Roger Williams Leads House Committee On Small Business Hearing On Biden's 'Burdensome Regulations'

  • 4 months ago
Rep. Roger Williams (R-TX) leads a House Committee on Small Business hearing on the 'Biden Administration’s Failure to Consider Small Businesses'.

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Transcript
00:00:00 Thank you, Mr. Chairman.
00:00:02 May I stand?
00:00:04 Heavenly Father, this coming weekend is Memorial Day, and we want to ask your blessing on the lives of those who have served our country and died in its service.
00:00:13 Especially bless their families and give them strength to endure the hardships that they have to with their loved ones gone,
00:00:19 and also to relieve the hardships of those veterans who survive among us today.
00:00:25 Please lead us today in our negotiations and our endeavors here as we work for the benefit of our constituents and the great people of this country.
00:00:33 We have a lot of issues before us, so we need your help, need your leadership.
00:00:36 We'll put our hand in your hand as you lead us to make the right decisions and do your work.
00:00:40 And in Jesus' name we pray, amen.
00:00:43 Pledge. Please put your hand over your heart.
00:00:46 [All] I pledge allegiance to the flag of the United States of America and to the republic for which it stands,
00:00:52 one nation under God, indivisible, with liberty and justice for all.
00:00:57 Good morning, everyone, and I now call the Committee on Small Business to order.
00:01:09 Without objection, the Chair is authorized to declare a recess of the Committee at any time.
00:01:14 I now recognize myself for my opening statement.
00:01:16 Welcome to today's hearing, which will focus on how the Biden Administration's burdensome regulatory agenda has negatively impacted Main Street America.
00:01:24 I'd like to start off by thanking our witnesses for being here with us today.
00:01:27 Your input on these important issues is greatly appreciated.
00:01:30 One of the top priorities of this committee has been combating the burdensome red tape and regulation that hamper small businesses across America.
00:01:37 On the flip side, since day one, this Administration has unleashed a regulatory onslaught on small businesses across the country.
00:01:44 Unfortunately, they have repeatedly shown that they do not consider the best interests of small business owners when making rules and making regulations.
00:01:51 The Regulatory Flexibility Act was created with the sole purpose of ensuring Federal agencies consider small businesses during the rulemaking process.
00:01:59 This committee conducted a 15-month investigation and found most Federal agencies are dodging the RFA's requirements and failing to consider the interests of small firms in the rulemaking process.
00:02:10 All you need to do is to look at the numbers.
00:02:12 All final rules issued by this Administration have cost over $1.4 trillion and will make over 230 million paperwork hours to comply with it.
00:02:21 Put simply, the RFA needs to be significantly improved.
00:02:24 Today, in the furtherance of that effort, the committee is releasing a staff report detailing all of the problems the committee uncovered and offering potential legislative solutions.
00:02:35 I ask for unanimous consent to enter this report into the record.
00:02:41 And so ordered.
00:02:43 Because the RFA is now operating as a shield, like it should, Main Street is suffering.
00:02:49 Every business owner will tell you that regulations don't happen in a vacuum.
00:02:54 They have a real-world consequence.
00:02:56 Complying with the mountains of regulations is no small task for a small business.
00:03:00 Just a couple of months ago, we heard from a small business manufacturer in this hearing room that his regulatory costs have gone up 460 percent in the last 8 years.
00:03:09 In an effort to make matters worse, he testified that the regulations have not made products better or safer.
00:03:15 This is unacceptable in every way, and we aren't giving our small businesses and small firms a chance to be successful if we continue down the road of regulation.
00:03:24 Small businesses do not have the luxury of large businesses with dedicated compliance departments.
00:03:29 When new regulations are finalized or changed, it's up to the business owner themselves to take away from their core responsibilities to understand the new requirements.
00:03:37 At a time when businesses are still struggling with stubborn inflation, high interest rates, and a bleak labor market,
00:03:43 we should not be adding mountains of regulations as an additional challenge that they must overcome.
00:03:49 So as a small business owner myself for over 52 years, I know all too well the consequences that come with piles of regulations.
00:03:56 Every small business owner knows it, too.
00:03:58 It is my hope that this hearing will shed further light on the issue at hand and that we use this hearing to advance solutions that will help Main Street America.
00:04:06 Again, we are eight pieces of legislation attached to this hearing, and I hope our conversation today will further shape these potential problems.
00:04:13 I want to thank you all again for being here with us, and I am looking forward to today's conversation.
00:04:18 And with that, I yield to my distinguished member from the great State of Kansas, Ms. Davids.
00:04:25 [Ms. Davids] Thank you, Chairman.
00:04:26 Federal regulations provide the rules of the road for business nationwide, impacting the everyday lives of Americans.
00:04:33 Throughout this Congress, this committee has heard testimony from witnesses that have talked about some of the benefits of these regulations.
00:04:40 For example, the Environmental Protection Agency's rules safeguard our nation's air, lands, and waters.
00:04:45 The Food and Drug Administration regulates products to protect and promote public health.
00:04:50 And the Department of Labor keeps our workplaces safe.
00:04:53 With that said, we have also heard testimony from small businesses that certain regulations can be onerous and difficult to comply with.
00:05:01 Part of our role as members of the Small Business Committee is to recognize the impact regulations have on small businesses
00:05:08 and work to find ways to balance the shared goal of minimizing the burdens and achieving the intended effects of those regulations.
00:05:15 To that end, our committee passed the bipartisan One-Stop Shop for Small Business Compliance Act in the 117th Congress, which was enacted into law.
00:05:24 This bill gives small businesses nationwide a clearinghouse for regulatory compliance guides when dealing with Federal rulemaking.
00:05:32 Democratic members of this committee have also led on the Small Business Regulatory Relief Act, introduced by Mr. Mfume,
00:05:39 which would give the Office of the National Ombudsman the authority to work with Federal agencies
00:05:44 and provide meaningful compliance assistance and increase outreach to better serve our small businesses.
00:05:50 Hearing more directly from small businesses affected by Federal regulations will greatly improve the rulemaking process,
00:05:57 and this administration has taken steps to broaden public engagement and community participation in that rulemaking process.
00:06:03 As part of the President's Executive Order to Modernize Regulatory Review,
00:06:07 agencies are encouraged to hold listening sessions to hear directly from impacted communities and reduce barriers to participation.
00:06:15 President Biden has also issued an executive order to promote competition in the American economy.
00:06:21 Americans have been frustrated in recent years by increased costs driven by lack of competition, hampered supply chains, and unfair price gouging.
00:06:31 Corporate consolidation is accelerating, which is hurting Main Street businesses, including small grocers, local stores, and innovators in the tech industry.
00:06:40 I am looking forward to hearing from our witnesses today about the impact of these executive orders,
00:06:45 especially on boosting competition for entrepreneurs.
00:06:48 I firmly believe that smart, well-crafted, common-sense regulations have the potential to unleash innovation
00:06:54 and provide critical health, safety, and environmental protections.
00:06:57 My hope is that we strive to find the right balance today to promote solutions
00:07:01 that are truly going to benefit small businesses and not special interests.
00:07:05 Thank you. I yield back.
00:07:07 [Mr. Gowdy] The lady yields back, and now I will introduce our witnesses.
00:07:12 The first witness here with us today is the Honorable Paul Ray.
00:07:15 Mr. Ray is the Director of the Roe Institute for Economic and Policy Studies at the Heritage Foundation, located right here in Washington, D.C.
00:07:22 At the Heritage Foundation, Mr. Ray has researched folks on administrative law and policy and is a frequent speaker on the Federal regulatory system.
00:07:29 Prior to his current role, Mr. Ray served as the Administrator of the Office of Information and Regulatory Affairs
00:07:34 within the White House's Office of Management and Budget.
00:07:37 As Administrator, Mr. Ray supervised a review of hundreds of regulations and led Federal efforts on regulatory reform.
00:07:44 Mr. Ray is a graduate of Harvard Law School, where he served on the Harvard Law Review and holds a bachelor's degree from Hillsdale College.
00:07:51 Thank you, Mr. Ray, for being with us today. I look forward to your conversation with you.
00:07:56 Our next witness here with us today is Mr. Dan Golbeck.
00:07:59 Mr. Golbeck is the Director of Regulatory Policy at the American Action Forum, located here in D.C.
00:08:05 Mr. Golbeck's research focuses on notable developments in the administrative state, the accumulation of paperwork requirements, and executive and legislative regulatory reform efforts.
00:08:16 His research and expertise have appeared in a wide variety of media outlets, including the New York Times, the Bloomberg News, the Washington Examiner, the Hill, Investors Business Daily, and Federal News Network.
