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

                     REGULATORY ACCOUNTABILITY ACT OF 2011

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

                                    HEARING

                                   BEFORE THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                       ON

                                   H.R. 3010

                                   __________

                                OCTOBER 25, 2011

                                   __________

                               Serial No. 112-75

                                   __________

             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 R. 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             [Vacant]
    TREY GOWDY, South Carolina
    DENNIS ROSS, Florida
    SANDY ADAMS, Florida
    BEN QUAYLE, Arizona
    MARK AMODEI, Nevada

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

                                C O N T E N T S

                                  ----------

                                OCTOBER 25, 2011

                                                                       Page

                                    THE BILL

    H.R. 3010, the ``Regulatory Accountability Act of 2011''.........     3

                               OPENING STATEMENTS

    The Honorable Lamar Smith, a Representative in Congress from the
      State of Texas, and Chairman, Committee on the Judiciary.......     1
    The Honorable John Conyers, Jr., a Representative in Congress
      from the State of Michigan, and Ranking Member, Committee on
      the Judiciary..................................................    35
    The Honorable Howard Coble, a Representative in Congress from the
      State of North Carolina, and Member, Committee on the Judiciary    37

                                   WITNESSES

    C. Boyden Gray, Boyden Gray & Associates
      Oral Testimony.................................................    40
      Prepared Statement.............................................    43
    Christopher DeMuth, American Enterprise Institute for Public
      Policy Research
      Oral Testimony.................................................    52
      Prepared Statement.............................................    55
    Arnold B. Baker, Owner, Baker Ready-Mix and Building Materials
      Oral Testimony.................................................    75
      Prepared Statement.............................................    77
    Sidney A. Shapiro, University Distinguished Chair in Law, Wake
      Forest University School of Law
      Oral Testimony.................................................    86
      Prepared Statement.............................................    88

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Prepared Statement of the Honorable John Conyers, Jr., a
      Representative in Congress from the State of Michigan, and
      Ranking Member, Committee on the Judiciary.....................    36
    Prepared Statement of the Honorable Steve Cohen, a Representative
      in Congress from the State of Tennessee, and Member, Committee
      on the Judiciary...............................................    38

                                    APPENDIX

    Material Submitted for the Hearing Record........................   169

                     REGULATORY ACCOUNTABILITY ACT OF 2011

                                  ----------

                           TUESDAY, OCTOBER 25, 2011

                              House of Representatives,
                                    Committee on the Judiciary,
                                                        Washington, DC.

        The Committee met, pursuant to call, at 10:24 a.m., in room
    2141, Rayburn Office Building, the Honorable Lamar Smith
    (Chairman of the Committee) presiding.
        Present: Representatives Smith, Sensenbrenner, Coble,
    Gallegly, Lungren, Chabot, Issa, Franks, Gohmert, Jordan, Poe,
    Griffin, Gowdy, Ross, Adams, Quayle, Conyers, Scott, Watt,
    Jackson Lee, Waters, Johnson, and Quigley.
        Mr. Smith. The Judiciary Committee will come to order.
        Without objection, the Chair is authorized to declare
    recesses of the Committee at any time.
        We welcome everyone here, particularly our witnesses.
        I am going to recognize myself for an opening statement,
    then the Ranking Member, then the Chairman and Ranking Member
    of the relevant Subcommittee.
        The American people urgently need jobs that only economic
    growth can give. Standing in the way of growth and job creation
    is a wall of Federal regulation. As of 2008, Federal
    regulations costs our economy $1.75 trillion each year.
        The Obama administration seeks to add billions more with a
    host of new major regulations. Its 2011 regulatory agenda calls
    for over 200 new major rules, each of which will affect the
    economy by $100 million or more each year. And the
    Administration has proposed four times the number of major
    regulations than the previous Administration over a similar
    period of time.
        New regulatory burdens and uncertainty about the economy
    have helped to keep trillions of dollars of private sector
    capital on the sidelines. Companies cannot safely invest if
    they cannot tell whether tomorrow's regulations will make their
    investments unprofitable. Without new investment, we cannot
    expect new jobs.
        The Administrative Procedure Act is out of date and
    encourages regulatory overreach and excessive regulatory cost.
    Enacted in 1946, it places only a handful of light restrictions
    on the Federal rulemaking process. Congress wrote it long
    before anyone imagined the reach and expense of the modern
    regulatory state.
        The APA does not require agencies to identify the cost of
    their regulations before they impose them. It does not require
    agencies to consider reasonable, lower cost alternatives. The
    APA does not even require agencies to rely on the best
    reasonably obtainable evidence.
        While the APA does require agencies to give notice of
    proposed rulemaking and receive public comment on its
    proposals, too often that is an after-the-fact exercise.
    Frequently agencies predetermine the outcome of rulemakings,
    and notice and comment serves only to paper over the record.
        The Regulatory Accountability Act fixes this problem by
    bringing the APA up-to-date. Under its provisions, agencies are
    required to assess the costs and benefits of regulatory
    alternatives. Unless interests of public health, safety, or
    welfare require otherwise, agencies must adopt the least costly
    alternative that achieves the regulatory objectives Congress
    has established.
        The Regulatory Accountability Act contains common sense
    reforms that have bipartisan support in both the House and the
    Senate. In large part, that is because so many of its
    provisions are modeled on the terms of executive orders that
    Presidents Reagan, Clinton, Bush, and Obama have issued to
    compensate for the APA's weaknesses. Over the past 3 decades,
    these bipartisan executive orders have proved that the
    principles of the Regulatory Accountability Act work, but the
    executive orders are not permanent, are not judiciously
    enforceable, and do not bind independent agencies.
        Congress should pass the Regulatory Accountability Act to
    make cost justification and other common sense practices
    permanent and enforceable fixtures of the regulatory landscape.
    If America's economy is to grow, produce jobs, and remain
    globally competitive, Washington must change.
        The Obama administration itself has made concessions to
    this view. Executive Order 13563 acknowledges that new
    regulations, quote, must taken into account benefits and costs.
    In September 2011, the Administration said no to a new
    multibillion regulation, at least for now. That regulation was
    the Environmental Protection Agency's new ozone national
    ambient air quality standards.
        Under the Regulatory Accountability Act, principles of
    Executive Order 13563 and its predecessors would, at last,
    become binding law. Sound decisions that meet statutory
    objectives, while they respect the economy's needs, would be
    the order of the day, not the rare occurrence. American jobs,
    American growth, and American competitiveness would all be the
    better for it.
        That concludes my opening statement, and the gentleman from
    Michigan, the Ranking Member of the full Committee, Mr.
    Conyers, is recognized for his.
        [The bill, H.R. 3010, follows:]

                                   __________
        Mr. Conyers. Thank you, Chairman Smith and Members of the
    Committee.
        I welcome all of the witnesses and look forward to what
    they say about this very important proposal.
        In numerous ways, if 3010 is to be taken seriously, it
    would effectively halt agency rulemaking, undermine critical
    public health and safety rules. Now, I want to say that again
    because I would invite discussion around from my colleagues.
    H.R. 3010 would amend the Administrative Procedure Act in ways
    that would effectively halt agency rulemaking, undermine
    critical public health and safety rules. And I would also
    invite all of the witnesses to comment on that statement as
    well.
        I am particularly concerned because the former chief of law
    enforcement of California, my good friend, Dan Lungren, has
    four law schools out of the 62 law professors that have sent a
    very thorough description of the problems that they see in this
    bill before us. And one of the professors at my law school in
    Detroit, whom I have not gotten in touch with yet or haven't
    succeeded in getting in touch with her yet, is also a
    signatory.
        So let's look at what the problem is. The bill would
    substitute, they say, for the current Administrative Procedure
    Act section 553 a new version that is approximately 10 times
    longer. That is the first sentence.
        The second sentence says it would add over 60 new
    procedural and analytical requirements to the agency rulemaking
    process, many of which would apply to all nonexempt rulemaking
    however ordinary and however far removed from the major health,
    environmental, and safety regulations that we sense animate
    current concerns.
        In the second paragraph, we seriously doubt that agencies
    would be able to respond to delegations of rulemaking authority
    or to congressional mandates to issue rules if this bill were
    to be enacted. Instead, it would likely lead to rulemaking
    avoidance by agencies, increasing the use of underground rules,
    case-by-case adjudication, or even prosecutorial actions to
    achieve policies without having to surmount the additional
    hurdles presented by the new section 553. Executive officials
    would find it practically impossible to use rulemaking either
    to create new regulations or to undue old regulations.
        And so they conclude, we therefore oppose the bill in its
    current form and, more importantly, oppose its basic approach.
    While we share many of the views expressed in the comprehensive
    comments of the ABA Section on Administrative Law and
    Regulatory Practice, we wish here to emphasize our conviction
    that the positive aspects of the bill identified by the section
    are greatly outweighed by the damage this bill would cause to
    administrative agencies and the public welfare they promote if
    it were enacted.
        And so I am going to follow this discussion very carefully.
    It is extremely important, and I hope that all of my colleagues
    will as well.
        I conclude with this observation, Mr. Chairman. H.R. 3010
    would require the agencies consider regulatory costs and
    benefits of proposed and final rules, quote, notwithstanding
    any other provision of law establishing a--again in
    quotations--super mandate. This overrides provisions in certain
    laws such as the Clean Air Act that prohibit agencies from
    considering costs when issuing public health or safety rules.
        And so I will put the rest of my statement in the record
    and welcome the witnesses' testimony. Thank you.
        [The prepared statement of Mr. Conyers follows:]
    Prepared Statement of the Honorable John Conyers, Jr., a Representative
     in Congress from the State of Michigan, and Ranking Member, Committee
                                on the Judiciary
        H.R. 3010, the ``Regulatory Accountability Act,'' would amend the
    Administrative Procedure Act in numerous ways that would effectively
    halt agency rulemaking, undermining critical public health and safety
    rules.
        For instance, H.R. 3010 codifies and expands cost-benefit analysis
    requirements and overrides current law that, in some cases, prohibits
    agencies from considering cost when public health and safety are at
    stake.
        Currently, under Executive Orders 12866 and 13563, every
    economically significant rule must undergo a cost-benefit analysis.
    While proponents of H.R. 3010 claim that it merely codifies the
    existing analytical requirements contained in those executive orders,
    H.R. 3010 in fact adds numerous additional analytical requirements to
    the already substantial analytical process, which threatens ``paralysis
    by analysis.''
        Moreover, it appears to expand the cost-benefit analysis
    requirement to include all rules, not just those that are economically
    significant. Also, H.R. 3010 expands the cost-benefit analysis
    requirement to include ``major guidance'' documents. The bill also
    would require agencies to identify the costs and benefits of
    alternatives to rules that are ultimately proposed.
        Additionally, H.R. 3010 would force agencies to adopt the least
    costly rule absent a compelling need to protect public health and
    safety. Under EO 12866, in contrast, agencies must simply determine
    that the benefits of a proposed rule--including non-quantifiable
    benefits--justify their costs and that benefits are maximized.
        Also, there is concern with the very act of not only statutorily
    requiring cost-benefit analysis, but with specifying the factors to be
    considered in that analysis.
        Sally Katzen, a former Administrator of the Office of Information
    and Regulatory Affairs during the Clinton Administration, testified
    before the Courts, Commercial and Administrative Law Subcommittee that,
    while both Democratic and Republican administrations have agreed on the
    basic principle that agencies should engage in cost-benefit analysis of
    proposed and final rules, codification is problematic because each
    administration has chosen to place different emphases and nuances into
    its cost-benefit analysis requirements. Codifying a single, stringent
    standard would deny such flexibility.
        Finally, H.R. 3010 requires that agencies consider regulatory costs
    and benefits of proposed and final rules ``notwithstanding any other
    provision of law,'' establishing a ``supermandate.'' This overrides
    provisions in certain statutes, such as the Clean Air Act, that
    prohibit agencies from considering costs when issuing public health or
    safety rules.
        And these are just three of many other concerns with H.R. 3010,
    including the expanded the use of formal rulemaking procedures, which
    will effectively prevent needed public health and safety rules from
    being promulgated by requiring them to undergo through a burdensome
    trial-like process.
        Also, H.R. 3010's expanded use of judicial review and a less
    deferential judicial review standard risks undermining agency
    rulemaking and reducing political accountability for policy decisions
    without enhancing due process by allowing generalist judges to second
    guess agency experts.
        I hope that we can have a fulsome discussion about these concerns.
                                   __________

