U.S. GOVERNMENT PRINTING OFFICE

67–352 WASHINGTON : 2000

THE QUALITY OF REGULATORY

ANALYSES

HEARING

BEFORE THE

SUBCOMMITTEE ON REGULATORY REFORM AND

PAPERWORK REDUCTION

OF THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

WASHINGTON, DC

JUNE 8, 2000

Serial No. 106–63

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

JAMES M. TALENT, Missouri, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

DONALD A. MANZULLO, Illinois

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

DAVID M. MCINTOSH, Indiana

RICK HILL, Montana

JOSEPH R. PITTS, Pennsylvania

JOHN E. SWEENEY, New York

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

EDWARD PEASE, Indiana

JOHN THUNE, South Dakota

MARY BONO, California

NYDIA M. VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

CAROLYN MCCARTHY, New York

BILL PASCRELL, New Jersey

RUBE ́ N HINOJOSA, Texas

DONNA M. CHRISTIAN-CHRISTENSEN,

Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

DENNIS MOORE, Kansas

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

SHELLEY BERKLEY, Nevada

HARRY KATRICHIS, Chief Counsel

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON REGULATORY REFORM AND PAPERWORK REDUCTION

SUE W. KELLY, New York, Chairwoman

LARRY COMBEST, Texas

DAVID M. MCINTOSH, Indiana

JOHN E. SWEENEY, New York

JOHN THUNE, South Dakota

BILL PASCRELL, New Jersey

ROBERT A. BRADY, Pennsylvania

DENNIS MOORE, Kansas

MEREDITH MATTY, Professional Staff Member

(III)

C O N T E N T S

WITNESSES

Page

Hearing held on June 8, 2000 ................................................................................. 1

Hahn, Robert W., Director, AEI-Brookings Joint Center on Regulatory

Studies ........................................................................................................... 5

Murphy, Robert, General Counsel, General Accounting Office .................... 9

Addington, David S., Sr. Vice President, American Trucking Association .. 11

Ricciardi, Sal, President, Purity Wholesale Grocers, Inc .............................. 15

Wallman, Kathleen, President & CEO, Wallman Strategic Consulting,

LLC ................................................................................................................ 16

APPENDIX

Opening statements:

Kelly, Hon. Sue ................................................................................................. 22

Prepared statements:

Hahn, Robert W ................................................................................................ 37

Murphy, Robert ................................................................................................. 78

Addington, David S .......................................................................................... 92

Ricciardi, Sal ..................................................................................................... 102

Wallman, Kathleen ........................................................................................... 127

(1)

THE QUALITY OF REGULATORY ANALYSES

THURSDAY, JUNE 8, 2000

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON REGULATORY REFORM AND

PAPERWORK REDUCTION,

COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:48 a.m., in room

311, Cannon House Office Building, Hon. Sue W. Kelly, [chairwoman of the subcommittee] presiding.

Chairwoman KELLY. Good morning, ladies and gentlemen. I

would like to thank you for attending this hearing of the Subcommittee on Regulatory Reform and Paperwork Reduction. This is

the second hearing in a series of hearings being held at the full

Committee level and in this Subcommittee concerning the reauthorization of the Paperwork Reduction Act and the effectiveness of

other regulatory reform efforts currently in place.

Yesterday, we focused on the regulatory burdens imposed on

small business and the regulatory relief efforts of the administration. Today, we will narrow our focus to discuss the quality of agency regulatory analyses. In order to explore this issue, we must discuss the adequacy of agency compliance with analytical requirements mandated by the Administrative Procedure Act, the Regulatory Flexibility Act, and various other executive orders meant to

direct agencies in producing regulations whose benefits outweigh

their costs and achieve their objectives in the lowest cost manner

possible.

Witnesses will focus on whether these analyses provide agencies

with sufficient information to properly assess the impact that the

rules will have on the regulated community and the small business

community in particular. Additionally, we will discuss any changes

that are needed to ensure that agencies recognize these impacts,

including whether Congress should obtain an independent assessment of these analyses in order to carry out its legislative functions. And while the subject may not be as entertaining as hearing

Chuck D expound on the sale of music on the Internet, for small

businesses affected by the ever-burgeoning mound of regulation

and paperwork requirements, it is critical that this Subcommittee

place this rather dry subject at the top of legislative priority.

Small business owners are very familiar with the burdens that

Federal regulations place on them. Some studies have shown that

for small employers, the cost of complying with Federal regulations

is more than double what it costs their larger counterparts, and

you do not need any study to reach that conclusion. Common sense

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will say that if a regulation costs General Motors and a 500–employee manufacturer of a copper tubing company the same amount

of money, the overall impact on General Motors is going to be significantly less on a per unit basis.

As a result, small business owners have historically been interested in regulatory reform efforts in Washington. Any mechanism

that will help control the size of this burden is naturally appealing

to the small business community. The APA, SBREFA, and several

other executive orders are such mechanisms. But these efforts will

manage the regulatory burden only if they are implemented fully

and only if Congress keeps a watchful eye on their progress.

As the Committee whose goal it is to promote and protect the interests of small businesses, we have the obligation to discuss how

well agencies are satisfied with and are satisfying these analytical

requirements and to explore ways in which Congress can better understand these regulations that small business owners struggle to

comply with on a daily basis.

There is yet another underutilized mechanism reducing the regulatory burden on small business, the Congressional Review Act. On

March 29, 1996, the Small Business Regulatory Enforcement Fairness Act, or SBREFA, became law. Included with this legislation

was a section that established a CRA, a formal tool by which Congress could review and prevent new regulations from taking effect

without going through the normal legislative process. Used properly, this new oversight device could greatly enhance the regulatory

process by ensuring that only those regulations which are truly in

the public interest are allowed to go into effect.

Unfortunately, the Congressional Review Act does not appear as

if it is being used effectively because it is not being used at all. Not

a single resolution of disapproval under the Congressional Review

Act has passed. The House has failed even to vote on one. Some

have given up on its ability to halt regulations that do not have

sufficient justifications that go beyond what Congress, or that create unintended consequences that require correction. But I believe

that combined with oversight hearings, legislative efforts, and the

submission of Congressional comments, CRA still has some hope.

Regardless of whether or not you believe CRA can be used, you

must admit that Congress does not have enough information to undertake appropriate oversight of the powers delegated to agencies

by Congress. The power delegated to these agencies enables them

to issue rules and those rules may not meet the objectives or have

the consequences that Congress expected when it enacted the legislation.

For example, when Congress enacted the Federal Motor Carrier

Safety Act to create the Federal Motor Carrier Safety Administration, it certainly expected that the agency would enact rules to improve the safety of our highways through improved regulation of

truckers. However, the most recent proposal from the FMCSA may

have substantial unintended consequences for tour bus operators,

independent route salesmen, and manufacturers. These consequences apparently were not considered when the FMCSA decided to treat all those individuals who drive professionally on the

nation’s road systems in an identical manner.

3

To help address this problem, I was joined by Chairman Jim Talent in introducing H.R. 3669, the Congressional Oversight and

Audit of Agency Rulemaking Actions Act. We call it COAARAA.

This office would focus solely on conducting independent regulatory

assessments of regulations to help determine whether the agencies

have complied with the law and executive orders. Unfortunately,

Congress cannot obtain unbiased information from participants in

the rulemaking because each participant, including the Federal

agency, has a particular viewpoint and bias. A Congressional Office

of Regulatory Analysis would help fill the information gap and assist members of Congress in determining whether action is warranted.

The purpose of COAARAA, then, is to ensure that Congress exercises its legislative powers in the most informed manner possible.

Ultimately, this will lead to better regulatory analyses, most cost

effective regulations, and most importantly, legislation tailored in

a manner to address a narrow problem and not overly broad legislation likely to impose unnecessary burdens on small business.

Only through active oversight can Congress ensure that the laws

that it passes are properly implemented. This is a responsibility

that Congress must take seriously, because as countless small business owners can attest to, not doing so can have dramatic implications.

We have joining us today an excellent panel who will discuss

some of these issues. I would like to thank each one of them for

participating with us today and I look forward to hearing their testimony. I thank you very much.

Now, I would like to turn to Mr. Pascrell for his opening statement. If anyone else has an opening statement, I am going to ask

that it be submitted for the record so that we can move this hearing on. Mr. Pascrell?

Mr. PASCRELL. Thank you. I would like to start my opening

statement by thanking my friend, the distinguished Chairwoman

from New York, for setting up this hearing to discuss the issue of

regulations and their impact on small businesses. In fact, we almost had a little preliminary yesterday at another hearing. I think

this serves as a nice complement and more focused follow-up to the

hearing that we had yesterday.

The issue we deal with today is one of the most critical issues

for small businesses. The need to have rules that are clear, well

thought out, and that realistically gauge economic impact, can be

critical to the success of small businesses, which are the backbone

of our economy. I relish this opportunity to examine the strides

that have been made in this area so we can see how successful

agencies have been in completing economic analysis that reflect the

true cost of these regulations.

Both sides of the aisle have concerns with regulations and their

burdens that they place on businesses, and indeed, if one was to

look since 1980 at the number of acts and executive orders that

have addressed the problem of bureaucracy and regulation and paperwork, particularly in the last seven or eight years, one of the

questions that we all have sitting around here is whether these

regulations, first of all, are being implemented and how would we

know if they were, and second of all, what is the fallout and is that

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more treacherous than the regulation which was supposed to correct some problem in the first place?

I do not think that there is any Democratic or Republican way

to design a regulation. There is just the correct way, one that is

thought out and is not a rush to judgment. It is a way that involves

a comment period where the agencies not only take comments but

they listen to the suggestions made and evaluate the validity of

business concerns.

I personally believe, and this is only my take on this, that any

regulation or rule which is the result of legislation that the Congress passes, that since the Congress is taking great pains to discuss this with those folks who are most impacted, and that is why

we debate these issues, that when an agency gets that law and now

has to implement it, that the rules and regulations should reflect

discussions with the particular business. Many times, they do, and

many times, they do not, and that is where we have major problems. If there is no one monitoring how these regulations are being

implemented, let alone promulgated, I think we have serious problems and we need to address them.