00:08:27 Mr. Golbeck earned his bachelor of arts in political science with a history and minor from the University of California, Santa Barbara.
00:08:33 Thank you for joining us today. We look forward to a conversation with you.
00:08:37 Our next witness here with us today is Mr. Rob Smith.
00:08:40 Mr. Smith is Senior Attorney in the National Federation of Independent Businesses, also known as the NFIB, located here in Washington.
00:08:47 Since joining the NFIB, Mr. Smith has authored amicus briefs for cases affecting small businesses, including in the Supreme Court,
00:08:55 written working papers on important issues to the small business community, including the Regulatory Flexibility Act,
00:09:01 and created posts informing small business owners of new legal developments.
00:09:06 Mr. Smith earned his bachelor's degree in criminal justice and political science at the University of Michigan-Dearborn
00:09:12 and went on to earn his JD from George Mason University's Antoine Scalia Law School.
00:09:20 Thank you for joining us here today, and I'm looking forward to our conversation.
00:09:25 I now recognize Ms. Davids to briefly introduce our last witness appearing before us today.
00:09:32 Thank you, Chairman.
00:09:35 The minority witness today is Todd Phillips, who is an assistant professor at Georgia State University
00:09:43 and has a wealth of experience and knowledge in this area.
00:09:50 I appreciate you taking the time today to come and testify before the committee.
00:09:55 I yield back.
00:09:57 [Mr. Blumenauer] The lady yields back. Thank you.
00:09:59 We appreciate, again, all of you being here today.
00:10:03 I would remind all of you, oral testimony is strict to five minutes in length.
00:10:07 If you see the light turn red in front of you, it means you've concluded and you should wrap up your testimony.
00:10:12 If you hear this, I'm happy to remind the red light that you're done.
00:10:17 With that being said, I now recognize the Honorable Paul Wray for his five-minute opening remarks.
00:10:26 [Mr. Wray] Thank you, Mr. Chairman, Vice Chairman Lueckenmeyer, Ms. Davids, and distinguished members of the committee.
00:10:31 It's a real honor to be here with you today. Thank you for the invitation.
00:10:34 I am the director of the Heritage Foundation's Brough Institute for Economic Policy Studies,
00:10:38 a focus on research and education about economic and regulatory issues.
00:10:42 As the chair mentioned previously, from 2018 through 2021, I served in the Office of Information and Regulatory Affairs within OMB.
00:10:49 For the last year of that period, I had the honor to serve as administrator of OIRA.
00:10:53 In that capacity, I had the chance to form views about many of the ways our regulatory system affects the ability of small businesses to survive and thrive.
00:11:01 The views I express in this testimony are my own and should not be construed as representing any official position of the Heritage Foundation.
00:11:08 As this committee's hearings have recently documented, America's regulatory system fails small businesses.
00:11:13 In particular, the system does not provide the predictable pro-growth environment that small businesses need.
00:11:19 Today, I would like to focus on some legislative initiatives that would help small businesses as they navigate the regulatory system.
00:11:26 The most obvious place to begin is the Regulatory Flexibility Act, but precisely because the RFA often garners so much attention in discussions about small business and regulation,
00:11:35 I am going to talk about other potential statutory reforms that could help small businesses obtain the predictable pro-growth environment they need.
00:11:42 After all, our small businesses need all the help they can get.
00:11:46 Merely amending the RFA, while essential, won't be enough.
00:11:50 One major problem with today's regulatory system is that it allows regulations to be issued, amended, and rescinded relatively easily, so agencies change them often and in large numbers.
00:12:00 These frequent changes are tremendously disruptive for small business, which faces much greater difficulty than their larger peers in predicting and coping with alterations in governing law.
00:12:09 The reason for the frenetic pace of change is simply that the executive finds it much easier to issue regulations than Congress does to legislate.
00:12:17 One bill that would help curb the alarming pace of regulatory change is the Regulations from the Executive in Need of Scrutiny, or REINS, Act.
00:12:24 The REINS Act would require affirmative congressional approval for the most economically significant regulations.
00:12:30 This approach would effectively import back into the regulatory process the deliberateness of Article I's legislative process, stabilizing the regulatory environment for our small businesses.
00:12:40 To survive and succeed under a regulatory system as mutable as the current one, businesses need to be able to predict future regulatory changes as far in advance as possible.
00:12:50 But small businesses often lack the resources to monitor future regulatory developments as closely as their larger competitors.
00:12:56 One solution is the All Economic Regulations are Transparent, or ALERT, Act.
00:13:01 The bill would require agencies to submit monthly information to OIRA about each pending rule.
00:13:06 This information would include the agency's latest estimates of the completion dates of their rulemakings.
00:13:11 The bill would require OIRA to post the information received from agencies online.
00:13:15 By requiring online publication of frequent updates to anticipated rulemaking timelines, the ALERT Act would level the playing field between large and small business,
00:13:24 ensuring that all businesses can plan efficiently in light of the most recent developments in ongoing rulemakings.
00:13:29 Another major problem small businesses face is that today's regulatory system fails to provide the pro-growth environment they need to thrive.
00:13:36 Federal agencies impose enormous costs on business owners and consumers, as the Chair mentioned.
00:13:41 One solution is for politically accountable actors to set a regulatory budget.
00:13:46 The Renewing Efficiency in Government by Budgeting, or REG Budgeting Act, would direct the OMB Director to set an annual regulatory budget for the federal government as a whole and for each agency.
00:13:56 It would forbid agencies to make a rule effective if doing so would push the author agency over its budget,
00:14:02 unless the agency first obtains permission from Congress, and it would require congressional approval of any positive regulatory budget.
00:14:09 Issuing regulations is not the only way agencies shape private sector conduct.
00:14:13 They also issue guidance documents which, though they lack the force and effect of law, can powerfully influence regulated parties.
00:14:19 Often, small businesses have trouble simply finding agency guidance, which historically has been housed on websites or even in filing cabinets scattered across the government.
00:14:28 The Guidance Out of Darkness, or GOOD Act, would ameliorate the difficulties with small businesses by requiring each agency to post its guidance on a single website.
00:14:36 Guidance not featured on an agency's guidance portal would be rescinded.
00:14:41 Finding guidance is not the only difficulty small businesses have.
00:14:45 Unlike more sophisticated competitors, they may not understand the difference between nonbinding guidance and binding regulations.
00:14:51 The Guidance Clarity Act would require agencies to provide a disclaimer explaining the nonbinding quality of guidance on the first page of each guidance document.
00:15:00 These are some of the measures that Congress could take to level the playing field and give small businesses the stable pro-growth environment they need.
00:15:07 Thank you.
00:15:08 [Mr. Gowdy] The gentleman yields back.
00:15:12 I now recognize Mr. Dan Goldbeck for his 5-minute opening remarks.
00:15:16 [Mr. Goldbeck] Chairman Williams, Congressman Davids, and members of the committee, thank you for the opportunity to discuss the economic impacts small businesses face from recent rulemakings and ways agencies can improve how they examine and adjust these rulemakings under the Regulatory Flexibility Act to provide some degree of regulatory relief.
00:15:33 The following is a summation of points made in my written testimony focusing on, one, the current overall regulatory environment;
00:15:39 two, rules that particularly affect small businesses; and, three, issues agencies should consider further under the RFA.
00:15:46 First, as of May 17th, the total estimated cost from final rules under the current administration adds up to more than $1.6 trillion.
00:15:54 For perspective, this sum exceeds the FY 2024 Federal budget deficit by more than $100 billion and is roughly equivalent to the GDP of Spain.
00:16:03 What's more is that a sizable portion of these costs have hit the books in only the past few weeks.
00:16:08 As of early April, the Biden regulatory cost total surpassed the total imposed on the entire first term of the Obama administration.
00:16:16 Then, largely due to a single rule, the EPA tailpipe emissions rule, with $870 billion in costs, the Biden total jumped well past the entirety of the Obama administration and into trillion-dollar territory.
00:16:28 Ensuing weeks have seen dozens of notable rulemakings that continue to push the total upward and upward at a rapid clip.
00:16:34 Second, in examining the costliest rules under the administration, I found 36 that contain some sort of partial acknowledgment of small business impacts.
00:16:42 The total of these rules adds up to approximately $235 billion.
00:16:46 The most significant rule here is the Fenton rule on beneficial ownership reporting requirements with more than $84 billion in costs.
00:16:55 Fenton states that for purposes of estimating costs to small businesses, all reporting companies are small businesses.
00:17:01 Thus, this rule is an example of regulation where small businesses bear the entirety of the cost burden.
00:17:06 Another key example is the recent rule from CMS setting staffing minimums for nursing homes.