        Mr. Smith. Thank you, Mr. Conyers.
        I am sure that some of our witnesses will be happy to
    respond to your question about whether this eliminates
    regulations or not, and we can get into that subject on our
    questions and answers.
        The Chairman of the Courts, Commercial and Administrative
    Law Subcommittee, the gentleman from North Carolina, Mr. Coble,
    is recognized for an opening statement.
        Mr. Coble. Thank you, Mr. Chairman. I thank you as well for
    scheduling today's hearing.
        Mr. Chairman, often times when one endorses or supports
    deregulation, he is accused of being insensitive to safety. He
    is accused to be willing to compromise safety. This is
    unfortunate because it is inaccurate.
        As I meet with representatives from my district, both large
    and small industries, one message is eminently clear. Our
    regulatory process is out of control. There is enormous
    uncertainty about what actions agencies will take. There is
    uncertainty over which agencies have jurisdiction, and there is
    a very serious concern that many independent agencies are being
    politicized. It is important to notice that these perceptions
    are not part of a larger campaign to discredit the Republican
    or Democratic agendas. They highlight a growing perception that
    our Government is completely out of touch.
        The Courts, Commercial and Administrative Law Subcommittee
    conducted several oversight hearings earlier this year to
    examine the efficacy of the Administrative Procedures Act. The
    hearings were enlightening in many respects, and although the
    subject matter is complicated at times, it was clear to me that
    in most cases there are few options for stakeholders to partake
    in the regulatory process with any substantial consequence. The
    process is missing checks and balances which are the
    cornerstone of our democracy, while regulators have virtually
    limitless resources and powers. The result is it enables
    special interests to impose their will on certain areas of our
    regulatory system after clearing few hooks and low hurdles.
    This has undermined our national interest and compromises the
    Administrative Procedure Act in my opinion.
        Meanwhile, the combined budget of regulatory agencies has
    ballooned 16 percent since 2008, topping $54 billion. During
    the same time, our economy has grown 5 percent. Employment at
    the agencies has grown 13 percent, while the number of private
    sector jobs has shrunk by 5.6 percent.
        The costs of ineffective regulations are enormous. Some are
    enough to drive businesses to other countries. Others are
    passed on to consumers, employees, and affected communities.
    Some argue that regulations have created an overall savings,
    and in some instances, I agree, but where regulations do not
    serve a legitimate purpose or impose a requirement that is
    unnecessary, the cost is obvious and wasteful. Regulations of
    this sort are becoming far too prevalent.
        The solution is not more regulations. It is better and more
    effective regulation, which is exactly what H.R. 3010 is
    intended to create. When the APA was implemented, few imagined
    that our Government would issue a regulation that would
    threaten the viability of an entire industry. Today,
    unfortunately, many would say this has become routine practice.
    H.R. 3010 addresses the situation by implementing new
    requirements that will give stakeholders a legitimate
    opportunity to improve regulations as they are proposed,
    promulgated, and ultimately implemented.
        Furthermore, H.R. 3010, Mr. Chairman and colleagues, will
    not restrict the ability of any agency to issue regulations. In
    fact, most of the bill emulates the executive orders that were
    issued by Presidents Bush, Clinton, and Obama.
        Finally, the bill will not change any existing regulatory
    standard or requirement.
        The overwhelming view from my congressional district is
    that Federal regulations are driving American ingenuity and
    opportunity to other countries. Improving our regulatory
    process may be one of the most significant legislative
    contributions that we can provide to help preserve our safety
    and provide economic opportunity for future generations.
        Mr. Chairman, as you and my colleagues know, we have an
    experienced and distinguished panel of witnesses before us
    today, and I appreciate their willingness to help us review and
    improve H.R. 3010 and yield back the balance of my time.
        Mr. Smith. Thank you, Mr. Coble.
        Mr. Conyers. Mr. Chairman, may I ask that the statement of
    Ranking Member Steve Cohen for this hearing be entered into the
    record at this time?
        Mr. Smith. Without objection, the statement of Mr. Cohen
    will be made a part of the record.
        [The prepared statement of Mr. Cohen follows:]
     Prepared Statement of the Honorable Steve Cohen, a Representative in
      Congress from the State of Tennessee, and Member, Committee on the
                                   Judiciary
        The Administrative Procedure Act has been described as an
    ``administrative Constitution'' that attempts to strike a balance
    between the need for due process and fairness, on the one hand, and the
    need for agencies to be able effectively to carry out their
    policymaking responsibilities, on the other.
        As with the Constitution itself, we must approach proposals that
    would make dramatic changes to the APA with caution, if not some
    considerable skepticism.
        The proponents of H.R. 3010, the ``Regulatory Accountability Act,''
    have a high burden to meet in that regard. Based on what I have heard
    thus far in four hearings before the Subcommittee on Courts, Commercial
    and Administrative Law, I do not believe that they have done so.
        As an initial matter, whatever the merits of any of the individual
    proposals contained in H.R. 3010, I am concerned that the cumulative
    weight of all of these changes would simply serve to stifle agency
    rulemaking, threatening to hamper the promulgation important public
    health and safety rules.
        In addition, several provisions in particular raise concern. First,
    H.R. 3010's expanded use of formal rulemaking procedures for major and
    ``high-impact'' rules strikes me as an unnecessary procedural expansion
    that would not serve to improve the quality of rulemaking while at the
    same time adding major costs to the process and would effectively grind
    agency rulemaking to a halt.
        Formal rulemaking largely fell out of favor more than a generation
    ago as its costs became more evident. A consensus developed that the
    notice-and-comment rulemaking procedures of Section 553 of the APA--
    which themselves are fairly heavily proceduralized, especially when
    combined with non-APA analytical requirements--struck a better balance
    between assuring a fair and accurate rulemaking process while
    maintaining agency effectiveness.
        H.R. 3010's proponents offer no study or other data indicating that
    the use of cross-examination and other facets of the formal rulemaking
    process are the more effective tools for making scientific and policy
    judgments than the current process.
        If anything, history may suggest the opposite. In an infamous
    example, one formal rulemaking proceeding before the Food and Drug
    Administration took more than 10 years to determine whether the FDA
    should require that peanut butter contain at least 90% peanuts as
    opposed to 87% peanuts. A government witness was examined and cross-
    examined for an entire day about a survey of cookbook and patented
    peanut butter formulas, missing recipes, and his personal preferences
    in peanut butter.
        While I make no judgments about personal preferences for how many
    peanuts should be in peanut butter, I do think that government could
    better spend its resources spending more than 10 years to decide that
    question. We ought to be wary of returning to those days.
        Another concern with H.R. 3010 is its codification of some overly
    burdensome cost-benefit analysis requirements. I do not oppose the use
    of cost-benefit analysis for economically significant rules. It can be
    a useful tool in helping agencies to do their jobs and in ensuring the
    best quality rules. Indeed, every Administration from Reagan's to
    Obama's has required through executive orders that agencies conduct
    cost-benefit analysis.
        Nonetheless, the particular agency determinations required by H.R.
    3010, and the requirement that all of these determinations be made for
    all rules, would cause unnecessary delay and cost tremendous taxpayer
    resources. I do not see the net benefit in expanding cost-benefit
    analysis requirements to non-major rules or to guidance documents,
    which do not have the force of law. Perhaps we should have a cost-
    benefit analysis done of H.R. 3010.
        There are other concerns that I will not get into in these brief
    remarks, including the expansion of judicial review under which judges
    would second-guess agencies' cost-benefit analyses, the establishment
    of a less deferential judicial review standard, and expanded
    opportunities to challenge agency compliance with the Information
    Quality Act.
        I hope we can explore all of these concerns today.
                                   __________

        Mr. Smith. Our first witness is C. Boyden Gray, former
    legal counsel to Vice President Bush and White House counsel
    for President George H.W. Bush. During the Reagan
    administration, Mr. Gray served as counsel to the Presidential
    Task Force on Regulatory Relief. More importantly, Mr. Gray
    served--excuse me. That is more recently, not more importantly.
    More recently Mr. Gray served as U.S. Ambassador to the
    European Union. Mr. Gray practiced law for many years as a
    partner at the Wilmer, Cutler, Pickering, Hale, and Dorr law
    firm in Washington, D.C. where he focused on regulatory matters
    related to environment, energy, antitrust, public health, and
    information technology. Currently he is a founding partner of
    the D.C.-based law firm, Boyden Gray & Associates.
        Mr. Gray graduated from Harvard University and the Law
    School of the University of North Carolina. Following his
    college graduation, Mr. Gray served in the U.S. Marine Corps.
    After law school, he clerked for Earl Warren, Chief Justice of
    the United States Supreme Court.
        Our second witness is Christopher DeMuth, Senior Fellow at
    the American Enterprise Institute (AEI). Mr. DeMuth served as
    president of AEI from 1986 to 2008. Before he joined AEI, Mr.
    DeMuth was the managing director of Lexicon, Inc.;
    administrator for the Office of Information and Regulatory
    Affairs in the Office of Management and Budget; and executive
    director of the Presidential Task Force on Regulatory Relief
    during the Reagan administration.
        Mr. DeMuth received his bachelor's degree from Harvard
    University and his juris doctor from the University of Chicago.
    He is the former editor and publisher of ``Regulation''
    magazine and the author of four books.
        Arnold Baker, our third witness, is founder and chief
    executive officer of Baker Ready-Mix and Building Materials in
    New Orleans, Louisiana. Mr. Baker has been honored by the
    National Black Chamber of Commerce as Entrepreneur of the Year.
    Mr. Baker also has been inducted into the Louisiana Business
    Hall of Fame.
        He currently serves as chairman of the National Black
    Chamber of Commerce, vice chairman of the New Orleans Business
    Council, and as a director on several local boards, including
    the New Orleans Board of Trade and the Greater New Orleans
    Construction Task Force.
        Mr. Baker is a former member of the mayor's cabinet for the
    City of New Orleans and served as assistant to the mayor for
    policy, planning, and development.
        Mr. Baker is a graduate of Texas State University, which I
    used to represent.
        Our final witness is Sidney Shapiro. Professor Shapiro is
    the University Distinguished Chair in Law at Wake Forest
    University School of Law. He has written six books, contributed
    chapters to seven additional books, authored or co-authored
    over 50 articles, and is working on a book on administrative
    accountability.
        Mr. Shapiro is the vice president of the Center for
    Progressive regulation, a nonprofit research and educational
    organization of university-affiliated academics.
        Before he joined the Wake Forest faculty, Mr. Shapiro
    taught at the University of Kansas. Prior to teaching, Mr.
    Shapiro was a trial attorney at the Federal Trade Commission
    and deputy legal counsel of the Secretary's Review Panel at the
    U.S. Department of Health, Education, and Welfare.
        We welcome you all, appreciate your time and your expertise
    and knowledge. And, Mr. Gray, may we start with you?
        Mr. Coble. Mr. Chairman, may I ask a question of the Chair
    before Mr. Gray speaks?
        Mr. Smith. The gentleman from North Carolina is recognized.
        Mr. Coble. You justifiably gave a mention to Texas. I need
    to remind you that two of our four witnesses have definite
    North Carolina ties as well. Thank you, sir.
        Mr. Smith. We should have known you weren't going to
    overlook that, Mr. Coble. Thank you for those comments.
        Mr. Gray?

