[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
REGULATORY FREEZE FOR JOBS ACT OF 2012
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, COMMERCIAL
AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
ON
H.R. 4078
__________
FEBRUARY 27, 2012
__________
Serial No. 112-90
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
----------
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Washington, DC 20402-0001
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 JARED POLIS, Colorado
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
------
Subcommittee on Courts, Commercial and Administrative Law
HOWARD COBLE, North Carolina, Chairman
TREY GOWDY, South Carolina, Vice-Chairman
ELTON GALLEGLY, California STEVE COHEN, Tennessee
TRENT FRANKS, Arizona HENRY C. ``HANK'' JOHNSON, Jr.,
DENNIS ROSS, Florida Georgia
BEN QUAYLE, Arizona MELVIN L. WATT, North Carolina
JARED POLIS, Colorado
Daniel Flores, Chief Counsel
James Park, Minority Counsel
C O N T E N T S
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FEBRUARY 27, 2012
Page
THE BILL
H.R. 4078, the ``Regulatory Freeze for Jobs Act of 2012''........ 3
OPENING STATEMENTS
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Chairman, Subcommittee on Courts,
Commercial and Administrative Law.............................. 1
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, and Ranking Member, Committee on
the Judiciary.................................................. 9
The Honorable Steve Cohen, a Representative in Congress from the
State of Tennessee, and Ranking Member, Subcommittee on Courts,
Commercial and Administrative Law.............................. 10
WITNESSES
Allan H. Meltzer, Carnegie Mellon University and Hoover
Institution
Oral Testimony................................................. 12
Prepared Statement............................................. 15
John B. Taylor, Stanford University and Hoover Institution
Oral Testimony................................................. 20
Prepared Statement............................................. 22
Robert Weissman, President, Public Citizen
Oral Testimony................................................. 27
Prepared Statement............................................. 29
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Letter from the Chamber of Commerce of the United States of
America, submitted by the Honorable Howard Coble, a
Representative in Congress from the State of North Carolina,
and Chairman, Subcommittee on Courts, Commercial and
Administrative Law............................................. 52
APPENDIX
Material Submitted for the Hearing Record
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, and
Ranking Member, Committee on the Judiciary..................... 55
Prepared Statement of the Honorable Steve Cohen, a Representative
in Congress from the State of Tennessee, and Ranking Member,
Subcommittee on Courts, Commercial and Administrative Law...... 57
Letter from the Coalition for Sensible Safeguards................ 59
Response to Post-Hearing Questions from Robert Weissman,
President, Public Citizen...................................... 61
Material submitted by the Honorable Steve Cohen, a Representative
in Congress from the State of Tennessee, and Ranking Member,
Subcommittee on Courts, Commercial and Administrative Law...... 64
REGULATORY FREEZE FOR JOBS ACT OF 2012
----------
MONDAY, FEBRUARY 27, 2012
House of Representatives,
Subcommittee on Courts,
Commercial and Administrative Law,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to call, at 4 p.m., in room
2141, Rayburn House Office Building, the Honorable Howard Coble
(Chairman of the Subcommittee) presiding.
Present: Representatives Coble, Cohen, Conyers, and
Johnson.
Staff Present: (Majority) John Hilton, Counsel; John Mautz,
Counsel; Ashley Lewis, Clerk; (Minority) James Park,
Subcommittee Chief Counsel; and Rosalind Jackson, Professional
Staff Member.
Mr. Coble. Good afternoon. We will come to order. I have my
opening statement, I recognize the gentleman from Michigan, and
Mr. Cohen is on his way here, I am told. It has been said that
there are three types of lies; lies, damn lies, and statistics.
All three species abound in Washington--perhaps they abound
everywhere. Last month, the Department of Labor reported the
national unemployment rate as 8.3 percent. It is certainly
better than 10 percent unemployment Labor reported in October,
but a far cry from where we would like for it to be. And by the
way, folks, you all pardon my raspy voice. I am trying to come
down with my annual winter cold, so I will make it as
inoffensive as possible.
In reality, many millions of able-bodied Americans are
still out of work, as bills pile up and hopes dwindle, the only
statistic that matters to them and their families is that they
are unemployed. We who voted against President Obama's so-
called stimulus plan know that Washington really cannot create
jobs, and the Federal Government certainly can destroy jobs.
But what I found out is that people just will oftentimes just
want Washington to get out of the way. A recent Gallup poll,
for example, found out that almost half of small business
owners who aren't hiring, are not looking for new employees
because they are worried about new government regulations, and
no wonder.
With ObamaCare and Dodd-Frank on top of everything else,
the red tape has been flying fast and furious lately in
Washington. While the Bush administration issued an average of
63 major regulations every year, the Obama administration has
issued an average of 88 regulations annually. The number of
economically significant regulations also has increased. Under
President Bush, the Office of Information and Regulatory
Affairs, reported reviewing an average of 77 economically
significant regulations biannually. OIRA's biannual average
under President Obama, however, is 125.
The Heritage Foundation, conservatively estimates that
President Bush added approximately 60 billion in annual
regulatory costs over 80 years, but that in his first 26 months
alone, President Obama added another 40 billion in annual
regulatory costs. To give job creators some breathing room, Mr.
Griffin, in his bill, has introduced the Regulatory Freeze for
Jobs Act of 2012. Chairman Smith and I, along with several on
the Subcommittee, and the full Committee, are original
cosponsors of the Freeze Act, which would put a moratorium on
new significant regs until the national unemployment rate
stabilizes at or below 6 percent.
The Freeze Act uses concepts and definitions that are well
established in administrative law. For example, it defines
significant regulatory action consistent with President
Clinton's long-standing executive order, 12866, but with one
important difference or exception: The bill only freezes
economically significant regulations that would cost the
economy $100 million or more, while executive order 12866
speaks to effects on the economy of 100 million or more. If the
President's common sense and the law of economics
notwithstanding create jobs through regulation, then the Freeze
Act won't stop them from doing so; nor would the Freeze Act
permit the President from making necessary regulations such as
for national security and public safety and health.
What the Freeze Act will do is to give job creators a
respite from unnecessary regulations until the unemployment
rate gets back down to 6 percent, which we haven't seen in 3\1/
2\ years, since the lame-duck days of the last Administration.
The regulatory agency should lay off the red tape.
In closing, I want to thank Mr. Griffin for sponsoring this
important bill. The Freeze Act would give the economy a much
needed boost and it deserve the Subcommittee's attention. I
look forward to the witness' testimony, and reserve the balance
of my time.
[The bill, H.R. 4078, follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Coble. It is good to see the gentleman, my good friend
from the banks of the Mississippi, Steve Cohen, Ranking Member.
Mr. Cohen. Thank you, and it is good to be seen and I would
like to yield my time at first, if I can, to the distinguished
Chairman from the State of Michigan, Mr. Conyers.
Mr. Conyers. Thank you very much.
Mr. Coble. Mr. Conyers, are you headed for the floor as
well?
Mr. Conyers. I was, but they tell me that our measure isn't
coming up today.
Mr. Coble. Okay.
Mr. Conyers. But I would like to go in front of the Ranking
Subcommittee Member anyway.
Mr. Coble. All right, very well.
Mr. Conyers. Thank you very much. We welcome our
distinguished guests here from the Hoover Institute, well, both
from the Hoover Institute. This is the ninth hearing on the
subject so-called regulatory reform, and nearly all of these
hearings there is always some discussion about how regulations
depress job creation. And I am going to defer to the head of
public citizens to help us examine that, but I invite our two
other distinguished witnesses to join in in this evaluation.
What the measure does is attempt to link regulations with
employment by preventing agencies from engaging in regulatory
actions if the average monthly unemployment rate exceeds 6
percent in any quarter.
This is legislatively unwise because the measure fails to
acknowledge the fact that regulations play a critical role in
ensuring the health and safety of Americans as well as through
the economic well-being of our Nation. So what we would do is
prevent agencies under this proposal from fulfilling the job
that we in Congress entrusted them to do; namely, to ensure the
safety of the foods we eat, the cars we drive, and the places
where we work.
Cass Sunstein who heads the agency charged with reviewing
Federal regulations recently said this: A moratorium would not
be a scalpel or a machete, it would be more like a nuclear bomb
in the sense that it would prevent regulations that cost very
little, and have very significant economic or public health
benefits.
And so I think unwittingly, the sponsors of this measure
could not possibly be intending to deliberately jeopardize the
health and safety of Americans in order to pursue their anti-
regulatory political agenda, but I am afraid that that is
exactly what would be the effect were this measure taken
seriously and enacted into law.
Finally, there isn't any credible evidence that regulations
have any substantive impact on job creation. Last year, one of
the conservatives' own witness testified before this
Subcommittee that ``the focus on jobs can lead to confusion and
regulatory debates.'' And that, quoting again, ``the employment
effects of regulation while important, are indeterminate.''
And so I approach this hearing with the hope that we will
recognize that our statements are going into the record as a
permanent part of the Judiciary Committee's responsibility, and
I urge you to be as careful as you can in giving us your well
thought out observations and convictions from the Hoover
Institution. And with that, Mr. Chairman, I yield back the
balance of my time, and thank you.
Mr. Coble. Thank you, gentleman from Michigan.
I am now pleased to recognize the Ranking Member of the
Subcommittee, the distinguished gentleman from Tennessee, Mr.
Cohen.
Mr. Cohen. Thank you, Mr. Coble. This bill, the Regulatory
Freeze for the Jobs Act is an instrument that creates a
mistaken cure for a problem that doesn't exist. There is no
ascertainable link between regulations and unemployment. There
is anecdotal evidence, there is political jargon, but there is
no empirical proof data that regulations affect unemployment,
and to not have regulations until unemployment hits 6 percent
is absolutely nonsensical. There is no reason for that. And the
bill, even if it gives exemptions for the President to do
certain things, gives judicial review over that process and it
takes away from the Administration, and what the Constitution
gives the executive otherwise.
It also awards attorney's fees and costs to small
businesses whenever an agency changes its position regarding a
significant regulatory action, the subject of a lawsuit,
independent of whether or not the change was because of filing
the lawsuit; ipso facto, no correlation. It is premised on
false assertions that regulations undermine job creation. And
as I said, there is no evidence; all of it is anecdotal.
One of the majority's own witnesses from a hearing last
year testified that, at most, the effect of regulations on
employment was indeterminate. Based on a review of their
written statements, the two witnesses also did not offer
evidence of an actual link, but an unemployment and regulation.
They hang their arguments on unsupported notions that the
creation of new rules creates uncertainty that causes
businesses to hesitate in hiring. Yet surveys of business and
economists show regulations have little to do with lack of
hiring. It is basically the lack of demand, the destruction of
the middle class, which has been done over and over through
laws and policies, advocated by the majority of this House of
Representatives. But it has hurt us, by being more austere
rather than more robust in our economic policy, we have set the
middle class back. And that has been a serious flaw.
The Wall Street Journal surveyed business economists last
summer and found the main reason U.S. Companies are reluctant
to step up is scant demand, not uncertainty. National
Federation of Independent Business, 45 percent said, dampening
business confidence is why they are not getting sales. Only 10
percent cited regulations. Proponents of this particular
provision and other anti-regulatory measures forget that our
unemployment problems can be traced right back to lack of
regulation in the financial services industries, and the
housing industry. And in this failure created the 2008 great
recession, also known as the Bush recession.
There are far greater economic costs to stopping agencies
from regulating, than there is allowing new regulations to take
effect. It raises many questions this particular bill, when
does the 6 percent go into effect if it drops? But it is not
worth going into all of those things because this bill is so
bad on its face that going into the particulars of what would
and if happen on such a poor-drawn bill is not worthy of the
time of this Committee.
There are issues that should be addressed as far as
regulations. In my home city there is a regulation that says
that you can't get your car inspected if you have a light that
goes on that says that your engine needs to be checked. That
may or may not relate to emissions. There should be a better
way to test emissions than a light that your manufacturer puts
on that basically says, do not pass the driver's license
station; go directly to your mechanic, and put your hands up,
and surrender. That is a regulation that could stop and I am
going to work on that.
There are regulations in my city concerning football
stadiums, the number of seats that you have to have for people
with disabilities. I may be one of those people that needs one
of those seats with a disability sometime in the future, but
right now, we don't have enough people to attend the games to
merit the number of seats that they are requiring us to have,
which could cost us a prohibitive amount of money, and maybe
hamper the improved stadium that could get us an approved team
and get some people with disabilities the interest to go into
the games. The reality is, our team has been atrocious, and the
average is about 8,000 people a game, and the people with
disabilities have got better things to do because only 13 of
them show up at an average game. But because of regulations,
the Department of Justice wants us to create 250 seats and
create all of these stands for the nonexistent fans that come
and watch a terrible team that has many disabilities, which we
hope will be cured with our new coach.
Nevertheless, there are changes that can be made to some
regulations. In EPA, it cost a lot of people a lot of money to
get their light fixed who can't afford it, and that is
something where there should be a waiver. In the football
stadium, that makes no sense. For some reason, the University
of Michigan got whatever they wanted. They had to have the same
number of seats for people with disabilities as the University
of Memphis has. Yet there is no comparison. One place averages
120,000 people; one averages 8,000. We have the same number of
seats for the stadiums.
Well, I don't know, who went to Michigan? I don't know.
Maybe somebody went to Michigan who cares about Michigan, but
that is wrong. Regardless, I thank the gentleman for his
opportunity, and he knows because East Carolina, his alma
mater, also makes our team look awful and destroys us on the
football field. I yield back the balance of my time.
Mr. Coble. I didn't realize that you all were that inept.
Steve, I will not provide you with that.
Mr. Cohen. Obviously, you have not watched us play enough.
Mr. Coble. Thank you, Steve, I appreciate that. Gentlemen,
it is good to have you all with us. Professor Meltzer, is a
distinguished visiting fellow at the Hoover Institute and
professor of political economy at the Temple School of Business
at Carnegie Mellon University. Professor Meltzer has served as
a consultant on economic policy for Congress, U.S. Treasury,
the Federal Reserve, the World Bank, and foreign governments,
and chaired as well the International Financial Institution
Advisory Commission.
Professor Meltzer's writings have appeared in numerous
journals. He is the author of numerous papers on economic
theory and policy and of several books, including the newly
released, Why Capitalism? Professor Meltzer earned his AB and
MA from Duke University, and his Ph.D. From UCLA. Thank you,
Professor, for coming to testify before the Subcommittee today.
Professor Taylor, John B. Taylor, is a George P. Shultz
Senior Fellow in economics at the Hoover Institute, and
professor of economics at Stanford University. He was director
of the Stanford Institute for Economic Policy and Research, and
founder--founding director of Stanford's introductory Economic
Center. Professor Taylor has the distinguished record of public
service.
Among other roles, he served as a member of the President's
Council on Economic Advisors from 1989 to 1991, and Under
Secretary of the Treasury for International Affairs from 2001
to 2005. He currently is a member of the California Governor's
Council of Economic Advisors. Professor Taylor received a BA in
economics, summa cum laude from Princeton University, and a
Ph.D. In economics from Stanford University. In recognition of
his many achievements, in 2010, he received the prestigious
Bradley Prize. We look forward to your testimony as well,
Professor Taylor. Good to have you with us.
Our final witness, Mr. Robert Weissman, as President of
Public Citizens, Mr. Weissman works in the areas of economics,
health care, trade, and globalization, intellectual property,
and regulatory policy, and on issues related to financial
accountability and corporate responsibility. He has worked to
lower pharmaceutical prices for AIDS victims and others in the
developing world.
