

to implement the laws passed by Congress. This includes providing 

higher quality education and technical assistance to businesses regarding regulatory compliance. In addition, broader reforms could 

raise size agency enforcement policies which could help ease this 

burden. By doing so, we can reduce the impact on small businesses 

without the costs and risks of wholesale regulatory restricting. 

Regardless of how we move forward, it is important to do so with 

one eye on the fiscal environment we are working within. While the 

SBA’s Office of Advocacy plays a critical role, it has a budget of $9 

million and 46 employees. It is already taxing with meeting its current role and expanding its powers significantly should be carefully 

considered. Given the current conditions, such statutory lifts may 

not be prudent. Smaller steps might prove more appropriate and 

effective. Doing so can yield many other positive benefits I think 

all of us on this Committee seek to provide but without the undue 

expense and bureaucratic upheaval. 

With this in mind, I look forward to today’s discussion on how 

RFA can be modernized to better meet small businesses’ needs. 

Since being signed into law more than three decades before, it has 

played an essential part in reducing regulatory burden. As we consider ways to improve it, we must move forward in a manner that 

is responsive to both small businesses and taxpayers. By doing so 

we can best ensure that entrepreneurs will be the job creating catalysts that our economy needs at this moment. 

I yield back. Thank you, Mr. Chairman. 

Chairman GRAVES. Thank you. If other Committee members 

have an opening statement I would ask that they submit it for the 

record. 

And I will take a real quick moment to explain the lights to you 

if you do not understand. You each have five minutes to give testimony. When it comes down to one minute left, the light will turn 

yellow and then red when you are over. If you go over a little bit 

it does not bother me. 

STATEMENTS OF FRANK S. SWAIN, PARTNER, BAKER AND 

DANIELS; JANE C. LUXTON, PARTNER, PEPPER HAMILTON; 

HARRY J. KATRICHIS, PARTNER, THE ADVOCACY GROUP; 

ADAM M. FINKEL, EXECUTIVE DIRECTOR, PENN PROGRAM 

ON REGULATION AND SENIOR FELLOW, PENN LAW SCHOOL 

Chairman GRAVES. So with that I will make my first introduction, which is Mr. Frank Swain. He is a partner in the Washington, 

D.C. office of the law firm of Baker and Daniels. During the 

Reagan administration, Mr. Swain served as the Chief Counsel for 

Advocacy. 


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Mr. Swain, I appreciate you being here and I look forward to 

hearing your testimony. 

STATEMENT OF FRANK S. SWAIN 

Mr. SWAIN. Thank you very much, Mr. Chairman. It is a pleasure to be here in front of you and Ms. Vela ́zquez and the other 

members of the Committee. 

I must say that I was greatly cheered when I came in the room 

about 12:45 and there was a line out the door for a hearing on regulatory flexibility, declaring an importance that I had forgotten 

that it had in the public eye. But it is really important that you 

are holding this hearing. It is really important that you are considering these two bills. 

I had the opportunity to participate when I worked for the NFIB 

years and years ago in the original congressional discussions about 

regulatory flexibility in 1980. I want to emphasize some of the 

points that were made by Ms. Vela ́zquez because in 1980, the Senate and the House were both controlled by the Democrats. This was 

a bill that was passed with strong support from both sides of the 

aisle, strong support from the chairman of the Senate Administrative Law Subcommittee, then Senator John Culver from Iowa. But 

it was a bit of a walk into the unknown. There was really only one 

other bill that was slightly like it and that was the National Environmental Policy Act, which had been passed in 1970. That law 

said when we make rules, when we take actions as a government, 

we have to think about what the impact of those actions is on the 

environment. 

So this was really the first time that they tried to take that principle of regulatory review and twist it to a different focus. And that 

focus is when we make rules for all sorts of important reasons— 

safety of the food system, protection of the environment, whatever—we have to take a look at the impact of those rules on small 

business and—and I think this is the real virtue of the regulatory 

flexibility—and we have to go further. We have to think about 

whether there are other ways of getting to the same regulatory 

goal, more flexible ways besides the one size fits all approach, 

which is typically the starting approach for most agencies. 

Again, as the opening statement suggests, the problem with regulation is a particular problem for small business because small 

business does not have the broad economic or employee base to 

spread the relatively fixed costs of regulation. So it is important to 

attempt to tailor the regulation to small businesses. 

My statement mostly addresses issues relating to the regulatory 

flexibility analysis, which is what was the state of the law when 

I served as chief counsel. I do not have personally as much experience with the panel review process and so I will defer to others on 

the panel that are more experienced with that. But it is really important to note that we do achieve a balance between a better Regulatory Flexibility Act that is less easily avoided by agencies and 

the very real dynamics of getting regulatory decisions made in 

some sort of prompt and efficient way. That is becoming an issue, 

particularly an issue involving science and technology, drug and 

medical device development. 


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And so we do have to maintain a balance but I think that if we 

can swing the balance of the current law more towards tightening 

up some of the ambiguities that were inevitable 30 years ago when 

we were sort of guessing at what might work, that that will make 

a real difference as far as small business is concerned. 

I detailed in my statement five or six specific issues. This is a 

complex subject and I would be happy to take questions or submit 

comments on any other specific issues that the Committee may 

want my perspective on. But the need for these reforms after three 

decades of experience with the regulatory flexibility is very plain. 

Small businesses continue to be under any economic assessment 

the job creator, and we have to do our best as a society and as a 

government to eliminate or lessen to the extent possible to fix costs 

of regulation which is such a serious drag on that job creation process. 

I ask that my statement be received in the record, and I would 

be happy to submit any further comments and respond to questions. Thank you very much. 

[The statement of Mr. Swain follows on page 31.] 

Chairman GRAVES. Thank you, Mr. Swain. 

The next witness is Ms. Jane Luxton, who is a partner in the 

Washington, D.C. office of the law firm, Pepper Hamilton. Prior to 

this, Ms. Luxton served as the general counsel of the National Oceanic and Atmospheric Administration regularly dealing with that 

agency’s implementation of the RFA. 

So Ms. Luxton, I appreciate you being here. Thanks for coming. 

STATEMENT OF JANE C. LUXTON 

Ms. LUXTON. Thank you very much. I appreciate the opportunity 

to testify regarding H.R. 527 and 585. 

As you mentioned, and I appreciate that introduction, my legal 

career has included public service and also private sector experience. And during the course of both of those types of experience, 

I have had a fair amount of exposure to small business issues, the 

Office of Advocacy, and the workings of the RegFlex Act and also 

SBREFA, which is another—the panel process that Mr. Swain referred to. 

Although my government service does not include having 

worked—like some others here—for the Office of Advocacy, I am 

one of its biggest fans and I support the proposed bill’s efforts to 

strengthen the role and ability of that office in protecting small 

business in the regulatory arena. In particular, H.R. 527 addresses 

some of the major concerns that have gotten in the way of effective 

help to small business entities. 

In discussion after discussion on the RFA, including SBREFA, 

the one problem that comes up most often is the lack of consideration of indirect effects. And you mentioned that, Ms. Vela ́zquez, 

in your introduction as well. It is probably no accident that H.R. 

527 tackles this issue in the first substantive section of the bill. 

The clear statement that indirect effects must be taken into account is necessary to overcome an interpretation in the case law 

that unfortunately cut this type of real-world, substantial impacts 

on small business out of the equation. To get an accurate gauge of 


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the actual effects of regulation, those indirect effects must be restored to the analysis. 

Similarly, in today’s difficult economic times, many have spoken 

out strongly about the unacknowledged cost of cumulative regulatory burden. Small businesses are most likely to feel and least 

able to afford these extra burdens. Section three of the bill requires 

rulemaking agencies to conduct more detailed analysis of several 

important factors, but among the most needed are the requirements for greater consideration of other rules that may overlap or 

conflict with and add cumulative economic impact to small entities. 

Section 5 of the bill would expand the SBREFA panel process to 

all agencies proposing rules that would have a significant economic 

impact on a substantial number of small entities, which is the key 

phrase, or would trip the threshold of a major role under the Congressional Review Act. In my experience, SBREFA panels have 

proven time and again that they improve rules, make them more 

cost-effective, and substantively stronger and lessen the adverse 

impacts on small business. They provide a unique opportunity for 

small business representatives to become involved at the formative 

stage of the rule before positions harden. I have seen the positive 

contribution of SBREFA panels in numerous EPA rules. I have also 

been engaged in discussions relating to the development of the 

SBREFA panel process for the new Consumer Financial Protection 

Bureau created under last year’s Dodd-Frank Act. And I am aware 

that bringing a new agency within the SBREFA panel process can 

be a large undertaking. There are helps that can make this transition easier, including the Office of Advocacy’s training programs 

and I strongly believe there are significant benefits to bringing 

more of the big impact rules within the SBREFA panel process. 

Section 5 of the act—of the bill rather—would also require agencies subject to the SBREFA panel process to do a better job of making available as much information as possible about a proposed 

rule as early as possible. I think this is another point Ms. 

Vela ́zquez made and it is very important. This would address problems with inadequate information that have arisen in some rules, 

especially recently, and they have undermined the ability of the 

small entity representatives or SERs to offer effective suggestions 

to the rulemaking agency for minimizing burden on small business 

while still achieving the agency’s goals. 