00:17:13 CMS estimates that the costs involved with meeting these requirements will be more than $43 billion.
00:17:18 The agency admits that, quote, 95 percent of the health care entities impacted are considered small businesses.
00:17:24 But since the cost versus revenue ratio at roughly 2.3 percent is apparently just below the 3 percent threshold that CMS uses under the RFA,
00:17:33 the agency has declared that, quote, this final rule will not have a significant economic impact on a substantial number of small entities.
00:17:41 Third and finally, and I go into more detail on these in my written testimony, I believe these examples and others highlight the need for improvements to the RFA.
00:17:49 Agencies ought to consider cumulative impacts more.
00:17:54 For instance, the nursing home rule may not cross the RFA threshold on its own, but it is certainly not the only regulation these facilities must respond to.
00:18:01 Any given rule may be well-intentioned and defensible as a standalone measure, but in real-world practice, multiple rules begin to add up quickly,
00:18:08 especially if such new requirements all become effective within a relatively short time frame.
00:18:12 Agencies also need to further examine indirect costs to small businesses.
00:18:17 Take the EPA tailpipe rule.
00:18:19 It doesn't directly regulate small businesses, but given its magnitude, there are almost certainly downstream effects.
00:18:24 If it leads to material price increases on vehicles, which EPA's analysis suggests is possible on some level,
00:18:30 then they will have an impact on small businesses like construction companies that often have fleets of vehicles to manage.
00:18:37 Furthermore, agencies simply need to do better at implementing the RFA.
00:18:41 Last year, in my analysis of the Office of Advocacy's report on agency RFA compliance,
00:18:47 I found that agencies produced the lowest amount of small business savings in a decade.
00:18:52 This was despite high levels of rulemaking activity and high levels of advocacy input into those rulemakings.
00:18:59 The RFA has been around for more than 40 years across administrations and congresses of both parties,
00:19:04 serving as an important tool in helping to better craft regulations by accounting for the inherent asymmetries small businesses face
00:19:10 in complying with regulatory requirements versus large businesses.
00:19:14 Such adjustments are not exercises in wanton deregulation, but rather changes made at the margins,
00:19:19 providing targeted relief to the entities that need it most.
00:19:22 Now, in this current period of unprecedented regulatory activity overall,
00:19:25 it is even more important that agencies refocus and expand their efforts in addressing these concerns.
00:19:30 Thank you. I look forward to your questions.
00:19:32 [Mr. Lynch] The gentleman yields back.
00:19:33 I now recognize Mr. Rob Smith for 5-minute opening remarks.
00:19:38 [Mr. Smith] Chairman Williams, Congresswoman Davids, and members of the committee,
00:19:43 on behalf of the National Federation of Independent Business, NFIB,
00:19:47 thank you for inviting me to testify today about the impact of burdensome regulations on small businesses.
00:19:53 My name is Rob Smith, and I am a senior attorney with the NFIB Small Business Legal Center.
00:19:58 NFIB is the Nation's leading small business association, consisting of nearly 300,000 small business members.
00:20:05 NFIB's mission is to protect the right of its members to own, operate, and grow their businesses.
00:20:11 The average NFIB member has eight employees, and the majority of them have been in business for over 15 years.
00:20:18 In the words of President Biden, they are the heart and soul of our communities.
00:20:23 Small businesses employ almost half of this country's private sector workforce
00:20:28 and account for 99.9 percent of all American businesses.
00:20:32 Thus, for America to succeed, small businesses must succeed.
00:20:37 Helping small businesses is not a Republican or Democrat issue.
00:20:41 The Regulatory Flexibility Act demonstrates this bipartisan understanding.
00:20:46 Republicans and Democrats have joined together to recognize that one size fits all government regulations are ineffective and inefficient.
00:20:54 This was true over 40 years ago when Congress unanimously passed the RFA and President Carter signed it into law.
00:21:02 It was also true in 1996 when a Republican-led Congress updated the RFA and President Clinton signed it into law.
00:21:09 I hope that same bipartisanship holds true today.
00:21:13 The RFA was meant to address the disproportionate impact of Federal regulations on small businesses.
00:21:18 Unfortunately, many agencies have figured out how to bypass the law's requirements.
00:21:24 With my testimony today, I would like to address two points.
00:21:27 First, how the regulatory burden disproportionately harms small businesses.
00:21:31 And second, NFIB's work examining the RFA.
00:21:35 As discussed in my written statement, the regulatory burden on small businesses has drastically increased since the RFA was signed into law.
00:21:42 This burden is now one of the biggest obstacles to small business success.
00:21:46 NFIB members currently and historically have ranked unreasonable government regulations as a top 10, if not a top 5, problem in running their business.
00:21:56 According to one study, the total regulatory cost in 2022 exceeded $3 trillion, and businesses with less than 50 employees are paying over $50,000 a year per employee.
00:22:08 This current accumulation of regulations and regulatory costs is unsustainable for small businesses.
00:22:14 Moving to the RFA, in 2023, NFIB examined the RFA compliance during the 117th Congress.
00:22:21 We exclusively relied on SBA Office of Advocacy comment letters to determine if an agency complied.
00:22:27 Therefore, the determination did not come from NFIB, but from the administration itself.
00:22:32 This analysis revealed a few disturbing trends.
00:22:35 First, agencies routinely failed to comply with the RFA.
00:22:39 There were at least 28 instances of RFA noncompliance during the 117th Congress.
00:22:45 Second, certain agencies, such as the EPA and Department of Labor, are consistent violators.
00:22:51 Third, agencies often bypassed the RFA requirements by improperly using the Section 605(b) certification to skip the small business impact analyses.
00:23:02 Nearly half of the 28 instances of RFA noncompliance included an improper certification.
00:23:08 Two examples are the Waters of the United States rule and the Department of Labor's tip credit rule.
00:23:14 Finally, agencies misrepresent the cost of regulations on small businesses by ignoring the indirect costs of regulations and severely underestimating the direct costs.
00:23:25 Now, how can Congress fix this problem?
00:23:28 Congress should require that agencies consider both the direct and indirect costs of regulations on small businesses.
00:23:35 Many bills have sought to do this, including a 2007 Democrat-led bill that I highlighted in my written testimony.
00:23:42 This should be a starting point.
00:23:44 Additionally, Congress should strengthen the SBA Office of Advocacy's role in upholding the RFA.
00:23:51 The Bipartisan Prove-It Act of 2024 achieves both aims.
00:23:55 It has been approved by the Judiciary Committee, and I hope that this committee will do the same.
00:23:59 On behalf of NFIB's nearly 300,000 small business members, thank you for holding this hearing and inviting me to speak.
00:24:06 I look forward to our discussion.
00:24:08 [Chairman Issa]
00:24:09 I now recognize Mr. Todd Phillips for his 5-minute opening remarks.
00:24:13 [Mr. Phillips]
00:24:14 Chairman Williams, Ranking Member Davids, and members of the committee, thank you for the opportunity to testify.
00:24:19 I am Todd Phillips, Assistant Professor of Legal Studies at Georgia State University.
00:24:23 I previously served as an attorney advisor working on an administrative process in two Federal agencies
00:24:29 and as counsel with what was then the House Oversight and Government Reform Committee.
00:24:34 My research focuses include administrative law and the rulemaking process.
00:24:38 My testimony is my own and not of any organization.
00:24:41 The Administrative Procedure Act provides for notice and comment when agencies are writing regulations,
00:24:46 but for too long, agencies have primarily heard from large businesses that hire high-priced lobbyists
00:24:52 and have lacked important input from entrepreneurs and small businesses.
00:24:56 To address this disparity, President Biden signed Executive Order 14094, Modernizing Regulatory Review,
00:25:03 which requires agencies to engage in expanded outreach to ensure the meaningful participation of those affected by regulations,
00:25:10 including small businesses.
00:25:12 Simply ensuring small businesses' participation in rulemakings is insufficient, however,
00:25:16 and rules must be crafted to ensure that small businesses survive and thrive.
00:25:20 To that end, President Biden's OIRA updated Circular A4 to require agencies to strive to reduce small businesses' compliance burdens.
00:25:29 Moreover, a centerpiece of President Biden's regulatory agenda is to increase competition in all areas of the economy
00:25:35 so that small businesses can effectively compete in the marketplace against their larger competitors.
00:25:41 Unfair methods of competition prevent small businesses from hiring workers and obtaining fairly priced inputs,
00:25:47 from selling their goods and services or fairly advertising their products to the public,
00:25:52 and from contributing to a growing economy.
