[Senate Hearing 114-480]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 114-480

                A REVIEW OF REGULATORY REFORM PROPOSALS

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

                                 HEARING

                               BEFORE THE

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS


                             FIRST SESSION

                               __________

                           SEPTEMBER 16, 2015

                               __________

        Available via the World Wide Web: http://www.fdsys.gov/

                       Printed for the use of the
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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

                    Keith B. Ashdown, Staff Director
                       Satya P. Thallam, Counsel
               Josh P. McLeod, Professional Staff Member
              Gabrielle A. Batkin, Minority Staff Director
           John P. Kilvington, Minority Deputy Staff Director
             Katherine C. Sybenga, Minority Senior Counsel
     Troy H. Cribb, Minority Chief Counsel for Governmental Affairs
                     Laura W. Kilbride, Chief Clerk
                   Lauren M. Corcoran, Hearing Clerk
                            
                            
                            
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Johnson..............................................     1
    Senator Carper...............................................     2
    Senator Portman..............................................     5
    Senator Heitkamp.............................................     7
    Senator Lankford.............................................     8
    Senator Enzi.................................................    22
Prepared statements:
    Senator Johnson..............................................    41
    Senator Carper...............................................    42
    Senator Heitkamp.............................................    44
    Senator Warner...............................................   144

                                WITNESS
                     Wednesday, September 16, 2015

Hon. Susan E. Dudley, Director, Regulatory Studies Center, and 
  Distinguished Professor of Practice, George Washington 
  University.....................................................    10
Sidney A. Shapiro, Frank U. Fletcher Chair of Administrative Law, 
  Wake Forest University School of Law, and Vice President, 
  Center for Progressive Reform..................................    12

                     Alphabetical List of Witnesses

Dudley, Hon. Susan E.:
    Testimony....................................................    10
    Prepared statement...........................................    46
Shapiro, Sidney A.:
    Testimony....................................................    12
    Prepared statement...........................................   126

                                APPENDIX

Case Western Reserve article submitted by Hon. Dudley............    54
Regulatory Science and Policy article submitted by Hon. Dudley...    86
Statement submitted for the Record from Michael Greenstone, 
  Milton Friedman Professor of Economics, University of Chicago, 
  Director, Energy Policy Institute at Chicago...................   145
Responses to post-hearing questions submitted for the Record:
    Hon. Dudley..................................................   151
    Mr. Shapiro..................................................   155

 
                A REVIEW OF REGULATORY REFORM PROPOSALS

                              ----------                              


                     WEDNESDAY, SEPTEMBER 16, 2015

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:04 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Ron Johnson, 
Chairman of the Committee, presiding.
    Present: Senators Johnson, Portman, Lankford, Enzi, Ayotte, 
Ernst, Carper, and Heitkamp.

             OPENING STATEMENT OF CHAIRMAN JOHNSON

    Chairman Johnson. Good morning. This hearing will come to 
order. I want to welcome our witnesses for the first time and 
thank you again for your appearance here, taking the time, and 
for your thoughtful testimony. I think this is going to be a 
really good hearing. It is an important hearing.
    Coming from a manufacturing background, coming from a 
business background, I certainly understand what it is like 
when you are trying to run a business, when you are trying to 
create products, how sometimes, oftentimes, maybe universally, 
having to comply with Federal regulations, as much as we all 
know we need some, takes time. And as we have seen over the 
decades, as we have developed layer upon layer upon layer of 
rules and regulation and law, sometimes often conflicting, 
sometimes totally contrary to, one department versus the other, 
it creates an awful high level of uncertainty, which I think is 
harming economic growth.
    One of the things as a businessperson I have done a lot is 
strategic planning, and I can go through a quick strengths 
weaknesses, opportunities, and threats (SWOT) analysis on the 
American economy. Let me just quickly go through that.
    I am just going to concentrate on the strengths and 
weaknesses side. I would say our No. 1 strength as an economy 
is we are the world's largest. We are the world's largest 
customer. That is an enormous advantage in global economic 
competition. Now, trust me, as a manufacturer, manufacturers 
want to be close to their customers.
    Our other, I think, enormous advantage is we have 
relatively cheap and abundant energy. Again, coming from a 
manufacturing background, if you want to manufacture products, 
you need power. And, by and large, cheap power is better than 
expensive power. Now, we all want a clean environment. We need 
to be environmentally sensitive. But I think we can have a 
strong economy and a clean environment. We have to balance the 
costs versus the benefits of that. But the fact of the matter 
is, in order to have a clean environment, you need a strong 
economy. You have to be able to afford the luxury of the 
pollution controls to keep your environment clean. So we need a 
strong economy.
    Our weaknesses, certainly we have a completely 
uncompetitive tax situation, and Senator Portman had a great 
hearing here on the uncompetitive nature of our tax system in 
his Permanent Subcommittee on Investigations. So we have an 
uncompetitive tax system.
    For example, if you are a global company, a global 
manufacturer, and you want to come and manufacture close to the 
world's largest customer, are you going to site your plant in 
Toronto with the top business tax rate of 15 percent or Detroit 
at 35? As Senator Claire McCaskill said in that hearing, it is 
just math. We have to benchmark that.
    And then the whole purpose of this hearing is the 
regulatory environment. The cost of regulation is onerous. We 
can put a chart up here. There have been a number of studies by 
the National Association of Manufacturers, the Competitive 
Enterprise Institute, and SBA pegging--estimating the cost of 
regulation somewhere around $2 trillion per year.
    Now, we are getting immune to these enormous numbers. What 
is $2 trillion? Just a quick aside. My wife does this all the 
time, but if I were to give you $1 per second, it would take me 
12 days to give you a million dollars. It would take 32 years 
to give you $1 billion. It would take 32,000 years to give you 
$1 trillion. Just understand that, those orders of magnitude, 
how much $1 trillion is.
    But another way to put it in perspective is only nine 
economies in the world are larger than $2 trillion. That is the 
extent of a regulatory burden that we are placing on the people 
that we really rely on to create innovative products and 
services that we all enjoy, that we rely on to produce the 
good-paying jobs that are self-sustainable in the private 
sector.
    So we need to address that regulatory burden in a common-
sense way. We need regulations. No doubt about it. Were it not 
for the EPA, we would still have businesses dumping benzene out 
their back door. So we all agree that we need regulations, but 
they have to be common sense, and they have to have a very 
strong high benefit, versus the cost. When you take a look at 
the layer upon layer, I think you can start arguing that we may 
be at the point or potentially well past the point of 
diminishing returns in many 
areas--not all but in many--and we have to be very careful of 
that.
    So, again, I am looking forward to the testimony and to the 
hearing and the back-and-forth. The way we are going to do this 
is we have a number of Senators that have introduced pieces of 
legislation to address the regulatory burden, and we are going 
to give them an opportunity to have an opening statement, but I 
will first turn it over to our Ranking Member, Senator Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman. Thanks so much for 
pulling this together, to our witnesses for joining us, to our 
colleagues who have introduced legislation that will be 
discussed in part in today's hearing. We are grateful for all 
of you.
    Before we turn to the subject of today's hearing, I want to 
just take a moment and look back just a few days where Senator 
Johnson and I and our staff directors on the minority and 
majority side were privileged to join Secretary of Homeland 
Security Jeh Johnson and former Secretary of Homeland Security 
Tom Ridge in traveling to Shanksville, Pennsylvania, to visit 
the memorial and to participate in really a day of remembrance 
for folks that day who laid down their lives aboard United 
Flight 93 in order to make sure that that plane did not make 
its way to Washington, D.C., perhaps to the Capitol, where we 
believe it was the intended goal. It was a very moving, 
sobering, inspiring moment. And it was a great day for us to be 
able to look back and to thank and remember the people who gave 
their all.
    Today is the second anniversary of the tragic shooting in 
the Navy Yard, not far from where we are located here today, 
where 12 lives were lost 2 years ago and several others were 
injured in really a senseless act of violence. And on this 
anniversary we remember the victims; we remember their loved 
ones and all those who were impacted by the tragedy. And we 
also remember the bravery of all those who came to the aid of 
others on that day. It is just an important time for us to 
remember the important work that we have to do in Congress and 
across government to protect Federal employees and Federal 
facilities, so I did not want to let this day pass without 
thinking of them and noting that.
    I agree with much of what Senator Johnson has said, and we 
all have the chance to go to schools. I love going to the 
schools. I have probably been at every public school in 
Delaware in my time as Governor and Senator. But I love to go 
to schools with little kids, elementary schools, and we have 
assemblies, and I am sure my colleagues do this sort of thing 
as well. And we do Q&A, and one of the questions that is often 
asked by students, especially third, fourth, fifth grades, 
``What do you do? '' And I say, ``Well, I am a U.S. Senator. 
There are 100 of us. We work with 435 Representatives and the 
President and the Vice President to make the rules for our 
country. We call them `laws.'"
    And they say, ``Oh, really? Well, what else do you do? '' 
And I tell them, ``We try to help people,'' and one of the best 
ways to help people is to make sure they have a job. And a big 
part of that is making sure that we are working focusing on a 
nurturing environment for job creation and job preservation. In 
our business, whether you are mayor in Gillette, Wyoming, or 
Governor of Delaware or some other place, if you have people 
working, productive lives, providing for themselves, the rest 
is really pretty easy. But a big part of that is access to 
capital--nurturing our environment and access to capital. Part 
of it a world-class workforce, public safety. There are many 
aspects. Transportation, good transportation systems. But it is 
also what I describe as common-sense regulation. Colleagues 
have heard me talk about my dad before. My dad, when I was a 
kid, my sister and I were kids growing up, he was always saying 
stuff to my sister and me about--like we would do some bone-
headed stunt. He was always saying, ``Just use some common 
sense.''
    ``Just use some common sense.'' He must have said it a 
million times. And I suspect Ron's dad said that or mom said 
that to him a lot as well. But I learned to use some common 
sense. The point that he makes, and I would echo it again here, 
when people got up this morning, they had breakfast. The food 
that they ate, the milk that they drank, the juices, the fruit, 
it was clean, it was safe for them to consume. When people got 
on a train with me this morning, they knew that the likelihood 
was they would make it from wherever they wanted to go or 
needed to go, people on airplanes the same thing, people in the 
cars that we are driving around here. Part of what they expect 
is that our vehicles and modes of transportation, the food that 
we consume is safe for us, safe for us as consumers.
    The point that my colleagues have heard me make over and 
over again, some people say you cannot have a clean environment 
and a strong economy. They say it is sort of like you have to 
choose one or the other. Well, that is nonsense. We can have 
both, and we have over the years strengthened our economy and, 
frankly, provided safer places for us to live, work, and 
breathe.
    The last thing I would say is this: I sometimes explain to 
kids, we pass these laws, and they are like a skeleton. They 
are like a skeleton for what we want to do with respect to 
transportation, defense, farming, education, whatever. And then 
somebody has to come along and put the meat on the bones, and 
the ``somebody'' are the agencies usually in the executive 
branch of our government, and they put the meat on the bones 
through regulations. And it is not just a process. And a clean 
power plant is a good example. The EPA, what they are doing is 
complying with the 1970 Clean Air Act, modified in 1990 with 
the Clean Air Act Amendments. And from time to time they have 
to put some more meat on the bones or take some of meat off and 
put new meat on because the world in which we live changes and 
the threats and the nature of the missions that we face 
continues to change.
    So do we need regulations? Of course we do. Do we need 
regulations that enable us to strengthen our economy and 
continue to grow our economy while keeping us safe? Of course 
we do. And it is a false choice to say that we cannot do both. 
We have to do both, and we need to use some common sense.
    Thank you so much. And I would ask unanimous consent to 
enter my statement into the record,\1\ Mr. Chairman.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Carper appears in the 
Appendix on page 42.
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    Chairman Johnson. Without objection.
    I will also ask for the same unanimous consent to enter 
mine in the record.\2\
---------------------------------------------------------------------------
    \2\ The prepared statement of Senator Johnson appears in the 
Appendix on page 41.
---------------------------------------------------------------------------
    As long as we are doing that, I know Senator Mark Warner 
has a statement that he would like to make based on his piece 
of legislation, so we will also enter that in the record,\3\ 
without objection.
---------------------------------------------------------------------------
    \3\ The prepared statement of Senator Warner appears in the 
Appendix on page 144.
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    I do want to just speak to the event in Shanksville as 
well, just briefly. It was inspiring. It is amazing. Out of 
that tragedy, you get a level of inspiration. I would recommend 
everybody to go to Shanksville and see that visitors center, 
listen to the messages, the voicemail messages of three of the 
passengers to their loved ones. It is an amazing display of 
humanity. But it is also an amazing display of the American 
spirit. We are all aware of it, but to hear it again, and the 
wonderful speeches that day, all I can say is it is just 
incredibly inspiring.
    So, again, I really did appreciate the Secretary inviting 
us to that, and it was a journey well worth taking, and I would 
recommend it to everybody.
    With that, I think we will turn it over to Senator Portman, 
who would like to make some opening comments on his bill.

