Prove It Act of 2024

Floor Speech

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Ms. HAGEMAN. Mr. Speaker, pursuant to House Resolution 1602, I call up the bill (H.R. 7198) to amend title 5, United States Code, to require greater transparency for Federal regulatory decisions that impact small businesses, and for other purposes, and ask for its immediate consideration in the House.

The Clerk read the title of the bill.

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Ms. HAGEMAN. 7198.

Mr. Speaker, I rise in support of H.R. 7198, the Prove It Act of 2024.

This is an important bipartisan piece of legislation that will help small businesses around the country comply with the overwhelming weight of Federal regulation.

It is no secret that small businesses around the United States face an uphill battle when complying with Federal regulations. Many regulations cause significant economic impacts on these small businesses.

When small businesses are forced to shoulder the burden of these regulations, it results in higher prices at the cash register. It also can keep some small businesses out of the market altogether. Rather than facing a mountain of regulation and compliance costs, some would-be small business owners may never achieve their dream of opening a small business.

Under the Regulatory Flexibility Act, the agencies that make these damaging regulations are supposed to take small businesses into account when writing the rules. All too often, however, the agencies are out of compliance with the RFA's mandates.

One report actually found that, in 75 percent of the rulemakings, the agencies either ignored costs on small businesses, or underestimated the regulations costs. H.R. 7198, the Prove It Act of 2024, would strengthen the RFA's already-existing provisions and make it so that agencies have a much harder time skirting their statutory obligations to our country's small businesses.

The Prove It Act of 2024 allows small businesses to petition the Small Business Administration to investigate a rulemaking process when a small business owner believes the agency inadequately performed its regulatory analysis as required by the RFA. It also authorizes the SBA's chief advocacy counsel to independently investigate a rulemaking agency's compliance with the RFA. Finally, it creates a penalty for rulemaking agencies that failed to comply with the RFA's requirements.

My colleagues on the other side of the aisle may claim that this bill is only an attempt to slow down the agency rulemaking, making it more difficult for the Federal Government to oversee the economy. This is incorrect.

There are no provisions in this bill that are designed to slow down rulemaking. In fact, the only thing that may slow down an agency's rulemaking endeavor is having to fully comply with the law as it is already written. The RFA was passed in 1980. Yet, there are still agencies which do not take the specific needs of small businesses into account when crafting regulations.

If Federal regulators followed the law as Congress intended, the legislation before us would not be necessary. Unfortunately, Federal regulators have been delinquent in their obligations to American small business owners.

H.R. 7198, the Prove It Act of 2024, is a bipartisan effort to force regulators to comply with existing statutes and consider small business owners when crafting legislation.

Mr. Speaker, I urge my colleagues to support this legislation, and I reserve the balance of my time.

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Ms. HAGEMAN. Mr. Speaker, I include in the Record the CBO score for this bill.

H.R. 7198, PROVE IT ACT OF 2024 AS REPORTED BY THE HOUSE COMMITTEE ON THE JUDICIARY ON NOVEMBER 22, 2024 ------------------------------------------------------------------------ By fiscal year, millions of dollars-- ----------------------------------- 2025 2025-2029 2025-2034 ------------------------------------------------------------------------ Direct Spending (Outlays)........... 1 5 10 Revenues............................ * * -7 Increase or Decrease (-) in the 1 5 17 Deficit............................ Spending Subject to Appropriation 6 40 not (Outlays).......................... estimated ------------------------------------------------------------------------ * = between -$500,000 and zero.

Increases net direct spending in any of the four consecutive 10-year periods beginning in 2035? < $2.5 billion.

Increases on-budget deficits in any of the four consecutive 10-year periods beginning in 2035? < $5 billion.

Statutory pay-as-you-go procedures apply? Yes.

Mandate Effects:

Contains intergovernmental mandate? No.

Contains private-sector mandate? Yes, under threshold.

The bill would:

Allow small businesses, nonprofit organizations, and small local governments to request that the Small Business Administration (SBA) review a certification that a proposed rule would not have a significant economic effect on a substantial number of such small entities

Require the SBA to declare a rule no longer in effect if the issuing agency fails to review that rule periodically

Impose mandates on private-sector entities

Estimated budgetary effects would mainly stem from:

Requiring some federal agencies to devote staff to meet new analysis and reporting requirements

Increasing costs for agencies that are funded through annual appropriations to carry out the bill's provisions

Increasing direct spending and decreasing revenues for several fee-funded, independent agencies and the Federal Reserve System to carry out provisions of the bill

Bill summary: H.R. 7198 would allow small businesses, nonprofit organizations, and small local governments to request that the Small Business Administration (SBA) review federal agencies' certifications that proposed rules would not significantly affect a substantial number of small entities. The bill would require the SBA to establish a process for reviewing those requests and determining whether certifications merit further review. (Federal agencies currently evaluate proposed rules' economic effects on small entities and either certify that a rule would not significantly affect them or they prepare a detailed regulatory flexibility analysis for the rule. A regulatory flexibility analysis is an assessment of a proposed regulation on small entities.)

