59

T have one minor drafting issue with the bill, stemming from my
experience in government and from a sensitivity regarding the branches of
government and their different roles. I would caution drafters to consider
section 3(d) of the bill concerning the information that the Executive branch
shall provide to the office. It is important that discussion and preliminary
analysis are not stifled in the executive branch. Such discussion and analysis
of regulations might be chilled if agencies were concerned that early drafts
or other information might become public.

In conclusion, I support this attempt to provide good quality analysis
of government regulations. Indeed, I would like to have analyses of existing
regulations and other non-major regulations and policies covered by this bill
as well. Congress needs an independent and objective perspective, which,
when combined with organizations like the Regulatory Analysis Program
outside government and OIRA in the Executive branch, will contribute to
better informed policy makers. Such analysis is especially important now
that OIRA appears to be so weak. I believe that Congress is not able to do
its job effectively under the Congressional Review Act without such
capability. Oversight of government agencies and the implementation of
laws like the Unfunded Mandates Reform Act are also rendered less
effective without adequate independent analysis. A Congressional Office of
Regulatory Analysis, as prescribed in H.R. 1704, can be a valuable if not
essential source of information and analysis to help produce regulations that
ultimately make society better off.


25

7

Table 1

Summary of Preliminary Estimate of Cumiative Incremental Coste

of Meeting H.

1022 and H.R.

g94

Type or Purpose for FTEs and
Extramural Resources

Low Estimate

High Eatimate

Baseline Costs
- PIES for regulations
- $ for FTEs and regulations

B.B, 1022 Provigions

- TES for regulations

- $ for PTEs and extramural
xesources

- [FTEs for permits
- $ for FTEs and extramural
resources

Sub-Total Increment for
Bom, 1022

I § for Pres and extramural
resources

~ PTBs for regulations
not covered under H.R. 1022
= $ for FTEe and extramural
resources

- FTEs for past regulations
> $ for FTEs and extramural
resources

Sub-Total Increment for H.R.
994

- FTEs
- $ for FTEs and extramural
resources

690 FrEe
$120 million

671 FTES
$221 million
1,945 PTES

$1,103 million

2,616 PIES
$1,324 million

5 FTEs
$1 million
41

FTES
$7 million

46 FIED
$8 million

690 Free
$120 million

998 FTES
$287 million

2,223 PTES
$1,261 million

3,221 FTRS
$1,546 million

18 FTEs
$4 million
154 FTES

$37 million

172 FYRs
$41 million



COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California

J. DENNIS HASTERT, Illinois TOM LANTOS, California

CONSTANCE A. MORELLA, Maryland ROBERT E. WISE, Jr., West Virginia

CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York

STEVEN SCHIFF, New Mexico EDOLPHUS TOWNS, New York

CHRISTOPHER COX, California PAUL E. KANJORSKI, Pennsylvania

ILEANA ROS-LEHTINEN, Florida GARY A. CONDIT, California

JOHN M. McHUGH, New York CAROLYN B. MALONEY, New York

STEPHEN HORN, California THOMAS M. BARRETT, Wisconsin

JOHN L. MICA, Florida ELEANOR HOLMES NORTON, Washington,

THOMAS M. DAVIS, Virginia DC

DAVID M. McINTOSH, Indiana CHAKA FATTAH, Pennsylvania

MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland

JOE SCARBOROUGH, Florida DENNIS J. KUCINICH, Ohio

JOHN B. SHADEGG, Arizona ROD R. BLAGOJEVICH, Minois

STEVEN C. LATOURETTE, Ohio DANNY K. DAVIS, Illinois

MARSHALL “MARK” SANFORD, South JOHN F. TIERNEY, Massachusetts
Carolina JIM TURNER, Texas

JOHN E, SUNUNU, New Hampshire THOMAS H. ALLEN, Maine

PETE SESSIONS, Texas HAROLD E. FORD, Jr., Tennessee

MICHAEL PAPPAS, New Jersey

VINCE SNOWBARGER, Kansas BERNARD SANDERS, Vermont

BOB BARR, Georgia (Independent)

DAN MILLER, Florida
Kevin BINGER, Staff Director
DANIEL R. MOLL, Deputy Staff Director
WILLIAM MOSCHELLA, Deputy Counsel and Parliamentarian
dJupiTH McCoy, Chief Clerk
PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH, NATURAL RESOURCES, AND
REGULATORY AFFAIRS

DAVID McINTOSH, Indiana, Chairman

JOHN E. SUNUNU, New Hampshire JOHN F. TIERNEY, Massachusetts
J. DENNIS HASTERT, Ilinois BERNARD SANDERS, Vermont
JOE SCARBOROUGH, Florida HAROLD E. FORD, Jr,, Tennessee
JOHN B. SHADEGG, Arizona PAUL E. KANJORSKI, Pennsylvania
STEVEN C. LATOURETTE, Ohio GARY A. CONDIT, California
VINCE SNOWBARGER, Kansas CHAKA FATTAH, Pennsylvania
BOB BARR, Georgia DENNIS J. KUCINICH, Ohio
PETE SESSIONS, Texas

EX OFFICIO
DAN BURTON, Indiana HENRY A. WAXMAN, California

MILDRED WEBBER, Staff Director
Karen BARNES, Professional Staff Member
ANDREW WILDER, Clerk
ELIzaBeri MUNDINGER, Minority Counsel

aD


68

The office would perform several important functions including:

* conducting its own Regulatory Impact Analysis (RIA) for each major
rule—including an assessment of their benefits and costs;

* assessing whether the agencies comply with procedural steps for major rules;
and

* issuing an annual report on the costs of federal regulations on the economy.

We think all of these tasks are worthwhile. The resources needed to do the tasks
well should not be underestimated, however. We think it is important that the director of
this office have the flexibility to hire appropriate high-level technical expertise where
needed.

(One of the features of the bill that we especialy like is that it provides a central focus
for the Congressional study of regulatory activity. Currently, different functions are being
handled by different agencies. For example, CBO has responsibility for the Unfunded
Mandates Reform Act and GAO has responsibility for the Small Business Regulatory
Enforcement Fairness Act. It is better to put similar functions under one roof to avoid
unnecessary duplication of effort.

‘The proposed office also is likely to stimulate better analysis and review of agency
rules within the Executive. Both the administrative agencies and OMB are likely to
improve the analysis of proposed regulations if they know that a congressional agency is
providing an independent review. In the case of OMB, it is useful to draw an analogy to
the process for making budget estimates. Both CBO and OMB develop budget estimates.
In that case, we believe that each agency provides a useful check on the other.


79

I think you served as the OIRA Administrator, OIRA returned 104
regulations. In President Bush’s term, they returned 87. In Presi-
dent Clinton’s first term, they returned 9 regulations. And to date,
in President Clinton’s second term, they returned 4 regulations.
And so, by an order of magnitude, there are significantly fewer reg-
ulations that are being returned. My experience at the Competi-
tiveness Council was for every one regulation, you actually sent
back, you got a better result on about five or six of them, because
the agencies negotiated to come up with a better rule. And so,
those numbers don’t even tell you the whole story.

Let me ask another question, Dr. Gramm. Was it your experience
in OIRA that it was routine for OIRA to tell some of the agencies
not to submit comments to them on regulations—for example, if the
Energy Department had a regulation would they ever tell EPA,
“don’t submit your comments on the environmental impact?”

(The information referred to follows:]


15

mouny &

Coast Guard), in-house personnel costs—salary, fringe benefits, and estimated
overbead—accounted for about one-third of all RIA costs; spending on outside

cofttractors accounted for the remaining two-thirds.

Although CBO's study represents a best attempt to collect and verify original
data from a sample of agencies that conduct RIAs, it leaves many questions
unanswered. The most difficult is why the costs of analyses vary so much, both
among agencies and within them. CBO identified several possible reasons based on.
‘anecdotal evidence from agency staff, A thorough exploration would require
investigating the history of each rule, which was beyond the scope of CBO's review.

Despite those limitations, the Congressional Budget Office identified several
features of regulatory impact analyses and similar analytic efforts by federal agencies:

° ‘There Is No Such Thing as a Typical RIA. The cost of the analyses and
the time needed to complete them varied tremendously in CBO's
survey. Anecdotal evidence suggests several reasons for that
variability, including the scope and complexity of the rule being
analyzed, the nature of the information required to perform the RIA,
and the degree of political consensus surrounding the rule. The costs
and time needed to perform similar regulatory analysis in the fixture will
probably also vary—both at executive agencies and at CBO or other


74

suggested that a couple of years ago in the context of the Clean Air

it was a non-starter. I think that if there were an agency like
the one we're discussing today, actually analyzing alternatives like
that, it would enable people on both sides of the aisle, no matter
which party was in power, to get objective information which would
say, “yes, we can save consumers hundreds of millions of dollars by
having a flexible approach to controlling—to pursuing environ-
mental objectives.” And we can even move farther on those objec-
tives faster if we pursue flexible approaches. And that would be
taken more seriously.

Ms. GRAMM. It’s hard to pick just a few. Let me give you personal
example, though. When I retired from government, I started to
work out of my home. And I thought this would be great. I needed,
though, a little bit of assistance help to help me with scheduling
and keeping track of my calendar and running errands, et cetera.
And I had the perfect candidate. My assistant, when I was chair-
man at the CFTC, had had a baby recently, and she wanted to stay
at home with her child, but she was happy and would have loved
to have come to my house—and I would. ve been happy to have
both her and her baby come to my house to help me several morn-
ings a week with my odds and ends and administrative work that
needed to be done. I thought it would be easy especially since that
I could pay her Social Security and all other taxes, I thought, by
simply adding her on like a household worker. I did pay Social Se-
curity for the housekeepers I had when my children were young so
I knew how to fill those forms. I thought that it would be easy.

Unfortunately, when I realized what I actually had to do in
terms of the regulations that were required to have her come as a
temporary business employee—there were paperwork forms, tax
forms that were literally an inch thick. It was something—it simply
made me not hire her. Here was just another example of how regu-
lations can stifle, job creation and flexible kinds oF work activities
that are useful.

There are lots of other kinds of regulations that we’ve heard of.
I thought that the aspirin example was a good example that I
think many people are aware of. it shows how you can have a
regulation that actually does harm people rather than help them.
I think the asbestos abatement programs, are a similar problem
where we were very concerned about asbestos in many of our pub-
lic buildings, but when you actually went through the process of
ripping out the asbestos, you created a greater risk than if you had
left that asbestos all tied together and really not affecting people.
There are a lot of examples like that. I remember when the Envi-
ronmental Protection Agency was first considering banning all uses
of asbestos, the courts as well as OIRA at that time raised a ques-
tion about whether or not there were alternatives available for the
asbestos use, especially in brakes. Someone who might be exposed
to that form of asbestos might be someone who works on brake lin-
ings and, therefore, could be afforded vacuum and personal protec-
tion devices. On the other hand, if you didn’t have as effective
brake linings, you have to consider the tradeoffs that this would
potentially cause more accidents on the road.

You have the same kind of problem with National Ambient Air
Quality Standards [NAAQS], for ozone and particulates. EPA has


32

Page 27

22ND REFERENCE of Level 1 printed in FULL format.

Copyright 1998 Capitol Hill Publishing Corp.
‘The Hill

January 7, 1998
SECTION: Pg. 1.
LENGTH: 1552 words

HEADLINE: GOP READY TO DUMP CBO CHIEF; JUNE O'NBILL AT ODDS WITH LEADERS ON
ECONOMIC FORECASTS AND POLICIES

BYLINE: A.B. Stoddard

Bopy:
Although June O'Neill has a year remaining in her term as director of the
Congressional Budget Office, she has so antagonized Republican leaders that they

will soon begin the process of replacing her in 1999, sources said.

O'Nei11, named CBO director when the GOP took control of Congress in 1995,
has reportedly disappointed some Republicans , particularly in the House , who
expected her to produce more optimistic forecasts for their tax-cutting
Proposals.

Like her predecessor, Robert Reischauer , a Democratic appointee who was not
re-appointed after the Republicans won control of Congress , O'Neill also is
Likely to serve only one term and step down as the CBO’s fourth director at the
end of the 105th Congress. Alice Rivlin was the CEO's first director, followed
by Rudolph Penner.

O'Neill's status also is complicated by her recent firing of three senior
aides, including a former Democratic member of Congress

"There is some displeasure with June, in part because of her performance at
committees and weakness in testimony, and there are some policy issues, like
dynamic scoring, that have led to disgruntlement on the House side," said a top
Republican aide involved in the budget process

Dynamic scoring consists of projecting the economic growth produced by a tax
cut.

‘The staffer, who called O'Neill a "good, solid economist," said “when a bill
comes along and cuts taxes, the more conservative members would like to see it
stimulate the economy instead of having to offset it by cutting Medicare or
Social Security. she has not favored more dynamic scoring.”

As a result, the aide said, "There will be a search committee established to
start the process of finding a replacement for June."

O'Neill, who noted there is an election between now and the time her term
will expire, told The Hill that congressional leaders have not given her any
evaluation of her performance.


39

Page 4
‘The Washington Post, July 25, 1996

wrcent of all cases -- welfare families in which both the father and mother
tre present. Since only one parent had to work, day care was not an issue. Most
i those to whom the requirement applied were fathers with work experience who
wus were relatively easy to place. States were given five years to get ready.
411, 41 states flunked. Nine didn't even make one-quarter of the federal
vandard.

Granted, that was several years ago. Maybe the states are more committed to
te effort now and more skilled at job creation. So let's assume the governors
stually create all the needed jobs -- and come up with the necessary day care
id transportation. It will cost a bundle. When fully phased in, says the CBO,
xe Republican bill would increase spending by almost $ 9 billion a year.
tanwhile, however, federal welfare funding is being cut by about $ 10 billion a
tar. Does anyone really think governors are going to increase state taxes to
tose the gap? States will be “reluctant to commit their own funds to employment
fograms,* predicts the CBO. (States simply could drop recipients from the

211s, of course, although the governors insist that's not their intention. And
rere are practical difficulties: Even the most anti-welfare governor will seek
> avoid TV pictures showing mothers with young children being thrown into the
rreets.)

So what happens? The congressional bills provide penalties for states failing
> meet the federal employment targets. The only problem is that the penalties
se small compared with the costs of creating public jobs. Here’a the CBO again:
fost states would simply accept penalties rather than implement the
tquirements." In other words, the work strategy will be a flop, and once again
ae American people will have been misled by all the reform talk.

But we've got to do something, respond the congressional reformers; the
srrent arrangements have given Us soaring illegitimacy and rising welfare
spendency. Doubtful. Last year, three eminent conservatives (William Bennett,
lenn Loury of Boston University and James Q. Wilson of UCLA) told the Ways and
vans Committee that little is known about the link between welfare and
at-of-wedlock births. They might as well have been talking to the four walls.
ambers continue to insist that slashing welfare will bring back the fathers,
yatever the research comunity may say.

Through ali of this, the Congressional Budget Office told congressional
vaders the truth about their the welfare proposals. It cannot have been easy.
30 Director June O'Neil was handpicked for the job by Gingrich and Dole, at
nose pleasure ahe serves. In time, though, it is congressional leaders who will
2 on the hot seat. When the new plans don't work, they will have to acknowledge
ney were forewarned.

‘The writer is commissioner of health care finance for the District of
plumbia.

ANGUAGE: ENGLISH

DAD-DATE: July 25, 1996


64

A Congressional Office of Regulatory Analysis
Robert W. Hahn and Robert E. Litan

We are pleased to appear before this Committee to provide our views on the
Congressional Office of Regulatory Analysis Creation Act (H.R. 1704).

The two of us have studied and written about regulatory issues for over two
decades. Recently, we co-authored two documents published jointly by the American
Enterprise Institute and The Brookings Institution, which outline principles we believe
Congress should keep in mind as it seeks to improve the regulatory process.! We have
forwarded copies of these documents to the Committee with this testimony and would ask
that the documents be included in the record with this testimony. We are pleased that
H.R. 1704 is consistent with many of the principles in these documents.

We believe a Congressional Office of Regulatory Analysis is a good idea. Such an
office has the potential to better inform the public and Congress about the benefits and
costs of regulation. It also has the potential to improve the level of dialogue about the
impact of regulation on the American public. Too often, legislators and agencies find it in
their interest to highlight the benefits of regulation without also noting the costs. We
believe it is important to highlight both in a way that makes the regulatory process more
transparent.

Our testimony proceeds in three parts. First, we offer a definition of the problem

‘Robert W. Crandall, Christopher DeMuth, Robert W. Hahn, Robert E. Litan, Pietro S.

Nivola, and Paul R. Portney, An Agenda for Federal Regulatory Reform (American Enterprise Institute and The

Institution, 1997) and Robert W. Hahn and Robert E. Litan, Improving Regulatory Accountability
(American Enterprise Institute and The Brookings Institution, 1997).

4In addition, both of us have had experience reviewing regulatory analyses and proposals
while we served on the staff of the Council of Economic Advisers.


35

Page 30
‘Capitol Hill Publishing Corp., January 7, 1998

‘The men said that during mediation with the Office of Compliance, attorneys
for the CBO refused to reveal any evidence warranting the terminations. All
three settled with the CBO as a result, but only Greigg received adequate
compensation because he had 28 years of government service, according to Houts-
Waving spent most of their professional lives in the private sector, both
Houts and Kohn received less compensation

Houts called getting fired "a truly bizarre episode," one in which the three
men were not the only victims of O'Neill's decision.

“The CBO has experienced some deterioration because of the way June handled
administrative duties and her poor relationship with the Hill," said Houts. "
Under the leadership of Penner, Rivlin or Reischauer the CBO's veracity was
never in question.”

But most CBO watchers agree that O'Neill's tenure was cursed from the start
by Reischauer's stardom coupled with unpredictable economic growth that made
forecasting particularly difficult. Indeed, the concept of a balanced budget, in
addition to a surplus, is likely to cool budgetary politics for years to come.

“the CBO was going to become less influential and it wouldn't matter who the
director was," said a former assistant director at the CBO. "It shouldn't be as
up top on the agenda as it was 10 years ago. Why prolong public attention to a
problem that shouldn't rank as high? There are other problems that are more
important now like Social Security and Medicare."

LANGUAGE: English

LOAD-DATE: January 7, 1998


67
current cost. The message is clear—our regulatory system is in urgent need of repair.

Several scholars have also questioned the wisdom of the expansion in social
regulation. Some regulations, such as the phaseout of lead in gasoline, have been quite
successful, while others, such as the requirement for safety caps on aspirin bottles, actually
increased the hazards they aimed to reduce! The regulation on phasing out lead in gasoline
was successful because it was based on a solid scientific and economic assessment, which
strongly suggested that the benefits of removing lead from gasoline far outweighed the
costs. In contrast, the regulation affecting aspirin was ineffective because the regulators
failed to anticipate what in retrospect seems obvious—making it difficult for adults to
remove caps from aspirin bottles led people to simply leave the caps off, thereby increasing
the risks to young children. This regulation, whose impact was documented by
independent policy research such as that proposed here, was modified eventually. It
provides a good example of how even well-intended regulation can lead to perverse
outcomes, and an even better example of how effective policy review can improve
regulation and save lives.

Throughout this period of continuing regulatory change, the debates over
regulatory policy have often been highly partisan and ill-informed. We believe attempts
to depoliticize the process are needed. The proposed Congressional Office of Regulatory
Analysis represents an important first step in the right direction.

How the Congressional Office of Regulatory Analysis Can Help Solve the Problem
The proposed Congressional Office of Regulatory Analysis can provide a non-

partisan assessment of the benefits and costs of regulation that can help in improving
policy and educating the American public.


45

implementation methods available for small businesses to achieve compliance, and
establish Regulatory Fairness Boards to rate the regulators. SBREFA, which mainly put
real "teeth" into the 1980 Regulatory Flexibility Act (Reg Flex), took the further step of
requiring the Environmental Protection Agency, the Occupational Health & Safety
Administration and the Internal Revenue Service to convene, prior to introduction of a
regulation, a panel of small business owners to gather their input on how to minimize
the negative impact of the proposed regulation. SBREFA has also given small entities, or
organizations that represent them, the ability to sue agencies in Federal Court if they
feel adversely affected or aggrieved by an agency's rulemaking for failure to comply
with the law. It also makes a number of sections of Reg Flex, including Section 610 — a
section that requires agencies to review their regulations periodically -- judicially
reviewable for small business.

Last, but by no means least, SBREFA contained the Congressional Review Act,
which called for Congress to have ultimate oversight upon major regulations that
impact the American economy in excess of $100 million.

SBREFA TODAY

Where does the SBREFA law stand today? At this early point, it is my
perspective that federal agencies have yet to take it seriously. I see the same amount of
effort being made on following SBREFA as we saw when Reg Flex became law ~ that is:
very little effort indeed. It isn't for a lack of involvement nor process. There are Small
Business Regulatory Fairness Boards in every region and there are Small Business
Advocacy Review panels. Former Congressman Peter Barca is our first Small Business
‘Ombudsman and is charged with leading efforts to protect small business. Last, but not
Teast, the SBA's Office of Advocacy continues making every effort to weigh in on the
issues and keep small business informed and active on regulations.

The problem I see isn't infrastructure and set up under SBREFA. The problems I
see is federal agencies just flat out ignoring the law that Congress passed. Ultimately,


Testimony of Gary D. Bass
RE: H.R. 1704

July 10, 1997

Page 2 of 6

And it affer reviewing all this information Congress stil has questions, congressional leaders
‘can hold hearings, There have been many hearings on the CRA and on specttic regulations

Such as OSHA's methylene chloride tule. ‘Mr. Chairman, you. for one, have hosted several
hearings on EPA's clean alr standards in this

‘The true reason that these rules — which have been vocally opposed by some Members —
have not been considered under the disapproval process is poitical. There is a fear among
those who might vole to strike down rules that they would be branded antl-environment or anti-
worker as a result. More research will not address these political considerations,

But apart from whether H.R. 1704 would accomplish its stated purpose and lead to.more
resolutions of disapproval, the bill has many other problems:

it would create a costly new government apparatus that would duplicate functions
already performed by OIRA and the individual agencles. Under Executive Order 12866,
‘OMB's Office of Information and Raeguiatory Affairs (IRA) must review all major rules (rules
with an annual economic impact of $100 milion or more, or rules OMB so designates) and
other nanmajor rules that OIRA believes warrant consideration. Last year this amounted to the
review of 502 agency rules; the content of these reviews is readily available to Congress.

‘CORA would duplicate all the work done by OIRA, including an annual report estimating the
total cost of federal regulations on the U.S. economy. Although these responsibilities are
‘time-consuming and expensive — OIRA operates on an annual budget of $5 million — H.R.
1704 goes further than simply creating a second OIRA.

peri aait Eotemy eth abby ph nettles Abstr Aahod peet pte forming an
additional "Regulatory Impact Analysis" for each major rule, and oral satan
required by the Unfunded Mandates Reform Act of 1995 — currently a task undertaken by the
‘Congressional Budget Office.

in gxplaining the necessity for this Gupication, the bil states tha inorder for the legislative
branch to ful its responsibilities ... ‘must have accurate and reliable Information on which to

Predictably, this new and would cost taxpayers millions,
carrying with It few or no benefits. This bili was recently reported out of the Judiciary
Commi CORA has the potential to be so. expensive,

that the scope of CORA's activities would be far greater than OIRA’s, i's dificult to see how
this could possibly be enough.


8
Mr. SESSIONS. Good. Thank you. The gentleman from New

Hampshire.
Mr. SuNUNU. Thank you very much. Thank you, Congress-
woman. Could you describe a little bit how, well first, with regard

to this being an agency or an office, not an agency, the office
wouldn’t really have the ability to weaken or modify any existing
regulations. Correct?

Mrs. KELLY. No. Congress would have the ability to weaken or
modify or strengthen and enhance. Let’s pt it on both sides. The
idea is to give us information that we need.

But right now, stop and consider what has happened to small
businesses just in the last year. I am a small business woman, so
are three of my children and my husband. We are very busy pest
trying to make ends meet and trying to run our businesses. It is
almost impossible for us to know which of those 4,000 rules and
regulations that were just promulgated last year are affecting our
businesses. It is very difficult for a businessperson to know that.
We depend on our Congressmen to keep an eye out for us.

The other thing that as Congressmen and women, we are not al-
ways cognizant when these rules and regulations come from the
agencies about redundancies and overlap. This office could tell us
that kind of information.

