[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]




    REGULATORY ACCOUNTING: COSTS AND BENEFITS OF FEDERAL REGULATIONS

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON ENERGY POLICY, NATURAL
                    RESOURCES AND REGULATORY AFFAIRS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 12, 2002

                               __________

                           Serial No. 107-155

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform


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                            WASHINGTON : 2003
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                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia                    DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida                  ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California                 DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky                  JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia               JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania    THOMAS H. ALLEN, Maine
DAVE WELDON, Florida                 JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida              DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho          STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia                      ------
JOHN J. DUNCAN, Jr., Tennessee       BERNARD SANDERS, Vermont 
------ ------                            (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs

                     DOUG OSE, California, Chairman
C.L. ``BUTCH'' OTTER, Idaho          JOHN F. TIERNEY, Massachusetts
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEVEN C. LaTOURETTE, Ohio           PATSY T. MINK, Hawaii
CHRIS CANNON, Utah                   DENNIS J. KUCINICH, Ohio
JOHN J. DUNCAN, Jr., Tennessee       ROD R. BLAGOJEVICH, Illinois
------ ------

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                       Dan Skopec, Staff Director
                 Barbara Kahlow, Deputy Staff Director
                         Allison Freeman, Clerk
                 Elizabeth Mundinger, Minority Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 12, 2002...................................     1
Statement of:
    Graham, John D., Ph.D., Administrator, Office of Information 
      and Regulatory Affairs, Office of Management and Budget; 
      and Thomas M. Sullivan, Chief Counsel for Advocacy, U.S. 
      Small Business Administration..............................     8
    Miller, James C., III, former Director, Office of Management 
      and Budget, counselor to Citizens for a Sound Economy; 
      Thomas D. Hopkins, former Deputy Administrator, Office of 
      Information and Regulatory Affairs, Office of Management 
      and Budget, dean, College of Business, Rochester Institute 
      of Technology; Susan Dudley, deputy director, regulatory 
      studies program, Mercatus Center, George Mason University; 
      Joan Claybrook, president, Public Citizen; and Lisa 
      Heinzerling, professor of law, Georgetown University Law 
      Center.....................................................    47
Letters, statements, etc., submitted for the record by:
    Claybrook, Joan, president, Public Citizen, prepared 
      statement of...............................................    94
    Dudley, Susan, deputy director, regulatory studies program, 
      Mercatus Center, George Mason University, prepared 
      statement of...............................................    67
    Graham, John D., Ph.D., Administrator, Office of Information 
      and Regulatory Affairs, Office of Management and Budget, 
      prepared statement of......................................    11
    Heinzerling, Lisa, professor of law, Georgetown University 
      Law Center, prepared statement of..........................   125
    Hopkins, Thomas D., former Deputy Administrator, Office of 
      Information and Regulatory Affairs, Office of Management 
      and Budget, dean, College of Business, Rochester Institute 
      of Technology, prepared statement of.......................    56
    Miller, James C., III, former Director, Office of Management 
      and Budget, counselor to Citizens for a Sound Economy, 
      prepared statement of......................................    49
    Ose, Hon. Doug, a Representative in Congress from the State 
      of California, prepared statements of..................... 4, 159
    Sullivan, Thomas M., Chief Counsel for Advocacy, U.S. Small 
      Business Administration:
    Congressional Record statement...............................    29
    Prepared statement of........................................    17
    Tierney, Hon. John F., a Representative in Congress from the 
      State of Massachusetts, prepared statement of..............   164

 
    REGULATORY ACCOUNTING: COSTS AND BENEFITS OF FEDERAL REGULATIONS

                              ----------                              


                        TUESDAY, MARCH 12, 2002

                  House of Representatives,
  Subcommittee on Energy Policy, Natural Resources 
                            and Regulatory Affairs,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m., in 
room 2154, Rayburn House Office Building, Hon. Doug Ose 
(chairman of the subcommittee) presiding.
    Present: Representatives Ose, Otter, Duncan, Tierney, and 
Kucinich.
    Staff present: Dan Skopec, staff director; Barbara F. 
Kahlow, deputy staff director; Alison Freeman, clerk; Yier Shi, 
press secretary; Melica Johnson, press fellow; Elizabeth 
Mundinger and Alexandra Teitz, minority counsels; and Jean Gosa 
and Earley Green, minority assistant clerks.
    Mr. Ose. Good afternoon. Welcome to today's hearing.
    Last fall, Mark Crain and Thomas Hopkins estimated that in 
2000 Americans spent $843 billion to comply with Federal 
regulations. Their report, commissioned by the Small Business 
Administration, states, ``Had every household received a bill 
for an equal share, each would have owed $8,164.'' Their report 
also found that, ``in the business sector, those hit hardest by 
Federal regulations are small businesses. Firms employing fewer 
than 20 employees face an annual regulatory burden of $6,975 
per employee, a burden nearly 60 percent above that facing a 
firm employing over 500 employees.'' Regulations add to 
business costs and decrease capital available for investment.
    Today, we will examine the Office of Management and 
Budget's--we will refer to them as OMB--annual regulatory 
accounting reports. They were intended to disclose the off-
budget costs and benefits associated with Federal regulations 
and paperwork.
    Because of congressional concern about the increasing costs 
and incompletely estimated benefits of Federal rules and 
paperwork, in 1996, Congress required OMB to submit its first 
regulatory accounting report. In 1998, Congress changed the 
annual report's due date to coincide with the President's 
budget. Congress established this simultaneous deadline so that 
Congress and the public could be given an opportunity to 
simultaneously review both the on-budget and off-budget costs 
associated with each Federal agency imposing regulatory or 
paperwork burdens on the public. In 2000, Congress made this a 
permanent annual reporting requirement. The law requires OMB to 
estimate the total annual costs and benefits for all Federal 
rules and paperwork in the aggregate, by agency, by agency 
program, and by major rule.
    Agency-by-agency data and data by agency program are 
important for the public to know the aggregate costs and 
benefits associated with each agency and each major regulatory 
program. For example, what are the aggregate costs and benefits 
of the requirements imposed by the Environmental Protection 
Agency and the Labor Department's Occupational Health and 
Safety Administration? Is there a more cost-effective way for 
OSHA or EPA to accomplish the intended objective? Would another 
approach achieve the same objective at less cost? Also, 
policymakers could make better decisions about tradeoffs 
between alternatives.
    To date, OMB has issued four regulatory accounting 
reports--in September 1997, January 1999, June 2000, and 
December 2001. All four have failed to meet some or all of the 
statutorily required content requirements, and the last was 
submitted 8 months late. This untimely submission was too late 
to be useful in the congressional appropriations process. 
Additionally, OMB's December 2001 report was not presented as 
an accounting statement, did not include any estimates by 
agency or by agency program, and did not include updated 
estimates from its prior annual report. Last, OMB failed to 
submit its next report due February 4, 2002. Today, we will 
hear testimony that OMB expects to issue its draft report this 
month.
    In 1996, OMB issued Best Practices Guidances to help 
standardize agency cost-benefit measures. Since then, OMB has 
not enforced agency compliance. As a consequence, agency 
practices continue to substantially deviate from OMB's 
guidance, with some agencies not even estimating costs or 
benefits.
    Last October, I wrote to the OMB Director, asking if OMB 
will be ready to provide agency-by-agency information and what 
steps OMB has taken to ensure that costs and benefits data will 
be provided in a traditional accounting statement format, 
including by agency and agency program.
    For OMB's Information Collection Budget and for the 
President's budget each year, OMB tasks agencies with preparing 
paperwork and budgetary estimates respectively for each agency 
bureau and program. OMB uses the Information Collection Budget 
to manage the burden of Federal paperwork imposed on the 
public. In contrast, for Federal regulations, OMB does not 
similarly task agencies annually with preparing estimates of 
the costs and benefits associated with the Federal regulations 
imposed by each agency bureau and program. As a consequence, 
OMB's annual regulatory accounting report is harder for OMB to 
prepare by agency and by agency program.
    Regulatory accounting is a useful way to improve the cost 
effectiveness and accountability of government. One of my goals 
when I came to Congress was to make the government more 
efficient. The only way that policymakers can innovate is to 
understand the strengths and weaknesses of new proposals. Cost-
benefit analyses give Congress tools to modernize our 
government and make it more responsive to the public.
    I look forward to the testimony of our witnesses about 
OMB's track record and the utility of its annual regulatory 
accounting reports due with the President's budget.
    I'd like to recognize the gentleman from Tennessee for the 
purpose of an opening statement.
    [The prepared statement of Hon. Doug Ose follows:]

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    Mr. Duncan. Well, thank you very much, Mr. Chairman.
    I don't have a formal opening statement, but I do want to 
say that I thank you for calling this hearing on what I think 
is a very important topic.
    I was a lawyer and then a circuit court judge for 7\1/2\ 
years before I came to Congress. I can tell you there are so 
many millions of laws and rules and regulations on the books in 
this country today that they haven't even designed a computer 
that can keep up with all of them, much less a human being. 
People, especially people in business, are out there every day 
violating rules and regulations that they didn't even know were 
in existence.
    I know that today it's estimated that almost 40 percent of 
the average person's income goes to pay taxes of all types--
Federal, State, local, property, gas, excise, etc.--and most 
people estimate at least another 10 percent go for regulatory 
costs that are passed on to the consumer in the form of higher 
prices. So Senator Fred Thompson from our State had an ad the 
last time he ran for office. He said, one spouse works to 
support the family while the other spouse works to support the 
government.
    I'm not as serious about what the tremendous costs are 
because who they impact most the lower income and the poor and 
the working people of this country. That is who is hurt the 
most by a society that's overregulated.
    But, also, I'm concerned about the effect on small 
businesses. When you come in with excessive regulation, you 
first run the small businesses out. Then you run the medium 
size out. So some of these people who believe in regulating 
everything in the world are the best friends that extremely big 
business has. It happens in every industry. Every industry 
that's overregulated ends up in the hands of a few big giants.
    We had 157 small coal companies in east Tennessee in 1978. 
Then they opened up a Federal mining regulatory office there, 
and now there are no small coal companies, and there are two or 
three big giants. That's happened in every industry in this 
country.
    So thank you very much for calling this hearing. I look 
forward to hearing the testimony of the witnesses.
    Mr. Ose. I thank the gentleman.
    The gentleman from Idaho.
    Mr. Otter. Thank you, Mr. Chairman.
    I, too, would agree with my colleague from Tennessee on the 
importance of this hearing. I appreciate your leadership on 
this important effort, as I also believe it is important for 
Congress to be provided with current, accurate, and timely 
information on the cost of financial burdens and the benefit 
and effectiveness of Federal regulations. To me, this is a 
simple matter of common sense.
    In my last life I was a french fry salesman, and I don't 
ever remember making a decision about building a plant or 
increasing a distribution port, whether it was in the United 
States or one of the 82 countries that we operated in, on 
partial facts and incomplete conclusions. If I had, I wouldn't 
have been in business that long. Without accurate and timely 
information, my colleagues and I are being left to conduct the 
business of this Nation without all the facts.
    As a businessman, as a lieutenant Governor and a member of 
the Idaho State legislature, I also became well aware of the 
impact that Federal regulations have on rural economies. The 
amount of money spent each year to meet regulatory demands of 
the Federal Government agencies is astounding.
    In fact, in a report by an agency represented by Mr. 
Sullivan here today, the Small Business Administration, it is 
estimated that $843 billion--and this was a report that was put 
out in October of last year--$843 billion to comply with 
Federal regulations. Now that's the actual cost. It does not 
also include the opportunity cost of $843 billion. So as the 
financiers of the Federal regulatory agencies I think it's 
imperative that Congress has access to all the necessary means 
to conduct a thorough review of the financial and functional 
effectiveness of Federal regulations.
    Again, I appreciate the chairman's attention to this issue 
and am proud to serve as the vice chairman of this subcommittee 
to look through these important issues. I look forward to 
hearing the testimony of our witnesses.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Mr. Ose. Thank you, Mr. Vice Chairman.
    We have two panels today. It's the custom of this committee 
and the subcommittees to swear their witnesses in. So, 
gentlemen, if you would rise, please.
    [Witnesses sworn.]
    Mr. Ose. Let the record show the witnesses on the first 
panel answered in the affirmative.
    We are joined today by two witnesses, by John Graham, who 
is the Administrator of the Office of Information and 
Regulatory Affairs in the Office of Management and Budget. 
He'll be first. Then we also are joined by the Chief Counsel 
for Advocacy in the Small Business Administration, Thomas M. 
Sullivan.
    Dr. Graham, we have your testimony. We have entered it into 
the record. If you could summarize within 5 minutes, that would 
be great.

 STATEMENTS OF JOHN D. GRAHAM, PH.D., ADMINISTRATOR, OFFICE OF 
 INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND 
  BUDGET; AND THOMAS M. SULLIVAN, CHIEF COUNSEL FOR ADVOCACY, 
               U.S. SMALL BUSINESS ADMINISTRATION

    Dr. Graham. Very well, Mr. Chairman.
    Good afternoon. I appreciate the opportunity to be here.
    Since this is my first oversight hearing with this 
particular subcommittee, I thought I should step back and say a 
few words about the approach I'm taking to running the Office 
of Information and Regulatory Affairs for the President. This 
is the office that oversees all of the regulatory policy within 
the executive agencies.
    As you know, the President supports regulations that are 
sensible and based upon sound science and economics; and, at 
the same time, we're determined to streamline the regulatory 
process to make sure there are no other regulations that are 
outside that basic criteria.
    In terms of overall approach to the office, I'm trying to 
introduce a greater degree of transparency and openness to the 
office. Since I was confirmed in July, I have had a virtually 
open door policy for public visitors from various types of 
groups, have hosted about 100 different groups interested in 
different facets of Federal regulation. We have also, through 
our Web site, been publishing the letters that our office 
submits to agencies on regulatory issues. We've published our 
meetings with outside groups, and we provide daily updates of 
new regulations that are either under review at our office or 
are being cleared, withdrawn, or returned.
    We believe that this more open and public approach to the 
way we do our work will enhance public scrutiny of the 
regulatory process and, in the long run, increase appreciation 
of the value of our office.
    Let me proceed now to the major topic of the hearing, which 
is the regulatory accounting law and our implementation of it. 
From your opening statement, Mr. Chairman, I realize we have a 
lot of work to do to bring our office into compliance with the 
requirements as you have described them in your opening 
statement. Let me say a couple things about what we're doing 
modestly to move in that direction.
    The first point I would like to make is that we view better 
quality data and better analysis by agencies as the key to 
generating the information to make this regulatory accounting 
report a more effective and useful document. The key way we 
intend to do that for new regulations is through intense 
scrutiny by my analytical staff of these regulations when they 
are coming to our office. Since July we have returned 20 rules, 
in most cases because of inadequate analysis; and that number 
is more than the total number of rules returned in the entire 
Clinton administration.
    We have also cleared six of these returned rules after the 
agencies improved their analysis and came back with stronger 
proposals. So a return does not necessarily mean the regulation 
is denied. It means it needs to be improved.
    The second thing we need to do to improve the underlying 
information for the regulatory accounting law is look at the 
very difficult problem of the sea of existing regulations that 
are out there. The administration does not support an across-
the-board review of every existing regulation in every agency. 
We don't believe that's practical. We don't believe the 
agencies could handle it, and we don't think OMB could handle 
it. However, we do believe that a public participation process 
rooted in the regulatory accounting law is an effective way to 
identify those particular regulations that are especially in 
need of reform and better analysis; and in the report that 
you've received that we submitted in December we took our first 
effort in this direction of seeking public comment on the 
existing regulatory state.
    The third step we're taking to improve this information is 
to update the analytic guidance that OMB asks agencies to 
adhere to when they produce regulatory analyses that are 
submitted to our office. Jointly with the Council of Economic 
Advisors, my office is going to be refining this guidance after 
a process of public comment and peer review. It's through this 
guidance that the analysts and the agencies are expected to 
follow that we hope to spawn better data and better analysis 
from the agencies.
    The final point I want to make is with regard to the timing 
of the regulatory accounting report. As you have mentioned, our 
statutory requirement is to release the report in February. I 
want to remind you at the end of the previous fiscal year, on 
October 1st, that left 4 months to generate a quality 
regulatory accounting report that has our office's analysis, 
peer review, interagency review, and the final analysis. Our 
position is we're going to do our best to get the draft 
regulatory accounting report to you in February of next year, 
and in future years we'll be working hard to do better than 
that. So I hope I have given you a general sense of where we're 
headed with compliance.
    Let me conclude by saying that the annual accounting report 
to Congress we're using in this administration is a crucial 
vehicle to stimulate both specific regulatory reforms and to 
spawn in the long run better data and analysis from the 
agencies. I look forward to working with the subcommittee to 
pursue that agenda.
    Mr. Ose. Thank you, Dr. Graham.
    [The prepared statement of Dr. Graham follows:]