              OPENING STATEMENT OF SENATOR PORTMAN

    Senator Portman. Thank you, Mr. Chairman, and thank you, 
Professor Shapiro and Professor Dudley, for being with us again 
today. We look forward to your testimony later and talking 
about some of these bills. And I thank Chairman Johnson because 
he has made regulatory reform a priority of the Committee, and 
we are going to be talking about a number of different bills 
today. A couple of them I have been involved with. I am the 
author of the Independent Agency Regulatory Analysis Act, which 
we will be talking about. My cosponsor is Mark Warner, and I 
appreciate the fact that the Chairman just included his 
statement in the record. I have it here. It is a very good 
statement about the need for this legislation. This has been 
bipartisan. It has been something that we have been working on 
for a few years now, really trying to build on some of the 
President's own comments about the need to expand the 
regulatory analysis to independent agencies. And I know both of 
you will be addressing that. I read your comments on it.
    I am also the author of the Regulatory Accountability Act, 
which is broader legislation. It is not part of the discussion 
today because it is not one of these bills that has been 
scheduled for markup yet. But a lot of the ideas in it are in 
other legislation we will talk about today, and I am hopeful we 
can move that forward as well.
    The independent agency bill is, again, common sense, I 
think. It is part of a recommendation from the President's Jobs 
Council. It is something that affirms the authority of the 
President to extend to independent agencies some of these same 
regulatory analysis and review regimes that govern rulemaking 
by the executive agencies, again, consistent with the 
President's own comments and Executive Order (EO).
    It was originally on the markup for the end of July. We 
decided to postpone it in order to address some minor concerns 
of a few of my colleagues on the other side of the aisle, 
including Senator Heitkamp, who I see is here with us today, 
and Senator McCaskill wanted to have a chance to further review 
some specific aspects of the legislation, and they have been 
very supportive of the intent of the legislation. I think we 
have made great progress. I think we are at about, to use a 
football analogy, at the one-yard line now. We are definitely 
in the red zone. And I thank both Senator McCaskill and Senator 
Heitkamp for their support and work on this. Hopefully we will 
be able to get it over the finish line.
    The independent agency bill is something that Presidents of 
both parties have talked about over the years, and, again, 
consistent with this notion that our regulators who are 
independent, like the Securities and Exchange Commission 
(SEC)--and I know you use that as an example, Professor Dudley, 
in your comments today--the CFTC, and others are issuing more 
and more regulations, more and more major regulations, and yet 
are not subject to the same Executive Orders.
    Four years ago, President Obama issued Executive Order 
13579 saying that they should comply. Of course, he does not 
have the legal authority to be able to require them to comply 
because they are independent by definition; therefore, 
codifying that through the work we do here in this Committee is 
necessary. Unfortunately, the kind of analysis that we have 
seen with the executive branch agencies is just simply not 
being done on a consistent basis by the independent agencies.
    Here are some statistics worth repeating that we will hear, 
I think, later today. In a recent Office of Management and 
Budget (OMB) report, not one of the 18 major rules issued by an 
independent agency in 2013 was based on a complete quantified 
cost-benefit analysis. The same was true in 2012 when there 
were 21 major rules, none with a complete cost-benefit 
analysis. And, by the way, you can go back to 2009 and see the 
same record.
    A recent study commissioned by the Administrative 
Conference of the United States reported similar findings. Out 
of the major rules issued by independent agencies in fiscal 
year (FY) 2012, the last year which they analyzed, only one 
rule was supported by a partial quantification of benefits, and 
only six rules included a partial quantification of costs apart 
from paperwork burdens, which is a narrow subset of the total 
cost.
    In its fiscal year 2014 report to Congress, the Office of 
Information and Regulatory Affairs (OIRA) wrote, ``It would be 
highly desirable to obtain better information on the benefits 
and costs of rules issued by independent regulatory agencies. 
The absence of such information is a continued obstacle to 
transparency. It might also have adverse effects on public 
policy.'' That is the Obama Administration OIRA.
    So what does this bill do? It affirms the authority of the 
President to extend to independent agencies the same regulatory 
analysis and review regime that governs rulemaking by executive 
agencies. It provides that independent agencies may be required 
to assess the costs and benefits of a major rule. It would have 
independent agencies submit economically significant rules to 
OIRA for review. OIRA would then assess the quality of the 
agency's cost-benefit analysis. So, again, for major rules 
only, they would go to OIRA, and OIRA would do their analysis.
    The Independent Agency Act has been endorsed by a 
bipartisan group of former OIRA Administrators from the 
Clinton, Reagan, and Bush Administrations, a bipartisan group 
of former and current heads of independent agencies, including 
scholars of regulation and administrative law, the American Bar 
Association (ABA), the National Federation of Independent 
Businesses, and the National Association of Manufacturers.
    One concern that some of my colleagues had on the other 
side of the aisle was that this bill might result in a delay of 
rulemaking. I have agreed to accept Senator Heitkamp's language 
that would clarify that OIRA has 90 days to review the agency's 
cost-benefit analysis. If that review if not completed in 90 
days, the independent agency would be deemed to have met the 
requirement for review. Any OIRA analysis issued after those 90 
days would not be included in the rulemaking record. So that 
puts a deadline on them.
    Another concern was that the analysis this bill lays out 
might be duplicative. Senator Heitkamp and I are working on 
language to ensure that agencies that are already engaged in 
this type of analysis are not required to reinvent the wheel 
when they submit a cost-benefit analysis to OIRA, and she may 
want to talk more about that later.
    I look forward to continuing to work with her, Senator 
McCaskill, and others on the Committee, including Senator 
Carper, who has been a supporter of this notion of being sure 
you have consistency, and I appreciate that Senator Heitkamp 
and Senator McCaskill are committed to actually getting this to 
a markup in early October.
    Thank you, Mr. Chairman. And, again, on the Regulatory 
Accountability Act, Senator King, Senator Collins, and I have 
recently reintroduced that bill. This is something we have 
worked on for 3\1/2\, 4 years. It is a comprehensive bill, 
again, drawing on some of the existing tools in the 
administrative process to basically reform the Administrative 
Procedure Act (APA) for the first time in decades in a 
significant way to ensure we have a less costly and more stable 
regulatory environment for job creation. That bill, by the way, 
is supported by 80 different trade groups, including the 
Chamber of Commerce, Business Roundtable, National Association 
of Manufacturers, and many academics and former public 
officials.
    So I appreciate all the good work, again, that is being 
done by Senator Lankford, Senator Johnson, and others, and I 
hope we can move forward with the legislation that is before us 
today with a markup and then be able to actually begin to make 
a difference in the way that Senator Carper talked about. There 
is no inconsistency with having a clean environment, a safe 
environment, a safe workplace, and having a good economy. But 
it does require us to go through this cost-benefit analysis in 
a rigorous way.
    Thank you, Mr. Chairman.
    Chairman Johnson. Well, thank you, Senator Portman, for 
your efforts and leadership on this regulatory reform.
    Next I will turn to the Chairman and Ranking Member of 
basically our regulatory reform Subcommittee, and I really want 
to give a shout-out in terms of I think all of your good work 
and efforts. And so we can kind of keep it going back and 
forth, I will start with the Ranking Member, Senator Heitkamp.

             OPENING STATEMENT OF SENATOR HEITKAMP

    Senator Heitkamp. Mr. Chairman, we have had such a great 
collaboration on this Committee, and I think you see it on the 
Committee as a whole, and I know there are a number of people 
on the Budget Committee, which is chaired by Senator Enzi, who 
also share a commitment to real reform. And so I am going to 
just ask that my opening statement be placed in the record\1\ 
and defer to my Chairman, Senator Lankford, for a description 
of the bills that we are working on.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Heitkamp appears in the 
Appendix on page 44.
---------------------------------------------------------------------------
    Chairman Johnson. Well, thank you. I am sure our witnesses 
appreciate that.
    It is amazing what you can accomplish if you concentrate on 
the areas of agreement. Let us concentrate on what we agree on, 
and let us not exploit what divides us. So, again, I just 
really do appreciate, first of all this and just all of your 
efforts. Senator Lankford.

             OPENING STATEMENT OF SENATOR LANKFORD

    Senator Lankford. Thank you, Mr. Chairman. We have worked a 
lot together on this to find the common-ground areas. 
Regulatory reform should not be a partisan issue. It should be 
a conversation about how we actually deal with actual business 
and operations.
    We have three bills that we have worked very hard together 
on, and let me just kind of walk through the basics of those, 
and then we will get quickly to our witnesses on it.
    S. 1817, what we call the ``Smarter Regs Act,'' that act 
just starts laying out a plan for retrospective review. We 
believe there should be an assumption that when every major 
regulation is passed there is an assumption there will be a 
retrospective review and that will be a time certain. So we 
give 10 years or less that the agency, when they promulgate the 
rule, they say this will be reviewed at this date. So everyone 
knows we are going to do a real cost-benefit analysis after the 
fact to really get--we know what it was estimated; then we will 
give 7 or 8 or 10 years, whatever it may be, whatever is set, 
to get the real analysis of it. And then at that time, a new 
date is set for the next time as well, and you just keep that 
going on a major regulation.
    Again, what we believe is there should be this continual 
improvement and not to have you put a regulation in place and 
assume 30 years from now nothing has changed. Well, 30 years 
from now, things will have changed in the world, and we need to 
make sure there is a continual lookback on that.
    Another one I want to be able to bring up to you of the 
three that are here is S. 1820, the Early Participation in 
Regulations Act. Again, we have this crazy belief that the 
government still is of the people, by the people, and for the 
people. And if it is a nation and a government of the people, 
by the people, for the people, that actually means people 
should be involved in the rulemaking process; that if an agency 
promulgates a rule and then it seems like everyone is trying to 
fight against the text of it, maybe we should back up and do an 
Advanced Notice of Proposed Rulemaking so that when we get into 
the major issues, the agency would put out the concept, and 
then we would have an opportunity for all the American people 
to engage early to say this is something handled by the States, 
or, yes, this is a major issue, that we need to do it, but when 
you do the rulemake sure it includes these areas. It will 
improve the inputs early on and will also allow people to be 
engaged in it, to have more common-sense rules come out, so 
when they are actually promulgated and you get to that stage, 
the majority of people have already looked at it and had good 
input, and now you really are tweaking it rather than fighting 
against it.
    And the third one is S. 1818. This one deals with just a 
very basic thing that should not be a controversial thing, we 
believe. For the past 20-plus years, regulations have been 
promulgated based on two Executive Orders, 12866 and 13563, 
that the President has over and over again, both Democrat and 
Republican Presidents, said we need some basic standards of 
when we produce regulations, we should consider the science; we 
should look at cost-benefit analysis; we should consider the 
best available other methods and alternatives that are out 
there. You should get quality public participation not only 
from city, State, tribal governments, but also from affected 
parties. You should look at scientific objectivity. These are 
commonly agreed on things that function under Executive Orders 
that have never been codified.
    So our belief is, we know where we have been in the past. 
We do not know where we are going on this. We would like to 
have these commonly agreed upon principles be codified into 
statute, and so we know from here on out, when regulations are 
actually created, these basic requirements are put into place.
    So, again, we feel like these are common-ground issues that 
Republicans and Democrats alike can wrap around and start to 
make some significant regulatory reforms. I look forward to the 
conversation today that we have had multiple times being able 
to look through this and also broadening this out and then to 
head toward a markup and try to actually put this into statute 
in the days ahead.
    I yield back.
    Chairman Johnson. Thank you, Senator Lankford. And, again, 
how many times we just hear, ``This is what we can agree on,'' 
so I have to commend both of you as well as every Member of the 
Committee. As we have gone through these Committee markups and 
we have reported out now 49 pieces of legislation, pretty much 
on a unanimous basis, it has not always been easy. We have had 
one scheduled for a markup, and then we would pull it, so the 
parties can work with individual members as well as the 
administration, and we hammer out the differences, and we find 
the area of agreement. And he also mentioned the words 
``continuous improvement.'' As, a manufacturer, that is just 
ingrained in my DNA, continuous improvement. You may not solve 
the whole problem. You do not let the perfect be the enemy of 
the good. But if we can find the continuous improvement, that 
is the right approach.
    So, again, I just want to really commend, both of you as 
well as the entire membership of this Committee. We have been 
trying to find that common ground and find those areas of 
agreement.
    This Committee swears in. It is the tradition of this 
Committee. So if you would both rise and raise your right hand. 
Do you swear that the testimony you will give before this 
Committee will be the truth, the whole truth, and nothing but 
the truth, so help you, God?
    Ms. Dudley. I do.
    Mr. Shapiro. I do.
    Chairman Johnson. Thank you. Please be seated.
    Our first witness will be the Hon. Susan Dudley. Ms. Dudley 
is the Director of the George Washington University Regulatory 
Studies Center and distinguished professor of practice at the 
Trachtenberg School of Public Policy and Public Administration. 
That is a really long title. She was previously Administrator 
of the Office of Information and Regulatory Affairs and 
Director of the Regulatory Studies Program at the Mercatus 
Center at George Mason University. Ms. Dudley.