Mr. SuNUNU. How would the analysis that the office is doing
compare to the regulatory impact analysis that some agencies cur-
rently undertake?

Mrs. KELLY. It would take whatever they have to say into ac-
count.

Mr. SUNUNU. It would build on that?

Mrs. KELLY. It would build on that, yes. The idea, and it’s writ-
ten into the bill, is that they would take whatever is available.
That was actually in the ly of my testimony, that they would
take the agency’s own information. But the other thing that is writ-
ten into the bill is that they can contract out for further studies
if they need to. It’s one of the things I think that would save money
from the agency. We have kept the amount of money that the agen-
cy could ever, would ever be working on. I shouldn’t say agency, I
mean office.

Mr. SUNUNU. Once this analysis is done, how do we ensure, what
mechanism do we use to make sure that the information then gets
out to consumers, to the small business community to enable them
to better understand what new rules and regulations may be, but
also what the costs of those regulations may be?

Mrs. KELLY. That really is the congressional responsibility. This
is an office that will work for Congress. That is a congressional re-
sponsibility for us to know what is there and to be aware. I am
sure you, Mr. Sununu are as aware as I am when something, some-
one will call and say, “I think that there is something happening
at an agency level that I would like you to have a look at.” This
would provide us with an office to turn to to say, I have a constitu-
ent who is concerned about this, could you please give me informa-

ion.

If there is information there that is a warning flag or if there
is—and I am speaking about it one way or another, if we need to
enhance it or if we need to reduce it we will know because the of-


H.R. 1704, CONGRESSIONAL OFFICE OF
REGULATORY ANALYSIS CREATION ACT

WEDNESDAY, MARCH 11, 1998

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,
NATURAL RESOURCES, AND REGULATORY AFFAIRS,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Washington, DC.

The subcommittee met, pursuant to notice, at 2:07 p.m., in room
2154, Rayburn House Office Building, Hon. David McIntosh (chair-
man of the subcommittee) presiding.

Present: Representatives McIntosh, Sununu, Barr, Sessions,
Tierney, and Kucinich.

Staff present: Mildred J. Webber, staff director; Karen Barnes,
professional staff member; Andrew Wilder, clerk; and Elizabeth
Mundinger, minority counsel.

Mr. SESSIONS [presiding]. The Subcommittee on National Eco-
nomic Growth, Natural Resources, and Regulatory Affairs will
come to order.

Today, we are going to examine a very important issue, the bur-
den of Government regulations on the American people, and
Congress’s role in reviewing these regulations. We are considering
a bill called the Congressional Office of Regulatory, Analysis Cre-
ation Act, H.R. 1704, submitted by Sue Kelly, the Honorable Sue
Kelly of New York, which would help Congress carry out its re-
sponsibility to review regulations.

The problem that is before Congress is that regulatory costs each
year amount to $688 billion. That is a 1997 figure. If you will
please note for purposes of evaluation, we have on the left of the
Chair, three different charts that enumerate these costs and show
the burden of regulatory growth that we have and the huge in-
crease. That is approximately $6,875 annually for a typical family
of four. That is roughly one-third for paper work, one-third for eco-
nomic regulations such as price and entry controls, and one-third
for social regulation, such as environmental, health and safet:
rules. More is spent on regulation than on medical expenses, food,
transportation, recreation, clothing or savings. Regulatory costs ab-
sorb 19 percent of an average family after tax burden in 1997.

The costs are rising. Today’s regulatory costs, total regulatory
costs in 1997 were up 1.6 percent from the previous year, 7.2 per-
cent over the past 5 years, and 25.3 percent over the past 10 years.
In addition, the number of pages in the Federal Register, which
contains all Federal regulations, has grown 37 percent over the last

@


42

of regulating must change for SBREFA to be truly effective. This
has not yet occurred.

That is why the introduction and passage of H.R. 1704, the Con-
gressional ‘Office of Regulatory Analysis Creation Act is so impor-
tant. Having reviewed the content and intent of the proposed legis-
lation, NSBU, on behalf of its 65,000 members, offers our support
to the legislation. CORA can serve a vital function for America’s
small business, and put real strength into SBREFA. It would be a
small budget, small staff addition to Capitol Hill, whose impact
could be far reaching. We know the story of SBREFA. We know
that there are those who want to see it fail. We know that Con-
gress has taken no action under SBREFA, despite the approxi-
mately 105 major rules based since it became law.

It is a learning process, but we are approaching the end of the
learning curve. We need to act soon. But we don’t want to take ac-
tion without proper information. Again, SBREFA isn’t about elimi-
nating all the regulation, but simply about having a more informed
process. What NSBU foresees CORA accomplishing is to allow Con-
gress to act in a bipartisan and informed manner that will help

lembers on both sides of the aisle help their constituents more.
Members on both sides of the aisle often admit that there are times
when the Federal regulatory agencies go too far. In the small busi-
ness community we see it nearly every day, the list of forms, the
duplicative paperwork, the ridiculous process steps, the over-bear-
ing compliance officer. It is something a small business has to live
with every day of the company’s existence.

To make matters worse for small business, they have never been
able to be an active part of the regulatory process. Regulators, big
business, and law firms have monopolize: the process and made it
complicated and expensive. On a regular basis, the business that
I own is requested to go back 5 or more years and answer ques-
tions relating to past employees about benefits, about earnings, and
many more issues from the Social Security Department. When we
have to do that, these forms are two or three pages long. We have
to go back in files that are offsite. We have to search. This is a day
or two of work. During that day or two of Jooking for old files, we
are, not able to move forward and do the things that we are about

lo.

The truth of the matter is that we have seen 2 years of SBREFA
and Federal regulatory agencies aren't including and informing the
small business community nearly enough. They are not deterred
from business as usual, nor are many of them regulating any wiser.
They know how difficult it is for a small business to sue. Courts
aren’t always the answer for small business, and while they have
proven a critical vehicle for interest groups to push their agenda,
the expense and enormity is somewhat overwhelming.

Despite all this, NSBU. is obligated to protect small business in-
terests and has sued the EPA in Federal court over last year’s pro-
mulgation of the revised National Ambient Air Quality Standards,
known as NAAQS, for ozone and particulate matter because small
business concerns were not met and EPA disregarded the SBREFA
process entirely.

It is our hope that in the near future, a middle ground can be
found between small business, Congress, and Federal regulatory


73

Mr. Livan. OK, on the cost issue. The problem is the costs are
hidden, and they're spread around all the products we buy and sell.
And so if you were to take even half that number up there on the
board and divide it across, all retail sales, you’re looking at maybe
a couple percent on every item, on some items it’s more, some it’s
less. On cars, for example, it may be several hundred bucks, if not
more. Actually, it’s probably more than that if you add all the safe-
ty and the environmental regulations. But I think—I don’t really
view it from that perspective because a lot of the costs it seems to
me that we impose are probably worth it. And that’s something
that this agency would presumably tell you—would help tell you.
And so, to me, you know, running through that exercise may or
may not be that important, because I want to know whether any
individual rule is worth it or not. And sort of adding up the aggre-
gate cost—let’s say it adds $1,000 to the price of a car—that in a
way almost tilts the debate. It sort of says, “well, maybe it isn’t
worth it because we got $1,000 out of the car,” when in fact some
of the regulation may be worth it.

So I'd rather focus on individual rules, just as my own preference
as a way to look at it. And then on looking at lower-cost alter-
natives, I’m going to have Bob expand on this, because we have in
our testimony the aspirin example. That’s one that we have in our
testimony, and I’m probably—he can probably give you some oth-
ers.

Mr. Haun. I was going to give a couple of examples at different
levels. First, let me start with a very personal example, which is
really an anecdote, but it happens to be true.

Over 10 years ago, I started a school for low-income kids, low-
income children in Providence, for kids in grades 4 through 8, pri-
marily what is known today as children of color. They weren’t
known that way then. And our school is doing very nicely. It’s sup-
ported primarily by private donors and foundations. But I went up
to the school over the weekend and on Monday, and I noticed that
this new building we had purchased for about $70,000, we now had
a ramp going around the building. And as far as I could tell it was
required by the Americans with Disabilities Act. Now no children
are going to be using that building. Our main building is handi-
capped accessible. And we had to pay $15,000 to put this ramp,
which I doubt many folks who are disabled would even use any
way, because it’s not simple to use but it satisfied the regulation.
And what struck me about it is it really brought it home for us
being a small organization, in a sense we're a business, we're
spending $15,000, which is like two and a half scholarships for

ids—you know 2¥2 years worth of scholarships, or 3 years worth
of scholarships, and we have to do it for an expenditure which we
don’t think is in the best interest of the lower-income children that
we educate.

I see my light’s on. Let me add one other example, which might
have a larger impact, but as public policy impact.

We have traditionally regulated vehicles by saying how much
junk should come out of the tailpipe very specific amounts. And
every vehicle had to meet that standard. Why not allow some vehi-
cles to do better than the standards, and some vehicles to do slight-
ly worse so long as there’s no impact on the environment. And I


82

Act. And that, therefore, is one of the reasons that I’m a strong
supporter of this bill. I have no further questions for this panel.

Mr. Tierney, did you have any last questions?

Mr. TIERNEY. Yes, I guess I do with Dr. Gramm. Thank you. Are
you suggesting in the last statement that OIRA’s analysis cannot
be reviewed by Congress so that we can determine whether or not
it’s, in fact, be a well done analysis, cost-benefit analysis, that we
can’t look at what they’ve done, and with our staff and our own——

Ms. GRAMM. Well, I don’t suggest-—

Mr. TIERNEY [continuing]. Commonsense we can say-——

Ms. GRAMM [continuing]. That at all. No, I’m just saying that I
think Congress would benefit by having its own independent——

Mr. TIERNEY [continuing]. And why is that? Are you insinuating
that because of the connection with the executive branch, there be
some political bias there, or something that we ought to be con-
cerned about that we can’t otherwise—

Ms. GRAMM [continuing]. Well, don’t forget that——

Mr. TIERNEY [continuing]. Detect?

Ms. GRAMM. Well, first of all, in many cases OIRA may not actu-
ally be writing any kind of analysis. A lot of their work is done by
just discussion. Their job is to—and their role has traditionally

een—to urge agencies to do better analyses. And, its clear——

Mr. TIERNEY [continuing]. Just starting—

Ms. GRAMM [continuing]. That they’re not doing that. Or, at least
the agencies are still not producing good analyses.

Mr. TIERNEY. Well, let’s assume that OIRA does the job, or that
we do our job and force OIRA to do the job that we think it should
do, then aren’t we not to be able to look at what they do and deter-
mine for ourselves whether or not the proper analysis has been
done without going out and spending money and duplicating it?

Ms. GRAMM. Well, you might be able to do it, say, using your own
staff. But the point is that it’s not getting done. Again, I agree that
on the macro issues, you might look at an individual analysis by
analysis and determine yourself, say, if you’re very interested
Member of Congress and have a staff to look at all the regulations.
I would argue that Congress, as a group, needs to have that kind
of independent analysis, even if OIRA is very strong, simply be-
cause OIRA being part of the executive branch——

Mr. TIERNEY. Well, let’s play that out for a second——

Ms. GRAMM [continuing]. Again, it’s going to reflect the—reflect
the President.

Mr. TIERNEY. Well, not necessarily, but let’s play that out. Let’s
suppose that we're all so distrustful that we think because we're
associated with the executive branch, therefore, that analysis can’t
be the one we’re looking for. So, let’s do CORA, where we have a
real concern that now we have a partisan-established staff over
there because it’s selected by one of the parties in the majority. So,
who do I go to now to get my third analysis so that we can keep
on going down the line?

Ms. Gram. I really reject the notion that analysis is partisan.

Mr. TIERNEY. Oh, well, let’s back up a step then. And why don’t
we just——

Ms. GRAMM [continuing]. And I don’t think—I think——


H.R. 1704, CONGRESSIONAL OFFICE OF
REGULATORY ANALYSIS CREATION ACT

HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,
NATURAL RESOURCES, AND REGULATORY AFFAIRS

OF THE

COMMITTEE ON GOVERNMENT
REFORM AND OVERSIGHT
HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
ON

HLR. 1704

TO ESTABLISH A CONGRESSIONAL OFFICE OF REGULATORY ANALYSIS

MARCH 11, 1998

Serial No. 105-146

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

ae

U.S. GOVERNMENT PRINTING OFFICE
50-118 CC WASHINGTON : 1998

For sale by the U.S. Government Printing Office
‘Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-057358-0





Poge 20

LTH REFERENCE of Level 1 printed in FULL format

Copyright 1998 Capitol Hil Publishing Corp.
The Hill

January 14, 1998
SECTION: Pg. 14

LENGTH: 464 words

HEADLINE: DONE IN BY DYNAMIC SCORING

Ropy:

‘By most accounts, June O'Nei11 has done a credible job since being appointed
director of the Congressional Budget Office by the newly elected Republican
leadership three years ago. While not as politically savvy as the three other
economists who have headed the CBO since it was established in 1975, O’Neill is
widely regarded as a competent professional who calls the shots on economic
policy issues as she sees them,

But that, apparently, is the main reason why Republican leaders are unhappy
with O'Neill and have decided to replace her when her four-year term expires at
the end of the year, As The Hill's A. B. Stoddard reported last week,
Republicans have become disenchanted with O'Neill because she failed to produce
more optimistic forecasts of the budget deficit.

Never mind that the best statistical minds in the country, including those
who work for Treasury Secretary Robert Rubin and Federal Reserve Board Chairman
Alan Greenspan, didn't see that the nation's extraordinary economic growth is
shrinking the federal deficit faster than anyone expected. Because of a surge in
tax revenues and spending restraints , largely imposed by the Republican
Congress , the $570 billion deficit that was projected for 2002 when President
Clinton took office may even turn into a surplus this year

But O'Neill's skeptical attitude toward dynamic scoring , the process used to
project economic growth produced by a tax cut , prevented the CBO from alerting
Republican budgeteers in both the House and Senate in time to get a jump on
Clinton and promise voters tax cuts and other goodies in this election year.

As a top Republican aide involved in the budget process told The Hill, eve!
though O'Neill is a "good, solid economist," more conservative members were
angered that the CBO didn't give them advance notice of a budget surplus that
would justify cutting taxes and thereby “stimulate the economy instead of having
to offaet it by cutting Medicare or Social Security."

while there were other criticisms of O'Neill's brittle personal style and her
recent firing of three senior CBO employees , Democrats were angered because one
was former Rep. Stanley Greigg (D-Iowa) and suggest the firings were politically
motivated , it appears that O'Neill was destined to fail

As her inmediate predecessor, Robert Reiachauer, noted, any director of the
BO who was truly doing his or her job would be criticized by Congress. " Those
who appoint you," said Reischauer, “are the most disappointed in your



Testimony of Gary D. Bass
RE: H.R. 1704

duly 10, 1997

Page 4ot 6

CORA would do the various types of analyses within a 45-day perlod before reporting to the
appropriate committee. Even if CORA gets a head start on iis requirements — say when the
‘agency publishes a Notice of Proposed Rulemaking — H.R. 1704 still would be unworkable.

During the 1994 debate over unfunded mandates, Robert Reischauer, Director of CBO at the
time, was very skeptical of the legislative branch's ability to conduct these sorts of highly
technical and tin consuming cont extstes, calling it “impossible in any practical sense.”
Congress heeded Relschauer’s warning by narrowing the scope of analysis that CBO is to do
under the Unfunded Mandates Reform Act.

Yet H.R. 1704 would move Congress directly Into areas that Relschauer wamed would be
dangerous. To top it off, H.R. 1704 requires CORA not only to conduct detalled cost-benefit
analyses, but also determinations of “potential net benefits" and descriptions of alternative

Put public pr finding
cost" regulatory approaches and don't take into account the reality of regulation. itis well
documented that the costs of regulatory compliance decrease dramatically over time for a
number of reasons (2.9. regulated entities adapt to new rules and leam to comply in more
cost-effective ways; and technological advances Improve the ablity of regulated entities to
comply). tf CORA Is not required to take these factors Into consideration, you would create an
institutional bias In the scoring of rules.

It contains no language requiring CORA to operate In the sunshine. During the 1980s,
OMB was permitted to operate in secret with litle public accountabilty. Rules would go to
OMB, changes coud be mado, and no one woul know exactly why. Simla CORA,

environment to children’s health could be made without ever providing a proper ¢ explanation to
the public. "hiss espdaly gear Congres gig oe CORA indgs a bass
to reject agency rules.

‘As the Freedom of information Act has been advanced, OMB has opened up slightly (hough
some of its problems still remain since tt is not subject to the same statutory requirements as.
federal agencies). But H.R. 1704 doesn’t touch the subject of whether or not FOIA would
apply to CORA, nor does it spell out any other mechanisms to bring CORA into the sunshine to
ensure greater public accountability.

More importantly, CORA raises serious concems involving the Administrative Procedure Act.
Under the APA, agencies are required to take a number of steps (e.g., public notice and
comment) to ensure openness. (Agencies can algo be sued ft the agency decision i arbitrary

and capricious,” checks CORA would have to conduct cost-
analyses just like federal agencies, but uniike federal. it would not be bound to
the APA. This means ‘decisions at CORA that could lead to the defeat of public


84

solution.” And so, now we had OIRA with two Executive orders
going after regulation.

A few years later, during your tenure, we had the Vice Presi-
dent’s Council on Competitiveness. Another magic bullet was com-
ing—that you were going save business from bad regulation.

is time around, we've got legislation. In the last Congress, the
Unfunded Mandates Reform Act, revisions to the Paperwork Re-
duction Act, SBREFA, and with each one of those I heard the rally-
ing cry from business: “a magic bullet. This is going fix it.” And
here | we are again with CORA, another magic bullet. Well, I don’t
think so.

There is no doubt that the regulatory process is a difficult proc-
ess. There is always tension, but most often tension between regu-
lated communities’ interest and the public interest. And there is no
doubt we need a better balancing act between those tensions.
CORA will not achieve that balancing act that’s needed. There just
is nowhere in the making.

On top of it, one of the biggest problems with the rulemaking
process is we need to speed it up, not take it and make it slower
with more and more analyses.

Now, today there was a lot of discussions about regulation. I deal
with regulation from a different perspective. I deal with the moth-
ers and the fathers and the families of kids who eat tainted meat
and have children that die. I deal with kids who have asthma from
unclear air. I deal with people who depend on the Federal Govern-
ment to put out fair and better public protections. I also must say
about this notion of the cost of regulation. Regulation also gen-
erates jobs. There was an interesting study done by the Economic
Policy Institute that demonstrated in the environmental arena,
when you look at all regulation and all impact on the economy, it
actually generated slightly more jobs, displacing in sub-sectors
where the revenues and the incomes go.

The real issue, as you had said earlier today, Mr. Chairman, it
isn’t that you need more information. If Congress wants, it has the
choice to disapprove or approve regulations. It requires political
will. You have always had that authority. You’ve had it before the
Congressional Review Act, to legislate as you wish. If you have a
problem with a rule, use your power. It isn’t a problem of informa-
tion, and frankly, I was a little confused with Mrs. Kelly’s com-
ments at the beginning about just a second opinion. And in fact,
if I hear her, I’d like to understand more clearly what she means
because the legislation doesn’t say that. And in fact, your esteemed

anel before that, pulling out their testimony—it says right here
from AEI and Brookings and it’s going to conduct its own regu-
latory impact analysis, including an assessment of their benefits
and costs. Assess whether the agencies comply with the procedural
steps and issue an annual report on costs. You can look at the bill
itself; it says that very specifically.

What is also says, is that CORA is to generate alternative regu-
latory approaches. Now, this is going to occur after the public has
had an opportunity to comment on a rule—after a point at which
there has been a fair and equal opportunity, and potentially jeop-
ardize any kind of potential lawsuits that are filed on that through
the Administrative Procedure Act.


12

CBO
PAPERS

REGULATORY IMPACT ANALYSIS:
COSTS AT SELECTED AGENCIES
AND IMPLICATIONS FOR.
‘THE LEGISLATIVE PROCESS

‘March 1997

0

CONGRESSIONAL BUDGET OFFICE
SECOND AND D STREETS, S.W.
‘WASHINGTON, D.C. 20515

_______ |



54

program at the Center for Study of Public Choice at George Mason
Iniversity.

This is a need I identified when I headed OIRA over 10 years
ago. The need for a mechanism to create responsible regulations
and to limit the production of overly burdensome regulations is
even greater today, as very conservative estimates of the direct cost
of regulation approaches $7,000 per year per family—I didn’t know
you would have a visual for me right there. But those are the same
figures that I’m using that professor Hopkins, from Rochester, has
carefully analyzed.

A Congressional Office of Regulatory Analysis can help ensure
that these resources that American families dedicate each year are
used wisely, and to help ensure that regulations that are written
implement the laws appropriately, as Congress has written them,
and ultimately make society better off.

Thank you very much.

[The prepared statement of Ms. Gramm follows:]


96

eee =r
See cuminonen rm cononess SSS
Sas Congress of the United States Ea
——— House of Representatives =
2 ‘COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT ==.
nae 2157 Parourm House Orrice Bunn el
= Wastmaton, OC 20515-6143, =,

‘Subcommittee on National Economic Growth,
Natural Resources, and Regulatory Affairs
Hearing on “Congressional Office of Regulatory Analysis Creation Act,” H.R. 1704
March 11, 1998
‘Statement of Chairman David M. Melntosh

Today we are going to examine a very important issue -- the burden of government
regulations on the American people and Congress’ role in reviewing these regulations. We are
considering a bill, the “Congressional Office of Regulatory Analysis Creation Act,” which would
help Congress carry out its responsibility to review regulations.

Regulation cost $688 billion in 1997. That's imately $6,875 annually for a typical
family of four. (roughly 1/3 for paperwork, 1/3 for economic regulations, such as price and entry
controls, and 1/3 for social regulations, such as environmental and health and safety rules) More
is spent on regulation than on medical expenses, food, transportation, recreation, clothing, or
savings. Regulatory costs absorbed 19 percent of the average family's after-tax budget in 1997.
‘And the costs are rising. Total regulatory costs in 1997 were up 1.6 percent from the previous
‘Year, 7.2 percent over the past five years, and 25.3 percent over the past ten years. The number
Of pages in the Federal Register, which contains all federal regulations, has grown 37 percent in
the past 10 years.

‘Our Subcommittee held 18 field hearings over the past three years, and we heard from
citizens across the country who are suffering under the burden of regulations. We beard from.
Bruce Gohman, president of W. Gohman construction company in St Paul, Minnesota, who told
us that, although his company could grow, he keeps the number of employees under 50 so that he
will not be subject to more regulations. We heard from Judi Moody in Sumner, Washington,
‘who told us that when she and her husband tried to open a small bookstore and cafe, they were
stopped by an overwhelming number of regulations. Mrs. Moody and her husband just wanted to
hire a couple of employees to sell books and coffee. But because of government regulations, they
‘were not able to realize their dream or create more jobs.

Not only do regulations cost jobs, but also some regulations work against their stated goal
cof protecting public health. The FDA recently proposed a rule to take asthma inhalers with CFCs
off the market. This regulation will leave asthma patients without the medicine they desperately
need, because many will not be compatible with the CFC-free alternative inhalers.


75

its own analysis, as well as the Department of Energy, to indicate
that ground-level ozone does have beneficial screening effects
screening out ultraviolet radiation. EPA had a study that affirma-
tively stated that it did not consider, but there are other studies,
including a Department of Energy study, to indicate that if you
consider the screening effects of ground-level ozone, EPA’s regula-
tions would result in their being harmful to human health. There
would be more deaths, more melanomas, more cataracts as a re-
sult.

These kinds of impacts don’t even consider what people often
refer to as a health-wealth effect, and that is for every $9 million
to $12 million worth of regulations that are imposed on an economy
tends to create one additional death simply from lowered health,
greater stress that comes from unemployment, and lower incomes
and a lower standard of living. We could § on forever, but the
point is that with an office like CORA, you'll have an organization
that is independent of the agency that wants to put forth the rule,
looking at the rulemaking with greater care.

Mr. McInTosH. Thank you to all of you. Let me turn now to Mr.
Tierney for any questions you might have for the panel.

Mr. TIERNEY. Thank you, Mr. Chairman.

Gentlemen, if I could ask Dr. Gramm just for a second to excuse
me for regard to my questions. Didn’t you, in the course of your
presentation, indicate that you thought that there was sufficient
current legislative support for agencies to actually perform this
overview function without the need to create a new bureaucracy to
handle all these duties?

