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REGULATORY REFORM: ARE REGULATIONS

HINDERING OUR COMPETITIVENESS?

HEARING

BEFORE THE

SUBCOMMITTEE ON REGULATORY AFFAIRS

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

JULY 27, 2005

Serial No. 109–108

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

GINNY BROWN-WAITE, Florida

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

MELISSA WOJCIAK, Staff Director

DAVID MARIN, Deputy Staff Director/Communications Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON REGULATORY AFFAIRS

CANDICE S. MILLER, Michigan, Chairman

GINNY BROWN-WAITE, Florida

CHRIS CANNON, Utah

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

STEPHEN F. LYNCH, Massachusetts

WM. LACY CLAY, Missouri

CHRIS VAN HOLLEN, Maryland

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

ED SCHROCK, Staff Director

JOSEPH SANTIAGO, Professional Staff Member

ALEX COOPER, Clerk

KRISTA BOYD, Minority Counsel

(III)

C O N T E N T S

Page

Hearing held on July 27, 2005 ............................................................................... 1

Statement of:

Copeland, Curtis W., Specialist in American National Government, Congressional Research Service; J. Christopher Mihm, Managing Director,

Strategic Issues, Government Accountability Office; Marlo Lewis, Jr.,

senior fellow in environmental policy, Competitive Enterprise Institute;

and Erik Olson, senior attorney, Natural Resources Defense Council ..... 33

Copeland, Curtis W. .................................................................................. 33

Lewis, Marlo, Jr. ....................................................................................... 82

Mihm, J. Christopher ................................................................................ 51

Olson, Erik ................................................................................................. 101

Hayworth, Hon. J.D., a Representative in Congress from the State of

Arizona; Hon. Sue W. Kelly, a Representative in Congress from the

State of New York; and Hon. Robert W. Ney, a Representative in

Congress from the State of Ohio .................................................................. 8

Hayworth, Hon. J.D. ................................................................................. 8

Kelly, Hon. Sue W. .................................................................................... 15

Ney, Hon. Robert W. ................................................................................. 20

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

Copeland, Curtis W., Specialist in American National Government, Congressional Research Service, prepared statement of .................................. 36

Hayworth, Hon. J.D., a Representative in Congress from the State of

Arizona, prepared statement of ................................................................... 11

Kelly, Hon. Sue W., a Representative in Congress from the State of

New York, prepared statement of ................................................................ 18

Lewis, Marlo, Jr., senior fellow in environmental policy, Competitive Enterprise Institute, prepared statement of ................................................... 84

Mihm, J. Christopher, Managing Director, Strategic Issues, Government

Accountability Office, prepared statement of ............................................. 53

Miller, Hon. Candice S., a Representative in Congress from the State

of Michigan, prepared statement of ............................................................. 3

Ney, Hon. Robert W., a Representative in Congress from the State of

Ohio, prepared statement of ........................................................................ 24

Olson, Erik, senior attorney, Natural Resources Defense Council, prepared statement of ........................................................................................ 103

Westmoreland, Hon. Lynn A., a Representative in Congress from the

State of Georgia, prepared statement of ..................................................... 7

(1)

REGULATORY REFORM: ARE REGULATIONS

HINDERING OUR COMPETITIVENESS?

WEDNESDAY, JULY 27, 2005

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON REGULATORY AFFAIRS,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:30 a.m., in room

2247, Rayburn House Office Building, Hon. Candice Miller (chairman of the subcommittee) presiding.

Present: Representatives Miller, Westmoreland, and Lynch.

Staff present: Ed Shrock, staff director; Rosario Palmieri, deputy

staff director; Dena Kozanas, counsel; Joseph Santiago and Erik

Glavich, professional staff members; Alex Cooper, clerk; Krista

Boyd, minority counsel; and Jean Gosa, minority clerk.

Ms. MILLER. The subcommittee will come to order.

I apologize for being late.

I think America is at a crossroads. We can continue down a path

that weakens our international competitiveness, or we can recognize our responsibility for reducing the cost of doing business in the

United States. America should be the very best place in the world

to manufacture goods, to create jobs. We are here today to discuss

some options that the Congress could consider for reforming our

regulatory process. This hearing will provide us with an opportunity to evaluate existing initiatives, consider new proposals, and

develop a regulatory reform agenda for the 109th Congress as well.

I certainly want to say how glad I am to have my colleagues Representatives Hayworth, Kelly, and Ney with us today. These are

three Members of Congress who really do understand this issue,

and they know how critical it is to improving our Nation. I want

to thank you all for being here. I am also pleased to mention that

my subcommittee colleague Representative Ginny Brown-Waite has

proposed her own piece of legislation to address the issue of regulatory burden on the American public.

Regulation is one of the tools used by the Government to implement public policy. It is necessary because laws may lack the details required to address the various circumstances that they were

designed to correct. Every year, over 60 Federal departments, agencies, and commissions dedicate actually over 240,000 full time employees to write and enforce regulations that range from allowing

fireworks displays over rivers to registering food facilities to protect

them from bioterrorism. Combined, these agencies annually issue

thousands of new rules and their costs for regulatory operations

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during fiscal year 2004 actually exceeded $39 billion, just to put it

in perspective.

According to one estimate, the total regulatory burden on the

American public exceeded $850 billion per year, which is almost

the equivalent of what Americans pay in income taxes. Government

regulations cost American small businesses 60 percent more per

employee than the cost incurred by larger businesses. And, for

every dollar devoted by the Federal Government to regulatory activity, American businesses spent $45 just to comply with those

regulations.

At $8,000 per employee, domestic manufacturers assume almost

twice the average cost for all U.S. industries. Workplace regulations alone cost manufacturers $2.2 million per firm per year,

which is roughly about $1,700 per employee. Our global competitors of course do not have this large of a burden, so it is no wonder

that our Nation continues to bleed jobs, unfortunately, to competing nations.

During the past 50 to 60 years, Congress and various Presidents

have developed procedures to guide the Federal rulemaking process

with the goal of reducing the amount of regulatory burden imposed

on the American public and businesses. Those in favor of regulatory reform argue that Federal regulations are too costly, time

consuming, complex, duplicative, burdensome, and intrusive for

businesses and other regulated entities. However, there are those

who would argue that regulatory reform efforts focus too much on

the costs of regulations and do not focus enough on the benefits derived from them.

Make no mistake, I think everybody on this panel, everybody in

this room is a person that wants to protect the environment, the

health, and safety of the workers. I am a defender of regulations

that watch over consumers and safeguard our natural resources. I

spent actually almost three decades in public office as an advocate

of our environment. However, I think that excessive and unnecessary regulatory burdens can cause substantial harm by limiting

economic growth, by slowing job growth, as well as by hindering

America’s ability to compete in the global marketplace and the

global economy. And as I have said many times, I think our standard needs to be what is reasonable.

So I am eager to have a dialog about how best to improve the

Federal regulatory process for the benefit of all Americans. In particular, I am hopeful that this hearing this morning will present us

with suggestions that will help Congress address the flaws of our

regulatory system. I am extremely troubled by the number of regulations that could have an impact on our ability to remain competitive with our key trading partners. Streamlining the regulatory

process to limit unnecessary regulatory burdens on the American

public is a very powerful force for reinvigorating our economy,

small businesses, and our competitiveness on the international

stage.

So I do look forward to the testimony of all of our witnesses here

today. I would like to recognize now Mr. Lynch for his opening

statement.

[The prepared statement of Hon. Candice S. Miller follows:]

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Mr. LYNCH. Thank you, Madam Chair. First of all, I want to welcome my colleagues who are here with us this morning to offer

their proposals to reform the regulatory process; Chairwoman

Kelly, who I serve with in the Financial Services Committee, along

with Chairman Ney, and my pal Representative J.D. Hayworth,

and we are also going to hear from a very energetic member of this

subcommittee, Ms. Brown-Waite, with her proposal as well. We do

appreciate your taking the time to come here today and also to

spend your energies on a good cause. I think we can all agree there

is a general consensus that we can do a lot more to improve the

regulatory process; no question about it.

While I embrace the notion that we can do much more to improve the process, I believe a lot can also be said for using some

of the tools that we have right now at our disposal to cause agencies to follow the spirit and the letter of the laws that we pass, to

act consistently with legislative intent, and also to follow the constitutional protocols that we dictate in that legislation. We have

seen departures from that on many occasions.

I believe that Congress already has the constitutional authority

to oversee these agencies and to guide them. For example, last

month it was revealed that the EPA plans to issue a draft rule,

which would allow pesticides to be tested on humans. Since 2001

when the Administration reversed EPA’s moratorium on using

human pesticide experiments, EPA’s position on this issue has

been the subject of some controversy. Now, EPA plans to issue a

proposed rule that fails to include necessary safeguards. For example, EPA’s rule would not fully protect children and other vulnerable populations.

However, the Energy and Commerce Committee, with its full

schedule, has not been able to have a hearing on EPA’s proposed

rule allowing the testing of pesticides on humans. On the other

hand, we did find time in the Congress in previous sessions to, for

example, spend 104 hours of congressional hearing time on examining whether or not President Clinton had abused his Christmas

card privileges. So sometimes our oversight time is not well-spent.

Congress, and this committee in particular, will have an opportunity to investigate important examples of regulatory abuse and

to help guide those regulatory agencies. We should also look at the

pattern in which regulated industries have had an inappropriate

influence on the EPA and other agencies’ rulemaking activities. We

are seeing, for example, significant delays in agency rules that are

required by statute. A major cause of this delay appears to be

OMB’s failure to review agency rules in a timely manner.

To the administration’s credit, the Bush administration has favored a rule implementing the Clean Air Act standards for fine

particulate matter. I think most Members of Congress, Democrat

and Republican, have said that this rule is favorable and has an

important and positive health benefit. EPA sent that proposal to

OMB formally in October 2004, but OMB still has not released the

rule. This is an example where even when we have consensus

among Democrats and Republicans, we have inactivity by OMB.

Congress has a Constitutional responsibility to conduct oversight

of Federal agencies. In addition to a standing committee with jurisdiction on certain laws, the Committee on Government Reform has

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a responsibility of overseeing whether agency laws, programs, and

rules are being implemented and carried out according to legislative intent. Hopefully, now this newly constituted subcommittee

under the guidance of Chairwoman Miller can make us all more effective toward that end.

