    [Senate Hearing 114-477]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-477

                    REVIEWING INDEPENDENT AGENCY RULEMAKING

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

                                     HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                   REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                                     OF THE

                                  COMMITTEE ON
                             HOMELAND SECURITY AND
                              GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               SEPTEMBER 8, 2016

                                   __________

                       Available via http://www.fdsys.gov

           Printed for the use of the Committee on Homeland Security
                            and Governmental Affairs

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                           U.S. GOVERNMENT PUBLISHING OFFICE
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    ________________________________________________________________________________________
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            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                        RON JOHNSON, Wisconsin, Chairman
    JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
    ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
    RAND PAUL, Kentucky                  JON TESTER, Montana
    JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
    MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
    KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
    JONI ERNST, Iowa                     GARY C. PETERS, Michigan
    BEN SASSE, Nebraska

                      Christopher R. Hixon, Staff Director
                  Gabrielle A. Batkin, Minority Staff Director
               John P. Kilvington, Minority Deputy Staff Director
                         Laura W. Kilbride, Chief Clerk

           SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                       JAMES LANKFORD, Oklahoma, Chairman
    JOHN MCCAIN, Arizona                 HEIDI HEITKAMP, North Dakota
    ROB PORTMAN, Ohio                    JON TESTER, Montana
    MICHAEL B. ENZI, Wyoming             CORY A. BOOKER, New Jersey
    JONI ERNST, Iowa                     GARY C. PETERS, Michigan
    BEN SASSE, Nebraska
                         John Cuaderess, Staff Director
                      Eric Bursch, Minority Staff Director
                          Rachel Nitsche, Chief Clerk

                                C O N T E N T S

                                     ------
    Opening statement:
                                                                       Page
        Senator Lankford.............................................     1
        Senator Heitkamp.............................................     3
        Senator Ernst................................................    10
        Senator Portman..............................................    11
    Prepared statement:
        Senator Lankford.............................................    31
        Senator Heitkamp.............................................    33

                                   WITNESSES
                          Thursday, September 8, 2016

    Robert R. Gasaway, of Counsel, Kirkland & Ellis, LLP.............     5
    Adam White, Fellow, Hoover Institution...........................     7
    Cary Coglianese, Ph.D., Edward B. Shils Professor of Law and
      Professor of Political Science, Director, Penn Program on
      Regulation, University of Pennsylvania Law School..............     8

                         Alphabetical List of Witnesses

    Coglianese, Cary Ph.D.:
        Testimony....................................................     8
        Prepared statement...........................................    69
    Gasaway, Robert R.:
        Testimony....................................................     5
        Prepared statement...........................................    34
    White, Adam:
        Testimony....................................................     7
        Prepared statement...........................................    48

                                    APPENDIX

    Report submitted by Adam White...................................    87
    Responses to post-hearing questions for the Record:
        Mr. White....................................................   121
        Mr. Coglianese...............................................   126

                    REVIEWING INDEPENDENT AGENCY RULEMAKING

                                  ----------

                          THURSDAY, SEPTEMBER 8, 2016

                                     U.S. Senate,
                            Subcommittee on Regulatory,
                          Affairs and Federal Management,
                        of the Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:02 a.m., in
    room 342, Dirksen Senate Office Building, Hon. James Lankford,
    chairman of the Subcommittee, presiding.
        Present: Senators Lankford, Portman, Ernst and Heitkamp.

                 OPENING STATEMENT OF SENATOR LANKFORD

        Senator Lankford. Good morning. Welcome to today's
    Subcommittee hearing entitled ``Reviewing Independent Agency
    Rulemaking.'' This is the 13th hearing in the regulatory
    process that this Subcommittee has held during this Congress.
    All our prior hearings the Subcommittee has reviewed the
    regulatory actions of executive branch agencies. Today we turn
    to the rulemaking record of independent regulatory agencies.
        First of all, I want to recognize Senator Portman for his
    work on this topic, and as the Subcommittee moves toward
    addressing shortcomings independent agencies regulate, we have
    Senator Portman to thank for his tireless work in this area and
    the foundation he has laid regarding common sense solutions to
    fixing problems associated with independent agency rulemaking.
        Independent regulatory agencies were conceived to
    accomplish varied missions, but they have one thing in common.
    They were structured to be somewhat independent from the
    influence of the President, the Administration, or originally,
    the Judiciary. However, independent agencies should not be
    exempt from oversight. When an agency is independent of the
    executive branch, it does not require that they are also
    independent of Congress and the American people. Congress
    created each independent agency and Congress still has the
    authority to oversee the agency they created. No public entity
    should be exempt from oversight.
        Independent agencies take regulatory action just like their
    executive branch counterparts. They promulgate rules, issue
    guidance, take enforcement actions. Accordingly, independent
    regulatory agencies should be held to the same procedural
    standards as executive branch agencies. I would actually argue
    that independent regulatory agencies require a heightened level
    of oversight over their regulatory regimes because the
    Executive Orders (EO) that have structured every aspect of the
    rulemaking process for executive branch agencies, and have been
    endorsed by both Democrat and Republican administrations for
    decades, do not apply to independent regulatory agencies.
        Part of the question we will have today is why not?
    According to the Office of Management and Budget (OMB's) 2015
    Report to Congress on the benefits and costs of Federal
    regulations from 2005 through 2014, Federal agencies issued 549
    major rules. Independent regulatory agencies were responsible
    for 141 of these rules, which equates to roughly 25 percent of
    rulemaking.
        There is cause for concern when it comes to the analysis to
    support those rules. In the same report, OMB found that in
    2014, only 10 of the 16 major rules issued by independent
    agencies provided some information on the benefits of the cost
    of regulation and that independent agencies continue to
    struggle in providing monetized estimates of benefits of cost
    and regulation.
        Another study published by the independent well-respected
    Administrative Conference of the United States in 2013 found
    that no major rule issued by an independent agency in 2012
    contained a complete cost benefit analysis. Many of these rules
    that are issued without a cost benefit analysis are financial
    regulations issued by the Consumer Financial Protection Bureau
    (CFPB), the Commodity Futures Trading Commission (CFTC), the
    Securities and Exchange Commission (SEC) and the Federal
    Deposit Insurance Corporation (FDIC) and have a direct impact
    on the smaller community banks that small business owners and
    farmers depend on.
        Take for example the CFPB's qualified mortgage rule. CFPB
    designed this in an attempt to extend credit only to those who
    can afford to repay a mortgage, preventing another mortgage
    crisis. Instead, the agency failed to monetize any of the costs
    and benefits and issued a one-size-fits-all rule that has
    crippled the ability of community banks to issue mortgages.
    Rules like this show that when agencies are not required to
    conduct a full cost benefit analysis before issuing a
    regulation, unintended consequences were likely to follow, such
    as uncertainty among community banks that limits their ability
    to issue credit to farmers and small businesses. Although
    community banks account for only 22 percent of all current
    loans, they hold three-quarters of all agricultural loans and
    half of all small business loans. Uncertainty for community
    banks means uncertainty for job creation.
        This Administration has made efforts to urge independent
    regulatory agencies to improve some of their regulatory
    processes. In July 2011, the President issued Executive Order
    13579, which urged independent regulatory agencies to comply
    with the analytical requirements that applied to executive
    branch agencies. Requiring independent regulatory agencies to
    follow the analytical requirements of Executive Order 12866 and
    13563 would be a reasonable and significant step toward
    achieving transparency and predictability for regulatory
    entities.
        We are pleased to have three witnesses today, and I look
    forward to hearing from each of you and what Congress can and
    should do to ensure that all agencies work for and hold
    accountable these independent agencies for the American people.
    With that, I recognize Ranking Member Heitkamp for her opening
    remarks.