Mr. Weissman has appeared on television and radio and is
published--and has been published and quoted in many
newspapers. He earned his JD degree, magna cum laude, from
Harvard School of Law and has led Public Citizens since 2009.
Previously, he was director of the nonprofit organization,
Central Action, and edited the magazine, Multinational Monitor,
which tracks the activities of multinational corporations, and
reports on the global economy. Thank you as well, Mr. Weissman,
for being with us today.
So welcome to all three of you. There is a timer on your
desk that will reflect the green light. The green light will
turn to amber, and when the amber light appears, the ice on
which you are skating is getting thinner. We would like you all
to close down on or about 5 minutes if you could. And then the
red light will appear that will indicate that the final time
has been exhausted.
Mr. Meltzer, why don't you start us off? You all can see
that timer, can you not? Mr. Meltzer, you will be our lead
witness.
TESTIMONY OF ALLAN H. MELTZER, CARNEGIE MELLON UNIVERSITY AND
HOOVER INSTITUTION
Mr. Meltzer. Yes, sir. Thank you, Mr. Chairman, I support
the proposed regulatory freeze--I support the proposed
Regulatory Freeze for Jobs Act of 2012. It restricts new
regulation during the current recession until the unemployment
rate falls to 6 percent of the labor force. This is not an
anti-regulation bill; it is a priority-setting bill. The
proposed legislation includes safeguards that permit the
restriction to be set aside for reasons of national security,
public safety, or for some other purposes.
I have urged repeatedly that Congress limit new, costly
regulation in the interest of increasing the speed and size of
the economic recovery. The proposed legislation does not oppose
regulation. As the short title suggests, its recovery and
reduced unemployment are set as priorities, badly needed
priorities. We all recognize that unemployment rates remain
high, growth and investment slow. Forecasters expected slow
growth to continue. One main reason is that investors and
producers are uncertain about regulation and taxation.
Current and prospective regulation make estimates of future
returns hard highly uncertain. Who can predict with acceptable
confidence what new or pending regulation will do to future
costs for energy, healthcare, finance, labor, or what they will
do to productivity.
I have taught in the business school for 50 years. We teach
the students in the business school to estimate what the future
rate of return is going to be. They can't do that in the
current conditions of uncertainty with any accuracy. That is
why regulation is costly.
That is a recent survey by Michael Porter and Jan Rivkin of
the Harvard Business School, asked thousands of HBS alumni
about impediments to investment and job creation in the United
States. The responses cited the U.S. Tax Code, the regulatory
burden and uncertainty, as well as the absence of job skills
among the unemployed.
Unless changes are made to reduce these costs and burdens,
the alumni expect the job-creating investment to decline over
the near future. During the period where new regulations would
be restricted, Congress can and should improve regulatory
processes and administration. Mr. Cohen, I agree with you that
much regulation is well intentioned, but wrong headed. Much
current regulation is ineffective and doesn't accomplish the
ends that the regulation is intending to achieve. Capture is
one reason. The regulated become the regulators, or the
regulators have one eye focused on a career change to work for
the firms or industries that they regulate.
The Securities and Exchange Commission is often cited as an
example. We know that the SEC did nothing to stop Bernard
Madoff's Ponzi scheme, despite several administrations--
demonstrations by a financial professional directly warning the
SEC of Madoff's claims could not be true.
Examples of regulatory capture are common in the academic
and policy literature. The claims are supported in practice.
Steve Linnick, Inspector General of the Federal Housing Agency,
issued a report stating that Fannie Mae knew about extensive
foreclosure abuses by its outside law firms in 2003, 4 years
before the crisis started. Regulators did not stop the bad
practices when they could have prevented some of the costly
failures that followed. Regulation failed in that case, as in
many others.
Banks are regulated by several agencies. Prior to the
housing and financial crisis that started in 2007, the Federal
Reserve had hundreds of regulators working inside the largest
banks in New York and Charlotte. They examined the loans made
during these periods. They did not prevent any bad loans.
Regulation failed.
Prior to the crisis, an agreement by all principal
developed countries required commercial banks that lend on
mortgages to increase their capital if they increase their
mortgage loans. The banks circumvented the regulation by
setting up subsidiaries to hold the mortgages. Instead of more
capital per dollar of mortgages, there was less.
Regulators did not object. Regulation failed. I am not
opposed to all regulation. I repeat, not opposed to all
regulation. Congress should work to develop effective
regulation. My third principle of regulation will guide you to
a more effective regulation. That principle says that
regulation is effective if it changes the incentives of the
regulated entity.
In closing, I would like to repeat that I support the bill.
But I urge you to be concerned about the broader consequences
of the large increase that has taken place in regulation. Much
of the regulation we have replaces the rule of law, with the
rule by regulators. The rule of law, has been a pillar of
successful capitalist development here and elsewhere. Increased
regulation erodes the rule of law, and invites corruption.
Under the rule of law, all citizens and companies are treated
alike, or nearly alike as possible. Under rule by regulators,
this is no longer so. Some gain advantages over others,
distorting resource allocation and making us poorer.
[The prepared statement of Mr. Meltzer follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Coble. Professor Meltzer, I notice that you earned two
of your degrees from Duke University. Did you have North
Carolina connections prior to your enrollment?
Mr. Meltzer. Yes, lots of--I have many examples of
regulations which are misguided, or misdirected, or don't end
up doing what they want. That is more likely to be the usual
case, rather than the--the second, my first law of regulation,
is that regulations are written by lawyers and bureaucrats, and
markets learn to circumvent them. I gave a talk about that to
the Council on Foreign Relations in New York, full of Wall
Street people. The first question that came was from one of the
lawyers who worked on Wall Street. He said, who do you think
shows them how to circumvent them? We do. That was all I
needed. I didn't have to argue with that.
My second law of regulation is that regulations are static,
and markets are dynamic. So if they don't learn to circumvent
the regulation early, they will learn later, and the
regulations get circumvented all the time. The only way that
you can successfully regulate to bring social and private cost
together, is to change the incentives of the people you
regulate.
I proposed that four times in hearings before the banking
committees when they were discussion what became the Dodd-Frank
regulation. One center introduced my legislation. It said,
look, we now subsidize people who are too big to fail. Let's
get rid of Too Big To Fail by saying the amount of capital that
you have to hold rises with the size of the assets. So instead
of being peanut subsidized, you are going to be penalized.
Mr. Coble. Well, let's move on.
Mr. Meltzer. Because we the public pay for the costs of
what you do.
Mr. Coble. Well, I thank you for that, Professor. I
appreciate that. We have been joined by the distinguished
gentlemen from Georgia, Mr. Johnson. Hi, good to have you with
us.
Mr. Coble. Mr. Taylor, you are now recognized for 5
minutes.
TESTIMONY OF JOHN B. TAYLOR, STANFORD UNIVERSITY
AND HOOVER INSTITUTION
Mr. Taylor. Thank you, Mr. Chairman, Ranking Member Cohen
and other Members of the Committee. I would like to submit my
written testimony for the record and just summarize very
briefly.
Mr. Coble. Without objection.
Mr. Taylor. I am very concerned about this recovery from
the recession that ended in 2009. It is 2\1/2\ years old now,
and it is like we don't have a recovery. And I make that
assessment by comparing it to the most recent recovery from a
deep recession and that was in the early 1980's. In the 10
quarters of this recovery, growth has averaged 2.4 percent. In
the 10 quarters following the recession that ended in 1982,
growth was 5.9 percent. There is just no comparison.
So there is a real problem here. That is why unemployment
is remaining high. That is why people are dropping out of the
labor force, and that is why employment growth is as weak as it
is.
This recovery has been weak from the start, and as a
result, a year and a half ago, I wrote an op ed for the Journal
along with the distinguished gentlemen on my right, and also
with George Shultz, former Treasury Secretary, Secretary of
State, and several other distinguished economists. We had a
comprehensive strategy we recommended to get the economy
moving. One part of that strategy, was, and I will quote, ``To
enact an moratorium on all new regulations with exceptions of
national security, and public safety.''
We thought that should be part of a more comprehensive
strategy which would include deficit reduction as well as a
more rules-based monetary policy. Unfortunately, that
recommendation was not enacted on, and as a result, this
recovery, I believe, has continued to be very weak.
And that is why I am so supportive of this bill, which
really takes action along those lines, I think in an improved
way. Ranking Member Cohen mentioned in his remarks that the
problem is a lack of demand, not too many regulations. Well, I
think the demand is low because of those regulations. Business
firms create demand by investing and hiring people, and one of
the reasons they are concerned about this, is uncertainty about
what the regulations are actually going to be.
I believe there is a growing recognition about the
difficulty of regulating the economy when it gets too far. And
in my testimony, I just offered this really very, I think
excellent, recent issue in The Economist Magazine, entitled on
the cover, The Overregulated America. And there is a detailed
description of the things that really make it difficult for
firms to expand. They are worried about the future. They don't
know what the regulatory apparatus is going to be. By the way,
there are also very worried about the tax laws, many things. So
it seems to be very important to take this action now, and to
really get this recovery moving.
I think the--in addition to the normal kind of growing
regulation, and cost of regulation that we are seeing, we have
two bills passed recently that I think make this problem worse.
And the one that I focus on mostly because that is my area, and
that is the financial reform bill. There is lots of discussion
about what caused the financial crisis, who caused it, you
heard Professor Meltzer say a few things about that. In my
view, it wasn't that there was not enough regulation; it was
that the regulations on the books were not enforced. I think it
is very clear when you look at the details of what happened.
So in this sense, the analysis that led to the financial
reform bill, misdiagnosed the crisis, instead added many new
regulations which have nothing to do with the financial crisis;
regulating payday loans for example, but I could go on and on.
And the regulatory rules that the regulators must write now are
just overwhelming to them, far more than they have had to write
in the past. So it is like an order of magnitude difference.
I know that is why so many firms are sitting on cash; why
banks are sitting on cash. They don't know exactly what to do.
So at this point, I think it is very important to enact some
kind of a freeze like what is being proposed here. That is why
I support the bill. And in a way, it addresses two problems
which are holding the economy back. Number one is the growing
amount of regulations that we are seeing. Number two, these
recent bills that are still being implemented, the Congress
gives instructions to the agencies to write the rules, and they
are busy every day writing rules, and no one knows quite what
to expect.
So I think in this case, you kind of need a time-out on
those bills; a time-out basically to digest what the rulemaking
should be about. Give people a chance to digest what is going
on. Maybe change some of those bills. But the regulatory freeze
serves those two purposes which are, to me, extraordinarily
important to get the economy moving again. Thank you.
Mr. Coble. Thank you, Professor Taylor.
[The prepared statement of Mr. Taylor follows:]
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__________
Mr. Coble. Mr. Weissman.
TESTIMONY OF ROBERT WEISSMAN, PRESIDENT,
PUBLIC CITIZEN
Mr. Weissman. Thank you very much, Mr. Chairman, Mr. Cohen,
Mr. Johnson. I think it is an excellent thing that the
Committee is focusing on the jobs crisis facing this country.
And I agree completely with Professor Taylor that it needs to
be a top priority for the Congress. However, I think the
legislation is a misguided way of trying to address that
problem. The legislation would effectively amount to a 5-year
moratorium on new significant regulation. That is, I believe, a
wrong and dangerous remedy for the problem we face. We have not
addressed the problem, but would create many new problems. It
is worth pointing out that the waivers in the bill are very
limited, particularly in the area of health and safety, where
it is only--the waiver is permissible only where necessary to
meet an imminent problem or a pending emergency; not why most
health and safety regulations are adopted.
Let me try to make five quick points that summarize the
testimony that I have submitted in writing. First point is that
the evidence does not support the claim that regulation is a
significant problem for a job preservation, or job creation.
The real problem, as Mr. Cohen said, is indeed, the lack of
demand. To the extent that there is a problem with uncertainty
in the economy, the uncertainty is over the future of the
economy, but not the future of regulation. And I go over in
some detail evidence that I think that supports that claim.
One data point that is relevant is that when employers
report the reason for mass layoffs, they cite lack of sales or
lack of demand as 100 times greater factor than regulation.
That is retrospective, not prospective, but that is two orders
of magnitude, and highly suggestive of what we are looking at.
A second data point is, rather than analyzing this
theoretically, to just look at the actual significant
regulations that are proposed. And if you go back over the last
10 years at almost any point, you will see the cost of almost
every major regulation, is overwhelmed by the benefits, and the
aggregate total of benefits exceeds the cost by 2 to 15 times.
It is measured by the Office of Management & Budget under both
the Obama Administration, and the Bush II administration.
The second point is that the jobs crisis we now face, I
agree with Professor Taylor, is a tribute to regulatory
failure. I disagree with--I am sorry, with Professor Meltzer. I
disagree with Professor Taylor that it is only a problem of
regulatory enforcement, although it surely was that. There were
many areas in which the failure to adopt new regulations to
deal with an evolving and increasingly complicated financial
sector contributed to the failure. I think that suggests a need
for new regulations to address those problems going forward,
some of them mandated by Dodd-Frank.
Third point is that regulation, not abstracted but looked
at concretely, makes our country stronger and makes us more
prosperous and makes us healthier, safer, makes our country
cleaner and more livable. I give a variety of examples of this
in my written testimony, but it is worth mentioning that many
regulations that will make our country stronger, and that are
supported by the regulated industries, would be blocked for
roughly 5 years by this legislation, including regulations
proposed to increase the fuel efficiency of our Nation's
automobiles and trucks, to improve food safety, and to enable
the introduction of generic versions of biotech
pharmaceuticals.
A fourth point: Beyond the area of traditional health and
safety regulation, this bill would impede many of the routine
functions of government in ways that I am sure the drafters do
not intend, but which I think are relatively inescapable under
the framework of the legislation. They would prevent issuance
of new annual rules that authorize bird hunting. They would
prevent issuance of rules that provide for stop-loss pay for
Veterans. They would prevent issuance of rules enabling
compensation for Vietnam vets. They would prevent the issuance
of rules, of which there are many, and a significant portion of
the annual significant regulations issued that deal with
Medicare reimbursement.
A fifth and final point is to say that although I think the
legislation is misguided as I have said, and I think regulation
makes our country stronger and better, is not to suggest that
we don't need to significantly reform the regulatory process. I
absolutely agree with Professor Meltzer that regulatory
captures a serious problem facing the country, and it would be
an excellent thing for there to be bipartisan legislation to
try to address that particular problem. I think another area of
fruitful investigation is the problem of under enforcement of
existing rules, and the failure to have sanctions for
violations of rules that are sufficiently strong.
Mr. Conyers, for example, has introduced legislation that
would make it a criminal violation to introduce products into
commerce or to expose workers to life-threatening hazards
without sufficiently warning them. And I think that is
something that this Congress ought to be looking at as well.
Thank you very much.
Mr. Coble. Thank you, Mr. Weissman.
[The prepared statement of Mr. Weissman follows:]
Prepared Statement of Robert Weissman, President, Public Citizen
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Mr. Chairman and Members of the Committee,
Thank you for the opportunity to testify today on H.R. 4078, the
Regulatory Freeze for Jobs Act of 2012. I am Robert Weissman, president
of Public Citizen. Public Citizen is a national public interest
organization with 250,000 members and supporters. For more than 40
years, we have advocated with some considerable success for stronger
health, safety, consumer protection and other rules, as well as for a
robust regulatory system that curtails corporate wrongdoing and
advances the public interest.