Again, my thanks to my colleagues and all the witnesses testifying here today. We welcome you and look forward to your testimony. Thank you, Madam Chair.

Ms. MILLER. Thank you very much. Are there any other opening

statements?

Mr. WESTMORELAND. I would like to make one, thank you.

Ms. MILLER. I recognize Mr. Westmoreland.

Mr. WESTMORELAND. Thank you, Madam Chairman. I am grateful that we are having this hearing and I appreciate my colleagues

coming to testify.

One of the reasons that first motivated me to get involved in politics, being in the building business, was all the government regulations that myself and my industry face. Many businesses today

spend so much time and money complying with regulations that

they are unable to focus on their core business. And we not only

have to deal with impact on businesses themselves, but also on the

oversight necessary to enforce these regulations. Many times we

were put under regulations to file papers that were just put in

storerooms and never looked at, only to later be used as evidence

against us for not complying or complying wrongly with the regulations that we were under.

One study placed the number of full time Federal employees necessary to write and enforce Federal regulations at 240,000. This is

just unthinkable that the number would be this high, especially

when so few of the individuals who write the regulations, as honorable as their intentions surely are, have no real world experience

in the areas that they regulate.

I look forward to us evaluating various proposals before the committee today, and I am especially interested in legislation that gets

a real cost-benefit analysis done for the impact of regulations on

businesses across our Nation. Again, thank you, Madam Chairman,

for having the hearing.

[The prepared statement of Hon. Lynn A. Westmoreland follows:]

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Ms. MILLER. Thank you.

To our witnesses, the Government Reform Committee insists

that we swear in all of our witnesses, even Members of Congress.

So if you will all rise, please, I will swear you in.

[Witnesses sworn.]

Ms. MILLER. Our first witness that the subcommittee is going to

hear from is my distinguished colleague, Representative J.D.

Hayworth from the Fifth Congressional District of Arizona. Congressman Hayworth, in his fifth term, has become a leading advocate certainly on regulatory reform. He has sponsored the Congressional Responsibility Act, which improves accountability in the legislative process. J.D. is also a member of the House Ways and

Means Committee and also serves on the House Resources Committee. Congressman Hayworth, we welcome you to our committee

hearing this morning and look forward to your testimony, sir.

STATEMENTS OF HON. J.D. HAYWORTH, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF ARIZONA; HON. SUE W.

KELLY, A REPRESENTATIVE IN CONGRESS FROM THE STATE

OF NEW YORK; AND HON. ROBERT W. NEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

STATEMENT OF HON. J.D. HAYWORTH

Mr. HAYWORTH. Madam Chair, thank you very much. I would

ask unanimous consent that my complete statement be made part

of the record.

Ms. MILLER. Without objection.

Mr. HAYWORTH. At the conclusion of the testimony, Madam

Chair, unfortunately, given the vagaries of the schedule and the

challenges of time, I will have to depart. But I do look forward to

reviewing all that transpires in today’s hearing.

Madam Chair, members of the subcommittee, and distinguished

guests, thank you for affording me this opportunity to discuss one

of the most fundamental reforms that this Congress can undertake:

ending the unconstitutional delegation of legislative powers.

As was mentioned in opening statements on both sides of the

aisle, reducing regulatory red tape will increase the ability of

American businesses to compete in the world market. Unfortunately, government regulation and bureaucracy are significant impediments to the success of every business.

For too long Congress has ceded its lawmaking authority to unaccountable, unelected employees in the executive branch. Not only

does this contradict the Constitution’s ‘‘separation of powers’’ by

making the executive branch the maker and enforcer of law, but

it violates Article 1, Section 1 of our Constitution which states

quite clearly: ‘‘All legislative powers herein granted shall be vested

in a Congress of the United States.’’ My testimony focuses on the

unconstitutionality of delegation and why it makes for bad government.

My testimony focuses on H.R. 931, the Congressional Responsibility Act. As my colleagues would note, and as that wonderful

baseball star Yogi Berra would say, ‘‘it is deja vu all over again.’’

We have been steadfast in our insistence on trying to reign in this

unconstitutional and unintended delegation.

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I believe our Founders understood the negative implications of

delegation of power. For this reason, our Founders defined the various roles of the three branches of government and emphasized

their separations of power.

For the first 150 years of our existence as a republic, the Supreme Court held that the transfer of legislative powers to another

branch of government was unconstitutional. But in the late 1930’s,

the Court reversed itself and upheld laws by which Congress merely instructed agencies to make decisions that served ‘‘the public interest.’’ Since then, we in Congress have ceded basic legislative responsibility to executive agencies that craft and enforce regulations

with the full force of law.

The Supreme Court has not invalidated a single delegation of

power since 1935. Lawmaking was never intended to be in the

hands of executive branch employees. As the Constitution enumerates, the power to make laws was solely vested in Congress because Congress is directly accountable to the people.

Delegation gives life to bad laws because it allows legislators to

craft ambiguous legislation, legislation for which legislators can

take credit without taking responsibility for the legal consequences

or their costs. Congress can reap the benefits of delegation and its

excesses by helping constituents through the complexities of Federal regulations at the same time those of us in public office can

blame bureaucrats for misinterpreting our intentions in legislation.

So for purposes of full disclosure, regardless of political party or

philosophy, the legislator basically can play both sides against each

other and win. But the real loser in all of this is the electorate, the

American people.

H.R. 931 will rightly return legislative powers to the Congress by

requiring Congress to vote on all rules and regulations, as defined

in Section 551, Subchapter 4 of Title 5 of the United States Code,

except those regulations of particular applicability, any interpretive

rule, general statement of policy, or any regulation of agency organization, personnel, procedure, or practice. My legislation will

apply only to new regulations and will not be retroactive.

Detractors say there is no way Congress has the time to review

all rules and regulations that are promulgated by the executive

branch. But regardless of the time it takes, I would maintain it is

the duty of Congress to review rules and regulations, as enumerated in Article 1, Section 1 of the Constitution.

Moreover, I have had the honor to serve as Speaker Pro Temp

of the House of Representatives and, on more than one occasion,

I have presided over a largely ceremonial debate in which we took

several hours to name Federal installations after noteworthy Americans. My colleagues, I ask you, if we can name courthouses, airports, military bases, and other places, do we not have enough time

to vote on rules and regulations that profoundly affect the citizens

of this country?

With these time constraints in mind, however, the Congressional

Responsibility Act provides an expedited procedure for considering

rules and regulations. Within 3 days after an agency promulgates

a rule, the Majority Leaders of both the House and Senate, by request, must introduce a bill comprised of the text of the legislation.

If the bill is not introduced in 3 days, any Member thereafter may

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introduce the bill. The bill is not referred to a committee unless a

majority of Members agree to send it through the normal legislative process.

Within 60 days of being introduced, however, the legislation

must come before the respective chamber for a vote. The bill shall

be limited to 1 hour of debate and cannot be amended. If a majority

of Members of the body vote for the bill, it is sent to the other body

for approval. And upon approval of both bodies, the legislation is

sent to the President to sign or to veto.

Other opponents of this legislation argue that this would delay

the implementation of rules and regulations. But in reality, I suggest that it would not. Rules and regulations are often the subject

of countless and seemingly endless lawsuits. For example, the final

rule for unleaded gasoline took nearly 10 years to promulgate because it was the focus of intense litigation. Congress becomes the

final arbiter in rulemaking and the Congressional Responsibility

Act states that a regulation contained in the bill is not an agency

action for the purpose of judicial review under Chapter 7, Title 5

of the United States Code. This would bring to a halt litigation that

delays implementation of regulations.

Finally, opponents of this legislation will say this is a backhanded attempt at regulatory reform or ripping the entire notion

of regulation out of government. No, no, no. Our Founders were

right, the Constitution makes it clear all legislative powers shall be

vested in Congress. Article 1 asserts that this legislative power includes the power to regulate. By returning the power to regulate

to Congress, we make Congress accountable to the people for Federal laws. This will make for a better government, a laudable goal

that we as well as the American people desire.

Ladies and gentlemen, this has a broad coalition of support. In

fact, even Nadine Strossen of the ACLU, we got together about 10

years ago, said, ‘‘I cannot exactly go with you on this but I agree

with the sentiment of the bill,’’ and conservatives such as Judge

Robert Bork, and, interestingly enough, it was now Justice Stephen

Breyer who wrote in 1984 how the legislative veto should be replaced by an expedited procedure for Congress to pass rules and

regulations.

Let me end by quoting John Locke’s admonition that ‘‘the legislative cannot transfer power of making laws to any other hands.’’

Delegation without representation is as wrong today as taxation

without representation was in the 1700’s. It is time Congress took

back its Constitutionally granted powers to make law.

Madam Chairwoman, members of the subcommittee, thank you

so much for your time and your attention.

[The prepared statement of Hon. J.D. Hayworth follows:]

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Ms. MILLER. Thank you very much. We certainly do appreciate

your time here today and your introduction of H.R. 931 and your

explanation as well. I recognize that you have other scheduling

pressing matters, so we certainly excuse you. Thank you very

much.

Mr. HAYWORTH. Thank you, Madam Chair.

Ms. MILLER. Our next witness is another one of my distinguished

colleagues, Representative Sue Kelly from the 19th Congressional

District of the State of New York. Congresswoman Kelly is in her

sixth term. She has certainly been an advocate for many, many

years of small businesses and small business owners and their employees.

She was the chief author of the Truth in Regulating Act of 2000

that created a new way of assessing the impact of new Federal regulations. Representative Kelly has introduced a bill now amending

the Truth in Regulating Act that enhances congressional responsibility for regulatory decisions developed under the laws enacted

by Congress.

We welcome you to our hearing today and look forward to your

testimony.

STATEMENT OF HON. SUE W. KELLY

Mrs. KELLY. Thank you very much, Madam Chairwoman. It is a

pleasure to be here. I appreciate your interest in this.

My bill, H.R. 1167, the Cut Unnecessary Regulatory Burden for

Small Business [CURB] Act, demands that GAO, at the request of

a subcommittee or full committee chairman in Congress, evaluate

any promulgated rules and regulations that would have an annual

effect on the economy of more than $100 million. This bill gives

Congress proper oversight because a request by Congress would require the GAO to do a cost-benefit analysis as well as something

that is equally important—looking at these rules and regulations

for redundancy and overlap.

