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HOW A BROKEN PROCESS LEADS TO FLAWED

REGULATIONS

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

SEPTEMBER 14, 2011

Serial No. 112–84

Printed for the use of the Committee on Oversight and Government Reform

(

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

http://www.house.gov/reform
(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director
(III)

C O N T E N T S

Page

Hearing held on September 14, 2011 ..................................................................... 1

Statement of:

Graham, John, Ph.D., dean, Indiana University School of Public and

Environmental Affairs; Robbie LeValley, co-owner, Homestead Meats

and member of the Board of Directors, National Cattlemen’s Beef Association; David Arkush, director, Public Citizen’s Congress Watch; David

Barker, owner, Vida Preciosa International, Inc.; and Mathew Palmer,

flight attendant, Delta Air Lines ................................................................. 13

Arkush, David ............................................................................................ 35

Barker, David ............................................................................................ 46

Graham, John ............................................................................................ 13

LeValley, Robbie ........................................................................................ 29

Palmer, Mathew ........................................................................................ 53

Sunstein, Cass, Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget .................................................... 159

Letters, statements, etc., submitted for the record by:

Arkush, David, director, Public Citizen’s Congress Watch, prepared statement of ........................................................................................................... 37

Barker, David, owner, Vida Preciosa International, Inc., prepared statement of ........................................................................................................... 48

Chaffetz, Hon. Jason, a Representative in Congress from the State of

Utah, letter dated September 2, 2009 ......................................................... 111

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland:

Letter dated September 13, 2011 ............................................................. 102

Letter dated September 13, 2011 ............................................................. 105

Prepared statement of ............................................................................... 8

Graham, John, Ph.D., dean, Indiana University School of Public and

Environmental Affairs, prepared statement of ........................................... 16

Issa, Chairman Darrell E., a Representative in Congress from the State

of California:

Prepared statement of ............................................................................... 4

Staff report ................................................................................................. 65

LeValley, Robbie, co-owner, Homestead Meats and member of the Board

of Directors, National Cattlemen’s Beef Association, prepared statement

of ..................................................................................................................... 31

Maloney, Hon. Carolyn B., a Representative in Congress from the State

of New York, Public Citizen report ............................................................. 133

Palmer, Mathew, flight attendant, Delta Air Lines, prepared statement

of ..................................................................................................................... 55

Sunstein, Cass, Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget, prepared statement of ............. 162

(1)

HOW A BROKEN PROCESS LEADS TO FLAWED

REGULATIONS

WEDNESDAY, SEPTEMBER 14, 2011

HOUSE OF REPRESENTATIVES, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The committee met, pursuant to notice, at 9:33 a.m., in room

2154, Rayburn House Office Building, Hon. Darrell E. Issa (chairman of the committee) presiding.

Present: Representatives Issa, Mica, McHenry, Jordan, Chaffetz,

Walberg, Lankford, Amash, Labrador, DesJarlais, Gowdy, Guinta,

Farenthold, Kelly, Cummings, Maloney, Norton, Tierney, Cooper,

Connolly, Quigley, Davis, Welch, and Murphy.

Staff present: Michael R. Bebeau, assistant clerk; Robert Borden,

general counsel; Molly Boyl, parliamentarian; Lawrence J. Brady,

staff director; Joseph A. Brazauskas and David Brewer, counsels;

John Cuaderes, deputy staff director; Gwen D. Luzansky, assistant

clerk; Adam P. Fromm, director of Member liaison and floor operations; Linda Good, chief clerk; Ryan M. Hambleton and Kristin L.

Nelson, professional staff members; Christopher Hixon, deputy

chief counsel, oversight; Justin LoFranco, press assistant; Mark D.

Marin, senior professional staff member; Kristina M. Moore, senior

counsel; Laura L. Rush, deputy chief clerk; Rebecca Watkins, press

secretary; Peter Warren, legislative policy director; Krista Boyd,

minority counsel; Ashley Etienne, minority director of communications; Devon Hill, minority staff assistant; Carla Hultberg, minority

chief clerk; Paul Kincaid, minority press secretary; Chris Knauer,

minority senior investigator; Lucinda Lessley, minority policy director; Dave Rapallo, minority staff director; and Suzanne Sachsman

Grooms, minority chief counsel.

Chairman ISSA. Ladies and gentlemen, in the interest of time, we

are assured the witness is coming, but we are going to go ahead

and begin, and he will be sworn in separately if he arrives after

that.

The hearing will come to order.

The Oversight and Government Reform Committee exists to secure two fundamental principles: first, Americans have a right to

know that the money Washington takes from them is well spent

and, second, Americans deserve an efficient, effective government

that works for them. Our duty on the Oversight and Government

Reform Committee is to protect these rights. Our solemn responsibility is to hold government accountable to taxpayers, because taxpayers have a right to know what they get from their government.

We will work tirelessly in partnership with citizen watchdogs to de-
2

liver the facts to the American people and bring genuine reform to

the Federal bureaucracy.

Good morning again. Our hearing today is going to scrutinize

agencies and the Federal regulatory process. We not only know on

this committee that it is flawed and that it often punishes job creators and stifles economic growth, but President Obama has spoken

about and even launched an effort to evaluate regulations that create unnecessary burdens. Regulatory agencies under this administration, though, have gone in the opposite direction.

And understand regulatory agencies under every administration

have a push to do more. But under this administration we have increased from 2,044 in 2009 to 2,439 in 2010. Another way of putting it is they pass more laws than we do here in Congress. Their

laws are not subject to accounting in the way that we are. If we

cost more money, we have to find offsets. Regulatory agencies have

an inherent right to pass on cost to you.

We have seen the budgets of these regulatory agencies grow by

16 percent over the last 3 years. Investor’s Business Daily summarized: If the Federal Government’s regulatory operation were a

business, it would be the fiftieth largest in this country in terms

of revenue and the third largest in terms of employees. Regulators

in America represent a larger work force than all of McDonald’s

workers, Ford’s workers, Disney’s and Boeing’s combined. With a

quarter of a million regulators, there is no question that job security is, in fact, growing their operation.

Employment at regulatory agencies has climbed 13 percent since

President Obama took office, and the number of staff working on

regulatory matters is scheduled to increase at a rate of 10,000 new

employees per year over the next 2 years. The number of full-time

regulators now is expected to reach, in 2012, 291,000.

Meanwhile, since President Obama took office, private sector jobs

have declined by 5.6 percent. We don’t blame the President for the

growth of regulation; we don’t blame the President for the loss of

jobs. But under his watch this has occurred. Under our watch, Mr.

Cummings and myself, we have an obligation, with the President,

to reverse this trend.

The administration has 219 economically significant regulations

in the pipeline right now. If finalized, these would cost $100 million

or more each year to the economy. That is a minimum cost of $219

billion over 10 years. And understand when I said that, each of

them is significant; therefore, each of them costs more than $100

million apiece.

To date, the administration has already imposed 75 new regulations, at a cost of more than $380 billion over 10 years. The business owners and workers who we will hear from today are not Fortune 500 executives, they are Main Street business owners and

workers from around the country. They, their families, coworkers,

and employees bear the cost of new and proposed regulations. For

them, the business around the country has a price greater than

just compliance; it is in fact a hidden tax, uncertainty, and perhaps

the loss of jobs not yet created or jobs that will not be retained.

An uncertain regulatory climate breeds a market of uncertainty,

forcing job creators’ capital to wait on the sidelines. Making matters worse, the Federal agencies charged with serving as a watch-
3

dog over Federal rulemaking, OIRA, has failed to take meaningful

action to address the breakdown in this process.

One of our questions today will be if an agency says something is not economically significant, meaning less than $100 million, and

later that is proven to be flawed, is there going to be a do-over or

do we simply assume that we didn’t catch that one and it becomes

law without the scrutiny of its economic impact?

Today we will hear from Administrator Sunstein and expect him

to address specific details of why and how this has happened and

what we can do to fix it. I would like to take note that the written

testimony he will provide to the committee fails to answer the

questions that we have asked. I intend to ask Mr. Sunstein to explain how the regulatory process can be circumvented, ignored, or

openly flaunted by the bureaucracy in a manner contrary to direction given by the President.

Thus far, the rhetoric we have seen from the Obama administration on the issue of regulatory reform has not matched its deeds.

But we take the President at his words. We intend to assist in seeing that, under our watch and under the President’s watch, we reverse this trend.

In order to be fair to the ranking member, I will put the rest of

my opening statement in at this time, and I recognize the ranking

member for his opening statement.

[The prepared statement of Chairman Darrell E. Issa follows:]
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5
6

Mr. CUMMINGS. Thank you very much, Mr. Chairman, and I

thank you for calling this hearing. I think every member of our

committee would agree that creating jobs should be our committee’s number one priority. The question is whether we can develop

bipartisan solutions we can all support.

When I go home to my district, only 40 miles away from here,

my constituents tell me we need to find common ground; we need

to focus on concrete proposals and we need to pass them now. More

than 7 months ago, as one of my first actions as ranking member,

I wrote to the chairman requesting that the committee hold hearings on an initiative proposed by President Obama in his State of

the Union Address. The proposal was to create jobs and strengthen

the economy by investing in America’s infrastructure. This proposal

was endorsed by both the U.S. Chamber of Commerce and the

AFL–CIO.

As I said at the time, ‘‘These are exactly the kinds of bipartisan

constructive initiatives our committee and Congress should support.’’ When the chairman decided not to hold that hearing, I

placed my statement into the record during a hearing just like this

one, which focused on regulations. Since then we have held 20

more hearings on regulations, but we have held few hearings on bipartisan proposals to create jobs.

In his speech to Congress and to the Nation last week, President

Obama renewed his call for bipartisan action on his infrastructure

proposal to create jobs by rehabilitating homes, businesses and

communities; investing in a national infrastructure bank; modernizing 35,000 schools; and expanding access to high speed wireless.

As I said in a hearing yesterday, we have to be very careful in our

country because if we do not improve our infrastructure, we will be

destroyed from the inside.

On Friday I sent another letter to the chairman urging the committee hold hearings on the President’s infrastructure proposal, as

well as other components of the American Jobs Act. I hope this

committee will hold these hearings and I hope we can be part of

a helpful, positive solution.

With respect to regulations, I support a balanced and thorough

review designed to improve regulations. I think there is no member

of this committee that would be against that. One of the things

that we must ask as we approach this is will we get rid of regulations and what guarantee that jobs will be created? Will we be in

a situation where we have no regulations, businesses are making

big money because they have gotten rid of regulations, benefits of

the regulations are gone, companies are making all kinds of money

and our poverty rate goes up, as was reported just yesterday, at an

alarming rate?

As I have said before, I strongly believe that any responsible effort to review regulations must consider both costs and benefits.

Today we will not hear a balanced view, by the way. Instead, we

will hear a lopsided view about why some groups believe certain

regulations are flawed. This approach narrows the information received by the committee and serves neither the regulatory process

nor the public interest.

If a regulation is problematic, we should hear that. But to ignore

the benefits only fuels cynicism about how we do business in this
7

Nation. On a broader level, repealing health and safety regulations

is no silver bullet. With all due respect to our witnesses from the

Association of Reptile Keepers, repealing a so-called job-killing regulation to allow more pythons, boa constrictors, and anacondas into

the United States is not the kind of bold bipartisan solution Americans are looking for to help the economy.

I am also concerned that the committee may be expanding attacks on agencies charged with protecting American workers. This

week a witness was added to the hearing at the last minute. Apparently, he is a plaintiff in an ongoing lawsuit against the National Mediation Board, who is objecting to rule changes under the

Railway Labor Act. The District Court for the District of Columbia

has already ruled against this plaintiff, but his case is scheduled

to be appealed next week.

In my opinion, it is time to work together and take action on proposals we should all be able to support. That is what the American

people want.

Mr. Chairman, with this in mind, I want to ask you if I can work

together with you and with the other members of our committee to

develop a joint, a joint bipartisan committee report with recommendations to the Super Committee on reducing the debt and

increasing the jobs. As you know, the law was established that established the Super Committee gave our committee the option of

submitting such a report by October the 14th. I think we would

make a much more responsive contribution if we submit one together, with recommendations on which we all can agree. And I

would ask, Mr. Chairman, if you would agree to do that. I think

it is very important. I think we have a lot to contribute, particularly with the jurisdiction of our committee.

[The prepared statement of Hon. Elijah E. Cummings follows:]
8
9
10

Chairman ISSA. I thank the gentleman and, in full answer to his

question, I would certainly hope that we would submit joint suggestions and each of us, if necessary, submit separate suggestions. I

think that all of our comments, both the majority, minority, and

those which we can both agree on, should be submitted for the

committee’s approval, and I thank the gentleman for it.

With that, I would like to recognize the gentleman from Florida,

the chairman of the Transportation Committee, Mr. Mica, for his

opening statement.

Mr. MICA. Thank you, Mr. Chairman, and thank you, Mr.

Cummings, for convening this important oversight hearing on regulations and its effect. I was thinking how do you get all these regulations. We are deluged with thousands of Federal regulations.

Here is how we get them. It is great to follow Mr. Cummings, because he is on the Transportation Committee and talked about

transportation.

This is the list of current surface transportation programs and

bureaucracy. This is what we deal with on our committee and our

jurisdiction. Look at them, dozens and dozens. It started from less

than a dozen programs. Every one of these programs have to

produce rules and regulations. So just look at this chart and then

look at what these people have to do. So one of the first things you

have to do is collapse some of the bureaucracy.

Some of these are duplicate activities and actually passing out all

kinds of regulations that people have to deal with. Then the results

are very important. And if you take something like Mr. Cummings

talked about, transportation projects, what the President talked

about, we can throw all the money we want at programs and try

to say we are going to put people to work in transportation.

Here is the problem we face. Shovel-ready has become a national

joke. This is why it has become a national joke. In this one chart

here, you see it takes you about 6 years to comply with regulations

to get any kind of transportation project that involves the Federal

Government. Six years. So shovel-ready has become just a joke because you can’t do it.

We have proposed actually to reduce the time, if you could do

some approvals concurrently, rater than consecutively, so we are

not accused of running over any environmental standards or regulations. And many of these things are important to comply with,

but this is what you have to comply with now, all these rules and

regulations to do a simple project.

So the rule of thumb is if the Federal Government gets involved,

the project takes three times as long and costs three times as

much. Then, if you are trying to shovel money into these projects,

which we have tried to do, and we have the latest proposal for,

what, $450 billion, of which only 12 percent is transportation and

infrastructure. You are going to run into the same problem they

ran into lost time. How many times do you have to hit your head

against the wall and get a different result?

But 35 percent of the $63 billion, $63 billion was the total out

of $787 billion that went for infrastructure, $63 billion. Thirty-five

percent, September 1st, was still in Washington, DC; they couldn’t

even spend it because of the regulations that inhibit the ability to

move forward with a project. So we have to change both the scope
11

of the bureaucracies we have created and we have to reduce the

regulations, or at least find some way to move forward in a coherent fashion if you want compliance, and people do want compliance

with certain things, in a reasonable fashion, and that is what we

are going to have to do.

But I am glad you brought up the subject, Mr. Cummings. And

thank you, Mr. Issa, for holding this hearing.

Chairman ISSA. Would the gentleman yield?

Mr. MICA. Yes.

Chairman ISSA. We usually don’t have additional opening statements, but I thank the gentleman because you came well prepared

and because hopefully this committee, which represents the job impediments that every committee of Congress deals with, will benefit from that, and I want to especially thank you.

Mr. MICA. Well, thank you. And this is just a little microcosm,

transportation. But you all serve on different committees and deal

with different issues in your communities, and you see how we are

strangling the Nation in bureaucracy and regulations, and we have

to attack both and this is a good start. Thank you.

Chairman ISSA. I thank the gentleman.

We now recognize the gentleman from Illinois, Mr. Quigley, for

his opening statement.

Mr. QUIGLEY. Thank you, Mr. Chairman. I appreciate the opportunity to speak.

I think the President had it right in the State of the Union Address when he talked about regulation and finding a middle

ground. We can avoid unnecessary regulation; we can avoid duplicative regulation. It is a tough task, but it is important to do.

But I do think that there are mind-sets and there is legislation

that is designed to eliminate any new regulation and to demonize

it. So what I try to do is remind folks in this manner: try not to

think about regulation at the Federal, State, or local level the next

time you get on a commuter airliner. How much sleep has that

pilot had? Try not to think about it if you are a miner in West Virginia, if you attend a State fair, you are a fisherman in the Gulf

of Mexico, or if you come to my town, Chicago.

If you breathe in Chicago, we are the asthma morbidity and mortality capital of the United States, the next time we have an ozone

alert. If you want to put it off, wait until lunch, when you have a

turkey sandwich, or tomorrow morning when you have your eggs.

About one in six Americans has food poisoning every year. A million cases of salmonella. Or if you just have a drink of water in

Chicago, where chromium levels are three times the healthy limit

and lead levels are surprisingly high, depending on where you are,

based on the distribution system.

So I recognize that regulation isn’t going to solve all our problems, but we have to constantly remind ourselves it shouldn’t be

just the day after a catastrophe that we say, well, we needed more

government regulation. It is an even stream throughout our lives,

recognizing that critical balance; not demonizing it, not cutting it

off at the knees with lack of funding, but recognizing that middle

balance that keeps us safe, keeps us healthy, because those catastrophes, those illnesses, those deaths cause us money, jobs, and it

hurts the economy.
12

I thank you and I yield back.

Mr. CONNOLLY. Would the gentleman yield?

Mr. QUIGLEY. I yield.

Mr. CONNOLLY. I thank the gentleman. Mr. Chairman, if regulations and economical growth were inversely related, then sub-Saharan Africa would have the most productive economy on earth. If

regulations and economic growth were inversely related, then economic growth would have accelerated during the Bush administration and shrunken during the Clinton administration. In fact, median household income today has declined to what it was in 1997.

If an efficacious National Labor Relations Board actually impeded

economic growth, then the 1950’s and 1960’s would not have produced the most sustained growth in middle class incomes in American history.

In reality, there is no empirical basis for the claim that government relation and economic growth are incompatible, or even inversely related. In fact, the evidence seems to suggest the contrary.

Consider the automotive industry. For decades, the Big Three successfully resisted legislative efforts to establish meaningful fuel efficiency standards. Their success resisting legislation contributed

directly to American automobiles losing market share to more efficient vehicles produced in Asia. Today, following a Federal rescue,

General Motors and Chrysler automotive manufacturers are deploying more efficient, more competitive products consistent with

Federal regulation.

Certainly, Mr. Mica has a point that we can find ourselves in a

regulatory bind in which regulation goes amuck or becomes counterproductive. But the idea that somehow it is all or nothing is an

unacceptable economic proposition. And as my colleague from Illinois just pointed out, from a human health point of view regulation

is essential because the marketplace is not self-correcting.

Mr. Cummings made reference to the fact that we are now reduced, in this twenty-second hearing on regulation, propounding

this etiology that regulation is strangling the American economy

and if we only released it from regulation, jobs would flow and all

would be well. We are now reduced to the point of actually hearing,

no disrespect, Mr. Barker, about reptiles and how intrusive Federal

regulation is in trying to protect the Everglades from now seeing

pythons becoming an endemic species, killing off all kinds of flora

and fauna that are native to the Everglades, and the fear that we

have actually lost the battle because of lack of control, not because

of too much control, of the importation of dangerous and foreign

species into the United States.

So I look forward to the hearing, Mr. Chairman, but I certainly

reject the premise. Thank you.

Chairman ISSA. I thank the gentleman.

All Members will have 7 days to submit additional opening statements and extraneous material for the record.

We now recognize our first panel of witnesses. Dr. John Graham

is dean of the School of Public and Environmental Affairs at Indiana University. He served as the Administrator of the Office of Information and Regulatory Affairs within the Office of Management

and Budget from 2001 to 2008, and at that time it was easier to
13

get through security here. You have our apologies for the trouble

you had.

Mrs. Robbie LeValley is a co-owner of Homestead Meats, a direct

meat marketing business that has been in operation since 1995.

Hopefully there are no PETA people objecting to what you do.

Mr. David Arkush is the director of Congress Watch at Public

Citizen. Thank you. A returning guest.

