[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]






                  THE QUALITY OF REGULATORY ANALYSES

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON REGULATORY REFORM AND
                          PAPERWORK REDUCTION

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                              JUNE 8, 2000

                               __________

                           Serial No. 106-63

                               __________

         Printed for the use of the Committee on Small Business


                    U.S. GOVERNMENT PRINTING OFFICE
67-352                      WASHINGTON : 2000






                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director
                                 ------                                

       Subcommittee on Regulatory Reform and Paperwork Reduction

                   SUE W. KELLY, New York, Chairwoman
LARRY COMBEST, Texas                 BILL PASCRELL, New Jersey
DAVID M. McINTOSH, Indiana           ROBERT A. BRADY, Pennsylvania
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
JOHN THUNE, South Dakota
               Meredith Matty, Professional Staff Member




                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page
Hearing held on June 8, 2000.....................................     1
    Hahn, Robert W., Director, AEI-Brookings Joint Center on 
      Regulatory Studies.........................................     5
    Murphy, Robert, General Counsel, General Accounting Office...     9
    Addington, David S., Sr. Vice President, American Trucking 
      Association................................................    11
    Ricciardi, Sal, President, Purity Wholesale Grocers, Inc.....    15
    Wallman, Kathleen, President & CEO, Wallman Strategic 
      Consulting, LLC............................................    16

                                Appendix

Opening statements:
    Kelly, Hon. Sue..............................................    22
Prepared statements:
    Hahn, Robert W...............................................    37
    Murphy, Robert...............................................    78
    Addington, David S...........................................    92
    Ricciardi, Sal...............................................   102
    Wallman, Kathleen............................................   127

 
                   THE QUALITY OF REGULATORY ANALYSES

                              ----------                              


                         THURSDAY, JUNE 8, 2000

              House of Representatives,    
      Subcommittee on Regulatory Reform and
                               Paperwork Reduction,
                               Committee on Small Business,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:48 a.m., in 
room 311, Cannon House Office Building, Hon. Sue W. Kelly, 
[chairwoman of the subcommittee] presiding.
    Chairwoman Kelly. Good morning, ladies and gentlemen. I 
would like to thank you for attending this hearing of the 
Subcommittee on Regulatory Reform and Paperwork Reduction. This 
is the second hearing in a series of hearings being held at the 
full Committee level and in this Subcommittee concerning the 
reauthorization of the Paperwork Reduction Act and the 
effectiveness of other regulatory reform efforts currently in 
place.
    Yesterday, we focused on the regulatory burdens imposed on 
small business and the regulatory relief efforts of the 
administration. Today, we will narrow our focus to discuss the 
quality of agency regulatory analyses. In order to explore this 
issue, we must discuss the adequacy of agency compliance with 
analytical requirements mandated by the Administrative 
Procedure Act, the Regulatory Flexibility Act, and various 
other executive orders meant to direct agencies in producing 
regulations whose benefits outweigh their costs and achieve 
their objectives in the lowest cost manner possible.
    Witnesses will focus on whether these analyses provide 
agencies with sufficient information to properly assess the 
impact that the rules will have on the regulated community and 
the small business community in particular. Additionally, we 
will discuss any changes that are needed to ensure that 
agencies recognize these impacts, including whether Congress 
should obtain an independent assessment of these analyses in 
order to carry out its legislative functions. And while the 
subject may not be as entertaining as hearing Chuck D expound 
on the sale of music on the Internet, for small businesses 
affected by the ever-burgeoning mound of regulation and 
paperwork requirements, it is critical that this Subcommittee 
place this rather dry subject at the top of legislative 
priority.
    Small business owners are very familiar with the burdens 
that Federal regulations place on them. Some studies have shown 
that for small employers, the cost of complying with Federal 
regulations is more than double what it costs their larger 
counterparts, and you do not need any study to reach that 
conclusion. Common sense will say that if a regulation costs 
General Motors and a 500-employee manufacturer of a copper 
tubing company the same amount of money, the overall impact on 
General Motors is going to be significantly less on a per unit 
basis.
    As a result, small business owners have historically been 
interested in regulatory reform efforts in Washington. Any 
mechanism that will help control the size of this burden is 
naturally appealing to the small business community. The APA, 
SBREFA, and several other executive orders are such mechanisms. 
But these efforts will manage the regulatory burden only if 
they are implemented fully and only if Congress keeps a 
watchful eye on their progress.
    As the Committee whose goal it is to promote and protect 
the interests of small businesses, we have the obligation to 
discuss how well agencies are satisfied with and are satisfying 
these analytical requirements and to explore ways in which 
Congress can better understand these regulations that small 
business owners struggle to comply with on a daily basis.
    There is yet another underutilized mechanism reducing the 
regulatory burden on small business, the Congressional Review 
Act. On March 29, 1996, the Small Business Regulatory 
Enforcement Fairness Act, or SBREFA, became law. Included with 
this legislation was a section that established a CRA, a formal 
tool by which Congress could review and prevent new regulations 
from taking effect without going through the normal legislative 
process. Used properly, this new oversight device could greatly 
enhance the regulatory process by ensuring that only those 
regulations which are truly in the public interest are allowed 
to go into effect.
    Unfortunately, the Congressional Review Act does not appear 
as if it is being used effectively because it is not being used 
at all. Not a single resolution of disapproval under the 
Congressional Review Act has passed. The House has failed even 
to vote on one. Some have given up on its ability to halt 
regulations that do not have sufficient justifications that go 
beyond what Congress, or that create unintended consequences 
that require correction. But I believe that combined with 
oversight hearings, legislative efforts, and the submission of 
Congressional comments, CRA still has some hope.
    Regardless of whether or not you believe CRA can be used, 
you must admit that Congress does not have enough information 
to undertake appropriate oversight of the powers delegated to 
agencies by Congress. The power delegated to these agencies 
enables them to issue rules and those rules may not meet the 
objectives or have the consequences that Congress expected when 
it enacted the legislation.
    For example, when Congress enacted the Federal Motor 
Carrier Safety Act to create the Federal Motor Carrier Safety 
Administration, it certainly expected that the agency would 
enact rules to improve the safety of our highways through 
improved regulation of truckers. However, the most recent 
proposal from the FMCSA may have substantial unintended 
consequences for tour bus operators, independent route 
salesmen, and manufacturers. These consequences apparently were 
not considered when the FMCSA decided to treat all those 
individuals who drive professionally on the nation's road 
systems in an identical manner.
    To help address this problem, I was joined by Chairman Jim 
Talent in introducing H.R. 3669, the Congressional Oversight 
and Audit of Agency Rulemaking Actions Act. We call it COAARAA. 
This office would focus solely on conducting independent 
regulatory assessments of regulations to help determine whether 
the agencies have complied with the law and executive orders. 
Unfortunately, Congress cannot obtain unbiased information from 
participants in the rulemaking because each participant, 
including the Federal agency, has a particular viewpoint and 
bias. A Congressional Office of Regulatory Analysis would help 
fill the information gap and assist members of Congress in 
determining whether action is warranted.
    The purpose of COAARAA, then, is to ensure that Congress 
exercises its legislative powers in the most informed manner 
possible. Ultimately, this will lead to better regulatory 
analyses, most cost effective regulations, and most 
importantly, legislation tailored in a manner to address a 
narrow problem and not overly broad legislation likely to 
impose unnecessary burdens on small business. Only through 
active oversight can Congress ensure that the laws that it 
passes are properly implemented. This is a responsibility that 
Congress must take seriously, because as countless small 
business owners can attest to, not doing so can have dramatic 
implications.
    We have joining us today an excellent panel who will 
discuss some of these issues. I wouldlike to thank each one of 
them for participating with us today and I look forward to hearing 
their testimony. I thank you very much.
    Now, I would like to turn to Mr. Pascrell for his opening 
statement. If anyone else has an opening statement, I am going 
to ask that it be submitted for the record so that we can move 
this hearing on. Mr. Pascrell?
    Mr. Pascrell. Thank you. I would like to start my opening 
statement by thanking my friend, the distinguished Chairwoman 
from New York, for setting up this hearing to discuss the issue 
of regulations and their impact on small businesses. In fact, 
we almost had a little preliminary yesterday at another 
hearing. I think this serves as a nice complement and more 
focused follow-up to the hearing that we had yesterday.
    The issue we deal with today is one of the most critical 
issues for small businesses. The need to have rules that are 
clear, well thought out, and that realistically gauge economic 
impact, can be critical to the success of small businesses, 
which are the backbone of our economy. I relish this 
opportunity to examine the strides that have been made in this 
area so we can see how successful agencies have been in 
completing economic analysis that reflect the true cost of 
these regulations.
    Both sides of the aisle have concerns with regulations and 
their burdens that they place on businesses, and indeed, if one 
was to look since 1980 at the number of acts and executive 
orders that have addressed the problem of bureaucracy and 
regulation and paperwork, particularly in the last seven or 
eight years, one of the questions that we all have sitting 
around here is whether these regulations, first of all, are 
being implemented and how would we know if they were, and 
second of all, what is the fallout and is that more treacherous 
than the regulation which was supposed to correct some problem 
in the first place?
    I do not think that there is any Democratic or Republican 
way to design a regulation. There is just the correct way, one 
that is thought out and is not a rush to judgment. It is a way 
that involves a comment period where the agencies not only take 
comments but they listen to the suggestions made and evaluate 
the validity of business concerns.
    I personally believe, and this is only my take on this, 
that any regulation or rule which is the result of legislation 
that the Congress passes, that since the Congress is taking 
great pains to discuss this with those folks who are most 
impacted, and that is why we debate these issues, that when an 
agency gets that law and now has to implement it, that the 
rules and regulations should reflect discussions with the 
particular business. Many times, they do, and many times, they 
do not, and that is where we have major problems. If there is 
no one monitoring how these regulations are being implemented, 
let alone promulgated, I think we have serious problems and we 
need to address them.
    A regulatory impact analysis, which was mandated by the 
administration, is crucial in making sure burdens are not 
excessive, and I believe some of those burdens are excessive. I 
believe some of those burdens do not reflect the spirit and 
intent of the original laws. They go beyond, and they are 
usually imposed by second- and third-level bureaucrats who have 
no appreciation whatsoever of what business folks have to go 
into day in and day out.
    As the study we will look at shows, and as we know from the 
many complaints our offices receive about overly burdensome 
regulations, the Federal Government has to do a better job with 
its analysis to ensure the regulations designed are efficient 
while at the same time being effective. It would seem to me the 
only way we can do that is have a report to each Congress of 
what has happened in the previous Congress and how these are 
being implemented so that the Congress itself knows of what has 
been monitored and what has not. You can have all the executive 
orders by whatever President you wish. If they are not being 
implemented or if the implementation of those executive orders 
are worse than the previous situation, then we have created a 
real amount of chaos and I am sure we do not want to do that.
    It is interesting to note that the two parties who compiled 
the report on both sides of the political spectrum joined 
together on their conclusions. It is much like our work on the 
Small Business Committee, which has been for the most part 
bipartisan. We try to steer away from the extremes. I think 
that is healthy.
    I look forward to using this hearing to look at the 
Chairwoman's COAARAA legislation contained in H.R. 3669. Maybe 
what we learn here today can help us weigh the need for an 
office within the General Accounting Office to compile separate 
analysis of regulations to balance the job currently done by 
the Office of Management and Budget.
    So I look forward to today's testimony and I thank the 
Chairwoman for her indulgence.
    Chairwoman Kelly. Thank you very much, Mr. Pascrell.
    I do want to say one thing before we begin. I look forward 
to the testimony, but I also thank all of you, every one in the 
audience and everyone who is on the panel, for waiting for us 
so patiently. We had no idea when we set the timing on this 
hearing that we would be caught in the involvement on the floor 
of the House. So I thank you very much, and with that, we will 
begin with the testimony.
    We will start with you, Mr. Hahn, Mr. Robert Hahn from the 
AEI-Brookings Joint Center on Regulatory Studies. He is the 
Director and we are very happy to have him with us today.