                 OPENING STATEMENT OF SENATOR HEITKAMP

        Senator Heitkamp. Thank you, Mr. Chairman. Today's hearing
    builds on the Subcommittee's thorough investigation of the
    current State of Federal rulemaking. Together, we have explored
    virtually every aspect of the rulemaking process in a
    comprehensive and, I believe, bipartisan way. We have sought
    out views and opinions from individuals across the political
    spectrum in order to identify sensible steps Congress should be
    able to agree upon to make needed improvements to the
    regulatory system.
        Our focus today is independent agencies which occupy a
    unique position in our national government. They were
    deliberately, deliberately established by Congress to operate
    independent of the President. Among other things, they are
    charged with vital public health and safety functions, ensuring
    economic and financial stability and serving as stewards and
    guardians of fairness and equity on a wide range of public
    policy issues. These are critical responsibilities and those
    responsibilities will certainly require independent agencies to
    issue regulations when authorized or required by statute.
        What I want to explore today is how Congress can ensure
    such rulemaking is of the highest quality. I remain committed
    to making the Nation's regulatory system more transparent,
    efficient, effective and certainly accountable. First, Congress
    cannot lessen its own authority through inaction on critical
    issues by blurring the lines between legislative, judicial and
    executive functions. In some cases though, excessive delegation
    to agencies, I think Congress has ceded their responsibility. I
    do not think there is any doubt about it.
        The clearest example that I can provide is Waters of the
    United States, where clearly over decades of litigation and
    decades of rulemaking there is not a clear answer. One would
    imagine in that factual situation Congress would see the
    important role of stepping in and providing the guidelines that
    need to be provided, the laws that need to be provided. But yet
    we do not do it because we would rather pound the table and
    complain about regulatory agencies.
        Simply stated, Congress must pass good laws by taking full
    responsibility for clearly articulating priorities and goals in
    legislation. If our statutory directives are unambiguous, we
    will not see as many claims of agency overreach. Second, while
    rulemaking is often mandated by statute, we must continue to
    understand the benefits and costs of regulation. That means
    that Congress must fulfill its obligation to the American
    people through oversight of the regulatory process and this has
    to include independent agencies whose rules in many cases have
    more impact on today's business world and today's health and
    safety world.
        To be clear, independent agencies face significant
    challenges in quantifying costs and benefit in the same manner
    as executive agencies. Nevertheless, in my opinion, their
    regulatory decisions should be based upon good regulatory
    analysis. It is not always easy to quantify cost and benefits.
    Decades of scholarship have revealed that it is often far
    easier to tabulate costs for regulation and much harder to
    capture benefits and quantify benefits.
        That just means that there will always be a role for
    quantifying cost and benefits in the regulatory analysis. We
    should be wary of imposing a one-size-fits-all requirement
    which would have serious unintended consequences. We must also
    be mindful of the regulatory resources if we expect agencies to
    compete and complete regulations in a timely fashion.
        Today I want to hear from our witnesses, all enormously
    gifted and knowledgeable in this area, on how to improve the
    regulatory process for independent agencies, with a focus on
    how best to improve congressional oversight. I look forward to
    continuing my work with Senator Lankford and the rest of my
    colleagues on these important issues, and I look forward to the
    testimony today and our continuing dialogue. Thank you, Mr.
    Chairman.
        Senator Lankford. Thank you. At this time, we will proceed
    with testimony from our witnesses. Robert Gasaway is of Counsel
    at Kirkland & Ellis, specializing in appellate litigation,
    where he represents clients before the Federal and State court
    and administrative agencies. He clerked for Judge James Buckley
    of the U.S. Court of Appeals for the D.C. Circuit. He has twice
    been recognized as one of the top lawyers in the country by the
    Legal 500.
        Adam White is a fellow at the Hoover Institution, adjunct
    professor at George Mason's Scalia Law School, and of counsel
    at Boyden Gray & Associates. He serves on the leadership
    council of the American Bar Association (ABA), of the
    Administrative Law and Regulatory Practice, and on the
    executive committee of the Federalist Society's Administrative
    Law and Regulatory Practice Group. He clerked for Judge David
    Sentelle; is that correct?
        Mr. White. Sentelle.
        Senator Lankford. Sentelle, of the U.S. Court of Appeals to
    the D.C. Circuit. Cary Coglianese is the Edward Shils Professor
    of Law and professor of political science at the University of
    Pennsylvania, where he serves as the director of the Penn
    Program on regulation. He specializes in the study of
    regulation and regulatory process with an emphasis on the
    empirical evaluation of alternative regulatory strategies and
    the role of public participation, negotiation and business and
    government relations and policymaking. He holds an M.P.P., J.D.
    and Ph.D. from the University of Michigan.
        I would like to thank all of our witnesses for not only
    your preparation, your written testimony, but also being here
    personally for your oral testimony as well. It is the custom of
    this Subcommittee to be able to swear in all witnesses that
    appear before us. I would like you to please stand, raise your
    right hand so you can be sworn in for your testimony.
        Raise your right hand, please. Do you swear the testimony
    you will give before this Subcommittee will be the truth, the
    whole truth and nothing but the truth, so help you, God?
        Mr. Gasaway. I do.
        Mr. White. I do.
        Mr. Coglianese. I do.
        Senator Lankford. Thank you. You may be seated. Let the
    record reflect all witnesses answered in the affirmative.
        We are using a timing system today. You will see it in
    front of you with a 5-minute countdown to it. We will be
    somewhat lenient on that, merciful, maybe 4 or 5 seconds or so
    past. But we are trying to stick as close as we can so we can
    have a lot of questions and dialogue. The goal of this
    conversation will be not only receiving your testimony, your
    input, which has been excellent for all three of you, but it is
    also for us to have an open dialogue on some of these issues.
        So with that, Mr. Gasaway, we would be honored to be able
    to receive your oral testimony first.

       TESTIMONY OF ROBERT R. GASAWAY,\1\ OF COUNSEL, KIRKLAND &
                               ELLIS, LLP

        Mr. Gasaway. Thank you very much, Chairman Lankford. And
    Senator Heitkamp, thank you as well. I am going to try to be
    very brief and give an overview and pick up on the statements
    that we just heard, both from you Senator Lankford and Senator
    Heitkamp. These are incredibly important hearings. We have a
    number of different issues in the administrative state. Some of
    them are chronic syndromes and some of them are breaks and
    sprains.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Gasaway appears in the Appendix
    on page 34.
    ---------------------------------------------------------------------------
        We are going to talk a little bit about breaks and sprains
    in the independent agencies, some of the specific issues that
    go to them. And these are very critical issues and they need to
    be addressed, but I think there are easy issues and easy things
    that can be done to address them. But I think you also have to
    look at the harder issues, the chronic syndromes. They are
    particularly acute in the administrative agencies for reasons
    that Senator Heitkamp referred to. They are independent of the
    executive branch, largely the Congressional Branch, and
    political accountability.
        And then we have to tie that back in, as Senator Heitkamp
    said, to the larger issues of this hearing. So see if I can do
    that with the remaining 4 minutes. First of all, the issue
    extending the Executive Orders 12866 and 13563, I think that is
    on the level of a no-brainer. More information is better
    information. I think it would clearly make a difference in
    agency decisionmaking. I do not think there is any good reason
    for exempting them. Their independence can be preserved through
    a carve-out, as has been effected in other statutes, and I do
    think it would make a difference.
        The American Equity Investment Life Insurance Company case
    is one, where as you know, under Section 2(b) of the Exchange
    Act, economic analyses are required because there was no Office
    of Information and Regulatory Affairs (OIRA) review, because
    there were no standards at that time at the SEC. They committed
    a very remarkable error of failing to measure the effects of
    their program against the existing legal baseline of State
    regulation. I think those are exactly the kinds of mistakes
    that would not happen if the Executive Orders were extended by
    statute.
        And again, there have been carve-outs in other statutes to
    preserve independence. I think that could be done. There are
    technical issues to be sure, and Professor Coglianese has
    looked at some of them. What is the threshold? Do you use cost
    or benefits? I like costs because they are more measurable. Is
    it adjusted for inflation? What is an independent agency? But
    those are all technical issues.
        The no-brainer is you should go ahead and do it. OIRA has
    an extraordinary wealth of capability. There would be an
    extraordinarily greater degree of coordination and the
    technical issues can be overcome.
        Now segueing briefly, I think that you also have to look at
    wider issues of actually bringing them under congressional
    control. And I stated briefly in my written testimony that I
    think an adaptation of the Red Tape Act that Senator Sullivan
    has introduced could function that way. I think, obviously,
    there are some challenges and there is a discussion that needs
    to be made. But the key point there is you overcome this
    cultural problem--and I will come back to that--that you see in
    Professor Coglianese's testimony. He says retrospective review
    is not part of the culture of agencies. We want to push our
    agencies forward.
        The great thing about the Red Tape Act, the one-in, one-
    out, is that retrospective review is bound up with the
    prospective review, right? You have to take regulatory costs
    off the table to move it forward. So now everybody's pushing
    together. And that division that we see reflected in Professor
    Coglianese's testimony becomes unified. Looking at old
    regulations, doing new regulations all become one. So I would
    greatly encourage all the Members of the Committee to take a
    hard look at how that legislation could be adapted.
        And then third, I do have to go back very briefly within my
    time to the issues that you have been struggling with, the mega
    issues of over-delegation, and I will just hit on them briefly
    there. The ``Chevron'' issue and over-delegation, Non-
    Delegation Doctrine in the Supreme Court is one of the
    challenges of this Congress and of our time. I am
    extraordinarily impressed with the testimony the Committee has
    received. I have tried to summarize that testimony in a new way
    and crystalize it in a new way, and I would urge the Committee
    to go back to previous witnesses and see if I have that right.
    Because if I do, ``Chevron'' is extraordinarily vulnerable and
    candidly more vulnerable than I expected when I first came to
    this Committee record.
        Second, very briefly, I emphasize that Congress does have
    to get back into the game. I put a couple novel proposals on
    there for using fast track administrative processes, just like
    you have fast track processes in the trade area.
        And then finally, I want to return to that word
    ``culture.'' Professor Herz gave testimony that it was a quote
    ``completely infelicitous phrase, a completely infelicitous
    choice of language in 'Chevron' to say administrators are freed
    unless Congress has quote, 'spoken to precise issues.'"
        He is absolutely correct about that. It has had pervasive
    cultural effects in independent agencies and executive agencies
    alike, and I would urge the Committee to return attention to
    that issue. Thank you.
        Senator Lankford. Thank you. Mr. White.

         TESTIMONY OF ADAM WHITE,\1\ FELLOW, HOOVER INSTITUTION

        Mr. White. Chairman Lankford, Ranking Member Heitkamp, and
    other Members of the Subcommittee, thank you for inviting me to
    testify today. In my written statement, I try to make three
    basic points. First, I recognize that so-called independent
    agencies have a long and varied history in American government.
    Nevertheless, the justifications for their independence from
    the President reflect largely a bygone era.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. White appears in the Appendix on
    page 48.
    ---------------------------------------------------------------------------
        Today, the rules of most independent agencies are largely
    indistinguishable from those of executive agencies, whose major
    rules are subject to full cost benefit analysis under OIRA's
    oversight. 35 years ago, the Reagan Administration made a
    prudential choice not to subject independent agencies to OIRA
    oversight because those agencies were at the time relatively
    unimportant.
        Today the regulatory world is completely different, with
    independent agencies like the Federal Reserve Board (FRB) of
    Governors, the SEC, the CFPB, the Federal Communications
    Commission (FCC) and even the Federal Energy Regulatory
    Commission (FERC), making immensely consequential policy
    decisions. Independent agencies issued at least 17 major rules
    from October 2013 through September 2014, according to OIRA and
    the Government Accountability Office (GAO). It is time for the
    Congress and the President to take down the artificial and
    increasingly arbitrary wall that insulates independent agencies
    from OIRA's review, as both the American Bar Association
    Section on Administrative Law and the Administrative Council of
    the United States have both long urged.
        My second point, we now see clearly what happens when
    independent agencies' cost benefit analyses do not face
    meaningful review or interagency coordination. As to meaningful
    review, I cite criticism of the Government Accountability
    Office, the CFTC's Inspector General (IG), the D.C. Circuit,
    and others who have found independent agencies' analyses
    woefully lacking.
        This week my wife and I are sending our kids back to
    school, and just as our schools do not trust students to grade
    their own homework, we should not leave the independent
    agencies free to grade their own homework. This is not intended
    to cast aspersion on the agencies motives or their dedication,
    but only to point out a basic fact of human nature: We do our
    best work when we know that someone else will eventually grade
    it.
        And as to interagency coordination, this is perhaps the
    most important role that OIRA plays, even more than cost
    benefit analysis. The OIRA framework facilitates an interagency
    dialogue that helps to coordinate agency policies, but also to
    ensure that each agency is getting the best possible expertise
    and advise from its sister agencies in the context of White
    House, OIRA oversight. Independent agencies should be fully
    incorporated into the OIRA framework for precisely this reason.
        The third point that I make in my testimony, as you focus
    on subjecting independent agencies to greater OIRA oversight
    perhaps, I urge you to subject independent agencies to greater
    congressional oversight, and not just in terms of oversight
    hearings, but more importantly, in terms of the way that you
    structure independent agencies and fund them. I think right now
    the trend is in the wrong direction in terms of giving
    independent agencies too much independence, not just from the
    President but also structurally and financially from Congress.
        If I may add just one final note to reemphasize the basic
    point of my testimony and what I see to be the crux of the
    issue before the Subcommittee. Cost benefit analysis and
    interagency coordination are not simply ends in and of
    themselves. The point of cost benefit analysis, as I see it, is
    not to come up with some precise, absolutely correct numerical
    answer. As Senator Heitkamp noted in her opening remarks, I
    doubt that is even possible. I doubt the cost benefit analysis
    could even accomplish this, even if we wanted it to.
        And I think there is risk in putting too much faith in
    seemingly objective economic analysis. Rather, the point of
    cost benefit analysis, as I see it, is the process. It creates
    a framework for agencies to think through these issues
    rigorously, think through the impacts of their decisions, and
    just as importantly, to look back at their analyses years down
    the road to see where their previous assumptions were right and
    where they were wrong.
        That is the retrospective reviews that my fellow witnesses
    have mentioned. This process should teach agencies and all of
    us to be more modest in our predictions and our arguments and
    to be more accountable to the public. Thank you.
        Senator Lankford. Dr. Coglianese.