Mr. David Barker is owner of Vida Preciosa. Actually, I understand it translates to Precious International, a business specializing in research and captive breeding of pythons and boas. And I

could do too much talking about those being two of the names in

my old alarm company, but we will stay off of that for today.

And Mr. Mathew Palmer, who is a flight attendant at Delta Airlines, testifying on his own behalf.

And I will support the gentleman, the ranking member’s statement. We do not have witnesses here to talk specifically about

their litigation or to support their litigation. We agreed to have you

here; we think it is appropriate because of your experience relative

to the effect at Delta. But please understand that we will limit, on

both sides of the aisle, on questions to not specifically pertain to

any litigation.

Pursuant to the committee rules, all witnesses are to be sworn.

Would you all rise to take the oath?

Raise your right hands.

[Witnesses sworn.]

Chairman ISSA. Let the record indicate that all witnesses answered in the affirmative. Thank you. Please be seated.

Now, Dr. Graham, you know the routine here pretty well, but for

the rest of you, your entire opening statements, all of your printed

material and any additional material you choose to present to the

committee, will be included in the record. So pretty close to exactly

5 minutes you will be given to make an opening statement. You

can read from your prepared notes. We strongly suggest that you

use this time, though, to expand on what you have already presented to us so that both may be part of the record.

You will see the light in front of you, basically pretty straight forward. If it is green, you are fine; if it is yellow, wrap up; if it is

red, please stop at the end of the full sentence, and no run-on sentences.

With that, Dr. Graham.

STATEMENTS OF JOHN GRAHAM, PH.D., DEAN, INDIANA UNIVERSITY SCHOOL OF PUBLIC AND ENVIRONMENTAL AFFAIRS; ROBBIE LEVALLEY, CO-OWNER, HOMESTEAD MEATS

AND MEMBER OF THE BOARD OF DIRECTORS, NATIONAL

CATTLEMEN’S BEEF ASSOCIATION; DAVID ARKUSH, DIRECTOR, PUBLIC CITIZEN’S CONGRESS WATCH; DAVID BARKER,

OWNER, VIDA PRECIOSA INTERNATIONAL, INC.; AND

MATHEW PALMER, FLIGHT ATTENDANT, DELTA AIR LINES

STATEMENT OF JOHN GRAHAM

Mr. GRAHAM. Thank you, Mr. Chairman and members of the

committee. The hearing this morning occurs at a time of our country in economic distress. The unemployment rate was 5 percent in
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early 2008; it rose to over 10 percent in October 2009. Last year,

it appeared the recovery was on the way, but now we appear to be

stuck around 9 percent unemployment. And, as Mr. Cummings

mentioned, we learned today about 15 percent of Americans are

now officially recorded to be in poverty. Any sustained recovery has

to have two basic things: fewer layoffs of people and more business

investment in hiring.

What is the connection to the regulatory system? It has been well

accepted for decades that the regulatory climate affects how businesses and consumers think about their future decisions and their

investments. Right now, virtually all major sectors of our economy

are facing potentially big, new regulatory burdens. I refer to manufacturing, mining, energy, agriculture, and even higher education

are all about to be subject to substantial new regulatory programs.

Is the Obama administration and OIRA in a good position to

handle these issues? I think we are in a good news/bad news situation. The good news is President Obama has personally and publicly expressed concern about the need for regulatory reform and he

has put OIRA to work to try to streamline some existing regulations. He has also recently returned publicly a regulation to the

Environmental Protection Agency that deals with ozone on the

grounds that it is not a good timing from the standpoint of the

economy. The Obama administration also has an administrator of

OIRA, Cass Sunstein, a talented and deeply knowledgeable person

about regulatory issues and about cost-benefit analysis.

The bad news we face at this time is that there is clear evidence

that a number of costly regulations coming out of the Federal Government is on the rise and, perhaps more troubling, the number of

costly regulatory proposals that are in the agendas of the agencies

are also on the rise, and this is the prospect that is of concern to

people who care about the relationship of regulation and the economy.

Now, in fairness to the administration, their argument will be,

and you have heard some of this already, that the benefits of these

regulations are also growing and, in fact, in some cases these benefits are larger than the costs, so maybe in some sense we are doing

better even though we are feeling worse. My concern, however, is

that the numbers we are talking about, in terms of benefits and

costs, it is the agencies, the regulators who generate these numbers, and if OMB and OIRA do not police these numbers, they can

tell a very rosy story even though the facts are in fact not in their

favor.

A related concern I have is if you look at the actual record of the

administration in returning regulations to agencies due to poor

cost-benefit analysis, there is not a single case of a public return

letter to a regulatory agency, now almost 3 years into this administration, due to poor cost-benefit analysis.

I included in my written statement an example where President

Bush and President Obama basically agreed on a regulatory issue,

the higher mileage standards for cars and trucks, and what I did

is I showed you how the benefit and cost estimates for these regulations have changed simply in the two administrations; and all of

a sudden the benefits of these mileage standards are much more

substantial than they used to be. I am not sure that these changes
15

in the way the benefit estimates are made have a good scientific

or economic foundation, but we are told now by the regulators that

these mileage standards are much more beneficial than they used

to be.

There are also very interesting, peculiar things going on in these

regulations. You look, for example, at manufacturers who are considering whether to put a hybrid engine in or a diesel engine in or

a natural gas engine in their cars. We now have a proposal from

the Obama administration that if they do an electric car they get

to count that car as two vehicles, instead of one, for compliance

purposes; and they are also allowed to count that vehicle as if it

emits zero pollution for five model years, even though we all know

that pollution, to some extent, is generated back at the power

plant, where the electricity comes from, and clearly that should be

included in this type of analysis.

So my concern is the kinds of issues that OIRA and OIRA staff

are typically very diligent about, the cost-benefit analysis underlying these rules. It is not as vigilant as I think it needs to be, and

this committee needs to take a very strong interest in how these

analyses are done.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Graham follows:]
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Chairman ISSA. Thank you, Doctor, and thank you for being the

consummate professional on the 5-minute rule.

Ms. LeValley.

STATEMENT OF ROBBIE LEVALLEY

Ms. LEVALLEY. Thank you, Mr. Chairman, Ranking Member

Cummings. I have been a beef producer all of my life and my two

boys represent the fourth generation on our ranch. In addition to

our ranch, my family and I are co-owners of Homestead Meats, a

direct beef marketing business that owns and operates a packing

plant regulated by USDA. So not only do I produce high quality

cattle, I also took the initiative to process and package beef in

order to provide a great eating experience for my customers.

Our business is built on relationships and marketing alliances

that allow me to produce a high quality beef that my customers demand, quality for which we get paid a premium for. The proposed

GIPSA rule, however, will cripple our ability to market cattle the

way we want, impacts our small business model, and limits consumer choices.

I strongly believe in the fundamental American business tenet of

a willing buyer and seller being able to enter into a private business contract because it protects my cattle marketing contracts and

it is the heart of our small business. GIPSA believes my contract

should be approved by the government and posted on the Internet.

It goes on to say that because I am part owner in a packing plant,

I should not be able to sell my cattle to other packers. This provision violates privacy and limits business opportunities.

For years, USDA has promoted exactly what we are doing: sell

direct to the consumer, operate as a packing plant in a strategic

area of the country and produce local food. We responded to consumer demand, we followed USDA’s lead, and now we are being

punished. This is a slap in the face to innovative businessmen and

women across the United States.

The proposed GIPSA rule offers neither clarity nor clear definition in terminology. Elimination of the competitive injury requirement will provide a disincentive for value-added marketing because

of fear of litigation. The vague definition such as ‘‘unfair’’ or ‘‘reasonable person’’ will open the door to an increased number of lawsuits because mere accusations without economic proof are enough

for USDA or an individual to bring lawsuits against a buyer. This

will be a trial lawyer’s dream and will cause cattle prices to spiral

downward.

Does increased government intervention and litigation determine

fairness, and who pays for this? Cattle producers will pay. What

happens to every other industry when litigation increases? Creativity, partnerships, balance and the desire to take a chance end,

which is the very basis of the entrepreneurial spirit of the American business owner. Do you truly want that for the beef industry

or the livestock industry?

This rule requires buyers of cattle to justify the price paid for my

livestock. And what will be the justification and who sets that?

This regulation seems to infer that it is the role of big government,

and I strongly oppose the government setting or justifying the

prices paid for my cattle.
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I have serious concerns about the process behind this rule. As

you know, the rule is a result of language included in the 2008

Farm Bill. However, we believe the rule published goes beyond the

intent of Congress because it includes provisions that are similar

to ones that were defeated by votes on the Senate floor or through

subcommittee or through committee action. This rule did not include a cost-benefit analysis. NCBA was one of several groups that

commissioned an independent analysis by Informa Economics to

look at the impact. The report concluded this rule would result in

the loss of over 23,000 jobs, annual GDP loss of $1.6 billion, and

annual tax revenue losses of $360 million. This is well over the

$100 million threshold to be considered economically significant.

But the rule was not treated that way.

We appreciate the letter sent by 147 Members of the House of

Representatives asking for a full cost-benefit analysis, but Secretary Vilsack has said the analysis won’t be open for review or

comment. The report also estimates annual costs of $62 million just

to cattle producers alone. Overall, we believe the process in formulating the rule is flawed and broken.

Value-based marketing has given our family and given families

across the United States the business opportunity to compete for

market share at the highest level. It accounts for 62 percent of the

actual cattle contracts across the United States, is value-based

marketing. We do not need big government setting up shop on our

farms and ranches, and government intrusion into the private marketplace is not the answer.

I urge the committee to help stop this rule from being finalized,

as it is detrimental to ranchers, consumers, and the entire U.S.

economy. Thank you.

[The prepared statement of Ms. LeValley follows:]
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Chairman ISSA. Thank you.

Mr. Arkush.

STATEMENT OF DAVID ARKUSH

Mr. ARKUSH. Thank you, Mr. Chairman. I think all of us here

agree that the regulatory process is, in some sense, broken. I disagree, I think, with a lot of people here on how exactly it is broken.

What I see in the record before this committee is strong evidence

of enormous net benefits to health, safety, and the economy; and,

given those benefits, it is surprising that we make it so hard for

our public protection agencies to do their jobs.

So on the benefits of regulations, there are obvious enormous

human benefits from public protections. We are talking about millions of lives, people’s health, children’s IQ points, clean air, clean

water. I have a lot of specifics in my written testimony; I am not

going to go into that in any greater depth.

It is controversial to try to put these benefits in narrow, economic terms because it is hard to put a price tag on them. It is

easy to understate benefits when we look at them monetarily and

it is easy to overstate costs. But even when you look at regulation

and evaluate it through this narrow lens of economic cost-benefit

analysis, the benefits are overwhelming and they overwhelm the

costs consistently. The authoritative resource on this is the annual

report from OMB to the Congress evaluating the past 10 years’

major regulations.

Across both the Bush administration and the Obama administration, these reports have come out every single year showing massive overwhelming benefits of regulations compared to their costs.

The most recent report showed that, on average, over the last 10

years, health, safety, and environmental regulations have had benefits 7 times as great as their costs. That is a 700 percent return

on investment. It is hard to find that kind of return on investment

anywhere in the United States, but you can find it from our regulatory agencies.

An often-overlooked benefit of regulations is that they can drive

innovation. As Mr. Connolly was saying in his opening remarks,

the auto industry, by fighting fuel economy standards for two decades, put itself at a severe disadvantage when consumers’ preferences shifted and consumers desired much more fuel-efficient vehicles, and the U.S. auto industry had a disadvantage compared to

foreign manufacturers who had been focusing on fuel economy.

Fuel economy standards would have forced auto manufacturers to

make the decisions that it turns out consumers actually wanted

and bring their fuel standards into the twenty-first century.

Another often missed benefit of regulation is that it can actually

help grow jobs. In the current economy, our principle problem is a

lack of demand. A lot of companies have idle cash sitting around

that they are not investing in their businesses because they are

afraid that if they invest in new products or services there won’t

be any demand for those products or services. It is a good time to

enact public protections that will bring those industries into the

twenty-first century in terms of environmental protections or worker protections and, in the process, use that idle cash to buy up-
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grades in equipment or hire service people or build other improvements to processes that will boost the economy and create jobs.

We also shouldn’t overlook the harms of deregulation. The big example in this area recently is the financial crisis. The financial sector was deregulated over the past several decades and, in short

order, it collapsed on itself. It imploded under the weight of its own

reckless and predatory practices in the absence of good government

oversight. The costs are hard to overestimate in this area. We are

11 million jobs behind where we should be in the U.S. economy, if

not for the great recession. The financial crisis evaporated trillions

of dollars worth of wealth and cost billions and trillions of dollars

of government bailouts and other supports.

So here is how the system is broken. Given all the benefits of

regulation and given the severe harms of under-regulation, we

make it far too hard for our public protection agencies to do their

jobs. The agencies that protect our health, safety, and environment

are some of the most heavily regulated entities in the United

States. They have to comply with the Administrative Procedure

Act; the Paperwork Reduction Act, which creates paperwork; the

Unfunded Mandates Reform Act; the Regulatory Flexibility Act; the

Small Business Regulatory Enforcement Fairness Act; the Congressional Review Act; several executive orders; and they are subject to

judicial review. In all, there are as many as 110 requirements an

agency needs to comply with just to write a rule.

As a result, even when an agency wants to write a simple, noncontroversial rule, it can take up to 10 years. My organization published a report earlier this year talking about one of those examples. The construction industry got together with labor unions and

public interest groups; everybody thought we needed a new rule to

protect crane safety. It still took 10 years to produce because of the

burdens on OSHA.

Here is the important point. When rules have massive economic

benefits, there are equally massive costs when we delay the creation of those rules. On average, the OMB estimates that the benefits of rules outweigh the costs by $9 to $59 billion a year. That

means that when we delay major rulemakings by 1 year, we are

costing the U.S. economy $9 to $59 billion. We need to give public

protection agencies the resources they need to do their jobs and we

need to reduce unnecessary burdens on them.

Thank you.

[The prepared statement of Mr. Arkush follows:]
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Chairman ISSA. Thank you.

Mr. Barker.

STATEMENT OF DAVID BARKER

Mr. BARKER. Mr. Chairman and members of the committee, my

name is David Barker. I am a published herpetologist and an entrepreneur engaged in the breeding and sales of pythons and boas.

I am grateful for this opportunity to relate some of the problems,

legal shortcomings and job-killing aspects of the Interior Department’s and the U.S. Fish and Wildlife Service’s proposal to add

nine species of large snakes to the Injurious Wildlife List under the

Lacey Act.

A listing under the Lacey Act makes it a Federal crime to import

or export these species, or move them across State lines. And this

would be the first time a species in common pet ownership was so

listed. The Fish and Wildlife Service has not considered the economic impact of this listing, failing, as the Small Business Administration Office of Advocacy noted, to fulfill its duties under the

Regulatory Flexibility Act. The proposed action also constitutes an

inappropriate taking of property, impacting as many as a million

Americans. Finally, it is based on an insubstantial scientific analysis that has not withstood scrutiny or subsequent review.

Taking that last issue first, the basis for the Fish and Wildlife

Service proposed action can be traced back to a paper published in

early 2008 concluding that pythons would find the climate of the

southern third of the continental United States to be favorable and

predicting that these pythons were likely to invade the United

States all the way from Washington, DC, to San Francisco.

The two past cold winters have now laid to rest that fear.

Pythons and boas will not survive anywhere in the continental

United States except extreme Southern Florida. In the past 2

years, there are four published papers that describe how pythons

fail to survive in cold weather, and three of those papers are coauthored by government biologists and academics contracted by the

Interior Department agencies.

Second, the proposal to invoke the Lacey Act is not a valid use

of this Federal criminal statute. The simple truth is that the proposed action, one, will not solve or correct any problem regarding

these snake species in South Florida; two, it will destroy American

businesses and it will damage hundreds of thousands of people economically; and, three, it threatens as many as a million law-abiding American citizens and their families with the penalty of a felony conviction for pursuing their livelihoods, for pursuing their

hobby or for simply moving with their pet to a new State. States

should be allowed the freedom to regulate this industry as they see

fit, without heavy-handed Federal intervention.

In my own personal circumstance, if the proposed action is implemented, it will directly and negatively affect my wife’s and my incorporated small business and our family income. It will destroy

more than 20 years of work and it essentially confiscates the value

of our investments in breeding stock and equipment, and it removes all value to our colony of breeding animals. It will stop all

of our interstate and international business, which is 90 percent of

our business; it will immediately reduce our family income by 35
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percent or more at a time when income and work come hard. It will

likely ruin our retirement and, additionally, our business is interconnected with many other local businesses, large and small, that

will be negatively affected.

There are thousands of other families with small snake breeding

businesses similar to ours. The Fish and Wildlife Service utterly

failed to take any hard look at these economic impacts and they

failed to consider reasonable alternatives to Federal regulation that

were offered by my industry. As the Office of Advocacy noted, the

agency failed to meet its most basic duties under the Regulatory

Flexibility Act.

Finally, a little discussed issue regards the disaster that may follow the implementation of this proposed rule. What is going to happen to the million or so animals that suddenly are without value?

Many, of course, may be maintained into the future by their current owners, but what will be the outcome for the animals that are

suddenly unwanted or unaffordable? The proposed action makes no

provision for the disposal of these animals. Zoos will not take even

one of them. Animal shelters are completely unprepared and generally without trained staff, equipment, cages, or food. The implementation of the proposed action may precipitate the greatest

slaughter of pet animals in American history.

I thank the committee for this opportunity to voice my concerns,

and if there are any questions I will do my best to answer them.

Thank you.

[The prepared statement of Mr. Barker follows:]
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Chairman ISSA. Thank you.

Mr. Palmer.

STATEMENT OF MATHEW PALMER

Mr. PALMER. Good morning, Mr. Chairman. Thank you for inviting me to testify. My name is Mathew Palmer and I am a proud

Delta flight attendant. I began my career with Delta in 2008 and

have been based both in New York City and Atlanta. I have had

the privilege of visiting five continents and seeing more than 20

countries. I have carried celebrities, common folks, and even shared

jet service to D.C. with President Jimmy Carter in route to President Obama’s inauguration.

A number of my colleagues, other Delta flight attendants both

pre-merger Northwest and Delta alike, are here with me who have,

like me, been harmed by government regulation. Combined, all of

us have hundreds of years of experience as Delta flight attendants.

My colleagues at Delta Airlines have three times in the past decade been involved in representational elections. Each time the Association of Flight Attendants were seekened to bargain on our behalf. AFA has failed each time to secure the votes of confidence

needed to step into that role.

The first two of these elections were conducted according to the

75 year old former rules of the National Mediation Board and the

Railway Labor Act, rules supported by both Republican and Democratic administrations. That leads to my main concern. A new rule

arranged by union insiders and pushed through by the NMB has

changed the election landscape despite strong objections from both

airlines and, more importantly, from thousands of employees who

do not want forced union representation.

When the NMB changed the election procedures to enable unions

to be certified with a minority of a workgroup, there was no change

to the archaic decertification process, which is convoluted at best

and requires a ‘‘straw man’’ posing as a union to win an election.

In fact, decertification has never been successfully used in a large

employee group in the airline and railroad industries.

When Delta and Northwest were merging into the world’s largest

airline, all signs indicated that the world’s largest flight attendant

union, the AFA, was in backdoor dealings with Board Members

Linda Puchala and Harry Hoglander, both of whom previously

served as AFL–CIO Union officials with the AFA and Airline Pilots

Association, respectively. The Transportation Trades Department of

the AFL–CIO during this time secretly petitioned the NMB for a

change in the voting rule to organize a union.

This was not disclosed to the pre-merger Delta flight attendants,

who it was intended to affect and, more shocking, not to the premerger Northwest flight attendants, who actually represented

them by the AFA, despite the fact that AFA President Patricia

Friend served as Secretary of the Transportation Trades Department herself. Call me foolish, but I believe she should effectively

communicate this to her members. Patricia Friend did not.