Public Citizen co-chairs the Coalition for Sensible Safeguards
(CSS). CSS is an alliance of more than 75 consumer, small business,
labor, scientific, research, good government, faith, community, health
and environmental organizations joined in the belief that our country's
system of regulatory safeguards provides a stable framework that
secures our quality of life and paves the way for a sound economy that
benefits us all. Time constraints prevented the Coalition from
reviewing my testimony in advance, and today I speak only on behalf of
Public Citizen.
The Regulatory Freeze for Jobs Act would impose a moratorium on all
significant regulatory action until the national unemployment rate
drops to 6.0 percent. The legislation defines ``significant regulatory
action'' as steps toward issuance of a rule having an impact on the
economy of $100 million or more, or which meets other criteria. The
legislation exempts action that would repeal a rule, but not to modify
it (even if the modification weakened a standard). The legislation
authorizes the president to waive the moratorium in certain limited
cases (to address an ``imminent'' threat to human health or safety or
other emergency; to enforce criminal laws; for national security; or
pursuant to legislation implementing international trade agreements).
Given current unemployment projections, the Act would impose a
roughly five-year moratorium on significant regulatory action.\1\
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\1\ The Congressional Budget Office projects that unemployment will
be 6.9 percent by the end of 2015 and 5.6 percent by the end of 2017.
Congressional Budget Office. (2012). The Budget and Economic Outlook:
Fiscal Years 2012 to 2022. Retrieved 24 February, 2012, from http://
cbo.gov/publication/42905
---------------------------------------------------------------------------
In the current context of scandalously high unemployment, the
Committee is right to focus attention on the causes of unemployment and
on needed remedies. However, excessive regulation is neither the cause
of the jobs crisis nor a meaningful impediment to job creation. The
Regulatory Freeze for Jobs Act is the wrong cure for the nation's
serious job ailment--it wouldn't remedy the problem, could well make
the problem worse, and would cause devastating side effects.
The first section of this testimony argues that regulation does not
have a meaningfully harmful impact on jobs and delivers significant net
economic benefits. The second section argues that regulatory failures--
deregulation, underregulation and lack of enforcement--had a central
role in causing the Wall Street crash and the Great Recession.
Recognizing the regulatory failures undergirding the current jobs
crisis emphasizes the need for new and evolving rules to prevent
another job-destroying, Wall Street-induced financial crisis. The third
section discusses the vital function of regulation in making our
country better and stronger, and shows some of the damage that would be
done by a five-year moratorium on significant regulatory action. The
fourth section analyzes the ways in which the legislation would,
perhaps unintentionally, interfere with a diverse set of government
programs and initiatives, including matters such as rules authorizing
bird hunting. The conclusion emphasizes that the regulatory system is
in need of significant reform, but not in the direction proposed by the
Regulatory Freeze for Jobs Act.
i. regulatory protections strengthen the economy
The central premise of the Regulatory Freeze for Jobs Act is that
regulatory protections meaningfully interfere with job preservation and
creation. This premise is mistaken.
While regulators commonly do not have job creation as a mission
priority, they are mindful of regulatory cost, and by statutory
directive or on their own initiative typically seek to minimize costs;
relatedly, the rulemaking process gives affected industries ample
opportunity to communicate with regulators over cost concerns, and
these concerns are taken into account. To review the regulations
actually proposed and adopted is to see how much attention regulators
pay to reducing cost and detrimental impact on employment. And to
assess the very extended rulemaking process is to see how substantial
industry is influence over the rules ultimately adopted--or discarded.
Even where the cost of regulatory compliance is nontrivial, the net
job impact may be minimal or even positive; firm expenditures on
regulatory compliance typically create new jobs within affected firms
or other service or product companies with which they contract.
It is also the case that firms typically innovate creatively and
quickly to meet new regulatory requirements, even when they fought hard
against adoption of the rules.\2\ The result is that costs are commonly
lower than anticipated.
---------------------------------------------------------------------------
\2\ Mouzoon, N., & Lincoln, T. (2011). Regulation: The Unsung Hero
in American Innovation. Public Citizen. Retrieved 24 February, 2012,
from http://www.citizen.org/documents/regulation-innovation.pdf
---------------------------------------------------------------------------
The economics literature on regulation does not support the claim
that regulation meaningfully impedes job growth. A survey of the
literature conducted by the Economics Policy Institute finds a rough
consensus: regulation has little direct impact on job creation, and may
offer a net positive benefit.\3\ A literature review by the Office of
Management and Budget, included in the 2011 Report to Congress on the
Benefits and Costs of Federal Regulation, highlights several studies
articulating theoretical approaches showing why different forms of
regulation--including labor market, environmental and economic
regulation--might increase or decrease employment and, in general,
concludes the empirical evidence is ambiguous.\4\ Addressing the impact
of a moratorium on environmental regulations, Congressional Budget
Office Director Douglas Elmendorf in Senate testimony last year stated,
``On balance, CBO expects that delaying or eliminating those
regulations regarding emissions would reduce investment and output
during the next few years, because the response to the factors that
would tend to boost investment under those circumstances would probably
be smaller than the response to the factors that would reduce
investment.'' \5\
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\3\ Shapiro, I., & Irons, J. (2011). Regulation, Employment, and
the Economy: Fears of job loss are overblown. Economic Policy
Institute. Retrieved 24 February, 2012, from http://www.epi.org/files/
2011/BriefingPaper305.pdf
\4\ Office of Management and Budget, Office of Information and
Regulatory Affairs. (2011). 2011 Report to Congress on the Benefits and
Costs of Federal Regulations on Unfunded Mandates on State, Local, and
Tribal Entities. Retrieved 23 February, 2012, from http://
www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/
2011_cba_report.pdf
\5\ Congressional Budget Office. (2011, November 15). Statement of
Douglas Elmendorf: Policies for Increasing Economic Growth and
Employment in 2012 and 2013, page 49. Testimony before the Committee on
the Budget, United States Senate. Retrieved 24 February, 2012, from
http://budget.senate.gov/democratic/index.cfm/files/
serve?File_id=795c2267-9349-4c2c-a488-262dfd346a2c
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Prognostications of job loss and excess cost from specific rules
routinely turn out to be significantly overstated, EPI has shown, both
in government estimates of the cost of regulatory compliance with new
rules and especially in industry claims.\6\ Impacted industries have a
natural bias to overestimate costs of regulatory compliance, and
projections of cost regularly discount the impact of technological
dynamism. In the case of acid rain regulations, for example, industry
projected costs of $5.5 billion initially, rising to $7.1 billion in
2000; ex-ante estimates place costs at $1.1 billion--$1.8 billion.\7\
And, ``in the case of the regulation of benzene emissions, control
costs were estimated at $350,000 per plant by the chemical industry,
but soon thereafter the plants developed a new process in which more
benign chemicals could be substituted for benzene, thereby reducing
control costs to essentially zero.'' \8\ The last century teaches us
that Chicken Little warnings about the costs of the next regulation
should be, at the very least, heavily discounted.
---------------------------------------------------------------------------
\6\ Shapiro, I., & Irons, J. (2011). Regulation, Employment, and
the Economy: Fears of job loss are overblown. pp. 21-27 Retrieved 24
February, 2012, from http://www.epi.org/files/2011/BriefingPaper305.pdf
\7\ The Pew Environment Group. (2010, October). Industry Opposition
to Government Regulation. Retrieved 24 February, 2012, from http://
www.pewenvironment.org/uploadedFiles/PEG/Publications/Fact_Sheet/
Industry%20Clean%20Energy%20Factsheet.pdf
\8\ Shapiro, I., & Irons, J. (2011). Regulation, Employment, and
the Economy: Fears of job loss are overblown. Economic Policy
Institute. Retrieved 24 February, 2012, from http://www.epi.org/files/
2011/BriefingPaper305.pdf
---------------------------------------------------------------------------
Indeed, careful examination of one of the most costly rules issued
during the Obama administration--national standards for mercury,
arsenic and other toxic air pollutants emitted by power plants, known
as the ``toxics rule''--shows that it will lead to net job creation.\9\
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\9\ Bivens, J. (2012). The `Toxics Rule' and Jobs: The job-creation
potential of the EPA's new rule on toxic power-plant emissions.
Economic Policy Institute. Retrieved 24 February, 2012, from http://
www.epi.org/files/2012/ib325.pdf
---------------------------------------------------------------------------
We are, of course, living in a period of shamefully high
unemployment and underemployment, and it is absolutely correct to focus
attention on job creation. But excessive regulation is neither the
cause of the nation's mass unemployment--actually, to a very
considerable extent, the opposite is the case, as discussed below--nor
the barrier to job creation. Indeed, not only do business economists
not cite regulation as a significant problem for business, they
actually say the regulatory environment is ``good'' for business.\10\
The overriding reason why business--including particularly small
business--is not hiring is lack of demand.\11\
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\10\ National Association for Business Economics. (2011, August).
Economic Policy Survey. Retrieved 24 February, 2012, from http://
www.nabe.com/publib/pol/11/08/nabepolicy1108.pdf
\11\ See the analysis by Treasury Department Assistant Secretary
for Economic Policy Janice Eberly. Eberly, J. (2011, October 24). Is
Regulatory Uncertainty a Major Impediment to Job Growth? U.S.
Department of the Treasury. Retrieved 24 February, 2012, from http://
www.treasury.gov/connect/blog/Pages/Is-Regulatory-Uncertainty-a-Major-
Impediment-to-Job-Growth.aspx (``If regulatory uncertainty was a major
impediment to hiring right now, we would expect to see indications of
this in one or more of the following: business profits; trends in the
workforce, capacity utilization, and business investment; differences
between industries undergoing significant regulatory changes and those
that are not; differences between the United States and other countries
that are not undergoing the same changes; or surveys of business owners
and economists. As discussed in a detailed review of the evidence
below, none of these data support the claim that regulatory uncertainty
is holding back hiring.'')
---------------------------------------------------------------------------
While the U.S. Chamber of Commerce and industry trade associations
regularly complain about regulation and argue that regulation is
impeding job creation and injuring small business, that is not what
actual small businesses say. They cite lack of demand and uncertainty
about when demand will pick up as their primary concerns.
Small business owners listed ``government regulation'' far down
their list of concerns in a survey commissioned by the American
Sustainable Business Council, Main Street Alliance and Small Business
Majority; the number one and number two identified biggest problems
facing their businesses are ``uncertainty about the future economy''
and ``rising costs of doing business,'' both cited more than three
times more frequently than ``government regulation.'' \12\ In an
informal survey, McClatchy/Tribune News Service found no business
owners complaining about regulation.\13\ The Chamber of Commerce's
survey of small business similarly shows a relatively low ranking of
concern about regulation.\14\ More than half of small businesses in the
Chamber rank ``economic uncertainty'' atop their list of obstacles to
hiring new employees; ``too much regulation'' is ranked fifth.\15\
Similarly, a survey by the National Federation of Independent
Businesses found small business owners ranking ``poor sales'' as the
number one problem they face, outdistancing worries about ``government
regulation,'' although as the economy has started to improve in recent
months, small business respondents to the NFIB survey have expressed
less concern about poor sales and more about regulation.\16\
---------------------------------------------------------------------------
\12\ Small Business Majority. (2011). Opinion Survey: Small
Business owners Believe National Standards Supporting Energy Innovation
Will Increase Prosperity for Small Firms. Retrieved
24 February, 2012, from http://smallbusinessmajority.org/energy/pdfs/
Clean_Energy_
Report_092011.pdf
\13\ Hall, K. G. (2011, 1 September). Regulations, taxes aren't
killing small business, owners say. McClatchy Newspapers. Retrieved 24
February, 2012, from http://www.mcclatchydc.com/2011/09/01/122865/
regulations-taxes-arent-killing.html
\14\ U.S. Chamber of Commerce. (2011, July). Small Business Outlook
Survey. Retrieved 24 February, 2012, from http://www.uschamber.com/
sites/default/files/reports/1107usc_summit%20_
harrisnteractive.pdf
\15\ Ibid.
\16\ Dunkelberg, W., & Wade, H. (2012). NFIB Small Business
Economic Trends. Retrieved 24 February, 2012 from http://www.nfib.com/
Portals/0/PDF/sbet/sbet201202.pdf
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Insufficient demand is also the primary reason for layoffs. In
extensive survey data collected by the Bureau of Labor Statistics,
employers cite lack of demand roughly 100 times more frequently as the
reason for mass layoffs than government regulation! \17\
---------------------------------------------------------------------------
\17\ U.S. Department of Labor, Bureau of Labor Statistics. (2011,
November). Extended Mass Layoffs in 2010. Table 6. Reason for layoff:
extended mass layoff events, separations, and initial claimants for
unemployment insurance, private nonfarm sector, 2008-2010. Retrieved 24
February, 2012, from http://www.bls.gov/mls/mlsreport1038.pdf
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Reason for layoff: 2008-2010 \18\
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\18\ Ibid.
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Critics of regulation have relied on some muc-touted studies that
emphasize the costs of regulation, but these studies are fundamentally
flawed and should not inform policy debates. Several studies cite the
``cost'' of regulation, but neglect to identify correlative benefits.
For example, The Heritage Foundation has issued a series of reports on
the cost of regulation under the Obama administration. These reports
simply ignore the benefits of rules, removing all context from the cost
estimate. To take one example, The Heritage Foundation attributes more
than a quarter of all costs of regulation issued under the Obama
administration to fuel economy standards.\19\ Yet Heritage fails to
mention that the National Highway Traffic Safety Administration--the
source of Heritage's cost estimate--found those rules would confer
benefits three times as great as the costs.\20\
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\19\ Gattuso, J., Katz, D., & Keen, S. (2010). Red Tape Rising:
Obama's Torrent of New Regulation. The Heritage Foundation. Retrieved
24 February, 2012, from http://www.heritage.org/research/reports/2010/
10/red-tape-rising-obamas-torrent-of-new-regulation
\20\ Public Citizen. (2010). Junk Math: How Public Interest
Protection Opponents Count Costs and Ignore Benefits. Retrieved 24
February, 2012, from http://www.citizen.org/documents/
cafebenefits12222010.pdf
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Another study that replicates this error of counting costs but not
benefits is the report issued by Nicole Crain and W. Mark Crain,
consultants to the Small Business Administration Office of
Advocacy.\21\ This study is thoroughly discredited, but the study's
groundless conclusions (that regulation costs the U.S. economy $1.75
trillion annually, or more than $10,000 per small business employee)
continues to be cited too frequently in policy debates, often without
attribution to the original, discredited study. Crain and Crain
attribute $1.236 trillion in costs to ``economic regulation,'' \22\ a
figure that is entirely derived from a regression analysis correlating
ratings on a World Bank ``regulatory quality index''--which is itself
based on nothing more than survey data from businesses and other
sources--and national GDP per capita. It is remarkable enough to
imagine that such a cross-cultural, international regression analysis
would yield such a robust result that it should meaningfully inform
U.S. policy; even more so, when it yields a total cost vastly out of
line with other careful analysis, as well as such unlikely findings as
a correlation between increased education and reduced economic growth.
It turns out, as the Economic Policy Institute has shown, that with a
more complete set of data than used by Crain and Crain--but still using
the same regression equations--no statistical relationship between
``regulatory quality'' and GDP exists.\23\ Crain and Crain also include
a cost for tax compliance--not typically considered a ``regulatory''
cost--which they pin at roughly $160 billion. A number of other fatal
flaws bedevil the discredited study.\24\
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\21\ Crain, N. V., & Crain, W. M. (2010). The Impact of Regulatory
Costs on Small Firms. Prepared for Small Business Administration,
Office of Advocacy. Retrieved 23 February, 2012, from http://
archive.sba.gov/advo/research/rs371tot.pdf
\22\ This concept as employed by Crain and Crain includes a range
of elements that might properly be considered regulation, but which are
not typically part of the regulatory policy debate. This includes
matters such as tariffs, antitrust policy, complexity of the tax
system, and ease of starting a new business. Ibid.
