[Senate Hearing 114-517]
[From the U.S. Government Publishing Office]
S. Hrg. 114-517
EXAMINING THE USE OF AGENCY REGULATORY GUIDANCE, PART II
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
REGULATORY AFFAIRS AND FEDERAL MANAGEMENT
OF THE
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
JUNE 30, 2016
__________
Available via http://www.fdsys.gov
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky JON TESTER, Montana
JAMES LANKFORD, Oklahoma TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire CORY A. BOOKER, New Jersey
JONI ERNST, Iowa GARY C. PETERS, Michigan
BEN SASSE, Nebraska
Christopher R. Hixon, Staff Director
Gabrielle A. Batkin, Minority Staff Director
John P. Kilvington, Minority Deputy Staff Director
Laura W. Kilbride, Chief Clerk
Benjamin C. Grazda, Hearing Clerk
SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL MANAGEMENT
JAMES LANKFORD, Oklahoma, Chairman
JOHN MCCAIN, Arizona HEIDI HEITKAMP, North Dakota
ROB PORTMAN, Ohio JON TESTER, Montana
MICHAEL B. ENZI, Wyoming CORY A. BOOKER, New Jersey
JONI ERNST, Iowa GARY C. PETERS, Michigan
BEN SASSE, Nebraska
John Cuaderess, Staff Director
Eric Bursch, Minority Staff Director
Rachel Mairella, Chief Clerk
C O N T E N T S
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Opening statement:
Page
Senator Lankford............................................. 1
Senator Heitkamp............................................. 2
Senator Ernst................................................ 9
Prepared statement:
Senator Heitkamp............................................. 31
WITNESSES
Thursday, June 30, 2016
Paul Noe, Vice President, Public Policy, American Forest and
Paper Association and American Wood Counsel.................... 4
Clyde Wayne Crews, Vice President for Policy, Competitive
Enterprise Institute........................................... 5
Amit Narang, Regulatory Policy Advocate, Public Ciziten.......... 7
Alphabetical List of Witnesses
Crews, Clyde Wayne:
Testimony.................................................... 5
Prepared statement........................................... 41
Narang, Amit:
Testimony.................................................... 7
Prepared statement with attachment........................... 93
Noe, Paul:
Testimony.................................................... 4
Prepared statement........................................... 32
APPENDIX
Responses to post-hearing questions for the Record:
Mr. Noe...................................................... 144
Mr. Crews.................................................... 148
Mr. Narang................................................... 153
EXAMINING THE USE OF AGENCY REGULATORY GUIDANCE, PART II
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THURSDAY, JUNE 30, 2016
U.S. Senate,
Subcommittee on Regulatory,
Affairs and Federal Management,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 9 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. James
Lankford, Chairman of the Subcommittee, presiding.
Present: Senators Lankford, Ernst, and Heitkamp.
OPENING STATEMENT OF SENATOR LANKFORD
Senator Lankford. Good morning. Welcome to today's
Subcommittee hearing, ``Examining the Use of Agency Regulatory
Guidance, Part II.'' Doesn't that sound exciting? The sequel is
always better than the first, right? [Laughter.]
This hearing builds on our oversight of the subject,
including the hearing held last September.
Guidance is one of the most common ways that agencies
communicate to stakeholders and the American public their
interpretations of the statutes and regulations they administer
and enforce. However, guidance receives little congressional
oversight. A major reason why guidance attracts so little
oversight is because guidance is hard to pin down, quite
frankly.
In the positive, what is guidance as opposed to what it is
not? Guidance, for example, is not a rule since it is not
promulgated pursuant to the requirements of the Administrative
Procedure Act (APA). Therefore, guidance cannot bind the public
in any way that the regulation it interprets could not.
Congress specifically exempted guidance documents from APA's
rulemaking requirements because Congress saw the need for
agencies to issue timely information to affected parties.
And timely information is indeed useful when it is used to
clarify existing regulatory authorities, a need which has
become even more apparent with the increasing complexity of the
administrative state.
Small businesses, schools, and other regulated parties want
to know how they must comply with Federal requirements, but it
is also hard to tell when a guidance document merely clarifies
existing regulatory authority as opposed to when it advances
new substantive policies, polices that should have been
subjected to the rigor of the rulemaking process.
Why is this distinction between guidance and regulation so
important? Because guidance can be changed at the whim of an
agency as an administration's policy preferences change.
Guidance is additionally problematic because it comes by many
names, and agencies do not post them centrally. Therefore, we
cannot fully know how many of these documents exist or the
economic effects of their instructions.
To the extent that agencies can get away with improperly
issuing guidance documents, any administration, Republican or
Democrat, can advance policies while running roughshod over
procedures Congress has enacted to ensure broad public input
and agency accountability. This results in unlawful procedure,
uncertainty, unaccountability, inconsistency, and a startling
lack of transparency.
Today we have witnesses with expertise in administrative
law and institutional experience in overseeing and coordinating
guidance processes. I hope to have a conversation about how we
in Congress can better understand the role of guidance, the
regulatory process, and the problems posed by improperly issued
guidance documents.
With that, I recognize Ranking Member Heitkamp for her
opening statement.
OPENING STATEMENT OF SENATOR HEITKAMP
Senator Heitkamp. Thanks, Chairman Lankford.
And thank you all for coming in. It is the hardworking red-
headed committee, I want you to know. [Laughter.]
I am sorry, Joni.
Senator Lankford. Joni is an honorary Member today.
Senator Heitkamp. She is. Of course, we do not know what
color her hair used to be, but I think we are going to call you
a redhead. [Laughter.]
Thanks so much for coming in. This is a touchy subject
because when you look at guidance, on one hand, it can be
critically important to helping agencies kind of clarify their
position, giving greater direction and knowledge to those who
are regulated. But on the other hand, it can be used as a
shortcut. And we have seen it used both ways, and one of the
great challenges that we have is trying to figure out how we
are going to balance those two things.
And as Chairman Lankford said, what are we going to do to
actually get to the point where we feel comfortable here that
guidance is not used as a shortcut to reinvent or to restate
current regulation in a way that is inconsistent with either
the law or inconsistent with past regulation?
And so I am going to just submit my opening statement for
the record\1\ and welcome you all, but tell you that that
really is the challenge that we have on this Committee, is
trying to figure
out--because we have seen it both ways--trying to figure out
how we do what we are supposed to do, which is provide
oversight over agencies, but also give both the regulators and
the regulated the option to have clarification. That can be
enormously useful, especially in the business world.
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\1\ The prepared statement of Senator Heitkamp appears in the
Appendix on page 31.
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Senator Lankford. Great. Thank you.
At this time we will proceed with testimony from our
witnesses.
Paul Noe is the Vice President for Public Policy at the
American Forest & Paper Association (AF&PA). Mr. Noe works on a
wide variety of issues, including regulatory reform, renewable
energy, environmental regulation, workplace health and safety.
Mr. Noe served as a counselor to the Administrator of the
Office of Information and Regulatory Affairs (OIRA), where he
helped lead the development of regulatory policy and the White
House review of regulation in the George W. Bush
Administration.
He also served as senior counsel to the Senate Committee on
Governmental Affairs, focusing on regulatory improvement. Mr.
Noe co-chairs the American Bar Association's (ABA)
Administrative Law and Regulatory Practice Committee on
Legislation and has published on the topic of regulatory
policy.
Wayne Crews is the Vice President for Policy, and Director
of Technology Studies at the Competitive Enterprise Institute
(CEI), focusing on the impact of government regulation, anti-
trust, and competition in environmental and privacy issues. Mr.
Crews publishes an annual report on the Federal regulatory
State called ``Ten Thousand Commandments'' and has written and
edited many books.
Prior to joining CEI, Mr. Crews worked at the Cato
Institute, the U.S. Senate, and the Food and Drug
Administration (FDA).
Amit Narang is the Regulatory Policy Advocate for the
Public Citizen's Congress Watch Division. I do not know why
that would be so hard. He focuses on Federal regulatory process
and has testified many times before Congress on legislative
proposals and oversight of Federal agencies as it relates to
the rulemaking process. He has been quoted in many media
outlets and has appeared on television and radio broadcasts.
Mr. Narang also serves on the Advisory Board of the
Administrative Law Review.
I would like to thank all of our witnesses today for
coming, and I appreciate your expertise and your preparation
time to actually submit the written testimony ahead of time.
It is the custom of this Subcommittee to swear all
witnesses in, so I would ask you to please stand and raise your
right hand.
Do you swear the testimony you will give before this
Committee will be the truth, the whole truth and nothing but
the truth, so help you, God?
Mr. Narang. I do.
Mr. Crews. I do.
Mr. Noe. I do.
Senator Lankford. Thank you. You may be seated. Let the
record reflect all the witnesses answered in the affirmative.
We are using a timing system today so we can have ample
time for us to pepper you with questions. So if you would, we
will start with Paul Noe and ask you to go first. There will be
a timing device there in front of you. Be as close to 5 minutes
as you can. Obviously, if you go a little bit over we are fine.
If you go under, you get bonus points. [Laughter.]
Fair enough?
Mr. Noe. Thank you, Mr. Chairman.
Senator Lankford. Mr. Noe, you are recognized.
