[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
REGULATORY REFORM: ARE REGULATIONS HINDERING OUR COMPETITIVENESS?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON REGULATORY AFFAIRS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JULY 27, 2005
__________
Serial No. 109-108
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
______
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut HENRY A. WAXMAN, California
DAN BURTON, Indiana TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee DIANE E. WATSON, California
CANDICE S. MILLER, Michigan STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California LINDA T. SANCHEZ, California
GINNY BROWN-WAITE, Florida C.A. DUTCH RUPPERSBERGER, Maryland
JON C. PORTER, Nevada BRIAN HIGGINS, New York
KENNY MARCHANT, Texas ELEANOR HOLMES NORTON, District of
LYNN A. WESTMORELAND, Georgia Columbia
PATRICK T. McHENRY, North Carolina ------
CHARLES W. DENT, Pennsylvania BERNARD SANDERS, Vermont
VIRGINIA FOXX, North Carolina (Independent)
------ ------
Melissa Wojciak, Staff Director
David Marin, Deputy Staff Director/Communications Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Regulatory Affairs
CANDICE S. MILLER, Michigan, Chairman
GINNY BROWN-WAITE, Florida STEPHEN F. LYNCH, Massachusetts
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
MICHAEL R. TURNER, Ohio CHRIS VAN HOLLEN, Maryland
LYNN A. WESTMORELAND, Georgia
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
Ed Schrock, Staff Director
Joseph Santiago, Professional Staff Member
Alex Cooper, Clerk
Krista Boyd, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on July 27, 2005.................................... 1
Statement of:
Copeland, Curtis W., Specialist in American National
Government, Congressional Research Service; J. Christopher
Mihm, Managing Director, Strategic Issues, Government
Accountability Office; Marlo Lewis, Jr., senior fellow in
environmental policy, Competitive Enterprise Institute; and
Erik Olson, senior attorney, Natural Resources Defense
Council.................................................... 33
Copeland, Curtis W....................................... 33
Lewis, Marlo, Jr......................................... 82
Mihm, J. Christopher..................................... 51
Olson, Erik.............................................. 101
Hayworth, Hon. J.D., a Representative in Congress from the
State of Arizona; Hon. Sue W. Kelly, a Representative in
Congress from the State of New York; and Hon. Robert W.
Ney, a Representative in Congress from the State of Ohio... 8
Hayworth, Hon. J.D....................................... 8
Kelly, Hon. Sue W........................................ 15
Ney, Hon. Robert W....................................... 20
Letters, statements, etc., submitted for the record by:
Copeland, Curtis W., Specialist in American National
Government, Congressional Research Service, prepared
statement of............................................... 36
Hayworth, Hon. J.D., a Representative in Congress from the
State of Arizona, prepared statement of.................... 11
Kelly, Hon. Sue W., a Representative in Congress from the
State of New York, prepared statement of................... 18
Lewis, Marlo, Jr., senior fellow in environmental policy,
Competitive Enterprise Institute, prepared statement of.... 84
Mihm, J. Christopher, Managing Director, Strategic Issues,
Government Accountability Office, prepared statement of.... 53
Miller, Hon. Candice S., a Representative in Congress from
the State of Michigan, prepared statement of............... 3
Ney, Hon. Robert W., a Representative in Congress from the
State of Ohio, prepared statement of....................... 24
Olson, Erik, senior attorney, Natural Resources Defense
Council, prepared statement of............................. 103
Westmoreland, Hon. Lynn A., a Representative in Congress from
the State of Georgia, prepared statement of................ 7
REGULATORY REFORM: ARE REGULATIONS HINDERING OUR COMPETITIVENESS?
----------
WEDNESDAY, JULY 27, 2005
House of Representatives,
Subcommittee on Regulatory Affairs,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:30 a.m., in
room 2247, Rayburn House Office Building, Hon. Candice Miller
(chairman of the subcommittee) presiding.
Present: Representatives Miller, Westmoreland, and Lynch.
Staff present: Ed Shrock, staff director; Rosario Palmieri,
deputy staff director; Dena Kozanas, counsel; Joseph Santiago
and Erik Glavich, professional staff members; Alex Cooper,
clerk; Krista Boyd, minority counsel; and Jean Gosa, minority
clerk.
Ms. Miller. The subcommittee will come to order.
I apologize for being late.
I think America is at a crossroads. We can continue down a
path that weakens our international competitiveness, or we can
recognize our responsibility for reducing the cost of doing
business in the United States. America should be the very best
place in the world to manufacture goods, to create jobs. We are
here today to discuss some options that the Congress could
consider for reforming our regulatory process. This hearing
will provide us with an opportunity to evaluate existing
initiatives, consider new proposals, and develop a regulatory
reform agenda for the 109th Congress as well.
I certainly want to say how glad I am to have my colleagues
Representatives Hayworth, Kelly, and Ney with us today. These
are three Members of Congress who really do understand this
issue, and they know how critical it is to improving our
Nation. I want to thank you all for being here. I am also
pleased to mention that my subcommittee colleague
Representative Ginny Brown-Waite has proposed her own piece of
legislation to address the issue of regulatory burden on the
American public.
Regulation is one of the tools used by the Government to
implement public policy. It is necessary because laws may lack
the details required to address the various circumstances that
they were designed to correct. Every year, over 60 Federal
departments, agencies, and commissions dedicate actually over
240,000 full time employees to write and enforce regulations
that range from allowing fireworks displays over rivers to
registering food facilities to protect them from bioterrorism.
Combined, these agencies annually issue thousands of new rules
and their costs for regulatory operations during fiscal year
2004 actually exceeded $39 billion, just to put it in
perspective.
According to one estimate, the total regulatory burden on
the American public exceeded $850 billion per year, which is
almost the equivalent of what Americans pay in income taxes.
Government regulations cost American small businesses 60
percent more per employee than the cost incurred by larger
businesses. And, for every dollar devoted by the Federal
Government to regulatory activity, American businesses spent
$45 just to comply with those regulations.
At $8,000 per employee, domestic manufacturers assume
almost twice the average cost for all U.S. industries.
Workplace regulations alone cost manufacturers $2.2 million per
firm per year, which is roughly about $1,700 per employee. Our
global competitors of course do not have this large of a
burden, so it is no wonder that our Nation continues to bleed
jobs, unfortunately, to competing nations.
During the past 50 to 60 years, Congress and various
Presidents have developed procedures to guide the Federal
rulemaking process with the goal of reducing the amount of
regulatory burden imposed on the American public and
businesses. Those in favor of regulatory reform argue that
Federal regulations are too costly, time consuming, complex,
duplicative, burdensome, and intrusive for businesses and other
regulated entities. However, there are those who would argue
that regulatory reform efforts focus too much on the costs of
regulations and do not focus enough on the benefits derived
from them.
Make no mistake, I think everybody on this panel, everybody
in this room is a person that wants to protect the environment,
the health, and safety of the workers. I am a defender of
regulations that watch over consumers and safeguard our natural
resources. I spent actually almost three decades in public
office as an advocate of our environment. However, I think that
excessive and unnecessary regulatory burdens can cause
substantial harm by limiting economic growth, by slowing job
growth, as well as by hindering America's ability to compete in
the global marketplace and the global economy. And as I have
said many times, I think our standard needs to be what is
reasonable.
So I am eager to have a dialog about how best to improve
the Federal regulatory process for the benefit of all
Americans. In particular, I am hopeful that this hearing this
morning will present us with suggestions that will help
Congress address the flaws of our regulatory system. I am
extremely troubled by the number of regulations that could have
an impact on our ability to remain competitive with our key
trading partners. Streamlining the regulatory process to limit
unnecessary regulatory burdens on the American public is a very
powerful force for reinvigorating our economy, small
businesses, and our competitiveness on the international stage.
So I do look forward to the testimony of all of our
witnesses here today. I would like to recognize now Mr. Lynch
for his opening statement.
[The prepared statement of Hon. Candice S. Miller follows:]
[GRAPHIC] [TIFF OMITTED] T5529.001
[GRAPHIC] [TIFF OMITTED] T5529.002
Mr. Lynch. Thank you, Madam Chair. First of all, I want to
welcome my colleagues who are here with us this morning to
offer their proposals to reform the regulatory process;
Chairwoman Kelly, who I serve with in the Financial Services
Committee, along with Chairman Ney, and my pal Representative
J.D. Hayworth, and we are also going to hear from a very
energetic member of this subcommittee, Ms. Brown-Waite, with
her proposal as well. We do appreciate your taking the time to
come here today and also to spend your energies on a good
cause. I think we can all agree there is a general consensus
that we can do a lot more to improve the regulatory process; no
question about it.
While I embrace the notion that we can do much more to
improve the process, I believe a lot can also be said for using
some of the tools that we have right now at our disposal to
cause agencies to follow the spirit and the letter of the laws
that we pass, to act consistently with legislative intent, and
also to follow the constitutional protocols that we dictate in
that legislation. We have seen departures from that on many
occasions.
I believe that Congress already has the constitutional
authority to oversee these agencies and to guide them. For
example, last month it was revealed that the EPA plans to issue
a draft rule, which would allow pesticides to be tested on
humans. Since 2001 when the Administration reversed EPA's
moratorium on using human pesticide experiments, EPA's position
on this issue has been the subject of some controversy. Now,
EPA plans to issue a proposed rule that fails to include
necessary safeguards. For example, EPA's rule would not fully
protect children and other vulnerable populations.
However, the Energy and Commerce Committee, with its full
schedule, has not been able to have a hearing on EPA's proposed
rule allowing the testing of pesticides on humans. On the other
hand, we did find time in the Congress in previous sessions to,
for example, spend 104 hours of congressional hearing time on
examining whether or not President Clinton had abused his
Christmas card privileges. So sometimes our oversight time is
not well-spent.
Congress, and this committee in particular, will have an
opportunity to investigate important examples of regulatory
abuse and to help guide those regulatory agencies. We should
also look at the pattern in which regulated industries have had
an inappropriate influence on the EPA and other agencies'
rulemaking activities. We are seeing, for example, significant
delays in agency rules that are required by statute. A major
cause of this delay appears to be OMB's failure to review
agency rules in a timely manner.
To the administration's credit, the Bush administration has
favored a rule implementing the Clean Air Act standards for
fine particulate matter. I think most Members of Congress,
Democrat and Republican, have said that this rule is favorable
and has an important and positive health benefit. EPA sent that
proposal to OMB formally in October 2004, but OMB still has not
released the rule. This is an example where even when we have
consensus among Democrats and Republicans, we have inactivity
by OMB.
