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88–291 2014

S. HRG. 113–325 

THE FIRST STEP TO CUTTING RED TAPE: BETTER 

ANALYSIS 

HEARING 

BEFORE THE

JOINT ECONOMIC COMMITTEE 

CONGRESS OF THE UNITED STATES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

APRIL 30, 2014 

Printed for the use of the Joint Economic Committee 

( 
(II) 

JOINT ECONOMIC COMMITTEE 

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress] 

HOUSE OF REPRESENTATIVES 

KEVIN BRADY, Texas, Chairman 

JOHN CAMPBELL, California 

SEAN P. DUFFY, Wisconsin 

JUSTIN AMASH, Michigan 

ERIK PAULSEN, Minnesota 

RICHARD L. HANNA, New York 

CAROLYN B. MALONEY, New York 

LORETTA SANCHEZ, California 

ELIJAH E. CUMMINGS, Maryland 

JOHN DELANEY, Maryland 

SENATE 

AMY KLOBUCHAR, Minnesota, Vice Chair 

ROBERT P. CASEY, JR., Pennsylvania 

BERNARD SANDERS, Vermont 

CHRISTOPHER MURPHY, Connecticut 

MARTIN HEINRICH, New Mexico 

MARK L. PRYOR, Arkansas 

DAN COATS, Indiana 

MIKE LEE, Utah 

ROGER F. WICKER, Mississippi 

PAT TOOMEY, Pennsylvania 

ROBERT P. O’QUINN, Executive Director 

NILES GODES, Democratic Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS OF MEMBERS

Hon. Kevin Brady, Chairman, a U.S. Representative from Texas ...................... 1 

Hon. Amy Klobuchar, Vice Chair, a U.S. Senator from Minnesota ..................... 3 

WITNESSES

Mr. Jay Timmons, President and Chief Executive Officer, National Association of Manufacturers, Washington, DC ............................................................ 7 

Dr. Michael Greenstone, 3M Professor of the Environmental Economics, Massachusetts Institute of Technology, Cambridge, MA ......................................... 9 

Dr. John D. Graham, Dean, School of Public and Environmental Affairs, 

Indiana University, Bloomington, IN ................................................................. 11 

Mr. Shaye Mandle, Executive Vice President and Chief Operating Officer, 

LifeScience Alley, St. Louis Park, MN ............................................................... 13 

SUBMISSIONS FOR THE RECORD

Prepared statement of Hon. Kevin Brady ............................................................. 28 

Report titled ‘‘The Need for Economic Analysis in Federal Regulation’’ ..... 30 

Prepared statement of Mr. Jay Timmons .............................................................. 71 

Prepared statement of Dr. Michael Greenstone .................................................... 83 

Prepared statement of Dr. John D. Graham ......................................................... 87 

Prepared statement of Mr. Shaye Mandle ............................................................. 101 

(1) 

THE FIRST STEP TO CUTTING RED TAPE: 

BETTER ANALYSIS 

WEDNESDAY, APRIL 30, 2014 

CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, DC. 

The committee met, pursuant to call, at 9:32 a.m. in Room 301 

of the Russell Senate Office Building, the Honorable Kevin Brady, 

Chairman, presiding. 

Representatives present: Brady of Texas, Paulsen, and Carolyn B. Maloney. 

Senators present: Klobuchar, Murphy, Coats, and Lee. 

Staff present: Corey Astill, Ted Boll, Gail Cohen, Jon Foltz, and 

Connie Foster, Niles Godes, Colleen Healy, Patrick Miller, and 

Robert O’Quinn. 

OPENING STATEMENT OF HON. KEVIN BRADY, CHAIRMAN, A 

U.S. REPRESENTATIVE FROM TEXAS 

Chairman Brady. Good morning, everyone. Welcome to the 

Joint Economic Committee hearing entitled The First Step Toward 

Reducing Red Tape: Better Analysis. 

Too often Congressional hearings are given titles that merely attract attention. But I believe the title for today’s Joint Economic 

Committee hearing accurately describes what our witnesses are 

here to talk about, and what we should take to heart—namely, that 

the first step toward reducing red tape and achieving our regulatory goals is better analysis. 

Every Member of Congress recognizes the economic justification 

and the Constitutional authority under the Commerce Clause in 

Article I, Section 8 of the U.S. Constitution for balanced Federal 

regulation to protect public health and safety, preserve our environment, and prevent fraud of all kinds. 

At the same time, many Members of Congress also recognize that 

Federal regulation has become overly burdensome and costly to job 

creators and the economy alike. Some regulations, regrettably, are 

even counterproductive. 

As the volume of Federal regulation has grown, regulation has 

done less to advance its stated goals and imposed ever more costs. 

These costs include slower economic growth, higher uncertainty 

that inhibits business investment and job creation, foregone product and process innovation, a lessening in the international competitiveness of American businesses, and stagnant incomes for 

hardworking American families. Unnecessarily burdensome regulation also aggravates our country’s long-term fiscal imbalance by in-
2 

hibiting the natural growth of Federal revenues under existing tax 

law. 

Consider the following facts: 

In 2013, the federal government issued 3,659 final rules contained on 26,417 pages, a record number in the Federal Register. 

Including proposed rules, the Federal Register finished last year 

with over 79,000 pages. 

Four of the five highest regulatory page counts have occurred 

during President Obama’s Administration, the all-time record being 

over 81,000 in 2010. 

Mr. Wayne Crews, the author of TEN THOUSAND COMMANDMENTS: AN ANNUAL SNAPSHOT OF THE FEDERAL REGULATORY STATE, estimates the overall annual cost of regulatory 

compliance to be $1.9 trillion, about equal to the economy of Australia, Canada, or Italy. 

Mr. Crews estimates that U.S. households face an annual hidden 

regulatory ‘‘tax’’ of nearly $15,000. 

In last year’s draft report to Congress on the benefits and the 

costs of Federal regulation, the Office of Management and Budget 

stated that Executive agencies and independent regulatory agencies promulgated a combined total of 68 major rules during 2012— 

each of which, as you know, have an impact of $100 million or 

more. Alarmingly, OMB presented a cost-benefit analysis for only 

14 of those 68 major rules. 

Looking longer term, during the decade ending in 2012, Federal 

agencies published over 37,000 final regulatory rules—with OMB 

presenting cost-benefit analysis for only 115 of them. That is 3/ 

10ths of 1 percent, meaning only 3 in every 1,000 regulations were 

subject to a complete analysis of their effects on the U.S. economy, 

job creators, and families. For a Nation seeking a smarter, more efficient government, that is just shameful. 

America’s regulatory system should be designed to achieve the 

greatest good at the least cost. Both Republicans and Democrats 

should be able to agree on that principle. 

Smart, effective regulations should seek to reduce rates of illness, 

mortality, and pollution—but not by reducing economic growth, job 

creation, and the incomes of hardworking Americans out of neglect 

or disregard. 

Safety and security must not come at the cost of stagnation, unemployment, and lower incomes that rob from the middle class. 

Yes, there will be tradeoffs, but too often our Federal regulatory 

system pursues singular objectives blind to the unintended consequences of its methods, and indeed often does not even focus on 

realizing the intended results. 

We need a better way, a 21st Century way to sift through regulations, both proposed and existing; transparently identify their true 

costs; and find the least costly, the least intrusive way to achieve 

the goals on which we all agree. 

We cannot do that without better analysis. 

My colleague, Senator Dan Coats, and I have introduced the 

Sound Regulation Act to improve the regulatory process through 

better analysis. The Sound Regulation Act would: 

First, expand accurate cost-benefit analysis to all Federal regulatory agencies—beyond the Executive Branch agencies to the inde-
3 

pendent ones as well—and close loopholes that allow some Federal 

agencies to skirt the requirement for objective economic analysis. 

It would end agency bias and establish more public transparency 

by requiring agencies to clearly identify the nature and significance 

of the market failure or other problem that necessitates regulatory 

action; establish an achievable objective for the regulatory action; 

and publish for public comment in advance the method and process 

for objectively weighing the costs and benefits of the proposed regulation. 

It would encourage more innovative solutions by requiring the 

development and evaluation of the costs and benefits of at least 

three regulatory options ranked by cost from lowest to highest. 

And, justify the—require justifying the choice of any option that 

is not the least cost method of achieving the objective. 

Finally, it would require reviewing existing regulations on a 

timely basis to determine the success and costs of the regulation 

in the real world. 

The Sound Regulation Act would not dictate solutions or how to 

achieve them. Instead, it would provide a better framework for 

rulemaking by Federal regulators so that regulations work more effectively and at least cost to the American economy. I believe that 

all Members of Congress in both chambers and both parties can ascribe to this goal. 

We have many ideas on how best to move forward on smart regulations. Senator Coats and I have one. There are others. That is the 

topic of the discussion today, and with that I look forward to the 

testimony of today’s witnesses. 

I would yield to the Vice Chair, Senator Klobuchar, for her opening remarks. 

[The prepared statement of Chairman Brady appears in the Submissions for the Record on page 28.] 

OPENING STATEMENT OF HON. AMY KLOBUCHAR, VICE 

CHAIR, A U.S. SENATOR FROM MINNESOTA 

Vice Chair Klobuchar. Well thank you very much, Mr. Chairman. I am pleased that the Committee is again looking at regulatory issues, and thank you for holding this hearing. 

Improving regulation is a big issue in our country. It is important to business. It is also important to consumers. 

I would like to thank the witnesses on our panel. Some of you 

are making return visits. Mr. Mandle, of course, is just going to become the new President and Chief Executive Officer of LifeScience 

Alley, which specializes in medical device and technology. 

I knew, Mr. Chairman, you would like to see from Representative 

Paulsen and myself another medical device witness. 

[Laughter.] 

We also have with us Dr. Graham. Thank you, Dr. Greenstone, 

thank you, and also a special note to Jay Timmons, the head of the 

National Association of Manufacturers. Thank you so much for 

your leadership. I truly enjoyed recently addressing the Women in 

Manufacturing, which are growing daily, and thank you for your 

work. 

Dr. Greenstone, last summer you pointed out in a hearing that 

cost-benefit analysis of proposed regulations are done only before 
4 

the regulations are enacted, when we least know what their impact 

will be. And I took your words to action, and Senator Susan Collins, Republican of Maine, and I introduced bipartisan legislation 

requiring a look-back to assess whether the regulation is actually 

meeting its goals. And I want to thank you for your testimony. We 

actually came out with that idea. And I also thank NAM and others for endorsing our bill. 

Our legislation requires the Congressional Budget Office to conduct a cost-benefit analysis of an economically significant Federal 

rule or regulation after it has been in effect. This would provide important information on which regulations are working, and I think 

would be a good step toward reducing red tape. 

Of course there’s more to be done. This is especially important 

to me. As I pointed out in our last hearing, I spent 13 years representing companies in regulatory areas. Americans expect a common sense approach to regulation. They want to have their water, 

and air, and their safety protected, but they also do not want to 

stifle innovation and economic growth. And we need to protect consumers with clarity and consistency, and not endless red tape. 

Medical devices are of course one example. Our State has a long 

history of leadership in this area of manufacturing and, Mr. 

Mandle, I am eager to hear your views on the opportunities and 

challenges facing the medical device industry. 