Congress, through the GAO, would have the knowledge of and

the ability to fully evaluate unfair costs or impacts on small businesses before the new rules are implemented. Most importantly,

GAO’s analysis would allow Congress to submit more informed and

more influential comments on the cost, scope, and content of proposed rules during the public comment period, and to hold hearings

on these rules and regulations, if necessary.

Since the 104th Congress, I have led the fight for a Congressional Office of Regulatory Analysis. As you may know, those efforts resulted in the passage of something called the Truth in Regulating Act of 2000. President Clinton signed it into law. TIRA authorized a 3-year pilot project adding a function at the GAO to respond to congressional requests and provide for such congressional

oversight. It now has sunsetted.

Last Congress, the House passed the Paperwork and Regulatory

Improvements Act, which contained a similar provision that would

have made permanent this pilot program. That bill never passed

the Senate.

Thus, I have introduced the CURB Act, which tries again to

make permanent the TIRA bill that was passed in 2000 and to

fund that bill.

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The oversight mechanism in H.R. 1167 is tailored to specifically

protect small businesses from burdensome and duplicative regulations. In New York’s Hudson Valley, where I represent the small

business owners, they have reiterated to me time and time again

that their paperwork is unreasonable, they feel the government

regulations are redundant, and the most severe problem they face

almost every day is trying to figure out how to fill out these forms.

They are begging for relief, and I do not think this is any surprise.

The burden of regulatory compliance on small businesses is so

much. Most people do not realize it is as much as 50 percent more

than for larger companies.

The increased workload and the time commitment is not the only

concern. Cost is also an issue. Troublesome and duplicative regulations cost the average small business in this Nation almost $7,000

per employee per year. Rather than using this money to hire new

employees, as well as create and enhance customer relations, small

businesses are forced to lose this money by complying with excessive regulation.

Passage of H.R. 1167 is important for small businesses across the

Nation. They are the primary engine of our economic growth in our

communities. We cannot go without the 7 out of 10 new jobs created each year by small businesses. If you stop and think about it,

by reducing the regulatory burden, there could even be more jobs

created by our small businesses.

This legislation is trying to help solve the dilemma of overly burdensome regulatory schemes in a number of ways. The CURB for

Small Business Act improves the transparency of the decisions at

the Federal agencies. In doing so, it enhances the efficiency in the

way regulations are designed and implemented. It leads to competent, economical use of our government resources, and most importantly, provides sensible rules for small business that have to

comply.

The act promotes valuable congressional oversight. Because Congress provides the authority for the administrative agencies to create the regulations, it makes sense that Congress should retain

some of the ability to make certain the regulations do not create

waste in government, or worse, redundant and unnecessary rules

for small businesses.

The bill also increases the accountability of Congress. This is one

method of assuring that not only are Federal administrative agencies doing their job, but it also encourages Congress to keep up

with its obligation in providing the authority to the agencies. Agency personnel are not elected, as my colleague pointed out. Because

we in Congress are, we have to answer to our small business owners, and they are begging us for relief.

The CURB for Small Business Act is a positive step in helping

small businesses and keeping regulations fair. In Congress, we

should have the oversight over the thousands of rules and regulations established by government agencies. The last time I looked,

government agencies were promulgating rules and regulations at

the rate of about 4,000 rules and regulations a year. There is definitely redundancy, there is definitely overlap, and no one has the

authority at the present moment to do a cost-benefit analysis of

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these rules and regulations with regard to what their effect is on

small business.

We have to help our small businesses. This piece of legislation

I am offering does just exactly that.

Thank you very much for allowing me to testify in front of the

committee today. I appreciate your concern, I appreciate your interest, and I look forward to your support on this bill.

[The prepared statement of Hon. Sue Kelly follows:]

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Ms. MILLER. Thank you very much. We certainly appreciate that

testimony.

The subcommittee will hear from another one of our distinguished colleagues, and this is Representative Bob Ney from the

18th Congressional District of Ohio. Congressman Ney is serving

his fifth term in Congress. He is also the chairman of the House

Administrative Committee of which I am proud to serve alongside

of him; we fondly refer to him as the Mayor of Capitol Hill. He is

also an advocate for reform of the Federal regulatory system. He

has introduced the Joint Committee on Agency Rule Review Act,

which would provide for greater congressional accountability in the

regulatory process.

We want to thank you for being here at our hearing today, and

we look forward to hearing your testimony.

STATEMENT OF HON. ROBERT W. NEY

Mr. NEY. Thank you, Madam Chairman, and we appreciate your

service on House Administration. You are a new member and you

have quickly brought a lot of good insight to the committee. And

thank you Ranking Member Lynch and also the gentleman from

Georgia, Congressman Westmoreland. I want to thank you for the

opportunity to discuss this bill. I think it is important.

Congresswoman Kelly and Congressman Hayworth and I came

at the same time 10 years ago to the Congress and this was talked

about at that point in time, and I am going to mention in a minute,

of course, the CRA, Congressional Review Act. But the bill I have

is H.R. 576. Let me begin by discussing the current regulatory climate and how the Federal Government currently addresses new

rules before proceeding on how this bill would improve these procedures and strengthen the congressional oversight.

In 2004, Congress passed, and the President signed, 299 bills

that are now law. Over that same period of time in 2004, regulatory agencies issued 4,104 final rules versus our 299 bills. I personally find the difference between these numbers staggering. Unfortunately, they are not atypical of the current system. Recent reports show that 4,266 more regulations are presently in the different stages of development as we speak, and 135 of those 4,266

are economically significant rules which will have an impact of at

least $100 million each.

In fact, the Office of Information and Regulatory Affairs at the

White House estimates that regulations adopted over the last 10

years cost Americans between $34 billion and $38 billion annually.

Some reports show the total impact of all Federal regulations to be

ten times this amount each year. And it is not going to go down.

Quite honestly, these regulatory costs have substantial effect on

our economy and the small businesses that drive it, and obviously,

most importantly, for the workers of the United States. A recent

World Bank study titled ‘‘Doing Business 2004: Understanding

Regulation’’ shows that cumbersome regulations are associated

with lower productivity, increased abuse, higher costs, and longer

delays. It was stated by this very committee that the structural

costs of American products compared with our foreign competitors

is 22 percent higher due to Federal regulations.

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I appreciate, by the way, the committee drawing attention to this

matter. I think it is important to show that regulations increase

costs to small business, and in a global economy these regulations

affect competitiveness. At a time when we are fighting for our lives

with China to eliminate unfair trading practices and open markets

to U.S. products, it simply does not make sense to make our products less desirable by increasing the overhead costs to American

small businesses and driving up the cost of their products.

Now not all regulations are bad, we know that. Nor do they all

have a negative effect. I believe some regulations are warranted,

meet the intent of Congress, and have a positive cost-benefit relationship. Now regulations should not be in the eye of the beholder,

and that is where I will get to the point of what this does, which

I think is fair to all the regulations.

But my concern is with our ability as an institution to review

4,000 rules a year. One thing I tell constituents back home is that

you can question how a Member votes. You know, people watch CSpan and say why does this person vote that way, but one thing

I think you cannot question of this body is the incredible amount

of hours and tough schedule that everybody I think puts in around

here. And, so how do we review 4,000 rules a year as a body?

Independent of Members’ individual reviews on a specific regulation, the avenues available to Congress under the Congressional

Review Act to address costly rules are limited and rarely utilized.

In the 8 years since the CRA took effect, Federal agencies have

submitted 34,000 rules to Congress. Of these rules, 535 were major

rules having impact of at least $100 million. Over this period of

time, approximately 30 Congressional Review Act joint resolutions

of rule disapproval have been introduced, regarding more than 20

of these 34,000 rules, but only one rule was overturned through

CRA’s procedures.

This legislation, House Resolution 576, would address this problem by establishing a special joint committee between the House

and the Senate that would be tasked with reviewing all regulations

proposed by a Federal agency. This Joint Committee on Agency

Rule Review, in Ohio we call it JCARR, would vote in disapproval

of the regulation if it violates the intent of the law it is supposed

to implement. Then a disapproval resolution under the Congressional Review Act would be introduced in each chamber with guidelines established for expedited consideration.

This process works in my State; I was on it. I think, Mr. Lynch,

you were on a similar type of body in Massachusetts from 1994 to

1996. I do not know exactly how it works, and I am told the research shows that many other States have similar types of mechanisms.

This process works. My State of Ohio has had this since 1977,

and this JCARR committee has played an important role in ensuring the accountability of State agencies while limiting the power of

State bureaucrats.

Here is a brief example of how JCARR would work if enacted

into law. In this scenario the EPA is proposing a regulation that

could be harmful and threaten hundreds of jobs. Here is the stepby-step of how a review would work:

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The EPA publishes a final regulation that is bad, we will call it

Regulation A in this example. Under the law, Regulation A must

be submitted to JCARR when it is published. JCARR, the House

and Senate panel, which is 12 Members of the House, 12 of the

Senate here, is then required to give the committees of jurisdiction

copies of the proposed regulation.

Once the rule is submitted to JCARR, a 60 day clock runs where

the committee has time to consider Regulation A. Days where either house is out of session, the House or the Senate, for more than

3 days does not count toward the 60 day clock.

Now if JCARR takes no action and the clock runs out, Regulation

A takes effect. Simple as that. However, if JCARR votes to disapprove Regulation A—and I would note a lot of committee Chairs

and Ranking Members would have input into JCARR, because that

is one of the concerns, that you are taking away jurisdiction and

you are really not. Most of the time we fight these rules or opinions

through letters that are sent around.

If JCARR votes to disapprove Regulation A, a joint resolution of

disapproval is reported to the Congress. If a majority of the House

and Senate Members vote to disapprove, the resolution goes to both

chambers; however, if a majority of just one chamber’s Members

vote in disapproval, the resolution is reported only in that chamber.

In the House, once the resolution is reported, the House has 3

days to bring the resolution to the floor, otherwise it is in order for

any Member to make a privileged motion to consider it if the House

does not do that. These are expedited procedures. In the Senate,

most of the expedited procedures are already in place because of

the Congressional Review Act. If the joint resolution goes to both

houses and passes, it goes to the President for his signature.

If the President signs the resolution, Regulation A will have no

effect and will not take effect. If the President vetoes it, Congress

has 30 days to vote to override the veto if they want to try again

to stop the regulation. If either chamber fails in a vote to override

the veto, Regulation A takes effect immediately.

