Rep. Tammy Duckworth appears to have been caught up in the anti-regulatory fervor that has continued to afflict the House of Representatives ever since the GOP took control there in 2010. On Monday, Representative Duckworth, an Illinois Democrat, announced a plan to address what she said was a problem: “For businesses with less than twenty employees, the annual cost of federal regulation can be over $10,000 per worker.” But before we get to the proposed solution, there’s a problem with the stated problem: it’s just not true. The stat comes from the 2010 “Crain and Crain” study commissioned by the Small Business Administration’s (SBA) Office of Advocacy, a study that has been thoroughly debunked in a CPR white paper, by the Congressional Research Service, EPI, and others. Fully 70 percent of the study’s cost estimates came from a regression analysis based on opinion polling about perceived regulatory climate in different countries.
Having aired a faulty claim of a problem, Rep. Duckworth introduced a bill ostensibly aimed at fixing it, by reducing small business reporting burdens. The bill, the Small Business Paperwork Relief Act, would bar federal agencies from fining “small businesses” for first-time violations of federal reporting requirements when certain conditions are met, significantly curtailing agencies’ discretion in ensuring compliance with these requirements while providing little benefits to true small businesses. Last term, identical bills were introduced in the House by Rep. Charles Boustany and in the Senate by Sen. David Vitter; Senator Vitter reintroduced the Senate bill in January.
I put the term “small businesses” in quotes, because the definition of that term in Duckworth’s bill is a far cry from what most of us envision when we think of small business. For this definition, the bill simply uses the small business size standards developed by the SBA. As documented in a recent CPR white paper, the SBA defines small business rather broadly; they aren’t just limited to the “mom and pop” stores lining Main Street in Small Town, USA. Instead, SBA counts petroleum refineries with up to 1,500 employees and chemical manufacturing plants with up to 1,000 employees as small businesses. While such facilities may be relatively “small” for their economic sectors, it defies credulity that such operations lack the resources and sophistication to fill out reporting requirements correctly.Full text
Congress created the Office of Advocacy (Office) of the Small Business Administration (SBA) to represent the interests of small business before regulatory agencies. It recognized that, unlike larger firms, many, if not most, small businesses can’t afford to lobby regulators and file rulemaking comments because of the expense involved. The Office was supposed to fill this gap by ensuring that agencies account for the unique concerns of small businesses when developing new regulations. Instead, as new reports from the Center for Progressive Reform and the Center for Effective Government document, the Office of Advocacy is using its resources and influence to weaken the regulatory process, usually at the behest of big business.
The Office of Advocacy has steadily expanded its role in the rulemaking process, creating numerous opportunities to oppose regulation, slow the regulatory process, and dilute the protection of people and the environment against unreasonable risks. Its activities are frequently undertaken in conjunction with corporate lobbies and trade associations that represent the interests of their large business members. Often, it is difficult to find even a sliver of sunlight between the positions taken by the Office and those taken by such prominent regulatory opponents as the big-business-focused U.S. Chamber of Commerce. It turns out that's not by accident: The Center for Effective Government’s report exposes emails between the Office and big business interests demonstrating that the Office takes its lead from big business lobbyists.
The Office of Advocacy bolsters its anti-regulatory efforts by sponsoring research projects with the obvious aim of weakening the U.S. regulatory system. Non-governmental researchers carry out these projects under contracts awarded by the Office with little in the way of oversight or peer review. At least in some cases, these "research" papers are thinly veiled political documents. The most egregious example is the 2010 study by economists Nicole Crain and Mark Crain, which purported to find that the annual cost of federal regulations in 2008 was about $1.75 trillion. As CPR and others demonstrated, the Office ignored serious methodological problems with the report, which rendered it implausible, apparently because the results fit with the Office’s anti-regulatory narrative.Full text
When the government succeeds in protecting the public from harms, is that good news – or something to be atoned for by eliminating other successful protections? If the Department of Labor issues a new rule on construction crane safety, saving dozens of lives each year, should the agency also be required to eliminate an existing safety regulation? A policy of regulatory “pay-go” would prohibit agencies from issuing new rules, no matter how beneficial they are, unless they first identify and eliminate an existing rule that involves greater or equal costs for industry.
