[Senate Hearing 109-955]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 109-955
 
                     NOMINATION OF SUSAN E. DUDLEY 

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                 ON THE

     NOMINATION OF SUSAN E. DUDLEY TO BE ADMINISTRATOR, OFFICE OF 
  INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET


                               __________

                           NOVEMBER 13, 2006

                               __________

        Available via http://www.access.gpo.gov/congress/senate

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

                   Brandon L. Milhorn, Staff Director
                John K. Grant, Professional Staff Member
             Michael L. Alexander, Minority Staff Director
         Adam R. Sedgewick, Minority Professional Staff Member
                  Trina Driessnack Tyrer, Chief Clerk





















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins..............................................     1
    Senator Akaka................................................     2
    Senator Warner...............................................     4

                                WITNESS
                       Monday, November 13, 2006

Susan E. Dudley to be Administrator, Office of Information and 
  Regulatory Affairs, Office of Management and Budget:
    Testimony....................................................     6
    Prepared statement...........................................    27
    Biographical and professional information....................    29
    Letter from U.S. Office of Government Ethics.................    48
    Responses to pre-hearing questions...........................    49
    Additional responses to pre-hearing questions................    67
    Responses to post-hearing questions..........................   101
    Additional responses to post-hearing questions...............   112
    Additional support and non-support letter and information for 
      the record.................................................   127


                     NOMINATION OF SUSAN E. DUDLEY

                              ----------                              


                       MONDAY, NOVEMBER 13, 2006

                                       U.S. Senate,
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:32 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins, Warner, Levin, Akaka, Carper, 
and Pryor.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. The Committee will come to order.
    Good afternoon. Today, the Committee will consider the 
nomination of Susan Dudley to be the Administrator of the 
Office of Information and Regulatory Affairs at the Office of 
Management and Budget. With the nominee to lead OIRA before us, 
this Committee will continue a longstanding debate: When should 
the government regulate and when should government rely on 
market forces to produce desirable outcomes?
    Regulations affect virtually every part of our lives. They 
make us safer and healthier. They help keep our air and water 
clean. They protect consumers from abusive practices. At the 
same time, excessive regulation can impose real burdens, from 
mere inconvenience to significant costs. The government must 
consider these trade-offs as it deliberates the need for and 
the extent of regulations. How the government weighs competing 
interests often depends in part on the methodology used to 
calculate costs and benefits, on the accuracy of the data that 
informs decisionmakers, and on the way alternative regulatory 
approaches are developed and compared.
    OIRA plays a significant role in the Federal rulemaking 
process. OIRA is one of those alphabet-soup agencies that few 
people would recognize. Its lack of name recognition, however, 
contrasts with the impact that its work has on the lives of all 
Americans. The office was created by the Paperwork Reduction 
Act of 1980 and has specific statutory responsibilities, such 
as reviewing the amount of paperwork generated by Federal 
agencies and assessing the costs and benefits of Federal rules.
    For the past 25 years, OIRA has also been responsible for 
reviewing the substance of proposed and final rules before 
agencies publish them in the Federal Register. The agency staff 
thus plays an important role in the rulemaking process. They 
advise agencies on an informal basis as regulations are 
developed and formally review proposed rules to ensure that 
proper cost/benefit principles have been followed.
    Let me be clear. Technically, OIRA does not approve or 
reject regulations. Individual agencies must ultimately decide 
whether or not to accept OIRA's suggested changes or proceed 
with the publication of a rule as drafted by the agency. But 
OIRA has significant influence over the regulatory process. Its 
officials ask some important and sometimes challenging 
questions, such as: Is the science behind the regulation sound? 
Do these cost/benefit calculations make sense? Is this 
regulation the best alternative to achieve our goals?
    I am particularly interested in the influence that OIRA has 
on the development of environmental regulations. The work of 
the Environmental Protection Agency is vital to the protection 
of our lakes, rivers, and the air we breathe. The regulations 
that the EPA drafts often involve calculating benefits that can 
be difficult, if not impossible, to quantify. At times, these 
regulations may be based on conflicting data that spark fierce 
debate in the scientific community.
    The President's nominee, Susan Dudley, has had considerable 
experience working with OIRA. After earning a master's degree 
from the Sloan School of Management at MIT, Ms. Dudley worked 
for a time with the EPA and then on the staff of OIRA itself. 
She spent 8 years as a consultant doing environmental analysis 
before joining the Mercatus Center at George Mason University, 
where she served as a senior research fellow and later as 
director of the Regulatory Studies Program. While with the 
Mercatus Center, Ms. Dudley has filed numerous public comments 
in regulatory proceedings concerning a broad spectrum of 
issues. The Committee has closely reviewed these comments and 
numerous other published articles in its consideration of Ms. 
Dudley's nomination to this important position, and I am 
certain that the Committee members today will explore many of 
these writings in some detail.
    For my part, I intend to discuss with the nominee some of 
her comments on safety and environmental standards. I also want 
to explore her advocacy of ``regulatory budgets'' to cap the 
costs that can be imposed on any one industry as a result of 
regulation. Ms. Dudley, your views on these and other matters 
are most important for the Committee to fully understand as we 
deliberate on your nomination, and I look forward to exploring 
these and other issues with you today.
    Senator Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Madam Chairman. It is 
good to be back here with you again and with the Committee. And 
I join you in welcoming Ms. Dudley, the President's nominee to 
head the Office of Information and Regulatory Affairs, to our 
Committee today. Ms. Dudley, I notice your family sitting in 
back of you, and I want to welcome them to this hearing.
    This position is far more important than is generally 
recognized. Those who understand the inner workings of the 
Federal Government know the critical nature of this office. 
OIRA, created as part of the Paperwork Reduction Act (PRA), has 
wide-ranging responsibility for the collection of government 
information under the PRA--reviewing draft regulations, 
developing and promoting governmentwide policies on information 
technology, privacy, and statistics.
    The influence of OIRA is truly substantial. The office 
affects the daily life of every citizen, from the distribution 
of government benefits to privacy rights, to regulations 
affecting the environment. That is why these decisions cannot 
be left to political whim or individual political preferences. 
If OIRA disregards the technical expertise of and decisions 
made by Federal agencies, then public health and safety is at 
risk.
    Unfortunately, I have several concerns with Ms. Dudley's 
nomination. Madam Chairman, I would like to ask that my full 
statement be placed in the record, and I will finish off with 
an abbreviated statement.
    Chairman Collins. Without objection.
    [The prepared statement of Senator Akaka follows:]
                  PREPARED STATEMENT OF SENATOR AKAKA
    Thank you Madam Chairman. I join you in welcoming Ms. Dudley, the 
President's nominee to head the Office of Information and Regulatory 
Affairs (OIRA), to our Committee today. I also welcome her family this 
afternoon.
    This position is far more important than is generally recognized. 
Those who understand the inner workings of the Federal Government know 
the critical nature of this office. OIRA, created as part of the 
Paperwork Reduction Act (PRA) in 1980, has wide-ranging responsibility 
for collecting government information under the PRA, reviewing draft 
regulations, and developing and promoting government-wide policies on 
information technology, privacy, and statistics.
    The influence of OIRA is substantial. The office affects the daily 
life of every citizen--from the distribution of government benefits to 
privacy rights to regulations affecting the environment. That is why 
these decisions cannot be left to political whim or individual 
political preferences. If OIRA disregards the technical expertise of 
and decisions made by Federal agencies then public health and safety is 
at risk. Unfortunately, I have several concerns with Ms. Dudley's 
nomination.
    First, Ms. Dudley has written in opposition to regulations 
preserving the environment, protecting individual privacy, and 
promoting public safety and workers' rights. For example, since 2001, 
OIRA sought public comment three times for suggestions on regulations 
that should be modified or repealed. Twice, Ms. Dudley and her 
colleagues at the Mercatus Center submitted proposals that, if 
implemented, would benefit industry over the environment, public 
health, and workers' rights. In 2001, Ms. Dudley submitted to OIRA 44 
different regulations for repeal or modification--most of which 
impacted the environment. OIRA should not become a place where 
environmental regulations go to die.
    Second, I am concerned that Ms. Dudley may expand upon Mr. Graham's 
risk assessment and peer review proposals and set impossibly high 
scientific evidence standards before accepting agency proposals for 
regulatory action. Too stringent a criteria, in my opinion, would lead 
to unnecessary delay which would only endanger the public. I expect the 
OIRA Administrator to trust agencies to use the scientific evidence 
available, instead of requiring irrefragable proof before a regulation 
is implemented.
    Third, a number of respected organizations have raised additional 
concerns about Ms. Dudley's inconsistent approach to applying common 
economic principles in a manner that is outside of mainstream economic 
usage. According to her writings, the one constant is that Ms. Dudley 
always seems to find regulations onerous or without need. I want to 
know how Ms. Dudley would apply common economic principles to ensure, 
should she be confirmed, that OIRA operates in a fair and transparent 
manner.
    Again, Madam Chairman I appreciate your holding today's hearing, 
and I look forward to our discussion with Ms. Dudley.

