[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
 OFFICE OF INFORMATION AND REGULATORY AFFAIRS: FEDERAL REGULATIONS AND 
                           REGULATORY REFORM

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                           REGULATORY REFORM,
                      COMMERCIAL AND ANTITRUST LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 30, 2013

                               __________

                           Serial No. 113-52

                               __________

         Printed for the use of the Committee on the Judiciary


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



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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT, 
LAMAR SMITH, Texas                       Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama              ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
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                     JUDY CHU, California
TED POE, Texas                       TED DEUTCH, Florida
JASON CHAFFETZ, Utah                 LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania             KAREN BASS, California
TREY GOWDY, South Carolina           CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada                  SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, FLORIDA
JASON T. SMITH, Missouri

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                   SPENCER BACHUS, Alabama, Chairman

                 BLAKE FARENTHOLD, Texas, Vice-Chairman

DARRELL E. ISSA, California          STEVE COHEN, Tennessee
TOM MARINO, Pennsylvania             HENRY C. ``HANK'' JOHNSON, Jr.,
GEORGE HOLDING, North Carolina         Georgia
DOUG COLLINS, Georgia                SUZAN DelBENE, Washington
JASON T. SMITH, Missouri             JOE GARCIA, Florida
                                     HAKEEM JEFFRIES, New York

                      Daniel Flores, Chief Counsel

                      James Park, Minority Counsel


                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 30, 2013

                                                                   Page

                           OPENING STATEMENTS

The Honorable Spencer Bachus, a Representative in Congress from 
  the State of Alabama, and Chairman, Subcommittee on Regulatory 
  Reform, Commercial and Antitrust Law...........................     1
The Honorable Steve Cohen, a Representative in Congress from the 
  State of Tennessee, and Ranking Member, Subcommittee on 
  Regulatory Reform, Commercial and Antitrust Law................     4
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary     5

                               WITNESSES

The Honorable Howard A. Shelanski, Administrator of the Office of 
  Information and Regulatory Affairs
  Oral Testimony.................................................    16
  Prepared Statement.............................................    19
The Honorable C. Boyden Gray, Boyden Gray & Associates, PLLC
  Oral Testimony.................................................    36
  Prepared Statement.............................................    39
Sally Katzen, Visiting Professor at NYU School of Law; Senior 
  Advisor, Podesta Group
  Oral Testimony.................................................    52
  Prepared Statement.............................................    54
John F. Morrall, III, Affiliated Senior Scholar, Mercatus Center, 
  George Mason University
  Oral Testimony.................................................    59
  Prepared Statement.............................................    61
Nicole Riley, Virginia State Director, National Federation of 
  Independent Business
  Oral Testimony.................................................    67
  Prepared Statement.............................................    69

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................     8

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Spencer Bachus, a 
  Representative in Congress from the State of Alabama, and 
  Chairman, Subcommittee on Regulatory Reform, Commercial and 
  Antitrust Law..................................................    80
Prepared Statement of the Honorable Steve Cohen, a Representative 
  in Congress from the State of Tennessee, and Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust Law    83
Prepared Statement of the Honorable Bob Goodlatte, a 
  Representative in Congress from the State of Virginia, and 
  Chairman, Committee on the Judiciary...........................    87
Material submitted by the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Ranking Member, Committee on the Judiciary.....................    94
Response to Questions for the Record from the Honorable Howard A. 
  Shelanski, Administrator of the Office of Information and 
  Regulatory Affairs.............................................    95
Response to Questions for the Record from the Honorable C. Boyden 
  Gray, Boyden Gray & Associates, PLLC...........................   107
Response to Questions for the Record from Sally Katzen, Visiting 
  Professor at NYU School of Law; Senior Advisor, Podesta Group..   113
Response to Questions for the Record from John F. Morrall, III, 
  Affiliated Senior Scholar, Mercatus Center, George Mason 
  University.....................................................   121
Response to Questions for the Record from Nicole Riley, Virginia 
  State Director, National Federation of Independent Business....   124


 OFFICE OF INFORMATION AND REGULATORY AFFAIRS: FEDERAL REGULATIONS AND 
                           REGULATORY REFORM

                              ----------                              


                       MONDAY, SEPTEMBER 30, 2013

                       House of Representatives,

                  Subcommittee on Regulatory Reform, 
                      Commercial and Antitrust Law