The final section I would like to highlight today is the bill’s requirement in Section 6 for periodic review of the rules. As I have 

previously said, the cumulative impact—and we have all recognized 

this—the cumulative impact of each new rule adds heavy burdens 

to small businesses. Those are the least equipped to absorb an 

unending flow of extra costs. Requiring agencies to review existing 

regulation is one idea on which the Obama administration and 

Congress seem to agree. This legislation would ensure that this 

beneficial process continues in periodic reviews of impacts on small 

business, by imposing mechanisms to ensure the job gets done. 

These bills serve the important purpose of addressing some 

shortcomings of previous legislation that have come into focus over 

time. They will strengthen the ability of the Office of Advocacy to 

fulfill its mission of serving as the voice of small business in the 

regulatory process in ways that are particularly needed in our curVerDate Mar 15 2010 23:36 Aug 25, 2011 Jkt 067792 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HR\OC\A792.XXX A792

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rent era of serious economic challenges. The RegFlex Act and 

SBREFA offer a strong foundation for protecting small business 

against excessive regulatory burden, but as I think we can probably all agree, they could still use a little improvement. 

I appreciate the opportunity to offer these comments and hope 

that my written testimony can be put into the record. I look forward to your questions. 

[The statement of Ms. Luxton follows on page 38.] 

Chairman GRAVES. Absolutely, without objection. Thank you, Ms. 

Luxton. 

Our next witness is Mr. Harry Katrichis, who is a partner at the 

Advocacy Group here in Washington, D.C. Mr. Katrichis was a 

former chief counsel of this Committee and was instrumental in 

shepherding the amendments to the RFA through the Small Business Regulatory Enforcement Fairness Act, which Ms. Luxton referred to, or SBREFA, shepherding that through the House of Representatives in 1995. 

Mr. Katrichis, I appreciate you being here and I know you have 

got about as much expertise on this as anybody does. And I look 

forward to hearing what you have to say. 

STATEMENT OF HARRY J. KATRICHIS 

Mr. KATRICHIS. Chairman Graves, Ranking Member Vela ́zquez, 

and members of the Committee. My name is Harry Katrichis and 

I appear here today—— 

Chairman GRAVES. We have got mics now. I know. I know. 

Mr. KATRICHIS. Motor vehicles, too. 

I appear here today to discuss my experience in several regulatory reform efforts that have been undertaken by this Committee 

over more than a quarter century and to lend my strong support 

for Committee and Congressional action on H.R. 527 and H.R. 585. 

First of all, I want to thank the Committee for inviting me to testify today. As you mentioned, for me this is like old-home week. For 

approximately 10 years, or about one-sixth of my life, I had the 

privilege and honor of serving as the Republican chief counsel of 

this Committee. I served under three different chairmen and two 

different ranking members during the 1990s. I look back on my 

time with this Committee as a true high point in my career. 

For the freshman members of this Committee, I want you to 

know that your time on this Committee will prove to be some of 

the best time you will have as a member of the House. This has 

always been a committee where partisan acrimony has been mostly 

left at the front door. Throughout the 1990s and continuing to this 

day, I enjoy excellent working relationships with my peers and 

former peers on the Democratic staff of this Committee and with 

the Committee’s Democratic members. 

This rich history of bipartisanship stands out most in the area 

of the many regulatory reform efforts undertaken by this Committee going back to its very creation as a standing Committee of 

the House in the 1970s. 

Former members of this Committee make up a virtual who’s who 

of the legislative branch. Several current and former U.S. senators 

have served on this Committee when they were in the House, such 

as Rob Portman, Ron Wyden, and John Thune, just to name a few. 


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House Speaker Boehner was a member of this Committee. John 

Dingell was a member of this Committee for several years, and 

Dave Camp, currently the chairman of the Ways and Means Committee, served on this Committee during his early years in the 

House. 

While several regulatory reform efforts were undertaken by this 

Committee’s historical predecessor—the Select Committee on Small 

Business which existed from 1941 to 1974, the real heavy work of 

regulatory reform began with those Committee members that were 

first elected in 1976. Two freshman members of that class stand 

out in my memory as two of the hardest working advocates for true 

regulatory reform. They are Andy Ireland, then a democratic member from Florida, who later switched parties, and Ike Skelton, a 

democratic member from Missouri. Andy Ireland is actually here 

today and I am very, very pleased that he could attend. 

These two members, along with many others, were the driving 

force behind what came to be the Regulatory Flexibility Act of 

1980. Another driving force that has been mentioned in this effort 

was Senator John Culver. As a member of the Senate Judiciary 

Committee, Senator Culver was instrumental in pushing the RFA 

to eventual passage. I am proud to say that John Culver is a friend 

of mine also and we actually worked together for over six years at 

Arent Fox. I still see him regularly. He is a great human being. 

H.R. 527 is the closest thing I have seen to addressing the gaps 

in true regulatory oversight that were left after the passage of the 

original Regulatory Flexibility Act and the efforts to improve the 

RFA with the passage of SBREFA and I commend the Committee 

for having this hearing on this important issue. 

While I was not involved in the early work that led to the passage of the original Regulatory Flexibility Act, I was involved in 

the early efforts to implement while working with Frank Swain at 

the Office of Advocacy in the 1980s. Back then, many regulatory 

agencies paid only lip service to the requirements. For many agencies, the automatic default was to certify that a pending rule would 

not affect small entities. They learned very early in the day that 

to do so held no downside for them. The Office for Advocacy had 

no meaningful recourse. 

By the time the White House Conference on Small Business 

came about in 1986, the small business community had come to realize that we needed some genuine ‘‘beefing up’’ of the RFA. Legislation to amend and strengthen the RFA during the late 1980s and 

early 1990s came and went without final action. In the early 1990s, 

the 102nd and 103rd Congresses to be exact, we had several Small 

Business Committee Hearings on regulatory reform efforts. In addition to official Committee and Subcommittee hearings, the House 

Republican Policy Committee, through its subcommittee on small 

business, held hearings on reforming and strengthening the RFA. 

These hearings were chaired by Susan Molinari, the Subcommittee’s chairman. 

One of the truly memorable hearings of the Small Business Committee during that timeframe was a Subcommittee hearing by the 

Subcommittee on Regulation of this Committee, which was then 

chaired by Ron Wyden. This hearing focused on OSHA and its apparent inability to understand what the RFA required it to do. 


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Back then, OSHA was probably one of the worst actors on the regulatory front as far as small businesses were concerned. Part of 

what was revealed in that hearing ultimately led to the creation of 

regulatory review panels that were included in SBREFA some four 

years later. 

Speaking of SBREFA, let us take another short stroll down memory lane. Upon the change in control of the House in the 1994 election, much of the information that was gleaned from hearings of 

this Committee and other sources was placed in legislative form for 

quick congressional action. The amendments to the RFA would 

eventually find their way into SBREFA a year later, move swiftly 

through this Committee, and the Judiciary committee, and were 

passed by the full House in March of 1995. 

While some of the congressional champions of small business regulatory reform have changed since the efforts of the 1970s, some 

were still here fighting on. Andy Ireland retired in 1992; John Culver lost his reelection bid in 1980; but some of the ‘‘old guard’’ remained. Ike Skelton was still in the House and Ron Wyden was a 

brand new Senator. Others that joined the fray included Jim Talent, first elected in 1992; Norm Sisisky, first elected in 1980; and 

Tom Ewing, who took the torch of RFA reform from Andy Ireland 

as Andy was headed toward retirement. 

As often happens, the other body took a little longer to get 

through their legislation for meaningful regulatory reform for small 

business. But those efforts, led in large part by the Chairman of 

the Small Business Committee in the Senate and its ranking member, Senators Kit Bond and Dale Bumpers, resulted in what came 

to be SBREFA. The passage of SBREFA not only gave us most of 

the reforms and enhancements to the RFA, it also gave us pre-regulatory review panels for OSHA and EPA rulemakings and it also 

gave us the Congressional Review Act. These and other components 

were great enhancements to what the House had already done a 

year earlier. 

The bad news is that regulators oftentimes make a few adjustments and find new or some of the old ways to obviate compliance 

with the letter and spirit of both the RFA and the amendments to 

the RFA contained in SBREFA. While many in this town refer to 

the press as the 4th Estate, I have always believed that regulatory 

agencies are the true 4th Estate of Federal Government. 

I firmly believe that the improvements to the RFA and SBREFA 

contained in H.R. 527 will go a long way in taming the 4th Estate 

of the Federal Government to the benefit of small businesses. 

As for H.R. 585, I completely support it. While professionally I 

have never been involved in the ebb and flow of the size standards, 

I do believe that the Office of Advocacy needs to be the final arbiter 

of what a small business is for purposes of Federal regulatory action. 

Thank you again for allowing me to be part of this hearing, and 

I look forward to your questions. 

[The statement of Mr. Katrichis follows on page 42.] 

Chairman GRAVES. Thank you, Mr. Katrichis. Ranking member. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. It is my pleasure to 

introduce Mr. Adam Finkel and I want you to know, Mr. Finkel, 

that Harry did not use your time. So you still have five minutes. 


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Mr. Finkel is the executive director of the University of Pennsylvania program on regulation. He is one of the nation’s leading experts in the field of risk assessment and cost benefit analysis regarding occupational safety and environmental hazards. From 1995 

to 2000, he was director of Health and Standards programs at the 

U.S. Occupational Safety and Health Administration and was responsible for promulgating and evaluating regulations to protect 

the nation’s workers or chemical, radiological, and biological hazards. Welcome. 