Mr. LITAN. No, actually in the course of our testimony, we point
out that in fact, of course, there is——

Mr. TIERNEY. Right. And you say that——

Mr. Livan [continuing]. There is an Office of —

Mr. TIERNEY [continuing]. It could be done in CBO?

Mr. LitaN. The?

Mr. TiERNEY. Did you say it could be done in the CBO?

Mr. Litan. Oh, this as an alternative, we did say that you could
have this function performed within CBO. You would have to add
some additional people and so forth to do it, because they don’t
have the analysts. But, yes.

Mr. TIERNEY. But if you did that, then you could do it in the
CBO. I mean, I liked hearing all of your antidotes, and I think we
can go on forever in any situation, given those. But with respect
to your $15,000 ramp around your building, how is, you know,
spending another $570,000 for yet a second analysis of the situa-
tion going to improve that particular incident, sir?

Mr. HAHN. Well—I think the two numbers are not comparable,
with all due respect. I think the $570,000 you used, which presum-
ably is the estimate of doing a good regulatory impact analysis,
would relate to another number that I developed in the course of
my serious research, which wasn’t anecdotal, which was going back
and looking at all OIRA’s between 1980 and 1995. And we're now
updating that to the present. And that suggests if you looked at the
regulations that didn’t pass the benefit-costs tests and either re-
vised those or got rid of them, or made them more sensible, you
could allow the economy to grow on the order of $300 billion so that


AST REFERENCE of Level 3 printed in FULL format.

Copyright 1997 The National Journal, Inc.
‘The National Journal

May 10, 1997
SECTION: BUDGET; Pg. 930; Vol. 29, No. 19

LENGTH: 840 words

MEADLINE: 11th-Hour Save Puts CBO's O'Neill on the Spot
BYLINE: Eliza Newlin Carney

BODY:

"NeiLl just can’t seem to win. Two years ago,
Democrats blasted her gloomy economic forecasts. Last year,
Republicans accused her of overstating the costs of their pet
projects. Now critics within both parties question whether her
budget numbers can be believed at all.

As director of the nonpartisan Congressional Budget_
Office, Congress's fiscal arbiter, O'Neill takes it as a good
sign that her detractors sit on opposite sides of the aisli
‘If we're attacked by both sides, then we're probably doing the
right thing, '' she said.

still, the CBO's 1ith-hour discovery of a $ 225 billion
revenue windfall has put O'Neill on the spot. Most Members of
Congress, of course, are delighted about the money. But some
wonder whether the C80 may have hurt its credibility.

‘othe fact that the CBO, at the very moment when the
budget agreement seemed to be faltering because tough choices
were (being) made, came up miraculously with a § 225 billion
gift--you've got to say that's suspect,’' said Sen. Phil Gramm,
R-Texas. ''It does not pass the smell test.''

O'Neill, 62, is hardly the first CBO head to feel the
heat during high-stakes budget talks. when she took over the job,
outgoing CBO director Robert D. Reischauer reportedly gave her a
skunk doll, as a reminder that the CBO can be about as popular as
a skunk at a congressional picnic

But O'Neill, an academic economist and former CBO
analyst, has attracted unusual controversy since GOP leaders
appointed her in 1995. Democrats threatened to block her
appointment, fearing that, as a free-market conservative and a
Re she was unlikely to be objective.

In 1995, Minority Leader Thomas A. Daschle, D-S.D.
angered in part by the CBO's cautious growth estimates, called
the agency a ''Republican-dominated organization that can't be

Page 1


48

and has sued the EPA in federal court over last year’s promulgation of the revised
National Ambient Air Quality Standards (NAAQS) for ozone and particulate matter,
because small business concerns were not met and EPA disregarded the SBREFA
process entirely. It is our hope that in the near future a middle ground can be found
between small business, Congress, and federal regulatory agencies — some manner of a
hammer without tying up courts.

One matter is certain, in the current dynamic, regulatory agencies aren't deterred
by the Congressional Review Act provisions of SBREFA because they know that
Congress likely doesn't have the time, resources nor inclination to get in the regulatory
game despite the rhetoric. | think a major reason that Congress hasn't weighed in more
is because they feel uninformed. Information on regulation is hard to come by. There
are only two places to go, the Agency promulgating or lobbyists fighting the reg. Either
source's information could be somewhat skewed

The other main reason Congress stays out is partisanship. No matter the
strength of the argument, fighting any regulation leads to partisan wrangling. EPA's
NAAQS revision is a perfect example. It is clear that the science is weak, SBREFA has
been violated and the American people and small businesses will suffer economically.
Yet, we continue witness partisanship rearing its ugly head throughout discussions of
possible solutions. If CORA existed this very day, I am certain that the nonpartisan
information they would provide members of Congress would unite nearly all of you to
end this regulation. But we don't see it happening.

So Congress -- for the most part — sits it out and this shouldn't be. While
progress has been and is being made by a handful of regulatory agencies progress isn't
across the board. Congress must get involved to solve some of these problems.

CORA is a step in the evolutionary process of better government. NSBU and a
number of our regional affiliates support Rep Sue Kelly, Jim Talent and thirty-two other
cosponsors of CORA because it will be a positive factor for small business. On behalf of
NSBU and our 65,000 members, | would ask this subcommittee and then the entire


53

that will provide the tools we need in a bipartisan fashion to move
forward with this bill.

So I want to thank you, Ms. Miller, for coming forward, and I do
have one question for you. That is, in your estimation, if CORA had
been in place 3 years ago, when we changed the majority in this
Congress, would your small business have been better off?

Ms. MILLER. Yes, I believe it would have.

Mr. SuNUNU. Thank you.

Mr. McINTOSH [presidi Thank you very much, and thank you,
Ms. Miller. We'll ask our third nel to come forward at this time.

Our third panel includes Ms. Wendy Gramm, director of the Reg-
ulatory Analysis Program for George Mason University; Robert
Hahn, resident scholar at the American Enterprise Institute; and
Robert Litan, director of Economic Studies at ‘the Brookings Insti-
tution.

Til ask you to remain standing so that you can be sworn in. If
you would please stand and raise your right hands.

[Witnesses sworn.]

Mr. McINTOsH. Let the record show that the witnesses answered
in the affirmative.

d afternoon, and thank you all for taking the time to be with
the committee today. I certainly welcome your testimony and ask
that we begin with Ms. Gramm—Dr. Gramm.

STATEMENTS OF WENDY GRAMM, DIRECTOR, REGULATORY
ANALYSIS PROGRAM, CENTER FOR THE STUDY OF PUBLIC
CHOICE, GEORGE MASON UNIVERSITY; ROBERT HAHN, RESI-
DENT SCHOLAR, THE AMERICAN ENTERPRISE INSTITUTE;
AND ROBERT LITAN, DIRECTOR OF ECONOMIC STUDIES,
THE BROOKINGS INSTITUTION

Ms. GRAMM. Thank you.

Td like to summarize my testimony.

I support H.R. 1704 and the creation of a Congressional Office
of Regulatory Analysis. CORA can help Congress carry out its re-
sponsibilities under the Congressional Review Act. That office can
also help Congress with its very important oversight role to see if
the executive branch of Government is implementing the laws that
it has passed.

Analysis that is independent of the agency that produces the rule
is crucial. Indeed, for 25 years, Presidents of both parties have felt
the need for analysis that is independent of the agency writing the
rules. They have generally housed an independent analysis group
within the Executive Office of the President, and usually it has
been within the Office of Information and Regulatory Affairs,

But in this administration, OIRA is weak, and the analysis of
regulations by agencies as a result is simply awful, or non-existent.
Even if OIRA were strong, and even if agencies were doing a better
job of analyzing the benefits, the costs, the effects, and the alter-
natives to re; ition, a Congressional Office of Regulatory Analysis
would be very valuable. My belief in the importance of independent
analyses, outside the executive branch, from the perspective of the
average citizen is the reason why I started the regulatory analysis


49

Government Reform and Oversight Committee to follow the lead of the Judiciary
‘Committee and report this important bill to the House floor and pass H.R. 1704 in 1998.

Thank you for your time. I will answer any questions.

Pursuant to the terms of rule XI, clause 2(g)(4) of the Rules of the House of Representatives,
National Small Business United (NSBU) communicates the follow federal grant:

From the Environmental Protection Agency (EPA), for the ENERGY STAR Small Business
progtam, This isa three year grant, which commenced on 5/1/96 and runs until 4/30/99. NSBU
will receive $285,000 to promote this program in partnership with the EPA.

Immediate Temporary Help, Inc. receives no federal grant money,


78

have the staff expertise right now to do the kind of regulatory anal-
ysis that we’re talking about.

Mr. McINTOSH. So, it’s not a matter of one being partisan and
the other not partisan. They’re both not partisan, but one of them
has function on—

Mr. Lian. Yes——

Mr. MCINTOSH [continuing]. Budget expertise. One of them has
audit expertise on how the money is——

Mr. LITAN. Yes, it’s a different kind of—it’s a different kind of op-
eration. Bob, you may want to expand, or Wendy, on this.

Ms. GRAMM. I think it’s important to point out that the same ar-

ments that you make for budget issues you can make for regu-
latory issues. Regulations are, in essence, a hidden tax, where you
have decided that for public policy reasons, we’re going to impose
certain requirements by mandates rather than taxing and paying
for the program through the regular fiscal budget process—the way
we typically do. So, why shouldn’t, then, you have similar kinds of
institutions to provide the analysis and the information that you
need to make sure that the laws are being implemented from a reg-
ulatory, perspective in the same way that you do making sure that
the dollars are spent in the way that you allocated.

Mr. McINTOsSH. Let me say to Mr. Tierney that I’m very sympa-
thetic to your statement that we should be reluctant to create new
agencies and new entities. And I would agree if I felt that one of
these other entities had the capacity to do the job, which I actually
think OIRA does have the capacity to do, but I don’t think they’re
living up to it. I’m intrigued and want to think more about Mr.
Litan’s point that actually maybe you need two to have some intel-
lectual tension there to get people to come up with the right an-
swer. But I’m not convinced OIRA’s doing the right job now. And
I guess, Dr. Gramm, I’d like to ask you—when I served as a lowly
staff member when you were the confirmed head of OIRA, and my
recollection was that OIRA was pretty firm with the agencies. They
had to get the regulatory impact analyses in, Would you have ever
allowed the agencies in 1 year to have 43 of the 58 major rules that
they were proposing come through the system and be allowed to be
promulgated without a regulatory impact analysis that included a
cost-benefit test?

Ms. GRAMM. Well, my statement about OIRA being weak really
is based not on knowing what goes on the day-to-day business right
now in that office. It’s really based on looking at the output. It’s
clear that OIRA is not reviewing, based on the statistics, they're
not reviewing as many regulations as they did in the past. There
are fewer changes that are being made during their review process.
Fewer rules are sent back—just a handful. But you also have to
understand that the OIRA is part of the executive branch of Gov-
ernment, and this administration has, and this President has—
even in his Executive order—made agencies more important in the
regulatory review process. So, it’s a function of this administra-
tion’s priorities, frankly.

Mr. McINTOsSH. Weil, let me actually submit for the record a
chart here that does talk about some of those statistics on the out-
put. In President Reagan’s first term, when OIRA was created,
they returned 192 regulations. In the second term, which is when


unreliable, for reasons explained below. Bur won oper unc te cortany oxkd be the

‘Subcommittee is true to its beliefs, on OF reruerents shout be walved it Congress
does not fully fund the office. Otherwise, you will create another unfunded

ft Members are truly concamed about the quality of analysis coming out of the agencies,
perhaps Congress should use the funding that some seem ready to apply to CORA and
ceprepriate ito the agencies. Jus wan the as wo year the President has signed no law
the Smal Business Rguatory Enforcement Flmess Act the Unfunded Mandatoe Reform
Act, and amendments to the Paperwork Reduction I ete roauice agencies to
perform rigorous new regulatory cost assessments. The obligations under these laws would
be more easily fulflled with greater resources, and the results would likely be better as well,

tt runs counter to current efforts to streamline the government. For a Congress thal prides
salon streaminog government H.R. 708 goes I exactly the wrong decton. Not oy
‘would it create bigger government, but it would create government that duplicates functions

already performed — which calls into question whether this bill could stand up to the sort of
rigorous cost-benefit analysis so valued by Members of this Subcommittee.

‘This Congress has often raised objections to agencies thal perform apparently redundant
functions, Seite “Ratwrenting Government itiaves, bok of whch hare atrapies £0. 2866 and the

Increase government efclency. HF. 1706 woud rr counter ot by duplesiog tunclons
at OIRA and the individual agencies.

It contains the unreasonable expectation that CORA conduct Its own cost-benefit

analyses for all major rules. Not even OIRA does this, and for good reason. Cost-benefit
analyses are extremely time-consuming, requi require significant expertise, and are done within the

Although cost-benefit analyses often take years to conduct, H.R. 1704 seems to imply that


43

agencies. Some manner of a hammer without tying up the courts.
One matter is certain. In a current dynamic regulatory, agencies
aren't deterred by the Congressional Review Act provisions of
SBREFA because they know that Congress likely doesn’t have the
time, resources, nor inclination to get in the regulatory game, de-
spite the rhetoric. I think a major reason that Congress hasn’t
weighed in more is because they feel uninformed. Information on
regulation is hard to come by. There are only two places to go, the
agency promulgating or lobbyists fighting the regs. Either source’s
information could be somewhat skewed.

The other main reason Congress stays out of it is partisanship—
no matter the strength of the argument, fighting any regulation
leads to partisan wrangling. EPA’s NAAQS revision is a perfect ex-
ample. It is clear that the science is weak. SBREFA has violated
the American people, and small businesses will suffer economically.
There were two main bills, H.R. 1984 and S. 1084 that would have
protected small business and the country from these unnecessary
and questionable standards of both these bills had extensive bipar-
tisan support. Yet we continue to witness partisanship rearing its
ugly head through discussion of possible solutions, limiting the ef-
fect of Congress power.

If CORA existed this very day, I am certain the non-partisan in-
formation they would provide Congress would unite nearly all of
you to end this regulation, but we don’t see it happening. So Con-
gress for the most part sits out, and this shouldn’t be. While
progress has been and is being made by a handful of regulatory
agencies, progress is not across the board. Congress must get in-
volved to solve some of these problems. CORA is a step in the evo-
lutionary process of better government. On behalf of NSBU and our
65,000 members, I would ask this subcommittee and the entire
Government Reform and Oversight Committee to follow the lead of
the Judiciary Committee and report this important bill to the
House floor and pass H.R. 1704 in 1998.

Mr. Chairman, members of the subcommittee, thank you for your
time.

(The prepared statement of Ms. Miller follows:]


CONTENTS

Hearing held on March 11, 1998

Text of H.R. 1704

Statement of:

Bass, Gary, executive director, OMB Watch,
‘ramm, Wendy, director, Regulator Program, Center for
Study of Public Choice, George e Macon Qniversite Robert Hahn, resi-
dent’ scholar, the American interprise Institute; and Robert Litan,

director of economic studies, the Brookings Institution... 53
Kelly, Ho Hon. Sue, a Representative in Congress from the State of New 5
Miller, Sharon, small business owner, Midland, MI 41

Letters, statements, etc., submitted for the record by:
Bass, Gary, executive director, OMB Watch, prepared statement of ... 86
Gramm, Wendy, director, Regulatory Analysis Program, Center for the

Study of Public Choice, George Mason Universigy prepared statement 55

of ..

lahn, Robert, resident scholar, the American Enterprise Institute; and

Robert Litan, di director of economic studies, the Brookings Institution,

prepared statement of . 64
McIntosh, Hon. David M., a Representative in Congress from the State

of Indiana, prepared statement of .. 96

iter, Sharon, small business owner, Midland, MI, prepared statement “4
mers Hon. John F., a Representative in Congress from the State
fassachusetts, documentation summarizing the substantial cost of

performing an independent RIA . a «

dD


66

improved, s0 that we could save more lives with fewer resources. One study has found that
a reallocation of mandated expenditures toward those regulations with the highest payoff
to society could save as many as 60,000 more lives a year at no additional cost.

Given the caps on federal discretionary spending, it is quite likely that regulatory
activity will increase far more rapidly than federal spending. Yet, the economic impacts of
regulation continue to receive much less scrutiny than direct, budgeted government
spending. This must change if society is to reap the maximum rewards from regulation at
the least cost.

While social regulation is on the rise, regulation of prices and entry into specific
industries—so-called “economic regulation”—is on the decline. Over the past two decades,
there has been substantial economic deregulation of airlines, trucking, railroads, financial
markets, and energy markets. Although deregulating specific industries has led to
substantial economy-wide gains, the steady rise in social regulation—which includes not
only environmental, health, and safety standards but many other government-imposed
rights and benefits—has had mixed results.

Entrepreneurs increasingly face an assortment of employer mandates and legal
liabilities that dictate decisions about products, payrolls, and personnel practices.
Examples include rules for making buildings and offices accessible to the disabled that pay
little attention to either benefit or cost, and rules for providing child care that make it
difficult to provide such care in the home. While such regulations may have superficial
appeal, they also have the potential to be excessive. Philip Howard highlighted some of
those excesses in his best-selling book on regulation, The Death of Common Sense. In that
book Howard showed how laws and regulations deterred Mother Theresa and the
Missionaries of Charity from building a homeless shelter in the South Bronx and prevented
‘Amoco from reducing five times as much benzene at its Yorktown refinery at one-fifth the



52

the officials of CORA, for the people that would operate it rather
than to have one party or another just make those appointments?

Ms. MILLER. You are asking me if I would look at or support a
different—

Mr. TIERNEY. No. If you would support bipartisanship, by taking
away that partisan potential of just having one party make the ap-
pointments, which obviously would lead to the pros; of the im-

ition of some ‘isan ideology and just remove that by putting
in a more neutral appointment process.

Ms. MILLER. I believe there should be a neutral appointment
process. .

Mr. TrERNEY. Thank you.

Mr. SUNUNU. Thank you very much. Mr. McIntosh.

Mr. McINnTosH. Thank you, Mr. Chairman. First of all, let me
say I strongly support this legislation and appreciate the author,
Mrs. Kelly, coming earlier. I appreciate you coming, Ms. Miller,
and want to say thank you to my colleagues who have chaired this
hearing so far. You have done a great job for me and the whole
committee.

Let me put some facts on the table here about this discussion.
The fact is that the agencies are failing to do their regulatory im-
pact analysis. OIRA in their own correspondence with this sub-
committee admits that of the 58 major rules that they were sent
last year, there were only 16 of them in which they did a regu-
latory impact analysis where they weighed the costs and the bene-
fits. agencies aren’t living up to their own Executive order that
President Clinton promulgated at the beginning of his administra-
tion. OIRA has virtually abdicated its role in trying to police and
enforce that. So you need to have congressional action. In order for
us to take a role in this, we need to have the information to be able
to understand what is at stake in these regulations.

Frankly, I would be willing to entertain an amendment to in-
crease the authorization if you think that is what it is going to
take, Mr. Tierney, to get the job done. Because I think it is so im-
portant that we have this information before us. Let’s take one ex-
ample, the NAAQS regulation that we talked about earlier. EPA
gave testimony to this subcommittee last Peal that they were going
to arrogantly break the law in SBREFA, by promulgating that reg-
ulation without doing an impact analysis because of the Supposedly
small impact on small businesses, when their own regulatory re-
view materials state very clearly that it has a significant impact
on small businesses.

I asked their lawyer, “How are you going to defend that in court
with a straight face?” And he gulped and said, “Well, we'll do it.”

0 IRA conspired with EPA to make sure that other agencies did
not give any t; of regulatory impact analysis on that regulation.
We're currently investigating that entire episode, because it was
one of the worst episodes that I’ve ever seen in OIRA’s history.

These things are a very serious matter. The impact of these regu-
lations are huge. Testimony before this subcommittee has indicated
that regulations cost as much as $600-$700 billion a year, more per
family in this country than the tax burden on the average family.
It’s time that Congress does fulfill its responsibility under the Con-
gressional Review Act. CORA is a tremendous piece of legislation


101

ysoU]O HY WW plAed uewssasfu0:) 40y pasedaag ‘SURUPUPUNUIGS PIEMIOYT THT, “sao4;) aukeM -224n0$

Ivak tad $/8'9¢



Type or Purpose for FTEs and | Low uatimate | High Ratinate
Extramural Resources .

Cumulative Total
(Base resources + H.R. 1022
+ WLR. 994)

Including Permits
- PIES 3,352 FTES 4,083 FIBA

- $ for PTEs and extramural | $1,452 million | $1,709 Tmition
resources

Only Reguiations
FTEe 1,407 FTEs 1,860 Frme

- $ for PTBs and extramural | $ 349 million} § 448 million

resources

I hope this information will be useful to you as you begin
your mark-up. Please let me know if I can be of further
assistanc

The Office of Management and: Budget has no objection to this
letter from the standpoint of the President's program.

Sincerely,

David

diner
Agsistant Administrator


22

a

In order to respond to this question, we must make several
assumptions with regard to a number of the provisions in
H.R, 994, and place this bill into context with other
pending legislation, particularly H.R. 1022. H.R. 994
requires that the Agency develop information to characterize
rigke and-economic costs, benefits and impacts for all

rules. This’ level of investment in risk and economic

analyeis is not now routinely produced to support every
regulatory action undertaken by the Agency. However, the
regulatory development process for major or significant
regulations does require this kind of information bi
developed (primarily economically significant regulations as
defined under Executive Order 12666 and the Unfunded
Mandates Reform Act of 1995). Proposed provisions in H.R.
1022 require risk and economic information be prepared for a
substantially larger universe of the Agency's regulations,
though not every new afd past regulation as required in H.R.
994.. Therefore, H.R, 994 would require more analysis than
ig (1) either conducted under current requiremente, and (2)
additional requirements posed by H.R. 1022's risk assessment
and economic analysis provisions. What follows below is an
attempt to depict these baseline and incremental costs.

In response to previous requests for information from
Congress and the White House, the Agency measured the
baseline level of current resources devoted to risk
assessment and economic analyses. We estimate that we
devote approximately 690 full-time equivalent (PTE)
positions at a,cost of $55 million per year, and an
additional $65 ‘million per year in extramural resources to
conduct risk assessments and cost-benefit analyses required
under existing environmental statutes, administrative
procedures, and other Administration policies.

The Agency has aleo estimated the incremental annual costs
of meeting the risk asaeasment and benefit-cost provisions
of H.R. 1022, which affects primarily new rules, but will
also have potential implications for past rules. Due to the
uncextainties in knowing how many past and new regulatory
actions will be the subject of judicial review, the Agency
produced a range of estimates for the resources needed to
comply with the provisions of H.R. 1022. A large:
proportion of the estimated costs are attributed to the
resources required to analyze permit decisions, but there
will be substantial increases in the analytic requirements
for regulatory actions (between 671 and 996 FTEs, and $221
to $287 million in salary and, analytic resources).

The provisions of H.R. 994 expand these requirements beyond
current and proposed action covered under H.R. 1022,
affecting: (1) the remainder of new EPA activities not
already covered by this proposed legislation; and (2) the


34

Page 29
Capitol Hill Publishing Corp., January 7. 1998

Another controversy attached to O'Neill was her recent firing of three senior
CBO employees, including Stanley Greigg, a former Democratic representative from
Towa who served as director of the Office of Intergovernmental Relations. He
helped establish the CBO with Rivlin in 1975

Because all three men claimed to have been fired without explanation and are
over the age of 60, and one of them is disabled, the incident caught the
attention of the House Budget Committee. Fourteen Democrats on the committee
wrote to O'Neill on Oct. 29, inquiring whether such "midnight pink slips" had
violated the law.

“The CBO has, we are informed, not disclosed any documentation nor has
asserted any reason for these dismissals. ... We are troubled that the CBO might
be relying on age and handicapped stereotypes in making employment decisions.
This is absolutely untenable and patently illegal,” said the letter written by
Rep. Patsy Mink (D-Hawaii).

O'Neill, who responded to the letter from the Democrats, said the three men
were "made aware of the complaints against them and they were made aware of
their rights." She said she is not able to discuss those explanations because
the legal agreement they entered into required the parties to keep such
information confidential.

A spokeswoman for Rep. John Kasich (R-Ohio), chairman of the House Budget
Committee, said she vas aware of the firings but not of the letter Democrats
sent to O'Neill. She did not respond further.