So even with the rules tilted in the favor of the unions, in the

most recent election, 94 percent of Delta flight attendants turned

out to vote and the majority voted to reject AFA representation

once again. Following, the AFA then had the gall to say that the
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high turnout rate indicated Delta interfered in the election. The argument apparently was that too many people voted. Now the same

two members who discarded 75 years of precedent are considering

requests from the unions to now disregard how we voted and now

force us to redo elections under rules that are even more favorable

to unions.

Mr. Chairman, I want the NMB to respect our vote. I want them

to respect the votes of the majority of Delta flight attendants and

Delta employees and other workgroups who prefer to have a direct

relationship with our company. I believe the majority of my coworkers agree with me that workers should make decisions about

their representation and a government agency such as the NMB

should not impose its judgment on employees. Rather, they should

be a neutral referee of elections.

We have been held hostage by the NMB and the union for 3

years since our merger. Our pre-merger employee group, some of

which are here today, are forced to be kept separate so we are not

able to get the full benefits of our merger. I cannot speak for Delta

Airlines and I will not pretend to. In fact, despite my testimony

echoing that of many of my colleagues at Delta, what I have said

is only my reality.

Frankly, I don’t care whether one is pro-union or not. What I am

concerned about is the fact of my pay, my work rules, my stock,

my livelihood, my friends, my colleagues, and our system of government are all being affected by the partisanship of this board working to do the bidding of unions whose elections are supposed to be

neutral. They are biased and they should not be. All should agree

it is time they be reined in.

I would like to thank the committee for their time.

[The prepared statement of Mr. Palmer follows:]
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Chairman ISSA. Thank you.

Thank you all for your statements and a near record that everybody was right there at or below the 5-minutes, which helps all of

us. And I would caution all of my colleagues we will do the same

on our questions. With that, I will now entertain a document,

unanimous consent, if you are ready.

Mr. CUMMINGS. I will just submit it.

Chairman ISSA. Oh, you will. Okay. Well, then I will submit during my opening statement. I ask unanimous consent that the Committee on Oversight’s staff report prepared for this hearing be accepted. Without objection.

Additionally, I am submitting for unanimous consent letters in

support of the GIPSA position. Without objection, so ordered.

[The information referred to follows:]
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Chairman ISSA. I will now get past that procedure.

Dr. Graham, I am concerned about something that is not directly

related to this, but I am concerned, as Mr. Palmer and others have

been, Ms. LeValley, about circumventing the process. Isn’t one of

the areas that is growing in circumventing sue and settled, not just

EPA but throughout government, in which, if you settle a case, you

effectively bypass all of the protections that are being complained

about not being complied with here today?

Mr. GRAHAM. That is a good question. My experience when I was

at OMB at OIRA is that the agencies and the Justice Department

are responsible for developing these settlement agreements that

commit agencies to doing certain regulations and, in some cases, to

doing very specific content of regulation. Those consent decree arrangements do pose a problem for OMB because, in a sense, OMB

doesn’t have a seat at the table when those consent decrees are

signed.

Chairman ISSA. And they are agreed to without scoring, effectively.

Mr. GRAHAM. Well, and there is no cost-benefit analysis to what

they are agreeing to, there is no legal analysis as to what they are

agreeing to that is independent of the parties who are at that table

itself. So it puts OMB in a difficult position then to be having to

review independently and objectively a regulation that is emerging

from a consent decree process where OMB was not a participant.

Chairman ISSA. Isn’t that also true that when agencies do guidance, rather than rulemaking, the same occurs, that implementing

that guidance there is no cost-benefit, it is just basically if you

don’t comply, then the regulatory system can hurt you, while at the

same time guidance, although theoretically not compelling, can cost

those regulated entities a lot of money?

Mr. GRAHAM. Yes. In the bargaining and game between regulators and OMB, and, of course, that is a daily occurrence in this

town, the regulators know that if they do a rule they have to get

OMB approval. But if they just issue a policy statement or a guidance or an enforcement suggestion, these types of documents aren’t

covered by the Executive order, are not typically reviewed by OMB,

and are certainly not subject to cost-benefit analysis.

Chairman ISSA. One other question. During your time through

OMB, isn’t it true that if guidance is implemented, then one of the

justifications for rulemaking is it is already being done and, therefore, there is no incremental cost? Isn’t that so to the other part

of the backdoor, that often compliance to a guidance mitigates the

cost and then it makes it easier to go to OMB for rulemaking after

the fact?

Mr. GRAHAM. Certainly the agency can say we have our foot in

the door, we already have this experience with this, we are just

trying to make it mandatory now, since we are already doing it

through guidance, supposedly. But in a lot of cases the guidance is

itself de facto mandatory because there is an enforcement arm behind it.

Chairman ISSA. Lord knows that if the FDA suggests something

and you have drugs pending, it is pretty hard not to take their suggestion.
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Dr. Graham, I am going to note Ms. LeValley’s statement and

predicament. During your time in government, if you found that

there was a circumvention of a cost-benefit, in other words, something cost a lot more than $100 million, perhaps much more than

a billion, it is discovered after the fact and then a cabinet says,

well, too bad, we are not going back to look at it. Although you

were powerless to absolutely stop that, what would have been the

position of any previous administration when you discover that less

than $100 million has become more than a billion and it wasn’t

taken into consideration?

Dr. Graham? Ms. LeValley has told us pretty well that what is

happening to her, but would this have happened in any previous

administration that you know of?

Mr. GRAHAM. I really don’t know, but it is a situation that is of

concern, without doubt.

Chairman ISSA. Okay.

Mr. Barker, I am not necessarily a fan of your particular advocation, but I do have an interesting question for you. Has there been

any finding behind this that any of the reptiles that you have produced have ever caused any damage for which this proposed rule

would be a cure?

Mr. BARKER. No.

Chairman ISSA. Okay.

Mr. BARKER. It wouldn’t. The animals are widespread; they are

found in 49 States in the United States. They are held by more

than a million American citizens. The Lacey Act won’t—the problem is a State problem that exists only in Southern Florida, and

this is an inappropriate law that will have no effect whatsoever.

Chairman ISSA. If I had more time, I would have more questions.

With that, I recognize the ranking member.

Mr. CUMMINGS. I want to pick up exactly where the chairman

left off. Mr. Barker, you agree with the U.S. Association of Reptile

Keepers who opposes the proposed rule for the Fish and Wildlife

Service that bans the import and export of some dangerous snakes,

is that correct?

Mr. BARKER. Yes, sir.

Mr. CUMMINGS. And you raised your concerns during the formal

notice and comment period, again, at an OIRA meeting, did you

not? Did you do that? Have you raised these objections before?

Mr. BARKER. Yes, in the public comment period, yes.

Mr. CUMMINGS. That is right.

I ask unanimous consent that this letter of September 13th directed to the chairman from 14 organizations, including the Audubon Society of Florida, be admitted into the record.

Chairman ISSA. Without objection.

Mr. CUMMINGS. Thank you very much.

[The information referred to follows:]
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Mr. CUMMINGS. Did you realize that there are organizations from

Florida in the Everglades that are begging for these regulations?

And let me just quote this letter. And, by the way, it is from the

Audubon Society of Florida, Florida Wildlife Federation, Everglades

Foundation, and I could go on and on. But it says, ‘‘Florida’s experience demonstrates that States would benefit from Federal leadership on this issue to ensure injurious species are restricted in a

timely way before they become firmly established. Similar injurious

status would be an important companion protection to Florida

State rules appropriately govern the Federal realms of import and

interstate commerce.’’

Are you familiar with that?

Mr. BARKER. Yes, sir.

Mr. CUMMINGS. The only reason I am raising this—first of all, I

sympathize with you. I understand; I ran a business. I understand

your concern about the welfare of your wife and your family. But

I want to make sure that we understand there is another side to

this. There are other people that are from your area who have an

opposing view and they are very adamant.

Ms. LeValley, according to your testimony, you have concerns

about USDA’s proposed rule to increase competition in the meat

packeting market and you testified before the USDA in a public

panel, did you not?

Ms. LEVALLEY. I did.

Mr. CUMMINGS. An essential component of a fair and working

regulatory process is that those who are impacted by a proposal

have an opportunity to explain their concerns to the rulemaking

body, that is, the notice and comment period.

You both had an opportunity to voice your concerns and neither

of the two rules you address is final; they are both still in the

midst of the rulemaking process, and I want to direct your attention to a letter which I ask be admitted to the record, dated September 13, 2011, addressed to the chairman, and it is from about

15 organizations, including the Campaign for Contract Agriculture

Reform. I ask that it be admitted into the record.

Chairman ISSA. Without objection.

[The information referred to follows:]
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Mr. CUMMINGS. Let me just read from this letter. Again, these

are people who are not here. I want to make sure that their voices

are heard, and they refer to 191 others who have the same opinion.

It says, ‘‘in conclusion, we urge Congress to allow USDA to move

forward expeditiously to implement a final rule that will strengthen and clarify the packers and stockyard acts with commonsense

protections for farmers and ranchers. We urge you to stand with

our Nation’s farmers, ranchers, growers, and consumers to oppose

the efforts of meat packer and poultry special interests to insulate

themselves from Federal scrutiny of their anti-competitive behavior

and unfair treatment of farmers and ranchers. As a measure of

support for the issuance of the GIPSA rule,’’ listen to this, ‘‘we have

attached to our letter an August 3, 2011 letter from 190 groups

submitted to the Senate in support of finalizing the GIPSA proposed rule. These groups represent thousands of farmers, ranchers

and consumers from around the Nation.’’

Again, I just want to make sure that there is another voice here.

There are some other folks that have a different view than what

you have.

Mr. Arkush, the title of today’s hearing is, ‘‘How a Broken Process Leads to Flawed Regulations.’’ One of the things that I am concerned about, and you heard me say this in my opening statement,

I have not heard too much here this morning so far that even if

you get rid of the rules that that creates jobs. So do you hollow out

a system, take away the regulations, take away the protections,

businesses make more money, poverty goes up, income goes down

for employees, regulations out of the window, and what is the guarantee that we get jobs? And if we don’t know what either of these

two final rules—by the way, this is the end of my question real

quick—if we don’t know what either of these two final rules will

look like, can we responsibly conclude that the process is broken

or the regulations are flawed?

Mr. Arkush.

Mr. ARKUSH. You are correct, there is no evidence, empirical evidence that deregulation or a lack of regulation creates jobs. To the

contrary, there is some evidence that regulations can create jobs

and there is overwhelming evidence, particularly from the financial

crisis, that is the big example that jumps out, that a lack of regulation can be devastating to the economy.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Chairman ISSA. I thank the gentleman.

We now go to the gentleman from Utah, Mr. Chaffetz, for 5 minutes.

Mr. CHAFFETZ. Thank you, Mr. Chairman, and thank you for

holding this hearing; it is vitally important.

I appreciate all of you who have traveled here to be here and to

testify.

Mr. Palmer, I would like to direct my questions to you, and I just

want to make sure I have this right. You had Northwest and Delta,

great airlines, merging together, a move that was widely applauded

as necessary in strengthening the airline industry and bringing together two great organizations. That happened in October 2008. In

September 2009 the AFL–CIO, in this letter that I have here and

that I would ask unanimous consent to insert into the record—I am
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sure that will be okay with the chairman if we insert this into the

record.

Chairman ISSA. I am sorry. Without objection.

Mr. CHAFFETZ. Thank you.

[The information referred to follows:]
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112
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Mr. CHAFFETZ. The AFL–CIO sent a letter to the National Mediation Board suggesting a rule change, that after 75 years, 75 years

of precedent, that they wanted to have these rules changed. My understanding is that now 3 years, 3 years into this merger, there

still has not been a resolution.

Mr. PALMER. There has not.

Mr. CHAFFETZ. So here you have a very large industry, roughly $731 billion into our economy, transporting 50 tons a day in cargo,

nearly 2 million people per day, there is this assertion that, well,

maybe this doesn’t have an effect. As the ranking member was saying, well, it doesn’t have any effect. It does have an effect. My understanding is here, according to a CNN article, ‘‘On average, nonunionized Delta flight attendants take home 12 percent more than

their non-unionized Northwest counterparts based on a typical 75

hour a month schedule, they enjoy more generous profitsharing and

retirement matches from the company, and they don’t have to dole

out $43 a month to union dues.’’

Now, Mr. Palmer, you don’t strike me as an overtly politically engaged person who is just here with partisan lenses on to extol the

Republican—my sense of it is that you are just looking at this objectively and that you want to say to your colleagues and to this

body, to the Congress as a whole, we want a resolution to this. Am

I overstating that or is that——

Mr. PALMER. You are not. I would respectfully disagree with Mr.

Cummings that it doesn’t affect us. I will bring it down from the

numbers that you talked about. There is approximately 21,000

Delta flight attendants, and it affects every one of us every day.

When you get on a Delta flight, you are going to get great service,

but you are going to get great service from a Northwest crew or a

Delta crew. Although our company is merged, we are not. So the

CNN poll I am not familiar with, but I do know that on every level

Delta flight attendants are paid more per hour, according to seniority; our per diem and other rates are higher. So we are doing the

same job, we are going to the same destinations, but because we

are in laboratory conditions and because the NMB and the AFA are

still messing around with our careers, Delta is not able to merge

us fully, so there are at least 7,000, perhaps 8,000 of the premerger

Northwest this affects every day.

Mr. CHAFFETZ. And what does that do to the morale and the atmosphere and the working conditions? When you are right next to

somebody who is exactly the same, and let’s pretend they are exactly the same in every way, what does that do to the working conditions there?

Mr. PALMER. The morale is certainly an issue because, first of all,

as I said in my testimony earlier, I began at Delta in 2008. I was

in training when that vote happened so, according to the rules, I

was unable to vote in it. So practically my whole career I have been

in laboratory conditions. There are people who have served through

other mergers. Some of the other mergers were probably a little

more smooth than this one, but this one is Delta is telling us they

are ready to move forward; the AFA is saying, no, we are not going

anywhere. Probably the best way I can describe it is non-Delta

flight attendants have no voice in this; we can’t say we are ready

to vote, we can’t petition the NMB to vote because we are not a
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union, don’t want a union. Those at Northwest who were unionized,

even though they lost their union last year because they cast their

votes not to have it, they don’t even have a voice anymore, nor do

they have the union. So it is politics and bureaucracy and red tape,

and there is absolutely no stability right now with us.

Mr. CHAFFETZ. But my understanding is that you said, I believe,

94 percent of the people did participate in the last vote?

Mr. PALMER. Not only was it 94 percent, but it was 94 percent

under the new rules, which were actually more favorable to the

unions.

Mr. CHAFFETZ. And what was the result of that vote, with 94

percent voting?

Mr. PALMER. I believe 9,500 out of us voted, 9,544 or so. But the

AFA immediately filed interference charges with Delta—or not

with Delta, but with the NMB, perceiving that too many people

voted, so that their polls were off. They felt they were going to win,

but because too many people voted, they were wrong and, thus,

there was interference.

Mr. CHAFFETZ. Did you experience any interference?

Mr. PALMER. Absolutely not.

Mr. CHAFFETZ. Thank you, Mr. Chairman; my time is up. I yield

back.

Chairman ISSA. I thank the gentleman.

We now go to the gentleman from Massachusetts, Mr. Tierney,

for 5 minutes.

Mr. TIERNEY. Thank you, Mr. Chairman.

Mr. Palmer, you are aware that when we have elections for Governor or for President or for Members of Congress, that the people

that stay home and don’t vote do not have their votes counted as

a no?

Mr. PALMER. I am aware of that, yes.

Mr. TIERNEY. Okay. And that rule that was changed in effect just

said that basically when you have a vote in a union situation in

your industry, they are not going to count the people that stay

home as a no vote anymore, right?

Mr. PALMER. Correct.

Mr. TIERNEY. Okay. Does that seem unreasonable to you?

Mr. PALMER. It doesn’t seem unreasonable to me.

Mr. TIERNEY. Thank you. Now, I have seen a motion in a lawsuit

against the National Mediation Board that lists Mathew R. Palmer

as one of the named parties listed as intervenors in the suit. Is

that Mr. Palmer the same person as you are?

Mr. PALMER. I am.

Mr. TIERNEY. And you intervened against the lawsuit against the

National Mediation Board.

Mr. PALMER. I did.

Chairman ISSA. Would the gentleman yield for just a question?

Mr. TIERNEY. Yes.

Chairman ISSA. In my opening statement, pursuant to the ranking member’s statement, we suggested strongly that we would not

ask and have him answer related to the lawsuit because it is something that we would like to avoid this committee getting in the

middle of, and I would ask the gentleman to try to agree with the

ranking member.
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Mr. TIERNEY. If you really wanted to stay out of the middle of

it, Mr. Chairman, Mr. Palmer wouldn’t be sitting there, all right?

So I will make sure that we ask the questions and they don’t skirt

the lawsuit stuff, but let’s be serious about this and not try to put

him on there and then claim we can’t ask him questions. All right?

He is here for a purpose, and let’s discuss it.

Now, as I understand it, the plaintiff’s lawsuit alleged that two

members of the National Mediation Board approached the rulemaking with an unalterably closed minds. You echoed that claim

in your testimony here today. And while you write that all signs

indicate that the world’s largest flight attendant union, the AFA,

was in backdoor dealings with Board Members Linda Puchala and

Harry Hoglander. But the district court judge ruled against you

and the other plaintiffs. He stated that the National Mediation

Board provided a neutral and rational basis for adopting the rule,

and the judge determined that your allegations were insufficient to

support even discovery in the issue. You didn’t get in the door with

it, the judge thought it was so weak. So the litigation is going on

right now, correct?

Mr. PALMER. Yes, sir.

Mr. TIERNEY. Okay. The plaintiffs have filed an appeal to the

judge’s ruling and you are currently scheduled for oral arguments

before the D.C. Circuit Court on Monday, is that correct?

Mr. PALMER. That is correct.

Mr. TIERNEY. Now, I am surprised, in that situation, to see Mr.

Palmer here at the hearing if you truly want to stay out of the litigation. It seems to me that you are doing just the opposite there,

Mr. Chairman. You have been sensitive to this issue before; you

were sensitive to it in the Tillman case, you were sensitive to it in

the Blackwater employees’ case on that. And if you really wanted

to be sensitive to it here today, Mr. Palmer would be sitting out

in the audience, not at the witness table.

Mr. Palmer, do you have concerns that your participation in this

hearing might imply in some way that this committee is trying to

support you in your ongoing litigation against the National Mediation Board?

Mr. PALMER. No. I would like to respond to your first question

as well.

Mr. TIERNEY. Well, I also—I have limited time to answer the

questions, so I would ask you to answer my questions.

Mr. PALMER. I understand that. No——

Mr. TIERNEY. I want to examine your claim that your testimony

that the new rules regarding union elections are tilted in favor of

unions. We haven’t seen any evidence that unions have won any

more union elections after the implementation of these new rules.

According to the data that the National Mediation Board in this

fiscal year, 2011, provided, following the enactment of the rule

change, the National Mediation Board has overseen 31 elections

and the certification rate for the elections under the new rule is basically the same as it had been for the decade prior, raising by exactly 1 percentage point, from 61.5 percent to 62.5 percent. These

elections under the new rules included four elections involving

Delta personnel. The unions lost all four of the Delta elections

under the new election proceedings.
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Mr. Chairman, I just want to wind up my comments saying if

Mr. Palmer wasn’t supposed to be having this committee look like

it was coming down on the side of the plaintiffs in that case, he

shouldn’t be sitting here. They clearly have lost more elections

under the new rules, they have not been adversely impacted on

that. Mr. Palmer has a direct interest as a plaintiff in that matter,

and I think that this committee should be in the business of not

interfering with litigation; we should not be putting these matters

on here when they are going on, and it would have been entirely

appropriate to leave Mr. Palmer on the bench.

Chairman ISSA. Would the gentleman yield?

Mr. TIERNEY. I yield.

Chairman ISSA. I know we are going to disagree until the end of

this hearing. Our view was that job creators and people impacted

were coming here to give their opinions about either rules, proposed rules, or other things that they thought was impacting them.

We asked Mr. Palmer, and he did so in his opening statement, to

limit to his opinion about the effect.

Now, I know you are a baseball fan, so I understand that if they

change the size of the strike box it may or may not affect differences, but at least as to the pitchers, they would say their job

got easier or harder with a rule change. Mr. Palmer is expressing

his opinion about that.

