[Senate Hearing 118-116] [From the U.S. Government Publishing Office] S. Hrg. 118-116 ONE SIZE DOES NOT FIT ALL: UNDERSTANDING THE IMPORTANCE OF RIGHTSIZING REGULATIONS FOR SMALL BUSINESSES ======================================================================= FIELD HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP OF THE UNITED STATES SENATE ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ AUGUST 23, 2023 __________ Printed for the use of the Committee on Small Business and Entrepreneurship [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available via the World Wide Web: http://www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 53-543 WASHINGTON : 2024 ----------------------------------------------------------------------------------- COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP ONE HUNDRED EIGHTEENTH CONGRESS ---------- BENJAMIN L. CARDIN, Maryland, Chairman JONI ERNST, IOWA, Ranking Member MARIA CANTWELL, Washington MARCO RUBIO, Florida JEANNE SHAHEEN, New Hampshire JAMES E. RISCH, Idaho EDWARD J. MARKEY, Massachusetts RAND PAUL, Kentucky CORY A. BOOKER, New Jersey TIM SCOTT, South Carolina CHRISTOPHER A. COONS, Delaware TODD YOUNG, Indiana MAZIE K. HIRONO, Hawaii JOHN KENNEDY, Louisiana TAMMY DUCKWORTH, Illinois JOSH HAWLEY, Missouri JACKY ROSEN, Nevada TED BUDD, North Carolina JOHN W. HICKENLOOPER, Colorado Sean Moore, Democratic Staff Director Meredith West, Republican Staff Director C O N T E N T S ---------- AUGUST 23, 2023 Opening Statements Page Joni Ernst, Ranking Member, U.S. Senator from Iowa............... 1 Witnesses Mr. Major L. Clark, III, Acting Chief Counsel, Office of Advocacy, U.S. Small Business Administration, Washington, DC... 4 Prepared Statement........................................... 6 Rep. Shannon Latham (R-55th) Iowa House of Representatives, Des Moines, IA..................................................... 33 Prepared Statement........................................... 35 Mrs. Megan Green, Counsel and Engineering Manager, Weiler Products, Knoxville, IA........................................ 41 Prepared Statement........................................... 43 Additional Letters/Statements for the Record Competitive Enterprise Institute Statement dated August 23, 2023.............................. 52 Goldbeck, Daniel Comments submitted August 23, 2023........................... 58 Job Creators Network (JCN) Statement dated August 23, 2023.............................. 61 National Automobile Dealers Association (NADA) Statement dated August 1, 2023............................... 64 National Federation of Independent Business (NFIB) Letter dated August 23, 2023................................. 65 SBA Office of Advocacy Chief Counsel Report on the Regulatory Flexibility Act, FY 2022 Report dated April 2023...................................... 70 Small Business and Entrepreneurship Council Letter dated August 31, 2023................................. 157 U.S. Chamber of Commerce Letter dated August 23, 2023................................. 159 Wall Street Journal Editorial Board ``Regulators Gone Wild'' Article dated August 14, 2023................................ 163 ONE SIZE DOES NOT FIT ALL: UNDERSTANDING THE IMPORTANCE OF RIGHTSIZING REGULATIONS FOR SMALL BUSINESSES ---------- WEDNESDAY, AUGUST 23, 2023 United States Senate, Committee on Small Business and Entrepreneurship, Des Moines, IA. The committee met, pursuant to notice, at 1:00 p.m. CDT, at Iowa Economic Development Authority, 1963 Bell Avenue, Des Moines, Iowa, Hon. Joni Ernst presiding. Present: Senator Ernst [presiding]. OPENING STATEMENT OF SENATOR ERNST Senator Ernst. Well, welcome everybody. We are going to go ahead and get started, so those that need chairs, if you can find one. The hearing is called to order. Good afternoon and thank you all for joining us today in beautiful Iowa. I know that some of you have traveled from out of state to be here today. As the Ranking Member of the Senate Small Business and Entrepreneurship Committee I want to specifically thank our witnesses for joining us as well as Sean Moore, the Committee's Democratic staff director, representing Chairman Ben Cardin. The issues facing small businesses continue to be the rare area of bipartisanship in Washington, and I appreciate the hard work Chairman Cardin, Sean, and their staff put in. Today's hearing is focused on rightsizing regulations for small businesses because one size does not fit all. Our goal is to examine the challenges small businesses face when they are forced to comply with the same regulatory requirements as much larger competitors. We will also discuss the benefits to small businesses when agencies adjust their regulatory demands accordingly. Small businesses today are drowning in red tape and unnecessary regulatory costs. In less than 3 years, the Biden administration has imposed almost $400 billion in regulatory costs on American businesses. By comparison, the previous two administrations combined, over the same time period, imposed $258 billion in regulatory costs, including during the implementation of Obamacare, with its hundreds of accompanying rules. In other words, the Biden administration has already imposed almost $140 billion more in regulatory costs than the previous two administrations did, combined. By one estimate, Biden's out-of-control regulatory agenda has imposed over $5,000 per household in costs, and I would like to submit for the record a Wall Street Journal editorial entitled ``Regulators Gone Wild,'' showing the full scale of the overreach. Senator Ernst. How can any small business keep up, and folks, sadly they cannot. And while those numbers are truly staggering, they do not even begin to tell a whole story of just how complex the Federal regulatory climate is for small businesses in Iowa and across the country. While regulatory costs hit all businesses, they are particularly damaging to small businesses, which is why, since 1980, the Regulatory Flexibility Act has required agencies to rightsize regulations by providing less-costly alternatives. When writing a new rule, the only way agencies can evade the rightsize requirement is by checking a box to certify that the regulation will not significantly impact small businesses. And folks, we know that any time Washington is creating a new regulation, chances are our small businesses will be severely impacted. Unfortunately, this has become a loophole for agencies to not put in the work to rightsize the regulation and provide flexibility