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    Mr. Ose. Our next witness is Thomas Sullivan.
    Mr. Sullivan, if you could summarize--we do have a copy of 
your testimony--for 5 minutes. Thank you.
    Mr. Sullivan. Chairman Ose, other members of the 
subcommittee, good afternoon and thank you for the opportunity 
to appear before you today, as the recently confirmed Chief 
Counsel for Advocacy, to discuss regulatory accounting.
    I'm pleased that my written statement has been accepted 
into the record, and I will briefly summarize the key points.
    First, let me tell you what an honor and privilege it is 
for me to have been appointed Chief Counsel for Advocacy by 
President Bush. This is my first statement before this 
subcommittee since my confirmation, and I am grateful for the 
tremendous support that I have already had from other 
committees in the House and the Senate, Members of Congress, 
from SBA administrator Hector Barreto, from government leaders 
like Dr. John Graham, and from regulatory experts who we work 
with and are well represented at this hearing.
    Today's topic, regulatory accounting, is one the Office of 
Advocacy understands very well, but from a slightly different 
perspective than what was just mentioned by Dr. Graham. We 
share the same concern as other panelists, concerns that will 
be voiced in the next panel, that there is an overwhelming 
regulatory burden on small businesses; and implementation by 
Dr. Graham's office of the regulatory accounting law forces 
government agencies to analyze the economic impact of their 
actions. This early examination of costs and benefits should 
help agencies comply with the analytical requirements of the 
Regulatory Flexibility Act, which my office oversees.
    The Office of Advocacy focuses on an early exchange of 
information with OMB and Federal agencies in order to assist 
them in reducing unnecessary burdens, while at the same time 
allowing the agencies to accomplish their public policy 
objectives. This is the primary tenet of the Regulatory 
Flexibility Act.
    Frankly, from my perspective, many of the 71 regulations 
identified in OMB's regulatory accounting report would not have 
appeared there as ``high priority,'' if agencies had consulted 
with our office early in the regulatory process, complied with 
the Regulatory Flexibility Act, and crafted less burdensome 
regulatory alternatives.
    Early analysis works. In OMB's 2001 report, Dr. Graham 
extolled the value of timely and meaningful consultation for 
the Federal regulatory apparatus.
    We at Advocacy could not agree more.
    Early consultation has led to the development of improved 
regulations that avoid undue burdens but still accomplish the 
agency's objectives. Early attention to economic consequences 
helps reduce the overall cost of regulatory development, and 
once the analysis is complete, there is less risk that a rule 
will be successfully challenged in court.
    Early dissemination to the public of regulatory analyses 
encourages well-informed policy decisions. Those decisions are 
enhanced by additional economic perspectives, like the quality 
work produced by the regulatory studies program in the Mercatus 
Center at George Mason University. The more analysis and 
flushing out of a rule's consequences, the better off the final 
product.
    We estimate that, during fiscal years 1998 through 2001, 
modifications to regulatory proposals in response to agencies' 
consultation with the Office of Advocacy resulted in cost 
savings totaling more than $16.4 billion, or more than $4.1 
billion per year on average.
    Let me put the $4.1 billion in small business terms. That 
money saved means that over 1.3 million employees who work in 
small businesses might be able to afford employer-sponsored 
health care.
    Small businesses are and have historically been our 
Nation's primary source of innovation, job creation, and 
productivity. They have led us out of recessions and economic 
downturns. They have provided tremendous economic empowerment 
opportunities for women and minority entrepreneurs, and small 
employers spend more than $1.5 trillion on their payroll.
    That is why it is so important for OIRA or OMB to do what 
it does well, track, analyze, and report to Congress on the 
impact of significant regulations in their annual regulatory 
accounting report. If agencies aren't doing their homework and 
are promulgating rules without thoroughly considering their 
economic impact, small business is going to get hit 
disproportionately harder than their larger counterparts.
    I see that my time is up, so I'll sum up, with the 
permission of the Chair.
    Mr. Ose. Fifteen seconds.
    Mr. Sullivan. In summary, regulatory accounting and early 
receipt of agency information continue to be important 
priorities for the Office of Advocacy. Government expects small 
business to follow Federal rules and regulations. I think it is 
only fair that agencies follow the rule requiring timely and 
deliberate economic analysis.
    Thank you again for inviting me here this afternoon. I'm 
happy to answer any questions the subcommittee may have.
    [The prepared statement of Mr. Sullivan follows:]

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    Mr. Ose. I thank the panelists.
    I think I'm going to go ahead and start here. My primary 
question has to do with--I have any number of issues in my 
district that are health and safety issues, they're 
transportation issues, they're water issues, they're education 
issues; and until I can get adequate feedback in terms of the 
relative costs and benefits of this or that regulatory action, 
I'm sort of flying in the dark in making decisions on an 
allocation of resource basis to address each of those issues.
    How do we move toward getting this particular report 
presented to Congress in time for me--and my colleagues, for 
that matter--to factor this analysis into the decisions that we 
have to make here? Because, frankly, if I've got $10 and I've 
got demand for $100 worth of resources, I have to prioritize. 
Without that analysis, which, frankly, my office is not capable 
of doing, I'm in a little bit of a disadvantage. Dr. Graham, 
how do we deal with this?
    Dr. Graham. Mr. Chairman, it's a very good question.
    The first point I would make is, while your office does not 
have the staffing and resources, as have you just said, to do 
all this analysis, the truth of the matter is that the Office 
of Information and Regulatory Affairs at OMB, with several 
dozen analysts, has some capability to do analysis, but, 
frankly, it's modest compared to the resources that are 
available in the many agencies. So I think the key to making 
the regulatory accounting reports successful is to change the 
culture within the agencies so they appreciate the importance 
of analysis and invest the resources and the data and quality 
and analytic tools to make that analysis better.
    One of the very first steps that we have tried in this 
administration is to make it clear to agencies that we are 
going to be returning rules to agencies that are not based upon 
quality analysis. But if those analyses are improved, then 
there's a basis for clearing those regulations.
    Mr. Ose. So the statute is clear that OIRA or OMB has the 
authority to require these, to acquire these analyses from the 
agencies?
    Dr. Graham. You're talking about the regulatory accounting 
statute?
    Mr. Ose. Yes.
    Dr. Graham. It places, actually, burdens on my office at 
the Office of Information and Regulatory Affairs. But, as a 
practical matter, the only real way that compliance can 
actually occur is if the agencies share with us the information 
and analysis. Otherwise, at a practical level, it's not really 
going to be feasible to do the job the law calls for.
    Mr. Ose. Are you getting resistance from the agencies in 
providing this information?
    Dr. Graham. Well, in a candid answer to that question, Mr. 
Chairman, I would say that the responses we get from agencies 
in terms of our calls for better analysis are highly variable; 
and the agencies and programs within agencies have varying 
levels of commitment to high-quality analysis. So I don't think 
I can be here, frankly, and tell you that we see across-the-
board high-quality analysis coming from the regulatory 
agencies.
    Mr. Ose. We're going to come around.
    Mr. Sullivan, I will come back to you in a minute.
    This really begs the question, this becomes so clear here. 
We've had this concept of best practices in terms of the manner 
in which the information is supposed to be reported by the 
agencies; and yet, if I understand correctly, we have a variety 
of formats not necessarily consistent with the Best Practices 
Guidance that has been put out that is delivered to you. Am I 
accurately informed on that?
    Dr. Graham. The Best Practices guidelines from my office 
that I'm aware of are from 1996. They were actually superseded 
by a much more general and limited document on guidelines that 
came out in the year 2000.
    One of the reasons the Council of Economic Advisors and OMB 
are jointly engaged to look at those two documents and improve 
them and refine them is that we're not convinced that the 
existing guidance for agencies, frankly, has enough teeth 
behind it.
    Mr. Ose. My time is about to expire. I will yield to Mr. 
Otter for 5 minutes.
    Mr. Otter. Thank you, Mr. Chairman.
    Before I begin, Mr. Sullivan, you quoted some figures in 
your testimony; and I have not been able to find them. It was a 
pretty important figure as far as I was concerned, that there 
was enough money saved in reviewing the regulatory burdens on 
small business that you could have provided insurance for 1.4 
million employees in small businesses. What page does that 
appear on in here?
    Mr. Sullivan. Mr. Otter, that does not actually appear in 
my written testimony. I do have a statement that I formalized 
into the Congressional Record during my confirmation hearing in 
the Senate. I have it with me; and, with the chairman's 
permission, I can enter it into the record.
    [The information referred to follows:]