Mr. TIERNEY. Reclaiming my time, Mr. Chairman. You can’t convince me that of all of the employees—there were 21,000 employees—Mr. Palmer was the only person that could testify with that

point of view and that was necessary to bring a plaintiff in a lawsuit here to testify with 20,999 others available to be the person

to sit on that panel.

I yield back.

Chairman ISSA. For the record, my staff indicates that at the tie

of his invitation, we were not aware he was an intervenor, but

when we became aware we chose to go forward, and I appreciate

the gentleman’s concern.

With that we go to the gentleman who represents my alma

mater, Mr. Walberg.

Mr. WALBERG. And always proud to represent Sienna Heights

University. Thank you, Mr. Chairman.

Mr. Palmer, appreciate you being here, and I want to give you

an opportunity to answer a question that you did want to answer.

All I would say is I appreciate the efforts of Delta and Northwest

attendants and crew. You complete every week, at least twice, the

object of my grandchildren, and that is to have a safely returned

grandfather, because they are the only people in the world who

truly adore me. So thank you for doing that.

I am going to ask five questions, at least that is my intention,

so if you could keep your answers as brief as possible, but complete

as possible. I want to let you end by answering the basic question,

any additional points or comments you would like to address. But

let me go back.

My Democrat colleagues state that the old rules were undemocratic and the elections were not how we elect government officials.

How do you respond to that?
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Mr. PALMER. He was partly right. They are democratic, but they

are not like we elect you, and they are not like we elect you for

several reasons. If you underperform, then your constituents have

a right to vote you out in a period of time. Also, your constituents

do not pay you dues. As I have written in my testimony as well,

besides that, the NLRB, which the NRLA and the NMB wanted to

do, there was an equal process to decertify. Once you vote in a

union, say Delta or Northwest with AFA, it is for an indefinite

term. There is no equal process to go back. There is the convoluted

straw man poll that I talked about. You have to get one person out

of the 21,000 to be a straw man. We all have to identically sign

cards, it has to be 50 percent of us plus one within a year, then

hold the election and then hope the person that we are electing to

replace the union will actually then step down once and if somehow

he wins.

Mr. WALBERG. So you are captured.

Mr. PALMER. Yes. Absolutely. Completely different.

Mr. WALBERG. Assertions have been made that Delta interfered

in the election. Did you experience any interference from the company in any way?

Mr. PALMER. I did not.

Mr. WALBERG. Is there any way for Delta to know how a flight

attendant voted in the election?

Mr. PALMER. There is not. I also had a Ballot Point. We vote online and by phone, which is another difference. We vote for 5

weeks, we don’t vote for 12 hours on 1 day. You have 5 weeks to

vote. You can vote online or you can vote by phone. That allegation

came up from AFA. I contacted Ballot Point, who coincidentally is

who AFA uses for their internal elections at Northwest. They state

that they give us a PIN, random PIN and a random password.

They store those on two separate servers, so once you log in and

then place your PIN, I have an email from them stating that not

even their engineers could tell you how you voted. And even if they

did tell you how you voted, they would have no clue who that PIN

belonged to. So, no.

Mr. WALBERG. So no ballot identification of the voter in any way,

shape or form.

Mr. PALMER. No way, shape or form.

Mr. WALBERG. You mentioned that the old rules were consistent

with the Railway Labor Act. Can you explain?

Mr. PALMER. I can. The old rule was 50 percent plus one of the

majority of the class, so just a round number, with 20,000 flight attendants at Delta, if 10,001 voted, then you would be unionized.

They have changed that now to be a minority vote, so if 2,000 vote

and 1,001 vote in the affirmative for any union, not even just AFA,

now you have a union for the whole group. So it was completely

different.

Mr. WALBERG. Has the NMB ever been requested to change the

rules before?

Mr. PALMER. Yes, they have. Actually, there have been four

times, and probably the most interesting time was under the

Carter administration. They had the exact same board, it was a

three member board; it was one Republican, two Democrats. They

were, I believe, in the mid-1980’s and the late 1970’s also asked,
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and then this last time with the TTD. During the Carter administration, the NMB actually published in their register that they did

not believe that they had the right, that it could only go by congressional law. And, again, I reiterate we have two Democrats and

one Republican now. During the Carter administration it was the

same thing. They refused to change it then; it was refused to be

changed in the 1960’s and refused to be changed in the 1980’s.

Mr. WALBERG. Twenty-seven seconds. Any additional comments

or points you would like to make on this issue that you seem extremely passionate about and is very personal?

Mr. PALMER. Well, someone had mentioned earlier about that

Americans have the right to know the inherent costs to us with

regulations. There are $516 of dues each year, plus millions over

the course of the years for the unions. We have a right to have that

money and know what it is going to be used for. With unions we

do not.

Mr. WALBERG. Thank you, appreciate your comments.

Chairman ISSA. I thank the gentleman.

We now go to the gentleman from Tennessee, Mr. Cooper, for 5

minutes.

Mr. COOPER. Thank you, Mr. Chairman.

It is very easy, in a hearing like this, to beat up on the executive

branch for different problems with regulations. I think Congress

needs to remember where the laws come from; that is us. And oftentimes we fail in our responsibilities to pass good laws, so that

really makes it harder on the agencies to pass or formulate good

regulations. An example I wanted to bring up in particular is the

Lacey Act, and I would like to ask the chairman to amend the report that he has already submitted for the record because on page

13 of his document it says the Lacey Act was last amended in 1981.

Well, we amended it in 2008; we added plant species to that act.

And a Tennessee company recently has suffered greatly as a result

of overzealous enforcement of that act.

The law, as written by Congress, included no grandfathering

whatsoever, so it literally puts at risk every serious musician in the

United States, not just musical instruments, but flooring, all sorts

of industries that have to deal with wood products or paper products, things like that. And that was a congressional mistake. I

didn’t vote for this law. The President actually vetoed it and Congress went to the trouble of overriding the veto. Now, this law was

a very small part of a much larger farm bill. That shows the risk

that we take when we pass a massive piece of legislation and it is

hard to spot the individual components of it.

Another flaw with the law as passed by Congress is it puts our

legal fate in this country completely in the hands of foreign law

makers in the way they come up with their laws, which is sometimes hard to detect in one of the, what, 220 countries around the

world.

So the best way to reform is to start looking in the mirror, and

we have a lot of work to do here.

It used to be, years ago, that there were study groups in Congress so that we could actually have a better idea of knowing what

we were voting on in advance, before the vote. An earlier speaker,

Newt Gingrich, banned those organizations, and that ban has con-
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tinued now for a decade or two. So now each one of us has individual staffs that try to keep up with what we are voting on, but

it is very difficult for them to do a super-professional job, the way

it used to be done. So perhaps this Congress could look into reinstating those organizations, allowing them to form so we could

have a much more professional look.

The group that I particularly focused on in the past was called

the Democratic Study Group, but, actually, Republicans trusted it

so much they subscribed too, because this group did not assume

that you would vote with the Democratic party at all; they just

wanted to serve up the facts, give you the pro and con, and then

let you make up your mind according to what is in the best interest

of your country and your folks back home. That sounds a little old

fashioned, but wouldn’t that be nice, to return to ideas like that so

we would actually have a much more solid idea of what we are voting on?

There is a silver lining in this hearing. I think a couple of the

witnesses and most folks on this committee realize that Cass

Sunstein is a brilliant individual. I wish he had more clout and

more visibility. We are going to hear from him in a little bit, but

I think he wants to make good things happen to get these cost-benefit analyses right. But it is difficult to reform a process overnight.

So hopefully with a little good will, a little patience we can start

fixing some of these broken things that have been broken for a long

time in this town, and I think Congress should start with itself.

So thank you, Mr. Chairman. I appreciate the opportunity.

Chairman ISSA. Would the gentleman yield?

Mr. COOPER. I would be delighted.

Chairman ISSA. First of all, we take note of the 2008 Act and

would ask unanimous consent we be able to revise the document

before submission. Second, I appreciate your points, including the

unintended consequences to the Qatar industry and a number of

others. This committee is cognizant that we have to do review of

laws we have passed, and I hope that we continue to remember

that many of the regulations that get created do start with ill-prepared legislation. And I will take to note, along with the ranking

member, if we can address your concerns on the study committees,

because I think there are successor study committees, but I would

like to know more about what you would like to see and we will

work on that.

Thank you, gentleman.

We now go to the other gentleman from Tennessee, Mr.

DesJarlais.

Mr. DESJARLAIS. Thank you, Mr. Chairman, and thanks to our

witnesses for appearing here today.

Mr. Arkush, as I listened to your testimony, it reminded me of

a reality TV show that was on, I think, Ashton Kutcher, You Have

Been Punked, and before I spend time asking you questions, I want

to make sure you weren’t punking us today with that testimony.

Okay.

Why do you think so many of our companies are going overseas

to create their businesses?
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Mr. ARKUSH. Oh. Well, I am certainly not a multinational corporation myself, so I don’t have a lot of personal insight into that.

I think a lot of factors go into decisions like that.

Mr. DESJARLAIS. Okay. Have you ever worked for the Office of

Management and Budget?

Mr. ARKUSH. No, I haven’t.

Mr. DESJARLAIS. Office of Information and Regulator Affairs?

Mr. ARKUSH. No, I haven’t.

Mr. DESJARLAIS. Have you ever headed an executive or independent agency?

Mr. ARKUSH. No, I have not.

Mr. DESJARLAIS. Owned or operated your own small business?

Mr. ARKUSH. That is a close call.

Mr. DESJARLAIS. Okay. As part of the job creators tour, I have

traveled through Tennessee and visited, oh, thirty-plus factories

and businesses and asked them what was standing in the way of

job creation, and their opinion is a little different than yours. Probably the number one answer I get is that we need to get government out of the way, and EPA comes up quite often. So clearly

their opinion of regulations differs from yours. Do you think that

all regulations are good?

Mr. ARKUSH. Oh no, of course not. Anyone can make mistakes,

and that is true of the government as well. And on the note of what

small businesses think, there have been some interesting surveys

recently that have shown that the number one concern of small

businesses is poor sales. The concern is there won’t be enough demand for their products; it is not government regulation.

Mr. DESJARLAIS. Just to get this straight, I think you had said

that one of the biggest problems for regulatory agencies is that

they are overregulated.

Mr. ARKUSH. That is right.

Mr. DESJARLAIS. Okay. I wanted to make sure I heard that correctly. Doesn’t that in itself suggest that the bureaucrats here in

Washington are doing a poor job in terms of overregulating?

Mr. ARKUSH. It suggests to me the contrary; it is that even when

there is a commonsense rule that they want to write, that everyone

agrees on—sometimes industry wants rules; sometimes industry

and labor get together and they say to an agency we need a new

rule here. Even in those instances it is too hard and it takes too

long to write a simple noncontroversial rule, because there are so

many administrative burdens on these agencies.

Mr. DESJARLAIS. I hear a lot of numbers thrown around out

there what regulations cost employers. I have heard anywhere from

$9,000 to $12,000 per employee just the sheer number of regulations. Is that a number that sounds about right?

Mr. ARKUSH. No, it sounds wrong to me.

Mr. DESJARLAIS. Okay. Do you have a number?

Mr. ARKUSH. Well, I think that number is derived from this

study by these economists Crane and Crane. They said that regulations cost the economy $1.75 trillion a year. That study has been

thoroughly discredited. It had an incomplete data set, it had a

flawed methodology; it only looked at costs of regulations, it didn’t

look at benefits. If we looked at everything that way, we wouldn’t
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buy food. I would say, well, my grocery bill is a little high, that is

$50 a week, that is a big cost.

Mr. DESJARLAIS. I don’t disagree. Some regulations are good. I

am not trying to sound like I am anti-regulation. But what I am

hearing in the real world from real job creators is that we need to

get government out of their way and they are overburdened. So I

appreciate your testimony and being a good sport.

Mr. ARKUSH. I do have one real world personal response to some

of this and the Lacey Act concerns. Actually, the way in which I

have a small business is I am a musician and I actually work in

a band; we play weddings and bar mitzvahs, if you have anyone.

Chairman ISSA. Excuse me, but no soliciting here.

Mr. ARKUSH. I am sorry.

Chairman ISSA. If we let it start with you, we will end up with

Pepsi cans sitting on the——

Mr. ARKUSH. With all respect, that was a joke. But I am a

guitarist and I don’t have concerns about the Lacey Act; it is not

a problem for me, it is not a problem for my business.

Mr. DESJARLAIS. I wanted to get to Ms. LeValley for a moment,

because clearly you have a great story there. In testimony you indicated that the USDA previously promoted consumer-driven small

scale processing operations. Can you expand on how the new rule

now restricts your operation?

Ms. LEVALLEY. Certainly. When we go back to the proposed rule,

what it says in the proposed language is that it bans packer-topacker sales. Does not differentiate size or anything. Nor do I believe that differentiating size is an answer by any means. However,

what it says is two-thirds of our animals actually are sold directly

to a packer. Under this proposed regulation, it says that those

packer-to-packer sales are banned. We are a packer. I am a packer,

I am a producer, I am a feeder, I am a rancher, and because I am

a packer, I now have limitations on who I can actually sell to because I cannot sell the rest of my animals to another packer.

Mr. DESJARLAIS. Okay. The chairman has been quick with the

gavel, but I want to just real quickly, if I get my question in,

maybe he will let you answer. Is it true that GIPSA agreed to conduct a more rigorous cost-benefit analysis of the rule in response

to the stakeholders’ concerns?

Ms. LEVALLEY. It is true, and we appreciate that. However, what

we would like is that that be open for review and comment. We

know that the original economic analysis was flawed. So, again,

just as you all have said, 147 of you have written a letter saying

that this process should be open for public comment. We want that

to be the case, and we have heard that that won’t be the case as

far as being open for public comment. That review, that cost-benefit

analysis should be open for review and public comment.

Mr. DESJARLAIS. Thank you, Ms. LeValley.

I yield back.

Ms. LEVALLEY. Thank you.

Chairman ISSA. I thank the gentleman and the gentlelady.

We now go to the gentleman from Virginia, Mr. Connolly, for 5

minutes.

Mr. CONNOLLY. Thank you, Mr. Chairman. And thank you for allowing me my opening statement; I appreciate it.
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Mr. Barker, I listened to your testimony and I have some questions about it, but let me ask. You make reference to the Lacey Act.

Am I not correct that the Lacey Act was introduced in 1900 by a

Republican Congressman from Iowa and signed into law by a Republican President, William McKinley, to try to—well, its original

motivation was to try to protect endangered species that were

being more than decimated because of the feather trade in women’s

hats at the time. Is that not correct?

Mr. BARKER. I am not expert on the history of the Lacey Act. I

can’t respond, sir.

Mr. CONNOLLY. Well, that act that has been on the books for 111

years, in your view, does it represent burdensome regulation that

should be repealed?

Mr. BARKER. Yes. At least in some cases, sir. It is a huge act.

Mr. CONNOLLY. Thank you. You made reference to the USGS

study, and I think you said it was very unscientific. This is the

study you are referring to?

Mr. BARKER. Yes, 302 pages published in 2009.

Mr. CONNOLLY. Are you aware of the fact that a number of scientists from all over the United States signed a letter praising this

study and saying it most certainly is scientific and is relevant and

ought to be taken cognizance of as we perform our deliberations?

I am referring to a letter you may not have seen, be glad to share

with you, to my colleague from Virginia, Bobby Scott, who was then

the chairman of the House Subcommittee on Crime, Terrorism, and

Homeland Security, on January 20th of last year. This letter is

signed by PhDs, usually in botany or biology or natural sciences,

from Waldorf College, University of Hawaii, University of Tennessee, Florida Museum of Natural History, University of Massachusetts, Texas Tech, Duke University, Central Lakes College,

World of Wildlife Federation, Defenders of Wildlife, Bishop Museum in Hawaii, the Union of Concerned Scientists, and Auburn

University. Have you seen that letter from these scientists?

Mr. BARKER. I don’t have it with me here, but yes, I have seen

the letter. Most of the signatories on it are people who would be

identified professionally as invasion species biologists and colleagues of the authors of that paper.

Mr. CONNOLLY. So they are just biased?

Mr. BARKER. Some are graduate students of one of the authors.

Mr. CONNOLLY. Are you familiar with the testimony given in

March of last year by the Director of the National Park Service before the House Resources Committee? He said, ‘‘The Burmese

python is currently well established in South Florida, including Everglades National Park and Big Cyprus National Preserve, and a

population of boa constrictors is established south of Miami. Additionally, recent evidence strongly suggests a reproducing population of Northern African pythons on the western boundaries of

Miami.’’

He is testifying here that these invasive species, these non-native, exotic species have now in fact established themselves in

South Florida. Do you take any issue with that testimony?

Mr. BARKER. There are several issues. One is that the Everglades

region of South Florida has more established alien species than any

other similar ecosystem in the world. Fully one-third of all plants
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and animals that have ever been recorded in that area are established alien species.

Mr. CONNOLLY. Do you believe that the Federal Government has

any obligation whatsoever, in concert with the State government of

Florida, to try to hold back and if not actually try to improve

progress in curbing both the introduction of exotic foreign species

that could be dangerous to the habitat and to try to make some

progress in curbing the habitat of the Burmese python and other

reptiles?

Mr. BARKER. I don’t know of anyone who is happy about Burmese

pythons existing in the Everglades region of South Florida. It is a

problem, but it is a very localized State problem; it is not a Federal

problem. Burmese pythons are not going to spread across the

United States and strike fear in the hearts of kindergartners everywhere. So in this case I think the Lacey Act is just simply the

wrong piece of legislation to invoke.

And I can offer as an example the fact that they are not going

to—I disagree with some conclusions in that report and other people support it, but in terms of actual evidence, over the past 20

years a significantly larger number of Burmese pythons were imported into Los Angeles, and there is no established population of

the snakes there. They have been maintained in large numbers, by

tens of thousands of people across the Southern United States for

30 and 40 years. I got my first one 41 years ago. I don’t have any

now, but there are no other populations anywhere else in the

United States, and I think that Florida has acted very aggressively

and very appropriately to handle the problem at the State level,

they have done very well. And I will mention that the African rock

python that was included in the testimony last year is believed to

have been extirpated from the United States now. There were a

very small number of animals existing in a huge pile of lumber.

The State came in, wood chipped the whole thing, didn’t find any

more animals; wiped out the thing. No animals have been reported

in 12 months, and they are waiting another year to formally declare them as exterminated, but they appear to be gone.

Mr. CONNOLLY. Thank you.

Chairman ISSA. I thank the gentleman.

We now go to the gentleman from Pennsylvania, Mr. Kelly, who

is not going to ask questions at this time.

We now go to the gentleman from Texas, Mr. Farenthold, for 5

minutes.

Mr. FARENTHOLD. Thank you, Mr. Chairman. Being a Texas, a

big cattle growing State, I wanted to talk to Ms. LeValley for a second about the effort that goes into producing cattle.

The USDA, right now, they grade select, choice and prime, and

that affects how much you get for your cattle. Can you tell us a

little bit about increasing upon that and creating different markets

with specialized product, grass-fed, Angus? I mean, there is some

effort that goes into doing that, and the breeds. Can you just give

me like a 30, 45 second background there?

Ms. LEVALLEY. Sure. And I appreciate the question. Sixty-two

percent, when we look at all of the marketing arrangements in the

United States that are incurred by beef cattle producers, are these

added value, and the added value is because of the way they are
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raised or the way they are processed or the quality, meaning that

they are either higher quality, closer to grading choice or prime or

that they are meeting a consumer demand. Because they are very

specific in how they are raised, the processors and packers have rewarded that individual or that ranch by paying a higher premium

price because it is closer to what the consumer wants. So, again,

that price differentiation between that and just a straight animal

that is not added any value, there is that price differentiation because of the added value, the added cost, and the added benefit,

and the consumer has been the one to benefit with the higher quality and greater eating experience.

Mr. FARENTHOLD. So you get more money if you sell it to a gourmet restaurant, as opposed to a fast food restaurant, is a simple

way to put that.

Ms. LEVALLEY. Correct.

Mr. FARENTHOLD. All right, so under the GIPSA regulations, tell

me what is going to happen to that sort of business model.

