Anti-regulatory Forces Launch Full Assault on Public Protections

2/8/2011

Corporate lobbyists and their allies in Congress have launched a systematic, coordinated effort to attack the federal government's efforts to boost innovation and protect public health, worker safety, and environmental quality. The attacks appear to have the Obama administration backpedalling on its agenda to provide meaningful health and safety standards to the American people.

During most of the time President Obama has been in office, corporate special interests have been complaining about the administration's attempt to govern more proactively. As Congress passed major reforms like health care and financial regulation packages and the 2010 midterm elections approached, anti-government opponents prepared strategies to attack the role of government. (See the Jan. 11 issue of The Watcher for a summary of strategies.) The sections below describe the actions taken or planned to implement these strategies.

Congressional Oversight Hearings

On Jan. 26, the Subcommittee on Oversight and Investigations of the House Committee on Energy and Commerce held a hearing on "The Views of the Administration on Regulatory Reform." The only witness was the Administrator of the Office of Information and Regulatory Affairs (OIRA), Cass Sunstein, who defended the Obama administration and its regulatory reform efforts.

The chair of the subcommittee, Rep. Cliff Stearns (R-FL), accused the administration of permitting "an onslaught of federal regulations" that have added significant costs to businesses in a slumping economy. Sunstein defended the pace of public protections coming from the administration. He said, "Actually, the number of regulations issued over the past two years is approximately the same as the number of regulations issued in the last two years of the Bush administration," according to a Congressional Quarterly article (subscription required).

Also on Jan. 26, the Committee on Education and the Workforce held a hearing on the "State of the American Workforce." The chair of the committee, Rep. John Kline (R-MN), in his opening remarks, expressed "strong concern with administration proposals and policies that are having a chilling effect on America's job creators." One target of the chair's wrath is the 2010 health care act.

Opponents of government intervention in the economy – for example, Virginia Gov. Bob McDonnell (R) and Dyke Messinger, testifying on behalf of the National Association of Manufacturers (NAM) – focused on reducing taxes and the costs of regulations as the two most important factors leading to new job creation. Neither focused on the benefits of public protections.

Heather Bushey, an economist at the Center for American Progress, painted a picture of a more complex economy crippled by "mismanagement … in the 2000s." She stressed the need for greater investment in U.S. infrastructure and keeping jobs in this country when making trade policy decisions. She also noted, "Even though corporate America is flush with cash, investment is at the lowest level in more than five decades. So far in this business cycle, from December 2007 to September 2010, business investment has averaged 9.8 percent of gross domestic product, the lowest average for any business cycle since the late 1950s."

Additional hearings with anti-government themes are scheduled:

  • On Feb. 8, the House Rules Committee plans a hearing on a resolution "Directing certain standing committees to inventory and review existing, pending, and proposed regulations and orders from agencies of the Federal Government, particularly with respect to their effect on jobs and economic growth." This resolution is expected to move to the House floor on Feb. 10 and will require major House committees to identify regulations that are "harming job creation," likely teeing up a broader assault on public protections.
  • On Feb. 9, the House Energy and Commerce Committee will hold a hearing on a bill to strip the authority of the U.S. Environmental Protection Agency (EPA) to regulate greenhouse gases.
  • On Feb. 10, the House Oversight and Government Reform Committee will hold a hearing on "Regulatory Impediments To Job Creation."
  • Also on Feb. 10, the House Judiciary Committee will conduct a hearing on the "'Regulatory Flexibility Improvements Act of 2011' – Unleashing Small Businesses to Create Jobs."
  • On Feb. 15, a House Oversight and Government Reform subcommittee will hold a hearing on "Regulatory Issues as it Pertains to Unfunded Mandates."

In addition to these and other specific hearings, the chair of the Oversight and Government Reform Committee, Rep. Darrell Issa (R-CA), sent letters to roughly 170 companies and trade associations requesting lists of regulations impacting job creation that should be reformed or eliminated. Issa also posted the same request on a business-oriented website. On Feb. 7, Issa announced he received more than 200 responses to his request. It is unclear how the committee intends to use the information, though many expect Issa to use the responses to put further pressure on the Obama administration.

Proposed Legislation Targeting Regulations

Anti-regulatory lawmakers have begun following through on their campaign promises to attack not only individual regulations, but the entire rulemaking process.

The most significant piece of legislation to date is the Regulations from the Executive In Need of Scrutiny (REINS) Act, H.R. 10. This bill would require Congress to vote on and approve every new agency rule with an estimated economic impact (either cost or benefit) of $100 million or more or any rule with a "significant effect" on prices, competitiveness, productivity, or other economic factors. The act would prohibit agencies from implementing rules that do not garner congressional approval.