As head of LifeScience Alley, you represent hundreds of organizations that employ nearly a quarter of a million people in my State 

alone. The U.S. is the largest net exporter of medical devices in the 

world, enjoying a trade surplus of $6 billion a year. Yet we have 

seen a decline in venture capital funding, partially due to delays 

in the approval process. 

According to one study, venture capital investment in the medical device industry fell 17 percent in 2013. It is critical we prevent 

regulatory burdens from interfering with the delivery of life-saving 

products. 

That is why in 2012 we passed the FDA Safety and Innovation 

Act. There are some very good ideas that many of us, including 

Senator Coats and Representative Paulsen, worked on, the leastburdensome principles, which has been ignored by FDA reviewers. 

It improved conflict-of-interest provisions, making it easier for the 

FDA to recruit top-line experts. And, from what we have heard, 

there has been some improvement. 

I know, hearing from the companies in our State, that while 

there are still issues that the FDA has made some significant improvements in getting these approvals done. And I am hoping the 

future looks bright for medical devices. 

Tourism is another example. Senator Blunt and I have taken on 

this issue and done a lot without legislation. We have worked with 

the State Department to reduce wait lines, making it easier for 

tourists to visit the U.S. 

When they come here, they spend an average of $4,000. The Visa 

process itself is a profit-making center for our government because 

when they apply for a Visa, just doing that, we make money. But 

imagine how much money we make when they actually come to 

visit our country. 
5 

Yet, in some countries they were waiting, like in Brazil, 100 

days, and we were losing business to other countries. If they could 

go to Great Britain in 3 days, that is where they would go. And 

so we have greatly improved that, and we were able to get an increase in tourism-related goods and services of 9 percent over 2012, 

and reduced wait lines significantly in Brazil and in China. 

We also, along with Representative Joe Walsh, streamlined the 

process for crossing the U.S.-Canada Border, something we care a 

lot about in our State. 

Exports is another great example, trying to reform the Export 

Control List. As we look at some decreased defense spending, looking at how we keep these companies strong by not just relying on 

old lists that, you know, basically make it hard to literally export 

nuts and bolts. And we have to do everything we can to make that 

easier. 

And the last thing I would mention is just one example of this 

regulatory reform is agriculture. We have seen a number of rules 

from the EPA that have come out and then been rejected, whether 

it’s protecting farmers from regulations that require milk spills to 

be treated like oil spills, or burdensome dust regulations. We can 

be smarter about how we regulate farming in rural America. 

I was pleased that the recent farm bill included something that 

Senator Lugar, when he was still with us, he and I had introduced 

a bill on the EPA to make sure that people with rural backgrounds 

were on the rulemaking authority that would suggest that they can 

bring a little of their expertise and farm backgrounds into the EPA. 

Mr. Chairman, thank you again for holding this important hearing. We have good attendance. As you know, I have two other hearings this morning, including one involving an important bill that 

I passed with Senator Cornyn where we have waited—are you 

ready for this, guys?—four years for the rules to come out involving 

allowing people to take back their prescription drugs. And I want 

to be at the hearing to ask the DEA why it is taking so long, and 

that is my good purpose for leaving early. And I appreciate your 

leadership in holding this hearing, and I will be turning this over 

to Representative Maloney. 

Chairman Brady. Thank you, Vice Chair, and good luck getting 

an answer. 

[Laughter.] 

I would like to—and I appreciate each of the Members being here 

today on this important topic. 

I would like to welcome our four witnesses this morning. I will 

be introducing three of them, and I will let my colleague, Senator 

Coats, introduce our witness from Indiana. 

Jay Timmons is President and CEO of the National Association 

of Manufacturers. Prior to his appointment as NAM president, Mr. 

Timmons was Executive Vice President and Senior Vice President 

of Policy and Government Relations at NAM. His previous experience includes serving as Chief of Staff to Congressman, Governor, 

and Senator George Allen of Virginia from 1991 to 2002. He is a 

Buckeye, Ohio State University. 

Dr. Michael Greenstone is a 3M Professor of Environmental Economics in the Department of Economics at the Massachusetts Institute of Technology. He is a nonresident Senior Fellow at the Brook-
6 

ings Institution, a Research Associate at the National Bureau of 

Economic Research, and is on the MIT Energy Initiatives Energy 

Council. Dr. Greenstone previously served as the Chief Economist 

for President Obama’s Council of Economic Advisers, and as the Director of the Hamilton Project at the Brookings Institution. Dr. 

Greenstone received a Ph.D. in Economics from Princeton, and a 

B.A. in Economics with High Honors from Swarthmore College. 

Shaye Mandle serves as Executive Vice President and COO for 

LifeScience Alley. Previously Mr. Mandle served as Executive Director of the FedEx Institute of Technology at the University of 

Memphis. Mr. Mandle has served as chief executive to industry 

and economic development organizations, the East-West Corporate 

Corridor Association, and the Illinois Coalition; and he previously 

served on the policy staff of former U.S. House Speaker Dennis 

Hastert, and former Illinois Governor Jim Edgar. Mr. Mandle has 

a J.D. from Duquesne University Law School, and a B.A. from Illinois Wesleyan University. 

And I would turn to Senator Coats for the final introduction. 

Senator Coats. Well, Mr. Chairman, thank you very much, and 

Vice Chair Klobuchar, also. It has been a pleasure for me to work 

with both of you. Vice president—Vice—Chair—I’ve got you moved 

up to Vice President already. 

[Laughter.] 

Chairman Brady. Is there an announcement here? 

Senator Coats. This could make some news this morning, if you 

want to respond to that—— 

Vice Chair Klobuchar. We have had a number of them from 

our State. 

[Laughter.] 

Senator Coats. The Vice Chair and I have worked together on 

the medical device issues in the FDA, and am very pleased to work 

with Chairman Brady on the Sound Regulation Act, which as you 

said will require every Federal agency to engage in extensive costbenefit analysis to determine the actual cost in dollars of regulations under each agency’s jurisdiction. 

The negative effects of over-regulation are felt in industries 

throughout my home State, and I’m sure throughout the states 

being represented here by the panel. While many regulations of 

course are of worthy purpose, there are many that I think unnecessarily increase costs and slow productivity. 

The statistics are pretty compelling, particularly as it impacts on 

small business. The Small Business Administration found that 

complying with Federal regulations cost small businesses 36 percent more per employee than larger firms. In many cases, this cost 

amounts to the difference between a small business hiring or not 

hiring additional employees. 

And further, new financial regulations have imposed what Indiana bankers are telling me is an avalanche of new rules. Hoosier 

community banks and credit unions are spending as much as 70 

percent of their time and 10 percent of their net income on compliance reporting. 

Now it is one thing for CitiCorp, JPMorgan, and so forth, to hire 

a backroom of lawyers and technicians to deal with all these regulations. It’s another thing for the community banks, credit unions, 
7 

and smaller banks that had nothing to do with the financial crisis, 

yet they have to go outside and outsource or hire their own cadre 

of lawyers, accountants, and others who will have to fill out all this 

paperwork as if at the same level that the major banks do. 

So we need to have some distinction, I think. The numbers are 

eye-popping when you add them up. Regulators published $112 billion in net regulatory cost in 2013 alone. 

Now I am pleased to welcome and introduce Dr. John Graham. 

Jay, we couldn’t let Ohio State control the whole thing here. We 

had to get an Indiana counter balance here. Dr. Graham serves as 

Dean for the highly regarded School of Public and Environmental 

Affairs at the Indiana University. The school is ranked first among 

all state universities’ public affairs programs. In March 2001, 

President Bush nominated Dr. Graham to serve as Administrator 

of the Office of Information and Regulatory Affairs. He was confirmed by the Senate, oversaw the regulatory information and statistical activities of the federal government. 

Dr. Graham, while encouraging good regulations that save lives, 

prevent disease, and protect the environment, actually reduced the 

growth of regulatory costs by 70 percent during his tenure. 

After his time at OIRA, Dr. Graham was Dean of the Frederick 

Pardee-Rand Graduate School at the Rand Corporation in Santa 

Monica, California. And then later assumed the deanship of Indiana School of Public and Environmental Affairs. 

Dr. Graham, we appreciate your willingness to come and testify 

before us, as we do for all four of our witnesses, Mr. Chairman, and 

look forward to their testimony. 

Chairman Brady. Right. Thank you, Senator. 

Mr. Timmons, we will begin with you. As in most hearings, we 

have reserved five minutes for the opening statement so we will 

have an opportunity to explore the testimony further during questions. So you are recognized. 

STATEMENT OF MR. JAY TIMMONS, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, NATIONAL ASSOCIATION OF MANUFACTURERS, WASHINGTON, DC 

Mr. Timmons. Thank you, Mr. Chairman and Vice Chair 

Klobuchar—— 

Chairman Brady. Can you hit that microphone? 

Mr. Timmons. All right. Well thank you very much, Mr. Chairman, and Vice Chair Klobuchar, Members of the Committee: 

I really appreciate the opportunity to testify about the regulatory 

system that is facing manufacturers, and some of our ideas about 

improving the system. 

Now from the opening statements today, bipartisanship is clearly 

breaking out all over the place when it comes to regulation, and 

that is a very good thing. I have to say, Mr. Chairman and Madam 

Vice Chair, manufacturers really appreciate your efforts to find 

common ground on regulatory reform. 

The legislation you have each offered would go a long way toward adding balance and transparency to the regulatory process. 

And, importantly, your proposals represent ideas that both parties 

can support. 
8 

And as I said, bipartisan cooperation is the key. It is crucial to 

any successful reform effort, and frankly it has been lacking in previous reform efforts. The inability of Congress to advance reform 

measures has led presidents of both parties to exercise their executive authority. And, to his credit, President Obama has signed Executive Orders seeking to enhance regulatory review. As you know, 

President Bush undertook similar initiatives. So did President 

Clinton, and so did President Reagan. 

Yet, look at where we are today. The regulatory state is growing 

in size and it is growing in complexity. Now I happen to be optimistic that we can get something done. Whether you are on the 

left, the right, or somewhere in between we all want clean air. We 

all want clean water. And we want healthy communities for our 

families. 

So step one is changing the rhetoric. The conversation about regulation all too quickly turns partisan. But from the perspective of 

the business community, particularly manufacturers, our position 

on regulation is often mischaracterized. 

Manufacturers believe that regulation is critical to the protection 

of worker safety, to public health, and to our environment, and our 

record backs up that fact. We have supported regulations such as 

the enhanced corporate average fuel economy rules in 2009, and 

legislation such as the Food Safety Modernization Act of 2011 and 

its accompanying regulations. 

And indeed, some critical government objectives can only be 

achieved through regulation. But that does not mean that Congress 

or the Executive Branch should be off the hook. By simplifying regulations, reducing overlap—or even conflicting rules—and ensuring 

that regulations are based on good data, we can ease the burdens 

placed on manufacturers and other businesses alike. 

New regulations are often poorly designed, poorly analyzed, and 

inefficient. Many times they are unnecessarily complex and duplicative. Their critical inputs—scientific and other technical data— 

are sometimes unreliable and fail to account for significant uncertainties. 

Regulations are allowed to accumulate with no real incentives to 

evaluate or clean up the past, and they too are often one-size-fitsall, without the needed sensitivity to their impact on small businesses. Frankly, we can do better. 

