    [Senate Hearing 114-418]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-418

                    TOWARD A 21ST CENTURY REGULATORY SYSTEM

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

                                    HEARING

                                   before the

                                  COMMITTEE ON
                   HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               FEBRUARY 25, 2015

                                   __________

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

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

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            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

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

                        Keith B. Ashdown, Staff Director
           Patrick J. Bailey, Chief Counsel for Governmental Affairs
                         Satya Thallam, Chief Economist
                  Gabrielle A. Batkin. Minority Staff Director
               John P. Kilvington, Minority Deputy Staff Director
                 Katherine C. Sybenga, Minority Senior Counsel
         Troy H. Cribb, Minority Chief Counsel for Governmental Affairs
       Lawrence B. Novey, Minority Chief Counsel for Governmental Affairs
                         Laura W. Kilbride, Chief Clerk
                       Lauren M. Corcoran, Hearing Clerk

                                C O N T E N T S

                                     ------
    Opening statements:
                                                                       Page
        Senator Johnson..............................................     1
        Senator Carper...............................................     2
        Senator Lankford.............................................    18
        Senator Ernst................................................    21
        Senator Portman..............................................    23
        Senator Heitkamp.............................................    27
        Senator Ayotte...............................................    30
    Prepared statements:
        Senator Johnson..............................................    43
        Senator Carper...............................................    44

                                   WITNESSES
                          Wednesday, February 25, 2015

    Douglas Holtz-Eakin, Ph.D., President, American Action Forum.....     5
    Jerry Ellig, Ph.D., Senior Research Fellow, Mercatus Center,
      George Washington University...................................     7
    Michael Mandel, Ph.D., Chief Economic Strategist, Progressive
      Policy Institute...............................................     9
    Hon. Sally Katzen, Professor, New York University School of Law,
      Former Administrator of the Office of Information and
      Regulatory Affairs at the Office of Management and Budget......    11

                         Alphabetical List of Witnesses

    Ellig, Jerry, Ph.D.:
        Testimony....................................................     7
        Prepared statement...........................................    56
    Holtz-Eakin, Douglas, Ph.D.:
        Testimony....................................................     5
        Prepared statement...........................................    47
    Katzen, Sally:
        Testimony....................................................    11
        Prepared statement...........................................    72
    Mandel, Michael:
        Testimony....................................................     9
        Prepared statement...........................................    62

                                    APPENDIX

    Chart submitted by Senator Johnson...............................    46
    Responses to post-hearing questions for the Record:
        Mr. Holtz-Eakin..............................................    86
        Dr. Ellig....................................................    89
        Dr. Mandel...................................................    95
        Ms. Katzen...................................................    99

                    TOWARD A 21ST CENTURY REGULATORY SYSTEM

                                  ----------

                          WEDNESDAY, FEBRUARY 25, 2015

                                         U.S. Senate,
                               Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:06 a.m., in
    room SD-342, Dirksen Senate Office Building, Hon. Ron Johnson,
    Chairman of the Committee, presiding.
        Present: Senators Johnson, Portman, Lankford, Ayotte,
    Ernst, Sasse, Carper, Heitkamp, Booker, and Peters.

                 OPENING STATEMENT OF CHAIRMAN JOHNSON

        Chairman Johnson. This hearing will come to order.
        I want to welcome all the witnesses. Thank you for your
    thoughtful testimony, and I am looking forward to this hearing.
        Coming from a business background, I have done a lot of
    strategic planning, and I have thought about this in terms of
    the Federal Government. In a business setting, I know a lot of
    people here in Washington have not heard of a strengths,
    weaknesses, opportunities, and threats (SWOT) analysis. And, if
    you were to do a SWOT analysis on the American economy, it is
    actually pretty easy to do.
        From my standpoint, the greatest strengths we have in this
    Nation is we are the world's largest economy. If you are a
    manufacturer, and I come from a manufacturing background, you
    want to be close to your customers. So, it is a huge economic
    advantage we have in this country. And, then, we have
    relatively low energy prices. Also from a manufacturing
    background, if you are going to manufacture things, you need
    power. Cheaper power is better than expensive power. We should
    try and do everything we can to lower the cost of energy. And,
    so, those are our strengths.
        Our weaknesses, well, a huge weakness is the subject of
    this hearing here today, our regulatory burden. It is huge,
    and, of course, we have a very uncompetitive tax system. I do
    want to put up a chart\1\ that, I think, pretty well describes
    what business organizations, what any organization is up
    against in terms of trying to expand, trying to create good
    paying jobs. It is the regulatory burden.
    ---------------------------------------------------------------------------
        \1\ The chart referenced by Senator Johnson appears in the Appendix
    on page 46.
    ---------------------------------------------------------------------------
        Now, I realize the numbers from the National Association of
    Manufacturers, of the Competitive Enterprise Institute in terms
    of their estimate, their cost estimate of how much it costs per
    year to comply with the Federal regulations, I realize those
    are estimates. I realize people dispute that. But, I think it
    is still good to put that estimate up against the size of our
    economy, just to put it in perspective.
        So, whether you agree or disagree, the regulatory burden is
    huge. These estimates are somewhere between $1.75 and over $2
    trillion per year. Now, compare that to the size of the
    American economy. Last year, it was $16.8 trillion. So the
    regulatory burden, potentially--again, this is a projection--
    potentially could be more than 12 percent the size of our
    economy. That is a massive burden on job creators and we need
    to recognize that is a huge weakness.
        That is something that this Committee can really
    concentrate on, because there have literally got to be
    thousands of regulations that are hampering the ability of
    businesses in red States and blue States, and certainly what I
    have asked the Members of this Committee is, let us identify
    those. Let us work together. We do not have to ask anybody to
    violate their principles. We can find those areas of agreement
    for regulatory reform, whether it is streamlining, modernizing,
    just outright eliminating those regulations, it would be very
    helpful to our American economy.
        The last point I want to make in terms of the actual size
    is we have listed the GDPs, the size of the economies of the 10
    largest economies in the world. You will notice our regulatory
    burden is as large as all but 10 economies in the world. I
    mean, that is what we are burdening job creators with and I
    think that is a pretty significant burden.
        I do want to point out that Senator Lankford is here. I
    appreciate that. He is going to be chairing a Subcommittee of
    this Committee that is really going to be focusing on
    regulatory reform. So, this is sort of the Committee-level
    kick-off meeting, let us put it that way, and Senator Lankford
    is really going to be lasering in on this and, again, trying to
    find those areas of agreement, so I appreciate that, and you
    will be sitting in the chair here for a few moments while I go
    to the Budget Committee.
        The last point I want to make, to indicate the level of
    burden here, and again, this is not perfect, but if you take a
    look at the number of Federal Register pages published--now,
    this is actually published versus what is the Federal
    regulations in a particular year--on an annual basis, during
    the FDR administration, it was about 15,000 per year. Under
    Nixon, it was 45,000. Today, we are publishing about 80,000.
    So, we are just kind of ramping up this potential problem.
    Again, just trying to put some perspective to the regulatory
    burden. I think Mr. Holtz-Eakin will speak a little bit more to
    some of these metrics.
        With that, I will turn it over to our Ranking Member.

                  OPENING STATEMENT OF SENATOR CARPER

        Senator Carper. Thanks, Mr. Chairman.
        It is very nice to see you all today. Thank you so much for
    coming, for preparing, and for presenting, and for responding
    to our questions. I think we are going to have a good
    conversation and a timely one, as well.
        I heard of the word aphorism earlier this week. You do not
    hear that word every day. It is a fairly simple statement that
    conveys a principle, a hopefully significant principle. And,
    one of my favorite aphorisms is about job creation. Guys like
    me, people who serve in these roles, we do not create jobs. I
    was a Governor for 8 years. A lot of jobs were created in my
    State during those 8 years. I did not create them. Presidents
    do not create jobs. Mayors do not create jobs. What we do is
    create a nurturing environment for job creation. That is the
    aphorism. Help to create a nurturing environment for job
    creation.
        That includes access to capital. That includes reasonably
    priced electricity, health care. That includes public safety,
    transportation infrastructure, cybersecurity protection,
    protection against those kinds of attacks. Somebody who is
    going to bat for us to make sure we can export our goods and
    services into foreign markets, all that stuff. Part of it is a
    reasonable tax burden. But, also, part of it is common sense
    regulations, and that is all part of the nurturing environment.
    And, we have to find the right balance in a lot of those, and
    today's hearing, I think, will help us find that balance.
        I thank the Chairman for bringing us here and thank all of
    my colleagues for joining us here today. I think it is an
    important hearing because regulations are important. We issue
    them for a number of reasons, including to better protect our
    health, our safety, our environment, and the economy. So,
    whether or not we are aware of it, regulations do play a role
    in our daily lives, a necessary role, not always, but usually
    in a positive way.
        We enjoy the benefits of regulations every time we have a
    drink of water, every time we drive a car or go to the bank.
    And, while there may be disagreements on occasions about
    certain rules, I believe everyone generally agrees that some
    regulation is necessary and good.
        It is important to note that regulations sometimes come in
    response to court orders. People go to court and they sue
    because they feel like an agency is not complying with a law
    that has been passed and the courts order regulations to be
    either issued or modified.
        Regulations also exist because we pass and the President
    signs a law that draws lines between what is acceptable and
    what is not in our society, and that directs an agency to take
    a certain action.
        But, those of us in Congress cannot legislate every detail
    of a particular matter, even if we tried, and legislative
    language cannot possibly take into account every situation that
    may arise as a result of enactment of a law. So, we have to
    leave some of the details to the regulatory process. And,
    sometimes, the way we write the laws, we make that very
    difficult, as you know.
        The regulatory process can be time consuming. It is also
    more difficult to understand and follow than the legislative
    process, and that is saying something. It should be our goal,
    though, to have the most effective, efficient, and transparent
    regulatory process we can have and to ensure that process
    results in common sense regulations that achieve the objectives
    laid out in the laws that we have passed in this Congress.
        While some people think we need to choose between
    regulations and having a robust, growing economy, I think that
    is a false choice. We do not have to make that choice. But, it
    is important that what do we say in the Constitution, the
    Preamble to the Constitution, ``In order to form a more perfect
    Union.'' It does not say a ``perfect Union,'' a ``more perfect
    Union.'' So, our goal should be to try to pass laws that enable
    us to use common sense and provide common sense legislation
    and, hopefully, common sense regulations to accompany those.
        For example, by advocating a common sense, cost effective
    approach to our Nation's environmental and energy challenges,
    we can reduce harmful pollutions. We can live healthier lives.
    We can lower our energy costs. And, we help put Americans to
    work manufacturing new products. Regulations also often provide
    the stability and predictability that businesses need, and they
    can help instill consumer confidence in the products they buy.
        Of course, many regulations do, by necessity, impose
    requirements and additional costs on businesses and others that
    must comply with them. And it is not always easy for those of
    us who want to participate in the process to have a say in a
    regulation they may be interested in as it is developed and
    finalized. So, I believe it is also important to conduct
    oversight of the regulatory process to ensure that we try to
    reduce burdens and ensure transparency where we can while
    achieving the greatest public benefit.
        I have been encouraged by the Administration's work in this
    area. I have also been impressed by the personal commitment the
    President has shown to his administration's efforts to identify
    existing regulations that should be reexamined or even
    repealed. It is my understanding that these retrospective
    reviews have already identified ways to reduce burdens and to
    save billions of dollars, and I expect these look-back efforts
    to continue to bear fruit.
        Finally, as I often say when it comes to issues like this
    that come before our Committee, we need to figure out what
    works and do more of that. That is another aphorism. But, this
    applies to regulatory reform, as well, and I hope that as our
    Committee continues to discuss these issues, we take a real
    look at this process, and that the Administration's ongoing
    efforts to acknowledge what is working and help them do more of
    it.
        I want to thank our Subcommittee Chairman over here on my
    left flank for his commitment to working on these issues, as
    well, and we look forward to the fruits of your labors.
        Thanks, Mr. Chairman.
        Chairman Johnson. Thank you, Senator Carper.
        Let me quickly introduce the witnesses before I swear them
    in. Our first witness will be Douglas Holtz-Eakin. He is the
    President of the American Action Forum. He has previously
    served as Commissioner on the congressionally chartered
    Financial Crisis Inquiry Commission, an economist at the White
    House Council of Economic Advisors, and as Director of the
    Congressional Budget Office from 2003 to 2005.
        Our next witness will be Jerry Ellig, a Senior Research
    Fellow at the Mercatus Center at George Mason University. He
    has previously served as Acting Director of the Office of
    Policy Planning at the Federal Trade Commission and as Senior
    Economist for the Joint Economic Committee.
        Our next witness will be Michael Mandel. He is the Chief
    Economic Strategist at the Progressive Policy Institute and
    President of South Mountain Economics. He was previously Chief
    Economist at Business Week.
        And, our final witness will be Sally Katzen. She is a
    Visiting Professor at NYU Law School and a Senior Advisor at
    the Podesta Group. She has previously served as Administrator
    of the Office of Information and Regulatory Affairs and Deputy
    Director for Management of the Office of Management and Budget.
        It is the tradition of this Committee to swear in
    witnesses, so if everybody would rise and raise their right
    hand.
        Do you swear the testimony you will give before this
    Committee will be the truth, the whole truth, and nothing but
    the truth, so help you, God?
        Mr. Holtz-Eakin. I do.
        Dr. Ellig. I do.
        Dr. Mandel. I do.
        Ms. Katzen. I do.
        Chairman Johnson. Thank you.
        We will start with Mr. Holtz-Eakin.