  STATEMENT OF ROBERT W. HAHN, DIRECTOR, AEI-BROOKINGS JOINT 
                  CENTER ON REGULATORY STUDIES

    Mr. Hahn. Thank you, Chairwoman Kelly, Congressman 
Pascrell, and Congressman Moore. In listening to your remarks, 
I am reminded of a Woody Allen story which I will tell you 
briefly, where his father comes home from work one day and says 
to his wife, ``You would not believe it. You would not believe 
it.'' And she goes, ``Well, what is wrong?'' And he goes, ``I 
have been replaced by a machine.'' She goes, ``Oh, that is 
terrible but you will go out and find another job.'' And his 
mother immediately went out to the department store and bought 
one of these machines. [Laughter.]
    I basically think that the remarks that you made in many 
ways reflect more common sense than what I am about to tell 
you, but I want to fill in some of the details that I think are 
important in talking about regulatory reform, but let me start 
with a couple of formalities.
    First, I am going to talk to you more, so I would ask that 
my formal remarks be placed in the record. They reflect not 
only my sentiments but those of Robert Litan, who is the Co-
Director of the American Enterprise Institute-Brookings Joint 
Center for Regulatory Studies.
    Chairwoman Kelly. We are glad to have the remarks and we 
will put them in the record. Thank you.
    Mr. Hahn. Thank you. My sister once told my niece, who I am 
hoping to visit later this afternoon if this hearing ends at a 
reasonable hour, once told my niece what her Uncle Bobby did, 
and she told her that he was an egghead. She said, ``Well, what 
do eggheads do?'' ``They think a lot.'' So the next time I went 
down to visit my niece, who is now five, she said, ``Uncle 
Bobby, what is it that you really do?'' And I said, ``Well, I 
study regulation.'' And she goes,``What is regulation?'' 
Remember, I am talking to a five-year-old now. And I said, ``We sort of 
study how when you tell a person to do something, you tell them to do 
it in a nice way.'' She says, ``Well, how about an example?'' I said, 
``Well, if Mommy tells you to clean up your room, she does not say, 
`Put this toy over in that corner and put that toy under your bed,' or 
whatever. She leaves it up to you how to do that.'' And she thought 
about it for a minute and she says, ``That is great. Can we watch 
Winnie-the-Pooh now?''
    This is a real problem with regulatory reform in the large, 
and I do not have to tell you that. One is, one conveying to 
people why it is important, that it can have an impact on each 
of our freedoms, it can have an impact on the size of the 
economy, the way we run our personal lives, the way we choose 
to engage with each other in business. So it seems that the 
more things change, the more they remain the same.
    I am sure you have heard the story and probably testimony 
from former Senator George McGovern about when he left this 
august body, in this case the Senate, he talks about how he 
tried to start an inn in New England and he said, ``Gosh, if I 
only knew then what I know now about regulation, I would have 
done things a lot differently.''
    There has been a steady stream of legislation and executive 
orders related to regulatory reform which you, Congressman 
Pascrell and you, Chairwoman Kelly, both told us about in your 
introductory remarks. The reality is that not much has been 
done. That is the bad news. The good news is, I think if we as 
foot soldiers, I include you in that army, if you will, and 
myself and the other distinguished members of the panel, if we 
stay focused and we stay focused on the right thing, I think we 
can make some headway.
    First, let me start by asking what is the nature of the 
problem, and we go into this in more detail in our formal 
remarks. Well, the nature of the problem is the Federal 
Government requires expenditures on the order of $200 billion a 
year, very, very, very roughly speaking. Those costs are 
imposed on the private sector, and to a lesser extent 
government bodies, to do things. We do not have a particularly 
good idea of what is being done.
    Congressman Pascrell, you talked about you have a hunch 
that some things are being done that do not make sense. Well, 
let me give you one example based on a study that I did not do 
but my colleagues, Randy Lutter and Elizabeth Mader, are just 
releasing today at the Joint Center.
    We have a lot of legislation regulating lead out there 
because lead is of concern for children's health, among other 
things. Did you know that the regulations that you were in 
charge of making the laws for and that EPA and HUD are in 
charge of implementing, those regulations require more 
stringent regulation of lead at hazardous waste sites than in 
the kid's back yard? There may be no kids at the hazardous 
waste site. Lots of kids play in their back yard. Do we have a 
problem? Maybe.
    We could be doing a much better job of improving kids' 
health, saving kids' lives, and saving money if we simply took 
a careful look at the process. We could do a better job of 
facilitating entrepreneurship in small business, in large 
business, if we took a serious look at what the paperwork 
requirements do and what these silly regulations of which I 
just gave you one example. George McGovern, for all we know, 
might be in business in New England today promoting bed and 
breakfasts. We could do a much better job of making sure that 
regulations do not impose a drag on the economy.
    Okay, how do we do this? How do we begin to think about 
improving the quality of regulation so that you and appointed 
civil servants can make better decisions? The short answer is 
it takes two things. One, you guys have got to step up to the 
plate. You have got to have guts. This is in short supply in 
this town. You have really got to have guts. And the second 
thing is it requires common sense, which you have already 
articulated in your opening remarks.
    Let me say a little bit about what I think we know about 
the quality of regulatory analyses, and I have a few people in 
the audience who I would like to acknowledge who have helped me 
on this, some of whom have already left me, very wisely. Irene 
Chan, who did some seminal work on this last year, looking at 
what the government actually does in terms of their regulatory 
analyses, and my colleagues, Jason Burnett and Aaron Labor, and 
will be happy to field any tough questions from you. But I will 
give you the broad-brush view of what I think we know.
    First of all, based on my earlier research, from an 
economist's point of view, many of the regulations that the 
Federal Government are implementing now are not likely to pass 
an economist's version of a benefit-cost test. I estimate that 
on the order of half the regulations, using the government's 
own analyses as data, would not pass a benefit-cost test. I 
find that rather disturbing. That is the first point.
    The second point, which speaks, Chairwoman Kelly, to the 
substance of this discussion today, is the quality of the 
analyses themselves. Well, the quality of the analyses in my 
view is really poor. We looked at analyses, so-called 
regulatory impact analyses, over the last three years, between 
1996 and 1999, all of them that we could find for major 
environmental health and safety regulations, and the bottom 
line is they do a bad job of even complying with their own 
guidelines. This is based on a Joint Center study, not funded 
by any particular business or whatever, just an independent 
study by economists.
    What do we find? We find that of those rules that we 
reviewed carefully, and Irene and Jason can tell you more about 
this, only 28 percent of those rules presented information on 
net benefits, that is, benefits and costs and taking the 
difference. Well, if you are going to be making multi-million 
and in some cases multi-billion-dollar decisions, I think the 
American public deserves to know what is happening.
    The second thing we found is that they quantified benefits 
and costs of alternatives for only a quarter of the 
regulations. Did you think of another way to clean up your 
room, Katie, or is this the only way to do it? Most of the 
time, these guys did not bother to look whether there were 
other ways to clean up the room, the hazardous waste site, or 
the dirt in the back yard. Duh, we have got a problem.
    All right. What are we going to do about this problem? I am 
going to briefly go through some of my recommendations, some of 
which are based on the good work of your Committee. The first 
is, I think in the interest of accountability and transparency, 
you ought to put these regulatory impact analyses and their 
underlying supporting documents on the Internet. Hey, if Al 
Gore invented it, we might as well use it. Let us use the 
Internet to tell people what is happening about regulation, 
with all due deference to the Vice President--just a joke. And 
before a regulation--this is important--before a regulation is 
actually considered at OMB, we ought to put it on the Internet 
so it is available to eggheads like myself and also real 
people.
    My second point, and this is a point which you might find 
astounding, but it is not, is that these regulatory impact 
analyses do not summarize in any sort of standardized way what 
they actually do. What does that mean? I have to hire a group 
of some of the best graduate students to spend sometimes up to 
a week to figure out what these analyses are saying. Well, 
Congress people do not have a week to look at what is in these 
analyses, so we recommend that you write a clear executive 
summary when you do these regulatory impact analyses and you 
attach a table to tell people what you did and what you did not 
do.
    Did you consider costs? Did you quantify them? Did you 
consider benefits? Did you quantify them? Did you consider 
alternatives? Did you try to quantify the impacts of those 
alternatives?What were the kinds of technical assumptions you 
made underlying these analyses to get your results?
    Again, it is not rocket science, but this is not enough. As 
Congressman Pascrell pointed out, you have got to figure out 
whether you have the guts to enforce these things. I mean, 
there are executive orders on the books here and there are tons 
of beautiful laws in the Soviet Union, or the former Soviet 
Union, that make it look like everything is hunky-dory, but, in 
fact, everything is not always hunky-dory and sometimes you 
have to step up to the plate to do things that we believe are 
common sensical.
    Our third recommendation, and this follows along the 
suggestions of the Chairwoman, is to create something like the 
Congressional Office of Regulatory Analysis. We think it would 
help make the regulatory process more transparent to the 
American people. It would help Congress in finding out what is 
actually happening down at the other end of Pennsylvania Avenue 
in terms of regulations and their impact.
    If you want me to say more words about COAARAA, I will be 
happy to do it. Mr. Litan and I testified on this, as you know, 
previously. We are great supporters of these initiatives for 
the reasons we state in the paper.
    Something else we believe is important, and it would 
require a little bit of stepping up to the plate, but again, it 
is common sense, is we believe that Congress should require 
agency heads to balance the costs and benefits of major 
regulations. I am not even saying at this point, though I 
believe the benefits should be at least equal to the cost and 
ideally greater, but I am saying at least there should be a 
statement that we balanced these things and this is how we 
thought about them, if you are making a big decision like the 
national ambient air quality standards.
    And finally, and this is again where you can step up to the 
plate to make things happen, is we believe that Congress should 
require that all regulatory agencies adhere to established 
principles of economic analysis when undertaking a regulatory 
impact analysis. OMB has already articulated a beautiful set of 
guidelines. The Joint Center has convened a group of scholars 
that also talks about established principles. The question is, 
as Congressman Pascrell pointed out, when are we going to begin 
to think about implementing these things?
    So in conclusion, as I said earlier, it is really going to 
take guts and common sense. It is very clear to me that the 
common sense is out there. I hope the political will is there, 
and I will be happy to entertain any questions after the panel 
or now. Thank you.
    Chairwoman Kelly. Thank you very much, Mr. Hahn.
    [Mr. Hahn's statement may be found in appendix.]
    Chairwoman Kelly. Next, we go to Mr. Robert Murphy. Mr. 
Murphy is the General Counsel for the General Accounting Office 
and Mr. Murphy, COAARAA might land in your lap, so I am very 
much looking forward to your testimony.