TESTIMONY OF PAUL NOE,\1\ VICE PRESIDENT, PUBLIC POLICY,
AMERICAN FOREST & PAPER ASSOCIATION AND AMERICAN WOOD COUNCIL
Mr. Noe. Chairman Lankford, Ranking Member Heitkamp, and
Senator Ernst, thank you for the opportunity and the honor to
testify before you today.
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\1\ The prepared statement of Mr. Noe appears in the Appendix on
page 32.
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The issue of agency use of guidance is an important and
timely issue, and AF&PA and American Wood Council (AWC) greatly
appreciate the fact that you are doing the hard work of
oversight in grappling with these issues to make a better
regulatory process, and that is very commendable.
I just wanted to note at the beginning that my wife, Wendy,
and my children, Helen and John, are here to see the hearing
today. And Wendy has put up with me for over 20 years talking
about these issues at home. And my kids are kind of puzzled
about what I do for a living, so I thought it would be good to
show them today's hearing.
The issue of agency use of guidance was a concern back when
I worked as senior counsel of this Committee under Chairman
Fred Thompson, Ted Stevens, and Bill Roth, and when I was at
the Office of Management and Budget (OMB) as a counselor to
Administrator John Graham. And I can tell you from working for
regulated industries that this is much more than an academic
issue. It has profound consequences for the functioning of the
regulatory process, important economic and also social
consequences. And AF&PA and AWC applaud the work that you are
doing and we hope further improvements can be made.
Simply put, we face a fundamental problem. We have had a
well-established process for the review of regulations that has
worked for over 35 years, with oversight from the Office of
Management and Budget, but that process is quite deficient when
it comes to guidance documents.
Originally, the Executive Order (EO) that President Reagan
issued governing regulatory review and OMB oversight covered
all rules. And by that I mean not only legislative rules known
as regulations but also guidance documents in the form of
interpretive rules and agency statements of policy.
When President Clinton came into office, he replaced that
order with Executive Order 12866. And that order attempted to
just focus on significant regulations, but the problem is it
neglected guidance documents. By its own terms, it only applied
to rules that, ``the agency intends to have the force and
effect of law.'' So that excluded guidance documents.
An attempt was made to address this issue, and the
Administration of George W. Bush took two steps. First, OMB
issued a Bulletin for Agency Good Guidance Practices. And
simply put, it has a few basic elements.
First, agency procedures for the approval and use of
significant guidance documents, with approval by appropriate
senior officials and direction that agency employees should not
depart from guidance without appropriate justification and
supervisory concurrence.
Second, there were standard elements, including that the
agency employees were directed to avoid inappropriate, binding,
mandatory language in guidance.
And third, there were public access and transparency and
feedback procedures. There was the basic presumption that there
ought to be pre-adoption notice and comment if a guidance was
going to have a particularly significant impact--economically
significant guidance.
This Bulletin was rooted in the recommendations of
nonpartisan expert organizations that have stood for decades.
It was not controversial. When President Obama came into office
he retained the OMB Bulletin. And as you know, it is in effect
today.
The second step was to amend the Clinton order to provide
simple procedures for OMB review of significant guidance. And
those procedures were streamlined compared to what is done for
regulations. And it was simply the following three things:
First, agencies should provide OMB advance notification of
the most significant guidance. Second, only if OMB asks, they
should have the opportunity to call in a guidance for review
with a brief explanation of the need for the guidance. The
burden was on OMB to choose what to review and also to tell the
agency if it needed a little bit of time to review it. These
provisions were also non-controversial, but unfortunately they
became wrapped up in other issues in that order that were
controversial. So when President Obama came in, he repealed
that order.
They did put in place a memo saying OMB will continue to
review guidance the way they did under the previous Clinton
order, but there are some serious problems with that. One, no
clear authority existed. But more importantly, there were no
procedures for OMB to have a heads up as to what was out there.
And you cannot review what you do not know exists. I had desk
officers telling me they first knew about a guidance from a
story in the Washington Post. And you know there is a breakdown
in the management and review process when that is the case. And
that was common.
I will leave my remarks at that, but just thank you again
for what you are doing.
Senator Lankford. Thank you. Mr. Crews.
TESTIMONY OF CLYDE WAYNE CREWS,\1\ VICE PRESIDENT FOR POLICY,
COMPETITIVE ENTERPRISE INSTITUTE
Mr. Crews. I am Wayne Crews, Vice President for Policy at
the Competitive Enterprise Institute. We are a libertarian
public policy and advocacy group. And I really appreciate and
thank the Committee for the invitation to address agency
subregulatory guidance today.
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\1\ The prepared statement of Mr. Crews appears in the Appendix on
page 41.
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I will give my conclusion first, which is to say that
subregulatory guidance from the Executive and independent
agencies needs to be treated more like regulation. That means
codifying elements of OMB's 2007 Good Guidance Practices,
Federal Register publication, more intense OMB review, and
questioning agencies' self-assertions that guidance is not
significant. Furthermore, the Web posting of significant
guidance, which is all over the map, needs to be harmonized and
expanded.
Congressional directives matter, too. We have seen recent
directives regarding guidance disclosure and retrospective
review in Financial Services, the Department of Labor (DOL),
the Department of Health and Human Services (HHS), the
Department of Transportation (DOT), and the Department of
Housing and Urban Development (HUD), Appropriations. In
addition, the legislative history indicates that the
Congressional Review Act's Resolutions of Disapproval apply to
guidance as well if the Congress chooses to elevate such
concerns.
Guidance, to me, has become more worrisome in a system that
already does not follow APA procedures for ordinary notice-and-
comment rulemaking enough, or conduct enough OMB review.
Senators may have noticed there is still no sign of the 2016
OMB draft report to Congress on the costs and benefits of
regulations. So Congress has neglected its role in regulatory
oversight, as June's House task force's looking at Article I
issues, and regulatory issues, and delegation issues make
clear.
Indeed, just as some guidance needs to be treated more like
regulations, regulations, in turn, need to be treated more like
normal laws passed by Congress and affirmed. In written
testimony, I put guidance in context with ordinary laws, of
which there are a few dozen annually, and with regulations, of
which there are over 3,000 annually. But beyond those, Congress
lacks and needs a clear grasp on the amount and costs of the
many of the thousands of executive branch and Federal agency
guidances and memoranda with sometimes practical, if not always
technically legally binding, regulatory effect.
I have taken a partial numerical inventory, and there are
580 acknowledged, significant agency guidance documents now in
effect, but many thousands of other secondary guidances are
subject to too little scrutiny, democratic accountability, or
true knowledge of significance. In an analogy to astronomy, I
have taken to calling this material regulatory ``dark matter.''
On page 19 of my written testimony, I note several
prominent examples, such as HUD guidance on rentals to those
with a criminal record, and Labor Department guidance;
guidances on independent contracting, and on joint employment.
In the financial sector alone, the St. Louis Fed lists 74
pieces of significant guidance in play across final agencies,
while the Conference of State Bank Supervisors points to over
1,400 so-called directives.
Guidance has been an issue for decades, of course, but
today's frontier economy is highly complex, and subregulatory
guidance can easily cross the line of economic significance,
such as ominous advisory opinions promised by the Federal
Communications Commission (FCC) in the wake of its new Net
Neutrality rule. Similarly, the Federal Aviation Administration
(FAAs) brand-new 624-page, highly prescriptive drone rule
should have been a law from Congress, but in my quick survey of
it I count at least six areas where the agency anticipates
issuing new guidance in this frontier sector.
I realize that businesses often regard guidance as vital,
and I do not wish to dismiss those concerns other than to
stress that safety, public health, financial stability,
privacy, and the like, are competitive features too, and
decentralized stakeholders have a disciplinary role to play
that can be undermined by too much regulatory zeal.
Reforms should come from a stance recognizing that not
every matter is a public policy question; that so-called market
failures may have political causes and coercive central
regulation is not always the answer, especially if guidance
inappropriately takes the place of normal regulations or laws.
So I support the Subcommittee on increased OMB review and
enhanced APA exposure, as well as establishing guidance
principles and legislation. But keep uppermost in mind too that
even normal rules are not always getting the proper APA
scrutiny.
In Part I of this hearing last September, Senators fretted
that the process by which an agency internally elects to issue
guidance on the one hand or normal regulation on the other is
something of a black box. Surely we do not want unknown aspects
of the regulatory enterprise increasingly outweighing the
known, so I urge close interaction between this important
Subcommittee, the public, and the entrepreneurial sector not
just to get things done but to see what can be undone for the
public good.
Thank you very much.
Senator Lankford. Mr. Narang.
TESTIMONY OF AMIT NARANG,\1\ REGULATORY POLICY ADVOCATE, PUBLIC
CITIZEN
Mr. Narang. Chairman Lankford, Ranking Member Heitkamp, and
distinguished Members of the Subcommittee, thank you for the
opportunity to testify today.
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\1\ The prepared statement of Mr. Narang appears in the Appendix on
page 93.
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Public health and safety regulation has been among the
greatest public policy success stories in our country's
history. Regulations have made our air far less polluted and
our water much cleaner. They have made our food and drugs
safer. They have made our workplaces less dangerous. They have
made our financial system more stable. They have protected
consumers from unsafe products and from predatory lending
practices. They have made our cars safer. They have outlawed
discrimination on the basis of race and gender, and much more.
Guidance has played a crucial role in securing these
benefits for American consumers, working families, and the
broader public. A brief survey of guidance issued in the last
year alone confirms its vital role in protecting the public's
health, safety, and financial security.