If further review is required, the SBA would consult the rulemaking agency, representatives of the small entities, and the Office of Management and Budget to determine whether, in place of a certification, the rulemaking agency must prepare a regulatory flexibility analysis. If the agency does not complete that process, the final rule would not apply to small entities.

Additionally, under the bill, if an agency fails to update its analysis of a rule's effect on small entities within 10 years of the rule taking effect, as they are required to do under current law, the rule would no longer be in effect. That provision would apply to rules for which agencies should have provided updated analysis within the 5-year period prior to the bill's enactment. Under the bill, a rulemaking agency could seek to reinstate a rule by carrying out a new rulemaking process.

Estimated Federal cost: The costs of the legislation, detailed in Table 1, fall within multiple budget functions.

Basis of estimate: For this estimate, CBO assumes that H.R. 7198 will be enacted near the end of calendar year 2024, that the estimated amounts will be appropriated in each year, and that outlays will follow historical spending patterns.

If an agency fails to comply with the bill's requirements, the SBA would determine that the existing or proposed rule is no longer in effect or would not apply to small entities. Because CBO expects that federal agencies would generally comply with the bill's requirements, we estimate that any budgetary effects stemming from that change would be insignificant.

In addition, CBO estimates that implementing the bill would increase administrative costs for most agencies because they would need additional staff to carry out the bill's provisions. TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 7198 -------------------------------------------------------------------------------------------------------------------------------------------------------- By fiscal year, millions of dollars-- ----------------------------------------------------------------------------------------------------------- 2025- 2025- 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2029 2034 -------------------------------------------------------------------------------------------------------------------------------------------------------- INCREASES IN DIRECT SPENDING Estimated Budget Authority.................. 1 1 1 1 1 1 1 1 1 1 5 10 Estimated Outlays........................... 1 1 1 1 1 1 1 1 1 1 5 10 DECREASES IN REVENUES Estimated Revenues.......................... * * * * * -3 -1 -1 -1 -1 * -7 NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES Effect on the Deficit....................... 1 1 1 1 1 4 2 2 2 2 5 17 INCREASES IN SPENDING SUBJECT TO APPROPRIATION Estimated Authorization..................... 8 8 8 9 9 n.e. n.e. n.e. n.e. n.e. 42 n.e. Estimated Outlays........................... 6 8 8 9 9 n.e. n.e. n.e. n.e. n.e. 40 n.e. -------------------------------------------------------------------------------------------------------------------------------------------------------- n.e. = not estimated. * = between -$500,000 and zero.

Direct spending: The administrative costs of the Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration (NCUA), and Office of the Comptroller of the Currency (OCC), are classified in the budget as direct spending. Two of those agencies, the NCUA and the OCC, collect fees from financial institutions to offset their costs; those fees are treated as reductions in direct spending.

Using information about the rulemaking activities of those agencies, CBO estimates that the increased administrative workload under H.R. 7198 would increase net direct spending for those independent agencies by $10 million over the 2025- 2034 period.

Revenues: H.R. 7198 also would affect revenues by increasing operating costs for the Federal Reserve System, which remits its net earnings to the Treasury; those remittances are classified as revenues in the federal budget. Based on the costs of similar activities, CBO estimates that the increased costs under the bill would reduce revenues by $7 million over the 2025-2034 period.

Spending subject to appropriation: CBO estimates that implementing H.R. 7198 also would increase spending for agencies that are funded by annual appropriations. CBO estimates that agencies that produce large numbers of rules affecting small entities would need more staff to meet the bill's requirements.

CBO expects that the agencies most affected by the bill include the Departments of Agriculture, Education, Health and Human Services, Homeland Security, Labor, and Transportation, and the Environmental Protection Agency and Securities and Exchange Commission (SEC). Using information about similar activities, CBO estimates that the administrative costs for federal agencies to implement H.R. 7198 would total $35 million over the 2025-2029 period; any related spending would be subject to the availability of appropriated funds.

Under current law, the SEC is authorized to collect fees sufficient to offset its annual appropriations. Therefore, CBO estimates that the net budgetary effect of that commission's activities to implement H.R. 7198 would be less than $500,000 over the 2025-2029 period, assuming appropriation actions consistent with the commission's authorities.