        TESTIMONY OF CARY COGLIANESE, PH.D.,\1\ EDWARD B. SHILS
    PROFESSOR OF LAW AND PROFESSOR OF POLITICAL SCIENCE, DIRECTOR,
      PENN PROGRAM ON REGULATION, UNIVERSITY OF PENNSYLVANIA LAW
                                 SCHOOL

        Mr. Coglianese. Chairman Lankford, Ranking Member Heitkamp,
    and other Members of the Subcommittee, thank you for the
    opportunity to be here today. And let me also thank you for
    your service to the Nation. I am pleased to talk about ways
    that Congress might help encourage independent agencies to
    engage in smarter regulation. Smarter regulation requires sound
    analysis, both upfront before rules are adopted prospectively
    as well as rigorous research after rules are adopted, to find
    out how well they are working, or retrospective analysis.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Coglianese appears in the
    Appendix on page 69.
    ---------------------------------------------------------------------------
        With respect to prospective analysis, as has already been
    indicated, one option would be for Congress legislatively to
    codify the outline of and requirements in Executive Order 12866
    and apply them to independent agencies. This would have the
    advantage of making symmetrical the analytical requirements
    between independent and executive agencies, but it would mark a
    major shift in the norms of independent decisionmaking by
    independent agencies. That is because Executive Order 12866 not
    only contains requirements for prospective analysis, but also
    establishes an institutional structure that places the
    President, and the president's staff, in a more central role in
    regulatory decisions.
        This option would also require a major increase in funding
    and staffing for OIRA.
        Let me suggest an alternative to that, which would have a
    similar advantage of creating symmetry in regulatory analysis
    requirements between independent and executive agencies, but
    would not bring with it the kinds of institutional changes and
    challenges that would accompany the first option. The
    alternative would be to eliminate the exemption in the Unfunded
    Mandates Reform Act (UMRA) for independent agencies. The
    Unfunded Mandates Reform Act simply imposes a requirement that
    all agencies, for certain rules, apply benefit-cost analysis to
    them, and that requirement is something that is enforceable
    through judicial review.
        The courts can make sure that the agencies have done that
    analysis, and then the quality of that analysis would form part
    of the standard arbitrary and capricious review that courts
    would give.
        If Congress should go forward with either of these options
    and apply a new mandate to independent agencies, it obviously
    should keep in mind that effectively implementing any such
    mandate will require resources by independent agencies, and
    even with these resources and the stronger incentives that a
    mandate would bring, regulatory analysis will always remain
    somewhat provisional. A mandate should not expect agencies
    always to be able to monetize costs and benefits, or at least
    all costs and all benefits, for every regulation.
        Let me turn in my remaining time briefly to retrospective
    analysis and possible steps to be taken to improve agencies
    study of their rules after they are adopted. Such analysis is
    absolutely vital to inform prospective analysis and it is
    something that is underproduced by both executive agencies and
    independent agencies.
        The Obama Administration's Look Back Initiative has been a
    good move forward in this regard. And Congress, I think, could
    help by codifying a model like that Initiative and applying it
    to independent agencies, which have been exempt from the
    regular status reporting that executive agencies have had to
    make on their retrospective reviews.
        I would also suggest that requiring all agencies to develop
    some kind of structural evaluation plans at the time they adopt
    new rules would help shape their thinking about evaluation
    early on in the process, as well as form a basis for more
    rigorous review after the fact. The very frameworks that are
    called for in the Smarter Regs Act of 2015, for example, strike
    me as quite useful.
        Finally, as with prospective analysis, of course, ensuring
    high quality retrospective analysis requires resources, and
    Congress would need to allocate those as well. In these various
    ways, and for the reasons I have elaborated in my written
    testimony, Congress has an opportunity to strengthen the
    capacity for smarter regulatory decisions by the Nation's
    independent agencies, by both encouraging better prospective
    and better retrospective analysis.
        Thank you very much for your time and dedication to these
    issues.
        Senator Lankford. Thank you, all three of you. The ranking
    member and I are going to defer our questions to the end, and I
    recognize Senator Ernst.

                   OPENING STATEMENT OF SENATOR ERNST

        Senator Ernst. Thank you very much. I appreciate that. And
    thank you, gentlemen, for appearing before us today. I am going
    to take just a moment and kind of set the stage, walk you
    through an issue that I have seen, and then certainly get your
    feedback on it.
        As you may know, in February, the FCC published its Notice
    of Proposed Rulemaking on the Set-Top Boxes that are now
    required. And I have received several letters from small cable
    companies in my State that are very concerned, serious concerns
    about what this rule means for the vitality of their business,
    some of which have been family owned for many decades.
        According to the Small Business Administration (SBA's)
    Office of Advocacy, the FCC published an Initial Regulatory
    Flexibility Analysis (IRFA), with its notice of proposed
    rulemaking (NPRM). However, the FCC did not attempt to quantify
    or describe the economic impact that its proposed regulation
    might have on small entities. SBA goes on to say that the FCC's
    analysis ``Simply describes compliance requirements without
    making any attempt to explain what kinds of costs small multi
    channel video programming distributor (MVPDs) might incur in
    order to comply, and without any discussion of how those costs
    might be disproportionately burdensome for small entities.''
        So my questions to you are two-fold. Can either of you, Mr.
    White or Mr. Gasaway, comment on the FCC ruling and the quality
    control of that economic analysis, and with your experience and
    background, would you believe further defining what an economic
    analysis should entail from the Regulatory Flexibility Act side
    and how it could improve economic analysis of those independent
    agencies? How can we do better, if you would please?
        Mr. Gasaway. Well, I will take a crack at that. Senators,
    first of all, let me say that I am aware that that rule is out
    there. I have not studied it and so it is hard for me to talk,
    but I am a lawyer, so I will talk at length.
        Senator Ernst. Thank you. Of course.
        Mr. Gasaway. It is hard for me to talk about. I would be
    surprised if there was a quality Small Business Regulatory
    Enforcement Fairness Act (SBREFA) analysis. It could well be
    that that is the case. But unless there is a reason for doing a
    quality SBREFA analysis, often times it gets lost in the fact
    that there are limited resources at agencies, and I think the
    empirical work at independent agencies shows that many times
    they cut short those types of analyses.
        So I would not be at all surprised if in fact it was cut
    short. I do think the types of steps that we are talking about
    today can help. One of them, obviously, is subjecting SBREFA
    type analysis or other type of analysis to either the Small
    Business Administration Office of Advocate or Counsel of
    Revenue. It would be tying that more closely, tying it more
    closely to OIRA.
        But I would again say that there is not going to be better
    decisionmaking until there is some sort of fundamental reform.
    Now, one reform that people often think about is just making
    SBREFA judicially enforceable. And if you had only one card in
    your deck that might do it there. And I always support positive
    incremental reforms. But without spinning out of control, I do
    think that it shows the larger problems of administrative
    agencies and the larger problems this Committee has been
    dealing with.
        Remember, the FCC or any other agency is going to be
    thinking, I have a programmatic mandate, and my programmatic
    mandate is not to promote small businesses; it is to promote
    good telecommunications. And promoting good telecommunications
    requires the small Set-Top Box rule. So the SBREFA requirements
    are always going to be the caboose, and what I was trying to
    suggest with some of my broader reforms in my testimony is if
    you are going to change that culture, that word that I
    appropriated from my fellow witness, you are going to have to
    think very seriously about one of these other proposals that
    are on the table and these larger issues.
        I do not think there is a clear answer to that, but I do
    see the problem.
        Senator Ernst. Very good. And Mr. White, I cannot help but
    notice those Iowa Hawkeye cufflinks. They are glaring at me.
    This is a Cy-Hawk weekend, right?
        Mr. White. I know, Senator. Thank you, and thank you very
    much for bringing the Committee to my hometown of Dubuque, Iowa
    last month. Thank you very much.
        If I may just add very briefly to what my friend just said.
        Senator Ernst. Absolutely. Thank you.
        Mr. White. I think the key word, if I heard it correctly
    from the SBA, was the FCC did not attempt an economic analysis.
    And that is key. It is not even that they did it and did it
    poorly. It is that they did not even attempt it, which I think
    goes to the cultural, the regulatory culture issue that Mr.
    Gasaway mentioned.
        I read a recent report by an economist named Hal Singer--I
    am sorry. I do not have it off the top of my head, but I would
    be happy to submit it for the record\1\--focusing on the
    broader problems of the lack of economic analysis at the FCC.
    The FCC's former chief economist called the recent Open
    Internet Order, he quipped that it was an economics free zone.
    And I think that is from the FCC's own former chief economist.
    I think the same could be said for a lot of what the FCC is
    doing.
    ---------------------------------------------------------------------------
        \1\ The report submitted by Mr. White appears in the Appendix on
    page 87.
    ---------------------------------------------------------------------------
        Senator Ernst. OK. Thank you, gentlemen, very much. Thank
    you.
        Senator Lankford. Senator Portman.