I constantly hear from members of the National Association of 

Manufacturers about the challenges they face in dealing with the 

regulatory system in our country. 

One small company, a die-caster, estimates that $1 out of every 

$5 of the company’s pretax profits is spent on complying with a dizzying array of new regulations. 

Another small manufacturer had an inspector at its facility, and 

that inspector told him that a fire extinguisher was affixed too low 

on the wall, making it difficult for employees to use. So the manufacturer corrected the problem, only to have another inspector come 

to his plant a few weeks later to inform them that the fire extinguisher was now too high and therefore it was in violation of the 

Americans with Disabilities Act. 

Yet another manufacturer told me that they spend upwards of 80 

percent—80 percent—of their R&D budget on regulatory compli-
9 

ance. It all boils down to a manufacturer’s ability to succeed in a 

highly competitive global economy. 

Today we see the nascent signs that manufacturing in America is making a comeback. We are now a $2 trillion sector of the economy, and that is larger than all but seven world economies. But 

imagine how much stronger this comeback could be if Washington 

removed impediments to growth; if manufacturers could focus on 

making better products and innovating instead of spending hours 

figuring out which rules that they must follow and then how to 

comply with those rules. 

Manufacturers are committed to common sense regulatory reforms that protect the health of our workers and the environment, 

as well as prioritize economic growth and jobs. 

We look forward to working with Congress in a bipartisan manner to make that a reality. Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Timmons appears in the Submissions for the Record on page 71.] 

Chairman Brady. Thank you, sir. 

Dr. Greenstone. 

STATEMENT OF DR. MICHAEL GREENSTONE, 3M PROFESSOR 

OF ENVIRONMENTAL ECONOMICS, MASSACHUSETTS INSTITUTE OF TECHNOLOGY, CAMBRIDGE, MA 

Dr. Greenstone. Thank you, Chairman Brady, Vice Chair 

Klobuchar, and Members of the Committee, for inviting me to 

speak today. 

The purpose of my testimony is to describe in concrete terms how 

we can improve our regulatory system, and to wholeheartedly offer 

my support for Senate Bill 1472, Strengthening Congressional 

Oversight of Regulatory Actions for Efficiency, that was introduced 

by Senator Klobuchar and is co-sponsored by Senator Collins and 

Senator King. 

American government at every level regulates a broad array of 

social and economic life. Regulatory policy determines the air we 

breathe, the quality of the water we drink, the safety of our workplaces, the investments we make, and much more. 

Government regulates these activities because in cases of market 

failure, for example, our free market system does not create the 

necessary incentives for businesses and individuals to protect the 

public good. 

The challenge for regulators is to consistently set rules with benefits that exceed their costs, or otherwise achieve their statutory 

objectives. However, an important weakness in our regulatory system is that we generally do not have the information necessary to 

make these judgments over the long haul. 

This is because our evaluations are done before the regulations 

are enacted and are almost entirely based on regulations’ ‘‘likely’’ 

benefits and ‘‘likely’’ costs. Of course, this is the point when we 

know the absolute least, precisely because the regulations are untested. 

Once a regulation passes this ex ante bar, it generally goes on 

the books and can stay there unexamined for years. In practice, 

some regulations work out exactly as we intended them to do, and 

in some instances they do not. 
10 

For example, an air pollutant may prove to be more harmful 

than was originally understood, or innovation may lead to new and 

less expensive pollution-abatement technology. 

President Obama’s Executive Orders 13563 and 13610 spell out 

what I think are a potentially revolutionary step forward in regulatory policy. Specifically, they require that agencies routinely revisit the measurement of costs and benefits of existing regulations, 

and identify the least costly ways to achieve a regulation’s goals. 

In the remainder of my testimony I am going to identify two further changes that I think would increase the chances that our regulatory system consistently produces rules with benefits that exceed their costs. 

The first is to make three reforms that build on the President’s 

Executive Orders. First, I recommend institutionalizing the retrospective review of economically significant rules so that these reviews are automatic. Depending on the particulars of the rule, the 

review should be completed within a prespecified period—say 5 to 

10 years. 

In addition, the relevant agency would be required to prespecify 

the expected benefits, as well as the expected costs—so that the 

terms of the subsequent review would be known in advance, which 

I think bears some similarity to your bill, Mr. Chairman. 

Second, the relevant agencies should commit to undertaking a 

new rulemaking when the results from the retrospective analysis 

differ from the benefits and costs that were expected prior to the 

rule’s implementation. The new rulemaking should also operate 

under a time limit. 

And third, these efforts would be strengthened if they were accompanied by triggers to ensure that they are undertaken within 

the prescribed time period. One approach would be for agencies to 

post on their websites the deadline for a rule’s review and reconsideration. A stronger approach would be to enable the judiciary to 

compel reviews and new rulemakings in cases where an agency has 

failed to comply with a review timeline, or to act upon its results. 

There are some difficulties with this approach I just outlined. 

Many agencies do not have the staff, expertise, or resources necessary to undertake these reviews. 

Further, the process of self-evaluation is quite difficult. I find it 

difficult in my own life. So my second recommendation is to establish a new, independent body for regulatory review. The nonpartisan Congressional Budget Office provides a very appealing 

model. 

As you know, before the CBO was established, only the President 

had a ready source of budgetary and economic data and analysis. 

The entire budget process has benefited from CBO’s existence and 

its independence. 

Budgetary analyses and proposals throughout Washington are 

now created to a higher standard knowing that they must ultimately face scrutiny by the nonpartisan CBO. 

I believe that Senator Klobuchar’s bill, Senate Bill 1472, which 

creates a regulatory analysis division in the nonpartisan CBO, is 

the best solution. The regulation analysis division would be 

charged with conducting independent regulatory impact evaluations. 
11 

Of course the creation of a regulatory analysis division within 

the CBO would require resources. My best estimate is that it would 

cost less than $10 to $15 million a year, and that that is very likely—it would very likely pay for itself 10, or 20, or 100 times over. 

To quickly summarize, I propose two key reforms. 

One, institutionalize a process by which agencies automatically 

undertake retrospective reviews of regulations, and initiate a new 

rulemaking when the results from the retrospective analysis differ 

from the expected benefits and costs. 

Two, create a regulatory analysis division within the Congressional Budget Office. We live in a rapidly changing economy and 

need a new regulatory review structure that evolves to meet the 

new and different needs of our society. 

The reforms that I have outlined here would give policymakers 

better tools for protecting those regulations with great benefits for 

our society, reforming those regulations that impose unnecessary 

costs, and culling those that no longer serve their purpose. 

That would be good for our well-being, and good for the American 

economy. Thank you once again for inviting me to participate in 

the discussion. 

[The prepared statement of Dr. Greenstone appears in the Submissions for the Record on page 83.] 

Chairman Brady. Thank you, Dr. Greenstone. 

Dr. Graham. 

STATEMENT OF DR. JOHN D. GRAHAM, DEAN, SCHOOL OF 

PUBLIC AND ENVIRONMENTAL AFFAIRS, INDIANA UNIVERSITY, BLOOMINGTON, IN 

Dr. Graham. Good morning, Mr. Chairman, Members of the 

Committee: 

The focus of my remarks will be on what Congress can do to 

bring smarter regulation from the Executive agencies. But before 

I go to those points, I want to underscore the importance that Congress itself needs a more evidenced and analytic approach to these 

issues. And I want to add my voice of support for expanding the 

Congressional Budget Office, as Dr. Greenstone indicated, to have 

regulatory analysis as a division that routinely introduces itself 

into the regulatory process. 

By way of comparison, I was in Brussels last week working on 

the effort for a Free Trade Agreement between Europe and the 

United States, and it turns out the European Parliament—which 

is often considered a primitive and developing legislative body; it 

has its own regulatory impact assessment unit now that checks the 

power of the European Commission. And I think for Congress, 

something like that at CBO would be quite sensible. 

Now moving to reforms at the agencies, the first point I would 

like to make is we need to remember that a lot of the burdens that 

occur for businesses and the private sector, and state and local governments, they occur before the regulation is proposed or adopted. 

There are quasi-regulatory determinations made early in the 

process—a technological hazard determination, a guidance document. The information quality that underpins these quasi-regulatory documents needs to be very strong if the ultimate rulemaking is going to be done. 
12 

I give examples in my written testimony of both the housing industry and the coal industry, where a lot of harm was done because 

of problems in these early quasi-regulatory documents. 

The second point is state and local regulation. You might say, oh, 

but we are here in Washington; we are talking about the federal 

government; we cannot solve all the world’s problems. In many 

cases, the federal government has the authority to preempt or to 

oversee state and local regulation and shape it in a specific direction. 

So for example we have in the automotive industry a regulation 

in California which is starting to be binding which requires manufacturers who do business in California to sell a zero-emission vehicle—practically speaking, an electric car in most cases—in California. Up to 15 percent of their fleets have to be ZEVs by 2025. These vehicles cost $10- to $20,000 more. And while there are 

savings in fuel costs, the cost-benefit analysis is pretty speculative 

on the advantages of this type of rule. 

It turns out the federal government already has incentives to promote electric cars. There’s a $7,500 Federal income tax credit 

for purchasers of electric cars. Manufacturers are allowed to count 

each electric car twice in their compliance for CAFE and carbon 

standards. 

You might say, well, aren’t there big environment advantages to 

having a mandate from California for electric cars? Well, it turns 

out manufacturers, because they have a national binding carbon 

constraint, if California forces more electric cars to be sold there 

that means the manufacturers will simply sell more higher-polluting vehicles in the non-California states. 

So it is a whole regulation that is actually not very well thought 

out. The federal government gave an official waiver to allow California to do this, and the federal government never did a cost-benefit analysis of that waiver decision. 

So we need to keep in mind that the state and local governments 

and the federal government needs to coordinate in a way that 

makes sense for regulatory policy. 

Point three, we need to look hard at regulation by litigation. The 

basic strategy here of a regulatory agency—and I was done in by 

this several times while I was an administrator—they get sued. 

They get into a negotiation. And then they agree, in a sense, to 

force certain regulations by a certain deadline. 

This prejudges all of the analytic and cost-benefit process that 

the Executive Orders put in place. So I think clearly we need some 

transparency in that process. We need some public comment process on whether there should be a settlement. And there needs to 

be some evidence-based analysis before agencies actually sign consent decrees that force mandatory rulemakings. 

The fourth point, we need more regulatory cooperation with our 

trading partners in Europe and Asia. And I applaud the Obama 

Administration for trying to get action moving in the direction of 

freer trade between Europe and the United States. 

Of course the signature examples of this that we complain about, 

with justification, are in agriculture where genetically modified 

seeds are still not available throughout most of Europe. But we 

have a lot of problems in our own regulations. 
13 

Our automotive safety regulations, and our automobile tailpipe 

emission standards are not aligned with the European standards, 

so manufacturers have to separately design and test their vehicle 

in Europe and the United States. 

I think Congress should be pushing the agencies to find a way 

to find common ground, or at least mutual recognition that European cars are clean and safe enough to be imported here, and ours 

are clean and safe enough to be put into Europe. So we have a lot 

of work to do there in terms of making that progress. 