Finally, the requirement for the SBA to establish and carry out a process for small entities to request certification review would pose additional costs to that agency. Using information from the SBA, CBO estimates that those administrative costs would total $5 million over the 2025- 2029 period; any related spending would be subject to the availability of appropriated funds.

Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays and revenues that are subject to those pay-as-you-go procedures are shown in Table 1.

Increase in long-term net direct spending and deficits: CBO estimates that enacting H.R. 7198 would not increase net direct spending by more than $2.5 billion in any of the four consecutive 10-year periods beginning in 2035.

CBO estimates that enacting H.R. 7198 would not increase on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2035.

Mandates: If federal financial regulators increase annual fees to offset the costs of implementing the bill, H.R. 7198 would increase the costs of an existing private-sector mandate on entities required to pay those fees. CBO estimates that the incremental cost of the mandate would be small and would fall well below the annual threshold established in the Unfunded Mandates Reform Act (UMRA) for private-sector mandates ($200 million in 2024, adjusted annually for inflation).

The bill contains no intergovernmental mandates as defined in UMRA.

Previous CBO estimate: On December x, 2024, CBO transmitted a cost estimate for H.R. 7198, the Prove It Act of 2024, as ordered reported by the House Committee on Small Business on September 10, 2024. The two pieces of legislation are similar, and CBO's estimates of their budgetary effects are the same.

Estimate prepared by: Federal Costs: Julia Aman (for the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency), David Hughes (for the Consumer Financial Protection Bureau), Aurora Swanson (for the Small Business Administration and for federal agencies funded by annual appropriations); Revenues: Nathaniel Frentz; Mandates: Rachel Austin.

Estimate reviewed by: Justin Humphrey, Chief, Finance, Housing, and Education Cost Estimates Unit; Kathleen FitzGerald, Chief, Public and Private Mandates Unit; Christina Hawley Anthony, Deputy Director of Budget Analysis.

Estimate approved by: Phillip L. Swagel, Director, Congressional Budget Office.

There are several points that I think need to be made in relation to this bill, but also to the obvious misunderstanding not only of what the bill does but of the rulemaking process and procedure that occurs under the Administrative Procedure Act in this country right now.

First of all, it applies to small businesses, not large businesses. By definition, it applies to small businesses. The allegation that this is going to somehow help these huge corporations is absolutely incorrect.

In addition to which, the Prove It Act does not authorize the SBA to review the substantive policy of any particular regulation. Again, any allegation that this would allow the SBA to address the substantive aspect of a regulation is again incorrect. If the agency has complied with the RFA, then the regulation will apply to small businesses as normal.

Here is something that I think is important. We often talk in the abstract about regulations and the regulatory impacts and regulatory agencies and unelected bureaucrats. Let's just talk about a real-life situation for once. Let's talk about what really happens when a regulation is adopted by an agency and the impact that it has on our small businesses.

Let's use the USDA EID rule as an example. On November 5, the U.S. Department of Agriculture issued a rule mandating electronic identification ear tags on cattle and bison. It will place a substantial burden on small ranchers when it goes into effect.

The USDA, however, in assessing this rule, only completed a brief, two-page initial regulatory flexibility analysis, finding that using the Small Business Administration's guidelines that the majority of cattle operations in the United States are considered small. In other words, the majority of our ranching operations are considered small businesses.

In 2013, when the USDA first considered imposing a rule like this, they estimated that the cost would be between $1.2 and $1.9 billion imposed against our small ranchers, yet in this latest analysis, they did a two-page RFA analysis. I can't imagine that anyone on the other side of the aisle would actually believe that that is adequate considering the circumstances and the fact that so many of our ranchers will be financially broken by such a rule.

After acknowledging that the proposed rule would have a substantial impact on small businesses, the agency then conducted an insufficient analysis based upon outdated and incorrect information. This entire analysis relies on a cost estimate created by APHIS. This estimate undervalues the cost to ranchers, and it has not even publicly disclosed how it calculated those costs.

This example of avoiding the RFA requirements resulted in the USDA ignoring the true cost of the rule and how the burden is shouldered by our small businesses.

The USDA and the ear-tag manufacturers are also wholly unprepared to alleviate the harm caused by the rule. In fact, many States have run out of the ear tags before even being able to provide them to the ranchers.

Under the Prove It Act, the USDA would be required to account for the additional, reasonably foreseeable indirect costs that are borne by ranchers because of this rule, costs that the USDA is currently ignoring.

The Prove It Act would give a voice to the ranchers and the organizations that represent them to point out the obvious flaws in APHIS's proposals, flaws which were ignored during the finalization of the rule.