I have kind of simplified this process. But if enacted, JCARR

would help to ensure that the regulations implementing laws

passed by Congress adhere to the spirit of the legislation and are

not detrimental to our Nation’s economy. I hope you will be able

to look at this. Let me just conclude, I want to thank one of our

staff, Brian Petersen, for putting a tremendous amount of time in

on this and who has worked with other staffs.

I just want to end with an example. Powhatan Point, OH, which

now Congressman Strickland represents but I used to represent actually 24 years ago as State Representative and then in Congress

for a while, they had a major flood down there. Powhatan is a poor

community, like a lot of communities in Appalachia I represent.

There was a rule so that if the people took their trailers and

moved them off the trailer court so they would not flood, when they

wanted to bring them back FEMA said you can bring them back

if you build concrete blocks and put the trailer on top of the concrete blocks, so they will be out of the way of the next flood. Of

course, that means that you have to run pipes up there, build the

concrete blocks and it is raised up there, and you would have to

build a porch.

23

We tried with the Federal Government to say why not just let

them do what they do every couple of years, put a hitch to the

trailer and take it out of harm’s way. I fought 10 years. I was finally successful last year in getting something in the flood insurance bill. Ten years.

If you look at some of these rules, again, they are not all bad,

but I just think it has gotten so out of control. This is a process

that will not take away Chairs’ or Ranking Members’ jurisdiction.

But the bottom line of JCARR, why it has worked so well in Ohio,

is the staff, trained professional staff, and pretty soon the agencies

start to get used to the fact that they better think these rules out

because they are going to run into a lot of interference if they do

not. So I think this enhances the abilities of the Chairs and ranking members.

Thank you for your time.

[The prepared statement of Hon. Bob Ney follows:]

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25

26

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Ms. MILLER. Thank you very much. I found your testimony really

fascinating. In fact, when we thought about having this hearing we

were sort of looking for some of the various innovative pieces of legislation that Members of Congress had introduced in regards to

regulatory reform. We looked at yours, in particular, as sort of a

best practices because you had experience with it in Ohio as well.

I was interested to note in your testimony, you mentioned about

China. Here we are fighting with China. In one of our hearings

previously we had invited my former Governor, John Engler, who

is now the executive director of the National Manufacturers Association, in which he very interestingly talked about a study that

NAM has done that shows the structural cost of all American goods

are about 22–23 points higher than any of our foreign competitors

principally because of regulatory burdens that we put on ourselves.

So as we are unfortunately bleeding manufacturing jobs to China

or Mexico or whatever? Guess what: they did not put all these regulatory burdens on us, we have done this to ourselves.

That is why I say I think the standard has to be reasonable. And

we look to the States very often, I think as incubators for some of

the best practices that the Federal Government could implement as

well. And as you talked about your bill, H.R. 576, could you flesh

out perhaps a little bit, for us, some of the principal differences you

might see in how the JCARR worked in the State of Ohio as opposed to an analogy of how you see your bill working here at the

Federal level?

Mr. NEY. One nice thing about Ohio, and this could be adapted,

parts of it could, we have Chapter 119 code, so the agencies have

to go through some pretty set procedures. When they come to

JCARR where you have six State Representatives and six State

Senators all equally divided, this is totally bipartisan, you have 12

and 12, all equal division, and when they would bring a rule, if

they had not followed all of the procedures or the public testimony,

we could actually sit there and say why not take this rule back,

take another look at it.

Most of the time the agencies would say fine. Every once in a

while they would still proceed, and then we could make a motion

to throw it to the floor within 3 days in the House and Senate. Now

once we disapproved it, we did not need the signature of the Governor, which was, I think, good, because it has your balance between the executive and the legislative. We did not need the signature of the Governor. In this case, you need the signature of the

President. I think that is one big difference probably.

When I first, 10 years ago, went to the leadership and other people, the committee Chairs said, this is taking away our authority.

And like I said earlier, with the schedules, tell me how many

times, and I Chair a committee and we oversee the Federal Elections Commission, how many rules, since you have been on the

committee, have we sat and reviewed? We really do not. We will

interact and have opinions, but we really do not review it.

So I view this House-Senate body as not usurping. And in Ohio,

that is the way the psyche worked with this. In fact, we were

happy to have JCARR because we could say, hey, I chair—at that

time I chaired appropriations—and I could say to JCARR, why not

28

take a look at this, and the staff really worked with us and enhanced us. It was very bipartisan.

So I think the difference is here you still need the President to

sign off. It puts a lot of pressure, I think, on the executive to have

a little bit more responsibility. They are just churning out rules

and regulations and we catch this or do not catch that. I also wanted to mention approaches—Congresswoman Kelly has an approach,

J.D. Hayworth has an approach—I think there are a lot of good approaches out there, but I think you are seeing this start to bubble

up because of the problems. So those are just a few differences in

Ohio’s JCARR, being that the main difference is the Governor is

not involved.

Ms. MILLER. I appreciate that. Talking about paperwork, I have

this question for you, Representative Kelly, because you mentioned

about the paperwork burden that all your small businesses are

complaining about.

Actually, the staff has heard me make this comment previously,

but in light of the shuttle launch, my dad was an aeronautical engineer and worked with Wernher von Braun at Redstone and at

the very early days of rocket science where they were shooting off

rockets. He always said it was very exciting until the Federal Government got involved, at which time they said with all the paperwork that was required they would never shoot off a missile until

the weight of the paperwork equalled the weight of the rocket.

And I think that is probably what happens now. But we also,

under this subcommittee and our full committee, look at the Paperwork Reduction Act and it is something that is coming through as

well.

Under your legislation, how would you see the Congressional Office of Regulatory Analysis [CORA], would they have a role in evaluating, reviewing the paperwork burden on small businesses?

Mrs. KELLY. CORA is not the actual bill that passed. TIRA is the

bill that passed and was signed into law. Congressman Ney has a

Cadillac, I have a sports car. And the reason I say that is, it is

something that would set aside an office in the GAO. The GAO exists. They already have experts, and basically they would do the

analysis and then report to Congress so that the analysis that

would be done would not only be cost-benefit, but it would be redundancy and overlap.

If you run a small business, as I did and as my family does, you

have constant interference from the Federal Government asking for

forms to be filled out, for your employees, for any impact you may

have if you have trucks, cars. There is just a huge number of forms

you are constantly being asked for from the Federal Government.

It seems to me if you look at redundancy and overlap, which my

bill does, we as Congresspeople are going to be able to go back to

an agency and say, why are you asking in agriculture for something that commerce is asking for also, can we not combine these

two requests into one request and let the small businesses comply

with that electronically, and then let each agency go to the electronics that were filed.

In other words, it is a way of shrinking paperwork and shrinking

a lot of what the Government is doing in terms of interfering with

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the way that small businesses do business because of these constant demands with paperwork.

Ms. MILLER. Thank you very much. Representative Lynch.

Mr. LYNCH. Thank you, Madam Chair. Chairwoman Kelly, just

to follow the procedure here, the bill that you did get passed, which

was a sound one, the TIRA, was never funded. You proposed a 3-

year pilot program, and it was never funded. Now we are sort of

leapfrogging and this new bill is actually to make TIRA permanent

without going through that 3 year pilot.

Would it not give us the benefit of looking at that program for

3 years if it were in fact funded? What I am asking is, I think your

original idea was a good one, and I am just questioning why we are

departing from that and instead trying to put this in permanently?

Is it just frustration with the fact that they did not fund it to begin

with?

Mrs. KELLY. I started this bill within 6 months of my freshman

year in Congress. I have been in Congress 101⁄2 years and I have

been pushing this for a very long period of time. Before I leave

Congress, I would like to actually do something to reduce paperwork and the burden of costs on small business. If we make TIRA

permanent and we fund it, we have a built-in situation at the GAO

where it can work and it could start work tomorrow.

I would like to see it go beyond just a pilot bill. I think now the

pain that small businesses in this Nation suffer from all of this tremendous burden of paperwork, the enormous number of Federal

regulations that are going after them day after day, it needs to be

lifted, and it needs to be lifted on a permanent basis.

When you stop and think about the fact, if you have been a small

business person, as I have, I have run a small business, I know

that I did not have time to sit down and read the Federal Register,

which is where most of this stuff is published. I never found out

about most of the regulations that were hitting my business until

somebody from the Federal Government came in and said, oh, by

the way, you did not file form JHQ137. Well, I did not know I needed to file that because I was busy running my business. And, yes,

I did file it.

But there is no reason why that should occur. That sort of thing

should be restricted by us; we are elected by these people to represent them. It is our duty to try to help them do what they do

best, which is generate jobs, shore up our economy. It seems to me

that if we make this permanent and we fund it, we have done just

that.

Mr. LYNCH. OK. My question was one around strategy and I

think you have explained it.

Mr. Ney, first, I think you correctly recognize that there will be

some concern around jurisdiction. I think the one benefit that we

do have with committees of jurisdiction is that they deal with the

substance of particular bills. In Financial Services, Sarbanes-Oxley,

those folks lived with it for I do not know how long, and so they

have this very profound understanding of the legislative intent and

the workings of the bill.

And so I think, in the first instance, it is probably better to have

them deal with a resolution for disapproval. But on the other hand,

I do recognize—you know, the numbers that you cited—only 30 disVerDate 11-MAY-2000 13:48 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 D:\DOCS\25529.TXT HGOVREF1 PsN: HGOVREF1
30

approval resolutions referred, only 1 successful on ergonomics, that

may be the flaw in the CRA, the Congressional Review Act, is that

it is everybody’s job, but it is nobody’s job; anybody can do it, but

nobody has to do it.

And so that the model that you set up on the Ohio model makes

it the responsibility of this committee. And maybe the value is in

that, that we actually have somebody who we have named as gatekeeper for the regulatory process so that somebody has to look at

it. And if they abdicate their responsibility to review it, so be it,

but it is their responsibility.

So I think that has an attractiveness to it that there is accountability and responsibility delegated to a certain group in the process that we do not have right now. That is all I have.

Mr. NEY. Madam Chair.

Ms. MILLER. Yes.

Mr. NEY. I thank the gentleman for his comments. Actually, differences, there are a couple of things, and without objection, if I

could submit this for the record.

Ms. MILLER. Without objection.