I hope these points are constructive and point the direction for 

some stronger, better regulation initiatives, and I look forward to 

the comments and questions. 

[The prepared statement of Dr. Graham appears in the Submissions for the Record on page 87.] 

Chairman Brady. Thank you, Dr. Graham. Mr. Mandle. 

STATEMENT OF MR. SHAYE MANDLE, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER, LifeSCIENCE ALLEY, 

ST. LOUIS PARK, MN 

Mr. Mandle. Chairman Brady, Vice Chair Klobuchar, Members 

of the Committee, thank you for the opportunity to be here this 

morning. 

My name is Shaye Mandle and tomorrow I will take over as 

President and CEO of LifeScience Alley, the Nation’s largest regional life science association. 

This year we celebrate our 30th anniversary of leading Minnesota’s medial alley, the most densely concentrated medical technology cluster in the world, and home to some of history’s greatest 

therapeutic and health care innovations. Our members include: 

3M, Medtronic, Boston Scientific, St. Jude Medical, Covidien, Endo/ 

AMS, Mayo Clinic, and hundreds of small companies that will 

bring new innovation to the health care marketplace. 

I personally would like to thank Senator Klobuchar as well as 

Congressman Paulsen for their leadership on behalf of patients and 

the companies that serve them, especially for those of us who call 

Minnesota home. 

Today this Committee is interested in taking the first step to cutting red tape through better analysis, and we agree that better 

analysis is needed, and that a regulatory environment that is 

smarter and more collaborative would serve patients and the U.S. 

health care system well. 

It is also important for broad-based analysis of the entire ecosystem, including tax and regulatory policy. It is critical for Congress to address repeal of the Medical Device Tax if we want to 

keep our jobs and competitive advantage, as well as providing a 

permanent fix to the FDA user fees and sequestration issue to ensure that FDA has access to the funds committed by industry. 

In 1957, Earl Bakken and Medtronic introduced the first batteryoperated external pacemaker. In 1976, the Federal Food, Drug and 

Cosmetics Act was amended to include the regulation of medical 

devices. At the beginning, innovation came from doctors and engineers working together to save lives. 
14 

For the first 25 years of medical technology innovation, there was 

no FDA oversight. So is it our position that medical devices 

shouldn’t be regulated? Quite the contrary. 

When medical devices were added to the FDA’s regulatory responsibility, something unique happened. An agency with no expertise in the field connected with the patients, doctors, and 

innovators to form a collaborative relationship. They taught each 

other. 

If you talk to anyone from industry or the FDA from those early 

years of regulation, they will amaze you with stories of working together to accomplish a shared goal: delivering the safest and most 

effective therapies in the world to the patients whose lives depended on them. 

Both the medical device industry and the FDA want the same 

outcome: safe and effective devices invented in the U.S. and available first in the U.S. 

For a couple of decades, this is exactly what we got. Over the 

past decade or so, this dynamic has changed and an adversarial relationship has emerged. 

As a result, patients outside of the U.S. frequently gain access 

to innovation and technology before American patients do. In fact, 

Eucomed claims that European patients get innovative technologies 

3 to 5 years earlier than the U.S. patient does. In fact, they even 

have a website called ‘‘Don’t Lose The 3’’ as in the 3 years of therapeutic advantage that European patients have over Americans. 

But things are improving. So passage of FDASIA in 2012 was a 

welcome update to our regulatory government, and MDUFA III 

should promote a more collaborative and effective pathway to approval. 

This legislation, if fully implemented as intended, will be a real 

benefit for patients, innovation, and our economy. The FDA is 

working hard to collaborate with industry and is focusing now on 

practical priorities, including: 

Improving efficiency in clinical trials; 

Balancing the premarket and post-market process; and 

Identifying ways to shorten the lag between product approval by 

the FDA and reimbursement approval by CMS and/or private payers. 

Dynamic public-private solutions are also happening. Since 2011, 

LifeScience Alley has been working closely with CDRH Director 

Jeff Shuren to find a solution that would re-engage the agency and 

industry in a conversation of collaboration and cooperation. 

As a result, we created the Medical Device Innovation Consortium, a public-private partnership that still has its roots in Minnesota but now includes a national consortium from industry and 

key members from government, including CMS and the NIH. 

Through the MDIC, we are working to identify opportunities for 

technical collaboration in the pre-competitive space where industry 

and the FDA can work together to share knowledge and improve 

the regulatory environment. 

Better analysis means constant improvement. As one of the few 

U.S. industries with a positive trade balance and an average wage 

of more than $70,000 annually, the medical device industry is a 

U.S. success story. 
15 

Regulation is vital. Smart regulation is even more vital. We look 

forward to working with the Committee to ensure that the U.S. 

regulatory environment represents the safest and smartest in the 

world. 

And I thank you for the opportunity to be here today. 

[The prepared statement of Mr. Mandle appears in the Submissions for the Record on page 101.] 

Chairman Brady. Thank you, Mr. Mandle. Congratulations on 

your new title. 

I thank the witnesses for your thoughts and insights today. A 

couple of thoughts. We had another disappointing GDP number 

today—some of it was weather-related; we hope it picks up next 

quarter—but it has been a disappointing recovery. We are all hopeful we can do better. 

Regulation I think has dragged, helped drag down the economic 

recovery. What I have noticed, I come from a Chamber of Commerce background, so you create a local business climate. You help 

start small businesses, help them survive tough times. You recruit 

new industry. You create a business climate for growth. 

There is always a natural tension between business and regulation. There should be a healthy tension. I have never seen it at the 

level we see today. It doesn’t matter what size businesses, or where 

they are, regulation, aside from the economy, is the number one 

concern facing them as they try to expand and in some cases survive. 

So today is about how we remove that drag on the economy and 

actually help our economy grow. A couple of questions. 

Does anyone on the panel object to expanding cost-benefit analysis to independent agencies like the SEC, the FCC, and the Fed, 

as it is now applied to the Executive agencies? Does anyone have 

a—think that is a bad idea? 

[No response.] 

Does everyone believe in closing loopholes so that no agencies or 

regulations are exempt from an objective cost-benefit analysis if 

they are a major rule? Does anyone object to that principle? 

[No response.] 

Third question. And this is the one I need your insight on. How 

do we end agency bias? How do we, or at least mitigate it, and realize the thought that agencies develop regulations and then are 

tasked with determining whether their benefits outweigh their 

costs? 

As you would imagine, the rare times it occurs, 3 out of every 

1,000 new Federal regulations have gone through this objective 

analysis, 3 out of 1,000, when that occurs, oftentimes the agency, 

as you would imagine, decides their own regulation is in fact a good 

one. Not surprising. 

So how do we create the transparency up front—and I think Dr. 

Graham you made the point that there are a number of quasi-regulatory decisions made early on that have a huge impact—how do 

we create transparency? How do we end agency bias? Is it requiring them to identify up front how they are going to measure this 

cost-benefit analysis? Invite public comments? So in an increasingly complex world some assume we have to have complex regulations; I assume we have to have more complex analysis up front. 
16 

So, Mr. Timmons, Let me start with you. Your ideas on how we 

mitigate or begin to address agency bias? 

Mr. Timmons. Well I think several of the proposals that the 

other panelists made here today are vital to that. Specifically with 

regard to agencies, you referenced when you introduced me that I 

had experience working for a governor, and states are—well, the 

states that really want to see economic growth and economic development—are very focused on the things that make them competitive. And the regulatory environment is clearly one of them. 

The governor that I worked for immediately seized the reins on 

the regulatory process through executive order and he demanded 

then, and required through executive order, a review of every single regulation. It was a retrospective review of whether the regulations were still relevant, and ordered a top-to-bottom review of 

their cost-benefit. 

And in the process, Virginia ended up either amending or abolishing 75 percent of those regulations. That is not getting directly 

to your question, but one of the things that he did insist on—and 

it created, just very honestly it created a firestorm at the beginning 

when he insisted that—those that are regulated had a seat at the 

table to present their analysis, their experiences—because oftentimes the regulators, as well intentioned as they are and were in 

Virginia, did not have the real-world experience of how the, perhaps, either the intended or unintended consequences of a regulation might impact that business. 

In the end, there was unanimous praise from all sectors—from 

folks on different sides of the philosophical divide—on that process 

and how effective it was. And I think it is a model for the rest of 

the country. I think that would be very helpful at the Federal level. 

Chairman Brady. Thank you. 

Dr. Greenstone, your thoughts? 

Dr. Greenstone. Thank you for the opportunity. 

I want to come back to the first question you asked. I think there 

are lots of—there are some opportunities for bringing the independent agencies under the same rules and requirements that the 

other agencies face. 

I think that would probably have to be examined, though, on a 

case-by-case basis. I don’t know that we want to be overlooking 

what the monetary policy is of the Federal Reserve. So I just want 

to put that note of caution out there. I think it probably should be 

considered on a case—— 

Chairman Brady. But on the regulatory function, you would 

not object to that. Obviously the Fed, as you know, has a pretty robust regulation agenda and has a major impact on our financial institutions. They have been given more power there. 

I agree on the monetary side of that. On the regulatory side, 

though, I think the impact is fairly strong. 

Dr. Greenstone. Yes. No, I think one could make a very strong 

case, actually, that what came out of Dodd-Frank should have been 

subject to IORA oversight, to be honest. And because it went in the 

Fed and supposedly in the Treasury, that didn’t happen. 

Chairman Brady. Got it. 

Dr. Greenstone. And then, you know, I think, does anyone object to widespread cost-benefit analysis? You know, I think the 
17 

more cost-benefit analysis the better. We will be able to make better decisions. It will help our economy. And as you pointed out, it 

has been a disappointing recovery, and I think having a clear look 

at things in advance would help. 

I think there is—the easiest opportunity to change things in a 

positive way is to change the culture of regulatory analysis. And 

that, as you highlighted, Mr. Chairman, right now almost all analysis of regulation comes from the people who are doing the regulations. 

And, you know, I have a very high view of myself as a father and 

a husband, and occasionally my wife is able to cut through the 

noise in my head and highlight that maybe there is an alternative 

viewpoint. 

And I just think history is very unkind to institutions that only 

engage in self-evaluation. And so how can that be done? As I outlined in my testimony, I think the easiest way to do it is to introduce a new player. And the CBO has been unbelievably effective 

at changing the quality of analysis that goes into budgeting, and 

I think it is just lying there as a slam dunk for regulatory analysis. 

And it would make the agencies’ analyses better, as well, knowing that they would face—their analyses would face scrutiny from 

a CBO-style organization. 

Chairman Brady. Thank you, Doctor. I too hate those marital 

cost-benefit analyses. They never work out well for me. 

[Laughter.] 

And we are running out of time. Dr. Graham, or Mr. Mandle, 

thoughts on agency bias? 

Dr. Graham. Just very quickly, OIRA had about 50 full-time 

equivalent staff when I served for Mitch Daniels in the Bush Administration. And it is now at 38. It has been in a steady erosion. 

So if you want inside the Executive Branch a reasonable check 

on the agencies, we need to staff OIRA appropriately. 

Chairman Brady. Got it. Good point. Thanks. Mr. Mandle. 

Mr. Mandle. I would just add, through FDASIA in 2012, you 

know, we required much earlier connectivity with the agency. I 

think those interactions are important. 

