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[Senate Hearing 114-418]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 114-418

                TOWARD A 21ST CENTURY REGULATORY SYSTEM

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 25, 2015

                               __________

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin Chairman
JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
BEN SASSE, Nebraska

                    Keith B. Ashdown, Staff Director
       Patrick J. Bailey, Chief Counsel for Governmental Affairs
                     Satya Thallam, Chief Economist
              Gabrielle A. Batkin. Minority Staff Director
           John P. Kilvington, Minority Deputy Staff Director
             Katherine C. Sybenga, Minority Senior Counsel
     Troy H. Cribb, Minority Chief Counsel for Governmental Affairs
   Lawrence B. Novey, Minority Chief Counsel for Governmental Affairs
                     Laura W. Kilbride, Chief Clerk
                   Lauren M. Corcoran, Hearing Clerk
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Johnson..............................................     1
    Senator Carper...............................................     2
    Senator Lankford.............................................    18
    Senator Ernst................................................    21
    Senator Portman..............................................    23
    Senator Heitkamp.............................................    27
    Senator Ayotte...............................................    30
Prepared statements:
    Senator Johnson..............................................    43
    Senator Carper...............................................    44

                               WITNESSES
                      Wednesday, February 25, 2015

Douglas Holtz-Eakin, Ph.D., President, American Action Forum.....     5
Jerry Ellig, Ph.D., Senior Research Fellow, Mercatus Center, 
  George Washington University...................................     7
Michael Mandel, Ph.D., Chief Economic Strategist, Progressive 
  Policy Institute...............................................     9
Hon. Sally Katzen, Professor, New York University School of Law, 
  Former Administrator of the Office of Information and 
  Regulatory Affairs at the Office of Management and Budget......    11

                     Alphabetical List of Witnesses

Ellig, Jerry, Ph.D.:
    Testimony....................................................     7
    Prepared statement...........................................    56
Holtz-Eakin, Douglas, Ph.D.:
    Testimony....................................................     5
    Prepared statement...........................................    47
Katzen, Sally:
    Testimony....................................................    11
    Prepared statement...........................................    72
Mandel, Michael:
    Testimony....................................................     9
    Prepared statement...........................................    62

                                APPENDIX

Chart submitted by Senator Johnson...............................    46
Responses to post-hearing questions for the Record:
    Mr. Holtz-Eakin..............................................    86
    Dr. Ellig....................................................    89
    Dr. Mandel...................................................    95
    Ms. Katzen...................................................    99
 
                TOWARD A 21ST CENTURY REGULATORY SYSTEM

                              ----------                              

                      WEDNESDAY, FEBRUARY 25, 2015

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:06 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Ron Johnson, 
Chairman of the Committee, presiding.
    Present: Senators Johnson, Portman, Lankford, Ayotte, 
Ernst, Sasse, Carper, Heitkamp, Booker, and Peters.