   TESTIMONY OF THE HONORABLE SUSAN E. DUDLEY,\1\ DIRECTOR, 
   REGULATORY STUDIES CENTER, AND DISTINGUISHED PROFESSOR OF 
             PRACTICE, GEORGE WASHINGTON UNIVERSITY

    Ms. Dudley. Thank you very much, Chairman Johnson, Senator 
Carper, and all of you, for having me today. I appreciate your 
interest in regulatory reform, and I am happy to respond to 
your invitation to talk about these specific six bills. I think 
they are all constructive and would contribute to what you all 
have been talking about: a bipartisan tradition aimed at 
ensuring accountable and well-reasoned regulations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Hon. Dudley appears in the Appendix 
on page 46.
---------------------------------------------------------------------------
    Three of the bills are aimed at retrospective review and 
would provide mechanisms for evaluating the effects of existing 
regulations and modifying them as appropriate. I think this is 
important. Agencies seldom look back to evaluate whether the 
regulations in place are achieving their intended effects.
    So S. 708 and S. 1683 would establish an independent body, 
modeled after the Base Realignment and Closing Commission 
(BRAC), to review existing regulations and present 
recommendations to Congress. Such a commission I think would 
address the natural accumulation of regulations over time and 
offer two main advantages.
    First, the independent third-party review would offer an 
objectivity that past efforts (which depend on regulatory 
agencies themselves to evaluate outmoded regulations) have 
lacked.
    Second, as the BRAC experience showed, an up-or-down vote 
in Congress on the complete set of recommendations could avoid 
having reforms get caught up in parochial interests regarding 
individual rules.
    I also wonder if the commission's analysis might provide 
insights into whether the underlying statutory authority--the 
skeleton that you talked about, Senator Carper--contributed to 
any of the undesirable consequences. Since the executive branch 
can only issue regulations pursuant to authority delegated by 
Congress, the commission's review might lead to improvements in 
underlying legislation.
    The ``cut-go'' element of S. 1683 would impose additional 
discipline on regulatory agencies, as discussed at the 
Committee's recent joint hearing with the Budget Committee on 
regulatory budgeting concepts.
    On the other hand, a one-time commission responsible for 
evaluating 10-to 15-year-old rules might not contribute much to 
better designed regulations going forward, and that is where I 
think S. 1817 would come in and complement this commission 
approach and ensure that not only are existing regulations 
being evaluated, but that new regulations are designed to 
facilitate such evaluation in the future.
    Another advantage of this approach is that it focuses not 
just on reducing burdens, but on improving regulatory outcomes 
through rigorous evaluation and feedback, and I think that was 
a point you made, too, Senator Carper, in your opening remarks, 
that we care about the benefits and the outcomes of the 
regulations.
    Institutionalizing a requirement to evaluate whether the 
predicted effects of the regulation were realized would provide 
both a powerful incentive and the necessary information to 
improve ex ante RIAs. I think on this one, in addition to 
OIRA's role in overseeing compliance with the bill, Congress 
might want to assign a congressional oversight body.
    Now, I recognize that accomplishing the important goals of 
these bills would require resources and suggest that perhaps 
shifting resources from ex ante analysis to ex post review 
would not only help with evaluation, but would improve our ex 
ante understanding of regulations.
    The other three bills under consideration focus on 
enhancing analytical procedures done before new regulations are 
issued. As Senator Lankford said, despite enjoying bipartisan 
support from Presidents of both parties for the last 30 years, 
these procedures have not been codified in statute, and so S. 
1818, the Lankford-Heitkamp bill, would do that. I think that 
has several advantages.
    First, it would lend congressional support to the order's 
nonpartisan principles. Many existing authorizing statutes 
ignore or explicitly prohibit analysis of tradeoffs, leading to 
regulations with questionable benefits that divert scarce 
resources from more pressing issues.
    Second, judicial review could be valuable because agencies 
tend to take more seriously aspects of their mission that are 
subject to litigation. So like executive and congressional 
oversight, judicial review would likely make regulatory 
agencies more accountable for better decisions based on better 
analysis.
    Third, the legislation could apply these requirements to 
independent agencies, and that is where the bill that Senator 
Portman mentioned, S. 1607, comes in. That bill, as Senator 
Portman mentioned, has bipartisan support of former OIRA 
Administrators and legal scholars. It would facilitate the 
Administrative Conference of the United States' recommendation 
that independent agencies adopt more transparent and rigorous 
regulatory analysis practices for major rules.
    And, finally, S. 1820 would require agencies to publish an 
Advanced Notice of Proposed Rulemaking for major rules, which I 
also think is very important. Regulatory impact analyses are 
often done after the fact to justify decisions rather than to 
inform them. And I think an advance notice of proposed 
rulemaking (ANPRs) could be valuable for soliciting from 
knowledgeable parties on a range of possible approaches, on 
data, on models, et cetera, before particular policy options 
have been selected.
    So, in closing, let me reiterate my appreciation for the 
Committee's interest in regulation and its consideration of 
these six bipartisan bills that I think offer constructive 
approaches to regulatory process reform. In addition to my 
written statement that provides more context for my remarks, I 
would respectfully offer for the record two recent writings--a 
little bit of self-promotion here--that may be relevant as you 
consider the bills. One is an article in Case Western Reserve 
Law Review\1\ where I review previous regulatory reform 
initiatives and offer recommendations going forward. And the 
second is a new working paper on ``Regulatory Science and 
Policy''\2\ in which I offer recommendations for improving how 
science is used in developing regulation.
---------------------------------------------------------------------------
    \1\ The article referenced by Ms. Dudley appears in the Appendix on 
page 54.
    \2\ The article referenced by Ms. Dudley appears in the Appendix on 
page 86.
---------------------------------------------------------------------------
    And, with that, thank you very much.
    Chairman Johnson. Thank you, Ms. Dudley. And without 
objection, we will happily enter those in the record.
    Our next witness is Sidney A. Shapiro. Mr. Shapiro holds 
the Fletcher Chair of Administrative Law at Wake Forest 
University and is vice president of the Center for Progressive 
Reform. He has published numerous books and articles on 
regulatory law and policy and has studied and advised several 
Federal agencies. Mr. Shapiro.

 TESTIMONY OF SIDNEY A. SHAPIRO,\3\ FRANK U. FLETCHER CHAIR OF 
 ADMINISTRATIVE LAW, WAKE FOREST UNIVERSITY SCHOOL OF LAW, AND 
         VICE PRESIDENT, CENTER FOR PROGRESSIVE REFORM

