    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                           ASSESSING THE OBAMA YEARS:
        OIRA AND REGULATORY IMPACTS ON JOBS, WAGES AND ECONOMIC RECOVERY

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

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                               REGULATORY REFORM,
                          COMMERCIAL AND ANTITRUST LAW

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  JULY 6, 2016

                                   __________

                               Serial No. 114-85

                                   __________

             Printed for the use of the Committee on the Judiciary

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

                             U.S. GOVERNMENT PUBLISHING OFFICE

    20-632 PDF                     WASHINGTON : 2016
    -----------------------------------------------------------------------
      For sale by the Superintendent of Documents, U.S. Government Publishing
      Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
             DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
                              Washington, DC 20402-0001

                           COMMITTEE ON THE JUDICIARY

                       BOB GOODLATTE, Virginia, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        JERROLD NADLER, New York
    LAMAR S. SMITH, Texas                ZOE LOFGREN, California
    STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
    DARRELL E. ISSA, California          STEVE COHEN, Tennessee
    J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
    STEVE KING, Iowa                       Georgia
    TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
    LOUIE GOHMERT, Texas                 JUDY CHU, California
    JIM JORDAN, Ohio                     TED DEUTCH, Florida
    TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
    JASON CHAFFETZ, Utah                 KAREN BASS, California
    TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
    TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
    RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
    BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
    DOUG COLLINS, Georgia                SCOTT PETERS, California
    RON DeSANTIS, Florida
    MIMI WALTERS, California
    KEN BUCK, Colorado
    JOHN RATCLIFFE, Texas
    DAVE TROTT, Michigan
    MIKE BISHOP, Michigan

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

        Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                       TOM MARINO, Pennsylvania, Chairman

                     BLAKE FARENTHOLD, Texas, Vice-Chairman

    DARRELL E. ISSA, California          HENRY C. ``HANK'' JOHNSON, Jr.,
    DOUG COLLINS, Georgia                  Georgia
    MIMI WALTERS, California             SUZAN DelBENE, Washington
    JOHN RATCLIFFE, Texas                HAKEEM JEFFRIES, New York
    DAVE TROTT, Michigan                 DAVID N. CICILLINE, Rhode Island
    MIKE BISHOP, Michigan                SCOTT PETERS, California

                          Daniel Flores, Chief Counsel

                          Slade Bond, Minority Counsel

                                C O N T E N T S

                                  ----------

                                  JULY 6, 2016

                                                                       Page

                               OPENING STATEMENTS

    The Honorable Tom Marino, a Representative in Congress from the
      State of Pennsylvania, and Chairman, Subcommittee on Regulatory
      Reform, Commercial and Antitrust Law...........................     1
    The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in
      Congress from the State of Georgia, and Ranking Member,
      Subcommittee on Regulatory Reform, Commercial and Antitrust Law     3
    The Honorable Bob Goodlatte, a Representative in Congress from
      the State of Virginia, and Chairman, Committee on the Judiciary     4
    The Honorable John Conyers, Jr., a Representative in Congress
      from the State of Michigan, and Ranking Member, Committee on
      the Judiciary..................................................     6

                                   WITNESSES

    The Honorable Howard Shelanski, Administrator, Office of
      Information and Regulatory Affairs, Office of Management and
      Budget
      Oral Testimony.................................................     7
      Prepared Statement.............................................    10
    William W. Beach, Ph.D., Vice President for Policy Research,
      Mercatus Center at George Mason University
      Oral Testimony.................................................    24
      Prepared Statement.............................................    26
    Clyde Wayne Crews, Jr., Vice President for Policy/Director of
      Technology Studies, Competitive Enterprise Institute
      Oral Testimony.................................................    32
      Prepared Statement.............................................    34
    David M. Driesen, Esq., Professor of Law, Syracuse University
      College of Law
      Oral Testimony.................................................    78
      Prepared Statement.............................................    80
    Douglas Holtz-Eakin, President, American Action Forum
      Oral Testimony.................................................    90
      Prepared Statement.............................................    92

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Response to Questions for the Record from the Honorable Howard
      Shelanski, Administrator, Office of Information and Regulatory
      Affairs........................................................   114
    Response to Questions for the Record from William W. Beach,
      Ph.D., Vice President for Policy Research, Mercatus Center at
      George Mason University........................................   117
    Response to Questions for the Record from Clyde Wayne Crews, Jr.,
      Vice President for Policy/Director of Technology Studies,
      Competitive Enterprise Institute...............................   121
    Response to Questions for the Record from Douglas Holtz-Eakin,
      President, American Action Forum...............................   124
                            OFFICIAL HEARING RECORD
              Unprinted Material Submitted for the Hearing Record

    Supplemental material submitted by David M. Driesen, Esq., Professor of
        Law Syracuse University College of Law. This material is available
        at the Subcommittee and can also be accessed at:

        http://docs.house.gov/Committee/Calendar/
    ByEvent.aspx?EventID=105157

     ASSESSING THE OBAMA YEARS: OIRA AND REGULATORY IMPACTS ON JOBS, WAGES
                             AND ECONOMIC RECOVERY

                                  ----------

                            WEDNESDAY, JULY 6, 2016

                           House of Representatives,

                      Subcommittee on Regulatory Reform,
                          Commercial and Antitrust Law

                          Committee on the Judiciary,

                                Washington, DC.