                     TESTIMONY OF C. BOYDEN GRAY,
                        BOYDEN GRAY & ASSOCIATES

        Mr. Gray. Mr. Chairman, thank you very much for the
    opportunity to appear here and thank you for taking up this
    issue which I think all of us up here think is fairly
    important, very important given our job situation.
        I feel as though this is 1980 again when we had an
    overwhelming inundation of regulatory overkill and there were
    serious concerns about our job creation and economic
    difficulties in the early 1980's. There is some question now,
    well, do regulations really hurt business development, job
    creation, or is it lack of demand? And all I can say is again
    it feels like the early 1980's, and what Chris and I and others
    did we hope in the public interest to make more sense out of
    regulation in the early Reagan years I think helped stimulate
    one of the biggest growth periods in U.S. history. And I think
    the same thing can happen again.
        I want to focus on two areas where things have changed
    since the original system was set up to review regulations
    under White House review, which Chris led on in the early
    1980's. Two issues: independent agency coverage and judicial
    review of cost/benefit analysis.
        We did not cover independent agencies with regulatory
    review in the beginning mostly for political reasons, but also
    because these agencies didn't have that much impact over the
    general economy. Now, in the last 30 years, things have
    dramatically changed and you have to just look at Dodd-Frank or
    Sarbanes-Oxley or the Internet, high tech, the world of finance
    to understand that the CFTC and the FCC and the Fed and the SEC
    and the other independent agencies really do now maybe impact
    more of the economy than the so-called executive branch
    agencies.
        I want to give just a couple of examples. It is in my
    testimony. I do not want to belabor the point, but if you take
    a look just at banking, you take a look at the Commodities
    Future Trading Corporation, they are proposing to cover a thing
    called end-use derivatives, which will lock up a couple of
    trillion dollars in collateral for no good reason. There is no
    cost justification for this. The Inspector General has scored
    the CFTC for relying on its lawyers to do the cost/benefit
    analysis. I am a lawyer. I would not rely on myself to do it.
    That doesn't mean I can't question it, but I would really
    rather have an economist take the first crack at it. This is
    very badly needed to underscore that the costs and the business
    inhibition that will be posed by the CFTC regulations far
    outweigh any possible benefits.
        If you turn to the Federal Reserve Board, which has
    enormous regulatory powers preexisting Dodd-Frank but even more
    since, he was asked by the chairman of one of the big banks
    will Dodd-Frank do more harm than good, and Chairman Bernanke
    answered nobody has looked at it. Nobody knows, he said, quote/
    unquote. Nobody has looked at it at all in detail. And then he
    said only after imposing the new regulations would they, quote,
    be able to figure out where the costs exceed the benefits and
    make appropriate adjustments. Well, that is a little backwards.
    They should do this before they issue the regulations.
        Later he was asked, what is the cumulative effect on the
    availability of credit from Dodd-Frank? And Chairman Bernanke
    answered, quote, you know, it's just too complicated. We don't
    really have quantitative tools to do that. Close quote. Well,
    they should get the quantitative tools to do that because this
    is at the heart of our current economic difficulties in my
    opinion, but my opinion doesn't count. Look at experts far
    better versed in this than I in terms of the economic fallout.
        If you look at telecom, the Internet, the net neutrality
    rules, which were hugely important, the FCC is badly split on
    whether costs exceed benefits. There shouldn't be such a split
    on the commission. There should be a requirement that the FCC
    hew to the same rules that executive branch agencies have
    understood and learned over the last 2 or 3 decades.
        Take a look at energy. EPA and the Department of Energy are
    probably the two most important agencies that affect energy,
    which is a huge component or our economy, but they are followed
    pretty closely by FERC, the Federal Energy Regulatory
    Commission; the Nuclear Regulatory Commission, NRC; and the
    CFTC, which I have said already will lock up hundreds of
    billions of dollars in collateral for just the utilities alone
    for doing ordinary, garden variety hedging that they have been
    doing for decades.
        It is important that all these agencies operate off the
    same sheet of music in terms of how they assess costs and
    benefits, and there is no reason why one set of agencies should
    be exempt from all this positive analysis and another set
    subjected to it. It is really sort of, I think, unsustainable.
        There was a comment earlier about changing the rules of the
    Clean Air Act. I believe actually most of the Clean Air Act
    provisions, regulatory provisions, actually do have a cost/
    benefit requirement. It is only setting the national ambient
    air quality standards at the standard-setting stage where costs
    can't be brought into the equation, but the Supreme Court made
    clear that when these standards are implemented at the State
    level, costs and benefits are highly relevant.
        I think this bill would do a great service with respect to
    the Clear Air Act, because it would regularize and systematize
    the cost/benefit provisions that do exist and aren't actually
    as consistent as they should be.
        On the question of judicial review, just two quick points.
    One just needs to read Judge Ginsburg's opinion in Business
    Roundtable v. the SEC, recently decided, where he goes into the
    SEC's failure to do cost/benefit analysis properly. It is
    something which judges are perfectly capable of doing. That is
    one of the great objections that judges can't do this. Read the
    opinion. Decide for yourself, but I think it is pretty clear
    they can do it.
        And there isn't going to be an overburden on the courts.
    The D.C. Circuit, which is expert at this, has probably the
    lowest caseload of any circuit in the country and can well
    adapt to whatever increase is required by your legislation. I
    think they would actually welcome the guidance on that circuit.
    It is well equipped to handle this bill, and it would welcome,
    I think, the opportunity to do so.
        Thank you.
        [The prepared statement of Mr. Gray follows:]

                                   __________
        Mr. Smith. Thank you, Mr. Gray.
        Mr. DeMuth?

    TESTIMONY OF CHRISTOPHER DeMUTH, AMERICAN ENTERPRISE INSTITUTE
                       FOR PUBLIC POLICY RESEARCH

        Mr. DeMuth. Thank you, Mr. Chairman, Members of the
    Committee. Thank you for inviting me to testify.
        The nature and scope of Federal regulation has changed
    fundamentally in the two-thirds of a century since the
    Administrative Procedure Act first made law, especially since
    1970. We have many, many more agencies. They operate primarily
    through rulemaking rather than adjudication. Their rules apply
    to very wide sectors of the economy. They cover society-wide
    issues. They result in costs and benefits often of very, very
    large proportion. And they operate under very broad grants of
    authority from the Congress that often amount to de facto
    lawmaking power.
        These developments set the stage for the regulatory
    controversies of the past 5 years where we have had an
    unusually large number of highly consequential, highly
    controversial policy proceedings going on in Washington, in all
    of which Members of Congress have been essentially bystanders.
        The Regulatory Accountability Act would bring the
    Administrative Procedure Act up to code. Most important, it
    would take the cost/benefit standard that has been the standard
    for rulemaking in the executive branch agencies from President
    Reagan through President Obama and make it a statutory standard
    subject to judicial review. This would be a big step forward
    for regulatory practice and policies. I would like to mention
    five.
        First, the cost/benefit standard is the regulatory
    equivalent to a budget constraint on spending programs. Single-
    purpose agencies, regulatory or spending, pursue their goals
    single-mindedly with too little regard for alternative worthy
    purposes of the resources that they command. There is nothing
    wrong with that at all. Congress expects single-purpose
    agencies to pursue their goals energetically, but in the case
    of regulation, it needs institutional adjustments. Spending
    agencies have a budget that they have to live within.
    Regulatory agencies command resources that are largely realized
    entirely in the private sector. They never go through any of
    the mechanisms of public finance, taxation, appropriation,
    authorization, budgeting, and so forth. We need some analog,
    and the cost/benefit standard is the best analog we have come
    up with where for each policy, one does not have a budget
    constraint, but one has to impose costs with a view not toward
    that budget but toward the benefits that one is trying to
    produce.
        Secondly, the cost/benefit standard is an excellent
    standard of statutory construction, how regulators should apply
    very broad regulatory mandates in pursuing the goods that they
    are asked to pursue, that is, that they should attempt to
    achieve the maximum benefits for the minimum costs. How is the
    faithful regulator vested with wide lawmaking power to exercise
    his or her discretion consistent with our constitutional and
    democratic values? You can't ask an individual legislator. Some
    will want more aggressive, some will want less aggressive
    pursuit of one purpose or the other. But if you ask how should
    representative politicians in the House and Senate as a whole
    want all regulatory statutes to be enforced, the best answer
    you can come up with is that each agency should pursue their
    statutory goals as cost-effectively as possible.
        Third, the cost/benefit standard promotes transparency and
    accountability. Regulation is a stream of narrow, complex
    issues often comprehensible only to insiders. Cost/benefit
    analysis is not a prescription for rule by economists and
    technocrats. It is just the opposite. It is the best procedure
    anyone has come up with for summarizing, systematizing the
    myriad details of any regulatory controversy and making the
    rule, the issues accessible to outsiders, to the White House,
    to the Congress, to the courts, to journalists, editorial
    writers, and to the general public.
        The cost/benefit analysis is not turning a crank. There are
    many uncertainties. There are many lively arguments in the
    estimation of benefits and costs in any rulemaking. The point
    is that those are the serious debates. Those are the debates
    where we should be focusing our attention. The debates should
    be known to much wider parts of the public and to Washington
    than just the rulemaking insiders.
        Fourth, as has been noted previously, the cost/benefit
    standard builds on 30 years of agency practice under Presidents
    of both parties. That we have had such constancy in regulatory
    policy across Administrations of widely differing political
    philosophies shows that the cost/benefit standard is not anti-
    regulation. Instead, it is a reasonable response to the
    institutional problems of regulation that I have mentioned.
    After 30 years, the cost/benefit standard is sufficiently
    established in agency practice to merit statutory codification.
        Fifth and finally, there are many flaws in the executive
    order programs across the last 30 years. There is much too much
    variation in the quality and seriousness of cost/benefit
    analyses from agency to agency, within agencies. OIRA sometimes
    gives very sloppy cost/benefit standards a pass. Sometimes it
    sends pretty good ones back to the agencies for review. These
    difficulties are all the result of the standards being
    internal, private, and voluntary. By making the standards
    subject to judicial review, the Regulatory Accountability Act
    would transform incentives and behavior within Administrations
    fundamentally. It would change the dynamics. People would be
    much more serious. There would be fewer attempts to game the
    system. Everybody would know that the final decision they made
    was going to be subject to a second, independent look by courts
    operating under conventional standards of deference.
        The court decisions would produce over time a common law
    such as we have under the Administrative Procedure Act today,
    but it would be more pointed, empirical, factual. It would lead
    to criticism in law reviews and newspaper editorials. It would
    result in a much greater degree of professionalism in
    regulatory policymaking in the Administration.
        One last point on the criticism that the act would
    undermine regulatory protections and lead to delays and the
    scuttling of many important rules.
        The criticism is a difficult one to get very far with
    because the act essentially takes what is going on today and
    what has been going on for 30 years and simply adds the
    important discipline that the final rule's costs and benefits
    be subject to independent, that is, to judicial review.
        The history of our regulatory----
        Mr. Smith. Mr. DeMuth, I am afraid we need to call time.
        Mr. DeMuth. Okay.
        Mr. Smith. You have gotten through your five points, and I
    especially appreciated the latter point you made as well.
        Mr. DeMuth. Thank you, sir.
        Mr. Smith. Thank you.
        [The prepared statement of Mr. DeMuth follows:]

                                   __________
        Mr. Smith. Mr. Baker?

                 TESTIMONY OF ARNOLD B. BAKER, OWNER,
                 BAKER READY-MIX AND BUILDING MATERIALS

        Mr. Baker. Chairman Smith, Ranking Member Conyers, and
    distinguished Members of the Committee, good morning and thank
    you for giving me the opportunity to come before you and to
    participate in this important meeting.
        My name is Arnold Baker. I am chairman of the National
    Black Chamber of Commerce, but more importantly, I am CEO of
    Baker Ready-Mix and Building Materials. Although Baker Ready-
    Mix is a small business, we have supplied a good deal of
    concrete used in the rebuilding of New Orleans in the immediate
    aftermath of Hurricane Katrina. Since we were the first
    concrete plant to reopen in the City of New Orleans, it well
    positioned us for growth during the rebuild. We have
    continually reinvested all of our profits into our company,
    allowing us to grow from a 10-person operation to a 60-person
    operation since Hurricane Katrina.
        Unfortunately, a new swarm of regulations coming out of
    Washington are actually threatening our survival and
    threatening our ability to be competitive. These new
    regulations are going to make it more difficult for us to sell
    concrete, more difficult for us to create jobs, more difficult
    for us to stay competitive.
        I am extremely non-partisan. I am just a business owner who
    over the past few years, as I have grown, I have had to endure
    a continuum of regulatory changes that have impacted my daily
    business operations. Most are excellent, but some have greatly
    impeded my ability to grow even more. So even though I may use
    a rule as an example, I am really not here about any particular
    rule or agency because most of the rules and most of the
    agencies' work is good stuff and good for society. But
    sometimes we all know that that is not always the case.
        This process should be improved to better ensure that the
    rules are needed and relevant, especially during these tough
    economic times. We just cannot afford job-costing mistakes.
    Federal agencies need to do a better job of understanding the
    impact that their regulations will have on businesses and jobs
    before they impose the new rules. Companies like mine, who have
    already had to fight to stay on top, fight to get back in
    business, and try to learn all the existing regulations, need
    to have certainty that the new rules are well conceived and
    supported by adequate data.
        H.R. 3010, the Regulatory Accountability Act of 2011, will
    meet these needs by requiring agencies to show that new rules
    are necessary and present the data that supports the regulatory
    action. Let me give some examples of ways that H.R. 3010 would
    benefit businesses like mine.
        Cement is a critical ingredient in the concrete that I
    sell. It is the glue that holds concrete together. In 2010, EPA
    issued the Cement MACT rule that imposes extremely stringent
    new emissions standards on cement plants. This caused a ripple
    throughout the industry. All concrete plants received
    notifications that your cement is going to increase anywhere
    from 15 to 30 percent. Our main ingredient, our livelihood.
    This rule is also expected to cost $3.4 billion and shut down
    at least 18 U.S. cement plants. On top of this, EPA plans to
    make fly ash, our second most critical ingredient, a hazardous
    material. They have also imposed new permitting requirements
    for greenhouse gases, has restricted the material that can be
    burned in cement kilns. Together, these rules are expected to
    add $20 to $36 to the cost of every ton of cement that my
    company buys. This represents a 33 percent increase in costs
    for one of my company's most critical ingredients.
        Because I am a small business, I certainly can't absorb
    this cost like larger businesses do. I can't spread this over
    several States or more trucks or more plants. I have to pass
    this cost directly to my consumer which is either a private
    sector business owner, the guy doing driveways, or the City of
    New Orleans or the State of Louisiana. This is a direct pass-
    through to them.
        On the other side of this is that as a small business
    owner, I lose contracts every day by $1 per yard. Someone will
    come in and bid $94, and I will bid $95. One dollar per yard
    makes a huge difference in my industry. So now my main
    ingredient is increasing the price by 33 percent. This has a
    significant impact on my business operations. If all this comes
    to fruition--we are going through a very difficult assessment
    process as to what the future looks like for us if these
    regulatory actions come to fruition because our margins are
    tight already.
        If H.R. 3010 had been law, EPA would have had to have held
    an on-the-record hearing to show that the data relied on is
    accurate and reliable. It would also have had to consider the
    cumulative and indirect effects of the rule, including
    industries such as mine that depend on cement. And the agency
    would have had to provide a detailed justification for the
    approach they took in that regulation. A better regulatory
    outcome would have probably resulted, one that is more
    balanced. We are not saying that the rules are wrong or rules
    are bad, but all the factors are not being considered. My
    business was not being considered when these rules were being
    brought to fruition.
        Poorly conceived and poorly supported rules create
    uncertainty and reluctance to make future investments,
    including the hiring of additional employees at a time when we
    need more jobs. H.R. 3010 will lead to better regulatory
    outcomes and a greater certainty about future investments and
    hiring. Again, this is not about a rule or any agency. this is
    merely about a more informed, more inclusive and more effective
    process.
        Thank you for allowing me this time, and I will be happy to
    answer any questions you might have.
        [The prepared statement of Mr. Baker follows:]