The one thing, you know, that I would urge the Committee to 

really work with regulators on is an analysis around what activities are actually value-added. So in our business, for example, the 

legal requirements are to make sure that medical devices are safe 

and effective. And certainly the regulation process, whether it is 

through submissions, or inspections, includes a lot of other activities that do not go to that value-add to American businesses and 

patients, which is, you know, fulfilling the legal responsibilities. 

And so, you know, staying true to their legal responsibilities but 

also asking the question: Are we adding value to our economy, to 

patients, I think is an important question. 

Chairman Brady. Great point. Thank you. 

Former Chair Maloney. 

Representative Maloney. Well I want to thank all of you for 

your very thoughtful testimony. And I think we can all agree that 

agencies should be able to reexamine and adapt policies to new developments and changing circumstances. 
18 

It strikes me that many of our most important regulations seek 

to prevent catastrophic events or crises, and evaluators may find 

it difficult to quantify the benefit of avoiding a disaster before it 

strikes. That is a lot of the movement that was in Dodd-Frank. 

That is a lot of the legislation that came out of the financial crisis. 

For example, a report published last year by the Dallas Fed 

found that the 2007 and 2009 financial crisis cost our country nearly a year’s worth of economic output, $14 trillion, up to $120,000 

for every household in America. 

And at this hearing, really, in our body here at the Joint Economic Committee, economists have testified that it was the first 

crisis that was totally preventable by better regulation of risky financial products. 

Just in my home State, it is estimated that rebuilding after the devastation of Hurricane Sandy will cost our State alone $41 billion. We are implementing certain programs to try to get ready for 

the next Sandy—how do you evaluate that? Surely avoiding another financial crisis or an environmental crisis like Sandy is a 

great benefit to our country. But these benefits are very difficult 

to quantify, and how can we better account for these benefits of 

policy and regulation? 

I will give you an example now, right before Congress. It is the 

Anti-Terrorism Risk Insurance. After Sandy—excuse me, after the 

financial crisis, no one would insure anyone in New York, Illinois, 

or L.A., or Washington. We had to go to Lloyd’s of London to get 

insurance. It was very costly. 

And then we developed a program to be ready for the next crisis, 

and to respond to it. We put it in place, and it has not cost this 

country one cent. But the program was in place and ready in the 

event, God forbid, we had another crisis. 

There is still tremendous opposition to another Terrorism Risk 

Insurance Act (TRIA) program. So I would like to throw that out 

for anyone who would like to comment on it, because I think a lot 

of our thought process after a lot of Dodd-Frank was how do you 

prevent it in the future, how do you prevent and respond in the future? The Sandy regulations we are putting in place in New York 

City, maybe in other cities. So maybe we could start with Mr. 

Timmons, and anyone else who would like to make a comment. Mr. 

Greenstone. 

Mr. Timmons. I am probably going to defer to some of my colleagues here that have studied this in more detail, but I think it 

is really important to note—and I think all of us have said this— 

not all regulation is bad. Not all regulation is—in fact, in most 

cases the intent of the regulation is good. 

Eliminating all risk from everything that we do in American life 

is probably not an achievable objective if we want our economy to 

grow and we want to be able to maintain the quality of life that 

we have as Americans. 

But trying to minimize risk certainly is a goal. And doing it in 

a way that is smart and, again, is transparent and puts all—put 

all options on the table from not only the regulators but the regulated, I think, is the goal that we seek to achieve. 

Representative Maloney. I would also say that, in response to 

TRIA, the opposition to it, if this country is attacked again, if an 
19 

attack happens here in the Capital, the country is going to respond. 

The government will respond. 

So it seems like, if we are going to respond anyway, we might 

as well put mechanisms in place that help us during an emergency. 

My time is about to run out, and I want to throw out another 

question because I think it relates directly to what Mr. Greenstone 

and Mr. Graham and others were saying. 

Earlier we had a program that was very debated called ‘‘Sunset,’’ 

that every regulation after five years had to be reviewed. And it 

was basically a cost-benefit analysis. And I would like your response on Sunset, whether it worked, and if some agencies implemented and others did not, or if the better approach that Congresswoman Klobuchar and really Mr. Greenstone and Timmons have 

spoken in support of having a special office in CBO. 

But how did Sunset work? Did Sunset work? That whole bill that 

every five years you’ve got to review every single regulation on 

whether or not it works? Any comment from anyone? 

Dr. Graham. I am not aware that it ever passed at the Federal 

level. There are some states that have tried to do Sunset legislation. 

One thing I want people to keep in mind is that a lot of the costs 

of regulation that are substantial are actually one-time capital 

costs early in the implementation period of regulation. This is particularly true in energy and in manufacturing. 

And if you look after the fact at what the costs and benefits are 

and you find it is not a good idea, it is frankly oftentimes too late. 

It is very important to get the analysis done right, properly, up 

front. And that is why a lot of this emphasis on the transparency 

and peer review and quality of information, when the rule is adopted in the first place, is very important. 

Representative Maloney. I think my time has expired. 

Chairman Brady. Thank you, Madam Chair. 

Senator Coats. 

Senator Coats. Mr. Chairman, thank you. And thanks to all of 

you for the good information here. 

It occurs to me there is a pretty good consensus among the four 

of you that cost-benefit analysis, retrospective reviews, perhaps a 

new division at CBO or a new involvement for an outside player, 

approval process, state and local coordination, alignment of standards on trade, that all that is, I probably could say, pretty much 

supported on a bipartisan basis, and pretty much a consensus, unless someone wants to say that should not be in there, or something else should be in there. 

Of all those, I would think that the cost-benefit is most important because it is a metric that we need before we pass legislation, 

or before we deal with responding to regulatory proposals, to really 

be able to make the case. 

I mean, does that rise to the top of priorities? Just a ‘‘yes’’ or 

‘‘no.’’ Would anybody think that there is something more important 

that we ought to focus on relative to the role of Congress in terms 

of dealing with either proposed rules or dealing with legislation? 

Mr. Timmons. From our perspective, that is a very important 

objective. 
20 

Senator Coats. Secondly, I think there is probably a consensus 

that tax reform, regulatory reform, fiscal reform, including entitlement reform, are the three big issues for things Congress ought to 

deal with. And we are dealing with regulatory here. 

I am struck by the fact that, while there is this consensus, while 

Chairman Brady and I and Members on the other side, pretty 

much have come to agreement on all of this, we introduced a lot 

of ideas. We talked about a lot of potential reforms. But we never 

seem to get to the final piece where it is actually enacted and put 

into place. 

And that goes to the question, or to the matter that I think Mr. 

Greenstone raised about the need for a change of culture. 

Dr. Graham in particular, based on your experience at IRA, I always get that acronym wrong, based on your past experience, what 

does it take to achieve that change of culture, that change of 

mindset? 

Does it take legislation to force it? Is there something you can 

do through leadership of the particular agencies, or what comes out 

of the White House? It just seems that we keep talking about all 

these legislative proposals and ideas, but if even those are implemented would that force the change of culture? Or is the change 

of culture—is the culture so ingrained in the past, and not understanding and recognizing the negative impact of regulations, is that 

too hard to do? 

Dr. Graham. Well it’s a great question. The agencies—it’s important to see the agencies as mission-oriented professionals trying 

to accomplish a certain objective. And some people might interpret 

that as bias, but they really do have a pretty kind of single-minded 

orientation, if you are at FDA, or EPA, et cetera. 

So I think Dr. Greenstone’s analysis of this is right at the heart 

of the cultural issue. Because you need to create a culture, a kind 

of a checkpoint about the value of the economy, and the value of 

cost-benefit, and so forth. 

And historically we have tried to do that through OIRA and 

through the Council of Economic Advisors. But OMB’s role over 

time has really diminished relative to the agencies, and this is well 

quantified by studies on staffing and so forth. 

So I think his point that maybe you bring CBO in as a player, 

but the basic point is the culture—you need multiple cultures, cultures that clash a little bit with each other. That is not necessarily 

a bad idea to have these people with different missions and different orientations, and getting their information on the table. 

So moving in that direction—which I think a lot of these bills 

that we are talking about do in modest ways, will lead to culture 

change. 

Senator Coats. I would like to get other comments on that, perhaps for the record since my time is running down. I want to ask 

if Mr. Mandle suggests a tax policy ought to be incorporated in the 

cost-benefit analysis. Is there agreement with that? Or do you have 

some reservations of the other three here? 

Dr. Greenstone. I’m not sure I completely understand the connection—— 

Senator Coats. Well—— 
21 

Dr. Greenstone. I’m not sure I completely understood the connection between tax policy and regulatory policy, so I am reluctant 

to agree to something I don’t understand. 

Senator Coats. Okay. Mr. Mandle, just very quickly? 

Mr. Mandle. Sure. No, my comment was simply that the regulatory environment itself also, from the Congressional perspective, 

you have to look at the entire ecosystem and those impacts on 

things like early stage investment. 

So in our business specifically it is the combination of cost controls through the Affordable Care Act, the Medical Device Tax, the 

expanded costs of going through the regulatory process. And so, 

you know, if we are asking questions about how does all of this impact our economy and job growth? You know, it is a quite complicated process and we just think it is again important to, as you 

are looking at regulatory changes, to also know that for every action there is a reaction in both—tax policy, you know, is a piece of 

this puzzle. 

Senator Coats. Well my time has expired. Mr. Chairman, thank 

you very much. I just hope that we seem to have a consensus here 

in terms of the direction that we ought to go, at least, and I just 

hope we can bring this home and put it into practice. 

Chairman Brady. I agree. 

Senator Coats. It will require bipartisanship, but it can be done 

because there does seem to be a consensus that it needs to be done. 

Thank you, Mr. Chairman. 

Chairman Brady. You are right, Senator. 

Mr. Paulsen. 

Representative Paulsen. Thank you, Mr. Chairman. I want to 

thank you for holding this hearing, because, part of the Joint Economic Committee’s responsibility is to gather this type of input and 

make recommendations to our colleagues to take actions on some 

of these policies. 

The regulatory environment and the red tape environment has 

definitely risen to the top of what I am hearing from my manufacturers, from small businesses, and from the medical device companies in Minnesota, for instance, in terms of how challenging it is. 

I want to ask one question on the tax policy, because Senator 

Coats asked about that. The Medical Device Tax, which you just 

mentioned, Mr. Mandle, has been front and center as a high priority of mine, and Senator Klobuchar has been pushing that issue 

in the Senate to repeal that tax. 

There have been some estimates that say maybe 25 percent of 

the tax might be paid out of a State like Minnesota where we have 

a big ecosystem, as you mentioned, in this area. We have the 

Medtronics and other large companies in Minnesota, but there are 

all these small companies that are directly impacted in particular 

too. 

What are you seeing on the ground that we are not seeing or 

hearing about in the press, or in the media? 

Mr. Mandle. I will be happy to answer that question. As you 

know, your Congressional District is the most densely concentrated 

medical device cluster in the world. You know, the medical device 

industry is different than pharmaceuticals and other industries. 
22 

Most of the companies, 80, 90 percent, have less than 50 employees. And, you know, it’s really where a lot of innovation takes place 

that can have an impact on cost, as well as increase and deliver 

new therapies. 

