[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
    COST-JUSTIFYING REGULATIONS: PROTECTING JOBS AND THE ECONOMY BY 
         PRESIDENTIAL AND JUDICIAL REVIEW OF COSTS AND BENEFITS

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



                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON COURTS, COMMERCIAL
                         AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 4, 2011

                               __________

                           Serial No. 112-48

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov



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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             DEBBIE WASSERMAN SCHULTZ, Florida
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona
[Vacant]

      Sean McLaughlin, Majority Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

       Subcommittee on Courts, Commercial and Administrative Law

                 HOWARD COBLE, North Carolina, Chairman

               TREY GOWDY, South Carolina, Vice-Chairman

ELTON GALLEGLY, California           STEVE COHEN, Tennessee
TRENT FRANKS, Arizona                HENRY C. ``HANK'' JOHNSON, Jr.,
DENNIS ROSS, Florida                   Georgia
[Vacant]                             MELVIN L. WATT, North Carolina
                                     MIKE QUIGLEY, Illinois

                      Daniel Flores, Chief Counsel

                      James Park, Minority Counsel


                            C O N T E N T S

                              ----------                              

                              MAY 4, 2011

                                                                   Page

                               WITNESSES

John D. Graham, Ph.D., Dean of the School of Public and 
  Environmental Affairs, Indiana University
  Oral Testimony.................................................     2
  Prepared Statement.............................................     4
Jeffrey Holmstead, Partner, Bracewell & Giuliani, LLP
  Oral Testimony.................................................    13
  Prepared Statement.............................................    15
Sally Katzen, Senior Advisor, Podesta Group, Visiting Professor, 
  New York University School of Law
  Oral Testimony.................................................    19
  Prepared Statement.............................................    21
Harold Furchtgott-Roth, President, Furchtgott-Roth Economic 
  Enterprises
  Oral Testimony.................................................    34
  Prepared Statement.............................................    35

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Trey Gowdy, a Representative 
  in Congress from the State of South Carolina, and Vice-
  Chairman, Subcommittee on Courts, Commercial and Administrative 
  Law............................................................    46
Prepared Statement of the Honorable Steve Cohen, a Representative 
  in Congress from the State of Tennessee, and Ranking Member, 
  Subcommittee on Courts, Commercial and Administrative Law......    49
Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................    51
Prepared Statement of the Honorable Henry C. ``Hank'' Johnson, 
  Jr., a Representative in Congress from the State of Georgia, 
  and Member, Subcommittee on Courts, Commercial and 
  Administrative Law.............................................    54
Letter from the Coalition for Sensible Safeguards................    57
Response to Post-Hearing Questions from John D. Graham, Ph.D., 
  Dean of the School of Public and Environmental Affairs, Indiana 
  University.....................................................    60
Response to Post-Hearing Questions from Jeffrey Holmstead, 
  Partner, Bracewell & Giuliani, LLP.............................    64
Response to Post-Hearing Questions from Sally Katzen, Senior 
  Advisor, Podesta Group, Visiting Professor, New York University 
  School of Law..................................................    70
Response to Post-Hearing Questions from Harold Furchtgott-Roth, 
  President, Furchtgott-Roth Economic Enterprises................    73


    COST-JUSTIFYING REGULATIONS: PROTECTING JOBS AND THE ECONOMY BY 
         PRESIDENTIAL AND JUDICIAL REVIEW OF COSTS AND BENEFITS

                              ----------                              


                         WEDNESDAY, MAY 4, 2011

              House of Representatives,    
                    Subcommittee on Courts,
                 Commercial and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 3:08 p.m., in 
room 2141, Rayburn Office Building, the Honorable Trey Gowdy 
(Vice-Chairman of the Subcommittee) presiding.
    Present: Representatives Gowdy, Gallegly, and Cohen.
    Staff present: (Majority) Daniel Flores, Subcommittee Chief 
Counsel; John Hilton, Counsel; Ann Hawks Woods, Counsel; 
Cecilia Daly, Counsel; Allison Rose, Professional Staff Member; 
Ashley Lewis, Clerk; (Minority) James Park, Counsel; and Susan 
Jensen-Lachmann, Counsel.
    Mr. Gowdy. The Subcommittee will come to order. I want to 
welcome and thank all of our witnesses, acknowledge Mr. Cohen, 
and I believe Mr. Gallegly is on his way.
    Today is going to be somewhat unusual with vote schedules, 
and we want to be sensitive to your individual schedules as 
well. Mr. Cohen and I are going to waive our opening 
statements. And, Mr. Graham, I think you may have a plane to 
catch, so if your compatriots are okay with it, we may let you 
do your opening statement, direct any questions that may be 
applicable to you, and then handle the other three witnesses, 
unless there is vigorous opposition to that.
    I think I need to swear the witnesses, which in my other 
job somebody else did in a black robe. So, let me see if----
    Mr. Cohen. They do not have to be sworn.
    Mr. Gowdy. They do not?
    Mr. Cohen. No, it is not like in a----
    Mr. Gowdy. Good. Fine with me.
    All right. Let me introduce John Graham, who is the dean of 
the School of Public and Environmental Affairs at Indiana 
University, one of the largest public policy schools in the 
United States. Dr. Graham has a bachelor's degree in politics 
and economics from Wake Forest University, a master's degree in 
public affairs from Duke University, and a Ph.D. in urban and 
public affairs from Carnegie Mellon University. He is the 
author and editor of numerous books, articles, and academic 
papers. From 2001 to 2006, Dr. Graham served as the 
administrator of the Office of Information and Regulatory 
Affairs in the Office of Management and Budget. With that, Dr. 
Graham, we would welcome you for your opening statement?

   TESTIMONY OF JOHN D. GRAHAM, Ph.D., DEAN OF THE SCHOOL OF 
      PUBLIC AND ENVIRONMENTAL AFFAIRS, INDIANA UNIVERSITY

    Mr. Graham. Thank you, Mr. Gowdy, and thank you to everyone 
in the room for your flexibility in allowing me to get back to 
my flight.
    Our topic is benefit-cost analysis and its role in Federal 
regulatory decision making. Let me start by saying that this 
topic has an interesting bipartisan history, and in the 
literature, there is some conflict on where it actually begins 
in American political debate. My own view is the most important 
starting point was President Jimmy Carter, a small businessman 
himself who urged and assembled his White House economists to 
begin looking at regulations, and he also championed the 
Paperwork Reduction Act, which ultimately established the 
office in OMB that has a central role in this area.
    Ronald Reagan's impact, of course, cannot be 
underestimated. This the President who established the process 
of OMB review of regulations with cost-benefit analysis being a 
central element.
    President Clinton reaffirmed a lot of these basic 
strategies and, I think importantly, focused the efforts on the 
most significant of the Federal rules so that the effort around 
analysis and economics would be concentrated.
    I worked for President George W. Bush. He made strong 
efforts to improve information quality and peer review as it 
relates to cost-benefit analysis. And I am very pleased that 
President Obama has reaffirmed the importance of cost-benefit 
analysis in the regulatory process.
    So, this raises the following question: if all of these 
Presidents are in agreement that cost-benefit analysis is 
important, it should be part of the regulatory process, why 
would people be considering legislation where Congress would 
require agencies to move in this direction? And I think there 
are two basic answers to that question.
    One is that a President's political preferences sometimes 
get in the way of the basic good government principle at 
looking at the benefits and costs of regulatory action. And I 
will give you as an illustration the President I worked for.
    After 9/11, the political imperative to pass Homeland 
Security regulations was overwhelming. And I must admit there 
were many regulations submitted to me as OIRA administrator 
under the banner of homeland security that were fairly 
expensive and fairly intrusive. Can I testify to you that each 
and every one of these was subject to a careful, cost-benefit 
analysis that looked at less expensive alternatives? To be 
honest with you, we did the best we could under the 
circumstances, but a President does not always want to go 
forward with the cost-benefit test when they have other 
political reasons to want to support another activity. As a 
result, we quantified by 2004 that half of the cost of all new 
regulations in the Federal Government were due to Homeland 
Security regulations.
    My own view is if Congress had required us to do cost-
benefit analysis of these regulations and it had been 
judicially enforceable, you would have given the airline 
industry, the colleges and universities who were impacted by 
these regulations, an ability to put reasonable pressure, not 
undue pressure, on the Federal Government to make sure that 
these regulations were necessary and worthwhile.
    So, the first reason that we need legislation is that 
presidential preferences do not always lead to faithful 
implementation of the cost-benefit requirement in these 
executive orders.
    The second reason is that the career staff at the agencies 
and OMB are human beings, and they are imperfect. And they 
develop regulations and promulgate them oftentimes without 
adequate economic and scientific basis. If, however, you have 
an enforceable check in court against the quality of their 
work, their incentive to do that work increases substantially. 
And as a consequence, there is a large body of literature 
showing the limitations of the existing--the quality of the 
existing activity.
    So, what should be the basic components of any kind of 
cost-benefit mandate of legislation in this area? One, it seems 
to me all cabinet and independent agencies should be subject to 
this type of benefit cost requirement. My own view is you 
should just start with the principles in the Clinton-Gore 
executive order in 1993, codify them unless there is a 
compelling reason to use other language.
    Second of all, I think this should be applied not only to 
regulations, but to so-called guidance documents that are 
really rules in their actual practical effect on businesses and 
on state and local governments.
    Third, I think it needs to be a judicially enforceable 
requirement; otherwise, you have not done anything different 
than what the Presidents have already done by issuing an 
executive order requiring cost-benefit analysis.
    And finally, it needs to be a benefits-justified cost test 
to make sure that the executive branch can account for 
qualitative factors as well as the quantitative benefits and 
costs.
    So, I have given you some examples of the kinds of things 
that should be in there. Let me conclude by saying cost-benefit 
analysis, like accounting and other tools, can be gamed. There 
is a garbage in/garbage out problem that needs to be worried 
about. There are ways to address this in the legislation by 
requiring OMB to issue technical guidance on how to do benefit-
cost analysis, and by referencing the information quality and 
peer review requirements that OMB has already adopted.
    So, in short, I think that really cost-benefit analysis as 
a tool, as part of a process of regulation is a good government 
principle. There are times when Presidents would prefer not to 
follow good government principles for whatever reason. The 
regulated communities, whether they be business or state and 
local governments, need to have safeguards in situations when 
the executive branch does not adhere to these principles.
    Thank you very much for the opportunity to be here today.
    [The prepared statement of Mr. Graham follows:]
          Prepared Statement of John D. Graham, Ph.D., Dean, 
     Indiana University School of Public and Environmental Affairs