    TESTIMONY OF DOUGLAS HOLTZ-EAKIN,\1\ PH.D., PRESIDENT, AMERICAN
                              ACTION FORUM

        Mr. Holtz-Eakin. Well, thank you, Mr. Chairman, Ranking
    Member Carper, Members of the Committee, for the privilege of
    being here today to talk about Federal regulatory reform. You
    have my written testimony. Let me just touch on three points
    briefly and then I look forward to answering your questions.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Holtz-Eakin appears in the
    Appendix on page 47.
    ---------------------------------------------------------------------------
        Point No. 1 is that, as the Chairman has pointed out, the
    regulatory burden continues to grow. If you look, for example,
    at the paperwork burdens of cabinet-level agencies since fiscal
    year (FY) 2000, they have increased by 30 percent. They are now
    9.3 billion hours. And if you look at 2010 as an example, in
    that year, there were 100 major rules, which is the most in the
    history of the Congressional Review Act. These are strikingly
    large regulatory initiatives.
        The second major point I would like to make is that those
    kinds of measures only scratch the surface of the implications
    of the regulatory burden. Like taxes, which people are very
    familiar with, regulations have a burden on the economy and
    they distort the natural organization of the economy and make
    it less efficient. We have seen examples of this in recent
    years, as well.
        Since 2008, the American Action Forum estimates that we
    have increased the annual regulatory burden by about $100
    billion in annualized costs. For perspective, that increase
    exceeds the higher estate taxes, capital gains taxes, dividend
    taxes that were part of the 2010 so-called fiscal cliff. And,
    so, these are an important impact on the economy.
        And, they will do two things. No. 1, they will be paid for
    by someone in the U.S. economy. It will show up in the form of
    higher prices for products. It may show up in part as lower
    wages paid or fewer people hired. Or, it could be less capital
    investment and lower profits. But, this cost will be borne by
    the economy and the American public in some form.
        And, the second thing it does is it does shift the
    composition of economic activity and the regulations in that
    way make our economy less efficient than it would otherwise be.
    If you look, for example, at some important prices that
    Americans pay, the $100 billion increase since 2008 has
    translated into about $3,100 increase in the price of a
    passenger vehicle. It is a $360 increase in the mortgage for
    every mortgage every year. It looks like about $135 a year in
    higher energy costs for Americans, or $108 a year in higher
    health care costs for Americans. These are price impacts of the
    increased regulatory burden we have seen just since 2008.
        The other kind of example of the impact of regulations, you
    can look in the State of Ohio as a random example, Senator
    Portman, and since--the BLS reports that there have been 1,100
    fossil fuel electricity jobs lost in the State of Ohio, while,
    on the flip side, we have seen employment in solar energy
    employment rise sharply. That is the regulatory results of
    shifting the composition of activity away from what the market
    had otherwise established. Those are important implications for
    the scale of regulation in the United States.
        So, the things that I would recommend to the Committee and
    to your efforts, Senator Lankford, would be to have some
    principles for regulatory reform, and first and foremost would
    be to codify the various Executive Orders (EO) that have
    existed for a long time and to insist on benefit-cost analysis
    in every Federal agency, including the so-called independent
    agencies, not going on at the moment. And, allow for judicial
    review if the agencies fail to conduct legally required
    analyses. At the moment, there is literally no penalty for
    violating the order to conduct a benefit-cost analysis.
        It would be useful to insert principles in future
    legislation that say there will be time lines for the
    regulatory implementation of this legislation. There will be a
    requirement for benefit-cost review. And, there will be limits
    on the amount of regulation that the legislation is about to
    produce. Those would provide for a better system.
        And, then, there should be a more formal process of
    retrospective review than the one we have at the moment. I know
    other witnesses are going to talk about that.
        The last thing I would say is to note that the United
    States is not alone. I thought the chart was very important in
    this regard. The other nations on that chart, the United
    Kingdom, the OECD countries, have all recognized the importance
    of regulatory review and reform and they are undertaking
    serious efforts to minimize their regulatory burden. I think
    the United States should follow suit, and I look forward to
    working with the Committee in that regard.
        Thank you.
        Chairman Johnson. Thank you, Mr. Holtz-Eakin.
        Our next witness is Dr. Ellig.

      TESTIMONY OF JERRY ELLIG, PH.D.,\1\ SENIOR RESEARCH FELLOW,
                MERCATUS CENTER, GEORGE MASON UNIVERSITY

        Dr. Ellig. Thank you, Chairman Johnson, Ranking Member
    Carper, Members of the Committee. I am also happy to be able to
    be here and talk with you today about regulatory reform, and
    particularly the role of regulatory impact analysis in
    regulatory reform.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Dr. Ellig appears in the Appendix on
    page 56.
    ---------------------------------------------------------------------------
        I work at a university. That means I am for knowledge and I
    am against ignorance. I think that the regulators and other
    decisionmakers have a moral responsibility to make decisions
    based on actual knowledge of the likely effects of a regulation
    and its alternatives, not just based on intentions or
    assumptions. A decisionmaker's failure or refusal to obtain
    this information is a willful decision to act based on
    ignorance.
        The tool that generates and organizes our knowledge about
    the effects of regulation and alternatives is called regulatory
    impact analysis. Unfortunately, regulatory impact analysis
    produced by Federal agencies is often not done very well and it
    often seems to have little effect on agency decisions. We are
    not likely to see substantial improvement in the quality of
    regulatory impact analysis unless we see legislation that turns
    it into a statutory requirement and provides for some type of
    judicial review to ensure that the analysis meets some minimum
    standard of quality.
        Now, let me expand on these points. A good regulatory
    impact analysis does at least four things. First, it assesses
    and identifies and traces the root cause of the problem the
    agency is trying to solve.
        Second, it outlines alternative solutions, and then it
    evaluates the benefits of the different alternatives and the
    costs of the different alternatives. When regulators have this
    information, they have a better shot at writing regulations
    that actually solve real problems at an acceptable cost.
        But, Congress should also have this information. Under the
    Congressional Review Act, Congress has an expedited process for
    vetoing regulations that Congress has decided it does not want
    to allow agencies to issue. Under the proposed REINS Act,
    Congress would play an even bigger role in regulatory
    decisionmaking by having to affirmatively vote before certain
    types of regulations take effect.
        Now, honestly, I do not know, if I were called to make a
    yes or no vote to approve or disapprove a regulation, I do not
    know how I could claim that I was making an informed decision
    if I did not know whether the regulation was solving a real
    problem and whether there were better alternatives out there. A
    yes or a no vote would be buying a pig in a poke if I did not
    have that information.
        Oversight Committees also should be able to find this kind
    of information useful. Oversight Committees look at what
    Federal regulatory agencies do to see if they are doing their
    job well and see if they are producing good results for the
    public. It is a lot easier to do oversight when you have access
    to a good regulatory impact analysis where the agency has
    declared, here are the results we are trying to achieve with
    our regulations, so that then there is some kind of a standard
    or a scoreboard where you can say, OK, did you achieve it or
    did you not achieve it? Let us go look.
        Let me give you a couple of examples of what happens when
    the analysis is not up to snuff. A few years ago, the Food and
    Drug Administration (FDA) proposed a rule that essentially
    required anyone who produces or transports or handles animal
    food has to have processes and procedures in place to make it
    as safe as human food, and the FDA did not trace any kind of
    problem to its root cause, did not estimate the benefits. One
    of my colleagues who spent a number of years in the FDA,
    though, took a look at it and found that pretty much all the
    benefits of the regulations come from preventing transmission
    of salmonella from pet food to human beings. So, the real
    problem was pet food, not animal feed. And, if the FDA had done
    a thorough analysis of alternatives and traced the problem to
    its root cause, the FDA would have discovered that it could
    have issued a much more carefully tailored regulation that was
    a lot less costly and still accomplished all the public health
    benefits.
        That is not an isolated example. In a project that I have
    run at the Mercatus Center since 2009 called the Regulatory
    Report Card, we evaluate the quality of analysis that agencies
    conduct when they issue really big regulations, the
    economically significant regulations. We find that, typically,
    on average, the quality of the analysis is not very good. On
    the four major items that are supposed to be in a regulatory
    impact analysis, we usually find that agencies earn about 60
    percent of the possible points or less, and in my book, 60
    percent or below is basically an F. I do not know that we
    should be making regulatory decisions based on information of
    that poor quality. This is consistent with the research of
    other scholars who have examined the quality of regulatory
    impact analysis.
        What can we do about it? What can Congress do about it? The
    first step in solving the problem is understanding that it is
    not the fault of a particular political party or a particular
    administration. My research, ``research by other scholars''
    finds that there are deficiencies in regulatory impact analysis
    under Republican administrations, Democratic administrations,
    administrations under various Presidents. So, it is not a
    partisan or political problem. It is an institutional problem
    that requires an institutional solution.
        The current enforcement mechanism is review of regulations
    in the Executive Branch by the Office of Information and
    Regulatory Affairs (OIRA). There is evidence that OIRA review
    improves the quality of regulatory analysis, but it falls far
    short of what you would expect if you have read 40 years' worth
    of Executive Orders and the Office of Management and Budget
    (OMB) guidance that tell agencies what they are supposed to be
    doing. OIRA does help improve things, but we are still far
    short of where we ought to be.
        The most obvious solution, to me, is a statutory
    requirement that agencies conduct regulatory impact analysis,
    that traces problems to their root cause, explores alternative
    solutions, and evaluates the benefits and the costs of
    alternatives, coupled with some type of judicial review to
    ensure that that analysis meets some minimal quality standards.
    We need to improve the quality of regulatory impact analysis
    because good intentions do not automatically create good
    results. Decision makers should act based on genuine knowledge,
    not just hopes or assumptions or good will, good wishes.
        That is why the real conflict in the debate over regulatory
    reform should not be Republicans versus Democrats, liberals
    versus conservatives, business versus the public. The real
    conflict is knowledge versus ignorance, and I urge you all to
    choose knowledge.
        Thank you.
        Senator Carper [presiding]. Senator Johnson has asked me to
    turn to the next witness, Congressman Lankford. Do you want to
    do it with me?
        Senator Lankford. Sure. Let it rip.
        Senator Carper. All right. You are on, Dr. Mandel.

         TESTIMONY OF MICHAEL MANDEL,\1\ PH.D., CHIEF ECONOMIC
                STRATEGIST, PROGRESSIVE POLICY INSTITUTE

        Dr. Mandel. Senator Carper, Senator Lankford, Members of
    the Committee, thank you very much for the opportunity to
    address the question of how to design a 21st Century Regulatory
    System. My remarks today will focus on retrospective regulatory
    review and offer up an alternative mechanism for reducing the
    burden of regulation without losing its benefits.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Dr. Mandel appears in the Appendix on
    page 62.
    ---------------------------------------------------------------------------
        My testimony is drawn from a series of policy briefs on
    regulatory improvement issued by the Progressive Policy
    Institute (PPI), where I am the Chief Economic Strategist. PPI
    stresses the importance of growth and innovation for lifting
    the living standards of all Americans. We are especially
    concerned with regulatory policy as an untapped tool for
    accelerating innovation and growth.
        Regulation, as you know, is essential for our whole
    economy. However, if policymakers allow the regulatory burden
    to become too heavy, innovation and entrepreneurial energy can
    be suppressed. As I noted in a recent essay, even the most
    regulation minded can see how the accumulation of well-
    intentioned rules can have a pervasive and negative effect on
    innovation. One useful analogy is that of a small child tossing
    pebbles in a stream. One or two or even 10 pebbles will not
    make an obvious difference in the flow of the stream, yet
    accumulating gradually over the years, thousands of pebbles an
    make an effective dam.
        One logical way to fix the regulatory system is to go back
    and review old rules. This process of retrospective review has
    been embraced by every President from Jimmy Carter to Barack
    Obama. Administratively, retrospective review seems simple.
    Executive agencies are ordered to make a list of regulations
    that are candidates for reform. They then go down the list one
    by one and ask if the benefits exceed the costs. This procedure
    seems fool proof, and yet with no exceptions, several studies
    have shown that these attempts at retrospective review have
    fallen far short of the desired result.
        I am going to argue here that retrospective review is a
    seriously flawed process that cannot by itself provide the
    answer to regulatory accumulation. In my written testimony, I
    give four reasons. I am going to focus on two of these here.
        First, we must recognize that assessing the costs and
    benefits of an existing regulation is far more expensive and
    time consuming than projecting the costs and benefits of a
    prospective rule. When an agency is first considering a new
    rule, it can use whatever limited evidence exists from academic
    studies and existing research. By contrast, after a major
    regulation has been in effect for years, the amount of
    potentially relevant real world data is enormous, expensive to
    collect, and potentially burdensome for companies.
        So, it actually turns out that retrospective review, if you
    did it right, imposes more burdens on the companies to provide
    the information. It is not very easy to design studies that
    actually fairly test whether a regulation is working or not
    because you have to figure out what would have happened without
    the regulation in terms of technology, in terms of investment,
    in terms of how the market would have developed.
        Equally important, retrospective review is inherently
    focused on assessing individual regulations. However, the
    impact of regulations is cumulative and non-linear. That means
    as rules pile up, they interact with each other to create more
    of an impediment, even if each rule makes sense on its own.
    Now, the fact is, both Democrats and Republicans have agreed on
    the impact of accumulation of regulations. The OIRA under Cass
    Sunstein published a memorandum on this. But, in fact, pretty
    much all agencies do not take regulatory accumulation seriously
    in any way, and neither, apparently, does OIRA.
        So, to augment the formal process of retrospective
    analysis, which does have its benefits, we see the need for a
    low-cost, non-bureaucratic channel for improving regulations
    and taking into account regulatory accumulation. A 2013 paper
    by myself and a colleague, Diana Carew, proposed a Regulatory
    Improvement Commission (RIC) that would be authorized by
    Congress for a fixed length of time and consist of a panel
    appointed by the President and by Congressional leaders of both
    parties. The Regulatory Improvement Commission, would have a
    limited period of time to come up with a package of regulations
    to be eliminated or improved, drawing on public suggestions.
    The package would then be sent to Congress for an up or down
    vote and then on to the President for signing. This complements
    retrospective review. It deals with some of the issues that
    retrospective review cannot get to.
        A version of the RIC was introduced in the Senate and in
    the House in the last 2 years with bipartisan sponsorship in
    both cases. It has the virtue of embodying regulatory reform
    that can be embraced by both Democrats and Republicans, and if
    I dare may say, could conceivably be enacted even in today's
    political climate.
        Let me mention several important characteristics of the
    RIC. First, it is specifically designed not to eliminate any
    Congressional prerogatives. Indeed, Congress gets two bites at
    the apple, once when RIC is authorized and again when the
    package of proposed rule changes come through.
        Second and related--and this is very important--the RIC
    does not lean exclusively on a supposedly objective measure,
    such as cost-benefit analysis. Instead, the RIC embraces the
    idea that regulations are a joint creation of the Executive and
    Legislative Branches with politics deeply embedded.
        Finally, the RIC is about small steps to build trust rather
    than big dramatic changes. The Regulatory Improvement
    Commission is designed to show voters that Washington can get
    things done. Retrospective regulatory review sounds good and
    has the benefit that it can be implemented unilaterally by the
    Executive Branch. However, we know from repeated uses that it
    falls short of expectations for what it can achieve for
    fundamental reasons. We have to have another mechanism that
    complements retrospective review, and we suggest that at the
    appropriate time the Committee seriously considers the RIC
    legislation when it is reintroduced.
        Thank you.
        Chairman Johnson [presiding]. Thank you, Dr. Mandel. Ms.
    Katzen.

