I had the privilege on Thursday to testify to the Senate about onerous federal regulations and how the rule making process relates to my business.
Like so many other manufacturers in the United States that compete in a global economy, Marlin Steel Wire succeeds through innovation, investment and the hard work of our dedicated employees. The innovative ideas from the engineering team propel success at Marlin Steel Wire.
Manufacturing in the United States lost 2.3 million jobs in the last recession. Since the end of 2009, we have gained back 826,000 manufacturing jobs. To maintain manufacturing momentum and encourage hiring, the United States needs not only improved economic conditions but also government policies more attuned to the realities of global competition. Because of the significant challenges facing manufacturing in the United States, federal policies that will ensure a robust and dynamic manufacturing sector that is ready to meet the needs of our economy and workers.
Manufacturers believe regulation is critical to the protection of worker safety, public health and our environment. We believe some critical objectives of government can only be achieved through regulation, but that does not mean our regulatory system is not in need of considerable improvement and reform. New regulations are too often poorly designed and analyzed and ineffectively achieve their benefits. They are often unnecessarily complex and duplicative of other mandates. Their critical inputs--scientific and other technical data--are sometimes unreliable and fail to account for significant uncertainties. Regulations are allowed to accumulate with no real incentives to evaluate existing requirements and improve effectiveness. In addition, regulations many times are one-size-fits-all without the needed sensitivity to their impact on small businesses. We can do better.
Unnecessary regulatory burdens weigh heavily on the minds of manufacturers. In the NAM/IndustryWeek Survey of Manufacturers released on March 8, 69.1 percent of respondents cited an unfavorable business climate due to government policies, including regulations and taxes, as a primary challenge facing businesses--up from 62.2 percent in March 2012.
The federal government's own data reflects these challenges. According to the annual information collection budget, the paperwork burden imposed by federal agencies excluding the Department of Treasury increased from 1.509 billion hours in fiscal year (FY) 2003 to 2.446 billion hours in FY 2013, an increase of 62.1 percent. To put this number in perspective, federal agencies--not including the Department of Treasury--imposed more than 279,000 years' worth of paperwork burden on the American public in one year. In the past 10 years, federal agencies (excluding the Department of Treasury) added almost 82 million hours in paperwork burden through their own discretion. This is on top of the 1.121 billion hours that non-Treasury agencies estimate was added because of new statutory requirements.
Manufacturers appreciate the need for recordkeeping and paperwork essential to ensuring compliance with important regulatory requirements, but government-imposed regulatory burdens continue to increase despite advancements in technology and both statutory and executive branch directives that federal agencies minimize unnecessary burdens. Government policies should support the global competitiveness of manufacturers and other businesses in the United States, not impose increasing burdens. Manufacturers in the United States confront challenges that our global competitors do not have.
The issue of an increasing federal regulatory burden is not unique to a particular presidency or political party. The non-Treasury paperwork burden increased 60 percent during the eight years that President George W. Bush was in office. The current President has signed executive orders, and the Office of Management and Budget has issued memoranda on the principles of sound rulemaking, considering the cumulative effects of regulations, strengthening the retrospective review process and promoting international regulatory cooperation. Unfortunately, these initiatives have yet to provide real cost reductions for manufacturers or other regulated entities.
In September 2014, the NAM issued a report that shows the economic impact of federal regulations. The study found that manufacturers in 2012 spent on average $19,464 per employee to comply with regulations, nearly double the amount per employee for all U.S. businesses. Small manufacturers--those with fewer than 50 employees like Marlin Steel Wire--incur regulatory costs of $34,671 per employee per year. This is more than triple that of the average U.S. business.
As the owner of a small manufacturing company, I know very well the importance of allocating scarce resources effectively to achieve continued success, which includes increased pay and benefits for my employees. Every dollar that my company spends on complying with an unnecessary and ineffective regulatory requirement is one less dollar that can be allocated toward new equipment or my employees' health care or tuition benefits. Government-imposed inefficiencies are more than numbers in an annual report. They are manifested in real costs borne by the men and women who work hard to provide for their families. This is something about which I am passionate.
I can attest that poorly designed regulations and duplicative or unnecessary paperwork requirements create real costs that affect manufacturers' bottom lines. In 2010, Marlin Steel Wire received a letter from the Department of Treasury imposing a fine of $15,000 for inadvertently omitting a third signature on a 20-page form from 2006 regarding our 401(k) plan for our employees. This simple oversight led to several weeks of unnecessary anxiety and communications unrelated to operating a business. Though we paid a smaller penalty for the missed signature, valuable resources were diverted away from our business activities simply because of a missed signature on a form.
Manufacturers support reform proposals that would fundamentally change the regulatory process with the goal of improving the quality of rules that agencies issue. Here are eight ways to break the log jam:
1. Streamline Regulations through Sunsets and Retrospective Review
Through a thoughtful examination of existing regulations, we can improve the effectiveness of both existing and future regulations. Importantly, retrospective reviews could provide agencies an opportunity to analyze, revise and improve techniques and models used for predicting more accurate benefits and costs estimates for future regulations.