        The Subcommittee met, pursuant to call, at 3:03 p.m., in
    Room 2226, Rayburn House Office Building, the Honorable Tom
    Marino (Chairman of the Subcommittee) presiding.
        Present: Representatives Marino, Goodlatte, Collins,
    Ratcliffe, Trott, Bishop, Johnson, Conyers, and DelBene.
        Staff Present: (Majority) Daniel Huff, Counsel; Andrea
    Lindsey, Clerk; (Minority) Slade Bond, Chief Counsel.
        Mr. Marino. The Subcommittee on Regulatory Reform,
    Commercial and Antitrust Law will come to order. Without
    objection, the Chair is authorized to declare a recess of the
    Committee at any time, and that is going to take place in about
    30 minutes, 30 to 40 minutes because we will be voting.
        Welcome to this hearing entitled ``Assessing the Obama
    Years: OIRA and Regulatory Impacts on Jobs, Wages, and Economic
    Recovery.'' This topic is of the highest importance to working
    Americans. The last recession ended in 2009, but the economy
    has been limping along ever since. Job growth has been weak.
    Households' incomes have stayed put. The economy has not grown
    by more than 3 percent in any of the one of these years. One
    clear contributor is the growing Federal regulatory burden.
        Under the Obama administration, the number of major
    regulations promulgated per year has increased dramatically. In
    2015, Federal regulations imposed an estimated cost of $1.89
    trillion. To put this in perspective, U.S. regulatory costs now
    exceed the gross domestic product of both Australia and Canada.
    Numerous studies and the agencies themselves concede that on an
    industry-specific level, regulations lead to job losses. At a
    minimum, the data also establishes probable cause for concern
    that regulations decrease employment in the aggregate. Data
    shows that even where workers in regulated industries find new
    jobs, the displacement triggers a lifetime of physical and
    economic problems.
        Accordingly, as President Obama's former OIRA Administrator
    Cass Sunstein said, ``Regulators must take that possibility
    seriously.'' Unfortunately, regulators are not following this
    prudent path.
        A recent study of agencies' Regulatory Impact Analyses
    found that only approximately 20 percent qualified employment
    effects. Since 2009, the Obama administration has imposed 229
    major regulations at a cost, by its own estimate, of $108
    billion annually. Merely administrating regulations in 2015 was
    estimated to cost taxpayers over $57 billion, an 83 percent
    increase over 2001. The effects are dire.
        A September 2015 study by a Princeton Nobel laureate shows
    ``shocking'' rising mortality among blue collar segments of
    society. According to the study's author, ``those are the
    people who have really been hammered by the economic malaise.
    Their wages in real terms have been going down.'' The economic
    stress is leading to drug and alcohol dependency and death,
    mental health problems, and even suicide. The Administration is
    dismissive. It circumvents reasonable procedures designed to
    limit burdensome regulations. It uses technical gimmicks to
    claim speculative benefits outweigh regulatory cost.
        Delegations of power are read broadly, while limitations
    are read narrowly. Half of the Administration's vetoes have
    been used to block congressional objections to controversial
    regulations.
        OIRA is supposed to be the gatekeeper, the entity that
    helps fight overregulation and protect small businesses and the
    American worker.
        Unfortunately, on some of the most costly and controversial
    regulations of the last 8 years, OIRA has not proven an
    effective check. For example, it never insisted upon the
    required small business impact analysis for EPA's Waters of the
    United States regulation, despite its obvious sweeping reach.
    Nor has it questioned agencies' excessive reliance on co-
    benefits and performing required cost-benefit analyses. In
    fact, one of the reasons agencies have to inflate the claimed
    benefit of their rules is to outweigh skyrocketing cost because
    they are regulating well into the region of diminishing
    marginal returns where one must spend increasingly more to
    achieve increasingly less. This track record makes me concerned
    about ``Midnight Rules'' at the end of this Administration.
        Midnight Regulations impose the ongoing Administration's
    agenda on the country before an incoming Administration can
    stop it. So today, it is important to ask what serious steps
    will OIRA take to prevent this final abuse? The legacy of this
    Administration will be severe damage to hardworking Americans,
    our economy, and the rule of law.
        Discretion afforded administrative agencies by Congress has
    been abused. Major decisions were made not by the people's
    Representatives in Congress, but by unelected bureaucrats. This
    cannot stand. I hope Administrator Shelanski can offer ideas on
    making OIRA more effective. I also hope to hear from our second
    panel of witnesses about needed reforms.
        The Chair now recognizes the Ranking Member of the
    Subcommittee on Regulatory Reform, Commercial and Antitrust
    Law, the gentleman from Georgia, Congressman Johnson, for his
    opening statement.
        Mr. Johnson. I thank the Chairman. Established by the
    Paperwork Reduction Act of 1980 and empowered with centralized
    regulatory review responsibilities under President Reagan, the
    Office of Information and Regulatory Affairs, also known as
    OIRA, functions as the gatekeeper of the regulatory system for
    the most important Federal rules.
        In 1993, President Clinton issued Executive Order 12866 to
    require that OIRA review all ``significant'' regulatory actions
    between 500 and 700 a year. It additionally requires that
    Federal agencies prepare a cost-benefit analysis for
    economically significant rules.
        In January 2011, President Obama issued Executive Order
    13563, which reaffirmed the principles of Executive Order 12866
    but also requires that agencies develop plans for retrospective
    review of existing regulations to determine whether any should
    be modified, streamlined, expanded, or repealed. And finally,
    the Obama administration issued Executive Order 13610 in May
    2012 to further increase public participation in retrospective
    reviews.
        According to Mr. Shelanski's predecessor, Cass Sunstein,
    these orders have energized agencies to identify hundreds of
    outdated rules for elimination, and many agencies have already
    finalized or proposed, or formally proposed, over 100 of these
    reforms. For instance, the Department of Health and Human
    Services has finalized several rules to remove hospital and
    healthcare reporting requirements, saving $5 billion over 5
    years. These efforts have continued under Administrator
    Shelanski, and thus far, appear to be working.
        Combined, it's clear that these initiatives have already
    resulted in hundreds of formal proposals to eliminate rules
    representing billions of dollars in savings over the next
    several years and substantially more in eventual savings. I
    look forward to learning about the continuing efforts, to date,
    of the President's push to have agencies improve and modernize
    the existing regulatory system.
        In addition to conducting oversight of OIRA, witnesses on
    our second panel will also discuss larger concerns with our
    Nation's regulatory system. I would note that the most pressing
    issue facing our regulatory system today is the timely response
    to public health and safety crises through the expeditious
    promulgation of Federal rules. But sadly, it has become common
    for my colleagues to assert that the same regulations that
    protect our health, safety, environment, and our financial
    system have undermined the Nation's economic recovery and job
    growth.
        This could not be further from the truth and is simply not
    borne out by any serious research. Perhaps that is why
    conservatives also acknowledge that in light of improvements in
    the economy and the unemployment rate, it is becoming
    increasingly difficult to argue that the current regulatory
    environment has any effect on jobs or growth. Douglas Holtz-
    Eakin, one of the majority's witnesses in today's hearing,
    commented last year that, ``with low employment and rising
    wages, the Republican's job gets a lot harder,'' while also
    referring to recent employment growth as promising.
        I think 20-some million new jobs created over in the
    private sector since, President Obama took office. First, it's
    a loss of a couple of million jobs during the previous
    Administration. And, with respect to those figures about rising
    mortality rates among the blue collar working group
    demographic, it's not just because wages have gone down and
    they're dying because of alcohol, drugs, and mental health.
        Certainly, wages have gone down, and they are dying of
    alcohol, drugs, and mental health disease, but also, liver and
    heart disease are taking out our fellow man, and this can all
    be attributable somewhat to the globalization of our economy,
    the movement of jobs offshore, production jobs, blue collar
    jobs, those jobs--many of those jobs have left under trade
    deals that have not worked for the American worker, and people,
    unfortunately, when they become--when they--there's a sense of
    hopelessness that starts to pervade their thinking, then they
    turn to alcohol and drugs, and they then develop liver disease,
    heart disease. But fortunately, there's treatment available for
    the millions, tens of millions who have been able to gain
    access to the healthcare system due to the passage and
    implementation of the Affordable Care Act, which my colleagues
    on the other side have tried more than 60 times to abolish with
    no plan in place to replace it.
        And, of course, we have had some regulations that have
    ensued as a result of implementation of the Affordable Care
    Act, a major piece of legislation, and also the Dodd-Frank
    financial reform bill that has attempted--or has been effective
    thus far at creating another--or enabling another too big to
    fail situation to take out the retirement earnings of our
    working people and to keep our economy moving forward.
        So I would like to say that once you set aside anti-
    regulatory rhetoric, it's clear that regulated industries
    exhibit more entrepreneurship, competition, and innovation
    given the fact that Alex Tabarrok, an economics Chair at the
    Mercatus Center at George Mason, found, in a 2015 study, that
    ``industries with greater regulatory stringency,'' and I am
    quoting him, ``have higher start-up rates as well as similarly
    high job creation rates.''
        So in closing, I would like to thank Administrator
    Shelanski for taking the time to appear before us today, and
    I'd like to thank the other witnesses for being here today, and
    with that, I yield back.
        Mr. Marino. The Chair now recognizes the gentleman of the
    full Judiciary Committee, Mr. Bob Goodlatte of Virginia, for
    his opening statement.
        Mr. Goodlatte. Thank you very much, Mr. Chairman. I want to
    thank you for holding this hearing, which is very timely.
    Overregulation is not a new issue, and the reason why this
    hearing is timely is it comes right after Independence Day.
    Among the grievances that the signers of the Declaration of
    Independence lodged against King George was overregulation:
    ``He has erected a multitude of New Offices and sent hither
    swarms of officers to harass our people and eat out their
    substance.''
        Unfortunately, the problem has resurfaced. Last year,
    employment at regulatory agencies hit an all-time high of
    277,000. In 2014, rules from the administrative agencies
    outnumbered laws passed by Congress 16 to 1. There has been a
    dramatic power shift in these United States from elected
    officials to unaccountable bureaucrats at Federal regulatory
    agencies.
        In theory, agencies are governed by legislation, like the
    Administrative Procedure Act, as well as executive orders,
    designed to ensure transparent, quality rulemaking that is
    responsive to the people, balances costs and benefits, and is
    faithful to the intent of Congress. In practice though, too
    many Administrations have not adhered to these procedures in
    good faith.
        The Obama administration, in particular, has taken
    advantage of the system to ram through radical, controversial,
    and sweeping policy changes contrary to the will of Congress,
    and of views of large segments of the voting public. Serious
    reforms are needed to curve these abuses.
        At key stages in the rulemaking process, the Administration
    has ignored, or subverted, commonsense rulemaking procedures
    that stood in the way of their policy goals. For example,
    instead of using required regulatory impact analysis to
    determine whether regulation is necessary, agencies produce
    them in a perfunctory way, after the decision to regulate has
    already been made. A Mercatus Center study found that in
    essentially 87 percent of cases, agencies embarked on costly
    regulations without significant evidence that there was a
    problem or a precise idea of what they needed to fix.
    Similarly, agencies make questionable certifications that rules
    will not have a significant economic impact on a substantial
    number of small entities in order to avoid requirements
    designed to help rein in impacts on small businesses.
        While the Obama administration pays lip service to the
    virtues of cost-benefit analysis, it routinely uses technical
    gimmicks like non-standard discount rates and excessive
    reliance on co-benefits to ensure its preferred outcomes. The
    Administration is also exploiting the Administrative Procedures
    Act's interpretive rules exception to impose dramatic and
    controversial policy changes without notice-and-comment or
    public participation. These include an unprecedented 30
    guidance documents from the Department of Education straining
    the application of Civil Rights laws into controversial areas
    well beyond their intended scope.
        Unfortunately, whether with regard to highly controversial
    rules, like EPA's Waters of the United States rule, Clean Power
    Plan rules, or Utility MACT rule, the Office of Information and
    Regulatory Affairs (OIRA), has proven ineffective at preventing
    regulatory abuses, particularly when the costs are highest and
    it matters most.
        To be sure, in some cases, OIRA has improved the quality of
    rulemaking. However, that just underscores the need for
    fundamental regulatory reform in the face of executive branch
    abuses in the most high-profile cases.
        This hearing is an opportunity to lay before the American
    public precisely how the President's ``I have got a pen''
    approach has exploited the weaknesses in the regulatory system.
    That is the legacy of the Obama administration. For 8 years, it
    has abused discretion that Congress delegated in good faith.
    Serious and comprehensive reform is needed, and I look forward
    to exploring with the witnesses both the problem and its
    solutions. Thank you, Mr. Chairman.
        Mr. Marino. The Chair recognizes the full Judiciary
    Committee Ranking Member, the gentleman from Michigan,
    Congressman Conyers for his opening statement.
        Mr. Conyers. Thank you, Mr. Chairman, Members of the
    Committee, and especially to our first witness, the head of the
    Office of Information and Regulatory Affairs. It's been 3 years
    since Administrator Shelanski was appointed to head OIRA, and
    I'd appreciate hearing his thoughts on the current state of
    affairs with respect to Federal rulemaking and whether
    legislative fixes are needed in his view.
        And, I'm also--I don't know how you can get all this into 5
    minutes, but I wanted to get a sense of what it was like before
    you got--before you took over so we can empathize with what it
    is you've been working on and how you've--how you've approached
    it.
        Some think the regulatory system, as you heard, is broken.
    But to that end--excuse me. They also support a series of anti-
    regulatory measures, many of which would impose numerous
    procedural burdens on Federal agencies.
        Now, that's a curious difference of views that are being
    pushed by some of the same important personalities in the
    Congress. Other anti-regulatory measures would up-end the
    rulemaking process through unnecessary and costly litigation
    changes. For example, one bill, 4768, Separation Powers
    Restoration Act, is likely to be considered on the floor later
    this month, and would require Federal courts to review all
    agency rulemaking and interpretations of statutes on a de novo
    basis, resulting, of course, in a paralysis that would be out
    of sight, probably impossible, from my point of view.
        And so, there's a sort of an opportunity to press down on
    OIRA and its leadership, which I've had some indication that
    they are small and understaffed, and with this enormous
    responsibility, and I would like to get from this hearing, not
    only from the Administrator, but the panels that follow, an
    idea of how we in the Congress can make the process more
    efficient and how the Administration can make it more efficient
    without Congress intervening, if that is possible. That's why
    the hearing is important.
        The government has the obligation to protect health,
    welfare, and safety of all our citizens with the need to foster
    economic growth. And so, it's in that spirit that I come to
    this hearing to hear our Administrator describe how things work
    inside OIRA, and what the challenges are that you are faced
    with. We know that the time--that the time--period of time for
    regulation is getting pretty long, and we want you to candidly
    tell us what you can do about it, and what we should do about
    it. And so, I thank Chairman Marino for holding this hearing.
    And, like my colleague, Mr. Johnson, I look forward to the work
    product of this important coming together. Thank you, Mr.
    Chairman.
        Mr. Marino. Without objection, other Members' opening
    statements will be made part of the record. Before we break for
    voting, I would like to swear you in, sir, if you don't mind,
    so would you please stand and raise your right hand.
        Administrator Shelanski, do you swear that the testimony
    you're about to give before this Committee is the truth, the
    whole truth, and nothing but the truth, so help you God?
        Mr. Shelanski. I do so swear.
        Mr. Marino. Let the record reflect that the witness has
    responded in the affirmative, and thank you. Please be seated.
    We're going to head to vote now. We have five votes. They're
    beginning now with a 15-minute vote and then four 5-minute
    votes, so it looks like we're looking at pretty close to at
    least a half hour, and I apologize for that, but we will get
    back as soon as possible, sir.
        [Recess.]
        Mr. Marino. The hearing will now come to order and resume.
        I will now introduce our esteemed witness. And, thank you.
    I apologize again for making you wait. Dr. Howard Shelanski was
    confirmed by the United States Senate in June 2013 as the
    administrator of the Office of Information and Regulatory
    Affairs, otherwise known as OIRA. Prior to his confirmation,
    Administrator Shelanski served as the director of the FTC's
    Bureau of Economics, and as chief economist for the Federal
    Communications Commission. Administrator Shelanski also served
    as senior economist for the President's Council for Economic
    Advisers.
        Prior to working for the government, Administrator
    Shelanski practiced law and taught at both Georgetown
    University and the University of California at Berkeley. He
    received his BA from Haverford College and his J.D. and Ph.D.
    in economics from the University of California at Berkeley.
    Following law school, he clerked first at the District and the
    Appellate Courts levels and then for Justice Antonin Scalia on
    the U.S. Supreme Court.
        The witness' written statements will be entered into the
    record in its entirety. And, I ask, sir, that--you have been
    here before. You know how it works. Now, because we're not in
    the original room, we have no lights. We don't even have a
    timer. Somebody's going to sit beside me and tap me on the
    shoulders. And, when you get at about 4\1/2\ minutes, I will
    just diplomatically hold the hammer up. I will not hit anything
    or anyone, and just try to wrap up then in the next 30 seconds
    to a minute.
        So Administrator Shelanski, please.