What we are seeing is a real challenge for those early stage companies. So there’s the Medical Device Tax, there’s an Excise Tax; 

it hits first sales. So in order to get a company started, and to get 

a medical device on the market, you are talking 3, 5, 7 years, 

$50-, $100-, $150 million. And as soon as you begin to sell to work 

toward profitability, you are paying the tax. 

Probably the biggest impact on innovation that the Medical Device Tax is having is it is really drying up early stage investment. 

So you’re an investor. Ten, twenty years ago you put your money 

in medical devices and it was a great return for investors, as well 

as great for patients. 

Today, with the regulatory timetables being significantly longer, 

the cost of going through them being significantly longer, the tax 

hitting first sale, if you are an investor there are frankly in some 

ways better places to put your money. 

So we do see growth in places like health IT software, a lot of 

the consumerization, I’ll say, of health care. And it is really harming the next generation of medtech companies that frankly either 

won’t get started, or won’t survive this period of time. 

Representative Paulsen. So just to follow up now on the regulatory side of that equation, you mentioned a lot of small companies get hit, and a lot of companies are developing not only traditional medical devices but also maybe creating medical software 

applications, for instance. 

On the regulatory side of the equation, you’ve got the FDA 

classifying ‘‘devices,’’ and so the tax may apply to software, for instance. Does it apply to software upgrades? And can you just talk 

a little bit about maybe what the regulatory environment has done 

in our ecosystem for companies that are looking for that venture 

capital startup? Are companies putting the FDA approval process, 

are they factoring that in to attracting venture capital as part of 

their business plan? 

Mr. Mandle. Again, I’m happy to answer that question. Actually, we saw something change about three or four years ago. You 

know, at LifeScience Alley we work with entrepreneurs in medtech 

specifically. We see business plans all the time. Haven’t seen a 

business plan that intends to take a product through the FDA process first in about three years now. 

So if you have a business plan today that does not go to Europe 

first, your likelihood of getting that company or that business plan 

funded is I would say almost nonexistent. 

Representative Paulsen. And Europe is bragging about getting 

products, your testimony said, three years earlier for their patients 

versus our patients, right? 

Mr. Mandle. Correct. Yeah. Look up the website. It’s called 

‘‘Don’t Lose The 3.’’ So it’s a marketing campaign in Europe. 

Representative Paulsen. Senator Klobuchar mentioned the 

least-burdensome principle and some of the provisions in the User 

Fee legislation that we passed, Mr. Chairman, in both bodies and 

in law now. We need to follow through on it, and I will give some 
23 

compliments to Jeff Shuren who we continue to meet with on a 

quarterly basis to make sure we are tracking and benchmarking 

the law. We need to make sure that that cultural issue which we 

were just talking about is actually going to be moving forward, as 

well, so that we are not stifling growth and innovation in a very 

important industry. 

Thank you, Mr. Chairman. 

Chairman Brady. Thank you, Mr. Paulsen. 

Senator Lee. 

Senator Lee. Thanks so much for your testimony. 

I appreciate having each of you here. Mr. Graham, why don’t we 

start with you. One of the difficulties that we have here involves 

measuring regulatory costs, and doing so in a way that is understandable to Members of Congress, that Members of Congress can 

get behind. 

So by way of analogy, in the budgeting context we have come up 

with a baseline. And so even though not every Member of Congress 

will necessarily agree with the baseline methodology that is used, 

it at least does give us some metric according to which we can kind 

of navigate our discussion. 

Do you think that it would be possible for us to construct sort 

of a baseline definition set that would allow us to estimate the cost 

of a particular regulation, or the aggregate costs of all regulations 

in a particular year? And what do you think some of the uses of 

that might be, if we could do it? 

Dr. Graham. There is a former colleague of mine at OMB, Dr. 

John Morrall, who has written extensively on the concept of a regulatory budget, which would be analogous to the appropriations 

process, but it is for costs that are imposed upon businesses and 

state and local governments that are not showing in the Federal 

budget. 

His idea is that you would try to basically expect Congress to 

exert discipline in this process by setting limitations on maybe an 

annual, or every-other-year basis on how large these regulatory 

costs, or unfunded mandates, could be over time. 

It is a complex business of trying to define those baselines. But 

your point is well taken. The budgetary baselines are pretty complicated to do. 

So I think in principle it is possible to do. I think the avenue that 

I would like to see is that you do a pilot project of this on maybe 

a couple of agencies. You do that for a couple of years, and you see 

how it goes. And then if you are comfortable, then you could try 

to do that on a government-wide basis. 

I think to try to just leap and do that on a government-wide 

basis, you know like through next year in legislation, I think that 

is a prescription for the UK’s problem. The UK actually tried to do 

a government-wide regulatory budget, and after passing the legislation and trying to implement it, they just basically gave up. 

So in a sense they tried too hard, and they didn’t take off a modest amount that they could actually learn from. 

Senator Lee. You think it might be better, for example, then to 

start with saying okay we’re going to try to develop such a model 

in the context of EPA and FDA, or, you know, pick any two regulatory bodies? 
24 

Dr. Graham. Right. Pick a couple of big regulators and have 

them do that as a regulatory budget, and try it as a pilot for a couple of years. Yes. 

Senator Lee. And you think that would be helpful to the economy to have Congress at least move in the direction of developing 

some kind of measure for aggregate regulatory compliance costs? 

Dr. Graham. Yes. Because one way to think about this is Congress never actually deliberates and votes on the overall impact 

they are imposing on the business community and state and local 

governments every year. 

Senator Lee. Right. 

Dr. Graham. And I would argue that you should have some heat 

on you to have to actually deliberate on that and vote on that. And 

the regulatory budget is explicitly designed to induce that, but it 

is a complicated idea and it needs—— 

Senator Lee. It is deliberately designed to what? 

Dr. Graham. It is deliberately designed to compel the legislature—— 

Senator Lee. Right. 

Dr. Graham [continuing]. To assume the responsibility for saying this is how much regulatory burden we are willing to impose 

for the next year, or the next two years. So it requires that deliberation and those votes. 

Senator Lee. Are you familiar with the REINS Act? The REINS 

Act is a bill that has been introduced. It has been passed by the 

House for the last two or three years in a row. It has been introduced in the Senate, but we have not had occasion to vote on it. 

It stands for Regulations from the Executive in Need of Scrutiny. 

It says basically that for any new major rule to take effect— 

‘‘major rule’’ as defined by OMB with an aggregate economic impact of $100 million or more—that it would need to be passed affirmatively into law. It would need to pass the House and the Senate and be signed into law by the President. 

This is an approach that would put Congress, as I see it, back 

in charge of actually making the law. In other words, what you described as a problem in which you’ve got Executive Branch agencies run by men and women who are well educated, very well intentioned, and very hard working and knowledgeable within their 

subject field matter areas, and very skilled, are not elected by the 

people and are therefore not accountable to the people as Members 

of Congress are. 

But if you had those major rules act as sort of proposals, and 

proposals that could not take effect, could not bind the general public unless or until they were enacted into law by Congress, then 

you would have Congress do the legislating. Do you think this 

would help address some of the problem you have described? 

Dr. Graham. What I would do is couple that idea with Dr. 

Greenstone’s Congressional Budget Office regulatory analysis 

branch, because I think Congress would need fairly indepth assessment of each of these rules from an independent body. 

So my suggestion would be: Start with Dr. Greenstone’s idea. Get 

the CBO regulatory analysis branch up and running and have it 

issue reports on legislation and regulation. And then take the 

step—I think jumping right to the REINS Act, and then have Con-
25 

gress vote on all these rules, I think that is too—I think it is not 

realistic. Because you don’t have the evidence and analytic base to 

be deliberating on this level of specificity that we have in each of 

these regulations that we’ve talked about in the testimony. I think 

we are a ways from that. 

Senator Lee. Although arguably that is part of the problem, 

though, isn’t it? 

Dr. Graham. It is part of the problem, but we need to build the 

culture and the capability to get Congress involved in a meaningful 

way on a regulation by regulation basis. That is a big change from 

where we are now. 

Senator Lee. Yes. 

Dr. Graham. And we’re not anywhere close to having the evidence and analytical infrastructure in the Congress to do that. 

Senator Lee. I think Mr. Greenstone wants—— 

Dr. Greenstone. Yes, if I could just—you know, I am just going 

to underscore what Dr. Graham was saying. I think the first-order 

problem in regulatory policy is the almost near complete opacity on 

what the impacts both on the cost side and also on the benefits side 

are. And the fact that we do not have like a reliable set of information about that means people can say anything, and anything could 

be true or not true, and there is no basis to judge what is false and 

what is true. 

And so I think any regulatory reform that is going to be successful is going to have to seed that environment with information that 

would allow all of you to make judgments. I mean, right now I 

don’t think, candidly, there is the information for all of you to make 

judgments on a lot of the regulation. 

Senator Lee. Right, right. Although I—and I understand the 

point you are both making. I would add to that, though, that in the 

meantime we are subjecting the American economy to an estimated 

$2 trillion, nearly $2 trillion in annual regulatory compliance costs. 

So by doing nothing, we continue through our own past delegation of authority, recklessly broad delegation of authority I might 

add, we are subjecting the American people to a lot of laws that 

are basically legislated without any elected official being involved 

in it. 

Dr. Graham. The European Parliament feels the same way. 

They feel that in Brussels the European Commission is imposing 

an enormous burden throughout the European economy, and where 

did they start, the European Parliament? They started by creating 

the analytic capacity, impact assessment unit, to actually independently analyze what the European Commission was giving 

them. 

Okay? And if we don’t have that step, the rest is not going to be 

smooth. 

Senator Lee. I want to remain in good standing with our Chairman. Thank you very much. 

Chairman Brady. You are. Thank you, Senator. I think your 

point that the regulatory horse is now out of the barn and we chase 

it with poorly designed unworkable regulations means we just 

fruitlessly chase it. And is there a better way at the outset? I think 

that is very key. 
26 

We are very mindful and respectful of our witnesses and Members. Thank you for being here today. You have given us great insight. I wish every Member of Congress could hear the ideas you 

have outlined, because there is a frustration and there is a need 

to act. You have been very helpful in building momentum for action 

in a bipartisan way on smart regulation. 

So again, thank you for being here today, to all our witnesses. 

The hearing is adjourned. 

(Whereupon, at 11:15 a.m., Wednesday, April 30, 2014, the hearing was adjourned.) 
(27) 

SUBMISSIONS FOR THE RECORD 
28 

PREPARED STATEMENT OF HON KEVIN BRADY, CHAIRMAN, JOINT ECONOMIC

COMMITTEE

Too often congressional hearings are given titles that merely attract attention. 

But I believe the title for today’s Joint Economic Committee hearing accurately describes what our witnesses are here to talk about and what we should take to heart, 

namely that the first step toward reducing red tape and achieving regulatory goals 

is better analysis. 

Every Member of Congress recognizes the economic justification and constitutional authority under the Commerce Clause in Article I, Section 8 of the U.S. Constitution for balanced Federal regulation to protect public health and safety, preserve our environment, and prevent fraud of all kinds. At the same time, many 

Members of Congress also recognize that federal regulation has become overly burdensome and costly to job creators and the economy alike. Some regulations, regrettably, are even counterproductive. 