STATEMENT OF ADAM M. FINKEL 

Mr. FINKEL. Thank you very much. I am glad to be here. As you 

said, I am a big supporter of analysis, particularly cost-benefit 

analysis to look at regulations. I had the pleasure of co-chairing, 

I think, the very first SBREFA panel in 1996 on our ill-fated tuberculosis standard. And as I said in my testimony, I owe all of my 

educational opportunities to my dad who worked for 47 years in a 

small furniture company. 

I do think we need to do better than to clash about these subjective and very overbroad and I think some factually suspect accusations about the whole regulatory system as it affects small business. If we cannot get past that we are not going to save lives, create jobs, and save money. 

In this hearing, and I read some of the testimony from the March 

30 hearing, a litany of complaints that I have heard as an academic 

and a regulator for many years is still front and center, about the 

yoke of regulation, the stringency and exaggeration of regulation, 

the lack of access to the process by small business, and the cavalier 

attitude of agencies to dismiss their concerns. And I have to say 

again as an academic and a former regulator I just do not recognize 

those complaints. I think if I had more than five or six minutes I 

could convince you that these premises are just not factually correct. 

If there is legitimate groaning, and I do not profess that there 

is not some out there, but we have to remember these are in some 

part the groans of those who bear the costs that are returned to 

society in the form of larger benefits. Now, my own research career 

has had a lot to do with this claim that risk assessment exaggerates risk. And I think my colleagues and I have pretty much demolished that. It was invented by people who had no training in 

the field many years ago. What we are learning, however, is that 

the track record of regulatory economics in estimating costs is really the weak link and that is where the exaggeration is endemic and 

rampant. 

As far as adequacy of small business access, in my experience at 

OSHA and working around EPA, on their own and with, of course, 

very enthusiastic prodding from OIRA, they take very seriously 

suggestions that can reduce small business costs without foregoing 

even more societal benefits. 

Two examples from my own experience. After I left OSHA but I 

have followed the rule and read up on it, the chromium standard 

that OSHA issued in 2006, by my count there were 38 recommendations from the SBREFA panel and 34 of them were accepted. But I hasten to add I was involved in a grandfathered rule 


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in the mid-90s, right after SBREFA passed, OSHA’s methylene 

chloride rule and even though we were exempt from SBREFA at 

that point, we made some very creative and I think very successful 

accommodations to small business just by directly working with 

them. And I am not suggesting that we should abandon these panels. I am concerned about expanding them to other agencies, but 

they work well. But also things worked well occasionally even before that. 

So my basic message is that there are many other more pressing 

needs in regulatory analysis and risk management than these attempts, however well meaning they are, to do yet more for one of 

the most favored constituencies in the process. 

I think my main concerns about H.R. 527 are really twofold. One 

is that I am an analyst but analyses cost money and they take 

time. And I think a bill like this which requires some very ambitious, very vague and very difficult analyses, some of which I might 

in theory support but in practice, if I am being asked to support 

them intellectually knowing there will be no resources to carry 

them out, I think that is a set up. I think that is a bad idea. 

I also think that any good idea can be ruined by fixating on one 

little piece of it. So through these statutes and through executive 

orders the agencies are now supposed to think hard in each rulemaking about roughly 30 different ways in which over-regulation 

or under-regulation can disproportionately affect some part of society. And it is not just small business out there at the tail of the 

cost distribution. There are local governments, property holders, 

energy suppliers. They all have their own statute or executive 

order. And then at the tail of the risk distribution there are orders 

and statutes about children’s health, environmental justice, and 

lots of other very important issues on the benefits side. 

The GAO report from 2000, I think, very convincingly looked at 

the empirical record and said that of all of these ancillary analyses, 

the agencies are doing much more on small business than on any 

others. 

Again, as an analyst, I would like to see more done on the others 

but as a realist with fiscal restraint, I think we should be very 

careful about increasing the best part of this at the expense of the 

others. 

I want to make two quick points about analysis and then close 

with one more point if I could have an extra minute or so. 

Indirect effects. Costs come in two flavors. Positive and negative. 

And Congress seems to be instructing the agencies here to look 

only at one and not the other. What about the existing small businesses that would profit from regulation or gain revenue? What 

about the small businesses that do not exist and are waiting for 

markets to be created by regulation? These are important indirect 

effects and it expands the analysis even further. But I think if the 

analyses were done right they would show more need for some regulation. 

Secondly, I think we have to be very careful about treating different risks differently. I will give an example from my testimony. 

Greenhouse gas emissions, well-mixed in the world’s atmosphere, I 

have a real sympathetic point of view about small businesses contributing a very small amount of that huge, well-mixed problem. 


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But if you think about hotspots, like mercury emissions or the 

worker risks that I am so concerned about, these are real people 

and you cannot trade one for the other. If a small business is employing five people, I think those people have as much right to safety and health as in a large business. If we can give them that at 

less burden, that is fine. But I do not think we should be under 

the illusion that the small companies are a small part of the problem. In fact, in the OSHA context, they are a large part of the problem. 

And then so I made a few suggestions for some process improvement but I just want to close for a second with a real concern I 

have from my days as a regulator. I think the agencies have to be 

cautioned by Congress not to give small business relief to all business. And again, I go back to the OSHA chromium standard that 

I have talked about as one of the most shameful standards ever 

issued by a federal agency. It is tragically weak. And the reason 

it is weak is that a couple of thousand small businesses out of half 

a million establishments needed some relief. And rather than giving it targeted to them, OSHA let the exposure limit go up from 

the proposal by a factor of five, and from what I thought as a risk 

assessor it should have been by a factor of 20. Two sizes sometimes 

fit all and we ought to be creative enough to give small business 

relief where it is due. 

Thank you. 

[The statement of Mr. Finkel follows on page 48.] 

Chairman GRAVES. We will now move into questions. And I will 

start with Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. 

I have a question for each member of the panel. And that is how 

much responsibility do you give Congress versus the agencies with 

rulemaking authority in terms of placing the burdens on small 

business? Do you think it is poorly written legislation? Too broad 

directives given to the regulatory authorities? You know, obviously 

when we look at the recent Health Care Affordability Act, it had 

a 1099 provision in it that we found was incredibly burdensome to 

small businesses but the Congress then stepped in and repealed 

that particular provision. Talk about that line of responsibility between Congress in terms of writing legislation and the rulemaking 

authority. Can the Congress of the United States do a better job? 

Are we giving far too much discretion? 

Mr. Swain. 

Mr. SWAIN. That is a key question, Congressman. And I do not 

have a single answer on it. I think it is almost inevitable given 

some of the complexity of some of the subjects that the Congress 

is dealing with that you have to essentially kick the can over to the 

agencies and say come up with the specific details. It is very hard 

as you would know much better than I, to achieve closure sometimes on merely general principles, let alone the highly specific details. 

That said, I think that the Congress can give direction, can 

through Committee reports and other mechanisms advise the agency of its general intentions as to what it would like the agency to 

do and what it wants the agency to be aware of. And Congress 

could probably do more along those lines. I will not get into the deVerDate Mar 15 2010 23:36 Aug 25, 2011 Jkt 067792 PO 00000 Frm 00016 Fmt 6633 Sfmt 6602 E:\HR\OC\A792.XXX A792

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tails about whether courts pay attention to that sort of non-legislative direction. Sometimes they do, sometimes they do not. But I 

think to the extent that in the real world we have complex problems and the Congress cannot inevitably make every detailed decision on every issue, you will have to always give some discretion 

to agencies but you can certainly always give them your intentions 

as to how they should exercise that discretion. 

Mr. COFFMAN. Thank you. 

Ms. Luxton. 

Ms. LUXTON. Thank you, Congressman. 

It is by its nature an iterative process. When a problem comes 

up and requires a solution, you only have the information available 

at that time. The legislation we are looking at today is an example 

of this. Problems have emerged over time partly through just the 

natural way the statute and regulations have been implemented. 

So I think we just have to assume it is going to be imperfect. It 

is easier to do iterations in regulation than it is to pass a new act, 

but occasionally it will be necessary to pause and look at new legislation to cure some of the problems that could not have been anticipated. 

Mr. COFFMAN. Thank you. 

Mr. KATRICHIS. One of the things that we kicked around in the 

early ’90s was whether or not Congress should have something 

similar to the Regulatory Flexibility Act applied to them. And a 

good example of how it would look is what we have now in committee reports where there has to be a statement that there are no 

unfunded mandates, you know, in the particular piece of legislation. You cannot do that on the cheap though. I mean, we have the 

Congressional Budget Office. We have GAO. And trying to have 

that kind of assessment before you actually move legislation would 

slow down the legislative process, I think. 

But it has been something that has been discussed. A former 

member of this Committee, Sue Kelly from New York, came up 

with an idea back in the mid to late ’90s of having a regulatory review mechanism in-house, I think, over at the Library of Congress 

that would serve a parallel function to the Congressional Budget 

Office to look at what kind of regulations would flow from particular kinds of legislation. And this is something that is worth exploring and worth exploring with, I guess, the Rules Committee 

about whether or not you could have that kind of requirement before you go forward. 

Mr. COFFMAN. Thank you. 