             OPENING STATEMENT OF CHAIRMAN JOHNSON

    Chairman Johnson. This hearing will come to order.
    I want to welcome all the witnesses. Thank you for your 
thoughtful testimony, and I am looking forward to this hearing.
    Coming from a business background, I have done a lot of 
strategic planning, and I have thought about this in terms of 
the Federal Government. In a business setting, I know a lot of 
people here in Washington have not heard of a strengths, 
weaknesses, opportunities, and threats (SWOT) analysis. And, if 
you were to do a SWOT analysis on the American economy, it is 
actually pretty easy to do.
    From my standpoint, the greatest strengths we have in this 
Nation is we are the world's largest economy. If you are a 
manufacturer, and I come from a manufacturing background, you 
want to be close to your customers. So, it is a huge economic 
advantage we have in this country. And, then, we have 
relatively low energy prices. Also from a manufacturing 
background, if you are going to manufacture things, you need 
power. Cheaper power is better than expensive power. We should 
try and do everything we can to lower the cost of energy. And, 
so, those are our strengths.
    Our weaknesses, well, a huge weakness is the subject of 
this hearing here today, our regulatory burden. It is huge, 
and, of course, we have a very uncompetitive tax system. I do 
want to put up a chart\1\ that, I think, pretty well describes 
what business organizations, what any organization is up 
against in terms of trying to expand, trying to create good 
paying jobs. It is the regulatory burden.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Johnson appears in the Appendix 
on page 46.
---------------------------------------------------------------------------
    Now, I realize the numbers from the National Association of 
Manufacturers, of the Competitive Enterprise Institute in terms 
of their estimate, their cost estimate of how much it costs per 
year to comply with the Federal regulations, I realize those 
are estimates. I realize people dispute that. But, I think it 
is still good to put that estimate up against the size of our 
economy, just to put it in perspective.
    So, whether you agree or disagree, the regulatory burden is 
huge. These estimates are somewhere between $1.75 and over $2 
trillion per year. Now, compare that to the size of the 
American economy. Last year, it was $16.8 trillion. So the 
regulatory burden, potentially--again, this is a projection--
potentially could be more than 12 percent the size of our 
economy. That is a massive burden on job creators and we need 
to recognize that is a huge weakness.
    That is something that this Committee can really 
concentrate on, because there have literally got to be 
thousands of regulations that are hampering the ability of 
businesses in red States and blue States, and certainly what I 
have asked the Members of this Committee is, let us identify 
those. Let us work together. We do not have to ask anybody to 
violate their principles. We can find those areas of agreement 
for regulatory reform, whether it is streamlining, modernizing, 
just outright eliminating those regulations, it would be very 
helpful to our American economy.
    The last point I want to make in terms of the actual size 
is we have listed the GDPs, the size of the economies of the 10 
largest economies in the world. You will notice our regulatory 
burden is as large as all but 10 economies in the world. I 
mean, that is what we are burdening job creators with and I 
think that is a pretty significant burden.
    I do want to point out that Senator Lankford is here. I 
appreciate that. He is going to be chairing a Subcommittee of 
this Committee that is really going to be focusing on 
regulatory reform. So, this is sort of the Committee-level 
kick-off meeting, let us put it that way, and Senator Lankford 
is really going to be lasering in on this and, again, trying to 
find those areas of agreement, so I appreciate that, and you 
will be sitting in the chair here for a few moments while I go 
to the Budget Committee.
    The last point I want to make, to indicate the level of 
burden here, and again, this is not perfect, but if you take a 