                      Committee on the Judiciary,

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 4:04 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Spencer 
Bachus (Chairman of the Subcommittee) presiding.
    Present: Representatives Bachus, Goodlatte, Holding, 
Collins, Cohen, DelBene, Garcia, and Jeffries.
    Staff Present: (Majority) Daniel Huff, Counsel; Ashley 
Lewis, Clerk; Doug Petersen, Intern; Philip Swartzfager, 
Legislative Director for Rep. Bachus; Jonathan Nabavi, 
Legislative Director for Rep. Holding; Jennifer Lackey, 
Legislative Director for Rep. Collins; Justin Sok, Legislative 
Assistant for Rep. Smith of Missouri; and (Minority) Susan 
Jensen, Counsel.
    Mr. Bachus. The Subcommittee on Regulatory Reform, 
Commercial and Antitrust Law hearing will come to order. 
Without objection, the Chair is authorized to declare recesses 
of the Committee at any time, although we don't anticipate a 
recess--unless something wonderful happens, right?
    Let me welcome Administrator Shelanski and all our 
witnesses to this oversight examining the Office of Information 
and Regulatory Affairs: Federal Regulations and Regulatory 
Reform.
    I think if there is anything that brings Members of both 
parties together is the importance of jobs and of creating more 
jobs in our economy. People call home ownership the American 
dream, but if you don't have a job you have very little way of 
ever affording a home. And to me, really, the American dream is 
having a good-paying job that allows you to provide for your 
family and for your financial future.
    Unfortunately, today there are too many people looking for 
good work in our economy, and there are simply not enough jobs. 
And that is also impacting our budget. You know, we are talking 
about budget deficits and the national debt. We have doubled 
the food stamp program, the number of people on it in the past 
5 or 6 years. We have done the same thing with Social Security 
Disability. Those programs are growing exponentially and are 
really beginning to overwhelm our Federal budget, and all 
because people apparently can't find a job.
    And that is where I think we can tie a part of that to 
regulations because I think we all agree, and I know Mr. Cohen 
said many times that regulations aren't bad and we shouldn't 
assume that they are bad. And a lot of regulations are good, 
they help safeguard our economy, our safety with our food 
regulations, and our health. But, then again, and really our 
past three Presidents have all identified in State of the Union 
addresses the need to cut back on Federal regulations.
    When you have excessive regulations that is separated from 
a true consideration of cost and benefits, you can do real 
damage to the economy and people's lives. I remember in 
economics one of the first things you are taught is about GDP, 
and GDP is basically a function of capital plus workforce, some 
people say population, and then productivity. But capital is an 
essential part. And so to generate jobs you have to have 
capital and you have to have workforce, and any time you deny 
that economic working capital you cost jobs.
    Now, what does capital have to do with--we know what it has 
to do with jobs, but what does it have to do with regulations? 
Well, consider this. A Small Business Administration report 
based on 2008 data--so this is rather dated--but it put the 
annual cost of Federal regulations at $1.7 trillion, and at 
that time it was 14 percent of our economy. Now, we are not 
talking about State regulations, we are not talking about local 
regulations, we are not talking about taxes, we are not talking 
about health benefits. We are talking about simply the cost of 
complying with Federal regulations. According to the Small 
Business Administration, not some conservative think tank, not 
Republican talking points, the Small Business Administration.
    Now, as I said, President Clinton, President Bush, and 
President Obama have all said we need to reduce excessive 
regulations. Well, have we done that? And let me say this: 
President Bush added to regulations, President Clinton more 
regulations. But how about President Obama? Well, as of January 
2013 Congressional Budget Director Douglas Holtz-Eakin 
testified--and he testified before this Committee in January of 
this year--that the Obama administration had added $520 billion 
worth of new regulations.
    Now, that number doesn't include many of Dodd-Frank 
regulations because they are still being enacted. It doesn't 
include all the regulations under the Affordable Health Care 
Act or, as the President has started calling it, Obamacare. It 
doesn't include many of the regulations being proposed under 
the President's climate control agenda, which includes many 
dictates against carbon.
    So you take all these regulations, well intended, but they 
cost money. They cost capital. And taking that capital out of 
the economy costs jobs. And I am sure there is nobody in this 
room that has not read that our GDP is growing by 2 percent, 
2.5 percent, and that that is not sufficient to create new 
jobs, that we need to be growing at least maybe 2 percentage 
points higher. And if we do that, we will create jobs, we will 
bring in more taxes, it will positively affect Social Security 
Disability, the pension fund in a positive way. It should cut 
down on our food stamp benefits and hundreds of other Federal 
programs.
    And think about 14 percent cost of Federal regulations, if 
we could just add to the economy about 2 percent. Now, if all 
regulations cost the same, that would be one out of seven 
regulations. If you could just decrease the cost of regulations 
by 2 percent, you would actually add 2 percent to our GDP.
    And that is where you come in, Administrator. As the new 
head of the Office of Information and Regulatory Affairs, you 
stand as one of the important checks and balances in the 
Federal regulatory system. You might say, well, Congressman, 
you also do, you pass the laws, and then the regulators write 
the regs. And I will tell you that even with the Administrative 
Practice Act and all these acts, I know in the last decade or 
15 years we have only repealed one regulation, so one law, and 
that was ergonomics. So, unfortunately, the Congress just 
doesn't seem to ever repeal a law and the regulations that go 
with it.
    Executive agencies must submit their proposed and final 
rules to your agency for approval before they can be published 
in the Federal Register. You have the authority to return a 
rule to the issuing agency if you find defects in the process 
or analysis.
    With this power often comes great pressure from parties 
interested in regulations and from the issuing agencies 
themselves. Your office must be committed to fair and unbiased 
reviews. You are sort of like a college football referee, 
passions are high on both sides, but you have to make the call. 
Some of them may be unpopular with someone's agenda, but your 
job is to make the call and to get it right.
    And in making those calls, if you find that a regulation 
can be less restrictive, less costly, the benefit does not 
outweigh the cost, you can actually help create jobs. You can 
give someone a job. And so my message to you is, when you think 
about these regulations, think about will it cost someone their 
job or will it result in a job not being created.
    Accordingly, I look forward to examining your activities in 
detail, particularly on several key issues. What is being done 
to ensure that agency cost-benefit reports are not overstating 
benefits or inappropriately mixing direct benefits with 
secondary benefits? This has concerned me as I have reviewed 
the administration's rationale for additional carbon emission 
standards, which will have a severe impact on the use of coal.
    Now, I am not as concerned about that as I am people 
working in the industry, of labor. Coal mining jobs are one of 
the highest paid professions in America, and I think you 
realize we need high-paying jobs. You have the responsibility 
with regard to the regulatory impact analysis process. An issue 
arising from that is what your agency is doing to make sure 
that real problems are being identified and whether the best 
regulatory approach is being used to address the problem.
    If you don't know already, Administrator, I have a 
particular interest in whether independent agencies, like the 
Consumer Financial Protection Bureau, should be required to 
submit their rules to you for review. Presently they are not. 
They are exempt despite the huge impact that their rules will 
have on the economy and on consumers. It is an agency in 
desperate need of oversight.
    To conclude, if your agency exercises its authority 
properly, it can be a gatekeeper to ensure smart and effective 
regulations. We all know what the flip side of that is: 
regulatory overreach that both puts a drag on our economy, 
retards job creation and growth, and fails to provide 
commensurate environmental health and consumer benefits. That 
is a bad deal for the American people.
    With that, I look forward to hearing from you and our 
second panel of experts on how our regulatory regime is 
functioning, how it can be improved, and how, if properly 
supervised, can create more jobs.
    I now recognize the Ranking Member, Mr. Cohen of Tennessee, 
for his opening statement.
    Mr. Cohen. Thank you, Mr. Chairman. And before I begin, I 
wish to make public the information that we shared this morning 
that, unfortunately, you are announcing you are going to be 
leaving Congress. Being on this Subcommittee and being ranking 
person, I have got to know you, and I value your service to the 
country and the Congress.
    At times, I have seen heroic action on your part. Your 
background in Alabama and seeing civil rights has caused you to 
make the statements and take positions of moral rectitude 
concerning civil rights and legislation, and concerning basic 
human dignity which reaped, I think, some constituent abuse 
when you stood on the right side, which I think, if I read 
correctly, you based on your good values from your position on 
immigration.
    So you have got the kind of moral rectitude this Congress 
needs and that would make us a better Congress if you stayed. 
So I regret that you are leaving, but I have enjoyed the 
experience and will continue for the next year and a half or 
so.
    Mr. Bachus. I will be here for the next year and a half. I 
am not retiring as much as I am not seeking reelection. So 
there is a difference. But I very much appreciate those 
remarks. And my father, if he were alive today, I am very proud 
of his role in the civil rights movement under great financial 
penalty at times to his business. But thank you.
    Mr. Cohen. You are welcome, sir. It has been a pleasure and 
will continue to be so.
    Now to OIRA, one of our particular areas of jurisdiction. 
And, Mr. Shelanski, you are new to the game here, but you are 
an outstanding economist, and for that reason, as I understand 
it, your nomination went through the Senate without any 
controversy and I think a lot of plaudits from both sides of 
the aisle. I commend you for that.
    Presidents, as the Chairman has said, Clinton, Bush the 
younger, and President Obama, have all said basically the same 
thing about reducing regulations, making them more efficient, 
harmonizing rules, et cetera. And I know that your predecessor, 
Mr. Sunstein, attempted to do that, and I am sure you will, 
too, and get rid of the bad ones, the outmoded ones, refine 
them, and give us, like Tide, a new, improved Tide, and that is 
what we need.
    There have been efforts to modernize. But when we come 
here, and as the Chairman said, I always say that the 
regulations have benefits, too, and there is a lot of good in 
regulations. They are not necessarily evil. They do keep our 
food safe, they keep our airplanes in safe condition, flying 
and landing and all those things that they need to do, and a 
lot of regulations keep our financial world safer and will 
continue to do that.
    There is a difference among some of us in the way we look 
at the benefits from regulations. And my home paper, the 
Commercial Appeal, had an article this year that was published, 
a columnist by the name of Doyle McManus, and he cited Cass 
Sunstein and said that in President Obama's first 4 years in 
office he issued fewer new Federal regulations than any of the 
four Presidents who came before him, including President 
Reagan. I take Mr. McManus' article as being accurate. 
Moreover, the op-ed noted President Obama has revoked hundreds 
of outmoded rules that produce savings for government, 
businesses, and consumers that will add up to billions.
    So I look forward to learning about the continuing efforts 
today that the President has pushed to have agencies improve 
and modernize the existing regulatory system. The cost of 
regulations, there is a cost, but there is a benefit, and 
according to the Office of Management and Budget in their 2012 
draft report on the benefits and costs of Federal regulations, 
the net benefits of regulations in the first 3 years of this 
administration totaled $91 billion. That is 25 times greater 
than during the comparable period under Bush the younger. 
Moreover, fewer final rules have been reviewed by OIRA and 
issued by executive agencies during the first 3 years of this 
administration than in the comparable time during the second 
Bush administration.
    Similarly, the 2013 draft report to Congress noted the 
benefits of Federal regulations between fiscal year 2002 and 
2012, a 10-year period, ranged from $193 billion to $800 
billion in benefits as against $57 billion to $84 billion in 
costs. That is a pretty nice ratio of benefits over costs.
    So I would like to thank you for your service to our 
country in this important position, and I would like to know 
from all of our witnesses, including the second panel, what 
steps Congress can take to help OIRA do its job, including 
whether Congress should provide OIRA with more resources so 
that you can be even more effective in streamlining 
regulations.
    I thank our witnesses for being here today. And more 
importantly, I thank Chairman Bachus for his many times of 
showing leadership and courage in this Congress.
    Yield back the balance of my time.
    Mr. Bachus. I thank you, Mr. Cohen.
    I would now like to recognize the Chairman of the full 
Committee, Chairman Bob Goodlatte of Virginia, for his opening 
statement.
    Mr. Goodlatte. Thank you, Mr. Chairman, and I want to thank 
you for holding this hearing. I want to join the Ranking Member 
in congratulating you, thanking you for your many years of 
service. We entered the Congress at the same time, just a few 
years ago, and your service has been very meaningful for the 
people of your district, I have no doubt, but also for people 
who work here with you, and I thank you for that.
    When you served with great distinction as Chairman of the 
Financial Services Committee, and as we require on our side of 
the aisle, you had to give that up because of term limits, I 
was absolutely delighted that you agreed to come back to this 
Committee and take the Chairmanship of this Subcommittee, and 
you will do great work. You already have, and you will for the 
next 15 or so months, and we will look forward to getting a lot 
done during that time. But we will also miss you because of 
your good work, your demeanor, your honesty, your character, 
and your determination to do the right thing. So thank you very 
much for that service.
    I also want to make mention, since I may--I have to attend 
a couple other things--I may after I give my opening statement, 
I won't be here necessarily when the second panel is 
introduced, and I do want to welcome one of my--she now lives 
outside the district, but she is a native of the 6th District 
of Virginia and someone who has been very close to my office 
and to some of the key people in my office for many, many 
years. And that is Nicole Riley, who is originally from Augusta 
County, Virginia, and who has served as the State director of 
the NFIB since 2011. She has also been educated in the 6th 
District of Virginia, which is a very key thing, at Roanoke 
College, which is now in the 9th District but was when she was 
educated there, and she also was a legislative assistant to my 
good friend, Delegate Steve Landes, and she was a legislative 
policy analyst under Attorney General Jerry Kilgore, and a 
special assistant for legislative affairs when current Governor 
Bob McDonnell was our attorney general. So she comes to us with 
a great deal of experience and very capable in representing the 
interests of NFIB members.
    Let me turn to the subject that she and others will be 
testifying in a moment. The Office of Information and 
Regulatory Affairs, or OIRA, has been called the most powerful 
Federal agency that most people have never heard of. OIRA is 
responsible for overseeing the development and promulgation of 
agency regulations. In particular, OIRA must review required 
cost-benefit analyses of economically significant rules, which 
are those rules having an annual effect on the economy of $100 
million or more.
    Such cost-benefit analysis is critical because, since early 
in the Obama administration, many have attributed the economy's 
lack of recovery in large part to increases in regulation and 
regulatory uncertainty. Even the administration acknowledges 
the problem. In a January 18, 2011, Wall Street Journal op-ed, 
President Obama stated that overregulation ``stifles 
innovation,'' and has a, ``chilling effect on growth and 
jobs.'' The President has even issued a number of executive 
orders and memoranda that address regulatory burdens. These 
include Executive Order 13563, which directs agencies to 
``propose or adopt a regulation only upon a reasoned 
determination that its benefits justify its costs.''
    While these executive orders look good on paper, it appears 
that it is all the Obama administration is willing to do. I 
want to know what OIRA is doing to ensure agencies actually 
implement the stated principles.
    Unfortunately, there are grounds for concern. Roughly two-
thirds of the claimed benefits of economically significant 
final rules OIRA reviewed in 2010 were actually from secondary 
effects that were not the statutorily authorized targets of the 
rules. What is OIRA doing to make sure that the bulk of the 
benefits agencies claim for their rules arise specifically out 
of improving the conditions Congress authorized those agencies 
to address by regulation?
    Similarly, in May of 2013 the administration quietly 
increased its estimate of the benefit of reducing carbon from 
the atmosphere from $21 to $35 per metric ton. That will 
dramatically increase agency estimates of benefits from 
regulations limiting emissions. However, there are significant 
concerns that the administration's new figure is substantively 
flawed and that the process for issuing it was not transparent. 
The Government Accountability Office is investigating.
    Administrator Shelanski joined OIRA at a critical time. Job 
creation continues to fall short of expectations. In August 
2013 employers added only 169,000 jobs to payrolls, less than 
expected, and gains for June and July were revised downward. 
The unemployment rate ticked down to 7.3 percent, but only 
because fewer people are looking for work. Even more worrisome, 
the labor participation rate is the lowest it has been in 
roughly 40 years. The economy as a whole also remains sluggish. 
On September 18, 2013, the Federal Reserve lowered its economic 
growth forecast for 2013 and 2014.
    In light of this worrisome data, I am particularly 
interested in hearing how Administrator Shelanski plans to 
ensure the administration's actions match its rhetoric about 
reducing the regulatory burden on the small businesses that 
form the backbone of our economy. The National Federation of 
Independent Business surveys; government regulations are 
consistently a top concern for small-business owners whose 
compliance costs are also higher than those of larger 
businesses. We cannot afford to regulate small-business job 
creators out of business.
    To this end, the OIRA administrator holds a number of tools 
that can be powerful if he chooses to use them. If an agency's 
cost-benefit analysis is improper or if the agency fails to 
consider alternatives or account for the impacts on small 
business, OIRA can return the regulation to the agency so it 
does not take effect. During the Bush administration, OIRA sent 
27 return letters. During the Obama administration, though, 
OIRA has sent only one.
    OIRA's zealous enforcement of the cost-benefit analysis, 
least burdensome alternative, and other requirements to 
regulations under consideration by the executive branch will 
help to prevent unnecessary and excessively costly regulations 
that harm the economy and kill jobs. And that is why I am 
pleased Subcommittee Chairman Bachus has called this oversight 
hearing, and I look forward to Administrator Shelanski's 
testimony, as well as that of our second panel of distinguished 
experts. And I thank you and yield back.
    Mr. Bachus. Thank you, Chairman.
    Now recognize the Ranking Member for a unanimous consent 
request.
    Mr. Cohen. Thank you, sir. I would ask unanimous consent to 
enter into the record the statement of Mr. Conyers.
    Mr. Bachus. Without objection, the full Ranking Member's 
statement, the gentleman from Michigan, John Conyers' statement 
will be added to the record.
    [The prepared statement of Mr. Conyers follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


                              ----------                              

    Mr. Bachus. And now we have our witness introduction for 
the first panel. I am told the Judiciary Committee, unlike 
Financial Services, introduces just one panel at a time, so I 
want to honor that approach. But we do have a very esteemed 
second panel, and we are very much looking forward to that.
    I do want to introduce a member of the audience, the 
chairman of the Administrative Conference of the United States, 
Paul Verkuil.
    Would you stand up, Mr. Verkuil? We are honored to have 
you. And so thank you and your staff.
    At this time I will make an introduction of our first 
panelist. Howard Shelanski is the administrator of the Office 
of Information and Regulatory Affairs, the Office of Management 
and Budget. He was previously the Director of the Bureau of 
Economics at the Federal Trade Commission and a professor at 
Georgetown University Law School. From 2011 to 2012 he was of-
counsel to the law firm of Davis Polk & Wardwell. He was also 
the Deputy Director for Antitrust in the FTC's Bureau of 
Economics from 2009 to 2011.
    Mr. Shelanski was on the faculty at the University of 
California at Berkeley from 1997 to 2009. He served as Chief 
Economist of the Federal Communications Commission from 1999 to 
2000 and as senior economist for the President's Council on 
Economic Advisers at the White House from 1998 to 1999. He was 
an associate with Kellogg, Huber, Hansen, Todd & Evans from 
1905 to 1997, served as a clerk for Justice Antonin Scalia of 
the United States Supreme Court, for Judge Louis Pollak of the 
U.S. District Court in Philadelphia, and for Judge Stephen F. 
Williams of the U.S. Court of Appeals here in D.C. Mr. 
Shelanski received his B.A. From Haverford College and a J.D. 
And Ph.D. from the University of California, Berkeley.
    Welcome to the hearing. And, Administrator, you are welcome 
to give an opening statement. And we are not going to time you 
as far as 5 minutes. If it is 6 minutes or 7 minutes, you are 
fine. So don't let the lights bother you.