                              introduction
    My name is John D. Graham, Ph.D. I am currently Dean of the Indiana 
University School of Public and Environmental Affairs--SPEA 
(Bloomington and Indianapolis, Indiana). SPEA is one of the largest 
public affairs schools in the United States and has graduate programs 
that are ranked in the top five by US News and World Report and by the 
National Research Council/National Academy of Sciences. Prior to 
joining IU in 2008, I served as Dean of the Frederick Pardee RAND 
Graduate School in Santa Monica California (2006-8), as Administrator 
of the White House Office of Information and Regulatory Affairs in the 
U.S. Office of Management and Budget (2001-2006), and as tenured 
Professor of Policy and Decision Sciences at the Harvard School of 
Public Health (1985-2001). For twenty-five years, I have taught the 
analytic tools of risk analysis and benefit-cost analysis in the 
classroom and published research on the application of these tools to 
health, safety and environmental issues. In fact, my doctoral 
dissertation at Carnegie-Mellon University (1983) was a benefit-cost 
evaluation of automobile airbag technology. While my testimony today 
draws on my academic expertise, it also draws on my experience at OMB, 
where I supervised a staff of fifty career policy analysts as they 
reviewed benefit-cost analyses performed by Cabinet agencies such as 
the Department of Labor, the Environmental Protection Agency, the 
Department of Homeland Security and the Department of Transportation. I 
am honored to have the opportunity to express my opinions on how 
benefit-cost analysis can be used more effectively to improve the 
federal rulemaking process. The views I express are strictly me own, 
and do not necessarily represent the views of SPEA or Indiana 
University.
                              terminology
    With respect to terminology, the phrases ``cost-benefit analysis'' 
(CBA) and ``benefit-cost analysis'' (BCA) are synonyms and thus can be 
used interchangeably. I prefer the phrase BCA because it reminds 
students and policy makers that this analytic tool is aimed at 
increasing the benefits of regulations as well as reducing unnecessary 
costs. (B also has the alphabetical advantage over C!) When regulatory 
options are compared, a BCA tells us which option produces the largest 
surplus of benefits minus costs (assuming all benefits and costs can be 
quantified in monetary units). When only some benefits and costs can be 
quantified (or monetized), the net-benefit surplus (or deficit) is 
reported but the decision maker is also informed of any important 
benefits and costs that could not be quantified. After considering both 
benefits and costs (quantitative and qualitative), OMB instructs 
agencies to make a determination as to whether the benefits of a rule 
justify the costs, compared to doing nothing and compared to other 
viable regulatory options.
    The phrase ``cost-effectiveness analysis'' (CEA) refers to a close 
analytic cousin of BCA. With CEA, the measure of effectiveness is 
expressed in physical units (e.g., lives saved or tons of pollution 
prevented), and the outcome of a CEA is the best option indicated by 
``bang for the buck'' (e.g., the regulatory alternative that saves the 
most lives given a budget constraint, or the alternative that achieves 
an environmental goal at minimum cost to society). It is sometimes 
useful for agency analysts to conduct a CEA in addition (or instead of) 
a BCA, especially if the benefits of the rule are difficult to quantify 
in monetary units.
           bipartisan support for regulation informed by bca
    The origins of BCA in federal regulatory policy are a matter of 
some academic debate but the push for cost-justified regulations goes 
back at least to the administration of President Jimmy Carter. As a 
small businessman, President Carter knew that the costs of regulation 
were a serious national problem and he deployed White House economists 
in a determined effort to reign in business regulations that were too 
costly. President Reagan went further and placed OMB in the driver seat 
during interagency reviews of the BCAs or CEAs prepared by federal 
agencies. President Clinton reaffirmed the legitimate role of benefit-
cost analysis in regulatory decision making while focusing OMB's 
efforts on a smaller sample of significant rules and recognizing the 
primacy of agency policy discretion. President George W. Bush largely 
reaffirmed the benefit-cost language in the Clinton Executive Order and 
I interpret President Obama's position on BCA in regulatory policy to 
be largely consistent with the positions espoused by previous 
presidents of both parties. Thus, although there are some advocacy 
groups and legal academics who oppose the use of BCA in federal 
regulatory policy, I think it is fair to say that recent Presidents of 
both parties have expected agencies to prepare benefit-cost analyses 
and use the insights from those analyses when making regulatory 
decisions.
    I would also like to point out that leading members of Congress 
from both political parties have been consistent advocates of a 
stronger role for BCA in federal regulatory policy. For example, 
Senator Carl Levin (D-Michigan) and Senator Orrin Hatch (R-Utah) have 
been pioneers of BCA proposals in the Senate. Much can be learned by 
reviewing the relevant speeches and legislative proposals of these 
members for the last twenty years.
                            myths about bca
    In my testimony today I would like to dispel some popular 
misconceptions about BCA. Much of my testimony about myths draws on a 
comprehensive article, ``Saving Lives through Administrative Law and 
Economics,'' University of Pennsylvania Law Review, 157(2), December 
2008, 395-540 that I have made available to subcommittee staff and 
would like to have inserted in the record of this hearing.
    Myth #1: It is not feasible to quantify the benefits of public 
health, safety or environmental regulations.
    Due to thirty years of progress in public health science, 
environmental science, risk assessment, and health/environmental 
economics, it is now feasible to produce (at least approximate) 
estimates of the benefits of federal health, safety and environmental 
regulations. The validity of benefit estimates varies depending on the 
quality of science used by federal agencies. For example, the projected 
number of lives saved by DOT's mandatory airbag regulation (1977) was 
estimated based on laboratory crash tests with cadavers, observed rates 
of safety belt use, injury surveillance data from police reports and 
hospital records, and engineering judgment. Based on more than 30 years 
of real-world experience with the airbag regulation, we now know that 
the safety benefits are smaller than projected by regulatory analysts 
but benefits are still large enough to justify the extra investment in 
airbag technology. In contrast, EPA's air pollution regulations have 
been shown to have higher public health benefits than previously 
thought due to better understanding of how the rate of premature death 
rises in a community due to the inhalation of soot and smog. As rates 
of urban air pollution have declined, the trends in mortality rates 
from chronic diseases (age adjusted) have been downward. Today, some of 
the best analytic work on the benefits of federal regulations is 
performed by analysts at the U.S. Environmental Protection Agency. 
While the benefits of federal regulations are sometimes overestimated 
and sometimes underestimated, there is no evidence that use of BCA 
causes any systematic bias in the estimates of benefits prepared by 
federal agencies.
    Myth #2: It is unethical to consider costs when making regulatory 
decisions about medicine, public health, safety, and environmental 
protection.
    The notion that ``safety'' or ``protection'' from harm is an 
absolute right, regardless of costs, is not defensible on either 
philosophical or practical grounds. Philosophically, complete safety 
(also called ``zero risk'') is an illusion because well-informed 
citizens choose, on a daily basis, to assume many risks in life in 
exchange for a variety of benefits (e.g., we reduce travel time by 
driving faster on four-lane highways than we do on two-lane roads). 
When risks are imposed on citizens without their explicit consent 
(e.g., when a pedestrian inhales pollution emitted by a car), the 
philosophical analysis is more difficult but the ethical solution is 
not necessarily a mandate for zero risk. A more compelling resolution 
is that regulators should protect citizens from imposed risks to 
whatever extent the affected citizens would prefer, assuming those 
affected citizens were to experience both the benefits and costs of the 
regulation. Philosophically, this is a standard of hypothetical 
informed consent, and it forms the ethical foundation of BCA. To reject 
the informed preferences of citizens in favor of absolute safety is a 
form of authoritarianism--an ill-considered rejection of the ideals of 
personal freedom and consumer sovereignty that are at the heart of 
democratic capitalism. The practical objections to zero risk are even 
more compelling. If regulators go so far in the pursuit of complete 
safety that they make families poorer (e.g., through higher prices for 
regulated, zero-risk products), there may be more imposed risk from the 
induced poverty than from the target risk that regulators seek to 
eliminate. For example, many regulations in the energy sector have the 
practical effect of raising the prices of gasoline at the pump. For 
many low-income households, rising gasoline prices have adverse 
ramifications for all aspects of welfare (including health). Thus, 
practical considerations favor some form of benefit-cost determination 
rather than blind pursuit of zero risk.
    Myth #3: BCA is a mathematical straight jacket that prevents 
consideration of important qualitative values such as fairness and 
special concern for the welfare of children.
    The falsehood here is the assumption that a benefit-cost 
determination may be based only on a numerical comparison, without 
consideration of qualitative values such as fairness and the special 
needs of children. It is well-accepted in the field of BCA that, while 
many benefits and costs can be quantified, some valid considerations 
are essentially intangible. BCA textbooks call for intangible benefits 
and costs to be disclosed by analysts and considered by regulators. For 
example, suppose that a federal regulation will reduce the rate of lead 
poisoning among children in poor urban communities. Assume further that 
the quantified benefits and costs of this regulation are roughly equal, 
without considering the fact that low-income children are the primary 
beneficiaries. A fairness argument can be made that a tie-breaking, 
intangible consideration favors the regulation: the notion that the 
federal government owes a special sense of fairness to low-income 
children who are less able than middle-class or wealthy adults to 
protect their own interests. Notice that this legitimate, fairness 
consideration may not be as compelling if the costs of the regulation 
are also borne by low-income families. In other words, a benefit-cost 
determination is not a mathematical straight jacket the prevents 
analysts and regulators from giving weight to compelling intangible 
considerations.
    Myth #4: BCA of business regulations is biased against regulation 
because the costs of regulations are exaggerated and the benefits of 
regulation are understated.
    For a variety of reasons, it is sometimes asserted that analysis of 
business regulations is biased because costs are exaggerated and 
benefits are under-valued. The literature now includes several dozen 
regulations where the ex post estimates of benefit and cost are 
compared to the ex-ante estimates made by agency analysts before 
regulations were issued. While many of these estimates have been shown 
to have errors, there is no universal pattern that costs are 
exaggerated and benefits are underestimated. Indeed, my summary of this 
literature is that it shows no systematic bias in the quantitative 
estimates of benefits and costs by federal agencies.
    Myth #5: BCA is so complicated and time consuming that it slows the 
regulatory process to a halt.
    There is a theory in the legal literature that the federal 
regulatory process has become so ``ossified'' by procedural and 
judicial requirements that the pace of federal rulemaking is now at a 
snail's pace. A related concern is that the addition of BCA 
requirements will exacerbate the ossification, and slow down the 
issuance of necessary regulations. Based on the available empirical 
literature and my five years of experience at OMB, I can assure you 
that federal agencies have no difficulty issuing numerous regulations, 
including highly expensive ones, when there is a political desire to do 
so. Consider, for example, the rapid flow of homeland security rules 
after the tragic events of 9/11. Anyone who has been following the 
Obama administration is aware that numerous new regulations are being 
proposed and finalized, despite the BCA requirement and other 
procedural requirements on agencies. And since most important 
regulations are already litigated by a wide range of stakeholders, and 
federal judges are already considering the findings of BCA, it is hard 
to see how a well-crafted statutory requirement for BCA could lead to 
more ossification or judicial delays.
    Now that I have addressed some of the myths about BCA in federal 
regulation, I turn to some constructive suggestions for legislation in 
this arena.
                    suggestions for statutory reform
    First, I recommend that Congress pass a simple statutory 
requirement that regulators conduct and use BCA (and related tools) 
when issuing significant federal rules. Reasonable people can disagree 
over how the benefit-cost mandate should be framed but I think it is 
sensible to start from the principles in the Clinton-Gore executive 
order (1993). I believe it may also be useful to review the legislative 
language that Senators Carl Levin and Fred Thompson crafted almost 
fifteen years ago, including some of the refinements made in 
consultation with the Clinton-Gore administration. I am very pleased 
that President Obama has recently reaffirmed presidential commitment to 
BCA as a valuable tool in rulemaking.
    Basically, there needs to be a statutory requirement that 
regulators perform BCA, a requirement that a preferred regulatory 
option have benefits that justify costs, and some safeguards to ensure 
that the BCA is performed with a high degree of quality. For example, 
the agency should be required to analyze at least one option that is 
less expensive and one option that is more expensive than the agency's 
preferred option. In other words, analyses that simply compare one 
regulatory option to ``doing nothing'' should not be considered 
adequate. Since presidents and agencies do not always adhere to the 
provisions in presidential executive orders, it is imperative that 
judicial review of the new statutory requirements be authorized. The 
benefits-justify-costs test should be applicable to each significant 
regulation, unless the agency's authorizing statute has explicitly 
prohibited consideration of BCA.
    Second, I recommend that Congress require OMB to issue guidance on 
the proper conduct of BCA, and that this guidance be updated 
periodically (e.g., at least every ten years or as soon as there is 
significant change in the state of the art of BCA). OMB currently uses 
a guidance document called Circular A-4 that was issued in 2003 after 
public comment, interagency deliberation, and expert peer review. I 
recommend that Congress require a similar process in the future, 
placing OMB in the lead in consultation with the White House Council of 
Economic Advisors and other agencies. In order to better ensure that 
the data and models used by agencies are valid and appropriate, the new 
statutory mandate should reference the information-quality and peer-
review guidelines that have been issued by OMB, and provide 
stakeholders an opportunity for judicial review in cases where these 
well-developed guidelines are not followed by agencies.
    Third, I recommend that Congress expand the scope of the statutory 
mandate to include significant guidance documents as well as 
legislative rules, at least in cases where the agency's action to issue 
a guidance document has the same practical effect on regulated parties 
as a regulation. Senator Collins (R-Maine) has already proposed a bill 
in the Senate to apply BCA to guidance documents, and I urge the 
subcommittee to take a careful look at her guidance-related provisions.
    Finally, Congress should consider adding a distributional arm of 
the ``benefits-justify-costs'' test that ensures that the welfare of 
low-income Americans is considered before a significant rule is issued. 
Thus, even if a regulation passes the benefit-cost test for society as 
a whole, it may not be advisable if low-income Americans are likely to 
incur more costs than benefits. For example, energy-related regulations 
that increase the price of gasoline at the pump have a 
disproportionately harmful effect on low-income families, especially 
those families living in small towns and rural areas where alternatives 
to automobile travel are not available. The benefit side of the ledger 
also needs to be considered, since some regulations offer significant 
benefits to low-income families while others do not. As a matter of 
fairness, regulators owe it to the most economically disadvantaged 
families in society to explore whether a proposed rule will make these 
families better off or worse off. My 2008 article in the Pennsylvania 
Law Review provides a more complete discussion of the philosophical and 
practical aspects of this recommendation.
    In summary, it has been accepted by U.S. presidents for at least 30 
years that BCA should play an important role in federal rulemaking. 
While OMB and federal agencies have made significant progress in this 
direction, it is well known that OMB and federal agencies do not 
implement this policy with consistency and a high degree of quality. 
Congress should build on the logic of the recent presidential orders by 
passing a simple statutory requirement that is backed by the force of 
judicial review. If OMB and federal agencies know that federal courts 
are authorized to review the role of BCA in federal regulation, they 
will take their BCA-related responsibilities much more seriously than 
they do today.
                               __________