    Senator Akaka. It is very important that we have 
regulations preserving the environment, protecting individual 
privacy, and promoting public safety and workers' rights. As 
such, peer review and risk assessment programs cannot set 
scientific evidence standards so high that OIRA cannot accept 
agency proposals for regulatory action.
    Also, I am concerned about an issue raised by a number of 
respected organizations. They claim that Ms. Dudley uses common 
economic principles in a manner that is outside of mainstream 
economic usage. I want to know how Ms. Dudley would apply 
common economic principles to ensure that OIRA operates in a 
fair and transparent manner.
    Again, Madam Chairman, I appreciate your holding today's 
hearing and look forward to our discussion with Ms. Dudley.
    Thank you very much.
    Chairman Collins. Thank you. Senator Levin.
    Senator Levin. Madam Chairman, I don't have an opening 
statement. I do share a number of the concerns of Senator 
Akaka, which we could explore during questions. I notice that 
our dear colleague, Senator Warner, is here to introduce Ms. 
Dudley, and I think on our side we would be willing to yield to 
him before any other opening statements are made because of his 
time schedule, if that would be desirable from his perspective.
    Chairman Collins. If that is OK with my two colleagues, we 
will----
    Senator Carper. Madam Chairman.
    Chairman Collins. Senator Carper.
    Senator Carper. I have been yielding to John Warner since 
he was Secretary of the Navy and I was Lieutenant Tom Carper in 
the U.S. Navy 7th Fleet. So I am happy to yield again.
    Chairman Collins. And, Senator Pryor, thank you.
    Senator Warner, we are very pleased to have you with us 
today as a Member of this panel and also the distinguished 
chairman for a little while longer of the Senate Armed Services 
Committee and, of course, as the senior Senator from the 
Commonwealth of Virginia. We welcome you to introduce the 
nominee.
    Senator Warner. Thank you, Chairman Collins, my colleagues 
on the Committee, and I appreciate the courtesy, Senator Levin, 
that you have always extended me and other colleagues.
    I was sorry to be a few minutes late. This Committee is 
known for punctuality. The Armed Services Committee somehow 
does not have the same reputation. [Laughter.]
    First, may I inquire, have you introduced the members of 
your family?
    Chairman Collins. Not yet.
    Ms. Dudley. No.
    Senator Warner. I wonder if we might invite the nominee to 
introduce her family.
    Chairman Collins. I was planning to do that in a few 
moments, but now would be a fine time as well.
    Ms. Dudley. OK. With me I have Brian Mannix, my husband, 
and my two children, Christopher Mannix and Gregory Mannix.
    Chairman Collins. We welcome all of you.
    Ms. Dudley. Thank you.

              OPENING STATEMENT OF SENATOR WARNER

    Senator Warner. Thank you. We are delighted that you have 
accepted this nomination by the President. You have brought 
your family, and you now appear before this Committee of the 
U.S. Senate. The Senate is not an unfamiliar institution to you 
because of your extensive background.
    Madam Chairman, you recited much of her biography, but I 
would like to just add another perspective. Without a doubt, 
the nominee has accumulated a wealth of experience in the 
regulatory process as she has held several positions in 
regulatory-related fields.
    After receiving her B.S. summa cum laude--that is a plateau 
that I never achieved, nor will I ever in my lifetime--from the 
University of Massachusetts and her M.S. from the Sloan School 
of Management at MIT, she began a career that spanned almost 8 
years within the Federal Government serving in various 
agencies: served in the Environmental Protection Agency as a 
financial consultant; in the Department of Energy Office of 
Environment, Safety, and Health, assisting the Assistant 
Secretary; in the Commodity Futures Trading Commission as an 
economic adviser to Commissioner Albrecht; and more recently 
she has already served the OIRA for almost 4 years as both a 
senior economist and a deputy chief of the Natural Resources 
Branch. And you recited what she has done in the interim, so I 
will not go further except to ask to have my entire statement 
put in the record.
    Chairman Collins. Without objection.
    [The prepared statement of Senator Warner follows:]
                  PREPARED STATEMENT OF SENATOR WARNER
    Chairman Collins and Senator Lieberman, I thank you for holding 
this confirmation hearing today and allowing me the courtesy of 
introducing a fellow Virginian, Susan Dudley. Ms. Dudley has been 
nominated to serve as Administrator for the Office of Information and 
Regulatory Affairs (OIRA) within the Office of Management and Budget 
(OMB). She is joined today by her husband, Brian Mannix and her two 
sons, Gregory and Christopher Mannix.
    The Office of Information and Regulatory Affairs was first 
established under President Ronald Reagan through the Paperwork 
Reduction Act of 1980. This Act required the office to manage 
information and statistical policy while enforcing paperwork reduction 
controls. In addition, subsequent Presidential Executive Orders have 
further refined the Office's role in the regulatory process, providing 
OIRA the responsibility to review the substance of agencies' regulatory 
actions before publication in the Federal Register.
    Without a doubt, Susan Dudley has accumulated a wealth of 
experience in the regulatory process as she has held several positions 
in regulatory related fields.
    After receiving her BS, summa cum laude, from the University of 
Massachusetts and her MS from the Sloan School of Management at MIT, 
Ms. Dudley began a career that spanned almost 8 years within the 
Federal Government serving in various agencies. She has served in the 
Environmental Protection Agency as a financial consultant; in the 
Department of Energy Office of Environment, Safety and Health assisting 
the Assistant Secretary; in the Commodity Futures Trading Commission as 
an Economic Advisor to Commissioner Albrecht. And more importantly, she 
already has served in OIRA for almost 4 years as both a Senior 
Economist and a Deputy Chief in the Natural Resources Branch.
    Subsequent to her public service, Ms. Dudley has worked in 
different facets of the private sector from financial and environmental 
consulting to working as an Adjunct Law Professor at the George Mason 
University School of Law teaching regulatory studies. Most recently, 
Ms. Dudley served as Director of the Mercatus Center at George Mason 
University, which focuses its research efforts on the conditions that 
enable good governance and successful economies.
    In my view, Susan Dudley's impressive credentials makes her highly 
qualified to serve as Administrator of OIRA.
    I am pleased to introduce her today, and I look forward to the 
Committee's favorable consideration of her nomination.

    Senator Warner. I am aware of concerns about her background 
in the positions she has held in public service, but I would 
only say that any individual worth their salt who has served in 
various public positions has engendered some controversy in 
their lifetime. And I would accept willingly, hopefully, that 
controversy in exchange for the extraordinary record of public 
service. Were I to ever stand--and it is most unlikely--for a 
public office again, not in the Senate--that is likely to 
happen, but I mean in other avenues, there would be thunder 
directed at me as a consequence of my previous positions in the 
Executive Branch of our government. So accept it with the 
bravery that you have shown in the past, and look them in the 
eye and tell it as it is, and be responsibe. And I wish you 
luck, and you're on your own. [Laughter.]
    Chairman Collins. Ms. Dudley, I am not sure you should take 
great confidence in that.
    Thank you, Senator Warner, for that introduction.
    We now will resume opening statements. Senator Levin, were 
you finished?
    Senator Levin. Yes. Thank you.
    Chairman Collins. Senator Carper.
    Senator Carper. No, thank you.
    Chairman Collins. Senator Pryor.
    Senator Pryor. No, thank you.
    Chairman Collins. Thank you.
    I do want to thank Senator Warner for his introduction of 
Ms. Dudley. Susan Dudley has filed responses to the 
biographical and financial questionnaires, answered pre-hearing 
questions submitted by the Committee, and had her financial 
statements reviewed by the Office of Government Ethics. Without 
objection, this information will be made part of the hearing 
record with the exception of the financial data, which are on 
file and available for public inspection at the Committee 
offices.
    Our Committee rules require that all witnesses at 
nomination hearings be sworn in and give their testimony under 
oath, so, Ms. Dudley, if you would please stand and raise your 
right hand. Do you swear that the testimony you are about to 
give to the Committee will be the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Ms. Dudley. I do.
    Chairman Collins. You may be seated.
    Ms. Dudley, please proceed with your statement.