A regulatory impact analysis, which was mandated by the administration, is crucial in making sure burdens are not excessive,

and I believe some of those burdens are excessive. I believe some

of those burdens do not reflect the spirit and intent of the original

laws. They go beyond, and they are usually imposed by second- and

third-level bureaucrats who have no appreciation whatsoever of

what business folks have to go into day in and day out.

As the study we will look at shows, and as we know from the

many complaints our offices receive about overly burdensome regulations, the Federal Government has to do a better job with its

analysis to ensure the regulations designed are efficient while at

the same time being effective. It would seem to me the only way

we can do that is have a report to each Congress of what has happened in the previous Congress and how these are being implemented so that the Congress itself knows of what has been monitored and what has not. You can have all the executive orders by

whatever President you wish. If they are not being implemented or

if the implementation of those executive orders are worse than the

previous situation, then we have created a real amount of chaos

and I am sure we do not want to do that.

It is interesting to note that the two parties who compiled the

report on both sides of the political spectrum joined together on

their conclusions. It is much like our work on the Small Business

Committee, which has been for the most part bipartisan. We try to

steer away from the extremes. I think that is healthy.

I look forward to using this hearing to look at the Chairwoman’s

COAARAA legislation contained in H.R. 3669. Maybe what we

learn here today can help us weigh the need for an office within

the General Accounting Office to compile separate analysis of regulations to balance the job currently done by the Office of Management and Budget.

So I look forward to today’s testimony and I thank the Chairwoman for her indulgence.

Chairwoman KELLY. Thank you very much, Mr. Pascrell.

5

I do want to say one thing before we begin. I look forward to the

testimony, but I also thank all of you, every one in the audience

and everyone who is on the panel, for waiting for us so patiently.

We had no idea when we set the timing on this hearing that we

would be caught in the involvement on the floor of the House. So

I thank you very much, and with that, we will begin with the testimony.

We will start with you, Mr. Hahn, Mr. Robert Hahn from the

AEI-Brookings Joint Center on Regulatory Studies. He is the Director and we are very happy to have him with us today.

STATEMENT OF ROBERT W. HAHN, DIRECTOR, AEIBROOKINGS JOINT CENTER ON REGULATORY STUDIES

Mr. HAHN. Thank you, Chairwoman Kelly, Congressman

Pascrell, and Congressman Moore. In listening to your remarks, I

am reminded of a Woody Allen story which I will tell you briefly,

where his father comes home from work one day and says to his

wife, ‘‘You would not believe it. You would not believe it.’’ And she

goes, ‘‘Well, what is wrong?’’ And he goes, ‘‘I have been replaced by

a machine.’’ She goes, ‘‘Oh, that is terrible but you will go out and

find another job.’’ And his mother immediately went out to the department store and bought one of these machines. [Laughter.]

I basically think that the remarks that you made in many ways

reflect more common sense than what I am about to tell you, but

I want to fill in some of the details that I think are important in

talking about regulatory reform, but let me start with a couple of

formalities.

First, I am going to talk to you more, so I would ask that my

formal remarks be placed in the record. They reflect not only my

sentiments but those of Robert Litan, who is the Co-Director of the

American Enterprise Institute-Brookings Joint Center for Regulatory Studies.

Chairwoman KELLY. We are glad to have the remarks and we

will put them in the record. Thank you.

Mr. HAHN. Thank you. My sister once told my niece, who I am

hoping to visit later this afternoon if this hearing ends at a reasonable hour, once told my niece what her Uncle Bobby did, and she

told her that he was an egghead. She said, ‘‘Well, what do eggheads do?’’ ‘‘They think a lot.’’ So the next time I went down to visit

my niece, who is now five, she said, ‘‘Uncle Bobby, what is it that

you really do?’’ And I said, ‘‘Well, I study regulation.’’ And she goes,

‘‘What is regulation?’’ Remember, I am talking to a five-year-old

now. And I said, ‘‘We sort of study how when you tell a person to

do something, you tell them to do it in a nice way.’’ She says, ‘‘Well,

how about an example?’’ I said, ‘‘Well, if Mommy tells you to clean

up your room, she does not say, ‘Put this toy over in that corner

and put that toy under your bed,’ or whatever. She leaves it up to

you how to do that.’’ And she thought about it for a minute and

she says, ‘‘That is great. Can we watch Winnie-the-Pooh now?’’

This is a real problem with regulatory reform in the large, and

I do not have to tell you that. One is, one conveying to people why

it is important, that it can have an impact on each of our freedoms,

it can have an impact on the size of the economy, the way we run

our personal lives, the way we choose to engage with each other in

6

business. So it seems that the more things change, the more they

remain the same.

I am sure you have heard the story and probably testimony from

former Senator George McGovern about when he left this august

body, in this case the Senate, he talks about how he tried to start

an inn in New England and he said, ‘‘Gosh, if I only knew then

what I know now about regulation, I would have done things a lot

differently.’’

There has been a steady stream of legislation and executive orders related to regulatory reform which you, Congressman Pascrell

and you, Chairwoman Kelly, both told us about in your introductory remarks. The reality is that not much has been done. That is

the bad news. The good news is, I think if we as foot soldiers, I

include you in that army, if you will, and myself and the other distinguished members of the panel, if we stay focused and we stay

focused on the right thing, I think we can make some headway.

First, let me start by asking what is the nature of the problem,

and we go into this in more detail in our formal remarks. Well, the

nature of the problem is the Federal Government requires expenditures on the order of $200 billion a year, very, very, very roughly

speaking. Those costs are imposed on the private sector, and to a

lesser extent government bodies, to do things. We do not have a

particularly good idea of what is being done.

Congressman Pascrell, you talked about you have a hunch that

some things are being done that do not make sense. Well, let me

give you one example based on a study that I did not do but my

colleagues, Randy Lutter and Elizabeth Mader, are just releasing

today at the Joint Center.

We have a lot of legislation regulating lead out there because

lead is of concern for children’s health, among other things. Did

you know that the regulations that you were in charge of making

the laws for and that EPA and HUD are in charge of implementing, those regulations require more stringent regulation of

lead at hazardous waste sites than in the kid’s back yard? There

may be no kids at the hazardous waste site. Lots of kids play in

their back yard. Do we have a problem? Maybe.

We could be doing a much better job of improving kids’ health,

saving kids’ lives, and saving money if we simply took a careful

look at the process. We could do a better job of facilitating entrepreneurship in small business, in large business, if we took a serious look at what the paperwork requirements do and what these

silly regulations of which I just gave you one example. George

McGovern, for all we know, might be in business in New England

today promoting bed and breakfasts. We could do a much better job

of making sure that regulations do not impose a drag on the economy.

Okay, how do we do this? How do we begin to think about improving the quality of regulation so that you and appointed civil

servants can make better decisions? The short answer is it takes

two things. One, you guys have got to step up to the plate. You

have got to have guts. This is in short supply in this town. You

have really got to have guts. And the second thing is it requires

common sense, which you have already articulated in your opening

remarks.

7

Let me say a little bit about what I think we know about the

quality of regulatory analyses, and I have a few people in the audience who I would like to acknowledge who have helped me on this,

some of whom have already left me, very wisely. Irene Chan, who

did some seminal work on this last year, looking at what the government actually does in terms of their regulatory analyses, and

my colleagues, Jason Burnett and Aaron Labor, and will be happy

to field any tough questions from you. But I will give you the

broad-brush view of what I think we know.

First of all, based on my earlier research, from an economist’s

point of view, many of the regulations that the Federal Government are implementing now are not likely to pass an economist’s

version of a benefit-cost test. I estimate that on the order of half

the regulations, using the government’s own analyses as data,

would not pass a benefit-cost test. I find that rather disturbing.

That is the first point.

The second point, which speaks, Chairwoman Kelly, to the substance of this discussion today, is the quality of the analyses themselves. Well, the quality of the analyses in my view is really poor.

We looked at analyses, so-called regulatory impact analyses, over

the last three years, between 1996 and 1999, all of them that we

could find for major environmental health and safety regulations,

and the bottom line is they do a bad job of even complying with

their own guidelines. This is based on a Joint Center study, not

funded by any particular business or whatever, just an independent study by economists.

What do we find? We find that of those rules that we reviewed

carefully, and Irene and Jason can tell you more about this, only

28 percent of those rules presented information on net benefits,

that is, benefits and costs and taking the difference. Well, if you

are going to be making multi-million and in some cases multi-billion-dollar decisions, I think the American public deserves to know

what is happening.

The second thing we found is that they quantified benefits and

costs of alternatives for only a quarter of the regulations. Did you

think of another way to clean up your room, Katie, or is this the

only way to do it? Most of the time, these guys did not bother to

look whether there were other ways to clean up the room, the hazardous waste site, or the dirt in the back yard. Duh, we have got

a problem.

All right. What are we going to do about this problem? I am

going to briefly go through some of my recommendations, some of

which are based on the good work of your Committee. The first is,

I think in the interest of accountability and transparency, you

ought to put these regulatory impact analyses and their underlying

supporting documents on the Internet. Hey, if Al Gore invented it,

we might as well use it. Let us use the Internet to tell people what

is happening about regulation, with all due deference to the Vice

President—just a joke. And before a regulation—this is important—before a regulation is actually considered at OMB, we ought

to put it on the Internet so it is available to eggheads like myself

and also real people.

My second point, and this is a point which you might find astounding, but it is not, is that these regulatory impact analyses do

8

not summarize in any sort of standardized way what they actually

do. What does that mean? I have to hire a group of some of the

best graduate students to spend sometimes up to a week to figure

out what these analyses are saying. Well, Congress people do not

have a week to look at what is in these analyses, so we recommend

that you write a clear executive summary when you do these regulatory impact analyses and you attach a table to tell people what

you did and what you did not do.

