House Passes “Red Tape Reduction and Small Business Job Creation Act”

The House of Representatives has passed a comprehensive regulatory reform bill to cut red tape and make the federal rulemaking process more friendly to job creators.

The measure included several provisions previously passed by the House Committee on Oversight and Government Reform.

“In more than 30 hearings, examinations and public forums, our Committee has heard loud and clear from job creators across the country who tell us that red tape imposed by the federal government chokes economic expansion and hurts job creation.  Nonpartisan research surveys report that the American public feels the same way—with an overwhelming majority saying federal regulations are a major reason why the economy is struggling.  This bill helps unwind much of this unnecessary red tape and frees entrepreneurs and business owners to do what they do best: create jobs and opportunity,” Oversight and Government Reform Committee Chairman Issa said.

The Red Tape Reduction and Small Business Act (H.R. 4078) includes several key proposals:

• The bill imposes a freeze on economically significant regulations that harm the economy until the unemployment stabilizes at 6 percent or below;

• It permanently blocks administrations, during the “lame duck” post election period in which they are not serving a subsequent term, from issuing economically significant regulations.  Administrations in this category have historically issued new rules at a 17 percent higher rate than non election years;

• The bill also ensures that parties impacted by government red tape have a right to intervene before agencies agree to binding legal settlements that mandate new regulations.  This will ease the use of judicial decrees or settlement agreements to force new regulations outside the regular process;

• It also requires that independent federal agencies such as the Federal Communications Commission and National Labor Relations Board comply with the same review requirements as other agencies as well as increased public transparency concerning unfunded mandates imposed on state and local governments;

• Ease regulatory hurdles on federal construction projects.  One survey found that some 350 energy projects were stalled because of red tape that, if expedited, could generate nearly 2 million construction jobs plus $145 billion in economic activity;

• The legislation also requires the Securities and Exchange Commission and the Commodity Futures Trading Commission to conduct more thorough cost-benefit analysis of proposed regulations.  Last year the agencies had over 100 rules in the approval process.

Several of the red tape reduction measures included were also supported by President Obama’s Job’s Council; three of the provisions included in this legislation were earlier passed by the House Committee on Oversight and Government Reform as stand-alone bills, and were included as part of the larger Red Tape Reduction and Small Business Job Creation Act.  The Committee recently released a comprehensive staff report documenting, in the words of job creators and business operators, the specific regulatory impediments they face that stifle job creation.

President Obama’s rulemaking and regulatory administrator Cass Sunstein has praised the Oversight Committee’s “constructive and important work” on the issue of streamlining red tape and easing federal rules that hurt job creation.

The federal government’s Small Business Administration estimates that current regulations already cost $1.75 trillion every year and add $10,585 in overhead per employee.  In the February 2012 Wells Fargo/Gallup Small Business Index, nearly half of small business owners who are not hiring cited government regulations as the reason.  Another poll found that 74 percent of registered voters think there are too many pending regulations, and 63 percent think federal regulations are hurting, not helping, small businesses.  In a recent National Federation of Independent Business (NFIB) survey, small business owners named “taxes” and “government regulation and red tape” among the most serious problems they face.

An analysis by the American Action Forum found H.R. 4078 could save at least 2,700 jobs, 2.6 million paperwork hours and $22.1 billion in compliance costs.

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