to small businesses. The SBA's Office of Advocacy is an independent entity in the Federal Government that is charged with policing the Reg Flex Act, and we appreciate that the leader of this critical office, Mr. Major Clark, is with us today. When regulators significantly underestimate the real costs of regulations it results in very real consequences for small businesses. To illustrate let's look at just two regulations with broad impacts on Iowa small businesses that Advocacy found were improperly certified. First, the Federal Trade Commission recently underestimated the costs a regulation would place on auto dealer small businesses by almost $70 billion. Iowa franchised auto dealerships employ over 15,000 Iowans, and most are small businesses. I would like to submit for the record a one-pager from the Iowa and National Automobile Dealers Associations illustrating the problem. Second, the Environmental Protection Agency improperly claimed a rule defining Waters of the United States would not significantly impact small businesses despite the fact that it would likely affect every farmer and small businesses that wished to build a new barn or expand their business. In Iowa, 98 percent of agriculture businesses, 99 percent of construction businesses, and 89 percent of manufacturers are small businesses, and collectively employ over 46,000 Iowans. That is why I supported a resolution to repeal the WOTUS rule that passed the Senate, but unfortunately it was vetoed by the President. So what happens when small businesses or the SBA make it known to these regulators that their costs are underestimated and they should find alternatives to protect small businesses? Unfortunately, right now agencies can simply ignore them. This is why I introduced the PROVE IT Act of 2023, to prevent agencies from simply checking the box and empowering the SBA Office of Advocacy to require these agencies to show their work. My PROVE IT Act would require Federal agencies to prove they are not avoiding the Reg Flex Act and demonstrate that any new regulation is actually compliant with existing laws. It would also, for the first time, consider both the direct and indirect costs placed on small businesses, which would directly push back on the Biden administration's efforts to use far- reaching global benefits to justify imposing any costs. Finally, my bill would give Advocacy the tools they need to require, rather than ask, agencies to consider less-costly alternatives for small businesses. I am proud to see that over 10,000 small businesses around the country and 75 small businesses in Iowa have sent letters to Congress showing support for my legislation. As you can clearly see, it matters when agencies simply check the box and avoid rightsizing regulations. One-size-fits- all regulations do not suit Iowa's entrepreneurs, and that is why I am fighting to ensure our small businesses are heard and considered in future regulatory mandates from Washington. I look forward to hearing from our witnesses on this issue and how to address it. Now we will introduce our witnesses, and again thank you to our witnesses for being here today. First we have Major L. Clark III. He is the Deputy Chief Counsel, Small Business Administration Office of Advocacy. He currently serves as the Deputy Chief Counsel for SBA's Office of Advocacy. The SBA Office of Advocacy is the independent voice for small businesses within the Federal Government to advance the views and interests of small firms with Federal agencies. In fiscal year 2021 and 2022 alone, Mr. Clark and his staff engaged with Federal agencies on almost 40 regulations that led to almost $3.4 billion in estimated regulatory cost savings. Prior to joining the Small Business Administration, Mr. Clark was the Senior Corporate Officer for the Maxima Corporation and served as the Chief Administrative Officer for the House Small Business Committee. Thank you again for joining us today, Mr. Clark. Next we have Representative Shannon Latham. Shannon is the Representative for Iowa's 55th Legislative District in the Iowa House of Representatives, serving since 2021, and it covers parts of Wright, Franklin, and Hamilton Counties. During her time in the Iowa House, Representative Latham has been a strong advocate for Iowa small businesses and has been a staunch ally in Governor Reynolds' efforts to modernize the regulatory system and make Iowa the best place in the country to do business. In addition to serving in the Iowa House, Representative Latham also co-owns Latham Hi-Tech Seeds, a family-owned seed company headquartered in Alexander, Iowa. A fellow graduate of my alma mater, Representative Latham received her BS in Ag Journalism and Public Service and Administration in Agriculture from Iowa State University, and her MBA from the University of Iowa. And finally we have Mrs. Megan Green. She currently serves as the Counsel and Engineering Manager for Knoxville-based Weiler Products, which designs, engineers, and manufactures equipment for the paving market. Mrs. Green is a member of the senior leadership team and serves as the President of the Weiler Foundation for Charitable Giving. She was also recently appointed as a member of the People's Bank Board of Director. Prior to joining her current employment, Mrs. Green served as an in-house counsel for the State Farm in Bloomington, Illinois, counseling clients in multiple states on regulatory, legislative, and public policy issues. Mrs. Green also attended my alma mater, receiving her bachelor's degree in finance from Iowa State University and her JD from the University of Iowa. And I will also mention, while it was not in his biography, Major Clark also attended the University of Iowa. So we all have those Iowa connections. I do want to thank our witnesses very much for being here today. We will go ahead and proceed with the testimony, and Mr. Clark, we will start with you please, sir. STATEMENT OF MAJOR L. CLARK III, ACTING CHIEF COUNSEL, OFFICE OF ADVOCACY, U.S. SMALL BUSINESS ADMINISTRATION, WASHINGTON, D.C. Mr. Clark. Good afternoon, Ranking Member Ernst and distinguished guests. I am honored to be able to return to Iowa. It has been a while since I have been here, but fond memories during my period here. Iowa taught me how to be a good lawyer, not one of the bad lawyers, so I am very honored with that. Congress recognized the importance of small business to our nation's economy. As such, Advocacy was created in 1976, to be an independent voice for small businesses within