                  OPENING STATEMENT OF SENATOR PORTMAN

        Senator Portman. Well, first of all, thank you very much
    for holding the hearing. I mentioned to Senator Heitkamp a
    moment ago, I hold these two up as my model at other hearings.
    I chair the PSI Subcommittee, saying that they allow Members to
    come and ask their questions and leave, because our lives are
    all so crazy and busy rather than monopolize the microphone. So
    thank you for letting me ask a question. I did just get here,
    so I missed some of your opening remarks. I did have a chance
    to look through your testimonies.
        Senator Lankford. You missed all my kind remarks about all
    your work for independent agencies. We talked about you
    positively even when you were not here.
        Senator Heitkamp. Major moment of suck up.
        Senator Portman. I missed it, but exactly, I heard about
    it, and I was not going to suck up again, as you--no, no.
    Seriously, thank you for mentioning that. And look, we have
    been working this a long time. Senator Warner deserves a lot of
    credit too, and I know some of you have disagreements with us
    in the way in which we make these agencies accountable, but
    give me a break. I mean, the American people are shocked to
    learn that independent agencies who play a bigger and bigger
    role in all of our lives do not have to go through a basic cost
    benefit analysis. I mean, they are shocked by that. And we have
    to figure this out.
        I am looking at some of these comments about how
    independent agencies are not subject to any influence from the
    White House. That is just not true. I mean, I would point you
    to April, when President Obama publicly announced his support
    for the FCC Set-Top Box proposal. I mean, Homeland Security
    Committee, this Committee, issued a report finding that the
    White House had duly influenced the FCC's decisions to
    reclassify broadband Internet under Title II.
        I mean, there is influence. I wish there was not that kind
    of influence, but there is. So this notion that they are
    somehow not subject to any kind of political pressure,
    unfortunately they are, but they do not have the same
    accountability. And I just think people really are ready to
    come up with some way. We can look, do the benefits outweigh
    the costs or not? And I think that is the least we should be
    asking for.
        So the way Senator Warner and I approach it is, as you
    know, is to have the independent agencies at least provide
    information to OIRA and have OIRA play an advisory role. There
    are various ways to do this, but I hope you will work with us
    on this. The President said that he is for it. All we really
    want to do is codify what the President has said through his
    Executive Order, and it has to be done legislatively because
    these are independent agencies.
        OMB found that 10 of the 16 major rules issued by
    independent agencies in 2014, which is the last year we have
    data for, included some information. That means six contained
    no information on cost or benefits and zero included a full
    analysis of the type of analysis required by executive
    agencies, zero.
        So I think we have a real problem here, and this
    Subcommittee has been terrific at focusing on it. We had hoped
    to get this Independent Agency Regulatory Analysis Act as part
    of a broader package on maybe six or seven bills. It seemed to
    have some bipartisan consensus. We were not able to get that
    done. Senator Heitkamp was helpful in trying to get that done,
    by the way, as were other Democrats, but there were others who
    just could not go along with the broader package. But I hope
    this is something that this Subcommittee can continue to work
    on and push on so we can get it done.
        I guess, Mr. White, if I could just ask you a couple
    questions, I would appreciate it. You have been at this for a
    while. I read your testimony. I thought it was very
    informative, very well done. I think our legislation is pretty
    modest. It does not go as far as maybe you would like us to go
    and some others would.
        The American Bar Association, the Justice Department under
    President Reagan and President Clinton, the Administrative
    Conference of the United States, legal scholars across the
    spectrum, including Cass Sunstein, who all of you know, have
    said that the President, as head of the executive branch, has
    the authority to bring independent agencies under the same
    regulatory analysis and review framework that applies to
    executive agencies.
        And as you said, agencies currently are able to grade their
    own homework. Can you explain what you see as the benefits of
    having an outside entity review an independent agencies cost
    benefit analysis in terms of how it increases the quality of
    their work, and perhaps tell us the problems that come from a
    lack of accountability.
        Mr. White. Sure. Well, with respect to the benefits, I
    think that oversight, while it provides an accountability
    mechanism for the people, I think it also helps make the
    agencies the best version of themselves when they know that
    they will have to explain and justify their analysis to a
    superior authority, whether it is in the White House or a
    Federal court, not to be micro-managed by the White House or
    the court, but just have someone kicking the tires seriously on
    their analysis and questioning their assumptions. I think that
    will spur the agencies to do better work.
        The Set-Top Box example, which again, I am not an expert
    on, but I have heard a lot about, is a worrisome example. The
    Open Internet Order, which I am involved in in litigation, I
    should make clear, is another example where everybody from the
    dissenting commissioner, Ajit Pai, to the dissenting judge,
    Judge Steve Williams of the D.C. Circuit, who is a former
    regulatory scholar himself, all had serious, serious criticism
    of the assumptions and often self-contradictions within the
    meager economic analysis that the FCC undertook. I think it is
    a glaring example of the need for serious accountability and
    cost benefit analysis before these rules are imposed on the
    public.
        Senator Portman. Thank you. I do not want to overindulge
    you guys. Thank you for letting me come and ask the question,
    and I look forward to hearing more from you guys with other
    questions. And thank you, Mr. Chairman.
        Senator Lankford. Senator Heitkamp.
        Senator Heitkamp. Thanks so much. We have covered kind of
    the whole watershed here from regulatory analysis to where that
    needs to be done all the way through judicial review and
    ``Chevron.'' I want to focus on independent agencies, because
    of all of the things that we have worked on, taking Senator
    Portman, and Senator Warner's bill, trying to sell it in a
    political sense, has been a lot tougher than I ever thought it
    would be, because it seems so common sense to me that if you
    have a major rule that is being promulgated, no matter who is
    promulgating it, all the rules should be the same for major
    rules, and that is not what we have.
        And so I am going to offer you some of the criticisms that
    we have heard from the independent agencies about that concept
    and ask you to kind of help me work through--if we are going to
    do a full frontal attack, right, and say we are going to do
    this no matter what, and it is going to go to OIRA, then we are
    going to lose politically, I can tell you that.
        We have already been--I know it is hard to imagine, because
    when you look at it and you look at the history of this, it has
    been very bipartisan. But it has been very difficult. And so
    let us walk through some of the criticism that we have
    received. First off, OIRA is an agency, a sub agency of OMB and
    under the control of the President, and simply giving
    regulatory review to OIRA under this procedure would in fact
    interject and interfere with independence.
        Now, what we have tried to do in response to that is look
    at another agency, whether it is the IGs, whether it is GAO,
    take a look at some other place where we could put that kind of
    regulatory analysis. Because I agree with you, Mr. White, I
    mean, none of this is ever going to be perfect, but if there is
    no level of scrutiny or analysis, work can be pretty sloppy,
    right? Your dog ate your homework every day, right?
        So how do we overcome, or how do we respond to an argument
    that OIRA is a sub-agency of the President and interference
    would be--Mr. Gasaway?
        Mr. Gasaway. With the Paperwork Reduction Act (PRA)
    precedent. You just say this is for analysis purposes only.
    There is a carve-out. It has to go to the expert agency within
    the Federal Government on regulatory analysis for their
    comments.
        Senator Heitkamp. That makes a lot of sense. However, the
    bill is very modest in terms of--I mean, it does not say they
    can stop the regulation.
        Mr. Gasaway. Non-binding.
        Senator Heitkamp. Yes, it is not binding. There is nothing
    in this legislation that would give OIRA any authority to stop
    the regulation. It just would give them review authority. And
    we still hear the argument that it is over-burdensome and
    attacks the independents.
        Mr. Gasaway. Well, then I would say this is like sending a
    medical question to the experts at the National Institutes of
    Health (NIH), or something like that, for non-binding review.
    The greatest repository of medical information in our
    government, I think, is at NIH. And maybe somebody is taking a
    policy decision and they need medical input. You do not have to
    do what they say, but you have to ask the question.
        OIRA is a terrific agency with a terrific bipartisan level
    of competence. And obviously, Professor Sunstein is great, but
    many of his predecessors are. And it is absolutely
    inconceivable to me, if I were the United States senator, which
    I am not, that I would want independent agencies to avail
    themselves of that expertise. And that is what I would say. Do
    you really just want them to not avail themselves of that
    expertise?
        Senator Heitkamp. I am looking for an alternative word,
    because we have said all these things. That is not the problem.
    The problem is not that we are not graded arguing our position.
    The problem is that we have reached this impasse that we need
    to somehow get over. And Mr. White, I am curious, I forget
    which witness talked about the need for coordination. I think
    it was you. Obviously, OIRA has a much better handle on all of
    the agency major rulemaking and probably is the best place to
    balance, what is the Department of Commerce doing against what,
    the Consumer Finance Protection Bureau might be doing.
        So it is dangerous to take it out of OIRA, but yet we need
    to get this kind of review. We need to change the culture of, I
    should not say lack of accountability, but kind of this, we
    have our own funding stream, we have our own--once we get an
    appointment and confirmation, which is getting tougher to get
    because of these issues, in my opinion, so now hands off, we
    are in charge.
        And so we are trying to get beyond that. How do we find a
    mechanism or find a way to do a work-around that would
    accommodate what we all here believe needs to happen?
        Mr. White. Well, if I may, I want to make clear, I do not
    mean to focus on OIRA to the exclusion of anything else.
    Whether it is accountability to the executive branch or to
    Congress, either through existing mechanisms or some new
    congressional office of regulatory review, or through the
    courts, at the end of the day, for me the most important point
    is there being a measure of accountability and oversight, not
    one particular branch doing it.
        And so I am open-minded on all these proposals.
        Senator Heitkamp. One of the concerns that I have about
    leaving this up to judicial review, and I am not being
    critical, and maybe I am, but you will hear agency heads
    saying, we are going to implement this rule. If the court does
    not issue a stay on the rule, then the rule is going to take
    effect even though the rule was bad. So it is not a process
    that provides for immediate reaction or some kind of
    contemporary analysis. And so it fails. Judicial review fails
    and should be a last resort. That is my position.
        The Chairman and I have had long debates about reform of
    judicial review, but I am looking for some way to get this
    concept over the finish line in a way that we have legitimacy
    to the argument that we are not imposing Presidential review on
    an independent agency.
        Mr. White. If I may just add on that point, at the end of
    the day, like I said, this is about accountability, not just to
    Congress, but to the people. In the last few years, especially
    in the aftermath of Dodd-Frank, where independent agencies on