In March of this year, the Centers for Disease Control
(CDC) issued guidance to address the growing crisis of opioid
medication addiction that has led to a dramatic increase in
hard-drug addiction and fatal overdoses across the country.
After the Flint, Michigan lead poisoning crisis, the
Environmental Protection Agency (EPA) issued guidance to
address allegations that certain localities and cities were
cheating on that test by pre-flushing taps to lower the amount
of lead detected in the taps. This week the environmental group
Natural Resources Defense Council (NRDC) released a report
showing that over 5,000 water systems across the United States
violated lead testing standards in 2015.
The Equal Employment Opportunity Commission (EEOC) issued
guidance this month prohibiting employers from discriminating
against job applicants on the basis of national origin, meaning
not only the applicant's place of origin but also ethnic
origin. This continues the EEOC's traditional use of guidance
to ensure American workplaces are free of racial, gender, or
sexual orientation discrimination. It is important to note that
Congress has prevented the EEOC from issuing binding rules to
enforce Title VII of the Civil Rights Act.
The Consumer Financial Protection Bureau (CFPB) issued
guidance late last year to curb increasingly egregious debt-
collection practices at debt collection agencies across the
country. Such practices include threatening consumers who owe
debt; illegally visiting consumers at their homes and
workplaces; and calling consumers' credit references,
landlords, and supervisors at work to jeopardize the consumer's
job and reputation.
Guidance is also routinely requested by and designed
exclusively for the benefit of industry stakeholders. Among the
most prominent examples are No Action Letters. Agencies
routinely issue letters that provide safe harbors for
businesses requesting clarity in the face of regulatory
uncertainty. Agencies use these letters to give businesses
confidence that their activities will not result in enforcement
actions against them. The Securities and Exchange Commission
(SEC), in particular, issues many No Action Letters, and a
quick glance at the SEC's website confirms that it has already
issued hundreds of No Action Letters to businesses this year
alone.
In short, when our regulatory system works efficiently and
effectively, the public benefits and regulatory uncertainty is
reduced. Tragically, our regulatory system is currently in
crisis, plagued by rulemaking delays that are unacceptable and
growing, which in turn costs lives, leaves consumers and our
economy vulnerable, and results in irreversible damage to our
environment and climate.
As the saying goes, protections delayed are protections
denied. This week Public Citizen released a groundbreaking
report that comprehensively analyzed all rulemakings listed in
the Unified Regulatory Agenda over the 20 years. The results
were striking and deeply troubling. The full report is attached
to my written testimony but I would like to share some key
findings.
At many agencies charged with protecting the public's
health and safety, such as the Department of Labor or the EPA,
it takes longer than a Presidential term to complete an
economically significant rulemaking. For example, at the
Occupational Safety and Health Administration (OSHA), the
primary regulator of workplace safety, it takes an astounding
12.5 years to complete an economically significant rule. Adding
in optional but time-consuming procedural steps leads to
substantially more delay.
Economically significant rules that included advance notice
of proposed rulemaking took 4.4 years to complete across
agencies, over twice as long as economically significant rules
without an Advanced Notice of Proposed Rulemaking (ANPRMs).
Conducting regulatory flexibility or small business impact
analyses leads to longer rulemakings at most agencies,
sometimes twice as long as compared to rules without these
analyses.
And the trend is going in the wrong direction, with
economically significant rulemakings taking longer and reaching
new records under this Administration. So far, economically
significant rules completed in 2016 took 3.8 years on average,
contradicting those who claim that the Obama Administration is
rushing rules out the door this year.
Our report finds that rulemaking delays are concentrated in
economically significant rules, meaning the rules that provide
Americans with the greatest benefits but also take the longest
to finalize. The bulk of new regulations that are minor and
technical in nature do not encounter significant delay. This is
directly relevant to proposals which impose a process similar
to the one for economically significant rules onto guidance
documents, including notice and comment, cost-benefit analysis,
and OIRA review.
These proposals will do nothing to fix the delays revealed
in our report. Instead, the proposals simply expand those
delays to another important area of agency action, which is
designed to address regulatory uncertainty efficiently.
While the available empirical evidence demonstrates that
there is no abuse of guidance documents in order to evade the
notice-and-comment rulemaking process on a widespread basis, it
is impossible to ignore the strong incentive agencies have to
avoid what has become an increasingly inefficient and
dysfunctional rulemaking process across regulatory sectors and
at virtually every agency.
If the Committee believes that agencies should be taking
action through a notice-and-comment rulemaking rather than
through guidance documents, the solution is to make the notice-
and-comment process more efficient and streamlined rather than
forcing guidance documents into the notice-and-comment
framework reserved for rulemaking.
Public Citizen stands ready to work with lawmakers across
the aisle to make our regulatory system work effectively for
consumers, working families, and the public.
Thank you, and I am happy to answer any questions you have.
Senator Lankford. Gentlemen, thank you for your testimony
as well.
The Ranking Member and I will defer our questions toward
the end, and I will recognize Senator Ernst.
OPENING STATEMENT OF SENATOR ERNST
Senator Ernst. Great. Thank you, Mr. Chairman. And thank
you, Ranking Member Heitkamp.
To our witnesses, thank you for being here today. Wow,
regulations; it is always really an exciting topic. [Laughter.]
It is for us anyway. So thank you for taking the time to
join us today.
First, Mr. Crews, in your testimony you state that in the
absence of Federal legislation or an APA-compliant legislative
rule, regulatory ``dark matter''--I love that--regulatory
``dark matter'' will continue to flow out of Washington and
increasingly impact State and local governments--and I have
worked at both the State and the local government before--and
also our personal lives.
Mr. Noe also acknowledged the need for a legislative
solution in his testimony. In your opinion, what would a
legislative or regulatory solution to this problem look like?
What does that look like?
Mr. Crews. As I indicated too, part of the context for this
debate is that, in the ordinary notice-and-comment rulemaking
system that we have now, it is already the case, as the
Government Accountability Office (GAO) report put out recently,
that 44 percent of the rules come through with no notice of
proposed rulemaking; 33 percent of major rules come out with no
notice of proposed rulemaking. So we already have a breakdown
in the rulemaking as it stands.
So what concerns me here is that we do need to strengthen
the rulemaking process itself, and at the same time recognize
we are in an era where agencies are tempted to use guidance and
avoid the rulemaking process. And you can see these hints of
things coming down the pipeline. As I had mentioned the FCC,
for example, it says in its new rule--it is a 400-page rule.
Page 80, it says, well, we are going to be like the Federal
Trade Commission (FTC) from now on and we are going to issue
advisory opinions to telecommunications infrastructure firms,
so before you move, give us a call and let us know.
The same in the wake of Dodd-Frank. In the Consumer
Financial Protection Bureau they have said, well, with respect
to unfair trade practices, we are just not going to issue
regulations. You have to check with--so you run a real risk if
you have lost control of the regulatory process, which is
already being debated heavily in Congress, looking at things
like the Regulations from the Executive in Need of Scrutiny
(REINS) Act, ``one in, one out,'' Regulatory Reduction
Commission. You already have that to deal with.
If you have guidance on top if it, where agencies are even
getting instructed that, well, if Congress does not act, we are
going to go ahead and do what we can without that action, you
run into a real concern of losing control of it. So at the very
least--you ask what you do legislatively. At the very least,
you have to start treating the guidance more like the
regulation should be treated but may not necessarily be getting
treated, and review them.
And we will engage in some interesting things here, but you
do have to be concerned about agencies not acknowledging when a
rule or a guidance, whatever the case may be, is something
significant that ought to get more scrutiny or that ought to
actually even be a law. So in the beginning--so I think you
want to give guidance more APA-type treatment, and do that
legislatively if you can.
Senator Ernst. And what kind of obstacles would you see for
us to try and do, such as those legislative fixes?
Mr. Crews. Regulatory reform is difficult and it comes
around every generation. In the 1980s you had Brookings and
other groups getting together with free-marketeers and deciding
we would deregulate telecommunications and transportation. Then
in the mid-1990s you had the Contract with America. And you
mentioned State and local unfunded mandates, reform at that
time, and things of that sort.
Now we are at a point where I think it is very difficult
for both parties--and, I think that is the tone to take. Both
parties have an interest in seeing a growing economy. And we do
have issues that make that important. With the national debt,
if interest rates were to--even if you balance the budget now,
if the interest rates started going to normal rates now, you
would quickly tamp down the economy again. So you will start
thinking about regulatory reform, I believe.
The obstacles are--it is very controversial. And, there are
clashes of visions about regulation, about what it is that
really protects the public, and whether it is top-down
regulation that does that or whether it is other kinds of
disciplinary forces that do. So that is one of the obstacles.
But I do still think there are ways that groups can get
together. The ``one in, one out'' notion, for example, was
bipartisan. That had been proposed by Senator Warner a few
years ago. I think there will be some--you could easily get
some bipartisan interest on more disclosure for regulations. I
do not think it is very objectionable that the amount of
guidance that comes out, for example, that is not catalogued
could be catalogued better, and that the amount of significant
guidance that does not get acknowledged ought to be
acknowledged, and things like that.
And you have precedents by which you can do that. There was
a report back in the 1990s called ``The Regulatory Program of
the U.S. Government.'' It looked just like the Federal budget.