                                   __________
        Mr. Smith. Thank you, Mr. Baker.
        Mr. Shapiro?

    TESTIMONY OF SIDNEY A. SHAPIRO, UNIVERSITY DISTINGUISHED CHAIR
              IN LAW, WAKE FOREST UNIVERSITY SCHOOL OF LAW

        Mr. Shapiro. Thank you, Mr. Chairman. I appreciate the
    invitation to be here today to share with you my views on the
    Regulatory Accountability Act of 2011.
        In the United States, administrative law is guided by three
    often competing principles that must be properly balanced:
    accountability, fairness, and efficient implementation. Efforts
    to achieve accountability and fairness must be balanced with
    ensuring that agencies can efficiently implement their
    statutory missions. I, therefore, have a number of concerns
    about H.R. 3010.
        First of all, we already have sufficient procedures to
    ensure accountability and fairness. It is beyond contention
    that business interests have an ample opportunity to file
    comments and to meet with agency and OIRA officials often
    multiple times. If anything, the system has too many
    procedures. The rulemaking process is now inordinately complex,
    time-consuming, and resource-intensive.
        As a result, it now takes 4 to 8 years for an agency to
    promulgate and enforce most significant rules. The proposed
    procedures would likely add another 2 to 4 years to the
    process. Under H.R. 3010, the longest rulemakings could take
    more than 12 years to complete which means that rulemaking
    could potentially span four different presidential
    Administrations.
        Second, because of the current ossification, the real
    threat to our society is one of under-regulation, not of over-
    regulation. The long history of regulation demonstrates that
    when agencies fulfill their legislative mandates, it saves
    lives, prevents serious injuries, and protects the economic
    livelihood of millions of Americans. And all of this has been
    done at a reasonable cost. By comparison, when agencies fail to
    fulfill these mandates, immense harm can result. The financial
    collapse, the BP oil spill, and the West Virginia mine disaster
    are but a few examples.
        Third, the arguments offered for 3010 are rebutted in
    academic literature. Claims of excessive regulatory costs of
    $1.75 trillion have been discredited. The evidence also shows
    that regulation is not a drag on employment. Regulation
    stimulates the creation of as many jobs, new jobs, as are lost,
    and job gains exceed job losses for some regulations.
        In addition, the evidence contradicts the claim that
    regulatory uncertainty is deterring business investment. In any
    case, the proposed legislation would increase regulatory
    uncertainty, not decrease it by delaying regulatory initiatives
    by several years.
        Delaying or stopping new regulations does not avoid
    economic costs. When the Government fails to regulate cement or
    anything else, we reallocate who pays the costs. When a
    regulation is delayed or blocked, the costs to industry of that
    regulation do not vanish into thin air. Instead those costs
    continue to be imposed on the general public in terms of lives
    lost, preventable cancers, and lost work days, among other
    harms.
        Fourth, the bill would overrule more than 25 environmental,
    health, and safety statutes by replacing current requirements
    of justifying a regulation. These are substantive changes. The
    bill does not simply continue the existing executive orders.
    The current executive orders call for analysis before a
    regulation is completed. The bill would make a cost/benefit
    standard the decisional rule for promulgating a standard, which
    would be an enormous change in the way that we do business.
        Finally, the legislation would add over 60 new procedural
    and analytical requirements to the agency rulemaking process.
    As I discuss in my testimony, there is no support in the
    academic literature for most of these procedures--most of these
    changes. Moreover, the Committee has received a letter from the
    Administrative Law Section of the ABA opposing most of the
    proposed procedures. The lack of support recognizes that the
    proposed procedures would, at best, lead to marginal
    improvements in accountability and fairness. At the same time,
    they would slow down an already slow regulatory process.
    Without new funding for agencies to do this work--and that is
    not expected--the reality would be agencies further bog down,
    blocked from their work of protecting the public.
        It is simply not the case that we are stuck with a 1947
    version of administrative process. Although the bill itself
    hasn't been substantially changed, there is a slew of executive
    orders which have changed administrative procedure, and
    Congress has legislated on several occasions to add
    administrative procedures such as the Regulatory Flexibility
    Act. So in other words, we have evolved the procedures as we
    have gone. We don't simply have a 1947 version of the act.
        I think the most important point here is we need to achieve
    a reasonable balance between promoting accountability and
    fairness and ensuring that agencies can actually protect the
    American public. The system is now out of balance, imposing
    costs on millions of Americans who not receive the regulatory
    protection that Congress has specified in our health, safety,
    and environmental statutes.
        Thank you and I will be happy to answer questions.
        [The prepared statement of Mr. Shapiro follows:]