Did you consider costs? Did you quantify them? Did you consider

benefits? Did you quantify them? Did you consider alternatives?

Did you try to quantify the impacts of those alternatives? What

were the kinds of technical assumptions you made underlying these

analyses to get your results?

Again, it is not rocket science, but this is not enough. As Congressman Pascrell pointed out, you have got to figure out whether

you have the guts to enforce these things. I mean, there are executive orders on the books here and there are tons of beautiful laws

in the Soviet Union, or the former Soviet Union, that make it look

like everything is hunky-dory, but, in fact, everything is not always

hunky-dory and sometimes you have to step up to the plate to do

things that we believe are common sensical.

Our third recommendation, and this follows along the suggestions of the Chairwoman, is to create something like the Congressional Office of Regulatory Analysis. We think it would help make

the regulatory process more transparent to the American people. It

would help Congress in finding out what is actually happening

down at the other end of Pennsylvania Avenue in terms of regulations and their impact.

If you want me to say more words about COAARAA, I will be

happy to do it. Mr. Litan and I testified on this, as you know, previously. We are great supporters of these initiatives for the reasons

we state in the paper.

Something else we believe is important, and it would require a

little bit of stepping up to the plate, but again, it is common sense,

is we believe that Congress should require agency heads to balance

the costs and benefits of major regulations. I am not even saying

at this point, though I believe the benefits should be at least equal

to the cost and ideally greater, but I am saying at least there

should be a statement that we balanced these things and this is

how we thought about them, if you are making a big decision like

the national ambient air quality standards.

And finally, and this is again where you can step up to the plate

to make things happen, is we believe that Congress should require

that all regulatory agencies adhere to established principles of economic analysis when undertaking a regulatory impact analysis.

OMB has already articulated a beautiful set of guidelines. The

Joint Center has convened a group of scholars that also talks about

established principles. The question is, as Congressman Pascrell

pointed out, when are we going to begin to think about implementing these things?

So in conclusion, as I said earlier, it is really going to take guts

and common sense. It is very clear to me that the common sense

is out there. I hope the political will is there, and I will be happy

to entertain any questions after the panel or now. Thank you.

9

Chairwoman KELLY. Thank you very much, Mr. Hahn.

[Mr. Hahn’s statement may be found in appendix.]

Chairwoman KELLY. Next, we go to Mr. Robert Murphy. Mr.

Murphy is the General Counsel for the General Accounting Office

and Mr. Murphy, COAARAA might land in your lap, so I am very

much looking forward to your testimony.

STATEMENT OF ROBERT P. MURPHY, GENERAL COUNSEL,

GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY CURTIS

COPELAND, ASSISTANT DIRECTOR, GENERAL GOVERNMENT

DIVISION, GENERAL ACCOUNTING OFFICE

Mr. MURPHY. Thank you, Madam Chairwoman, Mr. Pascrell. I

am pleased to be here today to talk about GAO reviews of the compliance by agencies with procedural and analytical requirements of

rulemaking. One of the assistant directors at GAO, Curtis

Copeland, who led many of these jobs, accompanies me at the table

today. With your leave, I will briefly summarize my testimony and

in particular talk about two reviews that we did of regulatory impact analyses and ask that the full text of my prepared remarks

be incorporated in the record.

Our reviews were conducted in response to Congressional concern that agencies were not, as Mr. Pascrell pointed out earlier,

considering the effects of their actions on regulated entities, nor

had they worked to minimize those negative effects. The requirements we examined are contained in a number of statutes from the

Administrative Procedures Act to the Unfunded Mandates Reform

Act, as well as Executive Orders 12866 and 12612.

While they may not have been representative of all rulemakings,

our work disclosed inadequate data, methodologies and assumptions, and disclosed noncompliance with the statutory requirements

and executive orders. There were examples where, as a result of

our work, agencies changed their practices and we helped ensure

better adherence to applicable regulatory requirements.

On the other hand, sometimes our reviews did not disclose noncompliances but they provided the facts and the analysis to the

Congress to understand what the agencies were up to in their rulemaking. Sometimes we discovered that the issues that concerned

the regulated community were not really those of the agencies but

were of the underlying statutes concerned, that the aspects of the

regulations that were considered burdensome by the regulated community were actually required by the statute being implemented.

Some of our work on regulatory issues has clearly demonstrated

the value of Congressional oversight of agency rulemaking. Congressional oversight can clarify issues left unclear in agencies’ public statements about their rules and on occasion can directly result

in changes to agencies’ rules. The targets of that oversight can vary

substantially, from the particular and sometimes highly technical

elements of agencies’ economic analyses used to support the rules

to the general public participation requirements in the rulemaking

process.

I would like to address, as I said earlier, two particular reviews

by GAO. In the last 20 years, we have seen enormous growth in

both the breadth and the number of Federal regulations. According

to OMB, these regulations have improved public health, safety, and

10

environmental quality, but they come at a real cost. I do not think

anybody estimates the annual cost of these regulations below hundreds of millions of dollars every year.

To control the costs of these regulations, administrations have

issued executive orders, such as 12866, and Congress has enacted

laws, including the Unfunded Mandates Reform Act of 1995. These

orders and laws require Federal agencies to prepare and use economic analyses, also known as regulatory impact analyses, to assess the benefit and costs of proposed significant actions before promulgating those regulations. These analyses are intended to inform

and improve the regulatory process by identifying the likely costs

and benefits of feasible alternatives.

We were asked to describe the extent to which Federal agencies’

economic analyses incorporate best practices and the agencies’ actual use of these analyses in regulatory decision making. We included in our review all economically significant proposed and final

rules issued between July 1996 and March 1997 that addressed environmental, health, and safety matters. As a result, GAO reviewed

the economic analyses used in promulgating 20 regulations by five

agencies, the Departments of Agriculture and Transportation, the

Environmental Protection Agency, the Food and Drug Administration within the Department of Health and Human Services, and

the Occupational Safety and Health Administration in the Department of Labor.

We found that five of the 20 analyses did not discuss alternatives

to the proposed regulatory action, six did not assign dollar values

to the benefits, one did not assign dollar values to the costs, all of

which OMB recommended in its best practices guidelines. OMB

guidance gives agencies flexibility to decide how thorough their economic analyses should be. At the same time, the guidance stresses

the importance of disclosing the reasons for omissions, gaps or

other limitations. Although GAO found many instances in which

best practices were not followed in the analyses, the reason for not

following was disclosed in only one case.

In addition, eight of the economic analyses did not include an executive summary that could help the Congress, decision makers,

the public, and other users quickly identify key information addressed in the analyses. Finally, only one of the 20 analyses received an independent peer review.

I should say that this past March, OMB issued a revision to its

best practice guidance for agencies and we found that, again, that

guidance falls short of the recommendations that we have made for

best practices, and incidentally, several of those that Mr. Hahn has

touched upon today.

In another instance, we found that a Congressionally requested

review of agency regulatory analysis actually resulted in a change

to those rules. We reported last year on the scientific basis for the

Food and Drug Administration’s proposed rule on dietary supplements containing ephedrine alkaloids and the agency’s adherence

to statutory and executive regulatory analysis requirements. Although the number and type of adverse event reports that FDA received warranted the agency’s consideration of steps to address

safety issues, we were concerned about the strength of the informaVerDate 11-MAY-2000 13:40 Dec 07, 2000 Jkt 067352 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 E:\HR\OC\67352.XXX pfrm11 PsN: 67352
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tion FDA used to support two aspects of the proposed rule, the dosing level and the duration of use limits.

We concluded that FDA generally complied with the statutory

and executive orders applicable to rulemaking, but the economic

analysis that accompanied the rule did not reflect the full range of

uncertainty associated with the proposed rule. The agency did not

always disclose why certain key assumptions were made or the degree of uncertainty involved in those discussions. It also did not

disclose that alternate assumptions would have had a dramatic effect on the agency’s estimate of the benefits of the proposed actions.

We recommended that FDA obtain additional information to support conclusions regarding the specific elements in the proposed

rule before proceeding to final rulemaking. We also recommended

that FDA improve the transparency of its cost-benefit analysis in

its final rule.

I am happy to say that in April of 2000, FDA announced that it

was withdrawing certain portions of its proposed rule, ‘‘because of

concerns regarding the agency’s basis for proposing certain dietary

ingredient level and a duration of use limit for these products.’’

That was an example of where Congressional oversight had an immediate benefit to the public and to the government.

There are numerous other examples of GAO reviews in recent

years that demonstrate that Congressional oversight can be effective in ensuring that agency rules are carefully developed and that

agencies permit public participation in the rulemaking process.

Madam Chairwoman, this concludes my statement. I would be

pleased to respond to any questions.

Chairwoman KELLY. Thank you very much, Mr. Murphy.

[Mr. Murphy’s statement may be found in appendix.]

Chairwoman KELLY. Let us move on to Mr. David Addington.

Mr. Addington is Senior Vice President of the American Trucking

Associations. Mr. Addington, thank you very much for being here

today.

STATEMENT OF DAVID S. ADDINGTON, SENIOR VICE

PRESIDENT, AMERICAN TRUCKING ASSOCIATIONS

Mr. ADDINGTON. Thank you, Madam Chairwoman. I have two

documents I would like to ask your permission to have in the

record, my full written statement submitted to the Committee and

the document I transmitted to the staff yesterday, five pages entitled ‘‘Summary of the Federal Motor Carrier Safety Administration’s Proposed Hours of Service Changes, Updated May 15, 2000.’’

Chairwoman KELLY. By all means, we will accept them into the

record. Thank you.

Mr. ADDINGTON. Madam Chairwoman and members of the Subcommittee, we appreciate the invitation to discuss the Department

of Transportation’s failure to properly conduct the required analyses to determine the full impact of proposed rules to govern the

hours that truck drivers may work. The hours of service scheme

proposed by the Department’s Federal Motor Carrier Safety Administration is disastrous for the trucking industry, for the safety of

the traveling public, and for American consumers. The proposed

regulations hit trucking companies hard and they hit small trucking companies hardest. I will describe the trucking industry, some

12

key problems with the Department’s proposed rule, and the defective analyses on which the Department of Transportation, which I

will call DOT, based its rule.