      TESTIMONY OF THE HONORABLE HOWARD SHELANSKI, ADMINISTRATOR,
        OFFICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF
                         MANAGEMENT AND BUDGET

        Mr. Shelanski. Thank you very much, Chairman Marino,
    Ranking Member Johnson, and Members of the Committee, for the
    invitation to appear before you today. I am pleased to have
    this opportunity to discuss recent developments at the Office
    of Information and Regulatory Affairs, OIRA, and report on the
    progress OIRA has made on the key priorities I outlined when I
    first appeared before this Committee in July of 2013.
        OIRA has a broad portfolio, but one of our main duties is
    to coordinate the review of significant regulations. The basic
    principles of regulatory development and centralized review
    have evolved in a bipartisan way over the course of the last
    few decades.
        The structure of regulatory review that we follow today was
    established by Executive Order 12866, which is quite simple and
    straightforward: Regulations should be based on a sound
    analysis of their impacts. They should be developed with public
    input and subjected to public scrutiny before they are
    finalized, and they should be reviewed by a central office to
    ensure consistency with sound regulatory practice and
    Administration priorities.
        OIRA does not review all executive branch regulations, nor
    would it be efficient for the office to do so. We review only
    significant regulatory actions. The most fundamental category
    of significant regulations are those that are economically
    significant, the threshold for which under the executive order
    is an annual effective on the economy of $100 million or more.
        Typically, an agency sends a draft of a significant
    proposed or final rule to OIRA, after which OIRA coordinates an
    interagency review process. Typically, the agency will agree
    with some but not all of the comments that it receives from
    OIRA and the other reviewing agencies. Through discussion and
    deliberation with interagency reviewers, the rulemaking agency
    ultimately produces a proposed or final regulation to be
    published in the Federal Register.
        OIRA works to ensure that the costs of new regulations that
    come to the Office of Review are justified by the benefits. To
    date, the net benefits of regulations issued through the sixth
    fiscal year of the Obama administration are about $215 billion.
    The benefits of these rules are not mere abstractions. They
    help American families every day by saving lives, preventing
    illness and injury, and protecting consumers.
        As this Administration comes to a close, we intend to
    maintain the strong regulatory review standards that have
    guided OIRA's review of regulations throughout the
    Administration. In December of 2015, I issued a memorandum to
    deputy secretaries outlining these expectations. The memo asked
    agencies to adhere to dates established in their fall 2015
    regulatory plan and agenda, and to update OIRA about any
    necessary changes.
        The memo acknowledged that agencies will issue many needed
    regulations through 2016, but requested that agencies strive to
    complete their highest priority rulemakings by this summer,
    because OIRA needs sufficient time to thoroughly review all
    regulations for compliance with applicable statutes, governing
    executive orders, and OMB circulars.
        When I became OIRA administrator in 2013, one of my goals
    was to increase the predictability of the regulatory review
    process by improving the timeliness and transparency of OIRA's
    key functions. Toward that end, and as I committed to do the
    first time I appeared before this Committee, we have published
    the regulatory plan and agenda each fall and spring, most
    recently on November 16, 2015, and May 18, 2016.
        OIRA is committed to putting out another regulatory plan
    and agenda in a timely fashion this fall. OIRA has also worked
    to improve the transparency of regulatory review. When an
    agency submits a rule to OIRA for review, the submission
    appears publicly the next day on OIRA's Web site. This posting
    provides stakeholders with notice that OIRA is initiating
    review of a regulation and is available to meet with any party
    interested in providing input on a rule under review.
        The entities with which OIRA typically meets include
    Members of Congress and their staffs, State and local
    governments, businesses, trade associations, unions, and
    advocates from a variety of organizations. OIRA posts a log of
    all such meetings on its Web site detailing the participants in
    each meeting, the organizational affiliation of the
    participant, and post any materials prior to OIRA at the
    meeting.
        One hallmark of this Administration's regulatory policy is
    our retrospective review effort. Retrospective review, which
    the President has advanced through Executive Order 13563 and
    13610, is a crucial way to ensure that our regulatory system
    remains modern and streamlined and does not impose unnecessary
    burdens on the American public. The essential idea is to
    scrutinize existing rules and assess whether in practice they
    are achieving their objectives without imposing unnecessary
    costs.
        Agencies release their most recent reports on March 4,
    2016, and will submit their next reports to OIRA this month. To
    date, this Administration's retrospective review efforts are
    expected to yield an estimated net 5-year savings of $28
    billion.
        In conclusion, regulations can and do bring great benefits
    to Americans, but they also carry costs. OIRA works every day
    to achieve the goals outlined in Executive Order 13563 to
    protect public health, welfare, safety, and our environment,
    while promoting economic growth, innovation, competitiveness,
    and job creation.
        It is critical to ensure that Federal agencies base their
    regulatory actions on high-quality evidence and sound analysis.
    It is also crucial that a culture of retrospective review is
    sustained at the agencies as any healthy organization should
    scrutinize its current approaches to see if they are still
    relevant and effective in a rapidly evolving economy.
        We look forward to continuing our efforts to meet these
    challenges. Thank you for your time and attention. I would be
    happy to answer any questions.
        [The prepared statement of Mr. Shelanski follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