\23\ Irons, J., & Green, A. (2011, 19 July). Flaws Call For
Rejecting Crain and Crain Model. Economic Policy Institute. Retrieved
24 February, 2012, from http://www.epi.org/page/-/EPI_IssueBrief308.pdf
\24\ Eisenbrey, R., & Shapiro, I. (2011, August). Deconstructing
Crain and Crain. Economic Policy Institute. Retrieved 24 February,
2012, from http://web.epi-data.org/temp727/IssueBrief312-2.pdf; Irons,
J. and Green, A., Flaws Call for Rejecting Crain and Crain Model.;
Shapiro, S. A., & Ruttenberg, R. (2011, February). The Crain and Crain
Report on Regulatory Costs. Center for Progressive Reform. Retrieved 24
February, 2012, from http://www.progressivereform.org/articles/
SBA_Regulatory_Costs_Analysis_1103.pdf ; Copeland, C. W. (2011, April
6). Analysis of an Estimate of the Total Costs of Federal Regulations.
Congressional Research Service. Retrieved 24 February, 2012, from
http://www.progressivereform.org/articles/CRS_Crain_
and_Crain.pdf
---------------------------------------------------------------------------
A more robust system for assessing the impact of regulation on the
economy--though significantly imprecise and heavily biased against the
benefits of regulation--is not to conjure up a theory to which facts
are made to conform, or to invent regression analyses that rely on poor
data and far too few inputs and that demonstrate regulation to have an
overdetermining impact on the overall economy, but to look at the
actual impact of actual regulations. Although the federal government
issues thousands of regulations every year, most of these are very
limited in impact, and the universe of economically significant
regulations--those that would be affected by the Regulatory Freeze
act--is relatively small, identifiable and analyzable. Every year, the
Office of Management and Budget analyzes the costs and benefits of
rules with significant economic benefit. The benefits massively exceed
costs.
The principle finding of OMB's 2011 Report to Congress on the
Benefits and Costs of Federal Regulation is:
The estimated annual benefits of major Federal regulations
reviewed by OMB from October 1, 2000, to September 30, 2010,
for which agencies estimated and monetized both benefits and
costs, are in the aggregate between $132 billion and $655
billion, while the estimated annual costs are in the aggregate
between $44 billion and $62 billion. These ranges reflect
uncertainty in the benefits and costs of each rule at the time
that it was evaluated.\25\
---------------------------------------------------------------------------
\25\ Office of Management and Budget, Office of Information and
Regulatory Affairs. (2011). 2011 Report to Congress on the Benefits and
Costs of Federal Regulations on Unfunded Mandates on State, Local, and
Tribal Entities.
In other words, even by OMB's most conservative accounting, the
benefits of major regulations over the last decade exceeded costs by a
factor of more than two-to-one. And benefits may exceed costs by a
factor of 14.
These results are consistent year-to-year:
Total Annual Benefits and Costs of Major Rules by Fiscal Year (billions
of 2001 dollars) \26\
---------------------------------------------------------------------------
\26\ Office of Management and Budget, Office of Information and
Regulatory Affairs. (2011). 2011 Report to Congress on the Benefits and
Costs of Federal Regulations an Unfunded Mandates on State, Local, and
Tribal Entities. Table 1-3, p. 19-20. Retrieved 23 February, 2012, from
http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/
2011_cba_report.pdf
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The reason for the consistency is that regulators pay a great deal
of concern to comparative costs and benefits (too great a concern, in
our view, given the built-in bias of cost-benefit analysis against
regulatory initiative \27\). Very few major rules are adopted where
projected costs exceed projected benefits, and those cases typically
involve direct Congressional mandates.
---------------------------------------------------------------------------
\27\ See, e.g., Shapiro, S. et al., CPR Comments on Draft 2010
Report to Congress on the Benefits and Costs of Federal Regulations 16-
19 (App. A, Pt. C.) (2010), Retrieved 24 February, 2012, from http://
www.progressivereform.org/articles/2010_CPR_Comments_OMB_Report.pdf;
Steinzor, R. et al., CPR Comments on Draft 2009 Report to Congress on
the Benefits and Costs of Federal Regulations 16-19 (App. A, Pt. C.)
(2009), Retrieved 24 February, 2012, from http://
www.progressivereform.org/articles/2009_CPR_Comments_OMB_Report.pdf;
Sinden, A. & Goodwin, J., CPR Comments on Draft 2008 Report to Congress
on the Benefits and Costs of
Federal Regulations 5-8 (2008), Retrieved 24 February, 2012, from
http://www.progressivereform.org/articles/2008_Comments_OMB_Report.pdf.
For all of the comments on OMB's annual reports to Congress on the
benefits and cost of federal regulation produced by CPR Member Scholars
and staff, see Ctr. for Progressive Reform, OMB Reports on the Costs
and Benefits of Regulation, Retrieved 24 February, 2012, from http://
www.progressivereform.org/OMBCongress.cfm
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A final point on this topic: Missing from much of the literature on
regulation and jobs are the economically systemic, positive impacts of
regulation. Proper regulation can avert catastrophic damage not
typically captured in prospective cost-benefit analyses, as the BP oil
disaster shows.\28\ Proper regulation is also essential to enable
markets to function efficiently and fairly. As the 2008 Wall Street
crash shows, improperly and insufficiently regulated financial markets
will fail with devastating consequences for job preservation and the
real economy. Regulation also has an important role in promoting
innovation and technological dynamism. Environmental and economic
realities necessitate the development and deployment of transformative
clean energy technologies. Markets alone do not offer sufficient
incentive and reward for the timely deployment of such technologies,
which promise both great economic savings and very significant job
creation.\29\
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\28\ In addition to the loss of human life with the explosion of
the Deepwater Horizon platform, the oil disaster imposed billions in
economic damage. BP has paid more than $6 billion in compensation under
the Gulf Coast Claims Facility it established. Many other claims are
pending. Gulf Coast Claims Facility. (2012). Overall Program
Statistics: Status Report as of February 23, 2012. Retrieved 24
February, 2012, from http://www.gulfcoastclaimsfacility.com/
GCCF_Overall_Status_Report.pdf Proper regulation could have averted the
disaster.
\29\ Pollin, R., Wicks-Lin, J., & Garret-Peltier, H. (2009, June).
Green Prosperity: How Clean-Energy Policies Can Fight Poverty and Raise
Living Standards in the United States. Political Economy Research
Institute, University of Massachusetts Amherst. Retrieved 24 February,
2012, from http://www.peri.umass.edu/fileadmin/pdf/
other_publication_types/green_economics/green_prosperity/
Green_Prosperity.pdf
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ii. regulatory failures helped create the jobs crisis
The present jobs crisis has particular and identifiable causes: the
collapse of the housing bubble and the ensuing financial crash. The
crisis also has identifiable culprits: The big banks and Wall Street,
which fueled the bubble through practices ranging from issuing
predatory mortgage loans to creation of esoteric financial instruments
that claimed to convert low-quality loans into top-notch investment
opportunities. These practices were enabled not by too much regulation,
but by too little. To a very considerable extent, the current jobs
crisis should be understood as resulting from regulatory failure:
deregulation, underregulation and underenforcement. The job loss
stemming from this regulatory failure--the 8 million jobs shed
following the Wall Street crash--vastly exceed any negative job impacts
plausibly linked to regulation.
Recognizing the regulatory failure underpinning the current jobs
crisis suggests not only that a regulatory freeze will not contribute
to or enable job growth, but that it risks imperiling our economy. An
unregulated or under-regulated Wall Street will strongly tend to
another crash, presenting the prospect of another major recession. The
Dodd-Frank Wall Street Reform and Consumer Protection Act, to be sure,
was an inadequate response to the crash--most notably in its failure to
more aggressively confront the problem of too-big-to-fail financial
institutions--but blocking implementation of Dodd-Frank or adoption of
other financial regulations would be an invitation for the financial
sector to engineer more mass rip-offs of consumers and make our economy
more vulnerable to another job-devastating crash.
There is by now a very considerable literature, and a very
extensive Congressional hearing record, that documents in granular
detail the ways in which regulatory failure led to financial crash and
the onset of the Great Recession. ``Widespread failures in financial
regulation and supervision proved devastating to the stability of the
nation's financial markets,'' concluded the Financial Crisis Inquiry
Commission. ``The sentries were not at their posts, in no small part
due to the widely accepted faith in the self-correcting nature of the
markets and the ability of financial institutions to effectively police
themselves. More than 30 years of deregulation and reliance on self-
regulation by financial institutions, championed by former Federal
Reserve Chairman Alan Greenspan and others, supported by successive
administrations and Congresses, and actively pushed by the powerful
financial industry at every turn, had stripped away key safeguards,
which could have helped avoid catastrophe. This approach had opened up
gaps in oversight of critical areas with trillions of dollars at risk,
such as the shadow banking system and over-the-counter derivatives
markets. In addition, the government permitted financial firms to pick
their preferred regulators in what became a race to the weakest
supervisor.'' \30\
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\30\ The Financial Crisis Inquiry Commission. (2011, January).
Final Report of the National Commission on the Causes of the Financial
and Economic Crisis in the United States. Retrieved 24 February, 2012,
from http://www.gpoaccess.gov/fcic/fcic.pdf, p. xviii
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Here I highlight just a few of the regulatory failures that
contributed to the financial crash, by way of illuminating the need for
a robust financial regulatory system that prevents excessive
concentration and interconnection among firms, protects consumers,
promotes transparency and facilitates systemic stability.
Repeal of the Glass-Steagall Act. The Financial Services
Modernization Act of 1999 formally repealed the Glass-Steagall Act of
1933 (also known as the Banking Act of 1933) and related laws, which
prohibited commercial banks from offering investment banking and
insurance services. The 1999 repeal of Glass-Steagall helped create the
conditions in which banks created and invested in creative financial
instruments such as mortgage-backed securities and credit default
swaps, investment gambles that rocked the financial markets in 2008.
More generally, the Depression-era conflicts and consequences that
Glass-Steagall was intended to prevent re-emerged once the Act was
repealed. The once staid commercial banking sector quickly evolved to
emulate the risk-taking attitude and practices of investment banks,
with disastrous results. ``The most important consequence of the repeal
of Glass-Steagall was indirect--it lay in the way repeal changed an
entire culture,'' notes economist Joseph Stiglitz. ``When repeal of
Glass-Steagall brought investment and commercial banks together, the
investment-bank culture came out on top. There was a demand for the
kind of high returns that could be obtained only through high leverage
and big risk taking.'' \31\
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\31\ Stiglitz, J. (2009). Capitalist fools. Vanity Fair, 51(1).
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Unregulated Financial Derivatives. The 2008 crash proved Warren
Buffet's warning that financial derivatives represent ``weapons of mass
financial destruction'' to be prescient.\32\ Financial derivatives
amplified the financial crisis far beyond the unavoidable troubles
connected to the popping of the housing bubble. AIG made aggressive
bets on credit default swaps (CDSs) that went bad with the housing
bust, and led to a taxpayer-financed rescue of more than $130 billion.
AIG was able to put itself at such risk because its CDS business was
effectively subject to no governmental regulation or even oversight.
That was because first, high officials in the Clinton administration
and the Federal Reserve, including SEC Chair Arthur Levitt, Treasury
Secretary Robert Rubin, Deputy Treasury Secretary Lawrence Summers and
Federal Reserve Chair Alan Greenspan, blocked the Commodity Futures
Trading Commission (CFTC) from regulating financial derivatives;\33\
and second, because Congress and President Clinton codified regulatory
inaction with passage of the Commodity Futures Modernization Act, which
enacted a statutory prohibition on CFTC regulation of financial
derivatives.
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\32\ Buffett, W. (2003). Report to Shareholders, February 21, 2003.
Berkshire Hathaway. Retrieved 24 February, 2012, from http://
www.berkshirehathaway.com/letters/2002pdf.pdf
\33\ After the collapse of Long-Term Capital Management, Born
issued a new call to regulate financial derivatives. ``This episode
should serve as a wake-up call about the unknown risks that the over-
the-counter derivatives market may pose to the U.S. economy and to
financial stability around the world,'' Born told the House Banking
Committee two days later. ``It has highlighted an immediate and
pressing need to address whether there are unacceptable regulatory gaps
relating to hedge funds and other large OTC derivatives market
participants.'' But what should have been a moment of vindication for
Born was swept aside by her adversaries, and Congress enacted a six-
month moratorium on any CFTC action regarding derivatives or the swaps
market. In May 1999, Born resigned in frustration. Born, B. (1998).
Testimony of Brooksley Born, Chairperson, Commodity Futures Trading
Commission Concerning Long-Term Capital Management Before the U.S.
House of Representatives Committee on Banking and Financial Services.
Retrieved 23 February, 2012, from http://www.cftc.gov/opa/speeches/
opaborn-35.htm.
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The SEC's Voluntary Regulation Regime for Investment Banks. In
1975, the SEC's trading and markets division promulgated a rule
requiring investment banks to maintain a debt-to-net capital ratio of
less than 12 to 1. It forbade trading in securities if the ratio
reached or exceeded 12 to 1, so most companies maintained a ratio far
below it. In 2004, however, the SEC succumbed to a push from the big
investment banks--led by Goldman Sachs, and its then-chair, Henry
Paulson--and authorized investment banks to develop their own net
capital requirements in accordance with standards published by the
Basel Committee on Banking Supervision. This essentially involved
complicated mathematical formulas that imposed no real limits, and was
voluntarily administered. With this new freedom, investment banks
pushed borrowing ratios to as high as 40 to 1, as in the case of
Merrill Lynch. This super-leverage not only made the investment banks
more vulnerable when the housing bubble popped, it enabled the banks to
create a more tangled mess of derivative investments--so that their
individual failures, or the potential of failure, became systemic
crises. On September 26, 2008, as the crisis became a financial
meltdown of epic proportions, SEC Chair Christopher Cox, who spent his
entire public career as a deregulator, conceded ``the last six months
have made it abundantly clear that voluntary regulation does not
work.'' \34\
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\34\ Faoila, A., Nakashima, E., & Drew, J. (2008, October 15). What
Went Wrong. The Washington Post. Retrieved 24 February 2012, from
www.washingtonpost.com/wp-dyn/content/story/2008/10/14/
ST2008101403344.html
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Failure to Prevent Predatory Lending. Preventing predatory lending
practices would not have prevented the housing bubble and the
subsequent financial meltdown, but it would have taken some air out of
the bubble and softened the economic crisis--and it would have saved
millions of families and communities across the country from economic
ruin. Predatory lending was easily avoidable through sound regulation,
but regulators failed to act. On the one hand, regulators failed to use
then-existing authority to crack down on abusive lending practices. The
Federal Reserve took three formal actions against subprime lenders from
2002 to 2007.\35\ The Office of Comptroller of the Currency, with
authority over almost 1,800 banks, took three consumer-protection
enforcement actions from 2004 to 2006.\36\ On the other hand, federal
regulators refused to issue appropriate regulatory rules to stem
predatory lending, despite persistent advocacy by consumer groups. By
way of contrast, action at the state level showed that predatory
lending rules could significantly limit abusive loans.\37\
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\35\ Tyson, J., Torres, C., & Vekshin, A. (2007, March 22). Fed
Says It Could Have Acted Sooner on Subprime Rout. Bloomberg. Retrieved
24 February, 2012, from http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=a1.KbcMbvIiA&refer=home
\36\ Torres, C., & Vekshin, A. (2007, March 14). Fed, OCC Publicly
Chastised Few Lenders During boom. Bloomberg. Retrieved 24 February,
2012, from http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=a6WTZifUUH7g&refer=us
\37\ Li, W., & Ernst, K. (2006). The Best Value in the Subprime
Market: State Predatory Lending Reforms. Center for Responsible
Lending. Retrieved 24 February, 2012 from http://
www.responsiblelending.org/mortgage-lending/research-analysis/
StateEffectsToolkit.pdf
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Poorly Regulated Credit Ratings Firms. The credit rating firms
enabled pension funds and other institutional investors to enter the
securitized asset game, by attaching high ratings to securities that
actually were high risk--as subsequent events revealed. The credit
ratings firms have a bias toward offering favorable ratings to new
instruments because of their complex relationships with issuers,\38\
and their desire to maintain and obtain other business dealings with
issuers. This institutional failure and conflict of interest might and
should have been forestalled by the SEC, but the Credit Rating Agencies
Reform Act of 2006 gave the SEC insufficient oversight authority. In
fact, under the Act, the SEC was required to give an approval rating to
credit ratings agencies if they adhered to their own standards--even if
the SEC knew those standards to be flawed.