Mr. FINKEL. As a regulator, I always thought that, and I worked 

at an agency, OSHA, that had an old statute that has not been 

subsequently amended in many years and EPA has many more. 

But they are broad, discretionary statutes. I always felt that between the statutes, the appropriations riders, the reports, and the 

judicial review, we had the right kind of circumscribed discretion. 

I think ultimately you want agencies to be subjected to judicial review but to have the discretion to do some of the things that you 

are asking them to do today, which is to look carefully at more 

nuanced impacts than the broad statutes really allow them to do. 

Mr. KATRICHIS. Another final point, one of the problems historically has been the IRS calling everything that they have an interVerDate Mar 15 2010 23:36 Aug 25, 2011 Jkt 067792 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\A792.XXX A792

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pretive rule. If you have some mechanism within the legislative 

process that would lay out the regulatory balancing, I think that 

would cut off the ability of the IRS to go to that default of everything is an interpretative role. 

Mr. COFFMAN. Thank you, Mr. Chairman. I yield back. 

Chairman GRAVES. Ranking Member Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. Let me take this opportunity to thank all the witnesses for your testimony. 

Mr. Swain, in 2004, this Committee had a hearing on similar legislation and at that time a former chief counsel said that it will 

cost between $2.5 and $3 million per year. We also received a letter 

from the then current chief counsel stating that external consultants and additional economists will need to be hired at a potential 

cost of more than $400,000 a year. 

Now, if we expand the panel process government-wide, we will 

bring in more than 50 new agencies, not just the three that were 

contemplated in 2004. At that time he said that it would cost between $2.5 and $3 million. Given this, bringing in 50 new agencies, 

what is your rough estimate of the annual costs for applying the 

panel process government-wide? 

Mr. SWAIN. Congresswoman, I am not trying to be coy but I do 

not think I was any of those people that you quoted because I have 

not had—— 

Ms. VELA ́ ZQUEZ. No, you were not. 

Mr. SWAIN. I have not had any direct personal experience with 

the panel process. It did not begin until after my tenure was up. 

There will be significant costs. Obviously, if you extend it to all 

agencies, and there is a fixed cost for doing the panel, but not all 

agencies have such a busy legislative regulatory agenda as OSHA 

and EPA. There may be agencies that theoretically it could be extended to that only issue one or two rules a year that are significant to small business. 

Ms. VELA ́ ZQUEZ. But what about IRS, CMS? They issue rules. 

Mr. SWAIN. They most certainly do. And I think that IRS is, as 

I stated in my written statement, and as I stated in the hearings 

in 2004, I think IRS is a special issue—— 

Ms. VELA ́ ZQUEZ. Let me ask. Given the legislation that we have 

in front of us, considering today in this hearing, and the budget 

that the chief—the Advocacy office has of only $9 million and 46 

employees, do you think, and this legislation does not provide for 

more money, how do you think it will undertake the new responsibilities that are given? 

Mr. SWAIN. I cannot speak to how the agencies are going to fund 

it. They would have to find the money somewhere. And I am confident that although agencies will not like this answer, that there 

is room in agency administrative budgets to put on an important 

process to bring greater sunlight to the regulatory process. Maybe 

not on all conceivable rulemakings. 

But as far as the Office of Advocacy is concerned, my perspective 

when I was chief counsel in the Reagan administration, is that you 

worked—I worked with what I had. And if I had X millions of dollars, I had to triage and work on what was most important. And 

every chief counsel going forward will have to do that. 


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Ms. VELA ́ ZQUEZ. To the other three witnesses, given the new expansion, along with rulemaking authority and the new power that 

the Office of Advocacy is going to have, do you think that $9 million, because none of those agencies will have to provide money. 

The money has to come out of the Office of Advocacy. 

Mr. KATRICHIS. I think that—— 

Ms. VELA ́ ZQUEZ. Do you think it is sufficient with the current 

budget? Because this does not provide for new money. 

Mr. KATRICHIS. I do not think you necessarily have to take the 

panel review process to all federal agencies. We can start down 

that road and try to get there eventually. There are certain agencies that really do not write a lot of rules as Frank said. There are 

more adjudicatory agencies and an example would be the Federal 

Trade Commission. It is much more of an adjudicatory agency. Yes, 

they do have some rules but I do not think people are going to be 

kept up at night by whether or not the mattress labeling, you 

know, regulation is—— 

Ms. VELA ́ ZQUEZ. Harry, you were here for a long time. 

Mr. KATRICHIS. A long time. Yeah. 

Ms. VELA ́ ZQUEZ. You know how this institution works. 

Mr. KATRICHIS. Yes. 

Ms. VELA ́ ZQUEZ. My question is simple, and you know how much 

respect I have for you. And let me just say as chief counsel of this 

Committee you were not only the chief counsel for the Republicans, 

you provided counsel for everyone. And you were fair and we really 

appreciated that and we welcome you back. 

But if we are going to give—we are going to create a superpower 

agency here with all this new authority that is given to the Office 

of Advocacy. And bringing all these new agencies into the panel review process, my question to you is if 46 employees and $9 million 

will do it. 

Mr. KATRICHIS. I do not think 46 employees and $9 million will 

do it. 

Ms. VELA ́ ZQUEZ. Okay. Thank you. 

Mr. FINKEL. Yeah, I think it is clear—— 

Ms. VELA ́ ZQUEZ. Mr. Finkel. 

Mr. FINKEL [continuing]. That Advocacy would have to provide 

more staff and more money if they were going to do it well. As far 

as what Mr. Swain said, I agree, yeah, there are little bits of wiggle 

room in all budgets. The question is what should those little extra 

bits be used for? When I hear 46 employees, I cannot help but 

think of the staff I used to have, which was just about that much. 

And we, in our heart of hearts and with a lot of scientific evidence, 

believed that our mission involved the premature mortality of 

about 60,000 Americans a year in the workplace from chronic exposures. And we worked with what we had. I wish as a citizen that 

that office had more. I do not think there is going to be new money 

but if there is I would not put it in Small Business Advocacy. I 

think the panels themselves can be done selectively and each marginal panel would not be that expensive. But wholesale expansion 

is going to cost the agencies money and SBA money. 

Ms. VELA ́ ZQUEZ. H.R. 527 effectively expands upon the process 

government-wide. And some have recommended expanding the 

panel process in a more incremental manner. Doing so could reduce 


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costs while focusing initially on the agencies that have the greatest 

track record of burdening small businesses. If we took such an approach, which three agencies would you at first? 

Mr. KATRICHIS. I would probably start with the IRS. We tried to 

add them in 1998, I believe, to the panel review process. It was 

mostly a fight between this Committee and the Ways and Means 

Committee. And we all know how that usually turns out. And possibly some of the component agencies at the Department of the Interior just in terms of, you know, water issues and land use issues. 

Those are two that come to mind off the top of my head. 

Ms. VELA ́ ZQUEZ. Mr. Finkel, you work at OSHA on some of the 

review panels. What do you think works and what missed the 

mark? 

Mr. FINKEL. Again, my experience was that whether it was 

through a panel, through notice and comment, which the agencoes 

always have. The agencies always have. It is a second bite of the 

apple as it were. You know, or through pre-settlement discussions 

after litigation has been filed. It was always frustrating to be accused of not listening when the reality was once in a while we simply just did not agree. 

And I think one of the things that did not work well from both 

sides was the insistence of the small entity reps in turning these 

panels into sort of a science court where they would argue about 

a chemical being carcinogenic or not. And there is plenty of room 

for that in notice and comment. It was frustrating for me as a regulator to have that time spent arguing about biochemistry when we 

could have been working together creatively to talk about reducing 

burden. 

Ms. VELA ́ ZQUEZ. Thank you. Thank you, Mr. Chairman. 

Chairman GRAVES. Ms. Ellmers. 

Ms. ELLMERS. Thank you, Mr. Chairman. 

Mr. Finkel, my questions are for you, and I would like to thank 

the entire panel for being here today for this. 

I am a little confused, Mr. Finkel, about where we are at and 

where your position is. I mean, I think you are stating wholeheartedly that you believe in regulation as it is. Is that correct? In 

that the opportunity to try to fine tune some of that is not necessarily what you think of. Is that correct? 

Mr. FINKEL. No. I think, I mean, I believe in smart regulation. 

I believe we have a lot of unfinished business to do to protect consumers and workers and the environment. But I believe that—I am 

an analyst so I believe that we ought to be looking more carefully 

and harder at not just total cost and total benefit but at real people 

who are affected both economically and—— 

Ms. ELLMERS. Are you aware that we have had an unemployment rate of 9.1 percent that has been sustained for about 23 

months now? 

Mr. FINKEL. I know where you are going with that and I think 

the evidence that at any significant amount that rate has anything 

whatsoever to do with health, safety, and environmental regulation 

is thinner than thin ice. 

Ms. ELLMERS. Well, let me just tell you my own experience then. 

Over and over again we have heard from our small business owners, businesses across the country, regardless. I say small business 


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because that is the Committee we are on. But all business alone 

is saying that government regulation is the number one problem 

that they are faced with and that the fear of the unknown, the fear 

of more regulation, the fear of the taxes going up, the fear of all 

the uncertainty that is out there is keeping them from hiring right 

now. 