                                   __________
        Mr. Smith. Thank you, Mr. Shapiro.
        We will now begin our questioning, and I will recognize
    myself.
        Mr. Gray, would you agree that the bill does not block
    regulations, it just requires us to go with the least costly
    alternative that achieves the intended goals?
        Mr. Gray. That is correct, Mr. Chairman. It does not block
    regulations, and for the executive branch agencies that are now
    subject to the various executive orders over the years, this is
    what they are supposed be doing anyway. So what you are doing
    is systematizing it, regularizing it, and making it the same
    across the board, which is an improvement, not an inhibition.
        Mr. Smith. Thank you, Mr. Gray.
        Mr. DeMuth, you mentioned five reasons why it would be a
    good idea to require a cost/benefit analysis. Your third reason
    was transparency and accountability. Would you give us maybe
    examples of the practical and beneficial consequences of the
    transparency and accountability argument that you made?
        Mr. DeMuth. I think that several examples are to be seen in
    the Congress at sessions like this and several other oversight
    sessions of the past year. The Environmental Protection Agency,
    other regulatory agencies, have come up with numbers suggesting
    what the benefits and the costs of their rules are. Academics,
    people from regulated businesses have come up with their
    estimates. They have argued over them. These arguments are
    focusing on what are going to be the costs and what are we
    going to get for the costs. That is how we should be addressing
    these issues. And the data exists because of the executive
    orders that have gotten the agencies to prepare assessments, to
    publish studies, and make their assumptions open to the public
    for general criticism.
        Mr. Smith. Thank you, Mr. DeMuth.
        Mr. Baker, you are a businessman and a successful one.
    Could you run your business if you did not take into
    consideration the cost and benefits of alternatives that you
    might consider?
        Mr. Baker. Well, in fact, it is a pretty standard banking
    process. When we go for financing, they want to make sure that
    as we are expanding, that we actually look at all the options
    that are available to us.
        Mr. Smith. Mr. Baker, do you think the Government should
    operate the same way?
        Mr. Baker. Well, I would hope that the same attention that
    this legislation is receiving now, that we would give this same
    attention to the rules that impact my business directly. So the
    answer is yes. I would hope for more attention and more input.
        Mr. Smith. Thank you, Mr. Baker.
        Mr. Shapiro, do you feel that our regulatory system must
    identify and use the best, most innovative, and least
    burdensome tools for achieving regulatory ends?
        Mr. Shapiro. Yes, and I believe the system does that now.
        Mr. Smith. That was a good answer inasmuch as that is the
    exact wording of President Obama's executive order on the
    subject. So you passed a trick question. Thank you, Mr.
    Shapiro.
        That ends my questions, and the gentleman from Michigan,
    Mr. Conyers, is recognized.
        Mr. Conyers. Thank you, Chairman Smith.
        And I want to thank all the witnesses.
        Now, there is a big question overhanging this discussion.
    One of the witnesses says that H.R. 3010 doesn't block
    regulations and that it would operate smoothly, and another
    witness says or implies it will create far more regulations.
    Could we settle this this morning, if we do not do anything
    else?
        What do you think, Mr. DeMuth? You are the former head of a
    think tank that I used to argue with pretty regularly. What is
    your idea? Is there some middle ground? Is this going to make
    it smoother for the regulatory process or more complicated in
    your view?
        Mr. DeMuth. I think it is difficult to predict the future.
    My hunch is that it will actually make the rulemaking process
    smoother and more effective, and that is because currently we
    have a cost/benefit standard that is informal and voluntary. If
    you are inside an Administration, there is a lot of gaming the
    system and forum shopping and so forth. If everybody inside the
    executive branch from the person three layers down at EPA to
    the people at the top of the White House understood that when
    you make a major regulatory decision, you have got to show that
    the benefits are worth the costs. And there is a good chance
    that a judge is going to look at that and decide whether you
    have done a good job.
        Mr. Conyers. But Mr. Shapiro says it is going to take
    longer, not just a little bit longer or just as long, but
    months and maybe years.
        Mr. DeMuth. I don't know where the estimate of 2 and a half
    years comes from. The procedures look to me very similar to
    what is actually happening on the ground right now.
        Mr. Conyers. But there are 10 times more rules in the bill
    already. That comes from the law school professors that wrote
    us this letter. And by the way, I am going to get that letter
    to all of you because the one thing I am asking that you do
    after the hearing is write me about what you thought of the
    letter.
        Mr. DeMuth. Sir, if I can make two brief points.
        Mr. Conyers. Well, no, hold it. You make them after Shapiro
    because we are running out of time.
        Look, you got a Committee on the Judiciary. They called
    distinguished witnesses, and at the very initial basic point of
    discussion, we are told that this isn't going to make
    regulations any more complex. On the other hand, the same
    morning at the same time at the same place, we are told that
    this is going to screw up the process beyond anything you have
    ever imagined. Could you help us out here?
        Mr. Shapiro. Well, as Mr. DeMuth pointed out, we are going
    to get these arguments about how to calculate these things, and
    the problem is there is no good way to resolve those arguments
    because many of these benefits are simply not quantifiable in
    any realistic sense.
        For example, right now, EPA currently values the loss of
    each child's IQ point at $8,800 per IQ point. But Mr. Lutter of
    the AEI argues that an IQ point is only worth $1,000 to $1,900
    per IQ point. And I don't understand how that argument is going
    to improve the administrative process, and moreover, I think
    the American people would be appalled to think that our
    decisions about whether to protect children come down to
    whether it is worth $8,800 or $1,100.
        Mr. Conyers. Could I get 30 seconds more? I see my time is
    about to run out.
        I wanted to let Mr. Baker know that as one who supported
    small business past and present, the whole idea of the
    regulation that you didn't like was to prevent tens of
    thousands of premature deaths, tens of thousands of cases of
    respiratory and cardiovascular problems, including heart
    attacks and acute bronchitis and over 100,000 asthma attacks.
    So the point I am getting at, Brother Baker, is if we don't pay
    this little bit more that you don't want to pay--and I can
    understand it is going to be hard on you--we are going to pay
    lots of money coming from the citizenry in terms of all these
    health costs if we don't clean up this cement thing. So you see
    the problem that we are in?
        Mr. Baker. Oh, I think we are on the same wavelength
    actually in that what the agencies are doing, as far as the
    laws or the rules themselves, that is not what this is about. I
    agree with you that without rules society becomes chaotic, and
    we don't protect the citizenry.
        This is all about the process, though. I would like more
    input. I would like the impact that it has on my business--just
    as the other impacts are being considered, I would like that to
    also be a consideration. And so this is not----
        Mr. Conyers. Let's assume they took into consideration the
    impact and said that this minor cost is going to have to be
    borne because it will save lots and lots of lives.
        Mr. Baker. The process that I understand was taken did not
    consider our industry. But the rule itself I am not contesting.
    I am not saying these aren't good things to do. I am just
    saying let's go about----
        Mr. Conyers. We want to get you to the Small Business
    Administration for a loan to cover these costs that this
    imposes on you.
        Mr. Baker. I am sorry, sir? I couldn't----
        Mr. Conyers. SBA. That is where I am going to send you
    after this hearing to get some money. [Laughter.]
        Mr. Baker. I appreciate that. I will definitely take you up
    on that.
        Mr. Smith. Thank you, Mr. Conyers.
        The gentleman from North Carolina, Mr. Coble, is
    recognized.
        Mr. Coble. Thank you, Mr. Chairman.
        Gentlemen, good to have you all with us this morning.
        Mr. DeMuth, is it not true that for decades agencies have
    been able to promulgate sound regulations to protect public
    health, safety, and welfare using cost/benefit criteria? Is
    that not an accurate statement?
        Mr. DeMuth. Yes, sir. In the 3 years I oversaw the process,
    EPA, NHTSA, the FDA issued many, many regulations that passed
    the cost/benefit test with flying colors.
        Mr. Coble. Well, would the Regulatory Accountability Act
    have prevented the promulgation of these regulations?
        Mr. DeMuth. No, sir.
        Mr. Coble. Mr. Gray, how easy would it be for the Consumer
    Financial Protection Bureau to promulgate economically damaging
    regulations under the existing APA act especially since the
    Consumer Financial Protection Bureau is not bound by the
    President's cost/benefit executive orders?
        Mr. Gray. There are no constraints on what that agency will
    be able to do. There are no congressional restraints because
    you don't provide the budget. There are no White House
    constraints because the White House is walled off, as is the
    Fed. The judicial system is basically required to defer to
    whatever it decides, and OMB cannot review the rules for any
    kind of cost/benefit equation at all. So there really are no
    requirements for accountability and no ability for any of the
    three branches to review it.
        Mr. Coble. I thank you, sir.
        Mr. Baker, I am going to quote from President Obama a
    statement with which I am in agreement, and I want to see
    whether you agree with it or not. He said where relevant,
    feasible, and consistent with regulatory objectives and to the
    extent permitted by law, each agency should identify and
    consider regulatory approaches that reduce burdens and maintain
    flexibility and freedom of choice for the public. Do you agree
    with that, Mr. Baker?
        Mr. Baker. You know, I couldn't hear very well, but if your
    statement was regarding ensuring that businesses like mine have
    input into the consideration process, then I do agree.
        Mr. Coble. I think the quote that I gave is pretty
    consistent with what your testimony indicated as well, and I
    concur with that as well.
        Mr. Shapiro, let me ask you whether you disagree or agree
    with a statement--statements--actually I will use the plural--
    from President Clinton and President Obama that an agency must
    tailor regulations to impose the least burden on society,
    consistent with obtaining regulatory objectives. Do you concur
    with that?
        Mr. Shapiro. I do but it is important to understand how the
    current system does that. While agencies now, although not
    independent agencies it is true, have to undertake a cost/
    benefit analysis, they don't have to prove at the end of the
    day that regulatory benefits exceed regulatory costs because of
    the difficulty of doing that with some great level of
    certainty. Instead, what Congress has done in all these various
    statutes is say where these estimates of benefits don't agree,
    you should favor protection of the American people as long as
    it doesn't impose unreasonable costs. This bill would change
    that substantive mandate.
        Mr. Coble. Well, I think, Mr. Chairman, it has been a good
    hearing, and I am not disappointed in any sense that there have
    been disagreements. I mean, these hearings oftentimes result in
    disagreements on the part of the witnesses that appear. This is
    the nature of the beast. So I think it has been a good hearing.
        And, Mr. Chairman, I am going to yield back before my red
    light illuminates. Thank you, sir.
        Mr. Smith. Thank you, Mr. Coble.
        The gentleman from Virginia, Mr. Scott, is recognized.
        Mr. Scott. Thank you, Mr. Chairman.
        Mr. Gray, the bill requires us to calculate for a major
    rule $100 million worth of, I think it says, annual cost on the
    economy and for a high-impact rule, $1 billion. How do you
    calculate those costs?
        Mr. Gray. Basically by trying to answer the question what
    will it cost the community that has to comply, and if it is an
    EPA rule that requires a certain installation of equipment, you
    find out how much the equipment costs and what it costs to
    install it. It is much more difficult, I will grant, when you
    get into a financial rule of the kind that Dodd-Frank requires
    or Sarbanes-Oxley.
        But these are not meant to be precise, absolutely down to
    the last dollar and cent. They are meant to be approximations
    that allow a relative weighing of relative numbers. They are
    not meant to be absolutely concrete, not to--so I don't think
    it is difficult to do, and agencies have been doing it in the
    executive branch since 1981.
        Mr. Scott. What are some of the benefits that you look to
    to compare to the costs?
        Mr. Gray. Well, again, when you are dealing with health and
    safety, perhaps it is easier. You look and see, all right, what
    health effects are eliminated, what harms are alleviated. When
    we phased out lead, it was pretty clear that lead was doing
    huge damage to childhood development. They didn't have to
    actually figure out what the costs were or what the benefits
    were. You knew that was huge, and it was fairly
    straightforward.
        Again, I think it is more difficult for a credit
    regulation, CFTC, but it can be done. And if you look at,
    again, a case that I cited, the Business Roundtable v. the SEC,
    you can see a court grappling with these issues with great
    facility and understanding that anybody in this room can read
    and process.
        Mr. Scott. Is there an effort to quantify, to the extent
    that Mr. Shapiro indicated, the damage, for example, for lead,
    or we just know it causes such damage that we are not going to
    try to quantify it, we are trying to end it?
        Mr. Gray. Well, if I understand your question--you know,
    Chris maybe ought to speak up--but we knew what we were dealing
    with, and I think we understood what the equations were. There
    was a mistake made back in those days because there was a
    question that we didn't know to ask that we know now to ask,
    which is, all right, so you take out lead. What is the
    substitution? What is going to be the substitute? And what is,
    something now understood, the so-called substitution risk? I
    think if we had asked that question, we would have had a better
    regime after lead had been phased out, but now we know to ask
    that question and this legislation would make sure that that
    question is asked across the board in a way that is
    understandable by the public and, equally importantly,
    processable by the D.C. Circuit and the courts.
        Mr. Scott. Thank you.
        Mr. Shapiro, Mr. Gray has indicated the subjective nature
    of these calculations. How does that translate into litigation?
        Mr. Shapiro. Cass Sunstein once wrote an article called
    ``The Arithmetic of Arsenic'' where he counseled regulatory
    lawyers about the many ways that they could challenge any cost/
    benefit decision. So no matter what the agency comes up with,
    there is going to be an argument over benefits, which is going
    to lead to more litigation, which is going to, under this bill,
    put some Federal judge in charge of deciding what the right
    number is. And all that assumes there would be some way to
    determine this, but there simply isn't. As you heard, these are
    at best approximations. There are competing approximations, and
    there is really no way to resolve those. That is like Congress
    said when there are doubts about the regulatory benefits, then
    the agency should do the best it can to protect the public and
    stop at the point where it is going to impose unreasonable
    costs on industry.
        Mr. Scott. What is the standard that the regulation is
    judged by?
        Mr. Shapiro. Well, it varies, but the most common one is
    called ``technology-based regulation.'' And what that asks an
    agency to do is go out in the marketplace and find the most
    protective technology which is currently available on the
    market and because that technology is being sold and used by
    industry, the general assumption is that it is an affordable
    one, and the agency will peg the level of regulation at the
    level of best available technology. That is a nice objective
    standard. That is something we can determine objectively.
        Mr. Scott. Thank you, Mr. Chairman.
        Mr. Smith. Thank you, Mr. Scott.
        The gentleman from California, Mr. Lungren.
        Mr. Lungren. Thank you much, Mr. Chairman.
        Mr. Gray and Mr. DeMuth, I have read Mr. Shapiro's
    testimony here, and it appears to be two points I would like
    you to respond to. One is we don't need this because it is
    unnecessary because we have the proper scheme right now in
    terms of the regulatory burden with these regulating agencies.
    This is unnecessary. They take into consideration what needs to
    be considered. And then on the other hand, if we pass this law,
    he says this will add to a longer period of non-decision and
    will add to the burden.
        Now, I wish you would respond to both of those in terms of
    the frailties or infallibility--or fallibility of this
    particular recommended change in law that we are talking about
    here. Mr. Gray?
        Mr. Gray. As we have said, most of the cost/benefit
    requirement in this legislation is supposed to be done today by
    executive branch agencies. The real benefit of this legislation
    is twofold: to make it consistent across the executive branch
    where you have multiple agencies always involved in the same
    subject matter; and secondly, to make it enforceable in the
    courts by primarily the D.C. Circuit which is really quite
    capable of dealing with this.
        Mr. Lungren. Well, that goes to one of the points Mr.
    Shapiro makes. Why would a Federal judge or Federal court be
    superior to the decision-makers that we have set up in the
    regulatory agencies right now?
        Mr. Gray. Well, under the rules of judicial review, the
    courts are not supposed to sit there and decide that the
    decision, a reasoned decision, made by an agency about the
    costs and benefits of a particular rule were wrong and come up
    with a different calculation. What the courts do and what the
    court did in the SEC case was to say did they actually analyze
    it, did they ask the right questions, and did they have a
    reasoned response. The judges are not going to sit there and
    recalculate it. They are just going to make sure that the
    calculation was made in good faith on the best available
    information and that is all. They are playing sort of a--I hate
    to go back to Justice Roberts, Chief Justice, but they are
    playing a role of sort of traffic cop to make sure that all the
    questions are answered and all the T's are crossed and the I's
    dotted, but they are not going to sit there and recalculate it.
    They haven't got the capacity to do that. They don't have
    economists on the staff. All they can do is look at the
    reasoning, and that is what they will do and they will do it
    very, very well. There has been no harm with judicial review
    basically, and adding cost/benefit to it is only going to make
    it more understandable and more consistent.
        Mr. Lungren. Mr. DeMuth, as one of the people who is
    somewhat concerned about courts trespassing on the rights of
    the other branches, how do you answer that concern?
        Mr. DeMuth. I think that the standard rules of deference
    are appropriate. We are not asking generalist judges to become
    economists. We are asking them to review, as judges usually do,
    the work of the administrative agencies.
        If I can, if I could quote two sentences from the SEC
    decision on its proxy access rules. The D.C. Circuit was not
    doing a cost/benefit analysis of its own. It was looking at
    what the SEC had done, and this is what it said. The commission
    inconsistently and opportunistically framed the costs and
    benefits of the rule, failed adequately to quantify certain
    costs or to explain why they could not be quantified, neglected
    to support its predictive judgments, contradicted itself, and
    failed to respond to substantial problems raised by
    commentators. That is what a court does.
        Mr. Lungren. Thank you.
        Mr. Baker, one of Mr. Shapiro's lines here underscored is
    regulatory uncertainty is not an obstacle to economic growth.
    Regulatory uncertainty. That is the uncertainty imposed by you
    as a businessman by virtue of the fact you are not sure what
    the regulation is going to be. Is that a benefit to you or is
    that a problem with being able to do your business?
        Mr. Baker. It is extremely problematic especially as we
    look at expanding beyond our----
        Mr. Lungren. So uncertainty doesn't help you.
        Mr. Baker. No, no.
        Mr. Lungren. As I understand simple economics, uncertainty
    is an additional burden on someone who is involved in an
    economic decision or certainly someone trying to create a
    business or maintain a business. Don't you find that in terms
    of the way you operate?
        Mr. Baker. Well, let me give you one example, the latest
    fly ash regulation. We do not know if we are going to be able
    to get the fly ash even though the mix designs for some of our
    projects require fly ash because the fly ash distributors are
    trying to assess whether they want to transport it or not. And
    so it is impacting our ability to even bid on work. And so from
    across the board, from new equipment to processes and
    operations, the regulatory environment is critically impacting
    to our business.
        Mr. Smith. Thank you, Mr. Lungren.
        The gentleman from North Carolina, Mr. Watt, is recognized.
        Mr. Watt. Thank you, Mr. Chairman, and I thank Mr. Lungren
    actually for setting the table on two real concerns that I have
    about the legislation.
        I started on page 4 of this bill, rulemaking considerations
    under rulemaking. An agency shall make all preliminary and
    final determinations based on evidence and consider, in
    addition to other applicable considerations, the following.
    That is on page 4. And then there are one, two, three, four,
    five, six considerations, and we get all the way over to page 6
    and 7 of the bill, we are still taking into account
    considerations that are going to be taken into account. And
    then we get to this phrase, ``notwithstanding any other
    provision of law,'' they are going to take into account the
    potential cost and benefits associated with potential
    alternative rules and other responses, cumulative costs and
    benefits, and estimated impacts on jobs, economic growth,