The REINS Act would cover nearly every aspect of government operations and service. Not only would health, safety, and environmental protections be required to face a fast-tracked vote in Congress before they could be implemented, but so would many rules covering civil rights, Medicaid, Head Start, tax provisions, and even subsidies to industry. This would strip away the current buffer between congressional politicking and technical rulemaking, allowing lobbyists to spread their money around and politicize rulemaking.

By designating this bill within the first 10 bills of the session, the House leadership has signaled that the REINS Act will be one of its top priorities. In addition, the legislative calendar has begun to fill with other bills that seek to undermine the rulemaking process, including:

  • The Regulation Audit Revive Economy Act (H.R. 213), which would impose a moratorium of up to two years on all new regulations, making only limited exceptions for emergencies and other issues.
  • The Congressional Office of Regulatory Analysis Creation and Sunset and Review Act (H.R. 214), which would create the Congressional Office of Regulatory Analysis and require agencies to review all significant rules to consider whether they should be revised or eliminated.
  • The 10th Amendment Regulatory Reform Act (H.R. 455), which would create special standing for state officials to challenge the constitutionality of any rule under consideration.

EPA's regulatory authority is another clear target of House Republicans, particularly related to EPA's efforts to regulate greenhouse gas (GHG) emissions. A few samples of these anti-EPA proposals include:

  • The Free Industry Act (H.R. 97), which would amend the Clean Air Act (CAA) to prevent it from being used as legal authority to regulate greenhouse gases.
  • The Protect America's Energy and Manufacturing Jobs Act (H.R. 199 and S. 231), which would suspend for two years EPA’s authority to regulate stationary source emissions.
  • A bill prohibiting any agency from regulating GHGs until China, India, and Russia have enacted similar regulations.
  • The Ensuring Affordable Energy Act (H.R. 153), which would prohibit the EPA from funding a cap-and-trade program or issuing any new stationary source emission regulations.
  • The Defending America’s Affordable Energy and Jobs Act (S. 228), which would amend the CAA to exclude greenhouse gases from EPA regulation and prevent the agency from taking climate change into account when considering any regulation.

The Obama Administration's Rulemaking Slowdown

Obama has shown that he, too, is willing to bow to anti-regulatory interests. In a Jan. 18 Wall Street Journal op-ed, Obama adopted the conservative mantra that regulations impair job creation and innovation. The op-ed also announced a new executive order on regulation that instructs agencies to review existing regulations and impressed upon agencies the need to place regulatory decisions in a job-creation context.

Rhetorically, Obama shifted during his State of the Union address. He reiterated points in his executive order but assured Americans, "I will not hesitate to create or enforce commonsense safeguards to protect the American people." Obama connected regulation to health and safety by saying, "It's why our food is safe to eat, our water is safe to drink, and our air is safe to breathe. It's why we have speed limits and child labor laws."

Since Obama signed the new executive order, however, several agencies have pulled back on planned regulatory actions. Whether politically motivated or not, each move strengthens the perception that the administration may be sacrificing regulation to curry favor with the business community and conservative lawmakers.

The most striking example of the administration's hesitancy toward regulation came Jan. 25 when the Occupational Safety and Health Administration (OSHA) announced it would reconsider a rule on musculoskeletal injuries that had been nearing completion. The rule would restore a musculoskeletal column to the form employers fill out when a worker is injured. This minor requirement for employers would be a boon to OSHA, which would then have additional information on such injuries. However, industry opposes the rule and lobbied against a draft final version while it was under review at OIRA, typically the last major step before final publication.

In a statement, OSHA head David Michaels acknowledged, "Work-related musculoskeletal disorders remain the leading cause of workplace injury and illness in this country," but added, "However, it is clear that the proposal has raised concern among small businesses, so OSHA is facilitating an active dialogue between the agency and the small business community."

The industry lobbyists that met with OIRA and OSHA were not from small businesses, but rather Washington-based trade groups including the U.S. Chamber of Commerce (the Chamber), the National Association of Home Builders, Associated Builders and Contractors, Inc., and NAM. In a statement, NAM Vice President of Human Resources Policy Joe Trauger called the musculoskeletal column "unnecessary."

Trauger referred to an earlier announcement that OSHA had withdrawn a "proposed interpretation" on occupational noise standards when he said, "This is another positive sign that the Agency is listening to the concerns of employers about the economic impact of costly and burdensome requirements." OSHA said it needed to perform more public outreach and is concerned about potential costs. Industry had publicly objected to the proposal and applauded its withdrawal. "OSHA spokeswoman Diana Petterson said the noise standards decision was 'completely unrelated' to Obama's order," according to the Associated Press.

