[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.]




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