Ms. LEVALLEY. Again, when you see the vagueness of the language that you see in the proposed regulation and the potential for

increase in litigation, what you have is the opportunity to actually

reduce the quality contracts, to reduce the ability to capture that

market value, to actually get paid for the added benefit. And,

again, increased litigation will have the USDA with the oversight

of is this price fair. The USDA will be determining what price is

fair, not looking at the differences in the quality of animals or the

weight differences or the freight differences, or anything like that.

USDA will be providing that oversight. That oversight will actually

increase the uncertainty in the market, and when we have increased uncertainty in the market, we have the tendency to go to

the lowest common denominator, price, which means there will be

a rollback in the prices received for the beef cattle industry because

there will be not anyone that takes the chance because of that increased government intervention and increased potential for litigation.

Mr. FARENTHOLD. I can’t imagine any industry that would be

happy with the government telling them how and what factors

have to be taken in to setting their price. That kind of strikes me

as going against the fundamental principles this country was

founded on.

Now, I take it you are not opposed to all USDA regulation. They

need to be in there making sure the packing plants are safe and

there are traditional grading methods, maybe even some additional

grading methods. Would that be a fair statement?

Ms. LEVALLEY. That would be a fair statement. Every day there

is between two and three USDA inspectors in our packing plant

every day, and we welcome them, we work with them on all of our

plants.

Mr. FARENTHOLD. All right. I appreciate it very much. Is there

anything you wanted to add about—are you able to partner well

with the USDA? I mean, you work well with them on most things,

is that not correct?

Ms. LEVALLEY. We do. We actually do. And, again, we welcome

that partnership in our plant. We just do not feel that they need
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to be in the pricing business or the setting of pricing business or

have the potential for increased litigation and competition.

I would like to just go back to the letter that was referenced that

was entered into the record. I want it to be well known that the

majority of the group that signed onto that letter that were in support of the GIPSA regulation were non-producer groups and do not

represent the majority of the livestock in the country. So I do want

that reflected, that even though there was significant numbers, we

have 84 producer groups that represent the majority of the livestock that is produced in this country that are opposed to this regulation.

Mr. FARENTHOLD. And what is the good outcome? Who benefits

from this regulation? It just seems anti-competitive.

Ms. LEVALLEY. Again, when you look at this and when we look

at that there is not a clear cost-benefit analysis completed, it will

not be the individual that is out there every day producing the livestock, they will not benefit in any way because, again, the price

will be rolled back because no one will want to pay a premium for

fear of litigation. So no one, whether it is small, medium, or large,

no one benefits from having this increased intervention and government litigation.

Mr. FARENTHOLD. Do you see a consumer benefit? To me, it

seems like it would take away choices. Your ability to say, all right,

I am going to do organic beef or I am just going to raise Angus cattle or I am going to just do grass-fed cattle. Do you think there is

a benefit to consumers there at all?

Ms. LEVALLEY. No. We see a rollback with the consumer choices

also in the outcome of this. It is unintended consequences with this

GIPSA regulation.

Mr. FARENTHOLD. All right, thank you very much.

I yield back.

Chairman ISSA. I thank the gentleman.

We now go to the gentlelady from the District of Columbia, Ms.

Norton, for 5 minutes.

Ms. NORTON. Thank you. Thank you very much, Mr. Chairman.

If I may say, before I ask my question, we are having these regulations just as the country is recovering from an economic debacle

that everyone agrees did not come from the usual market forces,

but from the failure to regulate. It produced a whole set of regulations, Dodd-Frank, and, by the way, we were saved from a worse

debacle because of regulations that were enacted 75 years ago, during the 1930’s.

Now, I would like to ask a question about cost-benefit. We know

we have had cost-benefit analysis for a very long time, but Mr.

Graham makes a very serious charge, that there may be ‘‘serious

and systematic flaw in the benefit and cost numbers,’’ and even

suggests that the regulatory agencies have their thumb on the

scales.

Now, I went and asked somebody to bring me the regulations

themselves, the regulation at issue itself, Executive Order 13563.

It says, in applying these principles, each agency is directed to use

the best available techniques to quantify anticipated, present, and

future benefits and costs as accurately as possible.
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I would like to ask Mr. Arkush are you aware of any basis for

this very serious charge, essentially that the agencies are cheating

in doing the cost-benefit analysis?

Mr. ARKUSH. Yes and no, but perhaps not in the way that Mr.

Graham means it. The agencies might try to cheat, might try to

put a thumb on the scale one way or the other. In my view and

the view of my organization, when Mr. Graham was heading OIRA,

the Bush administration and OIRA were putting a thumb on the

scale against measuring benefits adequately. Now, his view, when

he is no longer in the government, is that the Obama administration is putting a thumb on the scale the other way.

There are two points here. One is that this just demonstrates

how flawed cost-benefit analysis is as a methodology. It is very difficult to measure the costs and the benefits of a lot of very important things in the regulatory process; the value of lives saved, the

value of health, the value of clean air, clean water, children’s IQ

points. And people can disagree intensely on how to measure those

things.

One of Dr. Graham’s disagreements with the Obama cost-benefit

analysis on fuel economy standards is that he thinks he knows better what the price of gasoline is going to be in 10 or 20 years than

the Obama administration does. If he knew that, if any of us could

know that, we would be far richer than any of us is.

These are serious difficult problems that can’t be resolved easily.

There are political differences over those problems, and what Graham’s testimony shows is when he was in charge of OIRA, he knew

how to use his institutional power to require agencies to conform

to his views. It doesn’t mean that his views are right and it doesn’t

mean that the Obama administration is wrong.

The second point is it is very difficult for agencies to rig the costbenefit analysis in the manner that Dr. Graham says. It is hard

to overstate benefits because, again, they tend to get understated

in the economic analysis; they are hard to value——

Ms. NORTON. Why do they tend to get understated?

Mr. ARKUSH. Because it is so hard to put a price on them. Again,

it is hard to value the benefit of saving a life. At the same time,

costs frequently are overstated because most of the information

that agencies get is from industry. Industry has every incentive to

overinflate cost estimates. And we are only looking at the world as

it exists today when we look at costs of regulatory compliance. We

have no way of factoring in how much compliance costs diminish

with new innovations, new efficiencies. Retrospective reviews tend

to show that the cost estimates for major regulations were vastly

overstated when we look back at them later.

Ms. NORTON. I found another section of the Executive order that

welcomes flexible approaches, where relevant and feasible, consistent with regulatory objectives. It says the agency shall identify

and consider regulatory approaches that reduce burdens and maintain the flexibility and freedom of choice of the public, and then it

gives examples: warnings, disclosure requirements, information to

the public. That would seem to suggest that regulations are more

flexible than has been alleged.

Thank you.

Mr. LABRADOR [presiding]. Thank you.
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Now we will give time to Mr. Gowdy.

Mr. GOWDY. Thank you, Mr. Chairman.

Dr. Graham, the phrase cost-benefit analysis sounds impossible

to disagree with, much like shared sacrifice and balanced approach

and some other phrases we have heard recently. How could one

possibly not agree with a cost-benefit analysis? So my question to

you is can that analysis be gamed or manipulated? And if so, how?

Mr. GRAHAM. Yes, there are a lot of assumptions and inputs that

go into a calculation of cost or benefit, and if you are trying to tell

a good story about a regulation, you can try to pick the inputs that

make the regulation look good. If you are trying to make the regulation look bad, you can try to pick some that makes it look bad.

The key role that OMB OIRA has in this process is to review these

cost-benefit analysis and make sure that they are reasonably well

done.

Mr. GOWDY. Mr. Arkush, do you agree with one famous law professor by the name of Cass Sunstein, who said expensive regulations may well increase prices, reduce wages, and increase unemployment? Do you agree with him?

Mr. ARKUSH. I am still waiting for Mr. Sunstein to provide the

evidence to substantiate that conclusion.

Mr. GOWDY. So you disagree with him. Well, let me go to his

boss, President Obama. There are some rules and regulations that

put an unnecessary burden on a business. Is the President right or

wrong?

Mr. ARKUSH. I don’t doubt that we could imagine there might be

some, but the President hasn’t——

Mr. GOWDY. Can you name one?

Mr. ARKUSH. No.

Mr. GOWDY. Because he said he could come up with 500, 501 if

you include his salmon example from the State of the Union.

Mr. ARKUSH. That is right. And the conclusion among consumer

groups like mine and the U.S. Chamber of Congress was that the

administration didn’t find that much. There just aren’t that many

overly burdensome, unnecessary regulations.

Mr. GOWDY. You can’t think of a single solitary rule or regulation

that is unnecessary or duplicative?

Mr. ARKUSH. I didn’t say I can’t think of a single one.

Mr. GOWDY. Well, name one.

Mr. ARKUSH. There are 500 examples that the President—the

President, for example, is going to make certain recordkeeping electronic, rather than paper. That is a great idea.

Mr. GOWDY. Is that the only one you can think of?

Mr. ARKUSH. I didn’t come here to speak about examples of overly burdensome regulations. When the administration went looking,

they found 500 individual ones, but none of them is very significant, and that is what the U.S. Chamber of Commerce thinks, not

just me.

Mr. GOWDY. If someone were to say we should have no more regulation than the health, safety, and security of the American people

require, do you agree with that or disagree with that as a standard

of review for regulations and rules?

Mr. ARKUSH. I think it is a reasonable formulation, but it is a

little odd. I don’t think that the question is do we have too much
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regulation or too little; I think it is whether we have the right regulation.

Mr. GOWDY. Do you know who said that?

Mr. ARKUSH. I believe that might have been the President of the

United States.

Mr. GOWDY. It was. Let me ask you with respect to a couple of

specific examples. Can you tell me how the health, safety and security of the American people are impacted by the NLRB’s new quickie election rules?

Mr. ARKUSH. I am actually not an expert on those rules at all,

but I do know that union membership in this country has declined

a lot in the last several decades——

Mr. GOWDY. Historic low.

Mr. ARKUSH. Yes, and that it is correlated with poor income distribution; it is correlated——

Mr. GOWDY. So you agree that that rule is calculated solely to

drive up union membership? That is what you just said.

Mr. ARKUSH. Absolutely not.

Mr. GOWDY. That is what you just said.

Mr. ARKUSH. I was responding—I was taking for granted—I

thought that you were saying it was a pro-union rule, and I was

taking that for granted in my answer.

Mr. GOWDY. But you agree that it was calculated solely to drive

up union membership.

Mr. ARKUSH. I have no idea. I am not familiar with the rule.

Mr. GOWDY. Can you tell me how the posting of posters informing workers of their right to unionize, but not their right to decertify a union, impacts the health, safety or security of the American

public?

Mr. ARKUSH. I believe that all Americans should have adequate

knowledge about their rights.

Mr. GOWDY. Including their right to decertify if there are in a

union?

Mr. ARKUSH. They should have knowledge of any right that they

have. I believe that unions work best when they are dramatic and

I believe that workplaces work best when they respect their workers and respect the choice to join unions, if that is what the workers want.

Mr. GOWDY. So you would disagree with and argue against an

NLRB rule or regulation that only gave half of a worker’s right, the

right to unionize, but did not inform them of their right to decertify

a union?

Mr. ARKUSH. You know, in the abstract, I don’t know much about

these rules, but, sure, sounds like they should know about their

full rights.

Mr. GOWDY. All right, the redefining of bargaining units, can you

tell me how that impacts the healthy, safety, or security of the

American public?

Mr. ARKUSH. I don’t even know what you mean by the redefining

of bargaining units.

Mr. GOWDY. Reconstituting who can vote in union elections and

the majority necessary to win. How does that impact the health,

safety or security of the American public?
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Mr. ARKUSH. I would guess that—again, I don’t know, I am not

familiar with these rules, but I would guess that whoever put them

in place has a pretty well thought out theory on how it helps.

Mr. GOWDY. Could it be raising membership in unions? Could

that be the well thought out goal?

Mr. ARKUSH. That might be, and that would actually be a laudable goal if it were.

Mr. GOWDY. Thank you, Mr. Chairman.

Mr. LABRADOR. Thank you.

I now recognize the gentleman from New Hampshire.

Mr. GUINTA. No questions.

Mr. LABRADOR. I will take some of this time.

First, Mr. Gowdy, do you have any other questions? Do you need

some additional time?

Mr. GOWDY. Mr. Chairman, I think I have exhausted my questions, but thank you for your gracious offer.

Mr. LABRADOR. All right.

Dr. Graham, would you like to respond to Mr. Arkush? He took

some issue with some of the things that you were saying in your

testimony. I don’t know if you took note of those things. If you

would take the time to respond to him.

Mr. GRAHAM. Yes, just two factual things for the record. One of

his comments was that agencies don’t know how to take into account the fact that the costs of regulations sometimes decline over

time as industry gets accustomed to them and learns how to comply. But, in fact, some of the agencies, like EPA, build in assumed

reductions in costs over time, for example, in compliance with

motor vehicle standards. And there are other cases where regulations end up being more costly than anticipated; and, of course,

that needs to be part of the understanding as well.

The second thing was my key point on the future of oil prices

and gasoline prices. It is certainly not that I know the future of

those prices. I would be a very wealthy person if I could know that

much. My point is the agency, in good faith analysis, needs to consider the possibility that they might actually stabilize and decline

over time as they will continue to rise in the future, and that is

due to the slowing of the growth of the Chinese and Indian economy and the growing supplies around the world as new discoveries

of oil and new technologies define them are invented. So we just

need to take into account both of those possibilities.

Mr. LABRADOR. Okay. Now, as you know and as was already

mentioned, last week the President told a joint session of Congress

that we should have no more regulation than the health, safety and

security of the American people require; every rule should meet

that commonsense test. Do you believe Federal regulatory agencies

are currently meeting this commonsense test?

Mr. GRAHAM. I think it’s a rule-by-rule analysis, and I cited one

concrete example, giving special compliance credits for electric cars

under the mileage program. It doesn’t improve the environment, it

doesn’t make us any safer; it just allows manufacturers to produce

more cars that have lower mileage to offset those. So counting

them as zero pollution, when in fact pollution occurs back at the

power plant, it doesn’t do anything for the health, safety, and the

environment of the country.
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Mr. LABRADOR. Okay. How would you suggest that we solve this

problem? How can we get to—do you have any specific reforms that

you could suggest?

Mr. GRAHAM. Well, I would like to start with encouraging the

members of this committee to look very carefully at the operation

of OIRA, of the amount of activity OIRA is engaged in to improve

these analyses, and there are two concrete ways you can do that:

one, you can ask OIRA to provide examples of cost-benefit analyses

that were changed because of the reviews that OIRA has done and

how they have been improved, because after these rules are done,

those public documents should be available, there is nothing deliberative about that; and, second of all, you should be asking for examples of regulations that were withdrawn or returned or whatever because of poor quality cost-benefit analysis. In fact, I can assure you, after working 6 years in the administration and working

on these, it is very hard for these couple dozen people at OIRA to

keep track of all of these regulations and analyses, and the number

of them that are costly is on the rise. It is a very important job that

OIRA plays at this time in our American economy.

Mr. LABRADOR. Okay, thank you. Now, the President and his administration keep saying that they have had less regulatory burden

than other past administrations. Do you agree with that?

Mr. GRAHAM. I haven’t seen the basis for that claim, no.

Mr. LABRADOR. Now, you spoke about midnight regulations in

your testimony. Can you explain to us what that is?

Mr. GRAHAM. Well, at the end of Presidential administrations, at

the end of the fourth year or the eighth year, there is a historic

pattern that presidents and their regulators, they like to get out as

many of the rules as they can right at the end of the administration. So you see, in Republican administrations, in Democratic administrations, that last 6-month period tends to be a place where

a lot of these rules are issued.

Mr. LABRADOR. Now, has the Obama administration been using

that? Because we are not at the end, yet, of his administration.

Mr. GRAHAM. No. And I would be very surprised if this administration is any different than the previous ones. And that is another

example of a time when a strong and vigorous OIRA is very important.

Mr. LABRADOR. Okay. Thank you very much.

I yield now to the gentlelady from New York.

Mrs. MALONEY. I thank the gentleman for having this important

hearing and for all of your testimony. We are in several different

hearings at once. I regret I was not here, but I did read it. In terms

of regulation, with the financial crisis, it is really the first financial

crisis, according to the Bureau of Labor Statistics, that was caused

by the financial industry, basically unregulated aspects of the financial industry. And we saw through this crisis that areas that

were regulated did not cause the problem; it was unregulated areas

of credit default swaps and innovative new products that had no

regulation in the past. In fact, I will never forget President Obama,

when he came to Wall Street and unveiled his regulatory proposal,

he quoted from the paper and he said many people on Wall Street

are upset that these regulations are going to destroy their productivity, and he reads this long statement from the paper and then
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he says this is in 1929, 1930, after they created the FDIC, which

by all respects performed extremely well to stabilize our markets,

protect consumers’ deposits, and move forward.

So I would say that the FDIC was a regulation that helped save

our economy in many ways, and their ability to wind down companies or to manage them in a way that kept the stability of the financial markets was a plus. For the unregulated areas, Congress

had two choices: you could either bail them out, which is a bad

choice, or you can close them down, an equally bad choice. The

FDIC, with the regulatory tools that they were given and which

Dodd-Frank expanded to include the coverage of other areas that

were unregulated, you are able to manage it in a way that the

shocks to the economy were less, and one of the most riveting testimonies during this time was by Christina Roamer, who was the

head of the Economic Committee of Advisors. She said the shocks

to the American economy during this great recession were three

times tougher and deeper and stronger than they were during the

Great Depression.

So in some cases regulations can save industry and can save our

financial markets and can protect consumers. So I would just like

to ask are there any examples where you have seen regulation

maybe improve the quality of life of Americans, the economic security of Americans? And I would like to ask Mr. Arkush if you could

testify. I know that you came out with a report recently in this

area and I found it a very interesting report, and I would like

unanimous consent to put in the record the report that was done

by Public Citizen, if that would be appropriate.

Mr. LABRADOR. Without objection.

Mrs. MALONEY. Thank you very much.

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Mrs. MALONEY. So can you give us some examples where regulation has actually been helpful in making our water cleaner, our air

cleaner, our appliances work safer, or that your money that you deposit in a bank might actually be there and not be removed or lost,

so that there is economic security for American families? Thank

you.

Mr. ARKUSH. Sure. There is obviously a vast number of regulations that protect our air, our water, the safety of our deposits in

banks. The report that we issued yesterday was talking about regulations that not only did those types of things, but also spurred innovation in the industries that they applied to. So, for example,

when the EPA decided to phaseout CFCs in aerosol because CFCs

were harmful to the ozone layer, industry protested, made the

usual arguments about how this would kill millions of jobs, it

would put an entire sector out of business. But when it finally

came down to it, the day after EPA finalized its rule, the very next

day, the inventor of the original aerosol announced that he had

come up with a solution, and it actually turned out it was not a

problem to comply with this great regulation, which prevented the

destruction of the ozone layer.

Another example was when OSHA moved to phaseout vinyl chloride, a harmful carcinogen, from the workplace. Manufacturers of

PVC pipes said this would destroy their industry and cost lots of

jobs. But within 3 months of the finalization of the rule, a company

came up with a new manufacturing process for PVC pipe that was

more efficient, allowed the companies to comply with the rule, and

didn’t require them to kill the manufacturing workers.

Mrs. MALONEY. Well, my time has expired, but I think if we are

going to discuss the impact of regulations on jobs, shouldn’t we also

include information about their economic and social benefits, including whether they actually may create new products, new jobs,

or protect the American citizens and the American economy, as

they have done in terms of the deposit system and other areas?

My time has expired. Thank you, Mr. Chairman.

Mr. LABRADOR. Thank you.

I will now yield to the gentleman from Pennsylvania.

Mr. KELLY. I thank the gentleman. I will yield back my time to

the Chair.

Mr. LABRADOR. Thank you. I will take that time.

Mr. Barker, how would the proposed rule banning the importation and interstate trade of snakes affect your business?

Mr. BARKER. Ninety percent of my business is interstate and a

smaller percentage is international, and the Lacey Act stops that.

The animals can’t be crossed across State lines under any circumstances and it is a felony to do so. So whether I sell them or

my customer gets them and then he—they just can’t be moved

across State lines.