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\38\ The CEO of Moody's reported in a confidential presentation
that his company is ``continually `pitched' by bankers'' for the
purpose of receiving high credit ratings and that sometimes ``we `drink
the Kool-Aid.' '' A former managing director of credit policy at
Moody's testified before Congress that, ``Originators of structured
securities [e.g., banks] typically chose the agency with the lowest
standards,'' allowing banks to engage in ``rating shopping'' until a
desired credit rating was achieved. The agencies made millions on
mortgage-backed securities ratings and, as one member of Congress said,
``sold their independence to the highest bidder.'' Banks paid large
sums to the ratings companies for advice on how to achieve the maximum,
highest quality rating. ``Let's hope we are all wealthy and retired by
the time this house of cards falters,'' a Standard & Poor's employee
candidly revealed in an internal email obtained by congressional
investigators.
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Other evidence shows that the firms adjusted ratings out of fear of
losing customers. For example, an internal email between senior
business managers at one of the three ratings companies calls for a
``meeting'' to ``discuss adjusting criteria for rating CDOs
[collateralized debt obligations] of real estate assets this week
because of the ongoing threat of losing deals.'' In another email,
following a discussion of a competitor's share of the ratings market,
an employee of the same firm states that aspects of the firm's ratings
methodology would have to be revisited in order to recapture market
share from the competing firm.
See, Weissman, R., & Donahue, J. (2009, March). Sold Out: How Wall
Street and Washington Betrayed America. Essential Information and
Consumer Education Foundation. Retrieved 24 February, 2012, from http:/
/wallstreetwatch.org/reports/sold_out.pdf
For purposes of evaluating the Regulatory Freeze and Jobs Act, the
details of the regulatory failures that led to financial crash and
Great Recession are less important than two overarching points: first,
the cause of the current jobs crisis was too little regulation and too
little enforcement, not too much regulation; and second, legislation
that impedes financial regulators from issuing rules to control an
overly complex, centralized and reckless financial sector risks
enabling another financial meltdown with the attendant devastating jobs
impact.
iii. regulatory protections make our country stronger, safer and more
just
Health, safety, environmental, financial and other regulatory
protections make our country stronger, safer and more just. The
Regulatory Freeze and Jobs Act would impede our ability to strengthen
our nation, adjust to changing problems and technologies, act on new
evidence of harms and threats to public and environmental well-being,
and leave our country more vulnerable to economic shocks like the Great
Recession.
As discussed above, one underlying premise of the Act that we
believe mistaken is that regulation impedes job creation. Another
premise that we believe deeply misplaced is that the country can afford
a lengthy regulatory moratorium.
Rhetorical debates and cost-benefit abstractions can obscure the
dramatic gains our country has made due to regulation. Regulation has:
Made our food safer.\39\
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\39\ American Public Health Association. (2010, November 30). APHA
Commends Senate for Passing Strong Food Safety Legislation. Retrieved
24 February, 2012, from http://www.makeourfoodsafe.org/tools/assets/
files/APHA_Senate-Passage-Food-Act_FINAL2.pdf
Saved tens of thousands of lives by making our cars
safer.\40\
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\40\ NHTSA's vehicle safety standards have reduced the traffic
fatality rate from nearly 3.5 fatalities per 100 million vehicles
traveled in 1980 to 1.41 fatalities per 100 million vehicles traveled
in 2006. Steinzor, R., & Shapiro, S. (2010). The People's Agents and
the Battle to Protect the American Public: Special Interests,
Government, and Threats to Health, Safety, and the Environment:
University of Chicago Press.
Made it safer to breathe, saving hundreds of
thousands of lives annually.\41\
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\41\ Clean Air Act rules saved 164,300 adult lives in 2010. In
February 2011, EPA estimated that by 2020 they will save 237,000 lives
annually. EPA air pollution controls saved 13 million days of lost work
and 3.2 million days of lost school in 2010, and EPA estimates that
they will save 17 million work-loss days and 5.4 million school-loss
days annually by 2020. See U.S. Environmental Protection Agency, Office
of Air and Radiation. (2011, March). The Benefits and Costs of the
Clean Air and Radiation Act from 1990 to 2020. Retrieved 23 February,
2012, from http://www.epa.gov/oar/sect812/feb11/fullreport.pdf.
Protected children's brain development by phasing out
leaded gasoline and dramatically reducing average blood
levels.\42\
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\42\ EPA regulations phasing out lead in gasoline helped reduce the
average blood lead level in U.S. children ages 1 to 5. During the years
1976 to 1980, 88 percent of all U.S. children had blood levels in
excess of 10mg/dL; during the years 1991 to 1994, only 4.4 percent of
all U.S. children had blood levels in excess of that dangerous amount.
Office of Management and Budget, Office of Information and Regulatory
Affairs. (2011). 2011 Report to Congress on the Benefits and Costs of
Federal Regulations an Unfunded Mandates on State, Local, and Tribal
Entities. Retrieved 23 February, 2012, from http://www.whitehouse.gov/
sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf
Empowered disabled persons by giving them improved
access to public facilities and workplace opportunities,
through implementation of the Americans with Disabilities
Act.\43\
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\43\ National Council on Disability. (2007). The Impact of the
Americans with Disabilities Act. Retrieved 24 February, 2012, from
http://www.ncd.gov/publications/2007/07262007
Guaranteed a minimum wage, ended child labor and
established limits on the length of the work week.\44\
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\44\ There are important exceptions to the child labor prohibition;
significant enforcement failures regarding the minimum wage, child
labor and length of work week (before time and a half compensation is
mandated). But the quality of improvement in American lives has
nonetheless been dramatic. Lardner, J. (2011). Good Rules: 10 Stories
of Successful Regulation. Demos. Retrieved 24 February, 2012, from
http://www.demos.org/sites/default/files/publications/
goodrules_1_11.pdf
Saved the lives of thousands of workers every
year.\45\
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\45\ Deaths on the job have declined from more than 14,000 per year
in 1970, when the Occupational Safety and Health Administration was
created to under 4,500 at present. See AFL-CIO Safety and Health
Department. (2011, April). Death on the Job: The Toll of Neglect.
Retrieved 23 February, 2012, from http://www.aflcio.org/issues/safety/
memorial/upload/dotj_2011.pdf Mining deaths fell by half shortly after
creation of the Mine Safety and Health Administration. Weeks, J. L., &
Fox, M. (1983). Fatality rates and regulatory policies in bituminous
coal mining, United States, 1959-1981. American journal of public
health, 73(11), 1278.
Saved consumers and taxpayers billions of dollars by
facilitating generic competition for medicines.\46\
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\46\ Through regulations facilitating effective implementation of
the Drug Price Competition and Patent Term Restoration Act of 1984
(``Hatch-Waxman''), including by limiting the ability of brand-name
pharmaceutical companies to extend and maintain government-granted
monopolies. Troy, D. E. (2003). Drug Price Competition and Patent Term
Restoration Act of 1984 (Hatch-Waxman Amendments). Statement before the
Senate Committee on the Judiciary. Retrieved 23 February, 2012, from
http://www.fda.gov/newsevents/testimony/ucm115033.htm
Protected the elderly and vulnerable consumers from a
wide array of unfair and deceptive advertising techniques.\47\
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\47\ See 16 CFR 410-460.
For half a century in the mid-twentieth century, and
until the onset of financial deregulation, provided financial
stability and a right-sized financial sector, helping create
the conditions for robust economic growth and shared
prosperity.\48\
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\48\ See Stiglitz, J. E. (2010). Freefall: America, free markets,
and the sinking of the world economy: WW Norton & Co Inc.; Kuttner, R.
(2008). The Squandering of America: how the failure of our politics
undermines our prosperity: Vintage.
These are not just the achievements of a bygone era. Regulation
continues to improve the quality of life for every American, every day.
Ongoing and emerging problems and a rapidly changing economy require
the issuance of new rules to ensure that America is strong and safe,
healthy and wealthy. Consider a small sampling of rules recently
issued, pending, or that are or should be under consideration, but
which would likely be (or would have been) blocked for a half a decade
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or more by the Regulatory Freeze and Jobs Act:
Fuel efficiency standards. Pursuant to the Energy
Policy and Conservation Act, the Energy Independence and
Security Act and the Clean Air Act, the National Highway Safety
and Transportation Agency and the Environmental Protection
Agency have proposed new automobile and vehicular fuel
efficiency standards. The new rules, on an average industry
fleet-wide basis for cars and trucks combined, establish
standards of 40.1 miles per gallon (mpg) in model year 2021,
and 49.6 mpg in model year 2025. The agencies estimate that
fuel savings will far outweigh higher vehicle costs, and that
the net benefits to society from 2017-2025 will be in the range
of $311 billion to $421 billion. The auto industry was
integrally involved in the development of these proposed
standards, and supports their promulgation. The Regulatory
Freeze moratorium would prevent the adoption of the new fuel
efficiency standards. While industry might adopt some fuel
efficiency improvements in the absence of regulation, such a
supposition is speculative and not supported by recent decades'
history, and it's a virtual certainty that overall fuel
efficiency performance will be substantially worse in the
absence of new regulation. The costs would be high not just to
the environment and human health, but to consumer pocketbooks.
Our economy will be more efficient and stronger with the rules
in place.
Food safety rules. In 2010, with support from both
industry and consumer groups, and in response to a series of
food contamination incidents that rocked the nation, Congress
passed the Food Safety Modernization Act. The Act should
improve the safety of eggs, dairy, seafood, fruits, vegetable
and many processed and imported foods, but its effective
implementation depends on rulemaking. FDA has proposed a series
of implementing rules establishing food safety programs and
standards. These are delayed at OMB--a problem in its own
right--but would be put on hold for likely half a decade under
the Regulatory Freeze legislation. As recent outbreaks of
listeria in cantaloupe and other products evidence, such a
delay will likely cost lives. Not so incidentally, it will also
have major harmful economic impact on the agriculture and food
industries and job creation and preservation in those
industries.
Energy efficiency standards. Pursuant to the Energy
Security and Independence Act, the Department of Energy
currently has proposed energy efficiency standards for a range
of products, including Department of Energy energy efficiency
standards for a range of products, including Metal Halide Lamp
Fixtures, Commercial Refrigeration Equipment, and Battery
Chargers and External Power Supplies, Walk-In Coolers and Walk-
In Freezers, Residential Clothes Washers.\49\ Under the
Regulatory Freeze act, adoption of all of these standards would
be delayed for a half decade. Such a delay would injure the
U.S. economy and undermine job creation. The Department of
Energy estimates the net savings from implementation of the
Energy Security and Independence Act to be $48 billion--$105
billion (in 2007 dollars).\50\ Meanwhile, the Federal Trade
Commission is undertaking a labeling rulemaking on energy
efficiency, to protect consumers from misleading and deceptive
claims about energy savings from product purchases.\51\ This
would likely be caught in the Regulatory Freeze act net, with
consumers significantly harmed and no plausible beneficial
impact on job creation or maintenance.
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\49\ List of Regulatory Actions Currently Under Review. Available
at: http://www.reginfo.gov/public/jsp/EO/eoDashboard.jsp
\50\ U.S. Department of Energy. (2007). Energy Independence and
Security Act of 2007 Prescribed Standards. Retrieved 23 February, 2012,
from http://www1.eere.energy.gov/buildings/appliance_standards/m/
eisa2007.html
\51\ Federal Trade Commission. (28 November 2011). Rule Concerning
Disclosures Regarding Energy Consumption and Water Use of Certain Home
Appliances and Other Products Required Under the Energy Policy and
Conservation Act (``Appliance Labeling Rule''). Federal Register. Vol.
76, No. 228. Retrieved 23 February, 2012, from http://ftc.gov/os/
fedreg/2011/11/111118appliancelabelingfrn.pdf
Rules to avert workplace hazards. By way of example,
consider the case of beryllium, a toxic substance to which
workers in the electronics, nuclear, and metalwork sector are
exposed. The current OSHA beryllium standard, based on science
from the 1950s, allows workers to be exposed at levels that are
ten times higher than those allowed by Department of Energy for
nuclear power plant workers. Public Citizen petitioned OSHA to
update the standard in 2001. In response, the agency began a
rulemaking in November 2002. It is a testament to major
problems in the regulatory process that OSHA has still not
issued appropriate rules. OSHA's estimates show that, if it
were enacted nine years ago, the standard would have prevented
4,194 cases of chronic beryllium disease (a potentially fatal
respiratory ailment), 5,413 cases of beryllium sensitization (a
condition that often leads to chronic beryllium disease) and
216 cases of lung cancer.\52\ There is indeed very good reason
under the current regime to be skeptical that this rule will be
issued in the next five years, even as failure to act causes
the loss of hundreds of lives among exposed workers and the
long-existing health evidence should compel action. Under the
Regulatory Freeze act, however, it is a certainty that the rule
would not be issued; workers would needlessly be exposed to
dangerous beryllium levels, and many would die or become
seriously sick as a result. A number of other needed and
pending OSHA rules would meet the same fate, with similar
deadly consequences for workers.
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\52\ U.S. Occupational Safety and Health Administration. (2007).
Preliminary Initial Regulatory Flexibility Analysis of the Preliminary
Draft Standard for Occupational Exposure to Beryllium.
Controls on Wall Street. As discussed above, the 2008
financial crash was a direct result of regulatory failures.
These failures including inadequate regulation of mortgages and
other consumer financial products, on the one hand, and
esoteric financial products and the markets on which they
trade, on the other. Another critical failure was permitting
the rise of too-big-to-fail financial institutions, traceable
both to the failure to enforce existing rules and policies, and
the repeal and nonissuance of important rules. Few people are
entirely satisfied with the Dodd-Frank legislation--Public
Citizen is highly critical of a number of important omissions--
but the Act does include an array of very important reforms
that will make our financial system fairer and more stable--if
properly implemented through robust rulemaking. To take three
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examples:
The Volcker Rule: While Dodd-Frank failed to
revitalize the Glass-Steagall separation between commercial and
investment banking, or to break up the too-big-to-fail
financial institutions, it does include the consequential
Volcker Rule. The Volcker Rule aims to prohibit institutions
regulated under the Bank Holding Company Act (now including the
largest remaining traditional investment banks, Goldman Sachs
and Morgan Stanley) from engaging in proprietary trading--the
kind of activity that exposes taxpayer-protected depository
institutions to excessive risk, creates institutional
complexity and conflicts of interest, and heightens the
fragility and riskiness of both individual institutions and the
overall financial system. The Volcker Rule is perhaps Dodd-
Frank's most important provision to contain the size of too-
big-to-fail institutions and reduce systemic complexity and
risk. The provision could not be implemented under the
Regulatory Freeze act.