    innovation, and economic competitiveness, means to increase the
    cost-effectiveness of any Federal response, and incentives for
    innovation, consistency, predictability, lower cost of
    enforcement and compliance to Government entities, regulated
    entities and the public and flexibility.
        And we are going to at some point tell a court that you are
    going to be the arbiter of this where now, if somebody screws
    this process up, it is Congress that really makes that final
    determination. We are putting all of that authority in a court
    under this process and protracting litigation for 3 and 4
    years. And the exact points that Mr. Lungren raised--we may
    come out on different sides of this--will lead to absolute
    uncertainty for 6 to 8 to 10 years as we litigate any rule. And
    still, the court is the final arbiter rather than Congress. I
    don't understand how this is supposed to be consistent with
    what my colleagues say they want to have happen.
        Number one, the biggest complaint I hear--and I sit on
    Financial Services. We did Dodd-Frank--is that we cannot get to
    a final rule now quick enough to relieve the regulatory
    uncertainty because we don't know what the rules are. Tell us
    what the rule is and we can then adjust and get on with our
    lives.
        So how is this going to speed up the process of getting to
    a final determination so that people like Mr. Baker can know
    what rules he is operating under and get on with his life and
    the adjustments to it? And everybody else in his industry is
    going to have to make the same adjustments to it because they
    got to live under the same rules. But now they don't have a
    clue what the rule is because we are going through all of this
    litigation, all of this economic analysis that is adding more
    employees to the Federal Government, economists, innovation
    therapists, psychologists. All of these people have got to be
    taken into account. And you are telling me this is going to
    speed up the process. I don't understand that.
        Mr. Gray, Mr. DeMuth, Mr. Shapiro, please explain that to
    me. I can't understand how this is going to speed up the
    process of getting to any rule.
        Mr. Gray. Well, let me just quickly say, Congressman, that
    if you take a look at the so-called Volcker Rule--it is in the
    media now. The agencies have come out with a rulemaking which
    is, I think, a proposal 300 pages long, 300 questions. They
    don't know what they are doing.
        Mr. Watt. And a judge is supposed to know what he is doing
    after they don't know what they are doing? Tell me how some
    Federal judge is going to make that determination.
        Mr. Gray. Well, I would just proffer that if this
    legislation were in place, a lot of these questions would have
    answers. There would be guidance for the agency to say----
        Mr. Watt. Who is going to give the answers? Some economist?
        Mr. Gray. Well, no, the agency.
        Mr. Watt. Some innovation therapist or some psychologist? I
    mean, where are we getting these answers from all of a sudden
    that is going to expedite this process?
        Mr. Shapiro, give me a shot at this. Tell me this is not
    going to prolong the regulatory process ad infinitum and
    increase the uncertainty that is out there in the economic
    workplace.
        Mr. Shapiro. It is hard to see how it would not. Mark
    Seidenfeld, who is a law professor at Florida State about 10
    years ago, counted up all the steps that are now required,
    assuming all the analytical requirements applied, and of
    course, they don't apply in every rulemaking. But if you just
    assume for a second they all applied, 10 years ago Mark found
    over 120 different steps or requirements of analysis. And then,
    as you were pointing out, this bill, of course, adds many more
    things that an agency has to consider.
        If I might, I would also like to say that Mr. DeMuth and
    Mr. Gray have told you that the standard rules of judicial
    deference are appropriate, but the difficulty is the bill
    itself changes those rules. And if a judge decides that an
    agency has not done its cost/benefit analysis according to the
    mandate or way that OIRA says it is to be done, then all rules
    of deference are off, and the judge him or herself is,
    therefore, charged with deciding if this was correctly done. So
    the bill itself gets rid of the judicial deference which has
    been so common in our system.
        Mr. Coble [presiding]. The gentleman's time has expired.
        The gentleman from Arizona is recognized for 5 minutes.
        Mr. Franks. Well, thank you, Mr. Chairman.
        I will direct this question, if I could, to you, Professor
    Shapiro. President Obama said in his Executive Order 13563,
    section 2 that our regulatory system must, quote, take into
    account benefits and costs both quantitative and qualitative.
    Now, do you disagree or agree with that?
        Mr. Shapiro. I agree with it. May I point out, though, the
    bill does not allow an agency to take into account qualitative
    costs. The bill itself restricts the calculation of benefits to
    quantitative costs.
        Mr. Franks. All right. Well, then would you disagree with
    both President Obama and Mr. Clinton's perspective that
    agencies must, quote, propose or adopt a regulation only upon a
    reasonable determination that its benefits justify its costs?
        Mr. Shapiro. Again, these are management tools used by the
    President, but to that extent, I agree.
        Mr. Franks. But not in legislation. You agree that the
    President should put it in an executive order but that it
    shouldn't be in legislation.
        Mr. Shapiro. Congress certainly could codify the current
    executive orders, but as I have tried to explain, I believe
    this legislation goes way beyond codifying the current
    executive orders.
        There are some disadvantages to codifying the executive
    orders. It is now a flexible management tool that can be
    adjusted from agency to agency, and this would apply a kind of
    one-size-fits-all rubric for all agencies.
        Mr. Franks. Well, given the nature of the executive
    orders--I am just trying to be consistent with the approach of
    those executive orders--how could it be unreasonable to require
    agencies to always consider costs and to generally achieve
    their statutory objectives using the lowest cost alternative?
    How is that unreasonable?
        Mr. Shapiro. Where I get off the train is this switch
    between using regulatory analysis as a way of thinking about
    advantages and disadvantages of a rule as you are considering
    it and using a cost/benefit standard as the decision standard
    for whether or not an agency can promulgate a regulation at
    all. And the difficulty I have with making it a decision rule
    is that the methodology itself is so imprecise that it doesn't
    end up being a very good decision rule, whatever its merits
    might be, limiting its use to mere analysis.
        Mr. Franks. Well, again, in all due deference, it sounds
    like your disagreement is much with the Administration here as
    it is with the legislation.
        But let me shift gears on you here. Do you disagree with
    President Obama that our regulatory system, quote, must be
    based on the best available science?
        Mr. Shapiro. No.
        Mr. Franks. We are making progress. So consistent with that
    approach, how can it be unreasonable to allow those affected by
    billion dollar regulations or more to at least be able to
    subject the agency's evidence to cross examination?
        Mr. Shapiro. The trouble I have--and this is supported both
    in the ABA letter to you and the letter from the administrative
    law professors--is the assumption that cross examination is
    going to be useful in the determination of scientific facts. In
    fact, the scholarly community believes that it is not useful
    for that purpose, and therefore you are adding way more
    procedural time and burdens than would be worth the benefits of
    the amount of additional information it would yield.
        Mr. Franks. Well, again, with all due deference, you know
    when people put forth a maximum, whether it is based on
    scientific perspective or otherwise, it seems like the one way
    to try to examine that is with some sort of adversarial cross
    examination. That is just my perspective as a lawyer. I think
    some people would probably agree with that. That has worked
    pretty well in our judicial system.
        But, Mr. Gray, if I could ask you, sir, just in general--
    and it is a very general question--what do you think the most
    important effect of this legislation will be in terms of
    impacting the general productivity of the Nation?
        Mr. Gray. I think it is the coverage of the independent
    agencies putting them under the same regime as executive branch
    agencies have been operating. I think that is the most
    important thing that will come out of this. The new worlds of
    finance, of high tech, of the Internet--that should be subject
    to the same rules because of the overlap with what the
    executive branch does, and so I think that would be the best
    benefit.
        Mr. Franks. Well, Mr. Chairman, I am going to yield back my
    time but just suggest to you that as someone coming from a
    business background, so oftentimes the realities that we face
    on the ground are so different than what the regulators'
    analysis really is. They just have a different idea sometimes.
    They may be very sincere. But unless we have some type of
    adversarial or some type of check and balance here, these
    agencies are unfortunately from the position of making
    regulations oftentimes completely out of balance with the
    realities on the ground. And that is one of the big challenges
    I think for productivity in the country. And so with that, I
    yield back.
        Mr. Coble. I thank the gentleman. The gentleman's time has
    expired.
        The gentlelady from California, Ms. Waters, is recognized
    for 5 minutes.
        Ms. Waters. Thank you very much, Mr. Chairman. I am very
    pleased that you are holding this hearing. This discussion
    about regulations has moved to the top of my friends' agenda on
    the opposite side of the aisle. And I am very concerned about
    whether or not H.R. 3010 would rewrite the Administrative
    Procedure Act and change the way that all United States agency
    rulemaking is conducted for the sole purpose of making it
    nearly impossible for any agency to pass any regulation. And of
    course, I believe--and I think we all believe--that it is
    extremely important for us to have regulations that will
    protect the safety and security of our citizens and our
    communities.
        Professor Shapiro, can you elaborate on the impact
    aggressive lobbying already has had on the regulatory process,
    and how would H.R. 3010 further diminish agency rulemaking?
        Mr. Shapiro. Well, under the current process, any
    interested citizen is free to file comments and to meet with
    the agency. And there have been some empirical studies actually
    about who the agency ends up meeting with, and what we have
    found from those empirical studies is business groups and
    business interests basically dominate that process. Often there
    are 5 to 10 to 20 more times comments filed by business groups
    and business groups meet with the agency on average about 8 to
    10 times more than any public interest group. And there are
    many, many hearings where there are no public interest groups
    present at all. Whole rulemakings go forward with no public
    interest representation. So I am very sympathetic to Mr.
    Baker's concern about the small business community being
    represented, but it is also the case that the American public
    often goes unrepresented right now in these proceedings.
        Ms. Waters. My colleagues on the other side of the aisle
    have spent the entire year bringing bills to the floor intended
    to repeal regulations they believe will kill jobs and impede
    investment. Can you elaborate on how regulation can actually
    create jobs? Can you also explain why regulations have not
    deterred business investment?
        Mr. Shapiro. Well, when a company like Mr. Baker's or
    anyone else is asked to pay some regulatory costs, they are
    going to spend money. They are going to spend money buying
    equipment. They are going to spend money buying whatever is
    necessary to allow them to comply with the regulation. And as a
    result of this spending, we generate economic activity. So when
    people have gone to study what the overall impact is of
    important regulations, they have found generally it is a wash,
    that the jobs created by this new regulatory spending offsets
    the loss of jobs created when Mr. Baker has to raise his prices
    somewhat and that might cut back slightly on demand.
        Of course, it is important to remember, as was pointed out,
    that everyone in an industry is subject to the same level of
    regulation. So everyone has to comply and that does make it
    easier for the industry to pass on their costs a bit, but not
    completely perhaps.
        Ms. Waters. Thank you very much. I think it is important to
    put on the record that I think Members on both sides of the
    aisle are supportive of small business, and you will hear that
    time and time again. And you will see efforts in this Congress
    and in previous Congresses to give support to small businesses.
        At the same time, I think it is important that we never
    forget that prior to regulations, we had people who lost limbs
    in the workplace. We had child labor. We had dirty water. We
    had all kinds of health and safety hazards in our society. We
    have cleaned a lot of that up, and still yet every few months
    or so, we will find that it is cantaloupes or spinach or
    something that is contaminated. We need regulation in order to
    provide safety and take care of the health concerns of our
    society. So I think that even our small business people will
    agree with that.
        And so what we need to do is move toward making sure that
    there are not unreasonable requirements on small business and
    not try and kill regulation and at the same time have
    regulation that makes good sense. This bill goes too far. It
    goes in the wrong direction. And I think it would be wise for
    us not to end up simply supporting a one-size-fits-all kind of
    a regulatory effort through this legislation and get down to
    the business of doing what makes good sense both for small
    business and for our society.
        I yield back the balance of my time.
        Mr. Coble. I thank the gentlelady from California.
        The distinguished gentleman from South Carolina is
    recognized for 5 minutes.
        Mr. Gowdy. I thank the gentleman from North Carolina.
        Professor Shapiro, I may very well have misunderstood you.
    You are not suggesting that cross examination works for
    everything except science, are you?
        Mr. Shapiro. The understanding in the administrative law
    literature is that administrative procedures may add some
    accuracy but we have to measure how much accuracy they add. And
    so when we are dealing with what we call adjudicative facts,
    who, what, when, where, or why, what color was the stoplight
    when you ran through the intersection, facts that are in
    someone's possession because they are in their head--they deal
    with perception--cross examination is very useful as is
    demeanor evidence. As we get into the interpretation of
    scientific studies----
        Mr. Gowdy. Well, let me stop you there. So in a criminal
    context, we should no longer have cross examination of DNA
    experts? What about fingerprint experts?
        Mr. Shapiro. Right.
        Mr. Gowdy. What about ballistics?
        Mr. Shapiro. In most adjudications, we are dealing with
    adjudicative facts; in most rulemakings, we are not.
        Mr. Gowdy. What about ballistics experts? Should we no
    longer have cross examination of them in a criminal context?
        Mr. Shapiro. Well, again, we need a balance here.
        Mr. Gowdy. Well, let's switch balance. Let's switch to the
    civil side. What about medical malpractice cases? Should we no
    longer have cross examination of experts in medical malpractice
    cases because biology is a science?
        Mr. Shapiro. We set the balance different because it is a
    different system.
        Mr. Gowdy. Well, it may be a different system, but your
    testimony suggested to me that you don't think cross
    examination matters in matters of science, and whether it is
    medical malpractice cases, products liability cases, or at
    least a half dozen examples in a criminal context, we use it
    every single day. It is the best tool in our arsenal for
    getting at the truth.
        Mr. Shapiro. Again, we need to achieve a balance here and
    spending days and days in a legislative hearing dealing in
    rulemaking allowing unlimited cross examination ends up, based
    on our experience, in not making us that much smarter.
        Mr. Gowdy. Well, nobody is advocating for unlimited cross
    examination. Judges can control the scope and sphere of cross
    examination. They do it every day.
        I was just struck--and again, I may have misunderstood your
    testimony. I was struck by the notion that cross examination
    works for everything other than science.
        Mr. Shapiro. The difference, as I understand it, sir, is
    that when we are dealing with objective facts--is the light
    red--it is important. We want to set the balance in getting it
    right. When we are dealing with criminal rights, we want to get
    the balance right. When we are dealing with tort, we want to
    get the balance right. We also want to get the balance right in
    science but doing that through written procedures and letting
    people file rulemaking comments we have decided is sufficient.
        Mr. Gowdy. Well, I want to get at another balance. I want
    to read a quote from you and you tell me why he is wrong. There
    are some rules and regulations that do put an unnecessary
    burden on businesses at a time when they can least afford it.
    Do you know who said that?
        Mr. Shapiro. No.
        Mr. Gowdy. President Obama.
        Mr. Shapiro. Okay.
        Mr. Gowdy. Why is he wrong? Because your theory is that
    increased regulations actually create jobs, and when he was
    laying out his jobs speech, he cited excessive regulations as
    an example of something we need to turn back so we can create
    jobs. So are you right or is the President right?
        Mr. Shapiro. What I am saying is that--I agree with the
    President--these are considerations to be taken into account,
    but I believe the existing system does that.
        Mr. Gowdy. He came up with 500 regulations that should be
    repealed or unpromulgated. How many can you come up with?
        Mr. Shapiro. Well, what we did in the look-back--and I am
    not against look-backs--is look for additional savings in the
    way we regulate. But what is interesting about the look-back is
    in none of those cases, as I am aware, did we decide the
    fundamental rule was wrong, that it was unnecessary to protect
    the American public using that particular rule. What the
    Administration did find, because some of the rules are so old
    and we have new technologies, that it would be possible to do
    it in a more cost-effective manner, for example, switching from
    paper reports to reporting on the Internet.
        Mr. Gowdy. Do you agree with the President that we should
    have no more regulations than necessary for the health, safety,
    and security of the public?
        Mr. Shapiro. Yes.
        Mr. Gowdy. So would you analyze NLRB requiring posters to
    be posted in the workplace by that same standard?
        Mr. Shapiro. I would submit it to the normal rulemaking
    process and----
        Mr. Gowdy. Health, safety----
        Mr. Shapiro [continuing]. That will develop your
    information pro and con.
        Mr. Gowdy. Health, safety, and security?
        Mr. Shapiro. I am sorry, sir?
        Mr. Gowdy. Health, safety, and security. Those three.
        Mr. Shapiro. I am sorry. I don't understand the question.
        Mr. Gowdy. All right. Well, my time is up, Mr. Chairman. I
    had one more question but the light is red.
        Mr. Coble. You may have one more question.
        Mr. Gowdy. Thank you. It may be a three-part question.
    [Laughter.]
        Would you agree with me that rules and regulations are
    sometimes evidence of negligence in a civil case?
        Mr. Shapiro. Yes.
        Mr. Gowdy. In fact, they are evidence of negligence per se
    in some civil contexts.
        Mr. Shapiro. Yes.
        Mr. Gowdy. So there was a quote from an Administration
    official that a proposed rule or regulation was going to be a
    plaintiff's attorney's dream. What do you think that
    Administration official meant by that?
        Mr. Shapiro. I don't know, sir.
        Mr. Gowdy. Thank you, Mr. Chairman.
        Mr. Coble. Thank you.
        The gentlelady from Texas is recognized for 5 minutes.
        Ms. Jackson Lee. Thank you very much, Mr. Chairman.
        Let me thank all of the witnesses for being here. I am
    going to have some very cryptic questions.
        But I do want to acknowledge Mr. Boyden Gray for his
    service to this country. We overlapped. My husband, Dr. Elwyn
    Lee, was at Wilmer, Cutler, and Pickering when you were and
    certainly your work with President Bush. We thank you again for
    your service and your service in the United States Marines.
        Let me just pose a question. I am going to follow a line of
    reasoning. I would ask Dr. Shapiro if he has the bill in front
    of him, if he would be prepared for some questions starting at
    page 4. And if he does not, if a clerk could provide him with
    the legislation. Do we have a bill that we can provide him
    with?
        Mr. Shapiro. I apologize. I do not have a copy of the bill.
        Ms. Jackson Lee. I have an extra copy. Thank you so very
    much.
        But let me just indicate--this is from the CRS, which is
    our congressional research. It is an independent research that
    is used by all parties. But this sentence says the public
    policy goals and benefits of regulations include, among other
    things, ensuring that workplaces, air travel, foods, and drugs
    are safe and that the Nation's air, water, and land are not
    polluted and that the appropriate amount of taxes is collected.
        Mr. Gray, do you adhere to that simple sentence? Did I read
    it clear enough for you, sir?
        Mr. Gray. Yes.
        Ms. Jackson Lee. Mr. DeMuth, do you adhere to that simple
    sentence?
        Mr. DeMuth. Yes.
        Ms. Jackson Lee. Mr. Baker?
        Mr. Baker. Yes, ma'am.
        Ms. Jackson Lee. All right. I would like to read a sentence
    from the American Bar Association. I ask unanimous consent to
    submit this letter into the record that was sent October 24 to
    Mr. Lamar Smith and Mr. John Conyers. I am not sure if it is in
    the record, but I want to have it in the record.
        The sentence says, as they have indicated their support for
    this ambitious proposal, at the same time, certain provisions
    would harm the administrative process in unjustifiable ways. In
    particular, many of the new steps the bill would require for
    rulemaking, though wholly appropriate in some rulemakings,
    would, if imposed automatically and across the board, further
    ossify the rulemaking process with little offsetting benefits
    in the form of better rules. I would like this letter to be put
    into the record.
        Mr. Coble. Without objection.
        [The information referred to follows:]