Mr. LABRADOR. And does that affect any other businesses as

well?

Mr. BARKER. My industry is tightly interconnected with many,

many other large and small businesses. My wife and I spend a lot

of money at Home Depot; we spend a lot of money with Delta Air

Cargo; we spend a lot of money with FedEx. We buy snake cages

and they, in turn, buy stainless steel plastics, glass, whatever. We
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buy rats; the rat breeders invest in cages, the rat breeders buy

food, the grain mills buy grain from—it is not—people who don’t

like snakes or don’t know about snakes don’t realize how widespread it is and how interconnected it is and how many people do

it.

Mr. LABRADOR. Thank you. I am not a big fan of the snake.

Dr. Graham, you just heard the gentlelady from New York talking about how we needed to also discuss the benefits of regulation,

and I am always confused when I hear that because I think that

is implicit in the term cost-benefit analysis. I mean, isn’t that what

we are asking? We are not asking to only look at the cost of regulation; we are asking to look at both, isn’t that correct?

Mr. GRAHAM. Yes. And when I teach my students, I use the

phrase benefit-cost analysis because I tell them that B has the alphabetical advantage, and it is to remind people that benefits are

important, as well as costs.

Mr. LABRADOR. So you are not here to say that there are no benefits to regulation.

Mr. GRAHAM. No. There are often quite substantial benefits.

Mr. LABRADOR. Okay.

Mr. Arkush, I am going to ask you a few questions. I looked at

your impressive resume and you have some great experience in

academia; you went to some great law schools. How much experience have you had in the private sector?

Mr. ARKUSH. Well, I have worked, I have had many jobs, and,

as I mentioned earlier, I am actually in a——

Mr. LABRADOR. In a band. Absolutely.

Mr. ARKUSH. It is a lot of work.

Mr. LABRADOR. It is a lot of work. How many employees have you

had in your life?

Mr. ARKUSH. I have never had a full-time employee myself.

Mr. LABRADOR. So how can you sit here with all these job makers

and say that there is no cost to the regulatory burden that their

jobs have?

Mr. ARKUSH. I certainly never said there is no cost.

Mr. LABRADOR. Okay, you said that there is not a single regulation that you can think of that is bad. Is that correct?

Mr. ARKUSH. Well, that is right, not off the top of my head. In

fact, today I think we have only heard—all we have heard is repetition about two or three specific examples.

Mr. LABRADOR. But we have had hundreds of hearings about regulations, and I think there are numerous regulations that are bad.

But actually your testimony today actually contradicts what you

are saying. You tell us that it was the failure to regulate that created a lot of the problems, but then you said something that I actually agreed with, but I don’t think you realized what you were saying. You said that there is not too much or too little regulation;

sometimes the problem is that we don’t have the right regulation.

Isn’t that true?

Mr. ARKUSH. Absolutely.

Mr. LABRADOR. Well, if there is not too much or too little, it

means that some of our regulations are actually not correct, not the

ones taking care of the problem. So the problem is not that we
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don’t have regulation; the problem is that we don’t have the right

regulation in some instances, correct?

Mr. ARKUSH. That is sometimes right.

Mr. LABRADOR. So wouldn’t, by implication, that mean that some

of the regulations that we have right now are bad?

Mr. ARKUSH. I don’t doubt that there are some; I just, off the top

of my head, I don’t have examples for you. And no one else has provided examples today either, I might point out, except for GIPSA

and an NLRB rule and the Lacey Act.

Mr. LABRADOR. Yes, because these are the things that we are testifying about today.

Mr. ARKUSH. Well, your hearing is about the overall broken process and why it leads to flawed regulations. Only three have been

mentioned.

Mr. LABRADOR. And we have a whole report that has been entered into the record. It is 30 pages of regulations that actually affect. I just think, you know, when we talk about regulations, we

have a problem because people like yourself come in here and say

that there is no problem with the regulatory burden. But at the

same time they are not willing to look at regulations that are

maybe outdated, that maybe we should just get rid of because they

are actually hurting the economy, they are hurting us; and you are

not willing to look at any of those things.

Mr. ARKUSH. I am absolutely willing to concede that obviously

there could be, and there probably are, somewhere out there regulations that are unnecessary or burdensome, but we should talk

about them specifically and I think we ought to fix them where

they are. But the overwhelming weight of the evidence is that regulations are wildly beneficial; they have returned a 700 percent rate

of return for us.

Mr. LABRADOR. You know, and the most ironic thing about your

testimony was, in the end, your last line in your testimony, Congress should get to work on reducing the unnecessary burdens

placed on the agencies that protect our health and environment.

And it is just really beyond the pale for me to think that you think

it is more important for Congress to reduce the burden on regulators than it is to reduce the burden on job creators. But my time

has expired and I will now—now it is my time and I will yield my

time——

Mr. ISSA. Would the gentleman yield?

Mr. LABRADOR. Absolutely.

Mr. ISSA. I thank the chairman. I am back.

I am going to ask just a final round, and I appreciate your patience and your dialog here. But I am going to ask something that

I think crosses all of you. Some of you are very young; some of you

are a little more like me, a little less young; and some of you are

in between. But I grew up in Cleveland, Ohio in the 1950’s and

1960’s, so I grew up at a time in which we were an industrial capital; auto, steel, and rubber, plenty of coal still burning. My grandmother actually burned coal in a plain, old-fashioned big thing

down in the basement that just hot air rose through the house. Our

buildings were black, and it wasn’t until they really cleaned up the

city years and years later that it was worth cleaning them off and

showing the stone underneath. So I am somebody who has appre-
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ciated clean air, clean water, improvements. But I also have seen

that Cleveland no longer produces cars; less engines, no rubber, no

tires, steel mills are pretty well gone and so on. So I see the balance.

I want to ask you a fairly simple question, and, Mr. Arkush, I

will start with you. If in fact regulations individually all do good

things, but the price of getting cleaner air and cleaner water and

less pesticides, and everything else that we would like to have as

goals, and certainly not losing species and so on, if the price is that

our unemployment rate goes from 9 percent to 10 percent to 11

percent to 14 percent because simply the jobs created by being competitive around the world are diminished and transferred to outside

the country, are we better off? Or isn’t there a balance that this

committee and the regulatory regimen have to make sure are balanced of full employment, competitiveness, and clean air, clean

water, safety and the like?

Mr. ARKUSH. Mr. Chairman, that is the most difficult challenge

facing you and facing the regulators, obviously, when there is a difficult decision to be made between economic costs or jobs and protecting the public. Fortunately, what the evidence shows is the cost

just doesn’t come up. That question isn’t often posed by the regulations that our agencies produce; they overwhelmingly have benefits

that outweigh the costs, even though the costs are much easier to

quantify than the benefits.

Mr. ISSA. And I appreciate that. I want to follow up with you

quickly. When you say costs and benefits, the current benefits—

and Dr. Graham, I am sure, can help us with this—the benefits are

not necessarily global competitiveness. In other words, you can cumulatively have benefits and cumulatively become less competitive

and, thus, lose jobs, can’t you?

Mr. ARKUSH. And I think the attempt is to incorporate everything into the equation.

Mr. ISSA. Dr. Graham, you are not still at OMB, but were you

able to do that during the Bush administration? There were increases in regulations, not quite at the rate that they are going

now, but there were a lot of increases, and we began, continued losing our competitive edge against the rest of the world. Isn’t that

true?

Mr. GRAHAM. Well, let me start by saying I am a born and raised

Pittsburgher family in the steel industry——

Mr. ISSA. So you have no sympathy, being that you were from

the poor cousin of the Cleveland Browns.

Mr. GRAHAM. Yes. Right. [Laughter.]

And I think that the demise of industry in cities like Pittsburgh

and Cleveland has a complicated history and terrain, and it has

elements of not adequate technology; it has elements of labor costs;

it has elements of regulation. All of this is in the story.

But one thing to remember is that when we do these cost-benefit

analysis, we do the analyses one at a time on individual regulations. What happens, however, is when you have a suite of regulations that simultaneously hit the same sector, it is hard, when we

do cost-benefit analysis, to handle kind of the combination of that.

And there are certain sectors in our economy, and steel is certainly
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among them, autos is among them, mining is among them, they are

really under a lot of——

Mr. ISSA. Logging.

Mr. GRAHAM. Logging would be another example. And we should

be candid about the fact that when we do individual cost-benefit

analyses of individual rules, we don’t necessarily capture that combination.

One final point. These huge benefits that you are hearing about

from Mr. Arkush’s testimony, what he is doing, he is taking some

really wonderful regulations, clean air examples or automotive

safety examples, he is combining them with a bunch of other regulations which aren’t so great, and he is saying the overall benefits

are greater than the overall costs. Well, that is true, but we

shouldn’t defend all of the weak or bad regulations on the grounds

that there are some really great ones out there. And that is why

it is important to look at this as analytically as we can.

Mr. ISSA. I want to just close by noting something, Dr. Graham,

that you had in your opening statement. I am deeply concerned

that the CAFE standard change was done the way it was because

of process. I am also deeply concerned that if we fudge the numbers

so that an electric car gets considered to have, if you will, no pollution, when in fact it is fed maybe by coal-fired electric plant, that

what we are doing is forcing ourselves into one solution that may

not be as good as a enhanced diesel, hybrid, or even a conventional

car or, for that matter, compressed natural gas, lots of other solutions.

So, in closing, I appreciate the indulgence, Mr. Chairman, and I

look forward to the next panel, and thank you.

Mr. LABRADOR. Thank you very much.

Now we would like to excuse the panel. We thank you for being

here and we are just going to recess for a few minutes. Thanks.

[Recess.]

Chairman ISSA. The committee will come back to order.

We now recognize our second panel, the Honorable Cass Sunstein

is the current Administrator of the Office of Information and Regulatory Affairs within the Office of Management and Budget, and we

are very delighted to have you here today. Pursuant to the committee rules, we would appreciate it if you would rise to take the

oath. Raise your right hand.

[Witness sworn.]

Chairman ISSA. Let the record reflect the witness has answered

in the affirmative.

Administrator, you were here for the first panel, and I appreciate

your being here for that entire time. I also appreciate your additional comments that have been made and your cooperation

throughout this process. You are a single witness. We are not going

to hold you to exactly 5 minutes, but come as close as you can. And,

with that, the gentleman is recognized.

STATEMENT OF CASS SUNSTEIN, ADMINISTRATOR, OFFICE OF

INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET

Mr. SUNSTEIN. Thank you very much, Mr. Chairman and members of the committee. It is an honor and a pleasure to have the
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chance to appear before you to discuss issues relating to regulation

and regulatory review, and I am especially grateful to you, Mr.

Chairman, and to the committee as a whole for its constructive and

important work on this issue over the past months; it is very significant to try to get regulation in a place where it is helpful to the

economic recovery.

In the last 8 months, much of our work at the Office of Information and Regulatory Affairs has focused on the recent Executive

order on regulation, and especially on the requirement of retrospective analysis of existing rules. My written statement deals with the

500 reform proposals that have now been released to the public and

the associated economic savings, which are in the billions of dollars. It is my belief that these reform initiatives and this general

enterprise, which is ongoing, is consistent with the thrust of this

particular hearing and the policy goals that are shared on a bipartisan basis.

In these oral remarks, what I am going to do is focus on three

topics: first, the basic process of review under our Executive orders;

second, the role of the Regulatory Flexibility Act focused on small

businesses; and, third, an issue that has been discussed a great

deal in the last 6 months, that is, the relationship between OIRA

and the independent regulatory agencies.

Since 1993, under President Clinton, Executive Order 12866 has

established governing principles, requirements, and processes. It

builds, incidentally, on an Executive order from President Reagan

in 1981, which set out the fundamental charter, which continues to

this day.

As stated in the 1993 Executive order, and to the extent permitted by law, agencies must propose or adopt a regulation only

upon a reasoned determination that its benefits justify its costs, a

clear endorsement of cost-benefit analysis; second, tailor its regulations to impose the least burden on society; third, select among alternatives the approach that maximizes net benefits; and, fifth,

identify and assess available alternatives to direct regulation. More

freedom should be allowed if it is consistent with law.

The same Executive order establishes the process of centralized

review in which proposed and final significant rules are submitted

to OIRA for an interagency process in which different components

of the Federal Government comment on the rule that the agency

proposes. OIRA is also available—I would like to underline this

point—during the process to meet with anyone who wants to discuss regulations under review, including people who were on the

previous panel. The meetings may involve business organizations,

State and local governments, or congressional staff; and we have

had some important ones in all of those domains over the last few

years. In the vast majority of cases, the proposed or final rule is

changed as a result of these processes.

If the draft final rule follows public notice and comment, as is

the case typically, then much of the attention of review is on public

comments and concerns. In the recent past, those comments or concerns have led to fundamental rethinking of regulatory proposals.

There has been some discussion of the number of rules and we very

much appreciate the concern of excessive numbers.
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I would like to note, just as a supplemental point, that the number of rules issued in our first 2 years that have gone through our

office is actually lower than the number in the previous 2 years

under President Bush and, indeed, is lower than the average, at

least in the second term, of the Bush administration.

Okay, the interest of small business in particular are protected

by the Regulatory Flexibility Act. The Office of Advocacy of the

Small Business Administration plays a crucial role in ensuring adherence to that statute, and OIRA works very closely with that office to protect small business against unjustified rules. Of special

note is that office’s statement from just this year, just a few

months ago. As a result of improvements to the RFA, Advocacy’s

work on small businesses’ behalf has required greater involvement

in Federal rulemaking. The Office has had more success in urging

burden-reducing initiatives, and there is a list where the Office of

Advocacy has had that greater success. In short, the trend is going

in the right direction.

As you are aware, independent regulatory agencies under both

Democratic and Republican presidents have not been covered by

the regulatory review process, out of respect for the legal independence of those agencies. Nonetheless, President Obama, with the enthusiastic endorsement, I know, of many on both sides of the aisle,

took a significant and novel step with a different executive order

which states that independent agencies should follow the cost-producing requirements of Executive order and should engage in the

process of retrospective review.

Our hope is that, as a consequence, a direct consequence, the Nation will see significant improvements and significant savings, significant reductions in regulatory burdens. We are encouraged by

the early results from the independent agencies.

With that said, I am looking forward to answering your questions.

[The prepared statement of Mr. Sunstein follows:]
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Chairman ISSA. Thank you. And because Mr. Gowdy has crucial

other committee work, I would yield first to Mr. Gowdy for 5 minutes.

Mr. GOWDY. Thank you, Mr. Chairman.

Thank you, Professor, for your testimony. This is actually not a

trick question. I will read you the same quote I read to the first

panel. ‘‘We should have no more regulation than the health, safety,

and security than the American people require.’’ That was a quote

from the President. Do you agree with that?

Mr. SUNSTEIN. I agree with my boss.

Mr. GOWDY. That is why I said it wasn’t a trick question. I am

not trying to get anybody in trouble. At 9.2 percent unemployment,

I don’t want to add to it.

Is there anything that should have been added to that series?

Mr. SUNSTEIN. Health, safety, security? I think it is pretty comprehensive.

Mr. GOWDY. Do you know or are you familiar with someone by

the name of Dudley Butler?

Mr. SUNSTEIN. I do not know that name offhand.

Mr. GOWDY. If he were an administrator, either past or present,

U.S. Department of Agriculture, Grain Inspection, Packers, and

Stockyards Administration—there would be no reason for you to

know him, I don’t imagine, and you don’t have to know him to be

able to answer my question. He referred to a proposed rule as a

plaintiff lawyer’s dream. Would you agree that that is not an appropriate factor to be considered in the promulgation of a rule or

regulation?

Mr. SUNSTEIN. I wouldn’t want to say anything negative about

a colleague whom I don’t know and for which I don’t know the context exactly. I would say, in general, the question is whether regulation conforms to the law and existing executive orders, and the

question is not whether it is someone’s dream.

Mr. GOWDY. Violations of rules and regulations, are they ever

considered evidence of negligence in civil litigation?

Mr. SUNSTEIN. That is possible. It depends on the context.

Mr. GOWDY. Violations of rules and regulations, are they ever

considered negligence per se in civil litigation?

Mr. SUNSTEIN. You know, I would want to bone up on my tort

law, but it wouldn’t be stunning if the answer were yes.

Mr. GOWDY. So an ancillary reason to be concerned about what

some perceive to be the excessive promulgation of rules and regulations would be that it contributes to what some believe is an already litigious society.

Mr. SUNSTEIN. This is a very important question, the relationship between Federal regulation and tort law, and you are on to

something, if I may say, that would be very valuable for all of us

to have clarity on. Sometimes what happens is a regulation displaces State tort law, it eliminates it; sometimes it, as your question suggests, it kind of puts State tort law on steroids because it

gives a tool to the plaintiff that didn’t exist before. And whether

the preemption or the, let’s say, enhancement of State tort law is

desirable very much depends on the context. I do take your point

that there are contexts in which the amplification of the civil liabil-
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ity system, the regulation, let’s call it the non-preemption regulation creates can be harmful. There are such situations.

Mr. GOWDY. Are you familiar with and do you support in theory

the Raines Act, which is pending in the House?

Mr. SUNSTEIN. I am familiar with it. The administration agrees

with the cost reduction goals of the advocates of the Raines Act.

The administration does not favor the Raines Act on the ground

that the tool it gives to Congress Congress already has to eliminate

rules, and that there is a risk that the Raines Act would have unintended consequences. Just to give you one example, when I last

looked at the text, it would sweep up deregulatory initiatives in its

ambit, so our efforts to eliminate costly rules would be delayed, and

possibly indefinitely, by this new and very dramatic departure from

longstanding practice.

Mr. GOWDY. Do you agree in general that Congress has abdicated

its responsibility for filling in the details of legislation to executive

branch entities?

Mr. SUNSTEIN. Well, I wouldn’t want to make a general statement on that because there are many laws, as you know, which are

quite detailed and prescriptive, where the Executive has exceedingly little discretion; there are others where it has large discretion. And in those cases in which it has large discretion, whether

it is an abdication or a recognition of changing circumstances or

the need for technical expertise depends on the area. I do understand that many people on both sides of the aisle have been concerned about excessive delegation under some statutes.

Mr. GOWDY. My time has expired.

Thank you, Mr. Chairman.

Chairman ISSA. I thank the gentleman.

We now recognize the ranking member and would ask unanimous consent that he have one additional minute. I shorted or

excessed myself at the end. Without objection, the gentleman is

recognized.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

There is a lot of rhetoric in the committee and on the House floor

describing regulations as job killers, but regulations perform a critical role in implementing some of our most important laws, such

as the Clean Air Act. EPA estimates that in 2010 alone the Clean

Air Act prevented over 160,000, 160,000 premature deaths. Those

are real people who are alive today because of these protections.

Majority Leader Cantor sent a memo to House Republicans on

August the 29th laying out the Republican leadership’s agenda for

the fall. The memo identifies a list of agency rules the Republican

leadership wants to eliminate. These include rules aimed at protecting public health, the environment, and workers’ rights. Mr.

Cantor’s memo makes assertions about the costs of these rules but

does not discuss the benefits.

Mr. Sunstein, shouldn’t any evaluation of an agency rule include

analysis of the benefits the rule provides?

Mr. SUNSTEIN. Absolutely yes.

Mr. CUMMINGS. Of course, I believe we can always improve regulations to make them better. In fact, the President issued an Executive order in January that required agencies to review existing

regulations and streamline them when appropriate. In response,
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agencies developed draft plans in May and the public was given the

opportunity to comment on those plans.

As you highlighted in your testimony, those plans include over

500 initiatives that are expected to save more than $6 billion over

the next 5 years. I understand that the agencies were tasked with

developing these plans while considering both the costs and benefits of these rules. How were they able to find such significant savings while still ensuring the health, safety, and protections provided by these rules? Were they just outdated? Did circumstances

change? Did any of them have anything to do with new technology,

then making them obsolete? Tell us about that, because I think

that can provide us guidance with regard to what we are trying to

do, and that is strike a balance between making sure that we have

rules that we really need to protect the health, welfare, and the

safety of Americans, but at the same time get rid of those that just

don’t make sense anymore.