     TESTIMONY OF SALLY KATZEN,\1\ PROFESSOR, NEW YORK UNIVERSITY
                             SCHOOL OF LAW

        Ms. Katzen. Thank you, Chairman Johnson, Senator Carper,
    Members of the Committee. I appreciate your inviting me to
    testify today.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Ms. Katzen appears in the Appendix on
    page 72.
    ---------------------------------------------------------------------------
        It is my strong belief that the regulatory system and the
    rules that it produces is an integral component of governance
    and one of our country's strengths. Echoing what Senator Carper
    said, Congress makes the law, but it typically does not have
    the time, expertise, or sometimes the ability to identify or
    resolve all of the details. That responsibility is usually
    delegated to the agencies, which issue regulations that
    translate general statutory directives into concrete
    requirements or prohibitions with which the public must comply.
        We have heard a lot about the increased burden of
    regulations since the 1970s, and in my written testimony, I
    discuss several metrics for measuring that activity and whether
    they support the allegation that this administration is engaged
    in an unprecedented and unjustified amount of regulatory
    activity. I do not think they make that case.
        There are, essentially, two measures the critics of
    regulation cite. First is the volume, as in pages in the
    Federal Register or the number of regulations, and second,
    calculations of the cost of new or total rules. Both can be
    large, if not scary, but neither really tells us very much
    about the extent or nature of an administration's regulatory
    activity.
        Two points worth emphasizing. First, the fallacy of
    focusing on the length of the rule itself--how many lines, how
    many pages--is that, often, the length is driven by the need or
    desire to carve out exceptions or waivers. The Internal Revenue
    Code, for example, would be a lot shorter if there were no
    deductions or credits, or oil and gas depletion allowances, or
    accelerated depreciation, or alternative minimum taxes.
        And, also, think about the rules that set up government
    programs for benefits or for subsidies, from Food Stamps to
    Small Business loans. Detailed and, hence, lengthy eligibility
    standards and reporting requirements are often critical for
    accountability and a hedge against waste, fraud, and abuse.
        And, finally, brevity may not be a blessing in the world of
    regulations. A one-liner can ban a product, much more draconian
    than a very lengthy, complex set of rules about who can use it,
    when they can use it, how they can use it.
        Second about the numbers, it masks what they do. It may
    shock some people that the vast majority of rules are
    ministerial or routine, like changing the day for filing your
    income tax to Monday if April 15 falls on a Saturday or Sunday.
        Others are as non-controversial as they are necessary. I
    refer here to the Federal Aviation Administration (FAA)
    airworthiness directives. Should we stop them, or the FAA's
    rule this past year to stop ongoing flights over the Simferopol
    area because of the wars in Crimea, or the DOI rule which sets
    the bag limit for shooting fowl traveling north and south under
    the Migratory Bird Treaty. Without a limit, no one could enjoy
    that spot.
        So, it may be counterintuitive, but there are some, in
    fact, a lot of regulations that people actually want and that
    they need. This would include those structuring programs, this
    would be leveling the playing field. A lot of businesses ask
    for rules and regulations to provide certainty of operations
    for their activities.
        Now, a lot of these are major rules and are included in
    those vast numbers we see, because major rules are not just
    rules that have $100 million or more in an annual impact, but
    are rules that have $100 million or more in benefits, or rules
    that have a novel legal or policy issue involved, or have a
    material effect on the budget.
        Because my time is so short, I am not going to talk about
    the retrospective review or the RIAs, although I think it
    really is important to note on the RIAs, and I have been in
    this field now for a number of years, that the quality of the
    work done by the agencies is, indeed, mixed, as you would
    expect, because the agencies are mixed. They have different
    missions, different cultures, different budgets, different
    resources. And, so, to have them all performing at the same
    level would be unexpected, at best. But, what I have also seen
    over the years is that they have improved. They have come a
    long way since the 1980s when they were asked to start this
    effort.
        On the retrospective review, I will try to address that in
    the questions and answers.
        But, I, too, wanted to offer some general principles or
    framework for evaluating various regulatory reform bills that
    are likely to come before this Committee. Now, I fully
    recognize that Congress, unlike Federal agencies, is not
    constrained from enacting legislation that it deems salutary.
    But, as a prudential matter, I think this Committee, before it
    endorses a particular regulatory reform bill, should ask and
    answer some of the questions that Dr. Ellig had posed. What is
    the compelling need? How significant is it? Are there
    alternatives? That is what a Federal agency does in rulemaking.
    I think this Committee should think in that context rather than
    going to the bottom line.
        It is worth noting that Congress has imposed a series of
    process and analytical requirements on the Federal agencies
    over the last 30 years and has not increased the resources that
    the agencies have to do that work. Asking them to do more with
    less is simply not sustainable over the long term. Congress has
    other alternatives, as well, as Senator Carper indicated.
        I have tried today to emphasize that regulations are an
    important, valuable force in our society and are the reason
    that the air we breathe, and the water we drink is clean, our
    food and medicine is safe, our workplaces are secure, our
    markets operate as advertised, and our values are embodied in
    our public and our private institutions. That is why I think it
    is a strength, not a weakness, of our country.
        Now, we talk about the international scene and how
    everybody is engaged in trying to do better. I would tell you,
    they are trying to become us. We are the gold standard. We have
    the most transparent regulatory process in the world. We have
    the most accountable regulatory process in the world. And, the
    benefits of that system inure to all of us.
        Thank you. I appreciate your time.
        Chairman Johnson. I would like to thank all the witnesses
    for their thoughtful testimony.
        Dr. Ellig, like you said, you have to start with
    information. I would argue that the first step in solving any
    problem is you have to admit you have one. The reason we try
    and grapple with some kind of metrics, whether it is pages or
    whether it is dollars, is we are trying to describe a problem
    that exists. Now, I realize they are all imperfect measures.
        I was trying to get my staff to quickly come up with the
    exact numbers, but let me lay out part of the problem, is
    Congress now passes frameworks for the regulatory agencies to
    write the laws and the rules and regulations. We all agree, a
    job with the Federal Government should be providing a legal and
    regulatory framework to provide certainty for our economy, so
    you understand what the rules of the road are, like the Uniform
    Commercial Code. The problem is, we have passed so many, they
    are so confusing, they are conflicting, it is not providing
    that kind of certainty, not by any stretch of the imagination.
        Two examples. Both Obamacare and Dodd-Frank, when they were
    written, they were a few hundred thousand words--I do not have
    the exact numbers right now--a couple hundred thousand words
    apiece. The last time I looked, Dodd-Frank, in terms of
    regulatory number of words, was over 15 million. Obamacare was
    over 12 million. So, again, those are the large metrics to try
    and describe the problem that our private sector is trying to
    grapple with as they are trying to grow and produce good paying
    jobs.
        Anecdotally, I have had small banks in Wisconsin come up to
    me, small bankers, and say, ``Senator, I had to fire, layoff a
    loan officer because I had to hire a compliance officer.'' I am
    having banks say, ``I cannot survive as a single-branch bank
    anymore. I have to consolidate just to be able to afford and
    comply with all the regulations.'' So, whether it is
    anecdotally or this is from a macro sense, this is just a real
    problem.
        I think one of the problems we have in terms of regulatory
    agencies--and again, I am very impressed with the quality of
    the Federal workforce. That is just true. I am a limited
    government guy, but I am impressed with the people, the
    dedication, their intelligence. The problem is, I am concerned
    about their experience. How many regulators, what percentage--
    and I do not think anybody has this, but I want one of you to
    speak to the problem of regulators who have very little
    experience in the private sector understanding--for example,
    having the George McGovern moment. Do you remember when Senator
    McGovern ended up starting up a bed-and-breakfast, and I think
    his comment was, ``If I had only known.'' If I had only known
    what all these rules and laws and regulations and how difficult
    it was to comply.
        So, can somebody speak to just the private sector
    experience that is lacking in the regulatory community? Mr.
    Holtz-Eakin, you are looking away, but----
        Mr. Holtz-Eakin. I do not have any metrics, which is what
    you would like to know. But, certainly, the anecdotal evidence
    is exactly what you described, that those who walk from one
    side of this line to the other are stunned at how misinformed
    they were about the burdens that the regulations impose on
    people.
        Ms. Katzen. Well, with respect, I think that that is one of
    the reasons we have public participation in rulemaking.
    Agencies have to say what it is they intend to do, and they
    have to provide all of the data and all of the analyses that
    they rely on. And then there is an opportunity for comment, and
    at least during my tenure at OIRA, and I had some private
    sector experience before I went into the government,
    businessmen would come in and say, there is a problem, and we
    would listen and we would respond. It is not a closed, mindless
    exercise. So, I cannot give you a percentage, but I can give
    you a cultural attitude of openness and inclusion for
    information.
        Chairman Johnson. Sir.
        Dr. Mandel. Just to add one sentence here, part of the
    problem is the intersection of different regulations. So, what
    happens is that the regulatory agencies focus on--when they are
    developing regulations, they think about the impact of that
    single regulation. They do not think about the overlaps and the
    intersections and the problems that it causes with other
    regulations. And, when I talk to business people, a lot of what
    they complain about, they can deal with any single regulation.
    It is when they start layering on top of each other that it
    becomes a real problem. And we have to think about what we do
    in response to this. It is the intersection not just in the
    Federal level, but the State and local level, as well.
        Chairman Johnson. Yes. It is the conflicting regulations. I
    mean, you are damned if you do, damned if you do not, that type
    of problem.
        By the way, I do not think anybody here is claiming this is
    just an Obama Administration problem. This has been a problem
    as the fourth branch of government has grown exponentially in
    terms of the regulatory burden over the years. This is on a
    bipartisan basis.
        Ms. Katzen, you mentioned about the notice and comment
    period. I think we have witnessed--I do not have the exact
    numbers, but I have seen numbers in the past--I think we have
    witnessed lack of notice and lack of comment, and I actually
    want to ask somebody to explain the substantive rule
    requirement in terms of notice and comment period.
        Ms. Katzen. [Laughter.] I laugh only because I devote two
    full classes in my admin law class to this.
        Chairman Johnson. Very good.
        Ms. Katzen. The APA is quite clear that where there is a
    substantive rule that is binding--it has the force and effect
    of law--there must be notice and opportunity for comment. The
    APA explicitly carves out general statements of policies and
    interpretative rules, and as to those, there is no requirement
    for notice and comment, although OMB has a policy that if it is
    a statement of policy with significant economic impact, there
    should be a modicum of opportunity for public participation.
        Now, that issue is actually before the Supreme Court today.
    It was argued in December in the Perez case and we should have
    a decision by the end of the year as to whether those words in
    the APA, in fact, mean what they say.
        Chairman Johnson. Now, a Federal judge did actually rule--
    --
        Ms. Katzen. He did.
        Chairman Johnson [continuing]. I think, last week that
    President Obama's executive actions as regards to deferred
    action on--or we will call it executive amnesty, because it is
    easier to say--was a substantive rule and required notice and
    comment period and there was none, is that not correct?
        Ms. Katzen. That is what he----
        Chairman Johnson. Would you challenge----
        Ms. Katzen. Yes.
        Chairman Johnson [continuing]. That interpretation?
        Ms. Katzen. Yes, I would, and I think the Obama
    Administration will be challenging that, and I think that, in
    fact, his view of the law is not correct.
        Chairman Johnson. Can anybody else comment on that? Is
    anybody else qualified to speak to that?
        Dr. Ellig, you wanted to chime in----
        Dr. Ellig. Oh, on----
        Chairman Johnson [continuing]. On something else.
        Dr. Ellig. I am sorry. On your earlier question, I wanted
    to mention, I worked in a regulatory agency and the sum total
    of my prior private sector experience was cleaning hamster
    cages at a Woolworth's store and dressing up as Santa Claus at
    Christmas in the same place. But, I think----
        Chairman Johnson. That is better than none, by the way.
        Dr. Ellig. But, I think, even if you have regulatory
    agencies largely staffed by folks like us on the panel who have
    pursued pretty much analytical, policy oriented careers, there
    are certain fundamental questions that come out of how to do
    good policy analysis that agencies ought to be asking and
    answering that they are not always asking, like, what is the
    root cause of the problem we are trying to solve. And, so, I am
    not sure if you have to have a lot of people with private
    sector experience, but you at least ought to have people who
    know how to do good policy analysis.
        Chairman Johnson. And value good information. Thank you.
    Senator Carper.
        Senator Carper. Thanks. I said to Senator Johnson, this is
    a good hearing, and a timely hearing. I think we have the four
    right people in front of us.
        I am reminded, though, that sometimes we do not make, as
    legislators, we do not make it easy for folks who are writing
    regulations. And you know, sometimes we are trying to find a
    compromise and it is maybe inartful, but we have to get some
    kind of agreement so we can pass a bill and then we say, you
    guys clean it up when you write the regulations. We are guilty
    of that, so we have some responsibility. So, it is a shared
    responsibility, if you will.
        Ms. Katzen, given your time at OIRA, I know you fully
    understand the details of assessing the cost and benefits of
    some rules. For example, it is difficult for the Environmental
    Protection Agency (EPA) to assess the benefits of regulating
    certain toxins, including lead and mercury. Science is clear
    that these toxins impact our health, especially our children's
    health and their IQs, but calculating the direct dollar benefit
    of a smarter, healthier child just is not easy to do.
        Conversely, estimating the cost is not always easy.
    Agencies often end up overstating the cost. I believe the
    estimated cost of the acid ran program launched by former
    President George Herbert Walker Bush, I think they estimated
    the cost of the acid rain program, to be 50 percent higher than
    what it turned out to be. And actually, we got it done in,
    like, half the time. It is pretty amazing.
        During your time at OIRA, did you work on a rule that ended
    up having far more benefits and far less costs than estimated,
    and what should agencies do when it is difficult to determine
    estimated costs and benefits?
        Ms. Katzen. Well, Senator Carper, it has traditionally
    always been easier to quantify and monetize costs than
    benefits. We have done a lot of work, and there has been a lot
    of thoughtful analysis that has enabled us to do better
    analysis of benefits, although some are still escaping us, like
    invasions of privacy. How do you value that? How do you value
    national security? If you harden one site, terrorists can move
    to another site, so what is the reduction in risk of reducing
    an attack on a particular site? This is the Homeland Security
    Committee. These are things you deal with all the time. It is
    very difficult and we are sometimes not very sophisticated.
        But, we have made a lot of progress and OIRA does a lot of
    analysis, and the answer to your specific question is, yes, we
    always look to see that the benefits justify the costs--not
    outweigh as though it is some mathematical precision formula,
    but, rather, do they justify the costs. It should be
    informative but not necessarily dispositive. There are some
    things that are difficult to monetize.
        Nonetheless, even with only monetized benefits, reports
    have shown for the last two decades that the regulations that
    are adopted and issued by both Republican and Democratic
    Administrations--George W. Bush, the end of Clinton, and now
    Obama--the benefits clearly exceed the costs. Our regulations
    produce estimated net benefits to our country on an annual
    basis that is consistent and verifiable.
        Now, are they the benefits we will actually see, and this
    is the reason that you hear calls for retrospective review? No.
    These are estimates at the time and more work has to be done.
        Senator Carper. OK.
        Ms. Katzen. And, I would not deny that there is more
    progress that can be made to the system and that there are
    improvements to be had.
        Senator Carper. Good. Thank you. Just hold it at that. That
    was great.
        Dr. Ellig--when people in Delaware spell their name E-l-l-
    i-g, we pronounce it ``Aay-league.'' Would that be all right,
    to call you Dr. Ellig? I just want to say, you convey a sense
    of optimism and almost a sense of joy in attacking an issue
    that a lot of people find pretty boring---- [Laughter.]
        And, I said to the Chairman, how----
        Dr. Ellig. Well, somebody has to make it interesting.
        Senator Carper. That is good. Well, you do. And, I wrote
    down--I have a new aphorism here. I wrote down--this was before
    you got here, Heidi--I wrote down, you said, ``I am for
    knowledge and against ignorance.'' Is that not good? So, I
    wrote that one down. I will use that about 10 times today.
    [Laughter.]
        But, Dr. Ellig, you indicated in your statement that you
    think that codifying the requirement that agencies conduct
    cost-benefit analysis would improve the process. Could you just
    expand on that for a little bit, and why do you believe that is
    necessary?
        Dr. Ellig. Well, happy to. Yes. I think the problem is, we
    have a fairly weak enforcement mechanism in OIRA review because
    OIRA is part of the Executive Branch and it is fairly clear
    from my research and other folks' research that when there is a
    conflict between analysis and an administration's political
    priorities, it is an administration's political priorities that
    will often win. That is why I think some type of quality
    control needs to occur outside of the Executive Branch rather
    than having the Executive Branch review its own analysis and
    say, ``what do you know. This looks pretty good.''
        Then the question is, where is the logical place for that,
    and typically, the logical place for that kind of review has
    been, if there is a problem with a regulation, it violates the
    law or whatever, you take the agency to court. So, it seems
    sensible to have a statutory requirement that agencies have to
    conduct analysis that covers certain topics, together with some
    kind of a check through the court system on the quality of that
    analysis.
        And, I want to emphasize, I am not saying that judges ought
    to be free to second-guess the agencies' policy decisions or
    impose their own view of what the regulation should have been.
    But, surely, courts ought to be capable of looking at the
    evidence in front of the agency and saying, yes, that looks
    like a decent amount of evidence and the agency has done enough
    homework, or, no, that does not really look like enough. That
    is the kind of procedural review that I was thinking about.
        Senator Carper. Good. Thanks.
        And, Ms. Katzen, would you just briefly respond to any
    views, any comments you have on this particular issue that Dr.
    Ellig has spoken to, any views that you might have. Do you
    agree that codifying these requirements would improve the
    regulatory impact assessments, and the regulatory process as he
    seems to be suggesting?
        Ms. Katzen. Actually, I do not think codification would go
    a long way, because I think it is a cultural issue. I think it
    is a resource issue. Congress has enacted a lot of statutes
    telling agencies what to do and how to do it. And, as the
    agencies face straight lined and decreasing budgets, compounded
    by CRs and sequestration, they simply do not have the ability
    to do the kind of analysis that is called for. And, I think,
    casting it in a statute only compounds the problems, because so
    many terms--like quantifying costs, what does that mean and how
    would somebody say that is sufficient? He says that he does not
    want the courts to look at the quality, but at some point, it
    is more than just did the agency do anything. He does want them
    to look at the quality and that requires something.
        Senator Carper. Good. Thanks. Thank you so much. Thank you
    both.
        Chairman Johnson. Senator Lankford.