Now, this is the position that we are faced with and we are obtaining that information over and over again and it is just compiling. But what you are telling me is that you think more along 

the line of, for instance, let me just see if I pulled out a quote from 

your opening statement that small businesses—that you feel that 

there will be small businesses that will be created because of regulation and that they are just waiting to be created. So in other 

words, you know, we are creating a problem which then might actually spark a business growth environment? Is that what I am understanding you to say? 

Mr. FINKEL. Yeah, I am surprised that would be at all controversial. The problems that are created through what economists call 

externalities, the pollution, the safety hazards, when you solve 

those sometimes businesses who create the problems are hurt economically, and very often other businesses come in and take advantage of the market to provide the safe equipment, the pollution control technology. All I am saying is if you want to think about indirect effects far upstream, those come in two flavors. And there are 

some positive and indirect effects as well. 

Ms. ELLMERS. That is true. That is true. But basically what you 

are saying is there is a winner and then there is a loser. I personally do not believe that that is true in business. I think that the 

innovation in this country is outstanding and that we all grow as 

we move along. 

I also—I have a question, too. You had said that you did not necessarily feel that it was just large corporations, that small businesses are sometimes the bigger culprit of some of these. Can you 

expand on that? 

Mr. FINKEL. Well, again, in my area there are studies that suggest that in a lot of industrial sectors the occupational fatality rate 

is six or eight times higher in small establishments than in large 

ones. That does not say we should come down like a ton of bricks 

on small establishments, but the reality is these are dangerous 

places to work. In some cases they are contributing to pollution in 

others and I just tried to distinguish between yes, efficiency is a 

great idea and you go for the big sources. But it is a different problem if everybody is putting CO2 in the atmosphere, you go after the 

bigs first because you get most of your benefit there. But if everybody is causing grave risk to their employees, you do not necessarily only care about big employees—employers. 

Ms. ELLMERS. Last question. Do you believe in global warming? 

Mr. FINKEL. I am not a climate scientist but I have worked 

among them for many years. And yes, of course I do. 

Ms. ELLMERS. Okay. Thank you. Thank you. I yield back, Mr. 

Chairman. 

Chairman GRAVES. Mr. Owens. 

Mr. OWENS. Thank you, Mr. Chairman. 


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We have had some discussion about the Internal Revenue Service 

today and the regulations that it generates. And in a former life 

I had some experience with that. 

Is not the solution there a revamping of the Tax Code and a lessening and potentially the removal of the various tax expenditures 

which probably results in substantial amount of regulation 

issuance? And if we did that we would both simplify the Tax Code 

and reduce the number of regulations? I will throw that out to 

whoever would like to take the opportunity to answer that. 

Mr. SWAIN. Congressman, I would be a fan of simplification of 

the Tax Code. And you are correct that a lot of the regulatory 

issues come up because the particular interpretations of all of the 

statutes, and as you know, the IRS actually makes most of its decisions in a slightly less formal way involving so-called private letter 

rulings and other mechanisms that are not even regulatory in the 

legal nature but still are a pretty clear indication of what the IRS 

thinks. And there is absolutely no public review process on that 

mechanism. 

So if Congress were to make a very simplified tax code, it should 

be followed up with clear, small business analytic requirements for 

the minimal regulations that would be necessary under that new 

tax code. 

Mr. OWENS. Thank you. When we talk about small business and 

we talk about size, determination of what represents or is a small 

business, do we not also have another factor and that goes to 

whether or not that business may be located in a rural or an urban 

setting in terms of its impact on the local economy, on the local 

ecology? And if you—I would be interested to hear the thoughts 

about how we deal with that breakdown as well as the size of the 

businesses. 

Mr. KATRICHIS. I do not think there are any distinctions in the 

rulemaking process for rural-based businesses versus urban-based 

businesses. 

Mr. OWENS. Should there be? 

Mr. KATRICHIS. Well, one might suggest that, you know, in certain rule settings, trying to get the expertise engaged to respond 

to a rulemaking might be a little bit more difficult. 

Mr. OWENS. As you might guess, I come from a rural community. 

Mr. KATRICHIS. Yes. 

Mr. OWENS. And that is a big issue for us. 

Mr. KATRICHIS. Yes. 

Mr. OWENS. And I do see a distinction between a small business 

located in an urban setting and a small business located in a rural 

setting. We have this issue ongoing all the time on many levels. 

The last question maybe is more of a statement than a question. 

But Mr. Finkel stated that sometimes business grows as the result 

of regulation. One example that I would ask if you concur with is 

whether or not when we moved to a best abatement, that that did 

not, in fact, grow in industry. 

Mr. FINKEL. Boy, that is a controversial, touchy example, that I 

have written about a little bit. I think it did create some winners 

and losers, both, I think, on the economic front and on the health 

and safety front. That was not a star-studded effort and I think we 


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have learned from some of the overreaction and some of the overreaching on that. 

I do want to say I think you have got a really good point about 

the urban rule distinctions. I mean, lots of other distinctions. I am 

not sure. I think that SBA should not necessarily get involved in 

creating subcategories alongside their size standards. But I think 

it gets to what I was saying earlier about these 29 other things 

that ADs are supposed to think about and there is environmental 

justice and there are lots of other executive orders. And maybe 

there should even be more to encourage agencies to think about not 

just this one constituency who everyone here is very interested in, 

but there are lots of others. 

Mr. OWENS. I will finish with this. Do you think it is possible to 

create a body of analytics that in fact would permit an in-depth 

analysis of each regulation that would give you a truly accurate 

cost-benefit analysis? 

Mr. FINKEL. Well, I certainly hope so. And I think I have seen 

the field get a lot better, and of course, a lot of that needs to come 

from outside the government but limited governmental resources. 

That is what a lot of people are trying to do. The signs and the economics only take you so far and it should not be determinative. But 

we have gotten an awful lot better in 30 years and their ways to 

go. Especially, I think, on the call side where we just wait until the 

end of the process and come up with numbers. 

Mr. OWENS. Thank you very much. I yield back. 

Chairman GRAVES. Mr. Landry. 

Mr. LANDRY. Mr. Chairman. 

Dr. Finkel, let me tell you about a conversation I had last week 

with a very successful business owner in my district. He had sold 

his business. He had created hundreds of jobs and he was under 

a non-compete. When that non-compete ended, him and his partner 

decided to go back in the drilling business. And when they sat 

down and put their profile together on how they wanted to put 

their business and move it forward, they decided that they were 

going to build the largest shallow water drilling barge in the world 

and one of the most advanced. And when they looked at the cost— 

because we have a lot of fab yards in my district—at the cost and 

amount of regulations and red tape that they had to do to build 

that barge, they decided that they were going to build that barge 

in Singapore. And while they were contemplating the construction 

of this barge and then where they were going to implement this 

barge, where they were going to put it out for contract, they got 

a proposal to purchase a drilling company, an American drilling 

company, for about 60 percent of the cost of the drilling barge that 

they were going to build. And they made a determination that they 

did not want to do business in America anymore. That they were 

going to build this barge in Singapore and they were going to float 

it and send it to Nigeria to drill because it is more business friendly in Nigeria than it is in this country. 

And I can tell you that the OSHA regulations are destroying our 

fabrication yards down there. So we are not on thin ice; we are on 

thick ice. In fact, it is so ridiculous that during the BP oil spill, 

they would make the shrimpers come in during the daytime because it was too hot for them to collect oil on the water. And when 


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the shrimpers said, you know, it makes more sense for us to collect 

this oil at night, they said regulations do not allow that. 

Now, tell me how regulations are not smothering our economy. 

I have got to tell you. We just have to agree to disagree but you 

are going to have to put more real life examples in front of me as 

how those OSHA regs are trumping the unemployment or not causing the unemployment rate to be nine percent or greater, which is 

really not nine percent. It is really 14 percent or greater. It is just 

that those people are not looking for work anymore. 

Mr. FINKEL. Look, there is no way that—look, I know you do not 

want me to respond with anecdotal cherry picked examples on the 

other side because that is not my role as a witness to tell you of 

all the stories I used to hear and still hear of people who have lost 

their loved ones because of lapses, negligences, mistakes. It is a 

balance. Of course, there are going to be poignant stories of businesses who have had difficulty complying with what—— 

Mr. LANDRY. But is not that the role of the legal system? Is that 

not the role of the legal system to determine whether or not businesses are operating in a fair, safe environment for their workers? 

If people are getting injured and deaths are being caused, is not 

that what the plaintiffs’ lawyers do? And when they go in and they 

impact those small businesses, those small businesses have a 

choice of whether they want to pay those types of fines and settlements or whether or not they want to make their work environment safer. 

I mean, look, OSHA just issued a regulation where our welders 

are now going to have to wear long sleeve, Nomex outfits that do 

not breathe, and it is 110 degrees in the shade in Louisiana. How 

do we keep working under those conditions? There is no waiver for 

that. What do we do? 

Mr. FINKEL. If I were still there I could look into that for you. 

And there are always really difficult things that government has 

to do where they cannot satisfy both one risk and another. But 

again, I have got to say the plaintiffs’ bar and the tort system, that 

is after the fact. And there are agencies that exist—— 

Mr. LANDRY. But wait a minute. I have got—— 

Mr. FINKEL [continuing]. In order to prevent that from happening. 

Mr. LANDRY. Three people have passed out this summer in one 

yard complying with OSHA regs. Now, tell me how is there any— 

what is the safety there? 