TESTIMONY OF SUSAN E. DUDLEY\1\ TO BE ADMINISTRATOR, OFFICE OF 
 INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND 
                             BUDGET

    Ms. Dudley. Thank you, Chairman Collins, Senator Lieberman, 
and Members of the Committee for the opportunity to be here to 
answer your questions this afternoon. I am honored to be 
President Bush's nominee to be Administrator of the Office of 
Information and Regulatory Affairs at the Office of Management 
and Budget. And if I am confirmed, I look forward to working 
with each Member of this Committee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Dudley appears in the Appendix on 
page 27.
---------------------------------------------------------------------------
    I came to Washington almost 25 years ago as a newly minted 
MBA from MIT's Sloan School of Management, deeply committed to 
environmental issues and interested in learning how government 
policy can foster environmental and economic prosperity. At the 
Environmental Protection Agency, I observed how incentives 
matter when it comes to promoting compliance with environmental 
policy.
    To provide incentives for compliance with environmental 
regulation, I developed the BEN model, still in use today, to 
estimate the economic benefit of noncompliance for civil 
penalty assessments and used it to help negotiate the largest 
civil penalty for a water quality violation at that time. I 
went on to work as a career staff economist at OIRA and later 
at the Commodity Futures Trading Commission.
    For the last 8 years, I have studied and written on 
regulatory process and policy at the Mercatus Center at George 
Mason University. I also teach courses on regulation as an 
adjunct professor at the George Mason University School of Law. 
I believe my years working with, studying, and teaching about 
regulation will serve me well if I am confirmed as 
administrator of OIRA. But I also recognize that my role will 
be very different from what it is now.
    As a researcher and an academic, I have written 
extensively, both in scholarly journals and the popular press. 
Those writings have sometimes been provocative with the goal of 
challenging the way people think about the consequences of 
regulation. If confirmed, however, I will have a different 
role. The OIRA Administrator is responsible for implementing 
the laws of the land as Congress has written them. I will lead 
a team of talented and dedicated career analysts at OMB in 
working with agencies, Congress, and the public on issues 
regarding regulation, information technology and policy, 
privacy, paperwork review, and statistical policy. One thing I 
will continue to do is foster debate. As my students will 
attest, I am fair and open-minded and will listen to all who 
want to have a say in the public process.
    OIRA was created when President Carter signed into law the 
Paperwork Reduction Act of 1980. It is guided by several 
statutory authorities, such as the Privacy Act, the Unfunded 
Mandates Act, and the E-Government Act, as well as President 
Clinton's Executive Order 12866 governing regulatory review.
    The common theme in these different authorities is the need 
for a central office to coordinate, oversee, and guide 
executive branch agencies to ensure their activities are 
consistent with statutory and executive objectives and 
accountable to Congress, the President, and the American 
people.
    OIRA plays a vital role in ensuring that this process is 
transparent, open, and accountable, not to special interests 
but to the broader public interest, and I am committed to that 
role. Throughout my career, I have endeavored to conduct myself 
with honesty and integrity and to treat others with respect and 
openness. If I am confirmed, I look forward to working with you 
to fulfill the important functions of OIRA.
    Thank you for giving me the opportunity to make this 
statement, and I look forward to your questions.
    Chairman Collins. Thank you for your statement. I am now 
going to ask you three standard questions that we ask of all 
nominees.
    First, is there anything that you are aware of in your 
background that might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Ms. Dudley. Not that I am aware of, Senator.
    Chairman Collins. Second, do you know of anything, personal 
or otherwise, that would in any way prevent you from honorably 
and fully discharging the responsibilities of this office?
    Ms. Dudley. No, Senator.
    Chairman Collins. And, third, do you agree without 
reservation to respond to any reasonable summons to appear and 
testify before any duly constituted Committee of Congress if 
you are confirmed?
    Ms. Dudley. Yes, Senator, I do.
    Chairman Collins. We will now proceed to the first round of 
questions limited to 6 minutes each, but I would inform my 
colleagues that we will be doing a second round as well.
    Ms. Dudley, I have read many of your writings, and many of 
them are quite provocative in the approach that you have taken. 
I kept in mind as I read your many writings and comments that 
you were writing from a more academic perspective rather than 
as a public official with broader responsibilities.
    But if you read some of your writings, one could get the 
impression that you think that all regulatory matters can be 
boiled down to a hard dollar-and-cents calculation of the costs 
and the benefits. And yet it is very difficult to put a dollar 
value on many benefits. What is the value of being able to go 
outside and see an unpolluted sky? I am not talking about the 
health benefits. I am talking about the scenic value of being 
able to see a sparkling, unpolluted river or clean skies. What 
is the value of just knowing that our rivers and lakes are 
clean enough to swim in and to fish in?
    It is difficult to quantify everything. I think of that 
overplayed television ad about some things in life are 
priceless, but I am not sure you see it that way. I think you 
see everything as being quantifiable, that for everything else 
there is OIRA to calculate the cost and the benefit.
    What is your response to that? Does your approach to 
regulations take into account the nonquantifiable benefits?
    Ms. Dudley. Yes, indeed, I agree with everything that you 
said because I also enjoy a clear stream. I love going out and 
enjoying a clean environment, and a lot of these things are 
hard to quantify.
    I have actually never advocated for a strict benefit/cost 
analysis, and indeed, in my writings, in the comments that we 
file with Federal agencies we have a checklist that has seven 
elements, and cost/benefit is just one of seven. Other things 
include--and certainly there are a lot of nonquantifiable 
effects. So what kind of scientific information do we have? 
What are the distributional effects? Who is paying the cost? 
Who is getting the benefit?
    So there are a lot of different issues that need to be 
factored in, and cost/benefit analysis is not something that I 
would think is the--it certainly would not be a deciding 
factor.
    Chairman Collins. I want to follow up further on this 
theme. At one point you were quoted in the Washington Post as 
saying that a rule to increase fuel economy standards for light 
trucks was ``the worst rule of 2003.'' I personally believe 
that it is absolutely essential that we increase corporate 
average fuel economy standards, the so-called CAFE standards, 
because doing so would have important benefits for consumers, 
those are dollar-and-cents benefits, but also for our national 
security and for our environment. In the case of national 
security, I think it is very important that we decrease our 
dependence on foreign oil, so I have supported proposals that 
would save more than a million barrels of oil per day by 
raising CAFE standards.
    If you are confirmed, would you take into account the 
national security implications, the environmental benefits, as 
well as the more quantifiable consumer savings of reduced oil 
consumption in any future rulemakings on CAFE standards?
    Ms. Dudley. Well, it is interesting that my criticism of 
that rule in 2003 was just that, that it looked at the consumer 
savings but it didn't look at the externalities, the energy 
security, the energy independence, the environmental benefits, 
the fact that--the unintended consequence, the size of the 
cars. So that was precisely my criticism of the analysis behind 
that regulation was that it didn't, because indeed fuel economy 
is important to me, too. My husband and I bought--we drive two 
hybrid cars, and we had to wait in line for 6 months for the 
very first Prius that came out in the United States. So I 
believe in fuel efficiency, and I agree with you, those are all 
the reasons why we should be making those moves.
    And, in fact, the CAFE rule in 2006--I was not critical of 
that one because I think it did address specifically those 
issues that you mentioned.
    Chairman Collins. But why would you call it ``the worst 
rule of 2003'' if it had additional benefits that weren't 
recognized?
    Ms. Dudley. The criticism was really of the analysis, that 
the analysis was a one-size-fits-all analysis that didn't 
recognize that some consumers may bear more--or have more or 
less benefits from that regulation, depending on how much they 
drove. So I thought rather than focusing on the consumer 
savings, which I think is a decision consumers can make for 
themselves, the whole purpose of a CAFE rule would be these 
things that are external, that are, in economic terms, external 
to the consumer's pocketbook decision.
    Chairman Collins. Senator Akaka.
    Senator Akaka. Thank you very much, Madam Chairman.
    Ms. Dudley, in ``The Primer on Regulation'' that was 
published in 2005 by the Mercatus Center, you wrote, ``It is 
important to limit regulatory activity to identified market 
failures. In the absence of a significant market failure, 
individuals are better able to make decisions regarding trade-
offs in their lives than Government regulators.''
    In many instances, individual citizens are not in a 
position to act in the manner that you advocate. The power and 
financial leverage of businesses and government can leave 
individuals at a distinct disadvantage. Government regulation 
is often the only recourse to protect the interests of 
citizens, and so I would like to ask you to share with us what 
you mean by the concept of market failure?
    Ms. Dudley. Yes, Senator. Market failure is a standard 