As the volume of federal regulation has grown, regulation has done less to advance its stated goals and imposed ever more costs. These costs include slower economic growth, higher uncertainty that inhibits business investment and job creation, foregone product and process innovations, a lessening in the international 

competitiveness of American businesses, and stagnant incomes for hardworking 

American families. Unnecessarily burdensome regulation also aggravates our country’s long-term fiscal imbalance by inhibiting the natural growth of federal revenues 

under existing tax law. 

Consider the following facts: 

• In 2013, the federal government issued 3,659 final rules contained on 26,417 

pages, a record number in the Federal Register. Including proposed rules, the 

Federal Register finished 2013 with 79,311 pages. • Four of the five highest regulatory page counts have occurred during President 

Obama’s administration; the all-time record being 81,405 pages in 2010. • Mr. Wayne Crews, the author of Ten Thousand Commandments: An Annual 

Snapshot of the Federal Regulatory State, estimates the overall annual cost of 

regulatory compliance to be $1.9 trillion, about equal to the economy of Australia, Canada, or Italy. • Mr. Crews estimates that U.S. households face an annual hidden regulatory 

‘‘tax’’ of $14,974. • In last year’s draft report to Congress on the benefits and costs of federal regulation, the Office of Management and Budget (OMB) stated that executive agencies and independent regulatory agencies promulgated a combined total of 68 

major rules during 2012, (each of which have an impact of $100 million or 

more). Alarmingly, OMB presented a cost-benefit analysis for a miniscule 14 of 

them. • Looking longer term, during the decade ending in 2012, federal agencies published 37,786 final regulatory rules—with OMB presenting cost-benefit analysis 

for only 115 regulations. That is 3/10 of one percent—meaning only three in 

every 1,000 regulations were subject to a complete analysis of their effects on 

the U.S. economy, job creators and families. For a nation seeking a smarter, 

more efficient government, that is just shameful. 

America’s regulatory system should be designed to achieve the greatest good at 

the least cost. Both Republicans and Democrats should be able to agree on that 

principle. 

Smart, effective regulations should seek to reduce rates of illness, mortality and 

pollution—but not by reducing economic growth, job creation, and the incomes of 

hardworking American families out of neglect or disregard. 

Safety and security must not come at the cost of stagnation, unemployment and 

lower incomes that rob from the middle class. Yes, there will be tradeoffs, but too 

often our federal regulatory system pursues singular objectives blind to the unintended consequences of its methods—and indeed often does not even focus on realizing the intended results. 

We need a better way to sift through regulations both proposed and existing; 

transparently identify their true costs; and find the least costly, least intrusive way 

to achieve the goals on which we all agree. 

We cannot do that without better analysis. 

My colleague, Senator Dan Coats, and I have introduced the Sound Regulation 

Act to improve the regulatory process through better analysis. 

The Sound Regulation Act would: 

• Expand accurate cost-benefit analysis to all federal regulatory agencies—beyond 

executive branch agencies to independent agencies as well—and close loopholes 
29 

that allow some federal agencies to skirt the requirement for objective economic 

analysis. 

• End agency bias and establish more public transparency by requiring agencies 

to clearly identify the nature and significance of the market failure or other 

problem that necessitates regulatory action; establish an achievable objective 

for regulatory action; and publish for public comment in advance the method 

and process for objectively weighing the costs and benefits of the proposed regulation; 

• Encourage more innovative solutions by requiring the development and evaluation of the costs and benefits of at least three regulatory options ranked by cost 

from lowest to highest; 

• Justify the choice of any option that is not the least cost method of achieving 

its regulatory objective; and; 

• Review existing regulations on a timely basis to determine the success and costs 

of the regulation in the real world. 

The Sound Regulatory Act would not dictate solutions or how to achieve them; 

instead, it would provide a better framework for rule-making by federal regulators 

so that regulations work more effectively and at less cost to the American economy. 

I believe that all Members of Congress in both chambers and both parties can ascribe to this goal. 

With that, I look forward to the testimony to today’s witnesses. 
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1Kenneth Chay and Michael Greenstone, ‘‘The Impact of Air Pollution on Infant Mortality: 

Evidence from Geographic Variation in Pollution Shocks Induced by a Recession,’’ Quarterly 

Journal of Economics, 2003, 118(3); Olivier Deschenes, Michael Greenstone and Joseph Shapiro, 

‘‘Defending Against Environmental Insults: Drugs, Emergencies, Mortality and the NOx Budget 

Program Emissions Market,’’ Department of Economics, MIT (2013). 2Michael Greenstone, ‘‘The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufacturers.’’ 

Journal of Political Economy, 2002, 110(6); Michael Greenstone, John A. List and Chad 

Syverson ‘‘The Effects of Environmental Regulation on the Competitiveness of U.S. Manufacturing,’’ Department of Economics, MIT (2011). 

PREPARED STATEMENT OF MICHAEL GREENSTONE, MASSACHUSETTS INSTITUTE OF

TECHNOLOGY, NON-RESIDENT SENIOR FELLOW BROOKINGS INSTITUTION

Thank you Chairman Brady, Vice Chair Klobuchar, and members of the Joint 

Economic Committee for inviting me to speak today. 

My name is Michael Greenstone, and I am the 3M Professor of Environmental Economics at the Massachusetts Institute of Technology and a non-resident Senior Fellow at the Brookings Institution. My research focuses on estimating the costs and 

benefits of environmental quality, with a particular emphasis on the impacts of government regulations. 

I appreciate the opportunity to speak with you today about opportunities to improve the government’s regulatory system. Under all economic circumstances, regulatory efficiency and clarity are crucial objectives for the credibility and predictability of the government’s role in the marketplace. However in today’s economy, it 

is absolutely essential to design a regulatory structure that protects the well-being 

of our citizens without imposing unnecessary costs on American businesses and society as a whole. 

We can achieve these objectives without compromising our values in key areas 

ranging from the protection of public health to the supervision of financial markets 

by ensuring that the Executive and Legislative branches have the tools of analysis 

and measurement they need to review current and proposed regulations. The purpose of my testimony is to describe in concrete terms how this can be accomplished 

and to wholeheartedly offer my support for Senate Bill 1472, ‘‘Strengthening Congressional Oversight of Regulatory Actions for Efficiency,’’ that was introduced by 

Senator Klobuchar and is co-sponsored by Senator Collins and Senator King. 

INTRODUCTION

American government, at every level, regulates a broad array of social and economic life. Regulatory policy determines the air we breathe, the quality of the water 

we drink, the materials we use to construct our homes, the cars we buy, the safety 

of our workplaces, the investments we make, and much more. Government regulates 

these activities because in cases of market failures, for example, our free market 

system does not create the necessary incentives for businesses and individuals to 

protect the public good. 

But, in making decisions about regulations, public officials must choose which 

areas of our lives merit government rules, as well as how stringent those rules 

should be. 

The Clean Air Act is a classic example of a regulation with significant benefits 

and costs. Before its passage in 1970, there were few constraints on businesses that 

emitted pollution as a byproduct of their operations. The result was poor air quality. 

As one small example, white-collar workers in Gary, Indiana often brought an extra 

shirt to work because the first would be dirty from the air and unfit to wear by midday. Even more importantly, some of my research, as well as research by others, 

has found that the polluted air led to sicker and shorter lives for the American people.1 Obviously, no business sets out to cause these impacts; but, in trying to maximize their profits, it was not in their interest to install expensive pollution abatement equipment when their competitors did not. As a result, they did not act to adequately reduce emissions. 

At the same time, the Clean Air Act’s regulations require firms to alter their production processes in ways that raise their costs. Indeed, some of my recent research 

finds that an important set of Clean Air Act rules has raised polluting industries’ 

costs of production by roughly 2.6%. This has reduced firms’ profits and led to higher prices for consumers. Further, it has caused regulated firms to scale back their 

operations, which led to employment losses at those firms.2 Although the ultimate 

effect on the level of jobs in the economy is likely minimal in normal economic 

times, recent research indicates that workers who lose their jobs due to regulations 
84 

3 Reed Walker, ‘‘The Transitional Costs of Sectoral Reallocation: Evidence From the Clean Air 

Act and the Workforce,’’ Quarterly Journal of Economics, 2013, 128(4). 

often face prolonged periods of unemployment and become reemployed at lower 

wages.3

The challenge then for regulators is to consistently set rules with benefits that 

exceed their costs. 

In a pair of Executive Orders, President Obama has created a framework that has 

the potential to be the most fundamental shift in regulatory policy in more than 

three decades. The Executive Orders require that federal agencies routinely review 

existing significant regulations in order to ‘‘determine whether any such regulations 

should be modified, streamlined, expanded, or repealed’’ with the purpose of making 

the ‘‘regulatory program more effective or less burdensome in achieving the regulatory objectives.’’ These reforms offer the promise of finding a better balance between our health and safety, and our economic growth. 

To understand why the president’s efforts are so critical, imagine if the Food and 

Drug Administration approved new drugs without ever having tested them on people—that it approved drugs knowing only in theory how they were likely to affect 

the human body. Further imagine if such drugs remained on the market for years, 

or even decades, without their effects ever being subject to evaluation. This path is 

simply inconceivable, but it is how we have historically approached government regulations. 

Make no mistake—inadequate regulatory policy can be, as with drug approvals, 

a life-or-death issue because of the significant role regulations play in every aspect 

of our daily lives. 

A bit of history: U.S. regulations used to be designed essentially in the dark. 

Then, in 1981, President Ronald Reagan issued an executive order institutionalizing 

the idea that regulatory action should be implemented only in cases when, among 

other provisions, ‘‘the potential benefits to society for the regulation outweigh the 

potential costs to society.’’ It sounds obvious. But this idea of applying cost-benefit 

analysis in the regulatory arena fundamentally altered the way in which regulations 

were considered. 

In 1993, President Bill Clinton outlined more specific guidelines for prospective 

analysis of cost-benefit trade-offs. And yet, the regulatory review process was still 

operating with one hand tied behind its back. As a general matter, a regulation’s 

likely benefits and costs were considered only before the proposal was enacted—the 

point when we know the least precisely because the regulations are untested. Consequently, prospective estimates of the costs and benefits must rest on many unverifiable and potentially controversial assumptions. 

And, once a regulation passed through a prospective analysis and went on the 

books, it could remain there for decades without any further evaluation. 

Some regulations work out exactly as intended. But some, of course, do not. For 

example, an air pollutant may prove to be more harmful than was originally understood. Or, a regulation may end up imposing larger costs on businesses than suggested by the prospective analysis. In our rapidly changing world, regulations can 

and should adapt to change. 

President Obama’s Executive Orders take a critical step forward by looking backward. They require that agencies routinely reevaluate the costs and benefits of existing regulations and identify whether the goals of a regulation could be achieved 

through less expensive means. This potentially revolutionary process of retrospective analysis offers the promise of finding a better balance between our health and 

safety and our economic growth. 

In the remainder of my testimony, I will identify two further changes that would 

increase the chances that our regulatory system consistently produces rules with 

benefits that exceed costs. 

I. Extending Executive Orders 13563 and 13610 

The first change is to make three reforms that build on Executive Orders 13563 

and 13610. 