       Mr. Marino. Thank you. Now we will begin the 5 minutes of
    questioning from each of the Members. And, we will try to do
    just as well as you did, to do it within around 5 minutes.
        First thing I would like to bring to your attention and ask
    your response to, sir, is the Committee--the Subcommittee,
    which I've Chaired for the last couple of years now, asked in
    writing for a list of all proposed, or final rules reviewed by
    OMB since January of 2009 where the cost-benefit analysis, by
    one or more methods of calculation would be negative if co-
    benefits were excluded. OIRA offered a generic reply that co-
    benefits are discussed in an annual report.
        Would you be so kind as to commit to providing the list
    that I just asked for by July 20 of this month?
        Mr. Shelanski. Thank you, Mr. Chairman.
        I would like to take that request back and to see what it
    would take for us to compile that list, and we will get back to
    your office as quickly as possible with when we can reply.
        Mr. Marino. Do you think you will be able to get back to us
    as to when you can complete that list before July 20?
        Mr. Shelanski. Yes. I will get back to you before July 20
    with an answer as to what kind of work I think will be involved
    with that and when we can do that.
        Mr. Marino. Thank you.
        Your written testimony outlines steps you took ``to avoid
    an end-of-the-year rush,'' which we have seen concerning
    regulations with all Administrations. Essentially, you
    requested that agencies act promptly. Supposing they refuse
    your request, what consequences would they face--not could they
    face, but would they face--with you if that information is not
    put together?
        Mr. Shelanski. The memorandum that I issued in December
    makes clear that we at OIRA need time to make sure that we have
    done a thorough review. And, we will uphold the standards of
    the executive order. The consequence that agencies will face if
    they come to us too late with rules is that we may not have
    time to do that kind of thorough review, in which case their
    rule would not be completed by the end of the Administration.
        Mr. Marino. Let's expand a little bit on that question and
    your statement. You said you do not have--you may not have time
    because of what the agency has not done or fulfilled their
    request. But as the Administrator, how do you respond to that?
    It's like, you know, I ask my kids to have something done, and
    it's not done, there are consequences. Maybe we should start
    running the government a little more like we, parents,
    supervise our children.
        Mr. Shelanski. It's hard to know in advance of any rule
    being submitted what kind of shape the rule is in, or what the
    review time will be. Some rules can be reviewed thoroughly and
    completely in a relatively short period of time; others will
    take a lot more back and forth, will implicate a lot more of
    the equities of other agencies.
        So it's hard to know in advance what the consequence of a
    particular late submission will be, but--so the operative
    principle that we're using is to tell them that if you submit
    us a rule late and it's a rule that will take more time to do a
    good job on, it won't be able to be concluded on. I can't tell
    in advance before I see a rule how long it will take to review
    or what the process will be, but they are on notice that, you
    know, we can't shortcut our process and we can't rush rules
    through at the end.
        Mr. Marino. Don't you think there should be some type of--I
    don't want to use the word ``sanction,'' but some type of
    notice or warning, public notice or warning to that agency, to
    that department, that we requested this information, the time
    has lapsed, we have had no response? Or is it even a situation
    where you have requested an extension?
        I mean, the American people have to understand what is not
    taking place. And, elected officials and those that are
    appointed to office can simply just not ignore because this is
    what gets us into the problems that we're in with the debt and
    a whole litany of other issues. But there are responsibilities.
    I came from industry. You're an officer of the court. You know
    when a judge says I want this done by this date; if it's not
    done, there are sanctions. So why are the bureaucrats, why
    would the elected officials be immune from this?
        I think part of your responsibility and other
    Administrators' responsibility is to make it publicly known
    that your request wasn't fulfilled, and the agency is lacking
    in getting American people information. What say you?
        Mr. Shelanski. If an agency chooses not to send a rule to
    OIRA, that's something that's very much in their discretion. If
    it's not a rule that has a court order or a statutory deadline,
    I don't have any authority to issue a sanction because an
    agency doesn't send a rule over. But what I can do, and the
    authority that I do have is to make sure that my office
    operates in a way that it lives up to its authorizing executive
    orders.
        And so, what I can tell agencies--and again, it's not my--
    you know, I can tell agencies, look, you are working on this
    rule and you say you want it done, we're running out of time.
    And, that's the kind of thing that I can tell them, and then
    they have to make a decision and be answerable to the public
    about whether or not they are going to continue with that
    particular rulemaking.
        Mr. Marino. I agree with you. I'm way over my time and I
    apologize. But what would help is probably you giving them a
    little nudge and saying, if this isn't done by a certain time,
    I'm going to send notice over to the Committee that's
    responsible for oversight or budgeting you, and explain to them
    that you're not cooperating. Maybe that's what we need.
        But with that, my time has expired. I thank you, and I now
    yield to the Ranking Member of the Subcommittee, Mr. Johnson,
    for his questioning.
        Mr. Johnson. Thank you, Mr. Shelanski.
        I have serious concerns that the cost-benefit analysis
    requirement for significant rules comes at the expense of
    Americans' public health safety and environment. How can we
    possibly quantify the benefit clean drinking water will have on
    a neighborhood when new solid waste regulations protect that
    neighborhood from coal ash dumping? How can we possibly
    quantify the benefits that clean drinking water would have,
    based on a newly promulgated rule that protects that
    neighborhood from coal ash dumping?
        How can we accurately quantify the cost of exposure to
    dangerous chemicals and toxic materials on the long-term
    development of children in low-income and minority communities?
    Repeatedly, critical public health rules are called too
    burdensome for corporations to comply with, but what about the
    communities at stake, communities who find the cost to their
    health, safety, and well-being not factored in because it does
    not have an easily quantifiable dollar figure? What about the
    burdens that those folks face?
        Regulations should act as a floor, not a ceiling. Rather
    than weakening rules to lower the cost they have on big
    business, we should be strengthening rules so the burden on the
    American public is not too costly. In light of these concerns,
    should we reform OIRA's review process so it is more reflective
    of the cost and benefits that rules have on the health and
    well-being of everyday people?
        Mr. Shelanski. Thank you very much, Mr. Johnson. That's a
    very important question.
        I do think it's very important to quantify as much as
    possible the costs and benefits of a regulation. I think it's
    important for the American public to understand what regulation
    is costing them. I think it's extremely important for the
    business stakeholders to have notice of what their compliance
    costs might be. It is important that our regulation remain
    consistent with economic growth and job creation.
        On the other hand, we well recognize, and indeed, our
    executive orders well recognize that there can be limits in our
    ability to quantify benefits. So there is not a rigid
    requirement that quantified benefits exceed quantified costs,
    because there is a recognition that in some places, there are
    benefits, benefits that can be proven to exist but, as you say,
    are hard to put a dollar figure on.
        So what we ask agencies to do is to quantify as much as
    available scientific evidence and health evidence will permit,
    what the reduced illness incidents will be, what the reduced
    death and injury incidents will be of a rule, and to quantify
    those by some very well-established techniques.
        But we also recognize that in some cases, there will be--
    the evidence will be difficult to come by. And, there we look
    for a strong case that the rule will achieve its intended goal
    of, for example, clean drinking water or cleaner air, and that
    there is good evidence that those changes will be reflected in
    public health gains.
        So I do not--I would not be in favor of reforming the
    executive orders and the cost justification principles that
    underlie them. I think they are very healthy, and I think that
    they are consistent with providing the kinds of benefits that
    you articulated, sir.
        Mr. Johnson. Thank you.
        Anti-regulatory measures, such as H.R. 185, the Regulatory
    Accountability Act, and H.R. 4768, the Separation of Powers
    Restoration Act, have been proposed to heighten judicial review
    of agency rulemaking. You previously testified that you have
    grave concerns with conducting judicial review at a granular
    level because it could grind to a halt the deliberative process
    and good policy development.
        What are some examples of rulemakings that would be
    particularly sensitive to heightened review?
        Mr. Shelanski. Thank you, sir.
        My concern about judicial review is of the kind that has
    been suggested in some proposed legislation, is that it would
    put judges in the position of reviewing very detailed kinds of
    factual decisions that expert agencies typically make, and
    would really overturn decades of precedent about the
    appropriate scope of deference to fact-finding and decision-
    making in the agencies. And, the result would be that it would
    be very hard to move forward in rulemaking if at every given
    stage, every determination of the agency could be second-
    guessed, no matter how material on judicial review.
        So I do have some concerns about judicial review of OIRA
    determinations, or a very granular kind of agency
    determinations for the reasons that you set forth.
        Mr. Johnson. Are you concerned that heightened judicial
    review may empower courts to make substantive determinations?
        Mr. Shelanski. Yes, sir, that is one of the concerns. I
    think that the system of judicial review that is in place over
    decades of Supreme Court precedent is designed to have courts
    take one step back from those kinds of very detailed,
    substantive determinations. And, my concern would be that
    agencies would find it very difficult to make progress on
    necessary regulations, regulations that respond to pressing
    public needs, if they would face that kind of judicial review.
        Mr. Johnson. Thank you, sir. I yield back.
        Mr. Marino. The Chair recognizes the gentleman from Texas,
    Congressman Ratcliffe.
        Mr. Ratcliffe. Thanks, Mr. Chairman. Sorry, I was deep in
    thought there.
        Mr. Chairman, I appreciate you holding this hearing, and I
    will tell you that I think the work that this Subcommittee does
    is some of the most important work that we do here in Congress.
    I can tell you from the constituents that I have in Texas, the
    issues that we're talking about here, including what the
    gentleman from Georgia just referenced, are very personal to my
    constituents.
        I'm afraid that sometimes here in the Halls of Congress,
    the statistics and the numbers and the clinical terms that we
    use in these hearings desensitize all of us to the real impact
    that the policy decisions have, whereas I can tell you the
    folks back in northeast Texas aren't. They see these issues in
    very clear terms, terms like jobs and the uncertainty of their
    jobs and the stagnancy of their wages with respect to jobs and
    not getting pay raises for decades, how it impacts their
    families and their futures.
        And, from the conversations I've had with constituents,
    it's painfully clear to me that so many of the burdensome
    regulations are inflicting real harm on individuals and
    families. Making matters worse at times is the attitude of
    indifference, at best, and condescension, at worst, from
    Federal regulators. Sometimes when I ask about the consultation
    process and whether or not there has been any meaningful
    consultation with stakeholders in a respective area or
    industry, the response is too often laughter. I think that this
    concept at times isn't taken seriously by some of the
    regulators.
        The regulations--listen, I'm not against regulations. They
    certainly serve a purpose when they are done correctly. They
    can enhance consumer safety, they can promote responsible
    stewardship of resources, and they can improve the lives of
    everyday Americans. But when regulations go wrong, which is
    what we see so often today, they can be impossible to comply
    with, and impossible to rectify or to reconcile with plain-old
    common sense.
        And so, I think a great example of that is what some of the
    unelected bureaucrats are doing at some agencies impacting
    millions of Americans with misguided, misinformed approach to
    the regulatory process. Let's take the Internet. Every day
    Americans use the Internet for communication, for commerce, for
    Internet, for daily operations of their lives. And, I think
    that any regulation that is so far reaching should be done with
    extreme caution and undergo an intensive review process.
    Unfortunately, that's not what's happening.
        So last year, the FCC voted 3-2 along party lines to
    approve the Commission's net neutrality rule, or as my friend
    from Texas in the Senate calls it, ObamaCare for the Internet.
    But let's, for a second, set the policy debate about this new
    rule aside and talk just about the process.
        And, you know, the FCC is using the Communications Act of
    1934 to justify its regulation of the Internet. Bureaucrats at
    the FCC have said that it was the intention of this body of
    Congress to see that broadband Internet service was regulated
    like a telephone utility back in 1934.
        Now, I can't remember the exact year that Al Gore invented
    the Internet, but I'm pretty sure it was after 1934. I think it
    underscores the issue that we're talking about here. And, you
    know, with all due respect to the gentleman from Georgia and
    his comments about some of the legislation, admittedly, some of
    that legislation, the Separation of Powers Restoration Act, is
    my legislation, and it's aimed at exactly this problem.
        And, you know, your response, Mr. Shelanski, about judges
    not having the expertise that some of these agencies have to
    make these decisions, I would point you to the one that I just
    said to highlight the fact that unelected bureaucrats at
    agencies are not always experts on issues.
        To correct another point, my legislation does not go to
    factual findings; it goes to legal interpretations, which is
    what judges are trained, vetted, and ultimately confirmed to
    do.
        So let me ask you on this, while we're on the topic of the
    FCC, is because it's an independent agency, this enormously
    consequential rule is exempt from the cost-benefit framework
    and OIRA review. And, as a result, OIRA is not able to promote
    adherence to the review measures which are designed to ensure,
    I think, that rules that govern the lives of the American
    people have undergone a thorough cost-benefit analysis and
    determined to be the least burdensome alternative.
        As you probably know, in 2012, the President's Council on
    Jobs and Competitiveness recommended that independent agencies,
    like the FCC, be required to perform cost-benefit analysis and
    subject their regulations to OIRA review. I know that you
    previously worked at the FCC, correct?
        Mr. Shelanski. [No verbal response.]
        Mr. Ratcliffe. Do you, first of all, agree with the
    recommendations made by the President's council, and if so, how
    would this, in your opinion, change the benefit or the quality
    of independent agencies' rulemaking?
        Mr. Shelanski. Thank you very much, Mr. Ratcliffe. This
    touches on a very important issue. President Obama, in some of
    the executive orders that he has issued that govern OIRA, has
    actually very strongly encouraged the independent agencies to
    use some of the rigorous cost-benefit analysis that is--that
    executive branch agencies are subject to during OIRA review.
        I do have some concerns, separation of power concerns and
    other concerns, about subjecting independent agency rulemaking
    formally to OIRA scrutiny. I do agree, however, that the
    principles of cost-benefit analysis are ones that are good for
    any agency, whether it's executive branch or independent; and
    that encouragement of those agencies to use those kinds of
    mechanisms would benefit the quality of their rulemaking and
    the American public.
        Mr. Ratcliffe. Thank you. I see my time has expired. I will
    yield back.
        Mr. Marino. Thank you.
        The Chair now recognizes the gentleman from Michigan,
    Congressman Trott.
        Mr. Trott. Thank you, Chairman, and also, Ranking Member,
    for organizing this hearing.
        And, Mr. Shelanski, thank you for appearing today and for
    your work on behalf of our country. You have a very impressive
    background, so there's no question. A Ph.D. in economics from
    Berkeley, and clerking for Scalia, of Counsel to Davis Polk,
    and many great accomplishments. Have you ever run a business
    though?
        Mr. Shelanski. I have not run my own business, sir.
        Mr. Trott. You spent 2 years in private practice, right?
        Mr. Shelanski. That's correct, sir.
        Mr. Trott. So never signed a paycheck. Never managed to a
    bottom line or a budget?
        Mr. Shelanski. Just the household, sir.
        Mr. Trott. Okay. So I took a family business with six
    people, grow it into companies with about 2,000 people. We
    couldn't have done it today. Couldn't have done it. Even if we
    could've done it and made a profit, wouldn't have wanted--their
    heavily regulated businesses wouldn't have wanted to take the
    risk.
        So let me share with you--at a high level, do you think
    that--you know, you cited in your opening statement that over
    the last 6 years, all the benefits to the economy with
    President Obama's regulatory efforts. Do you think, with
    respect to small businesses in our country today, over the past
    6 years, that the regulatory environment is supportive, or is
    it too onerous or just about right? Kind of the Goldilocks
    question for you.
        Mr. Shelanski. Thank you. I think that that's a hard
    question. I will say this: Small businesses face unique
    challenges, and we have a system of regulatory review that is
    set up to try to take specific note of those. And, we do work
    closely with the Office of Small Business Advocacy to try to
    understand the specific effects that will occur on small
    businesses. So we certainly work to try to make it just about
    right.
        Mr. Trott. Well, so that's a good segue. So last weekend in
    the district, I met with some independent party store and gas
    station owners. And, I was impressed with their knowledge. I
    thought only people in Washington understood all of our
    acronyms, but they had all the acronyms down. And, during the
    course of the meeting, they said to me, We cannot continue,
    Would never open another party store or gas station in today's
    environment--these are independent business owners in my
    district--because of the following acronyms: EPA, FDA, ACA, and
    of course, the Department of Labor and some of their rules and
    regulations coming at them.
        So when I go home, I hear three questions: Why can't you
    get anything done in Congress? Why can't you stop President
    Obama? So I'm not going to ask you to opine on the first two
    questions. But if you give me some insight into the third
    question I get asked, which is, Can't you get Washington out of
    the way? I can't run my business in today's environment. What
    should I say to those folks about the future of small business
    in America and free enterprise, which I believe is the reason
    why we're the greatest country in the world?
        Mr. Shelanski. I think that the problem you allude to is a
    problem of cumulative burdens of regulation----
        Mr. Trott. No doubt.
        Mr. Shelanski [continuing]. That each regulation in itself
    may have a justification and may look fine, but by time you're
    a business starting up and you have got multiple regulations
    that you need to address, it becomes a very difficult
    enterprise. I think that to deny that this is a critically
    important challenge for regulatory review and for agency
    rulemaking would not be candid.
        We do strive at OIRA, when we meet with stakeholders and
    when we work with agencies, to try to get agencies to look more
    broadly outside of their rule to understand what this rule does
    to add to the effects on profit margins in a particular sector.
        So it is within our mandate, and it is something that we
    have worked very hard to do. The best answer I can give you is,
    this is an area in which we continue to work with agencies. I
    will agree with you that more attention needs to be paid to how
    we can account for cumulative burdens.
        Mr. Trott. Okay. So let's talk about major impact and rules
    that have major impact, which is the focus of your office. And,
    in connection with that, let's talk about the REINS Act. You're
    familiar with the REINS Act?
        Mr. Shelanski. Yes, sir.
        Mr. Trott. So tell me why that's a bad idea.
        Mr. Shelanski. The Administration has issued its view on
    the REINS Act, and I think that what underlies that view is a
    concern that Congress has the authority already to disapprove
    any major regulation under the Congressional Review Act.
        Mr. Trott. That hasn't gone so well because half of the
    President's vetoes have been of resolutions that we passed
    under the CRA, right?
        Mr. Shelanski. Yep. So one of the concerns is, under the
    REINS Act, an agency would issue a major rule, and then there
    would have to be a majority of Congress to ratify that rule. I
    think my concern is that this could really make it very
    difficult for important major rules to get done because they
    would--they could be done very well. They could meet a very
    specific need, and then still not marshal the necessary
    majority.
        Mr. Trott. But you would concede, if we had the REINS Act
    in place, it would give me a better answer when I go home, and
    I have to explain to small businesses why we haven't been
    able--we, the elected representatives of the people--haven't
    been able to weigh in on regulations that have an impact of
    over $100 million on our economy? I mean, that's a disconnect
    for me, because all I can point to is the fourth branch of
    government, that growing bureaucracy--which is, again, one of
    the questions I get hit with a lot, why has Washington gotten
    so big.
        And, then the other--and I run out of time--but the other
    question I get when people come visit here, tourists and come
    to see our Capitol and the White House, is they comment on all
    the cranes that are in Washington. They have never seen so many
    cranes. We all know Washington didn't have a recession like
    Detroit did, and we all know that Washington continues to grow
    because government just grows and grows beyond--but I thank you
    again for being here, sir, and I yield back my time.
        Mr. Shelanski. Thank you.
        Mr. Marino. Seeing no other Members on the dais, this
    concludes today's first panel.
        Administrator, I want to thank you so very much for being
    here. And, once again, I apologize for the delay. I want to
    thank you for agreeing to get that information to me before the
    20th. I really appreciate that. You are excused, sir.
        Mr. Shelanski. Thank you, sir.
        Mr. Marino. And, would the second panel please come up to
    the hearing table.
        We are missing one of the witnesses, but we're going to get
    started in the interest of time.
        I would ask the gentlemen at the table, would you please
    stand and raise your right hand to be sworn in. Do you swear
    that the testimony you're about to give before this Committee
    is the truth, the whole truth, and nothing but the truth so
    help you God? Thank you. Please be seated and let the record
    reflect that the witnesses have acknowledged in the
    affirmative.
        Mr. Crews, if you would just continue standing and raise
    your right hand. We just swore the other witnesses in. Do you
    swear that the testimony you're about to give before this
    Committee is the truth, the whole truth, and nothing but the
    truth so help you God? I do. Let the record reflect that the
    witness has acknowledged that he does affirm in the positive.
        The four distinguished members of this area of expertise to
    testify before us today, and I will begin with introducing Dr.
    William Beach.
        Mr. Beach. That's correct.
        William Beach is the Vice President for Policy Research at
    their Mercatus Center at George Mason University. Dr. Beach
    previously served as the chief economist for the Senate Budget
    Committee Republican staff. Prior to that position, he was the
    Lazof Family Fellow in Economics at the Heritage Foundation,
    and director of the Center for Data Analysis.
        Prior to joining Heritage in 1995, Dr. Beach served as a
    senior economist in the corporate headquarters of Sprint
    United, Incorporated, and from 1991 to 1995, as the president
    of the Institute for Humane Studies at George Mason University.
    Dr. Beach received his bachelor's degree from the Washburn
    University in Topeka, Kansas; his master's degree in the
    history of economics from the University of Missouri-Columbia;
    and a Ph.D. in economics from Buckingham University in Great
    Britain.
        Welcome, Doctor.
        Mr. Beach. Thank you very much.
        Chairman Marino, Ranking Member----
        Mr. Marino. Sir, I'm going to just go through everybody's.
        Mr. Beach. Is that held against my time?
        Mr. Marino. It's not. We will start from ground zero.
        Our next invitee is Mr. Clyde Wayne Crews, Jr. Mr. Wayne
    Crews is vice president for policy and director of technology
    studies at the Competitive Enterprise Institute, a former Cato
    Institute scholar as well as a Senate and FDA staffer. He is
    widely published and a frequent speaker on a range of policy
    issues at venues, including the National Academies, European
    Commission-sponsored conferences, and the Spanish Ministry of
    Justice.
        Mr. Crews is co-editor of the books ``Who Rules the Net?:
    Internet Governance and Jurisdiction,'' and ``Copy Fights: The
    Future of Intellectual Property in the Information Age.'' His
    other works are cited in dozens of law reviews and journals.
    Mr. Crews is a father of five, received his B.S. From Lander
    College and his MBA from William & Mary.
        Welcome, sir.
        The next witness is Professor David M. Driesen. Is that
    correct, sir?
        Mr. Driesen. Driesen, that's correct.
        Mr. Marino. Driesen. Thank you, sir.
        David M. Driesen is a university professor at Syracuse
    University, the 13th person in the history of the university to
    receive this honor, and a member scholar of the Center for
    Progressive Reform. He teaches environmental law, and his
    scholarship focuses primarily on law and economics and
    environmental law, including a substantial body of work on
    OIRA, or otherwise known as OIRA, review, and cost-benefit
    analysis.
        His books include ``The Economic Dynamics of Environmental
    Law'' and ``Economic Thought in U.S. Climate Change Policy.''
    He sits on the editorial board of the various international and
    environmental law journals. Professor Driesen holds a
    bachelor's degree in music from Oberlin College, a master's
    degree in music from the Yale School of Music, and earned his
    J.D. At the Yale Law School.
        Welcome, Professor.
        Mr. Driesen. Thank you.
        Mr. Marino. Our final witness is Dr. Holtz-Eakin, built an
    international reputation as a scholar doing research in areas
    of applied economics policy, econometrics methods, and
    entrepreneurship. He began his career at Columbia University in
    1985, and moved to Syracuse University from 1990 to 2001.
    During 2001 to 2002, he was a chief economist of the
    President's Council of Economic Advisers. From 2003 to 2005, he
    was the sixth director of the nonpartisan Congressional Budget
    Office, which provides budgetary and policy analysis to the
    U.S. Congress.
        Currently, he is the president of the American Action
    Forum, and recently was a commissioner on the congressionally-
    chartered Financial Crisis Inquiry Commission. Dr. Holtz-Eakin
    received his B.A. From Denison University and his Ph.D. from
    Princeton University.
        Welcome, Doctor. Thank you, all, for being here.
        Now, Dr. Beach, you're up.