The American Trucking Associations, which I represent, is a national trade association for the trucking industry, with more than

2,500 motor carrier company members, large and small who operate in every State of the union. Trucking is vital to the nation’s

economy. Trucks move the majority of the freight that moves in

America. Trucking accounts for more than 80 percent of the transportation revenue in the economy. Seventy percent of America’s

communities depend for freight service exclusively on trucks. So

DOT regulations restricting what companies can do with trucks

and drivers directly affects a huge segment of the American economy.

Although some trucking companies are multi-billion-dollar companies whose names you know, such as Mr. Moore’s district has the

Yellow Corporation, most of the trucking industry is small business. According to DOT, almost 50 percent of motor carriers have

only one truck, and a full 95 percent of motor carriers, almost

395,000 of them, have 20 or fewer trucks.

ATA has long called for reform of the existing Depression-era

hours of service rule. We ask for new rules based on three things,

sound science, public safety, and needs of the American economy.

ATA spent two years forging an industry-wide consensus on a proposal for new rules that would meet these requirements and our

board of directors adopted that proposal in November of 1999. We

filed the ATA proposal with the Department of Transportation in

December 1999, but instead, the Department published on May 2,

2000, proposed regulations that are inconsistent in a number of

ways with fatigue science and are so far removed from safer highways and economic reality that the ATA must strongly oppose the

DOT proposal.

The Department’s proposed rules fail the test of science, safety,

and economics. On science, for example, the DOT proposal takes

drivers whose jobs consist of five night shifts a week and requires

them to switch over to sleeping on both weekend nights. But fatigue science would counsel against requiring them to switch their

sleep/wake cycle over on both weekend nights.

On safety, the Department’s proposal will put more trucks and

more drivers on the road just to move the same amount of freight

that trucks move today and it will force more of the trucks to operate during daylight hours when traffic congestion is at its peak.

Regulations that put more of the trucks on the roads when most

of the cars are also on the roads can hardly be characterized as a

safety regulation.

On economics, shippers will face significant price increases for

freight service. Trucking companies will face tough obstacles in trying to meet the payroll and turn a profit. And businesses and consumers will pay more for the goods they purchase. Congress should

send DOT back to the drawing board on its proposed hours of service regulation.

With regard to economic analysis, the Federal law requires the

Department of Transportation to conduct an initial regulatory flexibility analysis, or IRFA, when it published its proposed rule. The

13

Department failed miserably in its attempt to meet this legal requirement. The Department provided only a cursory and inaccurate

examination of the economic effects of the proposed rules on the

trucking industry. Moreover, it completely ignored the larger economic impacts of the proposed rules on the economy as a whole.

With regard to the trucking industry, the Department undercounted by 100,000 the number of small trucking businesses and

that taints the Department’s entire IRFA. The IRFA also estimates

the economic impact of only one part of the proposed rule, the requirement that companies install in their trucks electronic onboard recorders to monitor the compliance of drivers with the Department’s hours of service regulation, and DOT even got that part

wrong because DOT underestimates the number of companies that

must install the recorders to be in compliance with DOT’s proposed

rule.

In any event, the regulatory costs that DOT attempted to address are dwarfed by the additional costs that DOT ignored. The

Department’s regulations will force trucking companies to incur

costs for the purchase of new trucks and hiring new drivers. While

ATA has not yet completed its final economic analysis of the DOT

proposal, our preliminary conclusion is that labor and equipment

costs to the trucking industry will increase by approximately 20 to

30 percent.

More trucks moving the same amount of freight also requires additional mechanics to maintain the trucks and additional dock

workers to handle getting the freight in and out of the trucks, more

costs that DOT ignored. Also, DOT ignored the cost of realigning

trucking terminal networks, which were principally designed to

allow truck drivers to move efficiently between terminals within

the driving hours allowed under the current rules but not under

the proposed DOT rules.

The Department also ignored the bigger economic impact beyond

the trucking industry. Shippers will pay more to move freight, including smaller manufacturers, wholesalers, and retailers who are

the engine of the nation’s economy. Many of those costs will, of

course, be passed on to consumers in the form of higher prices for

goods. The direct result of DOT’s proposed rule is inflation, which

is hardly what the American economy needs.

With regard specifically to small business, the Department of

Transportation failed to meet the legal requirement to compare the

economic effects of the proposed rules on small entities with other

alternatives. The Department examined alternatives, but only alternatives for the entire trucking industry. The Department did not

design or analyze alternatives solely with small companies in mind,

nor did it consider the alternatives for minimizing the impact on

small entities that the law requires DOT to consider. Thus, the Department failed to produce an initial regulatory flexibility analysis

comparing the relative costs and benefits of alternatives as they

pertain to small entities.

The Department also made a mistake in its proposal that calls

into question the quality of the DOT economic analysis. When it

published its proposed rule on May 2, 2000, the Department included the following sentence in the preamble to its rule, ‘‘Therefore, the FMCSA, in compliance with the Regulatory Flexibility

14

Act, 5 U.S.C. 601–612, has considered the economic impact of these

requirements on small entities and certifies that this rule would

not have a significant economic impact on a substantial number of

small entities.’’

Now, on May 26, just a few weeks later, the Department stated

instead that, ‘‘The FMCSA does not know with certainty the full

economic impact of the proposal and, therefore, withdraws its negative certification.’’ The withdrawal of the notification is a notable

change because the certification has exempted the proposed rule

from the Regulatory Flexibility Act’s requirements. The Department has explained that its certification was included by error, but

the initial erroneous inclusion of the language raises doubts about

whether the Department conducted a careful initial regulatory

flexibility analysis in the first place. Of course, the practical question also arises of how anyone at DOT could possibly think that the

proposed rule would not have a significant economic impact on a

substantial number of small entities.

Lastly, while the Department of Transportation admits it does

not know the full economic impact of its proposals, even after DOT

has looked at various changes to hours of service rules for 20 years,

it expects ATA and others to provide this information to DOT within the 90-day period that DOT allowed for comments on the proposed rule. We have asked for an additional 90 days so that we can

effectively survey our trucking company members, large and small,

and analyze and report the resulting economic data, but the Department has not granted our request.

When the trucking industry, the law enforcement community,

the manufacturing industry, the Teamsters, the AFL–CIO all agree

that more time is needed to analyze the economic impact of the

proposed rule, one would expect the Secretary of Transportation to

grant the additional 90 days, but that request has not been granted.

Madam Chairwoman, the Subcommittee asked only that I address the trucking hours of service issues and we appreciate having

that opportunity, but I would be remiss if I did not draw the Subcommittee’s attention that this rule is only one front of the current

three-front regulatory war that this administration is conducting

on the trucking industry. The rules on the other two fronts,

OSHA’s proposed rule on ergonomics and EPA’s proposed rule on

diesel engine and fuel standards, also are based on faulty economic

analyses.

On all three fronts, hours of service, ergonomics, and diesel, the

rulemaking process is not driven by the science, it is not driven by

health and safety, it is not driven by economics, and it is not driven

by the law. It is driven by the desires of the heads of those agencies

to issue final rules before the administration leaves office in January 2001. The interests of the public in these rulemakings should

not be subordinated to that artificial deadline. The agencies will

still be here with qualified people at the helm to make decisions

after next January. Let us take our time and get it right.

Thank you, Madam Chairwoman.

Chairwoman KELLY. Thank you very much, Mr. Addington.

[Mr. Addington’s statement may be found in appendix.]

15

Chairwoman KELLY. Next, we are going to hear from Mr. Sal

Ricciardi. Mr. Ricciardi, you are here in actually a double capacity,

are you not? You are the President of Purity Wholesale Grocers,

but also you are the President of the Pharmaceutical Distributors

Association, and we appreciate your taking the time to be with us

here today and look forward to your testimony.

STATEMENT OF SAL RICCIARDI, PRESIDENT, PURITY WHOLESALE GROCERS, INC., AND PRESIDENT, PHARMACEUTICAL

DISTRIBUTORS ASSOCIATION

Mr. RICCIARDI. Thank you, Madam Chairwoman and members of

the Subcommittee. Thank you for allowing me to speak to you

today. I feel like I am really getting my money’s worth because I

am a member of his organization and I agree with everything he

just said.

Mr. ADDINGTON. Thank you.

Mr. RICCIARDI. I request that the text of my prepared statement

be placed into the record.

My name is Sal Ricciardi and I am President of Purity Wholesale

Grocers of Boca Raton, Florida. I am speaking today for Supreme

Distributors, a division of Purity that distributes prescription drugs

and on behalf of the Pharmaceutical Distributors Association, PDA,

a trade association of ten Rx drug distributors. Most importantly,

I am informally representing approximately 4,000 small businesses

which are licensed to distribute prescription drugs for human and

animal use according to Food and Drug Administration estimates.

That is an estimate the Food and Drug Administration made. And

there are many thousand customers across America.

As I explained in detail in my written statement, these 4,000

small businesses will be economically devastated and most will be

forced to close their doors if an FDA rule issued to complete the

implementation of a 1988 law known as the Prescription Drug

Marketing Act is allowed to go into effect. The FDA rule establishes a ‘‘catch-22’’ type situation wherein smaller drug distributors

are required to obtain a very detailed sales history for drug products going back to the first sale by the drug manufacturer before

those products can legally be resold. However, neither the PDMA

nor the FDA rule require either the drug manufacturer or the large

national wholesalers who purchase the large majority of drug products directly from manufacturers to provide this sales history to the

secondary distributors. I know this is a mouthful. However, allow

me to explain a little further.

The result is that the rule will make it illegal for most wholesalers to resell prescription drugs and this will cause the loss of

thousands of jobs, disrupt existing distribution channels for thousands of nursing homes, clinics, doctors’ offices, and veterinary

practices across the country, potentially putting patients and animals at risk and remove an important restraint on pharmaceutical

prices by reducing marketplace competition.