 TESTIMONY OF THE HONORABLE HOWARD A. SHELANSKI, ADMINISTRATOR 
      OF THE OFFICE OF INFORMATION AND REGULATORY AFFAIRS

    Mr. Shelanski. Thank you very much, sir.
    Mr. Bachus. That is one procedure I violate, by giving 
people a little more time.
    Mr. Shelanski. Thank you very much. Chairman Bachus, 
Ranking Member Cohen, Chairman Goodlatte, and Members of the 
Subcommittee, thank you for the invitation to appear before you 
today. I am pleased to have this opportunity to discuss recent 
developments at OIRA and my priorities for the Office going 
forward.
    In the roughly 12 weeks since I took office in July, it has 
been my privilege to work with the excellent and dedicated OIRA 
staff, the first-rate leadership team at OMB, and our hard-
working colleagues throughout the executive branch. Together we 
are working to achieve the administration's goals of promoting 
economic growth and employment while simultaneously protecting 
the health, safety, and welfare of Americans now and into the 
future.
    OIRA has a broad portfolio that extends beyond regulatory 
review. For example, under the Paperwork Reduction Act, the 
Office ensures that information collection by the Federal 
Government is not unnecessarily burdensome. OIRA also provides 
guidance on privacy policy to Federal agencies and oversees the 
implementation of government-wide information quality and 
statistical standards. One of my objectives as Administrator is 
to work with colleagues across the government to ensure that 
Federal policy in each of these areas adapts to the ever-
changing technological environment while remaining clear and 
consistent with the law.
    To be sure, the largest area of OIRA's work is the review 
of regulations promulgated by executive branch departments and 
agencies. A set of executive orders establishes the principles 
and procedures for OIRA's regulatory reviews. Most 
significantly, as Chairman Bachus mentioned, Executive Order 
12866 and Executive Order 13563 delineate processes for 
regulatory review and establish standards and analytic 
requirements for rulemaking by departments and agencies. And 
importantly, Executive Orders 13563 and 13610 focus on the 
reduction of regulatory burdens through the retrospective 
review of existing rules.
    My priorities as OIRA administrator are directly rooted in 
the relevant executive orders. One such priority is to increase 
the predictability of the regulatory review process by 
improving the timeliness and transparency of OIRA's key 
functions. In that regard, I have committed to publishing the 
Unified Agenda and Regulatory Plan of agency rulemaking 
activity twice each year. OIRA staff have been working closely 
with all Federal regulatory agencies toward the timely 
publication of the fall plan and agenda.
    Of similar importance to clarity and certainty of the 
regulatory environment is that rules, both new rules and those 
already under review, move through OIRA as efficiently as 
resource constraints and rigorous analysis permit. It has been 
a top priority of mine since coming to OIRA to reduce the 
frequency of extended regulatory reviews and to work with 
agencies on rules that are already under extended review.
    While OIRA's consideration of Federal regulations must 
first and foremost uphold the standards of analysis that the 
executive orders establish, unnecessary delays in review are 
harmful to everyone: to those who are denied the benefits of 
regulation, to those wishing to comment on proposed rules and 
influence policy, and to those who must plan for any changes 
the regulations require of them. I am pleased to report that, 
thanks to the tireless work of OIRA staff in the months before 
and since my arrival, we have more than cut in half the number 
of rules that were under review for more than 200 days, and the 
number of rules under review for more than 90 days is down 
considerably and continues to fall.
    While increasing the predictability of the regulatory 
process through timely review of rules and publication of 
regulatory plans and agendas is essential, the executive orders 
also make clear that removal of unnecessary burdens is an 
essential element of the regulatory process. As I have 
previously testified, ensuring flexibility for small businesses 
and reducing regulatory burdens for everyone through the 
retrospective review process are high priorities for me as 
Administrator. Retrospective review is a crucial way to ensure 
that our regulatory system is modern, streamlined, and does not 
impose unnecessary burdens on the American public. It can also 
provide an opportunity to improve regulations already on the 
books.
    As I testified in July, our retrospective review efforts to 
that point had already produced significant results, bringing 
near-term cost savings of more than $10 billion to the U.S. 
economy. As agencies move forward with their current plans, 
OIRA will work with them to achieve even greater gains. 
Ensuring follow-through on such plans will be one of our key 
objectives going forward.
    Finally, OIRA has important responsibilities in the area of 
international regulatory cooperation under Executive Order 
13609. We have made progress in a number of areas with our 
international partners and will continue to further our 
regulatory international mission in coordination with the 
Department of State and USTR. Regulatory cooperation benefits 
both businesses and consumers by promoting consistent standards 
and procedures across borders and by preserving safety and 
welfare while promoting competitiveness here and abroad.
    In conclusion, the many activities of government bring 
great benefits to Americans but can also carry costs. It is 
therefore critical that paperwork and information collection 
are not unduly burdensome, that Federal agencies ensure privacy 
and use only high quality data, and that regulation protects 
health, safety, and welfare in a manner that is consistent with 
job creation and economic growth. These are central objectives 
of this administration and are the main tasks of OIRA.
    It is my honor and privilege to serve as OIRA's 
Administrator as we continue to meet these challenges. Thank 
you again for the opportunity to appear before the Committee 
today. I look forward to answering your questions.
    Mr. Bachus. Thank you, Administrator.
    [The prepared statement of Mr. Shelanski follows:]

    
    
    
    
    
    
    
    