    TESTIMONY OF WILLIAM W. BEACH, Ph.D., VICE PRESIDENT FOR POLICY
          RESEARCH, MERCATUS CENTER AT GEORGE MASON UNIVERSITY

        Mr. Beach. Thank you very much. Chairman Marino, Ranking
    Member Johnson, Congressman Trott, it is really a great
    pleasure to be here with you today. I'm going to testify about
    OIRA and cumulative cost and what we can do in terms of
    asserting Congress' authority in these areas, particularly in
    regulatory budget. But I would like to start with just a
    statement about the economy.
        The economic role changes most and for the good in
    economies where rivalrous economic behavior is allowed most to
    flourish, that is in economies devoted to free enterprise.
    Congress has no end of the number of things it has to do. I
    should know; I was once working, not so long ago, in the
    Senate. But near the top of the list of to-dos is the
    protection of this amazing process of value creation through
    innovation, discovery, and competition.
        We depend utterly on the private sector to produce nearly
    all of the material things we value. While the public sector is
    necessary as a partner in the production of these, by providing
    public goods, courts, highways, and so forth and so on, you
    wouldn't want it any other way, the betterment of the American
    people since 1900 is almost wholly the accomplishment of
    competition between entrepreneurs trying to obtain the
    consumer's attention for their products and services.
        Given the vital place of the competitive economic world in
    bettering the general public, Congress must be especially
    vigilant of the regulatory burden it imposes on the economy. In
    this vain, I am particularly eager to draw the Committee's
    attention to three areas of regulatory policy where I have some
    concerns: One, the decay of regulatory impact analysis; two,
    the economic effects of regulation, the cumulative costs of
    regulation; and three, the growing absence of Congress in
    directing the future developments of the administrative state.
        And, let me briefly mention all of these in turn on the
    regulatory impact analysis. Policymakers in Congress would
    largely be in the dark, Mr. Chairman, about the expected
    effects of regulatory policy changes were it not for the
    development of regulatory impact analysis, cost-benefit
    analysis it's also called.
        The Administration's oversight of RIA's is lodged, as we
    heard, in OIRA. Under normal circumstances, this small office
    would have trouble enough monitoring the adequacy of these many
    rules. But I would like to point out to you that it has some
    difficulty doing it because its staffing has been halved. It
    started off in 1981 with 90 people. It now has exactly 50
    percent of that at 45. So one of the things we can do to stop
    the hollowing out of our cost-benefit analysis is to adequately
    staff OIRA.
        So what should we do to improve the quality of regulatory
    impact analysis, cost-benefit analysis? You asked that,
    Congressman Johnson, in your opening remarks. First, improve
    OIRA's resources. Without adequate staffing and other
    resources, the Office's capacity to improve RIA quality, cost-
    benefit analysis will be substantially compromised.
        Two, implement the process reform described in the recently
    passed House bill, the Administrative Procedures Act, that
    requires agencies to produce preliminary regulatory impact
    analysis and submit that to public comment before sending in
    its final RIA cost-benefit analysis to OIRA. Our research
    indicates that preliminary analysis with public comment yields
    much better final results.
        And three, Congress should require all agencies to perform
    cost-benefit analysis when proposing major regulations.
        Let me go to my second point: The increasing effect of
    regulations on the economy. I'm with everyone who has, so far,
    spoken today in being a fan of regulations. You can look at one
    regulation in one area, one regulation of another, and always
    make a good case. But there is a mounting likelihood that the
    cumulative effect of regulation is slowing the economy.
        We have just finished some research in this area: How much
    declining growth have we experienced because of the cumulative
    rapid rise of regulation? My colleague, Patrick McLaughlin, who
    couldn't be here today, and his coauthors, recently used a
    growth model of the U.S. economy in a peer-reviewed piece of
    research and data from the Code of Federal Regulations to
    estimate is that there's a $4 trillion loss in GDP in the base
    year of 2012.
        Now, what does that mean? That is, had regulations remained
    the same as they were in the heavily regulated year of 1980,
    the economy in 2012 would be $4 trillion higher than it
    actually was. Now, that's a decrease of 25 percent from what it
    potentially could have had. There were 135 million employees
    working in 2012. That means, if you do the math, 25 percent
    more employees. We are missing 34 million jobs.
        Finally, I would like to say a quick word about regulatory
    budgeting. At issue in my two previous points, importance of
    RIA work and the mounting case for regulations are, in net,
    harmful to economic growth, is the need for congressional
    policymakers to attend to the more regulations than they have
    in the past.
        So what I'm advocating here is that Congress be a little
    more assertive in terms of what it does to authorize the
    spending of agencies that are pushing more regulations on us. A
    regulatory budget is an idea whose time maybe has come. It was
    first proposed by Lloyd Bentsen, and there are a number of
    Members who are very interested in regulatory budgeting as a
    way to contain and control the growth of regulations.
        I've got a good deal more in my written testimony which has
    been submitted for the record. Thank you very much.
        [The prepared statement of Mr. Beach follows:]

      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

      Mr. Marino. And, let me remind everyone--and thank you for
    the reasonable time--there are timing lights in front of you. I
    think those of you who have testified here before, if there is
    someone here that hasn't, I'm just going to say you have three
    lights. By the time that gets to the last red light, that means
    your time is up. The light before that gives you 1 minute.
    Please try to stay within that period of time, and if you need
    to express anything, we can give you some time during the
    question-and-answer session.
        So Mr. Crews.