                 OPENING STATEMENT OF SENATOR LANKFORD

        Senator Lankford. Thank you. I really do look forward to
    the ongoing part of this conversation. And, for the Ranking
    Member and his comment about trying to bring some happiness to
    a topic that can be boring, I looked at Senator Heitkamp and
    said, welcome to our Subcommittee. [Laughter.]
        We are going to focus on these issues a lot and spend a lot
    of time on them, because----
        Senator Carper. Maybe you should just invite Dr. Ellig a
    lot. [Laughter.]
        He can come to every hearing.
        Senator Lankford. He is a great witness and a great
    conversation.
        The struggle that we have is, is because it is so real
    life. Up here, we talk about the regulatory issues. But, I just
    sat down and jotted down some of the conversations I had in
    Oklahoma last week, so let me just give you a couple quick,
    brief comments about things that came up last week.
        I had a company that approached me that said they did not
    notify an agency last year that they had nothing to report, and
    so they just received a fine of half-a-million dollars for not
    reporting they had nothing to report and they are trying to
    figure out what to do with this.
        Multiple universities I talked to last week are very
    concerned about some of the new regulations or possible
    regulations that are coming down on them.
        I talked to some county commissioners in my State that have
    just put millions of dollars into a beetle farm rather than
    building a bridge in their county because they had to do beetle
    mitigation for a beetle population that is actually
    dramatically increasing in their county, but they are saying
    the beetle populations are decreasing in other counties and so
    they have to pay mitigation fees in their county because it is
    decreasing somewhere else. They are having a real struggle with
    that.
        A doctor's office that talked to me that said he has been
    waiting months for a Medicare number because of a new
    requirement that has come down on that and he has not been
    reimbursed since October.
        Duplication of forms--one different trucking company said
    that they have two different agencies that are asking for the
    exact same information, and they have spent hours and hours and
    hours filling out the same form for two different agencies
    because the agencies would not share that information.
        A small rural bank that said they have now stopped doing
    rural small home loans because of the cost of regulation,
    saying, basically, they cannot break even for all the
    compliance costs on it.
        There was also a disagreement that one of the companies had
    with an agency and they asked for a review of that and where do
    they go, and they were told someone else in the same agency
    would review it, and so they just gave up.
        That was last week. This is a constant issue in the
    national conversation that I think we do need to address.
        I do not know of anyone that I have served with that wants
    no regulation. There needs to be clear boundaries. There needs
    to be clear guidelines. All the good actors want to make sure
    there is regulation so the bad actors are not in there messing
    up their business and messing with families. So, we need to
    have good, clear boundaries. But, the boundaries need to stay
    consistent.
        We need to decide who is actually the right one to make
    that decision. Is it the Federal Government? Is it the State?
    That is a large responsibility we have to set. We have to deal
    with the issues of primacy and all the regulatory agencies, of
    what role does the State have in actually implementing this. We
    have a lot of issues on judicial review and retrospective
    review, cost-benefit analysis.
        We have to deal with the purpose of fines and fees. Who
    sets those? Where does that money go? Who gets to change those?
    How do we actually walk through that review? This does, at some
    point, to some company, feel like extortion when they say that
    your money will not come back to you after 4 years of audits,
    or we will settle with you now if you will take a 40 percent
    amount. At some point, that just does not smell right to most
    people.
        So, a lot of these are issues that we have to resolve in
    the days ahead, and I really do look forward to in our
    Subcommittee getting down and trying to resolve some of these
    issues, not picking on any one agency, not picking on any
    political party or the Administration. This is not about those
    things. Some of these cumulative effects have built up over
    years and years.
        So, I want to say to the Chairman that we look forward to
    walking through some of these processes and trying to see what
    we can do to be able to help not only keep people safe in the
    country and deal with things in an appropriate way, but also
    trying to resolve some of these issues in the days ahead, so
    let me just bounce a couple questions to you in the minutes
    that I have.
        Dr. Ellig, you had made a comment about some of the quality
    of analysis. Is there a consequence for any agency if they do a
    sloppy review? So, I understand if they do the review just to
    check the box and say, ``I did it,'' and then you go back and
    look at it later and find out it really was not good, is there
    a consequence for that?
        Dr. Ellig. Well, if it is a big enough problem and things
    line up right, the Administrator of OIRA may return the
    regulation and say, hey, you have to go back. Go back and do
    more work on this. The problem is, OIRA is seriously outmanned
    and outgunned. There are a couple of hundred thousand people in
    regulatory agencies. There are 40 employees in OIRA. Now,
    granted, not everybody in regulatory agencies is writing
    regulations, but there is still a significant imbalance there,
    and these people are working really hard to try to improve
    things, but it is a heck of an uphill battle.
        That is why I think having some kind of review outside the
    Executive Branch, or at least outside the agency that issued
    the regulation, is a pretty important thing, and to have some
    sort of consequence if the analysis is not particularly good,
    does not answer the questions that ought to be answered before
    a responsible decisionmaker would make a decision.
        Senator Lankford. Right. So, we struggle with the costs of
    actually reviewing, and several of you mentioned this issue
    about cost. When you actually try to do a review in real time,
    now you have real information, the cost goes up dramatically.
    Someone had mentioned even that the problem really becomes one
    when it is more burdensome to actually do the review than it
    does to actually walk through the process on it. So, the issue
    is, how do you do that, because there is a best guess at some
    point. If that guess is wrong, we have to be able to determine,
    hey, this was a bad idea. We need to review it.
        Dr. Mandel. That is right. Now, one of the things, when you
    are talking about all the people that are businesses and
    organizations that are complaining about regulations, it would
    be good to have a central place to collect all these
    complaints, so we know what is actually wrong out there.
        Senator Lankford. It is actually me and Senator Heitkamp's
    office. [Laughter.]
        Dr. Mandel. OK. Your office? [Laughter.]
        Senator Heitkamp. His first. [Laughter.]
        Dr. Mandel. Yes, his first. But, a central place that is
    actually tasked with the idea of assembling them so you can
    tell these----
        Senator Lankford. Should that not be OIRA right now?
        Dr. Mandel. No, it should not be.
        Senator Lankford. OK.
        Dr. Mandel. OIRA is not tasked with that.
        Senator Lankford. OK.
        Dr. Mandel. OK. It should----
        Senator Lankford. So, you are saying no one is tasked with
    that.
        Dr. Mandel. No one is tasked with that at this point. One
    of the central problems with the regulatory system we have
    today is that it has no place of central touch, where people
    can----
        Senator Lankford. But, every agency has a responsibility to
    do retrospective review. That is an Executive Order that has
    been put out for a long time, that every agency is required to
    do that.
        Dr. Mandel. But, remember----
        Senator Lankford. So, it is not just the agency. You are
    saying an entity beyond all those agencies----
        Dr. Mandel. Because when you talk about those multiple
    forms, those forms are coming from multiple agencies. So, we
    went to one agency and we say, oh, yes, we sent that form. What
    is wrong with that? But there is no one anywhere in the system
    who is tasked with--where the people that were complaining to
    you could go and say, we have this problem here. We have
    multiple forms. Can we not do something about it?
        Now, there have been States and localities that have
    assembled agencies like this to do this, but on the Federal
    level, on the national level, nothing.
        Senator Lankford. OK. My time has expired. I yield back.
        Chairman Johnson. Senator Ernst.