    financial policy have had ever greater power, you see so many
    of these regulations. No matter what they say in terms of
    marketing them as anti-Wall Street, ultimately these
    regulations benefit the biggest banks and the biggest companies
    first and foremost, whether it is because of the compliance
    burdens that the community banks and other small entities face,
    whether it is through the Financial Stability Oversight Council
    and others seeming to place a too big to fail stamp on the
    biggest players.
        At the end of the day, if an agency is truly independent
    and not accountable to the people, there is the greater risk
    that the biggest, most influential corporate players will have
    a disproportionate voice on policymaking, and whether it is
    through the President or Congress or through the courts, if the
    people do not have a real means of accountability for these
    agencies, at the end of the day, they will have a
    disproportionately quieter voice relative to the bigger
    players.
        Senator Heitkamp. I would like your thoughts.
        Mr. Coglianese. Yes. Well, first, let me just say that from
    a constitutional structure point of view, if a president wanted
    to apply OIRA review just to a single agency----
        Senator Heitkamp. He could.
        Mr. Coglianese [continuing]. He could, right. The Executive
    Order is the president's prerogative to design however he or
    she would like. The fact is that there is one piece of
    legislation that requires agencies to provide statements of
    cost and benefits of major rules, a piece of legislation that
    Congress has expressly exempted independent agencies from.
        So one way of making a cultural change might be for the
    Congress to say fundamentally, in what we have required of all
    other agencies, we are going to require of independent agencies
    as well. That would be a step forward. And it would address
    something that one reads time and again in responses by general
    counsel or others at independent agencies on these issues that,
    ``oh, we are not required, we have no legal obligation''.
    Amending the Unfunded Mandates Reform Act would, at least for
    those rules that pass that threshold, eliminate the ability to
    make that excuse.
        So that is one step, I think, that could be taken by the
    Congress that would also avoid the kinds of political issues
    that you have talked about, Senator Heitkamp. There are
    obviously limitations, right? I mean, this is not maybe
    providing the optimal level of oversight, peer review, and so
    forth. But the possibility exists for there to be judicial
    review, and the ex-post threat of judicial review does offer
    some ex-ante incentive for agencies upfront to do their
    homework.
        With respect to homework, I think the way I would
    characterize this is, yes, it would be great to get feedback
    from a teacher, but what is different about Executive Order
    12866 is it involves not just a grade from the teacher, but
    also permission to graduate to the next grade. So there is this
    lever, the hammer that hangs over it, and that is causing the
    kind of constraints and responses that you are talking about,
    Senator Heitkamp.
        One other possible approach, and it is not mutually
    exclusive, might be for Congress to impose on, quite frankly,
    all agencies, something along the lines of the peer-review
    guidelines that OIRA has in place already for various
    scientific analyses that agencies are conducting. This would
    bolster the Information Quality or Data Quality Act provisions
    where agencies could in real time get that kind of feedback
    through a peer-review process.
        Maybe that peer review could come from other agencies.
    Maybe it could come from outside experts, but at least there
    would be some process of someone reviewing, providing feedback
    if indeed the option of having analysis reviewed by the White
    House staff is not politically feasible or wise for other
    reasons.
        Senator Lankford. I want to open this up and I want to open
    it up for the full dais to be able to talk about questions, be
    able to interact, but I want to give you a broad philosophical
    question that you are going to think I am kidding, but I am
    not. Independent of who? They are an independent agency.
    Independent of who?
        Mr. Gasaway. I will give the answer. I think it is not
    independent of who but independent for what? To exercise
    independent judgment. And I think the key word there is
    judgment and I think the key thought is in Adam's testimony.
    They are originally thought of as kind of specialized courts,
    not as specialized legislatures. And I think unless you go back
    to that model of more an independent court with more
    circumscribed jurisdiction, I think you are going to have
    problems.
        Senator Lankford. I ask that question because the common
    question here is we cannot impose 12866 on them, we cannot put
    them in UMRA, we cannot put them in all these things because
    they are independent of the executive agencies and independent
    of Congress, and it is always they are independent of who. I
    think we have lost the why they were created, because they were
    supposed to be non-political, supposed to give faster judgments
    with greater expertise than what the Federal courts could do or
    other entities.
        They were going to be specialized in their area to be able
    to get faster, non-political responses, and now we have
    independents like the FCC where it is really a five-member
    board, that three members are selected by the president's party
    and by the president, and so they are not non-political, they
    are not faster, and they are not cheaper.
        And so we are back to the same issue. We still have these
    independent entities that Congress seems to argue about who are
    they independent from and we have lost the why that they ever
    existed as an independent. And I think the argument really
    boils down to a philosophical argument of if we are going to
    determine what to do with the agencies that are creating
    billions of dollars in regulatory schemes and giving answers to
    people based on statutes that we are at a loss to figure out
    where it connected actually to statutes, then we have to figure
    out if they are really independent.
        Independent of who? Is it independent of Congress,
    independent of the executive branch, independent of the
    Judicial Branch, independent of the American people? Who are
    they independent of, and then how are they going to actually be
    formed? I know that may be a bigger philosophical argument, but
    we have not resolved that basic question, quite frankly, as a
    Congress, and if we can ever resolve that issue, I think it is
    going to go to the next step.
        Do we need agents to have better independent agencies
    anymore, and if we do, how do we reform them? Because they are
    not functioning as apolitical bodies any more. They very much
    seem to have a political agenda in their timing and their cost
    seems to be equated to other Federal benches. Mr. White.
        Mr. White. I agree with all of that. And if I may add a
    further point, as I said earlier, I think the trend line is in
    the wrong direction with respect to independence from Congress.
    Independence from the president raises a whole host of
    questions in and of itself, but independence from Congress
    should not be a question at all. These agencies should be
    accountable.
        But in recent years, from Sarbanes-Oxley to the Affordable
    Care Act to Dodd-Frank, the move has been to make these
    agencies structurally independent from Congress, and that is
    very dangerous, and not just for these particular agencies but
    going forward. The New Deal era agencies and the ones before,
    from the Federal Trade Commission (FTC), the FCC and so on,
    they basically set the paradigm for the next 60 years or more.
    That defined what the benchmark for independent agencies would
    be. And if Congress does not take steps to correct the
    structural mistakes that it made, with all due respect, in the
    Sarbanes-Oxley Act, the Affordable Care Act, and Dodd-Frank in
    making these agencies even more independent, that will become
    the paradigm for independent agencies going forward. The next
    independent agencies will not be modeled on the FTC. They were
    modeled on, for example, the CFPB. I think that is very
    dangerous.
        Senator Lankford. And the CFPB, as of now in Oklahoma, 24
    percent of our commercial banks no longer do home mortgages
    strictly based on the issues that Consumer Financial Protection
    Bureau created these set of regulations. There is so much
    liability now, they walked away from doing mortgages. 24
    percent of our banks in Oklahoma. It is becoming more and
    difficult, especially in rural areas of my State, to be able to
    get a home loan because the banks have walked away from doing
    that because people have seasonal income, because their income
    does not come in every month in a predictable format that CFBP
    wants. It comes in when the crops come in or when there is a
    sale. So that seasonal income not consistent, too much risk.
    Those are things that should have been determined in a cost
    benefit analysis that should have oversight, and CFPB, as we
    all know extremely well, has no oversight.
        So I am back to the same issue. How do we get to a set of
    independents, that there is a sense that they are not
    independent of the American people? Congress created them. They
    are not independent of Congress' oversight by far. If Congress
    created them, Congress can turn it off as well. But there has
    to be some level of oversight. All of us have oversight, and if
    there is an entity that has no oversight, that is more
    independent than our Constitution ever conceived of in any
    mindset.
        Does anyone want to make a quick comment on that, just----
        Mr. Coglianese. You have asked a great question, and one of
    the reasons it is challenging, just to pick up on your last
    point about the Constitution, it really speaks to the
    independence from factions, if we go back to Madison. Both
    factional influences through political branches of government
    and through influence by private interests, through, say,
    regulatory capture-- both of those speak to the type of
    independence that is reflected in the concern that motivates
    independence for agencies.
        I think that the formal structures are not always fully
    aligned with actual independence. It was mentioned before--I
    think Chairman Lankford you mentioned the comments by a
    president reflecting a policy preference for what action the
    FCC might take, and the FCC then pursuing that action. There
    are opportunities for influence, I agree, Senator Portman, for
    influence by members of either Article I institutions or
    Article II institutions to influence independent agencies.
        And there are also some executive branch agencies that
    operate with a great deal of actual practical autonomy. I think
    ultimately it is a challenging question because we are looking
    for something where there is at least independence on factual
    determinations, expert judgment. We want that to be pure and
    based on sound scientific assessment. We do not want that to be
    influenced. But on the other hand, we are a democracy and
    agencies must make value choices. The fundamental values that
    are reflected in policy choices that independent agencies make
    should indeed reflect those of the Congress and the elected
    officials.
        Senator Lankford. So should we assume that executive
    agencies then will not have bipartisan or will not have non-
    political answers that are based on sound science and only
    independence can do that? Or should we assume that for both?
        Mr. Coglianese. No, I think that is not the implication--I
    mean, the Food and Drug Administration (FDA) has historically
    had a very strong reputation for operational independence on
    making those kinds of scientific judgments.
        Senator Lankford. So I am back to the same issue. Where we
    have evolved at this point in the structure of independent
    agencies and what has happened, whether it be Mr. White in all
    of your very good analysis just on the history and what
    happened in the Reagan Administration and opting out from OIRA
    at that time and some of the decisions that have been made and
    then the acceleration since then, is there a reason that we
    should have independent agencies separate from executive
    agencies, that they have two different structures due to
    operations?
        Because as all three of you noted in your written
    testimony, it is tough to get even a definition of what an
    independent agency is. I mean, there is the 19 that are listed,
    but operationally, it is ``can the president fire the head of
    it without cause just to fire the head of it'', and ``are they