the Federal Government, particularly during the Federal regulatory process. But that is not all that we do. Our legal team works to ensure regulations do not unduly burden small businesses, our regional advocates and our information team provide outreach to small business stakeholders across the country, and our economic research team conducts important research on small business and their roles, some of that which you have just heard from the Ranking Member. Advocacy's research demonstrates that small businesses continue to be a critical part not only of the nation's economy but also local economies, as here in Des Moines and in the total state of Iowa. We released a new small business profile series, which is available on the table behind you. It is the 2022 Small Business Profile, which focuses specifically on this great state of Iowa. This research confirms that small businesses are a vital component of Des Moines' and Iowa's economy. Small businesses account for 47 percent of Iowa's employment, which exceed the national share. Here in Des Moines metropolitan area, 98 percent of all businesses are small and account for about 41 percent of employment. Our research also shows that small businesses play an important role in rural areas. For example, small businesses provide 54 percent of rural jobs in the United States. Advocacy's economic research also inform agencies on the small business economic impacts of their regulations, which is critical. It is also our hope that this now helps stakeholders, many of you who are here today, understand the critical role that you play as small business owners in the local economy. After hearing from small businesses like those here in the state of Iowa, Congress passed what is called the Regulatory Flexibility Act to ensure Federal regulations are not, as the Chairman said, one size fits all. Rather, Federal agencies must consider the impacts of their regulations on small business, analyze effective alternatives that minimize small entity impacts, and make their analysis available for you, the public. As the watchdog for small businesses, Congress charged Advocacy with ensuring agency compliance with the RFA. Advocacy is required to report to Congress every year on agency compliance with the RFA, and our report for fiscal year 2022 was submitted to the Committees, House and Senate, in May of this year. Advocacy continues to remain active during fiscal year 2022. On behalf of our nation's small businesses, we submitted a record 37 comment letters to Federal agencies and hosted a record 30 roundtables on regulatory concerns facing small businesses. We also achieved numerous victories for small businesses by working with agencies on RFA compliance, including what was mentioned earlier, the $73.5 million in cost savings for our small businesses across the country. And these numbers were due, in large part, I think, to new methods that we implemented to reach more stakeholders, to reach outside of the Washington, D.C., area, including holding virtual meetings, roundtables, and events as we are having today, and also our site visits. In this current fiscal year, Advocacy has continued to be productive, and since October 1, of 2022, we have already submitted over 40 letters and held 23 roundtables this year. Advocacy has increasingly argued that Federal agencies need to conduct more outreach to small entities during the rulemaking process and improve the quality of their small business data. Advocacy relies on stakeholders, primarily you, to provide input in the regulatory process by writing comment letters, directing to Federal agencies, and by sending us their concerns. It is critical for all small businesses, including those here, to express concerns to Federal agencies on regulations that may impact their economic survival. Our success, in Advocacy, depends on you, our stakeholders. Madam Chair, this concludes my oral testimony, and I request that Advocacy's RFA report for fiscal year 2022 be included in the hearing record. Thank you for this opportunity to testify today, and you know that I am happy to answer any questions that you may have, so thank you. [The prepared statement of Mr. Clark follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Senator Ernst. Thank you very much, Mr. Clark, and we will submit that, without objection, so thank you. [The information follows:] Senator Ernst. Representative Latham, thank you. STATEMENT OF REP. SHANNON LATHAM, IOWA HOUSE OF REPRESENTATIVES, DES MOINES, IA Ms. Latham. Thank you. Good afternoon, Ranking Member Ernst, members of the Committee, and distinguished guests. It is a real honor to be here as a representative of Latham Hi- Tech Seeds to provide insights about difficulties faced by small businesses when complying with regulatory requirements. Latham Hi-Tech Seeds is a third-generation, family-owned seed company that is headquartered on our family's Century Farm in north central Iowa. Latham brand hybrid seed corn, soybeans, and alfalfa products are sold across the Upper Midwest, primarily through a farmer-dealer network. We are proud to have celebrated our company's 75th anniversary in 2022, but our success did not come without overcoming obstacles, and some of the obstacles we face today include gene editing, antitrust enforcement, and trucking. So I will begin with gene editing. Sustainable agriculture and food production require a range of innovative solutions, including the latest precision plant breeding tools, like gene editing. These tools allow plant breeders to develop better crops, in less time, with more accuracy than other methods. And because our seed company has a corn breeding program, we are greatly concerned with EPA's recent final rule on plant incorporated protectants. The EPA's precautionary and process- based policy imposes non-risk-based regulatory hurdles for certain plant characteristics created using the latest precision breeding tools. And antitrust enforcement. Consolidation in agriculture, livestock, fertilizer, chemicals, and seed is reducing competition, and we know that reduced competition leads to increased costs. The United States Department of Agriculture, in March 2023, issued a competition report that issued recommendations of being a voice for farmers and plant breeders as well as interagency coordination to promote fair competition. And trucking, I could have gone on a while for trucking. The U.S. Department of Transportation's Federal Motor Carrier Safety Administration Entry Level Driver Training final