look at the number of Federal Register pages published--now, 
this is actually published versus what is the Federal 
regulations in a particular year--on an annual basis, during 
the FDR administration, it was about 15,000 per year. Under 
Nixon, it was 45,000. Today, we are publishing about 80,000. 
So, we are just kind of ramping up this potential problem. 
Again, just trying to put some perspective to the regulatory 
burden. I think Mr. Holtz-Eakin will speak a little bit more to 
some of these metrics.
    With that, I will turn it over to our Ranking Member.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman.
    It is very nice to see you all today. Thank you so much for 
coming, for preparing, and for presenting, and for responding 
to our questions. I think we are going to have a good 
conversation and a timely one, as well.
    I heard of the word aphorism earlier this week. You do not 
hear that word every day. It is a fairly simple statement that 
conveys a principle, a hopefully significant principle. And, 
one of my favorite aphorisms is about job creation. Guys like 
me, people who serve in these roles, we do not create jobs. I 
was a Governor for 8 years. A lot of jobs were created in my 
State during those 8 years. I did not create them. Presidents 
do not create jobs. Mayors do not create jobs. What we do is 
create a nurturing environment for job creation. That is the 
aphorism. Help to create a nurturing environment for job 
creation.
    That includes access to capital. That includes reasonably 
priced electricity, health care. That includes public safety, 
transportation infrastructure, cybersecurity protection, 
protection against those kinds of attacks. Somebody who is 
going to bat for us to make sure we can export our goods and 
services into foreign markets, all that stuff. Part of it is a 
reasonable tax burden. But, also, part of it is common sense 
regulations, and that is all part of the nurturing environment. 
And, we have to find the right balance in a lot of those, and 
today's hearing, I think, will help us find that balance.
    I thank the Chairman for bringing us here and thank all of 
my colleagues for joining us here today. I think it is an 
important hearing because regulations are important. We issue 
them for a number of reasons, including to better protect our 
health, our safety, our environment, and the economy. So, 
whether or not we are aware of it, regulations do play a role 
in our daily lives, a necessary role, not always, but usually 
in a positive way.
    We enjoy the benefits of regulations every time we have a 
drink of water, every time we drive a car or go to the bank. 
And, while there may be disagreements on occasions about 
certain rules, I believe everyone generally agrees that some 
regulation is necessary and good.
    It is important to note that regulations sometimes come in 
response to court orders. People go to court and they sue 
because they feel like an agency is not complying with a law 
that has been passed and the courts order regulations to be 
either issued or modified.
    Regulations also exist because we pass and the President 
signs a law that draws lines between what is acceptable and 
what is not in our society, and that directs an agency to take 
a certain action.
    But, those of us in Congress cannot legislate every detail 
of a particular matter, even if we tried, and legislative 
language cannot possibly take into account every situation that 
may arise as a result of enactment of a law. So, we have to 
leave some of the details to the regulatory process. And, 
sometimes, the way we write the laws, we make that very 
difficult, as you know.
    The regulatory process can be time consuming. It is also 
more difficult to understand and follow than the legislative 
process, and that is saying something. It should be our goal, 
though, to have the most effective, efficient, and transparent 
regulatory process we can have and to ensure that process 
results in common sense regulations that achieve the objectives 
laid out in the laws that we have passed in this Congress.
    While some people think we need to choose between 
regulations and having a robust, growing economy, I think that 
