Dear Senators:
Business Roundtable is an association of over 200 chief executive officers of leading U.S. companies working to promote sound public policy and a thriving U.S. economy. Business Roundtable's CEO members lead companies with $7.2 trillion in annual revenues and nearly 16 million employees. Business Roundtable member companies comprise more than a quarter of the total market capitalization of U.S. stock markets and invest $190 billion annually in research and development – equal to 70 percent of U.S. private R&D spending. Our companies pay more than $230 billion in dividends to shareholders and generate more than $470 billion in sales for small and medium-sized businesses annually. The Roundtable companies also make more than $3 billion a year in charitable contributions.
The issue of federal regulation is a high priority to our members, and we appreciate the Committee’s commitment to pursue improvements in both the efficiency and effectiveness of regulatory programs. Federal regulation has provided substantial benefits to the country. These benefits, however, have come at a substantial cost. Business Roundtable believes in smart regulation: achieving our shared regulatory objectives while reducing the significant opportunity cost posed by regulation.
Your letter asked us to identify existing and proposed regulations that have a real impact on our membership. Based on past member surveys, pending regulations of greatest concern include, but are not necessarily limited to, certain regulatory proposals or recently finalized regulations emanating from the Clean Air Act including changing the ozone standard, reducing greenhouse gas emissions from the power sector, the Affordable Care Act, and the Wall Street Reform and Consumer Protection Act (e.g., derivatives trading used to reduce business risk, CEO pay ratio, conflict minerals). We are also concerned about pending FCC regulation (e.g., net neutrality). The issue to Business Roundtable members is the potentially large opportunity cost associated with many of these regulations. In some cases, this is partly or entirely due to statutory construction. In others, the concern stems from the exercise of – or, in some cases, the failure to exercise – agency discretion under the authorizing statute. Finally, we are deeply concerned by “rulemaking through enforcement actions” and the lack of due process by some agencies.
With respect to recommendations to improve the regulatory process, Business Roundtable has a long history. In 1994, Business Roundtable issued Toward Smarter Regulation which described concerns with the regulatory system and recommended improvements. In 2011, Business Roundtable published Achieving Smarter Regulation, which reaffirmed the recommendations contained in Toward Smarter Regulation and provided greater detail. These two reports, along with our 2012 report, Permitting Jobs and Business Investment represent the position of the Roundtable on smart regulation.
In the remainder of this letter, I would like to highlight three of the most important process reforms: (1) permit modernization, (2) cost-benefit analysis, and (3) retrospective review. Each of these reforms, if adopted, would lower the opportunity cost of regulation and enhance job growth. These recommendations align with those of the President’s Council on Jobs and Competitiveness.
The federal permitting process ought to be modernized to ensure that decisions are timely and more certain. We support S.280, the Federal Permitting Improvement Act, which would implement a number of major reforms necessary to modernize the federal permitting process; require deadlines and schedules for processing permit applications while designating a lead agency for each project; and codify and expand the Administration’s efforts to make the permitting process more transparent by creating an Internet-based infrastructure project-tracking dashboard. We also support approval of the Keystone XL pipeline.
Cost-benefit analysis is an essential tool for crafting sound regulations, and Business Roundtable CEOs believe agencies can do a better job of using it. Congress can: (1) codify key executive requirements for conducting sound analyses; (2) require that all federal agencies, including independent agencies, boards and commissions, conduct cost-benefit analyses on major rules; and (3) provide resources for implementation and oversight. The Office of Management and Budget (OMB) can require agencies to conduct more thorough analyses and create greater transparency so that experts outside of the government can replicate agency analyses.
Retrospective review, a concept we support in principle, refers to the evaluation of regulation to determine if it has achieved its objectives. We have followed with interest the Obama Administration’s efforts on retrospective review in which agencies have published plans that identify existing regulations in need of updating or elimination. These plans have been updated every six months. The latest agency plans were posted in mid-March.
The President’s initiative, while laudable, could be improved through: (1) leveraging input from stakeholders; (2) greater OMB oversight; and (3) incorporating a plan for retrospective review into every new major rule. Our recommendations align with those of the Administrative Conference of the United States (ACUS).
We believe that retrospective review should focus on regulations posing the largest opportunity cost, to ensure that limited agency resources are focused on rule changes that provide the largest net benefit. Opportunity cost is likely to be most significant when existing regulations: (1) are based on prescriptive (rather than performance) standards, (2) pose significant recurring costs (as opposed to one-time, up-front capital costs), (3) are based on outdated science/technology, and/or (4) impose burdens on very productive economic activities (e.g., R&D).
A focus on cumulative burden is also warranted. Executive Order 12866, which requires a retrospective review effort by each agency, includes the “aggregate burden” of regulation on a sector of the economy as one potential focus of retrospective review. Unfortunately, the federal government has no means to identify cumulative burden. One step toward this goal would be to require cost-benefit analysis for each major regulation, including those from independent regulatory agencies and commissions. Another is to make regulatory information accessible online to allow the use of data analytics and other techniques to bridge across multiple databases and integrate information (including local, state, federal, and international regulatory information) in a useable form. Some private sector firms are already moving to address this market need. Business Roundtable recommends the creation of a task force of experts from the public and private sectors to develop a long-term roadmap for identifying and reducing cumulative burden.
Thank you for reaching out to the public for information on how to achieve our shared regulatory objectives more efficiently and effectively. If you would like any additional information on this topic, please feel free to contact me. We look forward to working with the Committee on this initiative.