I think it is also incredibly important to understand that we are passing this bill today to help small businesses understand the true cost of compliance with regulations and to force regulators to be transparent when crafting their regulations.

If this bill becomes law, regulators will have to come to terms with the enormous weight that they place on small businesses in the form of regulations. In fact, under the Biden-Harris administration, the regulatory burden in this country is approximately $2.1 trillion a year. It is almost $16,000 per household.

I cannot understand, for the life of me, why anyone on the other side of the aisle would not want the agencies to have to disclose the real cost of these regulations. Maybe it is because they don't want the American public to understand the costs imposed by unelected bureaucrats. In an ideal world, regulators would think twice before imposing massive costs on our small businesses that are the lifeblood of so many of our communities.

I also want to point out that the claim that this would slow down rulemaking is absolutely absurd. The Prove It Act is designed to ensure that agencies are complying with existing law, the Regulatory Flexibility Act, when they are crafting their regulations. Agencies must already comply with the RFA's requirements. They are just not doing it, and this is a law that would force them to meet that requirement.

The RFA has been the law since 1980. Why are we allowing these agencies to get away with ignoring the law as written by Congress?

No agency can credibly claim that compliance with the RFA, which Congress enacted, improperly slows down the rulemaking process.

I also want to point out the comment that this would result in a bottleneck created by these large corporations filing petition after petition after petition. Again, that argument is absurd. The claim that small businesses, large businesses, or trade associations would abuse the Prove It Act's petition mechanism is just simply misguided.

The Prove It Act gives a method for the chief counsel for advocacy at the Small Business Administration to dismiss any petition that lacks merit. Following an initial review, the chief counsel can close the petition without any further action if the case does not warrant it.

To be clear, big businesses are not allowed to petition the SBA under the Prove It Act. I would like to repeat that. Big businesses are not covered by this act.

Finally, the CBO score. The CBO score for this bill is clearly wrong. The generic language that the CBO cites does not remotely support its finding that this bill will increase the deficit. CBO claims that direct spending would increase by $10 million, and Congress would need to appropriate an extra $35 million to Federal agencies for them to do much of the same work that they were supposed to be doing for the last 40 years.

Every Federal agency that engages in rulemaking should already have the staff and resources on board to comply with the law. The Prove It Act simply requires the already existing staff perform some additional analyses to report on the reasonably foreseeable indirect costs of their regulations. This should be relatively straightforward for the personnel already tasked with the RFA analysis.

Finally, any agency that is burdened by the Prove It Act's requirements probably did not comply with the RFA in the first place.

One of the things that I find so interesting in these debates about our efforts to force transparency and good government provisions on our agencies is often this discussion that it is going to destroy the air and water, we are going to have sick kids, the toys are going to be destroyed, and everything is going to be dangerous. That is absolutely absurd, and it is a red herring.

There is nothing wrong with requiring our agencies to be transparent and up-front about the costs that they are imposing on our businesses when they adopt regulations. I am actually surprised that anyone would oppose the Prove It Act in light of what it is intended to do.

Mr. Speaker, I rise in opposition to the amendment.

This amendment simply strikes the entire bill and replaces it with a training mandate. Claiming that training is all that is necessary to help agencies comply with their obligations under the RFA completely ignores the problems that the Prove It Act is going to solve.

The Small Business Administration already offers training sessions for regulators and has done so for over 20 years. According to the SBA, they held nine training sessions and trained 139 Federal officials in 2023 alone.

Further, the SBA has already trained personnel at nearly every Federal agency and department since 2003. Despite this training, however, in 2023, SBA sent 46 letters to agencies across government outlining the deficiencies in their RFA analysis. In 30 cases, the SBA found that agencies conducted inadequate analysis of small business impacts.

What this means is that during the rulemaking process for 30 rules, agencies did not comply with already existing law despite the SBA training they likely received.

Mr. Speaker, there are a few more points I would like to make.

Despite SBA's best efforts to help agencies comply with their obligations under the RFA, those efforts are being ignored. Agencies have had 40 years to develop the experience and expertise necessary to comply with the Regulatory Flexibility Act and still regularly come up short.

The claim that training is the answer is simply an attempt to distract from the importance of the Prove It Act. If we adopt this amendment and training is mandated instead of adopting the Prove It Act's provisions, nothing will change. Small businesses around the country will still be harmed by regulatory agencies blatantly ignoring their obligations under the RFA and discounting the costs of regulations.

The only legitimate solution is to adopt the Prove It Act, which strengthens the RFA and creates mechanisms to force regulatory agencies to comply with the law.

Mr. Speaker, I urge my colleagues to oppose this amendment, and I yield back the balance of my time.

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