    under OIRA review'' are the basics of it. But even that has
    some breakdown in some of the agencies that are called
    independents.
        So the issue is at this point, why do we have some entities
    now under current operation that are called independent and
    some are called an executive and have two sets of rules under
    them when they are all processing the same regulations? Mr.
    White.
        Mr. White. While we are talking now about rulemaking, it is
    important to keep in mind that independent agencies do a lot of
    adjudication. The FTC and some of the other agencies do a lot
    of case by case adjudication. That really was in the core
    function of independent agencies at their origin, and I do
    think some measure of independence, a limited measure of
    independence is important for those functions.
        And another word----
        Senator Lankford. But independent from who at that point?
        Mr. White. Right. Again, at that point, it is independent
    from direct control and decision by the president, or at least
    insulation from it. And I am not saying that the president is
    constitutionally barred from getting involved in that. I am
    just saying I understand why that is a specific subset of
    agency action that might justify some measures----
        Senator Lankford. Because it is more judicial?
        Mr. White. It is more judicial. As they used to say, it is
    quasi-judicial, which was the whole justification for their
    independence, and the Humphrey's Executor case that recognized
    agency independence. And I will say with the independent
    commissions, when you have a multi-member structure, that does
    help build in an internal check and balance, right? At the very
    least, when the FCC makes a decision, you might have two
    dissenting commissioners who, like judges on a court, are going
    to have dissenting opinions and in some limited ways, force a
    dialogue within the agency.
        I think that is a very important and very good aspect of
    independent regulatory commissions, that they have that multi-
    member body. And so that is a useful function, especially in
    that quasi-judicial context.
        Senator Lankford. So how are they functioning different
    than an administrative law judge, which is also quasi-judicial,
    but they are in executive agencies?
        Mr. White. Well, that is a very fair point. I might say in
    the independent agencies, it is like the difference between a
    court of appeals and district court judge. An administrative
    law judge (ALJ) makes an independent decision and then it goes
    on to the multi-member head. But you are right, in the
    executive agencies, that is a very good question why that
    should go directly to an executive branch official.
        Senator Lankford. Other thoughts?
        Mr. Gasaway. I will just say that I think you are hitting
    the nail right on the head, and I think these are very, very
    complicated and critical issues and I do not have a blithe
    answer to them other than just to say that I do worry about
    giving too much in legislation and trying to extend this,
    because if you extend it only in a way that preserves too much
    independence, you are in a sense sending a signal that they
    really are independent.
        Senator Lankford. Yes, and that is really the concern for
    me, is that we are creating more and more sense that they
    really are truly independent of everyone, and with no
    accountability, we have a big issue. When you get to CFPB, that
    their funding does not connect to Congress, their oversight is
    not here, there is no oversight in the presidency, no board
    even to be able to check a single member of that same leader,
    you really have created a fourth branch of government in some
    ways that has very little to no restrictions around them. And
    even if they want to reinterpret some of their own originating
    statute, they have the opportunity to be able to do that, and
    that is a big concern for me.
        One quick question. Let me open this up for broader
    conversation, because I do not want to hog all the
    conversation. Does any of the three of you have an issue with
    codifying 12866 for both executive entities and for independent
    agencies, that that would move from being an Executive Order to
    being codified?
        Mr. White. I do not. I would welcome it.
        Senator Lankford. OK. All right. Let me open this up. I do
    not want to hog the time, because I know several others that
    may have questions and thoughts.
        Senator Portman. I think it is a very interesting
    conversation about what constitutes independence, and
    obviously, CFPB is sort of one end of the spectrum without
    having the board or commission that Mr. White talked about and
    not only that, having no appropriations. So, the congressional
    purse strings are not attached.
        Again, I think the reforms that we are talking about are
    pretty modest. One we have talked about with CFPB is how about
    an inspector general? I mean, they do not have an IG that
    relates to them and their work. It seems to me that is kind of
    a minimum thing that we should be requiring that would allow
    them to continue their independence, but to have some check on
    their work.
        But let us get back to this issue of OK, without calling
    into question the whole notion of independent agencies, the
    fact is having some sort of a way to look at the cost and
    benefits everyone seems to agree on. The question is who should
    do it? I like what Mr. Gasaway said, that there is expertise
    actually in the Federal Government to do this. Unfortunately,
    it is not at GAO, it is not at the Congressional Budget Office
    (CBO). It is not at the IGs now. It could be created. It would
    be another expense to the taxpayer, and the question is whether
    you get the kind of smart career people that are at OIRA, who I
    used to have the honor of working with, to be able to do this.
        And we are not talking about a lot of rules. I mean, again,
    this is a modest proposal. We are talking about over $100
    million per year in impact. It is roughly 12 to 15 rules per
    year. And it is advisory. And Senator Heitkamp is actually
    right on that; it is non-binding. But the agency does have to
    respond to it. So when OIRA takes this on, they have a short
    period of time, 90 days max, to do it.
        And this notion that it is going to slow everything down,
    it is just not accurate. I mean, there is a deadline and, we do
    this with the executive agencies every day. But when they do
    get a non-binding analysis back, there has to be a response
    from the agency, which is part of this accountability we are
    talking about, and it is transparent. So as taxpayers, my
    constituents get to see it. As Members of Congress, we get to
    see it. As experts, you get to see it. I do think that it would
    have a very positive effect on coming up with some standards
    that are, viewed as reasonable in terms of looking at a cost
    versus a benefit.
        There is another criticism that we have seen out there,
    which is that somehow the individual statutes that have cost
    benefit within them would be overridden. We wrote the language
    explicitly to avoid that problem. It states that, and I quote,
    ``The president may by Executive Order require an independent
    agency to comply, to the extent permitted by law, with
    regulatory analysis requirements applicable at other
    agencies.''
        This mirrors the qualifying language that is in President
    Clinton's Executive Order, the 12866 we talked about. And
    everybody, including by the way, Elena Kagan, when she was a
    professor explained that to the extent permitted, a relevant
    statute means that, you would not be overriding those statutes.
        So again, kind of to Senator Heitkamp's point, we have sort
    of gone through them. We have answered all these questions, and
    yet there just seems to be this concern out there that somehow
    these independent agencies should be able to be out on their
    own freelancing, and whatever we come up with, there seems to
    be some concern. So again, but I think we have responded to
    very specifically.
        One of the issues that is broadly talked about is that the
    accountability of independent agencies would somehow be
    reduced. To me that is also crazy. I mean, this adds more
    accountability. And I guess the argument there is that there
    would be less accountability to Congress and more to OIRA, more
    to the executive branch. Congress needs to take its role
    seriously, which this Subcommittee does, to do the oversight,
    and it should have, I think, the obvious intent of this, to
    have more accountability. And again, we would know then what
    the analysis was and how it was not meeting what OIRA does for
    all the executive branch agencies.
        So again, I thank you guys for being here. I hope that you
    will continue to work with us on this and help us to be able to
    get the word out broadly. I do think Senator Heitkamp is right.
    We sort of make all these arguments, we are not succeeding. But
    part of it is maybe we are not making the arguments as
    effectively as we could and not doing it to the American
    people, who I think would be shocked to understand that there
    is this, lack of analysis at a time when so many of our
    businesses back home tell us the regulatory burden is making it
    difficult for them to add a job, to expand plant and equipment.
    We have an economy growing at 1.5 percent. We have flat wages.
    We have a middle class squeeze that is very real out there, and
    the regulatory burden is part of it.
        You mentioned the banks in Oklahoma, they are no longer
    offering mortgages. I would like to say that the community
    banks in Ohio are consolidating. What does that mean? That
    means there are fewer loans being available at the local level
    for smaller businesses. Where there is a personal relationship,
    there is less involvement in the community, and this is a
    function of regulations.
        They tell me that with very specific numbers this is what
    they had to put aside for compliance 5 years ago, his is what
    they are doing today. And they simply cannot be competitive
    with these levels of compliance and the regulatory burden, that
    sometimes it is more than one regulator, particularly with CFPB
    being involved.
        So thank you very much for coming in. I appreciate you guys
    having this hearing, and I hope we can get this legislation
    moving in the new Congress on a bipartisan basis.
        Senator Heitkamp. I do too. The luxury that we have on this
    Committee is that we are trying to design a highway. We are not
    putting the cars on the highway. We are trying to design a
    highway that is safe, secure and accountable for agencies so
    everybody knows the rules.
        The problem that we have is we get mired down in analyzing
    this rule that someone does not like or that rule that someone
    does not like, and all of a sudden, this turns into a
    discussion about this agency or that agency. And we have not
    had a lot of good luck in saying, imagine that the president is
    of a different political party than yours. What do you want the
    rules to be? What do you want the accountability to be?
        Because this is not about partisan politics. This is about
    accountability on how we interact with the American people as
    the Federal Government. And it is enormously frustrating to
    keep--you see this very modest proposal somehow getting painted
    even in ``The New York Times'' as a huge giveaway, to some big
    corporate interest that will result in financial mayhem in 2
    weeks if we do it.
        And so we are in this highly hyper-partisan exaggerated
    world trying to make common sense rules about how we move
    forward, and no one, if they really sat down like we do on this
    Committee and analyzed the rules, analyze the growth of what is
    happening with independent agencies, would ever think that they
    should not be subject to the same kind of rules or regulations
    of other executive agencies.
        I mean, this just does not make a lot of common sense, but
    yet we have created this culture that somehow, as the chairman
    has said, that to have any kind of influence eliminates
    independence. And everybody loves independence because we all
    know what that means, independent from politics. Well, there is
    nothing in this town that is independent from politics. Get in
    the real world.
        We have to have rules that prevent overbroad political
    opinions from basically being embedded in so many of these
    rules. And so, we need to--the idea of regulatory reform has
    become so politicized that the common sense aspects of
    regulatory reform, whether it is a look back, we are working on
    a number of retroactive provisions, a number of look-back
    provisions, whether it is a cost benefit analysis which has
    progressed. From my days in law school in the 1970s, when we