Mr. FINKEL. I know that OSHA just put out last week—I do not 

follow them week to week, but this week or two weeks ago they put 

out a whole set of interpretations and guidance on heat stress. 

They are very aware that it is hard to be safe and cool at the same 

time. It is hard to be wearing a respirator to protect your lungs and 

have to breathe through a dusty respirator. There are all kinds of 

very difficult choices where if we had a little more technological innovation we could solve some of these problems. But again—— 

Mr. LANDRY. It is hard to work and earn a living under those 

regulations. That is what it is hard to do. 

Mr. FINKEL. And it is hard to earn a living if you have been amputated or passed away, too. 

Chairman GRAVES. Mr. Tipton. 


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Mr. TIPTON. Thank you, Mr. Chairman. And I would like to 

thank our panel for being here as well. 

I guess I would like to start out with a little more of a generic 

sort of a question. You know, when we look at the RFA it was supposed to be supported by sound economic analysis in terms of impacts on businesses. Mr. Swain, have the bureaucracies, the regulatory agencies, have they complied with that mandate? 

Mr. SWAIN. I think in too many cases, Congressman, they have 

not because they have attempted to define away their obligation to 

do so by stating that a particular proposed rule does not or would 

not have a significant economic impact on a substantial number of 

small businesses. Those are the words in the law. And now to be 

sure they are doing it more than they were 30 years ago and I 

think one of the factors was alluded to by Mr. Finkel. There is 

more economic data out there now that allows people to do analysis. But if an agency does not want to do an analysis, even though 

all the data in the world is there, they do not have to do it in the 

sense that the downside, the legal downside for not doing the analysis is not very significant. And that is one of the reasons that the 

law needs to be strengthened. If they essentially thumb their nose 

at their obligation to do an analysis, it is very difficult to get that 

decision to not do an analysis challenged through court. 

Mr. TIPTON. Well, now, you know, I think that that is an excellent point. In fact, we have just heard testimony that we are able 

to observe over at Energy and Commerce when the EPA was specifically asked have you done cost benefit analysis and the answer 

is no, ultimately. 

Mr. Finkel, I am kind of curious. You had had an experience 

with OSHA. Can you give me some examples where OSHA went 

in to help rather than fine and punish? Or did it always be accompanied by a fine? 

Mr. FINKEL. No. In addition to being in charge of health rulemaking, I was out in Denver for three years as a regional enforcement administrator. And our staff always went out with a dual 

mission—to see to it that problems, especially imminent danger 

ones were corrected, but also to provide information, compliance assistance, consultation. Those programs have grown by leaps and 

bounds and a lot of us think that they are taking too much attention away from enforcement. But the fact of the matter is in this 

climate and the climate that existed when I was there 10 years ago 

there was a tremendous perceived need to provide good information. I think in many cases that information—— 

Mr. TIPTON. So there are no examples where it was not accompanied by a fine? 

Mr. FINKEL. Oh, there are plenty of examples where OSHA has 

an entire consultation program that is not permitted to levy fines. 

Mr. TIPTON. That is voluntary to come in. When they do an inspection, is that always accompanied by a fine? 

Mr. FINKEL. No, consultation is separate and it is employer driven. 

Mr. TIPTON. It is separate. 

Mr. FINKEL. And they can ask for it for free anytime they want. 

And there is—not only can they not fine but they cannot pick up 

the phone and call OSHA and say—— 


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Mr. TIPTON. No, I am talking about when they actually come in 

to do an inspection, not with voluntary compliance when you invite 

them. 

Mr. FINKEL. Well, about 25 percent of OSHA inspections now result in no fines. Now, that should be because there are no problems. But if you are asking me are there places where OSHA looks 

the other way? No, I hope not. There are instances where fines are 

reduced by 90 percent for small business, where fines are extended 

off in time, where willful citations are reclassified as non-willful in 

order to get some abatement and get some cooperation. 

Mr. TIPTON. Okay. Can you give me an example where an OSHA 

regulation has helped a business grow? 

Mr. FINKEL. I think every one of them has in some way. The 

vinyl chloride rule way back in the ’80s caused pollution control 

technology. 

Mr. TIPTON. Did it help those businesses grow? 

Mr. FINKEL. Well, actually, in that case it actually, you know, 

you want to talk about how wrong economic analyses can be. Not 

only did that regulation and others like it help other businesses, 

it actually helped the affected entities grow because they were so 

wrong about whether it would cost them money. They saved money 

in recovered product that was greater than the installation of the 

equipment to recover the product. Sometimes business needs a little wake up call. I mean, once in awhile it works out that there 

are $20 bills lying around that people are not picking up. 

Mr. TIPTON. I will tell you, just kind of personal experience, 

when OSHA came into my business we had a tipping hazard, pallets were stacked one on top of another, and the regulator had said 

that they were stacked 15 feet high and she was the expert. Unfortunately, the ceiling was eight foot high, so that was some of the 

actual experience that we have had. 

You know, really when we are looking at some of the regulatory 

process, and I guess I would open this up to anyone on the panel, 

do you think Congress needs to be more hands-on? That we see the 

regulatory process exceeding the legislative intent of Congress 

overreaching and that we need to be able to roll up our sleeves as 

Congress and get far more engaged, making the regulatory bodies 

responsive to that legislative intent? 

Mr. FINKEL. I would like to say yes, Congressman, and let me 

also mention while you are on OSHA, one of the problems in my 

view that typifies OSHA and it is not the only agency, is that many 

of the regulatory actions that we sort of think of as regulatory in 

the big picture sense are determined by OSHA not to be regulatory 

but to be enforcement actions and enforcement protocols. They will 

put out a statement saying we are going to enforce this kind of violation and we are not going to enforce this kind of violation. Those 

statements are completely exempt from any analytic requirement. 

And in fact, I read a case, a federal case involving the steel foundry 

business in which the court probably accurately from a legal perspective said this particular practice by OSHA is not challengeable 

in court because it is not a regulatory challenge; it is simply an enforcement practice so go complain to the agency or go complain to 

the Congress. 


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Chairman GRAVES. Before I move to Mr. West I want to clarify 

one thing. This question is for Mr. Finkel and then I would like for 

Mr. Katrichis to follow up. 

We talk or you talk as if implementing this legislation and requiring the agencies to follow the Regulatory Flexibility Act and examine how this is going to examine small business, that somehow 

this is going to prevent the regulation from going into effect. My 

question to you is does this in any way prevent an agency from implementing a rule or regulation as a result of studying it? 

Mr. FINKEL. Well, again, I think, you know, with all due respect, 

I think a lot of this is a solution in search of a problem. I do not 

see the thumbing of the nose at the RegFlex Act the way other people do but that is just a matter of interpretation. Again, as an analyst, I cannot sit here and say that I do not silently applaud the 

idea of looking more carefully at some of these—I do not want to 

say nuance but effects that will otherwise be given short shrift. But 

the idea of judicial review of some of these things, you know, the 

Chief Counsel for Advocacy picking the panelists and writing the 

report, I have got to say I have read the hearing memo that you 

put out and I do not begrudge at all your view about the dynamics 

here but it struck me as a punitive—you have said it yourself, the 

reining in of the agencies. So as a former regulator reading that 

I think this is a recipe for delay, and delay in the service of something is not a problem. Delay needlessly is a problem and I think 

that some of the analyses could proliferate and cause enormous 

delay in a process that is already, of course, people say ossified. I 

do not see it quite that dire a situation but, you know, things are 

stretched very thin. And indirect effects that are highly speculative, you know, the economists are having enough trouble in the 

agencies getting good estimates of total cost and benefit. I wish it 

were better but it is the way it is. 

Chairman GRAVES. I will go to Mr. Katrichis again. It is a simple 

question. Does it prevent an agency from implementing a regulation whatsoever? 

Mr. FINKEL. Yes. 

Mr. KATRICHIS. I do not think it does. I think that it may slow 

things down. 

Chairman GRAVES. Hit your mic, would you? 

Mr. KATRICHIS. I think it might slow things down. We have had 

executive orders, regulatory executive orders issued by every president going back to Gerry Ford. The president is the head of all 

these departments where all these executive branch agencies are. 

I mean, they have not paid attention. That is why RegFlex was 

needed in 1980. That is why SBREFA was needed in 1996. I think 

small businesses want some certainty out there. And certainty does 

not necessarily come with the hand of a new regulatory regime. 

Sometimes the not regulating is more scary than the regulating. 

I will give a couple of examples of that. For the longest time, 

EPA was considering regulating milk spillage in dairies as something that would be covered as an oil spill because there is a small 

percentage of animal fat in milk. And it was not until some serious 

prodding by both authorizers and the appropriators that now a few 

weeks ago EPA has finally said, well, we are not going to do that. 


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We have this other thing on the horizon, and that is something 

that is already regulated in California under their Clean Air Act, 

and that is, you know, bovine gas. I mean, you know, we are going 

to have a situation where EPA may go in. In California, if you are 

running a dairy, you get a bill every month which is determined 

by some mad scientist that sits in a windowless office and calculates how many, you know, cows you have and what your assessment is for that month. And there is no science that goes into this. 

There is no comment. But if this is pushed to other parts of the 

country behind California, I mean, how are, you know, dairy folks 

supposed to deal with that uncertainty? 

Chairman GRAVES. Mr. West. 

Mr. WEST. Thank you, Mr. Chairman, and also ranking member. 