    TESTIMONY OF CLYDE WAYNE CREWS, JR., VICE PRESIDENT FOR POLICY/
        DIRECTOR OF TECHNOLOGY STUDIES, COMPETITIVE ENTERPRISE
                               INSTITUTE

        Mr. Crews. Thank you. I'm Wayne Crews, Vice President for
    Policy at the Competitive Enterprise Institute, a libertarian
    policy and advocacy group. I thank the Committee for the
    invitation to address regulatory oversight.
        $19 trillion Federal debt notwithstanding, when
    policymakers neglect regulation, they ignore, arguably,
    government's greatest influence in the economy. Both spending
    and regulation reorients societal resources and priorities.
    Yet, members may have noticed there's still no sign of the 2016
    OIRA report to Congress, so what reviewed regulatory cost
    figures we have are nearly 2 years old.
        Last year's report was the latest ever. Congress confessed
    to over-delegation last month in last month's Article I task
    force report, so code law is here to stay for the moment. OIRA
    should help lawmakers create a regulatory transparency
    supernova to spur economic liberalization.
        I was struck by a businessman writing in the Financial
    Times. He said, when I am 100 percent utterly and completely
    certain that it is an absolute certainty that it is an absolute
    necessity that I need to recruit a new employee, I go to bed,
    sleep well, and hope the feeling is passed by morning.
        While those doing the regulating see no problems,
    exasperation is rampant. Home Depot co-founder Bernie Marcus
    said the company couldn't succeed if started today. Other polls
    say businessmen wouldn't do it again, and startup rates and
    part-time employment rates affirm this.
        Unemployment, like poverty, doesn't have causes. Both are
    the default state of mankind. Only wealth and production have
    causes, and regulatory zeal can derail enterprise. Problem is,
    legislatures rarely control spending, let alone the regulatory
    enterprise, and OIRA's central review machinery can't overcome
    presidents who deprioritize oversight or a regulatory system
    that frontally benefits rent-seeking special interests.
        Over 3,000 rules are finalized annually, but only 13 rules
    in the 2015 OIRA report reviewed cost and benefits. The
    proportion of all rules with OIRA-reviewed cost-benefit
    analysis is less than 1 percent. On the rest, we don't have
    cost-benefit analysis; we have agency selfies. The 800-pound
    gorilla independent agencies get no OIRA scrutiny, nor do the
    thousands of guidance documents and memoranda that I've taken
    to calling regulatory dark matter.
        Such chasms weaken the OIRA report's authority as a
    comprehensive survey of regulatory impact, especially since
    unmeasured categories of regulation propel cost as well, such
    as antitrust, the locking up of western lands, or the
    reluctance since the 1890's to move spectrums and other commons
    into market disciplines.
        When government steers cross-sectorally, as it does today,
    it creates mounting costs, even if no future rules are issued,
    such as Congress' delivery of the Internet and, as of 2 weeks
    ago, drones into century-old public utility models. Also new is
    EPA's central planning of electric charging and hydrogen
    fueling stations in the wake of the Volkswagen settlement.
    Alas, much is beyond OIRA's scope.
        Businessmen want to create jobs, but everything has limits.
    Jobs are a cost, they are a liability, and policymakers should
    recognize that. While a Vanguard study blamed hundreds of
    billions in cost on regulatory uncertainty, it said that
    sometimes the certainty of regulation is worse.
        My optimism stems from knowing there will always be an
    America, even if it's not here, but I do not believe members
    wish to go to the mat maintaining regulatory overreach, and I
    hope members will jointly think through some North Star goals
    to enhance OIRA.
        Ronald Reagan's Executive Order 12291 that energized OIRA
    in the first place showed the so-called pen and phone can also
    expand liberty by reducing Federal Register page counts and
    numbers of rules. Members can work with OIRA to enforce and
    codify the regulatory review executive orders, address
    independent agency costs, and illuminate regulatory dark
    matter.
        Other steps noted in my written testimony include boosting
    OIRA resources and free market law and economics staff at
    agencies, pausing regulation, and implementing the bipartisan
    Regulatory Improvement Commission.
        I highlight also the former regulatory program of the U.S.
    Government, a model by which OIRA could compile an annual
    regulatory transparency report to parallel the historical
    tables in the Federal budget. Optimally, reporting separately
    on economic, health, and safety, paperwork, and environmental
    and other costs.
        So while central review hasn't worked, just possibly it
    could. When it comes to economic expansion, you don't have to
    tell the grass to grow, but you do have to take the big rocks
    off of it. So why not use OIRA as a lever?
        Thank you very much.
        [The prepared statement of Mr. Crews follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________
        Mr. Marino. Thank you.
        Professor Driesen.

    TESTIMONY OF DAVID M. DRIESEN, ESQ., PROFESSOR OF LAW, SYRACUSE
                       UNIVERSITY COLLEGE OF LAW

        Mr. Driesen. Chairman Marino, Ranking Member Johnson,
    Members of the Committee, thank you for inviting me to testify.
        I think a key question we need to ask is whether OIRA helps
    us confront the major challenges that government standards
    address, such as global terrorism and climate disruption. I'm
    going to suggest today that OIRA has not helped us confront
    those challenges, and propose some reforms that would make the
    process more efficient.
        OIRA has not helped us confront these and other key
    challenges because it always delays standards, usually
    needlessly, while doing nothing, and never speeds them up. And,
    because when it does recommend changes, in almost every case
    the changes proposed weaken the standards.
        Now, government agencies already face substantial pressures
    to inadequately protect public health, the environment, and our
    safety, because regulated companies file voluminous comments,
    meet with agency officials, get concessions from them, sue them
    anyway, and then the courts make them do this all over again if
    they did not respond adequately to any of these comments. And,
    these are very well-funded interests, and we don't need yet
    further gauntlets to interfere with these vital protections.
        The primary justification for OIRA reviewers, I think
    you've heard today, is the idea that an office of economist
    should help government agencies use cost-benefit analysis to
    improve the most expensive standards. OIRA, however, focuses
    mostly on standards where no cost-benefit analysis can be
    completed, because none of the benefits are quantifiable. And,
    it overwhelmingly focuses on rules that are not economically
    significant, that generate costs less than the $100 million
    threshold in the law.
        So I have the following recommendations to streamline the
    process and make it much more efficient: First, OIRA should be
    permitted only to review standards that generate cost of $100
    million or more. This would force the agency to prioritize, and
    allow its small staff to review rules in a timely manner.
        Second, we should exempt rules that address terrorism and
    global climate disruption from the review process. These are
    cases where cost-benefit analysis cannot be helpful because it
    is radically incomplete on the benefits side, in both of these
    cases. And, these are areas where it cannot afford the delays
    that are routine in the OIRA process because there are risks of
    catastrophes that--and we don't know when they might occur. So
    in these cases, there should be no OIRA review.
        We also should demand that OIRA not review agency risk
    assessments. This is an office of economists. Risk assessment
    requires scientific expertise that the agencies possess, but
    OIRA does not. And risk assessment, by the way, is the way that
    we come up with a number of lives saved, a number of illnesses
    avoided, and so on. Monetization, economists know about that,
    but risk assessment they don't.
        Fourth, when a cost-benefit analysis shows that the
    monetized benefits exceed the monetized cost, OIRA should be
    pushing for stricter standards because those maximize net
    benefits. They do not follow economic theory in this respect,
    never have, except on one occasion I can think of.
        The other thing we need to do is instruct the agency to
    ignore--the agencies to ignore OIRA's input if the review
    process lasts more than 90 days. The current executive order
    has sought to limit the time of review. OIRA has evaded these
    limits. So we need a simple rule, and we need an enforcement
    mechanism.
        So my conclusion is that OIRA review has not helped us
    address key challenges that government standards address,
    including climate disruption and global terrorism, and that we
    need a much more efficient streamlined processes so that OIRA's
    resources will be used properly and not produce inordinate
    delays.
        Thank you very much for your attention, and I welcome your
    questions.
        [The prepared statement of Mr. Dreisen follows:] *
    ---------------------------------------------------------------------------
        *Note: Supplemental material submitted by this witness is not
    printed in this hearing record but is on file with the Subcommittee,
    and can also be accessed at:

        http://docs.house.gov/Committee/Calendar/
    ByEvent.aspx?EventID=105157

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Marino. Thank you. Dr. Holtz-Eakin.

     TESTIMONY OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION
                                 FORUM