To understand the real impact of the rule, we called the authorities in each State who license the distribution of prescription drugs.

We found that more than 32,000 licenses had been issued to distribute Rx drugs. It is obvious from this figure that most distribuVerDate 11-MAY-2000 13:40 Dec 07, 2000 Jkt 067352 PO 00000 Frm 00019 Fmt 6633 Sfmt 6602 E:\HR\OC\67352.XXX pfrm11 PsN: 67352
16

tors, including small companies like mine, distribute in multiple

States.

Of particular interest to the Subcommittee is the fact that the

FDA’s analysis of the effect of this rule on small business was 100

percent wrong. The FDA’s analysis published in the Federal Register concluded that the majority of the estimated 4,000 small distributors will not be affected by this rule. In fact, they will all be

seriously affected by the rule and most will be driven out of business. The FDA’s analysis did not calculate the number of jobs that

would be lost, the economic loss to the owners of the business that

would be wiped out, the likely increased cost to pharmaceutical end

users because of the elimination of existing supply channels, and

a decrease in competition and the very real potential physical

threat to patients whose supply of life-saving and life-enhancing

drugs would be disrupted.

I believe that these impacts are more than large enough to qualify this regulation as a major rule and that the FDA should be required to perform the proper analysis before the rule is reimposed.

I would also like to note that for about the past 12 years during

which the drug distribution has been operating under FDA interim

policy guidance, which does not require tracing sales history of

products back to the manufacturers, there have been no significant

quality or safety problems.

In conclusion, I would draw the Subcommittee’s attention to H.R.

4301, a bipartisan bill that would make small but vital technical

corrections to the statute. This bill would allow the 4,000 small distributors to continue to serve their customers and provide vital

price restraining competition while preserving the current safety

and integrity of our national pharmaceutical distribution system.

I thank you for your attention and will be happy to answer any

questions you might have.

Chairwoman KELLY. Thank you very much, Mr. Ricciardi.

[Mr. Ricciardi’s statement may be found in appendix.]

Chairwoman KELLY. Next, we would like to hear from Ms.

Wallman, and thank you for being so patient, Ms. Wallman. Kathleen Wallman is President and CEO of Wallman Strategic Consulting, LLC. Thank you very much for being with us.

STATEMENT OF KATHLEEN M.H. WALLMAN, PRESIDENT AND

CHIEF EXECUTIVE OFFICER, WALLMAN STRATEGIC CONSULTING, LLC

Ms. WALLMAN. Thank you and good morning, Chairwoman Kelly

and Congressman Pascrell. Thank you for the opportunity to participate in today’s hearing.

My statement addresses the experience of a particular kind of

small business, rural telephone companies, and offers some observations about regulatory impact analyses conducted by the independent Federal regulatory agency that regulates them, the FCC.

My observations are based on my work with these companies in

different capacities. I have worked on these issues most recently as

an advisor to small companies and their Washington representatives and previously as chief of the Federal Communication Commission’s Common Carrier Bureau and at the White House as DepVerDate 11-MAY-2000 13:40 Dec 07, 2000 Jkt 067352 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 E:\HR\OC\67352.XXX pfrm11 PsN: 67352
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uty Assistant to the President for Economic Policy at the National

Economic Council.

Rural telephone companies have a vital role in ensuring that all

Americans, no matter where they live, have access to telecom networks. The special challenges that these companies face in serving

remote and sparsely populated parts of our country are well documented in the policy literature and in FCC proceedings. Congress

expressly recognized these small rural telephone companies as a

category unto themselves in the Telecommunications Act of 1996.

Most rural telephone companies fit easily into the category of small

business and do not have resources devoted exclusively to monitoring Federal regulatory matters or mounting advocacy efforts in

FCC proceedings.

This is why the Regulatory Flexibility Act passed in 1980 and

amended by the Small Business Regulatory Enforcement Fairness

Act in 1996 is potentially such an important tool in ensuring that

Federal rules are adopted with an adequate awareness of the impact that the new rules or rule changes will have on small companies, such as rural telephone companies. The question is, how well

is it working?

My own view that it is starting to work in some ways but that

its implementation can be improved. There are inherent difficulties

in trying to implement regulations that affect rural telephone companies in a way that is sensitive to the burdens that new regulations impose. One difficulty is the inescapable complexity of common carrier regulation. Today’s common carrier regulation is the

result of decades of Federal and State legislative and regulatory action. There is some hope that this area will become less complex

as competition diminishes the need for regulation, but that is unlikely to happen very quickly. A topic for another day would be

what dramatic deregulatory and decomplexifying steps regulators

and Congress could take.

Another inherent difficulty and irony is the fact that many of

these complex regulations were adopted to help rural telephone

companies and their customers. Universal service regulations, for

example, impose burdens on small companies in order to assess

how much support the company and its customers should receive.

So in appraising the process, it is important to remember that

some regulations impose a burden in order to help the regulated

entity.

Another difficulty is presented by two realities about the rulemaking process at the FCC. First, there is the enormous workload

of the FCC. The dedicated staff at the Commission is still working

through the many assignments delegated to the agency by the 1996

Act. Under the pressure of a production schedule, it is not surprising that the agency has attracted some criticism about their

execution of the statutory procedural requirements of the RFA.

The second reality is that there is a tension between expertise

and objectivity. It is very difficult to expect the same internal experts who advise the Commissioners that a new rule is sound and

ripe for adoption to be objective in criticizing and editing that rule

because of its anticipated impact on one constituency, small regulated companies.

18

Another difficulty is that rural telephone companies are small.

Some of them are very small. They do not have Washington offices

of their own. They rely on membership associations and outside advisors. Even with such assistance, the resources needed to monitor

what is going on and to advocate reasonable results in each of

many pending proceedings spanning several of the FCC’s operating

bureaus simply are not available.

There is some reason to praise progress and there are still some

opportunities for improvement. At least some rural advocates have

noticed some improvement. For example, OPASTCO, one of the

leading membership associations that covers small telephone

issues, has noted that the FCC has been more willing to treat rural

telephone companies as small businesses rather than as dominant

incumbents that would not be entitled to the benefit of the RFA

small business analysis.

But there remains room for more improvement and the question

is what should be done. The answer might include legislation, but

there are a few steps short of legislation that would help, in my

view.

First, Congress should consider whether the FCC needs more focused resources to conduct better RFA analyses. Adding more people to the process is not the answer, but adjusting the mix to include the right people might help. Additional economists and rural

analysts specifically dedicated to the RFA process, for example,

would help.

Second, Congress should also consider whether there are process

changes that could be implemented at the FCC that would address

the tension between objectivity and expertise. The people most intimately familiar with the substance of a rulemaking may benefit

from the perspective of others not so closely involved in doing the

RFA analysis. There may be candidates already on the organizational chart at the FCC that could provide such assistance and perspective if given the right resources.

Third, Congress should consider encouraging the FCC to adopt

mechanisms that will allow it to communicate directly and easily

with rural telephone companies. The simplest, best way for the

FCC to ensure that it understands and can properly assess the impact of a proposed rule on small telephone companies is this: Ask

them. But it is not always so simple. There are hundreds of small

telephone companies. Which one should they call?

The FCC could make this ‘‘just ask’’ approach easier by creating

a standing task force or Federal advisory committee consisting of

rural telephone companies’ representatives and experts on rural

economic development. This would put valuable expertise close at

hand and it would increase the likelihood that the impact of new

rules on rural telephone companies would be authentically considered at the beginning of the process and weighed appropriately

throughout the process. That is the goal, after all.

In a real way, the success of the RFA must be measured by these

substantive results, and even the most scrupulous adherence to the

formalities of the RFA’s procedures should not be viewed as a substitute.

My view is that it would be wise to pursue options such as these

before creating another step in the regulatory review process, such

19

as by empowering GAO to undertake its own RFA-type review. The

views of GAO no doubt would make a thoughtful contribution to

the process, but one of the great problems of rural telephone companies is the damage to investment plans that uncertainty inflicts.

Adding another possible review step might exacerbate that uncertainty.

Nevertheless, even without new legislation, Congress can have

an important oversight role. Parties dissatisfied with the way the

RFA has been conducted in a particular case can call to the Subcommittee’s attention these deficiencies and provide the basis for

oversight steps with resulting guidance to the agency for improvement.

I thank you very much, the Subcommittee, for your work in this

area and thank you very much for the opportunity to testify.

Chairwoman KELLY. Thank you, Ms. Wallman.

[Ms. Wallman’s statement may be found in appendix.]

Chairwoman KELLY. I appreciate the testimony of all of you

today. It seems to me that we have a problem with regard to an

enormous amount of rules and regulations that the agencies are

promulgating. I think that all of this testimony and any of it is certainly helping us focus on how to resolve the problem and make it

easier for all of us to do our business, our small businesses in the

nation. I would like to ask some questions. I am just going to ask

a few of my questions first and then go to Mr. Pascrell.

Mr. Murphy, I was really interested in some of your testimony.

I found that you cited cases where the statute actually limited the

agency’s discretion in developing sound regulation. When it is your

belief that clarification is necessary and that a law should be

amended, how do you communicate that to Congress?

Mr. MURPHY. Well, in cases where we have been asked to look

at, for instance, the Unfunded Mandates Reform Act or the Regulatory Flexibility Act and we have concluded that there were aspects of the Act that really were not accomplishing what we believe

that the Congress intended by passing them in the first place, we

include recommendations in our reports to the Congress suggesting

that the Congress should consider whether amending those statutes might accomplish their purpose.

Chairwoman KELLY. And that is a written report that comes in?

Mr. MURPHY. Yes, ma’am.

Chairwoman KELLY. I am interested because I am also thinking

that it might help us in Congress if you too considered the Internet. That might be helpful to us. Are they posted on the Internet?