Consumer protections: Dodd-Frank created the
Consumer Financial Protection Bureau, charging the agency with
the single mission of protecting consumers and empowering it to
issue new consumer protection rules. Given the very
considerable extent to which the financial industry has
constructed a business model around trickery and unjust fees,
there are many potential rules that it may issue. These may
concern matters including: requiring mortgage lenders to
consider borrowers' ability to pay; prohibiting banks from
charging excessive overdraft fees or tricking consumers into
opting in to unreasonable overdraft fee harvesting schemes;
eliminating forced arbitration provisions in consumer financial
contracts; banning unfair practices in the payday loan
industry; prohibiting kickbacks to auto dealers who steer
buyers into overpriced loans; stopping student loan companies
from tricking students into taking high-priced private loans
before they exhaust cheaper federal loans.\53\ Under the
Regulatory Freeze act, the CFPB would be shackled from
advancing these needed consumer protections.
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\53\ National Consumer Law Center. (2010). An Agenda for the
Consumer Financial Protection Bureau: Challenges for a New Era in
Consumer Protection. Retrieved 24 February, 2012, from http://
www.nclc.org/images/pdf/regulatory_reform/pr-cfpb-agenda.pdf
Position limits in commodities markets: Consumers
are rightfully angry about rising prices for gasoline. There
are many factors explaining the rise in price, and some of them
cannot be addressed by governmental action. But some can.
Speculation on the oil commodity markets is likely responsible
for 20 percent or more of the price of oil. Even Goldman Sachs
suggests that legal speculation may be adding 65-70 cents to
the price of a gallon of gasoline. Speculators, in other words,
are imposing a private tax on us, with the proceeds of this
Wall Street-imposed tax going to Wall Street interests, giant
oil companies and foreign oil interests. Dodd-Frank instructed
the Commodity Futures Trading Commission to impose position
limits on speculators, limiting the portion of the market that
could be controlled by individual traders. The CFTC,
unfortunately, has adopted an inadequate rule; and Wall Street
interests have sued the agency to block implementation even of
this inadequate rule. Under the Regulatory Freeze act, however,
we would be forced to accept the Wall Street-imposed private
tax for 5 years, at very significant cost to consumers, the
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overall economy and job creation.
Generic competition for biotech medicines. An
overlooked component of the Affordable Care Act was the
creation of a process for the Food and Drug Administration to
grant regulatory approval for generic biologic pharmaceutical
products--essentially generic versions of biotech medicines.
Because the molecular composition of biologic drugs is more
complicated than traditional medicines, FDA had adopted the
position that, with some exceptions, it could not grant
regulatory approval for biologics under its previously existing
authority. In an important provision of the Affordable Care
Act--supported by the biotech industry--FDA was explicitly
granted such authority. The provision wrongly grants extended
monopolies to brand-name biologic manufacturers, but belated
generic competition is better than none. Implementation of the
new regulatory pathway for biogenerics, however, depends on
issuance of rules by the FDA. Under the Regulatory Freeze act,
FDA would likely be prevented from such action for a half a
decade, pointlessly and needlessly costing consumers and
taxpayers billions of dollars.
Crib safety. Pursuant to the Consumer Product Safety
Improvement Act of 2008, the Consumer Product Safety Commission
(CPSC) finalized updated safety standards for cribs that halted
the manufacture and sale of traditional drop-side cribs,
required stronger mattress supports, more durable hardware and
regular safety testing. These new crib safety standards mean
``that parents, grandparents, and caregivers can now shop for
cribs with more confidence--confidence that the rules put the
safety of infants above all else.'' \54\ Under the Regulatory
Freeze act, the CPSC would have been prevented from taking such
action for half a decade, with the result that some families
would have been experienced the preventable tragedy of a lost
or seriously injured baby.\55\
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\54\ Consumer Federation of America. (2011, June 28). Senators,
CPSC, Consumer Advocates Applaud Strong Crib Safety Standards to
Prevent Infant Deaths and Injuries. Retrieved 24 February, 2012, from
http://www.consumerfed.org/pdfs/crib-standards-press-release-6-28-
11.pdf
\55\ U.S. Product Safety Commission. (2011, June 27). Statement of
Commissioner Nancy Nord On The Vote To Extend The Compliance Date For
The New Crib Standard. Retrieved 24 February, 2012, from http://
www.cpsc.gov/pr/nord06272011.pdf The crib standard is only the second
major rule issued by this agency in its entire history. (A major rule
has an impact on the economy of over $100 million. The only other CPSC
major rule dealt with the flammability of mattresses.)
In short, the costs of the Regulatory Freeze act would be very
high. The act would forestall needed progress across the American
panorama. If the legislation were made law, Americans would needlessly
be exposed to more dangerous products; we would needlessly be forced to
breathe dirtier air; we would needlessly be forced to spend more on
gasoline; we would needlessly be subject to financial tricks and rip-
offs; we would needlessly be forced to confront more hazardous
conditions at work; we would needlessly pay more for biologic
pharmaceuticals; we would needlessly be forced to live with a riskier
financial system and a greater risk of another financial implosion; and
much more. The act, in short, would weaken America.
iv. a regulatory freeze would impede everyday governmental action,
including issuance of bird hunting rules
The Regulatory Freeze for Jobs Act is vast in its scope, with
implications perhaps exceeding the intentions of its drafters. A
significant portion of the government's work depends on rulemaking and
regulation. As drafted, the legislation imposes a moratorium on all
``significant regulatory actions'' until unemployment drops to 6.0
percent. Significant regulatory action is broadly defined, and the
moratorium is subject to very limited exceptions: to combat ``an
imminent threat to health or safety or other emergency;'' to enforce
criminal laws; to ensure national security; or to comply with terms of
an international trade agreement.
Under this legislative rubric, many regulatory actions that do not
fit the popular conception of ``regulation'' would be halted. Consider
this selection of recent and prospective rules that would have been or
will be affected:
Bird hunting. Every year, the Fish and Wildlife
Service analyzes massive amounts of data and public comments to
determine the appropriate bird hunting season for each state.
The Migratory Bird Hunting; Late Seasons and Bag and Possession
Limits for Certain Migratory Game Birds rule \56\ tells hunters
which birds they can hunt, how many of them they can take,
where they can do it, and when the season begins. This is a
significant regulatory action that would be caught in the
Regulatory Freeze net.
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\56\ Fish and Wildlife Service. (24 September 2010). Migratory Bird
Hunting; Late Seasons and Bag and Possession Limits for Certain
Migratory Game Birds. Federal Register. Retrieved 23 February, 2012,
from: http://www.federalregister.gov/articles/2010/09/24/2010-23754/
migratory-bird-hunting-late-seasons-and-bag-and-possession-limits-for-
certain-migratory-game-birds
Stop loss pay for service members. In 2009,
Retroactive Stop Loss Special Pay Compensation \57\ rule was
implemented to pay back the debt we owe to soldiers who stayed
for prolonged periods in Iraq and Afghanistan. This rule pays
$500 per month of stop loss, and includes partial months. This
is a significant regulatory action that would be caught in the
Regulatory Freeze net.
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\57\ See, for example, U.S. Department of Defense. (16 April 2010).
Retroactive Stop Loss
Special Pay Compensation. Federal Register. Retrieved 23 February,
2012, from:
http://www.federalregister.gov/articles/2010/04/16/2010-8739/
retroactive-stop-loss-special-pay-compensation#p-29
Compensation for veterans. Agent Orange left many
returning soldiers returning from Vietnam with lifelong
debilitating illnesses. In 2010, the Department of Veterans
Affairs (VA) expanded the list of ailments \58\ attributable to
Agent Orange and for which veterans could receive benefits. The
VA also decided that it should create a schedule of back
benefits for Vietnam veterans still suffering from these newly
added diseases and for widows of sufferers. More than 85,000
Vietnam vets and their families will be eligible for these
benefits.\59\ The rule written by the VA will give retroactive
payments to sufferers of these newly added diseases and will
allow 69,957 previously denied living veterans to receive
payments that will greatly improve their living conditions.
This is a significant regulatory action that would have been
caught in the Regulatory Freeze net.
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\58\ U.S. Department of Veterans Affairs. Veterans' Diseases
Associated with Agent Orange. Retrieved 23 February, 2012, from: http:/
/www.publichealth.va.gov/exposures/agentorange/diseases.asp
\59\ U.S. Department of Veterans Affairs. (31 August 2010).
Diseases Associated with Exposure to Certain Herbicide Agents. Federal
Register. Retrieved 23 February, 2012, from: http://
www.federalregister.gov/articles/2010/08/31/2010-21556/diseases-
associated-with-exposure-to-certain-herbicide-agents-hairy-cell-
leukemia-and-other-chronic#p-81
Medicare reimbursement rates. Every year, the Centers
for Medicare & Medicaid Services publish new Medicare payment
schedules for provision of medical care by physicians,
hospitals, home health workers and others. These schedules are
significant regulatory actions that would be caught in the
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Regulatory Freeze net.
Immigration visas and fees. In 2010, the Department
of Homeland Security issued a new fee schedule for visas and
immigrant benefits \60\, and adopted a fee for travel
authorizations for nonimmigrant aliens entering the United
States under a visa waiver program.\61\ This schedule is a
significant regulatory action that would have been caught in
the Regulatory Freeze net.
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\60\ U.S Department of Homeland Security. (8 October 2010)
Department of Homeland Security: U.S. Citizenship and Immigration
Services Fee Schedule, GAO-11-104R. Retrieved 23 February, 2012, from:
http://www.gao.gov/decisions/majrule/d11104r.htm
\61\ U.S Department of Homeland Security. (20 August 2010)
Department of Homeland Security, U.S. Customs and Border Protection:
Electronic System for Travel Authorization (ESTA): Travel Promotion Fee
and Fee for Use of the System, GAO-10-1010R. Retrieved 23 February,
2012, from: http://www.gao.gov/decisions/majrule/d101010r.htm
Pell grants. In 2009, the Department of Education
issued new regulations concerning eligibility and other rules
relating to the issuance of Pell, TEACH, Academic
Competitiveness and National Science and Mathematics to Retain
Talent and other grants. These regulations are significant
regulatory actions that would have been caught in the
Regulatory Freeze net.\62\
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\62\ U.S. Department of Education. (23 November 2009). Student
Assistance General Provisions; Teacher Education Assistance for College
and Higher Education (TEACH) Grant Program; Federal Pell Grant Program;
Academic Competitiveness Grant Program and National Science and
Mathematics Access to Retain Talent Grant Program. Federal Register.
Retrieved 23 February 2012, from: http://www.gpo.gov/fdsys/pkg/FR-2009-
11-23/pdf/E9-28050.pdf
Pharmaceutical approval standards. Every five years,
Congress reauthorizes the Prescription Drug and User Fee Act
(PDUFA), which establishes the framework for Food and Drug
Administration approval of new medicines and for the level of
user fees to be paid by industry for FDA review, as well as the
Medical Device User Fee Act, which functions similarly for
medical devices. Both acts are set to be reauthorized this
year. Implementation of the legislation, which historically has
been supported by the regulated industries and is formally
negotiated with industry, depends on FDA regulation. Such
regulation likely would be a significant regulatory action that
would be caught in the Regulatory Freeze net.\63\
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\63\ U.S Department of Health and Human Services. (1 August 2011).
Prescription Drug User Fee Rates for Fiscal Year 2012. Federal
Register. Retrieved 24 February, 2012, from http://www.gpo.gov/fdsys/
pkg/FR-2011-08-01/pdf/2011-19332.pdf
Preventing prison rape. Pursuant to the Prison Rape
Elimination Act of 2003, the Attorney General has proposed
rules that aim to prevent prison rape. This regulation is a
significant regulatory action that would be caught in the
Regulatory Freeze net (although it might conceivably be subject
to a waiver if the president determined it necessary to enforce
criminal laws).\64\
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\64\ U.S. Department of Justice. (3 February 2011). National
Standards to Prevent, Detect, and Respond to Prison Rape. Federal
Register. Retrieved 23 February, 2012, from: http://www.gpo.gov/fdsys/
pkg/FR-2011-02-03/pdf/2011-1905.pdf
Medical examiner registry. Pursuant to the most
recent transportation act, the Federal Motor Carrier Safety
Administration aims to propose a rule to establish a national
registry of certified medical examiners responsible for
certifying that truck drivers meet physical qualification
standards. This regulation would be a significant regulatory
action that would be caught in the Regulatory Freeze net.\65\
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\65\ 49 CFR Ch. 111, Part 390 (1 October 2011). Federal Motor
Carrier Safety Regulations; General. Retrieved 23 February, 2012, from:
http://www.gpo.gov/fdsys/pkg/CFR-2011-title49-vol5/pdf/CFR-2011-
title49-vol5-part390.pdf
Family and medical leave for military service
personnel. The Department of Labor is proposing rules to ensure
the Family and Medical Leave Act is applied fairly to military
service personnel. This regulation would be a significant
regulatory action that would be caught in the Regulatory Freeze
net.\66\
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\66\ Proposed rule can be found at: U.S. Department of Labor. Wage
and Hour Division. (15 February 2012.) Notice of Proposed Rulemaking,
29 CFR Part 825 RIN 1215--AB76, RIN 1235--AA03. The Family and Medical
Leave Act. Federal Register. Retrieved 23 February, 2012, from: http://
www.regulations.gov/#!documentDetail;D=WHD-2012-0001-0001
These examples highlight the overreach of the Regulatory Freeze
act. As the regulatory policy debate has heated up, perhaps some of the
more textured understanding of how regulation works in practice--and
its centrality to government carrying out its core functions--has been
lost. As drafted, the Regulatory Freeze act would halt a wide range of
governmental programs and initiatives not likely to be the target of
the legislation's supporters. However, there is no obvious fix to this
problem; it is a direct result of the ill-advised broad brush approach
of the legislation.
v. strengthening the system of regulatory safeguards
to strengthen america
To say that it would be a grave error to impose a 5-year moratorium
on regulation is not to say that all is well with the regulatory
system. It is in need of substantial reform to ensure that it serves
the broad public interest, not the narrow commercial interests of
regulated corporations. Many of the high-profile examples of regulatory
failure in recent years--the Wall Street crash, the BP oil disaster,
the Massey mine explosion, and others--evidence both the need for
stronger rules to limit corporate wrongdoing, and stronger enforcement
of existing rules. Those examples of regulatory failure also highlight
the very serious problem of regulated industries exerting undue
influence over the regulatory process itself.
Congress could meaningfully improve the functioning of the
regulatory system by working to ensure stronger enforcement of existing
rules. In too many cases, it pays for corporations to violate the law,
because penalties for regulatory violations are too small. As one step
forward, Congress should act to make it a crime for businesses to
recklessly expose consumers or workers to deadly products or working
conditions.\67\ Congress should also increase the enforcement budgets
of regulatory agencies, and hold those agencies accountable for
enforcing the law. And citizens should be given some direct authority
to enforce regulatory standards, loosely following the model of the
False Claims Act.