        Mr. Holtz-Eakin. Thank you, Chairman Marino, Ranking Member
    Johnson, Congressman Trott, for the privilege of being here
    today. You have my written statement. Let me make three brief
    points:
        Point Number 1 is there has been a clear explosion of
    regulatory burdens in the Obama administration. OIRA reports
    that it has issued 453 economically significant regulations.
    That's 38 percent more than the Bush administration. That's 41
    percent more than the Clinton administration. It's above
    historic norms by a large margin.
        At the American Action Forum, my colleague, Sam Batkins and
    his staff, do a comprehensive review of regulatory issuance,
    they read every single final regulation, and the agency self-
    reported compliance cost. Over the 7\1/2\ years of the Obama
    administration, the total is $800 billion in new regulatory
    burdens. That's about $250 for every house, every person in the
    United States, and given the concerns that have been expressed
    by the Chairman and others about the pace of midnight
    rulemaking, that total is certainly going to go up perhaps
    dramatically.
        The second point is that these burdens do not disappear.
    They have economic consequences. The regulatory burden has to
    show up in the form of higher consumer prices, or has to show
    up in the form of lower wages in employment, or reduce profits
    and the ability of firms to survive, or even desirability to
    enter.
        American Action Forum looked at 36 major regulations, as I
    indicated in my testimony, and found that they raised consumer
    prices by a cumulative $11,000. These are significant impacts
    on prices. This isn't AAF alone thinking this. When the
    Department of Labor issued a silica rule that had a $9 billion
    cost, it pointed out that for some of the smaller firms, those
    costs would represent 90 percent of their profits, but that it
    was not to worry. That would simply be passed on to consumers.
        If it doesn't go to consumers, it's got to go somewhere
    else, so in work, we looked at the impact of the 2008 ozone
    rule, and if you look at nonattainment counties compared to
    those in attainment, the impact is about $56.5billion in wages,
    or about $700 per worker, and a loss of something like 240,000
    jobs.
        So you're going to see these burdens in prices or wages and
    employment, or just in general economic growth. I mean, if you
    look at $800 billion, that's $100 billion a year and 60 million
    paperwork hours a year. You have to believe that if we had $100
    billion tax increase every year, everyone in America would know
    it, it wouldn't be a hidden cost, and a lot of people would be
    saying, Gee, I'm not so sure that's a good idea. This has been
    a terrible recovery by historical standards.
        And, I think it is no coincidence that for the past 3
    years, for the first time, the rate of birth of new firms in
    the U.S. economy has dropped below the rate at which firms
    fail. We are not seeing the traditional American entrepreneurs
    who show up in the data, and the regulatory burden, I think, is
    contributing to that.
        Final point is that the retrospective review process is not
    taking away existing regulations, so this is just new layers of
    burden on top of the old. The President signed, as has been
    mentioned, Executive Orders 13563 and 13610. If you look at our
    analysis of the impacts of those EOs, they raise the cost of
    the regulatory state by $16 billion. It went the wrong
    direction from a retrospective review point of view.
        And, one of reasons is new regulations, things like the
    gainful employment rule or new greenhouse gas controls are
    being classified as retrospective, when, in fact, they're new
    regulations, and all of this suggests that the EO process, not
    just with President Obama, with previous presidents, is not a
    powerful enough tool for retrospective review, and that
    Congress should think about an alternative mechanism, whether
    it be the SCRUB Act or other legislation I know the Committee
    has considered. I thank you for the chance to be here today,
    and I look forward to your questions.
        [The prepared statement of Dr. Holtz-Eakin follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Marino. Thank you. I will start by questioning the
    witnesses for my 5-minute period.
        Dr. Holtz-Eakin, what are some potential reforms that could
    stem midnight regulations?
        Mr. Holtz-Eakin. There are a range, and I think the
    question is which ones would be the most desirable. So you
    know, sometimes people want to just put a freeze on
    regulations. I think that's too blunt an instrument. I prefer
    to have changes to the regulatory process that would sort of
    make the midnight rush impossible.
        So for example, there is the ALERT Act that the House has
    looked at. That kind of transparency, knowing what's coming
    down the line, the timetables for rulemaking would, in fact,
    styme--stymie the midnight activities. And so, I think look to
    the entire regulatory process, reform that and stop the
    midnight rush in the process.
        Mr. Marino. Dr. Beach, when the Administration, whatever
    the Administration it happened to be, at the end of their
    period, imposes major changes through guidance or other
    regulatory dark matter, is the damage--is there damage to the
    economy and is there damage to our government and our
    liberties?
        Mr. Beach. Yes, I happen to believe that. I think that when
    you have an accumulation of regulations, whether it be in the
    major rules, it be in the minor rules or be in the dark matter
    that Wayne has so eloquently developed, these add to the cost
    of investment, they add to the cost of labor, they add to all
    those costs which go into the operation of a business.
        One of the reasons, as Doug pointed out, we have such a low
    level, a stunningly low level of firm creation has to be in the
    barriers which we've set up on the cost side, with all good
    intentions of helping people protect themselves against health
    and other kinds of injuries. It has prevented a lot of
    entrepreneurship. I'm very concerned about that.
        Mr. Marino. Mr. Crews, would you care to respond to my
    question?
        Mr. Crews. The same. Yeah, well, it's one of the things
    that you look at what OIRA's purview is. There are 3,400 or so
    rules that go through every year, and OIRA looks at about 500
    of them. There are about 60 that it looks at, including budget
    rules where there are just transfers involved, but then, it's
    just a very small handful that get any cost analysis at all.
        But on top of that, as the economy gets more complex, I
    think there is a concern now--there was a hearing in the Senate
    last week on this, of so-called--of agency guidances and
    memoranda and notices and bulletins. There's a whole word cloud
    of these things that agencies are using now to effectuate
    policy, and I think that matters a lot.
        We do have some review at OIRA. We didn't talk about it
    earlier when the administrator was here, but there is a good
    guidance practices memo from OIRA by which agencies can, they
    don't have to, present their so-called economically significant
    guidance. By my brief inventory of it, there are 580 pieces of
    that, but that's equivalent to the number of major rules at
    that go through every year. But those are scattered all over
    the place in terms of where you can find them on agency Web
    sites, so it's very, very difficult.
        We've got a very complex economy now. We've got a lot of
    new high technologies coming across the board. The FAA just
    dropped its drone rule 2 weeks ago, and I was just curious
    about this guidance issue. And, I just glanced--it's a 500-page
    rule, but I glanced through it quickly, you know, doing some
    word searching, and there are at least six substantive areas in
    there where the agency says, Well, we're just going to issue
    guidance in the future.
        The same thing has occurred with the Dodd-Frank law and the
    Unfair Deceptive Trade Practices principles there, not
    regulations forthcoming, but the administrator saying: We're
    not going to issue regulations. You just need to check with us.
        FCC was brought up earlier. Page 88 in the 400-page Federal
    Communications rule on net neutrality, it says: Well, from now
    on, we're going to be using these administrative notices like
    the FCC--like the FTC does with respect to antitrust. So you
    see, we've got a complex economy now that's increasingly at
    risk of being regulated, not by laws passed by this Congress,
    not even by the regulations that go through the Administrative
    Procedure Act but more of this guidance. So that's why I think
    some of the guidance materials is of great concern.
        OIRA does have some authority and even some ability, or it
    could just take the initiative to look at it and make the
    disclosure of it much more transparent.
        Mr. Marino. Professor Driesen, I--tell me if I've
    understood you correctly. You were saying that there's no need
    for OIRA at all?
        Mr. Driesen. No. I think we could do without OIRA, but
    that's not what I've suggested today. What I suggested is that
    it focus only on these rules that cost over $100 million a
    year, and that it get out of the couple of areas that are
    really vital to safeguarding America from real economic
    calamity like we experienced when we had the deregulation
    causing the financial crisis, that is, climate disruption and
    terrorism where the cost-benefit analysis is not going to do us
    any good because it's too incomplete, and where the science of
    climate says there're tipping points out there that could set
    off runaway warming, but we don't know where they are.
        And, terrorism is the same way. You don't know what the
    next thing is going to be, and for that reason you can't
    quantify the benefits. And there are potential disasters here.
    So I'm suggesting this now.
        Mr. Marino. Dr. Holtz-Eakin, you heard Professor's comment
    about quantifying cost, but there are, in my opinion, many
    other areas where we can quantify cost, and particularly when
    it comes to jobs, and more so, small businesses. You know, what
    say you about regulations that have come down at--with this
    Administration beyond what we've seen in the past, but other
    Administrations as well, what's it doing to our jobs in the
    United States, and particularly, small business jobs?
        Mr. Holtz-Eakin. I think it's been quite damaging. I
    understand the argument that says there are the benefits out
    there that need to be quantified as well, and I want echo what
    I believe Administrator Shelanski said very well, which is, you
    should try to quantify everything you can, and that imposes a
    discipline on the rulemaking process that's actually very
    important.
        But it is easy to quantify cost. We take the agencies at
    face value. I'm not even sure they're right, but even with
    those estimates, $800 billion of cumulative burden in 7\1/2\
    years is just like putting $800 billion of taxes onto America's
    businesses and small businesses, and the evidence on that
    impact on jobs, wages, growth, is unmistakably bad.
        Mr. Marino. My time is more than expired, and I now ask
    Congressman Johnson for 5 minutes of questioning, or 6.
        Mr. Johnson. Thank you. Thank you, sir.
        Dr. Holtz-Eakin, do you have any evidence whatsoever that
    the Obama administration plans a midnight rush of regulations,
    prior to its exit from the presidency?
        Mr. Holtz-Eakin. We know only that in past Administrations,
    this phenomenon has happened.
        Mr. Johnson. You don't see any evidence that this is going
    to happen in this Administration, do you?
        Mr. Holtz-Eakin. And, we have some suggested evidence
    presented in the written testimony of trying to sort of get
    things out before May, which is likely when the Congressional
    Review Act hits.
        Mr. Johnson. There's certainly no new evidence----
        Mr. Holtz-Eakin. That's what we know.
        Mr. Johnson [continuing]. Of a midnight rush. That's kind
    of like a--kind of like a hidden kind of situation that's
    sprung on people at the last minute, they can't do anything
    about it. We don't have any evidence that that's what the Obama
    administration is planning?
        Mr. Holtz-Eakin. If they're planning, they didn't call me.
        Mr. Johnson. Okay. Well, so you have no evidence. Isn't
    that correct?
        Mr. Holtz-Eakin. The evidence I have I told you about. We
    have a chart----
        Mr. Johnson. You have no evidence?
        Mr. Holtz-Eakin [continuing]. And, we have history.
        Mr. Johnson. Okay. All right. Well, let me ask you this:
    You remember when Alan Greenspan came to testify before
    Congress back in 2008 about the fact that he had made a mistake
    in believing that banks and operating--that banks operating
    in--would be operating in their own self-interest and thus
    would--it would be not necessary for the government to protect
    their shareholders and institutions. You remember that?
        Mr. Holtz-Eakin. I remember he testified. I don't remember
    the details of it.
        Mr. Johnson. And, do you remember he did say that he made a
    mistake about thinking that we didn't need any regulations?
        Mr. Holtz-Eakin. I'll take your word for that. I'm----
        Mr. Johnson. Well, that's what he said. I mean, you
    remember more than the fact that he testified before Congress.
    I know you remember that he did a mea culpa, and he, said,
    Look, I made a mistake. You don't remember that?
        Mr. Holtz-Eakin. Everybody makes mistakes. I don't find
    that a shocking statement.
        Mr. Johnson. Well, the mistake that he made was, he said
    that the government should play a much more active regulatory
    role over financial firms. Do you think that that was wise in
    the light of the Great Recession that he was talking about?
        Mr. Holtz-Eakin. I think that it's too simple to pin the
    Great Recession on financial regulation, and the reason it's
    too simple--if I could finish.
        Mr. Johnson. Do you believe----
        Mr. Holtz-Eakin. Is that----
        Mr. Johnson [continuing]. That it occurred due to lack of
    regulation----
        Mr. Holtz-Eakin. No.
        Mr. Johnson [continuing]. Or overregulation?
        Mr. Holtz-Eakin. There was overregulation at Fannie and
    Freddie.
        Mr. Johnson. Overregulation.
        Mr. Holtz-Eakin. There was underregulation in some cases.
    The issuers of subprime mortgages at the State level were often
    very unregulated. We saw some really bad mortgage origination.
        Mr. Johnson. So regulation would have helped that, wouldn't
    it?
        Mr. Holtz-Eakin. In some cases, with better prudential
    regulations, it helped. In some cases, we overregulated.
        Mr. Johnson. And, it was the lack of regulation that
    enabled it to happen. That's what Greenspan was talking about,
    correct?
        Mr. Holtz-Eakin. You can question him about his views. What
    I'm saying is my experience on the Commission is that----
        Mr. Johnson. Let me ask----
        Mr. Holtz-Eakin [continuing]. There were evidence of both
    overregulation and underregulation.
        Mr. Johnson. Let me ask one of the other hostile witnesses,
    if I will.
        Mr. Crews, would you agree that Professor--or that Mr.
    Greenspan was correct when he said that we needed more
    regulation in the financial markets to prevent a reoccurrence
    of the Great Recession that threatened to become a Great
    Depression?
        Mr. Crews. The financial markets have been heavily
    regulated for 100 years. The Federal--we have a Federal
    Reserve. The Federal Government sets interest rates and money
    supplies. We testified, I don't know what Committee it was, but
    in 1999, making the case that the government--that government-
    sponsored entities that were extending homeownership beyond
    what could be handled was going to lead to problems. It's in
    the record. You can see that. So yet----
        Mr. Johnson. But there have been some----
        Mr. Crews. You asked the question about----
        Mr. Johnson. There have been some----
        Mr. Crews. Your choice.
        Mr. Johnson [continuing]. Regulations that resulted in some
    harm, but I'm asking you about the lack of regulation that
    resulted in harm.
        Mr. Crews. I don't understand----
        Mr. Johnson. I don't think that it----
        Mr. Crews [continuing]. Talk of a lack of regulation
    because in free markets, there's no such thing as a lack of
    regulation. Laissez faire doesn't mean companies get to run
    around and do whatever they want to do.
        Mr. Johnson. Well, that's exactly what would happen.
        Mr. Crews. You said--no, I just said we had a heavily----
