Examining How Small Businesses Confront and Shape Regulations

March 29, 2017

Sofie E. Miller
Daniel R. Pérez

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Prepared Statement for the Record for the U.S. Senate Committee on Small Business & Entrepreneurship hearing on "Examining How Small Businesses Confront and Shape Regulations"

Introduction

Thank you Chairman Risch, Ranking Member Shaheen, and Members of the Committee for inviting us to submit for the record our research on the effects of regulation on small businesses and potential prospects for regulatory reform. Sofie E. Miller and Daniel R. Pérez are Senior Policy Analyst and Policy Analyst, respectively, at the George Washington University Regulatory Studies Center, where we analyze the effects of regulation on public welfare.

We appreciate the Committee’s interest in regulatory reform, including its effects on small businesses. The focus of our work at the George Washington University Regulatory Studies Center is on federal regulatory policies, processes, and reforms. While we do not focus exclusively on the effects of regulation on small businesses, our research on regulatory best practices and process is directly related to several of the provisions of the legislation being considered here today. With that in mind, our prepared statement includes the following points:

Small businesses are often indirectly burdened by federal regulation, and these indirect costs are not accounted for in the current regulatory flexibility analysis framework. While exploring opportunities to remedy this oversight, the Committee should be careful to avoid measures of indirect costs that would include double-counting, and may want to consider legislative language that ensures the indirect costs of implementing regulations (such as state implementation plans) are duly considered.

Regulatory review is an important component of a healthy regulatory process. An evidence-based regulation framework can be helpful for conceptualizing such a review process, and may assist in informing the Committee’s efforts to enhance review of rules that impact small entities.

To the extent that any legislative changes codify regulatory best practices, such as those found within Executive Order 12866, this may successfully strengthen Congress’ oversight of agency compliance.

Efforts to increase the opportunities for small businesses to participate early in the rulemaking process could be valuable in improving regulatory outcomes. However, the Committee should consider potential tradeoffs associated with doing so—with particular attention on possible unintended effects that reduce the efficacy of the existing SBAR process.