2. Strengthen and Codify Sound Regulatory Analysis
The complexity of rulemaking and its reliance on highly technical scientific information has only increased since the passing of the Administrative Procedure Act (APA) in 1946. Our administrative process has not kept up with those changes, and agency accountability is lacking without meaningful judicial review. Moreover, the process by which the government relies on complex, scientific information as the basis for rules should be improved and subject to judicial review. Efforts to encourage peer review of significant data and to create consistent standards for agency risk assessment should be part of that process.
3. Improve Congressional Review and Analysis of Regulations
Congress is at the heart of the regulatory process and produces the authority for the agencies to issue rules, so it is also responsible, along with the executive branch, for the current state of our regulatory system. While Congress does consider some of its mandates' impacts on the private sector through regulatory authority it grants in law, it has less institutional capability for analysis of those mandates than the executive branch. Congress does not have a group of analysts who develop their own cost estimates of proposed or final regulations. Over the past two decades, members of Congress have proposed to create a congressional office of regulatory analysis. As the Congressional Budget Office parallels the Office of Management and Budget, so too should Congress have a parallel to OIRA.
4. Support Centralized Review of Agencies' Regulatory Activities
President Clinton's 1993 Executive Order 12866 defines OIRA's regulatory review responsibilities. OIRA reviews significant rules issued by executive branch agencies and the analyses used to support those rules at both their draft and final stages. The office applies a critical screen to the contents of regulation, agencies' analytical rigor, legal requirements affecting the proposal and the President's priorities and philosophy. Nowhere else in the government does this take place. Single-mission agencies are frequently effective in accomplishing their objectives. This intense focus on a relatively narrow set of policies can weaken their peripheral vision, however, including their assessment of duplication between agencies, cumulative impacts of similar rules on the same sector of the economy or other broader considerations. OIRA is the only agency that brings to bear a government- and economy-wide perspective. For that reason, OIRA is a critical institution in our regulatory process for conducting a centralized review of the agencies' regulatory activities, facilitating interagency review, resolving conflicts and eliminating unnecessary duplication.
5. Hold Independent Regulatory Agencies Accountable
The President does not exercise similar authority over independent regulatory agencies--such as the National Labor Relations Board, the Securities and Exchange Commission and the Consumer Product Safety Commission--as he does over other agencies within the executive branch. They are not required to comply with the same regulatory principles as executive branch agencies and often fail to conduct any analysis to determine expected benefits and costs. Therefore, the rules issued by these agencies can impose significant costs on manufacturers.
6. Increase Sensitivity to Small Business
The Regulatory Flexibility Act of 1980 (RFA) requires agencies to be sensitive to the needs of small businesses when drafting regulations. It has a number of procedural requirements, including that agencies consider less costly alternatives for small businesses and prepare a regulatory flexibility analysis when proposed and final rules are issued. In 1996, Congress passed the Small Business Regulatory Enforcement Fairness Act (SBREFA), which requires the EPA and OSHA to empanel a group of small business representatives to help consider a rule before it is proposed. In recognizing the importance of the SBREFA panel process, the 111th Congress expanded this requirement to include the new Consumer Financial Protection Bureau when it passed the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Lawmakers have universally supported the RFA's provisions, but Congress needs to strengthen the law and close loopholes that agencies use to avoid its requirements. Unfortunately, agencies are able to avoid many important RFA requirements by simply asserting that a rule will not impact small businesses significantly. Only a small number of regulations require a regulatory flexibility analysis because "indirect effects" cannot be considered.
7. Enhance the Abilities of Institutions to Improve the Quality of Regulations
As discussed above, the SBA's Office of Advocacy plays an important role in ensuring that agencies thoughtfully consider small entities when promulgating regulations. When Congress created the office in 1976, it recognized the need for an independent body within the federal government to advocate for those regulated entities most disproportionately impacted by federal rules. The office helps agencies write better, smarter and more effective regulations. We urge Congress to support this office and provide it with the resources it needs to carry out its important work.
8. Improve and Streamline the Federal Permitting Process
This is another opportunity for government to learn from the private sector and use lean manufacturing thinking to eliminate waste in the process. As we seek to invest scarce federal resources in our nation's infrastructure to support our economy, federal agencies should not overlook the need to improve infrastructure project delivery by eliminating redundant activities, such as duplicative federal reviews and approvals that states are capable of performing.
In January, Sens. Portman and Claire McCaskill (D-MO) introduced the Federal Permitting Improvement Act (S. 280). The bill would greatly improve the permitting process by removing many bureaucratic delays that slow important construction projects. Importantly, S. 280 would establish deadlines and allow contiguous states impacted by an infrastructure project to coordinate and facilitate authorizations.
Chairman Lankford (R-OK) and Ranking Member Heitkamp (D-ND) are leading the charge to reform the regulatory system and improve analysis while enhancing our ability to protect health, safety and the environment. Manufacturers are committed to working toward policies that will restore common sense to our broken and inflexible regulatory system. The best way to meet regulatory objectives while ensuring continued economic growth and employment is by enacting a comprehensive and consistent set of policies that improve regulatory analysis, enhance the quality and transparency of scientific and technical inputs, eliminate waste and duplication and support the institutions and policies that work. These policies must be applied to all agencies, and we must ensure that regulators are sensitive to the needs of small business.