While some former employees question O'Neill's tactics in firing the three
men, two of them said the dismissals were warranted, most especially in the case
of Greigg.

“This is an unusual event for the CBO, to fire top people,” said one former
top-level staffer. "I had seen other directors who were no fans of Stan Greigg.
But why did June fire him? I think it's a matter of personality and sensitivity.
June ig not a real warm person. I don't think she would lose sleep over firing
someone. This is not an attractive feature of June's personality, but in this
cage it enabled her to do the right thing."

Paul Houts, the former editor-in-chief at the CBO, said he has had to sel)
hia how @ result of his dismissal and he blames O'Neill, if not directly
Because O'Neill is a weak leader, he maintains, power struggles emerged between
the assistant directors which eventually drove the men out of their jobs.

In the end, Houts and Greigg were approached by O'Neill about being fired,
but Sherwood Kohn, 70 , an editor who had already arranged his retirement plans
for January with the CBO , was called by the Personnel Department and told to be
out of his office by the end of the week.

Houts said he was informed by O'Neill herself that he had been fired and that
o’Neil1 said only that "the process wasn't working." When he asked to see his
personnel file Houts said he found not a single letter or memo of complaint or
any other analysis of his performance.


58

analysis is provided by organizations in different sectors — Congress, the
Executive branch, academia — we would undoubtedly receive a more
balanced review and oversight of rulemaking.

I therefore support strongly and enthusiastically the objectives of the
CORA bill, H.R. 1704. The benefits of the bill, if enacted, are the
independent analyses that Congress will receive concerning regulations.
Using this analysis, Congress will be able to eliminate unnecessary
regulations, using -the Congressional Review Act, and to prevent
burdensome regulations from being imposed on states and individuals, using
ither the CRA or careful oversight of agencies. As an aside, I would argue
that an important objective of Congressional oversight of the Executive
branch involves tracking regulations and other forms of rulemaking to
determine if those regulations and policies implement the laws as passed by
Congress.

The benefits of the bill come from reducing unnecessary or overly
burdensome regulations. Given the annual cost of government regulations
of $688 billion, even a small percentage change would yield huge benefits.
This estimate of the cost of regulations represent direct costs only, and
therefore the total social benefits of better regulatory analysis and
accountability are understated. An example of an important indirect benefit
of a reduced regulatory burden is greater innovation at lower cost. In the
health care area this would lead to an improvement in the quality of life if
new pharmaceuticals are available more quickly and more cheaply. Another
indirect benefit of lower regulatory burdens is better health that accompanies
higher incomes and reduced stress due to higher incomes, greater job
availability, and a better standard of living. There is also greater
opportunity, freedom, and choice available when individuals and businesses
can structure workplace practices, wages and fringe benefits to fit individual
needs and circumstances, rather than being dictated by the one-size-fits-all
approach that characterizes federal regulations.

The costs of the CORA bill include the cost of staffing the office.
History has shown that much can be done with a small number of highly
qualified individuals. President Ford and Carter’s Council on Wage and
Price Stability and OIRA were able to review many important regulatory
proposals with a handful of high quality economists. I believe CORA could
do the same.


16

we're wasting a lot of money. So when you compare that $570,000
or several million in analysis toward the potential savings and the
potential gains you could get from revising bad regulations or poor-
ly designed regulations, you’re talking about big bucks here. And

at speaks to your earlier question that Dr. Litan answered. I
think there is some value in having this be a separate agency, so
Congress makes it clear to the American public that they recognize
that the growth—that there is a growth in the regulatory activity
and that if regulatory activity is going to continue to grow, we need
to design regulations judiciously to make sure the American public
gets the maximum bang for their expenditures.

Mr. TIERNEY. You're certainly not advocating scrapping all the
regulations so that the economy can grow leaps and bounds?

Mr. HAHN. No, not at all——

Mr. TIERNEY. Because I guess it would grow best of all if you,
if you looked purely economically ——

Mr. HAHN. Actually, it would grow best of all because if Pins
couldn’t see your hand in front of your face and people had to
breathe terrible air and were dying in the streets—

Mr. TIERNEY. So there’s benefits to some regulations?

Mr. Haun. Absolutely.

Mr. Livan. Absolutely.

Mr. TIERNEY. And not all of them are measurable on economic
terms, would you agree with that?

Mr. HAuN. Certainly, and we say that in a couple of pamphlets.

Mr. TiERNEY. Can you give me a couple of examples of benefits
that you can’t measure in economic terms?

Mr. Haun. I don’t think you can easily measure some certain
kinds of benefits to ecosystems in economic terms.

Mr. TIERNEY. Then how do you factor that into a cost analysis?

Mr. HAHN. Well, what a distinguished—myself excluded—what a
distinguished sroup of economists said in a couple of pamphlets, in-
cluding one by AEI and Brookings, and one by AEI, is that it’s not
so much that we're saying that you should have a strict benefit-cost
test apply all the time. But you should try to quantify to the extent
possible, those things that you can, both on the benefit and cost
side. You should also note those factors you think are important
that can’t be quantified. And then, the appropriate body, be it the
Congress or an agency, should make a judicious decision based on
the best information. Our view, I think speaking—and Bob, correct
me if you disagree—is that we think bringing sunshine in the form
of analysis that is clear to you and the American public, bringing
that kind of information into the process is likely to improve public
decisionmaking.

Mr. Litan. I'd like to expand on that. There is a useful analogy.
Just think of Defense expenditures. No one whom I know can
quantify what we get by spending $250 billion, $300 billion for na-
tional defense. Yet, we all want it. At the same time though, Con-
gress doesn’t spend $1 trillion on national defense. It wants to
Know what the price tag of a B-2 Bomber is before it appropriates
the money, and so this is sort of the same situation with some reg-
ulations. You can’t quantify some of them, but you may want them.
You want it. You may want to preserve a lake. You may want to
preserve some oceans, but you want to know what the price tag is.


28

Page 15
Capitol Hill Publishing Corp., January 14, 1998

political purposes," wrote Schumer.

Schumer urged any replacement of O'Neill to be an economist who adheres to
mainstream economic principles. He called dynamic scoring, which lead to
trickle-down economic policies in the Reagan administration, "a colossal
mistake.

“Fifteen years later, we have finally dug ourselves out of the quarry that
trickle-down economics brought us," wrote Schumer. "These same economists argue
that the 1993 Clinton budget would lead to a steep recession. Again, they
couldn't have been more wrong."

Costello, who has signed the Schumer letter, warned it would be poor timing
to replace O'Neill at the end of a year in which President Clinton is expected
to submit to Congress the first balanced budget in 30 years.

8

"We shouldn't be making enormous policy changes in the agency which has tried
to use honest calculations to estimate the deficit," he said.

Costello admitted that Democrats will have little say in whether or not
O'Neill serves out a second term as the CBO director. However, he said she “ has
tried to do the best job she could without interjecting partisan politics in the
process."

O'Neill said in an interview with The Hill last week that "economists
naturally think about dynamic effects because it is their job. But on the issue
of dynamic scoring , would you for each and every piece of legislation that
passes attempt to say what the effect on the GDP (gross domestic product) would
be for the next 10 years, that would have to do with what is practical and what
is not practical."

O'Neill added that she was requested by the Republican leadership last summer
to analyze the effects of the balanced budget agreement and that she didn't
receive any complaints about her analysis

"Most people have observed the independence of the CBO so there has been
Little interference," she said.

A spokeswoman for the majority staff of the House Budget Committee said she
could neither confirm nor deny that O'Neill would be replaced.

Senate Democrats are not as supportive of O'Neill as their counterparts on
the House side. According to several sources, an incident that took place a year
ago involving a study on the effects of capital gains tax cuts diminished
O'Neill's credibility with Democrats on the Senate Budget Committee.

The study, originally presented at the Anerican Enterprise Institute, was
being prepared by the CBO but had reportedly been stalled or canceled by O'Neill
who deemed it inadequate.

In dune of 1996, then-Sen. Bill Bradley (D-N.J.) requested a copy of the
study, asking the CBO to provide it in early September. When he left office in
Novenber, the request had yet to be fulfilled. Last January, aware of the
unfulfilled request, Sen. Paul Sarbanes (D-Md.) asked O'Neill about the study
during a hearing in the Senate Budget Committee. Since the summary of the study



94

alternative regulations, I'm not sure will achieve what the es-
teemed colleagues from Brookings and AEI want to do, which is a
more academic and more careful overall look.

Mr. TIERNEY. But it may well have the effect of slowing down or
just impeding any rulemaking or regulation process?

Mr. Bass. Well, it definitely has to. I mean, even the bill itself
amends the number of days.

Mr. TIERNEY. And so that might, in fact, be somewhere where
some people are going without. But let me ask you about a sun-
shine issue here. Did you see problems—in looking through your
testimony here—with whether or not we might have a problem
with the nature of the business does and what the public knows
about what’s being done. Would you expand on that a little bit?

Mr. Bass. Congress has a history of not being covered by many
public access provisions that the executive branch already is. For
example, the Freedom of Information Act is one example that does
not apply to Congress. Since CORA would be a legislative branch
agency, the public probably would not be able to review these mate-
rials in the same manner the agencies’ materials now are available.
Agency materials under risk assessments and peer reviews and, to
some extent, some of the regulatory impact analyses are made part
of the final rulemaking record, which are then subject to judicial
review. Adding in a new component, through Congress, with a new
type of analysis may greatly complicate that process. I would great-
ly urge that this committee—I know the judiciary committee has
already looked at this bill—but consider what the judicial ramifica-
tions are for this.

Mr. TIERNEY. Well, thank you. I don’t really have any other ques-
tions, but I do ask the chairman, have we put in the written testi-
mony of this witness or may we do that?

Mr. McINTOSH. Yes, seeing no objection, that will be included in
the record.

Mr. TIERNEY. It seems to me that you’ve raised a number of good
issues, Mr. Bass, and the committee might even use it as a road
map to try to adjust what we have in existence to accomplish some
of the purported purposes anyway of the Congresswoman’s bill.
Maybe we could withdraw that and get down to business to try to
get down to the ends that we want to get and maybe this testimon:
is some way a design for the path that we could get there, whic!
certainly as a minority would be willing to work with you on that.

Thank you, sir.

Mr. McINTOSH. Let me turn now to Mr. Bob Barr for any ques-
tions or a statement that you’d want to make.

Mr. Barr. Thank you, Mr. Chairman.

I do apologize for being late. I particularly wanted to get here
while Ms. Gramm was testifying. Pinow of her work in the regu-
latory reform. going back many years, and she’s a national expert
on this. And I know that her testimony was not only insightful but
probably very eloquent as well. And I do appreciate her coming.

But I did want to commend Mrs. Kelly—I will be supporting and
become a co-sponsor of H.R. 1704—and to commend you, Mr.
Chairman for beginning—actually that’s not the right—for continu-
ing your work in terms of trying to bring some focus to our regu-
latory reform effort, and to continue to push this issue. I think this


9

fice will have that information, and we can put it together with all
the other information that we are getting from other sources such
as the agency itself.

Mr. SUNUNU. But as the legislation is currently written, you do
not take advantage or utilized say the Small Business Development
Center network or other resources available say to the SBA to help
get this information out to consumers? That’s not currently part of
the legislation.

Mrs. KELLY. That’s not currently part of the legislation because
this is really not an advocacy office. We have in the Small Business
Administration an ombudsman that’s an advocate. This is an office
that’s not an advocacy office, but a referral office. It’s one that will
give us the tools that we need. You know, you wouldn’t ask a
plumber, I mean you would look at a plumber who came to your

ouse to repair a sink who didn’t have a wrench as somebody who
maybe didn’t have all the tools he or she needed. That is kind of
the way I view this. It is a needed tool Congress doesn’t have. I
think we really do need this tool in our toolbox in order to evaluate
what we are doing with regard to regulations and rules.

Mr. SUNUNU. 1k you very much.

Mrs. KELLY. Thank you.

Mr. SEssions. Thank you, Mr. Sununu.

I would now ask Mr. Tierney of Massachusetts, I would ask that
you not at this time give an opening statement, but rather ask
questions of Mrs. Kelly. Then I will allow you that opportunity.

Mr. TIERNEY. Mr. Chairman, I'll do more than tt for you. I
really have no questions. Thank you for coming, Representative.

Mrs. KELLY. Thank you very much, Mr. Tierney.

Mr. SESSIONS. Thank you. Having no further questions from the
subcommittee, we want to thank you so much for taking your time
to be here. We appreciate your appearance. We will keep you ad-
vised of the progress that we’re making in the subcommittee on
your bill.

Mrs. KELLY. Thank you, Mr. Chairman.

Mr. Sessions. I would now before we have the first panel come
forward, I would like to allow Mr. Tierney the opportunity to make
an opening statement.

Mr. Tierney.

Mr. TigRNEY. Thank you, Mr. Chairman. Thank you for your pa-
tience in waiting as we had these dueling committees to get back
and forth. I want to thank you for holding this important hearing.
I am pleased that we are looking at a proposal that would osten-
sibly provide Congress with more information. Nevertheless, I be-
lieve it’s flawed because it would be duplicative, expensive, and
would run contradictory to existing efforts to streamline govern-
ment.

Furthermore, I am concerned that the appointment process
would open the door to creating an entity that merely provides sup-
port for partisan ideology. It’s duplicative in that H.R. 1704 creates
a congressional office of regulatory analysis, otherwise to be known
as CORA, that would perform duties that are already being han-
dled by others. Both the Office of Information and Regulatory Af
fairs and the General Accounting Office are already responsible for
reviewing the agencies’ submissions for major rules under the Con-


17

And just shutting your eyes and saying, “well, I don’t care. I know
it’s important,” is probably not a responsible thing to do because
we don’t act that way in defense. We actually do put price tags on
something and we say we're not going to spend the whole GNP on
defense. We're only going to spend so much.

Mr. TIERNEY. But we have the OIRA. We have the GAO. We
have the CBO. We have all of those agencies participating in one
way or another already. And now, you want to do yet another agen-
cy to help Congress out. Apparently, it needs yet another crutch?

Mr. Litan. Yes, I'd like to expand on this because I think while
you were gone, I was pointing out from my own personal experi-
ence that while I served at OMB during the Clinton administration
on the budget side, I experienced this creative tension, sometimes
not so friendly, between OMB and CBO on scoring. But, nonethe-
less I pointed out that there was a value to it. Even while we were
disagreeing I knew there was a value in having an honest check
on the numbers and the assessments. And that’s why Congress cre-
ated a Congressional Budget Office. And all I was saying is the
same benefits of that can be brought to the regulatory field.

Mr. TIERNEY. By an honest check, you’re implying that you want
one that’s either nonpartisan or certainly bipartisan? And would
you agree with me, then, that a process that would appoint the
people, the directors of this particular new agency ought to be
something that encourages or results in a nonpartisan or a biparti-
san staff?

Mr. Livan. I think that we ought to have the same kind of thing
that we have with CBO. I think everyone sort of has acknowledged
that with CBO right now, the estimating is done in a professional
way. I think people are quite satisfied with the process, though
without getting into a debate on particular issues. I agree with you
on the outcome. We want something respected as a professional op-
eration that’s nonpartisan.

Mr. TrERNEY. Do you think GAO’s a professional operation?

Mr. LIiTAN. It is, but it doesn’t have, with all due respect, it does
not have the set of expertise right now in that agency to do the
kind of work——

Mr. TIERNEY. But you think it has the right degree of non-
partisanship or bipartisanship in its staff?

Mr. Livan. I’d say GAO is perceived to be nonpartisan.

Mr. TIERNEY. So that might be a good model to follow?

Mr. LiTan. It’s a model, but I would prefer frankly the Congres-
sional Budget Office, only because——

Mr. TIERNEY. Thanks. I appreciate it. Thanks.

Mr. Livan. OK.

Mr. TIERNEY. The non-bias is killing me.

Mr. McINTosu. I would like to hear the rest of the analysis actu-
ally. Mr. Litan or Mr. Hahn, both of you seemed to indicate you
wanted to add to that.

Mr. LiTaN. Well, I would. Just think, for example, in the case of
GAO. Would Congress say, “Well, we don’t want to create a budget
office. We'd rather have GAO do the numbers?” GAO doesn’t do
that. It’s function, I think, has been more over time looking at the
effectiveness of different expenditure programs, and they don’t


83

Mr. TIERNEY [continuing]. Go along with the fact of seeing to
make sure that OIRA did its job because now we're not concerned
any longer that they’re—

is. GRAMM [continuing]. You can do that——

Mr. TIERNEY [continuing]. Connected with the executive branch
and we can trust them——

Ms. GRAMM [continuing]. I think that’s what the office—that’s
what the office is meant to do. Right? The office—

Mr. McINTOSH [continuing]. And on that point, Mr. Tierney, let
me welcome your help in our oversight over OIRA because we're in
the middle of that and we've got a long way to go to get them to
do their jobs.

Mr. TIERNEY. Hopefully, we'll finish before we start creating new
organizations to do that job.

ir. MCINTOSH. Thank you all. I appreciate you coming today and
appreciate your testimony. We, with unanimous consent, will hold
the record open for 10 days. Mr. Sununu had some additional ques-
tions, and other Members may as well.

Let me call forward our finai panel for today.

Mr. Gary Bass.

Welcome back, Mr. Bass. As you know, I think, we swear in all
our witnesses at this subcommittee.

[Witness sworn.]

Mr. McInTOSsH. Let the record show the witness answered in af-
firmative.

Our final panel today is Mr. Gary Bass, who is the executive di-
rector of OMB Watch, an independent, non-governmental agency
that watches not only OMB, but I suspect a lot of the other oper-
ations of the Federal Government.

Thank you for joining us today, and please share with us your
testimony.

STATEMENT OF GARY BASS, EXECUTIVE DIRECTOR, OMB
WATCH

Mr. Bass. It’s always an honor to come before this subcommittee
and before you, Mr. Chairman. In fact, I was probably given my
whole panel to myself because you probably thought I was going to
agree with you today. Alas, it’s not to be true.

OMB Watch strongly opposes H.R. 1704, CORA. Let me drop
back a little bit and—I was impressed with the witnesses today, in
part because I continue to have this image now of a magic bullet
out there. That there’s going to be something magically that comes
along and is going to make regulation better, particularly for busi-
ness. And I was reminded because I lived through this now with
the Reagan administration—and forward—that when President
Reagan came in, within a matter of a couple weeks of taking office,
we got Executive Order 12291, which was to move cost-benefit re-
view to OMB. And it was the business community that rallied be-
hind this and said, “this is the magic bullet. It’s going to work.”

Within 3 years, we had a second Executive order, Executive
Order 12498. And the logic was, “we’re not getting at the rule-
making early enough. We got to get in right when the agencies are
starting to plan.” And so the next Executive order came out, and
the business community rallied around that and said, “this is the


5

to our economy, but ultimately it’s regulatory costs that’s placed on
consumers. They are the ones who are buying the products, and
they are the ones who are really paying the hidden costs of the reg-
ulations and the hidden costs of the ability to write rules that Con-
press has delegated to a number of these ncies. So I welcome

, welcome her testimony, and look forward to hearing the other
panelists as well.

Mr. Sessions. I thank the gentleman from New Hampshire. It
should be noted in the record that Mr. Tierney of Massachusetts
is unable to be here at this time, but we have gone ahead and
made a decision to move forward with this hearing, that we will
continue until we finish, as long as we do not have any votes. So
those people who are witnesses, we will continue in this process.

I would now like to welcome the Honorable Sue Kelly, who is a
friend of this committee and certainly of our Congress, a colleague
of ours. She is also the author of this bill, H.R. 1704.

Mrs. Kelly, I would like to have you give your testimony for such
time as you wish to consume.

STATEMENT OF HON. SUE KELLY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW YORK

Mrs. KELLY. Thank you very much, Chairman Sessions and Con-
gressman Sununu, and any of the other members of the sub-
committee who e to come. I am glad to have the opportunity
to speak before you about H.R. 1704. This legislation would estab-
lish a congressional office of regulatory analysis. I appreciate your
giving me the opportunity to testify.

We are all familiar with studies that demonstrate the tremen-
dous burdens that Federal regulations place on our economy. A re-
cent study by the Office of Management and Budget attempted to
quantify the figure, estimating there’s approximately $280 billion
in annual costs for all regulations. Other studies place this figure
significantly higher, with annual costs exceeding $700 billion. We
also know that these costs disproportionately fall on our Nation’s
small business owners.

The reason I make these points is not because I am trying to
imply that all regulations are bad or harmful. On the cont v1
would be among the first to cite the many beneficial effects t
regulations have had in our country, especially with respect to the
environment and worker health and safety. Rather, the reason I
point out the burdens that regulations create is simply to reiterate
the significant role that regulations play in our system of govern-
ment.

It also does not appear as if this role is going to be scaled back
any time in the near future. In 1997 alone, agencies issued roughly
4,000 new regulations. Of these, 59 were designated major rules,
meaning generally that each one had an annual effect on our econ-
omy of $100 million or more.

In other words, the cumulative effect on the economy of just
these 59 rules was on the order of at least $6 billion. As respon
sible legislators, we cannot ignore the enormous impact that these
regulations have. We must commit ourselves to the goal of ensur-
ing that only those regulations that are absolutely necessary are
permitted to be in place.


81

Ms. GRAMM. On the contrary, the role of OIRA has traditionally
really started from a coordination function especially, for example,
during President Carter’s years. The idea was to get comments—
specifically to get comments from the other agencies. If for exam-
ple, EPA might be proposing regulations that might have an effect
on agriculture, they'd want to get comments from the Department
of Agriculture. They’d want to hear their views, but also to ensure
that you don’t have regulations that work at cross purposes with
other laws or other regulations—a pure coordination function. And
so, in fact, the role of OIRA, and in fact the role of OMB in general,
is to make sure that policies are coordinated, that the executive
branch doesn’t have conflicting regulations and rules out there.

Mr. Lian. Mr. Chairman, can I just add just a couple of points?

Mr. McInTosu. Yes. Certainly.

Mr. Litan. On your statistics about the number of rules re-
turned, I’m not going to comment on whether I believe the follow-
ing statement to be true, but I’m just saying that if Sally Katzen
were here defending her old job what she would probably tell you
is that the reason why there’s been a dramatic fall off is that the
agencies have internalized the instructions from OIRA, so they
don’t have to be slammed every so frequently and that they have
learned the rules of the game. I fairly suspect that’s what she
would say.

But my second point is in my view, it doesn’t matter. Even if
OIRA was returning every single rule, if I were a Member of Con-
gress, I'd still want an independent review. Because I’d want an
independent assessment—how do I know that OIRA’s doing it the
right way? Another thing is I’m not going to get macro analysis out
of OIRA, and I’m unlikely to. And the third thing is you want your
source of information to act as a check. And institutionally—I
would think just institutional jealousy or institutional rivalry
would almost require that you have an organization that’s yours
rather than theirs.

Ms. GRAMM. I'd say that I agree with you that the number of re-
turned rules doesn’t tell the whole story. But what does tell the
story is one, what—have the rules been like that have come out.
Have they had decent cost-benefit analysis. For example, in the
Clean Air Act rules, EPA’s own cost benefit analysis indicates that
costs exceeded the benefits, even as flawed as their analysis was.
I also agree that it is important for Congress to have analysis that
is independent of the executive branch. Part of your oversight func-
tion is to make sure that the executive branch is implementing the
laws as they have been written. And OIRA, after all, is part of the
executive branch, and they can perform an important function
doing independent analyses, independent of the agency that writes
the regulations. But what I’m also suggesting and I think my col-
leagues here also are suggesting that you need to have your own
review because of the functions that you’ve given yourself under
the Congressional Review Act, but also because of your oversight
role.