economic concept that really refers to what is the root cause 
of a problem that we observe. And the reason that I think it is 
important and the reason that it is widely accepted to be an 
important first step in looking at and understanding regulation 
is that if you don't know what the root cause of the problem 
is, it is hard to address it in a way that actually targets the 
problem and doesn't end up having unintended effects.
    So a market failure could include pollution because that is 
a cost that the company that is putting something up its 
smokestack does not bear, so that is an externality that would 
need regulation. Another is a common resource, like fishing. 
Nobody owns the fish until you take it out of the water, so you 
need to have some regulations so that we don't overfish. And 
perhaps what you were speaking to is information asymmetry. If 
certain groups have information that others do not have, that 
is a market failure, and that can be addressed through 
regulation by providing that information.
    So I think understanding the root cause is the purpose of 
market failure. And, by the way, this is not something that is 
unique to me. I think standard textbooks will refer to it, and 
indeed, the guidelines issued by both President Clinton and 
President Bush refer to that as the first step in understanding 
regulation.
    Senator Akaka. Thank you. Ms. Dudley, the Davis-Bacon Act 
requires that prevailing wages are paid to workers on public 
works projects. All Federal Government construction contracts 
over $2,000 must include a provision for paying workers no less 
than the prevailing wages and benefits paid for similar 
projects. On the record, you have criticized the Davis-Bacon 
Act imposing costs that fall disproportionately on young and 
minority workers. You also said that Davis-Bacon does not offer 
net benefits to society, that there is no economic 
justification for the act, and that alternative standards were 
not adequately explored.
    Now, given your comments about the Davis-Bacon Act, what 
assurances can you provide this Committee that, if confirmed, 
you will issue regulations related to the Davis-Bacon Act in an 
unbiased manner?
    Ms. Dudley. I have actually never suggested that the Davis-
Bacon Act shouldn't exist. I commented on a rule back in 1999 
on a provision to implement one aspect of it--the helper rule, 
or how to define ``helper'' under the Davis-Bacon Act. And my 
concern with that particular regulation was that the proposed 
definition would harm young, lower-skilled minority and female 
workers. The quote that you said, I was actually quoting a GAO 
study there, so those were not my words, but rather the GAO 
statement about the Davis-Bacon Act. So I have not--it was 
almost 10 years ago that I wrote that, and it was about a very 
specific proposal.
    If I am confirmed, I have every intention of following the 
laws of the land as they are written, Senator. I would like to 
assure you that.
    Senator Akaka. Ms. Dudley, as I mentioned in my opening 
statement, I am concerned about the value you will place on 
scientific evidence in determining whether regulatory action is 
necessary. Science can be extremely helpful in showing the 
consequences of actions and offer solutions to address 
resulting problems. However, science can have a degree of 
uncertainty, and I am concerned that you may require absolute 
scientific proof before relying on scientific evidence.
    If scientific evidence provides inconsistent results, how 
should agencies proceed with regulatory action?
    Ms. Dudley. There are guidelines that agencies rely on that 
talk about how to deal with uncertainty, and I have no 
intention to change those guidelines. I agree with you. We will 
never have perfect scientific information.
    Senator Akaka. Thank you very much. Thank you for your 
responses. Thank you, Madam Chairman.
    Chairman Collins. Thank you. Senator Levin.
    Senator Levin. Thank you, Madam Chairman.
    In your answer to Senator Akaka, I think you said that the 
words that there is no economic justification for a Federal 
role in defining construction practices and determining wages 
as required by the Davis-Bacon Act were these not your words?
    Ms. Dudley. Oh, I am sure they were my words, Senator, but 
they were referencing a GAO study, peer-reviewed economic 
journal article and GAO.
    Senator Levin. Well, because I am looking at what purports 
to be your words.
    Ms. Dudley. Yes, I am saying----
    Senator Levin. Did you believe that there is no economic 
justification for a Federal role in defining construction 
practices and determining wages as required by the Davis-Bacon 
Act? Did you believe that when you wrote it?
    Ms. Dudley. Yes. I examined the GAO study, and yes, I cited 
from the GAO study.
    Senator Levin. All right. And that is your current 
position?
    Ms. Dudley. I have not studied the Davis-Bacon Act at all 
except for that one regulation on helper rules, and my concern 
there was that it harmed the very people that I thought it was 
intended to protect.
    Senator Levin. Is there an economic justification for the 
Federal Government setting a minimum wage?
    Ms. Dudley. I have never studied the minimum wage.
    Senator Levin. Back in 2000, you wrote relative to the 
public's right to know about chemical plant risks that if there 
is a public demand for this information, as EPA's benefit 
assessment argues, nongovernmental organizations would find 
value in deriving it. How would a nongovernmental organization 
derive information from chemical plants?
    Ms. Dudley. I am not in detail familiar with that comment. 
I am not sure I could answer that part of the question.
    Senator Levin. OK. And then you went on to say, ``The fact 
that they don't suggests that the value of the information to 
the public is less than the cost of the information.'' How do 
you value that information about the risks that people face 
from chemical plant accidents or attacks?
    Ms. Dudley. I think it is very important to inform people 
about hazards that are in their community, and I think that is 
very important because you cannot make decisions for yourself 
and your family if you do not have that information.
    I believe my general comment on that regulation was that we 
needed to consider what the trade-offs were, and I was 
concerned that--well, terrorists--this was in 2000 so we didn't 
have evidence yet, but that terrorists might be able to access. 
That was information that developed scenarios for what is the 
worst-case thing that could happen if this chemical is 
released.
    Senator Levin. Is there always a nongovernmental 
organization out there to obtain information or to take action? 
That is the assumption of your comment.
    Ms. Dudley. With the Toxic Release Inventory, we certainly 
see a lot of nongovernmental organizations----
    Senator Levin. Is there always a nongovernmental 
organization that you can rely on to protect the public 
interest?
    Ms. Dudley. Absolutely not. I definitely see a role for 
government in protecting the public and informing the public.
    Senator Levin. Because that statement says that 
nongovernmental organizations would find value in deriving that 
information. The fact that they don't suggests what I just 
quoted; in other words, if there is value in obtaining it, 
there will be some nongovernmental organization that will 
obtain it. But isn't it true that there is not always a 
nongovernmental organization that has either the resources or 
the priorities to pursue a particular cause and you need to 
have a government to protect the public interest?
    Ms. Dudley. Yes, you are certainly right.
    Senator Levin. In 2002, you commented on an SEC rule to 
protect consumer privacy by limiting financial institutions' 
ability to share customer financial information without proper 
consent, and here is what you wrote about protecting the 
privacy of consumers' financial information: ``The implicit 
premise of the rule is that individuals and firms cannot come 
to a mutually satisfactory agreement as far as privacy is 
concerned without resort to government assistance.'' Is that 
the premise of the rule?
    Ms. Dudley. Actually, I did not comment on that rule. That 
was another scholar at the Mercatus Center.
    Senator Levin. I see. So those are not your words?
    Ms. Dudley. I believe what that is, is in OMB's Annual 
Report to Congress, they asked for recommendations for 
regulations, and what we did is we provided summaries of 
regulations we had researched. So I think that is where that 
came from. But I did not do that analysis, so I can't----
    Senator Levin. Those, then, were not your thoughts or words 
at the time.
    Ms. Dudley. Right.
    Senator Levin. You suggested that OIRA conduct independent 
assessments, that they have an outside organization to come up 
with an independent cost/benefit analysis separate from OIRA, 
rather than just having OIRA do the independent analysis, cost/
benefit analysis. So you would have a nongovernmental 
organization to operate above or alongside of OIRA to review 
and analyze regulations. You have said that OIRA from inside 
the Executive Branch cannot ``provide the necessary check or 
independent assessment of costs and benefits.''
    Do you believe that?
    Ms. Dudley. I am not exactly sure where that is from, but I 
believe that was my recommendation for a congressional office 
of regulatory analysis.
    Senator Levin. According to my notes, outside of the 
Executive Branch you wanted independent analysis, outside of 
the government, not just the Executive Branch.
    Ms. Dudley. I would love to follow up on this if I am wrong 
about this, but I believe that is testimony before Congress 
where I recommended a congressional office--or supported the 
congressional office.
    Senator Levin. In any event, my last question here, because 
I am out of time, would be to close that thought. What would be 
the cost of that independent analysis?
    Ms. Dudley. I don't know, sir.
    Senator Levin. Well, shouldn't you make a cost/benefit 
analysis before you propose that?
    Ms. Dudley. It was a recommendation to Congress, and I 
assumed that the Members that I made the recommendation to 
could analyze it.
    Senator Levin. You have a lot of confidence in us. 
[Laughter.]
    Thank you, Madam Chairman.
    Chairman Collins. Senator Carper.
    Senator Carper. Thank you, Madam Chairman.
    Ms. Dudley, would you tell us again the names of your sons 
and how old they are?
