Bipartisan Senate Report Highlights Regulatory Burdens on Businesses, Large and Small01/27/2016
Regulations Across the Board Are Overwhelming Businesses
By Karen Kerrigan
In a new U.S. Senate bipartisan report, the Senate Homeland Security and Governmental Affairs Committee (HSGAC) has highlighted the considerable and growing regulatory burden harming many businesses, large and small, across a wide variety of sectors, including energy, transportation, construction, agriculture, and manufacturing. At a minimum, the report should serve as a clarion call to legislators and regulators alike: The time is now to bring greater accountability and transparency to the regulatory process, as well as rescind damaging rules imposing high costs with no meaningful benefits.
Until that happens, the U.S. economy will continue to stumble. As SBE Council Chief Economist Ray Keating wrote in his Economic Outlook 2016: The Threat of Diminished Expectations: “The U.S. economy has underperformed for more than eight years now, including the Great Recession followed by one of the worst recoveries on record. Unfortunately, one hears more talk about this being the new normal, or even a poor or sluggish economy being spun as a ‘strong economy.’”
But as Keating also explained, “none of this is inevitable, since the underlying problems are poor policy decisions that have increased costs and uncertainties for the private sector, and undermined incentives for investment and entrepreneurship.”
The HSGAC report, titled “Direct from the Source: Understanding Regulation from the Inside Out,” provides ample support for Keating’s analysis. Whether it’s EPA’s more stringent national air quality standard for ozone and its excessively broad definition of “Waters of the United States,” complex labor and employment regulations from the Department of Labor and Occupational Safety and Health Administration (OSHA), or new regulations on hydraulic fracturing from the Bureau of Land Management, one thing is clear: all sectors of the economy are getting buried by huge costs and mountains of red tape, and the cumulative regulatory burden is growing every year.
HSGAC Chairman Ron Johnson (R-WI) issued the report in conjunction with Sen. Tom Carper (D-DE), the committee’s ranking member, along with Senators James Lankford (R-OK) and Heidi Heitkamp (D-N.D.), who also serve on the committee. Last year, the committee sent letters to businesses, trade associations, consumer advocacy and environmental groups to seek their input on regulations. The 1,036-page report provides detailed responses received from these groups.
Here are some excerpts from the report, which provide hard facts about the unfortunate consequences of overregulation:
American Composites Manufactures Association: “On behalf of the approximately 3,000 U.S. companies using fiber reinforced polymer composites to manufacture a wide variety of important and beneficial products, we take this opportunity to describe how certain EPA regulations and regulatory processes under the Clean Air Act (CAA) are harming our industry without providing any real improvement in the health and welfare of American. For example….[s]tate implementation of EPA requirements to address ozone concentrations in excess of its ambient air quality standard will cause considerable uncertainty for smaller manufacturers. Even when companies are able to show on case-by-case basis that there are no feasible options for additional emissions reductions, successfully making this showing can be an especially time-consuming and costly exercise for smaller companies.”
American Farm Bureau Federation: “The EPA and the Army Corps of Engineers are now engaged in a sweeping regulatory proposal that would redefine what constitutes a ‘water of the United States’ (WOTUS), bringing with any such designation a legal obligation and legal exposure to citizen lawsuits….[I]t is worth noting that the agency has received nearly 1 million comments on the proposal; of those, an estimated 20,000 or more of the filed complaints were viewed as substantive – and of those substantive comments, over half opposed to the agencies’ proposal. Yet the agency appears to be little concerned with those substantive concerns and has just sent its final proposal to OMB for final inter-agency review….We find it astonishing that the agencies intend to move forward on a rule that has raised bipartisan concerns in Congress and among other Federal agencies, and which has met with opposition from over half the states. Perhaps more than any other proposal, this entire proceeding amply demonstrates how agencies can ignore stakeholder input and even simple fairness when they have set their sights on expanding their regulatory reach.”
The Brick Industry Association: “Founded in 1934, the BIA represents the U.S. clay brick industry, which includes hundreds of manufacturers, distributors, and suppliers that provide employment for thousands of Americans in 44 states. Over 85 percent of the manufacturers are small businesses…There are numerous regulations that could adversely impact our industry, including the national ambient air quality standards (NAAQS) and greenhouse gas (GHG) regulations currently being developed by the U.S. Environmental Protection Agency (EPA), and the recent state implementation plan (SIP) call to reform start-up and shutdown requirements in many State SIP programs…Either one of these rules individually has the potential to threaten the viability of our industry. Together, they appear to be an insurmountable obstacle.”
Caterpillar: “Caterpillar has spent significant time reviewing the impact of proposed regulations from the Department of Labor (DOL), the National Labor Relations Board (NLRB), and the Equal Employment Opportunity Commission (EEOC). To simply review proposed regulations and Executive Orders takes an employer such as Caterpillar hundreds of hours per year. For example, determining whether we have the systems and resources to track and comply with a rule like the Fair Pay and Safe Workplaces Executive Order, required substantial amounts of time from Caterpillar’s Legal, Human Resources and Governmental Affairs groups.
“In addition, federal agencies often grossly underestimate the cost of implementing a proposed rule. For example, the proposed rule and guidance stemming from the Fair Pay and Safe Workforces Executive Order was deemed ‘not economically significant’ by the Department of Labor and Federal Acquisition Regulatory Council. However, the business community provided their own cost analysis showing that the proposed rule will easily cost over the $100 million threshold required for a more rigorous, detailed economic review. Federal agencies could easily make a more accurate cost analysis by considering stakeholder input.”