is a false choice. We do not have to make that choice. But, it 
is important that what do we say in the Constitution, the 
Preamble to the Constitution, ``In order to form a more perfect 
Union.'' It does not say a ``perfect Union,'' a ``more perfect 
Union.'' So, our goal should be to try to pass laws that enable 
us to use common sense and provide common sense legislation 
and, hopefully, common sense regulations to accompany those.
    For example, by advocating a common sense, cost effective 
approach to our Nation's environmental and energy challenges, 
we can reduce harmful pollutions. We can live healthier lives. 
We can lower our energy costs. And, we help put Americans to 
work manufacturing new products. Regulations also often provide 
the stability and predictability that businesses need, and they 
can help instill consumer confidence in the products they buy.
    Of course, many regulations do, by necessity, impose 
requirements and additional costs on businesses and others that 
must comply with them. And it is not always easy for those of 
us who want to participate in the process to have a say in a 
regulation they may be interested in as it is developed and 
finalized. So, I believe it is also important to conduct 
oversight of the regulatory process to ensure that we try to 
reduce burdens and ensure transparency where we can while 
achieving the greatest public benefit.
    I have been encouraged by the Administration's work in this 
area. I have also been impressed by the personal commitment the 
President has shown to his administration's efforts to identify 
existing regulations that should be reexamined or even 
repealed. It is my understanding that these retrospective 
reviews have already identified ways to reduce burdens and to 
save billions of dollars, and I expect these look-back efforts 
to continue to bear fruit.
    Finally, as I often say when it comes to issues like this 
that come before our Committee, we need to figure out what 
works and do more of that. That is another aphorism. But, this 
applies to regulatory reform, as well, and I hope that as our 
Committee continues to discuss these issues, we take a real 
look at this process, and that the Administration's ongoing 
efforts to acknowledge what is working and help them do more of 
it.
    I want to thank our Subcommittee Chairman over here on my 
left flank for his commitment to working on these issues, as 
well, and we look forward to the fruits of your labors.
    Thanks, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Carper.
    Let me quickly introduce the witnesses before I swear them 
in. Our first witness will be Douglas Holtz-Eakin. He is the 
President of the American Action Forum. He has previously 
served as Commissioner on the congressionally chartered 
Financial Crisis Inquiry Commission, an economist at the White 
House Council of Economic Advisors, and as Director of the 
Congressional Budget Office from 2003 to 2005.
    Our next witness will be Jerry Ellig, a Senior Research 
Fellow at the Mercatus Center at George Mason University. He 
has previously served as Acting Director of the Office of 
Policy Planning at the Federal Trade Commission and as Senior 
Economist for the Joint Economic Committee.
    Our next witness will be Michael Mandel. He is the Chief 
Economic Strategist at the Progressive Policy Institute and 
President of South Mountain Economics. He was previously Chief 
Economist at Business Week.
    And, our final witness will be Sally Katzen. She is a 
Visiting Professor at NYU Law School and a Senior Advisor at 
the Podesta Group. She has previously served as Administrator 
of the Office of Information and Regulatory Affairs and Deputy 
Director for Management of the Office of Management and Budget.
    It is the tradition of this Committee to swear in 
witnesses, so if everybody would rise and raise their right 
hand.
    Do you swear the testimony you will give before this 
Committee will be the truth, the whole truth, and nothing but 
the truth, so help you, God?
    Mr. Holtz-Eakin. I do.
    Dr. Ellig. I do.
    Dr. Mandel. I do.
    Ms. Katzen. I do.
    Chairman Johnson. Thank you.
    We will start with Mr. Holtz-Eakin.