It was a fat document. It was red, white, and blue, had the
eagle on it. And at the back was an appendix that listed
numbers of rules, pages in the Federal Register, whether there
had been a cost-benefit analysis, whether there was cost
analysis. And even just knowing things like the percentage of
rules that do not have a benefit assessment is good----
Senator Ernst. Right.
Mr. Crews [continuing]. But this needs to be applied to the
regulatory State but also with a lot more awareness of the
reality of guidance.
And for starters on that, when I did this inventory of
guidance, it spread--the agencies were publishing it all over
the place, calling it significant guidance and cataloging it
and things like that. It should be harmonized better, but then
you have also got to get the sub-significant guidance involved
in there too.
I will leave it----
Senator Ernst. And my time is expired.
Do you mind if Mr. Noe answers that?
Senator Lankford. Go ahead.
Senator Ernst. Thank you.
Mr. Noe. Thank you, Senator.
I think there is actually a very clear, simple,
straightforward solution here that should be absolutely
bipartisan. I have had discussions with the Chairman's staff.
In my understanding, he is considering elevating the Good
Guidance Principles that are in the OMB Bulletin and having a
kind of process for OMB review in legislation.
We would enthusiastically support that because it would be
based on recommendations of nonpartisan expert organizations
that have stood for decades. The agencies would take it
seriously. There is a compelling public need and it fits
perfectly within the strong bipartisan tradition of this
Committee to find commonsense solutions to the regulatory
system.
As I said, the OMB Bulletin itself has been non-
controversial, and it is no accident why. It is based on
recommendations of the Administrative Conference of the United
States (ACUS), an independent agency with great expertise in
regulation, whose sole mission in life is to improve the
regulatory process. They have recommendations from the mid-
1970s and the 1990s that are the foundation for those Good
Guidance Practices.
There are also recommendations of the ABA Section of
Administrative Law and Regulatory Practice that I am a member
of, from long before I joined the Section--on these basic
principles.
So all of that has been utterly non-controversial and has
enormous support in the academic literature. And, frankly,
there is an agency right now that did this even before OMB had
the Bulletin. The FDA has its own Good Guidance Practices
established in regulation. And what happened is, in the late
1990s they did this on their own. They thought this would be
helpful to the regulated community.
Congress liked the idea so much that when they modernized
FDA in the Food and Drug Administration Modernization Act
(FDAMA) of 2000, they mandated that the FDA do this by
regulation. And they had basic elements that are in the OMB
Bulletin about having an approval process so the supervisors in
the agency know what is going on, having standard elements in
guidance, stating it is nonbinding, making guidance transparent
to the public, putting it on their website, et cetera. That is
why the OMB Bulletin has been so non-controversial.
And the second piece about OMB review was non-
controversial. The only reason, again, that order got rescinded
was there were other completely unrelated provisions that got
to be controversial, but the academic literature, the work of
nonpartisan groups supports all of that.
So to me that is something concrete you could put in a
bill. I think Members from both sides of the aisle could agree
on this. I think you could march in people who worked on this
for decades, and I think you would have tremendous consensus
that this is a good thing, because it is about transparency, it
is about public knowledge about what is going on, it is about
people understanding when something really important is about
to change.
An agency interpretation of its statute or a regulation can
be enormously consequential. It can be, our policy is X, to,
tomorrow it is going to be not X. And there ought to be notice
and comment for that. Even though such interpretive rules are
not required by law to go through notice and comment under the
APA, as a matter of good government they should.
And that is what the Administrative Conference of the
United States and the ABA have recommended for decades. And I
think that would be a wonderful piece of legislation to do and
would help improve this process.
Senator Ernst. Thank you very much.
Thank you, Mr. Chairman.
Senator Lankford. Senator Heitkamp.
Senator Heitkamp. Mr. Amit, I would like you to engage.
Obviously nothing is going to happen here unless we do have
steps that we can all take together. At some point, the paths
may diverge, but I think there are some steps that we can all
take together.
And I think that when you look at, kind of through the lens
of, we are in charge now so we are happy, but tomorrow we might
not be in charge and we might not be as happy, so these rules
should set a framework or a foundation in which to evaluate
rules no matter which side of the political spectrum is
promulgating those rules.
And so I am curious about this path that we are talking
about, taking these steps, whether this is something you guys
have thought about. And, is this a process that you think folks
who tend to be very concerned about limiting regulation could
see some benefit to?
Mr. Narang. Sure. Here are our concerns.
So, I do not see a problem with agencies, of their own
volition, under their own discretion, like the FDA, instituting
different processes for certain types of guidance documents--
significant guidance documents. And my understanding is that
the FDA still continues to do that. It is a process that has
worked well for them.
At the same time, I do not agree that a one-size-fits-all
approach that basically turns the FDA process for significant
guidance documents into the process for significant guidance
documents at all agencies is the right way to go.
One-size-fits-all approaches normally result in unintended
consequences both for guidance documents that we believe are
important in protecting the public, like the recent CDC
guidance, but also guidance documents that are important in
addressing areas of regulatory uncertainty quickly. And that is
exactly what No Action Letters do.
The other concern I have is that guidance documents are
distinct from rules. The distinction is based on guidance
documents not being binding. Now, if you were supposed to--if
Congress was to essentially create a process that resembled
notice-and-comment rulemaking for guidance documents but kept
those guidance documents nonbinding, it seems to me that
agencies then really have no incentive to go--to issue guidance
documents since they have to go through basically the same
process as notice-and-comment rules, but with guidance
documents they are nonbinding and with rules they are binding.
Senator Heitkamp. Not many times but, we have seen
significant changes. Let's say these are the rules, and all of
a sudden in a guidance document those rules do not apply
anymore.
So it seems to, say to me that something changed and that
if you are simply interpreting a rule or a statute that gives
clarity, but when you simply--when you turn the boat and say,
now we are going to go in this direction, like OSHA did with
some of the anhydrous rules, then we get a little suspicious
and we say, wait a minute; for the last, decades, this was
perfectly acceptable and legal behavior. We had been
communicating with OSHA. We had been complying with the rules.
Now they are telling me we cannot do this and, in fact, we
could be out of business.
Don't you think in that case you would argue that a
guidance, albeit not binding but certainly terrifying in the
case of the regulated entity, that there should be more notice
and comment, there should be more availability in terms of
oversight rather than doing it through a guidance?
And so I do not want to think that this is, like, ``the''
big issue in terms of regulatory reform, but I do believe that
guidance is used as a shortcut, and that shortcut denies the
ability of the agency to get enough input to maybe choose a
path that could, in fact, be a better path and provide more
safety, provide better outcomes for both the regulated and the
regulator and the consumers.
So I think we are at this kind of impasse here where I am
trying to find which steps we can take that could achieve some
kind of consensus to actually open the dialogue.
So I am going to ask you, what about transparency? I mean,
I think that is a fairly, bipartisan notion that no matter what
an agency does we have government in the Sunshine in our States
and we have Freedom of Information here. Isn't transparency
pretty critical, that if you issue a guidance or a letter to my
competitor, and I do not know about it and I am still operating
under another set of rules or another set of, what I think the
rule says, isn't it important that we have transparency?
And couldn't you agree with these two that a transparency
step might be a good way to do oversight on our side but also
level the playing field for the regulated industries?
Mr. Narang. I agree that transparency is essential,
generally speaking, to the regulatory system. And I think there
is, actually, a great deal of transparency when it comes to
guidance documents, at least the existence of them, the
issuance of them. I think there is more transparency than they
are given credit for from some sources.
Now, at the same time--so I will give you an example. No
Action Letters, they are put on the website. Even though they
are directed to specific parties, they are put on the website
by agencies to make sure that other parties--competitors but
also the types of businesses that do the same activities as the
ones receiving the No Action Letters--also know that their
activities are not going to result in enforcement actions
against them.
Transparency, I think there could be ways to work with, in
a bipartisan fashion, work with folks that are interested in
transparency reforms for guidance documents. The devil is
always in the details. And, generally speaking, I think the
preferred way to go, in my mind, would be for Congress to push
agencies to adopt, on an individual basis, when they feel it is
appropriate, transparency guidelines for issuance of guidance
documents that impact the public.
One-size-fits-all approaches in congressional legislation
can result in unintended consequences, certainly can result in
additional delay in the regulatory system.
Senator Heitkamp. Mr. Noe, I have a question for you
because this is a theme that I have sounded many times from
this desk here, is that Congress does big things like Dodd-
Frank, they do big things like the Affordable Care Act, and
they get bogged down and they cannot give a lot of direction
because it is harder to do big things when you get into the
details.
And they just throw this stuff to the agencies and say,
good luck. And then we all pound the table when they do
something that results in complaints from constituents and is
contrary to maybe our philosophy. How do we kind of achieve a
recapture of that responsibility for legislating in a world
where we are doing big things that are so complicated?
Mr. Noe. That is a great question, Senator. And I think
part of it is Congress helping to channel agency discretion in
a way that is going to be reasonable. We could have a whole
separate conversation about regulations on that, but since we
are talking about guidance today, there are just very
fundamentally basic principles that are good government
principles. And this is not, I think, an occasion for
partisanship, which is there ought to be basic approval
procedures for guidance in the agencies.