    first started talking about cost benefit analysis, it was like
    this magic world.
        I think it has become much more professional. We have a
    whole society that is dedicated to improving the quality of
    cost benefit or benefit cost analysis. However, we want to
    structure that. So we just have not made the factual argument
    very well, it seems to me, because we keep running into the
    political argument. We keep running into the hyper argument.
        When we can sit down, Mr. White, and you and I nod our
    heads in total agreement about kind of where we are,
    recognizing that we may not agree on everything as a matter of
    politics, we know that we have some fertile ground here to
    actually get something done. But we are not going to get it
    done if we have the constant sniping at this, as this is just a
    way to shut down this agency or shut down that agency or
    restrict that agency.
        We are not trying to shut down, restrict, or do any of
    that. What we are trying to do is say, justify to us the
    decision that you made and the analysis that you did. And we do
    not want just you, to say do not worry, I got it. We want there
    to be someone who is changing the culture that--we all know
    that when we have accountability, we perform better, we make
    better decisions.
        And so that is the problem that we have, is that this
    enormously modest proposal was at the heart of really an op-ed
    in ``The New York Times'' before we even got the proposal off
    the ground. And, shame on us that we did not anticipate that
    this would be this controversial. It should not be
    controversial, because I just keep asking my colleagues, you
    could have a president that is not a Democrat. What oversight,
    what accountability do you want for the decisions that are
    going to be made in that case?
        And when you can answer that question, then we can get to
    common ground. But we need people to really help us kind of
    bridge these gaps and create some momentum without having a
    package that has become so highly politicized. I think we have
    the elements of a pretty good regulatory reform package that
    would in fact amend the APA, would in fact do the things that I
    think any--80 percent of people who live in the common sense
    world that we live in, and places like North Dakota would say,
    well that should be a no-brainer.
        We have 80 percent of the no-brainer stuff, but we cannot
    get political consensus here to get it done, and it is
    enormously frustrating. And I think it is because, I guess my
    family taught me that if I am failing, I should look at what I
    need to do differently. And so it is not just about these
    people cannot agree with me. It is how do I get this done in
    the face of this opposition?
        And so we are really in need of a broader kind of academic
    consensus out there that these are the five things. No matter
    which side of the political aisle you are on, how you view the
    world, these are five really good reform packages. And I guess
    that is what we are kind of asking, is how do we build that
    kind of consensus within a broad spectrum of political thought
    on what change should look like in terms of regulatory reform?
        And I cannot leave it without saying this because I think I
    say it at every one of these hearings: Congress needs to start
    doing its job. When we have things that are in litigation for
    30 years on definitional provisions of the Clean Water Act
    (CWA), maybe it is time for Congress to actually do its job and
    provide the lane or the framework for what constitutes things
    like Waters of the United States.
        And until we figure out how to do our job here, we are
    going to continue to over-delegate responsibility, I think, to
    executive and independent agencies. And then it is just a lot
    more comfortable for us to beat up on the agencies than to turn
    the finger pointing back at us to say, well, I guess we were
    not very clear in what we said. Maybe we ought to change that,
    because that is a lot of hard work. So much for my rant.
        Mr. Coglianese. May I make a comment?
        Senator Lankford. I am going to take up an offering after
    that.
        Mr. Coglianese. May I make a comment? If I could just add
    to the virtues that have been mentioned for the approach that
    Senator Portman was discussing. In addition to the modesty of
    that approach, as you said, Senator Heitkamp. There is another
    virtue that I think should go noted here, and it does address
    Chairman Lankford's question earlier about whether it would be
    appropriate to adopt wholesale Executive Order 12866. I think
    that that approach would be problematic in some of the
    institutional aspects or design aspects of 12866. In
    particular, I am just not sure how practical the conflict
    resolution mechanism would work with multi-member commissions,
    if 12866 were to become binding legislation imposed on those
    commissions. Just as a practical matter, it is hard to see the
    commissions going back and forth.
        So one of the virtues of the approach that Senator Portman
    was taking, where an OIRA review would lead to an advisory
    statement that then would need to be responded to, is that
    there is time for that, and you avoid the practical challenges
    that would be associated with a back and forth, which is how
    the Executive Order is really structured, but which is not
    going to work as well. It would be much more cumbersome with
    the multi-member commissions, and commissions by the way that
    are headed by individuals who in many cases cannot be removed
    at will by the president.
        Senator Lankford. But are often partisan placements.
        Mr. Coglianese. In some ways, one of the ironies of all of
    this is that with multi-member commissions, particularly where
    there are bipartisan requirements, but even without that, in
    any multi-member body, when you have multiple people who have
    to vote on something, that becomes a bit like a mini-
    legislative process. And there is a tension here that should
    not go unnoticed between setting up agencies that have that
    kind of collective decisionmaking structure and analysis which
    is supposed to be expert and non-political.
        So there is a deeper tension here as well. Again, that is
    why, if nothing else, I think it is important for Congress to
    go on the record in saying, if we are requiring cost benefit
    analysis in UMRA of executive agencies we could eliminate that
    exemption for independent agencies.
        Senator Lankford. I would have no issue eliminating that
    for Unfunded Mandates Reform Act because again, that was a
    compromise that was made years ago that has proved to be an
    error, because it does exempt out a whole group of folks that
    think the rule does not apply to them. Really, I think that was
    a compromise at that moment that should not have been done.
        It goes back to the same issue with the Reagan
    Administration not including OIRA connection to the executive
    branch, to those independent agencies. They could have at that
    moment. I wish they would have. But now we have several decades
    of history to be able to overcome, and I believe in some of the
    agency culture that they are independent of everyone, and they
    are not a fourth branch of government.
        We are incredibly grateful--and this is something we have
    talked about often. These are experts in the field in decisions
    that have to be made, that Congress is not the expert, the
    Federal courts are not the expert, and different agency folks
    are not the expert. These folks are, and we are grateful they
    are serving the American people in that spot. But there is a
    need to have accountability in every part of that, and I think
    that is the issue. You cannot be independent of everyone. There
    has to be a built-in accountability structure.
        Senator Heitkamp. And it is not even accountability. It is
    transparency.
        Senator Lankford. True.
        Senator Heitkamp. So who knew? I mean, how do you even have
    accountability when you do not know the rationality or the
    rationale--why they made decisions that they made.
        Senator Lankford. And that is the lowest tier on the
    judicial review.
        Senator Heitkamp. Right.
        Senator Lankford. It is just ``did you do everything you
    said you were going to do'' ? Not even do we agree or disagree
    with it. Did you check the boxes to actually work through to be
    able to get the information? Can we see the homework?
        Senator Heitkamp. It just seems to me that we are in a
    hyper-partisan environment dealing with an issue that should
    be, very bipartisan and very clear what rules we want to
    guarantee, that all sides have an opportunity to be heard and
    that we actually have a foundation in which to judge the
    decisionmaking that went into, in many cases, very expensive
    determination. And we just cannot get there because we get
    mired down in individual cases that then become, oh, you do not
    like this agency or you do not like that person, that is why
    you wanted to change the rule.
        That is not why I want to do any of this. It is not because
    I do not trust anyone or I do not like anyone. It is that I
    believe that we have a responsibility in the U.S. Senate and in
    this Congress and in this government to hold agencies and
    government decisions accountable and to understand why they
    decided what they decided. And I think they will, Mr. White,
    make much better decisions when they know that there is someone
    who is going to have the ability to judge the judgers, and that
    is the challenge we have.
        Mr. Gasaway. OK, now I will try to give you a practical
    solution. I gave you my political solution. The only thing I
    can think of would be to have it take effect some years in the
    future, if you say, I do not know who is going to control
    Congress the next day, I do not know who is going to be
    president. All I know, next date I want this to be the rule,
    because whoever is in those positions now.
        Senator Heitkamp. So then it does not become personal.
        Mr. Gasaway. So it does not become personal. It does not
    become partisan. If people say you are taking a shot at my
    former colleague Rich Cordray, you say, I do not know what Rich
    is going to be doing the next date. This is not about Rich.
    This is not about anybody else. So that is my only practical
    suggestions, Senator.
        Senator Heitkamp. Yes.
        Mr. White. It is about the third time in this hearing that
    Rob has beaten me to the punch on a good idea. I would like to
    reiterate that, that independent agencies are doing a lot right
    now and they will be doing a lot in coming years. If the
    legislation even said we are not going to go into effect for
    eight, 12 years, I will still take that. I think that would be
    a great improvement, because it gets around this problem of the
    immediate political ramifications.
        But one other point, Senator Heitkamp, that you raised a
    little bit ago, and I really do not want to let it go by, where
    you said about Congress doing its job. So much of Congress'
    relationship to the issue of independent agencies and the
    administrative state in general comes back to appropriations. I
    ended my written statement with a quote from Madison,
    Federalist 58, the power of the purse. It is hard for me to go
    through any one of these, writing a testimony like this without
    quoting that. It is so important, the power of the purse.
        And I think meaningful regulatory reform requires not just
    reforming the Administrative Procedure Act requirements. It is
    about seriously rethinking the way that appropriations work
    with the agencies. And now we are obviously biting off
    something even bigger than just administrative law. But the
    appropriations process right now, this annual sort of race for
    a single vote on a budget, almost a cliff scenario of solving
    the funding for agencies that really does complicate even more
    the problems of Congress' oversight of agencies.
        And when there comes a day when Congress is appropriating
    the agencies in a much more iterative process, much more tied
    to legislation and oversight, I think that is important,
    because at the end of the day, Congress' job involves
    legislation and the appointments process and the appropriations
    process, and all three of those are crucial in Congress doing
    its job.
        Senator Lankford. By the way, there are some proposals that
    are floating around now that a group of us have floated on
    reforming the budget process. If anyone is keeping score on
    this, it has been 20 years since Congress has passed a budget
    without a CR before it. Since 1974, when the Budget Act was
    passed, the Budget Act has only worked four times since 1974.
    So at some point, Congress has to admit that post-Watergate
    process that was created did not work as they hoped it would,
