Coalition Chair & Former Senator Blanche Lincoln and NFIB CEO & President Dan Danner penned the following open letter to President Obama today, outlining their call for five principles for sensible regulatory policy.

Dear President Obama and Vice President Biden:

Privately owned and operated in every city and town, America’s small businesses are the engine of the U.S. economy.  From dry cleaners and convenience store operators to small manufacturers, farmers, lawyers, plumbers and contractors, the fruits of America’s smallest enterprises add up to 50 percent of U.S. GDP. Nearly 60 percent of the private sector workforce is employed by the small-business sector.

For decades, small businesses have worked to ensure workplace and environmental protections, and federal regulations have played a role. However in recent years, small business’ ability to grow and continue to create two-thirds of the net new jobs annually has been threatened by a growing number of burdensome regulatory requirements handed down from Washington.  Since 2005, there has been a 60 percent increase in the number of federal regulations defined as “economically significant” – each costing the economy $100 million or more.  Today there are 4,257 regulations in the pipeline with 845 directly impacting small businesses.

Federal regulations disproportionately affect smaller firms, according to a study conducted last year for the Small Business Administration. The study found that small businesses pay 36 percent more per employee, per year to comply with federal regulations than larger businesses. Whether new rules require more paperwork, redundant certifications, or costly new technology, they put an unanticipated drain on small-business resources.

NFIB members have consistently pointed to federal regulations as one of the top three issues holding them back from hiring workers and taking other steps toward growth, and a new poll by Gallup validates this sentiment.

Small businesses require a stable and efficient regulatory environment, which is not in place today.  With our members’ input, we believe that there is a unique opportunity to fix today’s regulatory maze by reforming the system.

In this uncertain economy, we urge the White House to attach the highest priority to bringing balance to the federal regulatory process, which will give small businesses some of the certainty they need to expand their operations and create jobs.

Before adding additional layers of regulation, it is important that we ensure the integrity of the regulatory process so that new regulations, which will be on the books for decades into the future, are based on the best available information and take into account long-term impacts to our economy, workforce, and competitiveness.

We recommend that the Obama Administration halt the issuance of new regulations until the following recommendations, which are the foundation for sensible regulations, are incorporated:

America’s small businesses deserve a greater voice in the federal regulatory process.

In an executive order issued by President Obama earlier this year, the President pledged to promote an “open exchange of ideas” and greater public participation in the regulatory process. We urge the administration to invite small-business input in the earliest stages of crafting regulation. This  will promote better understanding about which problems proposed regulations are supposed to fix and result in regulations that meet agency objectives and provide flexibility for businesses.  Too often, regulators generating rules have little to no contact with those who will be required to implement them. They cannot be expected to understand the impact, feasibility, or unintended consequences of their actions without inviting small businesses to have a more prominent seat at the table.

The administration’s first focus should be on providing assistance to small businesses before assessing penalties. Small businesses usually don’t have the cash on hand to hire a full-time compliance officer, and they are often unaware of many of the new regulatory requirements imposed on them in any given week. Fining businesses for mistakes made in good faith only adds to their problems, and makes it less likely they can afford to comply. Sensible reform would promote greater compliance assistance for small businesses mandated to comply with multiple complex regulations and waive fines and penalties for first offenses involving minor errors on regulatory paperwork.

Every major regulation should undergo rigorous benefit-cost analysis.  Regulators should estimate the long-term benefits and costs of new regulations using the best available models and adopt only those regulations that impose the least burden on the economy at large.  Regulatory agencies often highlight indirect benefits of regulatory proposals, but should analyze and make public the indirect costs to consumers as well.  In addition, the collective impacts of more and more regulations on small businesses must be considered. 

Regulations should be based on objective data and hard science. Studies and analyses are released constantly inside the beltway with the purpose of pushing one point of view over another. But all too often regulators cherry pick studies to support policy agendas, rather than allowing empirical data and hard science to shape public policy. To reform this, federal agencies should adhere to a clear and consistent process for evaluating scientific studies and models justifying regulation as well as for selecting advisory panels based on their knowledge and experience.

The regulatory process requires more transparency and accountability.  Federal regulators should share publicly the data, methods and models underlying federal regulatory decision-making.  This includes any uncertainties stemming from their analysis.  To ensure transparency, the federal government should establish clear standards for assessing risks and calculating benefits and cost.  In addition, Congress and the courts should oversee the agencies’ work and hold them accountable for adhering to these principles.

Mr. President, adopting these principles and ensuring that federal agencies apply them to new regulations will help bring a level of needed certainty to America’s small businesses.  We ask that you attach the highest priority to implementing them today.

Signed,

The Honorable Blanche Lincoln
Former U.S. Senator (D-AR)
National Chairwoman
Small Businesses for Sensible Regulations

and

Dan Danner
President & CEO
National Federation of Independent Business

Download the signed open letter.