TESTIMONY OF DOUGLAS HOLTZ-EAKIN,\1\ PH.D., PRESIDENT, AMERICAN 
                          ACTION FORUM

    Mr. Holtz-Eakin. Well, thank you, Mr. Chairman, Ranking 
Member Carper, Members of the Committee, for the privilege of 
being here today to talk about Federal regulatory reform. You 
have my written testimony. Let me just touch on three points 
briefly and then I look forward to answering your questions.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Holtz-Eakin appears in the 
Appendix on page 47.
---------------------------------------------------------------------------
    Point No. 1 is that, as the Chairman has pointed out, the 
regulatory burden continues to grow. If you look, for example, 
at the paperwork burdens of cabinet-level agencies since fiscal 
year (FY) 2000, they have increased by 30 percent. They are now 
9.3 billion hours. And if you look at 2010 as an example, in 
that year, there were 100 major rules, which is the most in the 
history of the Congressional Review Act. These are strikingly 
large regulatory initiatives.
    The second major point I would like to make is that those 
kinds of measures only scratch the surface of the implications 
of the regulatory burden. Like taxes, which people are very 
familiar with, regulations have a burden on the economy and 
they distort the natural organization of the economy and make 
it less efficient. We have seen examples of this in recent 
years, as well.
    Since 2008, the American Action Forum estimates that we 
have increased the annual regulatory burden by about $100 
billion in annualized costs. For perspective, that increase 
exceeds the higher estate taxes, capital gains taxes, dividend 
taxes that were part of the 2010 so-called fiscal cliff. And, 
so, these are an important impact on the economy.
    And, they will do two things. No. 1, they will be paid for 
by someone in the U.S. economy. It will show up in the form of 
higher prices for products. It may show up in part as lower 
wages paid or fewer people hired. Or, it could be less capital 
investment and lower profits. But, this cost will be borne by 
the economy and the American public in some form.
    And, the second thing it does is it does shift the 
composition of economic activity and the regulations in that 
way make our economy less efficient than it would otherwise be. 
If you look, for example, at some important prices that 
Americans pay, the $100 billion increase since 2008 has 
translated into about $3,100 increase in the price of a 
passenger vehicle. It is a $360 increase in the mortgage for 
every mortgage every year. It looks like about $135 a year in 
higher energy costs for Americans, or $108 a year in higher 
health care costs for Americans. These are price impacts of the 
increased regulatory burden we have seen just since 2008.
    The other kind of example of the impact of regulations, you 
can look in the State of Ohio as a random example, Senator 
Portman, and since--the BLS reports that there have been 1,100 
fossil fuel electricity jobs lost in the State of Ohio, while, 
on the flip side, we have seen employment in solar energy 
employment rise sharply. That is the regulatory results of 
shifting the composition of activity away from what the market 
had otherwise established. Those are important implications for 
the scale of regulation in the United States.
    So, the things that I would recommend to the Committee and 
to your efforts, Senator Lankford, would be to have some 
principles for regulatory reform, and first and foremost would 
be to codify the various Executive Orders (EO) that have 
existed for a long time and to insist on benefit-cost analysis 
in every Federal agency, including the so-called independent 
agencies, not going on at the moment. And, allow for judicial 
review if the agencies fail to conduct legally required 
analyses. At the moment, there is literally no penalty for 
violating the order to conduct a benefit-cost analysis.
    It would be useful to insert principles in future 
legislation that say there will be time lines for the 
regulatory implementation of this legislation. There will be a 
requirement for benefit-cost review. And, there will be limits 
on the amount of regulation that the legislation is about to 
produce. Those would provide for a better system.
    And, then, there should be a more formal process of 
retrospective review than the one we have at the moment. I know 
other witnesses are going to talk about that.
    The last thing I would say is to note that the United 
States is not alone. I thought the chart was very important in 
this regard. The other nations on that chart, the United 
Kingdom, the OECD countries, have all recognized the importance 
of regulatory review and reform and they are undertaking 
serious efforts to minimize their regulatory burden. I think 
the United States should follow suit, and I look forward to 
working with the Committee in that regard.
    Thank you.
    Chairman Johnson. Thank you, Mr. Holtz-Eakin.
    Our next witness is Dr. Ellig.