00:25:55 Among the administration's many efforts are updated bank merger guidelines to ensure continued lending to small businesses,
00:26:01 lawsuits against Amazon and Apple for unfairly favoring their own products over small business competitors,
00:26:07 regulations that prohibit pay-for-play internet fast lanes and non-compete agreements,
00:26:12 and actions to tackle junk fees that tilt the playing field against honest businesses that are transparent with their customers
00:26:18 and towards their larger competitors that profit by hiding the ball from consumers, leading to a race to the bottom.
00:26:24 I am concerned that two bills the Committee is considering would, if enacted, halt these efforts by unnecessarily slowing down the regulatory process
00:26:32 without providing corresponding benefits to small businesses.
00:26:36 The PROVE IT Act would unnecessarily lengthen the rulemaking process, permit unnecessary litigation,
00:26:42 and delay rules' effectiveness without consideration for the benefits small businesses receive from regulation.
00:26:48 I oppose this bill for many reasons that I articulate in my written testimony,
00:26:51 but among them are that the Act would allow litigation over initial regulatory flexibility analyses for the first time,
00:26:58 ignore long-held principles of standing to allow large companies to launder their complaints under the guise of promoting small businesses,
00:27:05 and give courts broad latitude to retroactively impose analysis requirements on agencies that they cannot possibly anticipate.
00:27:12 In addition, the PROVE IT Act's penalty for failing to conduct retrospective reviews,
00:27:17 prohibiting rules from being enforced against any business, not just small businesses, is unnecessarily severe.
00:27:23 Next, the Regulatory Transparency for Small Businesses Act would impose costs on agencies without any corresponding benefit for small businesses.
00:27:32 Again, I oppose this bill for reasons that I articulate in my written testimony,
00:27:36 including that it is simply a solution in search of a problem.
00:27:40 The Regulatory Flexibility Act currently requires agencies to provide a factual basis
00:27:45 for certifying that their rules will not have a significant economic impact on a substantial number of small entities
00:27:51 and subjects those factual bases to judicial review.
00:27:54 Agencies must already demonstrate that they were not arbitrary or capricious.
00:27:58 Imposing new requirements on those analyses would simply provide no benefit.
00:28:03 Contrary to those two bills, the Committee is considering the Small Business Regulatory Relief Act,
00:28:08 legislation that would benefit small businesses.
00:28:11 This bill would provide the Small Business Administration's National Ombudsman
00:28:15 new authority to assist Federal agencies with better helping small businesses,
00:28:19 making government work more effectively and efficiently.
00:28:22 Today, the Ombudsman's role is to assist small businesses when they are being investigated
00:28:27 or are the subject of compliance or enforcement activities,
00:28:30 and the Small Business Regulatory Relief Act would expand the authority of the Ombudsman
00:28:35 to work with small businesses before they get into trouble,
00:28:38 helping small businesses avoid being the subject of investigations or enforcement actions in the first place.
00:28:43 I wish to make one final point.
00:28:45 Consideration of regulations' costs must include corresponding considerations of their benefits.
00:28:50 The American Action Forum's assertions that the Biden Administration has finalized 930 rules
00:28:55 imposing combined costs of $1.63 trillion tells you nothing about the sensibility of those regulations
00:29:01 as their analyses lack a similar quantification of regulatory benefits.
00:29:05 Yet in a single rule, the EPA has finalized a policy that provides quantified benefits
00:29:10 of between $1.7 and $2.1 trillion, far in excess of the total cost AAF has claimed for all Biden Administration rules.
00:29:17 Thank you, and I am happy to answer any questions.
00:29:19 [Mr. Lankford] The gentleman yields back.
00:29:20 I now move to the member questions under the 5-minute rule.
00:29:23 [Mr. Lankford] I recognize myself for 5 minutes.
00:29:25 Main Street's concerns should revolve around meeting payroll, supporting their employees, and growing their businesses.
00:29:30 Unfortunately, like you all have highlighted today, America's small business must spend valuable time
00:29:37 and resources complying with regulations meant to their slow success.
00:29:41 Over the last 15 months, the committee has been sending information requests to agencies on rules they put out,
00:29:48 and we have often found that if an economic analysis took place, it would often fail to take into account
00:29:53 the cumulative effect of their regulations coming out of Washington.
00:29:57 So, Mr. Wray, given your past experience working on regulations in the Trump Administration,
00:30:01 how would you recommend that we ensure agencies don't only view their actions in a vacuum
00:30:07 and turn a blind eye to the other regulations harming small businesses?
00:30:11 [Mr. Wray] Mr. Chairman, thank you for the question.
00:30:13 I think absolutely essential to remedying this problem, which you highlight and which is indeed a very grave problem,
00:30:19 would be some sort of regulatory budget.
00:30:22 The budget should apply both at the level of individual agencies and at the level of the Federal Government as a whole.
00:30:29 Any given family who is trying to make ends meet has to think about all their expenses put together.
00:30:36 Only Federal agencies are able to think just about the costs that they are imposing,
00:30:40 in particular rulemakings or, in the best case scenario, in a suite of rulemakings.
00:30:44 Federal agencies and the Federal regulatory system as a whole should have to play by the same rules
00:30:48 that American families do when they engage in a holistic budgeting exercise.
00:30:55 [Mr. Gowdy] Mr. Goldbeck, the numbers you state in your testimony are jarring
00:30:58 and make it blatantly clear that the Biden Administration is pushing an agenda out of line
00:31:02 with the best interests of America's job creators.
00:31:04 You highlight how some rules are hard to quantify, are just below the RFA threshold
00:31:10 and thus do not require an analysis to be done, despite having a clear impact on small business.
00:31:15 So my question is, what changes can be made to make agencies be more accurate in their assessment of a rule's impact?
00:31:23 [Mr. Goldbeck] Thank you, Mr. Chairman.
00:31:25 One aspect I think that I get into my written testimony on with that is that, particularly the rule I cite,
00:31:30 you have the 3 percent threshold that has just kind of become standard practice for CMS in this case.
00:31:36 But you have across agencies different thresholds for this cost-to-revenue ratio,
00:31:42 and part of that is to be flexible for different industries having different profit margins and everything.
00:31:48 But I think it is important to reexamine those ratios to see if they are truly accurate.
00:31:53 It seems like they have kind of settled into a basic practice rather than really come up with a solid estimate there.
00:31:59 [Mr. Gowdy] How much a business owner can do once a regulation has gone final?
00:32:07 They have already spent the time and resources to understand the regulation, how they plan on complying.
00:32:12 And while some things can be undone in future administrations, the whipsaw back and forth is not beneficial for small business.
00:32:18 So this is why it is so important to get the appropriate safeguards in place to protect small business on the front end.
00:32:24 So, Mr. Smith, time we have left. Both NFIB's and this Committee's investigations found that agencies treat the RFA like a check-the-box exercise
00:32:33 rather than a way to protect small businesses from the worst regulations coming from D.C.
00:32:38 It is my sincere hope that members on this Committee can come together to find the bipartisan solutions to address the shortcomings of the RFA.
00:32:45 So what do you believe are the first steps Congress should take in reforming the RFA and ensuring it works for small businesses like it is intended?
00:32:55 [Mr. Smith] Thank you, Chairman, for the question. I think there are a couple of steps that I would recommend.
00:33:00 First, agencies must be forced to consider the indirect costs of the regulations on small businesses.
00:33:07 To allude to a point that Mr. Ray mentioned, when the normal person thinks of what they are spending, they are thinking of direct costs and indirect costs.
00:33:18 They are thinking of the whole picture. Without thinking of indirect costs, which is the current environment, you are only looking at half the picture.
00:33:25 And small businesses oftentimes are hurt worse by the indirect costs than the direct costs.
00:33:31 I could cite a multitude of rules for this point. The Waters of the United States rule, where EPA claimed it wasn't even regulating businesses,
00:33:39 but businesses that own land would obviously be subject to that rule.
00:33:44 And there are other rules as well, such as interchange fee rules from the Federal Reserve.
00:33:51 Anything that can harm a small business needs to be taken into account.
00:33:54 Second, very important, that I am sure your report probably touches on, that ours found as well,
00:34:00 the certification is being abused. The 605(b) certification, agencies are abusing that to try and get out of having to perform the small business impact analyses that the RFA requires.
00:34:12 I am not going to say they are doing it in bad faith, but it appears, based on what we have looked at, that they are just trying to check the box,
00:34:21 and whenever they can, they are ignoring their requirements. And the certification is the way that they can do that.
00:34:28 So those would be the two things I would recommend.
00:34:31 Thank you. And now I yield my time to Ms. Davis for her questions.
00:34:36 Thank you, Chairman. And thank you again to all of our witnesses for being here to testify and share your recommendations and expertise.
00:34:46 I want to check in real quick on something.