    Mr. Gowdy. Thank you, Dr. Graham. Let me ask you a couple 
of questions, and then I will recognize the gentleman from 
Tennessee.
    Is it fair that some benefits are not quantifiable? Is that 
a fair statement to say? And how would you address that in a 
cost-benefit analysis if some benefits are not easily 
quantifiable?
    Mr. Graham. Let me start by saying basic textbooks in 
benefit-cost analysis acknowledge that not all costs and 
benefits will be quantifiable, or, even if they can be 
quantified in the physical units, like tons of pollution 
prevented, for example, they may not be quantifiable in dollar 
terms. So, clearly a good cost-benefit analysis lays out--think 
of it as the advantages and the disadvantages of the 
regulation, and quantifies those that can be quantified. But 
there is no point in forcing agency analysts to try to quantify 
things that cannot be quantified.
    So, in the final analysis, the decision about whether the 
benefits justify the costs is a policy judgment made by a 
regulator. That does not mean that the regulator can do 
anything, but they do have to make a judgment.
    Mr. Gowdy. Dr. Graham, the best argument for codification, 
is it the political whims and caprices that change with 
Administrations? Is it judicial review? What are the three 
best, strongest arguments for codification in your judgment?
    Mr. Graham. Well, I think the first thing to keep in mind 
is that at the career level, the staff members in the 
regulatory agencies, whether it be the Labor Department or 
Homeland Security, if they know that their regulation is going 
to be subject to judicial review for its benefit cost 
justification, they will devote more serious effort to the 
benefit-cost analysis. I think that is a very important thing. 
Without that codification, you are not going to get that type 
of judicial review on the benefit-cost analysis implementation.
    And then the second reason is, various Presidents--we can 
all pick our examples--they have called them political or 
policy preferences or campaign commitments in particular areas 
that they are going to want to proceed with, even though in 
some cases they really do not have a very good justification 
based upon benefits and costs. And the people who would be 
harmed by those regulations, they need the ability--the 
safeguards of the courts to ensure that those commitments and 
political commitments are not imposed on them without careful 
analysis of benefit and cost.
    Those would be my two primary reasons.
    Mr. Gowdy. All right. You said it is important to apply 
cost-benefit analysis to agency guidance documents because they 
have the same practical effect on regulated parties as a 
regulation. How can this happen? And, secondarily, does this 
mean that an agency can avoid the notice and comment process by 
just issuing guidance documents?
    Mr. Graham. Well, the short answer is yes. But there are a 
couple of good lawyers on this panel sitting next to me, and 
they can describe to you in better detail than I do the 
creative ways that agencies work to basically impose a burden 
on, say, a business without actually ever writing a regulation. 
They simply issue a guidance document and say, it would be a 
good idea if your plant was designed in this way or if it 
operated in that way. And then in addition, they say we might 
have visits or enforcement actions at your facility at some 
point in the future, and it is all kind of informal. But as a 
practical effect, the agency is saying you better do what this 
guidance document says.
    That is, I think, is a very serious problem. And agencies, 
because rulemaking is more expensive, it takes longer, they 
like to do as much as they can through these guidance 
documents.
    Mr. Gowdy. Can codification force agencies to quantify 
factors they might otherwise say are not quantifiable?
    Mr. Graham. I am not sure. I think the most important 
factor in the process of quantification is the peer review 
process where scientists, engineers, and economists from 
universities and from non-profit organizations, they review the 
analyses that are prepared by agencies. And they may say in 
certain cases, you know, there are data available that allow 
you to quantify this benefit or this cost. Or they may say, you 
are trying to quantify this, but the data you have are not 
adequate to support that. It is that technical peer review 
process which needs to be part of this legislation that I think 
is the best assurance that the quantification process is 
proceeding in a valid manner.
    Mr. Gowdy. Thank you, Dr. Graham. At this point I would 
recognize the distinguished gentleman from Tennessee and 
biggest fan of the Memphis Grizzlies in Congress, Mr. Cohen?
    Mr. Cohen. Thank you. Thank you. And even though they lost 
yesterday, they are still very much alive. They will come back.
    Mr. Graham, of the Atlantic Coast Conference, which also 
plays basketball on a different level, when you worked with the 
Bush Administration and you had these regulations come up on 
Homeland Security, how did you determine what we should do on a 
cost-benefit analysis when you are talking about people's lives 
and unknowns, such as Al-Qaeda?
    Mr. Graham. Well, I think that is a great question. And 
remember, I am talking about this period, maybe the first 18 
months after 9/11 where there is a lot of emotional concern in 
the country about trying to do things to protect the next 9/11.
    The Administration had the authority, emergency authority, 
to do a wide range of things without any cost-benefit analysis 
whatsoever. If they had had the kind of basis that was 
necessary to declare an emergency, they could have done so 
without any of the analysis I am talking about.
    The Administration knew they did not have that as a matter 
of intelligence and as a matter of the situation at the time. 
So, they proceeded with these regulations through normal 
rulemaking process. When they made that decision, they were 
implicitly saying that we really ought to follow the same kinds 
of procedures that would normally apply for the rulemaking.
    And in the case of these Homeland Security regulations, 
what I thought was the most interesting was the requirements as 
they are implemented in the United States and around the world 
are actually quite different. All of us travel to go through 
airports. Have you ever noticed how much variation there is 
between the specific requirements when you actually go through 
screening? Do each of these differences have a justification? 
Sometimes your shoes are off, sometimes they are on. Sometimes 
your belt is off, sometimes it is on. And it varies.
    And I do not think there, frankly, is a really good, sound 
justification for a lot of this variation, and that tells me 
that the evidential basis for what is being required is 
somewhat thin. Does that mean we should not have any of these 
regulations? No. But I think a little more thought to how they 
are designed in the first place is probably a good idea.
    Mr. Cohen. I agree with you, and I do not know that much 
about the regs, and I thought about them this week when in 
Memphis they said you had to take off your belt. They have 
never said that before, and sometimes they say it in D.C., and 
sometimes they do not. But we never said you had to take off 
your tennis shoes or your shoes, and then comes this guy with 
the material in his shoes. I mean, how do you quantify that 
type of regulation when 200 lives would have been in the 
balance if the guy had a better lighter or BIC or whatever?
    Mr. Graham. You actually just did a little bit of 
quantification. And it does not require much in terms of number 
of lives saved, even potentially, to justify a significant 
regulation. So, the real question is, do they have the basis 
for these different types of distinctions and why they are 
requiring passengers to engage in this type of screening versus 
another type of screening. If they have that basis, even on a 
qualitative basis, I think you could potentially justify these 
types of regulations.
    I am just trying to be candid with you and be honest with 
you that I have tire tracks on my chest from rules after 9/11 
that rolled through this Federal Government. You know, it 
probably would be a good idea right now to go back and look at 
some of those and see whether all of them are still really 
necessary.
    Mr. Cohen. Yeah, well, I do not disagree with you, and it 
is an interesting subject. I need to spend some more time on 
it. But some of the stuff is absurd, and I think we go 
overboard on some of the things. But nevertheless, safety, it 
is very difficult to do that in terms of dollars and cents. And 
some of it just seems like whether or not it makes sense, and 
sometimes we get into these regulations, like on the belt and 
all. We have really created an industry and we cannot get rid 
of it because their jobs are there, and there are companies 
that sell that equipment, and so they have become ones that 
push forward because, even though it really does not do us any 
good. So, I do not how you get around that.
    But the President has said some things about fairness, and 
he has talked about equity, and he has been criticized for that 
when considering rules with lead poisoning among poor children. 
Would you agree that the President has probably got something 
appropriate when he is dealing with fairness and equity or 
dealing with poor children and lead poisoning, and that maybe 
the criticism is not fair?
    Mr. Graham. I have not seen the details of the criticism 
that the President made. But I do cite in my testimony what I 
think is an important role that fairness considerations play in 
a reasoned development of a regulation. And sometimes, for 
example, when you take energy regulations that increase fuel 
prices at the pump, those regulations have a disproportionate 
adverse impact on lower income Americans, particularly 
Americans who live in rural areas and in small towns where 
alternative transportation is not available. In that kind of a 
case, even if the benefits of that regulation would be somewhat 
greater than the cost, a fairness consideration might say, 
well, really this is not a very good time to impose this kind 
of burden on the lower income elements of our population.
    So, I am a firm believer that fairness considerations, 
particularly as related to low income populations, do have an 
important role in a benefit cost framework. But I would have to 
look in more detail at exactly what President Obama said to 
understand his particular claim.
    Mr. Cohen. So, if the Chairman would allow me for just 20 
seconds, could you be willing to give me and/or the Chair and 
the Committee some of those tracks that you have got and tell 
us which of those regulations you think we should not have 
passed and an explanation so that we may look at that?
    Mr. Graham. It will be easy because my boss at the time was 
Mitch Daniels, the current governor of Indiana. And he allowed 
me in 2004 to actually publish an annual report from OMB that 
listed all of these Homeland Security regulations, what was 
estimated as to their cost, and what their rationale was. And 
we allow readers to make their own determination.
    Mr. Cohen. Do you have a Cliff's Note of that?
    Mr. Graham. Yeah, and it is on the website. It is a nice 
table actually, just maybe a two-page table that lays it all 
out. So, I will get you a copy of that.
    Mr. Cohen. Thank you, Mr. Chairman. Thank you, sir.
    Mr. Gowdy. Yes, sir, Mr. Cohen. Dr. Graham, that buzzer, I 
think, means something, but I am going to recognize the 
distinguished gentleman from the great state of California, Mr. 
Gallegly, for his questioning. And then with the indulgence of 
the other three panelists, we aspire to go vote and then 
return.
    Mr. Gallegly?
    Mr. Gallegly. Thank you, Mr. Chairman. I would just like to 
make a quick observation, and I know you have a flight to 
catch, and we have votes to take, and we are behind a couple of 
hours already.
    But in follow-up to Mr. Cohen, relative to airport security 
and so on, you know, we all do a lot of traveling. In fact, I 
have accumulated over 1,700 trips from one coast to the other 
because I commute every week to California. And you do get 
familiar with that process all too well.
    But the regulations, and I would like to know a little bit 
about maybe the flexibility in some of these regulations, 
because you mentioned, you know, you go into one airport, they 
require a belt, you go in another airport, it is taking your 
laptop out of the case, or your iPad or whatever, and then the 
next week it is different.
    Well, an observation that I have made for some time, and I 
happen to know a little bit about the rationale behind it, and 
it has to do with flexibility sometimes is important, because 
when you are dealing with terrorists, the most important thing 
you can do is keep them flat footed and off guard. And every 
time you move a guard from one corner today to the next corner 
the next day, they never know which corner the guard is going 
to be on. So, if everybody is in the same place doing the same 
thing every hour with a belt or with a laptop or whatever, it 
has a strategic benefit. Could you maybe respond to that a 
little bit and how regulations impact on the importance of 
flexibility?
    Mr. Graham. Well, first of all, I think you make a really 
excellent point, that in order to have an effective strategy in 
counter-terrorism through these kinds of regulations, you would 
have to have some changes over time that keep the terrorists 
off balance in terms of their targeting.
    The examples I was referring to were not changes in 
practices at the same location. It is that when you are in this 
airport, they do it this way, and when you are at that airport, 
they do it that way. And to me, it is just not obvious that 
that is confusing many terrorists. It just seems to be kind of 
an unexplained variation in what this practice is.
    But I agree with you. In fact, one of the things I noticed 
when I was at OMB and we were issuing all these rules, so many 
of the rules that we were issuing were trying to go back and 
prevent the incident that had already occurred. But surely a 
perceptive and shrewd terrorist, for their next couple of 
instances, would not necessarily be replicating the same 
pathway and the same targets that were used the time before. 
But how many regulations were we doing on all the other 
targets? Not very many.
    So, I am just trying to admit that the whole process of 
regulation in a situation where you have a lot of political, 
you know, saliency on an issue like that, it can benefit from 
some evidence, some analysis, some benefits and costs.
    Mr. Gallegly. The one thing that has certainly become 
abundantly clear is you have a very simple and unchallenging 
job. [Laughter.]
    I appreciate your testimony, and I do know the tremendous 
challenges, and they are changing every day. So, but yet we do 
have to have regulations.
    Mr. Graham. We certainly do.
    Mr. Gallegly. But we need to learn how to best prioritize, 
and that is why we have the experts out there hopefully that 
are doing the right thing. And I feel confident you are. Thank 
you.
    Mr. Graham. Thank you, sir.
    Mr. Gowdy. Thank the gentleman from California. It is the 
fervent hope of all three of us that you will make it through 
TSA with your shoes and your belt on. Thank you for your 
patience.
    To the three remaining witnesses, we continue to thank you 
for your indulgence. We are grateful for your patience. Mr. 
Cohen did much better in math than I did. He added up the 
number of minutes that we may be gone, and I am going to let 
Judiciary staff and our three witnesses decide how much of 
their lives they would like to be imposed on today. So, this 
could be a long series.
    But you have got a plane to catch. You have lives to live. 
I will let higher ranking people than me make the decisions. 
But if I see you again, I will look forward to it. If I see you 
again another day, thank you for your patience.
    We will be adjourned pending votes.
    [Recess.]
    Mr. Gowdy. We will reconvene. And, again, on behalf of Mr. 
Cohen and myself and everyone else involved in the process, we 
want to thank you again for your patience and understanding the 
vagaries of votes.
    Without further ado, it is my pleasure to introduce our 
three witnesses.
    Jeffrey Holmstead is one of the Nation's leading air 
quality attorneys and leads the Environmental Strategies Group 
at the law firm of Bracewell and Giuliani. Did I pronounce it 
correct?
    As the head of the Environmental Protection Agency's Office 
of Air and Radiation from 2001 to 2005, Mr. Holmstead saw 
firsthand how regulatory agencies conduct and use cost-benefit 
analysis. Between 1989 and 1993, Mr. Holmstead served on the 
White House staff as associate counsel. In that capacity, he 
was involved in the passage of the Clean Air Act amendments of 
1990 and the key steps taken to implement that law.
    He is a graduate of Yale Law School. He earned his 
bachelor's degree, summa cum laude, from Brigham Young 
University.
    Sally Katzen has enjoyed a distinguished career in legal 
practice, government service, and academia. The first female 
partner of the law firm Wilmer, Cutler & Pickering, Ms. Katzen 
also served as the Section Chair of the American Bar 
Association's Administrative Law and Regulatory Practice Group. 
She served for 8 years in the Clinton Administration, including 
5 years as administrator for the Office of Information and 
Regulatory Affairs in the Office of Management and Budget.
    She has a bachelor's degree from Smith College and a J.D. 
from the University of Michigan School of Law. She has taught 
at George Washington University, the University of Michigan, 
University of Pennsylvania, and Georgetown, and is a visiting 
professor at New York University School of Law.
    Mr. Harold Furchtgott-Roth. Have I pronounced that close to 
correct? All right. From 1997 to 2001, Dr. Furchtgott-Roth 
served as the commissioner of the FCC. Before his appointment 
to the FCC, he was chief economist for the House Committee on 
Commerce and the principal staff member on the 
Telecommunications Act of 1996.
    He is a professional economist, the president of 
Furchtgott-Roth Economic Enterprises, the author of dozens of 
publications, and has authored or co-authored four books, which 
means he has written more books than we have read, right?
    Mr. Cohen. You can say whatever you want to say about 
yourself. [Laughter.]
    Mr. Gowdy. Dr. Furchtgott-Roth received his Ph.D. in 
economics from Stanford University and a bachelor of science 
degree in economics from MIT.
    We would like to thank all three witnesses for joining us, 
and we will recognize each of you from my left to right, your 
right to left, starting with Mr. Holmstead, for 5 minutes and 
your opening statement?