That is not happening now. Our government should not be the
worst form of government except for all the others. We ought to
have a government that is something we brag about. And the idea
that there are not basic approval procedures in the agencies
being followed now, there is not basic compliance with these
simple Good Guidance Practices that are laid out in basically a
page, that there is not public access to all the guidance--
right now, in Cabinet-level departments, that should be the
envy of the world.
There is not public access to these documents. The GAO
report that was done documents this in detail, but they found
HHS--and of all departments, that ought to be one of our very
best--that they did not consistently apply Good Guidance
Practices. Their website did not link to the guidance
documents. And GAO, with their experts, were not able to even
find them on the website. I mean, that is no way to run a
railroad station. And we are not meeting these basic principles
for what is competent government? What is transparent
government?
And in terms of public feedback procedures, well, just like
OIRA staff cannot be expected to be responsible for something
they never heard about, how can the public possibly be held to
account for guidance documents the GAO cannot even find on the
agency's website? But that is the State of where we are today.
So what has happened is it has been over 9\1/2\ years since
these basic practices were issued by OMB in a Republican
administration, reaffirmed by a Democratic administration, and
there is gross noncompliance. I think it is embarrassing.
And I think it is time for Congress to step in, because no
rulemaking of any kind, whether it is regulations or guidance,
happens without the delegation of this authority from Congress.
It is time for Congress to step in and say, we are going to
have basic rules of the road for agency guidance, and we are
going to do what has been bipartisan, has broad support in the
academic community, and we are going to elevate that into law
because the agencies are flaunting it.
I can give you some statistics. Amit talked about empirical
evidence. I can tell you the numbers on how gross the
noncompliance has been with the Bulletin. In the entire 9\1/2\
years since it has been issued, the agencies have said there
are about three economically significant guidance that merit
pre-adoption notice and comment--three.
In terms of the significant guidance--those are not even
expected to have pre-adoption notice and comment--just that you
have an approval process for them; you list basic elements; you
say you are not binding in the guidance. For those, here is
what GAO found in a study:
The Department of Agriculture has issued a grand total of
34 in 9\1/2\ years. That is about four a year. The Department
of Labor, about four a year. Education, about four a year. I
can assure you those agencies issue hundreds of guidance a
year. A House subcommittee looked into this a number of years
ago, basically they looked at several major agencies and found
that, in a 3-year period, they had done thousands of guidance.
So the notion that when that level of guidance even merit
the standard, basic Good Guidance procedures being followed,
and a grand total of three they acknowledge merit pre-adoption
notice and comment, that is embarrassing. And I think it is
time for Congress to step in and do something about that, and
this Committee is the perfect venue for that. That is what is
in your mission, is to improve the rulemaking process.
Mr. Narang. Senator, can I add something quickly?
Senator Heitkamp. Yes.
Mr. Narang. So good government requires resources, and what
we are seeing currently is that agency budgets, basically
outside of the national security agencies, and the
Transportation Security Administration (TSA) in particular,
agency budgets have stagnated or declined even. I will give you
another example, OIRA itself. OIRA staffing has stagnated,
declined to a certain degree.
If we are going to impose mandates on both the agencies in
terms of additional procedural steps for guidance documents,
and at OIRA in terms of review--I have to say the recent track
record of OIRA regulatory review is not very good when it comes
to delay. We have had unprecedented delays under this
Administration. They have gotten a little bit better under
Administrator Shelanski but we have had unprecedented delays.
We are going to need
to--Congress will need to provide the resources to make sure
that we have good government. You only get the government that
you pay for, and so good government really requires good
resources.
Senator Lankford. Just as an observation on that: We get
calls all the time from businesses and from individuals that
say, we have this overwhelming number of guidance documents and
new regs that are coming down on us; we have limited resources
as well.
And so while I do hear often from government officials
saying, if you will just give us more money we will be able to
do better this or that, that is the same thing we hear from
individuals out in the country, saying, wow, we cannot keep up
with--as was mentioned before about Dodd-Frank.
A community bank that has 14 total employees and the number
of things that are coming at them from three different
agencies, that are indeed conflicted, is overwhelming them. And
they say the same thing: We do not have the staff to manage
this. Nor should they have to be able to have the staff to
manage that, based on the number of regs that are coming on
them.
I want to mention a couple of things, just to be able to--I
really appreciate the open dialogue on this. And I want this to
be an open dialogue. And so, Senator Heitkamp, anytime you want
to jump in, you can jump in this conversation. Let's open this
up.
Mr. Narang, I want to be able to bring something up. You
brought up three different times the No Action Letters. The one
caveat I would have on that--and by the way, I think the No
Action Letters are helpful, and I do think that is a document
that comes out that everyone can say, OK, that looks like it,
but you have used the term ``safe harbor'' a couple of times.
That does concern me, because on the SEC's website, it says
on it the staff are not bound to the statements of previous No
Action Letters. So it is not really a safe harbor. It is an
interesting piece of information to know that if you are in
conflict with SEC you can say, hey, I was trying to follow
this. But their staff has full ability to be able to say, hey,
we are not bound by that; that was for that group; we published
it for your information only. But they are not really bound by
that. Am I right or wrong on that?
Mr. Narang. Thank you, Senator. I believe you are right. It
is one of the general limitations on guidance documents, that
they are not binding.
I am unfamiliar with how often SEC takes enforcement
actions against likeminded--situated businesses--situated in
the same----
Senator Lankford. I have no idea on that. We can try to
find that, but----
Mr. Narang. So I would hope that it would not be that
often, though.
Senator Lankford. I would hope so too. But you used the
term it is a ``safe harbor'' at one point, and I want to just
put a check on that to say it is not really a safe harbor,
because even they say they are not bound by No Action Letters
because the facts are going to be different in every single
business, every single location. But it does give you a general
sense.
To me that is somewhat what guidance should be, is a
general sense of this is a direction of where we think things
are going to go. But the problem is, is that when we had
Education here before----
Mr. Narang. Right.
Senator Lankford [continuing]. We asked basically, if you
are a new person at a university and you want to be able to
pull all the previous guidance that has come down, where would
you go to get that? There is no place to go to get that.
I was interested--you made a comment at one point--what did
you say, 580? What was your number?
Mr. Crews. That is what I tallied up. And to get the
Education Department guidance, rather than being right there on
the website you click and then you go to a Word document.
Senator Lankford. Right.
Mr. Crews. So the kinds of reporting are all over the map.
Senator Lankford. So but you called it, if I remember, a
``partial list.''
Mr. Crews. Yes because, see, we have the memo in place, and
there is varying degrees of compliance with it. Like, HHS says
it does not have any economically significant guidance to
report, but on FDA's site it has this great search engine, it
has all these procedures to present information.
HUD does not own up to significant guidance, but other
agencies do. Sometimes you will see the main umbrella
department with zero in numbers of significant guidance but
some of the subagencies will acknowledge some significant
guidance, which is great.
So in the preliminary inventory I put together, I put those
zeroes in there because it is interesting to know which
subagencies say they do not have significant guidance and which
they do. That is important information as well, but then we can
check with those agencies later and find out if that is really
the case. If they say they have zero guidance, you can find out
from the public maybe the answer is different.
Senator Lankford. But that is just significant guidance you
are highlighting. Is that correct?
Mr. Crews. Right, and then you get--this is another reason
why we need a lot more disclosure than we have, because to get
other kinds of guidances that are sub-significant or secondary,
whatever--there needs to be a name for it. One name is
``notices'' but they are--but notices published in the Federal
Register are everything from meeting announcements to something
potentially significant.
John Graham, who had been the former head of OIRA, had said
what OIRA considers to be a significant notice, it is not quite
clear. So what counts as a guidance? What counts as a notice?
Once you get below the significant, it gets pretty iffy.
I had mentioned some financial guidance in which the St.
Louis Federal Reserve had tallied up what they considered to be
significant guidance and posted it. But you see, if you
multiply that all across the sectors of the economy, there is a
lot of stuff out there that is not easy to find. It is not even
easy to find the significant guidance----
Senator Lankford. Right.
Mr. Crews [continuing]. Because I had to do that exercise,
but the other, it is extremely difficult.
Senator Lankford. And it is the challenge that I have that
I bring the illustration up: If you have a new employee at a
university, you have a new employee at a manufacturing
location, the previous employer retired, died, fired, whatever
it may be; new person sits down in the chair and they ask the
question, where do I go to get the rules of the road from the
Federal Government?
Mr. Crews. Right.
Senator Lankford. They know where to go to get the
regulations, but all the interpretive guidance pieces and
everything else, there is nowhere they can go to get it.
Mr. Crews. I am here to say nobody can tell----
Senator Lankford. And they are all going to be bound by
that.
Mr. Crews. No one can tell you.
One thing I would say--and I hope there is some common
ground here--I had looked at the Public Citizen report, and I
understand about the delays in some of the regulations that you
are concerned about. My answer to things like that is, well,
when that occurs and it is that severe, that becomes a question
where Congress ought to step in and make things happen.
But beyond that, one thing that fell out of that new Public
Citizen report is that regulations that are not significant
actually come through on a pretty ordinary pace. So that tells
me that if you were to--and Public Citizen would be in favor of
disclosure and the public having the right to comment. That
tells me, for the typical guidances, it should not be too much
of a burden for them to go through some kind of alert or notice
of some degree.
So I think that disclosure can go a long way toward getting
a handle on the significant guidance and then the sub-
significant.