It sounds absurd, yet it’s an actual proposal supported by some very powerful people, though it has received relatively little attention. Mitt Romney has pledged in his economic plan to implement such a system (p. 61) if he is elected President, even saying that he’d issue an executive order for it on his first day in office (p. 7). Senator Mark Warner has proposed creating such a system through new legislation, though he has not introduced a bill to do so.
In a new issue brief today, Regulatory ‘Pay-Go’: Rationing the Public Interest, CPR Member Scholar Richard Murphy, CPR Policy Analyst James Goodwin, and I examine the concept, showing how it would undermine the regulatory system’s ability to protect people and the environment.
The story of regulatory protections in the last several decades has been one of remarkable success. Our air and water, for example, are far cleaner, by many measures, than they were just decades ago, and that’s largely thanks to government rules. Regulations under the Clean Air Act alone save well over 100,000 lives every year. And vehicle safety standards have reduced the fatality rate per vehicle mile traveled by more than half in under three decades. Yet despite this progress, work remains in these areas and others: tens of thousands of Americans still die each year from industrial air pollution and from automobile collisions.Full text
House GOP leaders may vote as early as this week on legislation that would eliminate the Independent Payment Advisory Board (IPAB), a cost-saving measure that was established as part of the national health care reform Congress passed in 2010. House leaders have also attached national restrictions on the right of patients to recover damages for medical malpractice (H.R. 5) to the IPAB bill, with the joint bill being called H.R. 5. The sponsors of the bills allege that the savings from tort reform will replace the money that would be lost if the cost savings board is eliminated. The combination of the two measures is pure politics. Repeal of the cost-savings board enjoyed some bipartisan support before GOP leaders attached the tort restrictions to it. Democrats are unwilling to vote for a bill that also limits the rights of tort victims. GOP leaders therefore hope to get the Democrats on record as voting against both issues.
The Republicans will claim that the Democrats oppose limiting the rights of medical malpractice victims because of support they receive from trial lawyers who represent the victims of medical malpractice. This conveniently ignores the fact that the Republicans receive support from the insurance and health care industries, which favor limiting the rights of malpractice victims. Once we turn to the merits of H.R. 5, it is apparent that it makes one bad idea (elimination of the IPAB) worse by adding another bad idea (tort reform).
The chief proponent of H.R. 5, Representative Phil Gingrey (R-GA) recently claimed in the Atlanta Journal-Constitution that his bill would save $70-126 billion per year by limiting "frivolous lawsuits." In a recent CPR White Paper, my coauthors and I explained this estimate comes from a flawed study by Daniel Kessler and Mark McClellan, two health economists. The study has been thoroughly debunked by the Congressional Budget Office (CBO), the Government Accountability Office (GAO), and several academics as a reliable estimate of the savings that could be achieved if Congress were to reduce the rights of medical malpractice victims. In fact, the savings to be achieved by medical malpractice “reform” is at best a tiny percentage – less than one percent – of the total cost of medical care, as our report details.Full text
On Tuesday, the House Judiciary committee is marking up the Regulatory Freeze for Jobs Act (H.R. 4078), which would block virtually any “significant regulatory action”—basically, any step toward promulgating any regulation that has a large economic impact or is otherwise controversial— as long as unemployment is over 6 percent. Rather than support initiatives that actually help the unemployed, a band of House Republicans prefer another cheap political trick here. The reality is that a moratorium would leave millions of Americans more vulnerable to health, safety, environmental, and economic risks, without improving the economy at all. In fact, the bill has the potential to shrink economic activity, not grow it.