           TESTIMONY OF JEFFREY HOLMSTEAD, PARTNER, 
                   BRACEWELL & GIULIANI, LLP

    Mr. Holmstead. Well, thank you. I am happy to be here. I 
wanted to be somewhat informal like Dr. Graham was and just 
say, to begin with, I like to think I have a somewhat unique 
perspective having seen the regulatory review process both from 
the White House and then from EPA and also from the private 
sector.
    And having done this now for 20 years, worked on cost-
benefit analysis and regulatory review, I want to say this. I 
know from my own experience that a lot of the career staff 
folks at EPA take cost-benefit analysis seriously and they try 
to use it to make regulatory decisions. But I have also seen 
that Federal officials sometimes use cost-benefit analysis not 
to inform their regulations, but to justify the regulations 
that they want to do for other reasons.
    Cost benefit analysis is an important regulatory tool, but 
it can be done in properly, it can be done poorly, and in some 
cases it can actually be misused. And for this reason, I do 
think it is important to have some sort of meaningful oversight 
of the type of regulatory analysis conducted by regulatory 
agencies. And I am enthusiastic that this Subcommittee is 
considering these types of enforcement mechanisms that would 
make sure that there is a meaningful cost-benefit analysis.
    I want to just start with a quick example of what I 
consider to be the misuse of cost-benefit analysis. And this 
may sound like I am down in the weeds; I do not mean to be. But 
there has been a lot of research done over the past seven or 8 
years, and Dr. Graham is one of the people doing this research, 
showing that reducing fine particle pollution is by far the 
most important thing EPA has ever done under any of its 
statutes. And, you know, there are arguments about all the EPA 
statutes, but I do not think any serious researcher disagrees 
that most of the benefits to our society achieved by EPA have 
come from reducing these fine particles, which we refer to as 
PM2.5.
    You would think, and in fact a proper cost-benefit analysis 
would say, well, what is the most cost effective way that we 
can achieve these benefits? Unfortunately, some EPA officials 
have come to use the benefits of reducing fine particles as a 
way to justify almost anything they want to do. Again, a proper 
cost-benefit analysis, one that actually adheres to the 
principles that President Obama has in his executive order and 
certainly comes from the prior executive orders, would say, 
well, let us look at the most cost effective way of achieving 
these benefits. But unfortunately, it has come to be, as I 
said, used as a way to justify almost anything.
    A particularly egregious example is something that we refer 
to as the Utility MACT Rule. This rule is supposed to be 
designed anyway to reduce mercury emissions from power plants. 
The sole basis for this rule was a determination back in the 
year 2000 by then administrator Carol Browner, that mercury 
emissions from coal-fired power plants needed to be reduced. 
So, they come up with this rule. The rule, as proposed, would 
be the most costly rule ever issued by EPA if they finalize it. 
And EPA's analysis says it is about $11 billion a year of 
costs. But then they say this is still a good deal for society 
because it will achieve benefits somewhere between $50 billion 
and $100 billion, so this seems like a good deal.
    You get into the details, though, and EPA says, well, we 
did look at the benefits of mercury, reducing mercury from 
power plants, and we have quantified those benefits, and we 
estimate those benefits to be somewhere in the range of 
$500,000 to $6.1 million. So, benefits of half a million to no 
more than $6.1 million, and the costs are $11 billion. And they 
say, but that is okay because we are going to get all these 
PM2.5 reductions. But what they do not do is say, are there 
other ways that would be much more cost effective to achieve 
these reductions? And the answer is, there are, and Congress 
has specifically adopted a program to deal with these. It 
provides much more flexibility, a very different role for EPA. 
But EPA has chosen to use this benefits analysis to justify 
what it really wants to do anyway, which is to impose very 
costly regulations on coal.
    I see that my time is running out. I will mention my last 
two points. One are, there are other ways that agencies have 
learned to avoid oversight. In some cases, and I am sure Ms. 
Katzen will probably agree that she has seen this. Two, is that 
there are friendly lawsuits that set deadlines on agencies that 
effectively prevent OMB from exercising any kind of regulatory 
oversight. I would be happy to give you many examples of that 
where, again, in the Environmental Protection Agency they will 
go into court and come up with a settlement agreement with an 
environmental group, and that will compel the Agency to issue a 
rule on a certain schedule, a schedule which prevents OMB from 
being involved in the process. And I think it is important for 
this Committee to at least think about mechanisms to ensure 
that there is an opportunity for meaningful regulatory 
oversight by the Office of Management and Budget. And I also 
believe that the kind of enforcement mechanism that Dr. Graham 
talked about where there could be some judicial oversight would 
also be a very helpful thing for the process.
    Thank you.
    [The prepared statement of Mr. Holmstead follows:]
         Prepared Statement of Jeffrey R. Holmstead, Partner, 
                       Bracewell & Giuliani, LLP

    My name is Jeff Holmstead. I am a partner in the law firm of 
Bracewell and Giuliani and the head of the firm's Environmental 
Strategies Group. This afternoon, however, I am not appearing on behalf 
of my law firm or any of my firm's clients. I am here as a former 
official in both the Environmental Protection Agency (EPA) and the 
White House who has spent more than 20 years working on the development 
of federal regulations.
    I served as the head of EPA's Air Office for more than four years 
(from 2001 to 2005) and as an Associate Counsel to the President for 
almost four years (from 1989 to 2003). During my time in the White 
House, I was very involved in the regulatory review process. I have 
also been an environmental attorney in private practice for many years. 
In both government and the private sector, I have spent many years 
thinking about and dealing with cost-benefit analysis as both a 
conceptual and practical matter. Thank you for the opportunity to 
address the subcommittee on the important issue of presidential and 
judicial review of regulations and the role that should be played by 
cost-benefit analysis (CBA), which is sometimes referred as benefits-
cost analysis (BCA). Both terms (and both acronyms) mean the same 
thing.
    It is increasingly clear that we are in an age of unprecedented 
federal regulation over many aspects of the Nation's economy. I am most 
familiar with the regulations that EPA has issued over the last two 
years, but Susan Dudley, the former head of the White House Office of 
Information and Regulatory Affairs (``OIRA''), has noted that the Obama 
Administration has issued a total of 132 ``economically significant'' 
rules (i.e. rules whose costs or benefits exceed $100 million per year) 
in the two years it has been in office. To put this total in 
perspective, this total is approximately 40 percent higher than the 
annual rate under Presidents Bill Clinton and George W. Bush.
    While it is tempting to draw conclusions by simply looking at these 
totals, each rule or set of rules that affect the same entities should 
be evaluated by looking at its costs and the benefits it provides to 
society--and how these costs and benefits are distributed. Everyone 
agrees that many of these rules will impose very substantial costs, but 
the rules may still be justified if they provide even greater benefits 
to our society. On the other hand, if the cost of a rule exceeds its 
benefits, our economy suffers the consequences. Proponents of greater 
regulation often pretend that the costs are simply imposed on industry 
or ``big business,'' but they also affect--sometimes quite 
substantially--workers, consumers, ratepayers, and all Americans who 
have privately-funded pension plans or are otherwise invested in 
stocks, bonds, or mutual funds.
    I can say from my own experience that many career officials at EPA 
take cost-benefit analysis seriously and try to use it as much as 
possible to make regulatory decisions. Other federal agencies also do 
CBA, but perhaps to a lesser extent. I have also seen, however, that 
federal agencies sometimes do not use CBA to inform their regulatory 
decision, but rather to justify actions they may want to take for other 
reasons. CBA is simply a analytical tool that can be used properly or 
poorly or even misused. For this reason, it is important to have 
appropriate oversight of the analysis conducted by regulatory 
agencies--to ensure that regulatory decisions are consistent with the 
principles of CBA and with the underlying statutory scheme created by 
Congress.
    I support this Subcommittee's efforts to consider legislation that 
will ensure proper presidential and judicial review of the 
justification underlying Federal regulations. To further your efforts, 
I would like to focus attention on three key issues relating to 
problems with the current system of cost-benefit analysis and areas of 
focus for any potential solution.
                               background
    Before evaluating the current use (or misuse) of cost-benefit 
analyses and the need for legislative action, it may be helpful to 
briefly review the mandates placed upon all Federal agencies when 
issuing regulations. First, under Executive Order 12866, issued by 
President Clinton in 1993, when an agency determines that a regulation 
is the best method of achieving a regulatory objective it must, among 
other things:

         (1)  ``design its regulations in the most cost-
        effective manner to achieve the regulatory objective;''

         (2)  ``propose or adopt a regulation only upon a 
        reasoned determination that the benefits of the intended 
        regulation justify its costs;''

         (3)  ``identify and assess alternative forms of 
        regulation and . . . specify performance objectives, rather 
        than specifying the behavior or manner of compliance that 
        regulated entities adopt;''

         (4)  ``tailor its regulations to impose the least 
        burden on society . . . taking into account . . . the costs of 
        cumulative regulations.''