Mr. SUNSTEIN. It is a great question, and at some point——

Mr. CUMMINGS. Thank you.

Mr. SUNSTEIN [continuing]. At some point probably a book will

be written about it, how agencies were able to identify so many reforms. And the $6 billion figure identified I think we are going to

be able to do a lot better than that; that is just a small fraction

of the 500 reforms. Let me give you an example by way of getting

into your question.

The EPA has actually proposed to eliminate tens of millions of

dollars in annual expense put on small business owners because of

air pollution requirements for gas stations, which are not helpful

because modern cars already control the air pollution; you don’t

need the gas stations to do it. So it is completely redundant. That

is a case where the rule, when issued, at least for all I know,

served a function. But it doesn’t serve a function anymore.

And there are other regulations like that where, at the origin, it

made some sense, but the technology, as you say, has evolved.

Some of the savings involved just learning from experience. For example, we have OSHA eliminating 1.9 million hours in paperwork

and reporting requirements imposed on employers. OSHA has

learned that those aren’t helping worker safety. They are providing

some information, but it is not information that the government

needs in order to do its job. So that is when you learn. And I am

excited about this for our future, unbreaking those aspects of the

regulatory system that aren’t working so well, just learning how

things are operating on the ground.

There are other things, and this is maybe relevant to your job,

where a law, as enacted, may overshoot a bit because the text may

sweep up conduct that doesn’t really cause the harms that the law

is designed to prevent. So we have an oil spill rule which is serving

important functions, but the definition of oil turned out to include

milk. Well, there is a difference between milk and oil in terms of

environmental harm, and a lot of work had to be done to exempt

milk and dairy industry from onerous regulatory requirements. Because Congress got alert to the problem, it gave EPA the authority

to fix it. It took a while to fix it, and with the President’s action

it got fixed in a hurry.
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There are other categories of things where there are compliance

dates, for example, or requirements that are issued in 1 year

which, when the relevant year comes around, it just doesn’t make

much sense anymore given the economic situation. So you may

have noticed, it got a lot of publicity, that States and localities all

over the country were asked—and this was by the Bush administration acting in good faith—to change their street signs and traffic

controls. By the time the compliance date came along, this new font

size requires and States and localities are saying you are asking us

to spend millions of dollars when there is not an ascertainable safety benefit, and the Secretary of Transportation, Secretary LaHood,

was very concerned and thought, given our current situation, this

is not what States and localities have to do. So we propose to take

away that multimillion burden.

Mr. CUMMINGS. Well, the method that is being used to get to

those kinds of situations that you just stated, I guess it is like a

screening process, like you have tea and you have to pour through

the tea to get what you want, but you want to keep something

there, a strainer. Do we have a sufficient strainer? Do you understand what I am saying? In other words, are we catching? Do you

feel like we have put together the mechanisms to catch?

Mr. SUNSTEIN. I don’t have an abstract answer to that question,

but I do think that it is often the case that laws, like regulations,

have unintended adverse consequences, including unintended coverage. And what we found with our look-back process, and not infrequently with our notice and comment process, is that if we just

listen to people who are running businesses or otherwise affected

by our rules, they can tell us things that can help create a good

strainer.

Mr. CUMMINGS. Thank you.

Thank you, Mr. Chairman.

Chairman ISSA. I thank you.

The gentleman from Michigan, Mr. Walberg.

Mr. WALBERG. Thank you, Mr. Chairman.

I thank you for being here, Mr. Sunstein. Two issues I want to

address with you, the first being GIPSA. And I take that in reference to a point that Representative Gowdy was attempting to get

out, and you appropriately chose not to answer based upon a colleague’s statements that you clearly weren’t aware of. But I do

want, for the record, to make sure that we understand, in relation

to this GIPSA question and the fact of being a former member of

the House Ag. Committee that passed the 2008 Farm Bill and did

a lot of work on making sure that that issue, GIPSA, was covered

well and regulations were put in place realistically, and a concern

now that USDA and GIPSA have gone well beyond the intent of

Congress in that proposal and those regulations.

Mr. Dudley Butler, J. Dudley Butler, in commenting about the

rule and its ability to allow for more litigation in the future, he

said this, ‘‘When you have a term like unfair, unreasonable, or

undue prejudice, that is a plaintiff lawyer’s dream. We can get in

front’’—and that is my concern, we—‘‘we can get in front of a jury

with that. We won’t get thrown out on what we call summary judgment because that is a jury question.’’ I think you would justifiably
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understand our concern when a regulator makes that type of statement in relationship to GIPSA.

Let me go on and ask a question here. As you may know, multiple studies have been released questioning the economic impact

of the proposed rule and what it would be doing and the cost that

there would be there, which would result to more than $100 million. Will you consider having the rule withdrawn and having the

USDA initiate a more thorough economic impact study before going

forward?

Mr. SUNSTEIN. Well, thank you for that. If the rule has $100 million in annual impact, then it is required to have an economic analysis associated with it. So that is just simple and straightforward.

And if, originally, a rule comes in, in answer to the chairman’s

question, originally it was proposed, didn’t look like it would have

$100 million, and then it turns out it is going to, then at the final

stage it has to have that analysis.

Mr. WALBERG. So even though, initially, it looked like the study

that was done was done in a cursory fashion to make sure it didn’t

cross the $100 million level, if it ultimately shows that it is going

to be more, you are telling me that there will indeed——

Mr. SUNSTEIN. There will be a regulatory impact analysis; will in

italics.

Mr. WALBERG. We will certainly look for that.

Let me move forward here on the silica issue. And I chair a subcommittee that deals with MSHA, and a lot of minds are concerned, farmers and others, because sand is certainly, as you know,

everywhere. Currently, OIRA is reviewing OSHA’s proposed

changes to the silica standard. This proposal has been under review for almost 6 months, and I appreciate the fact that it is still

under review and has not come out, because if it were to come out

there are some significant concerns on my part. In August 18,

2011, I copied OMB on a letter asking OSHA to publish an advanced notice of proposal rulemaking in order to allow for stakeholders to understand what changes are being contemplated. I

await that response. In that letter, I noted that the cost estimated

of lowering the standard would be between $3 to $5 billion by a

small business panel in 2003 that looked into it. Additionally, the

lowering of the standard, which has been effective so far in that silicosis is going down, it is not going up, the lowering of the standard

by half, which is what many in the affected industries are expecting, would effectively lower the limit to be virtually impossible to

enforce.

Can you explain how OIRA is reviewing the proposed regulation

and its impact on job creation?

Mr. SUNSTEIN. Yes. I am pleased to do that. I should avoid discussing the details of the particular rule under review, but I can

tell you some general principles that bear on all rules.

The first is conformity to law. That is our number one priority;

that is the foundation. And there are requirements in the Occupational Safety and Health Act, including feasibility requirements,

that would be relevant to any OSHA rule, and many other agencies’ rules which have a feasibility or achievability constraint built

into the law.
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Apart from the law, there is the Executive order, which requires

quantification, to the extent feasible, of all costs and benefits. That

bears on the rules discussed earlier, as well as this one. Within the

constraints of the law, there are principles that the new Executive

order has in it, including public participation, engagement with relevant stakeholders, and open exchange of ideas, flexibility, meaning give people room to maneuver, because that tends to make economic sense; it also promotes freedom. That is in our Executive

order.

So the law would be the first requirement; our Executive order

would set the second level of details for analysis. Within the framework of the Executive order, probably the most important point

here to emphasize is even when a rule is under review, before it

is proposed for comment—and this hasn’t been proposed for comment—people’s concerns are very welcome in the form of meetings,

as well as letters. So we have had a number of meeting requests

on this one in which relevant information has been provided, and

that definitely plays a role in the review process.

Chairman ISSA. I thank the gentleman.

We now go to the long-time businessman, job creator, and Congressman from Pennsylvania, Mr. Kelly.

Mr. KELLY. Thank you, Mr. Chairman, and thanks for the longtime job creator. It has been the family business for 57 years.

Professor, it is nice to have you with us again, and thank you so

much for being here. One of the things that Dr. Graham talked

about was that the bureaucrats at EPA and NTSA artificially inflated the benefits of their CAFE and greenhouse gas rulemakings

for both light-duty and heavy-duty cars and trucks by declaring

that society would declare a social benefit from tighter mileage

standards and assigning it a savings of anywhere from $21 to $45

for each ton of carbon not admitted. Did the agencies present any

type of science to back that up?

Mr. SUNSTEIN. Yes. That number is a result of a very lengthy report that reflected the views of the Council of Economic Advisors,

the Department of Treasury, the Department of Energy, the Environmental Protection Agency, the Department of Transportation,

the Department of Commerce, as well as the Office of Management

and Budget; and any report that gets consensus from that diverse

set of officials either would say nothing or be maybe pretty solid.

Mr. KELLY. Okay. So in that range, then, from $21 to $45 a ton,

that is a pretty big range for all those people that weighed in on

it.

Mr. SUNSTEIN. Yes. It actually is a somewhat larger range,

where the $21 is the central value, but at the low end it goes well

below 21; at the high end it goes into the sixties.

Mr. KELLY. Earlier, one of our colleagues from Virginia was talking about had the American auto manufacturers not spun an endrun to get around the CAFE standards in the 1970’s, they would

not have faced some of the challenges they had. I was actually selling cars during that time period. CAFE standards really don’t drive

the market; the price of gasoline does. And I remember that very

specifically, that whatever our standard was at that time wasn’t

really based on market conditions, it was, again, based on standards that somebody came up with that they thought would be bet-
171

ter than what we were currently doing with the concern for we

were running out of this fuel. And I can remember Newsweek with

the needle being on E and saying we are running out of this and

we are running out of that, and a lot of that stuff, since then, we

are finding out that we do have vast stores of oil, we do have an

awful lot available to us.

But I am always perplexed, and you said, and I thought this was

very good, you said we need to listen to the people who actually

run these businesses, and I would agree with that. I am a guy that

is a General Motors dealer. I am trying to understand the Chevy

Volt. If it has such a great value and is such a significant part of

our transportation strategy as we go forward, it should pretty

much sell itself. And the fact that General Motors isn’t putting a

rebate on it, but the American taxpayers are putting $7,500 into

every Volt that is sold, and these are not being bought and snapped

up by people who see, boy, this is a great car for me to own, this

is something I am going to run out to the dealership and buy. I

mean, we are being asked to take this car and stock it, which is

a poor business practice. I usually don’t like to have anything on

my shelf that I can’t turn in 45 or 60 days; it has kind of led into

our family being able to survive for 60 years in the business. But

I have people telling me, no, no, you have to stock this; you don’t

understand, this is the way the market is going.

And I am trying to understand because your comment, listen to

the people who run these businesses, where in the world do we get

a chance to do that?

Mr. SUNSTEIN. There are a couple of ways. One thing we are

really trying to do is to spur this at our little office, which is when

we have a rule under review, sometimes it will have been proposed

formally to the public so people have a good sense of what it might

look like. GIPSA is an example of that; that has been formally proposed. When it is out——

Mr. KELLY. If we could, I understand those, but when we are

talking about transportation—and most of us, at some time in our

life, actually go into a car dealership and sit down, pick out a car

and negotiate the price and then buy it, so I am not getting into

the silicons and everything else; I am talking about specifically who

were the people who were involved in coming up with some of this

great strategy as to what we should be driving in the future?

Mr. SUNSTEIN. With respect to fuel economy?

Mr. KELLY. With respect to the people who buy these. Because

at some point we are legislating and we are regulating people out

of the market. We are raising the prices of transportation, personal

transportation so high that their only choice is to go to public

transportation, finding another way to get from point A to point B,

and we are going to drive them from their suburban settings back

into the urban settings because they can’t get there effectively; and

that really does concern me, again, government picking and choosing the way we will choose our personal transportation.

Mr. SUNSTEIN. Okay. Well, before any rule that involves automobiles is finalized, and the one you are referring to is an example,

it is presented to the public for comments, and if automobile companies or auto dealers have a problem with it, that plays——
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Mr. KELLY. That is actually not true, and you know that is not

true. No, it is the government decides what the CAFE is going to

be, what the gas mileage is going to be, and then holds the car

manufacturers hostage in order to meet these regulations. The cost

of building these vehicles, by the way, is going to be so burdensome

that private transportation as we know it is no longer going to be

viable. We know that. No, the public does not weigh in on this.

This is really, when you talk about overregulation and a government that wields its weight way too much, that is exactly what is

happening in private transportation, and I would suggest that this

country, which is built on private transportation, needs to take a

look at what is happening.

Chairman ISSA. I thank the gentleman.

Mr. KELLY. And I thank you, sir. I yield back.

Chairman ISSA. Thank you.

We now go to another past job creator, the gentleman from

Texas, Mr Farenthold.

Mr. FARENTHOLD. Thank you much, Mr. Chairman.

Mr. Sunstein, thank you for your hard work. You have taken on

a very difficult task of weeding out some of these regulations. I

think you are working with a scalpel. If you are not successful pretty soon, I think we are going to come in after you with a machete,

because I think it is something that needs to be taken care of.

I want to start off by addressing something of particular interest

to the State of Texas, and that is specifically the cross-State air

pollution rule. This is a symptom that we are seeing in multiple

occasions in Texas. We saw it with the dune sagebrush lizard,

where Texas is not originally included in the original proposals and

not given an opportunity to take part in the rulemaking process,

and then as the final rule comes out or is about to come out, all

of a sudden we are thrown in there. About a month ago, I think

almost the entire Texas delegation sent you a letter with respect

to these cross-State air pollution rules. Have you had a chance to

read that letter and follow up on your offer maybe to help us out

on that?

Mr. SUNSTEIN. Well, yes, definitely. That letter followed a discussion I had with almost the entire Texas delegation, both Democrats

and Republicans, and subsequent to receiving that letter I have

transmitted it to the Environmental Protection Agency, which I can

assure you is thinking intensely about the issues that were raised.

Mr. FARENTHOLD. All right, let’s just step back now and look at

a broader perspective. You are seeing now agencies, more and

more, going into these emergency rulemaking procedures, where

the rules take effect immediately and end up being, in effect, permanently. Do you think we have maybe broadened the definition

of what an emergency is beyond what the average American citizen

would think is an emergency?

Mr. SUNSTEIN. You are taking me back to my days as an administrative law teacher. The Administrative Procedure Act allows

agencies to dispense with notice and comment rulemaking when it

is a unnecessary, impracticable, or contrary to the public interest.

That is the statutory term. Sometimes that is referred in shorthand

as an emergency exception, which I think is a useful way of re-
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minding everyone, maybe particularly agencies, that the ordinary

course is to go through notice and comment.

What I believe, and what OIRA is firmly committed to, and what

the President, more importantly, has directed us as of January

18th to be firmly committed to is a 60-day notice and comment period unless there is some very unusual circumstance.

Mr. FARENTHOLD. And can you talk a little bit about sue and settle, where agencies are basically forced to implement rules as a result of a lawsuit from an activist group and basically sidestepping

the normal procedure that way as well?

Mr. SUNSTEIN. Well, I think there are a couple of different situations that that rubric might capture. Let’s describe the optimistic

one first. The optimistic one is where the plaintiff, it could be a

company that wants to avoid a burden, it could be an environmental group that wants to clean the air or the water, has a really

good argument on the merits, let’s suppose; and then the agency

decides we are going to lose, why don’t we enter into a settlement

agreement, which will give us, in some cases, more flexibility and

room to maneuver than could happen if the case went to trial. So

that is completely legitimate. All I would say, as OIRA Administrator for that one, is that it should be clear that the public comment process and the legal requirements of the statute and the requirements of the Executive order, including careful cost-benefit

analysis, choice of least burdensome alternative, etc., to the extent

permitted by law, all have their appropriate play.

Mr. FARENTHOLD. I would love to sit down with you over coffee

and have about 30 minutes to discuss that and the separation powers issues associated with it on a former lawyer to law professor

level, but I only have about 30 seconds left, so I want to just pose

one more thought for your consumption, as well as those that are

watching.

Historically we have had scientists that are running these government agencies and in leadership posts, and I think now more

than ever we are seeing political appointees, and very often political appointees from activist organizations, that are taking over

leadership roles in executive branch regulatory agencies. Do you

see that as a trend and/or as a problem?

Mr. SUNSTEIN. It is a great question, and I don’t have enough

kind of data about what the trends have been. What I would say

is it is very clear, after my 21⁄2 years at this office, is the scientific

issues are often fundamental to regulatory decisions. And I agree

with you, the scientific decisions have to be made by scientists, not

by people who are political.

Mr. FARENTHOLD. Thank you very much. I see I am out of time.

Chairman ISSA. That is a rare sight you have.

Okay, well, I guess I will recognize myself for 5 minutes, and, if

no one else returns, you are done. Bet you somebody else will show

up, though; it just always happens. It is a busy day, and I appreciate your understanding of people going in and out.

I am going to just do some follow-up here. In the case of the

GIPSA situation, one in which it wasn’t $100 million, now it is

$100 million, perhaps multibillion, in addition to, obviously, this

economic review, would you commit to ensuring that there is a
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public comment period opened, as there would have been had we

realized that it was at least 10 times $100 million initially?

Mr. SUNSTEIN. Because the Secretary of Agriculture has the statutory lead——

Chairman ISSA. What you mean is you have already been told no,

so the answer is no?

Mr. SUNSTEIN. Definitely not. I would not say no to that, because

the general proposition not only do I agree with, I think it is fundamentally important that, in general, the cost-benefit analysis has

to be exposed to the public so that you can figure out whether the

assessment might have something wrong in it.

Chairman ISSA. Don’t make me buy something where I find out

the price afterwards.

Mr. SUNSTEIN. Exactly. Exactly. So what I will commit to is engaging with the USDA on exactly that issue.

Chairman ISSA. I appreciate that, and I realize under the law

that is the most we could ask for.

Would you agree to do essentially the same thing in the case of

CAFE, where we sort of have the cart before the horse, and additional comment and process could be helpful?

Mr. SUNSTEIN. There is no question that before that rule is finalized, there needs to be a public comment process not only on the

ultimate numbers, but on every ingredient of the number, as is

standard.

Chairman ISSA. Okay. And as you might have heard, I know you

heard earlier with Dr. Graham, concerns about the benefit analysis, particularly the weighting of electric cars as though they commit—you know, if you say there is no pollution when there is pollution, you are obviously distorting the cost-benefit consideration, so

hopefully that would be something you would commit to do.

Would you say, from your position, that executive orders, per se,

fall very far short of legislative action?

Mr. SUNSTEIN. In general, legislative action has more longevity

than executive orders; that, I would say.

Chairman ISSA. Well, you know, the reason I ask you—Mr.

Gowdy doesn’t do traps; I enjoy doing this one—is my staff gave

me this question because, in 2002, in the Law Review article you

coauthored, it states that executive orders are not, per se; they are

not sufficient for real change. That was a position that I think was

accurate, that executive orders exist in the vacuum of something

defined, and that something defined and put into statute in one

procedure or another, rulemaking in some cases, and clearly legislation being normally the first, is the only thing that has longevity.

Wouldn’t you agree?

Mr. SUNSTEIN. Well, in general. It has turned out that the

Reagan Executive order from the early 1980’s, and I happened to

be at the Justice Department at the time in the Reagan administration, the basic framework has lasted for decades, and my hope

is, and my belief is that that this is now regulatory review in one

or another form as a permanent part of our regulatory structure.

Chairman ISSA. Laws, like a declaration of war, are there until

they are repealed. Executive orders, for example, the executive

order that everyone said year after year was great, which is we

won’t assassinate a foreign head of state, it was only good until the
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first time a secret executive order said go get him. So the executive

order actually meant nothing, nothing at all year after year after

year. I am a little concerned that if we don’t come to that agreement, that an executive order is appropriate in order to guide the

executive branch in the absence of guidance which is appropriate,

but that ultimately if that guidance is intended to be acted on permanently, it should be codified in law as a regular matter of

course.

And I will take, for example, the Mineral Management Service

created by executive order under President Reagan—I think it is

Reagan. Dysfunctional, hopeless organization, reviewed and always

having problems, and part of the problem was that it really

hadn’t—it was put together conceptually and then never really

dealt with after that; and, of course, President Obama made it very

clear in the reorganization that that needed to be done now.