Congress has a Constitutional responsibility to conduct
oversight of Federal agencies. In addition to a standing
committee with jurisdiction on certain laws, the Committee on
Government Reform has a responsibility of overseeing whether
agency laws, programs, and rules are being implemented and
carried out according to legislative intent. Hopefully, now
this newly constituted subcommittee under the guidance of
Chairwoman Miller can make us all more effective toward that
end.
Again, my thanks to my colleagues and all the witnesses
testifying here today. We welcome you and look forward to your
testimony. Thank you, Madam Chair.
Ms. Miller. Thank you very much. Are there any other
opening statements?
Mr. Westmoreland. I would like to make one, thank you.
Ms. Miller. I recognize Mr. Westmoreland.
Mr. Westmoreland. Thank you, Madam Chairman. I am grateful
that we are having this hearing and I appreciate my colleagues
coming to testify.
One of the reasons that first motivated me to get involved
in politics, being in the building business, was all the
government regulations that myself and my industry face. Many
businesses today spend so much time and money complying with
regulations that they are unable to focus on their core
business. And we not only have to deal with impact on
businesses themselves, but also on the oversight necessary to
enforce these regulations. Many times we were put under
regulations to file papers that were just put in storerooms and
never looked at, only to later be used as evidence against us
for not complying or complying wrongly with the regulations
that we were under.
One study placed the number of full time Federal employees
necessary to write and enforce Federal regulations at 240,000.
This is just unthinkable that the number would be this high,
especially when so few of the individuals who write the
regulations, as honorable as their intentions surely are, have
no real world experience in the areas that they regulate.
I look forward to us evaluating various proposals before
the committee today, and I am especially interested in
legislation that gets a real cost-benefit analysis done for the
impact of regulations on businesses across our Nation. Again,
thank you, Madam Chairman, for having the hearing.
[The prepared statement of Hon. Lynn A. Westmoreland
follows:]
[GRAPHIC] [TIFF OMITTED] T5529.003
Ms. Miller. Thank you.
To our witnesses, the Government Reform Committee insists
that we swear in all of our witnesses, even Members of
Congress. So if you will all rise, please, I will swear you in.
[Witnesses sworn.]
Ms. Miller. Our first witness that the subcommittee is
going to hear from is my distinguished colleague,
Representative J.D. Hayworth from the Fifth Congressional
District of Arizona. Congressman Hayworth, in his fifth term,
has become a leading advocate certainly on regulatory reform.
He has sponsored the Congressional Responsibility Act, which
improves accountability in the legislative process. J.D. is
also a member of the House Ways and Means Committee and also
serves on the House Resources Committee. Congressman Hayworth,
we welcome you to our committee hearing this morning and look
forward to your testimony, sir.
STATEMENTS OF HON. J.D. HAYWORTH, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ARIZONA; HON. SUE W. KELLY, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW YORK; AND HON. ROBERT W. NEY,
A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO
STATEMENT OF HON. J.D. HAYWORTH
Mr. Hayworth. Madam Chair, thank you very much. I would ask
unanimous consent that my complete statement be made part of
the record.
Ms. Miller. Without objection.
Mr. Hayworth. At the conclusion of the testimony, Madam
Chair, unfortunately, given the vagaries of the schedule and
the challenges of time, I will have to depart. But I do look
forward to reviewing all that transpires in today's hearing.
Madam Chair, members of the subcommittee, and distinguished
guests, thank you for affording me this opportunity to discuss
one of the most fundamental reforms that this Congress can
undertake: ending the unconstitutional delegation of
legislative powers.
As was mentioned in opening statements on both sides of the
aisle, reducing regulatory red tape will increase the ability
of American businesses to compete in the world market.
Unfortunately, government regulation and bureaucracy are
significant impediments to the success of every business.
For too long Congress has ceded its lawmaking authority to
unaccountable, unelected employees in the executive branch. Not
only does this contradict the Constitution's ``separation of
powers'' by making the executive branch the maker and enforcer
of law, but it violates Article 1, Section 1 of our
Constitution which states quite clearly: ``All legislative
powers herein granted shall be vested in a Congress of the
United States.'' My testimony focuses on the
unconstitutionality of delegation and why it makes for bad
government.
My testimony focuses on H.R. 931, the Congressional
Responsibility Act. As my colleagues would note, and as that
wonderful baseball star Yogi Berra would say, ``it is deja vu
all over again.'' We have been steadfast in our insistence on
trying to reign in this unconstitutional and unintended
delegation.
I believe our Founders understood the negative implications
of delegation of power. For this reason, our Founders defined
the various roles of the three branches of government and
emphasized their separations of power.
For the first 150 years of our existence as a republic, the
Supreme Court held that the transfer of legislative powers to
another branch of government was unconstitutional. But in the
late 1930's, the Court reversed itself and upheld laws by which
Congress merely instructed agencies to make decisions that
served ``the public interest.'' Since then, we in Congress have
ceded basic legislative responsibility to executive agencies
that craft and enforce regulations with the full force of law.
The Supreme Court has not invalidated a single delegation
of power since 1935. Lawmaking was never intended to be in the
hands of executive branch employees. As the Constitution
enumerates, the power to make laws was solely vested in
Congress because Congress is directly accountable to the
people.
Delegation gives life to bad laws because it allows
legislators to craft ambiguous legislation, legislation for
which legislators can take credit without taking responsibility
for the legal consequences or their costs. Congress can reap
the benefits of delegation and its excesses by helping
constituents through the complexities of Federal regulations at
the same time those of us in public office can blame
bureaucrats for misinterpreting our intentions in legislation.
So for purposes of full disclosure, regardless of political
party or philosophy, the legislator basically can play both
sides against each other and win. But the real loser in all of
this is the electorate, the American people.
H.R. 931 will rightly return legislative powers to the
Congress by requiring Congress to vote on all rules and
regulations, as defined in Section 551, Subchapter 4 of Title 5
of the United States Code, except those regulations of
particular applicability, any interpretive rule, general
statement of policy, or any regulation of agency organization,
personnel, procedure, or practice. My legislation will apply
only to new regulations and will not be retroactive.
Detractors say there is no way Congress has the time to
review all rules and regulations that are promulgated by the
executive branch. But regardless of the time it takes, I would
maintain it is the duty of Congress to review rules and
regulations, as enumerated in Article 1, Section 1 of the
Constitution.
Moreover, I have had the honor to serve as Speaker Pro Temp
of the House of Representatives and, on more than one occasion,
I have presided over a largely ceremonial debate in which we
took several hours to name Federal installations after
noteworthy Americans. My colleagues, I ask you, if we can name
courthouses, airports, military bases, and other places, do we
not have enough time to vote on rules and regulations that
profoundly affect the citizens of this country?
With these time constraints in mind, however, the
Congressional Responsibility Act provides an expedited
procedure for considering rules and regulations. Within 3 days
after an agency promulgates a rule, the Majority Leaders of
both the House and Senate, by request, must introduce a bill
comprised of the text of the legislation. If the bill is not
introduced in 3 days, any Member thereafter may introduce the
bill. The bill is not referred to a committee unless a majority
of Members agree to send it through the normal legislative
process.
Within 60 days of being introduced, however, the
legislation must come before the respective chamber for a vote.
The bill shall be limited to 1 hour of debate and cannot be
amended. If a majority of Members of the body vote for the
bill, it is sent to the other body for approval. And upon
approval of both bodies, the legislation is sent to the
President to sign or to veto.
Other opponents of this legislation argue that this would
delay the implementation of rules and regulations. But in
reality, I suggest that it would not. Rules and regulations are
often the subject of countless and seemingly endless lawsuits.
For example, the final rule for unleaded gasoline took nearly
10 years to promulgate because it was the focus of intense
litigation. Congress becomes the final arbiter in rulemaking
and the Congressional Responsibility Act states that a
regulation contained in the bill is not an agency action for
the purpose of judicial review under Chapter 7, Title 5 of the
United States Code. This would bring to a halt litigation that
delays implementation of regulations.
Finally, opponents of this legislation will say this is a
backhanded attempt at regulatory reform or ripping the entire
notion of regulation out of government. No, no, no. Our
Founders were right, the Constitution makes it clear all
legislative powers shall be vested in Congress. Article 1
asserts that this legislative power includes the power to
regulate. By returning the power to regulate to Congress, we
make Congress accountable to the people for Federal laws. This
will make for a better government, a laudable goal that we as
well as the American people desire.
Ladies and gentlemen, this has a broad coalition of
support. In fact, even Nadine Strossen of the ACLU, we got
together about 10 years ago, said, ``I cannot exactly go with
you on this but I agree with the sentiment of the bill,'' and
conservatives such as Judge Robert Bork, and, interestingly
enough, it was now Justice Stephen Breyer who wrote in 1984 how
the legislative veto should be replaced by an expedited
procedure for Congress to pass rules and regulations.
Let me end by quoting John Locke's admonition that ``the
legislative cannot transfer power of making laws to any other
hands.'' Delegation without representation is as wrong today as
taxation without representation was in the 1700's. It is time
Congress took back its Constitutionally granted powers to make
law.
Madam Chairwoman, members of the subcommittee, thank you so
much for your time and your attention.
[The prepared statement of Hon. J.D. Hayworth follows:]
[GRAPHIC] [TIFF OMITTED] T5529.004
[GRAPHIC] [TIFF OMITTED] T5529.005
[GRAPHIC] [TIFF OMITTED] T5529.006
[GRAPHIC] [TIFF OMITTED] T5529.007
Ms. Miller. Thank you very much. We certainly do appreciate
your time here today and your introduction of H.R. 931 and your
explanation as well. I recognize that you have other scheduling
pressing matters, so we certainly excuse you. Thank you very
much.
Mr. Hayworth. Thank you, Madam Chair.
Ms. Miller. Our next witness is another one of my
distinguished colleagues, Representative Sue Kelly from the
19th Congressional District of the State of New York.
Congresswoman Kelly is in her sixth term. She has certainly
been an advocate for many, many years of small businesses and
small business owners and their employees.
She was the chief author of the Truth in Regulating Act of
2000 that created a new way of assessing the impact of new
Federal regulations. Representative Kelly has introduced a bill
now amending the Truth in Regulating Act that enhances
congressional responsibility for regulatory decisions developed
under the laws enacted by Congress.
We welcome you to our hearing today and look forward to
your testimony.