                               __________
    Mr. Bachus. And at this time I recognize the gentleman from 
North Carolina, Mr. Holding. We have a U.S. Attorney be your 
first examiner.
    Mr. Holding. Well, thank you, Mr. Chairman.
    And first off I would be remiss if I didn't thank the 
Chairman for not only his leadership, but his friendship. 
Although I am a new Member of Congress and a new Member of this 
Committee, the Chairman has taken the time to impart to me more 
than a bit of his wisdom.
    And I appreciate your friendship and look forward to that 
continuing in all the endeavors that you have for the future.
    As Chairman Goodlatte said earlier, pointed out that it was 
in January 18, 2011, in a Wall Street Journal op-ed that 
President Obama stated that overregulation stifles innovation 
and has a chilling effect on growth and jobs. I assume you 
agree with that statement?
    Mr. Shelanski. Yes, sir, I would believe that 
overregulation would certainly have that effect.
    Mr. Holding. Turning to the Unified Agenda and Regulatory 
Plan, I applaud your commitment to complying with the law and 
publishing that on a regular basis as specified. During the 12 
weeks or so that you said that you have been on the job, I 
assume one of the first things that you have done is kind of do 
an analysis of where OIRA is, what resources do you have at 
hand, what shortcomings do you have. And I would assume that 
you have looked at the failure to publish the Unified Agenda 
and Regulatory Plan in the past in a timely fashion. And as you 
have done that analysis, where are the shortcomings in OIRA 
that have caused this failing?
    Mr. Shelanski. Thank you very much, Congressman Holding. 
The OIRA staff is an absolutely first-rate staff that is 
dealing with an enormous set of responsibilities, as outlined 
in my opening statement, and indeed the opening statements that 
we heard earlier this afternoon. I don't see any shortcomings 
in the talent, the commitment, the ability of OIRA as a whole 
or, indeed, of any member of the staff. They are all extremely 
diligent, working very hard to ensure that the executive orders 
are observed.
    My priority in arriving in early July as Administrator was 
simply to make sure that nothing from the past would be an 
impediment moving forward and that would enable me to uphold 
the commitment I made during my confirmation hearings to ensure 
that that Unified Regulatory Plan and Agenda did get published 
twice a year.
    As to what may have happened in the past, I was not there 
at OIRA, and I was not particularly interested, to be honest, 
about what exactly happened at that time. What I was interested 
in finding out was whether there was anything at the agency 
that would prevent me from moving forward and ensuring 
publication twice each year, and indeed I found nothing that 
would be an impediment to that task.
    Mr. Holding. Well, I would recommend to you that you find 
out what was the impediment in the past to ensure that you have 
it identified. It may be there right before your very eyes, but 
since you haven't identified what the impediment was in the 
past, it is kind of hard to fix it in the future.
    You know, I feel very strongly that when the President 
failed to release the Unified Agenda and never released one 
until December of 2012, after the election, I think that was 
very unfair to voters. I think it is unfair because they were 
not told what regulations the President planned to do when he 
was--if he were to be reelected. And I believe had they known 
what regulations that the President had in mind of implementing 
after his reelection, it may very well have impacted the vote. 
So I think you have got a problem there, and if you are not 
undertaking the steps to identify what that problem was just a 
year ago, I think you are making a mistake.
    Turning toward transparency, you know, elaborate for me the 
importance to businesses large and small, you know, that they 
have a clear outlook as to what regulations are coming down the 
pike and looking at them, what they are looking at as they make 
determinations about what business plans they want to 
implement. You know, speak to me a little bit about 
transparency and its importance.
    Mr. Shelanski. Well, thank you very much. This actually 
relates to one of the issues with the Unified Regulatory 
Agenda.
    One thing that has happened in the past year and a half, 
really because of the good work and the attention that OIRA 
staff has dedicated to the issue, is that what is published in 
that Unified Plan and Agenda is far better than what was 
published in the past. We have been working very closely with 
agencies to ensure that what they do publish in terms of their 
plans going forward actually aligns reasonably closely with 
what they are publishing, what they are, in fact, doing. That 
way businesses, small and large, will be able to identify real 
targets, will be able to identify real issues on which they 
want to comment.
    In fact, if agencies just put everything they are thinking 
about on the Regulatory Plan and Agenda, that may look like 
transparency, but it is obfuscation. It is just like what 
happens in a discovery dispute when somebody pulls 27 semis up 
in front and dumps all those documents on your lap and you have 
got to go hunt through for the things that are really relevant.
    Well, we have tried to make the Unified Regulatory Plan and 
Agenda something that is clearer, by being more rigorous, 
better, by working more closely with the agencies, so people 
will know what the real plans are. And that is actually 
something that during whatever happened in the past to delay 
the publication, there were a lot of improvements that occurred 
in the process and in what the publication would be. So I think 
that certainly helps transparency.
    Mr. Holding. Thank you, Mr. Chairman. I yield back.
    Mr. Bachus. Thank you.
    Mr. Cohen.
    Mr. Cohen. Thank you, sir.
    Are you familiar with a group called the Heritage 
Foundation?
    Mr. Shelanski. Yes, sir, I am.
    Mr. Cohen. The Heritage Foundation issued a report last 
year that claimed that the Obama administration during its 
first 3 years, and I quote the report, ``unleashed 106 new 
major regulations that increased regulatory burdens by more 
than $46 billion annually, 5 times the amount imposed by George 
W. Bush's administration in his first 3 years.'' Now, that 
quote is contrary to what I said in my opening statement. Are 
you familiar with that position that the Heritage Foundation 
took?
    Mr. Shelanski. I am not familiar with that specific report, 
but I have heard such numbers quoted.
    Mr. Cohen. And how would you respond to such numbers that 
are quoted by the Heritage Foundation?
    Mr. Shelanski. Well, thank you very much for that question, 
Ranking Member Cohen, because I think it gets to an interesting 
issue.
    Over a period of years one can come up with many different 
ways to count the costs and benefits of regulation, many 
different ways to compare regulation across administrations, 
pages of regulations, costs of proposed rules, final rules. It 
is often hard to know what go into these different 
calculations.
    What I am interested in is this: making sure not that we 
only count the costs of regulation, but that we pay attention 
to whether those regulations were rigorously developed and 
reviewed by OIRA in where such review is appropriate, to ensure 
that they are bringing benefits that exceed those costs. And so 
simply pointing at the cost side of regulation and what might 
often be very questionable estimates of the cost side of 
regulation does not tell the story of why agencies regulate and 
of the benefits that may be brought.
    And so what I am interested in when I look at regulatory 
tallies is, sure, I care what the costs are. You can come to a 
point where the cumulative costs imposed on a particular sector 
of the economy really are creating difficulties for businesses, 
for consumers, job creation, economic growth. That needs to be 
paid attention to. But we also need to look at what the purpose 
of those rules is. And if those rules are bringing substantial 
benefits, benefits that themselves reduce costs currently and 
into the future, rules that themselves may in fact safeguard 
and stabilize the economic system going forward, I think that 
we have to look very carefully at what we are getting for those 
costs and not simply look at the cost side.
    Mr. Cohen. Are you familiar with the Crain study?
    Mr. Shelanski. Yes, I am familiar with the Crain and Crain 
study.
    Mr. Cohen. And would you put that on a pedestal or would 
you put it underneath a pedestal?
    Mr. Shelanski. I am not sure I can say in polite company, 
sir, where I would put that study. But let me say pretty 
clearly that that study has been, I think, pretty thoroughly 
refuted by everybody who has looked at it. In fact, the Small 
Business Administration, I don't see them relying on that 
study. It was not an official report of the SBA. It was done by 
two outside consultants. There are a variety of methodological 
problems with that study that I won't take the time to go into 
here. Others have, Congressional Research Service, I think GAO. 
One of those organizations put out an analysis thoroughly 
debunking that study. There have been a number of pieces that 
have pointed out the analytical flaws with it. So, no, I put 
that----
    Mr. Cohen. Somewhere beneath the Saturday Evening Post, 
maybe?
    Mr. Shelanski. Yes. So my view is that that study is not 
one that I take particularly seriously, and I actually think it 
is very unhelpful because it tells, I think, a story that is 
very frightening until one looks at the fact that the numbers 
are completely concocted and have very little basis in any real 
data, any real science, any real analysis.
    Mr. Cohen. Well, we do have a problem with science here, we 
are still working on evolution, we are working on climate 
change, we are working on economic relativity, shutdowns, and 
debt ceilings. So it is an area where we need improvement.
    Are you aware of any empirical evidence linking jobs----
    Mr. Bachus. Did you say evolution?
    Mr. Cohen. There are some people who have questioned 
evolution on your side of the aisle.
    Mr. Bachus. Oh, oh. I didn't know if we had any rules on 
evolution.
    Mr. Cohen. No, it is beyond our Subcommittee. It is in our 
larger unisphere, hemisphere of science and the lack of faith 
therein.
    Are you aware of any empirical evidence linking jobs and 
regulations?
    Mr. Shelanski. There are studies that have attempted to 
link job effects to regulation, but the link between any 
particular regulation and jobs, or indeed between our entire 
regulatory system and GDP and jobs, is a very tenuous one, and 
I am not aware of any study that has strong consensus in the 
economic community.
    Mr. Cohen. If I may ask one last question. Your agency has 
suffered through sequestration, as has the rest of government. 
How has sequestration affected your agency, and if you were not 
affected, if you had more money, do you think you could refine 
more rules and create more productivity?
    Mr. Shelanski. Thank you very much for that question. 
Sequestration is hurting all government agencies. OIRA is not 
unique in this respect. And indeed OMB as an organization 
itself is just doing a tremendous amount in every aspect on the 
budget side, the management side in my regulatory office, it is 
doing a lot with greatly pared-down resources. I can't say for 
certain, but we may well be at historic staffing lows in OIRA 
and indeed OMB-wide.
    It would certainly be a benefit to all of the Office of 
Management and Budget if we had more resources office-wide with 
which to do our work, and I at OIRA would certainly like to 
have my share of those additional resources so that we could do 
deeper and further work and move more quickly in providing 
clarity to the regulatory environment.
    Mr. Cohen. Thank you. I yield back the proverbial 
nonexistent balance of my time.
    Mr. Bachus. Thank you.
    Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman. I appreciate you, and 
I appreciate also, like my friend from North Carolina, your 
wisdom and patience as we learn the ropes, and I thank you for 
your service that will span beyond your years in this Chair.
    Mr. Bachus. Thank you. This is actually better than a 
funeral.
    Mr. Collins. Yeah, you actually get to hear it. I have done 
plenty of those in my life, too.
    Mr. Cohen. Wait until you get to Ms. DelBene, she is going 
to say wonderful things about you.
    Mr. Collins. I love it, I love it.
    Again, thank you for being here. I think there is a lot 
more that of course we can get into, and we will look forward 
in my office working with you as we go forward. I want to 
follow up briefly, I have a few more questions, I want to 
follow up briefly from the gentleman from North Carolina's 
question concerning the guidelines. One of the things that you 
talk about in your opening statement, but also that you had 
listed out and had sent a memo to agencies regarding publishing 
of the fall agenda. And I think the deadline on that was that 
you had asked for it to be due August 29th. Is that correct or 
is that wrong?
    Mr. Shelanski. Oh, in terms of receiving our reports from 
the agencies?
    Mr. Collins. Yes.
    Mr. Shelanski. Subject to check, that was approximately I 
think the deadline we set, yes.
    Mr. Collins. So is a guesstimation around the 29th?
    Mr. Shelanski. It was very close to that time period.
    Mr. Collins. How many have actually got close?
    Mr. Shelanski. Almost everybody.
    Mr. Collins. Okay.
    Mr. Shelanski. We are actually in very good shape. I think 
we are waiting for one independent agency to come forward with 
their report.
    Mr. Collins. I think it follows up on, as what was said, is 
where the impediments are and then actually getting real 
information, it would be of service. I think there is some 
general agreement across both sides of this dais as far as 
trying to find what helps business and grow jobs and the 
economy and the things that help and doing away with the things 
that do not. Do you have any suggestions for legislative 
reforms that this Subcommittee can look at that are consistent 
with this administration's goal to create regulatory system for 
the 21st century?
    Mr. Shelanski. You know, I think that the--and, Congressman 
Collins, I thank you for that question because I think it is an 
interesting question. Having been at OIRA for about 12 weeks I 
am still developing an opinion on areas in which we might or 
might not benefit from regulatory reform, but my inclination so 
far is to say that we have the tools that we need at OIRA to do 
good regulatory review. And I have some concerns about some of 
the regulatory reforms that I have heard about.
    We have got a good set of executive orders that set forward 
I think the right analytic principles and the right regulatory 
process for reviewing rules. We are working closely with the 
agencies to ensure that their analyses meet those requirements. 
And, as Chairman Bachus said, it is our responsibility to go 
back to the agencies and let them know when we think that they 
have not done a good analysis.
    I think that process works well, and at this point I think 
that leaving the process where it is, with OIRA under the 
executive orders to develop in that environment, will be 
sufficient to ensure a sound regulatory system going forward.
    Mr. Collins. Okay. That is, again, I think something we 
could, I want to say, you know, relatively, the new role that 
you are in, and getting into it later I think there is some 
questions there I have. But you had mentioned earlier about the 
cost and the benefits issue, and I am concerned that agencies 
don't always have the data that they need to accurately 
calculate, in fact, what you just said, the proposals will have 
on businesses, local and State economies, whether good or bad.
    There has been some proposals that OIRA actually should 
issue specific guidelines on how agencies should conduct more 
scientific evaluations of existing regulations and also 
agencies required to develop plans for future retrospective 
evaluation, which you made part of your confirmation. As part 
of the agencies' initial regulatory impact analysis, do you 
think the agencies currently possess all the data they need to 
accurately calculate the impact of a proposed rule and, if so, 
do you think they are consistently using the data to make 
accurate calculations?
    Mr. Shelanski. So this is a very important question. So let 
me start by saying that I share your concern about the need for 
additional what I might call institutionalization or guidance 
on the retrospective review process, and that is something that 
we are very seriously and in real time working on at OIRA, 
because it is a very important priority, and the more guidance 
we can give the agencies, the more closely we can work with 
them, I think the more beneficial this process will be, and to 
the extent there is underbrush that can be usefully cleared out 
in doing that and freeing American businesses from excessive 
burdens and from protecting American citizens by improving 
regulations by reviewing them through the retrospective review 
process.
    When it comes to guidance on the cost and benefit analysis, 
you know, we at OIRA do have a set of guidances, our biggest 
one is Circular A-4, that tells agencies how we want them to do 
the cost-benefit analysis, working on issues such as discount 
rates they should apply, what kind of data they should use, 
what the standards are. It is unquestionably true that there 
are rules in which the data are hard to come by for the 
agencies, and so there often is a lot of back and forth in 
working with the agency to ensure that they are using the best 
science, the best data that are available.
    We don't work in a world of certainty. Economics, cost-
benefit analysis, a lot of the issues that come up under this 
rubric are new, and so we try to ensure that there is enough 
data to make a reasoned decision and that they are using the 
best data without artificially discounting data that might be 
inconvenient, to do a rigorous analysis.
    Mr. Collins. Okay. Thank you. My time has expired, but I 
will be submitting for the record a question concerning rule 
review on positive impact of over $100 million as well, a 
significant factor there.
    And, Mr. Chairman, I yield back nothing because I have no 
time left.
    Mr. Bachus. Okay. Thank you, Mr. Collins.
    At this time I will recognize the gentlelady from 
Washington, Ms. DelBene.
    Ms. DelBene. Thank you, Mr. Chair. I first want to say 
thank you for all of your service. And as someone who started 
my life as well in Alabama, it was a great honor for me to be 
able to go to Alabama with you and many others earlier this 
year as we did the civil rights trip. And I appreciate even 
more now that I have an opportunity to do that while you are 
still here serving in Congress.
    Mr. Bachus. Thank you.
    Ms. DelBene. I am only disappointed that now when you 
finally learned how to pronounce my name, though, we won't----
    Mr. Bachus. It is not DelBene, it's DelBene?
    Ms. DelBene. No, actually the first time you just said it 
there you got it right, so maybe we will keep working with you.
    Mr. Bachus. Yeah, they keep giving me different--I have 
nerve damage in my ears.
    Ms. DelBene. And thank you, Mr. Administrator, for being 
here today. I appreciate your time. You were talking a little 
bit about retrospective reviews, and with changes in technology 
and kind of the way our economy works in many ways, we have 
reviews and cost-benefit analysis, but some of that also needs 
to take place because, you know, something that worked in the 
past just may not work anymore given changes.
    And so how do you view that and how can we make sure that 
we do a good job with helping agencies look at cost-benefit 
analysis in a different way when the way businesses work, et 
cetera, may be changing over time?
    Mr. Shelanski. Thank you very much. That is really a 
critical question. And one of the things that we need to make 
sure of is that we don't have regulations that might lock 
industry into a technology that is on its way out the door or 
lock them into very expensive capital expenditures when 
something might be able to be done a lot less expensively 
shortly down the road. You know, it is like somebody who 3 
years ago built a house wiring all kinds of fancy cable through 
their house, and then someone showed up with a $10 wireless 
modem a month later and said, well, you could have saved 
yourself a lot of money there. We want to avoid that kind of 
situation.
    And I think the agencies, first of all, they are very 
attuned to these kinds of issues. They have no interest in 
imposing costs that are unwarranted. In the time I have had the 
pleasure of serving in this role, I have had the chance to meet 
with and talk with top officials at most of our executive 
agencies, and this is a very serious concern on their part.
    So as part of the cost-benefit analysis, what is being 
asked is what technologies are on the horizon, what might there 