                   OPENING STATEMENT OF SENATOR ERNST

        Senator Ernst. First, I would like to thank Senator Johnson
    and, of course, Senator Carper for calling this meeting. This
    has been very interesting.
        And, I want to thank the witnesses here today. Really
    lively discussion on, you are right, on an issue that many
    would not find as fascinating, maybe as some of us. So, thank
    you. This is a very timely hearing.
        Regulatory reform is an issue that I am extremely
    interested in, and during the course of the past year or so as
    I traveled across Iowa, that is what I heard about. Concerns
    coming from everyday Iowans--our small business owners, our
    individuals, our farmers, our ranchers, and the burdens that
    are placed on them, and then how we respond as a Congress to
    their needs or what might not be their needs. But, they are
    very, very concerned about the costs of the bureaucracy, what
    the bureaucracy is doing to their livelihoods.
        So, one thing that I heard over and over again is that when
    you talk about the comment periods, many of them do issue
    comments. They will go online and they will put their comments
    out there, but they feel those comments, those concerns are not
    being heard by bureaucrats here, and not having responses back
    to them and why it is significant that these rules are in
    place, why maybe they could do something different.
        And, because these people feel that they are not being
    listened to, they really do not trust the government and they
    do not trust these agencies. They do not feel like they are
    being heard. So, the sentiment from my constituents is that the
    government is really out to get them, and that is an
    unfortunate situation to be in.
        And, it does make me reflect back on a line that President
    Reagan had used many years ago. The nine most feared words in
    the English language are, ``I am here from the government and I
    am here to help.'' When you hear that, it puts the fear of God,
    I think, in some of these folks.
        Unfortunately, that is how many Iowans feel, is that there
    are regulations out there, but they are not really there to
    help them. So, it is a difficult situation to be in.
        The other day, I did send a letter to the EPA
    Administrator, Gina McCarthy, just inviting her to come to Iowa
    and see the impacts that some of the rules and regulations
    proposed, or those that are already in existence, are having on
    our communities, whether it is the county levels, whether it is
    the individual farmer or rancher, whether it is the small
    business owner. We have seen the Waters of the U.S. situation.
    We have seen the Renewable Fuel Standard. And, these two
    particular examples are creating a lot of uncertainty in Iowa.
        And just yesterday, as I sat in the Agriculture Committee,
    we had a hearing and an Iowan farmer--corn, soybeans--I asked
    him, what are the impacts to you, and because of the
    uncertainty with the rules and regulations moving forward, he
    does not know what he needs to produce. He does not know what
    his production level needs to be. And, he does not know how
    best to manage his farm, especially when it comes to the Waters
    of the United States. So, we are creating big problems out
    there.
        And, it is not just rules and regulations by bureaucrats.
    It is this governing body also proposing legislation. So, we
    really do need to pay attention to that, but we need to hear
    from our constituents.
        So I am asking the full panel, please, to let us know what
    we can do better. How can agencies do better in listening to
    constituents all across the United States?
        Dr. Ellig. Well, if I may, I think this highlights also a
    problem with the current approach to retrospective review,
    because agencies are supposed to retrospective review
    regulations. They are told to do so by Executive Orders. In
    some cases, they are told to do so by legislation. Agencies put
    a notice in the Federal Register saying, hey, does anybody have
    problems with this regulation or this group of regulations?
    But, who is going to notice that and respond?
        The folks who are likely to notice and respond are
    typically going to be large entities--either large companies or
    maybe some State governments, if they are affected, who already
    have invested in the staff to follow regulation and figure out
    the process. And, the firms who have already figured out how to
    cope with regulation are not necessarily going to be eager to
    recommend that anything should be changed to make it easier for
    their competitors who have not figured out how to cope with
    things.
        So, if we are relying on the regulated entities, large and
    small, to tell us what is wrong with regulation and what needs
    to be reviewed retrospectively, we are going to get kind of a
    biased response or maybe no response at all, and that is why I
    agree with Dr. Mandel that the impetus for retrospective review
    has to come from outside the agency and not just counting on
    put a notice in the Federal Register and see who responds.
        Dr. Mandel. Can I add one thing to that? I think you are
    absolutely right. We have to have a way of listening
    constructively to the complaints, OK, and not even as part of
    the official process. There has to be a place that people can
    bring, where they know they are going to be listened to, and
    that it is going to be collated so we know that it is just not
    a single person or a single organization, that it is put
    together and we can see across agencies, across regulations,
    that this one is actually creating lots of problems for people.
        And, so, we have to have a kind of an official mechanism,
    and I would not even call it retrospective review, I would not
    call it prospective, but some way that people can know that
    they are being listened to and that the complaints are being
    collated and somebody is going to have a mechanism for doing
    something about it.
        Senator Ernst. Yes, I would agree, and there has to be a
    way to double-check regulations and rules from one agency to
    another, because oftentimes, there will be a rule that will
    come from one agency that is in direct conflict with another
    agency. And, I use, for example, positive train control. There
    is one agency saying, you must put these control poles in the
    ground, and you have the FCC saying, no, you cannot do that.
        Dr. Mandel. If I just can say one thing----
        Senator Ernst. Yes, please. Thank you.
        Dr. Mandel. I am going to say something nice about your
    organization, the Mercatus Center. This is where big data and
    technology can come to our aid, which is that if you can
    collate all the regulations into one big database----
        Senator Ernst. Mm-hmm. Correct.
        Dr. Mandel [continuing]. There are actually ways now of
    testing these against each other so you can catch these things
    more or less, I would not say automatically, but there is no
    excuse in this day and age that these conflicts occur without
    us knowing about it.
        Senator Ernst. Great. My time has expired. Thank you, Mr.
    Chairman.

                  OPENING STATEMENT OF SENATOR PORTMAN

        Chairman Johnson. Senator Portman.
        Senator Portman. Thank you, Mr. Chairman. Thanks for
    holding this hearing and for your work in this area. I am
    really looking forward to the opportunity to work with the
    members of this panel and that panel to try to get some stuff
    done here in the next 18 months. I think we have a window of
    opportunity here with Democrats and Republicans alike
    interested in this issue.
        there has been a lot of discussion today about whether we
    have too many regulations and what the impact is. I think it
    goes without saying that, yes, we need regulations, but, yes,
    we have real problems in our system. Sally, who was head of
    OIRA at one point, and I had the honor of being Director of the
    Office of Management and Budget and had responsibility for
    OIRA, can tell you there is a real tug-of-war sometimes with
    the agencies and with OIRA. But, you said it well, and you are
    the defender of some of this regulatory process that we have
    currently on this panel. You said that we need to make better
    progress and more improvements in the regulatory process. So, I
    think there is an understanding of that and the question is,
    what do we do that actually moves the ball forward?
        We all hear about this when we are home, all the time.
    Today, I had my weekly coffee, and, of course, people came
    forward with why do we do this, why do we do that. The one
    recently was somebody who had a coal mine in Ohio, and the guy
    has been there over 40 years as engineer, so he has some
    perspective, and he says, here are the two notebooks, and they
    were big notebooks, like, much bigger than this one, like, five
    times this size, and sort of plopped them down on the desk.
    ``Here is my permitting regulations,'' he said. ``I remember
    when it was two dozen pages.'' ``A lot of this is
    duplicative,'' he said. ``A lot of it is a waste of time and
    causes more compliance costs, and some of it just makes no
    sense and it is driving jobs out of,'' in this case, the coal
    business in Ohio.
        But, we hear it constantly, and let me give you one data
    point that I think is interesting. The Code of Federal
    Regulations (CFR), in 1960 had approximately 22,000 pages. By
    the end of 2013, it was 180,000 pages. And, so, Sally said
    earlier, and I think she is right, we do not want to just judge
    this based on volume, but, wow, that is a pretty big increase.
    We are talking about, what is that, eight times larger.
        There are some studies out there, and I know Doug Holtz-
    Eakin has done some of this good work, but that the
    accumulation of all these regulations--that is one of the
    points that you made in your testimony, Dr. Mandel--is
    resulting in less economic growth and fewer jobs. So, this
    study in 2013 by Dawson and Seater, between 1949 and 2005 that
    they had the data for, accumulation of Federal regulations
    slowed economic growth by an average of 2 percent per year. So,
    we are talking millions of jobs here. So, I think we all
    understand that, and the question is, what do we do?
        As you all know, I have three bills that are bipartisan
    that we have been promoting that meet a lot of the requirements
    that you all have laid out. Doug Holtz-Eakin, you talked about
    the fact that we should be doing cost-benefit analysis
    codification. I assume you are focused primarily on the
    regulatory impact analyses. We should be handling independent
    agencies, bringing them into the cost-benefit world. And, by
    the way, Ms. Katzen has also talked about that and has
    supported that. And, you talked about judicial review. You
    talked about time lines, comment period.
        All of that is in the Regulatory Accountability Act, and it
    has been bipartisan. We have introduced it in the last two
    Congresses. We are about to introduce it in this Congress. It
    also has more transparency, more early public outreach, use of
    best available data, more thorough processes on particularly
    major rules. And, this is one that I hope we will be able to
    move forward again, even in this highly partisan atmosphere we
    find ourselves in, one that seems to have bipartisan support.
        The other is Independent Agency Regulatory Analysis Act. It
    is a piece of this larger bill, just to deal with the
    independent agencies. Again, this is also part of the RAA, but
    this is just to say, let us codify what the President wants to
    do. The President's Job Council recommended this. Former OIRA
    heads have from both Republican and Democrat administrations,
    including Ms. Katzen, as I talked about. We introduced it last
    Congress, Mark Warner and I did. We are going to introduce it
    again this Congress. We are trying to help the President be
    able to do what he cannot do by Executive Order, because he has
    to have us pass a law in order to enforce this on the
    independent agencies.
        And then, finally, is the Federal permitting, which goes to
    that coal example I used, and we can talk more about that. You
    all are not necessarily here to talk about Federal permitting,
    but, wow, what an opportunity. That legislation, we have
    introduced. Claire McCaskill, who is on this Committee, and I
    have introduced it. The AFL-CIO Building Trades are very
    interested in it, as is the Chamber of Commerce, because we are
    falling behind in terms of permitting as a country and losing
    jobs and investment.
        So, I guess my first question would be to all of you just
    on this issue of codification. We heard some different aspects
    of it, and maybe we will just go left to right. Should we be
    codifying the RIA process as it currently exists. Just give a
    brief answer, if you would, because I want to leave room for
    Ms. Katzen at the end to have her argument be heard, which is,
    I think, probably why it should not be codified. But, Dr.
    Holtz-Eakin.
        Mr. Holtz-Eakin. I have said yes. My biggest complaint with
    our regulatory system is it is not systematic. We have
    different agencies doing different things, and there is no
    consequence in some cases. There are consequences with OIRA,
    but for other agencies, none. And, so, codification of the
    requirement of doing a legitimate RIA, some judicial review so
    there is a consequence for failure to meet the standard. This
    would improve the quality of what we do enormously, I think.
        Senator Portman. Dr. Ellig.
        Dr. Ellig. Yes. I agree, and a few years ago when we first
    started our research on the quality of regulatory impact
    analysis and then realized we had a problem and tried to figure
    out why, my colleagues at the Mercatus Center sat down and
    tried to figure out, OK, what are all of the different ways
    that you might improve the quality of analysis, and it kept
    coming back to it has to be some kind of requirement and review
    that happens outside the Executive Branch.
        Senator Portman. Mm-hmm. And, also, just briefly on this
    codification for the independent agencies, more and more of the
    major rules are coming out of the independent agencies.
        Dr. Ellig. Yes.
        Senator Portman. They are not under the control of the
    Executive Branch in the same way that an executive agency is,
    so the President cannot require them to go through the cost-
    benefit analysis, the least burdensome alternative, jobs
    analysis without codification, is that not correct?
        Dr. Ellig. That is correct. Now, the Securities and
    Exchange Commission (SEC) has some language in its authorizing
    statute----
        Senator Portman. Right.
        Dr. Ellig [continuing]. That has turned into a requirement
    for benefit-cost analysis, and after losing several court
    cases, the SEC in 2012 issued new guidance that said, OK, we
    are going to do good benefit-cost analysis and we are going to
    do it in accordance with the principles of Executive Order
    12866, and I hope a few years from now, we will be able to look
    and report and say, hey, it has actually gotten better.
        Senator Portman. Yes. Dr. Mandel.
        Dr. Mandel. So, I actually have nothing to say for or
    against codification in particular. In principle, it is a good
    idea, but it will not actually solve the problems that your
    constituents are having, OK, because what they are having is
    the problem of permitting----
        Senator Portman. Yes.
        Dr. Mandel. Their problem is they are being hit down from
    multiple agencies and multiple places and----
        Senator Portman. Thirty-five different agencies----
        Dr. Mandel [continuing]. What are they complaining about--
    --
        Senator Portman [continuing]. One project----
        Dr. Mandel [continuing]. And what your constituents are
    complaining about is not going to be dealt with by the
    codification. In fact, the codification may make it worse by
    putting on another layer of regulation. I hate to say this, but
    it has that possibility. We have to have something, a back-
    channel that exists outside of the codification process that is
    a way of collecting the complaints that are unanticipated and
    figuring out which ones need to be dealt with first.
        I am an economist. I hate coming out against cost-benefit
    analysis. Somebody is going to take me outside and shoot me
    after I come out of here. [Laughter.]
        OK. I had to sign a paper saying I believe in cost-benefit
    analysis. [Laughter.]
        And, in theory, I can do cost-benefit analysis as well as
    the next person can. But, the fact is, when you think about
    what your constituents are complaining about, they are not
    complaining that the cost-benefit analysis was not good enough.
    They are complaining about the layering of regulations, which
    codification is not going to deal with. And, there are a lot of
    different ways of dealing with the regulatory accumulation
    process, but you should not tell yourself that codification is
    going to deal with that.
        Senator Portman. I will make two quick comments. One, Dr.
    Mandel, this is not just about codifying existing practice, but
    it is improving it, as Dr. Katzen talked about----
        Dr. Mandel. Improving it----
        Senator Portman [continuing]. Because there does need to be
    less bureaucracy and more inputs, including the impact on jobs,
    by the way, which is in our legislation. So, it is not just
    cost-benefit, but what is the actual impact on jobs.
        Second, I would tend to disagree with you that some of what
    we do here is about that, what is the benefit of this
    legislation? I know what the cost is, because Dr. Holtz-Eakin
    talked about the thousand jobs being lost in Ohio. We are
    losing 15 power plants this year. And then the question is, how
    do you come up with a better analysis of what the actual
    benefits are? So, there is an analysis there that needs to be
    consistent, standard, high quality, and, let us face it,
    agencies take it more seriously when it is a law than when it
    is an Executive Order.
        Ms. Katzen. And, first of all, thank you for letting me
    come talk to your class.
        Ms. Katzen. It was a pleasure and they loved you.
        As you know, I agree with you on a lot of the general
    concerns that exist in this area, and we share, I think, some
    common beliefs. In particular, I think the work on the
    permitting process is very important and on the independent
    regulatory commissions. These are modest improvements at the
    margins, but I think could go a long way.
        Why I resist codification and something like the Regulatory
    Reform Accountability Act, or what its name is now, is because
    they are extraordinarily broad--comprehensive by their terms--
    applying to all agencies in all situations. And, they will cut
    across from USDA and EPA to DHS and DOD, and those agencies are
    very different. And, just as there are individual problems,
    which I do not deny need to be rectified and should be worked
    on, I do not think the best approach is a one-size-fits-all
    large rewrite of the Administrative Procedure Act.
        You identified some of the pieces in there, but you also
    said ``more thorough processes,'' and this is inside-the-
    Beltway talk or inside an administrative law classroom--like a
    556-557 administrative hearing in the middle of a rulemaking
    hearing. That is an adjudicatory hearing with discovery,
    witnesses, on and on and on, and that has been put in the
    middle of the rulemaking process.
        Senator Ernst would like to see the RFS rules come out. A
    lot of people want to see those rules come out. Those rules
    would never see the light of day if they had to be subjected to
    all of the more thorough processes that are included in that
    particular bill.
        Now, are there pieces that might make sense and that could
    be applied in some instances? That is what you and I have
    worked on in the past and I would want to continue working on,
    because I, too, want to see improvements in this area.
        Senator Portman. Well, thank you. I am over time. I
    apologize. I guess I would summarize by saying the legislation
    is intended to ensure that, given the impact of these
    regulations, that we measure twice and cut once. I look forward
    to continue to work with you and others on the panel. Thank
    you.
        Chairman Johnson. Senator Heitkamp.