STATEMENT OF HON. SUE W. KELLY
Mrs. Kelly. Thank you very much, Madam Chairwoman. It is a
pleasure to be here. I appreciate your interest in this.
My bill, H.R. 1167, the Cut Unnecessary Regulatory Burden
for Small Business [CURB] Act, demands that GAO, at the request
of a subcommittee or full committee chairman in Congress,
evaluate any promulgated rules and regulations that would have
an annual effect on the economy of more than $100 million. This
bill gives Congress proper oversight because a request by
Congress would require the GAO to do a cost-benefit analysis as
well as something that is equally important--looking at these
rules and regulations for redundancy and overlap.
Congress, through the GAO, would have the knowledge of and
the ability to fully evaluate unfair costs or impacts on small
businesses before the new rules are implemented. Most
importantly, GAO's analysis would allow Congress to submit more
informed and more influential comments on the cost, scope, and
content of proposed rules during the public comment period, and
to hold hearings on these rules and regulations, if necessary.
Since the 104th Congress, I have led the fight for a
Congressional Office of Regulatory Analysis. As you may know,
those efforts resulted in the passage of something called the
Truth in Regulating Act of 2000. President Clinton signed it
into law. TIRA authorized a 3-year pilot project adding a
function at the GAO to respond to congressional requests and
provide for such congressional oversight. It now has sunsetted.
Last Congress, the House passed the Paperwork and
Regulatory Improvements Act, which contained a similar
provision that would have made permanent this pilot program.
That bill never passed the Senate.
Thus, I have introduced the CURB Act, which tries again to
make permanent the TIRA bill that was passed in 2000 and to
fund that bill.
The oversight mechanism in H.R. 1167 is tailored to
specifically protect small businesses from burdensome and
duplicative regulations. In New York's Hudson Valley, where I
represent the small business owners, they have reiterated to me
time and time again that their paperwork is unreasonable, they
feel the government regulations are redundant, and the most
severe problem they face almost every day is trying to figure
out how to fill out these forms. They are begging for relief,
and I do not think this is any surprise. The burden of
regulatory compliance on small businesses is so much. Most
people do not realize it is as much as 50 percent more than for
larger companies.
The increased workload and the time commitment is not the
only concern. Cost is also an issue. Troublesome and
duplicative regulations cost the average small business in this
Nation almost $7,000 per employee per year. Rather than using
this money to hire new employees, as well as create and enhance
customer relations, small businesses are forced to lose this
money by complying with excessive regulation.
Passage of H.R. 1167 is important for small businesses
across the Nation. They are the primary engine of our economic
growth in our communities. We cannot go without the 7 out of 10
new jobs created each year by small businesses. If you stop and
think about it, by reducing the regulatory burden, there could
even be more jobs created by our small businesses.
This legislation is trying to help solve the dilemma of
overly burdensome regulatory schemes in a number of ways. The
CURB for Small Business Act improves the transparency of the
decisions at the Federal agencies. In doing so, it enhances the
efficiency in the way regulations are designed and implemented.
It leads to competent, economical use of our government
resources, and most importantly, provides sensible rules for
small business that have to comply.
The act promotes valuable congressional oversight. Because
Congress provides the authority for the administrative agencies
to create the regulations, it makes sense that Congress should
retain some of the ability to make certain the regulations do
not create waste in government, or worse, redundant and
unnecessary rules for small businesses.
The bill also increases the accountability of Congress.
This is one method of assuring that not only are Federal
administrative agencies doing their job, but it also encourages
Congress to keep up with its obligation in providing the
authority to the agencies. Agency personnel are not elected, as
my colleague pointed out. Because we in Congress are, we have
to answer to our small business owners, and they are begging us
for relief.
The CURB for Small Business Act is a positive step in
helping small businesses and keeping regulations fair. In
Congress, we should have the oversight over the thousands of
rules and regulations established by government agencies. The
last time I looked, government agencies were promulgating rules
and regulations at the rate of about 4,000 rules and
regulations a year. There is definitely redundancy, there is
definitely overlap, and no one has the authority at the present
moment to do a cost-benefit analysis of these rules and
regulations with regard to what their effect is on small
business.
We have to help our small businesses. This piece of
legislation I am offering does just exactly that.
Thank you very much for allowing me to testify in front of
the committee today. I appreciate your concern, I appreciate
your interest, and I look forward to your support on this bill.
[The prepared statement of Hon. Sue Kelly follows:]
[GRAPHIC] [TIFF OMITTED] T5529.008
[GRAPHIC] [TIFF OMITTED] T5529.009
Ms. Miller. Thank you very much. We certainly appreciate
that testimony.
The subcommittee will hear from another one of our
distinguished colleagues, and this is Representative Bob Ney
from the 18th Congressional District of Ohio. Congressman Ney
is serving his fifth term in Congress. He is also the chairman
of the House Administrative Committee of which I am proud to
serve alongside of him; we fondly refer to him as the Mayor of
Capitol Hill. He is also an advocate for reform of the Federal
regulatory system. He has introduced the Joint Committee on
Agency Rule Review Act, which would provide for greater
congressional accountability in the regulatory process.
We want to thank you for being here at our hearing today,
and we look forward to hearing your testimony.
STATEMENT OF HON. ROBERT W. NEY
Mr. Ney. Thank you, Madam Chairman, and we appreciate your
service on House Administration. You are a new member and you
have quickly brought a lot of good insight to the committee.
And thank you Ranking Member Lynch and also the gentleman from
Georgia, Congressman Westmoreland. I want to thank you for the
opportunity to discuss this bill. I think it is important.
Congresswoman Kelly and Congressman Hayworth and I came at
the same time 10 years ago to the Congress and this was talked
about at that point in time, and I am going to mention in a
minute, of course, the CRA, Congressional Review Act. But the
bill I have is H.R. 576. Let me begin by discussing the current
regulatory climate and how the Federal Government currently
addresses new rules before proceeding on how this bill would
improve these procedures and strengthen the congressional
oversight.
In 2004, Congress passed, and the President signed, 299
bills that are now law. Over that same period of time in 2004,
regulatory agencies issued 4,104 final rules versus our 299
bills. I personally find the difference between these numbers
staggering. Unfortunately, they are not atypical of the current
system. Recent reports show that 4,266 more regulations are
presently in the different stages of development as we speak,
and 135 of those 4,266 are economically significant rules which
will have an impact of at least $100 million each.
In fact, the Office of Information and Regulatory Affairs
at the White House estimates that regulations adopted over the
last 10 years cost Americans between $34 billion and $38
billion annually. Some reports show the total impact of all
Federal regulations to be ten times this amount each year. And
it is not going to go down.
Quite honestly, these regulatory costs have substantial
effect on our economy and the small businesses that drive it,
and obviously, most importantly, for the workers of the United
States. A recent World Bank study titled ``Doing Business 2004:
Understanding Regulation'' shows that cumbersome regulations
are associated with lower productivity, increased abuse, higher
costs, and longer delays. It was stated by this very committee
that the structural costs of American products compared with
our foreign competitors is 22 percent higher due to Federal
regulations.
I appreciate, by the way, the committee drawing attention
to this matter. I think it is important to show that
regulations increase costs to small business, and in a global
economy these regulations affect competitiveness. At a time
when we are fighting for our lives with China to eliminate
unfair trading practices and open markets to U.S. products, it
simply does not make sense to make our products less desirable
by increasing the overhead costs to American small businesses
and driving up the cost of their products.
Now not all regulations are bad, we know that. Nor do they
all have a negative effect. I believe some regulations are
warranted, meet the intent of Congress, and have a positive
cost-benefit relationship. Now regulations should not be in the
eye of the beholder, and that is where I will get to the point
of what this does, which I think is fair to all the
regulations.
But my concern is with our ability as an institution to
review 4,000 rules a year. One thing I tell constituents back
home is that you can question how a Member votes. You know,
people watch C-Span and say why does this person vote that way,
but one thing I think you cannot question of this body is the
incredible amount of hours and tough schedule that everybody I
think puts in around here. And, so how do we review 4,000 rules
a year as a body?
Independent of Members' individual reviews on a specific
regulation, the avenues available to Congress under the
Congressional Review Act to address costly rules are limited
and rarely utilized. In the 8 years since the CRA took effect,
Federal agencies have submitted 34,000 rules to Congress. Of
these rules, 535 were major rules having impact of at least
$100 million. Over this period of time, approximately 30
Congressional Review Act joint resolutions of rule disapproval
have been introduced, regarding more than 20 of these 34,000
rules, but only one rule was overturned through CRA's
procedures.
This legislation, House Resolution 576, would address this
problem by establishing a special joint committee between the
House and the Senate that would be tasked with reviewing all
regulations proposed by a Federal agency. This Joint Committee
on Agency Rule Review, in Ohio we call it JCARR, would vote in
disapproval of the regulation if it violates the intent of the
law it is supposed to implement. Then a disapproval resolution
under the Congressional Review Act would be introduced in each
chamber with guidelines established for expedited
consideration.
This process works in my State; I was on it. I think, Mr.
Lynch, you were on a similar type of body in Massachusetts from
1994 to 1996. I do not know exactly how it works, and I am told
the research shows that many other States have similar types of
mechanisms.
This process works. My State of Ohio has had this since
1977, and this JCARR committee has played an important role in
ensuring the accountability of State agencies while limiting
the power of State bureaucrats.
Here is a brief example of how JCARR would work if enacted
into law. In this scenario the EPA is proposing a regulation
that could be harmful and threaten hundreds of jobs. Here is
the step-by-step of how a review would work:
The EPA publishes a final regulation that is bad, we will
call it Regulation A in this example. Under the law, Regulation
A must be submitted to JCARR when it is published. JCARR, the
House and Senate panel, which is 12 Members of the House, 12 of
the Senate here, is then required to give the committees of
jurisdiction copies of the proposed regulation.
Once the rule is submitted to JCARR, a 60 day clock runs
where the committee has time to consider Regulation A. Days
where either house is out of session, the House or the Senate,
for more than 3 days does not count toward the 60 day clock.
Now if JCARR takes no action and the clock runs out,
Regulation A takes effect. Simple as that. However, if JCARR
votes to disapprove Regulation A--and I would note a lot of
committee Chairs and Ranking Members would have input into
JCARR, because that is one of the concerns, that you are taking
away jurisdiction and you are really not. Most of the time we
fight these rules or opinions through letters that are sent
around.
If JCARR votes to disapprove Regulation A, a joint
resolution of disapproval is reported to the Congress. If a
majority of the House and Senate Members vote to disapprove,
the resolution goes to both chambers; however, if a majority of
just one chamber's Members vote in disapproval, the resolution
is reported only in that chamber.