    In Executive Order 13563, issued on January 18, 2011, President 
Obama reaffirmed these regulatory principles under an overarching 
instruction to Federal agencies to protect public health and our 
environment ``while promoting economic growth, innovation, 
competitiveness, and job creation.''
                    misuse of cost-benefit analyses
    Having spent many years looking at the benefits of different 
environmental regulations, I agree with the many researchers who 
believe that reducing levels of fine particles in the air is the most 
important and beneficial thing that the federal government can do in 
the environmental arena. The vast majority of the benefits that EPA has 
ever achieved under all the federal environmental statutes come from 
reducing ambient levels of fine particles, which are often referred to 
as PM2.5.
    There are two major areas of uncertainty about the benefits of 
reducing PM2.5: (1) whether all the different components in PM2.5 
should be regulated equally; and (2) whether there are benefits of 
reducing such pollution in areas where levels are already low. I 
believe that the EPA and other agencies should pay more attention to 
addressing these areas of uncertainty, but I will not discuss them 
here.
    My concern is that, rather than using cost-benefit analysis to 
develop the most effective way to reduce PM2.5, some EPA officials have 
come to view CBA--and the benefits of reducing PM2.5--as a way to 
justify virtually anything that they may want to do. All too often in 
recent years, EPA has understood the instruction to issue the ``most'' 
cost-effective regulation to mean that it may issue ``any'' regulation 
where it can show benefits exceeding costs. Unfortunately, this is a 
serious misuse of the type of cost-benefit assessment that is required 
by Executive Orders 12866 and 13563. Proper CBA should identify the 
most effective way to regulate--and not be used simply to justify any 
regulation that can be claimed to provide benefits that exceed costs.
                a case study: the proposed utility mact
    EPA has recently issued a proposed rule to reduce emissions of so-
called ``hazardous air pollutants'' (or HAPs) from coal- and oil-fired 
power plants. This rule is generally referred to as the Utility MACT 
because it was developed under a section of the Clean Air Act that 
calls for EPA to develop standards based on the ``maximum achievable 
control technology'' (MACT) that can be used to control HAP emissions 
from different type of industrial facilities.
    As proposed, the Utility MACT would be the most expensive rule in 
EPA history. Some experts believe that EPA has actually understated its 
likely costs, but even EPA acknowledges that it would impose costs of 
about $11 billion a year on the U.S. economy. Yet EPA has also gone to 
great lengths to argue that the benefits of this rule will greatly 
exceed the costs. Under the requirements of the two Executive Orders 
cited above, EPA prepared a cost-benefit analysis which suggests that 
annual benefits will be in the range of $48 to $130 billion. If the 
annual costs of the rule are only $11 billion, then ``the benefits of 
the proposed [Utility MACT] far outweigh the costs,'' as EPA argues.
    The Agency's sole basis for issuing this proposal is a regulatory 
determination that then-EPA Administrator Carol Browner made in 
December 2000 that it was ``appropriate and necessary'' to regulate 
certain HAPs from power plants This determination was based almost 
entirely on the Administrator's concern about mercury emissions from 
coal-fired power plants. Not surprisingly, the majority of the proposed 
rule deals with mercury reduction requirements for coal-fired power 
plants.
    It stands to reason that the vast majority of benefits claimed by 
EPA to justify the proposed rule must be the result of reductions in 
mercury emissions. But the Agency's cost-benefit analysis tells a very 
different story. According to EPA, the benefits to society of the 
mercury-reduction requirements are in the range of $500,000 to a 
maximum of $6.1 million in total (i.e. not even annual) benefits. In 
other words, in a rule estimated by EPA to cost $11 billion annually, 
the maximum total benefit of reducing emissions of mercury--the 
emissions of which serve as the primary basis for the rule--is $6.1 
million.
    EPA asserts, however, that it's proposal is justified based on 
cost-benefit analysis because the rule will provide benefits of up to 
$130 billion ever year. Yet virtually all these benefits come from 
reducing PM2.5.
    Although mercury is the Agency's legal justification for the 
Utility MACT, EPA argues that it must also regulate non-mercury HAPs 
such as certain metals (e.g. nickel, selenium, etc.) emitted in trace 
amounts and acid gases (e.g. hydrogen chloride and hydrogen fluoride) 
that, according to EPA, do not pose a meaningful risk to public health. 
While some health risks from emissions of non-mercury HAPs are 
discussed in the proposed rule and the CBA (presumably implying health 
benefits from reducing such emissions), EPA does not make any attempt 
to evaluate the benefits that will be achieved by reducing these 
emissions. What is discussed at some length is that control 
technologies for non-mercury HAPs included in the proposed MACT 
standard result in reductions of emissions of PM2.5 and SO2. In fact, 
EPA's analysis admits that virtually all (i.e. 99+ percent) of the 
estimated $42 to $130 billion in annual benefits are due to reductions 
in PM 2.5.
    Nowhere does EPA explain whether there is a less costly way to 
achieve these benefits, which is puzzling because Congress has created 
a whole separate program to regulate PM2.5--and it is very different 
from the MACT approach that EPA is now proposing. Although EPA is 
aggressively implementing the program that Congress created to regulate 
PM2.5, this program is much more flexible than the MACT program and 
would be a much more cost-effective way of regulating PM2.5 from power 
plants.
    Why should this matter to the public? I have explained part of the 
answer above: EPA is mandated to find the most cost-effective solution 
for the regulatory priority (here: controlling mercury emissions from 
power plants) How can the Agency possibly conclude that it is a good 
deal for society to impose an annual cost of $10.9 billion to achieve 
benefits of $6.1 million?
    The other reason this type of analysis matters is that EPA has 
already controlled emissions of PM2.5 by setting a national ambient air 
quality standard (``NAAQS'') under section 108 of the Clean Air Act. In 
doing so, EPA has set a level of PM2.5 that it has found to be 
sufficient to public health and welfare with an adequate margin of 
safety. Areas of the country that already have attained this level of 
PM2.5 (i.e., that are in ``attainment'') are presumably therefore 
already safe from any health risks; Other areas that have not yet 
reached this level (i.e. are in ``non-attainment'') are already 
required to implement market-wide reductions in PM2.5 to get into 
attainment.
    In explaining how it developed the baseline for its benefits 
analysis, EPA's RIA states that ``EPA did not consider actions states 
may take in the future to implement the existing ozone and PM2.5 NAAQS 
standards[.]'' Of course, as it did for the Utility MACT, EPA's 
proposed NAAQS for PM2.5 contained an estimated analysis of the 
benefits of PM2.5 reductions. By not including these benefits in the 
baseline of the Utility MACT, EPA is essentially claiming these same 
benefits a second time to justify another regulation. Put a different 
way, the only way EPA can possibly claim more benefits from reductions 
in PM2.5 is to go beyond the controls it has already put in place under 
the PM2.5 NAAQS. Doing so, however, is completely contrary to Congress' 
intent to regulate PM2.5 under a different section of the Clean Air Act 
and contrary to EPA's own claims that the PM2.5 NAAQS is sufficient to 
protect public health and welfare.
             using ``friendly'' lawsuits to avoid oversight
    Currently, the only check on an agency's use of cost-benefits 
principles to make regulatory decisions is the interagency review 
process overseen by OIRA, which is part of the White House Office of 
Management and Budget (OMB). I have great respect for ORIA officials 
and staff, who are seasoned and dedicated economists and analysts with 
years of experience analyzing the costs and benefits of innumerable 
types of regulations. Unfortunately, OIRA officials are often unable to 
perform effective oversight due to factors outside of their control. 
EPA's proposed Utility MACT is, once again, a useful illustration.
    In April 2009, after being sued by several environmental 
organizations for its failure to issue emission standards for HAPs from 
power plants, EPA voluntarily agreed to a consent decree. Under this 
consent decree, EPA agreed to an extraordinarily ambitious schedule 
that almost guarantees that there will not be enough time to do serious 
regulatory analysis. The consent decree requires EPA to issue the 
proposed Utility MACT by March 16, 2011 (which it has already done) and 
then to issue a final rule by November 16, 2011. It is not clear that 
the environmental organizations had a valid legal claim that EPA was 
required to issue the Utility MACT on any particular schedule, but 
there was certainly no legal justification for a schedule like this 
one. Some observers have suggested that EPA may have wanted to be 
``required'' to issue the rule well in advance of the next presidential 
election.
    To gather data for the proposed rule, EPA issued an information 
collection request (``ICR'') to utility companies in December 2009. 
This ICR required these companies to conduct extensive testing and 
analysis that cost almost $200 million to produce. This data was not 
even available until late 2010, so neither EPA nor any other interested 
party had more than four months to review it before the proposed rule 
was issued. Putting aside the question of whether four months is an 
adequate timeframe in which to perform the required technical and cost-
benefit analyses, EPA only submitted its proposed Utility MACT to OMB 
for the regulatory review process on February 19, 2011. Accordingly, 
OIRA and OMB officials, as well as officials at other affected 
agencies, had a total of thirty days to review, analyze, submit and 
resolve comments on the 946-page rule and the 496-page cost-benefit 
analysis before EPA was required to publish the proposed rule. It goes 
without saying that thirty days to perform the type of careful analysis 
and provide the meaningful input intended by the Executive Orders is 
beyond the skills of even the most dedicated and hard-working public 
officials.
    This is just one example (a particularly glaring one, to be sure) 
of a consent decree having the effect, if not the intention, of cutting 
off meaningful regulatory review. But it highlights the need for 
Congress to ensure that agencies cannot make voluntary arrangements 
with outside entities which result in an end-run around the regulatory 
review process. I urge the Subcommittee to develop a legal, enforceable 
mechanism to ensure that there is sufficient time for meaningful 
interagency review.
       ensuring proper review and analysis of guidance documents
    I also recommend that the Subcommittee go beyond just rules and 
regulations to require that significant guidance documents are subject 
to analysis and interagency review. Informal guidance is a very 
important part of the regulatory and compliance process, and it would 
be a mistake to do anything that would prevent agencies from developing 
guidance that is helpful to outside parties. But some guidance 
documents can have major impacts on regulated entities, even though 
they are not formally designated as ``rules'' that must go through the 
normal rulemaking procedures and interagency review. The Subcommittee 
should expand the scope of its inquiry to ensure than such guidance is 
analyzed and reviewed like rules that have the same practical effect on 
regulated parties as a regulation.
          * * * * *
    It has been widely accepted for many years that cost-benefit 
analysis should play an important role in federal rulemaking. Although 
OMB and some other federal agencies have used CBA as an important tool 
in regulatory development, this requirement is not always done well. 
Congress should build on the work that has been done over the last 30 
years to ensure that agency do not avoid or misuse this type of 
analysis.
                               __________

    Mr. Gowdy. Thank you, Mr. Holmstead.
    Ms. Katzen?