be, a benefit in waiting, might there be a benefit in adopting 
standards that are flexible so that new technologies can come 
in.
    When it comes to looking at existing rules in the 
retrospective review process, it is often the case that new 
technology has emerged that might allow something to happen 
more inexpensively. The problem is, you know, sweeping that 
rule away might actually be more costly for industry because 
often they have already absorbed the fixed costs of regulatory 
compliance of 10, 20 years ago. And it is one thing to say new 
businesses coming in don't have to do things the same way. I 
think that is an important thing for us to look for and it is 
an important kind of flexibility to have. But to mandate a 
change for those businesses that have already made the capital 
expenditure and adapted to an old rule just for the sake of 
adopting a new technology could actually be very costly. And 
despite the fact of the new technology being cheaper, if you 
were doing this for the first time, might not be cheaper for 
some of these businesses.
    So where do we get the information? We work very closely 
with agencies, with industry. We hear a lot every time there is 
a rulemaking process going on during the notice and comment 
period. The agencies hear from industry saying, this will be 
very costly for us in ways you don't understand.
    Or we can get the same result in a less expensive way. And 
when a rule is under review at OIRA, under the process of the 
on-the-record publicly disclosed 12866 meetings that we have 
with stakeholders on all parts, we also hear from them. And so 
we can go back to agencies and say, why didn't you consider 
this? What was wrong with this idea? Why isn't this right? And 
where it is right, part of our job, under the executive order, 
is to make sure that the agencies take into account of that 
information. So----
    Ms. DelBene. Is there a way to share best practices? If one 
agency goes through an issue and kind of updates that as the 
way that information gets shared so everyone can benefit from 
that?
    Mr. Shelanski. I think that the Administrative Procedure 
Act and the executive order are really, and the documents, the 
circulars and things that are associated with the executive 
orders, really set out the procedures that bring to bear a set 
of best practices in terms of how information is processed. The 
variation across different industrial segments, different areas 
in which the departments and agencies regulate is so great that 
there is probably no single solution.
    And this actually gets back to a question Mr. Collins asked 
me about legislation. I worry about locking in a fixed set of 
practices, a one-size-fits-all procedure when different 
industries, in fact, may need different ways of approaching 
these problems.
    So I think there is a set of best practices in the sense of 
making sure that one is doing the cost benefit analysis, using 
all available data, really listening to the stakeholders 
through the notice and comment procedure. And in terms of ways 
to make sure that we gather information from retrospective 
review, that is one of the things that we are trying to reach a 
similar level of development on right now.
    Ms. DelBene. Thank you. And thank you, Mr. Chair.
    I also yield back my nonexistent time.
    Mr. Bachus. Thank you, Ms. DelBene. And Mr. Jeffries, I 
heard you are a man on the move and you are going to go next? 
Is that right?
    Mr. Jeffries. Okay, well thank you, Mr. Chairman.
    Mr. Bachus. The Ranking Member said you have to leave in a 
few minutes.
    Mr. Jeffries. Well I appreciate you yielding to me and of 
course your tremendous and distinguished service over the many 
years that you serve the people of Alabama and this country.
    It is my understanding that pursuant to statute, you have 
approximately 90 days by which to undertake a review of a 
pending regulation, is that correct?
    Mr. Shelanski. The executive order sets a timeline, and the 
initial review period that it sets is a 90-day period.
    Mr. Jeffries. Now is it often the case that you are unable, 
for a variety of reasons, the agency, to complete its work 
during that 90-day period and then there is a process by which 
an extension is granted?
    Mr. Shelanski. Yes. There is a process by which extensions 
can be granted, and the interpretation that is developed of 
that provision is at the request of the agency and/or granted 
by the agency. There could be multiple extensions and certainly 
a lot of the regulation that we review at OIRA is very 
complicated stuff. And so we do have to resort to that. I would 
say not most of the time, but there is certainly plenty of 
examples out there.
    Mr. Jeffries. It is also my understanding that under your 
tenure, the backlog that had accumulated has largely 
dissipated, is that right?
    Mr. Shelanski. Well, I don't want to claim credit for it. 
It is something that really began before I got there under the 
acting administrator who preceded me and really run by the 
excellent staff at OIRA. They really got with the program 
before my arrival, and Director Burwell at OMB made it a prior 
to of hers before I was in place to ensure the office was 
moving in that direction. I have tried since arriving 12 weeks 
ago to add some additional energy and push. And so we are down 
by more than half in terms of rules and extended review from 
where we were. And I would really like to, and have every 
intention of pushing that much farther down.
    Mr. Jeffries. Now, would it be fair to say that 
sequestration complicates your ability to evaluate pending 
rules on a timely basis?
    Mr. Shelanski. It has been problematic, Mr. Jeffries, 
because I have had to have staff on furlough. And every 
individual on my staff is incredibly important because each 
individual desk officer has a portfolio on which they are 
working, and a day on which they are not allowed to look at 
their government email or do any work is a day in which that 
slips further behind, and on top of which, we have already, I 
can't backfill positions when people leave, and so it becomes a 
slippery slope. And it is problematic.
    And as I have stated in my opening statement, timeliness is 
important, clarity is important, but ultimately the most 
important thing, and the reason for being of OIRA, is rigorous, 
careful analysis of the rules. And we won't compromise on that. 
And to be sure, furloughs, sequestration, the inability to hire 
and even backfill positions we have lost greatly compromise our 
ability to do that rigorous analysis in a timely way.
    Mr. Jeffries. If we fail to pass a continuing resolution 
over the next few hours, will your agency be required to shut 
down?
    Mr. Shelanski. Like most other Federal agencies, we will 
not be able to continue operation. So in my particular case, my 
staff at OIRA will go from approximately 40 to two. And I will 
call back people as needed to meet court deadlines, but all of 
our rulemaking review will certainly stop during a period of 
shutdown.
    Mr. Jeffries. So it is also my understanding I think that 
the courts could possibly shut down over the next few weeks, so 
I am not even clear what deadlines might actually be salient 
moving forward, but hopefully, we can avert all of those 
complications.
    One or two last questions, so it is my understanding that 
you review sort of what is deemed significant proposed 
regulations and final rules, is that right?
    Mr. Shelanski. Yes.
    Mr. Jeffries. And how is that significance determination 
made as to what is appropriate for your agency to consider?
    Mr. Shelanski. Well the primary category of significance is 
economic significance. And executive order 12866 which came out 
under President Clinton set a target of $100 million a year of 
economic turnover, of economic effect as a benchmark for 
economic significance. So we do review rules where the annual 
effect on the economy will be $100 million or more.
    There could be other significant determinations that arise 
because of something has to do with a particularly urgent or 
important issue. But that is the main category of significance.
    Mr. Jeffries. Thank you. And I thank the Chair and the 
distinguished Ranking Member.
    Mr. Bachus. I thank the gentleman from New York.
    Administrator, you went to Haverford which is a Quaker 
background?
    Mr. Shelanski. Yes, sir. It is a small Quaker college.
    Mr. Bachus. And to Cal Berkeley?
    Mr. Shelanski. Quite a change yes.
    Mr. Bachus. Was that a change?
    Mr. Shelanski. It certainly was. There was no question 
about that.
    Mr. Bachus. Are you from Philadelphia?
    Mr. Shelanski. I am a native of Philadelphia. In fact, most 
of my extended family is still there. My immediate family, my 
wife and child we live here in D.C. and rest of my immediate 
family lives in Brooklyn, New York.
    Mr. Bachus. Haverford has a stellar reputation producing 
very good graduates.
    Mr. Shelanski. Thank you, sir.
    Mr. Bachus. President Obama wrote an op-ed in The Wall 
Street Journal so--not The Wall Street Journal this is 
President Obama and The Wall Street Journal, I want to clarify 
that for the Ranking Member, but he said that overregulation 
stifles innovation and has a chilling effect on growth and 
jobs. Do you agree?
    Mr. Shelanski. I think the overregulation, that is to say, 
regulation that exceeds the benefits that it provides and that 
makes it difficult for an industry to grow or plan or function 
is going to have a variety of negative effects, exactly what 
effects at what time may be hard to tell. But I have long 
believed that regulation that serves no purpose, or regulation 
that can't be shown to achieve its purpose is better left 
undone because of the risks it could run.
    Mr. Bachus. And I know you mentioned executive order 12866 
four or five times in your testimony. That allows you to do a 
return letter to the agency?
    Mr. Shelanski. Yes. The return letter is one tool that the 
administrator has for a rule that does not meet the standards, 
and it is not going to through a process of interaction with 
the agency and during a process of review to ever meet the 
standards.
    Mr. Bachus. I know under the present administration, I 
think they only issued one return letter, as opposed to, I know 
during the George W. Bush administration there were 27 returns.
    Are you going to take a closer look at that tool? Or what 
are some other alternatives to that that you will be using?
    Mr. Shelanski. Thank you, sir. That is a very good 
question. I don't have any predetermined target of how many 
return letters I will or won't send, and I wouldn't feel 
unfulfilled in my term as administrator if I never sent one. In 
fact, I might see that as a success.
    But certainly it is one tool and if an appropriate 
circumstance arises, I would not hesitate to use the return 
letter authority in the executive orders.
    There is other authority that can be used, and one is the 
authority simply to push agencies to actually make a rule 
compliant with the analytic requirements of the executive 
orders.
    The other tool is that agencies can withdraw rules. And 
sometimes if there is simply a very great gulf between, for 
example, and this, again, gets to a question I think either Mr. 
Holding or Mr. Collins asked me about is the availability of 
information and data for the agencies, if they don't know 
enough, they may take the time to find out, to do a study, to 
wait for more information to develop out there in the world, 
and that can be an appropriate time for the agency to say, 
okay, we are going to withdraw the rule, and we will repropose 
it at such a time that we can get the available data and meet 
the requirements.
    And that is a tool that actually happens, that is actually 
used quite a bit more frequently than the return letter, in 
fact, has been used several times in recent weeks.
    And I find that to be, there is something good about the 
withdrawal in that it is really the agency coming to terms with 
what more it needs to do, and at least in my limited experience 
of 12 weeks, it is something that can be a more amicable 
solution than a return letter.
    Mr. Bachus. Thank you. Coming from the Financial Services 
Committee, I can't tell you the number of times that financial 
institutions have told me that although there is a big 
difference in a rule and guidance, that often they are told, 
you are not complying with guidance, and that actually can have 
as much of an impact. Of course, guidance you don't get to 
review guidance. Or do you? What is your role there?
    Mr. Shelanski. We actually do review guidance. This is 
actually something that the agencies are not always happy with 
us about. But in my view, the label that is attached to 
something that is produced by an agency is a lot less important 
than the effect that it actually has. So we try to work with 
agencies to have them submit things that they call notices or 
guidance because very often those do have, in fact, regulatory 
effect, and we have, on numerous occasions at OIRA, gone back 
to them with effectively asking for cost benefit analysis of 
notices and guidance. We have sometimes asked--in fact, this 
just happened with EPA where they had a guidance, a very 
helpful guidance, that was really responsive to two Supreme 
Court decisions to articulate the jurisdiction of the Clean 
Water Act. And they withdrew that guidance and reproposed it as 
a rule. And that will emerge once it is through OIRA review as 
a proposed rule for the public to comment on.
    The reason is that we felt notice and comment was very 
important although they had done notice and comment on their 
guidance, but some things should be labeled what they really 
are which is regulation, not guidance. But if it comes in and 
it is called a guidance and it has regulatory effect, we will 
review it.
    Mr. Bachus. I very much appreciate that answer. And I think 
the Financial Services Chairman and Committee would also, in a 
bipartisan way, appreciate that.
    I am not going to go into question on the so-called social 
cost of carbon, but the administration did appear to disregard 
two of OMB's guidelines on cost benefit in issuing them, but I 
may want to write a letter on it and maybe be joined by some of 
the other Members. But I don't think at this time I will go 
into that.
    But let me just close by saying, make a case to us that 
your all your employees are essential in this continuing 
resolution. Sequestration is creating problems and as oversight 
committee, I think we have an obligation--and I have done that 
with the SEC to urge the appropriators to, they have made 
tremendous new obligations and task and have not provided the 
funding.
    So I think it is a proper role for us to make that case for 
you. And I have really not heard too many Members on either 
side of the aisle, the OMB and its different segments and 
departments I think is one of our most valuable departments. 
And so we would love to at least give us the opportunity to 
look at that.
    Mr. Shelanski. I greatly appreciate that sir. And I would 
just emphasize that OIRA is in no different position than any 
other part of OMB. Every one of those offices is working flat 
out performing vital functions.
    Mr. Bachus. And I have really, I have not heard, I have 
heard almost no criticism of OMB. I will probably be criticized 
for saying that, but it returns its value many times over.
    Mr. Shelanski. Thank you.
    Mr. Bachus. With that, we will excuse the administrator and 
thank you for your testimony.
    Mr. Shelanski. Thank you, sir.
    Mr. Bachus. And we will call our second panel.
    We are going to delay the start for just a minute.
    I think we might proceed. I don't know what that bell is.
    Mr. Cohen. How many years do you have to be here until you 
know what the bells mean?
    Mr. Bachus. I think we are going to hit the badminton thing 
back over the fence.
    Maybe we are getting it from the other.
    Professor Sally Katzen has enjoyed a distinguished career 
in legal practice, government service and academia, the first 
female partner at the law firm of Wilmer, Cutler and Pickering. 
Wow.
    Ms. Katzen also has served as section chair of the American 
Bar Association's administrative law and regulatory practice 
groups. When we get past the sequestration, we may ask you if 
you want to come back up here and work. She served for 8 years 
in the Clinton administration including 5 years as 
administrator for the Office of Information Regulatory Affairs 
in OMB. She has a bachelor's degree from Smith College and a JD 
from the University of Michigan Law School.
    She has taught at the George Washington University, 
University of Michigan, George Mason University--George Mason 
University--the University of Pennsylvania and Georgetown 
University Law School and currently is a visiting professor at 
NYU School of Law. Is she the Democratic witness?
    Mr. Cohen. I thought she was. The George Mason thing got me 
totally confused.
    Mr. Bachus. Did you see that in her resume when you asked 
her to testify?
    Mr. Cohen. At least she didn't have Liberty University in 
there.
    Mr. Bachus. All right. Welcome, Ms. Katzen.
    And Boyden Gray, former partner of Wilmer Hale served as 
White House counsel for former President George H.W. Bush, 
subsequently the U.S. ambassador to the European Union. He was 
also appointed to the U.S. special envoy for European Affairs 
and for Eurasian energy.
    In 1993, he received the Presidential citizens medal from 
President Clinton. He is currently on the board of directors of 
the Atlanta Council and the European Institute. Boyden Gray is 
the founding partner of Boyden Gray and Associates, a law and 
regulatory strategy firm in Washington, D.C. following many 
years of service to his Nation in both domestic and diplomatic 
posts.
    As White House counsel to President George H.W. Bush, he 
assisted the President's enactment of the Clean Air Act 
amendments of 1990, development of a cap and trade system for 
acid rain emissions, and enactment of the Energy Policy Act of 
1992 which aimed to decrease American independence on foreign 
oil, protect our environment and promote economic growth. He 
previously had served as counsel to President Ronald Reagan's 
task force on regulatory relief and as legal counsel to vice 
president Bush.
    Later under President Bush, he served as U.S. Ambassador to 
the European Union special envoy for Eurasia and energy, 
diplomacy and a special envoy for European Union affairs.
    In addition to his public service and private legal work, 
he also serves on a variety of boards dedicated to public 
health, regulatory reform, constitutional law and a variety of 
other civic and charitable causes.
    We welcome you, Mr. Gray.
    And Dr. John F. Morrall, III, is an affiliated senior 
scholar with the Mercatus Center of George Mason University. 
There you go.
    And independent contractor for IMAP data and Bloomberg 
government. He specializes in regulatory impact analysis reform 
and government, benefit cost and cost effective analysis, 
health, labor, housing, and homeland security policy, and risk 
assessment.
    In the last 5 years he has also performed work for USAID 
the School of Public Environmental Affairs of Indiana 
University, the Pew Charitable Trust, the United States Chamber 
of Commerce, the Institute of Brazilian Issues at George 
Washington University, and the OECD in South Africa and the 
Institute for applied economic research in Brazil. What is the 
OECD in South Africa?
    Mr. Morrall. It is the Organization of Economic Cooperation 
and Development formed after World War II.
    Mr. Bachus. Thank you. And Institute for applied economic 
research in Brazil. I don't know if I complete that.
    But from 1989 to 2008, Dr. Morrall was branch chief for the 
Office of Information Regulatory Affairs.
    So you were at OIRA and acting deputy administrator the 
highest position at OIRA from 2006 to 2007.
    Dr. Morrall has authored several books and articles and 
graduated magna cum laude from Tufts University and received 
his Ph.D. from the University of North Carolina at Chapel Hill.
    And Tufts is also in Philadelphia, right? Is it in 
Philadelphia?
    Mr. Morrall. No. It is outside Boston.
    Mr. Bachus. Well, two fine cities.
    Ms. Riley, I think the Chairman introduced you. And he read 
the entire statement. But I would like to acknowledge your work 
with NFIB which the Chairman mentioned. And I think you saw 
firsthand some of the effects of regulation on job creation and 
deployment of capital or non-deployment of capital or use of 
capital in maybe not as, sometimes not as productive a way.
    We now proceed under the 5-minute rule with questions and 
we again will start.
    Barney Frank used to do this all the time. He didn't give 
the panel the time to do the opening statements. He would go 
right to questions and now I have done it.
    I guess it was time for me not to run for reelection.
    At this time, I apologize, our panelists will be recognized 
for their opening statements which we won't take, we won't 
adhere strictly to the 5-minute rule. We want to hear what you 
have to say.
    Mr. Bachus. Ambassador Gray.