Mr. McINTosH. Let me close by saying I'd very much agree with
yo" there. And frankly, I’ve been critical of O1 but I also can

self-critical and say that I’m disappointed that Congress hasn’t
taken up more of these regulations under the Congressional Review


92

Mr. McINTOSH. Thank you for coming, Mr. Bass. Let me say one
of those bullets that you mentioned, the Competitiveness Council,
which I did serve on, was abolished after this administration took
over. And I’ve often thought that they perhaps regretted doing that
because there have been various times when the White House
wanted the agencies to do things that it was difficult to arrange
for; although, apparently Vice President Gore has in the second
term been able to muster more influence along those lines. But as
I saw them struggling with reinventing government, I thought they
could use something like a Competitiveness Council. Let me say it
is our concern—and it may not be the answer to this entire prob-
lem, but I do think it would help—it is our concern with the 50 per-
cent of the regulations that do fail a cost-benefit test—and by the
way, it’s not business that actually pays for that—it ends up being
the consumer that pays in higher prices or the person who loses
their job who suffers the most as a result of those unproductive
regulations. We heard testimony earlier today that 60,000 lives
could be saved if we did a better job of using the regulatory appara-
tus that we have right now. And so, in many ways it’s a benefit-
benefit tradeoff that needs to be addressed. And I think Congress—
well, now having served for 3 years—I’d have to say individually
and as a whole, we're not really that well informed about many of
the details of those tradeoffs. And it would be my hope that with
CORA acting as a staff for Members in both parties that we could
acquire that information. Some of it they'll produce themselves,
but, yes, you’re right, a lot of it they'll have to bring in from other
sources in the agencies to better inform Congress. And that’s why
I compare them to CBO. I think Congress, prior to CBO, just didn’t
have the information about budget numbers and scoring and want-
ed an entity that reported to them to give them that information—
give us that information. And in that sense the comparison is made
with CORA and OMB, and CBO and OMB.

Let me ask you this question: If we could, as a result of CORA,
have some regulatory changes where you saw a better tradeoff and
more lives were saved, would that be worth spending the $5 mil-
lion?

Mr, Bass. Well, I think you've biased the question slightly. One,
I don’t think it could be done within $5 million for the tasks that
you're talking about, but we'll put that aside. I don’t think that
more analysis will result in saving lives. No, I don’t. I think that
there could be better analysis, and maybe one of the things that
the oversight role of Congress should be is to strengthen that.

Tm concerned frankly that the problem, in my mind, is not the
analysis. It’s the timeframe that it takes to do a rulemaking. I’m
thinking methylene chloride right now, one that is a controversial
rule. It’s a cancer-causing substance. It has taken almost a decade
now for OSHA to issue a standard. It wasn’t just doing the study.
There was plenty of studies. There were lawsuits. There was a
number of hurdles to get through. And on top it, as an example of
one where a resolution of disapproval was introduced both in the
House and the Senate and chose not to move it forward. So, I’m
not sure that it’s more analysis.

I would also add, Mr. Chairman, that your comment earlier—I
think the tradeoff issue is a real issue and one that we all struggle


60

_ Mr. McIntTosH. Thank you, Dr. Gramm.

Mr. Hahn.

Mr. Haun. I find myself in the unenviable position of following
Dr. Gramm, who said everything that Dr. Litan and I were going
to say, but more succinctly and better.

I'm going to give a brief bit of formal testimony and ask my dis-
tinguished colleague if he wants to add anything, and then we'll be
happy to take your questions.

e’re pleased to appear before you today to provide our views
on—I gather the euphemism is CORA, the Congressional Office of
Regulatory Analysis Creation Act. The two of us have studied and
written about regulatory issues for over two decades now, and re-
cently we co-authored a couple of pamphlets published jointly by
our respective institutions—the American Enterprise Institute and
the Brookings Institution—which outline principles we believe Con-
gress should keep in mind as it seeks to improve the regulatory
process. We forwarded copies of those pamphlets to you along wit
our formal testimony, and we’d ask that it be submitted in the

record.

Like Dr. Gramm, we believe that the proposal in H.R. 1704 for
a Congressional Office of Regulato: lysis is an excellent idea.
That office could help inform the public and the Congress about the
benefits and costs of regulation. Too often, we believe that legisla-
tors and agencies find it in their interest to highlight the benefits
of regulation without also noting the costs. We believe it is impor-
tant to highlight both and that the public has a right to know how
and why regulations are implemented.

This bill addresses a fundamental problem with the current regu-
latory effort. Despite the growing importance of Federal regulation
in everyday life, neither the public nor Co: ss has sufficient in-
formation to fully appreciate the impact on the welfare of the aver-
age citizen.

Federal regulation especially environmental health and safety
regulation—as you can see implicitly in those diagrams that—Rep-
resentative—I was going to say professor McIntosh, but that Rep-
resentative McIntosh prepared has grown dramati in recent
decades, whether considered absolutely as a relative sl of the
economy or as a relative share of the output of the Federal Govern-
ment. According to the first comprehensive government report on
the benefits and costs of Federal regulation, produced by OMB, the
cost of this so-called social regulation is rot ly $200 billion annu-
ally. This is comparable to what the Federal Government spends
on all domestic discretionary programs. And if you add in the bur-
den associated with paperwork, such as filling out our tax forms,
the cost is almost twice that high.

We need to compare these costs, of course, with the benefits.
OMB places the aggregate benefits of social regulation at about
$300 billion, with no estimate for any benefits associated with pa-

rwork. I don’t know about you, but I don’t get a lot of benefits

m sitting down and filling my tax form out—{laughter]}—filling
out my tax forms after hours. y do not provide an estimate of
the number of individual regulations that would not pass a strict
benefit cost test. Our research finds that more than half of the
Government’s regulation, let me repeat that, more than half of the


56

other reasons why the regulatory burden has grown - special interest groups’
effectiveness at obtaining their specific regulatory goals, the desire of
government agencies to expand their reach, new laws that require new
regulations. The relative ease with which regulations can be imposed on
state and local governments and the private sector is accompanied by a
notable lack of controls or limits on the ability of policy makers to impose
regulations.

As a result of the steady growth in regulations, since the mid-1970s,
Americans have raised concerns that regulatory agencies are less and less
accountable to the public for regulations. Congress and every President
since President Nixon have created mechanisms to improve rulemaking
procedures. In 1977, for example, the Commission on Federal Paperwork
was established, chaired by Congressman Frank Horton and co-chaired by
Senator Thomas J. McIntyre. The recommendations of this Commission
resulted in the Paperwork Reduction Act of 1980 and the creation of the
Office of Information and Regulatory Affairs (OIRA) in the Office of
Management and Budget. The Regulatory Flexibility Act sought to reduce
the burden on small businesses. More recently, the Unfunded Mandates
Reform Act, and the Congressional Review Act in the Small Business
Regulatory Enforcement Fairness Act (SBREFA) represent attempts by
Congress to ensure that regulations are not overly burdensome.

Efforts to promote responsible rulemaking generally require agencies
to consider regulatory costs. The Paperwork Reduction Act, the Regulatory
Flexiblity Act, and the Unfunded Mandates Reform Act (UMRA), for
example, require such analyses. With the formation of OIRA, the role of
analyzing regulations and encouraging agencies to consider a regulation’s
costs, impacts, and the scientific underpinnings fell to this office. A
significant role for this office is to help the President monitor paperwork and.
regulatory burdens ~ a role that Presidents Reagan, Bush and Clinton have
formalized through executive order.

In recent years, OIRA has been ineffective. This conclusion is based
on a review of regulations that have been issued by the Executive branch.
An effective OIRA, for example, would have required EPA to provide a
better analysis before promulgating the 1997 proposals further regulating
ozone and particulate matter.


18

38) REGULATORY IMPACT ANALYSIS Mah 1997

regulations might take and whether they will be significant or minor are
generally even more uncertain st thet point.

‘In wm, regulatory impact analyses generally require « considerable amount of
resources and time, Conducting comparable analysis within the current legislative
process would be difficult even if sufficient resources were made available. The
Congress has the ability to consider and vote on a bill the same day the bill is reported
by a committes if it chooses to do so, and normal rules permit a bill to be considered
in as few as three days. By contrast, even the quickest analysis in CBO's review took
six weeks. Furthermore, the average duration per analysis—three years—is longer
than the two-year session of Congress between national elections.


aT

all regulation, but simply about having a more informed process. What NSBU foresees
CORA accomplishing is to allow Congress to act in a bipartisan and informed manner
that will help members on both sides of the aisle help their constituents more.

NEXT STEPS

Members on both sides of the aisle often admit that there are times when the
federal regulatory agencies go too far. In the small business community we see it nearly
everyday: the lists of forms, the duplicative paperwork, the ridiculous process steps, the
overbearing compliance officer. It is something a small business has to live with every
day of the company’s existence. To make matters worse for small business, they have
never been able to be an active part of the regulatory process, regulators, “big business”
and lawfirms have monopolized the process and made it complicated and expensive.

There have been champions for the small business community through the
regulatory process. The Small Business Administration’s Office of Advocacy has been a
lonely voice with very limited resources in this fight against overburdensome
regulation.

CORA could augment what the Office of Advocacy is doing by being a data
source and a resource for members of Congress on both sides of the aisle to look into
regulation. We all want a smaller more efficient government. Some will say all CORA
will do is add to government, but indeed we would see a net reduction in government
because of this office and Rep. Sue Kelly's ~ and other's ~ idea and efforts.

‘The truth of the matter is that we have seen two years of SBREFA and federal
regulatory agencies aren't including and informing the small business community
nearly enough. They aren't deterred from business as usual nor are many of them
regulating any wiser. They know how difficult it is for small business to sue. Courts
aren't always the answer for small business, and that while they have proven a critical
vehicle for interest groups to push their agenda the expense and enormity is somewhat
‘overwhelming. Despite all this, NSBU is obligated to protect small business interests,


51

cause Congress hasn’t attacked any one of those 77 rules and gone
r it?

Ms. MILLER. I point to the NAAQS issue again.

Mr. TIERNEY. NAAQS apparently you disagree with NAAQS. You
don’t like the science or fou don’t like the rules.

Mr. McINTOsH. Would the gentleman yield? What she’s saying is
that——

Mr. TIERNEY. I’m asking her to answer the question.

Mr. McInTosH. I know. But what she is saying is Congress
doesn’t have the guts to do its job.

Mr. TIERNEY. Well, let’s hear her say that then. But I think basi-
cally, because she’s the witness and I can talk to you any time,

avid ——

Ms. MILLER. That would not be my terminology, but the —

Mr. TIERNEY. Are you arguing that we didn’t get enough informa-
tion on NAAQS before Congress acted? Because certainly I would
find it hard to agree with tt. We were inundated with informa-
tion.

Ms. MILLER. I would assume that, and I can’t speak for Congress
and what they do or don’t know. I wouldn’t be right to make my
comment in this forum on that. However, based on the action or
lack of action that took place on the NAAQS issue, I would assume
that someone didn’t have all the information they needed.

Mr. TIERNEY. Because they disagree with you?

Ms. MILLER. They didn’t disagree with me. They didn’t test it
against the SBREFA Act.

Mr. TIERNEY. Well, it wasn’t supposed to be tested against the
SBREFA Act. We had plenty of areas of testimony on that and
plenty of support for those that had the feeling that it was not a
rule at that particular point in time subject to SBREFA. I mean
certainly you had the debate on that issue and you had a conclu-
sion on it. You are just not happy with that conclusion and now
want to point to that as evidence of why we should develop another
agency to do analysis of analysis.

Ms. MILLER. Well again, I disagree with you on the SBREFA Act
and the NAAQS issue as it relates and the small business commu-
nity certainly disagrees with you on that, so much so that we filed
a lawsuit. So I don’t think that we have the answer to that yet.
I certainly can’t agree with what you are saying.

Mr. TIERNEY. Let me ask you this. You compare CORA with the
Small Business Office of Advocacy in your testimony. Do you expect
CORA would act as an advocate for small business? Is that part
of your contention?

Ms. MILLER. Absolutely not. It would be a place for information.
It would be for all people to get—for both sides of the aisle to get
that information, as I understand it. We aren’t asking for an advo-
cacy office to be established. That is not what we are supporting
this. It’s nothing to do with the CORA.

Mr. TIERNEY. You made a point in your testimony to say that you
thought that this CORA should be bipartisan in nature.

Ms. MILLER. Absolutely.

Mr. TIERNEY. So that would you support an adjustment in CORA
that would allow for a more bipartisan manner of appointment of


Chart 3: Regulatory Actions by OIRA: 1981-1998

80

Period Total | With Withdrawn by Retumed (for | % (of Total
Reviews | Change | Agency (mixed Reconsideration, | Reviews)

(butnot | category - includes | ete.) With
necessarily | both overtaken by Change,
with new legislation, etc. Withdrawn
substantive | & at OMB’s request by Agency,
change) | because problematic) or Returned

President Reagan’s 10,117 1053 177 192 4

Ast Term

Jan. 1981- Jan. 1985

President Reagan’s 8930 2053 237 104 27

2nd Term

Jan. 1985- Jan. 1989

President Bush 9218 2148 292 87 27

Jan. 1989 - Jan.

1993

President Clinton’s 3978 1281 223 9 38

Ist Term

Jan. 1993- Jan. 1997

President Clinton’s 498 272 25 4 60

Second Term to

Date

Jan. 1997- Jan. 1998

Prepared for Congressman David M. McIntosh

‘Three of the four were rules submitted by the Railroad Retirement Board.



13

SUMMARY.

‘Recent proposals for regulatory reform would subject the regulations that federal
agencies issue to increased cost-benefit analysis. Various laws and executive orders
already require such analyses (known as regulatory impact analyses, or RIAs) for any
"significant" rule—defined as one that would cost more than $100 million a year or
have adverse effects on the U.S. economy or the federal budget. Some recent
legislative proposals would also have the Congressional Budget Office (CBO) or
other Congressional support agencies perform similer work,

‘Many studies have explored whether the benefits of regulation justify its costs,
but few have examined the nature and level of resources necessary for the government
to conduct cost-benefit analyses. CBO has tried to fill that gap by studying the costs
of 85 RIAs from six offices in four agencies: the Environmental Protection Agency
(EPA), the Coast Guard, the Federal Aviation Administration (FAA), and the
‘National Highway Traffic Safety Administration. CBO chose those agencies because
they are frequently cited as imposing significant regulatory costs on the economy.

CBO also examined cost data on regulatory analyses from the Occupational
Safety and Health Administration, but OSHA was unable to distinguish RIAs from
other analyses. Thus, OSHA's analyses are not included in the final RIA count, but


55

Statement of Dr. Wendy L. Gramm, Director, Regulatory Analysis Program
Center for Study of Public Choice, George Mason University
Fairfax, Virginia

On Congressional Office of Regulatory Analysis Creation Act

Before the Subcommittee on National Economic Growth, Natural
Resources, and Regulatory Affairs, Committee on Government Reform and
Oversight, United States House of Representatives

March 11, 1998

Mr. Chairman, Members of the Committee, thank you for inviting me
to testify on the “Congressional Office of Regulatory Analysis Creation Act”
(H.R. 1704). Please note that this testimony reflects my own view and not
necessarily that of the Center for Study of Public Choice or George Mason
University.

Regulations are costing Americans around $688 billion dollars per
year. This is 9 percent of GDP; the projected budget deficit of $34 billion in
1997 pales by comparison. Unfortunately, there are few effective
mechanisms in place that can control the growth of the regulatory state.
Indeed, over the past few decades as policy makers have become more
concerned about the budget and deficits, they have turned increasingly to
regulations as an off-budget way to advance the public interest, or in some
cases, to advance special interests. The cost of the program is simply
imposed through mandates, or requirements to do something, or to refrain
from doing something. The regulatory burden thus can be and should be
viewed as a tax — in this case, an additional tax of $6875 per year on the
typical American family of four.

Another reason why the regulatory burden is so huge is that
Americans have come to expect government to try to prevent every problem.
Unfortunately, policy makers’ easy answer to every problem tends to be —
spend taxpayers’ money by creating or expanding a program, or require the
public to spend their resources directly through regulations. There are many


2

10 years. Each of these figures are on those posters to the left of
the Chair.
(The text of H.R. 1704 follows:]
105TH CONGRESS
1st SESSION
HLR. 1704

To establish a Congressional Office of Regulatory Analysis.

IN THE HOUSE OF REPRESENTATIVES
May 22, 1997

Mrs, KELLY (for herself and Mr, TaLeNt) introduced the following bill; which was
referred to the Committee on the Judiciary, and in addition to the Committee on
Government Reform and Oversight, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned

ABILL

To establish a Congressional Office of Regulatory Analysis.

Be it enacted by the Senate and House of Representatives of the United States
of America in Congress assembled,
SECTION 1. SHORT TITLE.

This Act may be cited as the “Congressional Office of Regulatory Analysis Cre-
ation Act”.
SEC. 2. FINDINGS.

The Congress finds that—

(2) Federal regulations have had a positive impact in protecting the envi-
ronment and the health and safety of all Americans; however, uncontrolled in-
creases in the costs that regulations place on the economy cannot be sustained;

(2) the legislative branch has a responsibility to see that the laws it passes
are properly implemented by the executive branch;

(8) effective implementation of chapter 8 of title 5 of the United States Code
(relating to congressional review of agency rulemaking) is essential to control-
ling the regulatory burden that the Government places on the economy; and

(4) in order for the legislative branch to ‘fil its responsibilities under
chapter 8 of title 5, United States Code, it must have accurate and reliable in-
formation on which to base its decisions.

SEC. 8, ESTABLISHMENT OF OFFICE,

(a) ESTABLISHMENT.—

(1) IN GENERAL.—There is established a Congressional Office of Regulatory
Analysis (hereinafter in this Act referred to as the “Office”). The Office shall be
headed by a Director.

(2) APPOINTMENT.—The Director shall be appointed by the Speaker of the
House of Representatives and the majority leader of the Senate without regard
to political affiliation and solely on the bavis of the Director's ability to perform
the duties of the Office.

(3) TeRM.—The term of office of the Director shall be 4 years, but no Direc-
tor shall be ‘ited to serve more than 3 terms. Any individual appointed as
Director to a vacancy prior to the expiration of a term shall serve only for
the unexpired portion of that term. An individual serving as Director at the ex-
piration of that term may continue to serve until the individual’s successor is
appointed.
th & REMOVAL.—The Director may be removed by a concurrent resolution of

1e Congress.
(5) COMPENSATION.—The Director shall receive compensation at a per
annum gross rate equal to the rate of basic pay, as in effect from time to time,



72

Mr. McINTOSH. Thank you, Mr. Litan. Let me say that, in fact,
T’ve thought of CORA as essentially a CBO of regulations. And I
think that’s the proper context for to consideration of this legisla-
tion. Historically, OMB was created before CBO and Congress,
after the 1975 Budget Act, I think, concluded that they needed in-
formation in order to discharge their duties. And we’ve got a par-
allel situation now where Congress is becoming more active on reg-
ulatory issues, and we need that information.

I also appreciate your points greatly in terms of affecting the
macro question. Many times we hear from regulatory agencies,
“well, we didn’t really like this regulation either, but Congress
made us do it”—I mean, in essence. And this would allow us to
have information about where that may be happening so that we
can consider our duty and changing the underlying statute.

I thank all of you for coming. I’m going to actually, if it’s all right
with Mr. Tierney, call on our colleague, Mr. Sununu first.

Mr. Sununu.

Mr. SUNUNU. Thank you, Mr. Chairman. First, Mr. Hahn, if I
could, I’d like very much for you to provide the committee perhaps
a few examples of regulations and the analysis to support your as-
sertion that, in some cases, the costs outweigh the benefits of a
number—you cited a half—but just for the committee’s benefit to
provide us with some examples of those types of regulations for the
record. And I’d ask that you just followup with some examples for
the subcommittee and that those be included in the record.

Second, I’d like each of the members of the panel to address ei-
ther or both of the following questions. One, can you give some—
we talked about the big numbers so to speak—the cost to a family
aggregate over the course of a year, the cost to our economy of reg-
ulations—but you try and personalize these a little bit more? Could
you give the subcommittee some examples of hidden costs of regu-
lation that consumers are paying that they otherwise—for what-
ever reason—might not really think about the regulatory costs as-
sociated with products that theyre purchasing or services that
they’re purchasing. Give some personal examples of those hidden
costs in our economy, and/or provide for some specific cases where
lower cost alternatives, with regard to regulation, were not chosen,
either because of institutional biases at the agencies where these
regulations or rules were promulgated, or because we had a lack
of technical information of what the alternatives were at a particu-
lar time. Or, frankly, because we had a poor or no independent
analyses of the costs of regulations. So, personalize some of the
costs that consumers are paying out there every day of regulation
and also talk a little bit about where we didn’t do a good job of
choosing the lowest cost alternative for achieving what we may
well agree is an important goal, but we didn’t achieve that goal in
a cost effective way.

Thank you.

Mr. Liran. Want me to? I can take a first crack.

Mr. SUNUNU. Yes, please feel free if each—if you can just go—

Mr. Liran [continuing]. On the record.

Mr. SUNUNU [continuing]. Through the line and address those
couple of issues. Thank you.


Page 14

LTH REFERENCE of Level 1 printed in FULL format.

Copyright 1998 Capitol Hill Publishing corp.
‘The Hill

January 14, 1998
SECTION: Pg. 3

LENGTH: 1052 words

HEADLINE: DEMOCRATS DEFEND CBO'S O'NEILL, AS REPUBLICANS LOOK FOR A SUCCESSOR
BYLINE: A.B. Stoddard

Booy

House Democrats have rushed to the defense of June O'Neill, who Republican
leaders plan to replace as director of the Congressional Budget Office (CBO).

Last week The Hill reported that GOP leaders will soon begin the process of
creating a search committee to find a new CBO director whose term would begin
next January at the start of the 106th Congress.

At issue is O'Neill's methodology. Since some Republicans had hoped she would
predict GOP tax cuts would yield increased economic growth , an economic model,
known as dynamic scoring , they are frustrated that the CEO's estimates have
remained conservative. Indeed, so cautious are her estimates that the CBO's
calculations of the fiscal 1997 budget deficit were $100 billion higher than
were finally calculated.

But Democrats on the House side, who strongly oppose dynamic scoring, have
endorsed O'Neill's tenure at the CBO. Rep. Jerry Costello (D-I11.), a member of
the Budget Committee, said O'Neill has used honest numbers to calculate the
deficit and the budget

“I admire the fact that she hasn't caved in to the wishes of the Republican
leadership on dynamic scoring," he said. "It should not be at the whim of the
Republican leadership to replace her because she doesn't agree with them on
policy matters.”

In response to the account in The Hill, Rep. Charles Schumer (D-N.¥.) plans
to send a letter to House Speaker Newt Gingrich (R-Ga.) and Senate Majority
Leader Trent Lott (R-Miss.) expressing concern that the GOP seeks to "oust"
O'Neill and plans to replace her with someone who advocates dynamic scoring. The
letter, which has been circulated to colleagues for their signatures, will be
sent to GOP leaders when Congress returns at the end of the month, according to
Cathie Levine, Schumer's press secretary.

In the letter, Schumer stated that the CBO had established credibility as a
non-partisan agency whose directors had helped make it one of the most respected
in Washington.

"None of these directors , not Rudy Penner, not Alice Rivlin, not Robert
Reischauer and not June O'Neill , bent their mainstream economic views for


0

A Congressional Office of Regulatory Analysis would help highlight the impact of
regulation on consumers and workers. It will help inform the process of designing new
laws and regulations. And it will also help provide insight on how to improve existing
regulations.

We believe HLR. 1704 will help ensure that appropriate regulatory activity is carried
cout in a rational, cost-effective manner. It deserves prompt action.


63

tion because your business is legislating, not making individual
rules. Although you're going to want to review individual rules
under the Congressional Review Act, your larger job is to see
whether or not we ought to tweak the statutes that are now on the
books and see whether we can save more lives at less cost. And
who’s going to tell you that? Well, you can’t set any information
like that from this report. But if you had an independent office out
there, giving you this comparative data on comparative regulatory
effectiveness of different programs, you’d be able to do you jobs a
lot more effectively.

So I think that in many ways may be the most important benefit
of having a se ite regulatory accounting office is what I will call
the macro level, not just the individual rulemaking level.

Thank you.

{The prepared statement of Mr. Hahn and Mr. Litan follows:]


1901 - 225 2
1982 - 289 5
1983 - 237 2
1984 - 245 °
1985 - 242 7
1986 - 234 2
1987 - 200 7
1968 - 212 6
1989 - 226 3
1990 - 162 12
1992 - 130 8
1992 - 103 7
1993 - 155 8
= a
TOTAL: 2,850 70

3. -For those final rules issued by your agency in each of the
years 1981 through how many rules: establish new
regulatory requirement implement revisions to existing
regulatory requiraments; and eliminate regulatory
requirements?