    Mr. Shapiro. Chairman Johnson, Ranking Member Carper, and 
Members of the Committee, thank you for inviting me here today 
to share with you my views on the proposed regulatory reform 
legislation under consideration by the Committee.
---------------------------------------------------------------------------
    \3\ The prepared statement of Mr. Shapiro appears in the Appendix 
on page 126.
---------------------------------------------------------------------------
    While it is important that agencies protect the public, 
these protections must be achieved in an accountable and fair 
manner. The role of administrative procedure is to ensure 
sufficient accountability and fairness. But it is possible to 
have too much of a good thing. While it is always available to 
add more procedures, we must consider the impact of doing so on 
an agency's capacity to protect the public.
    In short, administrative procedure seeks to advance the 
principles of accountability, fairness, and productivity. The 
administrative state will work best when administrative 
procedures are designed in a way that properly balances 
accountability, fairness, and productivity.
    In recent years, however, Congress, the President, and the 
judiciary have imposed numerous new analytical and procedural 
requirements on rulemaking. In most cases, these requirements 
are defended as necessary for advancing accountability and 
fairness, but their steady accumulation comes at the cost of 
productivity.
    As currently constituted, the rulemaking process contains 
more mechanisms for promoting the goals of fairness and 
accountability than is likely necessary. As a result, 
significant rules can take anywhere from 5 to 8 years, if not a 
decade, to complete the rulemaking. Add to this delay the 2, 3, 
or 4 years of judicial review which occur for almost every 
significant rule. During this 5-to 12-year delay, the risks 
that these rules are meant to address do not pause or even 
evaporate into the ether. Instead, the risks continue unabated, 
threatening the health and safety and security of families and 
businesses across the country.
    For this reason, the American Bar Association recommends 
the President and Congress, I am quoting here, ``exercise 
restraint in the number of rulemaking impact analyses, assess 
the usefulness of existing and planned analyses; and ensure 
agencies' adherence to recommendations of the ABA and the 
Administrative Conference . . . pertaining to such impact 
analyses requirements.''
    In my written testimony, I measure the legislative 
proposals that are the subject of this hearing against each of 
the three principles that undergird the administrative process: 
accountability, fairness, and productivity. None of the 
proposed reforms would improve the productivity of agencies. 
Instead, to varying degrees, the proposed bills are likely to 
reduce productivity. Likewise, the bills vary concerning the 
extent to which they address actual gaps in accountability and 
fairness that might exist in the current regulatory system. For 
the most part, however, the proposed legislation would reduce 
agency productivity for only modest and in some cases no net 
gain in accountability and fairness.
    I would be pleased to answer questions about the specific 
proposed questions in the question-and-answer period, but allow 
me to conclude by making four general recommendations 
concerning regulatory reform.
    First, Congress should provide agencies with the necessary 
resources to meet their procedural requirements and be 
productive. A key reason why additional procedures reduce 
agency productivity is because agency budgets have stagnated 
for years while the job at hand--more food and imported toys to 
inspect, for example--has grown. Agency budgets addressed to 
rulemaking are such a small part of the Federal budget that 
additional funding would simply have no significant impact on 
the deficit or the annual Federal budget.
    Second, and particularly if budgets are not increased, 
Congress should free agencies from unnecessary and, more 
important, duplicative analytical requirements. The idea that 
the regulatory system is widely out of control, producing 
excessive regulation, is simply a myth. The regulatory system 
must be accountable and fair, but it also must be productive if 
the public is to be protected.
    Third, in my mind, the most effective tool in addressing 
regulation that is problematic for some firms, such as smaller 
firms, is what in an article I called ``back-end adjustments.'' 
Agencies can and do address implementation issues on a case-by-
case basis, using exceptions, time extensions, variances, and 
waivers. Congress should ensure that all agencies have the 
authority and that they are using it to ensure that regulations 
are both effective and not unduly disruptive to regulatory 
entities.
    Finally, I think as has been recognized, the real need for 
regulatory reform substantive. For many years, regulatory 
agencies have been operating under statutes that have not been 
reviewed or refreshed for decades. The intervening years have 
revealed shortcomings in these statutes while new public 
health, safety, and environmental issues that were not 
initially addressed by the original statutes have emerged. In 
some cases, agencies lack the authority they need to tackle 
these issues.
    Again, I appreciate the invitation to appear, and I look 
forward to answering your questions.
    Chairman Johnson. Thank you, Mr. Shapiro.
    The Ranking Member talked about we create these laws that 
are kind of like skeletons, and then we need the regulatory 
agencies to put the meat on the bones. I always use this 
example. I asked staff to do this about a year ago, so they are 
not up-to-date figures, but when previous Congresses passed the 
Patient Protection and Affordable Care Act, it was 380,000 
words. A year ago, that act is now about 12 million words. So 
from 380,000 to 12 million. Dodd-Frank, when passed was about 
350,000 words, and a year ago, it was up to about 15 million 
words. So that is an awful lot of meat being added to the bones 
by the fourth branch of government that is largely 
unaccountable. It is unelected, and from my standpoint that is 
somewhat of a problem.
    Mr. Shapiro, you certainly understand the concept of 
productivity. I think your statement was that all the imposed 
new requirements, the layer upon layer, the steady accumulation 
of those requirements on the regulatory agencies is reducing 
the productivity. Don't you recognize the accumulation of layer 
upon layer upon layer of regulations coming out of those 
agencies is dramatically reducing the productivity of our 
economy?
    Mr. Shapiro. Senator, I do appreciate that. Like everything 
in life, we need to strike an appropriate balance, and, of 
course, people are going to differ exactly where that balance 
should be struck.
    I think sometimes it is very easy to look at regulatory 
costs. They are easily identified, and goodness knows those who 
have to bear those costs are happy to point them out.
    What we also have to consider, however, is that when we do 
not regulate, we leave in place dangers to the public, and 
those are real dangers. People die, people are injured, people 
get sick, people get cancer, on and on. People eat bad food, 
some of whom die. And those families, those individual families 
end up paying those costs. They do not go away. They settle on 
someone. So we have to achieve an appropriate degree of 
regulation, but we cannot simply look at costs.
    Now, I understand that there are difficulties for 
individual businesses. We need to strike an appropriate 
balance. But the productivity does have real terms, real effect 
on our economy and on people.
    Chairman Johnson. Do you know of anybody who argues we 
should not have any regulations?
    Mr. Shapiro. No, sir.
    Chairman Johnson. So we all agree, the Federal Government 
and State governments have a role in providing regulations that 
obviously protect the environment, protect worker safety, 
protection consumer safety. The argument is over, what level 
and at what point do we hit the law of diminishing returns?
    Do you know of anybody that does not want a clean 
environment?
    Mr. Shapiro. Senator, I appreciate everyone's commitment to 
this, and as I say, we are going to disagree about where the 
appropriate balance gets struck. But with all due respect, I 
guess I have to take issue with your claim that agencies are 
largely unaccountable.
    Chairman Johnson. I did not make that claim.
    Mr. Shapiro. Well, people do make it. Let me give you an 
example. Last week or 2 weeks ago, there was an article in the 
Washington Post, and the Department of Agriculture (USDA) wants 
to propose--they have not gotten to the proposal stage yet--a 
rule that would eliminate one of the ways, one of the 
designations for the size of raisins. So raisins are graded, 
like all agricultural products, and the smallest of the raisins 
in the regulations are called ``midget'' raisins. They were 
asked to get rid of that term, and they say, ``We are happy to 
do so. There is no one who disagrees with this. It is just a 
change of language.
    It has been over 2 years, and they have not gotten to the 
proposed rulemaking stage because they are going through all 
the various analytical steps that have been imposed on them, 
and that is something that is uncontroversial.
    So I do not think from the agency's point of view they feel 
like they do not do any analysis or they do not do enough 
analysis. They do a lot of it.
    Chairman Johnson. Well, I would never argue that government 
agencies are efficient in the way they approach things.
    Ms. Dudley, the BRAC Commission concept here is trying to 
bring some measure of subtraction to the Federal Government. 
Certainly what I see is everything is additive. We are 
legislators, so we legislate, and we just keep adding layer 
upon layer upon layer. I mean, at some point in time, you have 
to take a look and say, OK, we need to remove some of these 
layers; we have got clean out the garage.
    Can you just kind of speak to really what the concept of 
that BRAC Commission would be?
    Ms. Dudley. It actually might get to something like the 
raisins, because that is an example of a regulation that is in 
place that we need to change. And so a commission that could 
identify that as part of a pool of regulations that perhaps no 
longer are serving their usefulness, if it ever did, I think 
would be valuable.
    And as I mentioned briefly in the testimony, I think 
another value of it is what we learned from the BRAC, that is, 
being able to vote up or down on the whole package because, 
otherwise, it is so easy to think about what special interest 
it might harm if we do this versus another one; whereas, if you 
look at it as a whole, it might be an efficient way to do it.
    Chairman Johnson. One of the insights I try and provide 
people from the private sector, having come from it myself, is 
that the motivation of government agencies is the exact same 
thing as the private sector. They want to grow, bottom line. 
The difference in the private sector, in order to grow you 
actually had to produce a product or a service that you can 
create at a cost less than you can sell it. That is how you 
grow in the private sector.
    In government, let us face it. Oftentimes not succeeding 
helps you to grow. You never solve that problem. You keep 
asking for additional resources. I mean, is that something you 
have noticed certainly in your capacity when you were in 
government, just the imperative of government agencies just 
wanting to grow, and expand their authority over the private 
sector?
    Ms. Dudley. Well, I think another difference is that in the 
private sector there is that constant feedback. You have your 
customers' feedback. If you do not make a product that people 
want, you cannot sell it, and so there is constant evaluation 
and feedback.
    Yes, so I think that is another advantage of the BRAC 
Commission, is that it would step back and have a third-party 
evaluation. Michael Greenstein I think has said to this very 
Committee that point. He jokes that his wife thinks he is not 
capable of evaluating himself accurately and he needs a third 
party. I think we all do.
    Chairman Johnson. Basically what you are referring to in 
the private sector, you have the discipline in the marketplace. 
If you do not have a successful product that people want to 
buy, you do not produce at a cost less than you can sell, you 
go out of business. You go bankrupt. Where is that discipline 
in the Federal Government against the agencies? Isn't that 
really what we are trying to address here?
    Ms. Dudley. I mean, I think the bills that you have in 
front of you would address some of those things, including 
the--is it 1817 that would not only look back but say, going 
forward, we are going to create the data--or create the 
information that we can evaluate after the fact.
    Chairman Johnson. I also want to address--because I think I 
see this. I have been very impressed with the quality of the 
Federal workforce, their dedication. There is no doubt about 
that. With that being said, I am afraid that too often in 
regulatory agencies, you have individuals working in those 
agencies that have no connection, never came from the industry 
they are trying to regulate. I just want both of you to speak 
to the level of expertise within the agencies, the bureaucrats 
writing the rules within industries that they really do not 
understand.
    Ms. Dudley. I can tell you----
    Chairman Johnson. Which is why you need that----
    Ms. Dudley. Right. Anecdotally, that is what I have heard. 
People have come out and tried to implement the rules. They 
said, ``Oh, my goodness, we had no idea.'' Part of the Labor 
Department, ``We had no idea what this would really be like to 
implement in practice.''
    Chairman Johnson. Mr. Shapiro, would you like to comment on 
that?
    Mr. Shapiro. Sure. As we all know, the rulemaking process 
sets up a dialogue between all interested parties, and most 
trade associations are only too happy to point out, let alone 
work with agency staff, concerning the implementation of rules 
and their objections to it. So agencies hear all of the time 
from these various components, but that does not mean everybody 
gets represented. That is why I endorse the idea of back-end 
review, that once the rule is in place, naturally enough, not 
everybody is similarly situated, and agencies ought to have the 
authority, if they do not already, to use various accommodation 
mechanisms for the particular problem of the regulated entity: 
``We are in Alaska. You did not take into account that the 
weather is cold up here, and we cannot possibly put in that 
piece of equipment. It will not work.'' And then the agency has 
to say, ``Yes, you are right. Let us take that into account.''
    Chairman Johnson. OK. Do you have something?
    Ms. Dudley. Just a small point. That troubles me because it 
seems we are moving away from the rule of law to the rule of 
individual exemptions. And I think it is troubling to me.
    Chairman Johnson. And we are not seeing necessarily that 
back-end review being implemented properly or fairly.
    Ms. Dudley. Well, and if you are, you are seeing it to 
people who are connected and may be able to get the special 
favors. So that troubles me because I think it is connected 
people get the back-end outcome.
    Chairman Johnson. You are not saying that sometimes large 
organizations have an ability to utilize the regulatory 
framework to disadvantage their smaller competitors? I think 
that happens. Senator Carper.
    Senator Carper. Thanks. Thanks again to both of you for 
joining us today. Great to see you. And you bring a lot of 
expertise to an important issue, and we need that expertise.
    One of the things that we try to accomplish at a hearing of 