rule went into effect in February of 2022. The additional coursework costs between $1,000 and $4,000, depending on the course and the provider. This is a really large investment for small businesses. Whenever you add time and money it discourages people from actually getting their CDL. In addition to decreasing regulatory costs, one policy change that can help address trucking shortages is lifting interstate weight limits and making them uniform nationwide. Increasing interstate weight limits would create added efficiencies to transporting goods. During the 2023 session, the Iowa legislation passed a resolution encouraging Congress to increase weight limits on interstate highways in Iowa. Iowa allows higher weight limits on our state highways during the business times for agriculture. And because drivers can operate heavier loads on road that are under state jurisdiction they often avoid interstates. If the interstate system allowed heavier loads, truck drivers could take the most direct route, they would save driving time, and reduce fuel usage. And finally, electronic logging devices, or ELDs, are time- consuming and expensive for small businesses. It is especially challenging for businesses like ours that serve rural America. Electronics are prone to error, plus there are just a lot of areas in our trade territory where we lose phone service and we cannot get satellite signals. Another downfall is that these logs start clocking your time as soon as the truck moves. So it is problematic for a company like ours, like when we are trying to just load seed from a dock, because it will begin to clock the time. And then we have had instances where the driver forgot to log out, and then it made it look like the truck was parked and he was there. Yeah, you can overcome those, but it takes time and energy, and it just detracts from your day-to-day business. One solution for the overburdensome ELD regulations is to exempt companies with five trucks or fewer. Another solution is to just simply exempt anyone who carries 100 percent of their own products. This solution offered for ELDs is an example of how one-size regulations do not fit all businesses. Small businesses frequently encounter challenges stemming from regulations that were designed for larger enterprises. Examples include burdensome paperwork, expensive compliance measures, and intricate reporting requirements. These issues all impede growth, discourage innovation, and often lead to disproportionate costs that hinder small business success. I encourage this Committee to consider the recommendations presented here. The written document I submitted also includes comments that I gathered from other small business owners throughout my district and across the state. As a member of the Iowa House of Representatives, I visit regularly with business owners, and it is my honor to represent them. Thank you for your attention. Together I know that we can help Federal regulations become a catalyst rather than a hindrance for small business success. And you know I would be happy to answer questions. [The prepared statement of Ms. Latham follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Senator Ernst. Wonderful, and thank you Representative Latham. And Mrs. Green. STATEMENT OF MEGAN GREEN, COUNSEL AND ENGINEERING MANAGER, WEILER PRODUCTS, KNOXVILLE, IA Ms. Green. Thank you. Good afternoon and thank you to Ranking Member Ernst for inviting me to testify today. My name is Megan Weiler Green and I am Counsel and Engineering Manager for Weiler Products in Knoxville. We are a heavy equipment manufacturer. We do everything from design to taking raw steel all the way to a finished product. We make heavy equipment, primarily for the asphalt paving industry. I am also a second-generation business owner. Our business was started in 2000, with 4 employees and we have 615--or 618 or 620, depending on the day--employees now. What started as a small business in a 40,000-square-foot spec building is now 625,000 square feet under roof. Our equipment is sold into all 50 states and 15 countries. We are the market leader because we listen to our customers. We are proactive. We move quickly. We are innovative and find innovative solutions. And we are hands on. These core values describe many small businesses and many Iowa success stories. But they are often at odds with government regulators and government regulations. Entire industries are born out of interpreting government regulations for small businesses. We know from our experience that every minute one of our employees spends trying to decipher new regulations, creating reports to respond to regulations, purchasing new systems that add no value to our organization other than compliance with a new regulation is a minute taken away from what we do best: serve our customers and design industry-leading equipment. As we react to new regulations, small businesses are often left wondering ``who is this benefitting?'' The purpose of regulations is often nonobvious from the perspective of those who are asked to comply. We have also seen several instances of regulations being announced alongside the deadline for compliance. While we, as a business, work diligently to decipher unreadable regulatory jargon, announcements from the government are released days before that compliance deadline hits, saying we are going to move that date back. There is no recognition of the wasted time and duplicative effort that that puts on our business. Similarly, our team works together to gather complicated reports and data to respond to various mandatory surveys and government requests for information. While the demand for this information is firm, there is no discernible benefit to us, as a company, or explanation as to how the collection of this information is moving the greater good forward. In business, we operate in cost/benefit analyses. In order to come out with an accurate assessment, we need information that we can rely on. When new regulations are announced, we are often in a position to ask ourselves: Does this apply to our business? What does this mean for our business? Can I find anyone in this government agency who can answer my questions? And maybe most importantly, what happens if I do this wrong? When the rules are unknown, or the rules change in the middle of the game, we cannot trust that we are making decisions in the best interest of our customers and our employees. Entrepreneurs and small business owners created their companies out of a passion for a