[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
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Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
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
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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
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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:]
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__________
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:]
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__________
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:] *
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*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
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__________
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:]
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__________
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
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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]