Mr. NEY. There are some things I did not mention, because there

are some differences. There are 24 members here, 10 members in

Ohio. But I would note something which is of interest and food for

thought. The criteria for recommending disapproval or validating a

rule in H.R. 576 is not stated in there. In Ohio, it is if it exceeds

the rulemaking authority or if they did not follow the proper procedure and intent.

Ohio has an interesting part I did not put in this bill, which is,

if the intent of the bill is there. You know, all of a sudden around

here, somebody will say we wrote the bill, here we are, this was

our intention, and over here it sort of does not matter to the agencies, it is well, that is fine, OK, go away and we will do what we

want. Whereas in Ohio, intent could be a reason.

Now one other thing too, in this bill there is nothing short of disapproval. In Ohio, they can actually pick up the phone, see if they

can resolve part of it, and it can also be partial, part of the rule

can be dismantled if you want to.

So I just wanted to mention there were some differences. I also

do not go retroactively back. This is forward. But in regards to

what you said, I think that you have to watch the jurisdiction. But

as chairman of a committee and knowing other committees, there

is just so much that cannot be caught. So if you worked it the right

way, I think it would be an enhancer to the committee process.

But you are right, you have that expertise within, like SarbanesOxley, of debating, I think Section 418 or 404, I thought I would

say that in my sleep, I thought I would never forget it, but debating what was the intent, what was done. So, yes, there are some

levels of expertise in the committees.

But I think the staffs would also interact a lot with this staff.

And I have to stress, too, as it was in Ohio, you picked up the

phone, you interacted with the staff, they were all there for

JCARR, and it kept any amount of partisan bickering down.

Ms. MILLER. Very well. Representative Westmoreland.

Mr. WESTMORELAND. Thank you. Mr. Ney, just to kind of finish

up on what Mr. Lynch said. What my experience has been in the

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past of rules being approved, we have environmental health districts in the State of Georgia and it is composed of the school superintendent, a registered nurse, a doctor, a mental health advocate, and so forth, and yet the septic tank regulations have to be

approved by this group.

These people would not know a septic tank if they saw one. And

so what happens is you may get a guy coming in and he can tell

them anything, they think he is an expert in the situation, and so

they say, yes, this rule sounds good when it really may go against

the manufacturer’s recommendation of even how to put in the system.

I think what Mr. Lynch said maybe about the committee of jurisdiction, because they have heard testimony, they have actually

heard all the different reasons why or why not we should have the

law that we are passing, they may have more insight into the rules

or the regulations that were being written to make sure this law

was being abided by more than maybe some elected officials that

may depend on staff or whatever to do that.

Do you see that as a problem? I know that in Ohio this thing,

evidently, was quite successful. I agree with what you are trying

to do, but did you ever give any consideration to it being the committee of jurisdiction that would actually look at these things?

Mr. NEY. Yes, I thought about that because, again, when I first

got out here I was just told this is mixing in everybody’s business;

no, the committees handle it. After a couple of years I looked

around and we started asking staffers, you all can take your own

experiences in how long you have been here, how many times did

you actually have hearings on rules? I was stunned when Brian in

our office did this research. I was stunned at that. I had no concept

there had been that many and 4,600 in 2004. So, yes, we thought

about it.

Actually, when JCARR is functioning here, it will go to the committees, it will be submitted, and they can do something if they

want to. But a lot of committees are just absolutely too busy, and

they cannot handle thousands of them. And as you just gave an example in your statement, I think it is the small ones, too, that escape us.

I am sure you all have been through this, you go home and somebody says what is wrong with you, why on Earth did you do this

to us, or I am down at the local union and they will ask me a question, and I will say, I did not do that, and then you go back and

you find out it was an agency that did it last year; we did not

know.

I will give you one concrete example. I live in St. Clairsville, OH.

When I was a State Senator, Natural Resources said you have to

have composting because we do not want these grass clippings

thrown all over the place. So they had composting, and we agreed

with that; I think it was a good thing. Then they came back, and

they announced that every town had to hire a compost manager

and assistant compost manager.

My advice to the mayor is let everybody throw them all over the

hill, because it is 4,000 people, and you are going to pay $40,000

for a compost manager. People agreed to do composting. So you can

find those.

32

Now, a lot of people did not know that existed but because of the

way JCARR worked, basically they called up ODNR and said, if

you would like to continue down this path, we can tort you all day

long with hearings because JCARR has the time to do it. The staff

attorneys, the professional staff just keep at this all day with the

bureaucracy. That is a true example. And ODNR got hold of itself

and said, OK, we will rethink that. They are going way beyond

even the scope of law or the intent of law.

But we thought about individual committee jurisdiction. It will

still go there under this. I just think there is not enough time in

the day.

Mr. WESTMORELAND. I appreciate what both of you are trying to

do. I had a similar situation. I went home, and being in the building business, I had a gentleman that had a dual wheel truck and

was pulled over by the State Patrol and given a ticket because he

did not have his company name on the side of the truck and he had

not had a physical, and also because of a homeland security issue

on the size of trucks and the fact that you would have to have your

name and phone number.

He does not advertise his business, but yet now he has a sign

on his door that identifies his company with a phone number and

he had to go pay $300 to get a physical to be able to get the driver’s

license to drive that size of truck. It is just really a normal truck,

and how the State patrolman knew how much it weighed is beyond

me, but it was part of that homeland security.

So there are consequences that we never think of that we do up

here when we pass laws. And I want to commend both of your for

your effort, and I hope I am on both of those bills.

Ms. MILLER. We certainly thank you both so very much for graciously sharing your time with us. All of us, I think, have various

examples that we can cite. Back home, I have to tell you, my stump

speech when I am out speaking to Rotaries or Kiwanis or whoever

and I tell them I am subcommittee Chair of Regulatory Affairs

now, and they say what is that, and you start talking about some

of these different regulations.

The one I always cite is something that was told to us, and we

will probably be hearing about it in this committee at some point

in the future from the American Bakers Association, where you

have a situation where the Federal Government has decided there

is a molecule that is released when there is fresh baked bread with

a beautiful aroma emanating, and the Federal Government has determined that the aroma of fresh baked bread is smell pollution

and they are now regulating these small bakeries literally out of

business.

So I think people understand, they can grasp that some of these

regulations are nonsensical in many ways, and they are not achieving the objective that we are all looking for.

So, again, thank you very much for your time. Hopefully, we can

help these bills to become enacted. Thank you so much.

We will take a 2-minute recess while we empanel our next panel

of witnesses.

[Recess.]

Ms. MILLER. The committee will come to order.

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It is our practice here to swear in our witnesses. So if you would

all rise to take the oath.

[Witnesses sworn.]

Ms. MILLER. Thank you very much. Our first witness of our second panel is Dr. Curtis Copeland. Dr. Copeland is currently a specialist in American government at the Congressional Research

Service. His specific area of expertise is Federal rulemaking and

regulatory policy. Prior to moving to CRS in January 2004, Dr.

Copeland was an Assistant Director at the Government Accountability Office for 23 years working on a variety of issues from Federal personnel policy to regulatory policy. He has received his Ph.D.

from the University of North Texas in 1980 in political science.

Dr. Copeland, we appreciate your attendance here today and look

forward to your testimony, sir.

STATEMENTS OF CURTIS W. COPELAND, SPECIALIST IN AMERICAN NATIONAL GOVERNMENT, CONGRESSIONAL RESEARCH SERVICE; J. CHRISTOPHER MIHM, MANAGING DIRECTOR, STRATEGIC ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE; MARLO LEWIS, JR., SENIOR FELLOW IN ENVIRONMENTAL POLICY, COMPETITIVE ENTERPRISE INSTITUTE; AND ERIK OLSON, SENIOR ATTORNEY, NATURAL RESOURCES DEFENSE COUNCIL

STATEMENT OF CURTIS W. COPELAND

Mr. COPELAND. Thank you very much. Madam Chairman, members of the subcommittee, I am pleased to be here today to discuss

previous efforts to reform the Federal rulemaking process.

Although those efforts have had vastly different purposes, almost

all of them bear one common characteristic—they have not been as

effective as their authors had hoped. There appear to be at least

four general reasons why this is so.

One reason is the amount of discretion that is sometimes left in

the hands of agencies to implement the reforms. For example, the

Regulatory Flexibility Act of 1980 requires Federal agencies to assess the impact of their forthcoming regulations on small businesses and other small entities.

But it says they do not have to conduct the analysis if the head

of the agency certifies that the rule would not have a ‘‘significant

economic impact on a substantial number of small entities.’’ The

act does not define what a ‘‘significant impact’’ or a ‘‘substantial

number’’ means, thereby giving Federal agencies discretion to determine when the act’s requirements are triggered, and the agencies often use that discretion.

For example, in 1999 the Environmental Protection Agency

issued a proposed rule that would have significantly lowered the

threshold for reporting the use of lead under the Toxic Release Inventory program. By EPA’s estimate, this report would take more

than 100 hours to fill out the first time, and EPA said lowering the

reporting threshold would have swept in more than 5,000 additional small businesses, costing each of them $7,500 in the first

year. Nevertheless, EPA said this was not a ‘‘significant economic

impact’’ or a ‘‘substantial number of small entities’’ and exempted

the rule from the Regulatory Flexibility Act.

34

From 1996 through 1999, EPA as a whole exempted 96 percent

of its rules from the act, and two offices within the Agency, the Office of Pesticides and the Office of Solid Waste, exempted 100 percent of the rules.

A second reason why some reform measures have not worked as

well as expected is they were built on the flawed foundations of

other reforms. For example, section 610 of the Regulatory Flexibility Act requires agencies to review their rules within 10 years of

issuance to determine if they should be retained, eliminated, or

changed. However, this look-back requirement is triggered only

when Federal agencies determine that their rules have a significant impact on small entities.

Similarly, section 212 of the Small Business Regulatory Enforcement Fairness Act requires agencies to publish small entity compliance guides, but again only when the agency determines that the

rules have a significant impact on small entities. Section 212 has

other problems.

For example, the statute does not require agencies to consult

with small entities to develop the compliance guides, it gives agencies total discretion to determine whether they have to be written

in plain language, and does not indicate when the compliance

guides have to be developed. Therefore, an agency could develop a

hard to understand compliance guide years after a final rule is

published with no input from small entities and still be considered

in compliance with section 212.