    STATEMENT OF ROBERT P. MURPHY, GENERAL COUNSEL, GENERAL 
 ACCOUNTING OFFICE; ACCOMPANIED BY CURTIS COPELAND, ASSISTANT 
   DIRECTOR, GENERAL GOVERNMENT DIVISION, GENERAL ACCOUNTING 
                             OFFICE

    Mr. Murphy. Thank you, Madam Chairwoman, Mr. Pascrell. I am 
pleased to be here today to talk about GAO reviews of the 
compliance by agencies with procedural and analytical 
requirements of rulemaking. One of the assistant directors at 
GAO, Curtis Copeland, who led many of these jobs, accompanies 
me at the table today. With your leave, I will briefly 
summarize my testimony and in particular talk about two reviews 
that we did of regulatory impact analyses and ask that the full 
text of my prepared remarks be incorporated in the record.
    Our reviews were conducted in response to Congressional 
concern that agencies were not, as Mr. Pascrell pointed out 
earlier, considering the effects of their actions on regulated 
entities, nor had they worked to minimize those negative 
effects. The requirements we examined are contained in a number 
of statutes from the Administrative Procedures Act to the 
Unfunded Mandates Reform Act, as well as Executive Orders 12866 
and 12612.
    While they may not have been representative of all 
rulemakings, our work disclosed inadequate data, methodologies 
and assumptions, and disclosed noncompliance with the statutory 
requirements and executive orders. There were examples where, 
as a result of our work, agencies changed their practices and 
we helped ensure better adherence to applicable regulatory 
requirements.
    On the other hand, sometimes our reviews did not disclose 
noncompliances but they provided the facts and the analysis to 
the Congress to understand what the agencies were up to in 
their rulemaking. Sometimes we discovered that the issues that 
concerned the regulated community were not really those of the 
agencies but were of the underlying statutes concerned, that 
the aspects of the regulations that were considered burdensome 
by the regulated community were actually required by the 
statute being implemented.
    Some of our work on regulatory issues has clearly 
demonstrated the value of Congressional oversight of agency 
rulemaking. Congressional oversight can clarify issues left 
unclear in agencies' public statements about their rules and on 
occasion can directly result in changes to agencies' rules. The 
targets of that oversight can vary substantially, from the 
particular and sometimes highly technical elements of agencies' 
economic analyses used to support the rules to the general 
public participation requirements in the rulemaking process.
    I would like to address, as I said earlier, two particular 
reviews by GAO. In the last 20 years, we have seen enormous 
growth in both the breadth and the number of Federal 
regulations. According to OMB, these regulations have improved 
public health, safety, and environmental quality, but they come 
at a real cost. I do not think anybody estimates the annual 
cost of these regulations below hundreds of millions of dollars 
every year.
    To control the costs of these regulations, administrations 
have issued executive orders, such as 12866, and Congress has 
enacted laws, including the Unfunded Mandates Reform Act of 
1995. These orders and laws require Federal agencies to prepare 
and use economic analyses, also known as regulatory impact 
analyses, to assess the benefit and costs of proposed 
significant actions before promulgating those regulations. 
These analyses are intended to inform and improve the 
regulatory process by identifying the likely costs and benefits 
of feasible alternatives.
    We were asked to describe the extent to which Federal 
agencies' economic analyses incorporate best practices and the 
agencies' actual use of these analyses in regulatory decision 
making. We included in our review all economically significant 
proposed and final rules issued between July 1996 and March 
1997 that addressed environmental, health, and safety matters. 
As a result, GAO reviewed the economic analyses used in 
promulgating 20 regulations by five agencies, the Departments 
of Agriculture and Transportation, the Environmental Protection 
Agency, the Food and Drug Administration within the Department 
of Health and Human Services, and the Occupational Safety and 
Health Administration in the Department of Labor.
    We found that five of the 20 analyses did not discuss 
alternatives to the proposed regulatory action, six did not 
assign dollar values to the benefits, one did not assign dollar 
values to thecosts, all of which OMB recommended in its best 
practices guidelines. OMB guidance gives agencies flexibility to decide 
how thorough their economic analyses should be. At the same time, the 
guidance stresses the importance of disclosing the reasons for 
omissions, gaps or other limitations. Although GAO found many instances 
in which best practices were not followed in the analyses, the reason 
for not following was disclosed in only one case.
    In addition, eight of the economic analyses did not include 
an executive summary that could help the Congress, decision 
makers, the public, and other users quickly identify key 
information addressed in the analyses. Finally, only one of the 
20 analyses received an independent peer review.
    I should say that this past March, OMB issued a revision to 
its best practice guidance for agencies and we found that, 
again, that guidance falls short of the recommendations that we 
have made for best practices, and incidentally, several of 
those that Mr. Hahn has touched upon today.
    In another instance, we found that a Congressionally 
requested review of agency regulatory analysis actually 
resulted in a change to those rules. We reported last year on 
the scientific basis for the Food and Drug Administration's 
proposed rule on dietary supplements containing ephedrine 
alkaloids and the agency's adherence to statutory and executive 
regulatory analysis requirements. Although the number and type 
of adverse event reports that FDA received warranted the 
agency's consideration of steps to address safety issues, we 
were concerned about the strength of the information FDA used 
to support two aspects of the proposed rule, the dosing level 
and the duration of use limits.
    We concluded that FDA generally complied with the statutory 
and executive orders applicable to rulemaking, but the economic 
analysis that accompanied the rule did not reflect the full 
range of uncertainty associated with the proposed rule. The 
agency did not always disclose why certain key assumptions were 
made or the degree of uncertainty involved in those 
discussions. It also did not disclose that alternate 
assumptions would have had a dramatic effect on the agency's 
estimate of the benefits of the proposed actions.
    We recommended that FDA obtain additional information to 
support conclusions regarding the specific elements in the 
proposed rule before proceeding to final rulemaking. We also 
recommended that FDA improve the transparency of its cost-
benefit analysis in its final rule.
    I am happy to say that in April of 2000, FDA announced that 
it was withdrawing certain portions of its proposed rule, 
``because of concerns regarding the agency's basis for 
proposing certain dietary ingredient level and a duration of 
use limit for these products.'' That was an example of where 
Congressional oversight had an immediate benefit to the public 
and to the government.
    There are numerous other examples of GAO reviews in recent 
years that demonstrate that Congressional oversight can be 
effective in ensuring that agency rules are carefully developed 
and that agencies permit public participation in the rulemaking 
process.
    Madam Chairwoman, this concludes my statement. I would be 
pleased to respond to any questions.
    Chairwoman Kelly. Thank you very much, Mr. Murphy.
    [Mr. Murphy's statement may be found in appendix.]
    Chairwoman Kelly. Let us move on to Mr. David Addington. 
Mr. Addington is Senior Vice President of the American Trucking 
Associations. Mr. Addington, thank you very much for being here 
today.

    STATEMENT OF DAVID S. ADDINGTON, SENIOR VICE PRESIDENT, 
                 AMERICAN TRUCKING ASSOCIATIONS

    Mr. Addington. Thank you, Madam Chairwoman. I have two 
documents I would like to ask your permission to have in the 
record, my full written statement submitted to the Committee 
and the document I transmitted to the staff yesterday, five 
pages entitled ``Summary of the Federal Motor Carrier Safety 
Administration's Proposed Hours of Service Changes, Updated May 
15, 2000.''
    Chairwoman Kelly. By all means, we will accept them into 
the record. Thank you.
    Mr. Addington. Madam Chairwoman and members of the 
Subcommittee, we appreciate the invitation to discuss the 
Department of Transportation's failure to properly conduct the 
required analyses to determine the full impact of proposed 
rules to govern the hours that truck drivers may work. The 
hours of service scheme proposed by the Department's Federal 
Motor Carrier Safety Administration is disastrous for the 
trucking industry, for the safety of the traveling public, and 
for American consumers. The proposed regulations hit trucking 
companies hard and they hit small trucking companies hardest. I 
will describe the trucking industry, some

