Regulatory Moratorium Bill Passes House

Posted 26 July 2012 | By Alexander Gaffney, RAC 

The US House of Representatives passed a bill that would freeze many regulations, including those introduced by the US Food and Drug Administration (FDA), until unemployment falls to pre-recession levels.

The legislation, the Regulatory Freeze for Jobs Act, was introduced in the House in February and passed the House in a 240-178 vote largely on party lines on 26 July.

Among the bill's numerous provisions is a title stripping federal agencies of their power to pass "significant regulations"-a regulation impacting the economy by $50 million or more-until the unemployment rate falls below 6%.

Other notable provisions include requiring regulatory agencies to write regulations using easy-to-understand language, requiring all settlement decrees to be open for a period of public comment, requiring all regulations to be "the most cost-effective to achieve the regulatory objective" and allowing legislators to request a review of any federal regulation on the books. (See Regulatory Focus' 19 July story, "Major Regulatory Changes Proposed in House Bill").

Supporters Laud Passage

Representative Tim Griffin (R-AR) said in a statement he believed "hardworking American deserve a regulatory system that doesn't hamstring their ability invest, hire and grow." The congressman added that he believed "unnecessary or too costly" regulations were hurting the economy's ability to add jobs and recover from one of the worst economic periods in recent history.

In a 25 July editorial in Roll Call, Griffin said his bill was aimed at combating "excessive regulation."

"In its first three years, the Obama Administration created 120 new major regulations that cost Americans more than $46 billion every year," Griffin wrote. While the numbers he relies on have been subject to some debate between The Washington Post and The National Review, Griffin's remarks made clear he is looking beyond just the numbers.

"The House is listening, and we get it: Job creators need a break from the president's aggressive regulatory agenda," remarked Griffin. The Arkansas congressman also cited an analysis by the think tank American Action Forum, saying the bill could save $267 billion in compliance costs.

The congressman said he believes the bill "carefully targets the most harmful regulations while making exceptions for federal rules necessary for national security, trade agreements, enforcement of criminal and civil rights laws and imminent threats to health or safety."

Opposition to Bill Remains

The bill has encountered fierce opposition from a collection of public interest groups and democratic legislators, who claim the bill could materially and negatively impact safety regulations meant to protect consumers.

"It would be difficult, I think, to overstate the impact of this legislation," said Jessica Randall, federal regulatory policy analyst for OMB Watch, a public interest group focused on the Office of Management and Budget (OMB) and the federal regulatory process. "This cross-cutting, broad-based regulatory moratorium is inappropriately aggressive, and we're very troubled by the implications of the legislation."

"The legislation itself is designed to shut down the regulatory process," explained Randall in an interview with Regulatory Focus.

A moratorium on significant regulations could adversely affect the pharmaceutical and medical device sectors by delaying implementation of the recently enacted Food and Drug Administration Safety and Innovation Act (FDASIA), which contains numerous provisions calling for new regulatory structures to be put into place.

For medical devices, this could delay new investigation device exemptions (IDEs), new harmonization agreements with foreign regulatory agencies, and a unique device identifier system. For pharmaceutical products, the bill could delay new antibiotic incentives, accelerated approval pathways for "breakthrough therapies," and reporting requirements to alleviate drug shortages.

While the legislation contains a provision to allow the passage of regulations via an Executive Order for "health or safety" emergency reasons, it remains unclear what, if any, FDASIA provisions would be allowed to be passed through that provision. Both the public and industry are able to challenge any significant regulation passed while the law is in effect, potentially slowing the use of the emergency provisions in the absence of a concrete definition of the terms.

An 'Extreme Attack' Could Impact Industry

Other public advocacy groups agreed with Randall's assessment of the bill.

"This legislation is one of the most extreme attacks on our country's systems of public protections in this Congress and in a very long time," Amit Narang, regulatory policy advocate for the consumer advocacy group Public Citizen, told Regulatory Focus. "Professionals that ensure quality standards will not be able to benefit from the kinds of quality assurance that agencies provide," potentially leading to companies flouting regulatory loopholes in the absence of an agency being able to take action.

While the legislation is "not a turn-out-the-lights kind of situation" like a government shutdown could be, Narang said it still "reduces these agencies' ability to protect the public and protect American consumers, particularly when it comes to providing updated regulatory standards."

Narang also observed that "it's a little ironic…that this Freeze Act would undo this legislation that [the House] just passed."

Regulatory Uncertainty?

"There is a great deal of uncertainty that would result in the wake of a regulatory moratorium of this kind," explained Narang. "That uncertainty is going to hit industry officials, particularly those in regulatory compliance, the hardest because their jobs have been to not only comply with current regulations but also to comply with future regulations that they are anticipating being proposed. The problem here is all the preparations made in advance in anticipation of updated regulatory standards will have been a waste of time if we're looking at a period of four to five years before new regulatory standards arrive."

Even beyond the specifics of FDASIA, "shutting down the regulatory system has pretty significant impacts for regulated industry, just as it does for the average American citizen," said Randall. "If they have the sort of uncertainty that would be introduced by this sort of arbitrary and undefined moratorium, then that doesn't help them...but just makes it harder for them to know what to expect in the future."

Regulatory Capacity

Randall also said her organization was concerned about the regulatory capacities of federal agencies to comply with the law. One provision of the law requiring agencies to submit regulations to reviews by members of Congress was particularly concerning, said Randall. "We know those are expensive enterprises for an agency to take. It's troubling to see that [federal agencies] would be expected to waste those already limited resources in potentially frivolous ways."

Public Citizen agreed with OMB Watch's assessment. "Agencies should primarily be engaged in a forward-looking agenda to promulgate new standards and updated standards that benefit the American public-not constantly bogged down in a search for minor regulations that might be outdated or ineffective that would provide very little benefit to American consumers if killed."

The retrospective regulatory reviews are subject to diminishing returns, explained Narang, particularly as most modern presidents have ordered the reviews on a regular basis. The reviews do have at least one detrimental effect on agencies: time and monetary resources.

"Asking agencies to now do more [regulatory reviews] with less" is distracting them from "their primary missions," said Narang. "They simply don't have the resources to engage in this retrospective review process on a continual basis."

At its worst, allowing members of Congress to request regulatory reviews could amount to a "filibuster" on agency activities and regulations, said Narang. "You can have a particular representative or senator who is fed up with a particular agency or is fed up with an agency's activities…with the ability to shut down an agency by engaging it in an endless loop of retrospective review," observed Narang, who added that he found the provision "undemocratic."

Significant Obstacles Remain

The White House released a "Statement of Administration Policy" on 23 July stating the bill stands to "undermine critical public health and safety protections, introduce needless complexity and uncertainty in agency decision-making and interfere with agency performance of statutory mandates."

"Accordingly, the Administration strongly opposes House passage of H.R. 4078," wrote White House officials. "If the President were presented with [the bill], his senior advisors would recommend that he veto the bill."

The veto threat is unlikely to ever be acted upon as a result of the democrat-controlled Senate, which controls 53 of the 100 seats and holds a tie-breaking vote in Vice President Joe Biden. Even if republicans were to obtain 51 votes for passage in the Senate, democrats could filibuster the legislation and require republicans to obtain 60 votes for a cloture motion to close debate on the bill.

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