Mr. MURPHY. All of our reports are on the Internet. In fact, our

website gets some accolades. I think it includes not only all of our

reports, but all of our testimonies will be there within a day of

being given. Our legal opinions are posted there, also.

Chairwoman KELLY. Do you know how often a member will then

take that information and use it to try to draft some sort of a legislative solution or a fix to the problem?

Mr. MURPHY. I have no way of knowing how often that occurs.

We have anecdotal—I can remember occasions when that occurred,

but we do not have any systematic way of measuring that.

20

Chairwoman KELLY. If you can already provide Congress with

independent assessments of the regulatory costs and benefits, do

you think that we could use COAARAA?

Mr. MURPHY. Well, in this sense, I think it would be important.

The General Accounting Office, for example, is responding to statutory requirements for evaluations and requests from chairs and

ranking minority members of Committees and Subcommittees, and

so when a request comes in for GAO to take a look at a cost-benefit

analysis, we do not have staff that can drop the work they are

doing for other members and immediately jump on that. In order

for the Congress to have information about a regulatory impact

analysis quickly enough so that it can affect what the agency is actually accomplishing and perhaps decide whether to use the Congressional Review Act, which as you pointed out really has not

been used at all, that information has to come in very quickly.

So a CORA approach would allow GAO, or if it were located

someplace else, to establish a separate organization within GAO

staffed—we would have to hire economists and experts in regulatory processes so that when the regulation hit the street and a

Committee was interested and wanted us to take a look at it, we

could look at it very, very quickly. Some of these regulations are

in development for years and so in order to take a look at them

and provide the information that Congress needs, we think that a

separate organization either within GAO or in some other place is

really critical.

Chairwoman KELLY. Do you think that the agencies, the sheer

number of regulations that the agencies produce every year contributes to their inability to comply with all of the regulations, or

is that too loaded a question?

Mr. MURPHY. I can only speculate, really. Every year, agencies

must report to GAO, provide to GAO and to the Congress all of the

rules which they are promulgating. I took a look at the numbers

that came in just last year to GAO and saw that there were over

4,500 rules filed with GAO spread across a lot of agencies. Many

of these agencies have substantial numbers that they are processing. I was looking at the Internal Revenue Service which filed

almost 250 rules with us. The Environmental Protection Agency

filed almost 750 rules with us, and that is just in the last 12

months.

Chairwoman KELLY. That number again is 4,000 and something,

you said?

Mr. MURPHY. Last year, yes, ma’am.

Chairwoman KELLY. Last year, it was 4,000——

Mr. MURPHY. Four-thousand-five-hundred-and-thirty-four——

Chairwoman KELLY [continuing]. 534——

Mr. MURPHY [continuing]. Regulations that were filed at GAO in

calendar year 1999.

Chairwoman KELLY. Well, it is no wonder that our small businesses are having some problems with keeping up with whatever

is coming out there at them.

Mr. MURPHY. It is a big government.

Chairwoman KELLY. And a highly active group of agencies.

Mr. MURPHY. Yes, ma’am.

21

Chairwoman KELLY. It is not that anybody is doing something

that we perhaps do not need, but we need to find out if there is

a relief for some of this problem.

The other thing I would like to ask you is, when you look at rules

and regulations, do you also look for overlap and redundancy?

Mr. MURPHY. I think that is always something that you look at.

You look to see whether what the regulation is seeking to accomplish is already being accomplished in other ways. That would be

a baseline that you would have to begin with.

Chairwoman KELLY. Within the single agency or across agency

lines?

Mr. MURPHY. Well, we would have to be aware of whether it was

being accomplished across agency lines. That would be a piece of

information that agencies need. I am not sure as a legal matter

that that would be important to an agency who was given the job

of promulgating a regulation to implement a statute. The fact that

another agency is already working in that area should be something that they take into account in drafting their regulations, but

they are still going to have to implement their own regulations

with respect to the statute.

Chairwoman KELLY. I am wondering, Mr. Hahn, I see you have

your hand up here. If you want to jump in, feel free. Anyone on

the panel is free to speak up here. These questions, I am just

speaking with Mr. Murphy, but feel free, Mr. Hahn.

Mr. HAHN. The problem that Mr. Murphy and you are talking

about is a fairly deep problem. Judge Breyer, before he became Supreme Court Associate Justice, wrote a book called Breaking the

Vicious Circle, and one of the points that he made related to a

point that Mr. Murphy was making, that you have all of these

agencies trying to do good, if you will, on the basis of statutes and

turning out tremendous numbers of regulations. We have no clue

what is out there in terms of its impact. I can say that because I

am viewed at this point as one of the grand old men in the field

in terms of assessing the costs and benefits. We do not even have

time to look at the minor regulations, and the agencies tell us they

are simply too busy to do it, cranking out stuff for Congress.

And Judge Breyer notes in his book, one of the problems is each

of these agencies, while they are trying to do good, they are trying

to do good usually in a single policy area, like the environment,

like consumer product safety, like FDA, whatever, and he calls this

tunnel vision, and it is not an accident that that occurs. The question is, can we begin to develop overarching legislation to put a

check on this?

COAARAA is one example of that. We could talk about other examples. I think COAARAA is really important. I think in earlier

testimony I pointed out that we are not sure that GAO is the best

place to put it. If I had my druthers, and perhaps it is because I

am obsessed with regulation, I would set up an additional agency,

which is not politically correct to do today, but I think regulation

is an important enough area to do that. I think if you cannot do

that, CBO is a more logical place to put it.

But the generic problem, to suggest that we really know, in direct response to your question, whether regulations are consistent

22

with each other and what is actually coming out of the pipeline, we

only have a very dim idea of what is going on.

Chairwoman KELLY. I thank you very much, Mr. Hahn. We have

considered some other alternatives as to the placement of putting

the office, the COAARAA office. Currently, I have a lot of confidence in Mr. Murphy’s group and I think a number of other people do because they are in a position where they already have a

number of experts on staff. A separate bureaucracy right now may

be a step overreaching.

The importance to me of trying to get COAARAA in place is simply that we have got, I think, to do something about the fact that

we are getting 4,534 regulations a year thrown at us in all walks

of business life and all walks of life, and I think people get very

concerned that we have this huge bureaucracy. The only way that

we can make it make sense is if we make it accountable.

So I think that in the right instances, I think GAO is the first

place to do it, to start, and hopefully we will be able to have in the

budget enough money for them to be able to hire people. We will

get it started and we will at least begin the walk. As you know,

in Washington, things begin slowly, and we want to take it one

step at a time because we want to make sure if we are doing this,

it is effective. That is the bottom line. We need to relieve the problem, and I am sure you understand and agree with that.

Mr. Hahn, as long as we are talking, I think the alternatives

that are supplied often by the regulated community and the data

is often readily available, but the agencies just ignore the alternatives and they pay no attention to the executive order mandate.

I wonder, again, if you want to address that. Do you think that

there is a way we can try to make something happen there? I am

concerned because from your testimony, it seems to me that this

is worse than I thought.

Mr. HAHN. Well, we did not know how bad it was until we actually did this fairly serious study, which is published on our website.

How do you get the agencies to do it? Well, OMB issued guidelines.

Several distinguished economists have said it is a good idea. Congressman Pascrell, this really relates to the point you made in the

beginning about implementation. You and the other side of Pennsylvania Avenue have to have the political will to do this. You both

can exercise it independently or you can work together, but you

could do lots of very simple things.

You could say, if you do not make an honest attempt to look at

alternatives, the regulation will not move forward, except in cases

of emergency because people will yell at you and say, my gosh,

what if there is this emergency regulation? But that is one way to

do it. You simply write into law that a regulation is not going to

move forward unless it passes the kind of checklist that we put at

the end of our testimony. Did you consider cost? Did you consider

benefits? Did you consider alternatives? Did you consult with important parties to this regulation, or whatever?

So you can do it. We are not talking rocket science here. The reason I am big on providing a summary statement at the beginning

of a regulatory impact analysis and in clear English, a paragraph,

what you did—we took a look at this regulation on truckers, for example, and we think it is going to have these costs, these benefits,

23

these groups will be advantaged, these groups will be disadvantaged—people are going to see that.

Right now, these documents are written in Greek. They are hard

to dissect, purposely so in some cases. They do not want you to

know that they are not considering alternatives. There are five people at OMB who know this. I know this. Jason Burnett knows this.

But most of the rest of the world does not know or does not care.

And if we can get this information out there in summary form so

people can use it, see in some cases how regulations are well designed and in other cases they are very poorly designed, I think we

can make a lot of progress.

The key, as Congressman Pascrell points out, is what hooks do

you put in either legislation or what executive orders do you impose and what enforcement guidelines are there. If there is no enforcement, we can just forget it.

Chairwoman KELLY. So, Mr. Hahn, if I understand you correctly—let me rephrase this. What is so difficult about having some

of these alternative things, do you think?

Mr. HAHN. Nothing. It is political will. My shorthand language

for that is guts. If a President wanted to spend some political capital on this, he or she could do so. If the Congress was oriented in

this direction, and I think this is a bipartisan issue in a lot of

ways——

Chairwoman KELLY. It definitely is.

Mr. HAHN [continuing]. I just do not think it is on the radar

screen of lots of people because it does not have a high political

payoff, even though it is potentially big bucks in the large for the

economy, these 4,500 regulations that Mr. Murphy talks about.

But I think a starting point that is just not going to be controversial at all is to say, let us force these regulations before they move

forward, force the analysts who are doing these analyses to fill out

a little summary and write a paragraph in English that a

layperson can understand with a high school education. I think

that is a starting point, because then you are going to see the kinds

of results that have emerged from our fairly exhaustive analysis,

which took a summer to do.

You can see it very quickly.

Chairwoman KELLY. Mr. Hahn, can you explain why in approximately 60 percent of the rules that you studied, the benefit numbers in the Federal Register were inconsistent with the IRA?

Mr. HAHN. With the RIA?

Chairwoman KELLY. Excuse me, the RIA?

Mr. HAHN. I would ask Jason to answer that.