key problems with the Department's proposed rule, and the 
defective analyses on which the Department of Transportation, 
which I will call DOT, based its rule.
    The American Trucking Associations, which I represent, is a 
national trade association for the trucking industry, with more 
than 2,500 motor carrier company members, large and small who 
operate in every State of the union. Trucking is vital to the 
nation's economy. Trucks move the majority of the freight that 
moves in America. Trucking accounts for more than 80 percent of 
the transportation revenue in the economy. Seventy percent of 
America's communities depend for freight service exclusively on 
trucks. So DOT regulations restricting what companies can do 
with trucks and drivers directly affects a huge segment of the 
American economy.
    Although some trucking companies are multi-billion-dollar 
companies whose names you know, such as Mr. Moore's district 
has the Yellow Corporation, most of the trucking industry is 
small business. According to DOT, almost 50 percent of motor 
carriers have only one truck, and a full 95 percent of motor 
carriers, almost 395,000 of them, have 20 or fewer trucks.
    ATA has long called for reform of the existing Depression-
era hours of service rule. We ask for new rules based on three 
things, sound science, public safety, and needs of the American 
economy. ATA spent two years forging an industry-wide consensus 
on a proposal for new rules that would meet these requirements 
and our board of directors adopted that proposal in November of 
1999. We filed the ATA proposal with the Department of 
Transportation in December 1999, but instead, the Department 
published on May 2, 2000, proposed regulations that are 
inconsistent in a number of ways with fatigue science and are 
so far removed from safer highways and economic reality that 
the ATA must strongly oppose the DOT proposal.
    The Department's proposed rules fail the test of science, 
safety, and economics. On science, for example, the DOT 
proposal takes drivers whose jobs consist of five night shifts 
a week and requires them to switch over to sleeping on both 
weekend nights. But fatigue science would counsel against 
requiring them to switch their sleep/wake cycle over on both 
weekend nights.
    On safety, the Department's proposal will put more trucks 
and more drivers on the road just to move the same amount of 
freight that trucks move today and it will force more of the 
trucks to operate during daylight hours when traffic congestion 
is at its peak. Regulations that put more of the trucks on the 
roads when most of the cars are also on the roads can hardly be 
characterized as a safety regulation.
    On economics, shippers will face significant price 
increases for freight service. Trucking companies will face 
tough obstacles in trying to meet the payroll and turn a 
profit. And businesses and consumers will pay more for the 
goods they purchase. Congress should send DOT back to the 
drawing board on its proposed hours of service regulation.
    With regard to economic analysis, the Federal law requires 
the Department of Transportation to conduct an initial 
regulatory flexibility analysis, or IRFA, when it published its 
proposed rule. The Department failed miserably in its attempt 
to meet this legal requirement. The Department provided only a 
cursory and inaccurate examination of the economic effects of 
the proposed rules on the trucking industry. Moreover, it 
completely ignored the larger economic impacts of the proposed 
rules on the economy as a whole.
    With regard to the trucking industry, the Department 
undercounted by 100,000 the number of small trucking businesses 
and that taints the Department's entire IRFA. The IRFA also 
estimates the economic impact of only one part of the proposed 
rule, the requirement that companies install in their trucks 
electronic on-board recorders to monitor the compliance of 
drivers with the Department's hours of service regulation, and 
DOT even got that part wrong because DOT underestimates the 
number of companies that must install the recorders to be in 
compliance with DOT's proposed rule.
    In any event, the regulatory costs that DOT attempted to 
address are dwarfed by the additional costs that DOT ignored. 
The Department's regulations will force trucking companies to 
incur costs for the purchase of new trucks and hiring new 
drivers. While ATA has not yet completed its final economic 
analysis of the DOT proposal, our preliminary conclusion is 
that labor and equipment costs to the trucking industry will 
increase by approximately 20 to 30 percent.
    More trucks moving the same amount of freight also requires 
additional mechanics to maintain the trucks and additional dock 
workers to handle getting the freight in and out of the trucks, 
more costs that DOT ignored. Also, DOT ignored the cost of 
realigning trucking terminal networks, which were principally 
designed to allow truck drivers to move efficiently between 
terminals within the driving hours allowed under the current 
rules but not under the proposed DOT rules.
    The Department also ignored the bigger economic impact 
beyond the trucking industry. Shippers will pay more to move 
freight, including smaller manufacturers, wholesalers, and 
retailers who are the engine of the nation's economy. Many of 
those costs will, of course, be passed on to consumers in the 
form of higher prices for goods. The direct result of DOT's 
proposed rule is inflation, which is hardly what the American 
economy needs.
    With regard specifically to small business, the Department 
of Transportation failed to meet the legal requirement to 
compare the economic effects of the proposed rules on small 
entities with other alternatives. The Department examined 
alternatives, but only alternatives for the entire trucking 
industry. The Department did not design or analyze alternatives 
solely with small companies in mind, nor did it consider the 
alternatives for minimizing the impact on small entities that 
the law requires DOT to consider. Thus, the Department failed 
to produce an initial regulatory flexibility analysis comparing 
the relative costs and benefits of alternatives as they pertain 
to small entities.
    The Department also made a mistake in its proposal that 
calls into question the quality of the DOT economic analysis. 
When it published its proposed rule on May 2, 2000, the 
Department included the following sentence in the preamble to 
its rule, ``Therefore, the FMCSA, in compliance with the 
Regulatory Flexibility Act, 5 U.S.C. 601-612, has considered 
the economic impact of these requirements on small entities and 
certifies that this rule would not have a significant economic 
impact on a substantial number of small entities.''
    Now, on May 26, just a few weeks later, the Department 
stated instead that, ``The FMCSA does not know with certainty 
the full economic impact of the proposal and, therefore, 
withdraws its negative certification.'' The withdrawal of the 
notification is a notable change because the certification has 
exempted the proposed rule from the Regulatory Flexibility 
Act's requirements. The Department has explained that its 
certification was included by error, but the initial erroneous 
inclusion of the language raises doubts about whether the 
Department conducted a careful initial regulatory flexibility 
analysis in the first place. Of course, the practical question 
also arises of how anyone at DOT could possibly think that the 
proposed rule would not have a significant economic impact on a 
substantial number of small entities.
    Lastly, while the Department of Transportation admits it 
does not know the full economic impact of its proposals, even 
after DOT has looked at various changes to hours of service 
rules for 20 years, it expects ATA and others to provide this 
information to DOT within the 90-day period that DOT allowed 
for comments on the proposed rule. We have asked for an 
additional 90 days so that we can effectively survey our 
trucking company members, large and small, and analyze and 
report the resulting economic data, but the Department has not 
granted our request.
    When the trucking industry, the law enforcement community, 
the manufacturing industry, the Teamsters, the AFL-CIO all 
agree that more time is needed to analyze the economic impact 
of the proposed rule, one would expect the Secretary of 
Transportation to grant the additional 90 days, but that 
request has not been granted.
    Madam Chairwoman, the Subcommittee asked only that I 
address the trucking hours of service issues and we appreciate 
having that opportunity, but I would be remiss if I did not 
draw the Subcommittee's attention that this rule is only one 
front of the current three-front regulatory war that this 
administration is conducting on the trucking industry. The 
rules on the other two fronts, OSHA's proposed rule on 
ergonomics and EPA's proposed rule on diesel engine and fuel 
standards, also are based on faulty economic analyses.
    On all three fronts, hours of service, ergonomics, and 
diesel, the rulemaking process is not driven by the science, it 
is not driven by health and safety, it is not driven by 
economics, and it is not driven by the law. It is driven by the 
desires of the heads of those agencies to issue final rules 
before the administration leaves office in January 2001. The 
interests of the public in these rulemakings should not be 
subordinated to that artificial deadline. The agencies will 
still be here with qualified people at the helm to make 
decisions after next January. Let us take our time and get it 
right.
    Thank you, Madam Chairwoman.
    Chairwoman Kelly. Thank you very much, Mr. Addington.
    [Mr. Addington's statement may be found in appendix.]
    Chairwoman Kelly. Next, we are going to hear from Mr. Sal 
Ricciardi. Mr. Ricciardi, you are here in actually a double 
capacity, are you not? You are the President of Purity 
Wholesale Grocers, but also you are the President of the 
Pharmaceutical Distributors Association, and we appreciate your 
taking the time to be with us here today and look forward to 
your testimony.

    STATEMENT OF SAL RICCIARDI, PRESIDENT, PURITY WHOLESALE 
   GROCERS, INC., AND PRESIDENT, PHARMACEUTICAL DISTRIBUTORS 
                          ASSOCIATION

    Mr. Ricciardi. Thank you, Madam Chairwoman and members of 
the Subcommittee. Thank you for allowing me to speak to you 
today. I feel like I am really getting my money's worth because 
I am a member of his organization and I agree with everything 
he just said.
    Mr. Addington. Thank you.
    Mr. Ricciardi. I request that the text of my prepared 
statement be placed into the record.
    My name is Sal Ricciardi and I am President of Purity 
Wholesale Grocers of Boca Raton, Florida. I am speaking today 
for Supreme Distributors, a division of Purity that distributes 
prescription drugs and on behalf of the Pharmaceutical 
Distributors Association, PDA, a trade association of ten Rx 
drug distributors. Most importantly, I am informally 
representing approximately 4,000 small businesses which are 
licensed to distribute prescription drugs for human and animal 
use according to Food and Drug Administration estimates. That 
is an estimate the Food and Drug Administration made. And there 
are many thousand customers across America.
    As I explained in detail in my written statement, these 
4,000 small businesses will be economically devastated and most 
will be forced to close their doors if an FDA rule issued to 
complete the implementation of a 1988 law known as the 
Prescription Drug Marketing Act is allowed to go into effect. 
The FDA rule establishes a ``catch-22'' type situation wherein 
smaller drug distributors are required to obtain a very 
detailed sales history for drug products going back to the 
first sale by the drug manufacturer before those products can 
legally be resold. However, neither the PDMA nor the FDA rule 
require either the drug manufacturer or the large national 
wholesalers who purchase the large majority of drug products 
directly from manufacturers to provide this sales history to 
the secondary distributors. I know this is a mouthful. However, 
allow me to explain a little further.
    The result is that the rule will make it illegal for most 
wholesalers to resell prescription drugs and this will cause 
the loss of thousands of jobs, disrupt existing distribution 
channels for thousands of nursing homes, clinics, doctors' 
offices, and veterinary practices across the country, 
potentially putting patients and animals at risk and remove an 
important restraint on pharmaceutical prices by reducing 
marketplace competition.
    To understand the real impact of the rule, we called the 
authorities in each State who license the distribution of 
prescription drugs. We found that more than 32,000 licenses had 
been issued to distribute Rx drugs. It is obvious from this 
figure that most distributors, including small companies like 
mine, distribute in multiple States.
    Of particular interest to the Subcommittee is the fact that 
the FDA's analysis of the effect of this rule on small business 
was 100 percent wrong. The FDA's analysis published in the 
Federal Register concluded that the majority of the estimated 
4,000 small distributors will not be affected by this rule. In 
fact, they will all be seriously affected by the rule and most 
will be driven out of business. The FDA's analysis did not 
calculate the number of jobs that would be lost, the economic 
loss to the owners of the business that would be wiped out, the 
likely increased cost to pharmaceutical end users because of 
the elimination of existing supply channels, and a decrease in 
competition and the very real potential physical threat to 
patients whose supply of life-saving and life-enhancing drugs 
would be disrupted.
    I believe that these impacts are more than large enough to 
qualify this regulation as a major rule and that the FDA should 
be required to perform the proper analysis before the rule is 
reimposed. I would also like to note that for about the past 12 
years during which the drug distribution has been operating 
under FDA interim policy guidance, which does not require 
tracing sales history of products back to the manufacturers, 
there have been no significant quality or safety problems.
    In conclusion, I would draw the Subcommittee's attention to 
H.R. 4301, a bipartisan bill that would make small but vital 
technical corrections to the statute. This bill would allow the 
4,000 small distributors to continue to serve their customers 
and provide vital price restraining competition while 
preserving the current safety and integrity of our national 
pharmaceutical distribution system.
    I thank you for your attention and will be happy to answer 
any questions you might have.
    Chairwoman Kelly. Thank you very much, Mr. Ricciardi.
    [Mr. Ricciardi's statement may be found in appendix.]
    Chairwoman Kelly. Next, we would like to hear from Ms. 
Wallman, and thank you for being so patient, Ms. Wallman. 
Kathleen Wallman is President and CEO of Wallman Strategic 
Consulting, LLC. Thank you very much for being with us.