Mr. SUNSTEIN. I hear you, and the kind of statutory requirements that overlap with the executive order, including the Paperwork Reduction Act, the Unfunded Mandates Reform Act, and the

Regulatory Flexibility Act, those are all statutory, and we are

strongly supportive of them.

Chairman ISSA. Okay. Well, I am going to take a break on the

first round and go to the gentleman from Maryland for a second

round first. Go ahead.

Mr. CUMMINGS. This is only going to take a second.

You know, one of the things that I am concerned about is how

President Obama is portrayed, and I just listened to you talk about

this whole look-back process. I hear my Republican colleagues beat

up on President Obama, and it gets a little bit emotional for me,

to be frank with you, because here is a President that is probably

doing more than just about any other President in looking back.

Am I right? Did Bush do this? Did President Bush do this?

Mr. SUNSTEIN. No one has done it in this system.

Mr. CUMMINGS. I mean like this.

Mr. SUNSTEIN. Right. Agreed.

Mr. CUMMINGS. So, you know, I think the President, in fairness

to him, heard our colleagues and tried to create a balanced approach to trying to do this. And the reason why I bring this up is

based upon the answers to the questions that you just gave to the

chairman. He asked you about this rule; you said, okay, we are

looking back. You talk about the screening part; we are doing that.

And that is the balanced approach that makes sense. As a matter

of fact, I think if it were done that way, there is not a person on

this committee, I don’t think, that would disagree with that, with

the understanding that there are some things that become outdated. And you explained it quite well, why it is how you are able

to find those kinds of rules that are outdated, that there are problems with, and that we need to get rid of.

All of us want to create jobs. God knows. I have, in my district,

probably a 35 percent African-American male unemployment rate,

black. I want to create jobs. I also want them to be in safe jobs.

Now, going back to the GIPSA rule, the letter that was admitted

in the record a little bit earlier has a piece in here which I found

very interesting, and I know the young lady who testified on this

talked about there were a lot of organizations that were not related
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to this whole agricultural situation, but the 15 that signed this,

well, maybe about 14 that signed this letter, the Campaign for

Contract Agriculture Reform, Center for Rural Affairs, Dakota Resource Council, anyway, go on and on, all of them are agriculturerelated, the 14 that signed this letter.

But one of the things, the one that was admitted into the record.

The question is they have a paragraph here that says, and this is

why this is so interesting. This is part of the letter: ‘‘Prior to the

proposed rule, USDA held numerous meetings with all parties with

an interest in the proposed rule. After issuing the proposed rule,

USDA took the step of extending the comment period 120 days, an

extraordinary period of time for regulatory comment period.

‘‘The comment period on the proposed rule closed on November

22, 2011. Over 60,000 comments were submitted on the proposed

rule, including numerous detailed comments addressing the potential economic benefits and costs of the proposed rule. USDA also responded to the requests of livestock and poultry packers and processors to assign the USDA chief economist to oversee preparation

of a comprehensive economic analysis of the GIPSA final rule. To

date, USDA has taken almost 10 months in its review of the public

comments. The regulatory process of the GIPSA proposed rule has

been lengthy, thorough, open and even-handed.’’

And even with all of that, and I am not knocking you for doing

it, I am glad you are doing a look-back, because I want it to be fair,

even with all of that, you are still saying, we will take a look at

it. And I am just going on the record to say that I think we ought

to be fair to President Obama. At least he is trying to look back

at something, I mean, this has already gone through the process.

The other problem that I see, and somebody talked about it a little bit earlier, and it kind of comes up in this, the rulemaking could

take so long, and going back to what the chairman was saying, and

I thought he made a very good point, is that sometimes by the time

the rule comes up, it is outdated and it doesn’t make any sense any

more. So would you comment on that? I am not knocking the chairman or anyone. I just want a fair process.

Mr. SUNSTEIN. There are a lot of important points there. So it is

true that sometimes the process of issuing rules is slower than it

ought to be, including deregulatory rules. There is no question

about that. And many people applauded our rule that eliminated

milk producers from the oil spill rule, and thought, what took you

so long.

So I completely agree with that. It would be good to think of

ways to streamline not only rules, but processes for issuing rules

when there is good reason to think that the rules would do some

good. If we can work together on that, it would fit very well with

our look-back process but also where there is an urgent public safety or health need, that would also be a good thing. We got a rule

out that is presenting I think 79,000 illnesses from salmonella in

eggs.

It also exempts, by the way, small farmers who aren t the source

of the problem. So it is protective of small business as well as the

American public. Many people thought that that rule, which has

benefits well in excess of costs, took too long to get out, the protection was slower than it ought to have been.
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Chairman ISSA. Thank you.

I will now recognize myself. We have spent a lot of time on

GIPSA. Fortunately, you came very prepared, so that is helpful.

I am sure you are familiar that in the 2008 Farm Bill, in the discussion draft, now just remember, not to be partisan but to be descriptive, Republican President but a Democratic House and Senate, the language included in the discussion draft at the Senate

Committee markup of the Farm Bill included the provision that

would have allowed for what the rule is being proposed to do,

which is not requiring a plaintiff in order to have a lawsuit.

So considered by the Democratic Senate at the time, rejected, law

happens without it. On what basis, fundamental basis, does the

branch of execution get to do something that was rejected by, or

reasonably believed to be rejected by the body that created the law?

Mr. SUNSTEIN. Well, that would be hard to identify such a basis

unless it is the case that the statutory text authorized the Secretary of Agriculture to do this. The earlier question suggested that

this goes beyond congressional intent. If so, that is a very serious

problem. If there is a delegation of authority to the Secretary to resolve this question, that would be the only possible answer.

Chairman ISSA. Let’s go through something, because this is a

unique opportunity, well, not unique, because you have been very

generous to come here and come here again now, and we will ask

you back again. But because of the regulatory process, and because

quite frankly, C–SPAN and other groups sort of help us get out

some constitutional questions, the founding fathers did not have

regulatory language in the Constitution. They did not envision the

executive branch passing laws. This is something that was created

afterwards. And it didn t set limits.

So let’s go through a process. In order to make a law currently,

the House and the Senate have to pass bills that are identical

through an initial process or through conference. They then have

to send it to the President and have it either signed or if vetoed,

they must override it with two-thirds of both houses. That is the

law.

Once a law is in place, if the executive branch, and correct me

if I am wrong at any point, the executive branch chooses to, quite

frankly, extract out of pure air or thin cloth some ability to add another law, regulations are laws, rules are laws. The only way that

that can be stopped is either through a very unusual court challenge, which is rare, because they defer to us to fix it, or a twothirds majority of the House and the Senate telling the President

he is wrong, effectively. We can do it through an ordinary majority,

but then he can veto it.

So isn t that the current status of the balance between a rule

chosen by the President or even an executive order, is that he can

do anything he wants to do, he being the executive branch, that the

Congress doesn’t have a two-thirds majority to stop? Isn t that part

of the balance that currently exists?

Mr. SUNSTEIN. I hope that that is more pessimistic than reality.

Chairman ISSA. And by the way I wasn t saying this happens

regularly, or that there wasn t consultation. But ultimately, isn t

that one of the realities, is that the check and balance of, we could

have oversight, but to actually say, we don’t approve of your rule,
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we have to get majorities in the House and the Senate in order to

do it and on top of that, in a timely fashion or we have to pass a

new law, start to finish and strike it down?

Mr. SUNSTEIN. I would just add two points. One is that if a rule

is proposed by an Executive agency, the general counsel’s office at

the department, call it the Department of Transportation, which

has a superb general counsel, is carefully——

Chairman ISSA. Has a superb Cabinet officer, too.

Mr. SUNSTEIN. Yes, it does, absolutely. It is very much engaged

on the question whether the rule conforms to congressional instructions. And so the first line of defense is the lawyers at the general

counsel’s office.

Chairman ISSA. But they are executive branch employees.

Mr. SUNSTEIN. Yes, though it happens time and again, I can say

this from experience, that the general counsel’s office or subsequent

people engaged in the legal issue, will say, that is not what Congress meant, that is not consistent with the law.

Chairman ISSA. Well, let’s go through the process. Congress recently acted, and we have acted previously, to set CAFE standards.

We have in fact been the creators and the setter of CAFE standards, delegated to NHTSA. How did we get these CAFE standards

this time? Didn t we get them around clear congressional intent,

and isn t that part of why it is so controversial?

Mr. SUNSTEIN. Well, if you could imagine NHTSA doing some

things that would be in plan violation of the underlying statute,

and that would come out, the inconsistency with the underlying

statute——

Chairman ISSA. But understand, the President said he did this

without Congress. So it is very clear that the President did it without Congress. He did it without the process that has existed in the

past.

Where, to your knowledge, was there an intent of Congress to

have the executive branch from time to time raise those standards

on their own?

Mr. SUNSTEIN. That would be the fuel economy statute, which as

you said, delegates authority to the Department of Transportation.

So it was without Congress in one respect, that is, that Congress

didn t particularly select levels or mechanisms. But it was pursuant to a delegation of authority to the agency, which is a constrained delegation. And in fact, NHTSA has run into legal challenges for, not in this administration but in prior administrations,

for not acting consistently with the legal constraints, or at least so

was challenged.

So what is clear is that there couldn t be the creation of a CAFE

standard just out of thin air.

Chairman ISSA. Well, yes, and my time is expired, so let me do

this. I am going to yield to the gentleman from Pennsylvania and

ask him if he would yield me back time. The gentleman is recognized.

Mr. KELLY. I will do that, sir.

Chairman ISSA. Quickly, under the Issa Act, conveniently similar

to my name, we prohibited EPA from doing this, and yet they have

done it. So we can have a lot of argument, the courts may ultimately have arguments. But isn t it clear that the President’s ad-
179

ministration made a decision to do this, and they made a decision

to do it without precedent, specifically based on actions that were

created by Congress?

And I know you are not a constitutional, you are a very good

scholar, you are not a constitutional scholar per se, but isn t this

becoming a constitutional question? And that one of those in which

the American people have to ask, do they trust this administration,

the next administration? You didn t trust the last administration

in some of your writings.

And shouldn’t we ultimately seize back a great deal of this

through some process that says, go ahead and make your rules, but

ultimately, you have to get Congress buy-in in real time?

Mr. SUNSTEIN. What I would say is there are a couple of things

that are built into our system that are responsive to your question.

The first is, one of the President’s core constitutional responsibilities is to take care that the laws be faithfully executed. So adherence to the law is at the heart of the Executive power under Article

II.

It is also the case that Congress has mechanisms which have

been used to express its——

Chairman ISSA. Do you mean exactly one time wherever it will

shut down a rule?

Mr. SUNSTEIN. Well, I didn t just mean the Congressional Review

Act. I also meant offering input and criticism of the direction in

which any executive branch is going. And we have seen a couple

of examples in the last hours. I can’t emphasize strongly enough

that if there is a rule that is under review at our office, or that the

Department of Transportation, let’s say, is devising, that seems to

those who are responsible for the legislation to be inconsistent with

it. That voice matters greatly.

Chairman ISSA. Let me ask you one last question, and I appreciate the continued indulgence of the gentleman, if we were to pass

a law today that said, the President must on a quarterly basis

bring us his package of regulations for a package vote up or down,

essentially give us the right to vote as a package and if we didn

t like it, we would vote the package down if it was sufficient,

wouldn’t that make those regulations truly bought-in by the American people? And wouldn’t it make it inherently harder to pass a

regulation?

And by the way, the same would be true of rolling back legislation. The gentleman very rightfully so said, concern about regulations going away. But isn t that the best way to have the confidence of the American people, potentially, rather than the arguments that have gone on here today?

Mr. SUNSTEIN. I don’t know what would be the best way to have

the confidence of the American people.

Chairman ISSA. Let’s switch it to, wouldn’t we pass less regs if

in fact the President had to come to Congress with his package of

regs to get codification rather than passing them as, if you will, sua

sponte?

Mr. SUNSTEIN. There would be fewer regs and fewer deregs.

Whether that diminution in number would pass the cost-benefit

test, that is the question.
180

Chairman ISSA. And it is a good one. I yield back to the gentleman. Thank you.

Mr. KELLY. Thanks, Mr. Chair. And Professor, again, thanks for

your indulgence. I know this can’t be easy.

Going back to this CAFE, because I think it is important for the

American people to understand, and my concern with all this is it

doesn’t matter what President’s watch it happens on, whoever it is

that is sitting in the chair either gets the praise or the blame. So

really, it is truly a bipartisan criticism.

With CAFE, though, what has always bothered me, we are able

as a government to eliminate consumer choice by coming up with

these standards. If you could just help me on that. And I think I

have a better understanding right now after the chairman’s last

line of questioning. But it is disturbing to me, because we really

are eliminating, we are picking and choosing what people are allowed to drive and not drive or purchase and not purchase. The

market really determines that.

And I would say that as far as gas knowledge is concerned, when

the price of gasoline goes up, people go to smaller cars. It doesn’t

really have anything to do with CAFE. So if you could.

Mr. SUNSTEIN. The recent announcement by the President is the

initiation of a process that will involve engagement with a number

of the issues that have been raised today, including public notice

and comment on issues, including consumer choice issues.

What I would emphasize with respect to CAFE standards is that

there has been kind of bipartisan enthusiasm for assessment of

costs and benefits. And at least the CAFE standards that have

been issued in this administration have had benefits very far in excess of costs, really extraordinarily far in excess of costs. And have

also allowed very great room for consumer choice. So it would be

one thing to say, every car has to get 50 miles per gallon, it would

be another thing to say that there is a fleet-wide average of X and

the number of cars that are on the road can span an extraordinarily wide range.

And consistent with the Executive order which values flexibility

and freedom of choice, I am with you that any CAFE structure

should have a wide range of options, rather than be draconian.

So one question which really isn t for the OIRA Administrator

to answer, it is for the people who are authorized by Article I of

the constitution, you all, to answer, the question is whether the

economic energy security and environmental benefits of a CAFE

standard justify such restrictions as there are on the market. And

there was a report, I believe in the early 2000’s, from the National

Academy of Sciences, very detailed report by a wide range of respected people, which ultimately concluded, was supportive of

Congress’s judgment, which is in favor of CAFE standards.

Mr. KELLY. Okay, thank you.

Mr. FARENTHOLD [presiding]. Thank you very much, and I will

now recognize myself for 5 minutes. Again, I do want to thank you

for coming up. I am sure it is never pleasant to testify before a congressional committee.

According to a recent Wall Street Journal article, the Obama administration considered but ultimately rejected a partial moratorium on new regulations. Is that correct?
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Mr. SUNSTEIN. Well, the Wall Street Journal I believe said that.

That is correct. [Laughter.]

Mr. FARENTHOLD. Were you involved in any discussions about

that?

Mr. SUNSTEIN. What I am aware of is that in any domain that

bears on economic policy, a wide range of questions come up. Any

administration that is determined to help make things better, as

ours is, would consider every question that a reasonable person

might ask. It is true that a number of people on the outside have

raised that question.

Mr. FARENTHOLD. I don’t mean to try pin you down, are you

aware of any of the issues that were considered in not implementing that moratorium?

Mr. SUNSTEIN. I can tell you a bit about why a moratorium is

not coming, if that would be helpful. One problem which is closely

related to the previous chairman’s your immediate predecessor in

that chair, the executive has to take care that the laws be faithfully executed. A moratorium would violate the requirement that

the laws be faithfully executed. So it would have to be a highly

qualified moratorium.

Second, a moratorium would sweep up deregulatory measures

which we are pretty enthusiastic about expediting, because they

are regulatory actions. And third, and this is an important point,

a moratorium would not be a scalpel or a machete. It would be

more like a nuclear bomb in the sense that it would prevent regulations that, let’s say, cost very little and have very significant economic or public health benefits. So a moratorium would have the

disadvantage of defying what every President since President

Reagan has endorsed, which is cost-benefit analysis.

Mr. FARENTHOLD. We were talking a partial moratorium, and it

seems this administration has not been, has not stopped itself from

picking and choosing which laws it chooses to effect. We have seen

the administration publicly say they are not going to enforce the

Defense of Marriage Act, for example. So it is something they could

do, if they chose to do.

Mr. SUNSTEIN. What I would say is, in the regulatory apparatus,

to say we won t issue rules that Congress has required us to issue,

that would violate the——

Mr. FARENTHOLD. I am not going to advocate either side, I just

wanted to follow up on that article. In his opening statement, I

don’t believe you were here, but the opening statement for the first

panel, Chairman Mica of the Transportation and Infrastructure

Committee held up a chart with the amount and level of government regulations associated with building a highway. His numbers

say it takes about 6 years to build a highway, basically saying,

shovel-ready, basically saying does not exist in the amount of time.

I question how some of these regulatory agencies sleep at night,

knowing as they delay these people who are not going back to work

and not on a job. Do you have any solutions for this that we could,

I realize you are working on it from your end. Do you have some

things we could do on our end? We are costing ourselves money,

tripling the price of highway projects and delaying people getting

back to work.
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Mr. SUNSTEIN. I agree completely that there is a problem with

permitting requirements that at least in some important cases are

having unfortunate delaying effects on desirable projects. I agree

completely with that. If we have rules coming forward that add to

that problem, they will have close scrutiny.

What I would suggest just as in this case, a consumer rather

than an important actor, that engagement with the President’s

Jobs Council here would be very helpful. They are centrally concerned about this topic. Jeff Zientz, who is the Deputy Director at

OMB, is centrally concerned with this problem. It would be very

good, in this current economic situation, this opportunity, to improve the permitting process.

Mr. FARENTHOLD. As a Texan, Texas kind of prides itself on

being a business friendly, as little regulation as possible State. One

of the ways we were able to maintain that is all executive agencies

in Texas face a sunset process and have to come back before the

legislature to justify their existence. Do you see a benefit in adopting something like that on a Federal level?

Mr. SUNSTEIN. It may be too rigid. But I will tell you what I do

see a benefit in that is closely analogous, is to take our look-back

process not as a one-shot endeavor, but as a location for the creation of teams and institutions that are constantly, and not just because a President says so in a prominent document, but are constantly looking at rules to see if they should be eliminated. If you

look at the plans, and we could certainly use your help on this,

they say that this is a continuing endeavor. If members of the public see rules, including permitting-related rules, that are causing

harm, or rules that are not consistent with how technologies now

operate, or rules that were not a good idea at the beginning, but

were not gotten rid of because the agency issued the rule and then

declared victory and went on, there are teams now at the departments that are available to try to get that fixed.

It isn t quite a sunset provision, but it could serve many of the

same functions.

Mr. FARENTHOLD. Thank you very much. Let me just ask you one

more question, if you will indulge me. I get the sense that in some

areas of the government, there is a, let’s look for a solution to a

problem that doesn’t exist. It may be that there are people in jobs,

say, I need to make my job relevant or some sort of mind set

where, let’s do something where there isn t a problem. It is probably too small potatoes to be on your plate.

We have an example in the district I represent in South Texas

where the National Park Service wants to lower the speed limit on

the Padre Island National Seashore from 25 to 15 miles an hour

to protect the endangered Kemps Ridley sea turtle, when there has

never been one incident on the Padre Island National Seashore of

a turtle being hit by a car.

Do you have any thoughts on things we could do to maybe just

change the mind set of, let’s justify my job, let’s have more regulations, let’s make it harder to, if it ain’t broke don’t fix it kind of

mentality?

Mr. SUNSTEIN. In the rulemaking area, we are very conscious of

the need, as the President said the other night, to show that the

rule is required. What served I think both Republican and Demo-
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cratic administrations in good stead, in this domain, it is just a

small part of the whole government, of course, is to require right

off the bat a description of the market failure or other problem that

justifies regulation. If you can’t get over that threshold by saying,

there is a market failure or other problem, then you probably

should devote yourself to some other issue.

Mr. FARENTHOLD. I appreciate your taking the time to come and

testify before this committee. I look forward to seeing you again.

I would like to commend you on the job you are doing. It is a big

one, and again, thank you very much for testifying.

Mr. SUNSTEIN. Thank you so much.

Mr. FARENTHOLD. And with that, we are done.

[Whereupon, at 1:05 p.m., the committee was adjourned.]

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