To begin with, all of the economic studies agree: regulation does not cause a net loss in jobs. As other CPR Member Scholars and I have discussed (see here, here, here, here and here, for example), the reason is simple. Firms subject to regulation spend money on compliance, which creates additional jobs. The number of those jobs offsets any employment lost in the industry being regulated. There is even evidence that regulation can lead to a net increase in jobs. To the extent this is true, the Republicans’ effort to bolster employment with a regulatory moratorium will actually decrease it – it might be an actual “job killer.” Congressional Budget Office (CBO) Director Douglas Elmendorf raised the concern of reduced private sector investment caused by delaying or weakening environmental rules when he testified (p.49) before the Senate Budget Committee last November.Full text
In 1975, Indiana lawmakers joined a small but growing group of state legislatures passing aggressive medical malpractice “reforms.” Indiana’s law capped damages that victims of medical malpractice can recover at $500,000 and eliminated damages for pain-and-suffering altogether, Frank Cornelius, a lobbyist for the Insurance Institute of Indiana, played a role in helping pass this legislation. Twenty years later, Cornelius suffered a tragic series of negligent medical errors that left him wheelchair-bound, dependent on a respirator to breathe, and requiring a morphine drip for continuous physical pain. Facing medical expenses and lost wages of $5 million if he lived to retirement age, Cornelius experienced first-hand the effects of his lobbying for the insurance industry: he was forced to settle his claims for the $500,000 limit. In an op-ed in The New York Times several years later, Mr. Cornelius told his story, expressing regret and noting, sadly, if ironically, that the reforms he brought had failed to control health care spending in Indiana.
In pursuing their assault on the civil justice system, corporate lobbyists support legislation like that passed in Indiana by arguing the tort system leads to “defensive medicine.” A new CPR White Paper, The Truth About Torts: Defensive Medicine and the Unsupported Case for Medical Malpractice ‘Reform,’ refutes their claim that “defensive medicine” is a reason for increasing health care costs. My CPR colleague, Tom McGarity and I, along with CPR analysts Nicholas Vidargas and James Goodwin, show how conservative and business interests press their claims about defensive medicine despite the fact that there is no reasonable evidence to support their arguments.Full text
A new Pew public opinion poll published last week shows substantial public support for specific types of regulation, but skepticism about regulation in general. While 70-89% of the public would either expand or keep current levels of five specific types of regulation, 52% say government regulation of business usually does more harm than good as compared to 40% who think regulating business is necessary to protect the public interest. The five types of regulation were car safety and efficiency, environmental protection, food protection and packaging, prescription drugs, and workplace safety and health. These poll results generally echo previous polling, including an earlier poll by Pew.
It may be, as cynics are likely to point out, you can’t underestimate the power of the American people to hold two contradictory ideas at once. Perhaps, but the polling results do offer insight into how the public thinks about regulation.
For one thing, there is little enthusiasm for the radical cutbacks in regulation that many conservative seem to favor. The proportion of people saying that they favored reducing regulation was as follows: car safety and efficiency (9%), environmental protection (17%), food protection and packaging (7%), prescription drugs (20%), and workplace safety and health (10%). Moreover, the public generally leans toward strengthening regulation as opposed to keeping current levels, as the following comparisons indicate: car safety and efficiency (45% strengthen – 42% keep same); environmental protection (50-29%), food protection and packaging (53-36%), prescription drugs (39-33%), and workplace safety and health (41-45%).Full text
Senators Mark Warner (D-VA) and Jerry Moran (R-KS) introduced a bill earlier this month that proposes to change regulatory and tax policies with the goal of encouraging more entrepreneurial activity and creating more jobs. The legislation contains a grab-bag of proposals, such as allowing more aliens with professional expertise in stem cell research to become permanent residents and extending an income tax credit for certain small businesses. I can’t speak to the merits of these and other proposals in the bill with one exception. The legislation would codify the current requirement found in executive orders that federal agencies complete a cost-benefit analysis of proposed and final “major” rules. This idea may sound reasonable on its face, but ultimately it would hinder the ability of federal agencies to issue health and environmental safeguards, and provide no help to the economy.
