The economic recovery is slow, the labor force has been reduced, and small businesses are losing speed, but there's one area that just keeps growing: federal regulations. There's no shortage of new red tape or of bureaucrats to write new regulations, and small businesses are becoming overwhelmed.
It's time for some common sense from federal agencies. Federal regulations should promote safety without unnecessarily burdening small firms and costing much-needed jobs.
As Chairman of the House Small Business Committee, I've worked for several years now with colleagues of both political parties to update and strengthen the Regulatory Flexibility Act (RFA). The outgrowth of that collaboration is the Regulatory Flexibility Improvements Act. This week, for "Stop Government Abuse Week," the House is scheduled to vote on a regulatory reform bill that includes this legislation — a priority of the Small Business Committee.
The RFA requires federal agencies to assess the economic impact of their regulations on small firms, and if significant, consider less burdensome alternatives. Federal agencies sometimes fail to comply at all, or simply "check the box," fulfilling the letter of the law, while missing the purpose of the law entirely. Their analysis is weak; their solutions unworkable. These agencies must be accountable for the way their rule-writing plays out in the real world.
A small business owner from Wichita, Kansas, Carl Harris, earlier this year testified before the Committee that "…the reality is that far too often agencies either view compliance with the [Regulatory Flexibility] Act as little more than a procedural 'check the box' exercise or they artfully avoid compliance by other means."
That's not acceptable. The economy needs thriving, job-creating small businesses, but excessive and ill-considered regulations too often get in the way of growth. Congress must insist through the provisions of the Regulatory Flexibility Improvements Act that federal agencies can no longer get away with paying mere lip service to the RFA. The law is there to protect small businesses, and these job creators deserve those full protections, as Congress designed.
The point of the RFA is to ensure agencies examine how the regulations will affect small businesses and get the input of those who have to live with the requirements before putting a rule into effect. If agencies followed the spirit of the RFA, they would effectively work with — not against — America's 28 million small businesses. As Harris said in his testimony, "Agencies should seek to partner with small entities to help create more efficient, more effective regulations and, in so doing, reduce the compliance costs for small businesses."
The bipartisan Regulatory Flexibility Improvements Act, now Title III of the ALERT Act, updates the RFA's requirements and provides new tools to ensure compliance from regulating agencies. Among these key provisions, the bill requires all agencies to convene small business review panels to get input before proposing rules that will have a significant impact on small businesses. This way, small firms have a chance to be involved in the development of regulation on the front end before they have to live with it on the back end. Additionally, the bill requires agencies to consider the economic impacts more thoroughly, by assessing indirect impacts from regulations — the ripple effect — not merely the immediate or direct effect.
In September, 125 small-business groups and organizations signed a letter voicing the strong support of the small-business community for this legislative effort. Moreover, a U.S. Chamber of Commerce small-business survey revealed that regulations are among the top concerns of small businesses, only exceeded by the requirements of the health care law — further justifying the legislative fix.
Small businesses bear a heavy regulatory cost without the same resources in personnel or expertise as larger companies. In fact, in 2010, the Small Business Administration's study found that regulations cost small companies an average of $10,585 per employee, and compliance costs were 36 percent higher than large companies. The same study found that regulations cost the U.S. economy $1.75 trillion annually.
Regulations are mounting up, and the pace of new rule-making has reached record levels in recent years, with 2012 the costliest year on record. That regulatory pace is unsustainable for a healthy economy. The common sense provisions of this small-business legislation will encourage smarter, better regulations that avoid stifling growth, innovation and job creation. If the federal agencies can do their work as the law requires, then more Americans will be working for our nation's best job creators: small businesses.