Statement of Judiciary Committee Chairman Lamar Smith Full Committee Markup of H.R. 527, "Regulatory Flexibility Improvements Act of 2011"

Statement of Judiciary Committee Chairman Lamar Smith
Full Committee Markup of
H.R. 527, “Regulatory Flexibility Improvements Act of 2011”

Chairman Smith: Our national economic recovery remains sluggish, with the unemployment rate above 9%.  Jobs are the key to economic recovery, and small businesses – not government regulatory agencies – are the job creators in America.

Unfortunately, in recent years, federal regulations have become a barrier to economic stimulation and job creation.  The Small Business Administration (SBA) estimates that federal regulations impose a crushing $1.75 trillion burden on the economy – 15,000 per household. 

Over-regulation kills jobs—and the cost of regulatory compliance is disproportionately higher for small businesses, which are the main job creators in America.

Firms with fewer than 20 employees must pay 36% more to comply with federal regulations than firms with 500 or more employees.  This hurts small businesses’ ability to create the jobs Americans need. 

There is a broad bi-partisan consensus that over-regulation is a serious and growing problem for the American economy.  Even President Obama, in a Wall Street Journal op-ed, recognized that over-regulation “stifles innovation” and has “a chilling effect on growth and jobs.”

In a presidential directive issued January 18, 2011, to all executive departments and agencies, President Obama stated, “My Administration is firmly committed to eliminating excessive and unjustified burdens on small businesses, and to ensuring that regulations are designed with careful consideration of their effects, including their cumulative effects, on small businesses.”

This bill provides urgently needed help.  It ensures that agencies will fully account for the effects of new regulations on small businesses by thoroughly analyzing regulations in advance.  The agency then will have the information necessary to act in a way that does not impose unnecessary, wasteful or burdensome regulations on small businesses.

The Regulatory Flexibility Act of 1980 and the Small Business Regulatory Enforcement Fairness Act of 1996 require agencies to prepare a “regulatory flexibility analysis” so agencies will know how a proposed regulation will affect small businesses before it is adopted.  But GAO has found in numerous studies that agency compliance with these statutes is inconsistent.

For example, currently the law allows an agency to avoid preparing a regulatory flexibility analysis if the agency head certifies that the new rule will not have a “significant economic impact on a substantial number of small businesses.”  But none of these terms is defined in the law, so agencies routinely take advantage of this by issuing boilerplate certifications.

The bill fixes this problem by requiring the SBA to define these terms uniformly for all agencies, and by requiring agencies to justify a certification in detail and to give the legal and factual grounds for the certification.

The legislation also requires agencies to document all economic impacts – direct and indirect – that a new regulation could have on small businesses.  It restricts agencies’ ability to waive Regulatory Flexibility Act requirements. 

Current law requires only three agencies – the Occupational Safety and Health Administration, the Environmental Protection Agency and the Consumer Financial Protection Bureau – to consider the input of small business advocacy review panels before issuing new major regulations. 

The bill requires all agencies to use advocacy review panels.  This gives small businesses more opportunity to be heard before major new regulatory burdens are imposed.

Equally important, the bill strengthens requirements that agencies review and improve existing regulations to lower the burden on small business.  It enhances the Small Business Administration’s ability to comment on and help shape major rules.  It assures that the Regulatory Flexibility Act is uniformly implemented so individual agencies cannot interpret their way out from under its requirements.  And, finally, the bill improves judicial review.

Some critics of regulatory reform allege that this bill undermines agencies’ ability to regulate by making regulators jump through more hoops. 

But the bill primarily reinforces rather than adds to what agencies are supposed to be doing already under the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act.  

Furthermore, the Regulatory Flexibility Act is about protecting small businesses from over-regulation, not about protecting regulators from having to follow too many steps before they can regulate. 
Do opponents of the bill really want to argue that we have too few regulations?

Fundamentally, this bill recognizes that our national economic recovery depends on job creators—not regulators.

We need to create jobs by reducing the regulatory burden on small businesses.   

This bill is the next logical step in Congress’ long-standing struggle to protect small businesses from over-regulation.  Its consideration could not be more timely nor its passage more important.