Archive for the 'Congress' Category



Why Cost Benefit Analysis Makes Sense

I’m not the only person talking about making federal regulations smarter. As I noted in my Politico piece last week, the Regulatory Accountability Act would make agencies take the costs and benefits of their regulations more seriously before they finalize them. This is something that the CPSC has not done with rules issued under the Consumer Product Safety Improvements Act, because the Act specifically gave the agency the opportunity to opt out of doing cost-benefit analysis.  Happily, one of the chief architects of the CPSIA, Sen. Mark Pryor (D-Ark) has joined with Sen. Rob Portman (R-Ohio) and others to make sure that the CPSC and other agencies do a better job of considering the impact of rules before they issue them. These two senators take to the pages of Politico to discuss the need for a better regulatory process. As they explain:

Employers…say they would like to expand and add jobs, but the regulatory environment has become too uncertain and costly.  Over-regulation now tops the list of ‘most important problems’ faced by small businesses…now is the time to build a more job-friendly regulatory system. This bipartisan blueprint would do just that.

It is unfortunate that the CPSC did not think about minimizing regulatory cost as we busily churned out regulations over the past several years.  Maybe that will now change. 

Read their piece here.

End Government by Guesswork

Regulators need good data to make good policy. As President Obama made clear yesterday in his speech to Congress, it’s important to reform regulations that are “unnecessary[] or too costly.” He demanded that federal agencies “eliminate rules that don’t make sense.”

But over the last two and a half years, the Commission hasn’t taken the time to make sensible rules. Instead, we crystal-balled benefits and ignored costs that we refuse to measure. And since our rules came into effect, costs for consumers have gone up needlessly as companies pass their costs on or leave markets entirely. These results are unnecessary and do not benefit consumers. We could have minimized them by performing cost-benefit analyses. Today, Politico posted my op-ed explaining in more detail why cost-benefit analysis makes for smart regulation and why the CPSC needs to get back to competent, sensible regulating. You can read it here.

Regulatory Malpractice

In a decision that surprised few, the CPSC voted today to ignore common sense and regulatory conscience. We witnessed a majority putting its last grasp of political power ahead of doing what was right.

In 2008, Congress required that we put in place a rule telling the regulated community how to test and certify that the products they make meet the relevant standards. The deadline Congress imposed has long since passed, but we all agreed that the details of the rule proved much harder to write than its basic idea did. Staff put much time and effort into a rule with some solid pieces that I could support. Then the majority, all behind closed doors, summarily dismissed these changes and determined they knew better than our experts. I cannot support their changes, and I cannot ignore their tactics.

The way the majority has handled this rule is, in my opinion, regulatory malpractice. They ultimately didn’t listen to staff, they really didn’t listen to Congress, they didn’t sincerely listen to the regulated community, and they certainly didn’t listen to their fellow Commissioners. All parties pointed in the direction of re-proposal so that we could hear and learn from public comment on the significantly changed rule and the new law surrounding it. Instead, the majority seemingly pushed this through because they soon would not be a majority.

Their reckless disregard for the value of public input in writing regulations is stunning. Other agencies have sought extra public comment when proposals or facts changed. Here, we had a new law change the framework supporting a rule, and, still the majority said we will listen to public comment only after we vote out the thing the public will be commenting on.

The majority is quick to suggest that seeking re-proposal is seeking delay. That’s pure fiction. I offered an amendment to re-propose this rule in light of the statutory changes Congress made, to make the rule better and more likely to stand up in court. Under my proposal, the rule still would have taken effect within the same timeframe as the rule passed today. The majority had a chance to get this done better and faster. Instead, they blew it.

My heart aches for any family who has lost a child due to a faulty consumer product. The pain they feel can never be dismissed or diminished. That pain, however, cannot justify irrational decision-making or misuse of power.

There’s an old lawyer adage: When you have the law on your side, pound the law; when you have the facts on your side, pound the facts; when you have neither the law nor the facts on your side, pound the table. The table-pounding by my colleagues today speaks for itself.

This arrogant dismissal of input from both peers and the public on such an important vote betrays the public trust we bear to implement statutes fairly, openly, and responsibly.

Major Rule, Major Costs

For those of you who aren’t experts in the field of administrative law, when an agency issues a significant new rule, it has to do what’s called a Regulatory Flexibility Act analysis, also known as “Reg Flex”. That’s not Calisthenics for Commissioners (though that’s not a bad idea). It’s a report that examines the impact a new rule will have on the economy, and specifically on small businesses.