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    Mr. Ose. Without objection.
    Mr. Sullivan. Basically, what this does is average out per 
individual or per family the cost of health care. It's always 
helpful for me and our colleagues to put cost savings like $4.1 
billion into real terms; and I think, given the problem of 
access to health care, it does paint a very stark picture of 
what the money that is being saved thorough analysis of 
regulations really is about.
    Mr. Otter. OK. Thank you very much.
    Dr. Graham, what did you do in your life before this life?
    Dr. Graham. Well, I was in the academic world, actually, 
all the way since graduate school. I was at the Harvard School 
of Public Health as a faculty member, taught the analytic tools 
of risk analysis and cost-benefit analysis and launched the 
Harvard Center for Risk Analysis, which I ran for about a 
decade.
    Mr. Otter. Would you give me your understanding of 
regulations? Why do we regulate?
    Dr. Graham. Well, I think the reasons for regulation vary 
enormously, depending upon the underlying law that Congress has 
passed and given authority to various agencies. They range from 
laws that are engaged to protect the environment, to protect 
consumers, to protect workers, to protect some businesses. It's 
a broad range of regulatory statutes. But, in the final 
analysis, we cannot at all times rely exclusively on the 
marketplace to achieve the outcomes in society that we seek; 
and, hence, we need in some cases regulatory approaches to 
improve the outcomes that markets cannot generate.
    Mr. Otter. I certainly understand that, and I certainly 
agree. No question that we could go through an entire litany of 
horrors in the past that, without regulation, certain things 
happened with the environment, certain things happened in human 
conditions, etc.
    But what I'm after is, each of these regulations that we 
have, don't they carry some sort of an encouragement, generally 
in the form of a penalty, either financial or otherwise, for 
somebody that doesn't obey the regulation?
    Dr. Graham. Yes, sir. That would be typical.
    Mr. Otter. What happens when a Federal agency doesn't obey 
a regulation?
    Let me give you an example--and we have several. The Army 
Corps of Engineers, for instance, is dumping 200,000 tons of 
slop into an area of an endangered species, the snubnose 
sturgeon, in the Potomac River every year since 1994 and 
without even a license to do so. Yet, you know, if some 
corporation or some private property owner or some individual 
or even a municipality had done that, there would have been 
some regulatory relief, there would have been some financial 
relief and maybe, in some cases, some criminal relief to the 
government to see to it that was done.
    What happens when a Federal agent or agency doesn't obey 
the very same laws, as in the instance of the Army Corps of 
Engineers?
    Dr. Graham. I think you're asking a great question.
    To be candid with you, I don't think I really know the 
enforcement processes and penalty process that applies to 
governmental agents.
    Mr. Otter. These are good laws. And, if these regulations 
that are promulgated by agencies in order to carry out a very 
important public policy mission--shouldn't the agencies, the 
other agencies of government, including the regulatory agency 
that's required to do the enforcement, shouldn't they withstand 
the same criminal and the same financial penalties as the 
private sector? Lord knows, you know, we're going to send a 
private property owner or a corporate president or perhaps a 
mayor or maybe even a Governor to jail if they don't enforce 
the laws or if they don't obey the laws. Doesn't it seem 
reasonable that if it's good for the general population than it 
would be good also for the agencies and the people who are 
enforcing those same laws?
    Dr. Graham. Well, in candor, Congressman, if we're going to 
encourage people to be in public service, I hope we'll 
accompany that with some sort of compensation for the 
liabilities that they'll impose.
    But I think you're raising an excellent point. I don't feel 
authoritative to speak on it in terms of what would be the 
appropriate type of penalty structure for people operating in 
regulatory agencies.
    Mr. Otter. My time is up, and the chairman has picked up 
the gavel. So I'll come back to you.
    Mr. Ose. The gentleman from Tennessee for 5 minutes.
    Mr. Duncan. We have a staff briefing that estimates that 
the cost of regulations at approximately $843 billion are 8 
percent of the gross domestic product. You've heard in my 
opening statement and I've heard of other estimates of roughly 
10 percent. Can you tell me, do you think those figures are 
roughly accurate and will you tell me who pays those costs?
    Dr. Graham. Well, the first point I would make is the $800 
billion figure, which you're going to hear about later today in 
the testimony by one of the analysts who generated that, Dr. 
Hopkins, I think that is the best available estimate that 
exists at the time. It does have a lot of uncertainties and 
limitations, but it's the best that we have at the present 
time.
    My own personal view on that in terms of framing $800 
billion is less helpful than dividing that by the number of 
households in the country, roughly 100 million, roughly $8,000 
per household, because it can give you a sense for a family 
making $30,000 or so, an $8,000 bill for Federal Government 
regulation is a pretty substantial part of their overall 
disposable income. We at OMB view regulatory review as a form 
of consumer protection because it protects consumers from the 
invisible taxes that regulation often involves.
    Mr. Duncan. Well, certainly, as I mentioned, when you think 
about the regulatory costs being in addition to the tax burden 
of almost 40 percent on most people and $8,000 per family, it 
becomes very, very significant.
    Mr. Sullivan, you have in your testimony that small 
businesses are and have historically been our Nation's primary 
source of innovation, job creation, and productivity. They 
provide tremendous economic empowerment opportunities for women 
and minority entrepreneurs, so forth and so on. You say that in 
order for small businesses to continue to be such a valuable 
asset to our Nation's economy they must have a level playing 
field. The regulatory playing field is a vital one for small 
business.
    You know from my opening statement that was one of my main 
concerns, and I heard you say right at the tail end of your 
testimony that these regulations hit harder on small businesses 
than on very large ones. Is that correct?
    Mr. Sullivan. That is correct, Congressman.
    Mr. Duncan. Do you think that we have a level playing field 
now?
    Mr. Sullivan. No, I don't. I don't believe that we have a 
level playing field right now.
    Later on this afternoon you will hear from Dr. Hopkins, who 
is a coauthor of the Crain/Hopkins Report. That's where the 
Office of Advocacy obtained a lot of this statistical 
information that I cite in my testimony and in other statements 
that I make.
    We have an opportunity within the confines of this hearing 
and the regulatory accounting report. In order to get to a 
level playing field for small business, agencies have to do the 
analysis up front. When agencies start realizing the incredible 
burden that they place on the backs of small businesses, then 
they'll begin to realize that maybe there are less burdensome 
alternatives that still meet the objective of protecting the 
environment, still meet the objective of protecting the 
workplace safety or encouraging workplace safety, but don't 
impose such an overwhelming burden as to devastate entire 
sectors of small businesses.
    Mr. Duncan. You know, I chaired the Aviation Subcommittee 
for 6 years; and we had hearings in that subcommittee about the 
fact that a lot of the environmental rules and regulations and 
red tape caused major airport projects to cost at least three 
times what they should have cost. The main runway in Atlanta 
was 14 years from conception to completion, but it took only 33 
days of actual construction. Now, those were 24-hour days, so 
maybe you could say 99 days of actual construction. But, when 
you drive those costs up, it means that the cost of airline 
tickets go up a lot more than they should be. As I said in my 
opening statement, who this impacts and hits the hardest are 
the poor, are the lower income people, the working people of 
this country.
    I now chair a subcommittee called Water, Resources and the 
Environment. We had a hearing a few months ago in which they 
estimated some published EPA regulations were going to cause 
40,000 small farms to go out of existence. We had people crying 
at that hearing about the potential impact. And, all these 
people who believe in big government always say they're for the 
little guy. But it's the little guy who ends up getting hurt, 
and it's the consumer who ends up paying the cost. We run the 
small farmers and the small businesses out, and then these 
people who believe in all this regulation and stuff, as I said 
in my opening statement, they end up becoming the best friends 
extremely big business has.
    I'll yield. I don't have any time left.
    Mr. Sullivan. Could the chairman at least let the record 
reflect that throughout the Congressman's statement I was 
nodding in agreement?
    Mr. Ose. We will note your verbal statement for the record, 
as well as your physical.
    Thank you, Mr. Duncan.
    Let me--Dr. Graham, here's one of the things that I 
struggle with. The Federal Government collects taxes, and we 
can account for how much people pay in taxes on an annual 
basis. We distribute student loans, and we can account for how 
much was loaned and whether or not the borrower paid it back. 
We can account for Agriculture Department programs, whether 
they be on the foreign food service deliveries, or commodity 
support programs, or environmental quality improvement programs 
or what have you. Yet, when you look at the estimated costs of 
regulation, which in your testimony, if I understand correctly, 
are close to the discretionary expenditures of the Federal 
Government, we can't seem to account for the regulatory costs 
in a manner that allows us to factor that into our 
decisionmaking. I'm coming back to my question: Where's my 
report?
    The issue for me becomes not letting the perfect be the 
enemy of the good. Because at some point or another I've got to 
have this information, as do my colleagues. How do we move this 
thing forward? Do we pass--instead of have it be a regulatorily 
based requirement, do we pass a statute that says the agencies 
will provide to OMB or OIRA this information by such and such a 
date? How do we get this thing moving forward in a positive--
how can I help you do your job so you can help me do mine?
    Dr. Graham. Mr. Chairman, that's a good question. My 
initial instinct, after 6 or 7 months of working in this role 
and working with the agencies, is that we will be able to make 
some progress without any statutory change. We will be able to 
move this process to the point where we can give you with the 
budget the draft regulatory accounting report before peer 
review and before public comment.
    I don't really see, frankly, in the way it's designed, how 
we're going to get from here to getting you the final report in 
February of each year, given that all the information that we 
are looking at doesn't come to a conclusion until October 1st 
of the previous year. And Congress has required by statute that 
we have a public comment period, we have peer review, and I 
think we should have those processes with this report.
    So I do think there's a little reality check, frankly, in 
the designing of this regulatory accounting law that we need to 
talk about and see whether or not there's some way--that I 
don't see--that we can get this to the point where you ideally 
want it, which is that final report with the budget in 
February.
    Mr. Ose. Even if you were able to provide us with a draft 
copy of the report, even after 3 short years, I understand that 
draft copy will somehow or another become available to the 
interested parties and the peer review itself would take place 
just naturally. You would get feedback. I'd get feedback. Mr. 
Otter and Mr. Duncan, they would get feedback. My good friend 
from California, Mr. Waxman, Mr. Tierney, they'd get feedback. 
It would at least allow us to factor in the relative costs and 
relative benefits of any regulatory action as we approach the 
final date of the legislative session.
    I mean, the thing that's so crazy here is that when you 
look at the tax revenue we get, we account for that very 
carefully; you look at the discretionary expenditures that we 
make, we account for that very carefully; and yet we have to 
have, frankly, an equally quantified cost of the regulatory 
burden on an annual basis. And, it complicates my life, not to 
mention the lives of the other Members up here.
    So I really want to encourage you and your colleagues at 
OIRA and OMB to make the best of what you have at any available 
time. If it improves with peer review, great. I mean, I'm fine 
with it. But I've got to have something. I've got to have 
something to start with, and I'm trying to figure out how it is 
we make that possible. Even if it's, you know, 3 days later or 
6 days later or a week late, I don't care on that kind of a 
timeframe. But I have to have that information just to make my 
job more effective. So how do I make that happen?
    Dr. Graham. You're making yourself very clear, Mr. 
Chairman. We will work very hard to get the report to you with 
the budget. And if it can't be the final report, then we will 
definitely try to make sure that you have the draft report with 
the budget next year. Our estimate is we're going to miss by 
about 6 weeks this year, but our trend line is in the right 
direction. We've gone from 10 months late to 6 weeks late, so 
we're moving in the right direction.
    Mr. Ose. I appreciate that.
    My time is up. Mr. Otter.
    Mr. Otter. Thank you, Mr. Chairman.
    Dr. Graham, I received a questionnaire from the U.S. 
Department of Agriculture recently, wanting to know about how 
my farm and my ranch were doing and what I produced. I noticed 
on the document that I was required to fill out that, under 
penalty of law and under a certain financial penalty as well as 
perhaps criminal penalty. If I didn't fill it out and send it 
back that they could enforce those penalties. Do you have any 
such requirement--inducement when you ask these agencies for 
information relative to their regulatory practices?
    Dr. Graham. I was afraid you were going to ask me whether 
there are any penalties you can hold against me for not 
submitting the regulatory accounting report on schedule.
    Mr. Otter. That's my next question.
    Dr. Graham. No, I don't know the specifics of the example, 
Congressman, no.
    Mr. Otter. If you had that sort of enforcement 
encouragement that if an agency, wherever it was, whatever 
agency it was, refused to respond in full and complete 
according to your request, do you think then that you would 
probably get responses that were actually more factual and more 
evidentiary of what was actually going on with that regulatory 
agency?
    Dr. Graham. I think that's certainly worth consideration.
    Mr. Otter. Would the administration support that kind of 
legislation, if I wrote it and advanced it?
    Dr. Graham. I think it's definitely worth some discussion.
    Mr. Otter. The problem that we have with that is that we 
asked 283 million Americans that sometimes collect together in 
communities and sometimes collect together in companies and 
sometimes start their own companies, we put all these rules and 
regulations that cost them $843 billion a year. I think we 
pretty well accepted that figure and said that if you don't 
obey these rules and regulations, it's important for us to know 
this stuff. It's important for you to comply with these rules 
and regulations, and it's important enough that we're going to 
have to take some sort of action against you for this necessary 
enforcement.
    If it's important for these 283 million Americans, why 
isn't it important for the very Government that serves them to 
do the same thing?
    Dr. Graham. Fair point.
    Mr. Otter. Thank you, Mr. Chairman. That's all I have. I 
yield back the balance of my time.
    Mr. Ose. Thank the gentleman.
    Mr. Tierney. What I would like to do is ask unanimous 
consent to place relevant materials in the record and to ask 
questions of the witnesses for the record in writing.
    Mr. Ose. Oh, without objection. We extend that courtesy to 
all Members of Congress.
    Mr. Tierney. Just putting it on the record.
    Mr. Ose. Mr. Sullivan, Ms. Dudley recommends that OMB 
should identify in a common but comprehensive manner variables 
in the methodologies to estimate the benefits and costs of 
regulations. It's in her testimony and talks about a report 
card for each agency. Congressman Horn has done that very 
effectively over in the Management Subcommittee of this full 
committee. What is your view of Ms. Dudley's recommendations 
about using a report card for agency analyses?
    Mr. Sullivan. Mr. Chairman, this actually is a perfect 
opportunity to talk about a response to a number of questions 
that have come up and been properly directed to Dr. Graham; and 
that is the requirement for agencies to follow the law on which 
Congressman Otter just elaborated. The expectation is that 
those who we regulate should follow the law. Why aren't 
government agencies also following laws?
    There is a law entitled the Regulatory Flexibility Act, 
that I mentioned in more detail in my written statement, that 
does require agencies to consider economic impact before they 
promulgate rules. To the extent that a ``report card'' would be 
helpful to this committee, to Dr. Graham and others, that 
report card will be finished by the end of this month; and it's 
entitled the Annual Report of the Chief Counsel for Advocacy on 
Implementation of the Regulatory Flexibility Act. That report 
talks about whether or not agencies are doing the analysis that 
they're required to do and consider their impact on small 
business prior to finalizing regulations.
    Mr. Ose. The end of March of this year?
    Mr. Sullivan. Yes, Mr. Chairman.
    Mr. Ose. And, where will we be able to obtain copies of 
that report?
    Mr. Sullivan. It will be hand-delivered to your counsel, 
Mr. Chairman, and the entire committee. Advocacy does have a 
fantastic Web site containing all of our publicity available 
documents, but the actual copies and executive summaries will 
be hand-delivered to this committee.
    Mr. Ose. So this is a report by your office on compliance 
with SBREFA, if I understand correctly?
    Mr. Sullivan. You understand it correctly, Mr. Chairman.
    Mr. Ose. All right.
    If I may go on, Mr. Sullivan. What is your view of the 
value of the agency-by-agency data on the impact of each 
agency's rules on small businesses? Clearly you think there is 
value.
    Mr. Sullivan. I think there is tremendous value. And that 
value is reflected in how an agency itself considers that 
analysis, how this committee considers it, how Dr. Graham's 
office and how other stakeholders in the regulatory process 
consider the analysis.
    But, the first step in that process is making sure that the 
agencies adequately prepare their analyses. I know that Dr. 
Graham is vigilant in his insistence that agencies do that 
analysis. Our office is vigilant in our efforts. To the extent 
that we have the help of this committee, that certainly helps 
things.
    Mr. Ose. But your office is narrowly--your focus is 
narrowly crafted on small business or issues in the small 
business regulatory world.
    Mr. Sullivan. That is correct.
    Mr. Ose. Dr. Graham has got a much larger responsibility.
    Mr. Sullivan. We are a smaller piece of the larger 
regulatory pie that Dr. Graham has responsibility for, yes.
    Dr. Graham. But, Mr. Chairman, an important piece they 