                 OPENING STATEMENT OF SENATOR HEITKAMP

        Senator Heitkamp. Thank you, Mr. Chairman.
        Just a couple quick stories, and it will kind of give you a
    context. I, once upon a time, ran a regulatory agency. It was a
    State regulatory agency. And I, during a campaign, heard all
    about the regulations on charitable gambling. I thought, how
    bad could they be? And, I showed up and this small industry in
    North Dakota dealing mainly with minimum wage workers had a
    500-page--or, 300-page book of regulations. And, I brought the
    young man down who was responsible and I said, who do you think
    reads these? He kind of shrugged his shoulders and I opened it
    up and I said, why do you have this one? He said, ``Because
    some person up in Cando, North Dakota, did this and we thought
    we needed a regulation.''
        Every time we did it, my realization was, those regulations
    were written to write a perfect world. We are never going to
    have a perfect world through regulation. So, what we are trying
    to do is get down to the essential, and that is what I told
    him. I said, take these back. Give me what is essential for our
    doing our job to maintain the integrity of charitable gaming.
    He came back and it was down to about a third of what it was.
        And, it is that kind of analysis that we need to undergo,
    and we have been talking a lot about new regulation. There are
    two issues with new regulation. No. 1, we do not do it quickly
    enough, going to your point, which is let us take, for
    instance, the 1232 tank car issue we have now. We probably are
    going to see a regulation retrofitting 1232s when the
    Department of Transportation (DOT) should have been engaging
    earlier on to avoid that misstep. So, now, because we did not
    have regulation, people have made investments that are going to
    need to be retrofitted, OK. So, not getting regulation done on
    time can be just as injurious to the economy as getting
    regulation done in a thoughtful, stretched out process.
        So, we have regulation that does not happen on time, and we
    have regulation that does not exist in the existing world, that
    no one could--you heard the examples that my colleague from
    Oklahoma gave you, and no one can argue with a lot of what he
    said.
        This is not a partisan issue. The last time we reinvented
    government, you might recall, was when Al Gore took on this
    challenge as Vice President for President Clinton and came out
    and actually had a reasoned discussion that did two things. No.
    1, probably not well enough, taking a look at how do we deal
    with new regulation, and I think the first step, never mind the
    agency, the first step ought to be telling Congress, when you
    pass this law, here are the list of regulations you are telling
    us to adopt within this time period. So, we need a little
    training in the U.S. Congress about what our expectations are,
    right, whether it is a farm bill that Senator Ernst talked
    about, whether it is positive train control that FCC has to get
    approval from every Tribe in America--that was the problem. We
    are beyond that now with positive train control.
        So, I guess, my point is we need to have a comprehensive
    look at what the problems are, and the problems in many cases
    are right here in the U.S. Senate or in the Congress when we
    set out expectations, and I think that is what you are getting
    to, Ms. Katzen, and I really appreciate that. But, it does not
    mean that we should not also be doing a huge project on look-
    backs.
        One of the frustrations that the American public has,
    rightful, and, I think, meaningful frustration, is they do not
    know what is coming next. They do not know what is out there
    that is going to get them. They are going about their business
    without any real knowledge of what is going to get them.
        And, so, how do we do a better job, No. 1, identifying what
    the regulatory burdens are that we are putting on the agencies
    to adopt regulation when we adopt legislation?
        No. 2, what do we do to have a meaningful discussion to
    prevent the perfect world mentality of people who write
    regulation?
        And, the third thing is, what do we do to have a meaningful
    look-back process that is going to respond to legitimate
    concerns for which there is no venue at this point? I totally
    agree with you, Doctor. Where is the venue for people to
    complain broadly about what this is, other than our offices,
    and we would like to see something maybe other than our
    offices, because we would be inundated. We do not have enough
    staff to deal with all the concerns that will come.
        And, so, this is one of many discussions that we are going
    to have, but we have to get this right. We have to make sure
    that whatever we do actually adds value to the process,
    actually changes the process and does not prolong or have
    unintended consequences.
        So, not a partisan issue, not something that can be done
    quickly without really thinking about what is the problem we
    are seeking to solve, because there is a range of problems we
    are seeking to solve, and then how can we come to a consensus
    on how we can improve within those three categories. I do not
    have a lot of time left, because I yakked on and on, which is a
    familiar place sometimes for those of us in the U.S. Congress,
    but I would like just to have feedback on how I have laid this
    issue out and whether you could debate that or offer some
    additional suggestions.
        Mr. Holtz-Eakin. Well, I think you have articulated quite
    clearly. The cumulative impact and the fact that there is no
    venue to----
        Senator Heitkamp. I do not mean to interrupt, but I also
    want to add another dynamic to this. Everybody talks about
    Federal regulation, but it is on top of local standards, it is
    on top of State standards, and that is another complication of
    dealing with this issue.
        Mr. Holtz-Eakin. Yes. So, I think the notion of having a
    venue to voice concerns is an important one and would look
    forward to working with the Committee on that.
        There is another alternative that has been proposed about
    the cumulative burden, which is essentially a regulatory budget
    that simply says, this is how much burden we are going to place
    on the American public, and if we hit that cap, it will force
    something to go away if we put something else in. Now, the
    United Kingdom has taken a very extreme version of this with
    two out for every one in on business regulation, but that is
    something that would be good food for thought in your
    deliberations on how to deal with the burden issue and force
    people to make tradeoffs, and that is really what we want them
    to do.
        Dr. Ellig. Yes. I would just mention your example of the
    charitable gambling regulations as a great example of
    regulations being made in response to anecdotes about bad
    behavior rather than making regulations in response to actual
    evidence that there is a significant, widespread problem, with
    an understanding of what caused it and then a regulation that
    addresses that cause. So, yes, sounds like a great example of
    failure to ask the most fundamental question that regulators
    ought to ask, which also happens to be the question that
    Federal agencies tend to spend the least time on when they are
    doing regulatory impact analysis. That is a problem.
        Dr. Mandel. Let me talk briefly about the venue for
    complaints. We have the technological capabilities now for
    taking in a lot of complaints and sorting them out and figuring
    out what the patterns are. It is great that your office is
    here, but because there is no central point, we do not actually
    know what regulations should we fix or improve first. I cannot
    answer that question because we do not actually have
    comprehensive information across all the regulations about
    what, in fact, people are complaining about. And what happens,
    is your offices are some of the best places to get some of the
    interesting changes that could be made without harming the
    underlying goals.
        And, so, one of the things that this Committee or the
    Subcommittee should consider is how to structure a central
    location for complaints so that it does not have to be just
    restricted to Federal, but it can be Federal, State, and local,
    as well, so that we have a comprehensive view across agencies.
    I am sorry Senator Portman left, because what I meant to say
    about cost-benefit analysis was really cost-benefit analysis
    right now is applied within an agency. It is not applied across
    agencies. It is not applied across the regulatory accumulation.
    So, it is significant missing a lot of the key factors that
    your constituents are complaining about.
        And, frankly, the place where I start on this is, having
    started a small business at one point and realized that, oh, my
    God, it is impossible for me to comply with everything I am
    being asked to do. We need some way that is constructive and
    technological at this point to handle the volume of complaints
    and collate them so we can see patterns.
        Ms. Katzen. I think you raised very important questions.
    And, I am sorry for my voice, but I woke up with a cold this
    morning and it is cracking all over the place. But, I think you
    presented some of the challenges that are real and that need to
    be addressed.
        I actually was in the administration when Vice President
    Gore launched the other version of NPR and I went through that
    experience where there was a request for people's input to try
    to answer these questions.
        But, the hardest question is when and how to regulate. I
    used in my testimony that derivatives were creative and
    exciting until all of a sudden we had a financial crisis.
    Drones--who knew drones--no one thought drones were a problem
    until they became one by falling on people's property, or by
    interfering with commercial airlines, and----
        Senator Heitkamp. We call them remotely piloted aircraft in
    North Dakota. [Laughter.]
        Ms. Katzen. Oh, thank you. I will try to follow that. But,
    I think these are very important questions that Senator
    Lankford's Subcommittee are going to be dealing with, with your
    help, and others, and I just encourage you to keep trying,
    because they are important and they are very difficult.
        Chairman Johnson. Senator Ayotte.