Senator Heitkamp. I think one of the issues that we have is
that--probably an unfair kind of analogy, but let's say you
have five sisters and you all have photo albums, and one just
throws them in a box and the other person, you know, has them
indexed, you know, 500 different ways on a spreadsheet, right?
Mr. Crews. That is pretty good.
Senator Heitkamp. So we have not set any guidelines for how
this information is presented. Now we have a whole body of work
out there that is in the shoebox that is not necessarily
accessible. And so it is going to take, maybe some direct
analysis on, this is the expectation on transparency. You
should not have to dig around. You should not have to just
wonder if you are missing something. There should be one place
where you can go where you can sort it.
And the problem that you have is, I think, this has been
ignored, kind of like we are just doing it and we are just
doing it, because people are busy and they are not thinking
about communication. They are just thinking about today, not
what this body of work means kind of in the long run. And so I
think there is some work that needs to be done in terms of not
just one size fits all, but in terms of setting some standards
for how you present the material.
Our frustration here has been every time we talk about--
whether it is Taxpayer Bill of Rights, whatever it is, post
this information--well, that would just take so much time.
Well, I think, number one, we have the tools to do this fairly
quickly, but people do not have a framework. And when they say,
well, we cannot post it, you wonder why they do not want to
post it, not that--everybody can post it.
And so I think there is a need here to maybe set some
standards on how the information is presented. We can argue
about what is significant and what is not, but, all of this
information should be completely transparent and accessible to
the public.
Mr. Crews. A quick one on that. I love the shoebox analogy.
And I will tell you, the shoebox is called ``notices'' at the
Federal Register. If you look at the proposed rules coming out
every year, right now there are 2,500 in the pipeline. The
number of rules finalized last year were 3,410 but the notices
were 23,000. And so just ``notices'' is what it is called, but
it contains memoranda, directives and guidances, bulletins,
letters, all the--a word salad of things that it includes and
it is just in that shoebox now.
One of the things you can start to do is to tease that out,
becomes some things, like the FDA notices that Amit mentioned
that are just alerting the public about things--about Zika--
those are not guidances that concern anybody. Those are notices
coming out of the Federal Government. But the ones where it is
going to change behavior or require businesses to react, or
some businesses may act differently than others or be affected
differently by others, I think those can be pulled out of the
notices shoebox in the Federal Register reporting that comes
out every year.
So I think that kind of disclosure in presenting the
significant guidance and the material sub-significant guidance
straight on the webpage, along with elevating the guidance
principles, like Paul says, I think will go a long way toward
getting a handle on this issue.
Senator Lankford. Right. And part of our issue is not just
that it is in a shoebox; it is that it is in a shoebox in a
closet that no one knows where it is. And so that exists but I
cannot get to it and I cannot find it, and I do not even know
that it exists on that.
Mr. Noe, you had mentioned something earlier that I want to
be able to come back to and it was this thought of people at
OIRA finding out about a rule by reading it in the Washington
Post when it suddenly shows up.
In our conversations with agency individuals, it is one of
the frustrations that an agency does not know what another
agency is doing, and so a business or a manufacturing location,
whatever it may be, suddenly has two conflicting guidances from
two different agencies that, if I do this it is going to break
this agency's rule, and if I do this it breaks this one.
OIRA, I would assume, is the one that has to be able to
help navigate between the two to be able to raise the red flag.
But if not OIRA, who helps form that deconfliction? And how do
we get to a point where, if it is a significant rule that is
coming out, OIRA at least gets a shot to be able to take a look
at that?
Mr. Noe. Mr. Chairman, you are absolutely right that OIRA
is the proper place to coordinate with the other agencies on
any rule that is important, whether it is a binding legislative
rule or regulation, or an interpretive rule or policy
statement.
And sometimes it is--I say it myself, but I have to
remember it is kind of a misnomer to call it OMB review,
because OMB is just an intermediary. It is interagency review.
So if EPA, for example, is going to issue a regulation or an
important guidance on something related to agriculture, the
desk officer who works on those issues at OIRA is going to
alert the Department of Agriculture so that they are
coordinated on what the policy for the president is on that
issue. The same thing if it is energy. They will reach out to
the Department of Energy (DOE). If it is about food, it will be
Ag plus FDA.
And that is exactly why it is important to have clarity
that, one, OMB has authority to have interagency review on the
most consequential guidance. For the vast majority, they will
not do this. They have very limited resources, as Amit said.
And they are focused mostly on the mega rules.
But there are some guidance that are so consequential, they
ought to be able to have interagency review on that, and there
ought to be a procedure so they actually have a heads up to
know they actually should have interagency review instead of
reading about it in the Washington Post.
Senator Lankford. OK, so how does that happen?
Mr. Noe. It is very simple. It is just a few steps, which
is kind of a streamlined version of what you do for regulations
that could be done for guidance.
So, one, the agencies would provide a list to OIRA of their
upcoming significant guidance, only the most important ones.
Then OIRA could choose--based on its own limited resources and
the President's own priorities, pick off that list which ones
it wants to review. And then it would alert the other agencies
that are affected so that there is a coherence among the
agencies that, yes, this is the proper policy; this reflects
the President's priorities; we want to go forward with this
guidance.
And I can assure you, OMB would not review an enormous
number of guidance because, again, they have very limited
resources and they have to pay attention to the big
regulations. But there are some that they absolutely would want
to review, and they should, and the other agencies ought to
know about them.
Senator Heitkamp. One of the problems that we have when we
look at this is a lot of the significant guidance, a lot of the
significant regulations, are coming out of independent
agencies. And we are really challenged in how we do that
independent agency review. We had a bill--I mean, it has been
really a tough issue for us to kind of navigate in terms of our
oversight.
But I want to make a point about guidance, because I used
to be one of those regulators back in the day, both as Attorney
General (AG) and as tax commissioner, and I got criticized for
not promulgating rules and not issuing guidance because of how
critical it was for business certainty. You may not like the
answer, but you got an answer so you can rely on it.
Again, I do not know that we can say ``safe harbor,'' but
certainly during the term, that we would have a court that
would say, look, you said something; they relied on it; it is
binding. And so we do not want to lose that.
And, Mr. Narang, I think that one of the things that we
need to look at is we need to think in the context of if the
person in the White House did not share common values, and
started issuing guidances that were contrary to rules that had
been promulgated over the last 8 years, I mean, how would we
then want to see the process operate so that we would at least
have notice that there is some erosion from what you thought
the principles were or what the rules were?
I think sometimes we look at this in the lens of what the
political landscape is today, and we desperately need to look
at it from what is the level playing field that we need to be
operating on, so regardless of the political affiliations or
the tendencies on either side we have rules that we all know?
I mean, couldn't you see a need, in a case like that, to
actually have greater notice, have greater scrutiny over
guidance that might change rules?
Mr. Narang. I think that you are absolutely right to point
out that this--the procedural issues when it comes to the
regulatory process can cut both ways, depending on who is in
the White House.
I do not think that that diminishes the need for our
government to operate efficiently. I agree that they should
operate in a transparent manner, regardless of who is running
the show. But I do think--and certainly that may cut against
Public Citizen's interest sometimes, but I do think that
government efficiency as a principle is also a bipartisan
principle that needs to be honored across administrations.
And we do not have that with the rulemaking process. We are
very concerned that adding the same types of procedures for
guidance documents will simply make the dysfunction in
efficiencies and the rulemaking process then apply to guidance
documents.
Senator Heitkamp. Well, i have a concern, if guidance truly
is nonbinding, whether we are putting another layer on that
would prevent us from moving efficiently to give business
certainty to do the kinds of one-on-ones that can be very
helpful. But I have seen it go the other way too, where broad,
sweeping changes are done in guidance when they should have
been done in rules.
Mr. Narang. If I could just add to the OIRA discussion
really quickly, we talk a lot about transparency around here.
One of the major sources of a lack of transparency when it
comes to the regulatory process is OIRA.
The GAO has issued multiple reports now, making about 12
recommendations when it comes to OIRA actually following the
Executive Order 12866 transparency requirements. Every time the
GAO finds that OIRA really is not interested in instituting
their recommendations. I think they have only done about one
out of 12.
We really feel that, if we are going to give OIRA more
authority over more types of agency actions, that they need to
right the ship when it comes to reviewing regulations first
before we give them guidance document review authority.
Senator Lankford. So can I drop the bomb into the middle of
this conversation, then? [Laughter.]
So if OIRA does not follow the process, or if a regulator
does not follow the process, should there be judicial review?
Not on the decision--but did they do the process?
You are welcome. [Laughter.]
Mr. Narang. Thank you, Chairman. So that is a very thorny
question.
Senator Lankford. Because I am not asking, did they make
the right decision? I am asking, did they do the process, and
should there be an ability to have judicial review if they did
not complete the process?
Mr. Narang. I think that maybe it would be interesting to
ask an administration witness what they thought of that.
Executive Orders----
Senator Lankford. I already know what they think.
[Laughter.]
Senator Heitkamp. We do.
Mr. Narang. Executive Orders are not judicially
enforceable. They do not create any legal rights.
You make a very good point that when OIRA--or other
agencies, but especially OIRA, since agencies are held to
judicial review and judicial review's scrutiny, essentially,
when they do not comply with APA procedural requirements. OIRA
does not have that element of judicial review. And, when it
comes to, I guess delays, they are not complying with the
Executive Order. Of course, it is their Executive Order.
