Obama Administration Tackling Reg Reform

January 18, 2011

As previously noted, regulatory reform will be on the political agenda in the coming year. With the U.S. Congress already signaling its intent, the administration of President Barack Obama also has announced its intention to tackle regulatory reform.

Yesterday, Obama penned an essay in the Wall Street Journal, outlining his administration’s plan to create a “21st-century regulatory system.” In the essay, Obama sketched out his vision for this new framework. He emphasized the need to garner “more input from experts, businesses, and ordinary citizens,” and stressed his intent to get “rid of absurd and unnecessary paperwork requirements that waste time and money.”

Obama also announced that he was signing a new Executive Order and a Presidential Memoranda aimed at achieving this goal.

The Memoranda is directly addressed at reducing the regulatory burden on small firms. The Memo states that the Obama Administration is “firmly committed to eliminating excessive and unjustified burdens on small businesses, and to ensuring that regulations are designed with careful consideration of their effects, including their cumulative effects, on small businesses.” It goes on to emphasize that “it is especially important for agencies to design regulations in a cost-effective manner consistent with the goals of promoting economic growth, innovation, competitiveness, and job creation” in the current economic environment.

Specifically, the Memo directs executive department and agencies to give serious consideration to whether and how it can provide small businesses with increased flexibility, as provided by the Regulatory Flexibility Act (RFA).

The Memo also cites the increased flexibility measures outlined in the RFA:

  • extended compliance dates that take into account the resources available to small entities;
  • performance standards rather than design standards;
  • simplification of reporting and compliance requirements (as, for example, through streamlined forms and electronic filing options);
  • different requirements for large and small firms; and
  • partial or total exemptions.

Additionally, the Memo directs executive departments and agencies to provide an explicit justification for any decision not to afford increased flexibility to small firms in any proposed or final rule “likely to have a significant economic impact on a substantial number of small entities.”

The Executive Order—which is meant to supplement Executive Order 12866, which was signed Sept. 30, 1993—outlines a number of guiding principles agencies should consider during the rulemaking process. Broadly, rulemaking should be:

  • Cost-effective and Cost-Justified: Consistent with law, Agencies must consider costs and benefits and choose the least burdensome path;
  • Transparent: The regulatory process must be transparent and include public participation, with an opportunity for the public to comment.
  • Coordinated and Simplified: Agencies must attempt to coordinate, simplify, and harmonize regulations to reduce costs and promote certainty for businesses and the public.
  • Flexible: Agencies must consider approaches that maintain freedom of choice and flexibility, including disclosure of relevant information to the public.
  • Science-driven: Regulations must be guided by objective scientific evidence.
  • Necessary and Up-to-Date: Existing regulations must be reviewed to determine that they are still necessary and crafted effectively to solve current problems. If they are outdated, they must be changed or repealed.

Please click here to view the Executive Order.

Please click here to view the Presidential Memoranda.

NSBA Reaction

The National Small Business Association (NSBA) is greatly pleased by the administration’s intention to enact meaningful regulatory reform. Perplexing paperwork and an oppressive federal regulatory regime continue to overburden innumerable small-business owners across the country.

U.S. Small Business Administration (SBA) research demonstrates that, in total, companies with fewer than 20 employees pay more than $10,585 per employee to comply with federal regulations each year. Large firms pay about $7,755—or 36 percent less per employee.

Please click here more information on NSBA’s position on regulatory reform.

NSBA looks forward to working with Congress and the Obama Administration to achieve meaningful regulatory relief for America’s small businesses.

Please click here to listen to an interview on this announcement with NSBA President Todd McCracken on NPR’s All Things Considered.