product, a passion for serving customers, or a passion for improving the status quo. No one starts their own business out of a passion for the paperwork. Dedicating resources to regulatory compliance makes it more difficult for small businesses to compete with large companies, who can depend on big staff and healthy budgets dedicated to outside experts who can assist with information gathering, compliance, and audits. The bottom line is this: small businesses want to do the right thing. The Senate Committee on Small Business and Entrepreneurship can assist by helping small businesses in the following ways. Help small businesses understand regulatory requirements and the why behind new regulations. Leverage data that is already required, rather than creating new reporting requirements. Be flexible on what the output looks like for small businesses. Provide resources and access to people who can help navigate changing rules. We appreciate the attention that Senator Ernst and her office is bringing to this issue, and I welcome any questions that you have and appreciate your time. [The prepared statement of Ms. Green follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Senator Ernst. Thank you. Thank you, Megan, and a big thank-you to all of you for being here today and serving as our witnesses. It has been very informative testimony, and we appreciate your unique perspectives on today's hearing. Mr. Clark, we will start with you, sir, and thank to you and your staff for the great work that you do on behalf of our small businesses in Iowa and across the country. I also want to thank Darcella Craven, who is the regional advocate serving Iowa and the Midwest. Thank you for being here and for being a resource for Iowans. Mr. Clark, Federal agencies often improperly certify that a regulation will not significantly impact small businesses to avoid the Regulatory Flexibility Act, such as the EPA's WOTUS rule. Can you share why this happens and the significance of this issue for our small businesses? Mr. Clark. Thank you for your question, and yes, I can give you our insight as to why it may happen--well, not may happen. It does happen in some of the situations. One of the things--and I enjoyed the testimony from the other two distinguished guests because everything that was said kind of fit into what we look and see and do. But one of the things that is missing in this equation, extensively, is adequate data on small businesses. One of the things that we attempt to do when we worked with agencies is to get agencies to understand, as this hearing is talking about, one size does not fit all. So we want agencies to be able to break down their small business data to better respond to the types of small businesses that are being impacted, the small business that is 1 to 5 member employees, or 10 member employees, or 20 members employees, because that analysis has a different impact on each one of those groups. So that is one of the issues that goes on with this certification. The other issue is with training. Executive order--I cannot remember the executive order. Gray hair makes me forget executive orders. But there was an executive order that requires us to train agencies on the compliance with the Regulatory Flexibility Act. And we, in our RFA report, talk about the amount of training that we have done. That training has been very instrumental, I think, in getting some of these agents to better understand the significance of why it is important to analyze small businesses. So we have to do more training. And I think the other part of it is really the overall just education that goes on with this whole process. And that is, some of the agencies simply think that they are not going to be called to task in some of these situations. And what our office is designed to do, by statute, is to bring this to their attention when they fail to comply with these requirements. Senator Ernst. And Mr. Clark, so when an agency then improperly certifies a rule under the RFA, and you do bring it to their attention, you are notifying them in a timely manner, what then happens if that agency just simply chooses to ignore you? Mr. Clark. Well, several things happen in that situation. First, some of the agencies attempt to provide this certification when the rule is in its proposed stage. And when it is in that particular stage one of the things that we bring out to them is that depending on what that rules is really saying and depending on how they have provided the information we will bring out to them that they did not provide an adequate, factual basis for this particular rule. And in that regard, we will basically provide them with an alternative, and the alternative is to either provide a better factual basis to comply with the certification requirement or to conduct what is called an IRFA, an Initial Regulatory Flexibility Analysis, which goes into a little more detail in terms of the impact of that rule on small businesses. That IRFA looks at alternatives that the agency could come up with, and so forth. So in that regard, as a proposal, we are watching that process. If that rule actually goes final one of the things that his required, again, by another executive order, is that agency has to, in its final regulation, specifically mention what Advocacy has shared with them, told them about that process. And that then becomes--the next level for that clearly is the basis for litigation once that rule goes final. Senator Ernst. Okay. So just bottom line up front then, an agency, they do not have to change the rule, even if presented alternatives by Advocacy. Would that be correct? Mr. Clark. They do not have to change the rule but they have to provide a factual basis for that rule, such as we were talking about with the trucking here. They are going to have to show how that particular rule, what is the factual basis for that rule, how that rule impacts small businesses so that in that proposal stage that information can then be shared with the public for comment. Because if that certification does not have that factual basis then we are not able to get testimony from a Latham Seed or anyone else in terms of the impact that regulation is having. So the critical piece of that is the factual basis and then being able to get public input as to the impact. Senator Ernst. Right. And so you stated then that the organizations do have that right to judicial review of those improper certifications. You cannot bring the lawsuit until after the rule is finalized. And