Senator Lankford. Right, and that is the problem. But it is
every President for the last 20-some-odd years has done 12866.
And the question is, if we have a bipartisan agreement, this is
a good process. It has been tested. It has been evaluated.
Let's just make it statutory and to make sure that is what we
actually do.
And again, that is a broader conversation and we are
getting past guidance in this. But it does help, when you deal
with something like the Congressional Review Act, if you have a
significant guidance. A significant guidance is open to the
Congressional Review Act. If you do not do the process and
actually deem it as significant guidance, you actually pulled
it out of that statute to where it is not eligible to be dealt
with in that way. And so it does affect how the law functions
and how Congress interacts with guidance as well.
Senator Heitkamp. I think one of the concerns are the
nitpicking versus truly significant breaches of process. And I
think that people on the one side of this debate in terms of
following these rules, following the procedure, would argue,
look, if we missed it by a day or if we did something that was
not material to the public or really to the end result of the
rule, we should not be subject to scrutiny for a nonmaterial
breach of process.
But again, if you fail to provide notice and comment on the
front end, that is something the courts are going to review----
Senator Lankford. Right.
Senator Heitkamp [continuing]. I think, under APA.
And so, we have this debate going back and forth about
judicial review, and I think it challenges us all, kind of
going forward, on how do we make everybody comfortable that
there is not an ``I gotcha'' here?
There is an attempt to analyze and to know the rulemaking
process so that everybody is playing from a level playing field
that the regulated community knows that this is the process,
this is the rule of law that I am operating under, and I can
count on those steps being taken to protect my rights. And when
those steps are not taken, that creates a disharmony and, I
think, a sense that the government has run amok.
Senator Lankford. Can I ask Mr. Noe to make a comment? It
looks like you are about to jump out of your skin, so----
[Laughter.]
Mr. Noe. Well, I just wanted to comment, Mr. Chairman, that
I think there is a basic misunderstanding about this issue of
delay. And I know Amit is concerned about that. I respect the
concern about that, but it is very important to mention this
because it is fundamental in the FDA Good Guidance Practices,
in the recommendations of ACUS and the ABA that--basically what
they said is, for significant guidance documents, the agency
ought to ordinarily voluntarily comply with notice and comment,
unless they determine it is not feasible or appropriate.
And when Congress passed FDAMA, it is right there in the
statute. So there is an out. This is very different than saying
this is a legislative rule subject to APA notice and comment
requirements and judicial review. It is very different because
the agency can, on its discretion, determine, look, this one
was not significant or it was not feasible to do it.
What Congress said is if you do not provide pre-adoption
notice and comment for the most consequential guidance and you
go ahead and issue it, you ought to still allow the public to
comment on it even though it is out there already.
And that is perfectly reasonable. That is what the
Administrative Conference of the United States has said. That
is what the ABA has said. That is what is in the FDA Good
Guidance Practices. And it works perfectly well. The agency has
not crashed and burned. In fact, the regulated community, to my
understanding--I am not an FDA expert--but they are pretty
happy with how that works, and that to do it otherwise would be
a major problem.
So here you have an agency where human life is at stake in
the decisions it makes, the guidance it provides, and this idea
of having a presumption of public notice and an opportunity to
say something about this before it goes final works perfectly
well. And where they decide, look, it is not feasible, this is
an emergency or it is not appropriate, there is an out for
that. And so I think that is the same kind of thing you could
do if you elevate these Good Guidance Practices to legislation
for the agencies in general.
To your point earlier, Senator Heitkamp, I think you could
and should do it for the independent agencies too. Their
guidance is no different in its impact. You have absolute
authority to do that. Of course, I frankly think the President
has absolute authority to do it on his own. And I think there
is----
Senator Heitkamp. The independent agencies do not think
that.
Mr. Noe. They do not think that, but I think if you
consulted legal scholars, they would line up and say that is
correct. But the point is it is you. You are a legislator. You
have that authority.
As far as judicial review goes, I do not think there is a
whole lot for a court to review here other than if it is simply
``check the box.'' Again, we do not want to be embarrassed of
our government. Do you have approval procedures for your most
important guidance? Do you have standard elements in the
guidance, and do you say it is nonbinding? Do you provide
access to the public by actually posting them on your website
in the 21st Century? Yes or no?
If they did not do that, you could provide limited judicial
review to compel agency action lawfully withheld or
unreasonably delayed, under the Administrative Procedure Act,
Section 706(1). And all that anyone could do, if they are
willing to spend the money, is get a court to say, yes, you
have got to do what Congress told you to do. Nothing is going
to crash and burn if you have that limited judicial review. I
personally think you could do that.
Mr. Narang. So Paul makes a really good point. Congress has
the authority and has mandated that certain agencies conduct
guidance processes in a different way, in a much more robust
way, as they did with FDA.
I think the proper way of congressional intervention in
this area is to go, agency by agency, where the problems exist,
to the extent that they do exist, rather than a one-size-fits-
all approach. I think this is a broader recommendation when it
comes to regulatory reform legislation, generally speaking.
Senator Lankford. But here is the challenge when you are
dealing with a--I will go back to a manufacturing location as
well. They have EPA regulations, they have OSHA regulations,
they may have FDA regulations, they have USDA regulations,
Department of Labor regulations. If all of them have different
standards and different ways to do it--I understand it is very
helpful for the agency to say, we are different, but when you
are the business, actually, and for the 340 million Americans
that are trying to process these regs, it makes it more
complicated for them.
And so there is somewhat a balance between making it
simpler for the government or making it simpler for the
American people. Our default is to try to make it simpler for
the American people.
And so while I understand one size does not fit all, there
is a need for some kind of standardization so that a compliance
person in that business that deals with nine different agencies
can have some level of predictability of what to be able to do.
Senator Heitkamp. And we have established a one size fits
all by passing the Administrative Agencies Practice Act. So the
question is, should that be expanded into other areas? Should
we look at that and say there is a need for a broad-based rule
of the road that could apply? I agree with you that there needs
to be flexibility. I mean, the last thing you want is the
Internal Revenue Service (IRS) not to be issuing letter
rulings.
Senator Lankford. Right.
Senator Heitkamp. And no one here wants that. And so I
think you and I would agree it probably should be narrower than
maybe what these guys would think, but I think at some point
having the certainty of knowing, I know what is going to come
down because this is the process, and I look for it, and if it
does not show up I know there is not new guidance out there
that I need to worry about.
And so I think there is some advantage that we could have
to standardizing some kind of guidance principles, and making
those--I think Paul's point about, what would that review look
like? It is not substantive. It is really an objective review
is what you are talking about, not a substantive review, right?
Mr. Noe. Yes, Senator, just the process. Did they do it?
Did they do what Congress told them to do? That simple.
Senator Heitkamp. So, I mean, that offers an opportunity to
give the certainty that you might need--sorry.
Mr. Narang. I do want to make clear that I am not making
any claims that, significant guidance documents, economic--the
creation of these categories across agencies is going to lead
to the same length of rulemakings as economically significant
rules. That is not the case. It is not going to be as long as
that.
But even on the guidance end, delay is not an abstraction.
It costs lives. The CDC Opioid Guidance is a great example.
They wanted to issue it late last year. When they first came
out with it they got backlash from the pharmaceutical industry
and they had to delay the guidance for several months. The CDC
points out that 40 people across the country die every day from
opioid addiction and overdose.
Senator Lankford. Mr. Crews.
Mr. Crews. Just quickly too on the discussion about OIRA
and the transparency that you brought up, it is the case that
OIRA--we always look at OIRA's reviews of regulations but not
the independent agencies since those are left out. And in the
past year you have 13 rules that had a cost-benefit analysis
done on them, but it turns out that OIRA does review some
notices and we can get to the bottom of what that data is
actually telling us.
I mentioned that John Graham, who was the former head,
said, ``The OIRA website''--this is a quote--``is vague about
what constitutes a notice.'' ``More clarity about what
constitutes guidance notices worthy of review'' ``would be
valuable.'' But I went back and looked and it turns out there
were a few dozen notices that OIRA reviews every year. The
nature of what all of those are we do not know yet. And even
some of those are considered significant.
So there is some activity at OIRA that would be enhanced by
doing this--by enhancing those principles into legislation.
Senator Lankford. We have a couple of minutes left here. I
want to be able to honor everyone's time on it, so let me kind
of go in a couple of lightening round things that should not be
lightening round things. That will be faster.
One of them is--and it is for all of us on this, if you
have a particular comment. One of the things that we dealt with
last year was OSHA put out three new process safety management
rules as the result of a quick action from the fertilizer plant
explosion in West, Texas.
We have now learned from the Bureau of Alcohol, Tobacco,
Firearms, and Explosives (ATF) that that was not an accident
after all. That was actually an intentionally set fire. And all
of the basis for how they set out these quick emergency
guidance to be able to get there--it is an emergency when you
put out these new process safety management rules--the
foundation of that was incorrect. It was not an industrial
accident. It was an intentionally set fire.
They promulgated three different sets of rules. We
challenged those three guidance documents--I said rules, but
three guidance pieces they put out--and said, this should go
through the rulemaking process on all three of these. One of
them they have now responded back to us and said, you are
right; we are going to re-promulgate this as a rule. The other
two are now in litigation, where they have stepped aside and
settled it.