00:34:49 Yesterday afternoon, I know the committee majority uploaded eight regulatory reform bills ranging from like two to seven pages to the committee's repository.
00:35:00 I am just curious for each witness, can you tell me when you received a copy of the bills that were made available on the committee repository yesterday?
00:35:14 I cannot.
00:35:16 Okay.
00:35:18 I haven't received.
00:35:22 I don't know what bills you are referring to.
00:35:25 I only saw them yesterday afternoon when they were posted online.
00:35:28 Oh, okay. Okay. Just thank you, checking in on that.
00:35:34 I appreciate the chance for us to get to talk about regulatory burdens and what can sometimes be onerous for small business owners, for sure.
00:35:46 But regulations can also be an important tool to improve our nation's air and water to ensure that food and medicines are safe and effective and make sure that consumer products are not harmful.
00:35:58 The Small Business Committee plays an important role in ensuring that federal guidance doesn't burden small businesses, but allows them to thrive and compete with -- certainly with major corporations.
00:36:10 And a key part of that is the Regulatory Flexibility Act.
00:36:13 And for the last several decades, this law has required federal agencies to consider their effects on entrepreneurs.
00:36:20 It's also given small businesses nationwide additional opportunities to hopefully participate in the rulemaking process, including small business advocacy review panels for certain agencies.
00:36:32 Mr. Phillips, I was curious in your opinion, can you tell us a bit about what might be working well with the Regulatory Flexibility Act and what might not be?
00:36:44 What do we need to do to improve some of the process for our small businesses out there?
00:36:49 Yeah. So one of the things to remember is that the Regulatory Flexibility Act was created, was enacted to allow small businesses to really participate in the rulemaking process.
00:37:01 And to that end, they have been able to do so. They've been able to do so effectively.
00:37:07 The SBREFA panels do allow small businesses to participate.
00:37:13 They allow the initial and final regulatory flexibility analyses, allow small businesses information that helps them provide effective comments to the agencies.
00:37:26 I'm especially proud that this administration has really increased its effort to go out into the country to solicit the opinions of small businesses.
00:37:37 I think that one of the things that could be improved here is really helping small businesses end up complying with the regulations once they have been enacted.
00:37:51 To that end, that is why I appreciate the Small Business Regulatory Relief Act, because it would allow the SBA's ombudsman to help small businesses figure out how to comply with these regulations that do, yes, impose costs, but also do provide benefits to them.
00:38:11 So that's my recommendation.
00:38:14 And can you maybe talk a little bit more about what are some of the specifics?
00:38:22 You said that, in your opinion, the current administration is doing a bit more outreach to try to engage.
00:38:32 I know we heard, I believe Mr. Smith mentioned, you know, inviting people to join is not the same thing as actively taking the thoughts, opinions, and impacts of our small business owners.
00:38:49 Can you talk a little bit about what are some of the specific things you're seeing that you think constitute improvement?
00:38:56 Yeah, so the president signed the executive order on modernizing regulatory review that I spoke about.
00:39:05 His OIRA has implemented, has issued guidance on broadening public participation and community engagement in the rulemaking process.
00:39:16 The Administrative Conference of the United States under President Biden has released a collection of 16 principles for ensuring public engagement.
00:39:23 And many of these things that they encourage agencies to do or are requiring agencies to do is hosting Internet and social media forums, using focus groups, using advisory committees, holding public meetings, hearings, listening sessions out in the country, stuff like that.
00:39:41 Okay. Well, thank you so much.
00:39:43 And I know entrepreneurs nationwide don't always have time to give feedback to the SBA, but I yield back.
00:39:52 He yields your time back.
00:39:54 I now recognize Congressman Lueckemeyer from the great state of Missouri for five minutes.
00:39:57 Thank you, Mr. Chairman.
00:39:59 I'd like to sort of set the stage for my discussion this morning.
00:40:03 Here's the Wall Street Journal from today.
00:40:05 On the second page, we find a headline that says "Survey Finds Parents Suffer Financially."
00:40:11 In the article, it says that the parents living with children under the age of 18 said they were doing all right financially in 2023.
00:40:17 That number is down 5 percent from 2022.
00:40:21 And more than a third of the survey respondents, including the parents or people who did not have children, cited inflation as their biggest financial challenge.
00:40:28 So what are we talking about this morning?
00:40:30 We're talking about rules and regulations and the cost of complying with that.
00:40:34 And, Mr. Goldbeck, your colleague at the American Action Forum, Mr. Holtz-Eakin, was here a while back, about a year ago, and indicated to us that one of the four main drivers of inflation are rules and regulations.
00:40:47 So that's what we're talking about today.
00:40:49 The impact of rules and regulations and the increased cost, number one, on causing inflation, and number two, the cost of complying with that with the small businesses itself.
00:40:59 So one of the things that we're talking about here, I've got a bill, the Regulatory Transparency Small Business Act, which Mr. Phillips doesn't seem to like.
00:41:10 It's a great bill from the standpoint that what it does is it requires agencies to include information that a rule will not have a significant economic impact on a sustainable number of small businesses,
00:41:18 and its certification process that it will estimate the total cost of compliance per small entity affected by the measure.
00:41:26 Mr. Goldbeck, what do you think about that rule, or that bill?
00:41:31 I think any sort of legislation that helps to strengthen the process of determining a significant impact on small businesses is welcome.
00:41:42 I think there's clear evidence from both office advocacy and some of my panel mates here that agencies are not meaningfully responding to these requirements.
00:41:51 We talked a little bit about the cost of these things.
00:41:53 I think a cost-benefit analysis to show what the benefit is versus the cost of it.
00:42:00 This is why every single rule needs to be looked at very carefully.
00:42:03 They may think it's okay, but the overall cost indicates it's going to cost more than the benefit.
00:42:08 It may be well-intentioned, but the cost is going to override the actual benefit of what you're trying to do here.
00:42:12 This is why it's important that you have these cost-benefit analysis done on every single rule.
00:42:17 Now, we talked about thresholds a little bit of how it is implemented.
00:42:20 I don't think we need to have a threshold on any of these things when it comes to cost-benefit rules.
00:42:25 They need to have every single rule have a cost-benefit analysis on it.
00:42:28 What do you think about that, Mr. Smith?
00:42:31 I would agree, Congressman.
00:42:34 Agencies should be forced to consider all costs along with benefits of each rule that's engaged in it.
00:42:38 Yeah, I think that's a fair way to go about it.
00:42:40 If a rule is worthwhile, let's have it.
00:42:41 If it's not, get it pitched or change it to where it's not going to cost more than the benefits of it.
00:42:47 Mr. Goldbeck, you talked about regulations being one of the biggest problems of small businesses here,
00:42:53 and the agency is not complying with the RFA.
00:42:58 How do we enforce the RFA?
00:43:01 How do we enforce the rules of regulations, the situation we're talking about this morning here,
00:43:05 of forcing them to do their job of estimating costs?
00:43:10 So, yes, Congressman, in my testimony I talked about the most recent Office of Advocacy report on RFA compliance,
00:43:18 and what I found when I looked at it compared to past reports,
00:43:22 the agencies came up with only about $73 million in savings,
00:43:26 which was far lower than any year in the decade preceding it.
00:43:30 In the preceding decade, I think it averaged about $1.7 billion in small business savings per year
00:43:37 from Office of Advocacy input to agencies,
00:43:42 and so I think that that shows a clear pattern that agencies are not meaningfully responding to this input
00:43:48 and not making the necessary adjustments to these rules,
00:43:51 even though you keep seeing more and more rules come across the transit.
00:43:54 Mr. Olsiken testified last year when he was here that this administration is costing about $150 billion per year
00:44:00 to businesses in new regulations that they're putting out,
00:44:04 and now the estimate is for the first four months of this year $1 trillion in costs,
00:44:08 and I think all of you alluded to that number.
00:44:10 That is staggering, absolutely staggering, especially when you figure that it's got to go to --
00:44:14 you know, regulations are like a tax increase.
00:44:16 It takes money out of the system so businesses have less money to spend on employees, research, expansion,
00:44:22 whatever it may be, and as a result, it's very, very anti-economic.
00:44:27 It actually harms -- and that's a case that's not usually taken into consideration.
00:44:31 Is that right, Mr. Smith?
00:44:34 That's correct.
00:44:35 I actually spoke to a member of ours earlier this month who said she spends half of each day on regulatory compliance.
00:44:44 That's not making her any money, is it?
00:44:47 No, sir, it is not.
00:44:48 Well, thank all of you for being here this morning.
00:44:50 My time is about to expire.
00:44:51 I yield back to the chairman.
00:44:53 Jim O'Neill is back.