                  OPENING STATEMENT OF SENATOR AYOTTE

        Senator Ayotte. I want to thank the Chairman. I want to
    thank all of you for being here. I think this is a very
    important hearing.
        Here is what I am interested in. I always feel like it is
    Groundhog Day, because the bottom line is, I go out--my husband
    is a small business owner, and so when you said, Dr. Mandel,
    about small businesses, I live it. And then I go in a State
    where a lot of our businesses are small businesses, and there
    is not a business I visit, small or large, that does not have
    some regulatory story to tell me where the Federal Government
    is doing things that make it harder for them to put people to
    work or to grow in a way that just does not make sense.
        And, so, why I say it is Groundhog Day is where I think all
    of you can very much help this Committee is if you were in our
    position, what are the top two things you would do to change
    the dynamic that we are in, because the dynamic that we are in,
    I think, really is harming our economy, and that is the bottom
    line. And, it is harming the people who are interested in
    starting the next business, because it becomes discouraging to
    want to do that. And, so, I would love to hear from the four of
    you, what are the two things you would do if you were in our
    position that we could do that would make a difference?
        And, let me just add to that, something I think we should
    do is look in the mirror on ourselves a little bit, too,
    because we pass this legislation. In so many instances, we are
    deferring major decisions to regulatory agencies in the
    regulatory context that, frankly, should be made by us, the
    Congress. So, as I look at ourselves in the mirror here, we
    should be giving less authority to regulatory agencies,
    especially on critical issues where we should be weighing in to
    ensure that our policy decisions are clear on what we are
    intending. And, I think a lot of what I hear, too, is things
    that are done by agencies that certainly I would be shocked if
    they were intended by the Congress when things were passed.
        So, I am just going to turn it over to you. You are here.
    You have become a U.S. Senator, and I would like to know--we
    want to make it better collectively, as a group. Instead of
    having Groundhog Day and listening, what can we do to make a
    difference, to make this better?
        Mr. Holtz-Eakin. So, I just want to say, I started a
    business 5 years ago, the American Action Forum. We are up to
    30 full-time employees. I am very happy about that.
        Senator Ayotte. Congratulations.
        Mr. Holtz-Eakin. I am tired of paying lawyers to deal with
    all this stuff. It is a tough fundraising ask when you say,
    what is this for?
        Senator Ayotte. I am a recovering lawyer, so I understand.
    [Laughter.]
        Mr. Holtz-Eakin. So, the No. 1 thing that I would ask you
    to do would be to cap the total burden. I am a fan of
    regulatory budgets. They are highly imperfect, but it cannot
    just keep going up.
        Senator Ayotte. And, who does that?
        Mr. Holtz-Eakin. You have to have a cap.
        Senator Ayotte. Who does the regulatory budget in----
        Mr. Holtz-Eakin. It does not exist right now, so it would
    have to be created----
        Senator Ayotte. But, who would do it? Who would you
    recommend does it?
        Mr. Holtz-Eakin. You should pass every year, as you should
    pass a financial budget----
        Senator Ayotte. So, the Budget Committee would do two forms
    of budget. We would do a regulatory budget----
        Mr. Holtz-Eakin. The Congress should pass budgets.
        Senator Ayotte. OK.
        Mr. Holtz-Eakin. And, this is another cost of running the
    government and you should control that cost, No. 1.
        Senator Ayotte. I think it is a great idea, because it
    would show more honesty to the American people that we are
    looking at the big picture on this.
        Mr. Holtz-Eakin. The second is, I would like more
    uniformity. Independent agencies, cabinet agencies should be
    treated the same. That is a lot of the spirit of the discussion
    I had with Senator Portman. We have one tax system to fund
    spending programs. Every agency runs its own tax system by
    running its own regulatory system and that does not make sense
    to me. We should have some more uniformity. Standardize things.
        And, the last is the sentiment of Senator Heitkamp, do not
    let the perfect rule this. I mean, they just put out an ozone
    rule where 100 National Parks are not in compliance. The Cape
    Cod National Seashore is not in compliance. Sequoia National
    Park is not in compliance. Death Valley National Park is not in
    compliance. How are they going to come into compliance? The
    rule says, unknown technologies. Good luck.
        Senator Ayotte. Yes. That really shows the absurdity of it.
        So, Dr. Ellig, what would your top two be? That was great.
    Thank you, Doctor.
        Mr. Ellig. If I had to boil it down to the top two, I would
    say, establish a retrospective review process that puts
    responsibility for review outside of the agencies that issued
    the regulations, and have a uniform requirement for regulatory
    impact analysis for all agencies for regulations above a
    certain size.
        Senator Ayotte. Mm-hmm.
        Dr. Mandel. Two simple ones. One is, as I have been saying,
    establish a venue for collecting complaints. I do not mean a
    little office but something that has enough technological power
    to collate patterns so we can understand where the big problems
    are because right now, all we have is anecdotes. We have a lot
    of anecdotes, but all we have is anecdotes.
        And, second, to come along with that, you talk about a
    retrospective review agency. I would suggest something that is
    actually able to make recommendations about how to improve
    regulations. We talk about regulatory reform, and every time I
    heard the word ``reform,'' that has the Groundhog Day quality
    to it. I think we should start thinking about a continuous
    process of regulatory improvement, not of reform. I would like
    to move back to the language of business, as Chairman Johnson
    says, and think about continuous improvement.
        Ms. Katzen. I guess if I am to provide two, I would say to
    provide more resources to OIRA, and, on a directed basis, to
    the agencies to be able to do some of the things that we want
    them to do.
        And, the second is for all of us to stop playing
    ``gotcha,'' stop finding easy points to score, stop the 30-
    second sound bites on a very complicated but very critical
    component of our country's government.
        Senator Ayotte. Thank you all for being there. I think
    these suggestions that we heard are really helpful as this
    Committee moves forward to try to put in some legislation with
    teeth to make a difference for businesses across the country
    and to be more transparent in this regulatory process. So, I
    thank the Chairman and Ranking Member for having this hearing
    today.
        Chairman Johnson. Thank you, Senator Ayotte.
        Dr. Mandel, I do like the phrase ``continuous
    improvement.'' You do get that inbred in you in the private
    sector, certainly in the manufacturing setting. It is about
    continuous improvement.
        One thing I would like to point out, though, too, is when
    you come here from the private sector, one thing you notice
    about government, the Federal Government particularly, is
    everything here is additive. I mean, I get the point about
    having, whether it is the GAO, the Inspectors General, OIRA, or
    some of these agencies or offices within departments and
    agencies that are really tasked with auditing and trying to
    make government more efficient, that they need to be resourced.
    But, my problem is that there is just no process--and, again,
    that is another word that is music to my words--there is no
    process for subtraction.
        Mr. Holtz-Eakin, you mentioned the one in--I thought it was
    the one in, one out rule. I would love a one in, ten out rule,
    but I would settle for a one in, two out rule. There has to be
    a process of subtraction. There has to be a process of
    continuous improvement. And, I agree, if it is within the
    agencies, again, we have been trying to do this for decades. It
    has not worked.
        One of the first proposals I made--and, trust me, has not
    gotten traction--was a bicameral Sunset Committee, whose only
    task was, on a regular basis, rotating basis, go through a
    group of agencies over a number of years, and, really, the only
    task was subtraction, taking a look at the rules and
    regulations that were outdated or that were harmful and either
    update them, streamline them, modernize them, or eliminate
    them, and I think that is the kind of process we have to start
    looking at.
        It is, quite honestly, disappointing. I know our leader,
    Leader McConnell, was with President Obama in the White House
    and apparently President Obama said, do not even consider
    regulatory reform. Not interested in it. I hope that is not his
    real attitude.
        Certainly, the bipartisanship of this Committee, I have
    heard it. Senator Booker walked out and tapped me on the
    shoulder and he said, ``Boy, we have some real opportunities
    for some bipartisan agreements.'' Now, maybe not overall
    regulatory reform, like a REINS Act or Senator Portman's
    permitting act, but at least a rifle shot approach where we can
    take a look at the individual regulations and, like, again, on
    a bipartisan basis, hopefully with unanimous consent, if we do
    our job--and that was one of the aspirational goals that I set
    out for this Committee in our organizational business meeting,
    was in order to pass something in the Senate, we are going to
    need at least six Democrats. We have seven on this Committee.
    If we can get all seven Democrats and all nine Republicans in
    agreement, hopefully, we can get some of these marginal
    improvements, the continuous improvement, I will take any step
    we can take, and we have really got to direct that.
        But, again, it is about getting the information. I know
    Senator Carper was definitely taken with your, we want
    knowledge, not ignorance. I did pull up one of my favorite
    quotes from Thomas Jefferson. He said, ``If a nation expects to
    be ignorant and free, in the State of civilization, it expects
    what never was and never will be.''
        So, this is about information. We are the perfect conduit,
    trust me. Every day, every Member of Congress hears from
    constituents who come into our office with their tale of woe of
    a regulation that is doing great harm to their ability to
    improve, to grow, to create jobs. And, yes, there are
    regulations that do great jobs in terms of we have dramatically
    increased environmental protections, dramatically increased--or
    decreased the level of pollution. Those are good things. We all
    support that.
        But, there is a point of diminishing returns. There really
    is. And, I think in many cases, like Senator Heitkamp was
    talking about, too, is in our quest for a completely risk-free
    society, which also will never exist--never was, never will
    be--we have reached that point of diminishing returns, and I
    think the return on investment in terms of regulatory cost is
    dramatically diminishing, and, I would say, it has certainly
    overtaken the benefit.
        Mr. Holtz-Eakin, having been former CBO Director, you are
    talking about a regulatory budget. I mean, I love the concept.
    Again, a lot of people have criticized the $1.82 trillion
    regulatory burden. Again, these are projections. How could you
    come to agreement? How could you calculate that?
        Mr. Holtz-Eakin. So, at present, agencies self-report the
    compliance costs, the burdens they will impose. Those are not
    all in economic measures of cost and we should not pretend they
    are, but they are something that the agencies do and you could
    take those at face value, knowing that there is some multiple
    of them that is the actual economic cost, but just cap those.
    Provide some uniformity to the process of delivering those.
        I think Ms. Katzen is right about OIRA. If you are going to
    put all the independent agencies in there and have a more
    systematic process of delivering the information for a budget,
    it will have to be better staffed and that is a fact people are
    going to have to understand.
        But, I do not want to hold out the congressional budget
    process as the model, since it has all sorts of flaws. But, the
    idea that you systematically collect the information and
    measure something will give you the capacity to manage it is
    the appeal there. And, it is the cumulative. You can add it all
    up. That is the other appeal.
        Chairman Johnson. Dr. Mandel, I certainly agree with you. I
    think a number of people made this comment, that the review
    process has to be outside the agencies. Does it also have to be
    outside government? I mean, you are talking about a Regulatory
    Improvement Commission. Would that commission or committee,
    would that be outside of government, just set up by government
    and pretty much independent until it makes its recommendations?
        Dr. Mandel. That is basically right. It would be modeled
    after the Base Closing Commissions, where you would bring in
    distinguished people from the outside, appointed by the
    President and leaders of the Congress, and they would be able
    to make their decisions, their proposals, independent of
    anything else. Presumably, though, since it has to go through
    Congress, they would be sensitive to the politics of the
    situation and what can be passed and what cannot.
        Now, I have to make one point here, which is the Regulatory
    Improvement Commission can go on top of any of these other
    proposals. It is not, in fact, a substitute. It could go on top
    of the regulatory budget. It could go on top of Senator
    Portman's proposal. It is about setting up a back-channel and a
    place for complaints that everybody can use for any of these
    proposals.
        Chairman Johnson. Do you not think you would need
    Improvement Commissions? Would we not literally need dozens of
    these things, that they are actually focused and they have
    experts in particular areas of the private sector?
        Dr. Mandel. I am trying to think of things that can
    actually get passed under the current situation, So, the nice
    thing about the Base Closing Commissions is they were a limited
    term. You passed them. They did the job. They disappear. And
    then if there is an idea that it was good, you go and do it
    again.
        In today's situation, nobody really wants to layer on
    another level of permanent bureaucracy. It seems self-
    defeating. It seems ironic and paradoxical. So, let us go ahead
    and we will set this up, see if it works, see if we are happy
    with what it does--it is a small bite to build trust--and then
    go on from there. Like I said, it does not take the place of
    any of these other big picture.
        Chairman Johnson. No, I mean, my point being is what we
    would do is I would pick the low-hanging fruit. Let us find an
    area that really needs regulatory reform, something relatively
    simple, and let us get some experts in that particular area,
    set up an ad hoc commission, and have it operate and report
    back to--it is really what I was--the concept was with the
    bicameral Sunset Committee, where you do this on a revolving
    basis over a number of years----
        Dr. Mandel. Yes.
        Chairman Johnson [continuing]. And I guess what I would
    like from the panel is, think about that. What would be the
    best example? What would be the one area where we know we have
    expertise that is just crying for this type of commission to
    improve the regulatory environment outside of government, that
    can come in, report in, make recommendations.
        Dr. Mandel. I think that is an excellent idea, Senator.
    This can be structured that way and you can set up a couple,
    parallel to each other, but it is controllable.
        Chairman Johnson. Think about that. Senator Carper.
        Senator Carper. I am going to ask all of you--I have one
    specific question, and then I am going to ask all of you the
    last question. The last question, so you can be thinking about
    it, is I like to, when we have a panel like this with so many
    smart people, with some different views but well informed
    views, one of the things I like to do is ask for each of you to
    give me something that you think you all agree on, because one
    of the things we are looking for here is consensus. Just be
    thinking about that. What do you think could be one point that
    you all agree on? That would be helpful for us as closing words
    of advice.
        But, the question I want to go back to, I have been in and
    out of the room. I apologize for that. We have another hearing
    going on on transportation policy, so I apologize. But, I want
    to come back to retrospective review, if I could. When agencies
    are drafting regulations, there are a lot of steps to that
    process. They need to make sure that they know the law and the
    requirements that are placed on them, and they get input from
    stakeholders, they analyze the data, they draft the
    regulations, they get more input from stakeholders, and then
    they try to finalize the rule and promulgate it. But, that is
    not really the end of the process. When agencies learn more and
    when regulations have been around for a while, it is important
    to take a look and see, well, how well is it working?
        A number of our witnesses have discussed the lack of
    progress various Administrations have had in reviewing existing
    regulations. However, it is my understanding that this
    Administration, including the President himself, is actually
