Statement for the Record for the Hearing, “Burdensome Regulations: Examining the Impact of EPA Regulations on Main Street”

Re: Statement for the Record for the Hearing, “Burdensome Regulations: Examining the Impact of EPA Regulations on Main Street”

Dear Chairman Williams and Ranking Member Velazquez:

Thank you for holding the hearing today on how burdensome regulations impact Main Street. My name is Natalie Kaddas and I am the CEO of Kaddas Enterprises in Salt Lake City, Utah. I also serve as the Chair of the Small Business Council at the U.S. Chamber of Commerce. Currently, 96% of Chamber member companies have fewer than 100 employees and 75% have fewer than 10. The Small Business Council works to ensure the views of small businesses are integrated into the Chamber’s policy-making process.

My manufacturing company in Salt Lake City specializes in manufacturing thermoform plastic products for the energy, transportation and aerospace industries. Our largest source of revenue is our patented designs of BirdguarD™ products, designed to protect birds and other animals from electrocution. Our products also aid greatly in energy resilience by preventing wildlife-caused power outages.

There are roughly 33.1 million small businesses in the U.S. that comprise over 99% of all U.S. businesses, represent 43.5% of America’s GDP, and account for 62% of net job creation since 1995. The power of innovation and entrepreneurship has spurred remarkable growth since the COVID-19 pandemic in the face of high inflation, worker shortages, and high interest rates. Unfortunately, the crushing burden of federal regulation threatens this small business growth.

The most recent estimate pegs compliance with federal regulations at more than $3 trillion per year. According to the National Association of Manufacturers (“NAM”), that cost exceeds the entire annual economic output of the manufacturing sector. That NAM study estimates a burden of $28,000 per employee per year for manufacturers of our size, which is more than double of all other companies, of similar size, in other industries.

Forty-four years ago, the Regulatory Flexibility Act (“RFA”) was enacted seeking to correct the disproportionate burden by encouraging federal agencies to transparently consider the impact of new regulations on small businesses and to minimize negative impacts without compromising the underlying regulatory objectives. When President Carter signed the RFA into law, he stated that “small businesses are vital to the growth and to the future of our country” and that regulations “can impose a disproportionate and unfair burden on small businesses.”

Even though the Office of Advocacy at the U.S. Small Business Administration (“SBA”), the independent office responsible for overseeing regulators’ compliance with the RFA, is trying to convince federal regulators to comply with the RFA, the Office’s efforts at times seem futile. The National Federation of Independent Business (“NFIB”) reviewed comment letters from the Office of Advocacy from January 1, 2021 – January 1, 2023, and found 28 instances where the Office of Advocacy cited agencies for lack of RFA compliance. Those public letters unveiled loopholes in the law that regulators use as excuses to bypass and misrepresent the costs of regulatory proposals because (a) there is no way to go to court to challenge even the most absurd “certifications” that a proposal will not harm small businesses and (b) agencies only publish what they characterize as the direct impact on regulated firms, disguising the actual harm to small businesses.

One of the most egregious failures to consider small business and issue inadequate “certifications” required by the RFA has arisen in the series of Waters of the United States (“WOTUS”) rulemakings promulgated by the U.S. Environmental Protection Agency (“EPA”) and the U.S. Army Corps of Engineers (“Corps”). Rather than seek appropriate input from small businesses on how to manage wetlands permitting in a way that would be both environmentally protective and sensitive to impacts on small businesses, EPA and the Corps “certified” under the RFA in 2014 – that their proposed WOTUS rule would not have a “significant economic impact on a substantial number of small entities.” Now, ten years later, after the U.S. Supreme Court has sharply rejected the agencies’ claims of authority to impose wetlands permitting requirements, the agencies have yet to formally consider small business views, as required by the RFA, on how wetlands can be defined without unduly burdening small businesses.

Agency exploitation of interpretations of the RFA loophole that limit it to requiring consideration of small business impacts for directly regulated businesses is apparent in the ongoing Basel III Endgame rulemaking. Bank regulators published their perceived economic impact on large banks but were not transparent about how new mandates will make small business loans more expensive.

Legislation is pending that will close those real or apparent loopholes and allow for meaningful small business input in the federal regulatory process. The urgency for Congress to act was described before this Committee several weeks ago when former CBO Director Douglas Holtz-Eakin explained that costs from regulatory mandates issued under the Biden Administration are 50% greater than under any previous administration.

H.R. 7198, the Prove It Act, sponsored by Representative Finstad, Representative Moran, and Representative Caravaro, strengthen the RFA to avoid agency evasions by allowing small businesses to directly challenge an agency’s “certification” and by requiring agencies to be fully transparent about how regulations will impact the small business community.

The U.S. Chamber of Commerce, along with 47 national trade and membership organizations representing small business owners, along with over 100 local and state chambers of commerce ask that members of this Committee update the RFA and close real or apparent loopholes that shut-out small business input. Furthermore, we respectfully ask members of this Committee to sign on as co-sponsors to H.R. 7198 and that the Committee take up the legislation.

Minimizing red tape will enable small businesses to do what they do best – drive innovation, bolster communities, and create jobs.

Please do not hesitate to contact Tom Sullivan, the Chamber’s Vice President for Small Business Policy, if you have questions or comments regarding the content of this statement for the record.

Sincerely,

Natalie Kaddas
CEO, Kaddas Enterprises, Inc.
Chair, Small Business Council
U.S. Chamber of Commerce