          TESTIMONY OF THE HONORABLE C. BOYDEN GRAY, 
                 BOYDEN GRAY & ASSOCIATES, PLLC

    Mr. Gray. Mr. Chairman, thank you very much for the 
opportunity to appear. I want to make one basic point which is 
that the OIRA review process ought to include independent 
agencies as well as executive branch agencies. That is my main 
point.
    But I do want to make a point at the outset that I am 
honored to be at the same table with Sally Katzen and the point 
is the bipartisan nature of this whole endeavor has been 
apparent in the very, very beginning. It is one of the few 
places in Washington that still is bipartisan. I hope it stays 
that way. She was a law partner, tennis partner, is now a 
teaching colleague. And we get along pretty well together, and 
I also want to just note a little piece of trivia, that your 
first witness, his predecessor was at the Office of Legal 
Counsel in the Department of Justice in 1981 when the first 
executive order was drafted. And he was a high powered intern 
just off the Supreme Court clerkship, and he is the one who 
approved, if not, in fact, drafted the cost benefit language 
that survived her rewrite of that order 12866 which Ms. Katzen 
wrote, preserving the work of her, one of her successors, Cass 
Sunstein in the Office of Information and Regulatory Affairs. 
So there is a very tangled web of Republicans and Democrats who 
try to keep this a common endeavor.
    The point that I have made in my prepared testimony and 
just want to reiterate is the importance of covering 
independent agencies. Now, we did not do so in 1981, not for 
strictly legal reasons, but because we thought the political 
difficulties were greater than the benefits, the political 
costs were greater than the political benefits. That decision 
was carried forward, as I understand it, by 12866 and it is 
still true. But I don't believe now anymore that the political 
costs are greater. I think the political benefits are far 
greater to cover them. They are much more powerful than they 
used to be. The FCC is obviously much more powerful than it 
used to be, and you perhaps as much as anybody on the 
Subcommittee and the Committee are aware now how powerful most 
of the financial agencies are, most of which are independent: 
the SEC, FCC, the CFPB, a newcomer, and, of course, the Fed 
itself.
    I don't believe that my neighbor to my immediate left now 
objects to this general notion that OIRA should be reviewing 
independent agency regulations. I think I have uncovered 
statements where she has now agreed with that, but she can 
speak for herself, but I do think this is something which I 
think has bipartisan support, and I do think that it is 
absolutely critical to making the system work properly.
    I can come up with many examples, but one of my favorites 
was the issue of the CFTC issuing, or trying to issue under 
Dodd-Frank, rules on derivatives and we had thought that 
Congress, you, had exempted and used derivatives, that is 
common hedging, that has been going on for decades by utilities 
and energy firms. But for a while, it looked as though, well, 
that wasn't going to get exempted and that is a case where it 
didn't make any sense to divorce what the CFTC was doing with 
what EPA was doing which is the primary and the Federal 
Regulatory Energy Commission, FERC, the primary regulators of 
utilities, it didn't make any sense to divorce those. It 
doesn't make any sense to divorce financial services from the 
rest of the economy.
    And so I would make the plea that this be done, it can be 
done by executive order, the President can do it now, the 
President has asked, President Obama has asked independent 
agencies to submit their rules for review, but it is not 
mandatory. It could be, should be, and I think we would all be 
better off if it were.
    I can remember trying to go see Cass Sunstein myself on 
behalf of some clients engaged in the derivative issue, and he 
wouldn't meet because it was--the CFTC was an independent 
agency. So I do hope that it is fixed. It is better done by 
legislation, because that represents more democratic input, but 
it could be done, it could be done by executive order.
    In my prepared statement, I do have a quibble about 
something which has repeatedly come up so far, the social cost 
of carbon because I do think it is, you know, an example of why 
things should get full notice and comment, Administrative 
Procedure Act review with its review in the OMB in the proper 
course of its review obligations. The numbers don't make any 
sense.
    We have two markets that are extant, the European market, 
market in California and the price of carbon in those two 
markets is a fraction of what the government says is the social 
cost of carbon. So I could go into more detail in answer the 
questions but I did want to make that point.
    OMB has also approved, I think, erroneously, EPA's 
assessment of the benefits of certain of its coal regulations 
based on benefits of reducing PM2.5. Most of the 
reductions occur in areas that are well under the 
PM2.5 standard, even the tightened standards, one 
wonders whether you should really cap benefits in areas that 
are in complete attainment for the standard.
    I will stop there, but again, just repeat I hope that 
independent agencies get the review from OMB that they deserve.
    Mr. Bachus. Thank you very much.
    [The prepared statement of Mr. Gray follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Bachus. And I think we welcome statements of 
bipartisanship, because again, that is really the only way we 
are going to accomplish anything of any importance is by 
reaching across the aisle. And we try to do that on this 
Committee, and if anything can unite us, I think this is one of 
the issues that should. And Professor Katzen, you are 
recognized for your opening statement.