In the House, once the resolution is reported, the House
has 3 days to bring the resolution to the floor, otherwise it
is in order for any Member to make a privileged motion to
consider it if the House does not do that. These are expedited
procedures. In the Senate, most of the expedited procedures are
already in place because of the Congressional Review Act. If
the joint resolution goes to both houses and passes, it goes to
the President for his signature.
If the President signs the resolution, Regulation A will
have no effect and will not take effect. If the President
vetoes it, Congress has 30 days to vote to override the veto if
they want to try again to stop the regulation. If either
chamber fails in a vote to override the veto, Regulation A
takes effect immediately.
I have kind of simplified this process. But if enacted,
JCARR would help to ensure that the regulations implementing
laws passed by Congress adhere to the spirit of the legislation
and are not detrimental to our Nation's economy. I hope you
will be able to look at this. Let me just conclude, I want to
thank one of our staff, Brian Petersen, for putting a
tremendous amount of time in on this and who has worked with
other staffs.
I just want to end with an example. Powhatan Point, OH,
which now Congressman Strickland represents but I used to
represent actually 24 years ago as State Representative and
then in Congress for a while, they had a major flood down
there. Powhatan is a poor community, like a lot of communities
in Appalachia I represent.
There was a rule so that if the people took their trailers
and moved them off the trailer court so they would not flood,
when they wanted to bring them back FEMA said you can bring
them back if you build concrete blocks and put the trailer on
top of the concrete blocks, so they will be out of the way of
the next flood. Of course, that means that you have to run
pipes up there, build the concrete blocks and it is raised up
there, and you would have to build a porch.
We tried with the Federal Government to say why not just
let them do what they do every couple of years, put a hitch to
the trailer and take it out of harm's way. I fought 10 years. I
was finally successful last year in getting something in the
flood insurance bill. Ten years.
If you look at some of these rules, again, they are not all
bad, but I just think it has gotten so out of control. This is
a process that will not take away Chairs' or Ranking Members'
jurisdiction. But the bottom line of JCARR, why it has worked
so well in Ohio, is the staff, trained professional staff, and
pretty soon the agencies start to get used to the fact that
they better think these rules out because they are going to run
into a lot of interference if they do not. So I think this
enhances the abilities of the Chairs and ranking members.
Thank you for your time.
[The prepared statement of Hon. Bob Ney follows:]
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Ms. Miller. Thank you very much. I found your testimony
really fascinating. In fact, when we thought about having this
hearing we were sort of looking for some of the various
innovative pieces of legislation that Members of Congress had
introduced in regards to regulatory reform. We looked at yours,
in particular, as sort of a best practices because you had
experience with it in Ohio as well.
I was interested to note in your testimony, you mentioned
about China. Here we are fighting with China. In one of our
hearings previously we had invited my former Governor, John
Engler, who is now the executive director of the National
Manufacturers Association, in which he very interestingly
talked about a study that NAM has done that shows the
structural cost of all American goods are about 22-23 points
higher than any of our foreign competitors principally because
of regulatory burdens that we put on ourselves.
So as we are unfortunately bleeding manufacturing jobs to
China or Mexico or whatever? Guess what: they did not put all
these regulatory burdens on us, we have done this to ourselves.
That is why I say I think the standard has to be
reasonable. And we look to the States very often, I think as
incubators for some of the best practices that the Federal
Government could implement as well. And as you talked about
your bill, H.R. 576, could you flesh out perhaps a little bit,
for us, some of the principal differences you might see in how
the JCARR worked in the State of Ohio as opposed to an analogy
of how you see your bill working here at the Federal level?
Mr. Ney. One nice thing about Ohio, and this could be
adapted, parts of it could, we have Chapter 119 code, so the
agencies have to go through some pretty set procedures. When
they come to JCARR where you have six State Representatives and
six State Senators all equally divided, this is totally
bipartisan, you have 12 and 12, all equal division, and when
they would bring a rule, if they had not followed all of the
procedures or the public testimony, we could actually sit there
and say why not take this rule back, take another look at it.
Most of the time the agencies would say fine. Every once in
a while they would still proceed, and then we could make a
motion to throw it to the floor within 3 days in the House and
Senate. Now once we disapproved it, we did not need the
signature of the Governor, which was, I think, good, because it
has your balance between the executive and the legislative. We
did not need the signature of the Governor. In this case, you
need the signature of the President. I think that is one big
difference probably.
When I first, 10 years ago, went to the leadership and
other people, the committee Chairs said, this is taking away
our authority. And like I said earlier, with the schedules,
tell me how many times, and I Chair a committee and we oversee
the Federal Elections Commission, how many rules, since you
have been on the committee, have we sat and reviewed? We really
do not. We will interact and have opinions, but we really do
not review it.
So I view this House-Senate body as not usurping. And in
Ohio, that is the way the psyche worked with this. In fact, we
were happy to have JCARR because we could say, hey, I chair--at
that time I chaired appropriations--and I could say to JCARR,
why not take a look at this, and the staff really worked with
us and enhanced us. It was very bipartisan.
So I think the difference is here you still need the
President to sign off. It puts a lot of pressure, I think, on
the executive to have a little bit more responsibility. They
are just churning out rules and regulations and we catch this
or do not catch that. I also wanted to mention approaches--
Congresswoman Kelly has an approach, J.D. Hayworth has an
approach--I think there are a lot of good approaches out there,
but I think you are seeing this start to bubble up because of
the problems. So those are just a few differences in Ohio's
JCARR, being that the main difference is the Governor is not
involved.
Ms. Miller. I appreciate that. Talking about paperwork, I
have this question for you, Representative Kelly, because you
mentioned about the paperwork burden that all your small
businesses are complaining about.
Actually, the staff has heard me make this comment
previously, but in light of the shuttle launch, my dad was an
aeronautical engineer and worked with Wernher von Braun at
Redstone and at the very early days of rocket science where
they were shooting off rockets. He always said it was very
exciting until the Federal Government got involved, at which
time they said with all the paperwork that was required they
would never shoot off a missile until the weight of the
paperwork equalled the weight of the rocket.
And I think that is probably what happens now. But we also,
under this subcommittee and our full committee, look at the
Paperwork Reduction Act and it is something that is coming
through as well.
Under your legislation, how would you see the Congressional
Office of Regulatory Analysis [CORA], would they have a role in
evaluating, reviewing the paperwork burden on small businesses?
Mrs. Kelly. CORA is not the actual bill that passed. TIRA
is the bill that passed and was signed into law. Congressman
Ney has a Cadillac, I have a sports car. And the reason I say
that is, it is something that would set aside an office in the
GAO. The GAO exists. They already have experts, and basically
they would do the analysis and then report to Congress so that
the analysis that would be done would not only be cost-benefit,
but it would be redundancy and overlap.
If you run a small business, as I did and as my family
does, you have constant interference from the Federal
Government asking for forms to be filled out, for your
employees, for any impact you may have if you have trucks,
cars. There is just a huge number of forms you are constantly
being asked for from the Federal Government.
It seems to me if you look at redundancy and overlap, which
my bill does, we as Congresspeople are going to be able to go
back to an agency and say, why are you asking in agriculture
for something that commerce is asking for also, can we not
combine these two requests into one request and let the small
businesses comply with that electronically, and then let each
agency go to the electronics that were filed.
In other words, it is a way of shrinking paperwork and
shrinking a lot of what the Government is doing in terms of
interfering with the way that small businesses do business
because of these constant demands with paperwork.
Ms. Miller. Thank you very much. Representative Lynch.
Mr. Lynch. Thank you, Madam Chair. Chairwoman Kelly, just
to follow the procedure here, the bill that you did get passed,
which was a sound one, the TIRA, was never funded. You proposed
a 3-year pilot program, and it was never funded. Now we are
sort of leapfrogging and this new bill is actually to make TIRA
permanent without going through that 3 year pilot.
Would it not give us the benefit of looking at that program
for 3 years if it were in fact funded? What I am asking is, I
think your original idea was a good one, and I am just
questioning why we are departing from that and instead trying
to put this in permanently? Is it just frustration with the
fact that they did not fund it to begin with?
Mrs. Kelly. I started this bill within 6 months of my
freshman year in Congress. I have been in Congress 10\1/2\
years and I have been pushing this for a very long period of
time. Before I leave Congress, I would like to actually do
something to reduce paperwork and the burden of costs on small
business. If we make TIRA permanent and we fund it, we have a
built-in situation at the GAO where it can work and it could
start work tomorrow.
I would like to see it go beyond just a pilot bill. I think
now the pain that small businesses in this Nation suffer from
all of this tremendous burden of paperwork, the enormous number
of Federal regulations that are going after them day after day,
it needs to be lifted, and it needs to be lifted on a permanent
basis.
When you stop and think about the fact, if you have been a
small business person, as I have, I have run a small business,
I know that I did not have time to sit down and read the
Federal Register, which is where most of this stuff is
published. I never found out about most of the regulations that
were hitting my business until somebody from the Federal
Government came in and said, oh, by the way, you did not file
form JHQ137. Well, I did not know I needed to file that because
I was busy running my business. And, yes, I did file it.
But there is no reason why that should occur. That sort of
thing should be restricted by us; we are elected by these
people to represent them. It is our duty to try to help them do
what they do best, which is generate jobs, shore up our
economy. It seems to me that if we make this permanent and we
fund it, we have done just that.
Mr. Lynch. OK. My question was one around strategy and I
think you have explained it.
Mr. Ney, first, I think you correctly recognize that there
will be some concern around jurisdiction. I think the one
benefit that we do have with committees of jurisdiction is that
they deal with the substance of particular bills. In Financial
Services, Sarbanes-Oxley, those folks lived with it for I do
not know how long, and so they have this very profound
understanding of the legislative intent and the workings of the
bill.
And so I think, in the first instance, it is probably
better to have them deal with a resolution for disapproval. But
on the other hand, I do recognize--you know, the numbers that
you cited--only 30 disapproval resolutions referred, only 1
successful on ergonomics, that may be the flaw in the CRA, the
Congressional Review Act, is that it is everybody's job, but it
is nobody's job; anybody can do it, but nobody has to do it.
And so that the model that you set up on the Ohio model
makes it the responsibility of this committee. And maybe the
value is in that, that we actually have somebody who we have
named as gatekeeper for the regulatory process so that somebody
has to look at it. And if they abdicate their responsibility to
review it, so be it, but it is their responsibility.