    Ms. Dudley. Gregory, who is behind me--who shouldn't be, 
because every time I go back, I get his long legs. Gregory is 
16, and he is in the 11th grade. And Christopher is 13 and in 
the 8th grade.
    Senator Carper. OK. My sons are 16 and 18, and our oldest 
boy is actually a freshman engineering student at a school up 
in Massachusetts where you spent some time.
    Ms. Dudley. Very impressive.
    Senator Carper. He is a lot more impressive than his 
father, I can assure you of that.
    I wanted just to start off by--every now and then I say to 
my sons, ``There is nothing wrong with making a mistake. We all 
make mistakes. And sometimes we learn the most from the 
mistakes that we make. The key is not to make the same mistakes 
over and over and over again.''
    Senator Pryor and I, along with Senators Voinovich and 
Alexander, have sort of encouraged the Senate to start 
sponsoring every 2 years right after the election something we 
call ``orientation for new Senators and spouses.'' And the idea 
is for the new guys and gals coming here to learn from our 
mistakes and the faculty of current Senators and spouses, to 
say these are the ways that we messed up and you don't want to 
make our mistakes, to learn from our mistakes.
    If you had to talk about some mistakes that you have made 
of a professional nature with respect to really some of the 
issues that we are talking about here today and looking back in 
hindsight, what are some of the mistakes that you have learned 
from that would guide you maybe a bit differently in this new 
role?
    Ms. Dudley. I actually am proud of the things that I have 
written. If I had known I was going to be nominated for a 
position, I might have written less. But I think if you read--
don't just look at things pulled out of context, but if you 
read what I have written, I have always tried to be thoughtful 
and careful--and provocative, yes, challenge the way people 
think about things. But I have tried to do it openly, 
transparently, and with integrity. So I am sure I have made 
lots of mistakes, but in terms of the things that I have 
written, I think that they are sound.
    Senator Carper. All right. We all have probably our own set 
of core values to guide us as we approach a particular job or 
an issue. My own core values are pretty basic. It is to figure 
out the right thing to do and just do it; to treat other people 
the way I want to be treated; to be committed to excellence in 
everything that I do; to use some common sense; and when I 
think I am right, just not to give up. And I call them sort of 
like my moral compass, and when I look at an issue or a 
challenge, I sort of look at the issue through that prism of 
those core values to help me figure out the way to go forward. 
And when I get off on the wrong track, these kind of help get 
me right back on track.
    Would you just take a minute and talk with us about your 
core values and how they guide you in approaching an issue or a 
regulation or whatever?
    Ms. Dudley. OK. I would say some of my core values are like 
yours. They are honesty and integrity and doing--I am a wonk; I 
am a nerd. I like to do the research, and I do not like to know 
the answer before I have done the research. But to back up from 
there, core values, I would say I care deeply about the 
environment. That is a core value. And I always have. When I 
came to Washington to try to do environmental policy that 
improves the environment, I was concerned that some of the 
policies did not have the intended effects. So what I have 
become is what I have seen written in the newspaper, ``She is a 
free market environmentalist.'' And I think that is true, and 
that is going back to the question I think Senator Akaka said. 
You need to look at what is the root cause of the problem and 
then address it. And often, if you look at the root cause, you 
can find there are ways to harness people's incentive, harness 
market forces in order to respond to that, and really have the 
effects that we want on such issues as health care, worker 
safety, and the environment.
    But back to core values, honesty and openness, and I hope 
that is one message I can share with all of you, that I really 
am open and would really like to work with all of you and 
anybody who is interested in regulatory issues.
    Senator Carper. All right. What I have read about you and 
what you have said here and what others have said about you 
suggests that you have spent a lot of your life and your career 
working on and studying regulatory issues. I believe you spent 
some time working at OIRA itself, and I think that has been 
spoken to today.
    Based on your experience and your work, what do you think 
we do right when it comes to regulations? And what do you think 
we do wrong? And if confirmed, how would you seek to address 
some of the problems that you see?
    Ms. Dudley. I think there are lot of things that we do 
right. I think that the analytical framework that President 
Clinton put in place with Executive Order 12866, which has been 
continued, I think that shows that it is not partisan. There is 
a nonpartisan approach to understanding regulations to make 
sure that they are having the intended effects. So I think we 
are doing that right.
    I think that we are doing a better and better job of 
understanding these hard-to-understand benefits and costs. And 
we are doing better and better in the environment area. We have 
new challenges that this Committee is very aware of, I am sure, 
in homeland security. They are all new challenges there for 
costs and benefits that we have to really understand how to 
measure those. And transparency, I think we are getting better 
and more open in transparency, not just in the review process, 
which the Office of Information and Regulatory Affairs I think 
has become better and better at being open and transparent in 
their review. But also with e-rulemaking, the general public 
has a much better opportunity now to get involved in this 
process.
    Senator Carper. All right. Thanks. Thanks, Madam Chairman.
    Chairman Collins. Thank you. Senator Pryor.
    Senator Pryor. Thank you, Madam Chairman.
    Chairman Collins. Senator Pryor, I would note that with the 
new Congress you are going to move up substantially on this 
Committee.
    Senator Pryor. I know. I won't have to do long-distance 
phone calls to you now. [Laughter.]
    Thank you so much. Let me ask, if I may follow up on 
Senator Levin's question from a few moments ago, about 
financial information and privacy and the mutually satisfactory 
agreement that you talked about, and you said those were not 
your words, that someone else at the institute had written 
that?
    Ms. Dudley. That comment on SEC's financial privacy was not 
mine, no.
    Senator Pryor. But as I understand it, in that same 
analysis you did write to OPM under your name that the 
regulation in question was overly burdensome and should be 
withdrawn. Is that right?
    Ms. Dudley. I would have to check. I don't think we 
suggested that it be withdrawn. But I can get back to you on 
that, Senator.
    Senator Pryor. Yes. My research says that you did, but I 
just wanted to make sure and clarify that because in response 
to Senator Levin's question, you almost indicated that you did 
not agree with that or you did not really comment on that. But 
I was sensing that you were distancing yourself from that. Do 
you agree with what he said when it comes to financial privacy?
    Ms. Dudley. I care a lot about privacy, but I am basically 
a nerd, and it is hard for me to comment on something when I 
have not done the research. So I did not--but I will get back 
to you this afternoon on that.
    Senator Pryor. OK. And the center that you have been 
working for, is it called Mercatus?
    Ms. Dudley. Mercatus, yes, sir.
    Senator Pryor. Do you generally agree with the positions 
that Mercatus takes?
    Ms. Dudley. The scholars at Mercatus are independent 
scholars. It is an academic environment, so we have the 
academic freedom of being independent scholars. But we do share 
a feeling that market-based processes can be more effective at 
achieving people's needs and meeting social goals. So in that 
sense, yes, I would share----
    Senator Pryor. Generally?
    Ms. Dudley [continuing]. That basic value, yes, that 
generally--yes.
    Senator Pryor. Now, you have written something that I think 
is somewhat controversial on the senior death discount where 
you talked about this.
    Ms. Dudley. I have never written on a senior death 
discount.
    Senator Pryor. OK. Do you agree that there is or should be 
such a thing as the senior death discount?
    Ms. Dudley. I think that what we all want for ourselves and 
our families and our children is to live long, healthy, and 
happy lives. So what I have recommended and what I have used 
is, in addition to--so this is what is--it is all coming down 
to whether you are measuring lives. I have recommended looking 
at the number of years of lives. I think it is important to 
understand longevity. That is not--there is something else that 
people have referred to as a senior death discount, and it is 
not the life years approach, which is what I have recommended, 
and it is in the guidelines.
    Senator Pryor. Is it fair to say that you think that an 
older person's life is worth less in an economic sense than a 
younger person's life?
    Ms. Dudley. I think what I would say is that, regardless of 
how old you are, you would like to live longer. So if you are 
60 and there are two options, two alternatives you could have--
one that provides one more year of life and one that adds 10--
you would like to have that piece of information. You would 
like to have it if you are 60 and looking at your own life. You 
would like to have it if you are looking at your 6-year-old's 
life. You would like to know how much you are extending it.
    So I don't think it is related to age, but it tells you if 
this rule will provide me 10 more years of life, that is better 
than a rule that provides me 5 years.
    Senator Pryor. All right. Well, I am puzzled, then, because 
as I understand it, you wrote something called ``How Not to 
Improve Public Health,'' and you wrote something called 
``Arsenic Comments,'' Public Interest Comment on the 
Environmental Protection Agency's request for comments on 
national drinking water regulations for arsenic, and you are 
commenting on arsenic. And as I understand it, what you are 