    STATEMENT OF KATHLEEN M.H. WALLMAN, PRESIDENT AND CHIEF 
      EXECUTIVE OFFICER, WALLMAN STRATEGIC CONSULTING, LLC

    Ms. Wallman. Thank you and good morning, Chairwoman Kelly 
and Congressman Pascrell. Thank you for the opportunity to 
participate in today's hearing.
    My statement addresses the experience of a particular kind 
of small business, rural telephone companies, and offers some 
observations about regulatory impact analyses conducted by the 
independent Federal regulatory agency that regulates them, the 
FCC. My observations are based on my work with these companies 
in different capacities. I have worked on these issues most 
recently as an advisor to small companies and their Washington 
representatives and previously as chief of the Federal 
Communication Commission's Common Carrier Bureau and at the 
White House as Deputy Assistant to the President for Economic 
Policy at the National Economic Council.
    Rural telephone companies have a vital role in ensuring 
that all Americans, no matter where they live, have access to 
telecom networks. The special challenges that these companies 
face in serving remote and sparsely populated parts of our 
country are well documented in the policy literature and in FCC 
proceedings. Congress expressly recognized these small rural 
telephone companies as a category unto themselves in the 
Telecommunications Act of 1996. Most rural telephone companies 
fit easily into the category of small business and do not have 
resources devoted exclusively to monitoring Federal regulatory 
matters or mounting advocacy efforts in FCC proceedings.
    This is why the Regulatory Flexibility Act passed in 1980 
and amended by the Small Business Regulatory Enforcement 
Fairness Act in 1996 is potentially such an important tool in 
ensuring that Federal rules are adopted with an adequate 
awareness of the impact that the new rules or rule changes will 
have on small companies, such as rural telephone companies. The 
question is, how well is it working?
    My own view that it is starting to work in some ways but 
that its implementation can be improved. There are inherent 
difficulties in trying to implement regulations that affect 
rural telephone companies in a way that is sensitive to the 
burdens that new regulations impose. One difficulty is the 
inescapable complexity of common carrier regulation. Today's 
common carrier regulation is the result of decades of Federal 
and State legislative and regulatory action. There is some hope 
that this area will become less complex as competition 
diminishes the need for regulation, but that is unlikely to 
happen very quickly. A topic for another day would be what 
dramatic deregulatory and decomplexifying steps regulators and 
Congress could take.
    Another inherent difficulty and irony is the fact that many 
of these complex regulations were adopted to help rural 
telephone companies and their customers. Universal service 
regulations,for example, impose burdens on small companies in 
order to assess how much support the company and its customers should 
receive. So in appraising the process, it is important to remember that 
some regulations impose a burden in order to help the regulated entity.
    Another difficulty is presented by two realities about the 
rulemaking process at the FCC. First, there is the enormous 
workload of the FCC. The dedicated staff at the Commission is 
still working through the many assignments delegated to the 
agency by the 1996 Act. Under the pressure of a production 
schedule, it is not surprising that the agency has attracted 
some criticism about their execution of the statutory 
procedural requirements of the RFA.
    The second reality is that there is a tension between 
expertise and objectivity. It is very difficult to expect the 
same internal experts who advise the Commissioners that a new 
rule is sound and ripe for adoption to be objective in 
criticizing and editing that rule because of its anticipated 
impact on one constituency, small regulated companies.
    Another difficulty is that rural telephone companies are 
small. Some of them are very small. They do not have Washington 
offices of their own. They rely on membership associations and 
outside advisors. Even with such assistance, the resources 
needed to monitor what is going on and to advocate reasonable 
results in each of many pending proceedings spanning several of 
the FCC's operating bureaus simply are not available.
    There is some reason to praise progress and there are still 
some opportunities for improvement. At least some rural 
advocates have noticed some improvement. For example, OPASTCO, 
one of the leading membership associations that covers small 
telephone issues, has noted that the FCC has been more willing 
to treat rural telephone companies as small businesses rather 
than as dominant incumbents that would not be entitled to the 
benefit of the RFA small business analysis.
    But there remains room for more improvement and the 
question is what should be done. The answer might include 
legislation, but there are a few steps short of legislation 
that would help, in my view.
    First, Congress should consider whether the FCC needs more 
focused resources to conduct better RFA analyses. Adding more 
people to the process is not the answer, but adjusting the mix 
to include the right people might help. Additional economists 
and rural analysts specifically dedicated to the RFA process, 
for example, would help.
    Second, Congress should also consider whether there are 
process changes that could be implemented at the FCC that would 
address the tension between objectivity and expertise. The 
people most intimately familiar with the substance of a 
rulemaking may benefit from the perspective of others not so 
closely involved in doing the RFA analysis. There may be 
candidates already on the organizational chart at the FCC that 
could provide such assistance and perspective if given the 
right resources.
    Third, Congress should consider encouraging the FCC to 
adopt mechanisms that will allow it to communicate directly and 
easily with rural telephone companies. The simplest, best way 
for the FCC to ensure that it understands and can properly 
assess the impact of a proposed rule on small telephone 
companies is this: Ask them. But it is not always so simple. 
There are hundreds of small telephone companies. Which one 
should they call?
    The FCC could make this ``just ask'' approach easier by 
creating a standing task force or Federal advisory committee 
consisting of rural telephone companies' representatives and 
experts on rural economic development. This would put valuable 
expertise close at hand and it would increase the likelihood 
that the impact of new rules on rural telephone companies would 
be authentically considered at the beginning of the process and 
weighed appropriately throughout the process. That is the goal, 
after all.
    In a real way, the success of the RFA must be measured by 
these substantive results, and even the most scrupulous 
adherence to the formalities of the RFA's procedures should not 
be viewed as a substitute.
    My view is that it would be wise to pursue options such as 
these before creating another step in the regulatory review 
process, such as by empowering GAO to undertake its own RFA-
type review. The views of GAO no doubt would make a thoughtful 
contribution to the process, but one of the great problems of 
rural telephone companies is the damage to investment plans 
that uncertainty inflicts. Adding another possible review step 
might exacerbate that uncertainty.
    Nevertheless, even without new legislation, Congress can 
have an important oversight role. Parties dissatisfied with the 
way the RFA has been conducted in a particular case can call to 
the Subcommittee's attention these deficiencies and provide the 
basis for oversight steps with resulting guidance to the agency 
for improvement.
    I thank you very much, the Subcommittee, for your work in 
this area and thank you very much for the opportunity to 
testify.
    Chairwoman Kelly. Thank you, Ms. Wallman.
    [Ms. Wallman's statement may be found in appendix.]
    Chairwoman Kelly. I appreciate the testimony of all of you 
today. It seems to me that we have a problem with regard to an 
enormous amount of rules and regulations that the agencies are 
promulgating. I think that all of this testimony and any of it 
is certainly helping us focus on how to resolve the problem and 
make it easier for all of us to do our business, our small 
businesses in the nation. I would like to ask some questions. I 
am just going to ask a few of my questions first and then go to 
Mr. Pascrell.
    Mr. Murphy, I was really interested in some of your 
testimony. I found that you cited cases where the statute 
actually limited the agency's discretion in developing sound 
regulation. When it is your belief that clarification is 
necessary and that a law should be amended, how do you 
communicate that to Congress?
    Mr. Murphy. Well, in cases where we have been asked to look 
at, for instance, the Unfunded Mandates Reform Act or the 
Regulatory Flexibility Act and we have concluded that there 
were aspects of the Act that really were not accomplishing what 
we believe that the Congress intended by passing them in the 
first place, we include recommendations in our reports to the 
Congress suggesting that the Congress should consider whether 
amending those statutes might accomplish their purpose.
    Chairwoman Kelly. And that is a written report that comes 
in?
    Mr. Murphy. Yes, ma'am.
    Chairwoman Kelly. I am interested because I am also 
thinking that it might help us in Congress if you too 
considered the Internet. That might be helpful to us. Are they 
posted on the Internet?
    Mr. Murphy. All of our reports are on the Internet. In 
fact, our website gets some accolades. I think it includes not 
only all of our reports, but all of our testimonies will be 
there within a day of being given. Our legal opinions are 
posted there, also.
    Chairwoman Kelly. Do you know how often a member will then 
take that information and use it to try to draft some sort of a 
legislative solution or a fix to the problem?
    Mr. Murphy. I have no way of knowing how often that occurs. 
We have anecdotal--I can remember occasions when that occurred, 
but we do not have any systematic way of measuring that.
    Chairwoman Kelly. If you can already provide Congress with 
independent assessments of the regulatory costs and benefits, 
do you think that we could use COAARAA?
    Mr. Murphy. Well, in this sense, I think it would be 
important. The General Accounting Office, for example, is 
responding to statutory requirements for evaluations and 
requests from chairs and ranking minority members of Committees 
and Subcommittees, and so when a request comes in for GAO to 
take a look at a cost-benefit analysis, we do not have staff 
that can drop the work they are doing for other members and 
immediately jump on that. In order for the Congress to have 
information about a regulatory impact analysis quickly enough 
so that it can affect what the agency is actually accomplishing 
and perhaps decide whether to use the Congressional Review Act, 
which as you pointed out really has not been used at all, that 
information has to come in very quickly.
    So a CORA approach would allow GAO, or if it were located 
someplace else, to establish a separate organization within GAO 
staffed--we would have to hire economists and experts in 
regulatory processes so that when the regulation hit the street 
and a Committee was interested and wanted us to take a look at 
it, we could look at it very, very quickly. Some of these 
regulations are in development for years and so in order to 
take a look at them and provide the information that Congress 
needs, we think that a separate organization either within GAO 
or in some other place is really critical.
    Chairwoman Kelly. Do you think that the agencies, the sheer 