So I think that has an attractiveness to it that there is
accountability and responsibility delegated to a certain group
in the process that we do not have right now. That is all I
have.
Mr. Ney. Madam Chair.
Ms. Miller. Yes.
Mr. Ney. I thank the gentleman for his comments. Actually,
differences, there are a couple of things, and without
objection, if I could submit this for the record.
Ms. Miller. Without objection.
Mr. Ney. There are some things I did not mention, because
there are some differences. There are 24 members here, 10
members in Ohio. But I would note something which is of
interest and food for thought. The criteria for recommending
disapproval or validating a rule in H.R. 576 is not stated in
there. In Ohio, it is if it exceeds the rulemaking authority or
if they did not follow the proper procedure and intent.
Ohio has an interesting part I did not put in this bill,
which is, if the intent of the bill is there. You know, all of
a sudden around here, somebody will say we wrote the bill, here
we are, this was our intention, and over here it sort of does
not matter to the agencies, it is well, that is fine, OK, go
away and we will do what we want. Whereas in Ohio, intent could
be a reason.
Now one other thing too, in this bill there is nothing
short of disapproval. In Ohio, they can actually pick up the
phone, see if they can resolve part of it, and it can also be
partial, part of the rule can be dismantled if you want to.
So I just wanted to mention there were some differences. I
also do not go retroactively back. This is forward. But in
regards to what you said, I think that you have to watch the
jurisdiction. But as chairman of a committee and knowing other
committees, there is just so much that cannot be caught. So if
you worked it the right way, I think it would be an enhancer to
the committee process.
But you are right, you have that expertise within, like
Sarbanes-Oxley, of debating, I think Section 418 or 404, I
thought I would say that in my sleep, I thought I would never
forget it, but debating what was the intent, what was done. So,
yes, there are some levels of expertise in the committees.
But I think the staffs would also interact a lot with this
staff. And I have to stress, too, as it was in Ohio, you picked
up the phone, you interacted with the staff, they were all
there for JCARR, and it kept any amount of partisan bickering
down.
Ms. Miller. Very well. Representative Westmoreland.
Mr. Westmoreland. Thank you. Mr. Ney, just to kind of
finish up on what Mr. Lynch said. What my experience has been
in the past of rules being approved, we have environmental
health districts in the State of Georgia and it is composed of
the school superintendent, a registered nurse, a doctor, a
mental health advocate, and so forth, and yet the septic tank
regulations have to be approved by this group.
These people would not know a septic tank if they saw one.
And so what happens is you may get a guy coming in and he can
tell them anything, they think he is an expert in the
situation, and so they say, yes, this rule sounds good when it
really may go against the manufacturer's recommendation of even
how to put in the system.
I think what Mr. Lynch said maybe about the committee of
jurisdiction, because they have heard testimony, they have
actually heard all the different reasons why or why not we
should have the law that we are passing, they may have more
insight into the rules or the regulations that were being
written to make sure this law was being abided by more than
maybe some elected officials that may depend on staff or
whatever to do that.
Do you see that as a problem? I know that in Ohio this
thing, evidently, was quite successful. I agree with what you
are trying to do, but did you ever give any consideration to it
being the committee of jurisdiction that would actually look at
these things?
Mr. Ney. Yes, I thought about that because, again, when I
first got out here I was just told this is mixing in
everybody's business; no, the committees handle it. After a
couple of years I looked around and we started asking staffers,
you all can take your own experiences in how long you have been
here, how many times did you actually have hearings on rules? I
was stunned when Brian in our office did this research. I was
stunned at that. I had no concept there had been that many and
4,600 in 2004. So, yes, we thought about it.
Actually, when JCARR is functioning here, it will go to the
committees, it will be submitted, and they can do something if
they want to. But a lot of committees are just absolutely too
busy, and they cannot handle thousands of them. And as you just
gave an example in your statement, I think it is the small
ones, too, that escape us.
I am sure you all have been through this, you go home and
somebody says what is wrong with you, why on Earth did you do
this to us, or I am down at the local union and they will ask
me a question, and I will say, I did not do that, and then you
go back and you find out it was an agency that did it last
year; we did not know.
I will give you one concrete example. I live in St.
Clairsville, OH. When I was a State Senator, Natural Resources
said you have to have composting because we do not want these
grass clippings thrown all over the place. So they had
composting, and we agreed with that; I think it was a good
thing. Then they came back, and they announced that every town
had to hire a compost manager and assistant compost manager.
My advice to the mayor is let everybody throw them all over
the hill, because it is 4,000 people, and you are going to pay
$40,000 for a compost manager. People agreed to do composting.
So you can find those.
Now, a lot of people did not know that existed but because
of the way JCARR worked, basically they called up ODNR and
said, if you would like to continue down this path, we can tort
you all day long with hearings because JCARR has the time to do
it. The staff attorneys, the professional staff just keep at
this all day with the bureaucracy. That is a true example. And
ODNR got hold of itself and said, OK, we will rethink that.
They are going way beyond even the scope of law or the intent
of law.
But we thought about individual committee jurisdiction. It
will still go there under this. I just think there is not
enough time in the day.
Mr. Westmoreland. I appreciate what both of you are trying
to do. I had a similar situation. I went home, and being in the
building business, I had a gentleman that had a dual wheel
truck and was pulled over by the State Patrol and given a
ticket because he did not have his company name on the side of
the truck and he had not had a physical, and also because of a
homeland security issue on the size of trucks and the fact that
you would have to have your name and phone number.
He does not advertise his business, but yet now he has a
sign on his door that identifies his company with a phone
number and he had to go pay $300 to get a physical to be able
to get the driver's license to drive that size of truck. It is
just really a normal truck, and how the State patrolman knew
how much it weighed is beyond me, but it was part of that
homeland security.
So there are consequences that we never think of that we do
up here when we pass laws. And I want to commend both of your
for your effort, and I hope I am on both of those bills.
Ms. Miller. We certainly thank you both so very much for
graciously sharing your time with us. All of us, I think, have
various examples that we can cite. Back home, I have to tell
you, my stump speech when I am out speaking to Rotaries or
Kiwanis or whoever and I tell them I am subcommittee Chair of
Regulatory Affairs now, and they say what is that, and you
start talking about some of these different regulations.
The one I always cite is something that was told to us, and
we will probably be hearing about it in this committee at some
point in the future from the American Bakers Association, where
you have a situation where the Federal Government has decided
there is a molecule that is released when there is fresh baked
bread with a beautiful aroma emanating, and the Federal
Government has determined that the aroma of fresh baked bread
is smell pollution and they are now regulating these small
bakeries literally out of business.
So I think people understand, they can grasp that some of
these regulations are nonsensical in many ways, and they are
not achieving the objective that we are all looking for.
So, again, thank you very much for your time. Hopefully, we
can help these bills to become enacted. Thank you so much.
We will take a 2-minute recess while we empanel our next
panel of witnesses.
[Recess.]
Ms. Miller. The committee will come to order.
It is our practice here to swear in our witnesses. So if
you would all rise to take the oath.
[Witnesses sworn.]
Ms. Miller. Thank you very much. Our first witness of our
second panel is Dr. Curtis Copeland. Dr. Copeland is currently
a specialist in American government at the Congressional
Research Service. His specific area of expertise is Federal
rulemaking and regulatory policy. Prior to moving to CRS in
January 2004, Dr. Copeland was an Assistant Director at the
Government Accountability Office for 23 years working on a
variety of issues from Federal personnel policy to regulatory
policy. He has received his Ph.D. from the University of North
Texas in 1980 in political science.
Dr. Copeland, we appreciate your attendance here today and
look forward to your testimony, sir.
STATEMENTS OF CURTIS W. COPELAND, SPECIALIST IN AMERICAN
NATIONAL GOVERNMENT, CONGRESSIONAL RESEARCH SERVICE; J.
CHRISTOPHER MIHM, MANAGING DIRECTOR, STRATEGIC ISSUES,
GOVERNMENT ACCOUNTABILITY OFFICE; MARLO LEWIS, JR., SENIOR
FELLOW IN ENVIRONMENTAL POLICY, COMPETITIVE ENTERPRISE
INSTITUTE; AND ERIK OLSON, SENIOR ATTORNEY, NATURAL RESOURCES
DEFENSE COUNCIL
STATEMENT OF CURTIS W. COPELAND
Mr. Copeland. Thank you very much. Madam Chairman, members
of the subcommittee, I am pleased to be here today to discuss
previous efforts to reform the Federal rulemaking process.
Although those efforts have had vastly different purposes,
almost all of them bear one common characteristic--they have
not been as effective as their authors had hoped. There appear
to be at least four general reasons why this is so.
One reason is the amount of discretion that is sometimes
left in the hands of agencies to implement the reforms. For
example, the Regulatory Flexibility Act of 1980 requires
Federal agencies to assess the impact of their forthcoming
regulations on small businesses and other small entities.
But it says they do not have to conduct the analysis if the
head of the agency certifies that the rule would not have a
``significant economic impact on a substantial number of small
entities.'' The act does not define what a ``significant
impact'' or a ``substantial number'' means, thereby giving
Federal agencies discretion to determine when the act's
requirements are triggered, and the agencies often use that
discretion.
For example, in 1999 the Environmental Protection Agency
issued a proposed rule that would have significantly lowered
the threshold for reporting the use of lead under the Toxic
Release Inventory program. By EPA's estimate, this report would
take more than 100 hours to fill out the first time, and EPA
said lowering the reporting threshold would have swept in more
than 5,000 additional small businesses, costing each of them
$7,500 in the first year. Nevertheless, EPA said this was not a
``significant economic impact'' or a ``substantial number of
small entities'' and exempted the rule from the Regulatory
Flexibility Act.
From 1996 through 1999, EPA as a whole exempted 96 percent
of its rules from the act, and two offices within the Agency,
the Office of Pesticides and the Office of Solid Waste,
exempted 100 percent of the rules.
A second reason why some reform measures have not worked as
well as expected is they were built on the flawed foundations
of other reforms. For example, section 610 of the Regulatory
Flexibility Act requires agencies to review their rules within
10 years of issuance to determine if they should be retained,
eliminated, or changed. However, this look-back requirement is
triggered only when Federal agencies determine that their rules
have a significant impact on small entities.
Similarly, section 212 of the Small Business Regulatory
Enforcement Fairness Act requires agencies to publish small
entity compliance guides, but again only when the agency
determines that the rules have a significant impact on small
entities. Section 212 has other problems.