        Mr. Johnson. The financial part.
        Mr. Crews [continuing]. Regulated financial sector. But you
    have a lot of forces that are arrayed against companies that
    misbehave if you're not thinking that a central regulator is
    going to take care of the problem, and I don't think that they
    are.
        Mr. Johnson. You're talking about----
        Mr. Crews. Media, Wall Street, consumers.
        Mr. Johnson [continuing]. Free market forces?
        Mr. Crews. A lot of them.
        Mr. Johnson. That would cover----
        Mr. Crews. Consumers, media, exactly.
        Mr. Johnson. Well, let me ask you this, Mr. Crews, since
    I'm talking to you. The Washington Post awarded the famous two
    Pinocchio's to claims based on your report on regulatory costs.
    Ten Thousand Commandments was the name of it. They called it
    misleading, unbalanced, and--well, idiosyncratic guesstimate
    with serious methological problems. What is your response to
    their characterization of your Ten Thousand Commandments paper
    which they gave it two Pinocchio's?
        Mr. Crews. Well, maybe that they should have read the
    subtitle. This is The Washington Post. The paper that they're
    referencing was called, ``Tip of the Cost-berg.'' It's a
    working paper compiling OMB numbers on the cost of regulations
    on environment, health and safety, and OMB has quit compiling
    the paperwork cost that it ought to be compiling, and the
    economic regulatory cost that it ought to be compiling.
        Nobody sees the same rainbow. We all look through different
    drops when we see it, and nobody sees the same costs and
    benefits of regulation. I use a low ball figure for the cost of
    regulation of 1.9, which OMB's numbers, back at the turn of the
    century, were over a trillion. There have been a lot more
    regulation since then, and these days, the NAM has a cost study
    on regulatory cost, annual regulatory cost of over $2 trillion,
    Mercatus has a new study with substantial cost for regulation.
    There's another----
        Mr. Johnson. You're getting a little----
        Mr. Crews [continuing]. Study of the cost of regulation
    that would put cost over 50 trillion a year.
        Mr. Johnson. You're starting to dazzle me now. I just have
    one last question.
        Mr. Crews. Good.
        Mr. Johnson. I'll try to make it as clear as I can. Tom
    Donohue, the President and CEO of the Chamber of Commerce, is
    quoted as saying that ``we need'' many of the regulations
    included in your antiregulatory report, and that they are
    important for the economy, and we support them.
        That's what Tom Donohue, CEO and President of the Chamber
    of Commerce said. I want to know if you agree with that, and I
    also, I want to get your comment about the fact that prior
    versions of your Ten Thousand Commandments report admitted that
    it was not scientific, and it was back of the envelope, but
    that language did not appear in the most current version, the
    one that was given the two Pinocchio's, and I wanted to know
    why did you remove those caveats from the two Pinocchio's, Ten
    Thousand Commandments report.
        Mr. Crews. I didn't remove them. It's still all in there.
    The Ten Thousand Commandments report is citing the Cost-berg
    figures where I have all those disclaimers there. I cannot go
    below those figures. Those are--those are using largely
    government's own numbers for the cost of regulation and then
    other compilations that are out there. As for--as for
    Donohue's----
        Mr. Johnson. Do you disagree with what Tom Donohue said?
        Mr. Crews. Yeah. As for what he said, Ten Thousand
    Commandments is not an antiregulatory report, and the
    Competitive Enterprise Institute is not an antiregulatory
    group, and the majority here is not an antiregulatory entity.
    This is an OIRA hearing. We're talking about your job of
    reviewing the regulatory state and what the regulators, who are
    not elected, are doing.
        So that's the purpose of the hearing. But the Ten Thousand
    Commandments is not an antiregulatory report. Your question is
    what does the best regulation? Is it always going to be a
    political system that does the best regulation, or do you need
    other kinds of disciplines to play a role?
        Mr. Johnson. Well, Mr. Crews, you've been quite gracious in
    your responses, and Mr. Chairman, you've been quite gracious
    with the time. I'm way, way over the limit, and with that, I
    will yield back.
        Mr. Marino. I have another question I'd like to ask, and if
    you would like to, Hank, you certainly can.
        Even I don't consider Professor Driesen to be hostile, so
    this will pertain to you as well, sir, if you care to. Can you
    give me an end-of-term grade that would assign--that you would
    assign to the Obama administration for its performance in
    regulating without inflicting unnecessary economic harm or
    imposing unnecessary regulations?
        Dr. Beach?
        Mr. Beach. I'd give it a C minus or a D plus. I think the
    regulations which have been produced out of the recession,
    well-meaning, as they were, were done without due regard for
    the cumulative cost and the effects on the enterprise system.
        Mr. Marino. Thank you. Dr. Crews--Mr. Crews.
        Mr. Crews. I think looking at cumulative effects of
    regulations matter a lot, and even what Mr. Johnson said, what
    you said about OIRA's role in looking at and reviewing
    regulations, I think matters a great deal.
        Mr. Marino. Professor Driesen.
        Mr. Driesen. Well, with the caveat that that's a really
    difficult question to answer, none of us here have read all
    these rules. I would say that the ones I know about seem
    sensible to me and look like an A. I've seen them going after
    things that really need the attention and seem to be doing it
    in a reasonable way.
        Mr. Marino. Dr. Holtz-Eakin.
        Mr. Holtz-Eakin. I guess I'm in the vicinity of a C, C
    minus. I'd say the--the break they deserve is that a lot of
    this comes from the Dodd-Frank Act and the Affordable Care Act,
    which were drafted very poorly by the U.S. Congress and have
    led to some real regulatory problems in filling that out.
        The thing I think they did most poorly was to not keep
    track of the breadth of the regulatory burden. That's been
    unusually active, not just at HHS and at the SEC and CFTC, but
    the Department of Labor, the FCC, you know, the Department of
    Energy, sort of every agency has issued regulations that are
    remarkable, right, and I think it is OIRA and the
    Administration's responsibility to look at that and modulate
    its impact on the economy, and they did a bad job there.
        Mr. Marino. Mr. Crews, did I not hear you give a grade? If
    I did not hear you, then my ear is as bad as my arm.
        Mr. Crews. I did.
        Mr. Marino. You did or didn't?
        Mr. Crews. Yeah.
        Mr. Marino. You did. I think--what was yours? I'm sorry.
        Mr. Crews. I just said I think the presentation of the--
    there need to have been a lot more review of regulations than
    it was, and I wish that we could use OIRA more effectively to
    govern that.
        Mr. Marino. So is that an A, C, or an E?
        Mr. Crews. I've got to say a C, because----
        Mr. Marino. Okay. Now, one more thing I want to ask each of
    you to respond to. How important to each--how important is the
    fact that we must look at the economics involved when it comes
    to job creation or job loss in regulation, if it's important,
    in your opinion, at all?
        Dr. Beach.
        Mr. Beach. Well, yes. It's something we haven't talked
    about today is the important to whom, and it's largely
    important to people who are low and moderate incomes. They
    are--they bear a disproportionate share relative to their
    income, of the cost of regulation. So when we impose well-
    meaning regulations and it does what it does, we need to keep
    them in mind. It's called regressive effects, and I think
    they're--they're much in your mind in other areas as well,
    certainly.
        Mr. Marino. Mr. Crews.
        Mr. Crews. One thing related to that, too, in terms of job
    effects of regulation, it'd be good to look at how regulations
    might stack up as a small firm grows. Mr. Trott had mentioned
    growing a business and had mentioned I couldn't do it today if
    I were setting out in this kind of a regulatory enterprise.
        Well, if we disagree about that, let's find out why we
    disagree about it. Let's look at what laws are taking effect as
    this firm hits four employees, five employees, 10, and 49, and
    see what adds up, and look at it from the statutory side and
    from the regulatory side and see what we--what kind of
    inventory we have of how these things stack up when a small
    firm grows and affects job creation and job growth.
        Mr. Marino. Professor Driesen.
        Mr. Driesen. I do not think regulation is a--at least
    overregulation has not been a significant factor in causing job
    loss. Underregulation has, because we legalized subprime
    mortgages, which were illegal at one point. We allowed large
    firms to get into the--large banking firms that got them into
    the subprime business. When they were separated, there was no
    problem. I can give you the whole--I wrote an article to spell
    it out for you.
        So deregulation has caused a financial crisis. Regulation
    has a tiny effect on jobs, and in the environmental area, it's
    a small net positive. And, we used to have statistics on this
    from the Bureau of Labor Standards, but Congress has defunded
    it.
        Now, what those statistics shows is that environmental
    public health and safety was about 0.2 percent of mass layoffs.
    Mergers and acquisitions were a big cause of unemployment. And
    so, if you're going to get serious about unemployment, you've
    got to stop hammering away at regulation, refund BLS and look
    at what's really causing it, and I don't think you're going to
    find regulation to be prominent among the problems of job loss.
        Mr. Marino. Dr. Holtz-Eakin.
        Mr. Holtz-Eakin. So as I said, I think you should quantify
    everything you can so that you understand the comprehensive
    benefits and costs of a rulemaking process, but certainly, you
    should always place priorities on the most pressing issues.
    And, in the past, from the end of World War II to 2007, this
    economy grew fast enough that even with population growth, the
    standard of living doubled every 35 years, roughly, one working
    career.
        The projections are that this economy will grow only at 2
    percent, and if you roll in population growth, that means the
    standard of living doubles every 75 years. I believe that's the
    primary domestic economic policy problem that we have, and that
    we should devote all of our attention in the regulatory tax and
    budgetary process to solving that problem.
        Mr. Marino. Thank you. Mr. Johnson, do you have any
    questions?
        Mr. Johnson. Thank you, yes. Dr. Beach, with respect to the
    assertion that you just made and you also made it in your
    written testimony----
        Mr. Beach. Yes, sir.
        Mr. Johnson [continuing]. That regulations
    disproportionately burden low income populations and undermine
    economic productivity, and you said that citing studies
    conducted by the Mercatus Center. I just want a note from you
    whether or not the lead in the contaminated water in Flint was
    the result of overregulation?
        Mr. Beach. I'm not an expert on how it got there. I'm very
    concerned about it, as I'm sure you are as well.
        Mr. Johnson. Well, was it overregulation that was one of
    the factors----
        Mr. Beach. I'm not the best one to answer that question.
        Mr. Johnson [continuing]. That contributed to lead getting
    into the----
        Mr. Beach. It could have been a number of factors. I'm not
    sure. It could have been the land. Who knows? I'm an economist.
        Mr. Johnson. It wasn't overregulation, was it?
        Mr. Beach. Well, who knows. I mean, it could have been--it
    could have been this. For example, if you have a municipality
    that has a lot of--in a State that has the burden of a lot of
    regulation, that can undermine the tax base. If the tax base is
    undermined, you might not take care of your infrastructure.
    I've known lots of cities that have had poor infrastructure,
    which gets into things leaching into the water supply. So
    unless you--or and I are experts on now it actually got there,
    I could make an argument that yes, it could have been because
    of overregulation.
        Mr. Johnson. Well, if there were no regulations, then, of
    course, you would have all kinds of contaminants in the water.
    Isn't that correct?
        Mr. Beach. That doesn't necessarily follow. You could----
        Mr. Johnson. So in other words, you're saying in an
    environment with no regulations, you're going to always have
    safe drinking water.
        Mr. Beach. Absolutely not. We need--we need the regulations
    we have around----
        Mr. Johnson. Need the regulations.
        Mr. Beach [continuing]. Around the drinking water today.
    They've been very effective.
        Mr. Johnson. And those regulations----
        Mr. Beach. Yeah.
        Mr. Johnson [continuing]. Do not hurt, or
    disproportionately burden anybody, much less low income people?
        Mr. Beach. Exactly. Right. And so they, in fact, they
    benefit everybody, but my point is this: If you have----
        Mr. Johnson. That is the point that I want to make.
        Mr. Beach. If you have a slow economy because of a
    regulatory--cumulative regulatory burden, then wages grow
    slowly in the bottom half of the distribution. Now, they, of
    course, benefit from the clean water just like the top half,
    but they don't have the benefits of the growing economy like
    the top half does.
        Mr. Johnson. Well, I mean, but you can have a couple of
    companies making a gazillion dollars, and then you have the
    consumers, the people who purchase the product or service dying
    at an early age, as we heard someone say today, we've got
    people dying at an early age. I mean, what is best? I mean,
    should we just have an unregulated environment and a free
    market system to let the buyers beware, and let the companies
    do whatever they want to do, and there's no regulations?
        Mr. Beach. I think we're past that, aren't we, Congressman?
    I said in my remarks----
        Mr. Johnson. From what I'm hearing from the Republican
    witnesses and from the messaging from that side of the aisle is
    that we are overregulated, all of these regulations need to be
    abandoned, and we need to get government off the backs of the
    business community so that they can make more money, and it
    doesn't matter the health, safety of the people.
        Mr. Beach. Of course, health and safety matters a great
    deal, and we are----
        Mr. Johnson. How can you quantify that on a cost-benefit
    analysis?
        Mr. Beach. Well, I think it can and should be done so that
    you have the best advice possible for making decisions, as you
    must make, between spending on A, B, and C. If you----
        Mr. Johnson. Do you think the regulators should have that--
    --
        Mr. Beach. I think we should all do----
        Mr. Johnson [continuing]. Ability?
        Mr. Beach. Yeah, cost-benefit analysis needs to be done in
    much more than it's being done now.
        Mr. Johnson. Well, I'm going to--I'm going to yield back
    the balance of my time, and I thank you all for your testimony.
        Mr. Beach. Thank you.
        Mr. Johnson. I'm sorry I didn't get to you, Mr. Driesen.
    Thank you.
        Mr. Marino. Thank you all for being here. This concludes
    our hearing, and without objection, all Members will have 5
    legislative days to submit additional written questions for the
    witnesses or additional materials for the record. The hearing
    is adjourned.
        [Whereupon, at 5:52 p.m., the Subcommittee was adjourned.]

                                A P P E N D I X

                                  ----------

                   Material Submitted for the Hearing Record

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

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Response to Questions for the Record from William W. Beach, Ph.D., Vice
        President for Policy Research, Mercatus Center at George Mason
                                   University

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Response to Questions for the Record from Clyde Wayne Crews, Jr., Vice
       President for Policy/Director of Technology Studies, Competitive
                              Enterprise Institute

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Response to Questions for the Record from Douglas Holtz-Eakin,
                        President, American Action Forum

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                     [all]