number of regulations that the agencies produce every year 
contributes to their inability to comply with all of the 
regulations, or is that too loaded a question?
    Mr. Murphy. I can only speculate, really. Every year, 
agencies must report to GAO, provide to GAO and to the Congress 
all of the rules which they are promulgating. I took a look at 
the numbers that came in just last year to GAO and saw that 
there were over 4,500 rules filed with GAO spread across a lot 
of agencies. Many of these agencies have substantial numbers 
that they are processing. I was looking at the Internal Revenue 
Service which filed almost 250 rules with us. The Environmental 
Protection Agency filed almost 750 rules with us, and that is 
just in the last 12 months.
    Chairwoman Kelly. That number again is 4,000 and something, 
you said?
    Mr. Murphy. Last year, yes, ma'am.
    Chairwoman Kelly. Last year, it was 4,000----
    Mr. Murphy. Four-thousand-five-hundred-and-thirty-four----
    Chairwoman Kelly [continuing]. 534----
    Mr. Murphy [continuing]. Regulations that were filed at GAO 
in calendar year 1999.
    Chairwoman Kelly. Well, it is no wonder that our small 
businesses are having some problems with keeping up with 
whatever is coming out there at them.
    Mr. Murphy. It is a big government.
    Chairwoman Kelly. And a highly active group of agencies.
    Mr. Murphy. Yes, ma'am.
    Chairwoman Kelly. It is not that anybody is doing something 
that we perhaps do not need, but we need to find out if there 
is a relief for some of this problem.
    The other thing I would like to ask you is, when you look 
at rules and regulations, do you also look for overlap and 
redundancy?
    Mr. Murphy. I think that is always something that you look 
at. You look to see whether what the regulation is seeking to 
accomplish is already being accomplished in other ways. That 
would be a baseline that you would have to begin with.
    Chairwoman Kelly. Within the single agency or across agency 
lines?
    Mr. Murphy. Well, we would have to be aware of whether it 
was being accomplished across agency lines. That would be a 
piece of information that agencies need. I am not sure as a 
legal matter that that would be important to an agency who was 
given the job of promulgating a regulation to implement a 
statute. The fact that another agency is already working in 
that area should be something that they take into account in 
drafting their regulations, but they are still going to have to 
implement their own regulations with respect to the statute.
    Chairwoman Kelly. I am wondering, Mr. Hahn, I see you have 
your hand up here. If you want to jump in, feel free. Anyone on 
the panel is free to speak up here. These questions, I am just 
speaking with Mr. Murphy, but feel free, Mr. Hahn.
    Mr. Hahn. The problem that Mr. Murphy and you are talking 
about is a fairly deep problem. Judge Breyer, before he became 
Supreme Court Associate Justice, wrote a book called Breaking 
the Vicious Circle, and one of the points that he made related 
to a point that Mr. Murphy was making, that you have all of 
these agencies trying to do good, if you will, on the basis of 
statutes and turning out tremendous numbers of regulations. We 
have no clue what is out there in terms of its impact. I can 
say that because I am viewed at this point as one of the grand 
old men in the field in terms of assessing the costs and 
benefits. We do not even have time to look at the minor 
regulations, and the agencies tell us they are simply too busy 
to do it, cranking out stuff for Congress.
    And Judge Breyer notes in his book, one of the problems is 
each of these agencies, while they are trying to do good, they 
are trying to do good usually in a single policy area, like the 
environment, like consumer product safety, like FDA, whatever, 
and he calls this tunnel vision, and it is not an accident that 
that occurs. The question is, can we begin to develop 
overarching legislation to put a check on this?
    COAARAA is one example of that. We could talk about other 
examples. I think COAARAA is really important. I think in 
earlier testimony I pointed out that we are not sure that GAO 
is the best place to put it. If I had my druthers, and perhaps 
it is because I am obsessed with regulation, I would set up an 
additional agency, which is not politically correct to do 
today, but I think regulation is an important enough area to do 
that. I think if you cannot do that, CBO is a more logical 
place to put it.
    But the generic problem, to suggest that we really know, in 
direct response to your question, whether regulations are 
consistent with each other and what is actually coming out of 
the pipeline, we only have a very dim idea of what is going on.
    Chairwoman Kelly. I thank you very much, Mr. Hahn. We have 
considered some other alternatives as to the placement of 
putting the office, the COAARAA office. Currently, I have a lot 
of confidence in Mr. Murphy's group and I think a number of 
other people do because they are in a position where they 
already have a number of experts on staff. A separate 
bureaucracy right now may be a step overreaching.
    The importance to me of trying to get COAARAA in place is 
simply that we have got, I think, to do something about the 
fact that we are getting 4,534 regulations a year thrown at us 
in all walks of business life and all walks of life, and I 
think people get very concerned that we have this huge 
bureaucracy. The only way that we can make it make sense is if 
we make it accountable.
    So I think that in the right instances, I think GAO is the 
first place to do it, to start, and hopefully we will be able 
to have in the budget enough money for them to be able to hire 
people. We will get it started and we will at least begin the 
walk. As you know, in Washington, thingsbegin slowly, and we 
want to take it one step at a time because we want to make sure if we 
are doing this, it is effective. That is the bottom line. We need to 
relieve the problem, and I am sure you understand and agree with that.
    Mr. Hahn, as long as we are talking, I think the 
alternatives that are supplied often by the regulated community 
and the data is often readily available, but the agencies just 
ignore the alternatives and they pay no attention to the 
executive order mandate. I wonder, again, if you want to 
address that. Do you think that there is a way we can try to 
make something happen there? I am concerned because from your 
testimony, it seems to me that this is worse than I thought.
    Mr. Hahn. Well, we did not know how bad it was until we 
actually did this fairly serious study, which is published on 
our website. How do you get the agencies to do it? Well, OMB 
issued guidelines. Several distinguished economists have said 
it is a good idea. Congressman Pascrell, this really relates to 
the point you made in the beginning about implementation. You 
and the other side of Pennsylvania Avenue have to have the 
political will to do this. You both can exercise it 
independently or you can work together, but you could do lots 
of very simple things.
    You could say, if you do not make an honest attempt to look 
at alternatives, the regulation will not move forward, except 
in cases of emergency because people will yell at you and say, 
my gosh, what if there is this emergency regulation? But that 
is one way to do it. You simply write into law that a 
regulation is not going to move forward unless it passes the 
kind of checklist that we put at the end of our testimony. Did 
you consider cost? Did you consider benefits? Did you consider 
alternatives? Did you consult with important parties to this 
regulation, or whatever?
    So you can do it. We are not talking rocket science here. 
The reason I am big on providing a summary statement at the 
beginning of a regulatory impact analysis and in clear English, 
a paragraph, what you did--we took a look at this regulation on 
truckers, for example, and we think it is going to have these 
costs, these benefits, these groups will be advantaged, these 
groups will be disadvantaged--people are going to see that.
    Right now, these documents are written in Greek. They are 
hard to dissect, purposely so in some cases. They do not want 
you to know that they are not considering alternatives. There 
are five people at OMB who know this. I know this. Jason 
Burnett knows this. But most of the rest of the world does not 
know or does not care. And if we can get this information out 
there in summary form so people can use it, see in some cases 
how regulations are well designed and in other cases they are 
very poorly designed, I think we can make a lot of progress.
    The key, as Congressman Pascrell points out, is what hooks 
do you put in either legislation or what executive orders do 
you impose and what enforcement guidelines are there. If there 
is no enforcement, we can just forget it.
    Chairwoman Kelly. So, Mr. Hahn, if I understand you 
correctly--let me rephrase this. What is so difficult about 
having some of these alternative things, do you think?
    Mr. Hahn. Nothing. It is political will. My shorthand 
language for that is guts. If a President wanted to spend some 
political capital on this, he or she could do so. If the 
Congress was oriented in this direction, and I think this is a 
bipartisan issue in a lot of ways----
    Chairwoman Kelly. It definitely is.
    Mr. Hahn [continuing]. I just do not think it is on the 
radar screen of lots of people because it does not have a high 
political payoff, even though it is potentially big bucks in 
the large for the economy, these 4,500 regulations that Mr. 
Murphy talks about.
    But I think a starting point that is just not going to be 
controversial at all is to say, let us force these regulations 
before they move forward, force the analysts who are doing 
these analyses to fill out a little summary and write a 
paragraph in English that a layperson can understand with a 
high school education. I think that is a starting point, 
because then you are going to see the kinds of results that 
have emerged from our fairly exhaustive analysis, which took a 
summer to do.
    You can see it very quickly.
    Chairwoman Kelly. Mr. Hahn, can you explain why in 
approximately 60 percent of the rules that you studied, the 
benefit numbers in the Federal Register were inconsistent with 
the IRA?
    Mr. Hahn. With the RIA?
    Chairwoman Kelly. Excuse me, the RIA?
    Mr. Hahn. I would ask Jason to answer that.
    Chairwoman Kelly. Come forward and identify yourself, 
please.
    Mr. Burnett. I am Jason Burnett. I work at the AEI-
Brookings Joint Center. I think that there are probably two 
reasons for that. First of all, the RIA is created for the 
proposed rule and there are some changes in the final rule and 
some changes both in the analysis as well as the rule itself. 
That would explain some of the inconsistencies.
    The second reason may be that incompetency on the behalf of 
agencies. We found several cases where agencies use an 
inconsistent discount rate or dollar year within a single 
document and there's no good explanation for that.
    Chairwoman Kelly. Do you think there are two sets of 
benefit numbers being calculated?
    Mr. Burnett. Two separate?
    Chairwoman Kelly. Yes, several sets?
    Mr. Hahn. Let me take this question, Jason. Jason is not 
used to being on the record. We simply do not know. I mean, we 
do not have the data. As he pointed out, the inconsistencies 
are there, but I do not think we know.
    Chairwoman Kelly. Okay. Thank you very much.
    I wanted to ask Mr. Ricciardi, Mr. Ricciardi, you have 
asked for a stay of action, and I really appreciate your 
testimony. I think both you and Mr. Addington offer good 
examples of just what the problem is with regard to these 
agencies promulgating rules that they perhaps have not looked 
at the total effect of. Can you just quickly tell me where that 
stay of action is?
    Mr. Ricciardi. The stay has been granted. Originally, the 