For example, the statute does not require agencies to
consult with small entities to develop the compliance guides,
it gives agencies total discretion to determine whether they
have to be written in plain language, and does not indicate
when the compliance guides have to be developed. Therefore, an
agency could develop a hard to understand compliance guide
years after a final rule is published with no input from small
entities and still be considered in compliance with section
212.
Other regulatory reforms appear to flounder because they
are limited in terms of the agencies or rules covered. For
example, the Unfunded Mandates Reform Act of 1995 does not
cover any rules issued by independent regulatory agencies like
the Federal Communications Commission or the Securities and
Exchange Commission, even though those agencies clearly issue
some rules that some affected parties consider mandates. The
act also does not apply to any rules issued without a previous
Notice of Proposed Rulemaking, even though half of all final
rules are issued without a Notice.
Finally, political and structural limitations sometimes
make it difficult or impossible for regulatory reforms to
achieve their intended purposes. The 1996 Congressional Review
Act was initially viewed as a way for Congress to reassert
itself in the rulemaking process.
However, the reality, as we have heard earlier, is it has
been well short of that goal. Only 1 of the more than 39,000
rules submitted to Congress since 1996 has been disapproved.
The primary reason appears to be the balance of power between
Congress and the President. Because of the votes required to
overcome a Presidential veto, it is very difficult for Congress
to use the act to disapprove a rule that the President would
like to see go into effect.
So, based on this history, how can regulatory reform be
more effective in the future? The short answer is to avoid the
problems that I just mentioned. First, Congress and other
regulatory reformers could be as specific as possible regarding
what agencies are to do, defining key terms and avoiding broad
loopholes; second, avoid linking reforms to other reforms that
have not been effective; and third, do not exclude any rules or
agencies unless there is a good reason for doing so. And
finally, there should be a realistic assessment of the
Constitutional and statutory boundaries that exist.
Madam Chairman, thank you again for inviting me to appear
today at this hearing. I would be happy to answer any questions
you might have.
[The prepared statement of Mr. Copeland follows:]
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Ms. Miller. Thank you. We appreciate that very much.
Our next witness this morning is Chris Mihm. Mr. Mihm is
the Managing Director for Strategic Issues at the GAO. In this
capacity, he leads the GAO's work on governmentwide longer term
broader issues designed to support the transition to a more
results oriented and accountable Federal Government. He is also
a fellow of the National Academy of Public Administration.
I want to thank you for your participation and welcome you
to the committee hearing this morning. We look forward to your
testimony, sir.
STATEMENT OF J. CHRISTOPHER MIHM
Mr. Mihm. Thank you, ma'am, I appreciate it.
Madam Chairman and Mr. Lynch, I am honored to be here today
to discuss efforts to improve the Federal regulatory process
and to suggest some outlines for a possible reform agenda as
you move forward. I also must add, as you mentioned in your
introduction of Curtis, it is a great pleasure to be here today
with my former colleague from the Government Accountability
Office, then it was General Accounting Office.
In that spirit, I am also happy to acknowledge that many of
the reports and testimonies that form the basis of my statement
were written by Curtis when he was at GAO. So it is all in the
family, a lot of it, here today.
As you mentioned in your opening statement, Madam Chairman,
Federal regulation is a basic tool of government. Agencies
issue thousands of rules and regulations each year to implement
the statutes enacted by Congress and the public policy goals.
Benefits of regulation include, among other things, ensuring
that the workplaces, air travel, food, and drugs are safe; that
the Nation's air, water, land are not polluted; and that the
appropriate amount of taxes are collected. The costs of these
regulations, as you also noted, are estimated to be in the
hundreds of billions of dollars, and the benefit estimates are
equally high.
My bottom line today is that the recent regulatory reform
initiatives have yielded mixed results. On the one hand, there
have been real and important benefits associated with these
initiatives that Congress has put in place, while on the other
hand, they have often been less effective than were intended.
And also as a key point to consider as we move forward,
while many of the initiatives have added more requirements at
the beginning of the regulatory process, fewer of their
provisions have focused on evaluating the actual benefits and
costs of rules once implemented and using such information to
revise existing regulations and inform future action. Our
suggestion will be that this is where we need to augment that
part of the regulatory process to have more of the
retrospective and look-back provisions across the current array
of regulations.
Given the size and the impact of the Federal regulations,
it is no surprise that Congresses and Presidents over the last
25 years have sought to refine and reform the regulatory
process. One goal of such initiatives has been to reduce
regulatory burdens, but other purposes have also played an
important part. Among these are efforts for more rigorous
analysis of proposed rules and better information to
decisionmakers, enhancing oversight of rulemaking by Congress,
including what you heard from the first panel today, and the
President, and to promote greater transparency and
participation in the process.
Our reviews done over the years at the request of Congress
suggest that there are four overall strengths or benefits from
the regulatory reform initiatives that have been put in place:
First, they have certainly increased the attention directed to
rules and to the rulemaking process; second, there has been
increased expectations regarding the analytic support for
proposed rules; third, they have encouraged and facilitated
greater public participation in rulemaking; and fourth, they
have improved transparency of the rulemaking process.
Despite these important strengths, the overall
effectiveness of the regulatory reform initiatives, as I
mentioned, has been mixed. This may be particularly true when
results are compared to the originally established goals and
purposes, and for many of the issues that Curtis raised. For
example, despite the paperwork reduction goals under the
Paperwork Reduction Act, we have repeatedly testified about the
growth and burden hours imposed by the Federal information
collections; I know this is a key initiative of this
subcommittee, including hearings that you have recently had.
We have similarly reported that initiatives such as the
Unfunded Mandates Reform Act [UMRA], the Executive orders on
federalism, and requirements imposed under Section 610 of the
Regulatory Flexibility Act for reviews of existing rules, have
had, on balance, little impact on agencies' rulemaking.
Our reviews have identified at least four general reasons
that might explain why these initiatives have not been
successful. First, the limited scope and coverage of the
various requirements; second, a lack of clarity regarding key
terms and definitions, a point again that Curtis was making;
third, uneven implementation across agencies; and fourth, a
predominant focus on just one part of the regulatory process,
that is agencies' development of rules.
As this subcommittee begins to develop its own regulatory
agenda, two avenues provide a useful starting point in our
view. First, the subcommittee may wish to broadly revisit the
procedures, definitions, exemptions, and other provisions of
existing initiatives to determine what changes are needed to
achieve those goals.
And second, greater evaluation, often referred to as
retrospective analysis or look-backs, of existing regulations
and lessons learned is needed to keep the regulatory process
focused on the current results that are being achieved, or not,
as the case may be, and identifying successful practices in
meeting emerging challenges.
With that, let me conclude. Obviously, I would be happy to
take any questions that you or Mr. Lynch may have.
[The prepared statement of Mr. Mihm follows:]
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Ms. Miller. Thank you very much.
Our next witness is Marlo Lewis. Dr. Lewis is a senior
fellow at the Competitive Enterprise Institute where he writes
on global warming, energy policy, and other public policy
issues as well. Actually, during the 106th Congress he served
as a staff director on the House Government Reform
Subcommittee, at that time it was called the Subcommittee on
National Economic Growth, Natural Resources, and Regulatory
Affairs. So it is, I suppose, a little bit back to the future
for you, Dr. Lewis, to be here.
He has also published in the Washington Times and
Investor's Business Daily, and the National Review. He holds a
Ph.D. in government from Harvard University, and a B.A. in
political science from Claremont McKenna College. We welcome
you back to the subcommittee and look forward to your
testimony.
STATEMENT OF MARLO LEWIS, JR.
Mr. Lewis. Well it is certainly a pleasure to be back here.
Thank you, Madam Chairman and Ranking Member Lynch, for
inviting me to testify today. I want to commend the
subcommittee not only for holding this hearing, but for your
vigilant oversight. And more oversight by Congress I think is
the short answer to the question of how we improve Federal
regulations.
A lot of the statements today have already made the point
that Federal regulatory costs are large, they are growing, with
4,000 new rules each year, they are also really uncontrolled in
the sense that elected officials never make explicit choices
about how large the regulatory burden should be in relation to
the economy.
Over the years, Congress has adopted, debated, or
considered numerous reform initiatives to try to in some way
discipline the regulatory process. The specific elements of
these proposals typically fall into one or two categories,
which, for want of a better term, I would call policing reforms
and checks and balances reforms. By that I mean this, policing
reforms aim via rules of rulemaking and centralized review to
regulate the regulators; checks and balances reforms seek to
increase Congress' responsibility for regulation, foster
interagency competition, or enable outside experts to compete
with agency experts.
Both types I think will be needed to make the regulatory
system more affordable and accountable. However, a word of
caution is in order, and I think this segues very nicely into
what Curtis had to say. In the past, reformers have relied
heavily on policing reforms. Pinning their hopes on what James
Madison called ``parchment barriers,'' they have proceeded as
if agencies could be legislated or managed into practicing
sound science and economics.
In general, the results have been disappointing because
rules of rulemaking are not self-enforcing, and OMB is a
watchdog in constant danger of becoming a rubber stamp because
the OMB Director and the agency heads are all appointed by the
same President and work for the same administration.
A recent and highly effective checks and balances reform is
President Bush's Executive Order 13272, proper consideration of
small entities in rulemaking. This EO enables the SBA's Office
of Advocacy to play a wide-ranging role in rulemaking. Advocacy
provides partial relief to the monopoly that each agency
otherwise maintains over its rulemaking activity. Advocacy
saves small businesses billions of dollars each year in avoided
regulatory costs.
Now, I am pleased to say that all the bills that the
subcommittee is considering today aim to build Congress'
capacity to check and balance regulatory agencies. I think that
is the right goal.
Also worthy of consideration is a modest proposal by former
OIRA economist Richard Belzer. The aim of this initiative is to
open the market for regulatory analysis. Various statutes and
Executive orders create a huge demand or market for regulatory
analysis, but it is a market in which agencies face little
competition. The public is free to submit alternative cost-
benefit analyses, but the agencies ultimately decide which
estimates are best.
In effect, the agencies have the final say in grading their
own work. They monopolize the scoring of their own regulatory
proposals. But the agencies have no monopoly on regulatory
expertise. Industry, the non-profit sector, State and local
governments employ hundreds, perhaps thousands, of
professionals trained in economic and scientific analysis.
To open the marketplace, Congress should require OMB each
year to hold contests to pick the best analyses of specific
major rules. OMB would be forbidden to split the difference
between estimates or combine elements of different analyses. In
each contest, OMB would have to pick one winner and explain the
reasons to Congress for its choice.