  TESTIMONY OF JERRY ELLIG, PH.D.,\1\ SENIOR RESEARCH FELLOW, 
            MERCATUS CENTER, GEORGE MASON UNIVERSITY

    Dr. Ellig. Thank you, Chairman Johnson, Ranking Member 
Carper, Members of the Committee. I am also happy to be able to 
be here and talk with you today about regulatory reform, and 
particularly the role of regulatory impact analysis in 
regulatory reform.
---------------------------------------------------------------------------
    \1\ The prepared statement of Dr. Ellig appears in the Appendix on 
page 56.
---------------------------------------------------------------------------
    I work at a university. That means I am for knowledge and I 
am against ignorance. I think that the regulators and other 
decisionmakers have a moral responsibility to make decisions 
based on actual knowledge of the likely effects of a regulation 
and its alternatives, not just based on intentions or 
assumptions. A decisionmaker's failure or refusal to obtain 
this information is a willful decision to act based on 
ignorance.
    The tool that generates and organizes our knowledge about 
the effects of regulation and alternatives is called regulatory 
impact analysis. Unfortunately, regulatory impact analysis 
produced by Federal agencies is often not done very well and it 
often seems to have little effect on agency decisions. We are 
not likely to see substantial improvement in the quality of 
regulatory impact analysis unless we see legislation that turns 
it into a statutory requirement and provides for some type of 
judicial review to ensure that the analysis meets some minimum 
standard of quality.
    Now, let me expand on these points. A good regulatory 
impact analysis does at least four things. First, it assesses 
and identifies and traces the root cause of the problem the 
agency is trying to solve.
    Second, it outlines alternative solutions, and then it 
evaluates the benefits of the different alternatives and the 
costs of the different alternatives. When regulators have this 
information, they have a better shot at writing regulations 
that actually solve real problems at an acceptable cost.
    But, Congress should also have this information. Under the 
Congressional Review Act, Congress has an expedited process for 
vetoing regulations that Congress has decided it does not want 
to allow agencies to issue. Under the proposed REINS Act, 
Congress would play an even bigger role in regulatory 
decisionmaking by having to affirmatively vote before certain 
types of regulations take effect.
    Now, honestly, I do not know, if I were called to make a 
yes or no vote to approve or disapprove a regulation, I do not 
know how I could claim that I was making an informed decision 
if I did not know whether the regulation was solving a real 
problem and whether there were better alternatives out there. A 
yes or a no vote would be buying a pig in a poke if I did not 
have that information.
    Oversight Committees also should be able to find this kind 
of information useful. Oversight Committees look at what 
Federal regulatory agencies do to see if they are doing their 
job well and see if they are producing good results for the 
public. It is a lot easier to do oversight when you have access 
to a good regulatory impact analysis where the agency has 
declared, here are the results we are trying to achieve with 
our regulations, so that then there is some kind of a standard 
or a scoreboard where you can say, OK, did you achieve it or 
did you not achieve it? Let us go look.
    Let me give you a couple of examples of what happens when 
the analysis is not up to snuff. A few years ago, the Food and 
Drug Administration (FDA) proposed a rule that essentially 
required anyone who produces or transports or handles animal 
food has to have processes and procedures in place to make it 
as safe as human food, and the FDA did not trace any kind of 
problem to its root cause, did not estimate the benefits. One 
of my colleagues who spent a number of years in the FDA, 
though, took a look at it and found that pretty much all the 
benefits of the regulations come from preventing transmission 
of salmonella from pet food to human beings. So, the real 
problem was pet food, not animal feed. And, if the FDA had done 
a thorough analysis of alternatives and traced the problem to 
its root cause, the FDA would have discovered that it could 
have issued a much more carefully tailored regulation that was 
a lot less costly and still accomplished all the public health 
benefits.
    That is not an isolated example. In a project that I have 
run at the Mercatus Center since 2009 called the Regulatory 
Report Card, we evaluate the quality of analysis that agencies 
conduct when they issue really big regulations, the 
economically significant regulations. We find that, typically, 
on average, the quality of the analysis is not very good. On 
the four major items that are supposed to be in a regulatory 
impact analysis, we usually find that agencies earn about 60 
percent of the possible points or less, and in my book, 60 
percent or below is basically an F. I do not know that we 
should be making regulatory decisions based on information of 
that poor quality. This is consistent with the research of 
other scholars who have examined the quality of regulatory 
impact analysis.
    What can we do about it? What can Congress do about it? The 
first step in solving the problem is understanding that it is 
not the fault of a particular political party or a particular 
administration. My research, ``research by other scholars'' 
finds that there are deficiencies in regulatory impact analysis 
under Republican administrations, Democratic administrations, 
administrations under various Presidents. So, it is not a 
partisan or political problem. It is an institutional problem 
that requires an institutional solution.
    The current enforcement mechanism is review of regulations 
in the Executive Branch by the Office of Information and 
Regulatory Affairs (OIRA). There is evidence that OIRA review 
improves the quality of regulatory analysis, but it falls far 
short of what you would expect if you have read 40 years' worth 
of Executive Orders and the Office of Management and Budget 
(OMB) guidance that tell agencies what they are supposed to be 
doing. OIRA does help improve things, but we are still far 
short of where we ought to be.
    The most obvious solution, to me, is a statutory 
requirement that agencies conduct regulatory impact analysis, 
that traces problems to their root cause, explores alternative 
solutions, and evaluates the benefits and the costs of 
alternatives, coupled with some type of judicial review to 
ensure that that analysis meets some minimal quality standards. 
We need to improve the quality of regulatory impact analysis 
because good intentions do not automatically create good 
results. Decision makers should act based on genuine knowledge, 
not just hopes or assumptions or good will, good wishes.
    That is why the real conflict in the debate over regulatory 
reform should not be Republicans versus Democrats, liberals 
versus conservatives, business versus the public. The real 
conflict is knowledge versus ignorance, and I urge you all to 
choose knowledge.
    Thank you.
    Senator Carper [presiding]. Senator Johnson has asked me to 
turn to the next witness, Congressman Lankford. Do you want to 
do it with me?
    Senator Lankford. Sure. Let it rip.
    Senator Carper. All right. You are on, Dr. Mandel.