                                   __________

        Ms. Jackson Lee. Thank you.
        To the gentlemen quickly, do you accept this legislation,
    H.R. 3010, without amendment? Mr. Gray?
        Mr. Gray. Yes, ma'am.
        Ms. Jackson Lee. Mr. DeMuth?
        Mr. DeMuth. Yes, ma'am.
        Ms. Jackson Lee. Mr. Baker?
        Mr. Baker. I have not had a chance to fully review all
    aspects, but I will certainly get back to you.
        Ms. Jackson Lee. Thank you, Mr. Baker. I appreciate that
    comment.
        And let me just say that I truly believe your concern
    should be addressed, and I am a strong supporter making sure
    that you hire people, that your doors stay open, and that you
    grow to be even a bigger business. I have no quarrel with you
    and I understand how regulations need to be overseen.
        So let me go to Mr. Shapiro. Do you have page 4, Mr.
    Shapiro?
        Mr. Shapiro. Yes, ma'am.
        Ms. Jackson Lee. All right. And I want to make note of the
    fact that section 3 in this bill, Rulemaking, goes from page 4,
    page 5, page 6, and finishes on page 7. And the headline of
    this one is ``Rulemaking.'' So I assume what this means, Mr.
    Shapiro, is this is what has to be taken into account in
    regulatory agencies in order to get a rule in place. Is that
    correct?
        Mr. Shapiro. Yes.
        Ms. Jackson Lee. All right. Before I question you, let me
    also submit into the record an article entitled ``CDC:
    Cantaloupe Listeria Outbreak Deadliest in a Decade.'' This was
    dated September 28, 2011 by Christina Caron. I ask unanimous
    consent for this article to be put in the record.
        Mr. Coble. Without objection.
        [The information referred to follows:]