What would this accomplish? Agencies would come under
strong pressure to produce credible analyses to have at least a
realistic chance of winning. An agencies' analysis would, at a
minimum, have to conform to OMB's best practices guidelines and
information quality guidelines.
Now some might object that making OMB the judge would give
undue influence to the President or his appointees. I think
that is a reasonable concern, but it is also easily addressed.
If for whatever reason, you do not have sufficient trust in
OMB's judgment, Rick Belzer remarks, ask GAO to evaluate the
same information and reach its own conclusions. Even OMB can
benefit from some competition.
Again, thank you for the opportunity to testify. I would be
happy to answer any questions.
[The prepared statement of Mr. Lewis follows:]
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Ms. Miller. Thank you very much.
Our final witness this morning is Erik Olson. Mr. Olson is
a senior attorney at the Natural Resources Defense Council,
which he joined in 1991. His specialty is public health issues,
including drinking water, pesticides, toxics, and food safety.
From 1984 to 1986, Mr. Olson served in the Office of General
Counsel for the EPA. He received his law degree from the
University of Virginia, his undergraduate degree in
environmental biology and management from Columbia College at
Columbia University.
Mr. Olson, we certainly appreciate your coming. We look
forward to your testimony.
STATEMENT OF ERIK OLSON
Mr. Olson. Thank you for inviting me. I appreciate the
opportunity to testify.
I wanted to back up just for a second and talk about the
goals of all the legislation that is pending before the
subcommittee. I think the two major goals are accountability
and urging more effective, more beneficial regulation. I do not
think anyone can disagree with that. The issue is how do we
achieve that.
We have to keep in mind, first of all, that the Chief
Executive is also elected, just as Members of Congress are, and
ultimately the Chief Executive is responsible and accountable
for regulations adopted by his or, someday, her administration.
In addition, on the issue of whether we are ensuring more
beneficial and more cost-effective rules, our concern with the
legislation that is pending is a fewfold. One is that we feel
that it is often duplicative of existing statutes that could be
better implemented, and is fairly costly and burdensome to
implement.
Second, we have heard repeatedly this morning discussion of
what the costs are of all these regulations. I have not heard a
single witness speak about the benefits of the regulations.
I just wanted to quote one of my favorite people, John
Graham at OMB. His recent report to Congress, the 2005 Draft
Report, found that the aggregate benefits of Federal regulation
are $12 billion to $108 billion in the most recent timeframe he
looked at, whereas the costs were $3.8 to $4.1 billion. So the
benefits are far higher than the costs. What we need to do is
be talking not just about how much it costs business, but how
the American people benefit.
In addition, many of these pieces of legislation, as our
written testimony lays out, raise substantial Constitutional
issues in our view. For example, there are substantial
``separation of powers'' issues if the Chief Executive can no
longer execute laws by promulgating rules without Congress
ratifying them; there are issues of bicameral powers being
removed by a joint committee that has been proposed; and also
due process issues if we remove all judicial review of Federal
regulations, which some of the legislation pending would do.
These are very powerful tools that are being proposed and
subject to abuse we are afraid. We are concerned that the cure
may be worse than the disease.
Now, let us talk about the assumption that I think is
underlying this, which is that regulations are impairing our
competitiveness. This subcommittee held an earlier hearing
where Professor Sid Shapiro from Wake Forest testified that
there are numerous academic studies by independent academics
that demonstrate that regulations are not the cause of
competitive problems, that less than 1 percent of the cost of
manufacturing is regulation.
And I do not think any of the sponsors of this kind of
legislation is suggesting that we want to relax our regulations
to the point where we have the same rules as our competitors.
Do we want Chinese labor policies or Chinese environmental
policies? I do not think that is what we are aiming for. We
have to look at the health benefits, the safety benefits, the
environmental benefits of these rules.
Now specifically with respect to some of the legislation.
H.R. 931, the Hayworth bill, we are concerned that it
basically rests on some questionable Constitutional theories
and also is duplicative of what the Congressional Review Act
would authorize. If Congress really has problems with specific
rules, there is already something in place. Thirty-seven times
a Member of Congress has proposed a resolution of disapproval.
So clearly, there is an opportunity to do that. What this
legislation does is it would force Congress to review over
4,000 regulations with up to 1 hour of debate for each rule.
This we fear would shut down Congress as well as shut down the
Federal executive branch.
We think it raises substantial Constitutional issues.
Again, Article 2, Section 3 of the Constitution says it is the
President's responsibility to faithfully execute the laws.
Congress passes the laws, the President executes them. If the
President has no authority to execute the laws, we think there
are Constitutional issues. And also questions of judicial
powers under Article 3, because the courts are supposed to
adjudicate whether laws and regulations are appropriate and
Constitutional. The legislation we think would remove that
authority.
Other issues with the other legislation are laid out in our
written statement. And I would be glad to answer questions
about them. Thank you.
[The prepared statement of Mr. Olson follows:]
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Ms. Miller. Thank you all very much.
It is interesting to listen to your various recommendations
here. Mr. Lewis is saying that more congressional oversight is
the short answer to the question, and Mr. Olson mentioning H.R.
931, J.D. Hayworth's bill, which I think is a very interesting
bill, but if you think about 4,000 regulations a year, perhaps
we do not have the time to review every one of them but perhaps
it could be fine tuned with some specific criteria or
something.
I guess my question is, I will just throw this out
generally to the panelists, how can we actually achieve the
proper balance as Members of Congress for congressional
oversight, that we do have the proper oversight initiatives
here at the same time that we are not wanting to tie the
agencies' hands completely as well?
Mr. Lewis. There are a variety of ways of streamlining or
limiting congressional review, even under Representative
Hayworth's proposal. It was mentioned earlier that there are
something like 135 economically significant rules under various
stages of development in the most recent unified agenda of the
Federal Government.
I do not know exactly how many of those are completed
regulatory actions, but I do know how many were completed
actions in the 2003 edition when there were 127 economically
significant rules at the pre-rule, proposed rule, final rule
completed, and long-term stages. That was 22. So we are talking
about two dozen economically significant rules a year probably
that are finalized and go into effect that year.
I think it is unquestionable that Congress could find the
time to review and actually vote on two dozen, maybe even three
dozen economically significant rules, especially when you
consider how much time is devoted to matters of lesser
importance, as Congressman Lynch and others have pointed out.
I also think that even though I am not quite clear about
all the details of Congressman Ney's proposal, that the basic
idea is entirely sound. Everybody knows who works here
certainly, but even people who do not, who have just taken
college political science, that the work of Congress is done by
committees. And, so if something is really important and is to
get done by Congress, it has to have an institutional basis in
a committee structure, in a committee system.
And we also know when you have a committee, then you have
professional staff and they develop institutional memories, and
for these staff to justify their existence that committee
really has to take action. And so it is not surprising that
only 37 resolutions of disapproval have been introduced. As
Congressman Lynch said, if it is everybody's responsibility, it
is nobody's.
But if you give a specific committee an assignment to
monitor rules for the purpose of developing resolutions of
disapproval, I think we will find that we get a lot more than
37 over time.
Mr. Copeland. One thought. This balance is a tricky thing
trying to determine what controls need to be placed on
regulatory agencies without hindering them so much that they
cannot really act. But I do not think hardly anyone would
expect agencies to put out rules without issuing some clear
guidance as to how they are supposed to be implemented.
And Section 212 of the Small Business Regulatory
Enforcement Fairness Act, which required compliance guides but
allowed agencies to opt out of that process whenever they
determined that the rules do not have a ``significant impact on
small entities,'' points out the problem or part of the
problem, in that if an agency has that much discretion, then it
is basically up to them to decide what they get to do or what
they have to do.
There is currently a bill before the House, Congressman
Manzullo's bill, that would require the SBA Office of Advocacy
to define that term or at least come up with rules to define
that term. That would at least set some parameters so that if
it is more than a certain amount, 1,000 small businesses
affected to the tune of $5,000 apiece, above that is
automatically going to be considered a significant economic
impact on a substantial number. So there needs to be some
clarity with regard to that, and there are opportunities
legislatively to do that.
On the Senate side, Senator Snow has a bill that would
require agencies when they issue a compliance guide to issue it
contemporaneous at least with the effective date of the rule.
So that you cannot have instances where compliance guides are
issued years after rules have already taken effect. That, to
me, makes some sense. So there are some tweaks to the existing
reforms that can also be made.
Mr. Olson. I would like to just add one point, which is,
two of the bills that we have been talking about that create
this joint committee, I do have concerns both about the impact
of that on committee jurisdiction, the Energy and Commerce and
other committees, what the implications of that would be.
It would seem that where you have committee staff and
Members that already have developed expertise, the idea of
sending these to the committee of jurisdiction makes a lot more
sense. We have concerns that if it is difficult for the
committee of jurisdiction to develop the expertise to review a
rule, how can one committee review all the regulations of all
the agencies. I think it becomes very difficult. So, perhaps
some solution is to involve the committees of jurisdiction in
making those determinations.
I think also the committee that has been proposed has a 7-5
majority-minority split, which is unlike the Ohio one as I
understand it. In addition, there are issues about bicameral
authority. For example, a majority of Senators could force
something to be done in the House through a vote of this joint
committee, which I think raises substantial Constitutional
questions.
Mr. Mihm. What you are hearing, ma'am, I think is that
there is a series of initiatives Congress could take that
basically fall out along a continuum; at one end, some of the
legislative proposals that you have heard this morning, which
obviously will need some debate and careful consideration, but
at the other end there are some issues or some steps that
Congress could take relatively quickly, and I do not want to go
too far and imply that they would be without debate or smooth
sailing, but where there is a greater degree of consensus on
many of the issues, a couple of things that Curtis mentioned.
In addition, we had a forum at GAO several months ago in
which we pulled together a wide array of stakeholders on
regulatory reform issues looking at the unfunded mandates. One
of the key issues that came out of that was just the
opportunities for better definitions and better clarity about
what we are looking for and what would be an unfunded mandate
and not an unfunded mandate.
Again, it is not at the end of the day as though everyone
agreed on everything, but there was a general consensus of we
can get people together, we can continue the conversation, we
might be able to make some real substantive steps. And so my
point is, there is a whole series of very important but still
smaller baby steps that Congress could take before you have to
grapple with some of the more difficult issues.
Ms. Miller. All right. Thank you very much.
Representative Lynch.