Chairwoman KELLY. Come forward and identify yourself, please.

Mr. BURNETT. I am Jason Burnett. I work at the AEI-Brookings

Joint Center. I think that there are probably two reasons for that.

First of all, the RIA is created for the proposed rule and there are

some changes in the final rule and some changes both in the analysis as well as the rule itself. That would explain some of the inconsistencies.

The second reason may be that incompetency on the behalf of

agencies. We found several cases where agencies use an inconsistent discount rate or dollar year within a single document and

there’s no good explanation for that.

24

Chairwoman KELLY. Do you think there are two sets of benefit

numbers being calculated?

Mr. BURNETT. Two separate?

Chairwoman KELLY. Yes, several sets?

Mr. HAHN. Let me take this question, Jason. Jason is not used

to being on the record. We simply do not know. I mean, we do not

have the data. As he pointed out, the inconsistencies are there, but

I do not think we know.

Chairwoman KELLY. Okay. Thank you very much.

I wanted to ask Mr. Ricciardi, Mr. Ricciardi, you have asked for

a stay of action, and I really appreciate your testimony. I think

both you and Mr. Addington offer good examples of just what the

problem is with regard to these agencies promulgating rules that

they perhaps have not looked at the total effect of. Can you just

quickly tell me where that stay of action is?

Mr. RICCIARDI. The stay has been granted. Originally, the regulation was to take place December of this year and the stay was

granted until October of the year 2001. But if I can equate it to

our business and the businesses that I represent, I feel like a prisoner on death row who has been stayed, and the reason I say that

is our attempts to bring our message to the FDA, in correspondence

that the FDA has made, they do not seem to want to move on the

regulation.

I am relatively new at this process, Madam Chairman, and I am

learning as I go. One of the suggestions I could make to any agency

is for representatives of those agencies, prior to regulation, is to

come and visit with the companies that they are regulating. I have

had a couple meetings and correspondence with the FDA, and in

every correspondence that I have had, I have suggested that they

come and visit our organization, and to this date, they have not.

Chairwoman KELLY. Thank you. We have just been called for a

vote, and I am thinking I would like to hold this open. What I am

going to do is I am going to hold the hearing open.

I am going to allow Mr. Pascrell to question at this time. We can

stay for at least the second bell.

Mr. PASCRELL. Thank you, Madam Chairman.

Mr. Hahn, you held up the regulatory impact summary. Are you

saying that nothing like that exists at this point?

Mr. HAHN. Nothing to my knowledge.

Mr. PASCRELL. So this is a two-sheet form here which you are

recommending.

Mr. HAHN. Right. It could be a one-sheet form. It does not really

matter.

Mr. PASCRELL. But how are records kept, then, by those rule

makers? I mean, this seems to be a very simple form to the point

you made it that way. This is like rule and regulation making disclosure. I want to know who makes these things. The folks out

there have a right to know who makes the rules and where the regulations are coming from, and if these folks are hiding behind the

screen of employment, behind their jobs, then there is something

wrong. I mean, talk about cooking the books. If we are not disclosing the purpose of the rule, the cost and the benefit, it seems

to me we are not doing anything.

25

Mr. HAHN. They are disclosing. They are just disclosing sometimes in 100 to 1,000 pages and I would prefer it in one or two

pages for people who do not have an infinite amount of time to

read this wonderfully written prose, so-called regulatory impact

analysis.

Mr. PASCRELL. If we lay this out, I think the political will will

be there, and some of these things do not need another bill passage. These things can be done internally, so that if the administration, whatever that administration looks like in the future or is

now, that administration can basically send out some orders to indicate that this is what we would like to happen so we keep track

of what is going on if we want to do that. Now, we may not want

to know what is going on. We may not want to. We may simply

want a headline that these are the rules of the FDA, these are the

rules, et cetera, et cetera, but we do not care down the road what

is going to happen, what the results were going to be.

I was interested, Mr. Murphy, how many of those 4,500 rules or

regulations that you talked about were promulgated by the INS,

God bless them?

Mr. MURPHY. Well, I think I can tell you, Mr. Pascrell. Sixteen.

Mr. PASCRELL. That is pretty conservative.

Mr. MURPHY. I have to say that we do an audit comparing the

Federal Register to what is filed at GAO and we find annually several hundred that are not filed at GAO, largely through oversight.

And also, there are a lot of regulations that are not filed because

the agencies contend they are not regulations. For instance, the

Tongass Forest management plan, which took ten years to develop,

the agency says it is not a regulation and so they are not——

Mr. PASCRELL. The agency determines itself whether it defines

such and such as a regulation?

Mr. MURPHY. Yes. We have been unable to get OMB to take leadership to clarify that over the last four years.

Mr. PASCRELL. This is government in absentia. There is no two

ways about it. It seems to me there is very little difference between

Red China and what you are doing in subverting the will of the

people. That is why we have a legislative branch of government,

why we have an administrative branch of government, in terms of

checks and balances but even to find public disclosure. I find that

obscene, if I can choose that word, since every other word has been

used. I find it obscene, the methodology of how most of these rules

and regulations are coming to the fore.

Let me ask, if the agencies are subverting—we have the idea in

our minds that the end goal is who is the President and what does

the Congress look like. Second-level, third-level management in

these agencies remain the same, and we do this on the State level

when I was a State legislator. We are forgetting this. They are

going along the merry path writing these rules and regulations and

I am sure it is not all cavalier, but that is the impression I am getting.

Mr. Ricciardi, who benefits, to use your example, from the definition, the shrinking definition of who can sell pharmaceutical products? Who is benefitting from that rule, from that——

Mr. RICCIARDI. From that new regulation?

Mr. PASCRELL. Yes.

26

Mr. RICCIARDI. The manufacturers, and they will increase drug

prices.

Mr. PASCRELL. So the pharmaceutical companies are.

Mr. RICCIARDI. That is correct.

Mr. PASCRELL. Can you explain for the record, very briefly, how

they do that?

Mr. RICCIARDI. There is multiple pricing throughout the country

at any given point in time, and as long as there is more than one

drug for a particular illness, such as to treat prostate, there is open

market trading of pricing on drugs and we as a company and the

4,000 companies that are out there find opportunities to keep the

prices down and buy throughout the country. By eliminating us as

part of the open market system, the manufacturers will then be

able to dictate their price and will be able to charge higher prices

to the wholesaler, ultimately the consumer.

Mr. PASCRELL. And this came out of a 1988 law?

Mr. RICCIARDI. Yes.

Mr. PASCRELL. And we are just getting to the promulgation of

this thing at this particular point, and 4,000 companies are going

to be affected.

Let me just conclude by saying this. The more I get into this, the

more animated I become in spirit. If we are to compete on a worldwide basis, and indeed if we are going to compete within our own

borders, we need to make sure that we are not shrinking the possibilities of competition.

It would seem to me that many of our companies that have to

deal with environmental rules and regulations have good records

on the environment, but how can our companies compete with the

Chinese rules and regulations in the final analysis? We have found

the downside of our trade with Mexico when our companies just

cannot compete. We have to spend thousands and thousands of dollars to meet these rules and regulations while these characters,

many of them American corporations producing down in Mexico,

have a cakewalk.

So we talk out of both sides of our mouths and I want this to

continue. I do not think we can continue today, but I think there

is a lot more here than meets the eye and I really appreciate all

of your testimony.

Chairwoman KELLY. I am going to recess the Committee for approximately ten minutes while we go to the floor and vote and

come back. Mr. Pascrell, thank you, and I will also hold the hearing open so that you can submit written questions if you would

like. Thank you.

[Recess.]

Chairwoman KELLY. Thank you for waiting for the vote. I apologize. It took a bit longer than we expected.

I want to go back and ask a couple more questions. I think Mr.

Pascrell is coming back, but even if not, there are a couple more

questions that I would like to ask.

Ms. Wallman, do you think the FCC adequately estimates the

costs and benefits of the proposed regulation of small telephone

companies?

Ms. WALLMAN. I think that there are ways in which they could

do a much better job. The analogy that comes to mind, what I was

27

thinking about, what I would do if I had a magic wand goes back

to 1993 when the FCC started hiring a lot of economists. Before

that time, the economic analysis review was done at the end of the

process. There was a chief economist who had no staff and he

would look it over at the end and make sure it did not commit any

mortal sins, but by that time, the decision was really made and it

was made by people in other disciplines who did the best job that

they could figuring out what the right answer was based on comments in the record.

In 1993 and 1994, the FCC started hiring a lot of economists and

they started sprinkling them throughout all the bureaus and it

really effected a transformation in the way that the rules were conceived and developed and written because at every stage, not just

at the end, you had the influence of economists saying not just

what do you think is the right answer but what is the empirical

case for this being the right answer or the best answer.

And so I think that really this is a question of management focus

and really changing the mission definition, the hearts and minds

of the people actually writing the rules and sprinkling throughout

the agency people who are adept at either knowing on their own

or being able to draw from people who are in the small telephony

business what the real impact will be on a day-to-day basis.

So there is room for improvement, and if I had a magic wand,

what I would do is sprinkle that expertise throughout the agency

so that it would be there at the beginning, middle, and end of the

process, not just at the end looking back at what has already been

done.

Chairwoman KELLY. Thank you. I think that is a very interesting and good answer that could be utilized by other agencies, as

well. Should the FCC, do you think, establish a separate office?

Would that help, a separate office to perform the reg flex analyses?

Ms. WALLMAN. I think that they probably have enough boxes on

the organizational chart that there may be some candidates there

already. My experience there was in 1994 and 1995, so I am sure

things have changed since then, but my understanding now is that

in addition to having the bureau with substantive expertise and actually writing the rule involved, they do get comment from other

groups. But the pen is held by the people in the substantive bureau. It may be that the folks who have stayed up all night actually writing a substantive regulation would benefit from stronger

input from the general counsel’s office and from the business opportunity office.

So establishing an additional box, my inclination is generally

against creating new units, but I think there are talented people

there whose talents could be supplemented with the right resources

so that they could improve the way that they do the analyses.