can you talk about why that is an issue and whether review of the certification prior to the finalization could give small entities some real relief? Mr. Clark. Well, the review prior to the certification would actually give small entities--we say small entities but we are really saying small businesses--would really give small businesses the opportunity to better dissect that rule in terms of impact. And it would also give small businesses a better opportunity to propose alternatives to what is being proposed. I mean, for example, we just heard from dealing with trucking. Would exempting small businesses from one to five employees be better than just a blanket covering of that situation? So that is why it becomes important to have that factual basis, and that is why it becomes important for stakeholders, here today and across the state of Iowa, to be able to provide us with comments so that we can better challenge the agency in terms of what they are proposing. Senator Ernst. Very good. Thank you, sir. Representative Latham, thank you for joining us as well and the great work that you do serving the 55th District of Iowa. And I would like to start by asking you about the state-led efforts here in Iowa to reduce the regulatory burden on small businesses. So can you share what you think are the greatest success stories and whether there are any lessons that I could take from your examples back to Washington? Ms. Latham. Sure. I would be glad to share what I think are a couple of our successes at the state level. Three examples of recently passed legislation come to mind. One is updating the Iowa code on youth employment, another one is realigning state government, and then prohibiting local regulations on home- based businesses. So when we were working on updating youth employment it was not without controversy. But what we did is we just stuck to the facts. We also made sure we listened to Iowans and small businesses who are living this day-to-day, and that is really what guided our decision-making. We believe that youth employment can help. It is not going to totally solve the workforce crisis, but it is certainly going to help, especially in businesses that need help at night, on the evenings, weekends, and during the summer. One of the things that was outdated--and I am smiling as I even think about this--is why should teenagers in the workplace not be able to use a microwave? I mean, that was one of the questions we asked because they were prohibited from doing that. As someone who grew up in a family restaurant and bar, there were times when there were two of us working, and we were swamped, but I could not help in ways like grabbing the alcoholic beverage off the bar and taking it to a table I was already serving. She would have to walk all the way around. That is a change that has been made. If an adult is present, the parents approve it, you are in full sight, why not let that 17-year-old just simply deliver the alcoholic beverage. The third one is why should teenagers not be able to work past 7 p.m.? That is the heart of the dinner rush hour. They were prohibited from working past 7:00. As a mom of an athlete who played four sports, I mean, I would have loved him to be home at 7 p.m., but there were times when games started after that and buses did not get home until late. So why are we penalizing teenagers who want to work? So we removed those barriers while still keeping the requirements for safety and training and supervision in place. So that is one. Another one that I think is worth exploring is passing prohibitions on local regulations. We did that for home-based businesses. It pertained to requiring applications, permits, fees, zoning. Basically what it would do is allow startups to grow up a little bit before they had to comply with all of the regulations of a storefront business. The other thing that the realignment did that we passed this session was really to simplify the regulatory process so now it is almost one-stop location from the Iowa Department of Inspection and Appeals for licensing, building permits, safety. I think the more we can simplify processes for small businesses, the better. I mean, I agree with Mrs. Green when she said small businesses really want to comply, so let's not make it overly cumbersome, so we can help them do the right thing. And then I think I would also be remiss if I did not mention childcare. It is a huge workforce issue. We know that there are people who cannot go to work because they cannot find quality childcare. And the last 3 years I have served in the Iowa legislature we have sent 11 childcare-related bills that the governor has signed. Many of these came from her task force. I think whenever people hear ``task force'' they think, oh, that is just somebody checking the box, but really, there were recommendations that were implemented that are making a difference. And again, I truly believe that is just key to economic growth, is helping get those highly skilled, highly qualified people back in the workforce. So those are just a few of the highlights. Senator Ernst. Wonderful. No, that is fabulous, and I am very excited that our Iowa House and Senate and the Governor's Office have been able to find a way forward on these issues. And thank you for mentioning, as well, childcare. We did just, in the recent package that we put through, the Senate Small Business Committee did include a provision within that package for childcare, expanding opportunities for childcare, and thanking Senator Jacky Rosen for working me on that issue, and Senator Ben Cardin for including that in this recently passed package. We have some work to do with the House, but still great effort moving forward. It is key to getting people back into a place of employment if they know that they have safe and low- cost childcare available to them. So thank you. Mrs. Green, for you. Again, thank you for being with us and for sharing your story as well because it is really an incredible Iowa success story, so thank you. Iowa is very, very lucky to have Weiler Products in our state. In your testimony you discussed the difficulty of trying to grow a small business, manufacturing business, in a field with many, many large competitors. So why do you believe it is hard for a company like Weiler to face the same regulations and costs as larger manufacturers? Ms. Green. Well thank you for the question. I think it really comes down to resources. It is hours in the day. Workforce continues to be an issue for us. And even