On Jan. 18, the Employment and Training Administration (ETA) announced new wage standards for foreign guest workers. ETA says the rule, by setting wage floors, will help foreign guest workers while at the same time making U.S. workers more competitive in the job market. However, ETA delayed implementation of the rule until 2012, angering labor unions. "Delaying the new wage process until 2012 gives too great a concession to the Chamber of Commerce and other business groups that profit from employing low-paid foreign guest workers," AFL-CIO President Richard Trumka said in a statement. Like OSHA, ETA is a part of the Department of Labor.

On Jan. 31, the Consumer Product Safety Commission (CPSC) again delayed a requirement that children's product manufacturers test their products to ensure they do not contain harmful levels of lead. Since Congress approved the requirement in 2008's Consumer Product Safety Improvement Act, industry has complained about the costs of the testing, which must be conducted by an accredited third party. CPSC's commissioners have voted three times to delay implementation. The commission's Jan. 31, 4-1 vote extended the deadline until Dec. 31, 2011, and will be the final stay of enforcement, according to CPSC head Inez Tenenbaum.

Taken together, these examples portend a shift in the administration's regulatory strategy. A September 2010 OMB Watch report analyzing the Obama administration record on rulemaking in its first 18 months found that agencies had poured energy into their rulemaking agendas and had made significant progress on a variety of health, safety, and environmental issues. Obama's record stood in stark contrast to that of President Bush, who preferred a hands-off approach and more collaboration with industry, the report found.

It seems as if the Obama administration is trying to find a clear message on regulatory issues. Obama spoke at the Chamber on Feb. 7, where he reiterated points made in the Wall Street Journal op-ed and emphasized actions the administration has taken to reduce requirements on business. However, Obama countered those points by stating, "[E]ven as we work to eliminate burdensome regulations, America's businesses have a responsibility to recognize that there are some safeguards and standards that are necessary to protect the American people from harm or exploitation," and, "[T]he perils of too much regulation are matched by the dangers of too little."

Obama continued with a strong defense of regulation. He provided some historical context with examples where industry claimed the sky was falling, such as with seatbelts in cars and the creation of the Food and Drug Administration, and he stated that in fact, "companies adapt and standards often spark competition and innovation." Citing other examples, Obama concluded, "So regulations didn't destroy the industry; it enhanced it and it made our lives better." He then called on industry to create jobs by spending some of the corporate profits that have swelled from an annualized pace of $995 billion to nearly $2 trillion.

Yet on the same day that Obama was defending regulation at the Chamber, Sunstein of OIRA posted a blog entry heavy on capitulating to corporate special interests and light on promoting public protections.

The Case for Greater Public Protections

The jobs-versus-regulations myth has been perpetuated by corporations and their political allies for at least three decades, yet the U.S economy has experienced both tremendous growth and economic declines unrelated to government intervention during that time. There is little evidence to support the canard that regulations cost jobs. In addition, the current regulatory process, with its biased approach to calculating costs and benefits in favor of business, shows that the benefits of public protections far outstrip the costs as reported in OIRA's annual costs and benefits reports to Congress.

Businesses often urge federal agencies to set national standards to protect against disparate state standards and/or competition from international companies. In a recent Bloomberg Government Insider article, author David Lynch illustrates numerous examples of businesses supporting government intervention. On food safety, underground storage tanks, emission control systems, seat belts, air bags, and climate change, businesses benefit when the government creates standards that protect public health, safety, and environmental quality.

Lynch cites a representative of the Grocery Manufacturers Association that called the landmark food safety bill passed in 2010 "a present under the tree" because its clients lost millions of dollars after contaminated food led to multiple recalls and reduced consumer confidence in food products, even those products unaffected by the recalls. The new standards in the law "will be worth the trouble if they calm shoppers and prevent costly recalls," according to the article.

At the Energy and Commerce Committee hearing described above, ranking member Henry Waxman (D-CA) noted that nine corporate heads of energy and manufacturing companies supported comprehensive energy legislation. "What these CEOS [sic] were telling us is that they needed more energy and carbon regulation – not less – so they would know the rules and plan and invest for the future," Waxman said in his hearing statement.

Ironically, even the Chamber's chief lobbyist R. Bruce Josten debunks the jobs vs. public protections myth, according to the Bloomberg article, when he admits, "Everyone thinks the business community hates regulations. Not only is that not true, it couldn't be further from the truth."