have. Because two of the most important regulatory agencies, 
EPA and the Occupational Safety and Health Administration, it 
is in those particular settings where the two offices at this 
table can work together on panels with agencies before 
regulations are being developed.
    By the way, am I right about that? Is it EPA and OSHA 
together?
    Mr. Sullivan. That is correct.
    Dr. Graham. That model, our staff feels, has been very 
helpful in getting agencies to think through the small business 
issues early in the process before they get too committed to a 
particular line of regulatory thinking.
    So I think that is an area where we ought to look to in 
terms of collaboration that can continue between our offices 
and a model for early involvement that we might want to 
consider in other contexts.
    Mr. Ose. Thank you. The gentleman from Massachusetts for 5 
minutes.
    Mr. Tierney. Thank you for your indulgence. Thank you, Dr. 
Graham, Mr. Sullivan, for your testimony here, for being here 
today.
    Dr. Graham, let me start with just a question about the New 
Source Review under the Clean Air Act. You have emphasized that 
the administration strongly supports using what you say are 
sound analysis and economic tools to make policy decisions. One 
of the tools that you have argued for is cost-benefit analysis.
    There are serious concerns with this approach because, 
among other things, it is difficult to express many of the 
values in monetary terms.
    So my question to you is, you advocate this approach. Has 
your office reviewed the benefits and costs to changes to the 
New Source Review regulations that are under consideration by 
the administration?
    Dr. Graham. No, we haven't received any proposals from the 
agency as of yet, though we expect that very well may happen 
down the road.
    Mr. Tierney. But, that is on your list, is it not?
    Dr. Graham. It is on the list for what we believe the 
agencies should do. In this case, EPA.
    Mr. Tierney. Have you looked at any of the potential health 
effects of those changes at all?
    Dr. Graham. We haven't done any analysis yet on the NSR 
reform proposal.
    Mr. Tierney. Well, what gives OIRA the ability or the 
authority to make a target list of 23?
    Dr. Graham. What gives us our legal authority?
    Mr. Tierney. Yeah.
    Dr. Graham. Actually, the proposals that we have asked for 
public suggestions on were actually done pursuant to the 
regulatory accounting law that is the subject of this hearing.
    Mr. Tierney. That requires that you make a target list?
    Dr. Graham. No, it actually doesn't require us to do it. 
But we interpret it as authorizing us to do so. We think it is 
consistent with the authorization in the statute.
    Mr. Tierney. So you took the liberty to do it?
    Dr. Graham. Correct.
    Mr. Tierney. Now you have 23 targeted regulations that you 
target for high priority. Fourteen of them are nominated 
apparently by the Mercatus Center. Tell me a little bit about 
that, that center, and how it was that they got to play such a 
prominent role in your proceedings.
    Dr. Graham. Well, let me first start by noting that the 
public comment process that led to these nominations was a 
standard Federal Register announcement. Anyone was allowed to 
suggest nominations. And, frankly, we were very pleased that 
the Mercatus Center did the diligence to actually make the 
large number of nominations that they did. When we evaluated 
their nominations, quite frankly, we did not evaluate a 
majority of them as high priority. It is only a minority of 
them that we felt were in that class of 23 that you described.
    Mr. Tierney. Fourteen.
    Dr. Graham. Out of 40, I believe.
    Mr. Tierney. But 14 out of the 23 that you chose.
    Dr. Graham. They accounted for 14 out of the 23 that we 
chose, yes.
    Mr. Tierney. Were you at all concerned about the funding 
sources for Mercatus Center, that they might have a bias?
    Dr. Graham. No. We actually look at the quality of the 
arguments and analysis of each of the commenters regardless of 
where they happen to get their funding sources from.
    Mr. Tierney. Did you ever serve on the Mercatus Centers 
Board of Advisors?
    Dr. Graham. I think I may have actually served for a year 
or two toward the end of my tenure at the Harvard Center for 
Risk Analysis.
    Mr. Tierney. Now my understanding is that the American 
Chemical Council nominated the Mixture and Drive-From Rule, and 
the American Petroleum Institute nominated the Notice of 
Substantial Risk Rule. They are both on your high priority 
list. You testified that you were the director of the Harvard 
Center for Risk Analysis. Did the American Chemical Council and 
the American Petroleum Institute donate funds to the Harvard 
Center in undisclosed amounts?
    Dr. Graham. Yes. American Chemistry Council and American 
Petroleum Institute, yes.
    Mr. Tierney. And those amounts that they contributed were 
not disclosed?
    Dr. Graham. I don't believe that the Harvard Center for 
Risk Analysis discloses the actual amounts, but they do 
disclose who the contributors are.
    Mr. Tierney. Is there a limit on the amount that they could 
contribute to that center?
    Dr. Graham. Not that I am aware of.
    Mr. Tierney. How do you decide the number of staff that are 
going to be devoted to each of your agencies' regulations that 
you are reviewing? For instance, in October I think you only 
had one OIRA desk officer assigned to the IRS, but the IRS, I 
am told, generates 82 percent of the paperwork burden imposed 
by the Federal Government. At the same time the EPA, which 
generates only 1.7 percent of the total paperwork burden 
imposed by government, has 18 percent of your desk officers 
assigned to it. So how do you make those determinations?
    Dr. Graham. Through intense scientific analysis, sir. No, 
it is a fair question. The first point I would like to make is 
a distinction between the regulatory review side of our 
operation and the paperwork reduction side. As I understand 
your question, you are focusing on how we allocate our staff 
resources with regard to paperwork review.
    Mr. Tierney. Right.
    Dr. Graham. I think there, one of the key things that we 
look at is not simply what the aggregate amount of paperwork 
burden is by various agencies, but what the actual paperwork 
reduction opportunity is in these various agencies. And I did, 
in the process of my confirmation, look at prior hearings of 
this committee. And while I thought it was pretty clearly 
argued that there were substantial paperwork burdens from the 
IRS, a lot of those burdens are rooted in statute, and in 
interpretative rules that are outside of the authority of our 
office.
    So it may look at first blush like IRS is a great 
opportunity. But I think it is a lot more complicated than that 
when you look more closely at it.
    Mr. Ose. The gentleman's time has expired. The gentleman 
from Idaho for 5 minutes.
    Mr. Otter. I would like to pursue that just in general with 
the agencies. Regulatory agencies that have their mission, that 
have their laws pretty well rooted in statute, like the IRS, as 
opposed to a more subjective enforcement opportunity, say like 
the Environmental Protection Agency or OSHA, where a person on 
the spot doesn't necessarily have a statute to look at and 
says, ``this is the depreciation schedule and you will follow 
the depreciation schedule for a 30-year life on a building,'' 
whereas opposed to making a more personal judgment within the 
knowledge that one would have of a constructionsite, and/or of 
a potential hazardous material. Doesn't it seem possible to you 
that in the one case there is an awful lot more room for human 
error in the judgment case as opposed to the statutory laws 
that are available in statute, for instance for the IRS, and 
shouldn't we be more concerned about human error in trying to 
serve the public than otherwise?
    Dr. Graham. I think you are right that there is more 
discretion in certain agencies for how they frame regulations, 
how they design them, what their ultimate costs are likely to 
be. The example that you gave, however, the Environmental 
Protection Agency, my experience so far in the first several 
months, is that a lot of the rulemakings that they do are under 
specific statutory requirement, in some cases not only a 
statutory deadline, but in some cases a court order. We don't 
necessarily let those things cause us to not look carefully at 
regulations, but they do cause us to have a need for a much 
more expedited look at these regulatory proposals in light of 
the statutory and judicial context they are framed in.
    Mr. Otter. Were you--are you familiar with the Canadian 
Lynx study that was falsified by four Federal agencies in the 
Wenatchee National Forest?
    Dr. Graham. No, sir.
    Mr. Otter. Thank you. Thank you, Mr. Chairman. I yield 
back.
    Mr. Ose. I thank the gentleman.
    The gentleman from Massachusetts for 5 minutes.
    Mr. Tierney. That was a quick round. Dr. Graham, continuing 
on a little bit on that. In your report you say that you 
support, or strongly support, using sound analysis and economic 
tools to make your policy decisions. One of the tools that you 
have argued for is the cost-benefit analysis, and you say there 
are concerns with the approach because it is difficult to 
express many of your values in monetary terms.
    Tell me, if you would, how you would evaluate the potential 
health effects in monetary terms, something like the Clean Air, 
or something like the--you know, any one of those environmental 
regulations.
    Dr. Graham. Right. That is an interesting question. It is 
an area in which, as a faculty member of the Harvard School of 
Public Health, I did a lot of teaching and writing. When I 
actually came to Washington and looked at the guidance 
documents in this area, what I found is that our office does 
not in fact require agencies to put dollar values on life-
saving effects or other types of health effects.
    Agencies are certainly authorized to do so if they feel 
there is a useful analytic approach for doing that. But one of 
the interesting things I think about this is as you look across 
the Federal agencies, some of them are doing that exercise, and 
some of them, such as the National Highway Traffic Safety 
Administration and the Occupational Safety and Health 
Administration, are not doing that.
    So one of the things we are going to be looking at with the 
Council on Economic Advisors is whether there really is an 
adequate analytic foundation to be insisting upon some general 
approach to that very difficult question.
    Mr. Tierney. Well, if you don't factor in the health 
benefit on that, your study is not worth anything, is it? If 
you are leaving out one very major component?
    Dr. Graham. No, I think there would still be tremendous 
value in quantifying how many citizens each year suffer from 
aggravation of asthma, or how many citizens who have 
cardiopulmonary disease have hospital admissions as a result. 
But I thought your question was should we put a dollar value on 
that.
    Mr. Tierney. Well, you are going to do a cost-benefit 
analysis. So what is the benefit in terms of--what does that 
mean?
    Dr. Graham. Interestingly enough, I believe the 
Environmental Protection Agency does currently try to put 
dollar values on each of those effects, but other Federal 
agencies don't. So I don't think we are in a particularly 
orderly situation at the present time.
    Mr. Tierney. And, we get to my next question, which is 
assumptions. Everybody is using assumptions. I think you state 
in the report that it is only as strong as their assumptions 
made are. If the assumptions aren't strong or aren't correct, 
then we don't have much to go on.
    But then you just sort of seem to be dictating the 
assumptions that are used by the agencies. Do you think that 
your office has more expertise in this area than some of the 
agencies? I mean, you go into a particular agency that has all 
of that expertise, they come up with a recommendation and tell 
you what their assumptions are, and your group just kicks it 
back and says we don't agree with your underlying assumptions. 
They might ask, who the heck are you?
    Dr. Graham. Well, I am still early in my learning on where 
the sources of authority are in our office and this sort of 
thing. But, I believe the regulatory accounting law itself 
requires us, as an office, to develop the guidance that 
agencies use. So I don't think this is our office just sort of 
volunteering to be the analytic force within the Federal 
Government. I think actually there is statutory requirement for 
our role in analytic----
    Mr. Tierney. That is sort of setting parameters up here. 
But you are going right into their report and saying, ``Hey, I 
don't like the assumptions that you made.'' Who gives you the 
authority to do that? Where does it come in and say that you 
have more expertise than the Department of Transportation, the 
Environmental Protection Agency, or anybody?
    Dr. Graham. Well, on the authority side, clearly the 
executive order provides us that authority.
    Mr. Tierney. Then you might as well write the things 
yourself and not even include them in the process.
    Dr. Graham. We certainly look very hard--as I can tell by 
the line of your questioning, we do in fact look very hard at 
the analytic assumptions and the bases that agencies try. And, 
if we see that we don't feel an adequate rationale, we will 
return it to the agency and ask them to work on it some more.
    Mr. Tierney. So, I guess what you are telling me is you 
think that your staff has better expertise than the departments 
that are sending you these analyses?
    Dr. Graham. I wouldn't generalize on that. But in certain 
cases, I think we can make a contribution to inducing agencies 
to do better analysis.
    Mr. Tierney. You are doing it at a world record pace, 
aren't you, with all of your letters back, and rejections?
    Dr. Graham. Well, I will let others judge the rate of that 
pace.
    Mr. Tierney. There we go to the numbers, right. You have 
sent back more than the entire two terms of the past 
administration and you have been here a couple of months.
    I have to tell you that it raises a lot of concern, that 
this is just another way to go about some things that certain 
people may not like, and instead of just dealing with them in a 
legislative end of it, trying to go through the back door on 
the regulatory process and kick them out. The track record I 
have seen so far is very, very troubling.
    Dr. Graham. Well, I think, Mr. Chairman, if you look 
actually at the overall record----
    Mr. Tierney. Wait until November, maybe.
    Mr. Ose. This is the ranking member.
    Dr. Graham. I am sorry. Not until November, right? We 
discussed that earlier. But I hope you look at the overall 
record of the office. Because there are a number of other areas 
in which our office has been suggesting and encouraging 
agencies to adopt regulations in the health, safety and 
environmental arena. At FDA for the labeling of trans-fatty 
acids for foods, at OSHA in terms of making available automatic 
defibrillators that save lives from sudden cardiac arrest.
    Mr. Tierney. Well, the trans-fatty acids made your list at 
first and then somehow got kicked off, right?
    Dr. Graham. Pardon?
    Mr. Tierney. The regulation concerning trans-fatty acids 
made your list of concerns at first and then you decided to go 
with the regulation; am I right?
    Dr. Graham. I am sorry. I didn't hear the last part.
    Mr. Tierney. At one point wasn't the trans-fatty acids 
regulation on your list, your identified list of regulations 
that you wanted to look at?
    Dr. Graham. You are saying one of the public commenters 
raised it as one to look at?
    Mr. Tierney. Well, it made your list of 23. So, not only 
did the public comment on it, you put it up on your hit list 
here, about six down, food labeling, trans-fatty acids and 
nutrition labeling, nutrient content and health claims. You 
have since pulled back from that, right?
    Dr. Graham. Congressman----
    Mr. Tierney. My understanding is that you have since pulled 
back.
    Dr. Graham. We consider that a review list rather than a 
hit list.
    Mr. Tierney. It depends on your perspective, I guess.
    Dr. Graham. Some of these reviews may surprise you in terms 
of what type of results are actually generated. I hope you will 
look explicitly at what our office has suggested in the trans-
fatty acid area, because I am not sure we are in total sync on 
what actually our office has done in that area.
    Mr. Tierney. I hope with respect to all of the others you 
surprise the heck out of me.
    Mr. Ose. Yes. The gentleman's time has expired.
    The gentleman from Massachusetts for a final question.
    Mr. Tierney. I was going to ask you about each of your 23, 
go down the list. We can do that in writing, I suppose.
    I would really like to know what your specific reason for 
putting each of these 23 on your high priority list is, and why 
they made a high priority list as opposed to a medium priority, 
as opposed to low priority, or no priority. What distinguished 
them? One of the things that really draws it to my attention is 
the arsenic in drinking water regulation that made the list put 
out by the Environmental Protection Agency, the authority is 
the Safe Drinking Water Act. Description of your problem was 
that Mercatus states that, based on EPA's own analysis, 
benefits do not justify cost in standards of either 5 or 10 
ppb. Based on the more robust analysis, these levels are even 
less attractive. Then your proposed solution says, Mercatus 
believes that the EPA should set a standard. Then your estimate 
of economic impact says that Mercatus asserts. So, I think 
maybe you can see my concern that it wasn't your agency so much 
that was looking at these things and making the analysis, as 
that Mercatus was sort of writing out a formula here and 
dropping it on OIRA's desk and I think the end of this is, of 
course, that eventually the administration accepted the arsenic 
in drinking water standards as they were.
    Dr. Graham. The Mercatus Center was not the only player in 
that discussion. There was the National Academy of Sciences. 
There was the EPA Science Advisory Board. And, ultimately we 
looked at all of that information and came--and supported 
Administrator Whitman's decision on arsenic in drinking water.
    Mr. Tierney. But you based your proposed solution and your 
estimate of economic impact on Mercatus. You don't cite the 
other people. You cite Mercatus.
    Dr. Graham. Because, at that time, the review of the 
arsenic review was not ultimately completed when we made the 
rating that you are referring to in your statement.
    Mr. Tierney. We will put the others in writing. Thank you.
    Dr. Graham. I would be happy to answer your questions in 
writing, sir.
    Mr. Ose. I thank the gentleman for yielding back. I want to 
thank Dr. Graham and Mr. Sullivan for joining us today. Mr. 
Sullivan, I am sorry you didn't get much attention in the 
latter part of the hearing, but maybe next time. We do have 
additional questions which the Members may well submit in 
writing.
    We will be leaving this open. We appreciate your 
cooperation in coming today. I apologize for keeping you a 
little bit long. Thank you both.
    If we can have the second panel step forward. That would be 
Dr. Miller, Dr. Hopkins, Ms. Dudley, Ms. Claybrook, and Ms. 
Heinzerling. OK. I want to thank you for coming. In this 
committee and this subcommittee we routinely swear in our 
witnesses. So, if you all would stand and raise your right 
hand.
    [Witnesses sworn.]
    Mr. Ose. Let the record show all of the witnesses answered 
in the affirmative. As you have seen in our prior panel, we are 
going to give each of you 5 minutes to summarize your written 
testimony which we have received. We appreciate you coming.
    Dr. Miller, you are first. Joining us, our first witness is 
Dr. James C. Miller, III, the former Director of the Office of 
Management and Budget and the counselor to Citizens for a Sound 
Economy. Dr. Miller, 5 minutes.