saying, as I read your comments, is that these stricter 
standards for arsenic, you basically say, are ``an unwelcome 
distraction.'' I have that in quotes. It is ``an unwelcome 
distraction.'' And as I understand it, arsenic 
disproportionately harms older people, people who are advanced 
in age, and, therefore, if they had the information that you 
say they shouldn't have, their life might be prolonged. But you 
are saying we shouldn't have these regulations and people 
shouldn't know about the arsenic in the water, so they might 
not be able to add that year to their life.
    How am I misunderstanding what you are writing?
    Ms. Dudley. Well, on that, I don't know that it is true, 
but I don't think that was the point of--I don't think that it 
is true that arsenic disproportionately affects older people. I 
am not sure. Probably not because the concern is cancer, so it 
would be younger people.
    The point of that, because, of course, we all want safer 
drinking water, but there are small communities, particularly 
in the Southwest, that have higher natural levels of arsenic. 
They would have had to expend large amounts of money to meet 
those regulatory standards for their drinking water systems. 
And the unwelcome distraction was because it was at a time when 
we were all worried about whether terrorists might be attacking 
our water systems.
    So looking at a small community that has limited resources, 
how are they best to address those limited resources, and that 
was my concern. So it was not please do not give them 
information. I never suggested that, and I never suggested that 
we do not care about it because it is elderly people. It was 
really a question of how do we deal with the priorities given 
the different risks, public health risks with drinking water 
systems that we face.
    Senator Pryor. OK. Well, maybe your writings are not clear 
or maybe I have not read them thoroughly enough, but as I 
understand your writings, basically you look at the age as a 
factor when you look at regulation. Is that not right? Is that 
not fair?
    Ms. Dudley. What I have recommended is that, in addition to 
looking at how many lives are saved, which is one standard 
metric, we should also use the second standard metric, which is 
life years. And that really just tells you how many years are 
we extending life by. I think both of them are valid, and I 
think they both provide valuable information, and that looking 
only at one does not tell you enough information.
    Senator Pryor. Well, I am out of time, but I assume if you 
are going to have that second metric, as you call it, then you 
are making a judgment call on the number of years left as it 
relates to regulation.
    Ms. Dudley. I think that is information that we have, and 
so providing that information to make the decision, I think it 
does help you decide, will this regulation extend lives longer 
than that regulation? And I think that is an important piece of 
information to have.
    Senator Pryor. Thank you, Madam Chairman. I have overstayed 
my time.
    Chairman Collins. Thank you.
    Ms. Dudley, I know it is difficult to go back and look at 
comments or writings that you made several years ago, but you 
have commented extensively in your academic role, and I want to 
go back to some comments that you made that were published in 
1998 in an issue of the magazine Regulation.
    In these comments, you suggested that a jurisdiction that 
expects ozone levels to exceed the standard might offer to 
compensate an upwind jurisdiction in order to reduce ozone 
pollution. I have to tell you, coming from a State that is 
downwind of almost all power plants in the United States, this 
seems completely backwards to me. Just one of these power 
plants can cause more pollution of the type that produces smog 
and acid rain than all of the automobiles, factories, and 
businesses in Maine combined.
    In other words, if you took every car off the road in Maine 
and closed down every factory, Maine would still have a 
pollution problem, including in beautiful sites such as Acadia 
National Park, because of the effect of the prevailing winds.
    So when I read that you are suggesting that a State like 
Maine might need to compensate a polluter's State, I just don't 
understand those comments. Could you explain what you meant by 
that and whether you still hold to that viewpoint?
    Ms. Dudley. Well, this is a time when I wish Senator Carper 
were still here because that would be one that I wish I had not 
said. This is one I wish I had taken back.
    This is a perfect example of you can be an academic 
theorist and you can talk, ``Well, in theory, we could get the 
same result by the polluting State compensating the downwind 
State or vice versa.'' That is not the way our statutes are 
written, and if I were confirmed as Administrator of OIRA, I 
assure you that is not the kind of proposal I would suggest.
    Chairman Collins. So is this more of an academic exercise 
to talk about the theoretical possibilities?
    Ms. Dudley. Yes. I mean, it is applying the Coase theorem. 
Coase was a Nobel Prize-winning economist, and that was his 
theorem. But it clearly does not work from an equity 
perspective or a fairness perspective.
    Chairman Collins. Exactly.
    Ms. Dudley. And I agree with you, and equity and fairness 
are definitely something I think are important to understand in 
regulation.
    Chairman Collins. Let me turn to another clean air issue 
that concerns me. In October of this year, just recently, the 
EPA's Clean Air Scientific Advisory Committee unanimously 
recommended that air quality standards for ozone need to be 
substantially strengthened to protect human health, 
particularly in sensitive subpopulations, for example, children 
with asthma.
    This Committee found that the health impacts in healthy 
individuals at ozone levels below even the current standard 
were significant and were cause for concern, and it is already 
well known that sensitive individuals, such as the elderly with 
breathing difficulties or children with asthma, are even more 
susceptible than healthy individuals. Again, I recognize that 
this was sometime ago, but in 1997, you argued that the ozone 
standard should be set at a weaker level than even the current 
level, which has now been shown to be insufficient to safeguard 
the health of vulnerable populations.
    In light of this new evidence--and I realize it is new 
evidence since you wrote your comments--do you now believe that 
there is enough evidence to support an ozone standard at least 
as strong as, if not stronger than, the current standard?
    Ms. Dudley. You are right, it was 10 years ago when I wrote 
about ozone. And I do care about the air, having a son who has 
suffered from asthma. I understand those issues. I have looked 
at that. I have seen that, the Clean Air Science Advisory 
Committee's letter, and I think it will certainly weigh in to 
EPA's decision, particularly under the Clean Air Act.
    Chairman Collins. I have talked a lot this morning about 
the benefits of regulation, particularly in the environmental 
arena. There are times, however, when excessive regulations, 
costly regulations have a detrimental effect, and I want to 
bring to your attention an example that affects the State of 
Maine.
    As you know, for centuries Maine has had a fishing industry 
that is very important to our economy, to our way of life, and 
to our heritage. And yet the fishing industry is endangered in 
Maine because of excessive regulation that often seems to be 
grounded in the desire to avoid lawsuits rather than in sound 
scientific knowledge and expertise.
    Currently, the National Marine Fisheries Service is 
drafting a rule that could well have a detrimental effect on 
Maine's lobster industry. I don't want to go into exhaustive 
detail, and I realize this is not something that has probably 
been on your radar screen. But it is a good example of a 
regulation that has a noble goal, but would impose a tremendous 
burden on the lobster industry in our State. The regulation 
would require some gear modifications by requiring fishermen to 
replace their current floating ground lines with sinking ground 
lines. This is a costly change. Again, it has a worthwhile 
purpose. It is intended to help reduce the risk of interaction 
between fishermen and certain whales, and that is something 
that we all care about. But there may well be a better way to 
achieve that goal. The approach that the National Marine 
Fisheries Service is taking is using outdated cost estimates 
that do not reflect the true impact on our lobster industry.
    Now, I realize this is probably a new issue to you, but it 
seems to me that this is where OIRA could play an important 
role of ensuring that there is a full analysis and in-depth 
consideration of alternative methods of achieving the same goal 
without imposing such an onerous burden on our lobster 
industry.
    If you are confirmed, do you pledge to take a look at this 
rule and at any reasonable alternatives given the potentially 
detrimental impact on our lobster industry?
    Ms. Dudley. Yes, Senator, you are right. It is 
inappropriate for me to comment specifically, but if I am 
confirmed, I will definitely look at this and would love to 
talk to you about it if you are interested.
    Chairman Collins. Thank you. Senator Akaka.
    Senator Akaka. Thank you, Madam Chairman.
    Ms. Dudley, I would like to clarify one of your earlier 
responses when I asked you about market failure. I looked up 
``market failures,'' which is an economic term to describe when 
markets do not allocate goods and services efficiently. And 
normally the term is applied when the inefficiency is 
particularly dramatic. The term may also be used to describe 
situations where market forces do not serve the perceived 
public interest.
    When I asked you that question, you said that a lack of 
information can lead to a market failure.
    Ms. Dudley. Right.
    Senator Akaka. I'd like to discuss this matter further. 
What about inability to act because of economic factors? Can 
the lack of economic resources lead to a market failure?
    Ms. Dudley. I don't think it would fit the traditional 
definition of market failure. Certainly, that is a role for the 
government, but it probably does not fit the definition of 
market failure.
    Senator Akaka. Ms. Dudley, in May 2004, GAO issued a report 
at my request on the number of data-mining activities in the 
Federal Government. At that time, GAO found 36 agencies using 