First, I recommend institutionalizing the retrospective review of economically significant rules in a public way so that these reviews are automatic in nature. In the 

case of rules that are currently in force, this would mean publicly committing to a 

retrospective analysis of each existing rule within a pre-specified period. This might 

be 5 or 10 years, with the length of time depending on the particulars of the rule 

and the results of any previous reviews. 

In the case of new rules, the implementing agency would be required to announce 

a timetable for review with a maximum allowable amount of time, perhaps 5 or 10 

years, with shorter time periods being preferable. In addition, the agency would be 
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4 Congressional Budget Office, ‘‘CBO Testimony: Statement of Robert D. Reischauer, Director, 

Congressional Budget Office, before the Joint Committee on the Organization of Congress’’ 

(1993). http://www.cbo.gov/ftpdocs/105xx/doc10580/1993l06l10lmission.pdf. 

required to pre-specify the expected benefits (e.g., reduced child mortality rates) and 

costs (e.g., reduced business profits) so that the terms of the subsequent review 

would be known in advance. The agency would also be required to identify how 

these benefits and costs would be measured, such as the types of data and other 

information that it anticipates being necessary for review. 

Second, the relevant agency should commit to undertaking a new rulemaking 

when the results from the retrospective analysis differ from the benefits and costs 

that were expected prior to the rule’s implementation. As with the retrospective 

analysis, there should be a time limit for conducting the new rulemaking. In cases 

where the realized benefits exceed the costs by a wider margin than expected, there 

may be further opportunities to maximize net benefits. In cases where the rules are 

found to be ineffective or unjustified, agencies should identify ways to modify the 

rules or abandon them. Finally, if the retrospective analysis confirms the original 

expectation of benefits and costs, then there would not be a need for a new rulemaking. 

Third, these efforts would be strengthened if they were accompanied by a triggering mechanism to ensure that retrospective evaluations occur and, when appropriate, for new rulemakings to be undertaken within the prescribed time periods. 

One approach would be for agencies to announce publicly and post on their website 

the deadline for a rule’s review and reconsideration. A stronger approach would be 

for judicial action to compel reviews and rulemaking in the cases where an agency 

has failed to comply with a review timeline or to act upon its results. 

II. Creating a Regulatory Analysis Division Within the Congressional Budget Office 

The second change is to ensure that the quality of the reviews is commensurate 

with the stakes of getting regulatory policy right. In this spirit, there are some difficulties with the approach I just outlined. Many agencies do not have the staff, expertise, or resources necessary to undertake these reviews. Further, the process of 

self-evaluation is challenging for all organizations, as it requires complete objectivity. Indeed, history is unkind to organizations that fail to get outside reviews of 

their work. 

My recommendation is to establish a new, independent body for regulatory review. The non-partisan Congressional Budget Office (CBO) provides an appealing 

model. 

As you know, before the CBO was established, only the President had a ready 

source of budgetary and economic data and analysis. Congress was forced to largely 

rely on the Office of Management and Budget (OMB) for this sort of information. 

The CBO was invented to level the playing field. Its analyses allow Congress to consider the economic and budgetary implications of new policy ideas. Crucially, the 

CBO also helps Congress evaluate the information that it receives from the Executive Branch.4

The entire budget process has benefited from CBO’s existence. This is a direct result of its independence. The budgetary analyses and proposals of all legislators and 

Executive agencies are now created to a higher standard, knowing that they must 

ultimately stand up to scrutiny by the non-partisan CBO. 

I believe that Senator Klobuchar’s bill S.1472, which creates a Regulatory Analysis Division in the non-partisan CBO, is the best solution. This Regulatory Analysis Division would be charged with conducting independent regulatory impact evaluations. Some of the organization’s activities would be statutory in nature—for example, automatic reviews of economically significant regulations—while other evaluations could be performed at the request of Congressional committees and members. 

A Regulatory Analysis Division within the CBO would directly strengthen our regulatory system. Agency analyses would benefit from the scrutiny that they would 

ultimately receive from this new, independent organization. Further, the results of 

the retrospective reviews would become part of the agencies’ automatic assessments 

of their regulations that I described above. I believe that providing this type of rigorous, independent review would build confidence within the business community 

and a better sense of transparency. 

Finally, a Regulatory Analysis Division of the CBO could help to increase the 

credibility of the regulatory evaluations by developing an explicit checklist to determine the rigor of regulatory analyses. The checklist should favor randomized control 

trials, the gold standard in terms of evidence, and natural experiments over models 

and observational studies. A 2011 Hamilton Project paper provides some other ideas 
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5Ted Gayer, ‘‘A Better Approach to Environmental Regulation: Getting the Costs and Benefits 

Right,’’ Discussion Paper 2011–06, The Hamilton Project, Brookings Institution (2011). 6Office of Information and Regulatory Affairs, Office of Management and Budget, ‘‘2011 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on 

State, Local, and Tribal Entities’’ (2011). 

for a check list.5 Such a checklist could also be issued as guidance by the Administration to its agencies. 

Of course, the creation of a Regulatory Analysis Division would require resources, 

which are difficult to come by in our current fiscal environment. My best estimate 

is that it could be funded for less than $10–15 million annually. To put this in context, the current CBO budget is about $50 million annually. 

This is a very small amount of money when compared to the potential costs and 

benefits that regulations impose on our economy. Although it is difficult to determine the total number of economically significant regulations that are on the books, 

the Office of Management and Budget reviewed 540 major regulations between 2001 

and 20106, which are defined as having an effect of more than $100 million on the 

economy annually—either in costs or benefits. Consequently, it seems safe to conclude that the total costs and benefits of regulations can be measured in the hundreds of billions of dollars annually. 

It is apparent that we have a lot at stake economically with regard to our regulatory system and the cost of finding out which parts are working is quite small in 

comparison. My judgment is that it is very likely that a Regulatory Analysis Division would pay for itself many times over. 

By creating a body that can undertake rigorous analysis of the costs and benefits 

of regulation—both ex-ante and ex-post—policymakers will have better tools for protecting those regulations with great benefits for our society, reforming those regulations that impose unnecessary costs, and potentially culling those that no longer 

serve their purpose. 

IV. Conclusions 

In conclusion, our regulatory system is a linchpin of our well-being. It allows us 

to live longer and healthier lives, among many other important impacts. However, 

these important benefits come with direct economic costs. The purpose of my testimony has been to identify some reforms that will help to ensure that our regulatory 

system does its job in the most cost-effective way possible—in which the benefits 

to society exceed the costs. 

To quickly summarize, I propose two key reforms: 

1. Institutionalize a process by which agencies automatically undertake retrospective reviews of regulations and initiate a new rulemaking when the 

results from the retrospective analysis differ from the expected benefits and 

costs. 

2. Create a Regulatory Analysis Division within the Congressional Budget 

Office. 

We live in a rapidly changing economy and need a regulatory review structure 

that evolves to meet the new and different needs of our society. The reforms that 

I have outlined here will allow our regulatory system to consistently produce rules 

with benefits that exceed costs. That would be good for our well-being, and good for 

the American economy. 

Thank you once again for inviting me to participate in this discussion. I will gladly respond to any questions. 
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PREPARED STATEMENT OF SHAYE R. MANDLE, EVP & COO, LIFESCIENCE ALLEY

Vice-Chair Klobuchar, Chairman Brady, Members of the Committee—thank you 

for the opportunity to testify before you this morning. My name is Shaye Mandle 

and, tomorrow, I will take over as President & CEO of LifeScience Alley, the nation’s largest regional life science association. This year, LifeScience Alley celebrates 

our 30th anniversary of leading Minnesota’s Medical Alley—the most densely concentrated medical technology cluster in the world and home to some of history’s 

greatest therapeutic and healthcare innovations. Our members include 3M, 

Medtronic, Boston Scientific, St. Jude Medical, Covidien, Endo/AMS, Mayo Clinic 

and hundreds of small companies that will bring new innovation to the healthcare 

marketplace. Before we get started, I would like to personally thank Senator 

Klobuchar for her leadership and advocacy on behalf of patients and our companies 

who serve them, especially for those of us who call Minnesota home. 

Today, this committee is interested in taking the first step to cutting red tape 

through better analysis. We agree that better analysis is needed and that a regulatory environment that is smarter and more collaborative would serve patients and 

the U.S. healthcare system well. It is also important for broad-based analysis of the 

entire ecosystem, including tax and regulatory policy. It is critical for Congress to 

address repeal of the medical device tax if we want to keep our jobs and competitive 

advantage, as well as providing a permanent fix to the FDA user fees and sequestration issue, to ensure that FDA has access to the funds committed by industry. 

In 1957, Earl Bakken and Medtronic introduced the first battery operated external pacemaker. In 1976, the Federal Food, Drug and Cosmetics Act was amended 

to include the regulation of medical devices. At the beginning, innovation came from 

doctors and engineers working together to save lives. For the first 25 years of medical technology innovation there was no FDA oversight. 

Is it our position that medical devices shouldn’t be regulated? Quite the contrary. 

When medical devices were added to the FDA’s regulatory responsibility, something 

unique happened. An agency with no expertise in the field connected with the patients, doctors, and innovators to form a collaborative relationship. If you talk to 

anyone from industry or the FDA from the early years of regulation, they will 

amaze you with stories of working together to accomplish a shared goal—delivering 

the safest and most effective therapies in the world to the patients whose lives depended on them. 

Both the medical device industry and the FDA want the same outcome—safe and 

effective devices, invented in the U.S., and available in the U.S. first. For a couple 

of decades, this is exactly what we got. Over the past decade or so, this dynamic 

has changed and an adversarial relationship emerged. 

As a result, patients outside of the U.S. frequently gain access to innovation and 

technology before American patients do. In fact, Eucomed claims that European patients get innovative technologies 3–5 years earlier than U.S. patients. They even 

have a website called ‘‘Don’t Lose the 3,’’ as in the 3 years of therapeutic advantage 

that European patients have over their U.S. counterparts. 

But, things are improving. Passage of FDASIA in 2012 was a welcome update to 

our regulatory environment and MDUFA III should promote a more collaborative 

and effective pathway to approval. This legislation, if fully implemented as intended, will be a real benefit for patients, innovation and our economy. The FDA 

is working hard to collaborate with industry and is focusing on practical priorities, 

including 1) improving efficiency in clinical trials 2) balancing the premarket and 

post market process, and 3) identifying ways to shorten the lag between product approval by the FDA and reimbursement approval by CMS and/or private payers. 

Dynamic public-private solutions are also happening. Since 2011, LifeScience 

Alley has worked closely with CDRH Director Jeff Shuren to find a solution that 

would re-engage the agency and industry in a conversation of collaboration and cooperation. As a result, we created the Medical Device Innovation Consortium, a public-private partnership that still has its roots in Minnesota, but now includes a national consortium from industry and key members from government, including CMS 

and the NIH. Through the MDIC, we are working to identify opportunities for technical collaboration in the pre-competitive space, where industry and the FDA can 

work together to share knowledge and improve the regulatory environment. 

Better analysis means constant improvement. As one the few U.S. industries with 

a positive trade balance and an average wage of more than $70,000 annually, the 

medical device industry is a U.S. success story. Regulation is vital. Smart regulation 

is even more vital. We look forward to working with this committee to ensure that 

the U.S. regulatory environment represents the safest and smartest in the world. 

Thank you! 

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