Historically, EPA has not tracked regulations according to
these categories. However, for the first three months of
1995 the figures for our final rules are ae follow:

New regulatory requirements s
Revisions to existing requirements: 20

No rules to date in 1995 have totally eliminated regulatory
requirements. We have, however, modified a number 03

*EPA published 7, fos. actiona in the "Final Rules" section of
from 1981 to 1994. We estimate that
approximately 2600 of these were truly regulatory in nature. The
balance are *miniaterial* or ‘routine and frequent® actions
(categories used by the Federal Register) which are related to
final rules but which are nonregulatory. These categories
include State Implementation Plans under the Clean Air Act,
Pesticide Tolerances, Significant New Use Rules under TSCA,
Premanufacture wotde UST State ovals, Ocean Dumping site
designations, Oute: tinental Shelf amendments, Designation of
Reese for Air Quality (state attainment designations), and UST
State codifications.. Many of thesé actions do not impose new
requlatory requirements but rather implemant other major
regulations or revise existing requirements. Their relativel:
ge numbers reflect EPA's commitment to providing geographic
and other site-specific flexibility to the regulated community.



37

‘The National Journal, May 10, 1997

relied on as a bipartisan resource any longer.'*
Daschle doesn't appear to be upset about the § 225 billion
miracle: He's pleased that the CBO's forecast '‘is moving in the
direction that's more consistent with other estimate:
said. Few budget experts, in fact, question the numbers. Their
real surprise is that the CBO didn’t twig until so recently that
the economy was booming. And the timing has caused speculation
that O'Neill was bowing to GOP pressure.

‘*That is absolutely not true,'! O'Neill said of the
charge. She added that ''it was an accident'' that the CBO
boosted its revenue estimate when it did. As O'Neill tells it,
the agency was doing a routine monthly economic analysis when,
toward the end of April, ‘'it became abundantly clear that the
‘Treasury was awash in revenues.'' She added: ''It seemed really
foolish and counter-productive to wait to transmit this news--
which also, incidentally, would be known by the Treasury. I
thought we should tell the Budget Committees what we found.''

To many observers, O'Neill's story rings true. '*Given
that the revenues are pouring in and the economy is looking so
good, the CBO didn't have much choice but to tell the Congres:
that,‘ said Rudolph G. Penner, forner CBO chief and now managing
director of the Barents Group of KPMG Peat Marvick in Washington.

Still, O'Neill's side of the story hasn't gotten mich
play. Even her allies admit that she lacks the public relations
skills and stature that the job demands. O'Neill herself
acknowledges that Washington is a far cry from academia. '*I
don't give my own opinions on anything, and it's frequently
frustrating not to,'' she said. But O'Neill may soon be called on
to speak up in the CB0's defense--particularly if a recession
deflates that revenue windfall.

LANGUAGE: ENGLISH

LORD-DATE: May 13, 1997

Page 12


57

Even under the best of circumstances, there is a great need for careful
analysis of regulations — proposed and existing. There is also a need for
careful oversight of rulemaking by agencies as well. The case with which the
federal government imposes regulations on state and local governments,
businesses, institutions, and individuals gives rise to these continuing needs.

My grave concern is that there is no organization currently up and
running that is systematically providing careful analyses of agency
rulemaking proposals. Thus if agencies do a poor job analyzing the costs,
benefits, and impacts of regulations, there is little record or basis for
preventing regulations that are overly burdensome, Not only does this result
in more regulations whose costs exceed their benefits, but also poorly
drafted ones that might actually endanger rather than promote public health
and safety.

The need for careful analysis of federal regulations caused me to
establish a Regulatory Analysis Program (RAP) at the Center for Study of
Public Choice at George Mason University. The objective of RAP is to
advance knowledge about the impact of regulations on society. One part of
the program involves providing careful, high quality analyses of agency
rulemaking from the perspective of the public interest. The objective is to
create an organization like OIRA outside of government, in academia. I
have long believed that an organization like this would be extremely helpful
to the public and government agencies alike, including OIRA. Indeed, the
concept for this program grew out of the experiences I had as head of OIRA
over 10 years ago. Even if OIRA was strong and effective, RAP’s analyses
could provide valuable additional information. With a weak OIRA, this type
of program is essential.

RAP is still in its infancy. However, even if this Regulatory Analysis
Program was fully operational, it would be miniscule compared to the size of
the regulatory state. I would thus still support Congress’ efforts to increase
the knowledge base for estimating the impact of regulations. Congress
needs a source of information and analysis that is independent of the
government agency which is producing the regulations. Since agencies
rarely propose regulations they do NOT mean to impose ultimately, their
analysis can be biased. Furthermore, some agencies discount information,
especially cost information, which is provided by parties that must
implement the regulation. For this reason, regulatory analysis that is
independent of the agency that writes the rules is critical. If independent


23

5

universe of past EPA activities not covered by this proposed
legislation. At this time, the Agency does not have a
definitive count of the number of additional, new regulationa
that will be promulgated into the future. In response to an
earlier question, the agency estimated that approximately
200 new regulatory actions will be promulgated on an annual
basis in the coming three years. Of these regulations, the
Agency estimates that approximately 150 will be *major*
rules (as defined under H.R. 1022), and they will be
analyzed in accord with the provisions of H.R. 1022.
Therefore, around 50 additional or "non-major" regulations
will need to be analyzed to meet the criteria described in
H.R. 994. The agency anticipates that few of these
regulations will require that thie information be prepared
under current latory and administrative provisions, so
new analyses will be required for these rules. Consistent
with assumptions and information developed for the H.R. 1022
analysis, the EPA could conceivably be required to devote an
additional $ to 18 PYEs at a cost of $0.5 to $1.5 million,
and $0.5 to $2.5 million in extramural resources for the
study of these 50 new regulatory actions.”

In addition to the study of new rules, the provisions of

H.R. 994 require the Agency to review all of its past rules.

At _this tima, we do not have an estimate on the number of

but have information on the number of pages in the
Code of Federal Regulations (CFR) devoted to environmental
regulations (around 14,200 pages). In response to Question
2, the Agency estimated it promulgated roughly 2,850

- final regulatory actions since 1981. If we allow for the
possibility that for the years prior to 1961, the Agency
promulgated final regulatory actions amounting to an
additional 20% beyond this figure, then the total estimated
number of rules that would need to be reviewed could be
between about 2850 (assumes all final rules promulgated
prior to 1961 have since been. revised) and 3420 rules. The
schedule detailed in H.R. 994 requires that all of these
previous final rules must be reviewed within a seven-year
time period. Assuming an equal proportion of rules would be
studied over, this period, then between 400 and 490 past
xules would be analyzed each year for the next seven years.
Using the same cost figures for these rules as were used
above to analyze review of new *non-major" rules, this would
result in an annual expenditure of 41 to 154 FTES at a cost

2 Basie for estimates: The low range assumes 1 person-month
(0.08 PTE) and high range assumes 3 person-months (0.25 PTE) per
rule at a cost of $80,000 per FTE; low range aseumas $10,000
extramural resources and the high end assumes $50,000 extramural
resources ‘per rule, with 1 FTE per $500,000 extramural resources
for contract administration.



Testimony of Gary D. Bass
RE: H.R. 1704

July 10, 1997

Page Sof 6

to advance a political agenda rather than a source of objective analysis on agency rules.

It would potiticize the rulemaking process. Is not hard to magne a body Ske CORA. which
‘would function as an arm of Congress, being influenced by the expectations of

jawmakers looking to push an Kdeological agenda. Tipon dopa tors OM anal ire agency
head, CORA could utilize executive branch facilities and personnel without reimbursement 10
carry out work it needs done. Thus, a process would be opened up in which Committees can

give
campaign contributions lean on Committees. This would spell danger for the rulemaking
rocess wich fs bette of operating detached from the poftical arena and in the interest of
ind sclence.

It contains a regulatory accounting provision that could be an attempt to create a
congressional regulatory budget. There are many problems with the bil's requirement that
‘CORA do an annual report on the “total cost of Federal regulations” on the U.S. economy.
First, this would require significant work. CORA would not be able to review every rule
generated by the executive branch, and therefore would need to establish a process for
determining costs for every rule. Currently, OMB does not keep such Information elther.

‘Second, the regulatory accounting provision does not define what is meant by total costs.
Does this inctude iret cose? Inthe pat, business has wed such vague language 19
create opportunities for showing significant cost (8.9, lost business opportunity) relative
benefit, inflating burdens and justitying a decision not to regulate.

eieae arto tataa gee

Fourth, the requirement does not instruct CORA to provide an annual estimate of the total
Dene of federal regulations ncuding the economic benef of equation. This would create
a one-sided figure thal could be greatly misused.

Posty, an an anal requirement, the regulator accounting provision raises serious concerns
it could become a backdoor approach to creating a regulatory budge! — something
‘strongly opposed by the public interest community but called for in the Contract with America.

It assumes that agencies never issue the most cost-effective reguiatory alternative. The
bill states that CORA must provide “a description of alternative approaches that could achieve.
{he same regulatory goal ota wet et Gut it is entirely possible that an agency will have:
taken the appropriate, most cost-etfective action. In fact, its unlikely thal an agency would
move forward with a rule it t believed there was another more cost-effective altemative that


44

Mr. Chairman, members of the subcommittee, thank you for allowing me to
appear before you. My name is Sharon Miller, chairwoman of National Small Business
United (NSBU), the oldest small business organization in the nation representing 65,000
small businesses in all 50 states. I am also the owner of Immediate Temporary Help, a
small business based in Midland, Michigan.

‘As members of the House National Economic Growth, Natural Resources and
Regulatory Affairs Subcommittee, I know you are well aware of the impact that
regulations have on America's 22 million small business owners. For you to take the
time to address ways to minimize the impact on small business and explore
mechanisms to involve Congress in the process is critical and I applaud your efforts.

You well know only a precious few small businesses employ ~ or can afford to
hire — the lawyers, consultants, engineers and regulatory experts to keep them abreast
of the dizzying amount of rules, regulations and laws that come from Washington, DC
and their state capitals. That is why organizations such as NSBU are so critical. But,
my organization — or any small business organization ~ cannot possibly reach all of the
‘small businesses that are affected.

‘An October 1995 Small Business Administration, Office of Advocacy report to
Congress entitled "The Changing Burden of Regulation, Paperwork and Tax
Compliance on Small Business", exemplifies the problem. In this report, the Office of
‘Advocacy found that the total cost of federal regulations on a per-employee basis is 50%
{greater for firms with less than 20 employees — the vast majority of my members ~ than
for firms with 500 or more employees. No matter the perspective, the report found that
the total costs of federal regulations are generally 90% higher for small companies than

large.

‘That is why Congress passed SBREFA two years ago this month. The Small
Business Regulatory Enforcement Faimess Act of 1996 was designed to get small
business more involved, provide small businesses plain-English explanations of new
regulations, require federal agencies to do the research on the most cost-effective


85

Well, needless to say, I’m not pleased with CORA. My written
testimony, which I hope will be submitted for the record, lists a
number of specific concerns.

I do want to mention just one specific thing: that no way can
these analyses be done in 45 days unless one of two options hap-
pen. You take the agencies’ work, which then means it’s duplica-
tive. Or, alternatively, you take some special interest, whether it’s
an OMB Watch or whether it’s a regulated community, in which,
then, the data and the results are biased.

I don’t see where we get. Let me make one final comment.
There’s been a lot of discussion about likening this to the budget
process. It is very—it’s actually a bad analogy to use. The budget,
as you well know, is something that the administration proposes.
Congress has the statutory responsibility to appropriate funds in
order to have the execution through the executive branch. The reg-
ulatory process does not have a similar approach. Now, Congress
has actually bills before it that is trying to make a mirror ap-
proach, but at this point that doesn’t exist.

Second, the rulemaking process today has a very neutral process
by which a rule is published in the Federal Register for notice and
comment. It has added features for the small business review pan-
els that Congress has enacted. It has many other features under
the Unfunded Mandates Reform Act. In addition, the rulemakin;
process provides through the Administrative Procedure Act, judici:
review. All of these are significantly different than the budget proc-
ess.

So let me say that CORA will not increase Congress’ use of the
Congressional Review Act. More information is not what you need.
You can go right to GAO’s web site, if you’re worried about speed,
and get the analyses that they have done. It is costly; it is duplica-
tive raises concerns about CORA’s ability to fairly review these
rules.

So, let me just say to mix my metaphors, it’s sort of like a pot
of gold at the end of the rainbow. And I think that it’s both elusive
and imaginary.

Thanks.

[The prepared statement of Mr. Bass follows:]


62

Mr. McINTosH. Thank you, Mr. Hahn. And being referred to as
professor is probably the nicest thing anybody has said about me
in the last few days. [Laughter.]

Mr. Litan.

Mr. Litan. Sure. Thank you very much.

Tl be very brief. I prepared my testimony jointly with Dr. Hahn,
and he has more than adequately summarized it.

Let me just give you couple of personal observations. In a former
life, before returning to Brookings, I was an Associate Director of
OMB, not of OIRA, not Wendy’s old job, but one of the Program
Associate Directors. I’m not going to comment specifically on her
characterization of OIRA during the Clinton administration. It
probably is—it doesn’t matter either way in terms of my own views
as to whether or not we need this office, because I agree with
Wendy that we do need the office. But let me just tell you person-
ally that as a PAD at OMB, I spent a lot time having to deal with
CBO on scoring issues. We didn’t always agree with CBO, and I
found myself having to troop up here to talk to these people to try
to persuade them to change the numbers or whatever, and we
would have professional discussions. I never had a political discus-
sion. They were all professional to professional.

Now, sitting in that job, of course, it was a pain to me. On the
other hand, knowing that CBO was out there is important institu-
tionally because it keeps OMB honest in doing it’s own estimates.
And that’s the central lesson here—that if you have an independ-
ent office, whether it’s in CBO or whether it’s a separate office,
you're going to stiffen a lot of backbones. No. 1, you’re going to
stiffen the backbone of OIRA, because it’s going to be forced to take
it’s review responsibilities more seriously than they would other-
wise. No. 2, you’re going to stiffen the backbone of the agencies, be-
cause the agencies may or may not be able to snow OIRA, but
they’re very unlikely to snow CBO. And I can tell you that because,
even in the spending area, they try to do that right now, and they
can’t get away with it. And so on individual rules, you're going to
have atiffened | backbones so that’s a key benefit of having this sepa-
rate institution.

The second area of benefit, just keep in mind, is at the macro
level. Beyond just individual rules, having another outfit out there
to produce a report on Federal lation will act as a very impor-
tant check I think on having O do its report. Now, O! made,
in my view, a worthwhile first crack pursuing the Stevens Amend-
ment in issuing its initial report. But there are a lot of gaps in this
report. It’s very aggregate in nature. OMB didn’t do any independ-
ent review of analysis that had already been done by the agen-
cies and so forth. And most importantly, OMB didn’t help you in
Congress with your job, which is to compare the cost effectiveness
of different statutes and different regulatory efforts. You’d like to
know, it seems to me if I were sitting in your chair, how many dol-
lars are we spending to save a life through occupational regulation
versus environmental regulation and so forth. The numbers vary
all over the lot, as all of us know. But OMB didn’t tell us any of
that in its report, and it seems to me that having an independent
office out there do this every year would prod OMB to do a lot of
its work, and, at the same time, provide you with useful informa-


1742 CONNECTICUT AVENUE, NORTHWr ~

‘WASHINGTON, D.C. 20009-1171

‘TELEPHONE: (202) 234-8494
FAX: (202) 234-8564
e-mail ombwatch @rtknet.org

OMB WATCH

‘Statement of

Gary D. Bass, Ph.D.
Executive Director
OMB Watch

Batore the Subcommittee on Natlonal Economic Growth, Natural Resources, and
Regular Mfrs
House Committea on Government Reform and Oversight

On
Congressional Office of Regulatory Analysis Creation Act
March 11, 1998

‘My name is Gary Bass and | am executive director of OMB Watch, a nonprofit research
and advocacy organization that works to encourage greater civic participation in federal
decision-making and promote a more open, responsive, and accountable government.
We have been monitoring federal regulatory activities since 1983 and have Issued a
number of reports on the toplc. Pursuant to your request Mr. Chairman, OMB Watch
has not received any federal grants or contracts in the current and two preceding years,
nor are we representing any entity today that has received such funds.

‘We appreciate the opportunity to testity.

The bill before this Subcommittee, H.R. 1704 — the Congressional Office of
Regulatory Analysis Creation Act — would set up a congressional office to review
agency rulemakings and conduct its own cost-benefit analysis for every major rule (and
‘nonmajor rule upon the request of Members).

it has been suggested that through the creation of CORA, Congress would be better
informed on rules, and more likely to use the recently-enacied Congressional
Review Act (CRA). As Rep. Kelly pointed out on May 22, 1997, when introducing H.R.
1704, the House has not moved a resolution ot cleapproval through the expedited track
provided for under the law and no rule has been struck down.

‘Yet if you look at the recent case exampies, there appears to be little confusion among
Members. Is there anyone here on this Subcommittee who doesn't have an opinion on
OSHA's methylene chloride rule of EPA's new clean alr standards? Most, if rt all,
Members know exactly how they feel about these rules, which is not surprising
considering the wealth of information already made available to Congress.

‘The CRA requires that agencies submit all proposed rules to the parliamentarian and
teadership in each chamber. In addition, the General Accounting Office must prepare a
report on each agency rule and submit it to the congressional committees,
jin both the House and Senate. (In fact, this information can be viewed by anyone who
has access to the world wide web — www.gao.gov) Thus, the intimate details of each
‘agency rulemaking (e.9., the cost-benefit analysis, risk assessment, and smail business.
panel recommendations) are right there at the finger tips of each Member and readily
avallable to the relevant oversight committees.



31

Page 21
Capitol Hill Publishing Corp., January 14, 1998

performance."

Perhaps it is naive to argue that the CBO should be above the political fr
gut Congress and its leaders risk damaging their own credibility when they bring
pressure on the CBO to produce budget projections that support their political
ideology.

SANGUAGE: English

DORD-DATE: January 19, 1998


7

age of about 2,300 rules per year during 1982 to 1993. Although
this number has dropped significantly in recent years, it still re-
views hundreds of rules e: year. It does this with a staff and
budget similar to what CORA would have. There is also no reason
why it would not begin to analyze major rules before they were fi-
nalized. It could also use agencies own statistics and methodologies
in addition to using its own independent expertise and judgment.
As a result, there is no reason to think that CORA would be unpre-
pared for or unable to carry out its mandate.

In conclusion, H.R. 1704 is a very simple concept that will help
Congress deal with an increasingly complex and burdensome regu-
latory system. It will give Congress the resources it needs to over-
see the regulations that the executive branch issues on a regular
basis and facilitate use of the Congressional Review Act. I thank
the subcommittee for the opportunity to be here today and I am
happy to answer any questions that you have. Thank you very
much.

Mr. Sessions. Thank you, Congresswoman. We appreciate your
testimony today. I have one question, and then I will defer to Mr.
Sununu. Please let the record reflect that Mr. Tierney did come in
for just a moment during your comments, but had to leave due to
another vote in another committee.

I have heard you clearly say that in essence, this organization
would be a watch dog, primarily responsible for looking at legisla-
tion where rules and ations were involved. Would they come
give testimony? Would they come and be an advocate on behalf of
any particular piece of legislation? Or would they be more like this
watch dog and advisory council? How do you envision them really
working?

Mrs. KELLY. I envision them as being available to any Member
of Congress on a bipartisan basis, on a completely non-political
basis to offer information and to offer any kind of research that
that Congressman would like to have with regard to a proposed
agency rule or regulation.

Right now as a Congressman, I am gure you understand as I do,
when I need information sometimes it’s difficult to get all that in-
formation quickly. This would be an office that could do that. An
office that’s over there putting together information so it’s available
to us as needed.

Mr. SESSIONS. Do you envision also, and I believe your testimony
suggested this or perhaps said it, that they would look at Executive
orders or those orders that either the President or the administra-
tion issued as on their behalf within agencies? That they would
have those, that responsibility also to look at those and quantify
them and provide information’

Mrs. KELLY. Yes. They could look at anything that has any kind
of impact on a rule or a regulation having to do with the small
business entities. Of course if they are called to testify, they would
come and testify just like any other agency, any other offices avail-
able. This is not an agency. This is an office. So the people in that
office are obviously available if they are called to testify. But their
primary job would be simply to be there as someone that we can
refer to, an office we can refer to.


46

the whole culture of regulating must change for SBREFA to be truly effective and this
has yet to occur.

That is why the introduction and passage of H.R. 1704, the Congressional Office of
Regulatory Analysis Creation Act is so important. Having reviewed the content and intent
of the proposed legislation, NSBU — on behalf of its 65,000 members — offers our
support to the legislation.

CORA and REGULATION

‘Small business owners understand that while not all regulation is “bad,” there
are clearly some mandates that prove ineffective and detrimental to small business. The
reams of regulations that flow from Washington, D.C. have not been slowed by the
enactment of the SBREFA. As small business owners search for a mechanism to
minimize the disproportional regulatory impact on their businesses, providing added
weight to the Congressional Review Act is a positive step.

NSBU has always attempted to work with Congress and the federal regulatory
agencies to keep small business informed and in compliance with all rules and
regulations. With the added nonpartisan information that CORA would provide,
Members of Congress can actively join small businesses efforts to limit the far-reaching
scope of unnecessary regulation — when itis appropriate.

CORA can serve a vital function for America's small business and put real
strength into SBREFA. It would be a small budget, small staff.addition to Capitol Hill
whose impact could be far reaching.

We know the story of SBREFA. We know that there are those who want to see it
fail, We know that Congress has taken no action under SBREFA despite the
approximately 77 major rules based since it became law. Itis a learning process, but we
are approaching the end of the learning curve and we need to act soon. But, we don't
‘want to take action without proper information. Again, SBREFA isn't about eliminating


6

Fortunately, Congress has recognized this role. This month
marks the 2-year anniversary of Small Business Regulatory
Enforcement Fairness Act, or SBREFA, for short. A key provision
of SBREFA is the Congressional Review Act, the CRA, which al-
lows Congress to review new regulations and eliminate those that
it deems too burdensome or inconsistent with congressional intent.
I want to point out, I said new regulations, and eliminate those
that it deems too burdensome or inconsistent with congressional in-

nt.

This is something I know you, Mr. Chairman, have been actively
involved with, and for that, you deserve our thanks. Unfortunately
however, Congress has not fully implemented this new oversight
tool. In my opinion, this can be explained in large part because of
the fact that nearly all of Congress’s information about the impact
of new regulations comes from the agencies who are developing
them. This information is often unreliable because agencies have a
vested interest in downplaying any negative aspects of the regula-
tions they have proposed. As a result, Congress is at a disadvan-
tage when trying to determine just how a particular regulation will
impact the economy, making it that much more difficult to effec-
tively implement the CRA.

This is a problem that the Congressional Office of Regulatory
Analysis is designed to address. If established, CORA would be
charged with conducting its own analyses of a select new rules to
help determine their potential impact on the economy and on small
businesses. It would break the monopoly of information that has
traditionally been held by the agencies and helped Congress exer-
cise its vital oversight responsibility.

Before I conclude, I would like to briefly address one of the con-
cerns I have heard expressed about my legislation. It seems as if
some contend that CORA could not possibly carry out its mandated
functions within the limited budget with which it would be forced
to operate. They cite statistics asserting that on average it costs in
the neighborhood of half a million dollars, and takes roughly 3
years to conduct a single regulatory impact analysis. That confu-
sion seems to stem from the definition that’s being used for a regu-
latory impact analysis.

Those who have raised the concerns seem to think that CORA
would be starting from scratch and doing an exact duplicate of
what an agency is required to do. If this perception is the result
of a poor choice of wording in my legislation, I think it’s something
that can be fixed. However, I want to make it absolutely clear for
the record that such a brand new stem to stern full-blown regu-
latory impact analysis is not what is envisioned for CORA. The in-
tent is to have CORA do an analysis of the information that agen-
cies have developed about the impact of their own rules. In other
words, CORA would provide a second opinion or an analysis of the
analysis of new rules. If CORA were required to do a full regu-
latory impact analysis in the manner that some have suggested, I
would be the first to agree it could not possibly meet that goal with
the limited budget that we have assigned it. But that is not the in-
tent of the legislation. I want the record to reflect that.

All that one needs to do is look at the history of the Office of In-
formation and Regulatory Affairs, OIRA. OIRA reviewed an aver-


40

Mr. TIERNEY. Thank you. And articles that attack the majority’s
alleged abuse of the CBO’s appointment process and other related
material. Thank you, Mr. Chairman.