personal information obtained from the private sector in data-
mining activities. What policies and safeguards do you believe 
should be in place to ensure the accuracy of information 
obtained from the private sector?
    Ms. Dudley. Well, there are several statutes that guide OMB 
as well as agencies on those issues, including the Privacy Act, 
the Paperwork Reduction Act itself, and if I am confirmed, I 
would like to work with the other offices within OMB as well as 
the agencies to make sure that if we are collecting 
information, especially that is personally identifiable, we 
need to make sure that we are consistent with the framework set 
up in the Privacy Act and the specifics laid out in these other 
acts.
    Senator Akaka. Ms. Dudley, in 2001 and 2002, you and your 
colleagues in the Mercatus Center submitted numerous 
regulations to OIRA that you believed needed to be modified or 
repealed. What methodology was used to determine whether these 
existing regulations should be repealed, rescinded, or 
modified? And would you use the same methodology if you are 
confirmed as OIRA Administrator?
    Ms. Dudley. Well, in 2001, when OMB asked for comments on 
regulations that could be improved, we actually had already 
filed comments with agencies. We had our Public Interest 
Comment project operating for several years and had filed 
comments with agencies. So we had done research on particular 
rules, had suggestions for how to improve those rules, 
alternatives that could make them better.
    So when OMB asked for recommendations, we just sent one-
page summaries of all the rules on which we had done research. 
So our list was not necessarily a priority list. It was a list 
of here is some information that we have already done some 
research on, and they were not necessarily saying you should 
repeal it. They were saying there are smarter ways to deal with 
it, and here is our research.
    So that was the methodology in both of those cases. We 
didn't scratch our heads and say, ``Gee, what could it be?'' We 
really just supplied a list of what analysis we had already 
done.
    Senator Akaka. And you feel that if you head up OIRA, you 
would use the same method?
    Ms. Dudley. Actually, I would like to use the method that 
is codified in President Clinton's Executive order and statute. 
I do not plan to use any different methods.
    Senator Akaka. Ms. Dudley, the Privacy Act and the E-
Government Act are the primary mechanisms for protecting the 
privacy of citizens and legal residents. Do you believe that 
the Privacy Act and the E-Government Act provide adequate 
privacy protections?
    Ms. Dudley. Well, the Privacy Act, as you know, is getting 
pretty old. It is over 30 years old now, and yet from what I 
understand, the framework that is in the act, which is collect 
information and use it only for the purpose for which it was 
collected, unless somehow otherwise authorized, that general 
framework still seems to be working. And then as you have 
mentioned, the E-Government Act, as with FISMA, the Clinger-
Cohen Act, several other statutes have updated it.
    I think the bottom line is it is a constant challenge, and 
privacy concerns are dynamic and ever-changing. And within the 
framework provided by those acts, I think memoranda and working 
with the CIOs in the agencies and OMB may be the best way to 
deal with that. But I don't have all the answers and would love 
to talk to you if you have some thoughts on that.
    Senator Akaka. I thank you so much for your responses. 
Thank you, Madam Chairman.
    Chairman Collins. Thank you. Senator Carper.
    Senator Carper. Sometimes when we have had people who have 
been nominated by the President to serve as judges, Federal 
judges, I have tried to understand where they are coming from, 
especially if they do not have much of a judicial history, by 
saying, well, whose decisions, who on the court do you admire, 
and who do you see yourself sort of following in the footsteps 
of.
    Now, you are not going to have judicial decisions, but you 
have a lot out there in terms of where you are coming from, but 
I still want to ask a similar question, and maybe a two-parter.
    In your view, what should the role of the Director of OIRA 
be? How should it work and how should it play in the regulatory 
process? And how might the approach that you take in this job 
be different from the person who is not the incumbent, who I 
believe is there as an interim, but his predecessor, John 
Graham? So if you could take those on, I would appreciate it.
    Ms. Dudley. I see the role of OIRA as coordinating across 
agencies to make sure that one hand knows what the other hand 
is doing in the regulatory world, providing the guidance and 
the oversight. The agency has the ultimate authority for 
issuing the regulations, as Senator Collins said at the outset. 
So the OIRA role is more review and coordination.
    My style tends to be more collaborative, just by nature, 
and so I think--that is how I imagine that would be one thing 
that would maybe--I don't know if I should say distinguish me 
from the previous administrator because he was very effective. 
But actually I know and actually have worked with all but one 
of the administrators. I am teaching with Sally Katzen at 
George Mason University, and I have worked with the others 
either in OIRA or elsewhere. So I think there are some big 
shoes to fill and a lot to build on, and so I hope to be able 
to take characteristics from each of them if I am confirmed.
    Senator Carper. All right. Sometimes I like to say, one of 
my favorite sayings--Senator Collins has heard me say this a 
time or two--in politics our friends come and go, but our 
enemies accumulate. [Laughter.]
    Senator Carper. You have had a chance, as we all have up at 
this table, to collect a few enemies. When my enemies criticize 
me, in some cases they are totally without any validity, but 
sometimes they strike tellingly true. And folks have been 
critical of your nomination and of your suitability for this 
position. When some folks are critical of you, which of the 
criticisms do you think come closest to being maybe true or 
have some basis in fact? How would you rebut those or address 
them?
    Ms. Dudley. I think generally I would say please look at my 
writing and please meet me. I mean, that is one thing. I guess 
I would rebut them by saying if people are concerned that I 
will not be open and transparent, I can assure you that is not 
true because if I am confirmed as Administrator, I would 
invite--there was a letter that was signed against me. I 
haven't met anybody who signed that letter, but the letters 
that have been signed for me, I know all those 50 academics. I 
know the Nobel Prize winner; I know the OIRA Administrators who 
have all written supportive letters. I don't know anybody on 
the other letter, and I hope to change that if I am confirmed.
    Senator Carper. I wonder if I could just restate my 
question. When people criticize you, when you read criticisms 
people have made of you, which of the criticisms that you have 
heard have some basis in fact? How would you speak to those?
    Ms. Dudley. I guess a criticism that I believe that market 
forces work. It is true. I believe in people. I believe in 
people's ability to make decisions. I respect diversity, and I 
respect people. And so I resist one-size-fits-all standards 
that do not understand that diversity and that people have 
different needs.
    Senator Carper. OK. Let me ask a question with respect to 
your philosophy. What is your philosophy when it comes to when 
an agency should step in and propose a regulation? I serve on 
the Environment and Public Works Committee. We have been very 
much involved with the President's Clear Skies proposal, which 
we defeated in Committee. EPA responded by issuing regulations 
to try to do through regulations what Clear Skies would have 
otherwise done or not done.
    But what kind of things do you think an agency like EPA 
ought to consider before putting forward regulations on clean 
air, for example? And assuming they are authorized to act, when 
would it be appropriate for them to do so, in this case, EPA? 
And if confirmed, how would you apply this philosophy to your 
work?
    Ms. Dudley. I would say the first criteria should be the 
statutory mandate and what does the statute require. And then 
actually my philosophy really fits very well with the 
guidelines that have been issued by the past several 
Presidents, and that is, first understand why we are seeing the 
problem, and it is this notion of root cause. What is the root 
cause? I really do think you need to know what the root cause 
of the problem is before you can address it because otherwise 
you may be just putting on a Band-Aid and actually having 
unintended consequences.
    The third step would be let's look at some alternatives. 
Now, I will admit that as a writer, I think out of the box, but 
I promise not to think that far out of the box (if confirmed). 
You missed my apology to you in response to a question of 
Senator Collins earlier.
    Senator Carper. An apology to me? I hate to miss those.
    Ms. Dudley. She identified something that I wished that I 
hadn't said, but it was thinking out of the box. And I think as 
regulators we need to challenge our ideas, but obviously that 
box has to be constrained with what the statutory constraints 
are. And then the next step would be let's try to look and see 
what we think the consequences are under different scenarios, 
then understand who is bearing the costs and the benefits. And 
I have run you out of time.
    Senator Carper. All right. Thanks very much.
    Ms. Dudley. Thank you.
    Chairman Collins. Ms. Dudley, we haven't talked very much 
this afternoon about the critical role that OIRA plays in 
helping to safeguard the confidentiality and the security of 
private information. This is a less visible role of OIRA, but 
in this electronic age, it is an incredibly and increasingly 
important role.
    Many Federal agencies in the course of carrying out their 
missions must have access to or store personal identifying 
information of citizens, including birth dates, addresses, 
Social Security numbers. In the past year, we have seen serious 
breaches in agencies that have exposed citizens to identity 
theft. Probably the most widespread one that affected millions 
of American citizens occurred at the Veterans Administration, 
and I am sure you are somewhat familiar with that.