Other regulatory reforms appear to flounder because they are

limited in terms of the agencies or rules covered. For example, the

Unfunded Mandates Reform Act of 1995 does not cover any rules

issued by independent regulatory agencies like the Federal Communications Commission or the Securities and Exchange Commission, even though those agencies clearly issue some rules that some

affected parties consider mandates. The act also does not apply to

any rules issued without a previous Notice of Proposed Rulemaking, even though half of all final rules are issued without a Notice.

Finally, political and structural limitations sometimes make it

difficult or impossible for regulatory reforms to achieve their intended purposes. The 1996 Congressional Review Act was initially

viewed as a way for Congress to reassert itself in the rulemaking

process.

However, the reality, as we have heard earlier, is it has been

well short of that goal. Only 1 of the more than 39,000 rules submitted to Congress since 1996 has been disapproved. The primary

reason appears to be the balance of power between Congress and

the President. Because of the votes required to overcome a Presidential veto, it is very difficult for Congress to use the act to disapprove a rule that the President would like to see go into effect.

So, based on this history, how can regulatory reform be more effective in the future? The short answer is to avoid the problems

that I just mentioned. First, Congress and other regulatory reformers could be as specific as possible regarding what agencies are to

do, defining key terms and avoiding broad loopholes; second, avoid

linking reforms to other reforms that have not been effective; and

third, do not exclude any rules or agencies unless there is a good

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reason for doing so. And finally, there should be a realistic assessment of the Constitutional and statutory boundaries that exist.

Madam Chairman, thank you again for inviting me to appear

today at this hearing. I would be happy to answer any questions

you might have.

[The prepared statement of Mr. Copeland follows:]

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Ms. MILLER. Thank you. We appreciate that very much.

Our next witness this morning is Chris Mihm. Mr. Mihm is the

Managing Director for Strategic Issues at the GAO. In this capacity, he leads the GAO’s work on governmentwide longer term

broader issues designed to support the transition to a more results

oriented and accountable Federal Government. He is also a fellow

of the National Academy of Public Administration.

I want to thank you for your participation and welcome you to

the committee hearing this morning. We look forward to your testimony, sir.

STATEMENT OF J. CHRISTOPHER MIHM

Mr. MIHM. Thank you, ma’am, I appreciate it.

Madam Chairman and Mr. Lynch, I am honored to be here today

to discuss efforts to improve the Federal regulatory process and to

suggest some outlines for a possible reform agenda as you move

forward. I also must add, as you mentioned in your introduction of

Curtis, it is a great pleasure to be here today with my former colleague from the Government Accountability Office, then it was

General Accounting Office.

In that spirit, I am also happy to acknowledge that many of the

reports and testimonies that form the basis of my statement were

written by Curtis when he was at GAO. So it is all in the family,

a lot of it, here today.

As you mentioned in your opening statement, Madam Chairman,

Federal regulation is a basic tool of government. Agencies issue

thousands of rules and regulations each year to implement the

statutes enacted by Congress and the public policy goals. Benefits

of regulation include, among other things, ensuring that the workplaces, air travel, food, and drugs are safe; that the Nation’s air,

water, land are not polluted; and that the appropriate amount of

taxes are collected. The costs of these regulations, as you also

noted, are estimated to be in the hundreds of billions of dollars,

and the benefit estimates are equally high.

My bottom line today is that the recent regulatory reform initiatives have yielded mixed results. On the one hand, there have been

real and important benefits associated with these initiatives that

Congress has put in place, while on the other hand, they have often

been less effective than were intended.

And also as a key point to consider as we move forward, while

many of the initiatives have added more requirements at the beginning of the regulatory process, fewer of their provisions have focused on evaluating the actual benefits and costs of rules once implemented and using such information to revise existing regulations and inform future action. Our suggestion will be that this is

where we need to augment that part of the regulatory process to

have more of the retrospective and look-back provisions across the

current array of regulations.

Given the size and the impact of the Federal regulations, it is no

surprise that Congresses and Presidents over the last 25 years

have sought to refine and reform the regulatory process. One goal

of such initiatives has been to reduce regulatory burdens, but other

purposes have also played an important part. Among these are efforts for more rigorous analysis of proposed rules and better inforVerDate 11-MAY-2000 13:48 Feb 09, 2006 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 D:\DOCS\25529.TXT HGOVREF1 PsN: HGOVREF1
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mation to decisionmakers, enhancing oversight of rulemaking by

Congress, including what you heard from the first panel today, and

the President, and to promote greater transparency and participation in the process.

Our reviews done over the years at the request of Congress suggest that there are four overall strengths or benefits from the regulatory reform initiatives that have been put in place: First, they

have certainly increased the attention directed to rules and to the

rulemaking process; second, there has been increased expectations

regarding the analytic support for proposed rules; third, they have

encouraged and facilitated greater public participation in rulemaking; and fourth, they have improved transparency of the rulemaking process.

Despite these important strengths, the overall effectiveness of

the regulatory reform initiatives, as I mentioned, has been mixed.

This may be particularly true when results are compared to the

originally established goals and purposes, and for many of the

issues that Curtis raised. For example, despite the paperwork reduction goals under the Paperwork Reduction Act, we have repeatedly testified about the growth and burden hours imposed by the

Federal information collections; I know this is a key initiative of

this subcommittee, including hearings that you have recently had.

We have similarly reported that initiatives such as the Unfunded

Mandates Reform Act [UMRA], the Executive orders on federalism,

and requirements imposed under Section 610 of the Regulatory

Flexibility Act for reviews of existing rules, have had, on balance,

little impact on agencies’ rulemaking.

Our reviews have identified at least four general reasons that

might explain why these initiatives have not been successful. First,

the limited scope and coverage of the various requirements; second,

a lack of clarity regarding key terms and definitions, a point again

that Curtis was making; third, uneven implementation across

agencies; and fourth, a predominant focus on just one part of the

regulatory process, that is agencies’ development of rules.

As this subcommittee begins to develop its own regulatory agenda, two avenues provide a useful starting point in our view. First,

the subcommittee may wish to broadly revisit the procedures, definitions, exemptions, and other provisions of existing initiatives to

determine what changes are needed to achieve those goals.

And second, greater evaluation, often referred to as retrospective

analysis or look-backs, of existing regulations and lessons learned

is needed to keep the regulatory process focused on the current results that are being achieved, or not, as the case may be, and identifying successful practices in meeting emerging challenges.

With that, let me conclude. Obviously, I would be happy to take

any questions that you or Mr. Lynch may have.

[The prepared statement of Mr. Mihm follows:]

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Ms. MILLER. Thank you very much.

Our next witness is Marlo Lewis. Dr. Lewis is a senior fellow at

the Competitive Enterprise Institute where he writes on global

warming, energy policy, and other public policy issues as well. Actually, during the 106th Congress he served as a staff director on

the House Government Reform Subcommittee, at that time it was

called the Subcommittee on National Economic Growth, Natural

Resources, and Regulatory Affairs. So it is, I suppose, a little bit

back to the future for you, Dr. Lewis, to be here.

He has also published in the Washington Times and Investor’s

Business Daily, and the National Review. He holds a Ph.D. in government from Harvard University, and a B.A. in political science

from Claremont McKenna College. We welcome you back to the

subcommittee and look forward to your testimony.

STATEMENT OF MARLO LEWIS, JR.

Mr. LEWIS. Well it is certainly a pleasure to be back here. Thank

you, Madam Chairman and Ranking Member Lynch, for inviting

me to testify today. I want to commend the subcommittee not only

for holding this hearing, but for your vigilant oversight. And more

oversight by Congress I think is the short answer to the question

of how we improve Federal regulations.

A lot of the statements today have already made the point that

Federal regulatory costs are large, they are growing, with 4,000

new rules each year, they are also really uncontrolled in the sense

that elected officials never make explicit choices about how large

the regulatory burden should be in relation to the economy.

Over the years, Congress has adopted, debated, or considered numerous reform initiatives to try to in some way discipline the regulatory process. The specific elements of these proposals typically

fall into one or two categories, which, for want of a better term, I

would call policing reforms and checks and balances reforms. By

that I mean this, policing reforms aim via rules of rulemaking and

centralized review to regulate the regulators; checks and balances

reforms seek to increase Congress’ responsibility for regulation, foster interagency competition, or enable outside experts to compete

with agency experts.

Both types I think will be needed to make the regulatory system

more affordable and accountable. However, a word of caution is in

order, and I think this segues very nicely into what Curtis had to

say. In the past, reformers have relied heavily on policing reforms.

Pinning their hopes on what James Madison called ‘‘parchment

barriers,’’ they have proceeded as if agencies could be legislated or

managed into practicing sound science and economics.

In general, the results have been disappointing because rules of

rulemaking are not self-enforcing, and OMB is a watchdog in constant danger of becoming a rubber stamp because the OMB Director and the agency heads are all appointed by the same President

and work for the same administration.

A recent and highly effective checks and balances reform is

President Bush’s Executive Order 13272, proper consideration of

small entities in rulemaking. This EO enables the SBA’s Office of

Advocacy to play a wide-ranging role in rulemaking. Advocacy provides partial relief to the monopoly that each agency otherwise

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maintains over its rulemaking activity. Advocacy saves small businesses billions of dollars each year in avoided regulatory costs.

Now, I am pleased to say that all the bills that the subcommittee

is considering today aim to build Congress’ capacity to check and

balance regulatory agencies. I think that is the right goal.

Also worthy of consideration is a modest proposal by former

OIRA economist Richard Belzer. The aim of this initiative is to

open the market for regulatory analysis. Various statutes and Executive orders create a huge demand or market for regulatory analysis, but it is a market in which agencies face little competition.

The public is free to submit alternative cost-benefit analyses, but

the agencies ultimately decide which estimates are best.

In effect, the agencies have the final say in grading their own

work. They monopolize the scoring of their own regulatory proposals. But the agencies have no monopoly on regulatory expertise. Industry, the non-profit sector, State and local governments employ

hundreds, perhaps thousands, of professionals trained in economic

and scientific analysis.

To open the marketplace, Congress should require OMB each

year to hold contests to pick the best analyses of specific major

rules. OMB would be forbidden to split the difference between estimates or combine elements of different analyses. In each contest,

OMB would have to pick one winner and explain the reasons to

Congress for its choice.

What would this accomplish? Agencies would come under strong

pressure to produce credible analyses to have at least a realistic

chance of winning. An agencies’ analysis would, at a minimum,

have to conform to OMB’s best practices guidelines and information

quality guidelines.