The Reg Flex analysis for the testing rule we will vote on tomorrow looked at the costs of this rule, especially on small businesses.  Here is some of what our staff is telling us:

  •  This rule “will have a significant impact on all firms” making children’s products.  For example, the staff estimates that for large firms, increased testing costs will be approximately 1.2% of revenues.  For small firms, testing costs as a percent of revenues could be expected to increase to a staggering 11.7%. 
  •  The rule will have this financial impact on all manufacturers and importers of children’s products.  While we do not have a good handle on precisely how many firms this may be, it will be in the hundreds of thousands of firms.
  •  The testing rule “could be a barrier that inhibits new firms from entering . . . the market.”
  •  Impacted companies may “forgo or delay implementing improvement to products’ design or manufacturing processes in order to avoid the costs of third party testing.”
  •  Firms may be able to mitigate “the adverse impacts if they are able to raise their prices to cover their costs.”
  •  “The impact is expected to be disproportionate on small and low-volume manufacturers.”

At a recent briefing on this rule, one of my colleagues suggested that we already have done everything we can to reduce the costs of this rule.  What I believe he was saying is that we have done everything three Commissioners are willing to do to reduce the rule’s cost.  There are a number of things we could actually do to bring down the testing costs imposed by this rule.  Some of those things are even suggested in the Reg Flex analysis.  And we could still have a robust testing rule to address safety concerns. 

We know that this rule will burden our economy.  Our staff says so.  Because Congress was concerned about the high costs of testing, it recently told us to seek out ways to reduce the testing costs in this rule.  Therefore, before issuing this rule, we should do as Congress asked and look at ways to reduce the costs of testing consistent with assuring compliance with our safety standards. 

Unfortunately, politics often trumps good policy here at the CPSC, so tomorrow we will issue a final testing rule and then look for ways to reduce costs of the rule we are issuing.  Talk about putting the cart before the horse!  And this approach certainly raises the question of how sincere the effort to reduce costs will be. 

While we all agree on the goal of child product safety, I am convinced we can achieve that without incurring the staggering costs identified by our staff.

What Does CPSC Stand for These Days?

The CPSC seems to be floundering around in the deep end of the pool without a lifeguard to save it.  What was intended to be a quick, “under-the-radar” vote to flip-flop on a rule dealing with swimming pool drains now has turned into a big mess. 

Common sense and good administrative practice say that when you reverse course, you should find out who will be impacted by your action before you do it.  This is even truer when there is no impetus for the reversal and no rallying cry or public discussion prompting you to act.

In this case, many states and local jurisdictions have relied on the guidance we gave them 18 months ago and therefore we should have determined how a rule reversal would impact them.  Since the agency refused to ask for that information, I did, and I have been getting a number of troubling letters that detail the adverse safety impacts and the financial and regulatory burdens we will be placing on those jurisdictions by this action.  These letters make clear that, had we bothered to ask the public for their thoughts in the first place, they would have had plenty to tell us. Now we have gotten a letter from the Chairmen of the two Congressional Committees who oversee our activities asking why we are taking this action without even asking for public comment. 

This is not the only instance where the Commission is rushing to regulate before the effects of potential changes are understood.  We will soon be voting on the testing and certification rule.  Our own regulatory analysis tells us that this rule will be enormously expensive.  Recently, Congress told us to better consider the costs of testing, especially to small businesses.  In response, the majority plans to push out a final rule with a vague promise to perhaps amend it before it becomes final final, after we get input from the public on ways to reduce testing costs and burdens.  So, without getting the cost information Congress told us to get, we’re going to put the rule out, then maybe change it after people have already started relying on it, thus increasing the cost even further.

Rushing out rules without concern for the consequences is becoming standard operating procedure for this agency. Between our blind rush on the testing rule and our belly-flop of a hush-hush reversal on pools, with the enormous sums of other people’s money we’ll be wasting in both actions, CPSC might soon have to stand for Consistent Producer of Sunk Costs.

Radio Interview on Over Regulating Government

Last week I talked with Hugh Hewitt, a nationally syndicated radio show host, about government regulation run amok. Hugh asked me if I thought the CPSC’s new regulations were straining an already struggling economy. I wholeheartedly agreed, and discussed (again) how the agency is not doing the required leg work before issuing rules. I will continue to work to change the poorly-thought-through rules now being implemented at the Commission. Click on the link below to listen to my interview with Hugh.

Hugh Hewitt Interview 9-13-11

Is The CPSC Taking Regulatory Reform Seriously?

Last week I discussed both substantive and process issues surrounding the periodic ongoing testing rule the majority shortly plans to ram through the commission.  A majority of the commissioners proactively decided that, since they were not concerned about the costs of the rule, they did not need to do a cost-benefit analysis.  This is true even though agency past practice and directions from the President would suggest that as the appropriate course of conduct. 

Last week I sent a letter to the Administrator of the Office of Information and Regulatory Policy, who is the person designated by the President to assure that the costs of regulations do not outweigh their benefits.  Here is a copy of that letter.  Should I get a reply, I will be happy to share that as well.

Majority’s Plan: Ram it through while we can

The past three days in this blog I have discussed my disagreements with the three-member majority on the Commission about the pending testing and certification rule they plan to ram through in October.