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\67\ See, for example, the Dangerous Products Warning Act, H.R.
322, introduced by Rep. John Conyers.
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Congress should also prioritize addressing the problem of
regulatory capture and excessive corporate influence over the
regulatory process. Too many agencies are too cozy with the industries
they are supposed to regulate. These relationships undermine effective
rulemaking and enforcement, and fuel public frustration with our
government. Progress could be made in addressing regulatory capture and
undue industry influence with stronger revolving door (and reverse
revolving door) rules for regulators. Another positive step would be to
prevent regulated parties from meeting with staff at the Office of
Management and Budget's Office of Information and Regulatory Affairs
(OIRA) about pending rules, or to adopt new rules relating to such
meetings.\68\
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\68\ The Center for Progressive Reform has documented that OIRA
meets with regulated parties five times more frequently than with
public interest representatives; and that rules that were the subject
of meetings were 29 percent more likely to be changed during the review
than those that were not the subject of meetings. Steinzor, R., Patoka,
M., & Goodwin, J. (2011). Behind Closed Doors at the White House: How
Politics Trumps Protection of Public Health, Worker Safety, and the
Environment. Center for Progressive Reform. Retrieved 24 February,
2012, from http://www.progressivereform.org/articles/
OIRA_Meetings_1111.pdf
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It is not the position of Public Citizen that all is well with the
regulatory process. But for all its flaws, the regulatory system has
made, and continues to make, our country stronger, safer and more
prosperous. We need to improve the regulatory system, not bring new
rulemaking to a halt.
__________
Mr. Coble. Thank you, gentlemen, for your testimony. We try
to apply the 5-minute rule to ourselves as well. So if you can
keep your responses terse, that would help us beat the red-
light illumination. The gentleman from Tennessee.
Mr. Cohen. Thank you. Thank you, Mr. Chairman. Let me ask
Professor Taylor first. We have had great periods of commercial
success, and bullish periods. The Clinton years were very
economically robust. Did we have regulations during that time
period?
Mr. Taylor. Absolutely, we had regulations.
Mr. Cohen. And they didn't impede job growth, did they?
Mr. Taylor. Well, I think one thing that is very important
about the period of the--I referred to in the early 1980's,
was, there was a huge movement there to try to deregulate
certain industries. The mode began in the Carter
administration, and the airlines, and Fred Kahn. There was an
effort to try to rationalize regulations. There was an effort
to try to deal with regulatory capture. The important work done
by economists like Stigler, who won a Nobel Prize, pointed out
this regulatory capture, and that enabled the deregulation
movement of many industries to occur.
Mr. Cohen. Do you think that the deregulation of airlines
is a good thing? Have you traveled lately?
Mr. Taylor. I think that deregulation of airlines is a good
thing, because I can travel across the country at a much lower
rate than I could at that time, and there is other reasons too.
Mr. Cohen. You don't travel our of Memphis, sir. When you
are a hub town, and you are basically a company town, we have
got the highest rates of any place in the country. And back
when you had Northwest and you had Southern, and you had
Republic, and you had Delta, and you had American, and you had
TWA, and you had Fly Eastern, and you know, any of those folks,
you had competition. That kept prices down. That is America's
competition. Deregulation, I would submit, has not been the
panacea that some thought it was--during the 1990's, and
regulations didn't impede that expansionism, did it not?
Mr. Taylor. I think when you have a lack of enforcement of
antitrust or a competition policy you are going to get problems
like this. And of course, there are some routes now where there
is very high prices. So I think the advantage of deregulating,
when you don't need deregulations, is you let the markets work
and the prices are determined and there the new routes that
would not have existed if there had not been the regulation.
Now, to answer your question, because I think in some sense,
what happened in the 1980's, is an example of what can happen
if you try to more rationalize these regulations more than we
have been doing recently.
We are now, in my view, moving in the other direction. And
the fear that many businesses, economists have, that that
moving of the direction is actually holding us back. Again,
this recovery----
Mr. Cohen. A great example of what you are promoting or
suggesting is that we drop the regulations, we are going to
have this business boon, because businesses will be certain, is
what you are saying.
Mr. Taylor. No, I don't want to drop regulations. Excuse
me----
Mr. Cohen. Well, you would until the rates got down to 6
percent, until the unemployment rate gets to 6 percent under
this bill, would it not be a moratorium on regulations?
Mr. Taylor. Seems to me this bill is a freeze, while we
have this terrible problem with recovery. After the freeze, you
should put in the kind of reforms that have been discussed by
my colleagues. I would believe that is something that you
should rule on right now.
Mr. Cohen. And I understand what you are saying, Professor
Taylor, and I respect you. I think you have a tremendous
background, and you are acclaimed, and I can't compete with you
really. But you know, I just had an Aspen Institute seminar on
China. China has got this great booming economy. It is
unbelievable what they are doing. But they have like no
regulations. And children have got insects--or not insects, but
some type of substances in their intestines to where they can't
absorb their food because they are eating food that is not
well-regulated and it is not safe food, and the air is awful,
and the conditions in China--so if you had to take away
regulations, how do you make up for it when you put all of that
in the air, or have those children that don't get any nutrition
because you don't have regulations. And we have the same thing
here with air quality, and food quality, et cetera.
Mr. Taylor. Seems to me that this bill here, allows for a
lot of exceptions for things that have been mentioned already.
The intent is for this to be temporary, or a period where
people can take a breather, a time out, assess whether this is
damaging the economy. And the issues you are raising,
obviously, everyone wants to have a way to regulate in a
sensible way. There is an important role for regulation in an
economy. Economists have ways to describe when you should
regulate, when you shouldn't. There is a cost-benefit analysis,
I think the cost-benefit analysis should be done in a little
more independent way than it is now.
Mr. Cohen. I thank you for your testimony. My time is about
to run out. Professor Meltzer, I am going to follow up on the
question that I think was attempted to ask you. Duke, UCLA? Who
do you pull for?
Mr. Meltzer. Pardon me?
Mr. Cohen. Duke, UCLA? Who do you pull for? Who is your
basketball team?
Mr. Meltzer. Toss a coin.
Mr. Cohen. Toss a coin. I got you. Thank you, I yield back
the balance of my time.
Mr. Coble. I thank the gentlemen. Mr. Taylor, what do you
mean by the uncertainty that arises from new regulatory
authority, such as from the Administration's health care and
financial reform legislation? How can this uncertainty, as you
say, hold back investment and firm expansion and how does this,
in turn, affect job creation.
Mr. Meltzer. I think that is to me?
Mr. Coble. No, Mr. Taylor.
Mr. Taylor. So, the financial firm regulations, now they
are writing the rules. In normal periods, the Federal Reserve
and other regulatory agencies would have a period of time to
write rules. Now, they have roughly 200 they have to write. An
example is the so-called Volcker rule, which was in the
legislation, well-intentioned, to try to reduce the risk-taking
of the large financial institutions. But the implementation of
those rules, or rulemakings, 300 pages, there is thousands of
pages of remarks put in place, so people don't know how that is
going to be applied. The banks don't know how it is going to be
applied. People who would compete with the banks don't know how
it is going to be applied.
So that is a huge degree of uncertainty that that
legislation is causing. And of course, the alternatives, simply
just to try to raise capital requirements on the financial
institutions. So I think that is a big one in terms of giving
an example of what you are looking for.
Mr. Coble. Thank you, Mr. Taylor. Were you finished Mr.
Taylor? I didn't mean to cut you off.
Mr. Meltzer. Were you finished?
Mr. Taylor. It is off now.
Mr. Weissman. Were you finished with your answer?
Mr. Taylor. Yes.
Mr. Coble. Mr. Melter, you cite housing and the mortgage
market as examples of how regulators are undermining recovery.
Describe that in a little more detail, if you would.
Mr. Meltzer. Well, on one day, the Administration says we
want more mortgages issued. We really want the banks to issue
more mortgages. A few days later, or even on the same day, some
other agency of government sues the mortgage lenders for some
practice that they had in the past. Now, they may have
committed some egregious action, but that is not going to get
more mortgages. So that creates uncertainty. Are there going to
be more mortgages? Are we going to encourage the mortgage
lenders to issue mortgages, or are we going to encourage the
mortgage lenders to pay for the abuses, alleged abuses that
occurred in the past? Is that going to get us more housing? No,
it is not. It is going to get us less, fewer mortgages, and
less housing. That is an example. Here is another example, if I
may.
We have just seen in the last couple of years the
uncertainties created by the regulation that says women under
40, or at the age of 40, should not be given breast
examinations. Well, the government is deciding that. Many women
think that is not a good idea. The same thing is happening with
contraceptives. The same thing is going to happen with the
regulation, with hundreds of regulations that are going to come
down under the Health Care Act. The same thing is happening--
the K Street lawyers are descending on the Administration
agencies, like the Fed and Treasury, to get them to change the
legislation. Even Mr. Volcker has complained about what is
happening to the Volcker bill. Those are some of the
uncertainties, and there are many, many of them.
Mr. Coble. I thank you, Professor. Mr. Weissman, some
indicate that regulations do not inhibit job creation. And I am
not--I probably don't come down on that side. The President, in
his State of the Union address, identified himself as a less
prolific regulator than was President Bush. Can you square me
on that? I mean, on the one hand, folks say that the
regulations inhibit job creation, but yet the President claims
that he is going to be a less prolific regulator.
Mr. Weissman. Well, as you know, Mr. Chairman, I don't
represent the Administration. However, I believe that the
President's position is, and I think it may have changed. At
the time that he said that, I think that over the same time
period he had issued fewer regulations than President Bush had.
Be that as it may, I mean, obviously, the goal of issuing
regulations is to advance social objectives, including
financial protection, but not to issue regulations for
regulations sake. And anyone can make up a regulation that
would interfere with regular business operations, and I think
the President was saying, look, we don't make that. Our
regulations are as careful as we can possibly do them. We go
out of our way, which I believe to be true, to limit the impact
and the complexity that we are imposing on business. There are
surely examples where there is failure of that. But I think if
you actually look at the regulations that are issued, and look
especially at the rationales, the cost-benefit analysis, and so
on, that are issued for those regulations, you have to be
impressed with the care with which regulators generally put
forward those rules.
Mr. Coble. I thank you, Mr. Cohen. I see that my red light
has illuminated. The distinguished gentlemen from Georgia, Mr.
Johnson. You are recognized for 5 minutes.
Mr. Johnson. Thank you, Professor Meltzer. I see that you
have been highly critical of the Federal Reserve's decision to
rescue AIG.
Mr. Meltzer. Indeed.
Mr. Johnson. And was it--do you think it was because of
regulations that AIG failed, or was it because of lack of
regulation?
Mr. Meltzer. I don't think that regulation was a central
issue.
Mr. Johnson. Don't you agree, though, that----
Mr. Meltzer. The regulation was a problem.
Mr. Johnson. Well, you must then agree that it was the lack
of regulation.
Mr. Meltzer. No, I think that it----
Mr. Johnson. Well, what was it then? Either too much
regulation, or not enough.
Mr. Meltzer. The core problem was that both
Administrations, that is, Republican and Democrat, believed
that they were doing good things by encouraging housing for
under-housed minorities.
Mr. Johnson. Well, let's look at--is it a lack of
regulation that----
Mr. Meltzer. No, the regulation----
Mr. Johnson [continuing]. That has gotten into problems?
Mr. Meltzer. Mr. Johnson, there is an excellent book which
I recommend to you by the--one of the editors of The New York
Times, that goes through what happened when Jim Johnson, who
had been the campaign chairman for Walter Mondale, became the
head of an agency that was, at that time, 50 or 60 years old.
The Federal--Fannie Mae. He then expanded Fannie Mae into doing
many, many things that it had not done before, and he found----
Mr. Johnson. Including, including----
Mr. Meltzer [continuing]. People in the private sector.
Mr. Johnson [continuing]. Including taking it out from
under the Federal Government.
Mr. Meltzer. Well, that happened in the Johnson
administration.
Mr. Johnson. Well, I mean, so, now----
Mr. Meltzer. In the Johnson administration.
Mr. Johnson. Let's get our facts straight now. Tell me
something. Do you still agree that Lehman Brothers should have
been allowed to bite the dust?
Mr. Meltzer. I am sorry, that who?
Mr. Johnson. Lehman Brothers?
Mr. Meltzer. Lehman. I believe that Lehman, we would have
been better off if Lehman had gone into bankruptcy. That was
fine. What we shouldn't do----
Mr. Johnson. What about GM?
Mr. Meltzer. What was a mistake--the mistake was not
letting them go into bankruptcy. The mistake was that it had
bailed out Bear Stearns, and that it convinced the people that
the game was going to be played the way it usually was, and
then suddenly, without any warning, the rules were changed.
Mr. Johnson. And there was a failure of regulatory
authority basically, is what you are talking about.
Mr. Meltzer. Yes, there was a failure.
Mr. Johnson. Lack of regulations, in other words----
Mr. Meltzer. Not lack of regulation. It was the failure of
the regulators.
Mr. Johnson. Well, and you are not blaming any of that on
President Obama, are you?
Mr. Meltzer. No, President Obama had nothing to do with
what happened in 2008. He was in the Senate at that time.
Mr. Johnson. Okay, well, for 2 years. But Professor Taylor,
you have indicted the current Administration, it would seem,
for the lack of vitality in the recovery. In fact, you
criticized the recovery as being kind of just piddling, I think
you would agree to, but you would also agree with me, would you
not, that there had been 27 straight quarters of economic
growth during the last 27 months? Would you agree with that?
Mr. Taylor. We have had 10 quarters of positive economic
growth. The problem is the growth rate is only 2.4 percent.
Mr. Johnson. Now, is that because of regulations, or is it
because of Republican obstruction of the Congress, and the
President's initiatives to create a more stimulating
environment?
Mr. Taylor. The regulations are part of it, I believe. But
in addition, you know, the stimulus packages and the cash for
clunkers and the first-time home buyers, which were all efforts
to stimulate, I don't think stimulated, but, in fact, had----
Mr. Johnson. How do you account for the 2.--how do you
account for the 10.5 percent unemployment rate that has been
reduced now to 8.5 under the Obama administration? How do you
account for that?
Mr. Taylor. Well, unfortunately, a big part of that is
people dropping out of the labor force in unprecedented
amounts. And I----
Mr. Johnson. It was under President Reagan, as soon as he
came into office, that they changed the benchmarks for
measuring unemployment insurance. Isn't that--the unemployment
rate. Isn't that correct?
Mr. Taylor. Well, this recent reduction in the labor force
doesn't----
Mr. Johnson. No, no, no, no. I am talking about changing
the formula to determine who is employed, who is unemployed,
and how much that rate is based on a number of different
factors. That was changed as soon as President Reagan came into
office to make his numbers look better, and now you are going
to judge President Obama on the statistics that we have been
relying upon since 1980, and that just doesn't seem fair to me.
Mr. Taylor. I don't think the issue is measurement of the
statistics. I think if you look at the growth rates of GDP.
Again, GDP has grown 2.4 percent in this recovery, 5.9 percent
in early recovery.
Mr. Johnson. We didn't have a obstruction of Congress,
though, back then.
Mr. Taylor. But I don't think it is a partisan issue. I
think it is a policy issue.
Mr. Johnson. Well, sometimes it is political.