Thank you panel for being here today. 

I am going to try to have the simple man approach here. Yesterday was the Army birthday, 236 years for the United States Army, 

a little gang that I spent a few days with in my life, 22 years to 

be matter of fact. In that time of 22 years I was a paratrooper and 

I was also an artilleryman. And one of the things that we had in 

our military was that if something were to come down from the institution of the Airborne School or the Artillery School, a new regulation, a new piece of doctrine, what have you, before it was implemented they would send it out into the field as we would call it 

to make sure that the people who would have to implement this 

new regulation, new doctrine, new piece of equipment, what was 

their assessment of it? I mean, would this be something that would 

work? 

Now, my question is simple. Is that the type of process that we 

have here with regulation whereby we send these things out to the 

field to get a bottom-up assessment before we implement it? 

Mr. KATRICHIS. The whole notion of the SBREFA review panels 

was so that we could have a conversation with a regulatory agency 

before pen was put to paper. The concern was that there would be 

some pride of authorship once we went to a preliminary rule stage 

or proposal of a rulemaking. And I think that that is similar to 

what you are suggesting here. 

Mr. WEST. But are we doing that? 

Mr. KATRICHIS. We are doing it—— 

Mr. WEST. Yes or no? 

Mr. KATRICHIS. We are doing it at OSHA and EPA because it is 

required of them. 

Ms. VELA ́ ZQUEZ. Will the gentleman yield? 

Mr. WEST. I certainly will. You are the ranking member. 

Ms. VELA ́ ZQUEZ. Yes. 

Mr. WEST. I follow chain of command. 

Ms. VELA ́ ZQUEZ. I am glad to hear that. 

Mr. WEST. I take orders well, ma’am. 

Ms. VELA ́ ZQUEZ. Yes, there is communication once a regulation is 

going to be an agency. It is known as notice and comment, is it not? 

Mr. KATRICHIS. Right. 

Ms. VELA ́ ZQUEZ. Thank you. Thank you for yielding. 

Mr. WEST. Thank you. So this is once this regulation is identified 

or is it going to be implemented? 


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Mr. KATRICHIS. There are different ways. There could be an advanced notice of proposed rulemaking which occurs in very large 

undertakings. It can just be a notice of changes we are making. 

You know, for people that are in, you know, law firms, accounting 

firms, et cetera, they have the resources to see these things coming. 

Your average small business, they do not have the resources to see 

these things coming. They might belong to a trade association that 

does, et cetera. I mean, the gentleman on the other side of the 

aisle, his suggestion of some distinction between rural-based businesses and urban-based businesses is a good one in that regard because somebody out there in a rural community is not going to 

have, unless they have access to the Internet, et cetera, they are 

not going to have access necessarily to a library where they can go 

look at the Federal Register and see what is being contemplated. 

Mr. WEST. Well, and I think that the gentleman brought up a 

good point. I mean, is there an evaluative criteria that is out there? 

Because not all things are alike or equal. I mean, a rural community is different from an urban community or, you know, you do 

have these trade associations. Or what are some of the economic 

impacts? So, I mean, do we have these type of things out there that 

preclude this preponderance of, you know, top-down driven edicts 

and mandates that come down on small business? The next thing 

to know, once it hits there is nothing they can do. And I think it 

comes back to this, you know, predictability, uncertainty-thing that 

you talked about. 

Ms. LUXTON. If I may address that. The distinction, I think, is 

very important between what a SBREFA panel does and the later 

time when a rule is proposed. The distinction, and I had it in my 

testimony, is by that time positions have hardened. The value of 

a SBREFA panel is that the small entity representatives are selected from all of the diverse areas that would be affected—rural, 

urban—of any kind of effect that would be felt. And the whole point 

of it is to bring those people in early to explain what the impacts 

would be on them. The agency is required and this bill would 

strengthen the requirement that the rule alternatives be laid out. 

And the whole point of this is not to evade the rule or prevent 

a rule from becoming effective but to find ways to tailor it so that 

the impacts on small business could be less. And it by no means 

is always the case that the only answer is ‘‘do not do the rule’’ or 

‘‘do not let it apply to small business.’’ 

Mr. WEST. So my final question because I just had a small business forum back in my district last week, where is the breakdown? 

Because the small businesses are hurting. So somewhere there is 

a breakdown and I think that is what we have to identify. We have 

all these systems and panels and organizations and things in place. 

There is a breakdown somewhere and the people that are being affected are the economic engine that will drive a turnaround in this 

country, and those are the small business owners. 

Ms. LUXTON. I could not agree more. My point, I guess, would be 

that there are only three agencies currently subject to the SBREFA 

panel process, so the others never get the benefit of that early 

input from those small entities. 

Mr. WEST. Thank you. And I yield back. 

Chairman GRAVES. Ms. Chu. 


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Ms. CHU. Dr. Finkel, you developed several product stewardship 

partnerships involving government large manufacturers and small 

businesses who purchase a hazardous product and expose their 

workers to it. And you also talked about how when you were at 

OSHA you partnered with the Insulation Manufacturers Association so a rule on fiberglass insulation was not necessary. I think 

it is really great when the public and private sector can work together like that. How do we promote more of these product stewardship partnerships so that government and businesses can work 

together? 

Mr. FINKEL. You know, I wish I knew the answer to that. I was 

very frustrated that some of the ideas that my colleagues and I had 

at that period of time, frankly, they seemed a little—were viewed 

with some suspicion by—I was a career person but they were 

viewed with some suspicion by the political appointees in the Clinton administration, but I was involved and I survived the transition, of course, to George W. Bush, and immediately the same ideas 

were seen as way too aggressive. So they never really got, I think, 

their due. That particular partnership with the fiberglass people 

lasted for six or seven years and basically fizzled out because government did not give it the respect and support that I think the 

industry deserved by having come to us at that time with a really 

good idea that I think saved money and saved lives. And they are 

still doing some of that stuff but without—at one point they even 

came into our offices. This was actually—I should correct—a different partnership but one of the user groups came into our OSHA 

offices and said we are doing pretty well with this voluntary code 

of practice but we have some recalcitrant users who are clearly 

flouting this. Could you do some enforcement there? And our own 

lawyers were a little nervous about enforcing something that we 

thought was, in fact, the general duty of these employers to do. So 

it is an idea maybe whose time will come again. 

Ms. CHU. And what elements would be needed to make it successful? 

Mr. FINKEL. I think a more aggressive, more enthusiastic participation by government. And this was a unique set of three or four 

circumstances at work but there are plenty of others where the 

manufacturers know well that it is in their best interest to help the 

small users of their products use them properly. And sometimes 

they do that just through informal means but in this case with government as a partner saying we enthusiastically support what you 

are doing, maybe we do not have to do rulemaking because the 

problem is being solved through business relationships that we can 

sit back and watch work. 

Ms. CHU. You also mentioned in your testimony that government 

agencies already analyze how regulations affect small businesses 

and you suggest that there is an adequate analysis available for 

small businesses. In your opinion, would this bill add another layer 

of government bureaucracy? 

Mr. FINKEL. Yeah, I am concerned about the delay and the bureaucratization if that is a word, of the process. But I am also concerned about, again, two things. Some analyses are simply not 

value-added. They are make-work analyses. Not that, again, as an 

analyst you cannot come up with a little bit extra to do but just 


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as a sense of perspective, again, I understand I am in a room talking to the Small Business Committee but it is not the only constituency out there that has disparate effects, both economic and 

health and safety, from regulation. And I do think objectively of all 

these constituencies—children’s health, environmental injustice, 

other economic actors—it is this one that has been getting the most 

attention. And maybe it is time to give them a little more attention 

but also look at the rest of the whole pallete and see where the 

agencies are falling down in terms of analyzing the real world impacts of these things. 

Mr. SWAIN. Congresswoman, if I could just comment. I fundamentally disagree with Mr. Finkel’s response to that question. 

This law would not add another layer of bureaucracy. The Congress, led by Senator Culver and Congressman Ireland in 1980 

added another layer of bureaucracy. This law would make sure 

that that 1980 law works better but this layer of bureaucracy has 

been here for 30 years. It has worked sometimes and sometimes 

not so well. So this is basically a remedial statute to a process that 

has been in place for 30 years. 

Mr. FINKEL. Well, I have got to say it is a very broad bill and 

there are certainly sections that do exactly what you say. But expanding it from three agencies to 50 is a new layer of something 

for those 47. Changing who picks the panelists and who writes the 

report is a change. You can’t argue whether it causes delay or 

causes more analyses to be done. 

Ms. CHU. I see my time is up. I yield back. 

Chairman GRAVES. Mr. Hanna. 

Mr. HANNA. No, sir. 

Chairman GRAVES. Ms. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. I just would like to make a comment about the 

comment made by the gentlelady from North Carolina. And I am 

sorry she is not here but I just would like to ask her where does 

she see that regulations are the number one issue for small businesses? Because the last I checked, NFIB, every week they measure, they survey, they poll their members. And the latest poll coming out from NFIB has the number one issue for small businesses 

is not regulations. And it is sales. Okay? That is the number one 

issue from NFIB. And then the U.S. Chamber of Commerce’s later 

survey showed that also regulations come in three. And for NFIB, 

number three. So if we are going to come here and say that the 

number one issue for small businesses is regulation, based on the 

facts I do not think that it really reflects the reality. 