   TESTIMONY OF SALLY KATZEN, SENIOR ADVISOR, PODESTA GROUP, 
     VISITING PROFESSOR, NEW YORK UNIVERSITY SCHOOL OF LAW

    Ms. Katzen. Thank you, Mr. Gowdy and Mr. Cohen. I 
appreciate the opportunity to appear today.
    I think all of the witnesses are in agreement to a point. 
We all support the use of economic analysis by regulatory 
agencies, and that would include the independent regulatory 
commissions, like the FCC and the SEC, the CFTC, and the Fed. 
And in my written statement, I provided several paths that 
Congress could take if it wishes to pursue this, and I would 
like to discuss that further in the question period if you are 
interested.
    I also think it is wholly appropriate for Congress, using 
hearings like this one or other oversight tools, to monitor 
agency activity, evaluate current practices, spotlight 
deficiencies, and bring public pressure to bear to improve 
agency performance, if that is what is called for.
    Now, where I disagree with my colleagues is whether 
Congress should codify the requirements that exist for the 
executive branch agencies, including centralized review, and 
provide for judicial review of that process. I think not.
    Before regulating, we ask agencies to identify the problem 
it intends to address and explain how the proposed regulation 
would fix that problem in an efficient and effective way. Those 
same questions should be asked before Congress acts. What is 
the compelling need to codify pieces or all of the executive 
order? The foundational principles have been in effect for over 
30 years, endorsed and implemented by Presidents of both 
political parties, and recently reaffirmed by President Obama. 
And over the years, the benefits of regulations have 
consistently exceeded the costs. This was true during the Obama 
Administration, during the Bush Administration, during the 
Clinton Administration.
    I cannot and will not say that all executive branch 
agencies do a great job of economic analysis and always 
incorporate the results in rule development. While strikingly 
better than the IRCs, the record is mixed, which should not 
surprise anyone given that agencies have different cultures and 
different resources. The latter is important because economic 
analysis, at least thoughtful, careful, comprehensive analysis, 
is not cost free. It takes time and resources. And the more 
significant the proposed regulatory action, the more time and 
resources it should consume. Regrettably, some of the very 
people who call for more analysis are the first to suggest 
straight lining or reducing the agency's budgets.
    But even if the agencies were not consistently doing and 
using high quality analysis, and that case has not been made, 
would legislating pieces or all of the executive order bring 
about significant change?
    Over the past 30 years, Congress has imposed a series of 
analytical requirements on the agencies--the Paper Reduction 
Act, Reg Flex Act, NEPA, the Unfunded Mandates Act, just to 
name a few--without substantially increasing the funding for 
the agencies to carry out the tasks that they were assigned. 
So, before adding another requirement, Congress might want to 
rationalize the current set of analytical requirements and/or 
provide more resources to OIRA to review them. If there is an 
implementation problem, Congress should address the source of 
that problem directly and not just add another requirement.
    Second, executive orders are, after all, orders of the 
President, to those who report to him and for whom he is 
constitutionally responsible. Those who profess support for the 
unitary executive should pause before crossing the separation 
of powers line to codify an executive order despite its 
universal appeal. And the history of this particular line of 
executive orders, from 12291, to 12866, to 13422, to 13653--do 
we not love all the numbers--shows that while many of the 
concepts are the same from one Administration to the next, 
different Presidents choose to emphasize different things--
openness and transparency, market failure as a basis for 
regulating, public participation. These differences may be 
subtle, but are nonetheless important indicators of 
Administration policies and preferences.
    Third, if Congress were to codify the analytical 
requirements of the EO, it would be amending a host of 
previously enacted statutes dating back over half a century. At 
this point, it is totally unclear how many statutes and which 
ones would be amended, and what the implications of such an 
amendment would be, both for the regulated entities and 
intended beneficiaries of those statutes.
    A number of pieces of legislation are silent on the 
question of the role of cost, and others explicitly do not 
permit the consideration of cost. For that reason, the 
executive order says repeatedly that it will prescribe certain 
practices ``to the extent permitted by law.'' However, if you 
were to codify the executive order, that would become the law, 
and as a result, a proposed regulation, even under a statute 
that does not permit the consideration of costs, could not 
become effective unless, among other things, the benefits 
justify the costs.
    Now, Dr. Graham referred to the host of regulations coming 
through after 9/11 and was worried that they had not been cost-
benefit analysis. I recall explicitly that one of those was a 
DoT rule to reinforce the steel in the cockpit doors. That was 
what Congress told DoT to do. It was not just that the 
President, for some political reason, wanted to get these 
things through. Congress said to do that. Agencies are not free 
agents. They have to do what the Congress has told them to do.
    Now, you could amend all these acts. You can amend the 
Clean Air Act, the OSHA Act, and any other authorizing act. But 
I would urge you then to do it directly and not indirectly by 
creating decisional criteria.
    Lastly, I would like to say that the idea of judicial 
review here leaves me in a very difficult position. I am a 
lawyer who greatly respects our judicial system, and I am 
talking to the Judiciary Committee. I would ask you whether the 
Federal courts is really the proper forum for sifting through 
cost-benefit analysis and deciding whether or not it has been 
properly used in formulating rules. Dr. Graham talked about the 
non-quantified aspects. Fairness was one. Justice might be 
another. Disparate impacts. How do you have Federal courts 
deciding? So, that in addition to having an army of lawyers who 
will be battling out whether or not the decisional criteria 
here has amended the underlying act, you are going to have 
armies of economists who will be doing battle as well. With all 
due respect, I do not think that is the way to promote economic 
growth and job creation, except perhaps for lawyers or 
economists.
    With that, I thank you very much for your patience.
    [The prepared statement of Ms. Katzen follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Gowdy. Yes, ma'am. Thank you.
    Mr. Furchtgott-Roth, we recognize you for 5 minutes?

TESTIMONY OF HAROLD FURCHTGOTT-ROTH, PRESIDENT, FURCHTGOTT-ROTH 
                      ECONOMIC ENTERPRISES

    Mr. Furchtgott-Roth. Thank you, Mr. Gowdy. It is a great 
honor for me to be here today.
    Mr. Gowdy. I might implore you to turn on the----
    Mr. Furchtgott-Roth. I am sorry. Mr. Gowdy, Mr. Cohen, it 
is a very great honor for me to be here today before this 
Committee. I have to mention to Mr. Cohen that I was born in 
Tennessee, and I have noticed the color of your tie today, sir. 
Thank you very much.
    I am aware of the substantial effort that goes into 
preparing a hearing, an effort on the part of the Members and 
the staff, and I thank you for those efforts.
    I have a written statement that I would like to have 
entered into the record.
    I am trained as an economist and have spent my entire 
career as an economist, both inside and outside of government, 
except for three and a half years when I had the honor to serve 
as a commissioner on the Federal Communications Commission. I 
bring to this panel not only the perspective of an economist, 
but also the perspective of an independent agency, one that 
falls outside of the scope of executive orders, such as 12866 
and 13563. I am not saying that those orders are perfect, but 
the value of those orders is all too apparent in agencies not 
covered by them, agencies such as the FCC.
    The FCC promulgates dozens of rules every year. I regret to 
tell you that for not a single one of them can we say with any 
certainty that the benefits exceed the costs because they are 
never documented.
    I can tell you from the perspective of an agency that has 
never been under these executive orders that Ms. Katzen 
described, there is a lot that is lost. There is a lot of 
process that is lost. It is a process that is not there simply 
for the purpose of process or for the purpose of providing 
paper. Those are processes that are there for the end result, 
which is more sensible regulation or rational regulation, and 
regulation that not just the government officials, but the 
American public can have some sense that the benefits exceed 
the costs.
    I will summarize my testimony in just a few areas.
    The public and our economy benefit substantially from the 
careful consideration of costs and benefits of regulation. 
Federal agencies have substantial legal and regulatory 
requirements, including executive orders, to document their 
consideration of the costs and benefits that are proposed in 
new regulations, but those do not apply to independent 
regulatory agencies. The executive orders are not sufficient, 
even in Federal agencies, to ensure recent rulemaking, in part 
because they are not always enforced, and because the public 
cannot go to the courts to ensure that they are enforced.
    I have noticed that the FCC, which has an independent 
statutory requirement to review its rules every 2 years and 
ensure that they continue to be necessary, that that provision 
of law has never been applied. It has been around since the '96 
Act, and in the past 15 years I can assure you the commission 
has never reviewed its rules even once. And the reason is that 
the commission knows that no court is going to compel it to do 
so. Without the ability of court review, I have very great 
doubts that there will be any enforcement of any statutory 
requirement for cost and benefit analysis.
    I am quite optimistic that the regulatory decisions that 
would be made if Federal agencies, such as the FCC, would 
substantially improve if there were requirement to do careful 
cost-benefit analyses. The results without it are all too 
apparent. I think even this Committee is going to have a 
hearing in the coming days on network neutrality. Regardless of 
your views of whether those rules were good or bad, the fact 
that those rules were promulgated without a cost-benefit 
analysis, without some documentation that the commission can 
say, the benefits of this rule are greater than the cost, I 
think puts the commission in a very weak position. And had the 
commission been compelled to go through the type of cost-
benefit analysis that Ms. Katzen described, I think the rules 
probably would have been better, and I think that the 
commission would have been in a stronger position to defend 
those rules to the public.
    I know the hour is late, and so in the interest of time, I 
will end my comments at this point.
    Thank you very much.
    [The prepared statement of Mr. Furchtgott-Roth follows:]
       Prepared Statement of Harold Furchtgott-Roth, President, 
                  Furchtgott-Roth Economic Enterprises

                            i. introduction
A. Qualifications
    I am president of Furchtgott-Roth Economic Enterprises, an economic 
consulting firm in Washington, DC. I was a commissioner of the Federal 
Communications Commission from November 1997 through May 2001.
    From June 2001 through March of 2003, I was a visiting fellow at 
the American Enterprise Institute for Public Policy Research in 
Washington, DC. In 2007, I was a senior fellow at the Hudson Institute, 
another policy research organization.
    I have worked for many years as an economist. From 1995 to 1997, I 
was chief economist of the House Committee on Commerce where one of my 
responsibilities was to work on regulatory reform issues.
    My academic research concerns economics and regulation. I am the 
author or coauthor of four books: A Tough Act to Follow?: The 
Telecommunications Act of 1996 and the Separation of Powers 
(Washington, DC: American Enterprise Institute), 2006; Cable TV: 
Regulation or Competition, with R.W. Crandall, (Washington, DC: The 
Brookings Institution), 1996; Economics of A Disaster: The Exxon Valdez 
Oil Spill, with B.M. Owen, D.A. Argue, G.J. Hurdle, and G.R. Mosteller, 
(Westport, Connecticut: Quorum books), 1995; and International Trade in 
Computer Software, with S.E. Siwek, (Westport, Connecticut: Quorum 
Books), 1993. I received a Ph.D. in economics from Stanford University 
and an undergraduate degree in economics from M.I.T.
B. Summary of opinions
    Based on my years of experience both in government and in the 
private sector, and based on my training as an economist, I find the 
following:

          The public and our economy would benefit 
        substantially from the careful consideration of the costs and 
        benefits of regulations.

          Federal agencies have substantial legal and 
        regulatory requirements, including Executive Orders 12866 and 
        13563, to document their consideration of the costs and 
        benefits of proposed and new regulations

          The executive orders are not sufficient to ensure 
        reasoned rulemaking.

          The FCC does not effectively document or weigh the 
        benefits and costs of its rulemakings.

          Outside parties that participate in FCC proceedings 
        do not insist that the agency consider costs and benefits of 
        regulations because of the lack of judicial review.

          FCC regulatory decisions would likely improve with 
        greater consideration of costs and benefits.