Mr. Taylor. Sometimes policies are good in different
Administrations and sometimes they are bad. I do not think it
is partisan. I have lots of examples where Republicans don't
follow good policy, lots of examples where Democrats follow
good policy. And so I do not think this is partisan at all. I
think it is a question of resolve to find the good policies. In
the late 1990's during the Clinton administration, we didn't
have all of these stimulus packages. We were able to reduce the
role of the Federal Government in regulatory areas, and for
that matter, for example, the welfare reform. I think if you go
back into the 1970's, a very poor time with the economy,
Republicans, President Nixon, President Ford were there for
part of that time. So I think it is a mistake to think of this
as partisan. I honestly do. There are differences in the policy
which can you learn from, and some work, and some don't.
Mr. Coble. The gentleman's time is expired. The
distinguished gentlemen from Michigan, Mr. Conyers.
Mr. Conyers. Thank you, Chairman Coble. I would like to
review with Attorney Weissman, the five points that he
summarized against the conversation and interchange that we
have had with our witnesses, and with the Members on the
Subcommittee. The whole idea of strengthening the economy,
creating jobs, safer--safer conditions for citizens, the
unintended impeding of everyday government action, and the
strengthening of America.
And the strengthening of America through regulatory
safeguards. How has some of our discussion failed to take into
consideration much, if not almost all of the points that you
have made?
Mr. Weissman. Well, I think that the theory Professor
Meltzer and Professor Taylor is that regulatory uncertainty is
a significant problem for job creation and preservation. I
think that is not true. And I think the best evidence for that
is purely theoretical and almost philosophical, and existing
empirical evidence doesn't suggest it. And I think the
discussion of concrete examples is very helpful for elaborating
on that in a variety of ways. If you look at some of the
examples that were highlighted, and I know they could point to
others as well. The Volcker rule, for example is a very
important regulation being proposed. I believe it has flaws
too, for some of the reasons that Professors Meltzer and Taylor
say. It is overly complicated. It would be much better if it
was simpler. But it is a structural remedy for a very serious
problem.
It does, for sure, creates some uncertainty in the
financial sector, but that doesn't mean there is any connection
to job creation. I don't know what the story is about that. The
standard for breast examinations, I am not even sure it
constitutes a significant regulatory action as defined by the
bill. I think one would be very hard placed to say how that has
anything to do with economic uncertainty and job creation. The
fact that the Justice Department is considering suing mortgage
lenders for their rampant criminality in the mortgage market or
that State AGs are doing that, first of all, is a positive
thing. And it ultimately will be very important, I believe, for
reducing principal owed, actually by mortgage borrowers, and
expanding the economy. It has nothing to do with uncertainty in
the economic market and impeding job creation. That is on the
one hand.
On the other hand, there is a failure to address what the
bill would actually do. And what the bill would actually do is
block for 5 years with almost no relevant exceptions the
issuance of new health, safety, environmental, and financial
protections. It would also, not so trivially, undermine the
ability of the government to do what it does on a day-to-day
basis, including revamp the Medicare payment system every year.
So I think there is a philosophy that I disagree with.
There is a theoretical construct about what the bill would do
and why it should be issued, and I think that is misguided and
not supported by the evidence on the one hand.
On the other hand, when you look at the actual details of
what is at stake, you are looking at very serious things, both
in the health safety environmental financial protection realm,
traditionally what we think of regulation, but also a lot of
what the government just does. I think it is a huge mistake out
of a philosophical commitment to commit that error.
Mr. Conyers. Mr. Meltzer, I would like to recognize you at
this point.
Mr. Meltzer. It isn't what I say about uncertainty, the
Harvard Business graduates, they are the people who make these
decisions. They say this creates uncertainty, they say it
deters hiring, that is their view. They are the people who do
the hiring. I don't hire anybody except one secretary. They
hire hundreds of thousands of people. They are the leaders of
American industry. They say it causes a problem.
Second, I would like to say this bill does not prevent the
Administration from doing anything that it believes is in the
public interest. All it has to do under the bill is notify the
Congress that that is what it is asking and then the Congress
has a right as it should have, to make a judgment as to whether
it prefers to do what the Administration is asking, or whether
it prefers to avoid the regulation. It doesn't hamper
regulation. It is wrong to think of the bill as hampering
regulation. It may delay regulation, but we have gotten along
for hundreds of years without some of these regulations, so it
is probable that we can survive very well for another 5 years.
Mr. Conyers. Could I ask for 2 additional minutes, sir?
Mr. Coble. The gentleman is allowed 2 additional minutes.
Mr. Conyers. And I would just like to return to Attorney
Weissman because I haven't heard anything about what Harvard
said, with all due respect for Harvard, but let me yield to you
for the last comments in this hearing.
Mr. Weissman. Well, I will avoid the impulse to make some
comment about Jeremy Lin and the basketball team and things
like that. I think that Professor Meltzer is misreading the
bill. The bill provides for regulatory a regulatory freeze
until unemployment hits 6.0, that is it, that is the bill.
Mr. Conyers. You know----
Mr. Weissman. There are exceptions that are permitted that
is relatively routine for implementation of provisions required
under international trade--legislation to implement
international trade agreements. You could imagine that they
would be easily granted in the case of national security as
articulated in the legislation. But the requirement, as regards
health and safety, is necessary because of an imminent threat
to health or safety or other emergency. And there is quite a
bit of jurisprudence on this, plus the plain language of the
statute. Imminent threat means immediate, right now, something
that has to be done to prevent something that is otherwise
going to happen in a very near term with a high degree of
certainty. That is just not why most regulation takes place.
Take the example of food safety, we issue food safety rules
usually because there has just been an outbreak of some
problem, but not because we think it is about to happen again.
You can go down the case of crib safety or auto safety or
environmental protection or preventing another financial
crisis, on and on, you go down the list--it will almost never
meet the standard of an imminent threat to health or safety or
other emergencies. I believe the proper interpretation of this
bill is that will be a roughly 5-year moratorium on all health,
safety, environmental, financial, et cetera, protections.
Mr. Conyers. Well, I thank you very much. And I think we
need to examine the record as closely as we can, Chairman
Coble, because there is a great discrepancy of interpretation
about the measures as it has been brought forward. I thank you
for the additional time.
Mr. Coble. I thank the gentleman, without objection I want
to enter into the record a letter from the U.S. Chamber of
Commerce endorsing this bill.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Mr. Coble. Gentlemen, thank you all for being with us, we
appreciate your testimony today. Without objection, all Members
will have 5 legislative days to submit to the Chair additional
written questions for the witnesses, which we will forward and
ask the witnesses to respond as promptly as they can do so with
their answers that may be made a part of the record.
Without objection, all Members will have 5 legislative days
to submit any additional materials for inclusion in the record.
And with that, again, I thank the witnesses and this hearing
stands adjourned.
[Whereupon, at 5:11 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, and Ranking Member, Committee
on the Judiciary
Today's hearing marks the ninth one held to date during this
Congress on the subject of so-called ``regulatory reform.''
A common argument made by my friends on the other side of the aisle
at nearly all of these hearings is that regulations somehow depress job
creation.
H.R. 4078, the ``Regulatory Freeze for Jobs Act of 2012,'' clearly
attempts to link regulations with employment by preventing agencies
from engaging in significant regulatory actions if the average monthly
unemployment rate exceeds 6% in any quarter.
Let me explain why H.R. 4078 represents the ultimate in legislative
foolhardiness.
First, the bill fails to acknowledge the fact that regulations play
a critical role in ensuring the health and safety of Americans as well
as to the economic well-being of our Nation.
By imposing a moratorium on significant regulatory action, H.R.
4078 would prevent agencies from fulfilling the job that we in Congress
entrusted them to do, namely, to ensure the safety of the foods we eat,
the cars we drive, and the places where we work.
As Cass Sunstein, who heads the agency charged with reviewing
federal regulations, recently observed:
``A moratorium would not be a scalpel or a machete, it would be
more like a nuclear bomb, in the sense that it would prevent
regulations that . . . cost very little, and have very
significant economic or public health benefits.''
The proponents of this legislation could not possibly be intending
to jeopardize the health and safety of Americans in order to pursue an
anti-regulatory political agenda, but I'm afraid that would be the
exact practical effect of H.R. 4078.
Second, there is absolutely no credible evidence establishing that
regulations have any substantive impact on job creation.
Last year, the Majority's own witness testified before this
Subcommittee that the ``focus on jobs . . . can lead to confusion in
regulatory debates'' and that ``the employment effects of regulation,
while important, are indeterminate.''
The truth is that regulations can, in fact, lead to job creation.
And, here are just a few examples:
A pending regulation limiting the amount of airborne
mercury will not just reduce the amount of seriously toxic
pollutants, but create as many as 45,000 temporary jobs and
possibly 8,000 permanent jobs, as the New York Times noted last
week.
Heightened vehicle emissions standards have spurred
clean vehicle research, development and production efforts
that, in turn, have already generated more than 150,000 jobs at
504 facilities in 43 states across the U.S.
It should, therefore, not come as a surprise that Bruce Bartlett, a
former senior Republican Advisor in the Reagan and George H.W. Bush
Administrations, says that there is ``no hard evidence'' that
regulations stifle job creation and that it's simply being ``asserted
as self-evident and repeated endlessly throughout the conservative echo
chamber.''
And, finally, this bill will result in greater, not less, business
uncertainty. In fact, it will increase the cost of doing business.
By its own terms, H.R. 4078 makes the regulatory process dependent
on the national unemployment rate, which, as we all know, can fluctuate
from quarter to quarter for any number of reasons, creating a
tremendous amount of regulatory uncertainty for businesses.
Factors that can depress employment include a devastating terrorist
attack, a world-wide fuel shortage, or some cataclysmic natural
disaster.
So how is a company to plan in a regulatory regime that would
start, then stop, and then at some indeterminate point re-start, and
then possibly stop all over again, all as a result of outside events?
Even if we were to accept the premise that regulatory uncertainty
is currently a problem, there is no evidence that it is a significant
problem.
As Minority witness Professor Sidney Shapiro testified before this
Subcommittee last year, ``All of the available evidence contradicts the
claim that regulatory uncertainty is deterring business investment.''
This also explains why a July 2011 Wall Street Journal survey of
business economists found that the ``main reason U.S. companies are
reluctant to step up hiring is scant demand, rather than uncertainty
over government policies.''
Similarly, a September 2011 National Federation of Independent
Business survey of its members found that ``poor sales''--not
regulation--is the biggest problem.
Indeed, the Main Street Alliance, an small business organization,
observes: ``In survey after survey and interview after interview, Main
Street small business owners confirm that what we really need is more
customers--more demand--not deregulation.''
And, we cannot ignore the fact that the lack of regulation can lead
to greater costs for industry.
Take, for example, the disastrous BP oil spill that occurred a
couple of years ago.
New regulations intended to prevent another such spill will cost
the deep water drilling industry about $180 million. But compare that
figure with the cost of one well blowout: $16.3 billion.
This bill attempts to deal with a concern that is already being
addressed by the current Administration.
The Obama Administration has undertaken a series number of
innovative initiatives to ensure that the regulations it approves
result in net savings.
For instance, the net benefits of regulations issued by this
Administration in three fiscal years exceed $91 billion, which is more
than 25 times the net benefits of regulations issued by the Bush
Administration for a comparable period.
Rather than pursuing solutions for problems that don't exist, we
should be using the resources of the Judiciary Committee to address
real problems, like the ongoing home foreclosure crisis.
And, with respect to the real problem of unemployment, our
Committee should be promoting real solutions instead of discussing
solutions that are in search of a problem.
Prepared Statement of the Honorable Steve Cohen, a Representative in
Congress from the State of Tennessee, and Ranking Member, Subcommittee
on Courts, Commercial and Administrative Law
H.R. 4078, the ``Regulatory Freeze for Jobs Act of 2012,'' is a
blunt instrument designed to respond to a mistaken belief--namely, that
there is a purported link between regulations and unemployment.
The bill would prohibit agencies from engaging in any significant
regulatory action until the average monthly unemployment rate for one
quarter reaches 6% or less.
The bill also provides for judicial review of agency action,
including presidential determinations that certain circumstances exist
that ought to permit significant regulatory action even when it is
otherwise prohibited under this bill.
Finally, the bill requires courts to award attorneys fees and costs
to small businesses whenever an agency changes its position regarding a
significant regulatory action that is a subject of a lawsuit,
regardless of whether the change in agency position resulted from the
filing of the lawsuit.
H.R. 4078 is premised on the false assertion that regulations
undermine job creation. Proponents of anti-regulatory legislation have
asserted this again and again in favor of such measures, yet they have
never provided evidence of such a link. At best, all I have ever heard
in support of this assertion are anecdotes, and anecdotes are not
evidence.
Indeed, even one of the Majority's own witnesses from a hearing
last year testified before us that, at most, the effect of regulations
on employment was ``indeterminate.''
Based on a review of their written statements, the two Majority
witnesses today also do not offer evidence of an actual link between
unemployment and regulation. At best, they hang their arguments on the
unsupported notion that the creation of new rules creates
``uncertainty'' that causes businesses to hesitate in hiring.
Yet survey after survey of businesses and economists has shown that
regulations have little to do with a lack of hiring. Instead, they
overwhelmingly point to a lack of demand among consumers as the primary
culprit.
For instance, the Wall Street Journal surveyed business economists
last summer and found that the ``main reason U.S. companies are
reluctant to step up hiring is scant demand, rather than uncertainty
over government policies.''
Likewise, the National Federation of Independent Business found
from a survey of its members that 45% cited faltering sales as the
biggest factor in dampening business confidence. Only 10% of NFIB
members identified ``regulations'' as a factor.
Moreover, regulatory failure is more harmful to the economy than
the existence or creation of new regulations.
Proponents of H.R. 4078 and other anti-regulatory measures seem to
forget that our current employment troubles can be traced to a lack of
adequate regulation of the financial services and housing industries,
which allowed for reckless private sector behavior that, in turn, led
to the 2008 financial crisis and the Great Recession, the most severe
economic recession since the Great Depression.
In short, there is a far greater economic cost to stopping agencies
from regulating than there is to allowing new regulations to take
effect.
In addition to problems with its philosophical underpinnings, H.R.
4078 raises a number of troubling questions
First, when could non-exempt significant regulatory actions
commence? While economists can take educated guesses as to when the
quarterly unemployment rate will reach 6%, at best it would be just
that--a guess.
Second, what happens when the quarterly unemployment rate reaches
6% in one quarter, and becomes 6.1% in the next? By H.R. 4078's terms,
agencies potentially would have to re-freeze significant regulatory
actions after one quarter.
Third, what happens when the quarterly unemployment rate reaches
6.1% in one quarter? Should businesses start preparing for a slew new
regulations to go into effect in the next quarter in anticipation of
the unemployment rate reaching 6%?
Fourth, with respect to judicial review of presidential waiver
determinations, what would be the standard of review that a court
should apply? Would the President be required to keep a record of his
decisionmaking process, to be reviewed by the court? Does this judicial
review provision violate separation of powers and, in certain
instances, executive privilege?
Fifth, with respect to the attorney's fee provision, why is there
no link between the mandatory award of attorney's fees and costs to
small businesses, on the one hand, and the change in agency position
with respect to the significant regulatory action? The language of this
provision does not require the agency to have changed its position
because of the filing of the civil action.
I hope the witnesses will address these questions thoroughly. I
thank them for being here today and eagerly await their answers.
Letter from the Coalition for Sensible Safeguards
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Response to Post-Hearing Questions from Robert Weissman, President,
Public Citizen
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Material submitted by the Honorable Steve Cohen, a Representative in
Congress from the State of Tennessee, and Ranking Member, Subcommittee
on Courts, Commercial and Administrative Law
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]