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Ready for an Onslaught?

Is the American economy ready to face an onslaught of new regulations? Here at the CPSC, we’ve been regulating non-stop for quite some time now. And although we’ve heard a message from the White House that we need to be careful about how we regulate—minimizing the negative effects on consumers and small businesses—we haven’t really listened to this message. And now that the Commission is down to a two-to-one partisan split, are we going to ramp up regulating even more? As Richard Rahn explains here, if our small agency can and will continue to crank out costly regulations, imagine what the big ones will do.

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Talking Business

Yesterday, I had the pleasure of speaking at the 13th Annual Legal Reform Summit, hosted by U.S. Chamber of Commerce’s Institute for Legal Reform. I discussed regulatory review, cost-benefit analysis, and how little of each is happening at the CPSC.

Given the organization’s long and illustrious history, naturally, I wasn’t the first public official to speak to a Chamber audience about the administrative state. Here’s what one visitor had to say about 18 months ago: “[I]f there are rules on the books that are needlessly stifling job creation and economic growth, we will fix them.”

That speaker was President Obama, outlining an executive order on regulatory review. The order tells agencies like the CPSC to look at our rules and shed whatever wasn’t working or necessary. It envisions a regulatory system that “promot[es] economic growth, innovation, competitiveness, and job creation.” The order urges regulation “based on the best available science” that can “promote predictability and reduce uncertainty,” using “the best, most innovative, and least burdensome tools,” and taking “into account benefits and costs.”

The CPSC has failed every aspect of that order. Key recent rules stifle growth and discourage innovation. They also stifle competition and slant the playing field toward the biggest businesses. About the only jobs they create are for lawyers.

Here’s hoping that, regardless of what happens November 6th, we’ll see a renewed effort from the White House to bring CPSC into compliance with prudent government. Here is an article about my presentation at this meeting.

Voices from Outside the Echo Chamber

A regulator’s job description should include a requirement to get out of the Washington echo chamber, from time to time, to visit and talk with folks who have to live with our mandates. That is one of the best ways we have to gauge if regulations make sense out in the real world and if there are any issues surfacing as companies work to comply with the law. Last week I was on the road, having just those kinds of conversations.

The ABC Kids Expo was a wonderful opportunity to talk one-on-one with smaller companies who make a wide variety of infant and children’s furniture and other products. Without exception, these companies expressed a strong commitment to safety. This makes sense because many of the companies represented were started by entrepreneurial parents who saw either a need going unmet or a way to improve a product. While these companies were very pleased and eager to get whatever information we can offer on how to comply with our rules, I also heard concerns about both the process of writing the rules and the substance of the rules themselves. For example, the agency, working with the voluntary standards bodies, has been issuing the Congressionally-directed durable infant and toddler products regulations at a rapid pace.  Yet there is growing concern, which I heard expressed again last week, that this is resulting in a process that is less rigorous, at times more arbitrary and more error-prone than it used to be. Certainly, this is something that warrants greater attention at the CPSC.

I also spent time at the Specialty Graphic Imaging Association Expo, talking with the association’s Board of Directors, conducting a safety seminar and walking the show floor talking with individual members of this very complex and dynamic industry. Here are some of the key points I took home:

  • Overall, component testing is not working as the cost saver we hoped for this industry;
  • CPSIA-required testing is posing challenges in terms of expense and frustration as companies test for substances that are not present but do not fit into the exemptions; and
  • Testing variability among labs, in particular with respect to phthalates testing, is adding time and expense to the process, and is consuming resources in an unproductive manner.

While there are some very large players, the bulk of the industry is made up of small, domestic companies. Because of the nature of the business, the small batch testing exemption does not apply. One small business owner, with fewer than 10 employees, told me of needing to add an employee to do nothing but administer and document his testing and regulatory compliance program. Another told me that since children’s garments were not a major part of his business, he has decided just to get out of that aspect of the business altogether rather than have to hassle with all the rules.

I am concerned when I hear reports like that. Congress directed us to look at ways to cut costs. I suspect that, if and when we get serious with a commitment to action, taking that directive seriously, rather than just playing charades with that directive, we will find that there is ample opportunity to provide some real relief. In the meantime, with no boost to safety, the clock is ticking on the existence of numerous U.S. based low-volume businesses and their employees’ livelihoods.

Western Walkabout

I believe that one of regulators’ most important responsibilities is to assess the impact of the regulations they issue. A great way to do that is to get out of Washington and talk with the folks who have to live and work under the regulations we put out. I always welcome the opportunity to do that.

Recently I was in California and Arizona talking with various groups about how we are doing—both what we are doing right and what needs to be improved. In the “what we are doing right” column, there was appreciation that people in Washington would actually listen to concerns and talk candidly about how best to address them. In the “room for improvement” column, I heard strong concerns about the high costs of complying with regulations that are confusing or do not necessarily address real safety issues.

Here is an example. I visited an apparel manufacturer who has never had any safety violations or issues. They told me that, over the past 10 years, the average wholesale cost of a garment has decreased by about 50% and that costs increased by over 15% during the same time . The testing costs mandated by the CPSC under the CPSIA over the past three years have increased costs by an additional 3.5%. That added cost is an average: it’s much higher for small production runs. In fact, I was told that the testing costs for small runs “are killing us” and that this company has stopped doing small runs of products. In this case, the consumer loses: less choice and not necessarily any additional safety.

I also had the opportunity to visit with the Arizona Chamber of Commerce, doing more listening than speaking. The message I got was that businesses will support regulations that are based on sound science, are cost effective, and that advance a real safety goal. Unfortunately, some recent regulations do not meet these criteria so it is no wonder that we hear growing concern.

To me, this growing concern points to a system that is not operating in the public interest—that is, providing the appropriate level of safety in the most cost-effective manner. We need to fix this.

Postcard from the Subcontinent

Greetings from Bangalore, one of India’s principal textile and apparel manufacturing centers. This week I have been in both India and Bangladesh, advocating product safety to the region’s garment manufacturers. Here are some quick impressions:

• The textile and apparel industry is very important to the economies of India and Bangladesh. Most of the apparel Americans wear is imported and more and more of of that clothing comes from these two countries. In fact, Bangladesh is America’s fourth largest supplier of apparel, and India follows right after.

• My message of pushing safety up the supply chain has been well received in both countries. The Bangladesh conference where I spoke had more than 350 attendees, with many turned away because it was oversubscribed. The demand for the information we were giving was so great that the industry is already talking about another safety conference within the year. The turnout here in Bangalore was very large as well.

• Garment manufacturers, suppliers, and lab experts repeatedly expressed their appreciation that a senior government official would come this distance to discuss and explain the new and complex U.S. consumer laws. The level of official U.S. government engagement in this dialogue drove home the importance of product safety to this audience. Clearly, both the message and the messenger are important.

I was impressed by the eagerness of attendees to learn the rules and get it right. This translates into greater safety for American consumers.

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.

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


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