428A Russell Senate Office Building, Washington, DC 10:00 a.m. EDT
Chairman David Vitter
Good morning and thank you for joining me today for the Senate Small Business and Entrepreneurship Committee Hearing to examine the implementation of the Regulatory Flexibility Act. We are going to be hearing from the Chief Counsel for the Office of Advocacy at the SBA and a panel of industry representatives. I want to thank all of our witnesses for being here today.
Our conversation will focus on the need for regulatory reform in light of how federal agencies oftentimes issue new rules and regulations that cause undue burden on small businesses. While there are laws in place like the Regulatory Flexibility Act (RFA) to protect small businesses, federal agencies have been taking advantage of loopholes and misinterpretation to circumvent the law.
This is a major problem for our nation’s small businesses that struggle to comply with overly burdensome regulations. A large corporation has far more resources, some even have entire departments, devoted to regulatory compliance, and the economies of scale result in heavier compliance costs for small businesses.
It has become much more challenging for the owner of a small firm to shift their time, energy, and money away from growing a business in order to comply with over-demanding regulations issued by President Obama’s administration.
I hope that today’s hearing will explore possible solutions to level the playing field for small businesses, specifically via the RFA.
Many small businesses count on the RFA to protect their interests from economic burdens due to federal regulations. One of the most important tools to protect these firms is called an Initial Regulatory Flexibility Analysis (IRFA), which requires agencies to conduct an economic analysis when a new rule will have a substantial economic impact on a significant number of small entities.
Under President Obama’s administration, many agencies have avoided conducting an IRFA by simply claiming their proposed rules have no significant economic impact.
What is perhaps the greatest example of this abuse of power by federal bureaucrats, occurred just last year when the Environmental Protection Agency (EPA) and Army Corps of Engineer’s 2015 Waters of the United States (WOTUS) rule, which significantly expanded the scope of federal jurisdiction across the country under the Clean Water Act.
When EPA and the Corps drafted WOTUS, they failed to include small businesses during the process, violating the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). The EPA claimed that the rule would not have a substantial, direct impact on small businesses, and thereby avoided having to conduct the required SBREFA panel.
Before WOTUS was finalized, this Committee held a hearing in May 2015 examining the way the EPA and Corps shut out small businesses during the rulemaking process.
During that hearing, a representative from the SBA Office of Advocacy said, “Advocacy believes, first, the rule will impose direct costs on small businesses. Second, these costs will have a significant economic impact on those small businesses. And, third, the agencies incorrectly certified the rule and should have conducted a SBREFA panel.”
Despite Advocacy’s testimony highlighting the negative effects of WOTUS, the rule was finalized and is now one of the most well-known cases in which the Obama administration blatantly circumvented the legal process in an attempt to rush through a rule without considering the harm it would cause to small businesses.
It is imperative that Congress create greater accountability for agencies’ economic certification process and close loopholes in the RFA that allow the EPA, OSHA, and CFPB to avoid conducting SBREFA panels.
That is why earlier this Congress, I introduced the Small Business Regulatory Flexibility Improvements Act, which provided comprehensive reform of the RFA and made vital adjustments to protect small business community.
I want our industry representatives here today to know that I am working to develop a new reform bill in an effort to make bipartisan, common sense reforms.
Now, let’s get today’s conversation started. Again, I’d like to thank everyone for being here today and look forward to our discussion. With that, I’d like to turn it over to our Ranking Member, Senator Shaheen.