Construction Industry Round Table: In an effort to better understand the general impact or burden created by the ‘regulatory complex’ on the design/construction industry, CIRT undertook a series of steps to try to quantitatively measure the costs with its members…. The findings are extraordinary – when the answers were weighed the additional costs and time as the result of ‘red tape was 10 percent. If extrapolated out to cover the annual dollar activities of the industry (even at the sluggish levels of the past few years) – it still amounts to somewhere around $90-100 billion dollars in waste and inefficiency (per year) for infrastructure related projects.”
National Mining Association: “The MATS regulation—the most expensive in EPA history—is a poster child for unbalanced regulations that dismiss the real costs and inflate the benefits to convince the public that the enormous expense is justified. Even by EPA’s own calculation the rule will cost American consumers almost $10 billion each year, but bring, at most, only $4-$6 million in benefits. To make matters worse, more than half of the costs are attributable to imposing standards for emissions the agency found pose no danger to public health. EPA’s position is that while it was allowed to consider costs in choosing whether to regulate, it also retained the discretion to ignore them. And ignore them it did, with a rule that demands consumers pay $1,600 in exchange for $1 in benefits.”
Associated Builders and Contractors, Inc.: “A large percentage of ABC’s members are small businesses, and as you know, small businesses are the backbone of our nation’s economy. Their ability to operate efficiently and free of unnecessary regulatory burdens is critical for our county’s economic recovery.” [Regarding Department of Labor (DOL) prevailing wage rules under Davis-Bacon] “As a result of flawed, unscientific wage calculation methodology, federal ‘prevailing’ wages in construction fail to reflect actual local wages. An April 2011 Government Accountability Office (GAO) report found that the Davis-Bacon wage survey process does not produce true prevailing wages, and DOL’s efforts to improve wage determinations to date have not addressed key issues with accuracy, timeliness, and overall quality…. Absent full repeal, employers and employees in the construction industry would be well-served by requiring the use of job descriptions and earnings data from the Bureau of Labor Statistics (BLS)—which is acquired through proven statistical sampling technique—to calculate and set these wages in a transparent manner.”
Direct Selling Association: “Direct Sellers had more than $34 billion in domestic sales last year. The 18 million individual direct sellers who sell for direct selling companies are independent contractors; they frequently sell on a part-time basis to their neighbors, relatives and friends as a means of supplementing other income sources.” “Unfortunately, over the years, numerous regulatory and legislative proposals at both the federal and state levels would have unintentionally hampered individual independent contractor direct sellers. Most recently among federal proposals, the Department of Labor (DOL) continues to consider a rule that would require burdensome disclosure requirements and documentation related to an independent contractor’s employment status.” “Such an expansion of the authority of the DOL without prior Congressional hearings would be of concern as DOL’s proposed rulemaking could, whether intentionally or inadvertently, lead to the improper classification of independent sales personas and entrepreneurs as employees. Such an interpretation of DOL’s actions could lead to the demise of the direct selling industry and the opportunity it currently provides to 18 million Americans who generate over $34 billion in sales.”
National Black Chamber of Commerce: “The number of regulations impacting American business is greater than ever and growing every day, but not all regulations are created equal with respect to the burden them impose on business. Thus, review and reform of regulations currently on the books makes sense, provided it targets the regulations that really impose the greatest burden. Further, the large number of regulations on the books that are harmful to Americans’ ability to start and run a business successfully is an indication that the system is broken, and attention should be focused on avoiding adding more bad regulations by fixing the regulatory process in addition to reforming and/or eliminating existing bad regulations.”
[Regarding FCC net neutrality rule] “The Open Internet rules open the possibility that the FCC will now regulate broadband internet service prices through a complex system of rate regulation and fees, including additional state and local fees, potentially raising prices to consumers, especially small business customers who generally buy internet service the same way home users do…. Use of broadband technology to start a business is one of the few ways that lower income individuals in urban areas possess to easily and quickly start a business based on their ideas and hard work, rather than their access to credit, credentials, and ability to navigate the world of permits and licensing.”
We applaud the committee for exploring the impacts of overregulation on various sectors of the economy. As he heads into his last year in office, President Obama could do enormous good for growth, innovation, and entrepreneurship if he lives up to his words on this issue in his State of the Union address: “I think there are outdated regulations that need to be changed and there’s red tape that needs to be cut.” At the same time, however, there are plans by the Administration to advance a massive number of new and burdensome rules through executive order and other means (like “guidance” and “interpretations”).
Chairman Johnson said the committee will “continue to work in a bipartisan fashion to address the problem that President Obama highlighted in his speech.” Indeed, regulatory reform and relief is desperately needed for small businesses, for U.S. competitiveness, and to get the nation back on a strong growth track. There’s bipartisan support for real action, and let’s hope President Obama can follow through on his words by engaging with Senate leaders on their effort. Still, if the first month of 2016 is an indication of whether President Obama will cut red tape or produce more complex rules, the reality is that his Administration is currently moving in the wrong direction. This doesn’t mean the Senate cannot move forward with real reforms that produce accountability, transparency and common sense for a horribly broken regulatory system.
Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council (SBE Council). The Center for Regulatory Solutions is a project of SBE Council.