if we were fully staffed, we want our employees to focus on what moves our company forward, which is taking care of our customers. I think what we are seeing in many government regulations is uncertainty and things being passed that may never be implemented or things being implemented that may later change. And uncertainty is really expensive for businesses, in general, and it is increasingly expensive for small businesses. And if you think about even in your personal life, uncertainty is expensive, it is a distraction, and it takes our focus away from where it needs to be, which is customers and innovation on the business front. Senator Ernst. That is very good. I was doing a county visit earlier today in Taylor County, and that was brought up by a number of the farmers, the contractors, the state workers. It was at a conservation project that had been done in some farmland. And they mentioned just the changes in rules and regulations from one administration to the next, and that uncertainty, how it affects the decision-making process of those that are investing in their farmland, in their businesses. That is a very, very good point. Representative Latham, going off of Mrs. Green's comments, I am going to ask you to take off your legislative cap and focus on your business cap and ask the same question as well. Can you please talk about why it is so important to ensure regulations are rightsized so that your family-owned seed business is not burdened by the same costs as much larger companies in the grain industry? Ms. Latham. Sure. So family-owned businesses like ours are operating on much smaller margins, so regulations that might just be considered maybe inconvenient for a larger competitor could essentially shut down our business. It could put smaller businesses just simply out of business. You know, larger companies have resources that we do not have. You know, we do not have anybody on staff with a legal background. We rely a lot on trade associations to help keep us abreast of regulations. There are companies who cannot even, because of the economy they are in today, cannot even afford to pay for those associations. So they are trying to navigate through these regulations, and it really does have that ripple effect. You wind up with lower competition, increased costs. And it does have a ripple effect on the small communities too. Like I am just thinking at Latham Seeds we invest not only in our people but I mentioned we market through farmer-dealer networks, and those people are invested in their communities. They are the ones that are helping support the local league, the prom, the whatever. So as you get larger competitors who are not located in those communities, you have got out-of-state or out-of-country, they just do not have that same commitment to community. And then, ultimately, that affects the whole culture in the state of Iowa. We are a state of many small businesses, many small communities. That is really the backbone and the heart of who we really are, as Iowans. Senator Ernst. I really appreciate that context as well because we do have so many visitors that are here from out of state. The makeup of Iowa is large, in part, small, rural, Ag- based communities where those small businesses really do reinvest back into their communities. You mentioned prom and things of that nature. But yes, that is how our communities survive is by assisting one another. So whether it is here in Iowa, whether it is in Maryland, wherever it might happen to be, all of these little, small communities made up of small businesses and people reinvesting in the livelihoods of others. So thank you for that perspective. Mr. Clark, we will turn back to you. The Biden administration recently changed how agencies calculate the costs and benefits of their regulations. According to the Wall Street Journal article I referenced in my opening statement, those changes have given agencies the ability to justify regulatory costs on Iowans by claiming the rules could provide global benefits. What are your thoughts on this change, and do you believe agencies should be required to consider indirect costs if they are going to consider indirect benefits? Mr. Clark. Madam Chair, I am not sure what global really means in terms of small business because as you just said, small businesses are really very localized. One of the things that we--as I said earlier in my testimony, one of the things that we strive to do is to provide and to solicit and to gain data on the various impacts on small business. So changing the cost-benefit analysis, I am not sure really deals with the essence of what happens with a regulation in terms of its impact on small business. We just heard from Representative Latham and Mrs. Green that it is the margins. So when you start looking at cost- benefit analysis, and you are not able to break that analysis down into the detail it has to be broken down into in terms of the small business itself, it is hard to get a true cost- benefit analysis in terms of the impact. We had a regulation some years ago with the Department--not some years ago but a few years back--Department of Defense on what is called RFI, radio frequency, and the Department of Defense did not want to do a cost-benefit analysis on small business. We were able to get them to do one, and what we found was that the small business that only had a contract with the Department of Defense for one or two items paid a great cost as opposed to that regulation than a business that had 10 or 15 contracts. So it is very important, in Advocacy, when we look at this issue that we look at it from the context of who is being impacted, what size business is being impacted, and what are the margins, and what are the other parameters that impact of that situation. So when we go to whether it is direct or indirect, right now we are primarily looking at direct costs. But there are arguments to be made for looking at indirect costs. And the only situation that really occurs with looking at indirect costs is how far down that chain do you go to find the real impact, and continuing to go down that chain may force a missing of the family seed farm and other entities in that process. So we need to be careful as to how far we go down that chain, looking at indirect costs. But definitely look at direct costs and look at some baseline for indirect costs makes a lot of sense, yes. Senator Ernst. Thank you, and I had the same thoughts about global benefits. I was not sure exactly what the definition of ``global benefit'' was. Thank you. Mr. Clark. Well, I am not sure it relates to small business, and that is our statutory authority, to look at small business. Senator Ernst. Right. Thank you very much. Mrs. Green, one important piece of the PROVE IT Act is that it would ensure small businesses like Weiler can easily access agency guidance documents and allow small businesses to comment on these documents to seek clarification or suggest improvements. Can you discuss your experience with guidance documents and whether this provision would help you and other small businesses? Ms. Green. I think the concept is wonderful, and if it is implemented effectively it has great potential to be really useful. The concerns that I would have are being sure that whoever the comments are going to have the ability to respond quickly to those comments and that whoever is on the other end of responding to those comments has the authority to buy into whatever agency that are responding on behalf of. I have a law degree so I am the one who ends up, on behalf of the company, calling a lot of these agencies, saying, ``What does this mean?'' And a lot of times the agency, either they are not really sure or we have not really gotten there yet, or I am not sure how that is going to apply to you yet. But all of the time when you call, what I am about to tell you is just my interpretation, this is not binding on this agency. I mean, if I were to answer a question to my customer in that way, think about how that would go. So I think that is just really important, that whatever advice we are getting from that agency, we have to be able to rely on it, because again, that uncertainty is so expensive, so distracting, and just makes it so difficult to run a business. Senator Ernst. Okay. That is a very important point, Mrs. Green. And you have the legal background. But when you are calling an agency they will state that ``This is just my interpretation. It is not binding on the agency that I represent.'' Ms. Green. Yes. Senator Ernst. So again, why the call in the first place then, because it could change in the future. You may start to act on a rule or regulation and not actually have that be the right interpretation then. Ms. Green. Correct. And again, we would not be calling if we were not trying to do the right thing. We want to play by the rules, but we have to understand what they are. Senator Ernst. Okay. Very important point. Thank you. And for all of our witnesses--and again, thank you so much for this incredible testimony--I would like to finish today's hearing by asking one question to each of you, and we will start with Mr. Clark and then we will go on down the table. Mr. Clark, if you could leave one message for Federal regulators about the importance of truly considering how their regulatory costs hurt small businesses, what would it be? Mr. Clark. You are asking a lawyer to leave one message. [Laughter.] Mr. Clark. Well, the message to the regulatory community has to be that small businesses are the economic backbone of our nation, and if we do not have small businesses then this global environment that they are talking about does not exist. So we have to find ways to ensure that our small businesses continue to survive, but more so than continue to survive we have to find ways to ensure that they continue to grow and to expand and become multigenerational businesses because that is where wealth is built for many of our small businesses. So from a regulatory standpoint, it is clearly what we have pushed, and that is that one size does not fit all, that we must look at a deeper dive, take a deeper dive into the impact of the regulation on our small businesses. Senator Ernst. Thank you so much. And one of my favorite phrases, Mr. Clark, is ``not just survive but thrive.'' We really want them to thrive. Thank you very much. And Representative Latham, the same question to you. What would your message be? Ms. Latham. So if I could just leave them with one message it would be just because you can does not mean you should. And as a business owner, whenever we are starting a new project or somebody proposes a new idea, my very first question is what is the objective? So I think we need to ask, is it going to make it easier for small businesses, less confusing, easier for compliance? Does it increase safety? I think every regulation, every administrative rule should really be scrutinized to make sure it is even needed or is it vitally important. Again, less is more. The smaller the code is, the fewer the regulations, the more small businesses can thrive. Thank you. Senator Ernst. Wonderful. Thank you, Representative Latham. And Mrs. Green. Ms. Green. I would echo both thoughts. I think regulators need to take a step back and figure out what the end goal is, what is the actual objective that they are trying to accomplish, and then say is this actually moving the ball forward or are we regulating for the sake of regulating. And then just to continue with my theme of anything that we can do to reduce uncertainty and make it easier to run a business for the long term I think will be very effective. Senator Ernst. Wonderful. Thank you. Once again, thanks to all of you for joining us today, and a special thank you to our witnesses for their enlightening testimony. Before we conclude the hearing I would like to add to the record the following: an op-ed from John Sorensen, President and CEO of the Iowa Bankers Association, who published in the Des Moines Register. Thank you for that very much. We are very lucky to have you with us today. And also a statement from the U.S. Chamber of Commerce, who I am thankful has sent Tom Sullivan, the Chamber's Vice President for Small Business Policy, to join us today. As well, a letter from Alfredo Ortiz, the President and CEO of the Job Creators Network, who we are also lucky to have join us today. Thank you, Mr. Ortiz. And then a statement from the National Federation of Independent Businesses; a letter from Dr. James Berlau, a senior fellow and regulatory economist with the Competitive Enterprise Institute; a letter from Daniel Goldbeck, the Director of Regulatory Policy at the American Action Forum; and a statement from Karen Kerrigan at the Small Business and Entrepreneurship Council. [The information follows:] Senator Ernst. And with that today's hearing has concluded. I want to thank everyone for joining us today. [Whereupon, at 1:57 p.m., the hearing was adjourned.] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]