this nature, as you know, is to deal with a tough issue or 
tough issues, to ask people who are really well schooled and 
bring a lot of understanding to these issues, and people who 
have a different perspective of how to deal with these issues. 
And we respect both of you enormously, and you do not agree on 
a number of things here.
    One of the things we need to do is develop consensus around 
the legislation that has been introduced because we are going 
to have hearings--we may have more hearings, but we will have a 
markup. We will actually vote on this, offer amendments and so 
forth. I want to see how we can develop some consensus here and 
ask both of you to help us with that as it pertains to these 
pieces of legislation.
    We will just start off with where do the two of you agree. 
Where do the two of you agree on what we have been talking 
about, what you have been talking about this morning? Professor 
Shapiro, would you go first? And then I will ask Professor 
Dudley.
    Mr. Shapiro. I was hoping you would ask Susan first. 
[Laughter.]
    I think we agree on several points: first, the need for 
fairness and accountability; and the need for smart regulation. 
And I do not deny any of those things.
    I think as we developed the regulatory system, it occurred 
piecemeal. If someone had a good idea about this and someone 
had a good idea about this, let us add this accountability 
mechanism, let us add that accountability mechanism. And in and 
of themselves, none of these are objectionable. The spirit and 
some of the content of these proposed bills are not 
objectionable, except that we are adding them on top of every 
other analytical and procedural requirement that exists.
    So it would be good if the Committee wants to go forward, 
for example, and codify the Executive Orders to also get rid of 
all the other kinds of duplicative analytical requirements that 
exist out there. We only need to do a cost-benefit analysis 
once, but it is required under three or four different 
statutes. So we have all of these various steps, and I assume 
Susan would join me by saying we only need to do this once; we 
need to streamline the process. But, of course, she will speak 
for herself.
    Senator Carper. All right. Professor Dudley, where do the 
two of you agree?
    Ms. Dudley. Let me first agree with that point.
    Senator Carper. OK.
    Ms. Dudley. But with respect to the duplicative 
requirements, if they really are duplicative, agencies do not 
do them twice. They do it once. And so maybe one of the things 
to do, as you think about it, is how can you make sure that the 
language does not require a different format for delivering the 
same analysis, so, for example, the benefit-cost analysis that 
would be required in the Independent Regulatory Agency Act or 
the--I forget the numbers, but the smarter regulations. 
Agencies now do that analysis under Executive Orders, so they 
do the benefit-cost analysis according to 12866. And then they 
also have to do it for the Regulatory Flexibility Act, Unfunded 
Mandates Act. The fact is they tend to do the same analysis. 
Once you have done that analysis, it supports all these 
different things.
    So I think it is a valid point, and thinking about specific 
language can help with it, but I do not think it is a real 
concern that they really are finishing one benefit-cost 
analysis and then starting a whole new one from scratch, that 
is not my experience.
    The other area where I think we agree is that you talked 
about a lot of our legislation is really old and that we are 
trying to shoehorn regulations that fit new problems into old 
regulation, I agree--or old legislation. I think that Congress 
is the accountable body for passing legislation--for writing 
the laws of the land, and we should not be trying to do things 
like, for example, the Clean Power Plan based on 1970 sections 
of the Clean Air Act.
    Senator Carper. Thank you. Thank you very much. Maybe that 
will get us started in thinking about some other areas where we 
can agree.
    Let us turn to retrospective reviews, if we could. I think 
this administration has done a particularly good job of trying 
to make sure that we look at all those old regs that are out 
there and take a look at them and saying which ones make sense, 
which ones should be freshened up, gotten rid of, and I know 
under Cass Sunstein's leadership I think some good work has 
been done, and my guess is under yours some good work was done, 
too, Ms. Dudley.
    Senator Heitkamp has introduced legislation before this 
Committee, supported by a number of Members of the Committee, 
that I think provides a very promising approach to this. And I 
do have some concerns, though, with the idea of creating a 
regulatory commission and taking these decisions out of the 
hands of agencies which actually have a lot of expertise, 
whether it is toxic substances or air emissions, water 
emissions, and that sort of thing, and a whole lot of other 
things, too.
    I just want to ask you, do you think a panel of nine people 
can really have the expertise to review and make binding 
recommendations on regulations across the government? Susan, 
why don't you go first.
    Ms. Dudley. I think the way I have read the bills, they 
would not be doing it in a vacuum. So they would be working 
with the agencies, seeking public comment. There seem to be 
several opportunities for public comment. So I think it could 
be constructive.
    But I will use the opportunity to say I also think that 
Senator Heitkamp's bill is really valuable because it does--
right now we would be making those decisions without good data. 
We do not know. Agencies, when we go to look back at 
regulations, we really do not have the information to evaluate 
whether the predicted outcomes occurred, and that is what we 
need to do. We need to start planning for retrospective review 
with every new rule.
    Senator Carper. OK. And, very briefly, Mr. Shapiro, would 
you respond?
    Mr. Shapiro. Senator, I share your concern. The Base 
Closing Commission, of course, is the model, and it has solved 
a real problem. But it is focused on one subject, and it can 
focus on that subject, which is base closing and the military's 
need to be prepared and have the resources that are necessary 
to protect us.
    As you suggest, the commission sort of has this roving 
mandate to go all over the government, and I appreciate 
Professor Dudley's point that it is going to receive input. The 
bill is very explicit about that. But at the end of the day, 
you have to make some judgments, and the value of doing this 
within the context of an agency is those judgments are made 
with expertise and experience of the staff and often of the 
administrator. And I do not think that the consulting process 
really can quite replicate that.
    Senator Carper. All right. Thank you. When we come back--I 
will telegraph my pitch here for both of you. But when we come 
back, I am going to ask both of you to look at the issue of the 
regulatory analyses that are done at independent agencies, and 
I am going to be asking you is there a way to address those 
problems without requiring independent agencies to submit their 
analysis to OIRA. So just be thinking about that. I am going to 
come back.
    Thank you.
    Chairman Johnson. Senator Lankford.
    Senator Lankford. Thank you all for being here. I want to 
be able to follow-up on the same conversation we had about the 
BRAC-like commission. The concern that I have that I want to be 
able to talk a little bit about today is the time period. You 
have nine individuals taking on a lot of regs from across 
multiple agencies. Their time to be able to get up to speed on 
it, and then be able to make a good decision, make the 
proposal, and get it out, is the length of time that is 
allotted--do you think that is enough time for them to be able 
to study it, get public input, make a good recommendation, and 
then send it over to Congress? What kind of time period will 
that commission need to be able to get good input, do their own 
research, have conversation with agencies, and get it done?
    Ms. Dudley. I am not sure what is in the bill, but I think 
it should probably be 2 years or so.
    Senator Lankford. I think it is 2 years. I am just trying 
to figure out if it was a 2-year time period for them to be 
able to actually work through the process.
    Ms. Dudley. Yes, so you need at least that much time if you 
are--I believe so strongly in public comment because I think 
that there is information that none of us have individually 
that you could get from that open comment. So I think there 
needs to be adequate time for that.
    Senator Lankford. OK. Mr. Shapiro.
    Mr. Shapiro. Thank you, Senator. I think that is a 
realistic concern, and I am not even sure 2 years does it. The 
fact of the matter is many of these regulatory statutes are 
just really complex.
    Senator Lankford. Sure.
    Mr. Shapiro. There are defensible reasons for that and 
sometimes not defensible reasons. And so to understand whether 
or not a particular regulation is doing its job and is 
appropriate, you have to also understand the statutory scheme. 
And it is all I can do to teach one subject in law school. I 
certainly cannot teach four or five with any kind of mastery of 
environmental law and food protection law and consumer 
protection law and, of course, add that up across our 
government.
    Senator Lankford. Let me follow-up a little bit on this 
conversation about judicial review as well. Ms. Dudley, you 
made a comment that you feel like judicial review makes for 
better regulations because there is accountability built in. I 
would tell you, when I talk to those that are regulated, they 
struggle with a place to go when they have a complaint, when 
they feel like something is truly not working. And, Mr. 
Shapiro, you talk about this back-door opportunity to be able 
to go to an agency. They feel like when they take that back 
door, someone says, ``No. We wrote what we wrote,'' and they 
have nowhere else to go.
    If there is not a regulation that is actually engaging with 
them to say this really is a problem, where do they go? So the 
mechanics of that, do you have concerns or comments about this 
judicial review and then opening that up? For you, Ms. Dudley.
    Ms. Dudley. I think judicial review, there will be some 
cases that we all might look at and say, ``What were they 
thinking? '' Because judges do not necessarily have the skills 
to evaluate a regulatory analysis. But I do think the analyses 
will be better done if agencies know they are going to be 
subject to review. That is just the way we all work. If they 
know that there is going to be oversight, it will be done--it 
will be a better analysis.
    Senator Lankford. OK. Do you think it gets out of control 
in a hurry, that it ends up being so many cases that are filed 
that this quickly gets out of hand?
    Ms. Dudley. I do not know. We do not see that with the 
executive branch agencies. Are you asking more--I guess, yes, 
we see a lot of litigation, and what I think it would do is it 
would allow people to be litigating on the matters that really 
are what the tradeoffs that they are really thinking about 
rather than having to litigate on a few words that maybe really 
were not what everybody is talking about. I am not sure I made 
that very clear.
    Senator Lankford. That is OK. Well, the challenge is we 
want to--I think judicial review is important. I think it is 
the accountability that you had mentioned before, that does 
create that accountability out there, and it gives someone to 
be able to protest to that literally does not work in the 
cubicle next to the person who made the previous decision. So 
it gives you some opportunity to get an outside opinion on it, 
but I think it should be used sparingly. And so trying to be 
able to build into the language something that actually works 
so that you have that opportunity but it is not abused.
    Ms. Dudley. Well, I am sitting next to an administrative 
law professor who can correct me if I am wrong, but there 
already is the Chevron Deference doctrine that would lead the 
judges to defer to the agencies unless there is something that 
is egregious.
    Senator Lankford. Which I would love to be able to discuss 
at length, because Chevron Deference I think is one of those 
areas that has grown up and is now out of control in many ways. 
There is the challenge to find, as we have mentioned already 
previously, statutes that are 40 years old that we are now 
interpreting in a way that was never considered by the original 
statute. There is no new statutes to be able to bring it, and 
they have deference to be able to expand it. Now you really do 
have a regulator that looks like they are writing law, but they 
are just expressing deference for an unconsidered item that is 
45 years ago. So the challenge is how do we actually wrap back 
around that and say we do not need to have Chevron Deference 
that expands this far for something this old.
    Mr. Shapiro, you look like you have a smile on your face. 
You might have an interest in that.
    Mr. Shapiro. This is why my students do not like 
administrative law, Senator. We have this quandary, right? in 
Chevron, it is not unlimited deference, and various judges 
disagree----
    Senator Lankford. It is pretty broad, though.
    Mr. Shapiro [continuing]. About various approaches. And at 
some point the courts will say that is just outside the bounds 
of what Congress intended.
    But from the agency's point of view, there is a pressing 
national problem--climate change. It is their responsibility to 
try to deal with it, and so they propose, to the extent they 
can, to address that through existing statutory procedure.
    I actually think that the problem for agencies, though, is 
not so much Chevron, but a very detailed and careful review of 
the factual and legal basis, particularly the factual basis, 
for a rule called ``hard look review.'' So we have courts of 
appeals out there that have very demanding, analytical 
requirements in order to sign onto a rule and affirm it. The 
difficulty is that agencies have trouble with coming up with 
precise evidence on every point. The world is uncertain. 
Scientific evidence is uncertain. Cost-benefit analysis in 
particular is uncertain.
    And so when we say, for example, that an agency did not 
quantify a particular benefit, that may be just sloppiness. But 
it is also very difficult to know how to quantify some of these 
benefits. So we have to find a way of both using cost-benefit 
analysis, which can give us useful insights, but not ignoring 
obvious benefits that we just cannot quite find a way to 
quantify very accurately or at all.
    Senator Lankford. Correct. It does seem that we can 
quantify the costs, but the benefits seem to get out of balance 
at times. And that is one of the other big challenges, is 
trying to get the cost-benefit to align on there. If we have 5 
years of costs and 20 years or 25 years of benefits, suddenly 
we are out of balance here, and we are skewing things one way 
or the other. Or when you take long look on it, knowing that 
most of the costs will be early and most of the benefits may be 
far delayed, again, we are skewing the process on it.
    So I would like to continue this--obviously, I am out of 
time, but I would like to continue this conversation in the 
days ahead on Chevron Deference. I do think this is a big 
issue. We have so few laws that are being passed right now and 
such large effects on things, where an agency feels like they 
have the responsibility, as you mentioned to address it, but 
they do not necessarily have the legal authority to address it. 
Our system demands a new law is passed rather than the agency 
saying, ``It is our job. We will just create this.''
    So, with that, I yield back.
    Chairman Johnson. Senator Enzi.