Mr. SESsIons. Thank you, Mr. Tierney. I appreciate your com-
ments. Just so that you are aware, testimony that has been made
today by Congresswoman Kelly, I believe partially answered some
of the things that you were discussing, the question that CORA
would not conduct the type of RIAs that CBO has said would cost
$500,000 and take 3 years. Instead, they would review what agen-
cies have done and OIRA does not at this time do that review.

Mr. TIERNEY. Mr. Chairman, if I might just respond to that. It
was exactly my point when I said that that’s all we are going to
do is what we termed was an analysis of the analysis. That in fact
is our job, not the requirement for an establishment of an entirely
new bureaucracy, to simply look at paperwork to see whether the
paperwork was done chrgperly or not. it is all already done by
OIRA, the GAO, the CBO and others. So I guess that would exactly
be my point. That although she tried to respond to it, I think she
in fact made our point. Thank you.

Mr. Sessions. Good.

Mr. SUNUNU. Mr. Chairman, if I might just make one comment
on that point. It’s not simply a question of Congress doing the anal-
ysis. Obviously we’re all busy. That aside, we have for example, a
Congressional Budget Office that helps us with budgetary analysis.
I think what the Congresswoman is suggesting is a congressional
office of regulatory analysis to help us with the analysis of the reg-
ulatory issues. The reason that is important is because falling back
on the issue of the budget, for example, the President and the ad-
ministration puts together their budget proposal. But I don’t think
it is always worthwhile to take the agency or the President or their
proposals completely at face value. A case in point, the President’s
budget proposal estimated a year 2000 surplus of $10 to $15 bil-
lion. But in fact, when June O’Neil, that Mr. Tierney has com-
plimented here today, and rightly so, completed her analysis of the
President’s budget, it showed that in fact in the year 2000, it will
run a deficit.

At a time when putting Social Security first is on our minds of
foremost, I think it just shows the importance of independent anal-
ysis, whether the proposal is coming from the President, from the
administration, or from any other agency. We need independent re-
view, independent analysis, sometimes of analysis that’s already
been done. That is what we are trying to achieve here. Thank you.

Mr. Sessions. Thank you, Mr. Sununu. My comments would be
along the same line. Part of what Mr. Tierney has expressed today
is the discussion about static versus dynamic models that are used
by the CBO. I think it’s very interesting that we have found ourself
to be placed in an attack by the minority on this regard because
in the real world, the issues that I believe we're dealing with now,
those that deal with tax cuts in our economy and how they might
play out, simply cannot be addressed with static modeling. It would
not offer what I would call a real-world opportunity to see how
these tax cuts would play out. So I would like to just make sure
that the record reflects that I am a person that believes that dy-
namic modeling would be not only appropriate, but one that would


19

“oa” UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
(s) wasniwaTow, bie. 20480

OFFICE OF
POLICY, PLANNING ANO EVALUATION

MAY 17 1995

Honorable Cardiss Collins
Committee on Reform and Oversight
2157 Rayburn House Office Building
U. S. House of Representatives
Washington, DC 20515-6143

Dear Congresswoman Collins:

‘Thank you for giving us the opportunity to provide
information for your subcommittee mark-up on H.R. 994, the
Regulatory Sunget and Review Act of 1995. The Administrator has
asked me to respond on her behalf, and I would like to answer
each of your questions in turn. As you will see from our
response, this legislation has far-reaching implications for
Environmental Protection Agency (BPA) and its regulatory
programs.

1. How many regulations are currently administered by your
agency?

EPA has historically issued approximately 200 final,
substantive rules each year. Assuming this has been true
since the establishment of the Agency in 1970, EPA
administers approximately 4800 final rules as codified in
the Code of Federal Requlstions. As explained in our
response to Question 2, these figures do not include
nonregulatory actions published in the "Final Rules*’ section
of the Federal Reqister

We should note that of these final, substantive and

xegulatory actions, many do not establish new regulatory
programs but rather amend existing parts of the Code of
Federal Requlations.

2. How many final regulations have been ismed by your agency
4m each of the years 1961 through 19947

Since 1981 EPA has issued approximately: 2,800 final
@ubstantive rules. Of these 2800, 70 have cost over $100
million. The chart below breaks these numbera out by year.



4

wii REGULATORY IMPACT ANALYSIS. March 1997

some of its cost information is presented for purposes of comparison. Examining
other regulatory agencies, such as the Food and Drug Administration and the
Department of Agriculture, would also have been instructive, but CBO was unable

to do so because of time limitations.

The majority of the RIAs in CBO's study date from 1990 through 1996,
although some of the analyses are still gaing on, and five were published before 1990,
(The FAA submitted some RIA data from 1988 and 1989.) CBO reviewed that
seven-year period to capture the most recent analyses and to account for the fact that
RIAs can take years to complete.

Based on the sample of 85 analyses, the average cost per RIA was about
$570,000, with a range of $14,000 to more than $6 million per analysis. The median
cost (the value below which half of the costs per RIA are found) was $270,000,
indicating that a few relatively expensive analyses were skewing the average upward.
‘When the four RIAs that cost more than $2 million were excluded, the average and
soedian costs were about $390,000 and $270,000, respectively. (All values are stated
in 1995 dollars.)

‘The RIAs in CBO's study also varied considerably in the amount of time they
took to complete, with an average of three years and a range of six weeks to more
than 12 years. For agencies that use outside contractors (all EPA offices and the


3
for level III of the Executive Schedule in section 5314 of title 5, United States
le.

(b) PERSONNEL.—The Director shall appoint and fix the compensation of such
personnel as may be necessary to carry out the duties and functions of the Office.
All personnel of the Office shall be appointed without regard to political affiliation
and solely on the basis of their fitness to perform their duties, The Director may
prescribe the duties and responsibilities of the personnel of the Office, and delegate
to them authority to perform any of the duties, powers, and functions imposed on
the Office or on the Director. For purposes of pay (other than pay of the Director)
and employment benefits, rights, and privileges, all personnel of the Office shall be
treated as if they were employees of the House of Representatives.

(c) EXPERTS AND CONSULTANTS.—In carrying out the duties and functions of the
Office, the Director may procure the temporary (not to exceed one year) or intermit-
tent services of experts or consultants or organizations thereof by contract as inde-
pendent contractors, or, in the case of individual experts or consultants, by employ-
ment at rates of pay not in excess of the daily equivalent of the highest rate of basic
pay under the General Schedule of section 5332 of title 5, United States Code.

(d) RELATIONSHIP TO EXECUTIVE BRANCH.—The Director is authorized to secure
information, data, estimates, and statistics directly from the various departments,
agencies, and establishments of the executive branch of Government, including the
Office of Management and Budget, and the regulatory agencies and commissions of
the Government. All such departments, agencies, establishments, and regulatory
agencies and commissions shall promptly furnish the Director any available mat
rial which the Director determines to be necessary in the performance of the Direc-
tor’s duties and functions (other than material the disclosure of which would be a
violation of law). The Director is also authorized, upon agreement with the head of
any such department, agency, establishment, or regulatory agency or commission,
to utilize its services, facilities, and personnel with or without reimbursement; and
the head of each such department, agency, establishment, or regulatory agency or
commission is authorized to provide the Office such services, facilities, and person-
nel.

(e) RELATIONSHIP TO OTHER AGENCIES OF CONGRESS.—In carrying out the du-
ties and functions of the Office, and for the purpose of coordinating the operations
of the Office with those of other congressional agencies with a view to utilizing most
effectively the information, services and capabilities of all such agencies in carrying
out the various responsibilities assigned to each, the Director is authorized to obtain
information, data, estimates, and statistics developed by the General Accounting Of-
fice, Congressional Budget Office, and the Library of Congress, and (upon agreement
with them) to utilize their services, facilities, and personnel with or without reim-
bursement. The Comptroller General, the Director of the Congressional Budget
fice, and the Librarian of Congress are authorized to provide the Office with the in-
formation, data, estimates, and statistics, and the services, facilities, and personnel,
referred to in the preceding sentence.

(f) APPROPRIATIONS.—There are authorized to be appropriated to the Office for
fiscal years 1998 through 2006 such sums as may be necessary to enable it to carry
out its duties and functions.

SEC. 4, RESPONSIBILITIES.

(a) TRANSFER OF FUNCTIONS UNDER CHAPTER 8 FROM GAO TO OFFICE.—

(1) DiREcTOR'S NEW AUTHORITY.—Section 801 of title 5, United States Code,
is amended by striking “Comptroller General” each place it occurs and inserting
“Director of the Office”; and

(2) DEFINITION.-—Section 804 is amended by adding at the end the follow-

ing:

“(4) The term ‘Director of the Office’ means the Director of the Congres-
sional Office of Regulatory Affairs established by section 3 of the Congressional
Office of Regulatory Analysis Creation Act.”.

(3) MAJOR RULES.—

(A) REGULATORY IMPACT ANALYSIS.—In addition to the assessment of an
agency’s compliance with the procedural steps for “major” rules described
in section 801(a\(2)(A) of title 5, United States Code, the Office will also
conduct its own regulatory impact analysis of these “major” rules. This
analysis shall include—

() a description of the potential benefits of the rule, including any
beneficial effects that cannot be quantified in monetary terms and the
identification of those likely to receive the benefits;



Two Suggestions for Modifying the Bill

We have three suggestions that the committee may wish to consider in modifying
this bill.

1, The annual report should also consider the benefits of regulation, provided
adequate resources are made available. Benefits are frequently more difficult
to estimate, but they are nonetheless important. Such estimates will be
developed in the course of analyzing the benefits and costs of each major
regulation.

2. To the extent resources are an issue, the office should be given the discretion
to concentrate its own regulatory analyses on selected major rules rather than.
having to prepare an analysis for every major proposed rule.

3. While we approve of the idea of a separate Office of Regulatory Analysis, we
think it would also be possible to create a separate division within CBO to
carry out the required analysis, should a separate office be deemed infeasible.

Conclusion

‘Congress has traditionally paid much less attention to the benefits and costs of
regulation than to directly budgeted expenditures. This imbalance should be rectified.

Regulation is becoming increasingly important in many aspects of our economy.
Ithas an important affect on our quality of life and the costs of goods and services; it also
affects the ability of firms to compete in an increasingly global economy.

We believe regulations and the regulatory process need to be scrutinized more
carefully. Congress needs to have better information on the likely benefits and costs of
regulations that flow from the laws it passes. In addition, American citizens have a right |
to know how regulations are likely to affect them in everyday life.


24

6

of $3 million to $12 million, and $4 million to $25 million
in extramural resources for the study of these past rules.?

Table 1 serves to sunimarize these estimates. Taken
together, baseline Agency resources davoted to these
activities, 1f altered as a consequence of provisions in
H.R, 1022 and H.R. 944, would require a substantial increase
or re-direction of Agency resources to fulfill these
requirements. The resource demands would require several
thousand persons be devoted to these types of analyses
(abova and beyond the number of people that now work in
these areac). We estimate that an additional $1.4 - $1.7
billion in annual extramural resources would be devoted to
the conduct of risk ascesementa and economic analyses to
fulfill the provisions of proposed legislation in the House
of Representatives. Of thie amount, between 1400-1960 staff
would be reviewing and analyzing new and past rules, at an
annual cost of §350-$450 million for personnel and
extramural resources.

We should note that should H.R, 1022 fail to pass, but H.R.
994 be enacted, the incremental costs to the Agency to
satisfy the conditions of H.R. 994 would be less than the
estimated sum of the incremental costs of these two bills
This is primarily due to the provisions in H.R. 1022 for
judicial review, and inclusion of permite in the universe of
regulatory actions subject to risk and economic analysis.
However, the costs of enacting H.R. 994, absent any
additional changes, will be greater than the incremental
costs of H.R. 994 provided in Table 1. There would still be
requirements to produce risk and economic information for
all new and past regulations. The analyses performed for
H.R. 994 could conceivably be less complex and resource-
intensive than those produced for H.R. 1022, but there would
still be a substantial increase in effort and cost to
perform these analyses given the large number of rules to
which the provisions of H.R. 994 would be applied.

} Basie for estimates: The low range assumes 1 person-month
(0.08 FTE) and high range aspumes 3 person-months (0.25 FTE) per
rule at a cost of $80,000 per PTE; low range assumes $10,000
extramural resources and the high end assumes $50,000 extramural
resources per rule, with 1 PTE per $500,000 extramural resources
for contract administration.


10

gressional Review Act. Additionally, the Congressional Budget Of-
‘ice is responsible for comparing an agency’s estimate of cost
of a rule with the CBO’s original estimate for the act.

Furthermore, for the last 2 years, the Office of Information and
Regulatory Affairs has been estimating the total cost of regulations
on the U.S. economy. Apparently the only unique function that
CORA would perform is an independent cost-benefit analysis, or as
I just heard the representative indicate, sort of an analysis of an
analysis, as if that might be necessary, which was also referred to
as a regulatory impact analysis or RIA. CORA would analyze all
major rules and upon request, all non-major rules. This new func-
tion would simply be too costly.

In March 1997, the CBO conducted a thorough analysis of the
cost of conducting a cost-benefit analysis. After reviewing 85 analy-
ses from four agencies, tae CBO concluded that the average cost of
performing a single analysis was $570,000. Therefore, at an aver-
age cost of $570,000 per RIA, the CORA would need about $35 mil-
lion annually to conduct its own independent RIA or analysis of the
analysis for the 60-plus major rules filed with Congress each year.

CBO also notes that there’s a very broad range of costs. However,
CORA would be conducting independent analyses for all major
rules. I would venture to say that those analyses then are the more

msive ones, and that the $35 million estimate is quite conserv-
ative. Clearly CORA could not adequately perform this function
with the $5 million a year that is provided for in the bill as amend-
ed by the Judiciary Committee.

That said, it appears that CORA could not perform this function
within the 45 day time limit provided in the bill. CBO found that
on average, a cost-benefit analysis took 3 years to complete. Pro-
ponents of the bill may argue that CORA’s analysis would not be
as thorough as the analysis referred to in these studies. I suggest
that that must be what the representative was talking about when
she mentioned an analysis of an analysis.

If the purpose of CORA is merely to review what the agency has
done, why are we duplicating work that is already performed by
OIRA, the GAO, the CBO and others? I do not believe we need to
create a new small bureaucracy to solve a larger bureaucratic prob-
lem. This is in fact what people are always complaining we do with
small businesses. Now we ap} ntly intend to do it on agency
after agency that’s working within the Government.

I am also, Mr. Chairman, very concerned that the appointment
process for CORA opens itself to partisan politics. The majority
would be tempted to create a partisan shop that would merely re-
analyze the agency’s cost-benefit numbers to come up with new
numbers that fit the majority’s political agenda. Apparently, Mr.
Chairman, the majority believes that if it asked the question
enough times, it will eventually get the answer that it wants.

CORA’s Director would be appointed by the majority party. The
appointment Rrocess is modeled after the one used for the CBO.

majority been under fire in the media for using this a)
pointment process to encourage its political agenda. For example,
a recent widely publicized incident revealed an effort by the major-
ity to replace the current CBO Director June O’Neill, mainly be-
cause she would not apply dynamic scoring, the process used to


29

Page 16
Capitot Hill Publishing Corp... January 14, 1998

concluded that wealthy people benefit the most from capital gains, Sarbanes
suggested that perhaps the report had been “stopped in its tracks for some
reasons."

O'Neill responded that the CBO's "primary attention is devoted to reports
that are requested by the chair and the ranking minority of the committee.”
Ranking member Sen. Frank Lautenberg (D-N.J.) then made a formal request for the
study and it was eventually submitted to the committee after what O'Neill said
were some changes in the writing of the study.

O'Neill denies ever canceling the study. “I believe that at the time I had
told the senator it was a work in progress," she said. “I didn't say it was not
going to come out."

O'Neill also denies she meant to "quash" the report. "I think it's a very
good study and I myself have tried to promote it," she said. "It's a treasure of
information on capital gains that had not been available before.

Despite the incident, Senate Democrats share the concern that O'Neill will be
replaced by someone who is more of an ideologue, sources said.

"Both parties have conflicting feelings about thie," said the aide. *For
Democrats we are not delighted with her because she has an ideological bias , as
illustrated in the capital gains tax study, on the other hand we could end up
with somebody a lot worse."

LANGUAGE: English

LOAD-DATE: January 19, 1998


98

Lwant to thank the author of the bill, Chairwoman Sue Kelly of New York, for joining us
today to talk about her legislation. As the chairwoman of the Small Business Committee's
Subcommittee on Regulatory Reform and Paperwork Reduction, she has a unique understanding
of the problems many Americans face in complying with costly, burdensome, and often
counterproductive regulations. She has expertly crafted this bill. 1 also want to thank Sharon
Miller, a small business owner who has traveled from Midland, Michigan to be with us today,
and Wendy Gramm,Robert Hahn, and Robert Litan, who are some of the top experts in the field
of regulatory analysis. { want to welcome Gary Bass of OMB Watch back to the Subcommittee
as well. I look forward to your testimony and your insights on this bill.


91

Testimony of Gary D. Bass
RE: H.R. 1704

July 10, 1997

Page 6 of 6

could be used to achieve the exact same resut. Rater, H.R 1704 provides an excuse to
focus more on cost and less on public

Nt ralses serious Constitutional questions over the separation of powers. The bill moves in
the direction of subordinating the powers granted to the executive branch to execute the laws
of the land, Congress has every right to establish laws and revise them, but H.R. 1704 would

passing
appropriations bills each year without reviewing 500 major rules and a significant number of
nonmajor ones.

Itis not necessary. Under the CRA, GAO must provide an analysis of each agency rule to
the appropriate congressional committees. Furthermore, Information on OIRA's regulatory
review and the agency's rulemaking Is also delivered to Congress. This gives lawmakers all the
tools they need to exercise necessary executive branch oversight. Supporters of H.R. 1704
have failed to Identify why there Is a need to transfer GAO's functions to a new congressional
agency. Although H.R. 1704 purports to enhance congressional knowledge of agency
rulemaking, Members have exhibited litle confusion in this regard. For instance, most
‘Members have formed well-developed opinions on OSHA's rule on methylene chloride and
EPA's proposed clean alr standards without an expensive apparatus Ike CORA.

Jn summary, the fact that Congress has not used the CRA is a function of political will, not a
lack of information, and therefore CORA would not lead to more resolutions of disapproval as
the Chairman hopes. But it would create a costly new government apparatus to perform a
myriad of functions already performed by other government entities. This is not a wise use of

resources and contradicts recent efforts to streamline goverment. in addition, an array of
problematic side-effects would resutt from CORA's creation, such as its license to operate in
‘secret and questions regarding the separation of powers between the executive and legislative
branches of government. Furthermore, there are questions about CORA’s mandated
requirements and why they exceed those imposed on agencies. OMB Watch therefore
strongly opposes H.R. 1704,


11

project economic growth produced by tax cuts when scoring their
udget. Commenting on this situation, the Hill newspaper edito-
rialized perhaps it’s naive to argue that the CBO should be above
the political fray. But Congress and its leaders risk damaging their
own credibility when they bring pressure on the CBO to produce
budget projections that support their political ideology.

Mr. Chairman, I believe that Congress should diligently monitor
the executive branch and ensure that it is fulfilling its regulatory
requirements. As the subcommittee with jurisdiction over regu-
latory affairs, we have the authority to hold hearings on a regula-
tion when we question whether or not a cost-benefit analysis was
performed correctly. In fact, I recall that you held two hearings last
year on the EPA’s analysis of the clean air standards for ozone and
particulate matter. However, the subcommittee has not held any

earings between July 1997 and March 1998. During that time,
Mr. Chairman, we were busy expending our subcommittee re-
sources investigating the White House data base to no apparent
benefit to anyone.

I believe we should take our oversight obligations seriously
through the subcommittee rather than abrogating our oversight re-
sponsibilities and delegating them to a new expensive and partisan
bureaucracy.

Mr. Chairman, I would like to submit for the record a number
of documents that summarize the substantial cost of performing an
independent RIA.

Mr. SESSIONS. Without objection.

(The information referred to follows:]


97

Clearly regulations need to be carefully analyzed before they are issued. Under the
Congressional Review Act, Congress has the responsibility to review regulations and ensure that
they achieve their goals in the most efficient and effective way. But, Congress cannot carry out
its responsibility because it has neither all of the information it needs to carefully evaluate
regulations nor sufficient staff for this function. The only analyses it has to rely on are those
provided by the agencies which promulgate the rules. There is no official, third-party analysis of
new regulations.

The “Congressional Office of Regulatory Analysis Creation Act” would provide
Congress with the resources it needs to analyze regulations. It would establish a congressional
office, known as CORA, to analyze regulations as they are issued and identify ones that are
problematic. In the same way that the Congressional Budget Office was established in 1975 to
‘equip Congress to address the growing budget problem, CORA should be established to equip
Congress to address the growing and significant regulatory problem.

‘Our Subcommittee held a hearing yesterday on OMB/OIRA's failure to provide guidance
to the agencies on compliance with the CRA. Because OMB/OIRA isn’t doing its job, many
agencies have violated the CRA, allowing hundreds of rules to take effect without being reported
to Congress. CORA is needed because OMB/OIRA isn’t doing its job. OMB's OIRA has failed
tocritically review agency regulatory submissions. With respect to the 4,476 regulatory reviews
completed by OIRA to date during the Clinton Administration, OMB only retumed to the
agencies 13 regulatory submissions (.e., less than 0.3%), including 3 from a minor agency (the
Railroad Retirement Board). In contrast, there were 87 returns during the Bush Administration
and 192 returns in the first Reagan term.

If we take last year's OMB "Report on the Costs and Benefits of Federal Regulations" as
any indication of what the agencies are doing in the area of Cost-Benefit Analysis, I think the
need for CORA becomes clearer. OMB was required to prepare a report for Congress giving
estimates of the costs and benefits for all major rules they had reviewed or finalized during a 12-
month period in 1996 and 1997. OMB provided cost-benefit information for only 15 out of $8
major rules issued during that period -- because the agencies had not provided OMB any
estimates for the remaining 43 rules! If the agencies did do cost and benefit analyses for these
rules, i's disturbing that OMB isn't aware of these analyses — or isn't willing to report the
information to Congress as required by law. Clearly an independent voice is needed to provide
accurate information to the people and their elected representatives, who have a right to know
‘what they're getting out of these regulations, and at what cost.

CORA would perform several essential functions: (1) it would consolidate under one
roof Congress’ regulatory analysis functions, which are now performed by GAO and CBO; (2) it
‘would analyze all major rules and report to Congress their potential costs, benefits, and alternate
approaches that could achieve the same regulatory goals at lower costs; (3) it would analyze
‘non-major nules, which currently go unchecked by GAO or OMB/OIRA, at the request of
committees or members of Congress; and (4) it would issue an annual report on the estimated
total cost of Federal regulations on the U.S. economy.


65

that the proposed legislation attempts to address. Second, we consider how a
Congressional Office of Regulatory Analysis could help address the problem. We conclude
by offering three suggestions for modifying the bill.

What's the Problem?

H.R. 1704 addresses a fundamental problem with the current federal regulatory
effort: despite the growing importance of federal regulation in everyday life, neither the
public nor Congress has sufficient information to fully appreciate its impact on the
welfare of Americans.

Federal regulation—especially environmental, health, and safety regulation—clearly
has grown dramatically in recent decades, whether considered absolutely, as a relative
share of the U.S. economy, or as a relative share of the output of the federal government.
According to the first comprehensive government report on the benefits and costs of
federal regulation, produced by the Office of Management and Budget, the cost of such
“social regulation" is roughly $200 billion annually. This is comparable to what the federal
government spends on all domestic discretionary programs. If the burden associated with
paperwork is included, such as filling out tax forms, the cost is almost twice that high.

One should, of course, compare the benefits with the costs. OMB places the
aggregate benefits of social regulation at $300 billion annually with no estimate for the
benefits of paperwork. They do not provide an estimate of the number of individual
regulations that would not pass a strict benefit-cost test, but research suggests that number
could be substantial. Our research finds that more than half (57%) of the government's
regulations would fail a strict benefit-cost test using the government's own numbers.
Moreover, there is ample research suggesting that regulation could be significantly


a

Suggested Reading

Arrow, Kenneth J., Cropper, Maureen L., Eads, George C., Hahn, Robert W., Lave, Lester
B., Noll, Roger G., Portney, Paul R., Russell, Milton, Schmalensee, Richards, Smith,
V. Kerry, and Stavins, Robert N. (1996), Benefit-Cost Analysis in Environmental,
Health, and Safety Regulation: A Statement of Principles, AEI Press, Washington, D.C.