00:44:55 I now recognize Representative McGarvey from the great State of Kentucky for five minutes.
00:44:59 Thank you, Mr. Chairman.
00:45:00 I appreciate everyone being here today.
00:45:03 I will say this is our fifth hearing so far since we've been on this committee that is focused on what we call burdensome regulations.
00:45:12 And before I got to Congress, I was an attorney and part of my practice was representing small businesses.
00:45:18 I've seen rules and regulations that can be burdensome for small businesses.
00:45:22 I've also seen rules and regulations that have helped small businesses in my hometown of Louisville, Kentucky.
00:45:29 And so I think just like anything, when we talk about it, maybe it's the lawyer in me.
00:45:35 We're freaked out by words like "never" and "always."
00:45:38 But, you know, you can't say that all regulations are good.
00:45:41 You cannot say that all regulations are bad.
00:45:45 And it's finding some balance here.
00:45:48 So, like, I'll give you an example of some things we've talked about in this.
00:45:51 Last week we talked about -- we had Administrator Frost here.
00:45:55 We had a constructive discussion about lending to small businesses, how we get more capital in the hands of small businesses.
00:46:02 And, of course, I've heard people here talk today about making money.
00:46:05 Mr. Lueckenmeier just talked about businesses making money.
00:46:08 So let's talk about small businesses making money and how we can do that through this committee and through rules and regulations.
00:46:15 Each federal agency is required -- required, of course, by a rule or regulation to have a small business contracting goal of 23%.
00:46:26 And agencies must cover each of the subcategory goals, like women-owned businesses, service-disabled, veteran-owned small businesses, HUBZones.
00:46:34 Guess what the impact is?
00:46:37 The impact of this rule and regulation is that the federal government awarded 26.5% of federal contract dollars to small businesses.
00:46:45 26.5% -- that's nearly a quarter of contracting.
00:46:49 It might not seem like a lot, but it's $162.9 billion that are going to our small businesses.
00:46:57 So in the interest of that sort of spirit of balance, and we're talking about rules and regulations,
00:47:02 I want to know a little bit, too, about what happens if we deregulate some of these things.
00:47:08 So, Mr. Phillips, are there costs of deregulation that are borne by small businesses and their employers?
00:47:17 Absolutely.
00:47:19 Every regulation has some costs and also has benefits.
00:47:23 When you roll back regulations that businesses have already been complying with, rolling that back places additional burdens on them.
00:47:33 They need to understand what the new requirements are.
00:47:36 And this flip-flopping is just very, very difficult for businesses.
00:47:42 It imposes significant costs.
00:47:45 And I think all of us on this committee would agree small businesses make up the backbone of our economy.
00:47:50 They're a very wonderful part of the fabric of my community in Louisville.
00:47:54 And, of course, we do hear complaints from small businesses and things that they have to deal with.
00:47:59 One of the complaints I hear, and my guess is that many other members of this committee hear the same thing,
00:48:03 is that they don't like the inconsistency.
00:48:06 And so would you say that setting those regulations or rolling them back every election cycle is something that is confusing, good or bad for small business owners?
00:48:18 No, it's definitely bad.
00:48:20 Small businesses, just like all businesses, need consistency.
00:48:24 And when there is consistent -- when there is flip-flopping, rolling back and putting in place new regulations, it imposes costs on everyone.
00:48:35 One of my issue areas is banking and financial regulation, and small banks really, really, really dislike when a new administration comes in and starts rolling back everything.
00:48:48 They need to update their software.
00:48:50 They need to get new software.
00:48:52 It is just very burdensome to comply with that.
00:48:55 And, you know, I like that we're here talking about the RFA.
00:48:59 The RFA put in place in 1980 was meant to say what are the impacts of these on our small businesses.
00:49:05 But rather than just attacking the RFA, I would like to see us come together to show that commitment to our small businesses of America,
00:49:14 to set these regulations where we want them, where our small businesses can have them in a consistent manner that is good and is fair.
00:49:22 And I worry sometimes with hearings like this that we get focused more on the theater and not actually what's going to impact and help our small businesses.
00:49:31 So there have been some claims that the Office of Advocacy has found that the Biden administration frequently violates the RFA.
00:49:40 Mr. Phillips, do you see -- do you agree with that assessment?
00:49:45 Do you agree that these are truly violations, or are there more policy disagreements?
00:49:48 No. The Office of Advocacy is not an adjudicator.
00:49:52 They are not a court.
00:49:54 What they do is they provide comments to the agencies during the rulemaking process.
00:49:59 Their role is to ensure that the participation of small businesses occurs.
00:50:04 And even when Major Clark was last here on the committee, he made clear that these were comment letters and not adjudications.
00:50:11 Thank you, Mr. Chairman. I yield back.
00:50:13 [Mr. Lankford] The gentleman yields back. I now recognize Representative Stauber from the great State of Minnesota for five minutes.
00:50:18 [Mr. Stauber] Thank you, Mr. Chair and Ranking Member, for holding this hearing today.
00:50:23 This past Congress, we've held many hearings examining the regulatory burdens placed on American small businesses by this administration.
00:50:31 Across 17 different agencies, the rulemaking process has grown out of control and has restricted growth on Main Street America.
00:50:39 This committee has had the opportunity to hear directly from small business owners, many of whom feel the Federal Government is not listening to their concerns.
00:50:47 I've been on this small business committee since five and a half years, and not one small business owner, not one, said we need more regulations.
00:50:57 Not one raised their hand and said, please, please, Government, put more regulations on us. Not one.
00:51:05 I'd like to ask unanimous consent to enter into the regular letter from U.S. Chamber of Commerce, Mr. Chair.
00:51:11 In this letter, Tracy Tappany, the co-president of Wyoming Machine, outlines her concerns over costly and restricted Federal regulations and the lack of transparency in the rulemaking process.
00:51:22 She also points to the loopholes in the Regulatory Flexibility Act, the RFA.
00:51:27 The RFA requires agencies to consider the impact of their rules on small businesses, but agencies often do not properly consider the cost.
00:51:37 Mr. Wray, to what extent does the current RFA achieve its goal of reducing burdens on small businesses in Federal rulemaking?
00:51:46 Thank you for the question, Mr. Stauber. I would say the Reg Flex Act, while tremendously well intended and beneficial as far as it goes, is generally ineffective at driving down costs for small businesses.
00:52:00 We can talk about a few ways in which it's ineffective.
00:52:02 One provision to which I'd like to draw the committee's attention that has not come up so far is Section 610 of the RFA, which requires retrospective review of certain rulemakings.
00:52:10 Retrospective review is widely acknowledged within the regulatory community as one of the principal and most effective ways to update for real-world changes to regulations and allow for more sensible and cost-effective compliance, including especially by small entities.
00:52:26 Section 610 reviews are notoriously ineffective at actually driving regulatory change.
00:52:32 I know that small businesses under the Biden administration, the small businesses are struggling.
00:52:37 In this letter that I put forward for small businesses with 50 or fewer employees, in the cost in the manufacturing sector, small manufacturers incur costs of $34,671 per employee per year.
00:52:57 $34,671 per employee per year.
00:53:02 You've got to be kidding me.
00:53:04 This is the regulations that are put on our manufacturing and small business.
00:53:08 Nobody's going to convince me that that's good for that small business.
00:53:13 Mr. Goldbach, how does the economic impact of regulations issued by the Biden administration compare to previous administrations?
00:53:22 Congressman, to date, the total costs accumulated by agencies under the current administration is more than five times that of the Obama administration's total at this point in time.
00:53:35 More than five times?
00:53:37 The Biden administration's rule and regs have put forth five times the amount than the Obama administration.
00:53:43 To this point in their administration.
00:53:45 To this point, right.
00:53:46 I mean, you've got -- I mean, can you -- the small businesses in our country are being crushed by this administration.
00:53:54 Having been a small business owner for 31 years, every single rule or regulation costs money.
00:54:01 Every single rule or regulation costs money.
00:54:03 Go ahead.
00:54:04 You wanted to comment.
00:54:06 Yeah, I think it's important to note just the magnitude and how even if these rules aren't necessarily applicable to the RFA in their current form, however that may be, just the magnitude has to have downstream effects and it goes through the entire economy, basically.
00:54:23 Yeah, to the -- exactly.
00:54:27 I think we talked about Representative Finstead's bill, H.R. 7198, that this can help strengthen the RFA to avoid agency evasions by allowing small businesses to directly challenge an agency's certification and by requiring agencies to be fully transparent about how regulations will impact the small business community.
00:54:47 I will just tell you that three of the four I agree with you here on the panel.