    committed to making progress in this area. And, I have heard
    him talk about it in State of the Union Address and I have
    talked with people like Cass Sunstein and others that seem to
    think that there is a real commitment.
        I would ask, Ms. Katzen, in your testimony, you said that
    you believe this Administration's efforts at retrospective
    review seem to be much more aggressive than some previous
    efforts, and that has been my impression, too. Could you please
    discuss what you think this Administration is doing right in
    this area, and if you think the stronger effort will be more
    successful, and, finally, what more would you suggest that they
    do to ensure success as they continue this effort? Please, and
    thank you.
        Ms. Katzen. Thank you, Senator Carper. I think any such
    effort requires leadership, which the President has shown. He
    issued not one, but actually three Executive Orders, and he
    convened a cabinet meeting where he spoke to the members of the
    cabinet, saying this is real and this is important to me. This
    is a serious effort.
        OIRA provided guidance and several data calls and is now
    organizing outreach to a lot of the stakeholders so that they
    can hear some of the stories that we heard this morning that
    will help inform them of where they should be looking for
    potential improvement.
        I think there is a lot of know how out there. The
    Administrative Conference of the United States (ACUS), just
    issued best practices recommendations, which are quite good.
    The one thing that is missing, and this is a theme I have
    harped on, unfortunately, several times today, is resources, in
    that the agencies are caught betwixt and between. There are
    people pushing them forward and people telling them to look
    backwards. Do they have sufficient resources to do that, and
    how do they make those choices.
        Will it provide success? I was part of the Clinton look-
    back experience and I had high hopes and we did not produce a
    whole lot, I will confess. I think it is a very difficult thing
    because there is not a whole lot of low-hanging fruit out there
    in the Federal regulatory system, in large part because some of
    the onerous or burdensome or costly regulations, as they are
    called, require capital investments up front and those are now
    sunk costs. You do not get them back. So I say in my written
    testimony, if you take seat belts out of cars or scrubbers out
    of smoke stacks, you are just going to have to incur costs to
    change the assembly line, or reconstruct the building.
        Where you get, I think, the biggest bang for the buck is in
    continuing operating and maintenance expenses and reporting,
    which can be done electronically. The references earlier to big
    data and being able to coordinate--two agencies should not be
    asking for the same information that we heard Senator Lankford
    talk about. And, in fact, DOT just issued a rule that
    eliminated the requirement to report that there is nothing to
    report for truck motor carriers who otherwise were having to do
    this kind of reporting.
        Those need to be flagged. They need to be immediately
    rectified. And, there is a will here. So, I am sanguine that we
    will get something. I am just not sure how much.
        Senator Carper. Thank you. Thanks very much.
        I ask, Doug, if you would just lead us off, that final
    question. Pick one area where you think you all agree that we
    should take real note of. What would that be?
        Mr. Holtz-Eakin. I think that everyone at this table would
    acknowledge that OIRA has been an improvement in the regulatory
    process, and it does send back regulations to agencies and it
    does engage in an attempt to improve the quality of regulation.
    So, going forward, look at the areas of success and imagine
    bringing OIRA to scale to encompass the entire regulatory
    burden and that would be a step in the right direction.
        Senator Carper. OK. Thanks. Dr. Ellig.
        Dr. Ellig. I think we agree on some problems, particularly
    that there are problems with the quality and the completeness
    of the analysis that agencies conduct that is supposed to
    inform their decisions about regulations. We may not agree on
    all the solutions.
        I think maybe another thing that we all agree with,
    although I am not sure everybody has spoken to it, is the idea
    that, yes, independent agencies ought to be gathering the same
    kind of information and doing the same kind of analysis that
    Executive Branch agencies are required to do.
        Senator Carper. OK, thanks.
        Dr. Mandel.
        Dr. Mandel. I think that we all agree that the regulations
    can be improved, and that continuous improvement would actually
    benefit all of us. We have to take a lot of regulations and
    boiling them down to a smaller number as opposed to just
    plucking at them one by one.
        Senator Carper. OK, thanks. Ms. Katzen.
        Ms. Katzen. And, finally, I think all of us would subscribe
    to the notion that economic analysis is good. I think we will
    all be in favor of knowledge, not ignorance. And, I am glad to
    hear my co-panelists all support OIRA, because I think OIRA is
    good.
        Senator Carper. All right.
        Ms. Katzen. Not surprising.
        Senator Carper. Good. Well, my closing thought would be
    here--this is one of my new aphorisms. I wrote it down. It is,
    I am for knowledge and against ignorance. So, that is another
    one of my good take-aways. I thank you all for that. I told the
    Chairman, I said, I will use that often in the days ahead. I
    will never acknowledge where it came from. [Laughter.]
        No, I will. Thanks so much. This was great.
        Chairman Johnson. He will use it again. Senator Lankford.
        Senator Lankford. Yes, just a couple of quick questions.
    Dr. Mandel, just a process thing. As you talk about this
    gathering organization, trying to filter it, the first
    regulation that came to mind for me was actually an obscure
    regulation dealing with 316(b) water rules. That was for,
    basically, power plants that have a lake around them. They have
    to take the water in. It is not the water that comes out as
    steam, it is just cooling in their facility. It had a pretty
    significant cost increase.
        They asked the question--because there were fish being
    impinged, that means trapped against the screen as they are
    coming in. In Oklahoma, all these lakes were manmade by the
    power plants. They were all stocked with fish by the
    powerplants. Most of the fish that were being impinged were
    minnows, which, by the way, 100 percent of minnows that you put
    a hook through their eye and throw it in the water when your
    fish, die. So, this is a fish that is replaceable in that
    sense. They did millions of dollars of work to try to do that.
        Now, that is a very small group of folks that are
    complaining about it. It is a very large, as Ms. Katzen said,
    capital cost up front. You are not going to undo that, because
    once they are required to do millions of dollars of work, 2
    years later when they say, just kidding, you do not have to do
    that. Actually, what you can do is if 5,000 minnows die on the
    screen that year, you can just put 5,000 minnows back in the
    lake and that will work fine, which would cost about $50 to do.
    But, that was not an option that was given to them. It was
    millions of dollars worth of rescreening and concrete work and
    everything else in their lake to accomplish that.
        How would that instance rise to the level of response when
    you are gathering things from all over the place? You are not
    talking about frequency on that one. That is a small group of
    folks, but it is a big issue to them.
        Dr. Mandel. So, one of the nice things that we could not do
    before is actually identify patterns that are very important to
    a small number of people, so that if you have big data
    techniques, you have an ability to sift through that and pick
    out things like that. I actually think that a lot of what we
    are going to find is that, to the extent that there is low-
    hanging fruit, they are going to be of that nature, small
    things that, without an organization collecting this in
    particular, would never rise to the level of doing anything
    about it.
        So, what I would say is that an organization to collect
    complaints would be intensely focused exactly on finding
    situations like this, small situations where you can fix a
    regulation and genuinely deal with a problem.
        Senator Lankford. But, again, that is supposed to be when
    they are promulgating the rule. That is the notice and comment.
    People are coming at them and saying, this is a bad idea. You
    are not giving us the least intrusive option, basically. We are
    getting a more expensive option when there is a cheaper option.
    When that is ignored, the rule comes out. They have limited
    time. Now, you are trying to argue about it. Going back to Ms.
    Katzen's statement, well, they have a huge capital cost. You
    are not going to----
        Dr. Mandel. I think there are things that need to be caught
    at the beginning, but I would actually put that in the class of
    if you flag that afterwards, it might improve the quality of
    future rules. I think we do not actually have a feedback
    learning loop where we learn from our mistakes in the past to
    talk about what is going to happen in the future. Your
    constituents on this would actually be happy knowing that
    somebody was listening so the next rule that came along that
    potentially was like this----
        Senator Lankford. Is not as bad.
        Dr. Mandel [continuing]. Is not as bad.
        Senator Lankford. Right, and we have notice of common
    issues and everything else.
        Let me make one quick statement on this, as well. We talk a
    lot about problems. I would like to identify who is doing a
    good job on this, especially on the retrospective review. Is
    there any agency in particular that you could identify and say,
    that agency is more diligent than other agencies on doing a
    retrospective review and trying to evaluate where there are
    problems and getting rid of it? So, what I would like to know
    is, obviously, those are agency heads we would want to visit
    with and see if there are areas that we can learn and gain
    from, as well. So, what agency is doing a good job at
    retrospective review and dealing with this?
        Dr. Ellig. A couple of years ago, Dr. Randy Lutter, who
    formerly worked at OIRA, now at Resources for the Future, did a
    study for Mercatus Center looking at agency retrospective
    review to try to figure out who is doing a good job and he did
    not find many. He did find, though, that, for some reason, the
    National Highway Traffic Safety Administration does have a
    longstanding program of retrospective review of regulations
    that they issued, and that was the only one he could find where
    he could name an agency that does this consistently over a long
    period of time.
        Senator Lankford. But, back to Dr. Mandel's comments, that
    is an agency that they have State individuals that are watching
    for it all the time. They are always looking for ways to be
    able to find that, so it is a limited customer base, I guess,
    at that point, that is processing that. But, I am glad to hear
    that.
        Dr. Mandel. The only one that I am aware of, it actually
    comes out of the same study.
        Senator Lankford. OK.
        Dr. Mandel. OK. Most of the studies that have looked at
    this does not pick out ones that have done things especially
    well.
        Senator Lankford. OK. Other ideas or thoughts from you on
    this?
        Ms. Katzen. Well, I think it is an ongoing process now, and
    if I could get back to you----
        Senator Lankford. Sure.
        Ms. Katzen [continuing]. I would be happy to do so. But, I
    am not familiar with the ins and outs currently----
        Senator Lankford. Let me just say, this Committee would
    always be willing to be able to hear about good stories, what
    we are doing well, because that is the kind of story, whether
    you are in a neighborhood that has extensive poverty and all
    kinds of crime and you find a few families that are succeeding,
    to be able to find out, how are they succeeding and how do you
    multiply that in the neighborhood, or whether it is within
    agencies that are doing a good job in this process. We want to
    multiply and elevate the folks that are doing a good job with
    it.
        Ms. Katzen. That is so constructive. Thank you.
        Senator Lankford. OK.
        Dr. Mandel. You mentioned the report that was recently done
    on best practices. Let me actually just read you a short
    excerpt from that report. In 2014, Executive Branch agencies
    issued 24 major rules. Not one regulation included a plan for
    retrospective review of the rule in the future, even though
    that was mandated by the Executive Orders from the President.
        Senator Lankford. OK. We will get back to you. Thank you.
    With that, I yield back, and I appreciate the conversation of
    the panel today.
        Chairman Johnson. Thank you, Senator Lankford. And, there
    is no doubt about it, if you want to achieve continuous
    improvement, analyzing best practices is probably one of the
    best, most efficient ways of doing that.
        We have a couple more minutes, and Ms. Katzen, I know you
    have to catch a flight, but without taking too much time, if I
    were in your chair, I would be sitting here going, OK, there is
    one thing I just wanted to get out and I did not get asked the
    question. I will give each one of you the opportunity, if there
    is something--you do not have to answer, but if there is
    something that you just want to talk about here and get it on
    the record before we close out the hearing.
        Mr. Holtz-Eakin. Just as a matter of the self-reported
    compliance burdens, I respect the Administration's intent with
    the retrospective review and every President issues Executive
    Orders on this front, but if you actually look at the regs
    revisited under retrospective review, the self-reported
    compliance costs went up, not down, as a result of that
    process, and I think that tells you a lot about how hard it is
    to get this right.
        Chairman Johnson. Thank you. Dr. Ellig.
        Dr. Ellig. Yes. Several members earlier in the hearing
    mentioned specifically issues with banks, which triggered
    something that I forgot to mention earlier. The Mercatus
    Center, some of my colleagues did a survey of community banks
    and how they are affected by Dodd-Frank, because, in theory,
    they are not regulated by Dodd-Frank, but in practice, Dodd-
    Frank regulates products and services and if they sell those
    products and service, such as mortgages and other loans, in
    effect, they have to comply with Dodd-Frank.
        And, I think that is a really good example of why it is
    important to understand what caused the problem we are trying
    to solve, because if the main point of Dodd-Frank was to try to
    prevent a financial crisis, I think we have to really ask
    carefully, what is the evidence that community banks caused the
    financial crisis.
        And, the more general point is if you have a set of
    regulated entities, or who would be regulated, who are not
    contributing to the problem you are trying to solve, why does
    the regulation need to apply to them to begin with?
        Chairman Johnson. By the way, I am the one that raised the
    community banks, and I will guarantee you, they feel like they
    are being affected dramatically by Dodd-Frank.
        Dr. Ellig. Yes.
        Chairman Johnson. Dr. Mandel.
        Dr. Mandel. I just want to make a point about language. I
    think we should start thinking about regulatory improvement
    rather than regulatory reform----
        Chairman Johnson. OK.
        Dr. Mandel [continuing]. Because regulatory reform puts us
    all to sleep and it does sound like Groundhog Day, and
    regulatory improvement is something that it can actually gather
    more bipartisan support.
        Chairman Johnson. That is a good suggestion. Words matter.
    Ms. Katzen.
        Ms. Katzen. I would just like to thank the Chairman and the
    other Members of the Committee. I thought that what you brought
    to the table today was highly constructive and forward looking,
    and I think that is critically important in this area, that we
    recognize what we have and we build on our successes, and I
    thank you for the approach that you are demonstrating in this
    area.
        Chairman Johnson. Well, I appreciate those kind comments.
    And, by the way, this has been an excellent Committee since I
    have been serving here in the Senate for 4 years, very
    bipartisan, very collegial. And, I am trying to maintain that
    tradition that I have witnessed with Senators Lieberman and
    Collins, and Senators Carper and Coburn, trying to do the same
    thing with Senator Carper now.
        And, these hearings, when you have excellent witnesses that
    provide thoughtful testimony, that provide thoughtful answers
    to, I think, some pretty thoughtful questions, I want it to
    continue. So, in other words, you do not just leave this table
    and go home and forget about it. Keep thinking about it. For
    example, if we want to set up one of these test commissions,
    that would be a good thing. So, keep collaborating. Keep
    thinking about these things. You are all obviously involved in
    this issue. Stay in communication with this Committee.
        So, again, I really do appreciate your thoughtful
    testimony, your answers.
        This hearing record will remain open for 15 days, until
    March 12 at 5 p.m., for the submission of statements and
    questions for the record.
        This hearing is adjourned.
        [Whereupon, at 12:11 p.m., the Committee was adjourned.]

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