 STATEMENTS OF JAMES C. MILLER III, FORMER DIRECTOR, OFFICE OF 
   MANAGEMENT AND BUDGET, COUNSELOR TO CITIZENS FOR A SOUND 
ECONOMY; THOMAS D. HOPKINS, FORMER DEPUTY ADMINISTRATOR, OFFICE 
OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND 
   BUDGET, DEAN, COLLEGE OF BUSINESS, ROCHESTER INSTITUTE OF 
 TECHNOLOGY; SUSAN DUDLEY, DEPUTY DIRECTOR, REGULATORY STUDIES 
    PROGRAM, MERCATUS CENTER, GEORGE MASON UNIVERSITY; JOAN 
  CLAYBROOK, PRESIDENT, PUBLIC CITIZEN; AND LISA HEINZERLING, 
       PROFESSOR OF LAW, GEORGETOWN UNIVERSITY LAW CENTER

    Dr. Miller. Mr. Chairman, thank you. Thank you, Mr. Ranking 
Member. I appreciate an opportunity to be here with you today. 
My statement can be summarized in nine points. I will try to be 
brief.
    One. Regulation is just one of the two major ways the 
Federal Government uses to acquire command over resources, or 
to make those resources go to uses other than they would have 
gone otherwise.
    The other, of course, is by spending, taxing, borrowing--
also printing money, we don't do much of that--spending and 
buying the resources on the private market.
    Two. You have an elaborate budget process or spending 
process. An elaborate process for making decisions about 
spending. You don't have an analogous process for making 
decisions about the way government goes about regulating.
    Three. The regulatory resource burden or the amount of 
resources in value terms obtained by the Federal Government 
through regulation is significant. It is about half the total 
spending of the Federal Government. In fact, it exceeds all 
appropriations. Let me say that again. The regulatory resources 
directed by the Federal Government exceed, in value terms, all 
appropriations for the Department of Transportation, the EPA, 
all of these departments, all of those appropriated accounts.
    Four. Although I have spent a lot of time in my career 
studying the efficiency of collective decisionmaking, and I 
wouldn't say that all collective decisionmaking by this 
Congress is perfect, I think you would be a lot better off in 
your decisionmaking, you would make a lot more efficient 
decisions, if you had adequate information and if these issues 
were transparent to you.
    Five. I think you ought to develop a regulatory process 
very much like your spending process. You ought to appropriate 
regulatory resources just like you appropriate spending 
resources.
    Six. It is not anti-government to say that you ought to 
estimate the cost of regulation any more than it is anti-
government to produce a budget, a spending budget, for the U.S. 
Government. When you make decisions about some program and fund 
the program, you have to make some evaluation of the benefits 
of that program. In fact, the very fact that you approve it is 
revealing that in your mind the benefits exceed the costs.
    There is nothing any more biased about looking at 
regulatory costs than there is a bias in looking at the costs 
of programs. Some argue you ought to just do what is right 
instead of looking at cost--you shouldn't look at costs at all. 
The analogy there would be, you ought to just tell agencies go 
do this, that, or the other without any notion of what it will 
cost, any budget, any spending limit at all.
    Eight. A start would be to have better regulatory 
accounting. Now I know there has been some problems about 
getting this regulatory accounting budget to you. And, that 
brings me to my ninth and final point.
    It is easy to blame OMB. Maybe I am expressing a parochial 
view since I was the first Administrator of OIRA, I was the 
first OIRAnian, Mr. Chairman. Along with Dr. Hopkins here, I 
was present at the creation. Let me also mention that 
accompanying me today is Dr. Wayne Brough, who was also a 
member of the OIRA staff.
    It is easy to blame OMB. But the agencies don't necessarily 
respond to OMB, to OIRA. When OIRA asks for information, they 
don't always get it. The raison d'etre of agencies is to 
promulgate regulations or spend money or whatever. When OMB 
says we are not going to give you any money unless you respond, 
they tend to respond.
    To the degree that OIRA can say, well, we are not going to 
approve your regulations unless you respond, that raises all 
sorts of problems, creates controversy, etc.
    But to the degree to which you can support OIRA and impress 
your colleagues on the authorizing committees for the agencies 
that it is important that they cooperate with OIRA in producing 
these estimates of costs and benefits, this will improve your 
chances of getting this information. I am not against 
estimating benefits. I think it is very important, I think we 
would be better off if we had them.
    But you have got to give OIRA a bigger stick. Part of the 
problem is that you have the diffusion of power and authority 
in OMB with the management deputy and all of these recent 
reforms. But I think if you give OIRA a bigger stick and you 
give this new Administrator of OIRA, Dr. Graham, some support 
and encouragement, I think you will get your reports in a more 
timely fashion.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Miller follows:]

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    Mr. Ose. Thank you, Dr. Miller. Our second witness, who has 
been briefly introduced by Dr. Miller, is Dr. Thomas Hopkins, 
who is the former deputy administrator, the Office of 
Information and Regulatory Affairs at OMB. He is also the Dean 
of the College of Business at the Rochester Institute of 
Technology.
    Dr. Hopkins, welcome. We have your written statement. If 
you could summarize in 5 minutes, that would be great.
    Dr. Hopkins. Mr. Chairman and members of the committee, I 
am pleased to have this opportunity to present my views on the 
regulatory accounting issues now before you.
    Government regulation, however well intentioned and 
effectively designed, necessarily impose burdens on those who 
are regulated. When a burden is imposed without an accounting 
of its consequences, government operates without accountability 
and without transparency. Most of the costs associated with 
regulatory compliance are hidden from public view.
    A recent report that Dr. Mark Crain and I prepared for the 
U.S. Small Business Administration found this hidden additional 
spending on regulatory compliance exceeding $800 billion 
annually, more than half of the size of the Federal 
Government's entire tax take each year. Indeed, if the Internal 
Revenue Service mailed ``informational invoices'' showing each 
family's share of spending on regulatory compliance, the 
average family would ``owe'' some $8,000 annually over and 
above their taxes.
    Regulations' coerced shift of resources results in a less 
productive economy to the extent that regulations fail a 
benefit-cost test. And, unfortunately, much regulation does not 
pass such a test.
    Robert Hahn and Cass Sunstein conclude that adding some 
regulations while removing or improving others could save tens 
of thousands of lives and millions of dollars annually, thus 
giving simultaneous boosts to health, safety, and economic 
growth.
    Restrictions on free trade, such as the recently announced 
quotas on steel imports, also fail a benefit-cost test. They 
are particularly burdensome on the many small businesses that 
now will be facing higher prices for the steel they purchase.
    Our government routinely mandates inefficient uses of 
resources. This would be of limited significance if regulatory 
compliance costs in the aggregate were small. But they are not. 
Moreover, small firms face 60 percent higher regulatory 
compliance costs per employee than do large firms. Spending on 
tax compliance and environmental protection is especially 
burdensome for small firms.
    The work that Dr. Crain and I have completed shows 
regulatory costs can be measured, and they are sizable in both 
absolute terms and relative to government spending.
    Thus, any initiative aimed at improving government should 
ensure that spending programs and regulatory programs receive 
parallel and balanced attention. In the early 1990's, the 
Office of Management and Budget began moving in this direction, 
linking regulatory spending with fiscal spending in its Unified 
Budget documents. This early effort did not continued past 
1993, however.
    Timely annual regulatory accounting reports are needed, and 
they would benefit from more complete standardization of the 
data that agencies should be required to provide OMB. 
Regrettably, agencies routinely have ignored such requirements.
    Another all too common problem is agency estimates that 
lack comparability in fundamentally important respects. OMB 
guidance to agencies, while generally sound, has not insisted 
upon common data formats and methods. Since agencies are not 
given discretion to utilize varying accounting practices in 
reporting their fiscal outlays, neither should they in 
reporting regulatory effects.
    Our paramount need is for sound estimates of incremental 
effects of every major new regulation, and of each's most 
prominent components relative to alternatives. Armed with such 
information, it would be far easier to avoid inefficient 
regulatory action.
    But, there also is merit in deriving aggregate measures 
which help citizens gauge the overall extent of government 
mandates relative to taxation. It makes little sense, for 
example, to advocate tax reduction if, as sometimes happens, we 
then get what amounts to an offsetting increase in regulatory 
requirements.
    If budget constraints cause the government to step back 
from spending tax revenues on some new initiative, it now is 
all too easy for the same initiative to be accomplished through 
government regulation that forces business or State-local 
government to pick up the tab.
    There are no aggregate constraints on, or even consistent 
measures of, overall regulatory spending. This committee's 
endeavor to improve regulatory accounting is most promising. It 
will require perseverance and common sense. I hope that my 
comments are helpful and constructive, and I thank you for the 
opportunity to participate in this hearing.
    [The prepared statement of Dr. Hopkins follows:]

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    Mr. Ose. Thank you, Dr. Hopkins. Our third witness on the 
second panel is Ms. Susan Dudley, who is the deputy director of 
the regulatory studies program at the Mercatus Center, George 
Mason University. Ms. Dudley, thank you for coming. We do have 
a copy of your testimony. As with the others, we would 
appreciate your summary within 5 minutes.
    Ms. Dudley. Thank you. Mr. Chairman, and members of the 
subcommittee, thank you for inviting me to speak today on 
regulatory accounting. My name is Susan Dudley. As you said, I 
am a senior research fellow and deputy director of the 
Regulatory Studies Program at the Mercatus Center at George 
Mason University. Please note that the testimony today reflects 
my own views and not an official position of either Mercatus or 
George Mason.
    Our program is dedicated to advancing knowledge of 
regulations and their social consequences. Through our public 
interest comment project, we have submitted comments to OMB on 
its 1998, 2000, and 2001 reports to Congress on the costs and 
benefits of regulation. We also have several regulatory 
accounting projects of our own underway.
    Dr. Miller had nine points to make. I would like to make 
two. The first is on the importance of the analysis and 
information requested by Congress in these annual regulatory 
account reports. The second is on the timing of the submission 
of the reports. In my written testimony I also offer specific 
ways to improve the quality and value of the reports.
    As Dr. Miller said, the Federal Government has two 
principal mechanisms by which it diverts resources from private 
sector use to meeting government-mandated goals. Those are 
taxation and regulation.
    While tax revenues and the associated spending are measured 
precisely, tracked through the Federal budget, and subject to 
congressional oversight and public scrutiny, there is no 
corresponding mechanism for keeping track of the total cost of 
regulation.
    To get a sense of the size of this hidden tax, we have had 
to resort to such proxies as the number of pages in the Federal 
Register or the size of the budgets of regulatory agencies. 
These statistics confirm that the number and scope of 
regulations has grown dramatically over the last three decades, 
but they cannot inform policymakers and the public about the 
costs or the benefits attributable to these regulations.
    The Small Business Administration reports, as Mr. Sullivan 
and Professor Hopkins have discussed, offer the most reliable 
estimates of regulatory costs available. But those periodic 
snapshots do not fulfill the need identified by Congress for an 
annual accounting of both the regulatory costs and benefits by 
agencies.
    Thus, I strongly support the regulatory accounting reports. 
These annual reports can begin to shed some light, not only on 
the magnitude and impact of this hidden tax, but also the 
benefits Americans are expected to derive from it as well. 
Submitting reports concurrently to Congress with the Federal 
budget will improve their effectiveness. Because regulations 
require off-budget expenditures to achieve government goals, 
integrating these reports with the Federal budget will provide 
valuable information about the full impact of government 
activities on American citizens.
    Rigorous analysis of regulatory costs and benefits can 
significantly improve the allocation of the Nation's limited 
resources and can improve the effectiveness of our regulatory 
efforts. Like triage practices that are common in the public 
health field, directing resources to where they can do the most 
good depends on reliable information.
    Having a better understanding of regulatory performance and 
results at the agency and program levels during the budget 
process will help appropriators allocate budgets toward 
regulatory programs that produce the greatest net benefits.
    Thus, I strongly recommend that the annual regulatory 
accounting report be submitted to Congress simultaneously with 
the Federal budget. Though I recognize it will take 
considerable effort, at least initially, to get the reports on 
track for annual submission each February, the information 
would be valuable to Congress and other policymakers as they 
allocate available resources to various government programs.
    Let me wrap up by pointing out that, for over 30 years, the 
White House has maintained in one form or another a centralized 
mechanism for executive branch oversight of regulations issued 
by Federal agencies. President Clinton's Executive Order 12866 
continued this tradition, reinforcing the philosophy that 
regulations should be based on an analysis of the cost and 
benefits of all available alternatives and that agencies should 
select the regulatory approach that maximizes net benefits to 
society consistent with the law.
    Over the last year, OMB has applied and enforced the 
principles of Executive Order 12866, and made its own analysis 
and decisions regarding agency regulations more transparent to 
the public. It should continue to hold agencies accountable for 
ensuring proposed regulations do more good than harm.
    The annual regulatory accounting report to Congress can aid 
in this effort by providing rigorous and defensible estimates 
of the costs and benefits of regulations issued over time by 
agency. It can increase transparency, accountability and 
regulatory effectiveness. Thank you.
    [The prepared statement of Ms. Dudley follows:]

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    Mr. Ose. Thank you, Ms. Dudley.
    Our fourth witness joining us today is Joan Claybrook, who 
is the president of Public Citizen. We have your testimony 
also, which we appreciate you submitting. If you could 
summarize within 5 minutes, that would be great.
    Ms. Claybrook. Thank you so much, Mr. Chairman. I 
appreciate this opportunity to testify. We have heard a lot 
about costs today. I would like to talk about three points.
    One is the issue of the regulatory accounting system and 
the report, and the use of cost-benefit analysis.
    Second is, why this report is so fundamentally flawed, 
because it is based on very inadequate information.
    And third, the use of return letters by OMB most recently.
    First of all, we have heard a lot about cost this morning, 
and it is interesting we haven't heard a lot about benefits. 
But, if you look at the--despite all of the deficiencies in the 
numbers, if you look at the reports put out by OMB in the last 
several years, you find that the range of net benefits in 1999 
was $25 billion to $1.6 trillion for regulation, and in 1998, 
it was $30 billion to $3.3 trillion.
    I would say that is one of the best deals going in the 
United States of America. I doubt that any business could boast 
those returns. We have serious objections to the regulatory 
accounting system, as does, we believe, just about every other 
public interest, consumer, environmental, public health, labor 
organization.
    Doubts regarding the overall cost-benefits were noted by 
OIRA itself in its report. I shall expand on that. First, 
however, the problem with regulatory accounting is that it 
implies that the overall numbers are reliable, which they are 
not, and I will explain that in more detail.
    Second, the number for prior years, if you include prior 
years and not just the most recent current year, those numbers 
are grossly out-of-date because the regulatory agencies do 
their analysis when they issue a rule. They don't go back every 
year and recalculate those numbers. So, if you include, let's 
say, 1981 to the year 2001, everything but the last year or two 
could be completely and grossly out-of-date. So I don't know 
that those numbers would provide you any value at all. Surely 
you wouldn't have them go back and recalculate all of those 
numbers. I am sure a business wouldn't want to have to answer 
the myriad of questions the agencies would ask in order to get 
those updated.
    Third, it is biased toward cutting regulations opposed by 
industry because the government agencies do not have the funds 
to adequately gather the benefits data. The agency I used to 
head, the National Highway Traffic Safety Administration, has a 
data collection operation, but it has got one-third of the 
funding it did when I left there in 1981 because it hasn't been 
increased, and inflation has taken it away.
    Fourth. The conclusions are highly manipulable because they 
are based on a raft of assumptions, a change in any one of 
which could affect the outcome.
    Fifth. By relying on discounting, regulatory accounting 
subverts the importance of longer-term goals and protections.
    Sixth. It ignores the critical side benefits of regulation 
that help industry, for example, by limiting the risk of 
developing new products, such as environmental or consumer 
products. Or forcing industries to update and upgrade their 
manufacturing processes as in the case of textiles, which 
essentially saved that industry so that it could compete with 
imports, and made them more competitive with imports as well, 
and improved products to help ride out market disruptions.
    For example, fuel economy in cars. Our industry did not 
want to improve the fuel economy. Standards helped to save this 
industry.
    Seventh. It does not reflect the public values and advances 
of the quality of life, the standards of living that are 
fostered by regulation. We see that difference when we go to 
foreign countries and yet we accept it as the normal way of 
living here. That is why the public so deeply appreciates 
regulation.
    Eighth. It is impossible to present meaningful conclusions 
in an accounting format, because so many of the values are 
nonquantifiable.
    Ninth. The underlying purpose to set a regulatory budget 
would impose false limits on safeguards across the Federal 
regulatory system, undermining public health and safety.
    Ten. It is a waste of public resources, I believe, in the 
long run, because of all of those facts.
    Now, as to the cost-benefit issues. Abstract cost-benefit 
studies suffer fatal flaws. They are not neutral. They are 
highly discretionary. They are subject to manipulation. They 
are biased in terms of trying to improve our quality of life.
    When you put garbage in, you get garbage out. A number of 
these numbers are inherently unreliable. The agency estimates 
of costs are badly inflated due to poor and inadequate 
information from the regulated industry, which hypes numbers 
them when they submit them, and there are some studies that I 
could submit for the record on that, because industry has 
strong financial incentives to skew the data.
    And, the agencies themselves have very little resources to 
develop the benefits data. Agencies base their estimates on 
conservative or inappropriate assumptions often because they 
are forced to do so. And, agencies only apply a static market 
analysis, failing to consider new and innovative ways that the 
industry can and, when the rule is issued often do, innovate to 
save cost.
    The benefits can't be calculated because some of them are 
incalculable. Often the numbers are hard to get, and there are 
not the resources to do it. There are also many subtle quality-
of-life issues, such as asthma sufferers being able to breathe 
because of clean air standards, that aren't taken into account.
    Third. Discounting distorts priorities and devalues human 
suffering. The entire regulatory regime at OMB requires a 7-
percent discount rate. It should be 3 percent at most, if at 
all. That makes a huge difference in dollar terms.
    Fourth. Rigid cost-benefit calculations undermine democracy 
and the legitimacy of regulation because only so-called experts 
can play the game. The public is completely left out of this 
obscure, complex, and often secret process. Companies often 
submit data and refuse to provide the basis for it.
    And my last point, Mr. Chairman, if I can just have 1 or 2 
more minutes. Is that possible?
    Mr. Ose. We are going to have to cover it in questions.
    Ms. Claybrook. Well, I would like to, in the question and 
answer period, talk about the tire monitoring return letter, 
because I do believe that it is a great example of this 
process. Thank you very much for letting me testify.
    [The prepared statement of Joan Claybrook follows:]