My concern is it looks like this is--going back to, Mr.
Narang, what you were saying--a faster way to be able to create
a reg by creating a guidance, stepping aside into a quick
settlement with the affected parties and then putting it back
out and saying, here is the result of that, that still excludes
a lot of people, if it was going to be a true reg, from giving
input. The only people that got input were the people that were
actually in the settlement. And then everyone else was cut out
of that.
I am very concerned about that being a new process that is
being birthed out of the length of time and the difficulty it
is to do a regulation or a significant guidance, that agencies
are exploring, how can we get this done in a faster way with a
smaller group of people? That is a separate issue. I just
wanted to be able to raise it. I am very concerned about that.
We are going to continue to press on that.
The issue that I wanted to be able to raise is who has--and
we cannot get into all of it--who has given good, clear
definition of what is guidance, significant guidance, and
regulation? It is one of the great struggles that we have.
Every time a new regulation comes out--and, Mr. Narang, you
mentioned it, for instance the sexual assault rule on campuses,
that campuses across the country have said: That is not a
``Dear Colleague'' letter. That is a new guidance. That forces
us to create this whole new legal system. There is all kinds of
issues, all kinds of attorneys. And legal scholars on
universities have said, this definitely should be a regulation,
not a ``Dear Colleague'' guidance letter.
Where do we go to be able to get good, clear definition
that we can put in statute to clarify, in the days ahead, here
are the clear boundaries?
Mr. Noe. Mr. Chairman, I will take a stab at that.
I think that this is pretty fundamental. If it creates or
alters legal rights or obligations as a foundational matter,
that is a legislative rule, which we call a regulation. If it
merely interprets a pre-existing legal requirement, whether it
is in a statute or a legislative rule, a regulation, that is an
interpretive rule. If it simply sets forth agency policy but it
is not binding, that is a policy statement.
These are the three kinds of rules under the APA. And if
people are fair-minded, I think, when they read what the agency
is writing, it is not that mysterious as to which of those
three is going on. If there is a proper review process and the
agency really intends to follow the rules of the road, that
should be pretty clear.
One benefit of having notice and comment as a presumption
for guidance is if they feel like there is an emergency and we
have to put out an emergency interpretation, they can go ahead
and do that, but then the notion is, but we will still take
some comment in case we got it wrong and we will think about
that comment. And that allows them, if they made an error to--
if they quickly made a mistake, they can quickly correct the
mistake under that kind of a system.
Mr. Crews. It is often claimed that there ought to be a
law, and sometimes maybe there ought not be a law. I think one
of the issues we have here is when Congress has been debating
reforms and is looked at the REINS Act, where if a particularly
regulation was extremely significant and Congress thought it
ought to have a say and would come in and vote up or down on
it, I had always thought that should be extended to
controversial regulations, not just major ones, because often
when you look at the data coming through OMB, there are not any
cost-benefit analyses. There are very few that actually even
happen.
Senator Lankford. Especially in the independents.
Mr. Crews. Exactly. And so now, given the tendency to turn
to guidance now, and given the nature of the economy we have
now where we are moving into the information sector and to
high-tech sectors, where it is very easy to issue a drone rule
and financial rules and telecommunications rules but then not
issue any rules after that, just make declarations and
guidances and memoranda, I think you have to bring controversy
into it. It is not just that it is economically significant,
but if it has alarmed enough
people--like it was very controversial, what you described
about the explosion and then finding out that there was a
sabotage; it was not even a failure of process--you have to
have something to flag when there has been a major change in
law implemented or a major change in the way that regulated
parties have to behave, based on what the Federal Government is
doing, whether it is coming out of Congress, an agency, or if
through a regulation or through a guidance.
Mr. Narang. So this is not a direct answer. I will go back
to what I said in my oral remarks, which is that one way to
deal with concerns about guidance is to make notice-and-comment
rulemaking easier.
And this Committee has a good model, actually, just from
this Congress in terms of streamlining and making more
efficient regulatory processes to address delay. So the delay I
am talking about here is energy and infrastructure permitting.
And the solution to that delay, which became law last year,
passed out of this Committee initially, was essentially to cap
public comment periods at 60 days, scale back judicial review,
make the standing a little bit more narrower for parties to
bring judicial actions on permit denials or approvals, and to
reduce cost-benefit analysis, not expand cost-benefit analysis
when it comes to environmental impact statements.
So that is an interesting model. I think it potentially is
a very effective model. Unfortunately, it is not the model that
Congress has generally been following when putting out
proposals for reforming the regulatory process. And so I think
that hopefully our report makes clear that the delays, when it
comes to regulations, are substantial, just as substantial as
in the energy and infrastructure permitting world, and so we
need similar types of solutions.
Senator Lankford. No, I do not think there would be a
question from this Committee, either side of the aisle, on
dealing with clear deadlines and boundaries and clear
definition. No one wants a regulation to take 12.5 years. No
one wants that process to be so burdensome and so time-
consuming that you actually cannot respond to a statute.
The challenge is if people are not engaged in it--what a
lot of folks on this dais have heard me say: We are still a
government of the people, by the people, and for the people.
And if people do not get input into the regulatory process and
to a guidance, then we are no longer a nation of the people, by
the people, for the people. This is somebody else that is
imposing.
So I think affected parties should have an opportunity to
be able to raise their hand and say, have you thought about
that, before something goes in. And it should not just be
wealthy affected parties, that could do a lawsuit and could
step aside and could do that, but it should be anyone that
would be allowed to do that. But they cannot do that if they do
not get the opportunity to present comment. And they cannot do
that if their comments are not heard and actually put into
action.
So clear moments where they can do that, where they can
engage, is extremely helpful to us, I think, just as a Nation,
just as a transparent government as well. I wish it was as
clear as what you just described. There has been uncountable
lawsuits that have happened in the past several years over,
that is a reg, or, that is a guidance; that guidance has now
become something else.
But apparently there are some in government that wish to be
able to promulgate something that sure looks a lot like a
regulation as a guidance, and no one seems to be stopping them
in the process. And I think that should be an OIRA position,
but often OIRA does not get the opportunity to see it. And now
it just happens and gets out there.
And I think my issue is, how do we actually put this in
position with regardless of who is in the White House, that
everyone knows regulations come from law and guidance comes
from regulation, and everyone can point back to law, not just
the preferences of the White House, because if everything is
based on, we are going to put out this guidance based on White
House preferences, at some point we have lost, it has to be
connected to statute over here, not just White House policies.
And so we have to figure that out regardless of who is in
the White House. Otherwise, we have no predictability and the
next White House can just flip the guidances and say, we are
going to go the other direction now; because the last one did,
because if this passes a guidance this way, then it can
certainly be taken away this way, and now no one knows how to
do capital investment in the country.
Mr. Noe. I can tell you, Mr. Chairman, when I was at OIRA
we caught a number of what I call spurious rules. They were
supposedly guidance that were going to be legally binding, and
we were able to stop them.
So I think it can be done if there is OIRA review and there
is a desire to make sure people are following the law. It is
tempting to go by guidance because it is easier to do, as Amit
was saying, but it does not fit with due process to do it.
And I think it is not an accident you have seen this vein
of cases from the D.C. Circuit, the spurious rules cases, that
actually started growing a lot in the 1990s. And I think that
is because the Clinton order took OIRA out of the job of
reviewing guidance.
Senator Lankford. Well, it is simple. We have to be able to
re-establish that and to be able to find a clear way to be able
to do it, because at this point we are--my belief, we are
clearly out of balance. There is too much latitude to be able
to create guidance and too much instability that is created
with that, and we are not getting back to the basics of
promulgating it based on statute.
And it seems to be a focus on the Chevron deference-type
issue that I come back to all the time: We can get away with
it. We can call this permissible construction. And so because
it is permissible, we are just going to go ahead and do it and
wait until a court at some point tries to stop us in the
process.
And that is really expensive and really long, and it may be
simpler for the agencies but it is much tougher for the
American people.
Any other quick comment from anyone?
[No response.]
Gentlemen, I thank you very much again for all the
contributions that you made, the study that you do already, and
the different reports that you already put out. That is very
valuable to us in the national conversation on it. And we want
to continue the dialogue both on the staff level and with
myself and other Members of this Committee. But let's keep the
work going. This is not unsolvable. This is one of those
solvable issues, but we have to get some good-quality
resolutions, and it has to be able to pass the House, the
Senate, and be signed by the White House.
I have heard several of your comments today saying Congress
could fix this, and I have smiled only as I thought that, and
say, when Congress fixes things, that is law. That also
requires the White House to be engaged and to say yes, because
most of these issues require a reduction of Executive power,
and of late there does not seem to be much conversation about
limiting the power of the executive branch. So, yes, while
Congress has the power to write that law, the Executive has to
sign a law that says, no, the executive branch has to live by
law, not Executive Orders. And that will be a different day and
a different conversation.
So I appreciate very much the conversation and the input
for this. Thank you.
Mr. Noe. Thank you.
Senator Lankford. With that, let me see if there is any
closing statement I need to make, or announcement.
The hearing record remains open for 15 days, until the
close of business on July 14, for the submission of statements
and questions for the record.
The hearing is adjourned.
[Whereupon, at 10:29 a.m., the Subcommittee was adjourned.]
A P P E N D I X
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