Two weeks ago, members were saying that CDFI is—FDIC is an 

office under the jurisdiction and responsibility of the Department 

of Treasury. It is an independent agency and that should be on the 

record. 

I would like to ask unanimous consent to enter into the record 

the two surveys conducted by NFIB and U.S. Chamber of Commerce. 

Chairman GRAVES. Without objection. 

Ms. VELA ́ ZQUEZ. Thank you. 

Mr. Finkel, the legislation gives Chevron deference to Advocacy’s 

rulemaking regarding RegFlex and this will likely extend to 

Advocacy’s opinion as to whether an agency has, in fact, complied. 


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Are there any drawbacks to giving such immense power to Advocacy? 

Mr. FINKEL. With the caveat that I hope you are not confused by 

my being—that I have a law degree or know anything particularly 

about the law. But since you asked me I cannot resist. What troubles me really about this idea is that I guess I may be ignorant but 

I do not know of other parts of government where there—not to say 

there is not—was not and is not a need for a person whose job title 

is the chief counsel for advocacy for small business granted but to 

have that person in that office clearly delineated as only caring 

about one side of a complicated issue. Having Chevron deference, 

it just strikes me as not good government to say someone who is 

paid to be in an advocacy role, you know, should have any special 

deference. There is no chief counsel for Children’s Health and 

maybe there should be. But I think the idea of letting that person 

have access, have panels, have input to the process that he or she 

does, you know, ought to be sufficient if, as Frank Swain says, the 

agencies are complying with the law. In my experience they are 

more than they are not but it is old experience at this point. 

Ms. VELA ́ ZQUEZ. Mr. Finkel, what are the more significant indirect costs to small businesses? And most importantly, the economic 

benefits to small businesses from regulations? 

Mr. FINKEL. Well, this gets back to what the congressperson from 

North Carolina seemed so quizzical about but I think when you— 

there have not been such studies done recently. But when you look 

at studies of all business and people look at the effects of regulation, when you only look at half of the cost, the costs that accrue 

to people who pay versus when you look at the whole change in the 

economy pre- and post-regulation, when you do not count the job 

creation, the new markets that are created by regulation, sometimes those are small and do not make much difference in the total 

costs. Sometimes they are huge and turn something that was supposed to be a net loss for the economy into something that was a 

net gain for the economy. Am I in favor of agencies having to look 

at those impacts on balance? I think not, because it is, you know, 

they are not doing a good job when they have infinite time and 

sometimes sources of money. For free and quickly you are not going 

to get good answers. 

Ms. VELA ́ ZQUEZ. Thank you. 

Mr. Swain, in 2004, the chief counsel, and you were not—I want 

to make it clear—testified before this Committee saying, and I 

quote, ‘‘that vesting the authority to determine size standards to 

advocacy may cause confusion over which SBA office determines 

size standards.’’ He followed by saying that he did not, and I quote, 

‘‘believe the proposed language will benefit small entities.’’ As a 

former chief counsel yourself, do you agree or disagree with these 

concerns? 

Mr. SWAIN. There is no issue that I have met in Washington that 

has so many people on so many different sides than size standards. 

And, you know, it is like giving somebody a job. For every one person you make happy, you make 10 mad. And the same is true with 

size standards. 

I think I agree with the chief counsel’s statement. I think that, 

and I should say that I am not personally aware of—I am not perVerDate Mar 15 2010 23:36 Aug 25, 2011 Jkt 067792 PO 00000 Frm 00032 Fmt 6633 Sfmt 6602 E:\HR\OC\A792.XXX A792

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sonally acquainted with how this dilemma arises in the real world. 

I accept that it does but I do not have any personal knowledge of 

experience. But in theory, I think the chief counsel has plenty to 

do without being in the size standard business. I think that they 

ought to be consultative with the SBA Size Standards office when 

these issues come up. But to give the chief counsel this authority 

is not the most important part of this bill. 

Ms. VELA ́ ZQUEZ. Thank you. Thank you. 

Mr. SWAIN. Could I make one brief statement on the Chevron 

deference issue? 

Ms. VELA ́ ZQUEZ. Yes. 

Mr. SWAIN. Because I think it is a very important issue and I understand the hesitancy on it. I think it is really important that I 

point out that as I understand it, and better lawyers on the panel 

than me can correct me, the Chevron deference would be the court 

could defer to the chief counsel’s opinion as to whether the proper 

small business regulatory analysis has taken place, but the court 

can still say whether it is an OSHA case or an EPA case, we are 

going to find that this rule should go into effect because it is an 

important rule and it is not arbitrary. The only thing that they 

have to say is, well, the chief counsel said they did not do a good 

job so maybe they did not do a good job. But even though—the 

court can say even though they did not do a good job we still will 

allow this rule to go into effect. So it is a deference as to the procedural step; it is not deference about the chief counsel’s position as 

to what finally should happen to the rule. 

Ms. VELA ́ ZQUEZ. Okay. Mr. Finkel, my last question to you is 

should agencies be encouraged to seek input during the panel review process from those affected workers and consumers by those 

proposed regulations? 

Mr. FINKEL. Yeah. I mean, my agency friends will not be happy 

because they will see it as one more being stretched thin. But fundamentally, yeah, I believe that it was a good idea to have these 

SBREFA panels. I think they have worked well. They have added 

good value in my experience. But it just seems fundamentally not 

fair and symmetric to me that we invite in one constituency who 

has some built-in hope that the regulations will not get promulgated or will get promulgated differently and the constituency who 

is out there waiting to be protected do not get in. I mean, they get 

in the notice and comment, obviously, but the whole point of this 

is an early bite at the apple. 

Ms. VELA ́ ZQUEZ. Thank you. 

Ms. LUXTON. If I could just add, I believe the way it works now 

is it is small entity representatives. It is not entirely small business. So there have been recent panels at EPA where environmental groups have been brought forward for this. Communities, 

small governments. So it is not exclusively small business. 

Ms. VELA ́ ZQUEZ. Okay. Thank you, Mr. Chairman. 

Chairman GRAVES. Thank you. This has been a very interesting 

hearing. I am very frustrated by some of the aspects of what was 

said today and obviously some of that being that one of the benefits 

of regulation is that it creates new industries and the idea that we 

are going to create regulation that could put industries out of business and create new industries is engineering that I think is wrong 


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for a government to be doing that. And it could be interpreted that 

way very, very easily. 

My number one goal in this legislation is to make darn sure that 

the government determines and evaluates what it is doing to small 

business and how it is affecting small business. And there is absolutely nothing in this legislation that prevents an agency from implementing any one of the regulations that they put forth. Not one 

single thing. It will slow down the process and I darn sure hope 

it slows down the process. And that is exactly what I am trying to 

go through here. 

So with that I would ask that all members have five legislative 

days to extend and revise their remarks. And with that this hearing is adjourned. 

[Whereupon, at 2:41 p.m., the Committee hearing was adjourned.] 


pwalker on DSK5TPTVN1PROD with HEARING
31 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 86 here 67792A.001
32 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 87 here 67792A.002
33 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 88 here 67792A.003
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pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 89 here 67792A.004
35 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 90 here 67792A.005
36 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 91 here 67792A.006
37 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 92 here 67792A.007
38 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 93 here 67792A.008
39 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 94 here 67792A.009
40 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 95 here 67792A.010
41 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 96 here 67792A.011
42 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 97 here 67792A.012
43 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 98 here 67792A.013
44 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 99 here 67792A.014
45 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 100 here 67792A.015
46 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 101 here 67792A.016
47 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 102 here 67792A.017
48 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 103 here 67792A.018
49 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 104 here 67792A.019
50 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 105 here 67792A.020
51 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 106 here 67792A.021
52 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 107 here 67792A.022
53 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 108 here 67792A.023
54 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 109 here 67792A.024
55 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 110 here 67792A.025
56 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 111 here 67792A.026
57 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 112 here 67792A.027
58 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 113 here 67792A.028
59 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 114 here 67792A.029
60 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 115 here 67792A.030
61 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 116 here 67792A.031
62 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 117 here 67792A.032
63 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 118 here 67792A.033
64 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 119 here 67792A.034
65 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 120 here 67792A.035
66 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 121 here 67792A.036
67 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 122 here 67792A.037
68 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 123 here 67792A.038
69 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 124 here 67792A.039
70 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 125 here 67792A.040
71 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 126 here 67792A.041
72 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 127 here 67792A.042
73 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 128 here 67792A.043
74 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 129 here 67792A.044
75 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 130 here 67792A.045
76 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 131 here 67792A.046
77 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 132 here 67792A.047
78 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 133 here 67792A.048
79 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 134 here 67792A.049
80 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 135 here 67792A.050
81 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 136 here 67792A.051
82 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 137 here 67792A.052
83 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 138 here 67792A.053
84 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 139 here 67792A.054
85 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 140 here 67792A.055
86 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 141 here 67792A.056
87 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 142 here 67792A.057
88 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 143 here 67792A.058
89 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 144 here 67792A.059
90 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 145 here 67792A.060
91 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 146 here 67792A.061
92 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 147 here 67792A.062
93 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 148 here 67792A.063
94 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 149 here 67792A.064
95 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 150 here 67792A.065
96 


pwalker on DSK5TPTVN1PROD with HEARINGInsert offset folio 151 here 67792A.066