    and it does have to be reformed.
        But that is a different hearing for a different day.
        Senator Heitkamp. The Budget and Impoundment Act, we are
    going to repeal it?
        Senator Lankford. We can fix it.
        Mr. Coglianese. One other, if I may, outside the box
    suggestion that I think is feasible to consider, but it is a
    long-term strategy as well, and that is to foster research. Let
    us just not there are just very clear research limitations well
    at issue in getting better analysis at these agencies. And I
    know that we have been talking here about legal structures and
    organizational structures that might encourage agencies to
    produce that work themselves.
        But there is another way of thinking about this, not
    mutually exclusive, but another way, that would say let us
    also, at the same time we are thinking about institutional
    structures, think about other ways of resolving some of the
    fundamental research questions that need to be answered in
    order to do good prospective analysis of financial regulation.
        Now, there is a big debate right now in the academic
    literature about whether financial regulation can be subjected
    to meaningful benefit cost analysis, whether we can actually
    get good estimates or not. And there is one side that sort of
    says ``no, it is just not even possible'', and there is another
    side that says, ``yes, it is feasible''.
        I think even the side that says it is feasible would agree
    that we are not anywhere near the level of sophistication or
    rigor in understanding the implications of financial
    regulations and how they affect financial markets to be able to
    make reliable forecasts as often as we would need to in order
    to get analysis to a level where some of the best executive
    agencies have it.
        I know from having taught environmental law that in the
    early days, in the 1970s, there were lots of analytical
    questions that were unanswered, and we just did not know a lot.
    Part of the reason why today we have much better consensus
    about how to estimate the benefits and costs of environmental
    regulations, is in part because of work that agencies have
    done, but it is also in part of funding and studies that have
    been done by the National Academies of Sciences and funding
    through the National Science Foundation. And to the extent that
    those institutional avenues could help. I do not think they
    should be neglected. They could be used to bring up the level
    of the state-of-the-art thinking about these issues. Then it
    will be harder for agencies to say, well, we just do not know
    how to do this.
        And part of what they are saying today is ``we are not
    required to do it'', but ``we do not know how to do it'',
    ``there is not enough time'', ``we do not have the tools yet''.
    Let us build a collective knowledge base then. That is
    something that could be done wholly apart from administrative
    law reforms through targeted and strategic funding initiatives
    through other scientific enterprises.
        Senator Lankford. I think you could also accomplish some of
    those same things with advanced Notice of Proposed Rulemaking
    and get more people at the table earlier and so that they
    actually receive input from people that are affected. If you
    get the people that are affected at the table, they can give
    you a pretty good estimate of how it is going to actually--I
    cannot even begin to tell you the number of times I have talked
    to someone in business that said, X, Y, Z Agency estimated it
    would cost this much, just our business, it will cost three
    times that, just for our business not counting everyone else.
        And so when you do not get all the people at the table
    early with advanced Notice of Proposed Rulemaking, then you get
    a best guess from academics rather than from practitioners.
        Mr. Coglianese. Some of the questions might though take
    years to resolve. So I mean, one issue in the environmental
    context, how do you value the benefits of reducing air
    pollution over the Grand Canyon? There is not a market that one
    could refer to; you would normally like to use market values to
    input into a benefit analysis there.
        So there have been years of study of what are called
    contingent valuation techniques and a consensus emerging over
    that. And similar questions arise in other areas of regulation
    that need answers, and there are opportunities, I think, to
    make progress in those areas, as well.
        Senator Heitkamp. But there also is an opportunity for
    everybody to recognize that some benefits cannot be monetized.
    And so, I think that everybody thinks that we are trying to put
    monetary values on things like a view shed, what does that mean
    that we can still see the Grand Canyon as a country? That has
    value. That is not easily monetized, but we can all agree it
    has intangible value, right?
        Mr. Coglianese. Oh, absolutely. And this is one of the
    things, in going forward legislatively that I would urge you to
    think about retaining in 12866 and in UMRA, which is a
    recognition that it is not always possible to get good
    estimates of these things, and that benefits should justify the
    cost, but that does not necessarily mean that we always have
    fully monetized benefits that outweigh fully monetized costs.
    There are sometimes going to be decisions that regulators have
    to make in the face of uncertainty.
        Senator Lankford. So quick comment on that, then I want to
    be able to wrap this up. We are at 11:30 and I appreciate
    everyone's time.
        Cost benefit analysis, as several of you have brought up,
    is to inform rather than to check the box and to justify. It
    should not be the we want to do this regulation and so we are
    going to create a cost benefit analysis that then benefits the
    regulation that we want to create. It should inform to say we
    are thinking about this. We go and check it and say, you know
    what, that is not a good option. Let us look for other options,
    and I think we are missing that.
        And some of the conversation and some entities, it seems to
    be a justification to do what they want to do rather than
    informing the best solution. The intent of it was, is this the
    best option. If we go down this track and the cost is so high
    and the benefit does not seem to do it, then let us find other
    alternatives to do it.
        So at some point, I hope we can get back to that, where it
    is an educational experience and a targeting different options
    rather than a justification to be able to do what we want to
    do. There are some pieces of common ground that I heard today
    from all of us in this conversation. There are things that I
    hope that we can continue to build on on these issues.
        Let me open this up to final comments that anyone wants to
    be able to have on some of the issues. Mr. Gasaway, I just want
    you to know, I showed my absolute best restraint not to drift
    into a ``Chevron'' deference conversation when you had a
    significant part of your written testimony dealing with
    ``Chevron,'' which we will reserve for another day. But I do
    appreciate your comments in your written testimony adding to it
    and referring to other things. We appreciate that as an
    unresolved issue. But again, another conversation for another
    day.
        Any other comments? Mr. White.
        Mr. White. Just on your last point, I think it is very
    important, like you said, that on the one end, it cannot just
    be a box-checking exercise. That 2011 CFTC inspector general
    report I cite is just devastating, where the CFTC repeatedly
    treats economic analysis as a caboose on the process, run by
    lawyers more than economists.
        At the other end, it is important that the economist not
    get so fixated on technical precision that they lose sight of
    the bigger picture. I studied economics in college and the old
    joke was an economist is someone who knows the price of
    everything but the value of nothing. And I think that that is
    important here, that at the end of the day, cost benefit
    analysis, the numbers are important, but the most important
    thing is the process and the exercise of thinking through these
    things rigorously to inform the value judgments.
        Mr. Coglianese. And if I may add also one thought about
    that, which I agree completely. The goal of the analysis should
    be learning and informing and making better decisions. That is
    just another factor that would weigh in favor of an approach
    that would have less of a hammer behind it, rather than more of
    a hammer. That is, if you want agency officials really to
    internalize and take seriously and act earnestly to use
    analysis to learn, they have to own it. And there is a risk,
    and we know this from a variety of research on performance
    measurement in organizations, that once you put high stakes
    associated with measurement, then you create incentives for
    gaming and box checking and not doing what, Chairman Lankford,
    you so rightly said, taking it seriously to make better
    decisions, to learn and not just to cover up and paper over
    decisions you already want to make.
        Senator Heitkamp. Just one more observation, and I think
    when you get down to it, this is not an exact science. And if
    people want to kind of say, you missed the boat. But the other
    piece of this that is so critical, and it goes back to the
    other pieces we are trying to pull together, is the
    retrospective review. And so we have a bill that received
    unanimous approval in the Committee that would require every
    new major rule have a provision in it that was noticed. That
    would require retrospective review within the provisions of
    that new rule.
        We have to deal with the body of work that is out there,
    but if we do not have retrospective review, we do not learn
    about the mistakes that we made in the last cost benefit
    analysis, and so we do not improve the quality of that work
    overall, because there is never a look back or a judgment.
        And so these are--we keep trying to compartmentalize these,
    but the package itself is what is going to get us where we need
    to be. And we laugh because the one area where we probably have
    some of the most interesting discussions between the chairman
    and the ranking member is ``Chevron.'' So just to give you a
    little insight.
        Senator Lankford. Just needs to be fixed, that is all it
    is. Just one little word change.
        Senator Heitkamp. I guess we all agree with you, right?
        Senator Lankford. How about just switching it judicially to
    ``probable construction''. Just that would probably fix this.
    But that is a whole different conversation.
        On the OIRA conversation as well and the cost benefit, the
    benefit of going through OIRA with everybody is cumulative
    effects. If independents are independent, we cannot get
    cumulative effects, and everyone says all these regs came down
    at different times, different deadlines, different authorities.
    Nothing seems to be coordinated. It is one of the many reasons
    independents need to go through OIRA, so someone can check
    cumulative effects. And it is very helpful to have somebody
    just talk and say, great, what other options did you look at,
    and how did the cost benefit work on the other options. That is
    a tremendous benefit just to have that conversation that
    currently we do not get.
        But hopefully in the days ahead we can, because as I remind
    everyone, independents are not independent of the American
    people. They are still all a part of us and we are grateful
    that they serve the way they do, but we have to all be
    connected and get on the plane together.
        So with that, thank you very much for your testimony and
    your preparation. I look forward to an ongoing conversation in
    the days ahead. I hope you will maintain the ongoing
    relationship you have with us and with our staff so we can get
    a chance to gather your ideas in the days ahead.
        Let me do a final closing statement. I think I have to get
    some deadlines in here. The next time that we are together as a
    subcommittee is the 22d of September. We will continue our
    examination of agency use of regulatory guidance in a hearing
    titled ``Continued Review of Agency Regulatory Guidance, Part
    3.'' At the upcoming hearing, it will be the Department of
    Education, Department of Labor, and the Office of Information
    Regulatory Affairs, which we have discussed at length today.
        That concludes today's hearing. I would like to thank all
    of our witnesses. The hearing record will remain open for 15
    days, to the close of business on September 23rd for the
    submission of statements and questions for the record. This
    hearing is adjourned.
        [Whereupon, at 11:38 a.m., the Subcommittee was adjourned.]

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