regulation was to take place December of this year and the stay 
was granted until October of the year 2001. But if I can equate 
it to our business and the businesses that I represent, I feel 
like a prisoner on death row who has been stayed, and the 
reason I say that is our attempts to bring our message to the 
FDA, in correspondence that the FDA has made, they do not seem 
to want to move on the regulation.
    I am relatively new at this process, Madam Chairman, and I 
am learning as I go. One of the suggestions I could make to any 
agency is for representatives of those agencies, prior to 
regulation, is to come and visit with the companies that they 
are regulating. I have had a couple meetings and correspondence 
with the FDA, and in every correspondence that I have had, I 
have suggested that they come and visit our organization, and 
to this date, they have not.
    Chairwoman Kelly. Thank you. We have just been called for a 
vote, and I am thinking I would like to hold this open. What I 
am going to do is I am going to hold the hearing open.
    I am going to allow Mr. Pascrell to question at this time. 
We can stay for at least the second bell.
    Mr. Pascrell. Thank you, Madam Chairman.
    Mr. Hahn, you held up the regulatory impact summary. Are 
you saying that nothing like that exists at this point?
    Mr. Hahn. Nothing to my knowledge.
    Mr. Pascrell. So this is a two-sheet form here which you 
are recommending.
    Mr. Hahn. Right. It could be a one-sheet form. It does not 
really matter.
    Mr. Pascrell. But how are records kept, then, by those rule 
makers? I mean, this seems to be a very simple form to the 
point you made it that way. This is like rule and regulation 
making disclosure. I want to know who makes these things. The 
folks out there have a right to know who makes the rules and 
where the regulations are coming from, and if these folks are 
hiding behind the screen of employment, behind their jobs, then 
there is something wrong. I mean, talk about cooking the books. 
If we are not disclosing the purpose of the rule, the cost and 
the benefit, it seems to me we are not doing anything.
    Mr. Hahn. They are disclosing. They are just disclosing 
sometimes in 100 to 1,000 pages and I would prefer it in one or 
two pages for people who do not have an infinite amount of time 
to read this wonderfully written prose, so-called regulatory 
impact analysis.
    Mr. Pascrell. If we lay this out, I think the political 
will will be there, and some of these things do not need 
another bill passage. These things can be done internally, so 
that if the administration, whatever that administration looks 
like in the future or is now, that administration can basically 
send out some orders to indicate that this is what we would 
like to happen so we keep track of what is going on if we want 
to do that. Now, we may not want to know what is going on. We 
may not want to. We may simply want a headline that these are 
the rules of the FDA, these are the rules, et cetera, et 
cetera, but we do not care down the road what is going to 
happen, what the results were going to be.
    I was interested, Mr. Murphy, how many of those 4,500 rules 
or regulations that you talked about were promulgated by the 
INS, God bless them?
    Mr. Murphy. Well, I think I can tell you, Mr. Pascrell. 
Sixteen.
    Mr. Pascrell. That is pretty conservative.
    Mr. Murphy. I have to say that we do an audit comparing the 
Federal Register to what is filed at GAO and we find annually 
several hundred that are not filed at GAO, largely through 
oversight. And also, there are a lot of regulations that are 
not filed because the agencies contend they are not 
regulations. For instance, the Tongass Forest management plan, 
which took ten years to develop, the agency says it is not a 
regulation and so they are not----
    Mr. Pascrell. The agency determines itself whether it 
defines such and such as a regulation?
    Mr. Murphy. Yes. We have been unable to get OMB to take 
leadership to clarify that over the last four years.
    Mr. Pascrell. This is government in absentia. There is no 
two ways about it. It seems to me there is very little 
difference between Red China and what you are doing in 
subverting the will of the people. That is why we have a 
legislative branch of government, why we have an administrative 
branch of government, in terms of checks and balances but even 
to find public disclosure. I find that obscene, if I can choose 
that word, since every other word has been used. I find it 
obscene, the methodology of how most of these rules and 
regulations are coming to the fore.
    Let me ask, if the agencies are subverting--we have the 
idea in our minds that the end goal is who is the President and 
what does the Congress look like. Second-level, third-level 
management in these agencies remain the same, and we do this on 
the State level when I was a State legislator. We are 
forgetting this. They are going along the merry path writing 
these rules and regulations and I am sure it is not all 
cavalier, but that is the impression I am getting.
    Mr. Ricciardi, who benefits, to use your example, from the 
definition, the shrinking definition of who can sell 
pharmaceutical products? Who is benefitting from that rule, 
from that----
    Mr. Ricciardi. From that new regulation?
    Mr. Pascrell. Yes.
    Mr. Ricciardi. The manufacturers, and they will increase 
drug prices.
    Mr. Pascrell. So the pharmaceutical companies are.
    Mr. Ricciardi. That is correct.
    Mr. Pascrell. Can you explain for the record, very briefly, 
how they do that?
    Mr. Ricciardi. There is multiple pricing throughout the 
country at any given point in time, and as long as there is 
more than one drug for a particular illness, such as to treat 
prostate, there is open market trading of pricing on drugs and 
we as a company and the 4,000 companies that are out there find 
opportunities to keep the prices down and buy throughout the 
country. By eliminating us as part of the open market system, 
the manufacturers will then be able to dictate their price and 
will be able to charge higher prices to the wholesaler, 
ultimately the consumer.
    Mr. Pascrell. And this came out of a 1988 law?
    Mr. Ricciardi. Yes.
    Mr. Pascrell. And we are just getting to the promulgation 
of this thing at this particular point, and 4,000 companies are 
going to be affected.
    Let me just conclude by saying this. The more I get into 
this, the more animated I become in spirit. If we are to 
compete on a worldwide basis, and indeed if we are going to 
compete within our own borders, we need to make sure that we 
are not shrinking the possibilities of competition.
    It would seem to me that many of our companies that have to 
deal with environmental rules and regulations have good records 
on the environment, but how can our companies compete with the 
Chinese rules and regulations in the final analysis? We have 
found the downside of our trade with Mexico when our companies 
just cannot compete. We have to spend thousands and thousands 
of dollars to meet these rules and regulations while these 
characters, many of them American corporations producing down 
in Mexico, have a cakewalk.
    So we talk out of both sides of our mouths and I want this 
to continue. I do not think we can continue today, but I think 
there is a lot more here than meets the eye and I really 
appreciate all of your testimony.
    Chairwoman Kelly. I am going to recess the Committee for 
approximately ten minutes while we go to the floor and vote and 
come back. Mr. Pascrell, thank you, and I will also hold the 
hearing open so that you can submit written questions if you 
would like. Thank you.
    [Recess.]
    Chairwoman Kelly. Thank you for waiting for the vote. I 
apologize. It took a bit longer than we expected.
    I want to go back and ask a couple more questions. I think 
Mr. Pascrell is coming back, but even if not, there are a 
couple more questions that I would like to ask.
    Ms. Wallman, do you think the FCC adequately estimates the 
costs and benefits of the proposed regulation of small 
telephone companies?
    Ms. Wallman. I think that there are ways in which they 
could do a much better job. The analogy that comes to mind, 
what I was thinking about, what I would do if I had a magic 
wand goes back to 1993 when the FCC started hiring a lot of 
economists. Before that time, the economic analysis review was 
done at the end of the process. There was a chief economist 
whohad no staff and he would look it over at the end and make sure it 
did not commit any mortal sins, but by that time, the decision was 
really made and it was made by people in other disciplines who did the 
best job that they could figuring out what the right answer was based 
on comments in the record.
    In 1993 and 1994, the FCC started hiring a lot of 
economists and they started sprinkling them throughout all the 
bureaus and it really effected a transformation in the way that 
the rules were conceived and developed and written because at 
every stage, not just at the end, you had the influence of 
economists saying not just what do you think is the right 
answer but what is the empirical case for this being the right 
answer or the best answer.
    And so I think that really this is a question of management 
focus and really changing the mission definition, the hearts 
and minds of the people actually writing the rules and 
sprinkling throughout the agency people who are adept at either 
knowing on their own or being able to draw from people who are 
in the small telephony business what the real impact will be on 
a day-to-day basis.
    So there is room for improvement, and if I had a magic 
wand, what I would do is sprinkle that expertise throughout the 
agency so that it would be there at the beginning, middle, and 
end of the process, not just at the end looking back at what 
has already been done.
    Chairwoman Kelly. Thank you. I think that is a very 
interesting and good answer that could be utilized by other 
agencies, as well. Should the FCC, do you think, establish a 
separate office? Would that help, a separate office to perform 
the reg flex analyses?
    Ms. Wallman. I think that they probably have enough boxes 
on the organizational chart that there may be some candidates 
there already. My experience there was in 1994 and 1995, so I 
am sure things have changed since then, but my understanding 
now is that in addition to having the bureau with substantive 
expertise and actually writing the rule involved, they do get 
comment from other groups. But the pen is held by the people in 
the substantive bureau. It may be that the folks who have 
stayed up all night actually writing a substantive regulation 
would benefit from stronger input from the general counsel's 
office and from the business opportunity office.
    So establishing an additional box, my inclination is 
generally against creating new units, but I think there are 
talented people there whose talents could be supplemented with 
the right resources so that they could improve the way that 
they do the analyses.
    Chairwoman Kelly. When the EPA and the OSHA issue some 
significant proposal, they are required by law to put together 
groups that are basically focus groups of the businesses, 
people who are affected by the proposed rulemaking and by the 
proposed rule. Do you think that that would be an option for 
the FCC? It might slow the process, but do you think that might 
be worth it?
    Ms. Wallman. I think it would be a great idea. I had an 
opportunity to see how some of those EPA-type groups work when 
I was at the White House and I thought they were really quite 
helpful. And hearing the presentation live was very helpful. 
The FCC gets written comments. I should say that in many cases, 
I know some decision makers in the Commission will bring people 
in. Sometimes they will bring them in and sort of stage a 
debate so that they can make sure they are not persuaded by the 
last voice they have heard. They have people come in and they 