          Assigning to a federal agency the responsibility for 
        reviewing the compliance of all agencies--including independent 
        agencies--with requirements for cost-benefit analyses could 
        help standardize practices and give the public a more 
        predictable standard of analysis.
  ii. the public and our economy would benefit substantially from the 
     careful consideration of the costs and benefits of regulations
    Evaluating the costs and benefits of an activity is not an idle 
academic exercise. As individuals, as families, as businesses, and as 
other organizations, we constantly evaluate activities. We are 
reluctant to delegate to others those decisions about which activities 
we engage in. We reject those activities whose costs are too high for 
the possible benefits. We engage in those whose benefits exceed our 
estimate of costs.
    We make these cost-benefit analyses with varying degrees of 
formality. Individuals and families are informal. We reflect on those 
decisions that we make for ourselves as individuals. We may explain to 
our families decisions about why we make certain decisions, such as 
reducing our driving as gasoline prices increase.
    Businesses make decisions supported by documents. Woe be to the 
vice president of a company who proposes an investment without 
documents explaining the possible returns, examining them in detail, 
and reviewing possible alternative investments. Civic organizations do 
the same.
    A publicly traded company that makes major decisions without 
documentation is reckless. A privately held company making such 
decisions would have difficulty attracting investors. Investors insist 
on some documentation of decisions not because they are obsessed with 
process but rather because they are obsessed with results.
    Good documentation helps lead to good results. Good documentation 
leads to rational decisions-- decisions that can be reviewed and 
vetted, decisions that can be replicated if they yield positive 
results, and decisions that can be avoided in the future if the results 
are negative.
    We insist on documentation and rational decision-making with 
benefits expected to exceed costs by our private companies and civic 
organizations. Yet, in government, we all too often insist on 
documenting practically everything except the common-sense requirement 
that the benefits of our federal agency decisions should exceed their 
costs.
    It may well be that many--or hypothetically even all--federal rules 
have benefits that exceed their costs. But such a statement today would 
be an unverifiable expression of faith rather than verifiable fact. We 
cannot possibly know which federal rules have benefits that exceed 
their costs because our government agencies too often fail to document 
such benefits and costs.
    The net result almost certainly is that we have some rules whose 
costs exceed their benefits. Perhaps even worse, we cannot identify 
those harmful rules and distinguish them from those that are 
beneficial.
    Bad government regulation harms America. It weakens our economy, 
lessens incentives to invest in America, destroys American jobs, and 
makes less productive the jobs that remain. It reduces the choices we 
have as consumers taking many options away from us and unnecessarily 
raising the prices of the choices that remain. It robs us and our 
children of the belief that our government is always in the right. We 
are a poorer country as a result of harmful regulation, regulation that 
we cannot even begin to identify.
    This result is not a surprise to the American public. Your 
constituents see it every day. We see it in our daily lives in toilets 
that do not work well as the result of government regulation. We see it 
in manufacturing plants that have gone elsewhere because of government 
regulations. We see it in security screening at airports. We see it in 
employment rules that ordinary Americans cannot understand.
    Ask your constituents about bad federal regulations, and you will 
hear an earful. Many if not most Americans have their favorite stories 
about a bad federal regulation. Some of the stories don't even pertain 
to federal rules--such as automatic dish washing detergents that no 
longer work. Washington regulation has become so discredited in the 
eyes of many Americans that it is the presumed source of much that ails 
America, whether it is the actual culprit or not.
    Americans don't understand Washington regulation, and Washington 
refuses to explain it. The result is not merely bad regulation that 
harms our country but a corrosive mistrust of Washington and our 
government in general.
    We are a better country than this. America deserves regulation that 
is accountable. We can do a much better job, and it begins with having 
better documentation of the benefits and costs of each regulation.
    Let me describe the value of documented cost-benefit analyses in at 
least two different stages in the regulatory process:

        1.  Notices of proposed rulemaking--One of the most important 
        aspects of the Notice of Proposed Rulemaking process is to 
        obtain guidance from the public about how best to craft a rule. 
        A federal agency should solicit ideas from the public first 
        rather than develop a predetermined rule before seeking public 
        comment. An agency that can articulate in detail the possible 
        costs and benefits to various segments of our economy of each 
        proposed rule and alternatives to it demonstrates some 
        thoughtful analysis behind the proposed rule. And the agency 
        can explain other forms of the rule, including no new rule, 
        that can be considered. Part of the reason to make these cost-
        benefit analyses public at the NPRM stage is to enable the 
        public to vet the analyses. Can the analyses withstand public 
        scrutiny? Are they internally consistent? Do the numbers make 
        sense? Here is what the federal agency identifies as the likely 
        benefits and costs of the regulation. Here is what federal 
        agency identifies as the likely distribution of those benefits 
        and costs.

        2.  Final rules--After it has received comments on the 
        reasonableness of the cost-benefit analyses for a proposed 
        rule, an agency can modify not only the proposed rule but 
        modify the cost-benefit analyses as well. The final cost-
        benefit analyses should present in some detail the expected 
        levels and the expected distributions of the expected benefits 
        and expected costs of the final rule. The final cost-benefit 
        analyses should review the comments the agency received on the 
        initial cost-benefit analyses and should explain how and why 
        the final cost-benefit analyses were modified to accommodate 
        the comments, or why certain comments were disregarded. As 
        important, the final costs-benefit analyses should present 
        milestones that the agency expects the rule to accomplish, 
        milestones by which the rule can be reviewed in the future. If 
        the rule is intended to reach goal Y in two years, the agency 
        should be willing to have the rule evaluated in 2 years based 
        on whether or not goal Y was in fact reached or not. In much 
        the same way, a business makes an investment and projects that 
        it will be cash-flow positive in two years. In two years, the 
        board and the shareholders can evaluate both whether the 
        investment met its targets and also whether management had good 
        business acumen in the past and is worthy of being trusted to 
        make decisions in the future.
      iii. federal agencies have substantial legal and regulatory 
 requirements, including executive orders 12866 and 13563, to document 
   their consideration of the costs and benefits of proposed and new 
                              regulations
    The processes that I describe above are not academic exercises. The 
assessments of costs and benefits for both proposed and final rules are 
required by Executive Order 12866. The review is to be comprehensive, 
consider all alternatives, including not regulating: ``In deciding 
whether and how to regulate, agencies should assess all costs and 
benefits of available regulatory alternatives, including the 
alternative of not regulating.'' \1\ The objective is to ensure that 
benefits not only exceed costs, but that benefits exceed costs by as 
much as possible: ``Further, in choosing among alternative regulatory 
approaches, agencies should select those approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages; distributive impacts; and equity), 
unless a statute requires another regulatory approach.'' \2\
---------------------------------------------------------------------------
    \1\ Executive Order 12866, Section 1.
    \2\ Ibid.
---------------------------------------------------------------------------
    Moreover, the Executive Orders instruct federal agencies to 
evaluate not only new rules but existing rules as well. Executive Order 
12866 requires agencies to consider whether existing rules may 
contribute to a problem that new rules are intended to correct: ``Each 
agency shall examine whether existing regulations (or other law) have 
created, or contributed to, the problem that a new regulation is 
intended to correct and whether those regulations (or other law) should 
be modified to achieve the intended goal of regulation more 
effectively.'' \3\
---------------------------------------------------------------------------
    \3\ Ibid., Section 1 (b) (2).
---------------------------------------------------------------------------
    Executive Order 13563 goes further and requires federal agencies to 
have periodic reviews of existing ``significant'' rules:

        Within 120 days of the date of this order, each agency shall 
        develop and submit to the Office of Information and Regulatory 
        Affairs a preliminary plan, consistent with law and its 
        resources and regulatory priorities, under which the agency 
        will periodically review its existing significant regulations 
        to determine whether any such regulations should be modified, 
        streamlined, expanded, or repealed so as to make the agency's 
        regulatory program more effective or less burdensome in 
        achieving the regulatory objectives.\4\
---------------------------------------------------------------------------
    \4\ Executive Order 13563, Section 6(b).

Each agency may have additional cost-benefit analysis requirements 
under its organic statutes. Section 11 of the Communications Act, for 
example, requires the Federal Communications Commission periodically to 
review all of its rules every two years and eliminate those that are no 
longer necessary.
    iv. the executive orders are not sufficient to ensure reasoned 
                               rulemaking
    If fully implemented and enforced, Executive Orders 12866 and 13563 
would go far towards ensuring reasoned regulation in the federal 
government. At least two limitations have prevented the full 
implementation of these Orders.
    First, as executive orders, these documents are not laws or rules 
under which interested parties can seek compliance or enforcement 
either through the executive branch agencies themselves or through the 
courts.
    Second, the Orders apply only to executive branch agencies, not 
independent federal agencies. The executive orders do not cover the 
Federal Communications Commission, on which I served, and other 
independent agencies.
  v. the fcc does not effectively document or weigh the benefits and 
                        costs of its rulemakings
    While the Executive Orders 12866 and 13563 are insufficient, they 
provide a framework for the evaluation of regulation that is entirely 
absent at independent agencies. It would help the quality of 
regulatory-decision making at the independent agencies to be required 
to comply with the executive agencies.
    Perhaps partly because it is not covered by the executive orders, 
the FCC does not directly weigh or even itemize the benefits and costs 
of a particular regulation. The FCC does not systematically consider 
alternative forms of regulation including no regulation. The FCC 
certainly does not focus on the alternative with the greatest net 
benefit. The only presentation of the costs and benefits of a 
regulation is an appendix for the Regulatory Flexibility Act. This 
appendix is at best an afterthought: a short, rarely read boilerplate 
passage that is outside the deliberative process. Sometimes it is 
forgotten altogether. I have seen little change in the regulatory 
analyses at the FCC since I left the Commission.
    I have seen even less attention at the FCC to the biennial review 
of all regulations under Section 11 of the Communications Act. After 15 
years of Section 11 being in the statute, the FCC has yet to review 
meaningfully all of its rules even once. Indeed, many if not most of 
its rules have never been formally reviewed at all. Those that have 
been reviewed have not documented cost-benefit analyses.
    Of course, the FCC, like every other federal agency, implicitly 
considers the costs and benefits of proposed and final rules. But the 
costs and benefits are rarely if ever formally presented. Rather than 
explain exactly how and why benefits would be greater than costs, and 
rather than explain the distribution and level of those benefits and 
costs, the Commission routinely recites the magic words--``the public 
interest''--as if it were possible for rules which plausibly had costs 
in excess of benefits to be in the public interest.
 vi. outside parties that participate in fcc proceedings do not insist 
 that the agency consider costs and benefits of regulations because of 
                      the lack of judicial review
    The absence of judicial review of the regulatory process means that 
both the federal agency and the outside parties do not take the 
regulatory process seriously. If Congress were to alter the regulatory 
process, it would be important to have mechanisms whereby courts can 
review federal agency decisions.
    Absent the prospect of meaningful judicial revision, outside 
parties that participate in FCC proceedings do not insist that the 
agency fully comply with either the Regulatory Flexibility Act or 
Section 11 of the Communications Act. Outside parties are reluctant to 
invest in an effort that will annoy a federal agency but have little 
prospect of a judicial remedy. Consequently, few if any parties bother 
to review either the initial and final regulatory flexibility analyses, 
much less comment on them.
    vii. fcc regulatory decisions would likely improve with greater 
                  consideration of costs and benefits
    Careful and thoughtful consideration of costs and benefits of 
regulation could substantially improve the regulatory decision-making 
process at the Federal Communications Commission. Whether one agrees or 
disagrees with the new rules, it is impossible to determine from the 
Commission's record whether the benefits of the new rule exceed the 
cost. The Commission provided no cost-benefit analysis for the new 
rule, nor did it explicitly consider and calculate the benefits and 
costs of alternative rules, including no regulation.
    The Commission is currently considering a wide range of new rules, 
some dealing with compensation among telecommunications companies, some 
dealing with spectrum, and still others dealing with the future of the 
broadcast industry. None of the proposed rules under consideration has 
a meaningful cost-benefit analysis. Nor do the proposed rules have a 
range of specific alternatives, including the option of no regulation. 
Based on documents that the FCC has provided the public, it is 
impossible to determine for each rule what the Commission considers to 
be either the range of benefits or the range of costs--and who will pay 
for those costs. The public has no basis to comment on whether the 
Commission's assessment of benefits and costs of regulation are 
accurate because there is no such assessment.
    Not infrequently, Congress itself is alerted to new rules at the 
Federal Communications Commission that raise public concern. Late last 
year, the FCC adopted new rules for network neutrality. The FCC 
provided no meaningful assessment of costs and benefits in the final 
rules, nor specific consideration of alternative forms of regulation 
including no regulation. The FCC has not helped its cause by failing to 
provide at various stages of the regulatory process clear statements 
about the assessment of benefits and costs of its network neutrality 
rules. Had the Commission presented to the public such an assessment of 
the costs and benefits of these rules, and had the Commission accepted 
and incorporated comments on such an assessment, the Commission would 
today be in a much stronger position to defend those rules.
    Instead, the Commission is in the weak position of asking Congress 
and the public to trust its judgment to regulate sensibly. It cannot 
point to a document that lists the benefits and costs of the new rules 
and explains in straightforward terms how the benefits and costs were 
assessed, who will likely receive the benefits, and who will likely pay 
the costs. Nor can the Commission point to such a document that has 
been vetted by the public and modified to reflect public comment.
    The Commission's neglect of accounting for costs and benefits of 
regulation is not limited to network neutrality. The Commission 
proposes and promulgates dozens of new rules each year, some more 
controversial than others. For none of the rules, controversial or 
otherwise, does the Commission prepare a document that either an 
economist or an ordinary citizen would consider a full accounting of 
the costs and benefits of each of the proposed or new rules.
 viii. assigning to a federal agency the responsibility for reviewing 
 the compliance of all agencies--including independent agencies--with 
requirements for cost-benefit analyses could help standardize practices 
      and give the public a more predictable standard of analysis
    It would be useful to designate a federal agency with 
responsibility for ensuring the uniform application of cost-benefit 
analyses across different agencies so that the public can more easily 
interpret agency findings.
                               __________

