Rules Study Backed by Republicans ‘Deeply Flawed,’ Sunstein Says

A U.S. Small Business Administration study estimating regulations cost $1.75 trillion is “deeply flawed,” the Obama administration’s rules chief said, as Republicans said new rules are hurting job growth.

The study by Nicole V. Crain and W. Mark Crain of Lafayette College in Easton, Pennsylvania, has “become a bit of an urban legend,” Cass Sunstein, director of the White House Office of Information and Regulatory Affairs, testified today to a congressional hearing.

Sunstein said the Office of Management and Budget reached a different conclusion, finding that rules such as environmental or worker safety protections often have a net benefit for the economy.

Republican lawmakers said a rush of regulations from the Obama administration is to blame for a weak U.S. job market, and cited the study’s finding to support their complaint. Unemployment unexpectedly rose to 9.1 percent in May from 9 percent in April, the Labor Department reported today.

“The biggest obstacle we’re having about jobs is regulation and regulatory overreach,” Representative Marsha Blackburn, a Tennessee Republican, said at the hearing of a House Energy and Commerce Committee panel on oversight and investigations. “All of the regulations coming out of this town are not helping employers.”

The administration said May 26 that 30 U.S. agencies are seeking to repeal or modify regulations in an effort to reduce reporting requirements and save businesses and individuals billions of dollars in compliance costs.

‘Flawed System’

The effort to eliminate unnecessary regulations has so far failed to slow the process, said Republicans such as Representative Cliff Stearns of Florida, chairman of the subcommitee.

“New regulations affecting many sectors of industry and aspects of American life are being promulgated under the same flawed system that produced the regulations identified today,” Stearns said. “Enormously expensive regulations have sped through the review process on” Sunstein’s “watch with little or no opportunity for meaningful public comment.”

Among revisions proposed by the Obama administration is elimination of a requirement in some states for vapor recovery systems at gas stations and changes in labeling mandates for hazardous materials.

The changes are the result of a review President Barack Obama ordered on Jan. 18, saying he wanted “to remove outdated regulations that stifle job creation and make our economy less competitive.”

‘Spilt Milk’

The review has resulted in an exemption for the dairy industry from Environmental Protection Agency rules that defined milk as an “oil” and subjected farmers to regulations designed to cover oil spills.

The change means the dairy industry won’t “cry over spilt milk,” Sunstein said today, saying the changes could save the milk and dairy industries $1.4 billion over 10 years in clean-up costs.

The review didn’t include independent agencies set up by Congress, including the Securities and Exchange Commission, the Federal Reserve, the Federal Communications Commission and the Federal Trade Commission, which exercise regulatory authority over industries such as finance and telecommunications.

Sunstein said today that so far the EPA is complying with the intent of the review, and that he is hopeful other independent agencies will participate.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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