                                   __________

        Ms. Jackson Lee. I don't know if this number is accurate. I
    thought the number had gone up to 28, but it says in this
    article so far 13 people have died, 72 people have been
    infected in 18 States.
        Mr. Shapiro, this cantaloupe outbreak from your
    understanding or at least you know that there are regulations
    that deal with food. Is that correct?
        Mr. Shapiro. Yes.
        Ms. Jackson Lee. And the cantaloupe is a food product.
        Mr. Shapiro. Yes.
        Ms. Jackson Lee. And we have seen the most deadliest
    outbreak that we have seen in life.
        Let us go to section 3 and B, subsection 3. I can barely
    understand it. The ABA has indicated there are some major
    problems with this legislation. I assume that you do not take
    this legislation on face value, meaning that you don't believe
    it should be passed immediately as it is written.
        Mr. Shapiro. That is correct.
        Ms. Jackson Lee. And do you read and see what I see in
    section 3 that says the specific nature and significance of the
    problem the agency may address with a rule, then in paren,
    including the degree and nature of risks the problem poses and
    the priority of addressing those risks compared to other
    matters or activities within the agency's jurisdiction?
    Professor Shapiro, do you see a group of people sitting in a
    room coming to this parenthesis and attempting to say what is
    going on in the third floor or the fourth floor in terms of
    what the agency's priorities on that task that they were given?
        Mr. Chairman, I would like for Mr. Shapiro to be able to
    answer how much of an obstruction just this provision would be
    alone in the contemplative, thoughtful thinking and writing of
    regulations that might save lives and avoid the deaths that we
    had in listeria. Could you respond to just that provision
    alone?
        Mr. Shapiro. Well, I appreciate the intent to tell agencies
    that they need to think clearly about their regulations before
    they are enacted. It is really hard to argue with that
    sentiment. But what we have done over the years is try to help
    them along by having a list of things they have to take into
    account. And as I said earlier, that list now has gotten very
    long and probably already involves 130-140 different things
    they are supposed to at least look at and see whether or not
    they are impacted by the bill. And then as you have pointed
    out, this bill alone would add numerous other very detailed,
    think-before-you-leap requirements.
        Ms. Jackson Lee. Mr. Chairman, could I just get a quick
    follow-up question? May I have a quick follow-up question to
    Professor Shapiro please?
        Mr. Coble. Very briefly. Your time has expired, but go
    ahead with one more question.
        Ms. Jackson Lee. All right. Mr. Shapiro, I do want to focus
    you more clearly on section 3. I appreciate the broad answer,
    but you listed that we have many other reviews that an agency
    does. In the paren, they are asking them to stop and say do I
    want do this over other priorities. And agency has many
    different subsets, and I would imagine that they have many
    different groups dealing with their priorities. And so you add
    to rulemaking a question of whether or not I have to address
    whether I need to deal with cantaloupes and food security or
    food regulation juxtaposed against worrying about--not worrying
    about but maybe talking about apple regulation. The point I am
    making is----
        Mr. Issa. Mr. Chairman, is there a question?
        Ms. Jackson Lee. Yes, there is. Is this not a redundancy
    and an act that is already taking place?
        Mr. Shapiro. As I said in my opening statement, it is
    important to balance----
        Mr. Coble. Professor Shapiro, our time has expired. If you
    could be very brief.
        Mr. Shapiro. Sure. I was just saying it is important to
    have a balance here, and I think you can always add procedures
    in an attempt to be more accurate, but at the end of the day,
    it is also important to protect the American people.
        Mr. Coble. The time of the gentlelady has expired.y
        The distinguished gentleman from California, Mr. Issa, is
    recognized for 5 minutes.
        Mr. Issa. Thank you, Mr. Chairman. As we both know,
    ``distinguished'' around here generally means old. And since I
    see our panel is plus or minus a few years, some of you my age,
    let me go through a line of questions that follows up the
    gentlelady from Texas.
        There is a point that this legislation piles on to lots of
    other legislation, each intended to stop legislation by
    rulemaking from, if you will, jamming up people like Mr. Baker.
    Mr. Baker, you are a few years younger than me and you only
    started your business in 2003, but it wasn't your first time on
    the merry-go-round. In 1990, were you also in a similar
    business?
        Mr. Baker. No. In 1990, I was redeveloping malls.
        Mr. Issa. So at that time you were watching cement
    operations. You were watching construction and so on?
        Mr. Baker. Correct.
        Mr. Issa. Would it surprise you that there are more than
    twice as many regulations that people building shopping malls
    today have to abide by as there were in 1990, some 20 years
    ago?
        Mr. Baker. It would not. I am not surprised by that. As I
    was researching, I found 4,000 new rules on industry just this
    year alone, which is what in the small business community we
    are becoming more and more reliant on trade industries because
    we just can't follow them.
        Mr. Issa. So there are so many new laws that Congress has
    nothing directly to do with that you have to hire, if you will,
    teams of people through trade associations just to keep up with
    the ever-new regulations.
        So in your opinion, would you say it is way too easy to
    pass regulations after all of what Mr. Shapiro called these
    layers of delay?
        Mr. Baker. Well, I probably wouldn't use the word ``easy,''
    but I would say it is not----
        Mr. Issa. I mean, it is not easy on you once they pass
    them.
        Mr. Baker. I would state that there are many examples of
    where litigation could have been avoided had there been more
    input on the front end, where conflicting regulations could
    have been made more effective had there been more input on the
    front end. And so that is really my objective for being here
    today is to----
        Mr. Issa. And we appreciate a real live American job
    creator being here. We don't see enough of you.
        Professor Shapiro, I am going to consider you an expert on
    regulations, but how are you on shopping malls? Have you been
    to some?
        Mr. Shapiro. I try not to, but yes, I have been to some.
        Mr. Issa. So would be afraid to go to a shopping mall that
    was created in 1990?
        Mr. Shapiro. No.
        Mr. Issa. So would you be afraid to have a piece of
    cantaloupe if the regulations around cantaloupe production were
    1990 regulations?
        Mr. Shapiro. The food safety system is something we have
    been unable to get up to adequate protection levels on.
        Mr. Issa. So, in other words, when the gentlelady from
    Texas talked about cantaloupe and the worst in a decade, we
    have piled on hundreds or thousands of new regulations but we
    haven't made food safer. Isn't that true?
        Mr. Shapiro. The numbers for total number of regulations
    are a little misleading in the following sense, that many of
    these are technical amendments----
        Mr. Issa. Wait a second. When every single pesticide and
    every single chemical used in agriculture is required to go
    through--even if it has been on the market for decades,
    required to go through an all new, ground-up evaluation by this
    Administration, you are going to say it is small and technical?
    Is it small and technical? Is that what you call small and
    technical if you are a farmer and you find out that nothing you
    have used for decades in some cases can be used without a huge
    price increase because it is going through a set of evaluations
    even though it has been used for decades?
        Mr. Shapiro. These are things of great concern to business,
    but they are also of great concern to consumers and we have to
    get an appropriate balance.
        Mr. Issa. Mr. Gray, you like me have been around a couple
    of days and you have been around in Washington a couple days
    longer than I have. Is this really just Washington talk, that
    we think we make everything safer by piling on regulations? And
    aren't we here today looking at a way to slow down the ease
    with which unelected, unappointed career people often are able
    to create laws without a cost-effective analysis, without a
    question of dire need, but rather 4,000 new laws a year in the
    name of regulations? Isn't that really just Washington talk for
    let's go ahead, it is easy for us to do, and it makes us seem
    important?
        Mr. Gray. Oh, gosh. I think the regulatory process, the
    administrative process does provide a lot of public goods and I
    think if you look past back to--I mean, maybe when I first went
    into the Government, you know, what President Reagan did didn't
    stop one of the greatest booms in American history. But I think
    we are at a stage now where things have gotten out of hand
    again.
        Mr. Issa. And as a follow-up, would you say Boiler MACT is
    an example of that where even the EPA knows that their standard
    isn't ready and yet they can't seem to figure out how to stop
    something they did without a real cost/benefit analysis?
        Mr. Gray. One of my problems with the Boiler MACT case is
    that for what it is supposed to do, which is to deal with air
    toxics, EPA provides no benefit analysis at all. The benefits
    that they claim to the rule are all from different regimes
    within EPA which are being handled under separate--so I have a
    problem. I wish EPA would calculate the actual benefits of what
    the rule is aimed at, but they don't do it and the statute
    doesn't require it. This statute would, and I think we would
    all be better off if that happened.
        Mr. Issa. Thank you.
        And Mr. Chairman, I would only note that I would never say
    that some bill is perfect, but this bill is absolutely needed,
    and I appreciate the Chairman of the full Committee bringing it
    to us and yield back.
        Mr. Coble. I thank the gentleman. The gentleman's time has
    expired.
        The distinguished gentleman from Georgia is recognized for
    5 minutes.
        Mr. Johnson. Thank you, Mr. Chairman.
        Mr. C. Boyden Gray, you are a former official of the George
    Herbert Walker Bush administration. Correct?
        Mr. Gray. Yes.
        Mr. Johnson. And Mr. DeMuth, you are a former high-level
    Reagan administration appointee. Is that correct?
        Mr. DeMuth. I was in the Administration. Whether the level
    was high or not, I----
        Mr. Johnson. Well, as former administrator of the Office of
    Information and Regulatory Affairs of the Office of Management
    and Budget, it is a pretty highly responsible position,
    wouldn't you admit?
        Mr. DeMuth. Yes, sir.
        Mr. Johnson. And Mr. Baker, with the Black Chamber of
    Commerce, that is an organization that takes subsidies from the
    U.S. Chamber of Commerce, isn't it?
        Mr. Baker. I'm not aware of any firsthand.
        Mr. Johnson. You wouldn't be surprised, though, with the
    close working relationship that the Black Chamber of Commerce,
    the National Black Chamber of Commerce, has with the U.S.
    Chamber of Commerce.
        Mr. Baker. That and the U.S. Hispanic Chamber of Commerce
    and many other organizations. Yes, we do try to collaborate.
        Mr. Johnson. Well, let me say this now. And right now, Mr.
    DeMuth, you are a high-level official with the American
    Enterprise Institute.
        Mr. DeMuth. I am a fellow at the institute.
        Mr. Johnson. Now, the institute is what is known as a
    conservative or neo-conservative think tank. Correct?
        Mr. DeMuth. It is a think tank, a public policy research
    institute.
        Mr. Johnson. Of conservative and neo-conservative leanings,
    if you will.
        Mr. DeMuth. Leanings, yes.
        Mr. Johnson. Yes. I mean, Dick Cheney is on your board.
    Right?
        Mr. DeMuth. Yes, sir.
        Mr. Johnson. And a number of others. In fact, your board--
    you used to have Mr. David Frum as one of your resident
    fellows. Correct?
        Mr. DeMuth. Yes.
        Mr. Johnson. And Mr. Frum was terminated from the
    organization back in 2010 after he wrote an editorial entitled
    ``Waterloo'' in which he criticized the Republican Party's
    unwillingness to bargain with Democrats on the health care
    legislation. Is that correct? He was terminated for writing
    that editorial.
        Mr. DeMuth. No, sir.
        Mr. Johnson. That is not correct? But he was terminated,
    though.
        Mr. DeMuth. I don't even know if that is the case. I know
    that he left the institute.
        Mr. Johnson. And I think that is the same gentleman who I
    saw an article from a couple of days ago that wondered whether
    or not Paul Krugman, the hated liberal progressive economist--
    whether or not he in fact is correct with all of his analysis
    of our current economic state. Were you aware of that?
        Mr. DeMuth. No, sir.
        Mr. Johnson. So this is a guy who was a neo-conservative
    who has now seen the light, but he was dismissed from your
    organization. But your organization is--this American
    Enterprise Institute is funded by corporations and financial
    services industry Wall Streeters. Correct?
        Mr. DeMuth. Does it receive any contributions from
    businesses and people from Wall Street?
        Mr. Johnson. Yes.
        Mr. DeMuth. Or is it funded by? Those are very different
    questions, sir.
        Mr. Johnson. It is funded by, receives contributions from.
    Isn't that a fact? Both?
        Mr. DeMuth. It receives donations from businesses,
    including businesses that are located on Wall Street.
        Mr. Johnson. Now, climate change you all have made opinions
    about. You all have given opinions. Some of your high-level
    officials have intimated that they are not convinced of this
    global warming being a manmade--or at least manmade actions
    contributing to global warming. You all don't believe that, do
    you?
        Mr. DeMuth. I am sorry, sir. The question is do I believe
    that?
        Mr. Johnson. You don't believe in climate change--your
    organization.
        Mr. DeMuth. Excuse me, sir. The organization does not take
    positions such as that. On that and several issues, you would
    find people of varying opinions, just like in the United States
    Congress. On the question you posed, some people would agree,
    some people would disagree.
        Mr. Johnson. Have you all ever studied the influence of the
    political process--excuse me--the influence of corporations on
    the political process after the Citizens United Supreme Court
    ruling? And I will note that you have a close connection to The
    Federalist Society also.
        Mr. DeMuth. It is a big organization. I do not know of any
    research that we have done on that subject.
        Mr. Johnson. Well, it is no coincidence that we would be
    sitting here today talking about a piece of legislation that
    would forever paralyze the rulemaking process by the
    administrative agencies that are in charge of our environmental
    protection, workplace safety, consumer products safety, and the
    financial services industry misconduct. It is no coincidence
    that we would be seated here today in the midst of a economic
    downturn, if you will, a troubled economy where jobs is the
    issue, and the only thing that the Republicans want to do is
    cut regulations and cut taxes. So we are talking about a
    situation that I am certainly not surprised at.
        Mr. Coble. The gentleman's time has expired.
        Mr. Johnson. Thank you.
        Mr. Coble. The distinguished gentleman from Texas is
    recognized for 5 minutes.
        Mr. Gohmert. When you say ``distinguished gentleman,'' were
    you talking about me, Mr. Chairman?
        Mr. Coble. I was indeed.
        Mr. Gohmert. Oh, okay. I wasn't sure.
        Mr. Shapiro, you referenced potential delay of 10 years, if
    I understood correctly, if this bill were passed, in the length
    of time it would take to promulgate regulations and make them
    effective. Is that right?
        Mr. Shapiro. The current system is particularly ossified,
    so it now takes 4 to 6 years to get a regulation done. And my
    best estimate is if all these procedures would apply, that
    would lengthen the process another 2 to 4 years.
        Mr. Gohmert. Thank you.
        And you say the current system takes 4 to 6 years. So I
    note that the regulations the EPA has come up with in the last
    2 and a half years that they have announced this year that will
    take effect January 1st, I will be sure and let the President
    know those can't take effect for another 4 to 6 years. And the
    people in Texas will be glad to know our plants don't have to
    shut down on January 1st.
        Mr. Gray, you had referenced earlier ways to game the
    system, if I understood correctly. Isn't that correct?
        Mr. Gray. Yes.
        Mr. Gohmert. And I was wondering since you mentioned that,
    if you had something specific in mind as the way the system is
    being gamed or can be.
        Mr. Gray. Well, I think--just take an example from EPA
    which affects your State. I should perhaps know more about
    this, but what EPA is doing when they include your State in one
    of these rules of cross-state, interstate rule, they are trying
    to reduce NOx emissions in two counties, one in Illinois, one
    in Michigan. And what EPA neglects to do when it does that is
    to take into account--and it should. This bill hopefully would
    make it do this--the fact that when you reduce NOx--it is very
    counter-intuitive--you actually increase pollution. So what EPA
    is doing by including your State in this rule is actually to
    increase pollution where they say they are trying to reduce it,
    which is in Michigan and Illinois and the Great Lakes.
        So is that a gaming? Well, yes, I think it is a gaming. And
    I think this legislation would, I think, correct that. It would
    have the impact of forcing EPA to acknowledge when you do costs
    and benefits, that the benefits have to include negative
    benefits, which is what they are going to cause not only you
    but downwind States of Michigan and Illinois.
        Mr. Gohmert. Well, but I think you would have to admit,
    though, there are some positives about the new EPA regulations
    that will cause many Texas power plants to shut down the first
    of next year. Thousands of people that are working with the
    lignite in other parts of the industry will be out of work. The
    positives that I see coming from that will be to someone who is
    running for reelection and is sick and tired of people pointing
    to Texas and saying look at all the jobs they have created and
    all the good things that are going on. It will be a real
    positive for that person to be able to say, look, they got
    plants closing down. They got thousands of people out of work.
    You know, it is not the great State people have said it was. So
    I think there are some positives particularly if you are
    running for reelection as President that you don't want to
    miss.
        And in fact, when we talk about--you brought up this gaming
    the system. Some people say they are not sure if anybody but me
    and Congress, the House or Senate, has read the President's
    entire jobs bill. I really don't believe--I really don't
    believe, based on the things the President said, he has read
    his own bill.
        I also know from the fact that the President's bill was
    filed with a Senate number instead of stripping a House number
    when it was known his jobs bill raises revenue, that it
    couldn't be passed like that. It could never become law like
    that. They have to strip out a House bill so that it originated
    in the House under Article I, section 7 that by Harry Reid
    doing that, he knew this will never become law. It was gaming
    the system here in Congress.
        And now this week we have the President out there saying
    since Congress won't pass my jobs bill, then he is going to
    have to take regulatory action to get things done. He is going
    to have to do executive orders and take action himself to get
    around Congress. That appears to be gaming the system to me.
        One of the reasons I support this legislation is that I
    know enough about our history to know that the Founders wanted
    it to be difficult to pass laws, and when regulators can pass
    them in a system that takes 4 to 6 years, as we have heard, to
    get done and they can get it done within 9 months in a system
    designed to take 4 to 6 years, then we have got some work to
    do.
        And I appreciate all of your being here. I know it is
    inconvenient. I know the pay is not all that good to come
    testify. That is sarcasm because you don't get paid. I know.
    But anyway, thank you for coming and for your input.
        Mr. Coble. The time of the distinguished gentleman from
    Texas has expired.
        Gentlemen, thank you all for being here.
        This concludes our hearing, but the distinguished gentleman
    from Virginia has asked permission to ask a very brief question
    and it is granted.
        Mr. Scott. Yes. Thank you, Mr. Chairman.
        Mr. Shapiro, if a judge determines that a better rule could
    have been promulgated, is he subjected to a standard that the
    promulgator the new rule is not unreasonable by clear and
    convincing evidence or preponderance of the evidence? What
    standard is he to make that determination by?
        And then if in the final analysis a better rule could have
    been promulgated, what happens next? Does he throw out the new
    rule? Can he oppose the new rule, or do you have start from
    scratch? What happens?
        Mr. Shapiro. The bill changes the rules of deference for
    the judiciary in certain instances, and it would make it more
    likely that a Federal judge who, after all, is unaccountable
    because she or he has lifetime tenure, could decide that the
    agency's job was inadequate and would remand it back to the
    agency. So it would just add years of delay, assuming it ever
    got reenacted.
        Mr. Scott. What is the standard? In administrative law, if
    a law is not unreasonable, it will stand. But is that the
    standard that the judge is held by, or is it he has to show by
    clear and convincing evidence that the rule is wrong?
        Mr. Shapiro. Right now----
        Mr. Scott. And can he impose the new rule?
        Mr. Shapiro. No. The judge can't impose a new rule under
    standard administrative law practice. The agency can only do
    that.
        Right now, the question that a judge asks is whether or not
    the agency's decision is either arbitrary or capricious or in
    certain instances lacks substantial evidence. But the important
    point, in reaching that decision, the courts have ruled that
    the agency, in order to justify a rule as being reasonable, has
    to respond to each and every comment in the rulemaking record.
    So when business interests and others file a comment saying you
    have miscalculated the costs, the costs are too high, there
    should be a different rule, you didn't understand this, the
    agency must reply to each and every one of those objections.
    And the judge must determine whether or not the agency's reply
    to those specific objections is a reasonable one.
        Mr. Coble. The distinguished gentleman's time has expired.
        Gentlemen, thank you again. We are appreciative to you all
    for your contribution today.
        Without objection, all Members will have 5 legislative days
    to submit additional written questions for the witnesses or
    additional materials.
        This hearing is adjourned.
        [Whereupon, at 12:36 p.m., the Committee was adjourned.]

                                A P P E N D I X

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                   Material Submitted for the Hearing Record