KERRIGAN Opening Statement: On “Midnight Regulation” – Committee on Science, Space and Technology

By at 10 February, 2016, 8:26 pm



Small Business & Entrepreneurship Council


“Midnight Regulation: Examining Executive Branch Overreach”

Before the

Committee on Science, Space and Technology

U.S. House of Representatives

February 12, 2106


It should come as no surprise to members of the Committee that many small businesses have concerns about federal regulations, and the process by which the rules are made.

A host of new rules, and ones yet to come, are piling on at a time when small businesses continue to struggle in a tough economy. Complying with existing regulations and navigating new rules take time and significant resources. Business owners are now looking at what’s in the pipeline for 2016, which only perpetuates the uncertainty that is behind less risk taking and growth.

The period between the recession up until now has been challenging for small businesses. A Bank of America survey conducted mid-year last year found that that only one in five small business owners say they have completely recovered from the Great Recession.

So it is times such as these that federal agencies and government policies need to be especially sensitive about how proposed actions impact entrepreneurship and small business growth. After all, even given their struggles and challenges, small businesses and startups still remain the engine of job creation, and innovation in our nation.

It is that understanding that was behind the development and passage of laws meant to protect small business from excessive regulation and provide them with some voice in the regulatory process. But unfortunately there has been a breakdown in the process and responsiveness to their concerns. So as we enter a period where there will be a change of Administrations, and historically this has been a time where there is an uptick in new rulemakings, I think you can empathize with the concerns of small business owners who feel their voice and concerns could be minimized further.

We are concerned that an anticipated regulatory rush could lead to more shortcuts in a process that is meant to look out for small businesses.

The Mercatus Center analyzed data during the midnight regulatory period across Administrations from 1975-2006 and found regulatory analysis quality drops, and regulatory oversight by the Office of Information and Regulatory Affairs (OIRA) weakens. As a result, federal agencies produce ineffective regulation and these rules are more likely to be more costly.

So this is why we do hope there can be some action, some reforms that will improve the process and make it more accountable and inclusive for the small business community.

Because small businesses are disproportionately impacted by regulation – and, I would add, more so by environmental regulation. A National Association of Manufacturers (NAM) report details the disproportionate costs, which I have included in my written testimony.

EPA’s possible activity is of concern given the agency’s history of improper certification of proposed rules when it comes to small business impact. On several major rulemakings, for example, the SBA’s Office of Advocacy made it clear that EPA’s certification of rules did not comply with the Regulatory Flexibility Act. This was the case for example, with greenhouse gas rules and the Waters of the U.S. rule. In each of these cases, EPA’s own analysis contradicted its certification.

The bottom line is that small businesses remain very concerned about what’s ahead in 2016 on the federal regulatory front. With an economy that lacks strong traction, and with indications that economic growth may slow further, regulations that raise compliance and energy costs and make it more difficult to compete only create more headwinds for small businesses.

Thankfully, both sides of the political aisle recognize that we have a regulatory problem. There are solid bipartisan solutions that have been proposed in the House and Senate that begin to chip away at the lack of accountability and to provide small businesses a greater voice and more protection in the regulatory process. I look forward to discussing these with committee members. Thank you.


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