    OMB has issued some guidelines to improve information 
security, but what more do you think can be done to ensure that 
personal information that is shared by the citizens of this 
country with Federal agencies, whether it is Social Security or 
Medicare or the IRS or the VA, is truly protected from an 
unauthorized release?
    Ms. Dudley. You are right, I mean, this is important, and 
there is certainly room to improve. As I understand it, this is 
a responsibility within OMB that is shared within different 
parts of OMB. The Deputy Director issued a memo about a year 
ago requiring agencies to look at not just the information that 
they use but how they store it, evaluate how well it is 
working. I believe their responses are due soon, if they are 
not already in. I think that might give the office a better 
look at understanding how do we do this and understand that it 
is a life-cycle approach. When you gather that personal 
information, you need to know how it is going to be stored and 
how it is going to be used to try to avoid situations like the 
VA laptops that you mentioned. And so I would like to work with 
the other parts of OMB as well as the agencies to try to do 
better, if I am confirmed.
    Chairman Collins. Another challenge that Federal agencies 
and departments, particularly the Department of Homeland 
Security, have is striking the right balance between privacy 
and security. We are seeing the Department of Homeland Security 
try to implement new programs at the border, the secure flight 
program, that require the collection of considerable amounts of 
private information.
    In general, what is your philosophy about how we strike the 
right balance between gathering information that we need about 
individuals and yet not creating vast government databases that 
could be used for inappropriate purposes?
    Ms. Dudley. I think it is a difficult challenge, and it is 
not a new challenge, but it is additionally challenging in 
recent years. So I think it is something that needs to be faced 
more.
    As I say, I think that the framework that is set up in pre-
existing acts recognizes the need for those balances. So I 
imagine it requires a lot of serious case-by-case analysis 
about specific choices that we have and whether you can achieve 
the same security with less breach of privacy or understand 
what the trade-offs are, because there are serious trade-offs, 
and Americans want both.
    Chairman Collins. It is a very difficult trade-off because, 
obviously, the 9/11 Commission and other experts have pointed 
out that we did not do a good enough job with information 
sharing and with collecting as much information as possible and 
disseminating that information about those who would do us 
harm.
    The problem becomes figuring out who are the individuals 
who would do us harm versus law-abiding individuals for whom 
there is no need to collect information that involves a certain 
breach of privacy. And I think that is going to be a tremendous 
challenge throughout the Federal Government in the coming 
years.
    I do have a number of additional questions on everything 
from how the OIRA Director would interact with the E-Government 
Director and other more technical issues, which I am going to 
submit for the record. I would like to turn to my colleagues 
and give them an opportunity for any closing questions that 
they might have.
    Senator Akaka.
    Senator Akaka. Thank you very much, Madam Chairman.
    Ms. Dudley, you said that you have always tried to be open 
and transparent and you would like to continue that. I 
appreciate that since I believe OIRA should operate in an open 
and transparent manner.
    In 2003, the GAO reported that the changes agencies made to 
regulations at OIRA's request were not always available. In 
addition, although OIRA has said it can have its greatest 
impact on agencies' rules during informal reviews, agencies are 
only required to disclose changes made at OIRA's request during 
formal review.
    If confirmed, would you institute a policy whereby agencies 
disclose changes recommended by OIRA during informal review?
    Ms. Dudley. One of the things I have complimented OIRA on 
is its increased transparency because I do think sunshine makes 
for better government, and I think the work that it does is 
positive, and it should be open. So if I am confirmed, I am 
willing to discuss any reasonable request to see if there is a 
need to actually increase that transparency. So I am definitely 
willing to talk with you if I am confirmed.
    Senator Akaka. Do you have any ideas to further improve the 
transparency of OIRA's review process?
    Ms. Dudley. I am not at OIRA now and I have not been at 
OIRA in a long time, so I am not familiar with exactly how 
things work. But what I have appreciated is the posting on the 
website and the ability to track a regulation to see where it 
is in the review process. But I am sure there are more things 
that can be done. I just do not have specific suggestions.
    Senator Akaka. It is well known that the former OIRA 
Administrator, John Graham, sent what are called ``prompt 
letters'' to agencies to suggest that the agency develop 
regulations in a particular area or to encourage ongoing 
regulatory efforts. If confirmed, would you issue prompt 
letters? And if so, which areas of regulation would you 
encourage?
    Ms. Dudley. I actually do not have something specific in 
mind, as I mentioned in response to a question earlier. My 
personality tends to be more collaborative, but I know--the 
prompt letters were something that I thought actually were a 
good thing that Administrator Graham did. One in particular 
that I thought was important was to FDA on a trans fat 
regulation, and the prompt encouraged FDA to provide more 
information to consumers on trans fats. And that was one that I 
thought was a positive step.
    Senator Akaka. Thank you, Ms. Dudley. Madam Chairman, I 
have other questions that I may submit for the record. Thank 
you very much.
    Ms. Dudley. Thank you.
    Chairman Collins. Thank you, Senator. Senator Carper.
    Senator Carper. Just maybe one or two things in closing. In 
Senator Akaka's comments, he mentioned the word ``transparent'' 
and presented it in a way that I think a lot of us think of 
transparency today. When we say someone is transparent or a 
process is transparent, we think of it in positive terms. I am 
old enough to remember whenever accused of being transparent, 
it was not a compliment. It is interesting how things change.
    I was sitting here watching you respond to these questions, 
Ms. Dudley, and it is hard not to see your boys here sitting 
behind you, and I know that if my sons at their age had to be 
here and sit--this is worse than church. [Laughter.]
    Senator Carper. You could not pay them to endure this for a 
couple of hours. At least in church you get to stand up from 
time to time and maybe sing or pray or close your eyes, or 
whatever. But they have done a very fine job in holding up 
their end of the bargain in all of this.
    Gentlemen, I don't know if your mom is going to be 
confirmed or your wife is going to be confirmed, but if she is, 
we thank you for your willingness to share your mother and your 
wife with the people of our country.
    You have held a number of important and responsible 
positions to date, but if you end up in this one, you are going 
to be what I call ``shooting with real bullets.'' And that is 
not to say you have been shooting with blanks for the earlier 
part of your life, but you will have a fair amount of say as to 
the direction that we are able to take.
    We pass laws, and they are kind of like a skeleton, if you 
will, and then meat on the bones is the regulations that are 
adopted in response to those laws. What you have been nominated 
to do here is an important thing, and we appreciate your time 
and responses to our questions. But you may be in a position to 
decide what kind of air these guys have to breathe and what 
kind of fish they are going to have to eat and what kind of 
oceans they are going to have to swim in and what kind of 
pollution is going to be coming out of the cars or trucks or 
vans that they drive. It is important stuff, and I would just 
ask that you keep that in mind.
    You mentioned collaboration, you are into collaboration. 
Frankly, I would like to think that is one of my strong suits 
as well. My colleagues might deny that, but that is one of the 
things I try to do. And in the nature of the job that you might 
some day hold, that is a quality you do not want to let go.
    Thanks very much.
    Ms. Dudley. Thank you, Senator.
    Chairman Collins. Thank you.
    Ms. Dudley, I want to thank you for appearing before the 
Committee today and for your cooperation with the Committee's 
process. I very much appreciate your frank responses to the 
many questions that you have been asked throughout this 
process. I know it is a long and involved one, and certainly 
your many writings have given us a lot to ponder.
    I do want to thank my staff for their hard work and the 
Minority staff for their hard work on this nomination. Given 
that the nominee did have voluminous writings, it was a great 
deal of work for the staff to read through all of them, and 
they probably could write a book on your writings at this 
point.
    I also do appreciate your willingness to serve. I think 
that many people looking at the contentious nomination process 
that too often seems to occur these days would decide that they 
were better off staying in an academic environment. Not to say 
that academia is not contentious, but I know it is very 
different to have a public nomination process, and I appreciate 
your willingness to put yourself forward and to consider 
serving in this role.
    Without objection, the hearing record will be kept open 
until 5 p.m. on Wednesday. I do anticipate the submission of 
additional questions for the record. Senator Lieberman was not 
able to be here today, but as you know, he has a great interest 
in your nomination, and I suspect that he will have some 
follow-up questions, as will I and some of the other Members.
    I, too, want to join Senator Carper in thanking your family 
for being here and thanking them for their willingness to 
endure this process as well and for your commitment to public 
service.
    This hearing is now adjourned.
    [Whereupon, at 4:01 p.m., the Committee was adjourned.]


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