               OPENING STATEMENT OF SENATOR ENZI

    Senator Enzi. Thank you, Mr. Chairman. I want to thank the 
ones who have testified. You have covered quite a few areas and 
given quite a few suggestions, and I appreciate that.
    As an old shoe salesman, I was particularly impressed with 
Ms. Dudley's comment about how we are trying to shoehorn new 
things into old ones, and I see a lot of that happening with 
our regulations. We are going to back--we found a solution, and 
now we are looking for a problem to solve. And we go back 
through the laws and find something that we can wedge it into.
    I used to be a mayor during a boom time in Gillette when 
the energy was beginning to be developed out there, and we have 
virtually all kinds of energy out there. But I reviewed all the 
Environmental Impact Statements for every new business that 
came, and there was supposed to be a comment period for them, 
and people commented. And the agencies were supposed to comment 
on the comments. What I found was that it was acceptable for 
them to say, ``No comment necessary,'' and dismiss thousands of 
comments.
    We have some problems in what we are doing. This shoehorn 
situation, one of the things I have been looking at is the rule 
on mercury and toxins, and sometimes I wonder whether they are 
designed to solve a problem or if they are intended to put a 
business out of business.
    The mercury and toxins rule was supposed to have a benefit 
of about $500 million to $1 billion. I never was able to 
determine over what period of time that was. But the cost is 
$40 to $70 billion a year.
    Now, there needs to be a solution for that, but did they 
pick a good solution? Half a billion dollars of benefit, $40 
billion of cost, if you take the lowest estimates of both. 
Shouldn't we be looking for solutions instead of just 
regulations? I think that that is included in some of your two 
articles that you put out. I appreciate you having done that.
    One of the things that this Committee and the Budget 
Committee combined for a hearing--I think that was the first 
time in 40 years that the two Committees combined for a 
hearing. It was on regulations, and one of the people who 
testified was the equivalent of the Secretary of the Treasury 
of Canada, who was in charge of their regulations. And he 
mentioned that they have an international standard that they 
use for measuring cost and benefit that aligns both the costs 
and the benefits in terms of years. Are either of you familiar 
with that? Could you comment on that a little bit?
    Ms. Dudley. Yes. As I understand it, it is a standard that 
looks at the--it would not be able to capture all of types of 
costs or benefits, but it looks at the number of hours required 
to do something times--so it is kind of a basic dollar-per-hour 
amount of time. So it gets at that aspect of regulations, but 
maybe not opportunity costs or other types of costs.
    Senator Enzi. Thank you. What we are talking about, of 
course, is how do you measure these regulatory costs and how do 
you measure the benefits and how do you match them up. Do the 
cost-benefit analysis used by the agencies now, do you feel 
have standards that ensure that we are measuring anything 
consistently or accurately? I would ask each of you that.
    Mr. Shapiro. Yes, Senator, thank you. OMB has fairly 
detailed guidance, which are sort of the best economic 
principles, for doing cost-benefit analysis. And agencies do 
attempt to meet that, given resource constraints. So I think 
there is a pretty good sort of notion or norm as to how to do 
these things.
    But having said that, and going back to your previous 
question, these are not easy to do. As Senator Lankford pointed 
out earlier, for particularly toxic regulation, the costs are 
up front. Agencies have to add new protections; they have to 
add engineering equipment. And the benefits we achieve are in 
the future. It is someone not getting cancer 25 or 30 years 
down the road.
    So the question is: How do you put those on the same 
baseline? And so we use discounting because a dollar in the 
future is worth less than a dollar now. But the trick is: What 
is the discount rate? And so you can get a rule really out of 
balance by using a very high discount rate, but then those 
benefits in 25 or 30 years shrink. Of course, the costs are 
today and tomorrow, and they are very high.
    If you use a lower discount rate--and you can do that; 
there are good economic arguments for doing that--then these 
things tend to come more in balance. There is really no 
agreement, as I understand it, which set of discount rates are 
appropriate. It just depends on how you want to characterize 
regulation. If you characterize it using investment theory, you 
tend to use a higher rate. If you use the discount rate of 
government bonds, which now are very low, you use a very low 
discount rate.
    So it is a kind of policy issue rather than an economic 
issue. How are we going to treat benefits in the future? And I 
agree with Senator Lankford, that is a very tricky question.
    Senator Enzi. Well, and how do you make sure that the 
benefits that we are talking about are really related to the 
same project?
    Mr. Shapiro. Well----
    Senator Enzi. Right no.
    Mr. Shapiro. I am sorry, Senator.
    Senator Enzi. Right now we are having a thing called 
regional haze that we are trying to correct in the West. 
Meanwhile, Washington, Oregon, and Idaho are burning up. The 
smoke is so thick you cannot see anything, and there is 
actually ash involved in that, which most of the commercial 
establishments have not been allowed to put ash in the air for 
about 50 years. But we are regulating the companies, but we are 
not regulating the problem with the wildfires. So the companies 
are the ones having to take the blame for the regional haze, 
when it is not even their problem, their cause.
    I do appreciate that we have a Small Business Advisory 
Committee that is supposed to be looking at any regulation that 
will cost small business over $100 million a year in costs, and 
I would hope that that could be expanded to other businesses as 
well.
    I yield back.
    Chairman Johnson. Thank you, Senator Enzi. Senator 
Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman.
    There is so much here--I mean, we have been pretty wide-
ranging, and so I kind of do not know where to start. But I 
will start by raising another issue that has not been raised 
here on duplication.
    We talk about the frustration of small business or the 
frustration of American business, and we think about the 
Federal Government, writ large, and who is doing what and 
duplication between agencies. But a lot of frustration that I 
hear is inconsistency and duplication between State and local 
regulation and Federal regulation, and we have not--I just want 
to lay down that marker because we have not even begun to talk 
about addressing those concerns.
    You take a look at the Uniform Law Commission. That was 
created to try and ease commerce across jurisdictions. We have 
all these various regulatory responsibilities that States have 
taken on or local municipalities have taken on because they 
reflect their political ethic, and they are not necessarily 
lending a path forward for interstate commerce. But that is 
probably an editorial comment I did not need to make.
    Mr. Shapiro, in your testimony, you recommended that the 
bill that we have introduced for retrospective--I like to call 
it my ``prospective retrospective bill'' because it would 
require any new regulation to actually think about how we are 
going to review that regulation into the future. And we really 
thought very hard about flexibility, and we said what better 
way than make it part of the review process, part of the 
drafting process, to say this is what we think would be 
appropriate, we are going to get notice and comment from the 
industry, from other stakeholders on what would be an 
appropriate lookback.
    And so I was surprised when I read that you thought it was 
inflexible, because we pretty much thought that what we 
created, although we did not want to leave this open-ended 
completely so we put some timeframe on it--10 years is kind of 
a long time, right? And so I am surprised, quite honestly, and 
would like further comment that you think that this is not 
flexible enough and what you would do to make it more flexible 
in your vision of how we could make that piece of legislation 
work better.
    Mr. Shapiro. Thank you, Senator. And I think it is obvious 
that you were concerned about that and tried to address it. 
Perhaps the point that is missing in the bill is that when you 
do these regulatory lookbacks, you have to do them under your 
statutory mission. And these regulatory requirements in various 
statutes across the government vary widely. And so I think 
perhaps what we need to be careful of is that we are not asking 
an agency to do a type of review--I agree with you, 10 years is 
plenty--a type of review that does not fit within their 
statutory mandate, because they cannot change their statutory 
mandate. They have to comply with it, and the original 
regulation, hopefully, was serving that mandate.
    Senator Heitkamp. Yes.
    Mr. Shapiro. So, for example, it may or may not be possible 
to develop metrics. It may be that you would have to use 
quantified or qualitative assessments as to whether it is 
working.
    Senator Heitkamp. But, again, going back to the option that 
the agency has, what the bill does is force the agency to think 
about how will we evaluate this regulation into the future, not 
what do we need to do to get it done today, but then what does 
this mean for the future. And one of the regulations that we 
like talking about--and it was mandated by Congress, and I am 
going to close out talking about how we have not done our job. 
But it was mandated by Congress, which was on conflict 
minerals. We hear about this all the time, about the 
recordkeeping and the reporting and how do we know where this 
came from, and, we are subject to huge fines. Even if we do not 
file a report saying we do not have them, there are huge fines 
associated with them.
    And, when you look at cost-benefits of that kind of 
regulation and you say have we stopped the development or the 
production of conflict minerals, have we actually achieved a 
purpose here, or are we just, kowtowing to an ethic that 
understandably--and I am not saying that that is not a noble 
goal, to prevent people from enslaving people to produce 
minerals. But is this regulation really working to prevent 
that? And that is really what we are trying, I think very hard, 
to get at.
    If you kind of think about into the future--and I want to 
talk about Senator King's bill and the kind of commission, 
because I think this is an idea that is going to bear fruit 
here. I think we are going to move a bill like this, and I 
think there is going to be a lot of bipartisan support. So we 
truly want to get at a bill that is the best it can be in terms 
of actually achieving a product.
    Now, we have been talking about this commission and saying 
it is nine people, but we consistently turn to OIRA and say, 
``You are now the expert,'' right? ``You are now the expert on 
rail safety. You are now the expert on this issue.'' And so I 
do not know that we are going to solve some of your concerns 
today, but we really would like you to kind of at least think 
about this in the context of this is going to happen, how can 
we make it better?
    A final point that I want to make in the little time that I 
have left is Congress. We do not do our job. It is a lot easier 
to pound the table and damn the agency. It is a lot easier to 
say all the courts got that wrong. And we look at a regulation 
that is particularly troubling in my State, which is Waters of 
the United States. That has been back and forth, ping-ponged up 
to the Supreme Court. The Court has done nothing to provide 
clarity, right? And so we keep rewriting this. And I would tell 
you, if you flew over North Dakota and looked down, every bit 
of that water I think the Environmental Protection Agency (EPA) 
is asserting jurisdiction over.
    Now, beyond the kind of craziness of that result, I would 
say, How are they going to manage that once they regulate it? 
And that is another challenge. And I guess I want to kind of 
close by saying what we need to do here in Congress is start 
legislating. When we do not agree with what the agency does or 
even when the agency is struggling with a 40-year-old law, we 
need to take responsibility. And we do not do that very well 
here. It is a lot easier to criticize than it is to actually 
make the decision.
    And so I want to give a shout-out to all the Federal 
workers who are working hard on these regulations. They could 
use a better partner in the U.S. Congress.
    Chairman Johnson. Thanks, Senator Heitkamp. Senator 
Portman.
    Senator Portman. Thank you, Mr. Chairman. And I agree with 
what Senator Heitkamp just said about how Congress has a role 
here and that, when we get behind on the legislative front is 
sometimes when you have agencies step in and sometimes 
overreach, and we certainly have seen that recently with regard 
to the legislation that she is talking about in terms of Waters 
of the U.S.
    On the independent agencies, again, I want to thank Senator 
Heitkamp and Senator McCaskill and others for working with us 
on this. Senator Warner and I have been trying to be 
accommodating. I think we are close to a final result. But one 
of the things we have done is put a timeline on OIRA's review 
of the independent agencies, and let me just be clear on this 
one for folks who are wondering why this is necessary.
    For 30 years, Presidents of both parties have said there 
should be an economic cost-benefit analysis, and this has been 
consistent. It is not terribly controversial. What President 
Obama did, which was the next step, was to say, well, look, 
these independent agencies--and there are more than a dozen of 
them--they have more and more power, they are issuing more and 
more regulations; I am going to issue an Executive Order saying 
they should also be subject to these rules that the executive 
branch agencies are subject to.
    And what our legislation attempts to do is to codify that 
in a sensible way, and because Senator Carper just returned, I 
know he is going to be interested in talking later about, who 
should do this. I would just say that I agree with Mr. Shapiro 
on one thing in his testimony, when you said, and I quote, 
``The White House would not have the same gatekeeping power 
that it enjoys under those Executive Orders to stop, stall, or 
change executive branch agencies' rules for political 
reasons.''
    That is true, because what you are saying to OIRA in this 
case is give us an advisory opinion, so you submit the analysis 
to OIRA and they do an advisory opinion, in essence. So it is 
not the same as executive branch agencies. Some of us would 
like to go further, but to accommodate those who are concerned 
about these issues of timeliness and preserving the 
independence of those agencies otherwise, we came up with this, 
what we think is a very reasonable compromise.
    So that is where we are. Again, OMB has said that 18 major 
rules most recently that they analyzed in an entire year, not 
one was based on a complete quantified cost-benefit analysis. 
The Administrative Conference of the United States has issued 
similar things. The President's Jobs Council, same thing. OIRA 
itself has said,``. . . it would be highly desirable to obtain 
better information on the benefits and costs of the rules 
issued by independent agencies. The absence of it is a 
continued obstacle to transparency, and it might also have 
adverse effects on public policy.'' So that is what we are 
trying to do.
    On the duplication side of it, there has been discussion of 
that today, and I just again want to clarify this. It is not 
requiring a duplication of the cost-benefit analysis, and, 
Professor Shapiro, in your testimony you said this type of 
duplication, and I quote, results ``in the need to conduct 
years of analysis before significant rules may be adopted.'' I 
do not think that is what is going to happen at all. If the 
agencies already have the requirement to go through a cost-
benefit analysis, it is not duplicated. They submit that to 
OIRA. That is it. And so if they are required to engage in it, 
I do not see how it makes it duplicative.
    I know, Professor Dudley, you have worked on some of this. 
Do you have any comments on the duplication concern?
    Ms. Dudley. That is the same thing that I would say, and my 
observation is that if agencies have to do an analysis, they 
are not going to just go and redo a separate analysis or have a 
separate unit of their agency working on the two analyses. The 
same analysis will be able to comply with different 
requirements.
    So my only recommendation would be to do things that would 
make sure that you're not asking--doing things that just 
require more kind of busy work in order to comply with 
different statutes. And I did not see that in your bill because 
I think your bill 
is--the general requirements of Executive Order 12866 really 
are very general. They essentially say make sure you do more 
good than harm; and to the extent you can quantify that, do.
    So one little comment--and we have been talking about 
regulatory impact analysis as if it is benefit-cost analysis, 
which requires quantification. That is not what any of the 
Executive Orders require, and in my understanding, it is not 
what your bills require. Regulatory impact analysis tries to 
look at the whole and understand that essential point: Are we 
going to making Americans better off or worse off if we do 
this?
    Senator Portman. All right. I would love both of your 
comments, if I could, on the financial regulators. One of the 
pushbacks we have gotten specifically is from financial 
regulator who say somehow we are so different we should not be 
subject to cost-benefit analysis. And to me, a lot of these new 
regs are coming from the so-called financial regulators. They 
allege this bill would result in delay, the rulemaking, 
duplicative analysis. Alternatively, they have said that these 
financial regulations are in a class by themselves, and because 
they have to issue things quickly in response to market 