Chairwoman KELLY. When the EPA and the OSHA issue some

significant proposal, they are required by law to put together

groups that are basically focus groups of the businesses, people

who are affected by the proposed rulemaking and by the proposed

rule. Do you think that that would be an option for the FCC? It

might slow the process, but do you think that might be worth it?

Ms. WALLMAN. I think it would be a great idea. I had an opportunity to see how some of those EPA-type groups work when I was

28

at the White House and I thought they were really quite helpful.

And hearing the presentation live was very helpful. The FCC gets

written comments. I should say that in many cases, I know some

decision makers in the Commission will bring people in. Sometimes

they will bring them in and sort of stage a debate so that they can

make sure they are not persuaded by the last voice they have

heard. They have people come in and they actually go back and

forth and try to hear the debate live. But I think opportunities like

that, like what EPA does, like what OMB does in some cases, could

be a real illumination of the process at the FCC.

Chairwoman KELLY. Thank you. I really appreciate your testimony here today. I think you have added a lot because of your perspective.

I want to go to you, Mr. Addington. Yesterday at the full Committee hearing, we had John Spotila, the Administrator of OIRA

and he commended the FMCSA for their regulatory streamlining

efforts, and I asked him then if the FMCSA had developed too

many resources to streamlining and not enough resources to complete regulatory analysis, given the trucking and bus industry’s

complaints about the hours of service rule, and he replied, and I

am quoting, that DOT would be considering all of the comments

and that the comment period has not yet closed. He implied my

question was jumping the gun.

How do you respond to his suggestion? My question really is

based a question that I am jumping from earlier that I asked, basically, and that is do you think that we should wait for the comment

period to close before——

Mr. ADDINGTON. No, ma’am. As I told you in my testimony, the

American Trucking Associations has worked before years because

we want——

Chairwoman KELLY. Can you pull the microphone closer to your

mouth? Thank you.

Mr. ADDINGTON. The American Trucking Associations, as I said

in my testimony, has been seeking hours of service reform. The

rules we have now on the books come from 1937, I believe it is.

They last had any significant amendment in 1962 and they are out

of date and they need work, and we agree with the government on

that.

We were, frankly, surprised when they issued the proposal that

they issued because we had expected it to be somewhat in the ballpark so that you could hope in the normal rulemaking process to

improve things, to get the data out there and fix it. We also expected, frankly, that the Regulatory Flexibility Act, all the other requirements would be complied with in such a way that, frankly,

they would have a better product. We think it is so bad that we

need to stop and start over.

One thing I will say in their defense in this process is what is

now the Federal Motor Carrier Safety Administration has been

through the bureaucratic equivalent of the seven circles of hell in

the last year. At the beginning of 1999, they were known as the

Office of Motor Carriers in the Federal Highway Administration.

Then Congress passed as part of the Appropriation Act, because

Congress was not satisfied with the performance of that office as

part of the Federal Highway Administration, a prohibition on the

29

Transportation Department’s appropriations bill for the fiscal year

2000 that said the Secretary of Transportation cannot delegate his

trucking authority to that office as long as that office stays in the

Federal Highway Administration.

So the Transportation Department had to figure out, okay, what

do we do with it? They established a new office in the Office of the

Secretary of Transportation known as the Office of Motor Carrier

Safety, moved the bureaucratic boxes around, pushed people, different people in charge, lots of paperwork for delegations of authority and all that.

It was not there more than a few months, I believe, at the most,

because we, and we considered this a good thing, the trucking industry fought for this, creation of the Federal Motor Carrier Safety

Administration as a separate modal in administration of the Department. That took effect January 1.

So all the boxes over there are moving back and forth. The people are moving back and forth. People are spending their time trying to figure out, which appropriations accounts do I charge for

what? They are in all this while they are trying to produce these

rules. So that may account for some of the reason that people did

not quite get the thorough job that the law requires done to put

together the regulatory package. That is not necessarily an excuse,

and certainly is not to us. We will fight in the rulemaking and we

will fight in the courts later, if necessary, because it is the government’s responsibility to govern properly, but it may explain why

they had as much trouble as they had trying to put together a regulatory package.

Chairwoman KELLY. Well, I also sit on the Transportation Committee and I was in on those hearings and I know why Congress

did what it did and I know it has been a problem perhaps to make

sure that you are getting the right letterhead at the top of the stationery, but on the other hand, we want to make sure that we are

able to have an office that is a responsible office. That was why it

was moved around a little bit, but——

Mr. ADDINGTON. And we supported what Congress did. We think

that is great.

Chairwoman KELLY. Oh, I know you did. I know you were there,

and there were many people from the industry that testified. But

I am very saddened to see this regulation coming out and I am concerned that I believe there was just a sloppy initial reg flex analysis on this. You evidently feel that they just probably did not have

the right information or enough careful information in order to put

the rule together before they wrote the rule.

I am not going to ask that in the form of a question because I

do not want to put you on the spot, but I want to ask another question and that is, do you think that this proposal should be withdrawn and reissued after the DOT and the FMCSA do another

analysis under the Regulatory Flexibility Act?

Mr. ADDINGTON. Yes, ma’am. I think it ought to be withdrawn

and done properly under the current laws, and that will be part of

the comments that we will file with the Department. It is to their

advantage, as well, because there is no point in all of us putting

this massive energy in this to end up litigating this in court because they have not complied with the applicable laws.

30

Chairwoman KELLY. All right. Thank you very much. I will not

only—I am glad we have that in our record, but I will see that we

manage to get the record transmitted to the other Committee, as

well.

I want to go back now just to discuss COAARAA, since it is dear

to my heart. This question is really for Mr. Hahn and Mr. Murphy.

Some people feel that Congress has oversight at any point in the

process and that currently through hearings, Congress can better

understand agency rulemakings and analyses and that COAARAA

is not needed. I would like very much to hear both of you discuss

how you feel that COAARAA would be useful. We can start with

you, Mr. Hahn, or whichever. Mr. Murphy.

Mr. HAHN. I testified on this, and I am happy to refer you to

that, and I think you know more about this subject than I do, but

let me suggest that I think COAARAA is useful for at least three

reasons, and the relevant analogy here, as you know, has to do

with OMB, when we had a budget process without CBO. I think

it is much improved by having the two organizations compete with

each other and they provide an independent check on each other.

So that is one good reason. You have an independent check on the

analysis of the executive branch.

A second is a lot of what OMB does is not always open to the

public, and I think COAARAA would make the process more transparent and improve the process and in so doing it will give you better ideas for improving your laws and the regulators better ideas

for improving regulations. So it is really that simple to me.

Chairwoman KELLY. Thank you very much, Mr. Hahn. Mr. Murphy?

Mr. MURPHY. Madam Chairwoman, I was thinking that maybe

one way to respond would be to ask Curtis Copeland to talk about

some actual examples where we have been able to look at economic

models or look at the highly technical details of the regulation process, something that really would be more difficult for a Committee

or a Subcommittee to do in the course of the hearing format or the

hearing model, and because we have been able to get into those—

in fact, we have a number underway at the moment with respect

to EPA regulations—we have been able to get the kinds of information that would be useful to the Congress, that otherwise would be

very difficult to come up with, through a more CORA-type model.

Chairwoman KELLY. Mr. Copeland, would you like to identify

yourself, and yes, by all means, we would be glad to hear from you.

Mr. COPELAND. Sure. I am Curtis Copeland. I am an Assistant

Director within the General Government Division at GAO and we

do a lot of the cross-cutting work that looks at agencies’ compliance

with these analytical and procedural requirements.

The rules that we have looked at over the course of the last few

years in many cases are highly technical. For example, we are looking at one now, a rule that EPA issued last year that drops the

threshold for reporting of lead and lead compounds under the Toxic

Release Inventory Program from 25,000 pounds to ten pounds, and

EPA said that this rule would not have a significant economic impact on small businesses and so we have been asked to look at that

certification statement.

31

It is extraordinarily difficult to plow into an economic analysis

that has six different chapters and is about 300 or 400 pages in

length. So it is something that requires a great deal of effort just

to get comfortable with what the agency is describing, much less

trying to get into the particulars as to what alternatives they might

could have considered.

Last year, we looked at a rule that FDA issued on the dietary

supplements containing ephedrine alkaloids and the science behind

that and the adverse event reports that are being reported to FDA,

and after a great deal of review, looking at more than 1,000 of

these adverse event reports, we determined that only 13 of them

really constituted the basis of the rule. And so it took a long time,

though, to determine that those 13 were the critical ones that FDA

relied on, and so we suggested that EPA get better data in order

to support the rulemaking and FDA agreed with us and in February of this year withdrew the rule.

Chairwoman KELLY. Good. Thank you very much for saying that.

I think that is part of the problem. It is almost impossible for our

staffs here, if we wanted to look at a rule before it was actually

finalized, it is almost impossible for our staffs to, under the workload that they carry, to examine all of this. And also, it is a problem with regard to their expertise. So I think it is always important that we try to do something.

I think that the whole point of what I am trying to do with

COAARAA, what I am hoping to do with COAARAA is to raise the

quality of the analyses and ask the agencies to be more careful, as

you have just pointed out, in terms of not only looking within

themselves but also transmitting that information to those people

who are going to be affected by the rule or regulation.

I think that we have identified in this hearing that there is a

problem and we are following your model, Mr. Hahn. We are identifying the problem, we are analyzing the problem, and I think the

answer for us perhaps is to start with passing COAARAA.

I really thank you very much. I think that it is really wonderful

that you were willing to sit through as lengthy a process as this

has been. I did not expect it to be that when we set this meeting

for ten o’clock in the morning, but I thank all of you for being here

and I thank you very much for your testimony. You may be hearing

from some of the other members of the Committee simply because

there is so much going on on the Hill today, markups and so forth,

that that is why some people could not be here.

With that, I am going to adjourn. Thank you very much. [Whereupon, at 1:00 p.m., the Subcommittee was adjourned.]

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