  • The proposed rule applies a one-size-fits-all approach to third-party testing that is guaranteed to be a misfit rather than requiring third-party testing where it is the most necessary (i.e., where the risk is highest);
  • The proposal needlessly sets detailed definitions of a “reasonable testing program” in regulatory stone; and
  • The voluntary component part testing rule—which holds the promise of actually lowering costs and for which work was completed some time ago—has been needlessly held back while we work on the testing rule.

I also question the insistence on rushing this flawed product through. H.R. 2715, passed just weeks ago, expressly instructed us to consider the costs of our testing rules and get public feedback on how to mitigate those costs while still ensuring the safety of children’s products.  It would make sense to get that information before we issue the rule, but the three-member majority doesn’t want to do that. I have to ask: If we don’t have time to get it right the first time, when are we going to have time to fix it?

Congress addressed another problem that I had with our proposed testing rule. The CPSIA required companies to submit “random” samples of their products for testing, but didn’t define the term “random.” It would have been good for the Commission to interpret “random” to mean that manufacturers couldn’t rig the game by choosing “golden samples” they knew would comply.

Our proposal, however, did not take that plain-language approach. It read “random” in a much more technical, complicated sense that might have meant lots of money for statisticians but little or no safety benefits beyond those of a common-sense reading.

In H.R. 2715, Congress resolved this dispute. The new law makes clear that Congress intended to prevent the cherry picking of samples by striking the word “random” and replacing it with “representative.” We could have done this by interpretation, but we chose to let others clean up our mess after the fact. Sound familiar?

 So:

  • Congress has expressly informed us that the majority was mistaken on at least one key aspect of the testing rule.
  • The new law re-shapes the landscape to require us to look at ways to reduce costs. 
  • The proposed testing rule has serious flaws that will make it more burdensome than it has to be and less effective than it could be.

Given all this, prudence indicates the path forward. We should take a few moments to re-examine what we’re trying to accomplish and how we’re trying to accomplish it. If we do that openly and sincerely, we will arrive at a better product.

Instead, because three members of the Commission want to do all they can while they still have their majority, they are poised to foist a misguided, misconceived, and likely expensive regulation on an already fragile economy. All with the promise that sometime in the future it could be fixed.  Man up and fix it now.

Ready…Fire…Aim (3)

My last two blogs have discussed shortcomings in the soon-to-be-voted-on testing and certification rule.  A third aspect of this testing and certification rule that concerns me is how it has mired another rule in an arbitrary process: our voluntary component testing rule.

The component testing rule clarifies that testing done by a component part manufacturer can be relied upon by the manufacturer of the final product.  The rule would allow component part manufacturers (like the company that makes the plastic for the teddy bear’s nose) to test and certify those component parts themselves. The final manufacturers of consumer products (here, the teddy bears) could then pass through the compliance maze more quickly by relying entirely on components that were already tested and certified. The goal of the component testing rule is to mitigate the burden of testing by spreading those costs across the supply chain.  It recognizes that, from a safety standpoint, the whole really is just the sum of its parts. And, it effectively pushes safety up the supply chain.

The component testing rule could have been issued months ago.  Indeed, all year long I have been asking the majority why they were holding back this rule and have yet to receive a satisfactory answer.  Apparently, their thinking is that if this is tied to the testing and certification rule, it will make the whole indigestible package more palatable.  They are wrong in thinking this.  And they are wrong, by holding the component parts rule hostage, to regulate with such disregard for how their actions impact those who have to live with them.

Ready…Fire…Aim (2)

Yesterday, I talked about how the final rule for testing and certification will be up for Commission vote shortly. This, in spite of directions from President Obama and Congress, our staff’s opinion, and the common sense judgment that we should pause and consider the costs and benefits of the testing rule. This rushed timetable and the contents of the draft final rule were decided by the majority, in defiance of those express concerns. 

I said that we should take a risk-differentiated approach, tailoring the requirements of the rule to risk so that it will make a difference in safety, not just increase cost. Today, I want to talk about another major piece of the testing rule that troubles me—the setting of “reasonable testing program” requirements for all products (not just children’s products). The law requires that manufacturers of non-children’s products use reasonable testing programs for their safety and compliance obligations.  The law neither defines the features of a reasonable testing program, nor requires us to do so in rulemaking. This makes sense. The pending proposal would change that, issuing detailed requirements for a reasonable testing program and—similar to many of our recent actions—apply those requirements “one size fits all.” It’s a step we don’t have to and shouldn’t take, for several reasons.

  • Including reasonable testing program requirements in the current testing rule is unnecessary and further complicates an already complicated regulation.
  • It is irrational to suggest that a reasonable testing program is the same for every product and irresponsible to cement that program in regulations that have the force of law.
  • Companies can tailor their compliance testing programs to be effective for particular products. There are plenty of best practices sources they can lean on, including guidance from our own talented employees.
  • Companies always have the obligation to meet statutory requirements, whether that is for lead content, phthalates, flammability, or any other requirement.

Defining a reasonable testing program through regulation is unnecessary, ineffective, and an irresponsible use of our safety resources. The provisions defining a reasonable testing program should come out of the rule.


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