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    Mr. Ose. Thank you. Our final witness on the second panel 
is Professor Lisa Heinzerling. She is a professor of law at 
Georgetown University Law Center. Thank you for coming. We do 
have your prepared testimony, which we appreciate receiving. If 
you can summarize in 5 minutes, that would be great.
    Ms. Heinzerling. Thank you. OIRA has been reviewing major 
Federal regulations for over 20 years. Nevertheless, with this 
administration, OIRA has set a new direction and tone in 
undertaking this review. Simply put, the direction is away from 
regulation, particularly health and environmental regulation, 
and the tone is one of skepticism and second guessing.
    These are unfortunate and perhaps even unlawful 
developments. I will describe three ways in which OIRA has 
changed course with the new administration. All of the subjects 
I am about to describe are discussed in the 2001 OMB report 
which is the subject of this hearing.
    First, for the first time this year, OIRA used this report 
as a vehicle for allowing regulated entities and groups funded 
by regulated entities to try to rid themselves of regulations 
they do not like.
    OIRA invited interested groups to tell OIRA about rules 
that should be reformed or undone. Regulated entities and 
groups funded by regulated entities happily obliged. They 
presented OIRA with a wish list of 71 regulations they would 
like to see reformed or even erased. OIRA chose 23 of these 
rules as high priority, and it signaled its intent to revisit 
these rules and perhaps even to direct the relevant agencies to 
reconsider these rules.
    In this way, regulated industries' wishlist became a kind 
of hit list in OIRA's hands. No principled basis for 
determining priorities emerges from OIRA's decisions on 
priorities. Indeed, for all of OIRA's emphasis on peer review 
and quality analysis by administrative agencies, I have been 
unable to discover one word in OIRA's lengthy report that 
explains how it arrived at the priorities it chose.
    For example, OIRA labeled EPA's rule on arsenic in drinking 
water, which we have just heard about, high priority, even 
though the rule had been issued 2 months before, after months 
of in-depth inquiry, by three different expert panels.
    The unmistakable impression, encouraged by reports of 
contemporaneous meetings with industry groups whose least 
favorite rules magically appeared on OIRA's hit list, is that 
in this setting bad politics dominated good science.
    A second way in which OIRA's direction and tone have 
changed in this administration is that OIRA has announced that 
it tends to make aggressive use of the so-called return letter, 
under which rules may be returned to agencies when the agencies 
have not analyzed the relevant problem in the way OIRA thinks 
it should be analyzed.
    Indeed, OIRA, as we have heard this afternoon, has already 
issued 20 return letters. OIRA's assertion of authority 
essentially to veto rules it does not like threatens to 
undermine a basic premise of the law governing administrative 
agencies, which is that their expertise in the subjects over 
which they have authority entitles their decisions to a good 
deal of deference.
    At this time, OIRA appears not to have the kind of humility 
that its lack of expertise would make appropriate. In fact, 
OIRA appears to have no humility at all in this regard and 
appears more than willing to second-guess expert agency 
judgments.
    Thus, we are witnessing a spectacle in which OIRA's staff, 
made up predominantly of economists, are presuming, for 
example, to tell EPA scientists how to conduct research into 
the health effects of air pollution.
    OIRA's plan to intervene in expert agency decisionmaking is 
perhaps made most obvious by its recent announcement that it 
intends to hire physical scientists for the first time.
    Now I suppose that, if OIRA intends to second-guess the 
scientific basis for agency decisions, one might say that at 
least the office should have scientists on its staff.
    But, suppose the office decides to hire only scientists who 
take a skeptical view of, say, the hazardousness of toxic 
chemicals. In that event, an OIRA decision second-guessing an 
agency rule regulating such chemicals will be based not on good 
science, as OIRA would have it, but on the idiosyncratic 
scientific and perhaps political viewpoints of the scientists 
OIRA chooses to hire. This is a recipe for political second-
guessing disguised as good science.
    Finally, the tone of OIRA's 2001 report must be regarded as 
hostile, even if subtly so, to health and environmental 
regulation. I offer one example, in the interest of time. OIRA 
unreasonably gives credence to the possibility that, as of the 
year 2000, environmental regulation had on the whole done more 
harm than good in this country, that is, that its costs 
outweighed its benefits.
    OIRA bases this calculation on studies that are not only 
over 20 years old, but that contain assumptions that tend to 
disfavor environmental regulation. Crediting these studies and, 
therefore, suggesting that environmental laws may have done 
more harm than good in the last 30 years is a signal that OIRA 
takes the benefits of environmental protection less seriously 
than it should.
    To me, it is hard to read the 2001 report without coming 
away nervous about what OIRA's discussion presages for 
environmental protection in this country. Perhaps I am too much 
influenced by the fact that OIRA's current head, Dr. Graham, 
was quite overtly hostile to environmental protection in his 
many years as an academic. But, nothing in this report, or in 
OIRA's recent activities, convinces me that my fears are 
unwarranted. Thank you.
    [The prepared statement of Lisa Heinzerling follows:]

