The Regulatory Tsunami

Tuesday, March 1, 2011 - 13:13

The Editor offers excerpts from the 2011 State of American Business Address delivered by Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, on January 11, 2011.

[To successfully improve our economy], we must rein in excessive regulations and reform the regulatory process. At the federal level alone, regulations already fill 150,000 pages of fine-print text and cost Americans $1.7 trillion a year. Many of these rules are necessary, and business strongly supports them. Yet in recent years, we have seen an unprecedented explosion of new regulatory activity. Furthermore, the administration is likely to turn increasingly to the regulatory agencies, now that getting legislation out of Congress could be more difficult. The resulting regulatory tsunami poses, in our view, the single biggest challenge to jobs, our global competitiveness and the future of American enterprise.

Health Care

The new health care law creates 159 new agencies, commissions, panels, and other bodies. It grants extraordinary powers to the Department of Health and Human Services (HHS) to redefine health care as we know it. When the bill passed, Americans were promised that it would lower costs and allow anyone who liked their existing coverage to keep it. Instead, costs are rising, and health plans are being forced to change. Officials have already raised the cost estimates of the bill and have acknowledged that the savings earmarked for Medicare will never materialize.

In some states, Medicare Advantage participants are being told their plans will no longer be available. Workers who have been banking on employer-based coverage when they retire are being told not to count on it. And as premiums rise, thanks in part to the law's new mandates, many companies are thinking about ending their employer-based plans and moving workers into government-run exchanges.

By mid-December, HHS had already granted 222 waivers to the law - a revealing acknowledgement that the law is unworkable. And, with key provisions under challenge in the courts by states and others, it's time to go back to the drawing board.

Last year, while strongly advocating health care reform, the Chamber was a leader in the fight against this particular bill, and thus we support legislation in the House to repeal it. We see the upcoming House vote as an opportunity for everyone to take a fresh look at health care reform - and to replace unworkable approaches with more effective measures that will lower costs, expand access and improve quality.

Financial Regulations

The regulatory tsunami is also about to wash over our capital markets. Dodd-Frank contains 259 mandated rulemakings, another 188 suggested rulemakings, 63 reports and 59 studies. My grandchildren will be old and retired before it is all implemented. The Chamber's Center for Capital Markets Competitiveness is deeply involved in the regulatory rulemaking triggered by this massive law.

We are particularly concerned that the new Consumer Financial Protection Bureau does not use its broad authority in ways that deny small businesses and consumers the credit and financial products they need. We want to make sure that Main Street end users are still able to use derivatives in an effective way to manage their legitimate business risk without sidelining billions of dollars in productive capital and costing tens of thousands of jobs.

Although our pending litigation against the SEC over its proxy access rule has delayed its implementation, that battle is far from over. We'll continue to oppose proposals that would expand the ability of special interest shareholders, such as unions, to exploit proxy access rules to the detriment of companies, jobs and all shareholders. Even as we actively participate in these and many other rulemakings, we will renew our efforts to create a more modern, coherent regulatory structure with more effective regulators - areas where the new legislation fell far short. If we want to create enough jobs, we must ensure that our nation has the most vibrant, transparent, efficient and well-regulated capital markets in the world.

Labor Market Regulations And Policies

Job creators are also facing unprecedented regulatory activity and case law changes in the Department of Labor, the National Labor Relations Board and similar agencies. Over 100 such efforts are underway, covering compensation, contracting, leave, ergonomics, workplace safety, hiring and firing, and union organizing. The Chamber is going to fight hard throughout the year to challenge policies and rulings that are unfair to employers. But much more than workplace rules is at stake here.

Some unions - particularly the public employee unions - are pushing an extreme agenda that extends well beyond representing their members in the workplace. They have been using their position as a powerful political force to sabotage the nation's trade agenda, which has damaged our standing overseas. Some want to vastly expand the size and cost of government, perpetuate the status quo in our failing public schools and attack the nation's best companies through destructive tactics. The sad irony is that all of these activities undermine the nation's ability to create and keep good-paying American jobs.

EPA Rulemakings And Greenhouse Gas Regulations

We will also continue our legal and legislative efforts to stop the EPA from misapplying environmental laws in order to unilaterally regulate greenhouse gases. The Chamber will support appropriate bipartisan legislation to delay or stop the EPA and return the important climate change issue to the purview of the Congress.

While EPA is starting with the largest emitters, it could eventually regulate 6 million entities - including small businesses, hotels, warehouses and even churches. Before any of these facilities could build or expand, they would have to get pre-construction permits that take six to nine months to obtain at a cost in excess of $100,000 per permit, and even then, the permits can be challenged in court. This could seriously disrupt construction activity across our nation and throw a lot of people out of work.

Beyond greenhouse gases, EPA's regulatory agenda lists 342 rulemakings in various stages of development and completion. Of these, 30 are deemed "economically significant" - each with a cost to our economy of $100 million or more.

Regulatory Reform And Advocacy

I could cite many other troubling examples of regulatory over-reach. Here's just one: By unfairly imposing a one-size-fits-all test that has little to do with academic quality, the Department of Education would make entire higher education programs ineligible for federal financial aid. As a result, hundreds of thousands of students could be denied access to our excellent for-profit colleges, universities and technical institutes. The administration should take the advice of many in the Congressional Black Caucus and withdraw the regulation.

How will the Cham ber challenge this vast array of regulatory activities across our government? We will use a range of tools depending on the circumstance. We will work cooperatively with the agencies whenever we can to reach a reasonable outcome. We will support, when appropriate, efforts to limit agency funding to implement regulations. We may pursue legislation or seek the application of the Congressional Review Act.

Yet the time has come to reform the regulatory process itself - to restore some badly needed balance and accountability to the system. This could be done by giving Congress the right to vote up or down on major rules before they take effect and by strengthening the burden of proof that all agencies would have to demonstrate in court when they are imposing major rules.

Speaking of courts, new regulations mean new opportunities for the trial bar to expand lawsuits. The need for legal reform as well as courtroom advocacy on behalf of business will be greater than ever in the coming year and beyond. Our Institute for Legal Reform and our law firm, the National Chamber Litigation Center, will therefore play a critical role in the Chamber's ongoing program of work.

Finally, the Chamber will soon stand up a new group that will engage one or more respected advocates of stature and experience in the regulatory arena. This group will continually tell the story to the American people, policymakers, and the media about the massive costs of excessive regulations on jobs and on our personal and economic freedoms.

We cannot allow this nation to move from a government of the people to a government of the regulators. That's where it has been headed under Republicans and Democrats alike. We're going to be engaged in this fight for years to come.