As other CPR scholars and I have discussed (see here, here, here, here and here, for example), the policy evidence refutes arguments that regulation is somehow at fault for the slow economic recovery. Ignoring the evidence, House Republicans have spent countless hours on hearings and legislation that is intended to slow down and impede the regulatory process. It is therefore disappointing that Senators Warner and Moran include cost-benefit analysis, one such anti-regulatory idea repeatedly endorsed in the House, as one of their proposals to jump start entrepreneurial activity.
When it comes to deciding the level of protection for people and the environment, Congress most of the time has adopted a precautionary stance – requiring risk creators to do the best they can to reduce safety, health and environmental harms. But every President since Ronald Reagan has required agencies to analyze potential costs and benefits, even though agencies usually do not base regulations on a comparison of costs and benefits. Proponents of this requirement insist that it helps agencies focus on adopting the most appropriate regulation, but this claim ignores the fact that many health, safety and environmental benefits cannot be easily stated in dollar terms. As a result, cost-benefit often consists of incomplete benefit estimates and complete cost estimates (or over-estimates), skewing the analysis in favor of less protection.Full text
Within the last hour, the House of Representatives approved the Regulations from the Executive in Need of Scrutiny Act – the REINS Act. The bill was among House Republicans’ top priorities for the year, and they’ve made it and a series of other anti-regulatory bills a centerpiece of their agenda.
The plain purpose of the REINS Act is to make it all but impossible for the nation’s regulatory agencies to adopt regulations that would enforce a host of protective laws, including the Clean Air Act, Clean Water Act, Occupational Safety and Health Act, and many others. The Act would permit Congress (in fact, just one House of Congress) to ignore these legislative mandates in deciding whether to approve regulations, opening the door for much greater politicization of the regulatory process. House Republicans have pursued it in part to prop up their disingenuous argument that regulation is somehow the cause of the nation’s economic difficulties, and in part as a reward to high-dollar donors who’d just as soon go on polluting for profit, cutting corners on workplace safety, and in a variety of other ways subjecting Americans to preventable deaths and illnesses.Full text
On Tuesday, Senators Susan Collins (R-ME) and Claire McCaskill (D-MO) introduced the Bipartisan Jobs Creation Act, legislation that offers a number of proposals for jump-starting the economy. The bill includes two provisions that would hobble the regulatory system without generating the new jobs that the Senators seek. If these provisions were enacted, the bill would block regulatory safeguards that protect all Americans and our environment. The bill’s regulatory provisions would make it harder for the EPA and other regulatory agencies to implement congressional legislation designed to clean up our air and water, make our food safer, and reduce avoidable workplace hazards.
The regulatory provisions in the Collins-McCaskill bill are a nod to Republicans’ specious claim that “excessive regulation” is holding back job growth. One provision would delay EPA’s rule limiting hazardous air pollutants from commercial and industrial boilers by 15 months, and prevent the agency from issuing regulations that are as strong as the Clean Air Act currently requires. This regulation is already more than a decade overdue, and, once implemented, would prevent thousands of premature deaths and non-fatal heart attacks every year. They didn’t call it the “more mercury pollution bill”, but that’s what it effectively is.
The other deregulatory provision—based on the CURB Act, a bill introduced earlier this year by Sen. Collins—would add several new procedural requirements to the regulatory process, which would effectively block or delay critical safeguards. The bill would require agencies to conduct detailed cost-benefit analyses—including the impossible requirement of measuring "indirect effects"—before it could issue new rules. Most environmental, health and safety statutes rightly require protecting the public to levels that make these analyses irrelevant under the law, and would serve only to delay regulations while agencies completed the required analysis. Another requirement would require agencies to conduct lengthy analyses before issuing “guidance documents.” These documents can come in several forms, and regulated industry often welcomes them, because they help reduce regulatory uncertainty. Delaying or blocking these documents will only waste limited government resources, and make it harder for industry to comply with regulations.Full text