actually go back and forth and try to hear the debate live. But 
I think opportunities like that, like what EPA does, like what 
OMB does in some cases, could be a real illumination of the 
process at the FCC.
    Chairwoman Kelly. Thank you. I really appreciate your 
testimony here today. I think you have added a lot because of 
your perspective.
    I want to go to you, Mr. Addington. Yesterday at the full 
Committee hearing, we had John Spotila, the Administrator of 
OIRA and he commended the FMCSA for their regulatory 
streamlining efforts, and I asked him then if the FMCSA had 
developed too many resources to streamlining and not enough 
resources to complete regulatory analysis, given the trucking 
and bus industry's complaints about the hours of service rule, 
and he replied, and I am quoting, that DOT would be considering 
all of the comments and that the comment period has not yet 
closed. He implied my question was jumping the gun.
    How do you respond to his suggestion? My question really is 
based a question that I am jumping from earlier that I asked, 
basically, and that is do you think that we should wait for the 
comment period to close before----
    Mr. Addington. No, ma'am. As I told you in my testimony, 
the American Trucking Associations has worked before years 
because we want----
    Chairwoman Kelly. Can you pull the microphone closer to 
your mouth? Thank you.
    Mr. Addington. The American Trucking Associations, as I 
said in my testimony, has been seeking hours of service reform. 
The rules we have now on the books come from 1937, I believe it 
is. They last had any significant amendment in 1962 and they 
are out of date and they need work, and we agree with the 
government on that.
    We were, frankly, surprised when they issued the proposal 
that they issued because we had expected it to be somewhat in 
the ballpark so that you could hope in the normal rulemaking 
process to improve things, to get the data out there and fix 
it. We also expected, frankly, that the Regulatory Flexibility 
Act, all the other requirements would be complied with in such 
a way that, frankly, they would have a better product. We think 
it is so bad that we need to stop and start over.
    One thing I will say in their defense in this process is 
what is now the Federal Motor Carrier Safety Administration has 
been through the bureaucratic equivalent of the seven circles 
of hell in the last year. At the beginning of 1999, they were 
known as the Office of Motor Carriers in the Federal Highway 
Administration. Then Congress passed as part of the 
Appropriation Act, because Congress was not satisfied with the 
performance of that office as part of the Federal Highway 
Administration, a prohibition on the Transportation 
Department's appropriations bill for the fiscal year 2000 that 
said the Secretary of Transportation cannot delegate his 
trucking authority to that office as long as that office stays 
in the Federal Highway Administration.
    So the Transportation Department had to figure out, okay, 
what do we do with it? They established a new office in the 
Office of the Secretary of Transportation known as the Office 
of Motor Carrier Safety, moved the bureaucratic boxes around, 
pushed people, different people in charge, lots of paperwork 
for delegations of authority and all that.
    It was not there more than a few months, I believe, at the 
most, because we, and we considered this a good thing, the 
trucking industry fought for this, creation of the Federal 
Motor Carrier Safety Administration as a separate modal in 
administration of the Department. That took effect January 1.
    So all the boxes over there are moving back and forth. The 
people are moving back and forth. People are spending their 
time trying to figure out, which appropriations accounts do I 
charge for what? They are in all this while they are trying to 
produce these rules. So that may account for some of the reason 
that people did not quite get the thorough job that the law 
requires done to put together the regulatory package. That is 
not necessarily an excuse, and certainly is not to us. We will 
fight in the rulemaking and we will fight in the courts later, 
if necessary, because it is thegovernment's responsibility to 
govern properly, but it may explain why they had as much trouble as 
they had trying to put together a regulatory package.
    Chairwoman Kelly. Well, I also sit on the Transportation 
Committee and I was in on those hearings and I know why 
Congress did what it did and I know it has been a problem 
perhaps to make sure that you are getting the right letterhead 
at the top of the stationery, but on the other hand, we want to 
make sure that we are able to have an office that is a 
responsible office. That was why it was moved around a little 
bit, but----
    Mr. Addington. And we supported what Congress did. We think 
that is great.
    Chairwoman Kelly. Oh, I know you did. I know you were 
there, and there were many people from the industry that 
testified. But I am very saddened to see this regulation coming 
out and I am concerned that I believe there was just a sloppy 
initial reg flex analysis on this. You evidently feel that they 
just probably did not have the right information or enough 
careful information in order to put the rule together before 
they wrote the rule.
    I am not going to ask that in the form of a question 
because I do not want to put you on the spot, but I want to ask 
another question and that is, do you think that this proposal 
should be withdrawn and reissued after the DOT and the FMCSA do 
another analysis under the Regulatory Flexibility Act?
    Mr. Addington. Yes, ma'am. I think it ought to be withdrawn 
and done properly under the current laws, and that will be part 
of the comments that we will file with the Department. It is to 
their advantage, as well, because there is no point in all of 
us putting this massive energy in this to end up litigating 
this in court because they have not complied with the 
applicable laws.
    Chairwoman Kelly. All right. Thank you very much. I will 
not only--I am glad we have that in our record, but I will see 
that we manage to get the record transmitted to the other 
Committee, as well.
    I want to go back now just to discuss COAARAA, since it is 
dear to my heart. This question is really for Mr. Hahn and Mr. 
Murphy. Some people feel that Congress has oversight at any 
point in the process and that currently through hearings, 
Congress can better understand agency rulemakings and analyses 
and that COAARAA is not needed. I would like very much to hear 
both of you discuss how you feel that COAARAA would be useful. 
We can start with you, Mr. Hahn, or whichever. Mr. Murphy.
    Mr. Hahn. I testified on this, and I am happy to refer you 
to that, and I think you know more about this subject than I 
do, but let me suggest that I think COAARAA is useful for at 
least three reasons, and the relevant analogy here, as you 
know, has to do with OMB, when we had a budget process without 
CBO. I think it is much improved by having the two 
organizations compete with each other and they provide an 
independent check on each other. So that is one good reason. 
You have an independent check on the analysis of the executive 
branch.
    A second is a lot of what OMB does is not always open to 
the public, and I think COAARAA would make the process more 
transparent and improve the process and in so doing it will 
give you better ideas for improving your laws and the 
regulators better ideas for improving regulations. So it is 
really that simple to me.
    Chairwoman Kelly. Thank you very much, Mr. Hahn. Mr. 
Murphy?
    Mr. Murphy. Madam Chairwoman, I was thinking that maybe one 
way to respond would be to ask Curtis Copeland to talk about 
some actual examples where we have been able to look at 
economic models or look at the highly technical details of the 
regulation process, something that really would be more 
difficult for a Committee or a Subcommittee to do in the course 
of the hearing format or the hearing model, and because we have 
been able to get into those--in fact, we have a number underway 
at the moment with respect to EPA regulations--we have been 
able to get the kinds of information that would be useful to 
the Congress, that otherwise would be very difficult to come up 
with, through a more CORA-type model.
    Chairwoman Kelly. Mr. Copeland, would you like to identify 
yourself, and yes, by all means, we would be glad to hear from 
you.
    Mr. Copeland. Sure. I am Curtis Copeland. I am an Assistant 
Director within the General Government Division at GAO and we 
do a lot of the cross-cutting work that looks at agencies' 
compliance with these analytical and procedural requirements.
    The rules that we have looked at over the course of the 
last few years in many cases are highly technical. For example, 
we are looking at one now, a rule that EPA issued last year 
that drops the threshold for reporting of lead and lead 
compounds under the Toxic Release Inventory Program from 25,000 
pounds to ten pounds, and EPA said that this rule would not 
have a significant economic impact on small businesses and so 
we have been asked to look at that certification statement.
    It is extraordinarily difficult to plow into an economic 
analysis that has six different chapters and is about 300 or 
400 pages in length. So it is something that requires a great 
deal of effort just to get comfortable with what the agency is 
describing, much less trying to get into the particulars as to 
what alternatives they might could have considered.
    Last year, we looked at a rule that FDA issued on the 
dietary supplements containing ephedrine alkaloids and the 
science behind that and the adverse event reports that are 
being reported to FDA, and after a great deal of review, 
looking at more than 1,000 of these adverse event reports, we 
determined that only 13 of them really constituted the basis of 
the rule. And so it took a long time, though, to determine that 
those 13 were the critical ones that FDA relied on, and so we 
suggested that EPA get better data in order to support the 
rulemaking and FDA agreed with us and in February of this year 
withdrew the rule.
    Chairwoman Kelly. Good. Thank you very much for saying 
that. I think that is part of the problem. It is almost 
impossible for our staffs here, if we wanted to look at a rule 
before it was actually finalized, it is almost impossible for 
our staffs to, under the workload that they carry, to examine 
all of this. And also, it is a problem with regard to their 
expertise. So I think it is always important that we try to do 
something.
    I think that the whole point of what I am trying to do with 
COAARAA, what I am hoping to do with COAARAA is to raise the 
quality of the analyses and ask the agencies to be more 
careful, as you have just pointed out, in terms of not only 
looking within themselves but also transmitting that 
information to those people who are going to be affected by the 
rule or regulation.
    I think that we have identified in this hearing that there 
is a problem and we are following your model, Mr. Hahn. We are 
identifying the problem, we are analyzing the problem, and I 
think the answer for us perhaps is to start with passing 
COAARAA.
    I really thank you very much. I think that it is really 
wonderful that you were willing to sit through as lengthy a 
process as this has been. I did not expect it to be that when 
we set this meeting for ten o'clock in the morning, but I thank 
all of you for being here and I thank you very much for your 
testimony. You may be hearing from some of the other members of 
the Committee simply because there is so much going on on the 
Hill today, markups and so forth, that that is why some people 
could not be here.
    With that, I am going to adjourn. Thank you very much. 
[Whereupon, at 1:00 p.m., the Subcommittee was adjourned.]
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