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    Mr. Ose. Thank you for joining us today. We will now go to 
questions for our second panel, and we will just alternate back 
and forth for 5 minutes.
    Dr. Miller, one of the things in your written statement as 
well as your verbal, is that the regulatory agencies have a 
disincentive or strong incentive to avoid OIRA's demands for 
information. As you heard me asking Dr. Graham and Mr. 
Sullivan, I am trying to figure out how to basically give them 
the tools so that we can get this information up where we have 
to make decisions.
    How would you recommend going about facilitating that 
transfer of information from the agencies to OIRA so that they 
can forward it to us?
    Dr. Miller. Well, Mr. Chairman, I think you ought to put a 
lot of pressure on the agencies and support OMB in soliciting 
the information and processing it in the right way. If they 
don't give the right guidance, you should chastise OMB for 
that. But I think you should encourage the agencies and 
encourage your colleagues on the authorizing committees and the 
appropriation committees to hold the feet to the fire of the 
heads of these agencies to make sure that they respond with 
this information.
    In the end, I think you ought to be making the decisions. I 
mean, I think on this you ought to have a regulatory 
appropriation process that parallels the spending appropriation 
process.
    I have heard the comments at the other end of the table 
that somehow that there are biases here, as if the agencies 
don't have their own biases. They do. Anyone who has reviewed 
the regulatory process knows the agencies have their own 
biases. I mean, they want to do their own thing. They don't 
want to be bothered by any outside influence. That is one 
reason they don't give up the right information very readily.
    But, I think, if you made the decisions, and you required 
them to give you the information in a consolidated way, I think 
that would solve the problem.
    Is it easy to get some of this information? No. But I don't 
think there is any more bias against regulation because you 
come up with cost data than there is bias against spending 
programs because you don't have benefit data. I can say this 
fairly authoritatively because I put together budgets. Where in 
the budget, the spending program, are all of these analyses of 
benefits? They aren't there. Agencies come in and talk about 
what they do. Members of Congress talk about them; experts come 
in and talk about them. But there is no quantifications of 
benefits in the same way that some people say, well, you have 
got to have the quantification of benefit in regulation before 
you can even talk about the issues.
    Mr. Ose. Well, let me explore that for a minute, because 
this is one of the areas that I have some difficulty with, and 
Ms. Heinzerling mentioned it. That is, how do you establish a 
template where you know that the assumptions you use in one 
agency are the same assumptions you use in the next and the 
third? How do you go about doing that?
    Dr. Miller. Well, Mr. Chairman, it is a messy process. You 
would never get it perfect. You just try and you work on it. I 
remember when I was a colleague of Dr. Hopkins how he used to 
sit down and write the instructions to the agencies about how 
they would put the data together, and what kind of assumptions 
they would use, etc.
    It is never a perfect process any more than the budget 
process is a perfect process or the spending part of the budget 
is a perfect process. But, again, right now what you do as 
Members of Congress--and I don't want to oversimplify it, but 
you know the truth of what I am about to say--you essentially 
tell the agencies to go do their thing. You give them a 
financial budget that they can spend, but in terms of the 
regulation, you give at the most just general guidance, you 
leave it up to them to carry out these broad mandates. You 
don't have that kind of special oversight of the agencies and 
what they are doing and the costs that they are imposing, that 
you have in the spending side of the budget when you decide on 
appropriations.
    And, if you, Congress, had to appropriate regulatory 
resources--that is, the costs imposed by the agencies in the 
same way it does the spending resources--I think you would get 
a lot better, a lot more efficient, effective decisionmaking on 
the regulatory side.
    Mr. Ose. I want to examine this, because this is an idea 
that has been rolled around by the staff in front of me. When 
you talk about appropriating regulatory resources, you are 
saying to any given agency, you may impose on the American 
people X, cost of X in total for the year for any regulatory 
action or all regulatory actions, period?
    Dr. Miller. Yes.
    Mr. Ose. And they have to set a priority in terms of what 
they want to use that for?
    Dr. Miller. Well, Mr. Chairman, there is a tradeoff. I 
don't think you would any more than say tell the Department of 
Defense, go spend $100 billion on the war, or defending this or 
that or whatever. You would be very specific. Do you want to 
have this plan, or this weapons system? You are going to have 
this kind of mobility, and you tell them. You don't go down to 
the detail of telling the individual decisionmaker down in the 
field exactly what to do.
    The same way on the regulatory side. You wouldn't just say 
to EPA, you have $110 billion in costs you may impose, you 
would talk about the different programs they have, and have 
them justify spending this much in this area and that much in 
another area.
    By the way, there is a technical----
    Mr. Ose. We are going to have to come back. My time has 
expired here. So Mr. Tierney for 5 minutes.
    Mr. Tierney. Interesting that you called the Department of 
Defense in for an example, because they haven't balanced their 
books for years. They are about $1.3 trillion of unaccounted-
for resources out there, so, unfortunately, Congress does often 
give them the money and tell them to go spend it.
    I am concerned, from some of my earlier comments, you might 
be able to tell, about the process here and who has been 
involved in it.
    Let me ask you, Ms. Dudley, some questions about your 
organization. Isn't the director of the Mercatus Center's 
Regulatory Studies Program Wendy Gramm?
    Ms. Dudley. Yes, she is.
    Mr. Tierney. This is the same Wendy Gramm that, when she 
was at the Commodity Futures Trading Commission back in January 
1993, championed what some would call an Enron-friendly process 
of exempting some energy derivatives from regulation, right?
    Ms. Dudley. I actually worked at the CFTC, but not at that 
time. As I understand, she was involved when it was proposed. 
But the person who came after her was the one who actually 
issued that.
    Mr. Tierney. Well, that was only a matter of timing. She 
was the one that generated it and got it going and had it all 
but out the door, right?
    Ms. Dudley. It was not done at her time at the CFTC. It was 
begun.
    Mr. Tierney. So it has nothing to do with the person that 
came behind, except it just happened to be done technically 
when that person came along.
    Ms. Dudley. No, I don't think so. I think the final rule 
was issued, not by Wendy but by her successor.
    Mr. Ose. Will the gentleman yield for a moment? We will 
stop the clock here. I need to ask the relevance of a 
regulatory decision to the issue of regulatory accounting? I am 
willing to proceed, but----
    Mr. Tierney. Well, we are going to proceed. And obviously I 
am going to ask the questions I want to ask. But my line of 
questioning here is I want to show what I think is very clear 
bias by some of the people that contributed greatly to the 
report that was done by OIRA, and it is a legitimate line of 
reasoning.
    Mr. Ose. In terms of the 23 items?
    Mr. Tierney. In terms of the 23 items, 14 of which are from 
this group, Mercatus Center, who I will put information on the 
record, I think, have a very clear and to me disturbing bias.
    Mr. Ose. All right. I am willing to proceed.
    Mr. Tierney. I would expect so.
    Did the Mercatus Center receive $50,000 in donations from 
Enron over the past 6 years?
    Ms. Dudley. I read the city paper article, and that is what 
it said. But let me--may I say something?
    Mr. Tierney. Did you also get $10,0000 from Chief Executive 
Kenneth Lay and his wife?
    Ms. Dudley. I am not the right person to ask about funding, 
because we have----
    Mr. Tierney. If you don't know, you only need to say you 
don't know.
    Ms. Dudley. Well, I read the city paper.
    Mr. Ose. Ms. Dudley, if I may. You are under oath. If you 
don't know, you just need to say, ``I don't know.''
    Ms. Dudley. Thank you. I don't know.
    Mr. Tierney. You don't know. All right. The Koch 
Foundation, which is backed by money from the oil conglomerate 
Koch Industries, has provided $16 million in grants to 
Mercatus, hasn't it?
    Ms. Dudley. I don't know.
    Mr. Tierney. And, would $16 million in grants make up over 
a third of your, Mercatus, budget?
    Ms. Dudley. I am sorry, sir. I don't know.
    Mr. Tierney. You don't know what the budget is for 
Mercatus?
    Ms. Dudley. No. If I can just explain why I don't know, it 
might help with this line of questioning. We have a separate 
group that does the fundraising, and the research team, which I 
head, is kept separate from that so that we can be objective.
    Mr. Tierney. So you don't know what the budget is?
    Ms. Dudley. No, I don't.
    Mr. Tierney. And--well, let me do you the favor. Why don't 
we ask you if you can submit those questions to somebody within 
Mercatus and have them respond to them for us on that basis, if 
you would.
    Ms. Dudley. Certainly.
    Dr. Miller. Mr. Tierney, can I just make a comment? I am a 
member of the Board of Visitors of George Mason University, of 
which Mercatus is a part. We are very proud of that 
institution. It is an excellent institution. It does cutting-
edge research in the areas of regulation and ancillary 
programs. It has first rate people attached to it. And let me 
just go back to this----
    Mr. Tierney. You are taking my time. I am not going to let 
you take up my time. I will submit for the record an article 
and ask that be put in the record. It tells us a little bit 
more about Mercatus Institute and that--and you can put all of 
the things in writing.
    Dr. Miller. I would like to contribute to the record my 
response to that very article.
    Mr. Tierney. You may.
    Mr. Ose. We will accept the article for the record. And the 
time is Mr. Tierney's.
    Ms. Heinzerling, you didn't get a chance to really flush 
out a lot of your written testimony, but in that you outlined a 
number of issues that you were going to discuss. One example--
give me some examples of how the OIRA report reveals OIRA's 
intention to intrude upon the decisionmaking prerogatives of 
the administration's agencies in such a way as to promote the 
unwarranted delay of meddling with the agencies' work, as you 
wrote in your report.
    Ms. Heinzerling. Yes. The OIRA's revitalization, I should 
say, or vitalization of the return letter suggests that OIRA 
intends to send back to the agencies any rules that it finds 
objectionable on a number of very broad grounds, including 
inconsistency with the President's policies and priorities, 
inconsistency with the cost-benefit analysis that OIRA thinks 
is appropriate, inconsistency with the statutes and executive 
orders under which the agencies operate.
    With all of those very broad authorities that OIRA has 
asserted, it is almost inconceivable that a rule that OIRA 
doesn't like couldn't be fit into one of those authorities.
    And, as we have suggested this afternoon, 20 rules have 
already been sent back, which is more than in the entire 8 
years of the previous administration. Not only that, but in 
addition to the return letters, OIRA has been issuing prompt 
letters which aren't always rules that prompt regulation, but 
that are letters that nudge the agency in one direction or 
another.
    So, for example, one of the letters I mentioned suggested 
to EPA that it should view--consider the health effects of air 
pollution and then look at the study showing the effects from 
air pollution in such a way as to facilitate economic analysis 
of national air quality standards. That suggests to me just a 
role for OIRA that is well beyond its expertise and authority.
    Mr. Ose. I am curious, but before I ask my question, Dr. 
Miller, you will be provided an opportunity to respond.
    Dr. Miller. Thank you.
    Mr. Ose. We may well do it in writing, but you will be 
given an opportunity.
    Ms. Heinzerling, I am a little bit confused. The standard 
you set for Dr. Graham's efforts on the previous 8 years, under 
the previous administration in which no rules were returned, 
there were no prompt letters and the like, I am kind of 
curious, what is your vision of OIRA's role?
    Ms. Heinzerling. I think OIRA can play an important role. 
As I understand it, this was the role that was envisioned 
originally for OIRA, an important role in coordination. It may 
be that you have two or three agencies that are attacking a 
similar problem. And it is helpful for them to know what each 
other is doing and helpful to have a centralized authority that 
is able to say, you know what, the FDA is regulating this, and 
the EPA is trying to regulate this, and let's have them talk to 
each other.
    That to me seems sensible. What I don't think is sensible 
is a small cadre of civil servants located in the White House, 
comprised mostly of economists, who are empowered to send rules 
back to agencies on the grounds that those economists don't 
agree with the analysis done by the agency, when an agency like 
EPA is not predominately charged with economic analysis. So 
coordination, yes; second guessing, no.
    Mr. Ose. One of the things that I find interesting is, you 
know, someone sitting over at OIRA--I almost said an OIRA-
anian, as Dr. Miller said--might find in your example FDA and 
EPA's analyses to be mutually exclusive and send one back. The 
standard that you're using to evaluate the return would suggest 
that action is somehow invalidated.
    Now, Dr. Miller, you wrote the Executive order that set up 
OIRA. What was the purpose for doing so?
    Dr. Miller. Well, Mr. Chairman, Boyden Gray and I share 
some co-authorship in that Executive order. But the basic 
thrust out of the box was to get the attention of the agencies 
who were running roughshod over the review process set up in 
the previous administration and to say: you must do the 
analysis, you must provide a factual analytical basis for 
making your decisions within the discretion afforded by law. If 
the law does not give you any discretion, we don't touch it. 
But if you have discretion, or within the discretion you have, 
you must do this analysis and make decisions based on the 
analysis.
    Ms. Heinzerling surprises me that she does not know, for 
example, that during the very first year of OIRA, during the 
first program, then-Vice President George Bush invited comments 
from outsiders about regulations that should be reviewed and 
addressed by OIRA. And, we had a number of press conferences to 
talk about them. And it might surprise some to find out that 
the list had commonality. The lists from academics, the lists 
from business, the lists from others, had very much----
    Mr. Ose. What do you mean, commonality?
    Dr. Miller. You had the same regulations on the lists. So 
that's one reason I'm surprised that someone takes a list and 
says, well, this organization listed 10 of the 23 or whatever, 
and therefore those 10 must have been on there just because 
this organization suggested them. We found that everyone knew 
what the problem regulations were and they listed those 
regulations.
    So the Vice President of the United States made a 
determination of which ones that we would address because he 
was head of the Task Force on Regulatory Relief under President 
Reagan. But they were regulations that many, many different 
organizations indicated needed to be reviewed. I suspect that 
the same thing is true of the list that OIRA has now.
    Mr. Ose. When the Executive order went out, did you publish 
a comment period so you got input? I'm trying to figure out the 
due process.
    Dr. Miller. No. No. The President issued the Executive 
order. There were some followup guidance to the agencies that 
were the subject of some comment. We had an enormous flood of 
information and comment on all the things that we were doing. 
We kept the big docket room in the new Executive Office 
Building. There was just a flood of information that could be 
accessed by anyone and everyone.
    Ms. Claybrook. Mr. Chairman, could I comment on that?
    Mr. Ose. I would be encroaching on his time. We'll come 
back to it. Mr. Tierney for 5 minutes.
    Mr. Tierney. You may comment on that.
    Ms. Claybrook. First of all, in April 1981, the first 
review of regulations, a report was put out called ``Actions to 
Help Detroit.'' That was the name of it. It was a list of 
environmental and safety regulations that the Reagan 
administration wanted to revoke to help Detroit because it was 
in financial trouble. Yet, neither the safety statute nor the 
clean air or other fuel economy statutes in any way suggested 
that was a criteria for revocation of regulations.
    Second, the people who did submit requests to the White 
House at that time were primarily the auto industry for that 
report. The consumer groups were never asked to even meet or 
come or have anything to do with it. So I think that what Dr. 
Miller said is not accurate.
    Third, there were hearings all during the 1980's, which I 
could reference and submit for the record if you wish, about 
how secretive OMB-OIRA was and how it was acting outside of its 
statutory authority. The only statutory authority it had until 
the 1990's was the Paperwork Act, and yet it used it to--its 
muscle, if you would, with the budget authority--to quash 
opposition to the Reagan administration's revocation of health 
and safety environmental standards.
    Mr. Ose. Mr. Tierney for 5 minutes.
    Mr. Tierney. I would like you to submit that information 
for the record if you would.
    Mr. Ose. Without objection.
    Mr. Tierney. Can you tell me, Ms. Claybrook, how it was 
that somebody would go about calculating the consequences or 
the benefit of improved safety or improved health or saved 
lives, so that when you're doing that analysis you have some 
numbers that are reliable to work with?
    Ms. Claybrook. At the National Highway Traffic 
Administration, there are two major data sources. One is the 
fatal accident reporting system, which is all fatal crashes in 
the United States; and the other is the national accident 
sampling system, which is a sampling of fatal and other types 
of crashes, nonfatal crashes. That system is grossly 
underfunded, as I mention in my testimony. It's one-third the 
size it was when I was there. That's it. That's the money that 
the agency has. It's not a small amount of money in citizen 
terms, but in agency terms it's a footnote.
    And, these data are not sufficient to get the kind of 
information that you need, plus the fact you need discretionary 
money so that, if an issue arises such as children being killed 
by air bags, the agency has the capacity to go out and do 
special studies to evaluate--or rollover with the Ford/
Firestone case. So you do need to have more resources to do 
that.
    The cost data come from industry. In the 1970's, when we 
were regulating fuel economy, the agency had $10 million and we 
knew about every transmission plant, every engine plant. We 
were able to rebut or analyze or question the cost data that 
came in. Today, the agency doesn't have any money to do that, 
so the cost data just come in and they're accepted and they're 
presumed to be accurate, which they absolutely are not.
    I would like to submit for the record some information 
about some studies that have been done that shows the gross 
overestimation by industry when a regulatory process is going 
on that later shows that it's inaccurate.
    That's one of the problems with the regulatory accounting 
system, because it just uses whatever information is in the 
record from, let's say, 1988 or 1992 that the industry 
submitted. There's no re-analysis of it now. So the numbers are 
completely wrong and completely out-of-date. Because one of the 
things I will say as well about the industries that are 
regulated is that they find very innovative and creative ways 
to meet a regulation when they have to, and they can cut costs 
like mad.
    Mr. Tierney. I recall some early hearings we had last year, 
or actually the year before, with the Administrator of the EPA 
indicating that the Clean Air Act--the industry had six times 
more of an estimate of what it was going to cost to implement 
some regulations. In the final analysis, it was one-sixth of 
what their figures were on that.
    You indicated, Ms. Claybrook, during your testimony that 
you would really want to talk a little bit about a tire 
monitoring return letter.
    Ms. Claybrook. Yes, I would, if you don't mind, Mr. 
Chairman, I would appreciate very much the opportunity to do 
so. The law that came out of the Firestone/Ford Explorer 
problem, the TREAD Act, required NHTSA to issue a tire 
monitoring system, which is an indicator of the dashboard of 
your tire inflation, because it's important for safety and fuel 
economy and there are big benefits to such a system.
    The agency did an enormous amount of work. This is an issue 
that's been around since the 1970's, when, actually, the agency 
first proposed it, and then it was eliminated by the Reagan 
administration and the ``Actions to Help Detroit'' report. And 
so, it's now required by Congress in the year 2000. The agency 
set about doing it. They did a lot of tests. They did a lot of 
research. They had 20 different meetings with all different 
industries concerned about it. The tire industry supported it; 
the auto industry didn't.
    They came out with a recommendation, after a rulemaking 
proceeding and the proposal, the final rule, to have a direct 
monitoring system so all four tires could be measured. The OMB-
OIRA just recently sent it back to the agency and is going to 
insist that, instead, the agency publish a rule that only 
monitors one tire. Now, most cars have four tires. The 
consumer, I am concerned, is going to say, ``This is stupid 
government regulation all over again, blame the National 
Highway Traffic Administration, the Department of 
Transportation,'' when in fact it comes out of the brain child 
of some economists at OIRA.
    Their basis for this is support for an indirect system, 
which, by the way, doesn't monitor if you're on a long road, 
and/or flat surface, which I suppose some of the members of 
this committee who live in Western States would be concerned 
about; it doesn't monitor when the car is not moving, so when 
you're at the gas station you can't figure out how much air to 
put into your tires. And, it only registers one tire. And, in 
fact, John Graham calls it the one-tire standard. And, it costs 
less, but on a net basis--the direct system is $15 more on a 
net basis; that is, after saving fuel efficiency and so on.
    What Graham wants is for the agency to issue a rule that 
allows the indirect system, which only works with anti-lock 