00:54:55 What's happening, the punishment that this administration is putting forth on our small businesses is devastating to our local economy and our local communities.
00:55:04 Our small businesses are the engine of our economy.
00:55:07 And when you have them being attacked on a daily basis because of rules and regulations, we're going to find ourselves as a country in deep trouble and these entrepreneurs that want to get involved with the American dream and own their own home and company are going to find out it's very difficult.
00:55:23 We cannot continue down this path.
00:55:26 And I yield back.
00:55:28 The gentleman yields back.
00:55:30 I now recognize Representative Glusenkamp-Perez from the great State of Washington for five minutes.
00:55:35 Thank you, Chairman.
00:55:36 Thank you, Ranking Member.
00:55:37 And thank you to the witnesses for being here today.
00:55:39 Mr. Phillips, I'm interested in exploring which kinds of small businesses are considered when agencies are addressing the potential impacts of any given regulation on small businesses through the Regulatory Flexibility Act process.
00:55:52 Earlier this Congress I spoke with Mr. Frank Knapp, a small business owner, about how agencies should do a better job of reaching out to small businesses across the country and not just those with Washington-based trade associations.
00:56:07 So in your opinion, how are agencies doing now in making sure that they are getting feedback from a representative sample of businesses, like mom and pop, not just people with hundreds of employees and, you know, groups with, you know, trade associations?
00:56:26 Yeah.
00:56:27 This administration has done very well with that.
00:56:30 As I said in my opening testimony, the President has signed an executive order effectively requiring agencies to go out into the country and solicit information from small businesses.
00:56:43 If you look at the Federal Trade Commission's recent regulation on non-competes, there are pages and pages and pages of testimony from small businesses talking about how they have been harmed by non-compete agreements.
00:56:57 This administration is doing a, I think, a very effective job at reaching out to small businesses rather than simply relying on D.C.-based trade associations that generally can speak for the largest of companies.
00:57:14 What do you think that Congress should do to conduct more engagement and outreach throughout the country to make sure that we really are reaching small businesses in the rulemaking process?
00:57:24 I think that what this administration is doing by really requiring agencies to go out is very effective to the extent that Congress does want to legislate something.
00:57:37 Congress could legislate that kind of outreach, could legislate hosting forums and focus groups and things like that.
00:57:48 That being said, one thing I'm very concerned about generally is agencies try very, very hard to comply with the law, but we have seen that there are courts who are willing to overturn months and months and months of work on the part of agencies for failing to comply with just one de minimis part of a statute.
00:58:08 I'm really cautious about Congress allowing judicial review over failing to perhaps do one of those small things.
00:58:18 When Mr. Frank was here, he said it would be helpful for agencies to project costs for different size small businesses.
00:58:27 In your view, would that work? How could it work?
00:58:30 I think one of the problems with the RFA today is that the term small business can apply to firms that have tens of millions of dollars in revenue and a thousand or more employees.
00:58:46 I think one of the purposes of the RFA really was to ensure the participation of the smallest of the small businesses.
00:58:55 To the extent that Congress wanted to really focus agencies' attention on those smallest of the small, the businesses that have eight, ten employees, I think that would be absolutely appropriate.
00:59:07 You also talk in your testimony about excessive market concentration and how unfair methods of competition hurt small businesses.
00:59:15 What do you think should be done to help level the playing field?
00:59:19 I think that what this administration is doing is very effective.
00:59:25 Bringing lawsuits to enforce the antitrust laws is absolutely appropriate.
00:59:29 Issuing regulations to prohibit junk fees to ensure competition is very important.
00:59:39 I would want to see the administration just keep on doing that work.
00:59:43 Thank you to all of our witnesses for being here. I yield back.
00:59:46 [Mr. Lankford] The lady yields back. I now recognize Representative Muser from the great State of Pennsylvania for five minutes.
00:59:52 [Mr. Muser] Thank you, Mr. Chairman. Thank you to our witnesses.
00:59:55 Perhaps the largest burden facing small businesses are regulations.
01:00:00 I think if anyone spends any time with local chambers, as I do, walks the streets of Main Street, visits with small businesses, retailers, manufacturers, distributors,
01:00:12 I think that they would learn pretty fast, and if they had an open mind and didn't think they knew better than the small business that's been there for two years, five years, ten years, twenty years,
01:00:25 in our government, that they would realize that taxes, excessive taxes, are not a good thing for small business.
01:00:33 Competitive tax rates, there are taxes that have to be paid, but excessive taxes like eliminating the so-called Tax Cut and Jobs Act that was for the rich,
01:00:45 let's face it, every small business in America benefited by it and continues to benefit by it, and if we eliminate it, we're going to add burdens to them.
01:00:53 But still, the regs are that much more significant. This inflation that we call by dynamics and we call greedflation and all this utter nonsense that's being spewed by the left regarding our economy,
01:01:08 the assault on American energy, the inflation is hurting really three groups, small business, those on fixed income, which tend to be elderly, and low to middle income families.
01:01:22 That's what gets hurt primarily by it. Meanwhile, we have an SBA that is focused on registering voters in the state of Michigan.
01:01:30 Okay, so it's not really within their scope, and it's a real problem to this committee. The SBA leadership, I should clarify.
01:01:41 So Mr. Wray, the general state of small business, right now small business, by the way, tax revenues are way down, I mean like tens of billions, hundreds of billions of dollars,
01:01:53 and the reason for that is because their profitability is down, so therefore there's less tax revenues to pay for all the things that our government pays for.
01:02:02 What do you think is the general state of small business right now?
01:02:05 Congressman, as far as I can tell, it's pretty dire facing the onslaught of regulations. I remember when I was serving at OIRA, speaking with a member,
01:02:14 a leader of the small business community, and asking what regulation was most helpful for your business and those of others to thrive,
01:02:21 and he said, well, it wasn't any one regulation. It was just having certainty in the regulatory environment,
01:02:24 just knowing that we're not going to get buried under new regulations every few months.
01:02:27 Exactly. I hear the same thing. Rules over ideology, which is the vagueness that they get hit with.
01:02:33 Mr. Goldblock, the regs of the $1.6 trillion, could you try to get us a list of those?
01:02:42 I mean, do they include the beneficiary ownership rule, the CFBPs, 1071s, the climate rule, Basel III, which isn't in effect yet, but go ahead, please.
01:02:54 So, yes, Congressman, the number I ascribed is basically I go through and catalog all regulations that have some sort of quantified cost or paperwork estimate,
01:03:03 and we have that available on our website, and I can provide for the details and all that.
01:03:06 I would love to get that. Thanks.
01:03:07 Mr. Smith, you represent NFIB, how many members, your organization, small business members?
01:03:13 Almost 300,000.
01:03:14 Over 300,000. What do you think that group would say to Mr. Phillips here, assertion that regs actually help these small businesses create a stronger economic climate for them,
01:03:27 and in the end, somehow raise money for they as well as the economy? What do you think your members would say to that?
01:03:35 Thank you, Congressman. I don't have to say what I think, because I know I've talked to the members,
01:03:40 and I could not even begin to count how many members have told me what I'm about to tell you.
01:03:45 The number one thing I hear from members on this issue is, do people in Washington not know what it takes to run a small business?
01:03:52 Do they not know the impact of these regulations on me running my business?
01:03:56 So, to Mr. Phillips' point, I do not believe they would agree with him. I know they would not.
01:04:01 Mr. Phillips, do you spend any time running a small business?
01:04:04 I currently run a small consulting firm.
01:04:06 You do?
01:04:07 I do.
01:04:08 Okay. I'd like to take a look at that, because it doesn't show up, and you have a pretty extensive background, but you don't include that.
01:04:15 It's in my written testimony, sir.
01:04:18 I see. Okay. That's great.
01:04:20 So, let me ask you guys, as you've witnessed this.
01:04:25 Wouldn't it be great if our SBA, rather than trying to register primarily those who benefit their party in Michigan,
01:04:32 maybe we joined in a group where we went line by line and did everything we could to weigh the pros and cons of these massive regulations?
01:04:43 Of course, it would take a long time.
01:04:45 And line item them out along the way, and then have the SBA present such a report to this committee?
01:04:52 What do you think about that?
01:04:55 I certainly support that, sir.
01:04:57 Okay. With that, Mr. Chairman, I yield back.
01:05:00 [Mr. Gowdy] The gentleman yields back.
01:05:02 I now recognize Representative Tanidar from the great State of Michigan for five minutes.
01:05:06 [Mr. Tanidar] Thank you, Chair. Thank you, Ranking Member, for this hearing.
01:05:10 And I thank all of our witnesses here.
01:05:13 I ran technology small business for over 25 years, so I understand the struggles small businesses have in coping with,
01:05:25 understanding the regulations and complying with.