Mr. Lynch. Thank you, Madam Chair. I want to thank you each
for participating and for your help. I have been reading a lot
of your stuff recently, especially of Mr. Copeland. Very, very
helpful. It has been very educational on my part; I am a new
member of this committee.
There are 1,000 ways that we could go here. But Mr. Mihm,
you described this continuum where we can actually be more
specific with our legislation, to begin with, which would
provide more specific guidance to agencies so they would not
wander afield. And then we have a couple of opportunities I
think during the proposed draft public comment process, and
then again in the final rule draft we have another opportunity.
Then the Congressional Review Act gives us an opportunity for
this resolution of disapproval, if you will, which is
cumbersome and it is not anybody's central job to review it.
But in back of all that, the assessment that we are making of
each of these regulations, good or bad.
Mr. Lewis, maybe you could speak to Mr. Olson's point about
how we fall into a pattern of talking about regulations solely
as a burden. I am an ironworker, spent 20 years in the
business. We have regulations now that were not in place when I
was ironworking, where they actually have nets so people do not
fall to their deaths.
When I was ironworking, we had the dubious distinction of
having more people killed and injured on the job than any other
industry in the United States. We were in this bizarre, macabre
competition with coal miners who would die years later of black
lung or collectively in cave-ins back in the day; ironworkers
died one at a time, but continually.
And then they came up with regulations that required safety
belts, hard hats, nets that have a cost. They have a cost. But
if you look at the productivity of ironworkers, it has gone
straight up since I left. Hopefully, there is no cause and
effect of that. [Laughter.]
But there is a benefit to some of this regulation. And so
to just sweep it all aside, as Mr. Olson has articulated, I
think is wrong and ignores the benefit that we gain from some
of these regulations.
And I was fascinated by your proposal, Mr. Lewis, to open
up competition to this analyses that we have going on, there is
a certain monopoly there among OMB and GAO, whatever, and to
open that up. Now we open that up, but we also have industry
out there, people that want to tell us that smoking is actually
good for you, you know, the tobacco industry and all that, but
you do have industries out there that would want to sell you a
bad bill of goods, and they would sponsor research. Maybe we
ought to take a look at that in a separate hearing at some
point.
But what would be part of that analysis? Would we invite
this competition and have people try to quantify the costs and
benefits of the regulation in a real way, in a meaningful way?
Because we are sort of hung up on that.
Mr. Lewis. Yes, I quite agree with you that regulations
have benefits, and included among those is saving lives.
Sometimes regulations have unintended consequences, and they
actually increase fatalities and casualties. Fuel economy
standards, for example, of automobiles has resulted in the
downsizing of cars, and NHTSA in several studies has determined
that, yes, that contributes to highway fatalities.
But of course, the purpose of health and safety regulation
is to make people healthier and safer, and the purpose of
environmental regulation is to make the environment cleaner,
and I am in no way disputing that.
The competition proposal that I was discussing would be one
in which people would be able to submit their own cost and
benefit estimates and have it go toe-to-toe with an agency's
estimate. It would not be quite a level playing field because
in this particular formulation of this proposal, and there
might be other ideas, like putting it in front of a Blue Ribbon
panel or something, it would be OMB that would be one of the
judges, at least.
I think it would be great to have GAO also judging and
making its own independent determination of who the winner is,
but OMB definitely I think has a bias in favor of the agencies
that are all part of the same administrative team. But, see,
you could also do this with independent agency rulemakings, and
maybe OMB would be a little bit more impartial there.
The idea would be to allow really a public debate and
conversation on an agency analysis that would be excited by a
contest. There is nothing, as some people have said, there is
nothing like a good brawl to draw a crowd. And why is it
Americans love sports? Why is it that so many millions of
people watch football? Because Americans love contests and
contests bring out the best in people.
Mr. Lynch. If I may interject, though. Using that same
analogy, it is the George Steinbrenners who have the most money
that buy the best players that win. And I am just concerned
that the greatest incentive would be to industry--the coal
industry, the automobile industry, the tobacco industry--to
weigh in against GAO or OMB, and so the public, you know, Joe
Schmoe and Mary Schmoe, who do not have an advocate on their
side, their interest is subverted or ignored completely.
Mr. Lewis. Well I think they are lost in the shuffle today.
I think the difference here is that you would have State and
local governments weighing in, they also have their regulatory
experts, and you would have small business associations
weighing in. It would be a public contest and OMB would finally
have to judge whose analysis is best.
See, right now, Mr. Olson cited John Graham's testimony to
the effect that the benefits swamp the costs. But if you read
the fine print in OMB's 2005 Draft Report, and in fact all of
their reports under the Regulatory Right to Know Act going back
over the years, they do not do anything like an audit of the
agencies' estimates, they just compile them. And so what they
are taking is the agencies' estimates, which, let us face it,
have to be to some extent self-serving because a cost-benefit
analysis is a justification for actions the agency wants to
take, and they just aggregate them.
So here, you know, you would actually get OMB not just
reporting what the agency said were the cost and benefits of a
rule, but OMB having to pick that estimate versus the estimates
that could be submitted by a small business group, by a State
government regulatory expert, or an association of State
governments. I just think that this kind of more open
marketplace for regulatory analysis--and we would not be
requiring the agency to accept the cost-benefit analysis of
anyone else.
We are just saying let us have your expert and the other
fellow's expert present your material and have judges decide.
That in itself would generate a tremendous amount of oversight
and interest on the part of Congress and the public and I think
it could just have a healthy result overall.
Mr. Lynch. Interesting. I do not know if anybody else wants
to----
Mr. Mihm. Mr. Lynch, since GAO was mentioned in this
context, I would add just a couple of seconds on this, not so
much on the broad merits of what has been discussed. But our
longstanding belief and Congress' belief as well has been that
the appropriate role for GAO is not to be an independent judge
in these types of situations, but rather this would be an
executive function to be judging, to the extent you wanted to
go down that road, among competing cost-benefit analyses.
The more appropriate role, if Congress would want GAO to do
that, would be then to kind of weigh in on the merits of the
debate after it took place rather than to be an active party in
that debate. It also would have a series of resource
implications that, depending on if you want to advance this,
that we would like to engage in that discussion with you as
well.
Mr. Olson. Could I just add briefly. It is important to
keep in mind that, according to a CBO review, just doing one of
these cost-benefit analyses costs on average about $570,000 and
can cost several million. I mean, Joe Schmoe and Mary Schmoe
are not going to pay that kind of money to run one of these
things.
So I think one of these competitions that has been
suggested would end up being just completely disproportionate,
that the industry that is well-funded would come in with a
higher rack of economists, attack the agency--which they
already do, there already is an opportunity for them to
comment--and try to shoot down the agency and bog it down.
The other point I would make is that OMB absolutely does do
reviews of the agency's regulatory impact analyses and often
comments on them and says that they are no good and go back to
the drawing board. So, it is not quite accurate to say there is
no OMB review of these RIAs.
And finally, I think one idea, the TIRA, the Truth in
Regulating Act, that already is law, that theoretically is a
pilot--it sort of reminds me, my son just got his learner's
permit to start driving and----
Mr. Lynch. My condolences. [Laughter.]
Mr. Olson. It is like giving him the keys to a Mazaratti or
something and just saying go ahead and drive. We have not test
piloted this thing yet. It has never been funded. Why not sort
of see whether this pilot program starts working, start looking
at whether a pilot can work before we start throwing this out
into a full-blown, full-time kind of an approach.
Mr. Lewis. Could I comment?
Ms. Miller. Mr. Lewis.
Mr. Lewis. I think that Congresswoman Kelly's proposal is
exceedingly moderate, you could describe it as tame. And I
understand why she is proposing something so tame. It is
because she did not get very far with something more ambitious.
Nonetheless, I think it is useful to lay out the ultimate goal
here, and I think the ultimate objective is to have a
counterpart to the Congressional Budget Office. Congress would
be at the mercy of the White House, OMB, and the executive
branch if you did not have CBO to do its own assessment of
taxes and spending. Regulation is, if not equal in size in
terms of the overall cost on the American economy or benefit of
spending programs, it is certainly quite substantial. It is a
gigantic part of the overall activity of government.
I see no reason why Congress should not have its own
independent institution dedicated to regulatory affairs, just
the way it does to budget affairs. And that, I think, would
make it a lot easier for you folks to do all kinds of
oversight. And that would also, it seems to me, be the proper
institution for providing an alternative judgment to OMB's
judgment as to whose cost-benefit estimate is best.
Ms. Miller. Do you have any other questions?
Mr. Lynch. No. Mr. Copeland, I did not know if you wanted
to comment.
Mr. Copeland. I think it is an interesting concept, the
layout in terms of competing economic analyses. I would point
out that GAO has weighed in on agencies' economic analyses in
the past; I have been part of a few of those efforts. And what
those typically look at is, are the underlying data
appropriate, are they sound, are the assumptions that the
agencies are making in the absence of data sound, and have they
considered all the available alternatives? Those are reasonable
questions that can be asked.
And we did in the context of the TRI lead rule that I
mentioned a while ago, where we found that EPA in their
economic analysis said that the rule would affect 60 different
SIC codes, they only had data on 30, so they left the other 30
completely away. And we said even making some modest
assumptions about how many small businesses would be affected
there, the number of small businesses could be much larger than
what EPA had estimated. But on the other hand, we said EPA has
the complete right to certify under the Regulatory Flexibility
Act to saying that the rule would not have a significant
economic impact because Congress has never defined that term.
Mr. Lynch. All right. Fair enough. Thank you, Madam Chair.
Ms. Miller. Thank you. Again, we want to thank all the
witnesses. Your testimony was certainly fascinating,
particularly as you were talking about some of the various
approaches to the cost-benefit analysis of these regulatory
kinds of things.
I think it was last week, at our last hearing at any rate,
we picked one particular issue to look at, something that OSHA
is looking at right now and promulgating a rule for, and this
is hexavalent chromium. And it was interesting. They are going
from a standard that we have had for quite a few decades I
suppose of 50 milligrams per billion, I suppose that is the way
they measure it, down to 1. We looked at all of our various
foreign competitors and what their standards were, etc.
But the cost-benefit analysis by OSHA was I think $200
million, and the industry's was billions and billions and
billions. So it is a balancing act I think for Members of
Congress just to try to understand it and try to do our very
best job here.
But we certainly appreciate all of your time. You are
gracious to come here and give of your time and your testimony
as well. We appreciate that very much. Thank you.
With that, we will adjourn the meeting.
[Whereupon, at 12:20 p.m., the committee was adjourned.]
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