changes, and, they talk about financial stability, that that is 
their job and, therefore, they should not be subject to this.
    I would just ask you all, do you think they are unique from 
other types of independent agencies in terms of how this bill 
would affect their rulemaking? Should financial regulators be 
exempt from, as Professor Shapiro said earlier, fairness, 
accountability, transparency, and cost-benefit analysis?
    Ms. Dudley. I know financial regulators have not been doing 
benefit-cost analysis. They have not been doing the same rigor 
of regulatory impact analysis. But it is impossible to think 
that it is harder than trying to measure environmental effects 
or homeland security effects.
    So it is analytically doable because things are already 
measured in dollars. So it seems to me that it is going to be 
simpler, if anything.
    Senator Portman. Professor.
    Mr. Shapiro. Thank you, Senator. I do applaud your efforts 
to thread the needle here and get OIRA's advice without giving 
them undue influence over the agency as long as Congress wants 
to keep the agency as independent.
    I think where perhaps the commissioners of the various 
agencies are nervous about this deals with the experience of 
the SEC so far. The court of appeals has read their statute as 
requiring that certain kinds of the new financial regulations 
meet a cost-benefit test in order to be enacted. Now, the 
statute does not say that.
    What Congress often does--and I think this is wise--is it 
gives an agency a series of things they need to take into 
account and balance without trying to put all of those on an 
economic scale or trying to do that in terms of costs and 
benefits. And so an agency has to speak to each of those.
    Now, as to all of those, cost-benefit analysis may be 
helpful, but the limitation of the methodology is such it 
really cannot tell us what to do. Yet the court of appeals has 
very exacting standards for this, and the SEC has sent three 
different rules up to the court of appeals, and they have 
knocked down each one, at least in my mind, by fairly picky 
objections to the failures of the SEC to do the cost-benefit 
analysis. And so far none of those rules have come back. The 
agency has not attempted to reissue those rules.
    So I think what makes the agencies nervous is finding the 
happy approach to judicial review, which makes sure the agency 
does its job, but does not allow it to pick apart the cost-
benefit analysis because they are just so difficult to do. And 
at least in some of the cases, for some of the agencies, they 
may be even more difficult than environmental regulation.
    So, for example, one of the rules dealt with shareholder 
democracy. It dealt with the rules by which a dissident 
shareholder could put in an initiative on the annual ballot of 
the corporation. And the SEC now under this new requirement 
that the D.C. Circuit has imposed had to figure out the costs 
and benefits of that. Well, frankly, the cost has always seemed 
to me fairly minimal. They just need to put it on there. Of 
course, they do not want to because the board of directors 
wants to control the ballot.
    But when it came to benefits, the problem is: What is the 
benefit of that? I mean, how do you model that benefit? And 
they tried. And Susan is an economist. She probably has some 
better ideas about this than I do. And perhaps they fell short, 
but I think that is indicative of the difficulty sometimes of 
measuring these costs and benefits. I am not saying we should 
not try, but I think that is the difficulty, particularly under 
strict review.
    Sorry to go on for so long.
    Senator Portman. My time is way expired now, but just 
briefly, having that standard approach that is transparent I 
think actually helps with regard to judicial review rather than 
having it be left up to courts.
    Chairman Johnson. Senator Ayotte.
    Senator Ayotte. I want to thank the Chairman, and I want to 
thank both of you for being here.
    Professor Dudley, first of all, what I hear a lot are two 
things. When I am around New Hampshire and I am meeting sort of 
businesses of all stripes--small, large--one thing that I hear 
consistently is whoever is putting together these regulations, 
they really do not know what it is going to manually take me in 
my business to actually do what you are asking us to do versus 
what we are getting for a benefit from it. And I do not know 
how we bridge that disconnect, but it is very common feedback 
that I get. Regardless of what the business is doing, 
regardless of what their political background is, it is a very 
consistent piece of feedback.
    But the other piece of feedback that I get is conflicts. So 
I recently visited a manufacturer that received conflicting 
requirements from the Occupational Safety and Health 
Administration (OSHA) and from the EPA on storage of an 
adhesive that it used for textiles. In fact, even one agency 
told the business to do something in a certain way. They did 
it. And then the next agency came in and was going to fine them 
for how they did it, for what the other Federal agency told 
them to do. And so you can imagine they are trying to comply. 
They just were very frustrated to have this conflict. And I was 
just surprised at how much they had to actually litigate their 
case even though they had been told by the other Federal 
agency, ``This is the way you should do it.'' They had invested 
resources in doing it and now were going to be fined by another 
agency.
    So how do we provide relief to people so that at least it 
is clear who is in charge and what they have to do? And who can 
be the referee? Do you think of having OMB or OIRA serve as an 
umpire when two agencies issue conflicting requirements? And I 
think that is the minimum that we owe people in terms of 
clarity and not having to--especially when you think people are 
trying to comply and then being told by another agency, ``We 
want you to do it different.''
    Ms. Dudley. And that is really tough because OIRA does try 
to do that. I mean, that is part of OIRA's job before the rule 
is issued. But OIRA is not involved at all in enforcement. So 
when agencies enforce it, you see those conflicts.
    It may be that this is something that the retrospective 
review could catch and improve. Particularly, this may be where 
the commission would be particularly valuable to get that kind 
of input.
    I think it is a very important problem. I remember hearing 
a story from a baker once that they wanted to put a fence 
around their parking lot for their bakery, and they could not 
do it. Between Homeland Security and OSHA and the other 
regulations they had to comply with, there was nothing within 
that that they could actually build this fence.
    Can I also respond to your first comment?
    Senator Ayotte. Yes.
    Ms. Dudley. Because I think that is really important, too. 
We do not really think through what the unintended consequences 
of the regulation might be. We do not understand how it will 
actually--how much time it would take to implement. And that 
one, I think some of the bills you are looking at, the Advanced 
Notice of Proposed Rulemaking, maybe get some feedback before 
we have gone too far down the path of this is the approach that 
we want to take, and also the retrospective review, doing a 
better job of looking back I think maybe could address that.
    Senator Ayotte. Professor?
    Mr. Shapiro. Senator, may I respond in two points?
    First, I think that is one of the more useful roles that 
OIRA plays in the rulemaking process, is putting the rules out 
to various parts of the government to have them comment, so 
hopefully they could take in the point of view of other parts 
of the government, although I agree with her as well that 
sometimes these things come up in the enforcement provision.
    Earlier in my general comments, I spoke about we already 
have a lot of accountability procedures and process out there, 
and the Office of Advocacy of the Small Business Administration 
is particularly charged with the role of representing the 
particular and unique interests and needs of small business in 
the rulemaking process, which hopefully would lead them to 
point out to these agencies at the front end some of these 
difficulties.
    I am not at all sure they do that role as well as they can, 
and there have certainly been some reports, including by my own 
organization, suggesting they have a ways to go in doing that. 
And so one thing that you and perhaps others may want to 
consider is whether that existing mechanism could be made 
better by looking at what they do as opposed to adding another 
one. But I agree with you particularly the coordination problem 
is very difficult.
    Senator Ayotte. Very challenging. And, in fact, I think 
just to put in perspective the Small Business Administration's 
role, I serve on the Small Business Committee as well, and to 
cite the rule that Senator Heitkamp raised on the Waters of the 
U.S., the Small Business Administration is supposed to do an 
analysis of what the impact of regulations are on the small 
businesses, and that rule was issued before their analysis was 
actually taken into account.
    So I agree. I think that if you want to know, especially on 
small businesses who--they do not have an army of lawyers and 
accountants waiting to figure this out. Often, it is just one 
person or a few people who are working on the business. So I 
think we need to certainly make it more rigorous, and we need 
to make it clear for people, and the idea of looking back to 
this retrospective view, because even if OIRA puts it out in 
advance, we are not going to know sometimes all of the things 
that flow from it unless we are actually re-evaluating what 
happens based on the application of a regulation. So I do hope 
that is something that we can work together to address.
    The other issue is we talked a lot about cost-benefit 
analysis, and let me just give you an example in New Hampshire, 
and that is, our fishermen. So we happen to have--National 
Oceanic and Atmospheric Administration (NOAA) has the catch 
limits, puts catch limits in place to sustain the fishery, but 
part of their charge is to sustain the fishery but also to 
balance to make sure that they look at the sustainability of 
the fishing communities and the economic impact. And so just 
recently in the last 5 years, our commercial fishermen have 
seen cod catch limits reduced by 95 percent. Can you imagine a 
business where 95 percent of what you can do goes down? I am 
not sure how anyone is able to survive that. But now on top of 
that, NOAA is also requiring that they pay more fees for them 
to actually monitor themselves.
    So we are in this situation where I cannot see how they are 
taking the balance of the fishery in. And as I look at this 
idea of cost-benefit analysis, so often it seems that it is 
skewed one way or the other. And how do we ensure, like in the 
example of my fishermen and--women, who--we are in New England, 
iconic New England. We like to keep some fishermen working off 
our waters. They are going to be out of business. So I am 
trying to figure out--when the statute says ``balance,'' often 
the balance of how it is evaluated does not happen. How do we 
improve that? Either of you.
    Mr. Shapiro. Well, as a tourist, I hope we can keep this in 
place as well.
    Senator Ayotte. I am talking about the small boats.
    Mr. Shapiro. And as the child of parents who ran a small 
business, I certainly appreciate--or try to--where you are 
coming from. And I do not know the particulars of that, but I 
know in general that on the benefit side, the agency and their 
scientists try to model the future of the fish population and 
the extent to which it is depleted, the extent to which they 
can help it grow faster, and the extent to which they 
apparently have to put in fairly drastic limits to preserve the 
sustainability of the particular species. And I do not have any 
doubt about both the difficulty of doing that, the complexity, 
and the controversy that probably surrounds how accurate their 
estimates are. But I think that goes to the difficulty of 
attaching a monetary value when we use cost-benefit analysis 
because it depends totally on those scientific projections.
    Ms. Dudley. I would love to get back to you on that one in 
particular, because often it is the case that the statute does 
not allow it. So the agency may do the analysis, but it really 
does not base its decision on it. So I would like to look 
into--and I should know this--just what NOAA's statutory 
requirements are, if that is all right.
    Senator Ayotte. We would love to have you follow-up on 
that. I appreciate it.
    [The information referred to follows:]
    Senator Ayotte. And, by the way, I think I would argue that 
our iconic fishermen and--women, they are priceless. 
[Laughter.]
    Chairman Johnson. Thank you, Senator Ayotte.
    By the way, I wanted to commend you also for the hearing 
you held up in New Hampshire on heroin. We will probably bring 
something back here to the Committee on that as well. So we 
appreciate your leadership on that.
    I do want to quickly go through another round. The reason 
you are seeing such a bipartisan commitment to this regulatory 
reform is, just as Senator Ayotte pointed out, multiple times a 
day we hear the anecdotal evidence of businesses coming in, 
being threatened to be put out of business, or projects being 
stymied, people being subjected to conflicting regulations from 
different agencies, and that level of uncertainty is really 
hampering the ability for our economy to grow so that 
organizations can grow and produce good-paying jobs. So this is 
a real problem. That is why you are seeing the kind of 
bipartisan support.
    As an accountant, one thing that drives me nuts working 
with the Federal Government is you just do not get good 
information. I agree, these things are very difficult to 
quantify but you have to use some common sense.
    Mr. Shapiro, you talked a little bit about accountability. 
Again, what I had said is ``largely unaccountable,'' and I can 
see where you can draw the conclusion I said ``unaccountable.'' 
But I do want to talk about the unaccountable nature of the 
fourth branch of government and how they are in many respects 
getting out of control. And we have not talked yet about a very 
serious circumvention of our Constitution and really of this 
body of Congress, and that is the process of sue and settle. 
This is where, an outside group has got a problem with its 
environmental regulation, and they work with the regulatory 
agency that does not necessarily have the legal authority to do 
something. In a cooperative fashion, they sue the agency. That 
lawsuit goes to court, and then they settle. And what does the 
judge do other than say, ``OK, well, case dismissed.'' It 
becomes law.
    Ms. Dudley, would you comment on that? Because there have 
been multiple circumstances. I had staff just give me a list of 
the different types of regulations that are now in force from 
my standpoint--I think people would argue, and maybe it is a 
legitimate argument--no legal authority, no congressional law 
passed that gives them the authority, but it is legally binding 
because the courts have ruled it so. And to me that completely 
circumvents the constitutional three co-equal branches of 
government.
    Ms. Dudley. Well, it even cuts out the President, because 
it is hard for the President to be aware of an in control of 
all of those different litigations and settlements.
    Chairman Johnson. Although the President does control the 
agencies.
    Ms. Dudley. Well, he does, but----
    Chairman Johnson. In theory.
    Ms. Dudley. So with the regulations, of course, it goes 
through OIRA, and so there is that oversight. With those 
settlements it does not go through OIRA the same way, and so 
you even have less Presidential accountability. I think it is a 
valid concern.
    Chairman Johnson. Mr. Shapiro, I would really like your 
comment, with you being an administrative law professor. What 
are you seeing there? Does that concern you?
    Mr. Shapiro. Not as much as you, perhaps, Senator, but that 
answer probably will not surprise you. Basically, agencies have 
a choice when they get sued--and, by the way, a lot of these 
lawsuits are over deadlines that Congress imposed for 
rulemaking that the agencies find impossible to complete 
because of resource limitations, and then they get sued, and 
then they settle that they are actually going to do something.
    So the question before the agency is: We got sued. There is 
some disagreement about the way we interpret this regulation, 
the way we implement it, the way we enforce it. Should we go 
through a whole other round of rulemaking, 10 years, or should 
we settle this lawsuit? And I think the real objection is by 
people who also sue the agency, but they do not win. Or the 
agency forecasts they will not win, but they would have settled 
it some other way. This is just part of our system.
    Chairman Johnson. But, again, your answer kind of 
presupposes this is actually an adversarial lawsuit, some group 
is an adversary against the agency. And what we are seeing is, 
no, it is a completely cooperative arrangement where, they say 
we do not really have the legal authority that we can see, but, 
we are with you on this one, so why don't you sue us? Again, 
this is my interpretation of what has happened. Do you deny 
that that has not happened in the past?
    Mr. Shapiro. It is a big government, Senator. I cannot deny 
that lots of things happen in the government. But I do not----
    Chairman Johnson. But you would have a problem with that, 
would you not?
    Mr. Shapiro. I would have to see the specific situation, 
and that is the difficulty I am having because these things are 
very contextual. Does the Federal Government ever reach a 
compromise which is not a good one? Probably. But we would have 
to look case by case.
    Chairman Johnson. Ms. Dudley, would you want to cite an 
example?
    Ms. Dudley. I am not sure that I can cite an example, but 
there are law reviews that have been written about that, 
illustrating that problem where the agency says, ``We could not 
get this through our notice and comment and through our normal 
rulemaking process. So twist my arm. Come in here and sue me on 
this, and we will find a way to settle.'' So I think there is 
evidence that that happens.