01:05:28 My question to you, Professor Phillips, is in your testimony you mentioned that many small businesses simply need help understanding
01:05:37 what the law expects of them from a regulatory compliance standpoint.
01:05:44 The Small Business Regulatory Relief Act that I and many of my Democratic colleagues co-sponsored
01:05:52 would allow the SBA to establish programs that would help small business comply with Federal regulations.
01:06:00 How large of an impact would the Small Business Regulatory Relief Act would have on small businesses seeking assistance
01:06:09 to meet regulatory requirements?
01:06:13 Congressman, I think it would be huge.
01:06:16 The RFA currently requires small business guides to help small businesses comply with regulatory requirements,
01:06:24 and that is an excellent first start.
01:06:27 However, this bill that you co-sponsored would allow SBA's ombudsman to really work with small businesses
01:06:36 to help them understand what is happening.
01:06:39 It would give them a point of contact with SBA and with the regulatory agencies to help them understand how to effectively comply with the law.
01:06:51 As I said, small businesses want to comply with the rules of the road.
01:06:56 They want to do the right thing, and Congress and the agencies need to give them the resources to help them with that.
01:07:05 Thank you, Professor. And today, the SBA can help small businesses when they experience Federal regulatory enforcement actions.
01:07:15 How often does the SBA assist small businesses when they are subject of investigations?
01:07:23 And how would the Small Business Regulatory Relief Act further help small businesses thrive in the United States?
01:07:31 Sure. I don't have exact numbers, but I will tell you.
01:07:35 The national ombudsman statue right now allows them to -- the ombudsman serves as a point of contact for small businesses
01:07:45 that will help facilitate communication between them and regulatory agencies.
01:07:51 And I think that is an excellent service that they provide.
01:07:55 However, it's just insufficient.
01:07:57 We need to help small businesses before they become the subject of investigations or enforcement actions.
01:08:03 We need to help them, again, comply with the law, figure out how to comply with the law,
01:08:08 so that they don't end up on the other side of the table in the first place.
01:08:13 Makes sense. Yeah.
01:08:14 Professor Phillips, you also mentioned that the Biden administration has focused much of its efforts on promoting transparency
01:08:22 to ensure that small businesses with upfront pricing can compete fairly by eliminating hidden fees and junk fees,
01:08:32 which attempt to conceal the true cost.
01:08:35 As a result, the Consumer Financial Protection Bureau, the Federal Trade Commission,
01:08:42 and the Department of Transportation have all acted to ensure small businesses can fairly compete
01:08:49 and to protect consumers from deceiving prices.
01:08:54 Can you explain how the Biden administration's push for transparency has benefited consumers and small businesses?
01:09:01 Absolutely. I think everyone in this room can appreciate the experience of going online and searching for a plane ticket
01:09:10 or a concert ticket or something like that.
01:09:13 As soon as you check out, you are hit with fees that are double the price.
01:09:20 We all hate that. Everyone hates that experience.
01:09:24 What the administration is doing is they are making this pricing transparent so that people can understand,
01:09:32 just looking at the menu prices, what the price will be and can comparison shop that way.
01:09:39 It helps small businesses be able to compete.
01:09:42 Small businesses tend to have lower costs than their larger competitors.
01:09:46 Really showing that all-in price when people are doing cost comparison helps small businesses have a fighting chance
01:09:54 at obtaining the customer's business.
01:09:57 Thank you so much. My time is up. I yield back, Mr. Chair.
01:10:01 I now recognize Representative Bean from the great state of Florida for five minutes.
01:10:06 A very good morning, Mr. Chairman. Thank you for holding the fifth hearing on overregulation.
01:10:12 And to our all-star panel, welcome. We're glad to have you here.
01:10:16 Five meetings means it's a big deal.
01:10:19 You know, it reminds me, I used to play a game when my kids were toddlers.
01:10:24 We called it the block game. We would just take blocks and stack them up until the tower collapsed, the whole box collapsed.
01:10:32 It seems as if the Biden administration, Joe Biden is playing this game with America's small business,
01:10:40 just thinking that small businesses are strong enough to handle an endless supply of overregulations.
01:10:48 As Chairman Williams has said, the fact that there was $875 million, billion dollars, with the B, billion,
01:10:57 in new costs from final rules issued in one week is hard to fathom, even for this president.
01:11:04 Some have said that the Biden administration doesn't fully appreciate what the rule,
01:11:10 what the burden does to small business and that they just check a box when they're trying to comply with the Regulatory Flexibility Act,
01:11:18 which Congress created to help protect small business.
01:11:21 Would you agree, Mr. Paul Ray, would you agree that they fully don't understand what the impact is to small businesses?
01:11:29 Absolutely, Congressman. You know, every agency tends to want to maximize achievement of whatever its special goal is.
01:11:35 Right. And they and they tend to just check in that box, disregard the costs that they incur along the way.
01:11:40 Right. That's right. You know, the blocks. Is it true, Mr. Goldblatt,
01:11:44 the box that they already have to carry even before the Biden administration starts putting more blocks on,
01:11:49 they're dealing with inflation. That's a very heavy block that businesses have to carry.
01:11:54 We know that the average household is spending over a thousand dollars a month just to keep up with what they purchased two years ago.
01:12:02 A thousand dollars more. They've also got supply chain issues. They've also got trying to hire people.
01:12:08 I'm in another committee, education and workforce, and we're trying to protect this whole new classification of independent contractors.
01:12:16 They want to put independent contractors on the banks of of of small businesses.
01:12:20 So would you agree to that, Mr. Goldback, they don't fully understand what's happening to small businesses?
01:12:27 Yeah, I think one of the aspects is. They analyze these rules in a vacuum as a standalone basis.
01:12:34 But as you allude to with the block example, if you keep stacking the cumulative impact, maybe one rule is justifiable in its own right.
01:12:42 But if three rules fall on top of you, then it's a different. Yeah, I got you.
01:12:46 You know, one of the Mr. Chairman, you had a great hearing on energy. We had energy companies.
01:12:51 Some of the energy companies were about to keel over from the the sheer weight of all the regulations.
01:12:58 So, Mr. Ray, what if I just say I'm a small business owner and I just say I don't want to comply? I can't comply.
01:13:05 What is the cost of just saying I can't do it anymore? What are the what are the consequences to the small businesses?
01:13:11 Well, absolutely devastating. I mean, you could be facing millions of dollars in fines or if regulations involving criminal criminal penalties, jail time.
01:13:18 So it's serious. It is serious weight. Absolutely. Very good.
01:13:24 Mr. Smith, you represent thousands of businesses with NFIB.
01:13:30 I've asked multiple businesses that have sat in the same chairs that you have sat.
01:13:35 How is the regulatory environment right now on a scale from one to ten, one being, you know what, it's just the cost of doing business?
01:13:42 Ten is just we've never seen it like this before. What would you rate the current environment?
01:13:49 Thank you, Congressman. I would rate it as a ten.
01:13:51 And in fact, there are recent numbers that April had the most significant economic economically significant rules dating all the way back to the 1980s in that month alone.
01:14:01 And that this administration is currently pushing through an unprecedented rate of economically significant rules on small businesses.
01:14:09 Gotcha. No, I'm with you. We've heard nines and tens consistent out consistently throughout the five hearings that it's that it's serious business.
01:14:17 Now, you also represent, again, NFIB, thousands of businesses.
01:14:22 We all heard from Mr. Ray, you can't ignore these things. You've got to comply or there's jail time.
01:14:27 There's bonds. There's all kinds of stuff. What about the what about the actual hours to comply?
01:14:33 What about trying to do the paperwork and trying to comply? What is that taking its toll as well on small business?
01:14:39 Mr. Smith. Thank you, Congressman. Absolutely.
01:14:42 As I mentioned earlier, I spoke to one of our members out in Oregon earlier this month about a rule.
01:14:48 And she told me that the cumulative burden hours is half of every day, each day, half of a week, half of a month.
01:14:57 Too many. Too many. Eventually, we have to learn from that toddler game.
01:15:01 You put enough blocks, small businesses just can't cope with that.
01:15:05 Mr. Chairman, thank you for your leadership. I yield back.
01:15:08 General yields back. And I'd like to thank our witnesses today for the testimony and for you appearing with us.
01:15:13 Without objection, members have five legislative days to submit additional materials and written questions for the witnesses to the chair, which will be forwarded to the witnesses.
01:15:21 I ask the witnesses to please respond promptly.
01:15:24 So with that in mind, there's no further business. Without objection, the committee is adjourned. Thank you.
01:15:29 [BLANK_AUDIO]

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