Now some might object that making OMB the judge would give

undue influence to the President or his appointees. I think that is

a reasonable concern, but it is also easily addressed. If for whatever reason, you do not have sufficient trust in OMB’s judgment,

Rick Belzer remarks, ask GAO to evaluate the same information

and reach its own conclusions. Even OMB can benefit from some

competition.

Again, thank you for the opportunity to testify. I would be happy

to answer any questions.

[The prepared statement of Mr. Lewis follows:]

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Ms. MILLER. Thank you very much.

Our final witness this morning is Erik Olson. Mr. Olson is a senior attorney at the Natural Resources Defense Council, which he

joined in 1991. His specialty is public health issues, including

drinking water, pesticides, toxics, and food safety. From 1984 to

1986, Mr. Olson served in the Office of General Counsel for the

EPA. He received his law degree from the University of Virginia,

his undergraduate degree in environmental biology and management from Columbia College at Columbia University.

Mr. Olson, we certainly appreciate your coming. We look forward

to your testimony.

STATEMENT OF ERIK OLSON

Mr. OLSON. Thank you for inviting me. I appreciate the opportunity to testify.

I wanted to back up just for a second and talk about the goals

of all the legislation that is pending before the subcommittee. I

think the two major goals are accountability and urging more effective, more beneficial regulation. I do not think anyone can disagree

with that. The issue is how do we achieve that.

We have to keep in mind, first of all, that the Chief Executive

is also elected, just as Members of Congress are, and ultimately the

Chief Executive is responsible and accountable for regulations

adopted by his or, someday, her administration. In addition, on the

issue of whether we are ensuring more beneficial and more costeffective rules, our concern with the legislation that is pending is

a fewfold. One is that we feel that it is often duplicative of existing

statutes that could be better implemented, and is fairly costly and

burdensome to implement.

Second, we have heard repeatedly this morning discussion of

what the costs are of all these regulations. I have not heard a single witness speak about the benefits of the regulations.

I just wanted to quote one of my favorite people, John Graham

at OMB. His recent report to Congress, the 2005 Draft Report,

found that the aggregate benefits of Federal regulation are $12 billion to $108 billion in the most recent timeframe he looked at,

whereas the costs were $3.8 to $4.1 billion. So the benefits are far

higher than the costs. What we need to do is be talking not just

about how much it costs business, but how the American people

benefit.

In addition, many of these pieces of legislation, as our written

testimony lays out, raise substantial Constitutional issues in our

view. For example, there are substantial ‘‘separation of powers’’

issues if the Chief Executive can no longer execute laws by promulgating rules without Congress ratifying them; there are issues of

bicameral powers being removed by a joint committee that has

been proposed; and also due process issues if we remove all judicial

review of Federal regulations, which some of the legislation pending would do. These are very powerful tools that are being proposed

and subject to abuse we are afraid. We are concerned that the cure

may be worse than the disease.

Now, let us talk about the assumption that I think is underlying

this, which is that regulations are impairing our competitiveness.

This subcommittee held an earlier hearing where Professor Sid

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Shapiro from Wake Forest testified that there are numerous academic studies by independent academics that demonstrate that regulations are not the cause of competitive problems, that less than

1 percent of the cost of manufacturing is regulation.

And I do not think any of the sponsors of this kind of legislation

is suggesting that we want to relax our regulations to the point

where we have the same rules as our competitors. Do we want Chinese labor policies or Chinese environmental policies? I do not

think that is what we are aiming for. We have to look at the health

benefits, the safety benefits, the environmental benefits of these

rules.

Now specifically with respect to some of the legislation.

H.R. 931, the Hayworth bill, we are concerned that it basically

rests on some questionable Constitutional theories and also is duplicative of what the Congressional Review Act would authorize. If

Congress really has problems with specific rules, there is already

something in place. Thirty-seven times a Member of Congress has

proposed a resolution of disapproval.

So clearly, there is an opportunity to do that. What this legislation does is it would force Congress to review over 4,000 regulations with up to 1 hour of debate for each rule. This we fear would

shut down Congress as well as shut down the Federal executive

branch.

We think it raises substantial Constitutional issues. Again, Article 2, Section 3 of the Constitution says it is the President’s responsibility to faithfully execute the laws. Congress passes the laws, the

President executes them. If the President has no authority to execute the laws, we think there are Constitutional issues. And also

questions of judicial powers under Article 3, because the courts are

supposed to adjudicate whether laws and regulations are appropriate and Constitutional. The legislation we think would remove

that authority.

Other issues with the other legislation are laid out in our written

statement. And I would be glad to answer questions about them.

Thank you.

[The prepared statement of Mr. Olson follows:]

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Ms. MILLER. Thank you all very much.

It is interesting to listen to your various recommendations here.

Mr. Lewis is saying that more congressional oversight is the short

answer to the question, and Mr. Olson mentioning H.R. 931, J.D.

Hayworth’s bill, which I think is a very interesting bill, but if you

think about 4,000 regulations a year, perhaps we do not have the

time to review every one of them but perhaps it could be fine tuned

with some specific criteria or something.

I guess my question is, I will just throw this out generally to the

panelists, how can we actually achieve the proper balance as Members of Congress for congressional oversight, that we do have the

proper oversight initiatives here at the same time that we are not

wanting to tie the agencies’ hands completely as well?

Mr. LEWIS. There are a variety of ways of streamlining or limiting congressional review, even under Representative Hayworth’s

proposal. It was mentioned earlier that there are something like

135 economically significant rules under various stages of development in the most recent unified agenda of the Federal Government.

I do not know exactly how many of those are completed regulatory actions, but I do know how many were completed actions in

the 2003 edition when there were 127 economically significant

rules at the pre-rule, proposed rule, final rule completed, and longterm stages. That was 22. So we are talking about two dozen economically significant rules a year probably that are finalized and

go into effect that year.

I think it is unquestionable that Congress could find the time to

review and actually vote on two dozen, maybe even three dozen

economically significant rules, especially when you consider how

much time is devoted to matters of lesser importance, as Congressman Lynch and others have pointed out.

I also think that even though I am not quite clear about all the

details of Congressman Ney’s proposal, that the basic idea is entirely sound. Everybody knows who works here certainly, but even

people who do not, who have just taken college political science,

that the work of Congress is done by committees. And, so if something is really important and is to get done by Congress, it has to

have an institutional basis in a committee structure, in a committee system.

And we also know when you have a committee, then you have

professional staff and they develop institutional memories, and for

these staff to justify their existence that committee really has to

take action. And so it is not surprising that only 37 resolutions of

disapproval have been introduced. As Congressman Lynch said, if

it is everybody’s responsibility, it is nobody’s.

But if you give a specific committee an assignment to monitor

rules for the purpose of developing resolutions of disapproval, I

think we will find that we get a lot more than 37 over time.

Mr. COPELAND. One thought. This balance is a tricky thing trying to determine what controls need to be placed on regulatory

agencies without hindering them so much that they cannot really

act. But I do not think hardly anyone would expect agencies to put

out rules without issuing some clear guidance as to how they are

supposed to be implemented.

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And Section 212 of the Small Business Regulatory Enforcement

Fairness Act, which required compliance guides but allowed agencies to opt out of that process whenever they determined that the

rules do not have a ‘‘significant impact on small entities,’’ points

out the problem or part of the problem, in that if an agency has

that much discretion, then it is basically up to them to decide what

they get to do or what they have to do.

There is currently a bill before the House, Congressman

Manzullo’s bill, that would require the SBA Office of Advocacy to

define that term or at least come up with rules to define that term.

That would at least set some parameters so that if it is more than

a certain amount, 1,000 small businesses affected to the tune of

$5,000 apiece, above that is automatically going to be considered a

significant economic impact on a substantial number. So there

needs to be some clarity with regard to that, and there are opportunities legislatively to do that.

On the Senate side, Senator Snow has a bill that would require

agencies when they issue a compliance guide to issue it contemporaneous at least with the effective date of the rule. So that you

cannot have instances where compliance guides are issued years

after rules have already taken effect. That, to me, makes some

sense. So there are some tweaks to the existing reforms that can

also be made.

Mr. OLSON. I would like to just add one point, which is, two of

the bills that we have been talking about that create this joint committee, I do have concerns both about the impact of that on committee jurisdiction, the Energy and Commerce and other committees, what the implications of that would be.

It would seem that where you have committee staff and Members

that already have developed expertise, the idea of sending these to

the committee of jurisdiction makes a lot more sense. We have concerns that if it is difficult for the committee of jurisdiction to develop the expertise to review a rule, how can one committee review

all the regulations of all the agencies. I think it becomes very difficult. So, perhaps some solution is to involve the committees of jurisdiction in making those determinations.

I think also the committee that has been proposed has a 7–5 majority-minority split, which is unlike the Ohio one as I understand

it. In addition, there are issues about bicameral authority. For example, a majority of Senators could force something to be done in

the House through a vote of this joint committee, which I think

raises substantial Constitutional questions.

Mr. MIHM. What you are hearing, ma’am, I think is that there

is a series of initiatives Congress could take that basically fall out

along a continuum; at one end, some of the legislative proposals

that you have heard this morning, which obviously will need some

debate and careful consideration, but at the other end there are

some issues or some steps that Congress could take relatively

quickly, and I do not want to go too far and imply that they would

be without debate or smooth sailing, but where there is a greater

degree of consensus on many of the issues, a couple of things that

Curtis mentioned.

In addition, we had a forum at GAO several months ago in which

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form issues looking at the unfunded mandates. One of the key

issues that came out of that was just the opportunities for better

definitions and better clarity about what we are looking for and

what would be an unfunded mandate and not an unfunded mandate.

Again, it is not at the end of the day as though everyone agreed

on everything, but there was a general consensus of we can get

people together, we can continue the conversation, we might be

able to make some real substantive steps. And so my point is, there

is a whole series of very important but still smaller baby steps that

Congress could take before you have to grapple with some of the

more difficult issues.

Ms. MILLER. All right. Thank you very much.

Representative Lynch.

Mr. LYNCH. Thank you, Madam Chair. I want to thank you each

for participating and for your help. I have been reading a lot of

your stuff recently, especially of Mr. Copeland. Very, very helpful.

It has been very educational on my part; I am a new member of

this committee.