TESTIMONY OF SALLY KATZEN, VISITING PROFESSOR AT NYU SCHOOL OF 
               LAW; SENIOR ADVISOR, PODESTA GROUP

    Ms. Katzen. Thank you, Mr. Chairman, Ranking Member, 
Members of the Subcommittee, I appreciate your inviting me to 
testify today on the point that Ambassador Gray was just 
speaking to. It is not free of controversy, but there is broad 
support across the political spectrum for extending the 
requirements for economic analysis and OIRA review to the 
Independent Regulatory Commissions and I have been supportive 
of S. 1173 that accomplishes this in the Senate.
    I would like to use my allotted 5 minutes to make three 
points: First, agency regulations, like legislation enacted by 
Congress, is legitimate activity of the government, and 
experience has shown that they are affirmatively good. 
Complaints about their cost, their inconvenience, their 
intrusiveness gets traction, at least with some constituents, 
and in some quarters. I was cheered by the Chairman's and the 
Ranking Member's statement about the benefits of regulations 
because regrettably, we hear less about that than about the 
costs.
    Too often, the benefits are taken for granted and I think 
in a hearing such as this, it bears emphasis that because of 
regulations the air we breathe, the water we drink are cleaner 
than they otherwise would be, that our homes, our workplaces, 
our cars and planes, our children's toys, our parents' medical 
devices are safer. It is because of regs that we are able to 
enjoy our civil liberties, our privacy, the freedom from 
discrimination and regs provide us with information to make 
intelligible choices and promote competition and fair practices 
in our markets so that they are open and acceptable and 
function effectively.
    Regulations are not intrinsically evil to be restrained or 
suppressed because they bring to life the laws that Congress 
has enacted and the values that we all share.
    It is important, I believe, not to forget this attribute of 
regulations when we speak blithely about regulatory reform 
which, in some instances, means additional hurdles for the 
agencies, or obstacles to overcome in their rulemaking effort, 
and that sensitivity should be in the forefront.
    Second, the regulatory process includes many players 
starting with the agencies to whom Congress has delegated its 
authority, and including those affected by the regulations, 
whether they be the regulated entities or the regulatory 
beneficiaries. And there is a critical role for OIRA to provide 
a dispassionate objective critique of proposals to ensure to 
the extent permitted by law that the work of the agencies takes 
into account the perspective of other agencies and is 
consistent with the preferences and priorities of the 
President.
    Some see OIRA a gatekeeper. Others call it a coordinator or 
facilitator, but the importance of OIRA is beyond dispute. 
Which brings me my third point, the ability of OIRA to carry 
out its function effectively.
    OIRA has new leadership, and this oversight hearing has 
given you an opportunity to hear directly from Mr. Shelanski 
and to judge his competence and capabilities.
    You can draw your own conclusions. I believe his background 
and his performance for the last 12 weeks has proved that he 
has the qualifications, the skills and the temperament to lead 
OIRA. He has, however, an exceedingly hard task, because 
regrettably we have come to the point that OIRA does not have 
the resources, namely manpower, to continue to perform its 
function effectively.
    When President Reagan signed executive order 12291 and gave 
OIRA the task of coordinating centralized regulatory review--
and there were a lot of rulemakings at that time just as there 
are a lot now--there were 90 staff members, 90 FTEs. There are 
now fewer than half that number. It is closer to 40. And during 
the intervening years, Congress has given OIRA a series of 
responsibilities, be it filing reports with Congress or 
additional specific responsibilities under a multitude of 
statutes.
    On top of that, we can talk about morale. I thought Mr. 
Shelanski was quite restrained, but the OIRA staff is extremely 
dedicated and diligent. But the sequester hurt. I think that 
each member of the staff had 8 days of furlough this summer. In 
addition, we are talking about OIRA's capacity tonight when 
tomorrow morning, it is possible that the staff will be told to 
pack it up, go home, and don't do their work. They won't know 
how long, they won't know whether they will be ever be paid for 
the downtime that they have suffered. I am not sure there is a 
whole lot more to say if you are talking about oversight of the 
OIRA function at this point, but I thank you for including me 
on this panel and I look forward to any questions you may have.
    Mr. Bachus. I appreciate that passionate statement and it 
was I can tell you they will be given every consideration.
    [The prepared statement of Ms. Katzen follows:]

    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Bachus. And that is a striking number that the staff is 
half of what it used to be, and I notice that the administrator 
said that each of those analysts is a specialist. They have 
different areas of expertise and they are not interchangeable, 
and so there definitely, the way we are approaching our budget 
and our funding leaves a lot to be desired. Mr. Morrall, or 
Doctor, I am sorry.

 TESTIMONY OF JOHN F. MORRALL, III, AFFILIATED SENIOR SCHOLAR, 
            MERCATUS CENTER, GEORGE MASON UNIVERSITY

    Mr. Morrall. John.
    Chairman Bachus, Ranking Member Cohen and Members of the 
Committee thank you for this honor to testify on the role of 
OIRA. I have spent my working life trying to improve regulatory 
policy, much of it at OIRA as a civil servant from its 
beginning in 1981 until.
    Mr. Bachus. Doctor, if you will turn on your mic.
    Mr. Morrall. I have spent my working life trying to improve 
regulatory policy, much of it as OIRA as a civil servant from 
its beginning in 1981 to my retirement exactly 5 years ago 
today. During that time, we reviewed almost 22,000 final rules 
out of 130,000 published by all Federal agencies, including the 
independent agencies. I am currently an affiliated scholar at 
Mercatus, and the regulatory analyst for Bloomberg government. 
My day jobs entail reading each day's Federal Register, so 
please forgive me if my remarks make your eyes glaze over, or I 
don't always use plain language. Blame years of reading 
hundreds of thousands of pages in the Federal Register.
    A well-known Washington saying is, where you stand is where 
you sit. I sat in thousands of meetings discussing specific 
regulations as both regulator and as a regulator of regulators 
with agency officials supporting regulatory proposals, outside 
interests trying to modify them to their advantage, and White 
House officials, including Boyden and Sally, trying to do the 
right thing.
    So I have some thoughts about how to improve the regulatory 
process and its results. I wish to make two broad points, 
present some research findings that I have been involved with 
and offer some suggestions for the new administrator.
    First, OIRA should focus on its original mission to 
mitigate unintended consequences of agency actions. Even a well 
functioning administrative process is not likely to produce 
smarter regulations absent a strong, internal advocate for 
economic efficiency and an independent ability to verify the 
evidence offered.
    Incentives and pressures applied to agencies create an ever 
present risk, decision making influenced more by politics and 
preferences than objective analysis focused on problem solving 
for which OIRA and OMB have traditionally been advocates. I 
told my staff to represent the people not at the table who 
don't likely don't even know there is a table.
    Second, an effective OIRA needs more of the right staff 
members, individuals trained in economics, benefit cost 
analysis and the scientific method. And they need more time and 
opportunity to evaluate major rulemakings that heavily impact 
economic growth and jobs.
    At many of the meetings I attended to discuss regulatory 
impact analysis, politics not economics dominated. Program 
officials and their lawyers viewed OIRAs as a procedural hurdle 
to overcome and a possible danger to their regulations either 
in their public rollouts or judicial review. The economists 
from the agencies often sat quietly and later in follow-up 
could not talk to OIRA without going through their general 
counsel's office.
    The vast literature on OIRA's role and effectiveness is in 
improving regulations with some exceptions, agrees that 
safeguards against capture, tunnel vision and ex post 
rationalization are keys to better regulation. I saw OIRA's 
main role evolve from watchdog whose job was to ensure that 
agencies use economic logic and quality benefit cost analysis 
when regulating to a ``conveyor and convener and information 
aggregator assuring that agencies properly follow the 
Administrative Procedure Act.
    The new administrator is uniquely qualified with both 
formal legal and economic training to pursue both roles but 
rulemaking needs more careful analysis of consequences and 
fewer advocacies for special interests, which are always well 
represented. With the goal of approving regulation in mind I 
recommend the following.
    First, the OIRA administrator needs to insulate the 
economic analysis and recommendation from politics as much as 
legally feasible. It is difficult for agencies to achieve 
objectivity when subject to so many subjective forces. OIRA can 
serve as a mechanism for regaining focus on the potential 
effects of the rulemaking which will impact everyone, rather 
than being focused on who does or does not support the rule.
    Number 2 make it a priority to expand OIRA's resources in 
the areas where it matters the most, specialists in benefit 
cost analysis and risk assessment, errors in these two areas 
can be major barriers to successful problem solving which is 
the intent and purpose of rulemaking.
    And last, make the time devoted to rulemaking as productive 
as it can be. Consider making procedural change to have 
agencies submit an OIRA contain a description of the problem, 
options for addressing it and cost benefit analyses of each 
option to OIRA for quality control and approval before the 
agency actually drafts its proposed rule. Thank you very much.
    Mr. Bachus. Thank you, Doctor.
    [The prepared statement of Mr. Morrall follows:]

    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Bachus. And Ms. Riley.

 TESTIMONY OF NICOLE RILEY, VIRGINIA STATE DIRECTOR, NATIONAL 
               FEDERATION OF INDEPENDENT BUSINESS

    Ms. Riley. Thank you, Mr. Chairman and Members of the 
Subcommittee. It is my pleasure to be here on behalf of the 
National Federation of Independent Business and our 350,000 
members across the country, 5,500 of those that are in the 
State of--Commonwealth of Virginia. So I know they very much 
appreciate the Committee's interests on how Federal regulations 
impact them as small business owners and the amount of time and 
resources it takes for them to comply. So thank you very much 
for this opportunity.
    In my written testimony, you will find more details 
regarding how members feel about today's regulatory climate, 
but I did want to first recognize that our small business 
owners are very much aware and recognize the need for 
regulation, understanding that there is public safety for 
consumers, for clients and for the general public. But what 
they really do worry about is they want to make sure that those 
regulations are sensible. And what we mean by that is that they 
accurately weigh all the costs and benefits, including flexible 
compliance options. For many small business owners one size 
does not fit all and so many of them, flexibility would 
certainly be helpful.
    But what I really want to spend most of my time this 
afternoon speaking of are actually to give you three good 
examples of members' stories that I have heard while I have 
been out on the road visiting with our members across the 
Commonwealth, because I think a lot of times it helps to really 
get a real picture, a flavor for what small business owners are 
actually experiencing.
    The first example I want to talk about is members that we 
have in Roanoke City, Chris and Betsy Head, they are franchisee 
owners of Home Instead Senior Care, which means they provide 
companionship-type services for their clients, for people who 
are elderly or disabled. And this allows these people to stay 
in their homes more than having to put them in facilities to be 
cared for.
    Specifically, the Department of Labor just 2 weeks ago 
finalized a rule that was known as the companionship exemption 
for minimum wage and overtime for home care workers employed by 
third party agencies, many of which are small businesses, 
including the Heads. And specifically this overtime portion is 
where, I think, a lot of folks including the Heads are really 
going to feel an impact on their business, but there is also 
going to be impact on their clients and there is going to be 
impact on their employees.
    The Heads often provide what they call sleep over service 
for their clients. And this is where a worker comes in at night 
for a 10 to 12-hour shift, ensures the client eats dinner and 
gets them ready for bed, and then while the clients is asleep, 
the worker sleeps as well on site in case of an emergency.
    The new Department of Labor rule will require employees be 
paid time and a half for every hour worked over 40 in a given 
week. Under the exemption, employees received their straight 
hourly wage for hours over 40. So this will significantly 
increase the cost for these employees that provide this type of 
sleep-over service. Many clients simply won't be able to afford 
this change. The Heads anticipate that they will see a 20 to 25 
percent number of clients that will leave and try to go 
elsewhere. And they might end up trying to find, what they are 
worried about is they potentially go to folks who are not 
licensed, they would do more, go to someone who might work in 
that gray area. But to stay competitive, the Heads will have to 
limit their employees to 40 hours to keep costs down so that 
that client could afford them.
    So but we are seeing where both the client is going to be 
seeing less care or not be able to afford the care that they 
need, and you are also going to see employees who typically 
would have had more hours in pay are now going to be limited to 
40 hours.
    Another example comes from Mr. Bill Neff from Harrisonburg, 
Virginia. He is a commercial real estate developer has been in 
business about 50 years. And he ran into some trouble not too 
long ago with a church actually that was trying to construct on 
a new piece of property that they had. He put together a 
projected cost for that project, and it included what would 
need to deal with stormwater runoff. And a lot of this comes 
from the EPA particularly where Harrisonburg is located it is 
in the Chesapeake Bay watershed, so there are a lot of 
stringent rules regarding stormwater runoff.
    He typically, in this project, originally proposed that 
they put in a retention pond with rock to be able to filter the 
runoff during the storm. He submitted that project for permits. 
It was rejected, and he ended up having to put in a filtration 
system that would now cost $60,000. The original proposal was 
only $10,000.
    So this was a significant burden on that church. And now 
any new commercial property project that he takes on, he will 
have to now consider those costs into the project.
    A third example is Rob Frazier with Frazier Quarry. They 
are a limestone company in Rockingham County, and they recently 
have had to deal with a rule that came through a couple years 
ago that requires a mining operation to, in the event of an 
emergency, make the a call to the agency to report that 
emergency within 15 minutes of the emergency occurring.
    They had a situation where this did occur here. They did 
not want to face the 5- to $60,000 fine that would be incurred 
upon them, even though within 15 minutes of that emergency they 
are really more concerned about obviously making sure emergency 
personnel are onsite, their employees are taken care of, but 
here they are having to make this call to this agency within 15 
minutes.
    Once they did make the call, they did make the call within 
15 minutes, they were given a phone service. That individual on 
the call did not know why they were calling, did not understand 
why they were making this call. And so then they had to spend 
additional time trying to explain why they were trying to call 
the agency to report this emergency.
    So a lot of times for small business owners, it is also the 
frustration of just the compliance piece that they face on a 
daily basis. So hopefully these three situations give a little 
bit of an illustration of what they face on a day-to-day basis. 
And I certainly appreciate the time and I will take any 
questions. Thank you.
    Mr. Bachus. Thank you.
    [The prepared statement of Ms. Riley follows:]