brakes, but less than two-thirds of the cars in the United 
States have anti-lock brakes. So when you add the anti-lock 
brakes in to use with the indirect system, then it is much more 
costly, and plus the fact all the studies show that anti-lock 
brakes on cars aren't that valuable. They don't really produce 
much. Graham misleadingly says that they do. It's not good 
statistical information. He misuses it. So this is an example 
to me of complete second-guessing by Graham.
    If you look at the entire record, you'll see that OMB is 
completely wrong. Public Citizen will sue the minute that rule 
comes out. I believe we will win. I believe that it will be a 
great example of the courts putting a limitation on OIRA in the 
future. That's what we will seek. I would much rather have the 
four-tire rule than a one-tire rule.
    Mr. Tierney. Thank you.
    Mr. Ose. I am curious. If I understand correctly, this is 
the document referenced with the 71 items that was reduced to 
23 testimony items? I see the witnesses shaking their heads so 
I assume--I want to make sure I'm correct on my source.
    Now, as I look through this, there is a page per 
regulation, and then in the back there's a summary of the 
people who offered comments to this particular document. There 
are a total of 33, including yours truly, and Mr. Waxman who 
offered comments. I don't quite understand. Were you aware of 
this document?
    Dr. Miller. I haven't seen the document, no, sir.
    Mr. Ose. Dr. Hopkins, were you aware of this document 
entitled ``Making Sense of Regulations: 2001 Report to Congress 
on the Cost and Benefits of Regulations and Unfunded Mandates 
on State, Local, and Tribal Entities''?
    Dr. Hopkins. Yes, I have seen that document.
    Mr. Ose. Ms. Dudley.
    Ms. Dudley. Yes, I have.
    Mr. Ose. Ms. Claybrook.
    Ms. Claybrook. Yes, we were. But I would like to have the 
opportunity to explain, if I could, why we didn't make any 
suggestions.
    Mr. Ose. Were you aware of this document?
    Ms. Heinzerling. Yes.
    Mr. Ose. This was put out for public comment last spring, 
if I'm correct. Dr. Miller, did you offer--you didn't know 
about it.
    Dr. Miller. I didn't know about it.
    Mr. Ose. Dr. Hopkins.
    Dr. Hopkins. I did not offer comments, though I knew I had 
the opportunity.
    Mr. Ose. Ms. Dudley.
    Ms. Dudley. Yes, Mercatus did.
    Mr. Ose. You did send it in, obviously. Good point.
    Ms. Claybrook.
    Ms. Claybrook. We submitted comments in May on the basis 
for the analysis. We did not submit suggestions for regulations 
to be revoked. That's what that list of 21 or 23 or 71 is.
    Mr. Ose. Ms. Heinzerling, did you offer any comments on 
this?
    Ms. Heinzerling. I was a peer reviewer for that document.
    Mr. Ose. So you were aware of it.
    Ms. Heinzerling. Yes.
    Mr. Ose. I just can't--I'm trying to figure out why--it 
would seem to me if you're affected by these rules, you would 
offer a comment. Obviously as a peer reviewer, you can't. So 
you kind of have to excuse yourself, it would seem to me, as a 
peer reviewer of the document itself. Is that accurate?
    Ms. Heinzerling. May I comment on your question?
    Mr. Ose. Certainly.
    Ms. Heinzerling. I am not sure about whether there were 
business interests that were encouraged more heartily than 
other interests to comment on that report. I don't know. There 
were news accounts to that effect. I can't--I can't comment on 
whether those are reliable, but there were news accounts to 
that effect.
    The second point, OIRA has a very long history of being, 
especially in Republican administrations, with due respect, it 
has a history of being anti-regulatory. One can imagine when 
OIRA asks are there any regulations out there that you'd like 
reformed--for one thing, the public interest community often is 
in favor of regulations, so they don't want them to be erased.
    The second point is I can imagine the public interest 
community being skeptical about the effects of its comments on 
an agency that historically has not treated the public interest 
community with a great deal of solicitude.
    Mr. Ose. If I might just interject one thing, in September 
1997, again in 1999, and again in 2000, there were requests put 
out for recommendations to reform or eliminate certain 
regulations. Now, I am new to this job but I don't remember 
those being--I mean, your words, Republican administrations. So 
I'm a little bit confused. It would seem to me that OIRA under 
the Executive order, that was written by Dr. Miller and Boyden 
Gray, if I recall.
    Dr. Miller. Right. I did the economics, he did the law. It 
was a division of labor.
    Mr. Ose. It would seem to me that the regulatory accounting 
process requires a periodic review of things for 
recommendations of reform or elimination. Is my logic wrong?
    Ms. Claybrook. Could I answer that question? First of all, 
Vice President Gore had, before this law was passed, an ongoing 
program, agency by agency, asking whether there are any rules 
that are in need of being eliminated or updated or any other--
--
    Mr. Ose. Did he find any?
    Ms. Claybrook. They did. There were pictures of him with 
all these rules that they named. Most of the time what 
happened, was that it was a bottom-up process; that is, it went 
agency by agency. So organizations generally tend to be focused 
on particular areas of expertise. I have expertise in auto 
safety; David Flack in our office has expertise in OSHA. So, 
for example, those are the agencies that we tend to connect 
with. So when the agency asks, are there any rules that you 
would suggest go one direction or another, that's when we 
respond. When OIRA comes out with something much more generic, 
it tends not to filter down.
    Mr. Ose. My time has expired. I'll come back. Mr. Tierney 
for 5 minutes.
    Is it your position that OIRA is not empowered to suggest 
reforms or regulations for reform or elimination?
    Ms. Claybrook. I think that a government agency has very 
broad authority including OIRA. The question is can it impose 
it. That's a very critical question here, Mr. Chairman. For 
example, can OIRA command that a regulatory agency change a 
rule because the economists at OIRA want them to? I don't think 
so. I think that the statutes that are written that I know of--
if I could just finish that, Mr. Chairman--the statutes are 
written delegating authority to the Secretary of 
Transportation, to the Secretary of HHS. They don't delegate it 
to OIRA. OIRA's authority is very specific. It's the Paperwork 
Act, it's overseeing SBRFA, it's your Accounting Act. They're 
very, very specific but they're not ones that give them, in my 
view, the authority to command an agency to eliminate or change 
a rule.
    Mr. Ose. Does the Executive order that you and Mr. Gray 
wrote provide OIRA with the authority needed, under Ms. 
Claybrook's scenario, to send those back?
    Dr. Miller. No. We can send them back and ask the agency to 
reevaluate them, but technically Ms. Claybrook is right in the 
sense that the agency head has the discretion to make the 
determination. But the agency head works for the President of 
the United States.
    Mr. Ose. So whether it's Vice President Gore's review or 
Vice President Cheney's review or Vice President whoever's 
review or the President's review--well, although in the 
President it might be a different case--the agency heads have 
the ability to put these things in the Federal Register?
    Dr. Miller. They can put them in the Federal Register and 
they can make the final determination subject to the ordinary 
kinds of questions that someone might raise, and the courts 
might say that you didn't have a sufficient evidentiary basis 
and all of that, but they do have the authority to do that. But 
they work for the President of the United States, and the 
President can remove them at will.
    Mr. Ose. We're going to recognize Mr. Tierney for 7\1/2\ 
minutes.
    Mr. Tierney. I don't think anybody has a problem with 
people asking, you know, for people to comment on regulations. 
I think that would be beyond the pale if we had a problem with 
that. The issue, I think, arises when we have secret meetings 
with select groups of industries that are regulated and have a 
serious interest in it, and nobody else is invited. They come 
in and all of a sudden, presto, we got a hit list out there. 
Then Dr. Graham is reported to be involved in it, and then all 
of a sudden the committee staff is still involved in it only.
    But the long and the short of it is the committee staff 
comes up with a list, Graham comes up with a list, and 
surprisingly enough, there's a lot of overlap despite a lot of 
denial. That's the problem.
    I think that together, with 14 out of 23 of them coming 
from an organization that is heavily funded by a lot of people 
who are regulated, it just happens to be they've got questions 
with the things that are regulating them. So I guess I look at 
this thing as OMB has the authority to send a letter--return 
letter. And, I suppose that you can tell me that the agency has 
the ability to just kick it back and say, no, we like it the 
way it was the first time.
    What's the likelihood of that happening when you have got 
OMB sitting at the right hand of the President, obviously you 
know, very close, and under the direction there, sending a 
return letter and having the agency head, who is a subordinate 
of the President, actually standing up to that and saying that 
oh, no, we're going to plow forward because we think we had it 
right the first time.
    Isn't it more likely, I would ask anybody that wants to 
answer, isn't it more likely that you will get the experts at 
the agency to kowtow to the inexpertise or the lack of 
expertise of the economists at OIRA?
    Ms. Claybrook. That's exactly what happened with the tire 
monitoring rule. In fact, they're going to issue the authority 
to allow an indirect system. So--the one-tire standard. So 
that's exactly what does happen. We just had, of course, an 
agency head, former Member of Congress, fired for disagreeing 
with the President's budget. I should think that if they 
disagree with the regulation that's the end of that.
    Mr. Tierney. My additional fear is they're going to now 
hire scientists, as I think somebody was mentioning, that they 
are going to hire scientists from the same kind of group that 
they went to get advice on these regulations, people with a 
stacked deck and a real preconceived idea of where they want to 
go. It just spells disaster as far as I can see. It looks like 
there's a real concern here that this is an agency that's being 
used for a purpose other than what was originally crafted.
    Ms. Claybrook. Mr. Tierney, could I make one more comment? 
And that is, the Congress considered for 20-odd years, since 
1981, a regulatory reform bill which has never passed. It's a 
bill that Dr. Graham supported vigorously, and it's never been 
enacted into law. One of the things that it had in it that we 
objected vigorously to was peer review of agency regulations, 
which take a lot of additional time; in addition, there are no 
conflict-of-interest standards so that industry people who have 
a self-interest can sit on the peer review panel.
    Dr. Graham has announced that he is going to reinstitute 
peer review and that he is going to have it be that if an 
agency does peer review, then their rules are more likely to be 
accepted. If they don't get peer review, they're going to get 
heavier scrutiny. What you're having is, if there's any 
extension of authority beyond the scope of their statutory 
basis, to me it is in this office of OIRA and its head, Dr. 
Graham. So he is assuming the authority to do this kind of 
thing. It's in this report. It's one of the elements that he 
spells out in the back of the report, a number of areas that 
they're going to be issuing new guidelines.
    For example, they're not reissuing the Executive order. A 
big stink was made about the Executive order when Dr. Graham 
was up for confirmation. Senator Lieberman made a huge issue of 
it. So Dr. Graham is not going to rewrite that because it will 
attract a lot of attention. He's going to issue guidelines, 
which is one of the things he mentioned today. These guidelines 
are essentially going to be the equivalent of an Executive 
order, but they're going to be issued by Dr. Graham.
    Mr. Tierney. Sometimes people confuse cute for smart. But 
the problem with this whole thing is, you know, there just 
seems to be no real balance to the system. And, I have to ask 
Ms. Heinzerling, if you were one of the peer people that looked 
at that report, what would you do to set this issue straight? 
How would you get OIRA to function in a way what we could trust 
that it wasn't biased and that it didn't have preconceived 
notions, that it actually was doing its legislative job?
    Ms. Heinzerling. That's a really hard question. I guess I 
would say, first of all, that OIRA operates, as I say, with 
this history of interference with agency rulemaking and the 
history, at least through most of its experience, of an anti-
regulatory bias. It's just hard to take out of an agency that 
exists. It's hard to take out of that office. Many of the staff 
people there have been there for years. I've heard EPA staffers 
tell me that they won't even propose some regulations because 
they can't get it by the desk officer in charge. Which goes to 
your question earlier about the influence of these 
interventions on agency decisionmaking.
    So I almost wonder whether a fresh start is necessary in 
order to sort of root out this kind of deregulatory bias or 
anti-regulatory bias. I think OIRA serves some important 
functions. I think paperwork reduction is important. As I say, 
I think the coordination among agencies is important.
    What has developed now, at least as I see it, is an office 
that has a strong bias toward economic analysis of regulations, 
even in cases where those regulations, as I've said, are not 
predominantly economic. So you get a misfit between the 
agencies saying, look, we're going to increase visibility in 
the Grand Canyon, we're going to save lives, we're going to, 
you know, reduce asthma in kids, and the office within the 
White House that's charged with reviewing those has by its 
history and by the disciplinary expertise of the personnel--
doesn't listen to those kinds of qualitative kinds of benefit 
statements.
    So I think it's hard to--I think it's hard to reform within 
OIRA if OIRA is to say--to imagine an OIRA that performed this 
kind of cost/benefit analysis or reviewed it, that didn't 
interfere with what agencies do.
    Mr. Tierney. Thank you.
    Mr. Ose. The gentleman yields back.
    Dr. Hopkins, what is your view of the utility of agency-by-
agency data on regulatory accounting?
    Dr. Hopkins. I think it can serve a very useful purpose 
since it hones in on the units that have separate statutory 
authorizations given to them. So, if we have the analysis by 
agency, we'll be able to track it back to the laws that 
correspond to those agencies.
    But, if I may, Mr. Chairman, I could add a comment on the 
conversation that has just been taking place, with your 
permission?
    Mr. Ose. Please.
    Dr. Hopkins. I find it puzzling to hear the 
characterization of OIRA as involving a small cadre of 
economists who are ``intruding upon agency prerogatives'' in an 
anti-regulatory way, because I think one can go back to every 
President since President Nixon--of both parties--each of these 
Presidents has wanted to have a small cadre of economists in 
the Executive Office of the President who were ``intruding upon 
agency prerogatives'' when it comes to regulation.
    I joined the administration of President Ford in 1975, 
precisely for the purpose of being a part of a cadre of 
economists ``intruding upon agency prerogatives.'' That mission 
continued under every President, without exception, since that 
time. So this is not some new nefarious scheme of OIRA since 
1981 or under Dr. Graham, it's a consistent effort that every 
President has felt needed as a counterbalance to the agency 
regulators.
    Mr. Ose. Well you're suggesting that, if the standard for 
judging OIRA is the empirical data of number of return letters 
or number of refusals to allow to proceed, if that's the 
standard by which OIRA is judged, are you suggesting for 8 
years they were just absent?
    Dr. Hopkins. I'm not sure that's an adequate standard by 
which to judge their performance. It seems to me the more 
important contribution that entity can make is to be an 
advocate for balanced economic analysis of regulatory issues. 
It has taken different forms under different administrations. 
But, the same cadre of economists has persevered through each 
administration, sometimes working more visibly, sometimes less 
visibly, to try to bring that kind of analytical balance to 
regulatory decisionmaking.
    Mr. Ose. I don't like the word ``cadre.''
    Ms. Dudley, do you share that opinion?
    Ms. Dudley. Yes, I'd like to make a similar point. In terms 
of the last administration and this one, I think perhaps what 
we're seeing now is a more transparent role for OIRA. I think 
that's a benefit, that with the return letters and with OIRA's 
actions, it's very visible what OIRA is doing. I think the same 
can be said for your requirement for an annual accounting of 
costs and benefits. It makes it transparent so that Ms. 
Claybrook and I can discuss what discount rate is appropriate.
    So a regulation-by-regulation, agency-by-agency data base 
with consistent assumptions allows people to adjust the 
assumptions and do different analyses with it. But, you can't 
do that if it's not a transparent data base of regulations, 
which I think is what you are asking OMB to do.
    Mr. Ose. Dr. Miller, any thoughts on that?
    Dr. Miller. I agree with that. Let me just say I thought 
those were two excellent statements. Let me add, though, that 
the notion that these green-eyeshade economists over there have 
no compassion or concerns about the benefits generated by 
regulations is not true, anymore than you could characterize 
the budget people at OMB as being completely unsympathetic to 
the notion that certain kinds of spending programs by the 
Federal Government do generate benefits.
    And, a methodological point I wanted to raise in response 
to a comment made earlier: I don't take issue with the 
allegation that the sum total of benefits of regulation exceeds 
the sum total of costs. Goodness, I hope so. Just as the sum 
total of benefits generated by all the spending programs of the 
Federal Government should exceed those costs. I sure hope so.
    The question is at the margin, what do you do? Should some 
expand, some contract? Some programs make sense, some don't; 
some new programs that are not funded maybe make sense. It's a 
process where I think you elected representatives would be in 
the best position to make those kind of determinations, and you 
should make those determinations only, as Ms. Dudley was 
pointing out, with more transparency, more information. I would 
urge to you consider establishing a regulatory appropriations 
or budgeting process that's analagous to the appropriations 
process on the spending side.
    Ms. Claybrook. Could I just comment on one thing?
    Mr. Ose. With the consent of the ranking member, my time 
can be extended. There you go.
    Ms. Claybrook. Thank you, Mr. Chairman. I've never seen an 
analysis of the spending part of our budget in terms of costs 
and benefits. And, in fact, you know, industry loves Uncle 
Sugar, they don't like Uncle Sam. So they lobby like mad to 
have limits on Uncle Sam. But, for Uncle Sugar, it's open 
season. There are just huge amounts of money that are expended 
in the budget that have no analysis whatsoever in terms of 
their costs and their benefits.
    So as you look at the regulatory agencies, you know, I urge 
you to, No. 1, consider that. Second, the agencies that--at 
least the ones that I have overseen and worked with and lobbied 
to get something done out of it, the amount of data that they 
produce before they issue a regulation are huge. Now, whether 
or not it's in the same format, agency by agency, to facilitate 
OMB putting it into one big package is another issue. But in 
terms of the issues that are raised, these are usually problems 
that have existed for 15, 20, 30 years. These are issues about 
which Congress has had hearings. These are often issues about 
which Congress has commanded the agency to take action. There 
are lengthy regulatory proceedings. I don't know any rule 
that's issued in less than 2 years, and usually it's 4 to 5.
    So this huge amount of data that is produced, in fact, by 
these regulatory agencies--and I think that for OMB to say 
that, or John Graham to say, that there's not enough data, I 
would ask him and I urge you to ask him which agencies aren't 
producing those data, because I'll tell you we don't see it. We 
sue these agencies from time to time. It's really hard. We 
don't sue them most of the time because they do produce a lot 
of support for their decisions.
    Mr. Ose. Let me answer your first question, just something 
I learned here recently, but in terms of measuring the impact 
in programs funded by the Federal Government, there is 
something called the Government Performance and Results Act of 
1993 which does require agencies to measure and report on 
program results achieved for dollars expended. So there is some 
accountability, that I will admit readily that the agency 
progress in making those reports is at best mixed to date. So 
it's much the same question.
    Ms. Claybrook. Does it cover all government agencies?
    Mr. Ose. It's much the same question on the reverse of what 
we're asking in the regulatory world, and that is how do you 
evaluate how to spend scarce resources? The imposition of $830 
billion odd in annual cost is a tax, as sure as you and I are 
sitting here. To the extent that Congress, in effect, ought to 
be accountable for that and make the agencies accountable for 
that, that's the thrust of our efforts. Whether it's the 
airport in Mr. Tierney's district, or the freeway in mine, or 
the schools in both of ours, to the extent that we have some 
expenditure occurring by virtue of Federal mandate, I want to 
know whether it's having an impact, whether it's positive or 
negative.
    I think everybody in Congress would appreciate that 
information. That's why we ask where is our report, as you 
heard me earlier. We could use it, and we will. And, we may 
well end up with different judgments accordingly, but where is 
our regulatory accounting report that's due by statute? That's 
what we're after.
    Ms. Claybrook. Mr. Chairman, if I could just ask you a 
question. If the report----
    Mr. Ose. Unfortunately, Ms. Claybrook, I ask questions.
    Ms. Claybrook. If I could make a comment then. If this 
report----
    Mr. Ose. Ms. Claybrook, we're going to bring this hearing 
to a halt. I do appreciate your attending. Ms. Heinzerling, 
thank you. Ms. Dudley, thank you. Dr. Hopkins, Dr. Miller, I do 
appreciate it. I appreciate your patience, Congressman Tierney.
    We will submit our closing statement for the record.
    With that, we are adjourned.
    [Whereupon, at 4:36 p.m., the subcommittee was adjourned.]
    [The prepared statements of Hon. Doug Ose, Hon. John F. 
Tierney, and additional information submitted for the hearing 
record follows:]

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