Crandall, Robert W., DeMuth, Christopher, Hahn, Robert W., Litan, Robert E,, Nivola,
Pietro S., and Portney, Paul R. (1997), An Agenda for Reforming Federal Regulation,
AEI Press and Brookings Institution Press, Washington, D.C.

Graham, John D. and Wiener, Jonathan B. (1995), Risk vs, Risk: Tradeoffs in Protecting Health
and the Environment, Harvard University Press, Cambridge.

Hahn, Robert W., ed. (1996), Risks, Costs, and Lives Saved: Getting Better Results from
Regulation, Oxford University Press and AEI Press, New York.

Hahn, Robert W. and Litan, Robert E. (1997), "Improving Regulatory Accountability,” AEI
Press and Brookings Institution Press, Washington, D.C.

Morgenstern, Richard D., ed. (1997), Economic Analysis at EPA: Assessing Regulatory Impact,
Resources for the Future, Washington, DC.


16

1 RBQULATORY BOPACT ANALYSS Mar 1997

parts of the legislative branch that might be required to undertake
similar analysis.

© Agencies Do Not Track Costs Separately for Each RIA. Although
agencies employ both govemment personnel and outside contractors to
perform RIAs, none of the agencies that CBO reviewed keep track of
the total contract and personnel costs incurred for each regulatory
impact analysis. In addition, estimates of the time that government
personne! spend on RIAs are imprecise because agencies do not keep
time sheets by activity. Estimates of contractor costs are more reliable
because they can be traced through billing records. However, even
contractor costs can be hard to allocate if one contract inchides work
‘on several RIAs. As a result, accurately projecting the costs that
‘another office might experience in undertaking regulatory analysis is
difficult because the components of the baseline costs are not well

‘Asulysis. Agencies routinely perform economic analysis on proposed
rules, Some of that analysis is inchided in the RIA and some is not, but

even analysis excluded from the final document plays a role in the
decisionmaking process. Moreover, agencies often need to perform


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3

existing rules to allow more flexibility to the regulated
community. The state options in our Vehicle Inspection and
Maintenance program are examples of this initiative. All of
our existing regulations are currently under review as part
of the President’s Regulatory Reinvention initiative. We
expect to announce by June 2 a number of existing
requirements that will be eliminated.

How many existing regulations has your agency reviewed to
determine whether they continue to serve the purpose for
walch they were origissily iesued in cach of the years 1982
through 19947

The driving force behind EPA’s regulatory activity has been
new legislation and the requirements placed on the Agency to
develop and implement the corresponding regulatory programs.
Most recently, the Clean Air Act Amendments of 1990 have
required EPA to commit a substantial portion of ite
resources to develop the regulatory program, meet the many
statutorily imposed deadlines, and assure compliance with
the new rules

When we take into account the Agency’s additional
responsibility to meet many judicial deadlines, there has
been little time and fewer resources available to review
exieting regulations other than those periodic reviews
mandated by statute. Among EPA’s mandated reviews are the
TSCA Section 8 biannual review, the annual review of the
Effluent Guideline program under the Clean Drinking Water
Act, and the reviews of National Ambient Air Quality
Standards under the Clean Air Act.

How many regulations would your agency have to review within
year time period and within’ the seven-year time
tablished by H.R. 9947

Within seven-years, EPA would need to review all 2800 final,
substantive rules currently codified at the rate of about
400 per yeax. In addition, EPA will publish approximately
600 final, substantive rules over the next three years and
would therefore need to review 200 of these per year to meet
the three-year sunset provision of H.R. 994.

How many people would your agency envision needing in order
to carry out the requirements of H.R. 994 to review all
existing apd all new regulations that are ivsued?

(Sée response to question #7.)
What are the administrative costs your agency would expect
other

to incur in order te carry out the review and
requiremente of H.R. 9947


50
Mr. SUNUNU [presiding]. Thank you very much, Ms. Miller. We'll

go to Mr. Tierney for questions, please.

Mr. TIERNEY. Thank you. Thank you, Ms. Miller for joining us
today and sharing your views. I may share some of your concerns
that small businesses aren’t always sufficiently involved in the de-
velopment of regulations. They may not adequately be informed
about how to comply with regulations once they are adopted. Still
I don’t necessarily think that CORA is the answer to that.

Apparently from what I have seen and what I have heard and
read about the testimony of the representative in putting forth the
legislation, the only new thing that CORA would do is yet another
cost-benefit analysis, an additional cost-benefit analysis or she said
an analysis of the analysis. I was maki the point that as small
businesses, you probably have seen enoug! lysis of the analysis
and now we'll have our agencies suffering that experience that we
as small businesses often complain about.

If it is to be more than that, than a perfunctory review of paper-
work, then we have also seen the estimates that it will take $35
million to do it. Wouldn’t you agree with me that we might better
spend that $35 million making sure that there is a way for small
businesses to be involved in the process of the development of regu-
lations and impact it at that point in time, to have some say in the
regulations and as they are developed, and to be adequately in-
formed about how to comply before the burden has been placed?

Ms. MILLER. Well, it’s obvious to me that it’s not working as it’s
currently laid out. We have had 77 different areas where some-
thing could have been done, should have been done, and Congress
hasn’t acted on any of those 77.

Mr. TIERNEY. How was that? There are 77 rules.

Ms. MILLER. That’s right.

Mr. TIERNEY. And what would you have had Congress do?

Ms. MILLER. Well, there hasn’t been dialog about those rules.
There has been no action on any of those rules.

Mr. TIERNEY. I think there has been inaction on those rules
which would lead us to believe that Congress chose not to act on
them. Isn’t that correct? Or would you have them bring every sin-
gle rule up for review and some ialog and some debate and go
through that process even if they didn’t have a problem with the
rule?

Ms. MILLER. As an individual business owner, a small business
owner, I find it unbelievable that 77 instances would come before
Congress with no action.

Mr. TIERNEY. So for all the agencies in Government, for all 50
States, for all the areas that 77 rules were implemented, you find
w unbelievable that there would be 77 rules that were just accept-
ed?

Ms. MILLER. Yes. I would. I believe that that would show me and
based on the action in SBREFA and the NAAQS issue, it shows me
that it’s not working. So CORA——

Mr. TIERNEY. So they should do by inference?

Ms. MILLER. Pardon me?

Mr. TIERNEY. This you do by inference. Your majority or your
major testimony here today is that you don’t think it’s working be-


95

is a good piece of legislation as once more part of overall regulatory
reform. Unlike before us now, I’m not at all nervous about Con-
gress taking on more of the responsibility in this area. I think part
of the problem with the regulatory monstrosity that we have in this
country is Congress, over the years, has abrogated too much of the
responsibility for understanding the impact of rules and regula-
tions and consciously deferring its proper role so that we don’t need.
to hold ourselves accountable, and we can blame somebody else
when those rules and regulations go awry and when problems de-
velop. So, I think that this is really one step to try and bring back
into the proper balance the regulatory scheme in this country. And
there is so much more that we can do that this subcommittee has
already begun to look at and that the last Congress and this Con-
gress is moving forward on. But this, I think, will be an important
part of that—to give us the tools to really restore a proper balance
in the regulatory schemes of this country.

I commend you, Mr. Chairman, for your work in this area, and
I commend also the Congresswoman from New York, Mrs. Kelly,
for introducing this piece of legislation, which I do support.

Thank you.

Mr. McINTOSH. Thank you, Mr. Barr. Before we adjourn, let me
ask unanimous consent that my opening statement, the prepared
statement, also be put into the record.

Seeing no objection, the committee stands adjourned.

Thank you.

(Whereupon, at 4 p.m. the subcommittee adjourned subject to the
call of the Chair.}

{The prepared statement of Hon. David M. McIntosh follows:]


33

Page 28
Capitol Hill Publishing Corp., January 7, 1998

“Most people have observed the independence of the CBO so there hag been
Little interferenc: id O/Nei11

On the subject of dynamic scoring, O'Neill said “economists naturally think
about dynamic effects because it is their job. But on the issue of dynamic
scoring , would you, for each and every piece of legislation that passes,
attempt to say what the effect on the GDP (gross domestic product) would be for
the next 10 years, that would have to do with what is practical and what is not
practical."

Sources acknowledge that budgeteers in both the House and Senate were
frustrated with O'Neill, blaming her for the CBO's cautious forecasts. A year
ago the CBO estimated a deficit of $125 billion for fiscal 1997, but amended the
figure months later during budget negotiations. As a result of unexpected tax
revenues, the CBO then estimated the deficit would actually be more than $40
billion less than previously stated. The year-end total deficit was $22 billion,
nearly one-sixth of the original estimate

In her defense, many observers say it is unfair not only to compare O'Neill
to Reischauer, but also to criticize her conservative estimates at a time of
extraordinary and unpredictable economic growth.

Indeed Reischauer himself , who did not deliver administration-friendly
forecasts for Clinton's health care plan , said that any director of the CBO who
is truly doing his or her job will be criticized by Congress.

“those who appoint you are the most disappointed in your performance," said
Reischauer, now a senior fellow in the Economic Studies Department at the
Brookings Institution.

Another often-recited story of O'Neill's tenure involves a study on capitol
gains taxes that she allegedly canceled because she said it was inadequate. At a
hearing in the Senate Budget Committee last winter Sen. Paul Sarbanes (D- Md.)
asked O'Neill about the study, which had previously been presented at the
American Enterprise Institute.

O'Neill reportedly told Sarbanes that studies could only be requested by
chairmen or ranking members and that Sen. Frank Lautenberg (D-N.J.) then made
the request. While some say O'Neill was then forced to produce a version of the
study she had canceled, O'Neill herself denied she ever took such action.

"It was not canceled," said O'Neill. "I believe I told the senator at the
time it was a work in progress. I didn't say it was not going to come out. rt
may have been pushed farther to the front burner as a result of the request but
it was something that couldn't appear the way it was. There was some question in
the writing of it."

The study, which reportedly showed cuts in capital gains to benefit the
wealthy, was submitted to the committee after a long delay one budget aide said
was purely political.

O'Neill also denies she meant to "quash" the report, as others allege, due to

its findings. "I think it's a very good study and I myself have tried to promote
it," she said.


Ww

x

other types of anslysis—such as risk analyses or engineering studies
—to determine the costs and benefits of 2 regulation. Although those
studies are necessary precursors to the RIA, they are not included in the
costs attributed to preparing it. By excluding the costs of those studies,
‘the agencies in CBO’s survey may underestimate the costs of
performing regulatory impact analyses. Other agencies—including
(CBO—would therefore probably need to establish some added analytic
infrastructure to support a regular program of regulatory analysis.

“regulatory impact analysis" usually signifies a cost-benefit analysis
pecformed for «significant rule, other working defitions exit, Some
officials define an RIA as any analysis that considers benefits as well as
costs, or that considers altematives as well-as the preferred option,
even if it is not for a significant rule. Also, some RIAs are never
published because the rules they are associated with are never finished
and put into effect. Consequently, although much work has gone into
the analysis, the RIA will never show up on any list of published
analyses. Given all of those difficulties, it can be hard to define and
isolate the universe of RIAs. That problem will be compounded if such
analysis is moved to the legislative stage, because the form the potential


61

Government’s regulations would fail a strict benefit cost test using
the Government’s own numbers—not some external folks who may
have less of an axe to grind—but the Government’s own numbers.

Moreover, we think we can do better for less. For example, a
Harvard study found that if you reallocated mandated expenditures
toward those regulations with the highest payoff to society, you
could save an additional 60,000 lives annually without spending an
extra nickel.

Over the past two decades, the debates over regulatory policy
have often been highly partisan and ill-informed. We believe at-
tempts to depoliticize the process, such as those in H.R. 1704, rep-
resent an important step in the right direction. We believe the of-
fice that is designed in H.R. 1704, for regulatory assessment, could
provide a nonpartisan evaluation of the benefits and costs of regu-
lation that can help improve public policy and equally important
educate the American public.

We think tasks such as conducting regulatory impact analyses by
this agency in a nonpartisan way, assessing whether the agencies
actually comply with procedural steps for major rules, and issuing
an annual report on the impact of Federal regulations, we think
that all of these tasks are worthwhile.

One of the features of the bill that we especially like is that it
provides a central focus for congressional study of regulatory activ-
ity. We know that there is study out there in the executive. We
think that there can be healthy competition between the executive
and the Congress on this issue. And I hope that my colleague, Dr.
Litan, will expound on that.

Very quickly, we have three suggestions that the committee may
wish to consider in modifying the bill.

First of all, you talk about issuing an annual report discussing

the costs. We'd also like to see the benefits considered in that re-
port.
To the extent—second, to the extent resources are an issue, the
office should be given the discretion to concentrate its energy and
its regulatory analyses on selected major rules rather than trying
to perform an analysis—a superficial analysis of every rule.

Third, while we approve the idea of a separate Office of Regu-
latory Analysis, we’ve been in Washington long enough to know
that while this may be public policy heaven for some, there may
be some useful compromises. And one such compromise that you
may want to consider is to create a separate division within CBO
to address these functions.

In conclusion, a Congressional Office of Regulatory Analysis
would help hi blight the impact of regulation on consumers and
workers. It will help inform the process of designing new laws and
regulations, and it will also help provide insight on how to improve
existing regulations.

We think the expenditures on such an agency, the benefits would
far exceed the cost, and we can give you some data to suggest why.
We believe that H.R. 1704 will help ensure that appropriate regu-
latory activity is carried out in a sensible, cost-effective manner.
And we also think it deserves prompt action.

Thank you very much.


4

(ii) a description of the potential costs of the rule, including any ad-
verse effects that cannot be quantified in monetary terms and the iden-
tification of those likely to bear the costs;

(iii) a determination of the potential net benefits of the rule, includ-
ing an evaluation of effects it cannot be quantified in monetary

terms;

(iv) a description of alternative approaches that could achieve the
same regulatory goal at a lower cost, together with an analysis of the
potential benefit and costs and a brief explanation of the legal reasons
why such alternatives, if proposed, could not be adopted; an

(v) a summary of how these results differ, if at all, from the results
that the promulgating agency received when conducting similar analy-

ses.

(B) TIME FOR REPORT TO COMMITTEES.—Section 801(a)(2XA) of title 5,
United States Code, is amended by striking “15” and inserting “45”.

(4) NONMAJOR RULES.—The Office shall conduct a regulatory impact analy-
ses, as defined in | paragraph (3A), of any nonmajor rule, as defined in section
804(3) of title 5, Unit tates Code, when requested to do so by a committee
of the House of Representatives or the Senate, or individual Representative or

nator.

(5) PRIORITIES.—

(A) ASSIGNMENT.—To ensure that analysis of the most significant regu-
lations occurs, the Office shall give first priority to, and is required to con-
duct analyses of, all “major” rules, as defined in section 804(2) of title 5,
United States Code. Secondary priority shall be assi to requests from
committees of the House of Representatives and the Senate. Tertiary prior-
ity shall be assigned to requests from individual Representatives and Sen-
ators.

(B) DISCRETION TO DIRECTOR OF OFFICE.—The Director of the Office
shall have the discretion to assign priority among the secondary and ter-
tiary requests.

(b) TRANSFER OF CERTAIN FUNCTIONS UNDER THE UNFUNDED MANDATES RE-
FORM ACT OF 1955 From CBO To OFFICE.—

(1D) Cost OF REGULATIONS.—Section 103 of the Unfunded Mandates Reform
Act of 1995 (2 U.S.C. 1511) is amended—

(A) in subsection (b), by striking “the Director” and inserting “the Di-
rector of the Congressional Office of Regulatory Analysis”; and

(B) in subsection (c), by inserting after “Budget Office” the following:
“or the Director of the Congressional Office of Regulatory Analysis”.

(2) ASSISTANCE TO THE CONGRESSIONAL OFFICE OF REGULATORY ANALYSIS.—
Section 206 of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1536) is
ament _—

(A) by amending the section heading to read as follows: “SEC. 206. AS-
SISTANCE TO CONGRESSIONAL OFFICE OF REGULATORY
ANALYSIS.”; and

(B) in paragraph (2), by striking “the Director of the Congressional
Bese eee pad inserting “the Director of the Congressional Office of
al ysis”.

(c) OTHER REPORTS.—In addition to the regulatory impact analyses of major and
nonmajor rules described in section 4(a) of the Congressional Office of Regulatory
Analysis Creation Act, the Office shall also issue an annual report on an estimate
of the total cost of Federal regulations on the United States economy.

SEC. 5. EFFECTIVE DATE.

This Act and the amendments made by this Act shall take effect 180 days after
the date of enactment of this Act.

Mr. Sessions. At this time I will ask Mr. Sununu if he has any
opening remarks. Mr. Sununu.

Mr. SUNUNU. Thank you, Mr. Chairman. I don’t have an opening
statement, altho I will be submitting some brief remarks for
the record. I am pleased that Congresswoman Kelly is here to dis-
cuss her proposed legislation that will I think help us get our
hands around the costs of regulations, not just for a business com-
munity or even the small business community that’s so important


93

with if we want better rulemaking. I think, though, that too often
we put an emphasis on cost-benefit where maybe it’s not appro-
priate. The quantification issues are highly inappropriate in certain
cases. And even the non-quantitative approaches are inappropriate.

For example, take civil rights. I personally, and I think many
Members of Congress would agree, that on a constitutional right of
civil rights, one would not want or would the public want to see
a cost-benefit analysis. Many times in a civil right, the costs will
be greater than the benefit. But we have made the determination
in the country, in terms of our values and our beliefs that that’s
a case what we do want to happen: we do want to protect civil

ights, no matter the costs.

‘ou have also passed legislation—I shouldn’t say you but past
Congresses—an example of OSHA, where the Supreme Court has
interpreted the statutory provisions and say that cost-benefit
should not be considered in the case of health conditions, that the
health of the worker prevails, no matter what the costs. So, there
are many issues that go well beyond the points you’ve made that
have to be looked at carefully.

Mr. McInTosH. Thank you for your time. And let me now ask
Mr. Tierney, and then Ti turn to Mr. Barr, who will have some
questions.

Mr. TIERNEY. Thank you, Mr. Chairman. Mr. Bass, you are a
breath of fresh air. Thank you for joining us today. Let me—be-
cause I agree with a lot that you've said, and I don’t recover
ground, whatever. But might we not accomplish some of the things
that the chairman and the author of this bill want to accomplish
by taking the $5 billion that we’re funding and putting it elsewhere
to make things, to make the current analysis better? Wouldn’t that
be helpful?

Mr. Bass. I think that makes a lot of sense. In the last Congress,
you passed a number of laws that require new analyses, new work
on the part of the agencies. Personally, I think if Congress has a
surplus of money and chooses to put it into the regulatory arena,
Td put it back to the agencies to get better analysis to help you
make the decision you need to make.

Mr. TIERNEY. And one of the comments—you heard the colloquy
going back and forth with previous witnesses—CORA, as you read
it, does it seem to be in fact just establishing either another analy-
sis of the analysis as the Representative herself said, or asking for
a full-blown, very expensive proposition, again redoing ground that
could be done—that should lone by the agencies that have al-
ready been placed for this?

Mr. Bass. Yes, I think it’s quite conceivable that Co: sswoman
Kelly has a vision in her own mind where she intends to amend
this bill. But as it’s written, and I can only go based on what the
bill is written, this requires significant new research. It takes the
responsibilities that previously have gone to GAO and puts it over
to this new office. It supplants the role that CBO played in terms
of some of the work it was doing under unfunded mandates reform
to put it to CORA. And in addition, it creates a whole new appara-
tus for analysis, not only with the annual report, but in the review
of rule by rule. Frankly, ’'m very nervous about Congress embed-
ding itself in the rulemaking-writing process. And to come up with


38

2ND STORY of Level 1 printed in FULL format.

Copyright 1996 The Washington Post
‘The Washington Post

Suly 25, 1996, Thursday, Final Edition
SECTION: OP-ED; Pg. A29

LENGTH: 887 words

HEADLINE: Unlearned Lessons About Welfare

BYLINE: Paul offner

BODY:
‘The remarkable thing about the welfare bill passed Tuesday by the Senate is
that it ignores just about everything we've learned about the subject during che
past 35 years. It's as if there were no lessons from past welfare reforn
efforts, many of them evaluated by groups like the Manpower Demonstration
Research Corp. and the Urban Institute. Congressional reformers even disregard
their own in-house experts at the Congressional Budget Office, who have been
telling them in clear English that the evidence doesn't support their current
proposals.

Lesson number one: Welfare reform won't remove many families from the rolls
only four of 23 welfare reform demonstrations had caseload reductions exceeding
§ percent, one study found. Even the program in Riverside, Calif., regarded by
many as the most successful on record, saw caseloads decline less than 10
percent. “The payoff for such programs has been shown to be low in terms of
reductions in welfare case loads," says the CBO. Yet reform leaders predict the
rolls will plummet under their plans. Wisconsin Gov. Tommy Thompson, for
instance, says 60 percent of those placed in workfare in his state will find
private jobs and leave the rolls.

Since caseloads won't fall much, putting welfare adults to work will require
a large public jobs program. This is the ugly little secret that neither
Democrats nor Republicans want to face up to. President Clinton always has shied
away from a big jobs program -- "It won't be necessary, we won't do it, we cant
afford it,” says top aide Bruce Reed. And Republicans agree. "I don't see us
going back to a massive public works program," says Michigan Gov. John Engler.
‘The only problem is that that's exactly what's needed if we're going to put
welfare mothers to work.

Unfortunately, the states don’t have the slightest idea how to run large jobs
programs. Nowhere have public jobs been created for more than a small fraction
of welfare recipients even though workfare is popular with the voters, and one
governor after another has committed himself to it. Even in carefully organized
demonstrations, only a minority of recipients actually participated in work
activities. Yet both parties now say they'll put half of all recipients -- 2.5
million people -- into jobs.

Look at what happened the last time the federal government passed a welfare
work requirement. The year was 1988, and the requirement applied to only 6



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41

be a responsible venue for any Congress to take when we were
looking at that as a modeling for the future, since we’re now in a
balanced budget and tax cut mode.

Is there any further discussion before we call the second panel?
Hearing none, I would now ask that we have panel two, Sharon
Miller, if you would please come forward.

Ms. Miller, I am going to swear you in in just a minute, if you
will please remain standing. Sharon Miller is CEO from Immediate
Temporary Help, which is a small business in Midland, MI.

[Witness sworn.]

Mr. SEssIONS. Thank you. Will the record please reflect that she
answered in the affirmative.

Ms. Miller, we are glad to have you here with us today. I am
going to give you 5 minutes, please.

STATEMENT OF SHARON MILLER, SMALL BUSINESS OWNER,
MIDLAND, MI

Ms. MILLER. Mr. Chairman, members of the subcommittee, thank
you for allowing me to appear before you today. My name is Sharon
Miller, chairwoman of the National Small Business United, the old-
est small business organization in the Nation, representing 65,000
small businesses in all 50 States. I am also the owner of Immediate
Temporary Help, a small business based on Midland, MI, and an
active member and past chair of the Small Business Association of

‘ichigan.

As Members of the House National Economic Growth, Natural
Resources, and Regulatory Affairs Subcommittee, I know you are
well aware of the impact that regulations have on America’s 22
million small business owners. For you to take the time to address
ways to minimize the impact on small business and explore mecha-
nisms to involve Congress in the process is critical. I applaud your
efforts.

You well know only precious few small businesses employ or can
afford to hire the lawyers, consultants, engineers, and regulatory
experts to keep them abreast of the dizzying amounts of rules, reg-
ulations, and the laws that come from Washington, DC, and their
State capitals. That is why organizations such as NSBU are so crit-
ical. But my organization or any small business organization can-
not possibly reach all of the small businesses that are affected.
That is why Congress passed SBREFA 2 years ago this month. The
Small Business Regulatory Enforcement Fairness Act of 1996 was
designed to get small business more involved in the regulatory
process and allows small entities or organizations that represent
them the ability to sue agencies in Federal court among many
other vital functions.

SBREFA also includes the Congressional Review Act which
called for Congress to have the ultimate oversight upon major regu-
lations that impact the American economy in the excess of $100
million. Where does SBREFA law stand today? At this early point,
it is my perspective that Federal agencies have yet to take it seri-
ously. The problem I see isn’t infrastructure and set up under
SBREFA. The problems I see is Federal agencies just flat out ig-
noring the law that Congress passed. Ultimately the whole culture