    Mr. Gowdy. Thank you. I will ask a series of questions, and 
then recognize the gentleman from Tennessee.
    Mr. Furchtgott-Roth, picking up on what you said toward the 
end, why is it that no President to date has included a cost-
benefit analysis in the executive orders for independent 
agencies? They could have done so, right?
    Mr. Furchtgott-Roth. I believe they could have. I believe 
that one of the limitations is that most independent agencies, 
certainly when I was at an independent agency, I would have 
been reluctant to feel guided by an executive order. And that 
is, I think, one of the benefits of having a statutory remedy, 
that a statute definitely applies to an independent agency. It 
is an open question as to which executive orders apply to 
independent agencies. And the string of executive orders on 
cost-benefit analysis explicitly do not apply to independent 
agencies.
    Mr. Gowdy. What do you think the result of a cost-benefit 
analysis would be with respect to net neutrality? Walk me 
through what that analysis would be like.
    Mr. Furchtgott-Roth. The agency would have been required to 
at least put on paper what it views as the benefits of the rule 
and what it views as the cost of the rule. And it would have 
had to explain those benefits and costs.
    The commission does not have to do that, and what it does 
is it has other statutory requirements. I am not saying that it 
does not follow those. It does, but the net result we do not 
know because no one has ever, at least the commission has never 
done that. And it might have come up with a very different set 
of rules had it been required to have that benefit-cost 
analysis.
    Mr. Gowdy. Mr. Holmstead, toward the end of your testimony, 
you made a reference to friendly lawsuits allowing folks to 
skirt oversight. Can you give an example of that or extrapolate 
on that some?
    Mr. Holmstead. There are a couple of recent examples where 
an environmental group brings a lawsuit trying to argue that 
EPA should have issued a regulation. In at least two recent 
cases, it is far from clear whether EPA did have that 
obligation, if anybody had been kind of litigating that 
straight up, that the environmental groups did not really have 
much of a case. Notwithstanding that fact, EPA entered into a 
consent decree in one case to issue something called new source 
performance standards to reduce greenhouses gases from coal-
fired power plants and from refineries, which had been a big 
target of regulation. There is no legal basis for that suit, 
especially to get them to issue the greenhouse gases. 
Notwithstanding that fact, they entered into a consent decree. 
They went to the court to get that consent decree blessed, and 
the consent decree includes a schedule which is extremely 
aggressive. And as a result, because the consent decree has a 
date that has to be met by court order, OMB might get 2 weeks 
to review a rule that is going to cost several billion dollars. 
And it completely prevents the kind of normal interaction and 
analysis that would go on.
    And I could give you a number of examples for the record, 
but they are, you know, allies of the agencies that enter into 
these lawsuits and certainly have the results, if not the 
intention, of avoiding regulatory oversight.
    Mr. Gowdy. Are there instances where you can cite agencies 
double counting the benefits, single counting the cost?
    Mr. Holmstead. And, again, I keep coming back to the 
Utility MACT Rule because it is a particularly egregious 
example. The heart of the Clean Air Act is designed to force 
states to regulate, to meet these standards. And so, there are 
regulations on the books today that require states to reduce 
flying particles. And now, EPA has done this Mercury MACT Rule, 
which is supposed to be about mercury, but EPA says, well, we 
are going to get all these benefits from flight particles. And 
they take credit, again, for benefits that they are taking for 
in this other regulatory program. So, that may be not a very 
good way of explaining, but, yes, there are cases where EPA 
does double count the benefits in justifying different rules.
    Mr. Gowdy. Ms. Katzen, Cass Sunstein, I believe, I know he 
wrote a book on judicial review. I think he was a law professor 
and now currently with the current Administration. If my 
research is correct, he supports an executive order that allows 
judicial review?
    Ms. Katzen. I would be reluctant to speak for him now. But 
I would say----
    Mr. Gowdy. I was going to ask you for yourself on whether 
or not you think that is a good idea.
    Ms. Katzen. No. I mean, I will speak to it, and, no, I 
think it is a very bad idea. During the Clinton administration 
and during the Bush administration, George W. Bush 
administration, there were attempts to provide for judicial 
review of those processes. And in both instances, both the 
Democratic and the Republican administrations, took the 
position that it would not be productive. As I said, it is a 
question of where is the proper forum to have that kind of 
analysis reviewed. There are issues whether, it be forum 
shopping to find the right court that will stop something or 
other issues. It is another level as part of the process.
    But judicial review does exist. If there are problems with 
the regulation, it will be challenged in court. And one of the 
basic tenants of administrative law is that it has to pass the 
arbitrary and capricious standard. It has to have substantial 
evidence. That material is in the record. But to have an 
additional clause that goes to the cost-benefit study and 
whether the benefits justify the costs, when you have part of 
the benefits being qualitative, not quantitative, I find it 
just mind blowing. And I have been practicing law for over 40 
years. To ask a Federal judge to go through that, it strikes me 
as being really quite an extension.
    If I may, Mr. Gowdy, I would like to answer your very first 
question because----
    Mr. Gowdy. I will ask permission from Mr. Cohen because I 
am 2 minutes over my time limit. So, I will----
    Mr. Cohen. Permission not granted.
    Mr. Gowdy. Permission not granted, so I am going to 
recognize the gentleman from the great state of Tennessee, Mr. 
Cohen?
    Mr. Cohen. Thank you. Ms. Katzen, answer the first 
question?
    Ms. Katzen. President Reagan was the first one to write the 
executive order. His advisers asked the Office of Legal Counsel 
at the Department of Justice whether the President had the 
authority to extend the economic requirements and centralized 
review to the independent regulatory commissions. He was told 
yes. He declined to do so for political reasons, not legal 
reasons. He declined to do so because he did not want to offend 
Congress.
    When we drafted the executive order for President Clinton 
in 1993, we went back to OLC. We asked them the exact same 
question. They gave us the same answer. They said, yes, he has 
the authority to do it. The President chose not to extend it 
for political reasons, not legal reasons. He did not want to 
offend Congress.
    It is for that reason that in my written testimony I give 
you several routes that you could take to achieve this, whether 
it be a sense of the Congress that the President could do it, 
or you self-designate an entity. It is there. It is possible.
    Mr. Cohen. Well, if Congress did it, little chance of 
offending Congress.
    Ms. Katzen. If Congress did it for the IRCs, there would be 
little chance of offending Congress, particularly if the entity 
was who was going to review it was OIRA.
    Mr. Cohen. Let me ask you this. It does seem a bit, Ms. 
Katzen, in your testimony, and then, gentleman, if you all 
would like to add your comments. If you give the courts the 
right to make these decisions on the cost-benefits analysis, I 
do not know what their standard would be and how they would do 
it. And since of it is qualitative, are you not letting the 
courts then legislate and take value judgments that they have 
and make them law? And is that not somewhat antithetical to 
kind of the idea that you are supposed to interpret the law and 
not make the law?
    Mr. Holmstead. Can I answer?
    Ms. Katzen. Well----
    Mr. Cohen. Please, Mr. Holmstead?
    Mr. Holmstead. We are not asking courts to make those 
judgments. As I understand it, we are asking them to review 
whether the agency made a good faith effort to do that. That is 
a much easier inquiry for the courts than many of the things 
that they view today. I mean, if you look at the statutory 
provisions that judges deal with under the Clean Air Act, under 
the Clean Water Act, under the FCC, all sorts of things, there 
are much more complicated questions than whether the agency 
made a showing that the benefits justify the costs.
    So, I do not think it is a meaningful change. What I do 
think, though, is that agencies would take the requirement much 
more seriously if it were enforceable. So, it seems odd to me 
to say, well, we believe in these principles; we just do not 
want them to be enforced.
    Ms. Cohen. Ms. Katzen?
    Ms. Katzen. If you read Dr. Graham's testimony, he says 
that judicial review should extend to whether the agency has 
followed the guidelines set out by OMB in Circular A-4. I 
invite you, if you have insomnia, to read Circular A-4. It is 
50 pages single spaced of alternative ways of calculating 
everything under the sun and throughout it says, ``where 
appropriate,'' ``where appropriate, where appropriate.''
    Mr. Holmstead sas the inquiry is did they do it? I have not 
heard good faith. Has the agency met the requirements? Do the 
benefits justify the costs? Has the agency chosen the 
alternative that maximizes net social benefits? Those are 
result questions, not process questions.
    Mr. Cohen. And that seems like, as I said--Mr. Furchtgott-
Roth, if you would like to comment. It just seems to me that it 
does give a lot of discretion to the judge to make policy, 
which the Congress should be doing?
    Mr. Furchtgott-Roth. Mr. Cohen, the FCC is challenged in 
court on its rules on a routine basis. Many of those challenges 
have to do with compliance with the APA. Was there adequate 
public notice? Did the findings reflect the comments that were 
provided to the agency?
    The commission candidly has a very poor track record in 
court. The courts deal with that agency all the time, and I do 
not think it is the case that the courts necessarily get 
involved in legislating as you described it. A lot of times 
they simply say, you know, this is not in your statutory 
authority to make this judgment.
    I think right now, parties can and do go to courts on 
everything from they did not provide adequate notice in the 
NPRM, they did not do this, they did not do that. But if 
someone came to a court and said, this agency did not put on 
paper that the benefits of the rule exceeded the cost, the 
court would say, well, you know, they are not required to.
    Candidly, as a citizen, I find that result to be so 
profoundly disturbing for a government that requires agencies 
to document practically everything under the sun, but to say 
they are not required to demonstrate to the American public 
that the benefits of a rule are greater than the cost, I do not 
get it.
    Mr. Cohen. Well, I have a plethora of additional questions, 
but my time has expired. I yield back to the Chair.
    Mr. Gowdy. I am sure Mr. Cohen joins me in expressing the 
frustration of having such a distinguished and learned panel 
fall on an afternoon where our vote schedule impacted your 
schedule and our ability to have this hearing in a timely 
fashion. So, it was a treat to hear from each of you. I 
compliment you on your acumen, your professionalism, and, 
frankly, your civility toward one another.
    Without objection, all Members will have 5 legislative days 
to submit to the Chair additional written questions for the 
witnesses, which we will forward and ask the witnesses to 
respond as promptly as they can so their answers may be made 
pat of the record.
    With that, again, my apologies to all for disrupting more 
of your afternoon than we were originally planning on doing. 
And we thank you.
    [Whereupon, at 6:02 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record








                                






                                








                                








                                








                                

    Response to Post-Hearing Questions from John D. Graham, Ph.D., 
    Dean of the School of Public and Environmental Affairs, Indiana 
                               University










                                

  Response to Post-Hearing Questions from Jeffrey Holmstead, Partner, 
                       Bracewell & Giuliani, LLP














                                

 Response to Post-Hearing Questions from Sally Katzen, Senior Advisor, 
  Podesta Group, Visiting Professor, New York University School of Law








                                

    Response to Post-Hearing Questions from Harold Furchtgott-Roth, 
            President, Furchtgott-Roth Economic Enterprises







                                 
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