    Chairman Johnson. Thank you.
    Mr. Shapiro, you talked about--and I really did appreciate 
Senator Carper's question about what do we agree on. And you 
agreed, and you pointed to this duplication of requirements. 
And, trust me, this Committee is all about reducing duplication 
in all of its forms.
    Again, what I see is, coming here, everything is additive, 
which is how you get that duplication. You pass a new law; you 
pass a new law. So I think part of the purpose of the BRAC 
Commission--or in our previous hearing, we did talk about a 
one-in, one-out rule. What would you recommend in terms of a 
process of subtraction? How would you recommend we eliminate 
that duplication, not only in terms of requirements on the 
agencies but in terms of the regulations that have been 
written, the laws that have been passed that are, again, 
creating that conflict, the level of uncertainty, hampering 
organizations, including, for example, the University of 
Wisconsin at Madison, whose chancellor came in and was looking 
for some regulatory relief? How can we reduce that duplication? 
What process would you use if not a BRAC or not a one-in, one-
out rule?
    Mr. Shapiro. The particular duplication to which I was 
referring, Senator, was not so much the duplication of 
regulations over here and over there. I have already stated I 
think that is a problem, and it is a difficult one.
    It is that agencies have all these analytical requirements, 
and they are different. And it would be good and more efficient 
if we had these in one place and Congress could decide which 
ones they want them to do.
    So, for example, there are Executive Orders on federalism, 
litigation analysis----
    Chairman Johnson. Again, so, yes, we will stipulate there 
is duplication in both--there are duplication of regulations on 
the private sector and on organizations, and there is 
duplication in terms of requirements on the agencies. The 
question is: How do we eliminate that? What process of 
subtraction would actually work? Because, again, everything 
here is a process of addition.
    Mr. Shapiro. Well, we already engage in retrospective 
analysis. I am in favor of that. I am just against duplicative 
retrospective analysis. So, for example, under the Regulatory 
Flexibility Act, agencies, particularly OSHA and EPA, have to 
go back under that law--and I forgot the number of years; I 
think it is 8 or 10--and have to look at the impact on small 
business every 8 or 10 years.
    So my point is if Congress wants to do that another way--
and that has been proposed here--then we ought to get rid of 
that way so they are not having to do it for both, even if they 
can somehow pass the same analysis off using for the same 
purpose. So that is what I would----
    Chairman Johnson. Again, so I am sympathetic with 
duplication in all its forms. We are trying to figure out a 
process for elimination.
    Ms. Dudley, can you comment on that? And, are there that 
many examples where regulatory agencies are eliminating 
regulations themselves?
    Ms. Dudley. No, there are not. And the retrospective 
review, I think agencies are not thinking ahead to how they 
will do retrospective review.
    I think there is a difference in duplication in 
regulations, because if you really do have to report something 
one way to OSHA and another way to EPA, that really is 
duplication; whereas, if agencies have to report for the public 
record what their analysis is for different statutes, that is 
less duplicative. You have the same analysis and the same 
process.
    Chairman Johnson. OK. Senator Carper.
    Senator Carper. Thanks. Thanks, Mr. Chairman.
    A couple of our colleagues have talked about how we 
contribute to the problems by the way we exercise 
responsibilities in the legislative branch, and sometimes we 
make situations worse than they otherwise would be. So there is 
a shared responsibility here. I actually jotted down while 
others were asking questions some of the ways that we in the 
Congress can help contribute positively or negatively to this 
process. It is not that we do not have the ability to have an 
impact on the regulations. We actually have a lot of 
opportunities to provide input on the regulations. One of those 
is by passing legislation that is clear and unambiguous, and it 
reduces the need for the regulators to come in and kind of put 
the meat on the bones. If we have robust bones, maybe less meat 
and less interpretation is needed. I have seen legislation in 
which we basically tried to reach a compromise on legislation 
and actually having the same law or same bill, two different 
points of view, two directions, and basically say, OK, punt it 
to the regulators, you guys and gals figure this out, we should 
not do that.
    In the regulatory process, again, we have the opportunity 
to draft legislative language that is clear and unambiguous. We 
have the opportunity to pass it, and in the language coming out 
of a conference report that seeks to reconcile differences 
between the House and Senate, we can use that opportunity. We 
have colloquies on the floor, in the Committee, and so forth, 
which can help address ambiguities. We write report language at 
the end of the process that says this is what the bill is 
attempting to do.
    When the time comes from the regulators, the writers of the 
regulations on a particular issue, whether it is environmental 
or safety or financial services, but we have the opportunity to 
provide input beyond just the legislation that we have sent to 
them and to say--write to them, call them, meet with the 
regulators, and say, ``This is what we meant,'' or maybe, ``We 
made a mistake here, and this is another thought that we would 
like to share with you.'' We can hold hearings on the draft 
regulations, and we do that sort of thing here, in another 
meeting, hearing rooms in the Senate and in the House.
    When the regulators actually draft regulations and send 
them to us, we can comment on those. We can comment on their 
writing. We can invite folks from the agencies to come over and 
meet with us, to take our questions and to accept our thoughts, 
our further thoughts.
    When an agency finalizes a regulation, we can actually ask 
for further delay, or they are about to finalize a regulation, 
and one example is fiduciary responsibility. The Department of 
Labor has promulgated draft regulations. We asked them to delay 
the amount--to extend the period of time where folks can 
comment by a week or a month or whatever.
    And, finally, at the end of the day, if a regulation is 
drafted and we think it is awful and something else needs to be 
done, there will be lawsuits filed against them, and we have 
the opportunity to join in those lawsuits in some cases as a 
friend of the court. I think that is what you call it. So we 
actually do have more opportunities to shape the regulations 
and the regulatory process than maybe we think of, and I just 
wanted to remind us of that.
    I have a question, if I could, both for Professor Dudley 
and Professor Shapiro, and this goes back to what I said I was 
going to ask earlier. This is the pitch well telegraphed. But 
even if we are to assume that there are problems with the 
quality of regulatory analysis at some of the independent 
agencies, is there a way to address those problems without 
requiring the independent agencies to submit their analysis to 
OIRA? Is there another way to do this that might make more 
sense? Professor Dudley, why don't you go first.
    Ms. Dudley. I actually think OIRA review does add a layer 
of accountability, so I think it is an important element of it. 
Just asking them to do better analysis, if there is nobody 
checking their homework, it may not work. Or you will go back 
to the courts, which, you get inconsistent results.
    One thought I have on that, though, is that it could work 
more like the Paperwork Reduction Act where OIRA reviews 
independent agencies' requests to collect information, but 
OIRA's decision--the agency by a vote of the commission can 
override OIRA's decision. So that might be a way to maybe 
address that concern.
    Senator Carper. That is a helpful thought. Thank you. 
Professor Shapiro.
    Mr. Shapiro. Not to harp on a theme, but I am. There 
already exists accountability mechanisms. The reason that the 
independent agencies are different is they are politically 
balanced to a point. So the party of the President has three; 
the minority has two. And that puts the minority commissioners 
in a position to write dissents. The SEC Commissioners, 
Republican Commissioners, do that all the time, including on 
the economic analysis. And the SEC has come a long ways, 
particularly since they have to--they are now required to--and 
they have gotten a lot better at economic analysis. And I just 
do not know to what extent OIRA is a useful addition here. I 
think they do offer good input, and if we are going to do this, 
I like the way the bill does it, which basically says give us 
your input and then get out of here, this is an independent 
commission. And that may be the way to do it, but that is 
duplicative on top of the two minority commissioners.
    Senator Carper. OK, good. We are going to come back--I will 
come back to you with some questions in writing, and we will 
just try to flesh this out just a little bit and see if we 
cannot find some further consensus.
    With respect to codifying Executive Orders, Senators 
Lankford and Heitkamp, as we have heard, have put forward 
legislation to codify two key Executive Orders on rulemaking. I 
think they were issued by former President Clinton, and maybe 
by President Obama, too. And they lay out the current framework 
for agencies to follow when issuing regulations. These 
Executive Orders have, as you heard here, broad bipartisan 
support.
    First, I will ask, Mr. Shapiro, could you help us 
understand any concerns that maybe you or other observers may 
have with putting these Executive Orders in statute? You have 
spoken to this already, but I want you to revisit it. And then 
I want to come back to you, Professor Dudley, and ask you to 
restate your views on the value of judicial review. First, 
Professor Shapiro.
    Mr. Shapiro. I would say we need to be careful of a couple 
of things: first, that the requirements do not ask more of the 
analyses than it is capable of giving, particularly regarding 
benefits that are difficult to quantify; and, second, to be 
clear that there's not direct judicial review of the cost-
benefit analysis, which would be highly problematic. These 
things are difficult to do, and if somebody can sue just over 
the cost-benefit analysis, it would further delay the 
regulatory system.
    That is not to say these things do not get reviewed, but 
they become part of the rulemaking record, and if and when--and 
usually when--the agency is eventually sued, a court will take 
the analysis into account.
    The third thing I think it needs to be careful of is, as I 
indicated earlier, in many of these statutes, Congress 
anticipated the difficulty of using cost-benefit analysis as 
the sole guide as opposed to an input. And so the statutory 
language says this is how you make a decision. Often there are 
four or five principles you have to take into account. You have 
to explain qualitatively how you took those into account and 
how you balanced the conflicts between all of these legislative 
principles, and the courts will expect you to do that and do 
that with some clarity.
    So we have to reconcile cost-benefit analysis with statutes 
that usually do not require it given the difficulty of making 
that the sole determining feature and make sure that the 
codification of the cost-benefit analysis, it is just codifying 
it as an input to that broader process.
    Senator Carper. All right. And, last, Professor, on 
judicial review, you have mentioned this already before, so 
just very, very briefly, just touch again on that.
    Ms. Dudley. I think agencies will take it more seriously, 
but let me--and this is answering your question, but building 
on that.
    Senator Carper. Yes.
    Ms. Dudley. What the Executive Orders say and what the 
codification of it says, it is talking about regulatory impact 
analysis, not just benefit-cost analysis, or cost-benefit 
analysis if you are a lawyer. Economists tend to call it 
``benefit-cost analysis.'' And that is an important point 
because it is not just--you had earlier said that benefit-cost 
analysis cannot tell us what to do. I do not think anyone says 
that it should. It is a tool that provides us the best basis of 
information from which to make a decision, and that is what the 
judiciary would be reviewing. It is not did they quantify 
everything right, but it is did they do that regulatory impact 
analysis and lay out the pros and cons, the intended 
consequences, as well as the unintended consequences.
    Senator Carper. Thank you.
    Well, Mr. Chairman, this has been a really good hearing, 
and really a lot of that is a tribute to our colleagues, but 
especially to our witnesses. I would just say sometimes, we 
think it is easy to do a benefit analysis or cost analysis. It 
is hard. On clear air issues, if you are trying to do a cost-
benefit analysis, what is the benefit of a parent who does not 
have to leave work in order to be with a sick child who has an 
asthma attack? And how do you cost all that out? It is really 
not easy. And we try hard, we do our best. I guess it is the 
best we can do.
    Thank you for helping us do our jobs better. We are most 
grateful to you for your input and for your being good 
citizens.
    Thanks, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Carper.
    One thing we do like to do is let the witnesses basically 
make a final statement, and we will start with Mr. Shapiro. But 
before we do that, let me just reiterate the reason you are 
seeing such bipartisan support in that this is a real problem. 
There have been a number of very successful businesses in 
Wisconsin, on separate occasions have come up to me, the 
entrepreneurs, the owners, saying, ``Ron, there is no way I 
could have started my business and grown it to the point I have 
in today's regulatory environment. Just no way.'' And, again, 
we all hear these anecdotes all the time. So this is a serious 
problem.
    I will go to you, Mr. Shapiro, but before you do your 
closing statement, I just have one other quick question, 
because we talked about accountability. I just would like you 
to tell me to whom or to what is the Consumer Financial 
Protection Bureau accountable.
    Mr. Shapiro. They are accountable to you, sir. Senator 
Carper was talking about legislative hearings. They are 
accountable in terms of the entire regulatory process as it 
exists with the exception of the Executive Orders, which have 
not been applied to independent agencies. That was a judgment 
of Congress that it wanted to keep these agencies independent. 
I think there are some good reasons for that. You have built up 
an accountability mechanism that takes that into account. They 
have minority commissioners. They are subject to judicial 
review. They are subject to many of the same requirements, 
regulatory flexibility, and other statutes that you have 
passed--Paperwork Reduction. So I suspect if you work there, it 
does not sound like or feel like you are not accountable to 
anyone.
    Chairman Johnson. OK. Well, anyway, why don't you finish 
with your final comments. Then we will turn it over to 
Professor Dudley.
    Mr. Shapiro. Thank you, Senator, and goodness knows I 
appreciate the invitation and the questions that have been 
asked, and I appreciate your struggle to find appropriate 
administrative procedures that handle the kinds of concerns 
that all of you have, and about that I say Godspeed, because 
there is nothing easy about this.
    Judge Leventhal, a judge in the 1960's on the D.C. Circuit, 
once said that in administrative law, complexity has a bright 
future. And if today's hearing proved anything, I suppose that 
is the case.
    So I would end only by saying that I agree with the ABA, 
which is a pretty bipartisan, centrist organization, when it 
said Congress should exercise restraint in the number of 
rulemaking impact analyses and assess the usefulness of 
existing and planned analyses. I appreciate the difficulty you 
are having in doing that, but we have built up a fairly thick 
level of analytical requirements. That is not to say that we 
might need new ones, but if we put new ones in place, we ought 
to take into account the old ones and what we want to do with 
them.
    And then I would end again on the issue of resources. One 
of the reasons we are having trouble balancing productivity and 
accountability is the cut in agency budgets. There is just not 
enough people to do this. If they had more people, they could 
probably do both better.
    Thank you.
    Chairman Johnson. Thank you. Professor Dudley.
    Ms. Dudley. Let me too thank you again, both of you and the 
whole Committee, for these efforts and for taking it so 
seriously. I think it really does continue. We have seen 
bipartisan efforts at improving how regulation is done ever 
since the founding of our country, and I think that you all are 
continuing that.
    I am just going to come back to what regulatory analysis 
is. What it is intended to be is really an evaluation of 
effects and trying to understand before we do something, to the 
best we can, what effect it will have. And then just like you 
said businesses have to do, then we do need to come back and 
see if we were right. So analysis is the hypothesis. We need to 
be able to gather the data and test that hypothesis, and I 
think that is something that some of these bills would do.
    So I will paraphrase Winston Churchill when he talked about 
democracy, that regulatory impact analysis is the worst of all 
things, except for everything else that we have tried. So I 
think it is something that we need to do.
    Chairman Johnson. OK. Well, again, I want to thank both the 
witnesses for the time you have taken, for your thoughtful 
testimony and your thoughtful answers to our questions.
    With that, the hearing record will remain open for 15 days 
until October 1st at 5 p.m. for the submission of statements 
and questions for the record. This hearing is adjourned.
    [Whereupon, at 12:07 p.m., the Committee was adjourned.]

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