There are 1,000 ways that we could go here. But Mr. Mihm, you

described this continuum where we can actually be more specific

with our legislation, to begin with, which would provide more specific guidance to agencies so they would not wander afield. And

then we have a couple of opportunities I think during the proposed

draft public comment process, and then again in the final rule draft

we have another opportunity. Then the Congressional Review Act

gives us an opportunity for this resolution of disapproval, if you

will, which is cumbersome and it is not anybody’s central job to review it. But in back of all that, the assessment that we are making

of each of these regulations, good or bad.

Mr. Lewis, maybe you could speak to Mr. Olson’s point about

how we fall into a pattern of talking about regulations solely as a

burden. I am an ironworker, spent 20 years in the business. We

have regulations now that were not in place when I was ironworking, where they actually have nets so people do not fall to their

deaths.

When I was ironworking, we had the dubious distinction of having more people killed and injured on the job than any other industry in the United States. We were in this bizarre, macabre competition with coal miners who would die years later of black lung or

collectively in cave-ins back in the day; ironworkers died one at a

time, but continually.

And then they came up with regulations that required safety

belts, hard hats, nets that have a cost. They have a cost. But if you

look at the productivity of ironworkers, it has gone straight up

since I left. Hopefully, there is no cause and effect of that. [Laughter.]

But there is a benefit to some of this regulation. And so to just

sweep it all aside, as Mr. Olson has articulated, I think is wrong

and ignores the benefit that we gain from some of these regulations.

And I was fascinated by your proposal, Mr. Lewis, to open up

competition to this analyses that we have going on, there is a certain monopoly there among OMB and GAO, whatever, and to open

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that up. Now we open that up, but we also have industry out there,

people that want to tell us that smoking is actually good for you,

you know, the tobacco industry and all that, but you do have industries out there that would want to sell you a bad bill of goods, and

they would sponsor research. Maybe we ought to take a look at

that in a separate hearing at some point.

But what would be part of that analysis? Would we invite this

competition and have people try to quantify the costs and benefits

of the regulation in a real way, in a meaningful way? Because we

are sort of hung up on that.

Mr. LEWIS. Yes, I quite agree with you that regulations have

benefits, and included among those is saving lives. Sometimes regulations have unintended consequences, and they actually increase

fatalities and casualties. Fuel economy standards, for example, of

automobiles has resulted in the downsizing of cars, and NHTSA in

several studies has determined that, yes, that contributes to highway fatalities.

But of course, the purpose of health and safety regulation is to

make people healthier and safer, and the purpose of environmental

regulation is to make the environment cleaner, and I am in no way

disputing that.

The competition proposal that I was discussing would be one in

which people would be able to submit their own cost and benefit

estimates and have it go toe-to-toe with an agency’s estimate. It

would not be quite a level playing field because in this particular

formulation of this proposal, and there might be other ideas, like

putting it in front of a Blue Ribbon panel or something, it would

be OMB that would be one of the judges, at least.

I think it would be great to have GAO also judging and making

its own independent determination of who the winner is, but OMB

definitely I think has a bias in favor of the agencies that are all

part of the same administrative team. But, see, you could also do

this with independent agency rulemakings, and maybe OMB would

be a little bit more impartial there.

The idea would be to allow really a public debate and conversation on an agency analysis that would be excited by a contest.

There is nothing, as some people have said, there is nothing like

a good brawl to draw a crowd. And why is it Americans love

sports? Why is it that so many millions of people watch football?

Because Americans love contests and contests bring out the best in

people.

Mr. LYNCH. If I may interject, though. Using that same analogy,

it is the George Steinbrenners who have the most money that buy

the best players that win. And I am just concerned that the greatest incentive would be to industry—the coal industry, the automobile industry, the tobacco industry—to weigh in against GAO or

OMB, and so the public, you know, Joe Schmoe and Mary Schmoe,

who do not have an advocate on their side, their interest is subverted or ignored completely.

Mr. LEWIS. Well I think they are lost in the shuffle today. I think

the difference here is that you would have State and local governments weighing in, they also have their regulatory experts, and you

would have small business associations weighing in. It would be a

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public contest and OMB would finally have to judge whose analysis

is best.

See, right now, Mr. Olson cited John Graham’s testimony to the

effect that the benefits swamp the costs. But if you read the fine

print in OMB’s 2005 Draft Report, and in fact all of their reports

under the Regulatory Right to Know Act going back over the years,

they do not do anything like an audit of the agencies’ estimates,

they just compile them. And so what they are taking is the agencies’ estimates, which, let us face it, have to be to some extent selfserving because a cost-benefit analysis is a justification for actions

the agency wants to take, and they just aggregate them.

So here, you know, you would actually get OMB not just reporting what the agency said were the cost and benefits of a rule, but

OMB having to pick that estimate versus the estimates that could

be submitted by a small business group, by a State government

regulatory expert, or an association of State governments. I just

think that this kind of more open marketplace for regulatory analysis—and we would not be requiring the agency to accept the costbenefit analysis of anyone else.

We are just saying let us have your expert and the other fellow’s

expert present your material and have judges decide. That in itself

would generate a tremendous amount of oversight and interest on

the part of Congress and the public and I think it could just have

a healthy result overall.

Mr. LYNCH. Interesting. I do not know if anybody else wants

to——

Mr. MIHM. Mr. Lynch, since GAO was mentioned in this context,

I would add just a couple of seconds on this, not so much on the

broad merits of what has been discussed. But our longstanding belief and Congress’ belief as well has been that the appropriate role

for GAO is not to be an independent judge in these types of situations, but rather this would be an executive function to be judging,

to the extent you wanted to go down that road, among competing

cost-benefit analyses.

The more appropriate role, if Congress would want GAO to do

that, would be then to kind of weigh in on the merits of the debate

after it took place rather than to be an active party in that debate.

It also would have a series of resource implications that, depending

on if you want to advance this, that we would like to engage in

that discussion with you as well.

Mr. OLSON. Could I just add briefly. It is important to keep in

mind that, according to a CBO review, just doing one of these costbenefit analyses costs on average about $570,000 and can cost several million. I mean, Joe Schmoe and Mary Schmoe are not going

to pay that kind of money to run one of these things.

So I think one of these competitions that has been suggested

would end up being just completely disproportionate, that the industry that is well-funded would come in with a higher rack of

economists, attack the agency—which they already do, there already is an opportunity for them to comment—and try to shoot

down the agency and bog it down.

The other point I would make is that OMB absolutely does do reviews of the agency’s regulatory impact analyses and often comments on them and says that they are no good and go back to the

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drawing board. So, it is not quite accurate to say there is no OMB

review of these RIAs.

And finally, I think one idea, the TIRA, the Truth in Regulating

Act, that already is law, that theoretically is a pilot—it sort of reminds me, my son just got his learner’s permit to start driving

and——

Mr. LYNCH. My condolences. [Laughter.]

Mr. OLSON. It is like giving him the keys to a Mazaratti or something and just saying go ahead and drive. We have not test piloted

this thing yet. It has never been funded. Why not sort of see

whether this pilot program starts working, start looking at whether

a pilot can work before we start throwing this out into a full-blown,

full-time kind of an approach.

Mr. LEWIS. Could I comment?

Ms. MILLER. Mr. Lewis.

Mr. LEWIS. I think that Congresswoman Kelly’s proposal is exceedingly moderate, you could describe it as tame. And I understand why she is proposing something so tame. It is because she

did not get very far with something more ambitious. Nonetheless,

I think it is useful to lay out the ultimate goal here, and I think

the ultimate objective is to have a counterpart to the Congressional

Budget Office. Congress would be at the mercy of the White House,

OMB, and the executive branch if you did not have CBO to do its

own assessment of taxes and spending. Regulation is, if not equal

in size in terms of the overall cost on the American economy or

benefit of spending programs, it is certainly quite substantial. It is

a gigantic part of the overall activity of government.

I see no reason why Congress should not have its own independent institution dedicated to regulatory affairs, just the way it does

to budget affairs. And that, I think, would make it a lot easier for

you folks to do all kinds of oversight. And that would also, it seems

to me, be the proper institution for providing an alternative judgment to OMB’s judgment as to whose cost-benefit estimate is best.

Ms. MILLER. Do you have any other questions?

Mr. LYNCH. No. Mr. Copeland, I did not know if you wanted to

comment.

Mr. COPELAND. I think it is an interesting concept, the layout in

terms of competing economic analyses. I would point out that GAO

has weighed in on agencies’ economic analyses in the past; I have

been part of a few of those efforts. And what those typically look

at is, are the underlying data appropriate, are they sound, are the

assumptions that the agencies are making in the absence of data

sound, and have they considered all the available alternatives?

Those are reasonable questions that can be asked.

And we did in the context of the TRI lead rule that I mentioned

a while ago, where we found that EPA in their economic analysis

said that the rule would affect 60 different SIC codes, they only

had data on 30, so they left the other 30 completely away. And we

said even making some modest assumptions about how many small

businesses would be affected there, the number of small businesses

could be much larger than what EPA had estimated. But on the

other hand, we said EPA has the complete right to certify under

the Regulatory Flexibility Act to saying that the rule would not

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have a significant economic impact because Congress has never defined that term.

Mr. LYNCH. All right. Fair enough. Thank you, Madam Chair.

Ms. MILLER. Thank you. Again, we want to thank all the witnesses. Your testimony was certainly fascinating, particularly as

you were talking about some of the various approaches to the costbenefit analysis of these regulatory kinds of things.

I think it was last week, at our last hearing at any rate, we

picked one particular issue to look at, something that OSHA is

looking at right now and promulgating a rule for, and this is

hexavalent chromium. And it was interesting. They are going from

a standard that we have had for quite a few decades I suppose of

50 milligrams per billion, I suppose that is the way they measure

it, down to 1. We looked at all of our various foreign competitors

and what their standards were, etc.

But the cost-benefit analysis by OSHA was I think $200 million,

and the industry’s was billions and billions and billions. So it is a

balancing act I think for Members of Congress just to try to understand it and try to do our very best job here.

But we certainly appreciate all of your time. You are gracious to

come here and give of your time and your testimony as well. We

appreciate that very much. Thank you.

With that, we will adjourn the meeting.

[Whereupon, at 12:20 p.m., the committee was adjourned.]

[Additional information submitted for the hearing record follows:]

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