    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Bachus. Mr. Holding.
    Mr. Holding. Thank you, Mr. Chairman. The introduction of 
Mr. Gray left out a very important element that he is a 
distinguished North Carolinian, and hails from a family that 
has been committed to public service within North Carolina and 
throughout the United States for generations, and it is an 
honor and a pleasure for me to be here sitting across from you, 
so thank you.
    Mr. Gray, in your written testimony, you note that 
centralized review of administrator agencies is most effective 
when the Office of the Vice President takes an active role in 
its supervision. If you could share with us a little bit about 
your experience in seeing this process work when the Vice 
President is taking an active role, and whether or not you know 
if Vice President Biden's office is has taken on such a role 
and should if it has not.
    Mr. Gray. Well, of course, my experience with this comes 
through my service as counsel to Vice President Bush who was 
delegated the authority to convene all of this effort beginning 
in 1981. But Vice President Quayle continued in that capacity 
when Vice President Bush became President, and Vice President 
Gore did the same thing when President Clinton was elected. So 
there is a long history of this. And why is it important? 
Because I think OMB, even more now probably than ever, because 
of the cuts in the staff, OMB needs a champion in the West 
Wing, OMB is part of the larger executive office of the 
President and the head of the director of OMB is a member of 
the cabinet and attends senior staff, et cetera. But it is 
always great to have a champion in the White House. It 
certainly, I think, was important to John, he can speak for 
himself and his colleagues and I would be willing to say that 
Sally would second the motion when she was head of OIRA.
    Mr. Holding. Thank you. You also had pointed out regarding 
EPA regulations and the specifically co-regulations coming out 
of the EPA, and I just wanted to give you a minute to elaborate 
on your thoughts there and the problems that you see.
    Mr. Gray. Well the social cost of carbon leaving aside the 
procedural defects, which I think are fairly clear, there is 
just a mixup on the numbers and the number of 36, which is now 
the number used, $36 a ton is a worldwide benefit. But I don't 
think that can be attributed to reductions made just in the 
United States. The costs all occurred here but the benefits are 
worldwide. I think the benefits should be attributed to a rule 
containing carbon in the United States should be what the 
benefits are in the United States, that is what the OMB 
circular actually provides for and I think that is what should 
happen.
    Now what is the benefit in the United States? It couldn't 
be any greater than U.S. share of GDP, world GDP which is under 
25 percent, it is probably a lot less because we have 
controlled carbon better than many countries, contrary to the 
sort of public image, and probably closer to 10 or 15, maybe as 
low as 7.
    And if you look at the delta, the difference between say 15 
and 36, it is more than $100 billion a year and the potential 
regulatory costs, you could say it is the equivalent of a $1 
trillion tax increase over a 10-year period. That is not 
peanuts. And so I think it needs to be sorted out.
    As I said, the price that Europeans pay is about $7.50 give 
or take, and the price that is paid in California which is a 
pretty good proxy for the U.S. is 20 percent of the U.S. 
economy is less than 12. And so I think that needs to get 
sorted out.
    On the question of PM2.5, which is mainly to the 
present time a coal issue, the benefits for some of the rules 
have been astronomical, the MACT rule, the air toxics rule, the 
actual air toxic benefit from the air toxic reduction is like 
about 5/10 of, half of 1 percent of the total benefits. The 
total benefits are in 99 percent derived from calculations of 
what it means to reduce PM2.5 but those reductions, 
as I said a few minutes ago, all occur most of them, I mean, 90 
percent or more in attainment areas that is parts of the 
country that are well in attainment of the standard. And I 
don't think you can imply a straight line benefit down to zero 
for your PM2.5 reduction. I am a lawyer I am not a 
scientist. John can talk to this if you want to ask him a 
question with much greater sophistication than I can.
    But why do we have attainment? Why do we have national air 
quality standards if you are going to continue to regulate 
below the level of the standard and claim the same benefit?
    Mr. Holding. Thank you. Ms. Riley, quickly I just wanted to 
thank you very much for being here. The NFIB is a great 
resources in my district, and has brought to my attention many 
examples analogous to the ones that you have brought here 
before the Committee and the impact unfair and unreasonable 
burdensome regulations are bringing upon small business. 
Chairman Goodlatte's district and my district share a lot of 
similarities.
    And as I listened to the examples that you brought forth, 
they are very similar to what the folks in my district are 
facing. So thank you for being here. Mr. Chairman, I yield 
back.
    Mr. Bachus. Thank you, Mr. Holding, and the gentleman from 
Memphis.
    Mr. Cohen. Thank you. Thank you. It is I think appropriate 
that this may be the last substantive Committee that meets 
before the government closes down. It is not the sexiest 
subject, it is not the most watched and provocative subject, so 
a good way to wind down into halting government.
    The big issue, I guess, and the big picture, Ambassador, 
is--let me ask you, in 1985 were you working with the 
administration?
    Mr. Gray. Yes, sir.
    Mr. Cohen. Do you recall when there was an attempt to not 
raise the debt ceiling and President Reagan spoke about that?
    Mr. Gray. I am afraid to say I do not recall that specific 
incident. There were several, we were talking about this in the 
ante room, several shutdowns during the Reagan-Bush years, and 
quite frankly, I can't remember the details of any of them 
except that for the very first one I was deemed nonessential, 
and it was one of the most humiliating things in my life.
    Mr. Cohen. That didn't last long, though, did it?
    Mr. Gray. No, it was only about 2 or 3 days but I didn't 
dare appear in public during daylight hours for fear someone 
would look at me and say look, he is not essential. It was 
quite traumatic. It is traumatic for anybody. When I was on the 
council, I had to oversee a couple of shutdowns, and we worked 
with OMB over who was supposed to be nonessential and 
essential. And I am telling you what a very pain, it is a very, 
very painful exercise. But I do not remember----
    Mr. Cohen. President Reagan, this was about getting beyond 
the debt limit, what do you think would happen you got so much 
experience I read your vitae, what would happen to the world's 
economy if we on October 17th did not raise the debt ceiling?
    Mr. Gray. I think that the consequences would be very 
severe, and I can not really get my arms around my head around 
what would happen if we just ignored it.
    Mr. Cohen. And let me ask you something. When you play 
tennis with Professor Katzen, does she go to her left and you 
go to your right?
    Mr. Gray. We are very bipartisan when we play, but I 
probably play more opposite her than with her, and don't ask me 
or her who usually wins. It is always sort of mixed doubles, so 
it is kind of hard to trace the actual causality in these 
matches.
    Mr. Cohen. And then tell me this, none of this is relevant 
to anything, but except to the big picture. You clerked for 
Chief Justice Warren. Can you tell us something about Chief 
Justice Warren? He was one of my heroes, and I was impressed to 
see that you had time with him.
    Mr. Gray. Gosh. Well, it was one of the great experiences 
of a lifetime, and maybe the best experience, and he was 
wonderful to work for. All of his ex-clerks loved him. He 
never, I think, got over, always complained about his service 
on the Warren Commission. I think he thought that was the 
biggest mistake he ever made, and I can still remember his wife 
saying, you know, it is a good thing that Earl was not a woman 
because he can never say no. But he was a wonderful man to work 
for, and what I most admired about him were two things: He had 
an uncanny sense for what was really going on in litigation, 
and at the Supreme Court, he really knew what was going on, and 
he really understood the legal issues, and writing dissents for 
him was very difficult because you couldn't quite capture his 
own passion, and he wrote extremely well legally, and I was 
always surprised that here is somebody who had been a 
politician who could handle legal analysis so well.
    The other thing was is that he was used to being in the 
public eye. I don't want to belabor this point, used to being 
in the public eye all of his life, and when he came to the 
Court, he pulled down the curtain and never gave another press 
conference, never appeared in public again and shut it off cold 
turkey, and I think that is an extraordinary gift to the Nation 
when he did that.
    Mr. Cohen. I have got something I want to share with you. I 
think I have got it here if I can read it. Have you been out 
to--do you know these words, ``Where there is injustice, we 
should correct it; where there is poverty, we should eliminate 
it; where there is corruption, we should stamp it out; where 
there is violence, we should punish it; where there is neglect, 
we should provide care; where there is war, we should restore 
peace; and wherever corrections are achieved, we should aim 
them permanently to our storehouse of treasures''?
    Mr. Gray. I should know who said this. I wish I did know. 
Was that Chief Justice Warren?
    Mr. Cohen. That is a verbiage from 1970 that is placed on 
his stone. Of course he passed, I guess he passed later, but 
that is what is on his tombstone.
    Mr. Gray. On the tombstone.
    Mr. Cohen. I went out across the river in Arlington and 
photographed that because I thought it was just so beautiful, 
and he was a great man, and that is one of his quotes, but 
happy for your experience, and that was good.
    Mr. Gray. Thank you, sir.
    Mr. Cohen. Professor Katzen, how did you end up at George 
Mason, and what did you teach? Balancing your resume?
    Ms. Katzen. No, I always was under the impression that 
administrative law was a bipartisan effort, that there are 
principles that one can subscribe to that do not go along 
ideological lines. The Chair was quite kind to mention that I 
had been chair of the administrative law section. I followed 
Justice Scalia, and then Chairman Verkuil from ACUS followed 
me.
    There is no rhyme nor reason or predetermination for a 
position, and if I was teaching administrative law, it seemed 
to me that I could teach anywhere. I found the experience very 
interesting because of the faculty lunches every day, I learned 
new things.
    Mr. Cohen. Were you forced to eat crow ever?
    Ms. Katzen. No. No, and I didn't require them to, either.
    Mr. Cohen. Good for you. Good for you. I yield back the 
balance of my time, and thank each of the witnesses.
    Mr. Bachus. I taught law school at the university just on a 
very brief basis when the professor was disabled, and it was a 
very challenging experience because you are dealing with very 
bright students, and you better get the message right, you 
better; what you say better be correct or they will correct 
you, and I don't think there is a tougher profession, more 
demanding than teaching at any level, but at the college level, 
but it can be delightful because you can--you also learn as 
much as you teach.
    This has been an excellent panel. I am very encouraged by 
the fact that there is some bipartisan agreement on some 
things. The bill in the Senate that Senator Warren and--Warner 
and others have, so I think it gives us a lot of direction, and 
I am not going to--I think we have had a good hearing. I am not 
going to mess it up, particularly after I announced today I 
wouldn't be running for reelection, and the government appears 
to be shutting down, so--so I have probably said enough. But it 
is a sad day for our country if, in fact, the government does 
shut down, and so thank you very much for your attendance and 
your testimony, and this is a very bright panel and a lot of 
good information to digest.
    This concludes today's hearing, and thank you to all of our 
witnesses, again, for attending, and without objection all 
Members will have 5 legislative days to submit additional 
written questions for the witnesses or additional material for 
the record. This hearing is adjourned.
    [Whereupon, at 6:09 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record









                                











                                

















                                

Material submitted by the Honorable John Conyers, Jr., a Representative 
 in Congress from the State of Michigan, and Ranking Member, Committee 
                            on the Judiciary





                                

   Response to Questions for the Record from the Honorable Howard A. 
 Shelanski, Administrator of the Office of Information and Regulatory 
                                Affairs



























                                

Response to Questions for the Record from the Honorable C. Boyden Gray, 
                     Boyden Gray & Associates, PLLC
























                                

   Response to Questions for the Record from Sally Katzen, Visiting 
     Professor at NYU School of Law; Senior Advisor, Podesta Group









                                

    Response to Questions for the Record from John F. Morrall, III, 
  Affiliated Senior Scholar, Mercatus Center, George Mason University









                                

Response to Questions for the Record from Nicole Riley, Virginia State 
         Director, National Federation of Independent Business






                                 
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