Push to Cut Oversight of Businesses Roils Senate

Sen. Olympia Snowe (R-ME) is pushing legislation that would make it more difficult for government agencies to set health, safety, environmental, and economic standards that protect the American people. Snowe is using the debate over her bill to reinforce untrue stereotypes about regulation's impact on the economy.

Snowe is pushing her bill, the Small Business Regulatory Freedom Act (S. 474), co-sponsored with Sen. Tom Coburn (R-OK), as an amendment to an unrelated bill (S. 493) that provides financial aid and other help to small businesses. She is doing so in such a vehement manner that her actions are threatening to derail the underlying bill altogether. Senate Majority Leader Harry Reid (D-NV) has said he will not allow a vote on the Snowe-Coburn bill as an amendment to the small business aid bill.

In a testy exchange on the Senate floor April 14, Reid said that the Snowe-Coburn bill was not germane to the small business aid bill and that her insistence on including it as an amendment would jeopardize passage of the bill when the Senate resumed debate the week of May 2. "I am disappointed my friend from Maine is killing this legislation," Reid said. Reid also pointed out that the Snowe-Coburn bill has not been the subject of a committee hearing. Snowe responded, "I am just surprised that there is a new standard here because we have passed numerous pieces of legislation on the floor of the Senate that may not be subject to a specific hearing."

The row stems from Snowe's insistence that business lobbyists should be given additional opportunities to influence the rulemaking process and that agencies should water down health and safety standards if businesses object to their compliance costs. The Snowe-Coburn bill would require agencies to form panels of business representatives to review rules prior to the public comment period. It would also require agencies to conduct look-back reviews of existing rules on a regular basis and to consider reducing or waiving penalties if businesses are found in violation of health and safety standards.

To enforce the requirements on agencies, the Snowe-Coburn bill authorizes agency inspectors general to impose a one percent budget cut at an agency if it fails to review a rule properly. The bill would also allow businesses to sue agencies over the cost-benefit analyses they prepare during the rulemaking process, effectively allowing businesses to tie rules up in court before they can even be finalized.

Snowe says the bill is needed because the costs of regulation are too high. She regularly cites a study prepared by two economists, Nicole Crain and Mark Crain, for the Small Business Administration's Office of Advocacy. That study claims that the annual cost of regulations is $1.75 trillion. The statistic is included in the findings of the Snowe-Coburn bill, and Snowe also cited the figure in an opinion piece authored for The Hill and on the Senate floor.

However, the Crain and Crain study has been widely discredited. In an assessment of the study, the Congressional Research Service found shortcomings with the models used by Crain and Crain to predict regulatory costs and also noted that the study does not acknowledge the economic benefits of regulation. The nonprofit Center for Progressive Reform (CPR) published a report in February that found severe methodological problems with the study and concluded that "policymakers should disregard its misleading conclusions as they consider matters of regulatory policy."

Evidence actually shows that regulations can benefit the job market and the economy as a whole. A recent paper published by the Economic Policy Institute found that regulation can spur job creation in certain industries. The paper also found that regulations are generally beneficial for society and that cost-benefit analyses prepared by agencies before rules take effect often overstate costs and understate benefits.

Snowe also wrote in The Hill, "Too often, new regulations are piled on top of existing regulations without substantial consideration of the impact on those who will have to comply." However, agencies already comply with a host of analytical requirements under existing laws and executive orders. Agencies' regulatory cost-benefit reports, often hundreds of pages long, are exhaustive and can take years to develop. Additionally, two laws already exist requiring agencies to consider regulations' impacts on small businesses.

Snowe couches her bill as an attempt to help small businesses, but small businesses may be hurt and big businesses are likely to benefit from the legislation. As Rena Steinzor, president of CPR, points out, many firms that meet the legal definition of small businesses may employ 1,000 or more individuals, including petroleum refineries, which are permitted to employ up to 1,500 workers before losing their status as "small." These businesses could be tapped for the business panels all agencies would be required to form under the Snowe-Coburn bill, potentially squeezing out true small businesses. (Under existing law, only the Occupational Safety and Health Administration and the U.S. Environmental Protection Agency are required to form these panels.)

The Snowe-Coburn bill also calls for budget increases for the Small Business Administration's Office of Advocacy. To offset the increase, the bill would eliminate three existing small business programs: one to encourage drug-free workplaces, one to promote energy efficiency among small businesses, and one to help veterans start and maintain small businesses.

A May 4 vote to end debate on S. 493 failed, with only 52 Senators voting for cloture (eight short of the 60 needed). The vote could prove fatal to the small business aid bill, because the Senate is now expected to proceed to other issues. The vote fell strictly along party lines, with 52 Democrats and Independents voting for, and 44 Republicans voting against. (Three senators, including Coburn, did not vote.)

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