     TESTIMONY OF MICHAEL MANDEL,\1\ PH.D., CHIEF ECONOMIC 
            STRATEGIST, PROGRESSIVE POLICY INSTITUTE

    Dr. Mandel. Senator Carper, Senator Lankford, Members of 
the Committee, thank you very much for the opportunity to 
address the question of how to design a 21st Century Regulatory 
System. My remarks today will focus on retrospective regulatory 
review and offer up an alternative mechanism for reducing the 
burden of regulation without losing its benefits.
---------------------------------------------------------------------------
    \1\ The prepared statement of Dr. Mandel appears in the Appendix on 
page 62.
---------------------------------------------------------------------------
    My testimony is drawn from a series of policy briefs on 
regulatory improvement issued by the Progressive Policy 
Institute (PPI), where I am the Chief Economic Strategist. PPI 
stresses the importance of growth and innovation for lifting 
the living standards of all Americans. We are especially 
concerned with regulatory policy as an untapped tool for 
accelerating innovation and growth.
    Regulation, as you know, is essential for our whole 
economy. However, if policymakers allow the regulatory burden 
to become too heavy, innovation and entrepreneurial energy can 
be suppressed. As I noted in a recent essay, even the most 
regulation minded can see how the accumulation of well-
intentioned rules can have a pervasive and negative effect on 
innovation. One useful analogy is that of a small child tossing 
pebbles in a stream. One or two or even 10 pebbles will not 
make an obvious difference in the flow of the stream, yet 
accumulating gradually over the years, thousands of pebbles an 
make an effective dam.
    One logical way to fix the regulatory system is to go back 
and review old rules. This process of retrospective review has 
been embraced by every President from Jimmy Carter to Barack 
Obama. Administratively, retrospective review seems simple. 
Executive agencies are ordered to make a list of regulations 
that are candidates for reform. They then go down the list one 
by one and ask if the benefits exceed the costs. This procedure 
seems fool proof, and yet with no exceptions, several studies 
have shown that these attempts at retrospective review have 
fallen far short of the desired result.
    I am going to argue here that retrospective review is a 
seriously flawed process that cannot by itself provide the 
answer to regulatory accumulation. In my written testimony, I 
give four reasons. I am going to focus on two of these here.
    First, we must recognize that assessing the costs and 
benefits of an existing regulation is far more expensive and 
time consuming than projecting the costs and benefits of a 
prospective rule. When an agency is first considering a new 
rule, it can use whatever limited evidence exists from academic 
studies and existing research. By contrast, after a major 
regulation has been in effect for years, the amount of 
potentially relevant real world data is enormous, expensive to 
collect, and potentially burdensome for companies.
    So, it actually turns out that retrospective review, if you 
did it right, imposes more burdens on the companies to provide 
the information. It is not very easy to design studies that 
actually fairly test whether a regulation is working or not 
because you have to figure out what would have happened without 
the regulation in terms of technology, in terms of investment, 
in terms of how the market would have developed.
    Equally important, retrospective review is inherently 
focused on assessing individual regulations. However, the 
impact of regulations is cumulative and non-linear. That means 
as rules pile up, they interact with each other to create more 
of an impediment, even if each rule makes sense on its own. 
Now, the fact is, both Democrats and Republicans have agreed on 
the impact of accumulation of regulations. The OIRA under Cass 
Sunstein published a memorandum on this. But, in fact, pretty 
much all agencies do not take regulatory accumulation seriously 
in any way, and neither, apparently, does OIRA.
    So, to augment the formal process of retrospective 
analysis, which does have its benefits, we see the need for a 
low-cost, non-bureaucratic channel for improving regulations 
and taking into account regulatory accumulation. A 2013 paper 
by myself and a colleague, Diana Carew, proposed a Regulatory 
Improvement Commission (RIC) that would be authorized by 
Congress for a fixed length of time and consist of a panel 
appointed by the President and by Congressional leaders of both 
parties. The Regulatory Improvement Commission, would have a 
limited period of time to come up with a package of regulations 
to be eliminated or improved, drawing on public suggestions. 
The package would then be sent to Congress for an up or down 
vote and then on to the President for signing. This complements 
retrospective review. It deals with some of the issues that 
retrospective review cannot get to.
    A version of the RIC was introduced in the Senate and in 
the House in the last 2 years with bipartisan sponsorship in 
both cases. It has the virtue of embodying regulatory reform 
that can be embraced by both Democrats and Republicans, and if 
I dare may say, could conceivably be enacted even in today's 
political climate.
    Let me mention several important characteristics of the 
RIC. First, it is specifically designed not to eliminate any 
Congressional prerogatives. Indeed, Congress gets two bites at 
the apple, once when RIC is authorized and again when the 
package of proposed rule changes come through.
    Second and related--and this is very important--the RIC 
does not lean exclusively on a supposedly objective measure, 
such as cost-benefit analysis. Instead, the RIC embraces the 
idea that regulations are a joint creation of the Executive and 
Legislative Branches with politics deeply embedded.
    Finally, the RIC is about small steps to build trust rather 
than big dramatic changes. The Regulatory Improvement 
Commission is designed to show voters that Washington can get 
things done. Retrospective regulatory review sounds good and 
has the benefit that it can be implemented unilaterally by the 
Executive Branch. However, we know from repeated uses that it 
falls short of expectations for what it can achieve for 
fundamental reasons. We have to have another mechanism that 
complements retrospective review, and we suggest that at the 
appropriate time the Committee seriously considers the RIC 
legislation when it is reintroduced.
    Thank you.
    Chairman Johnson [presiding]. Thank you, Dr. Mandel. Ms. 
Katzen.

 TESTIMONY OF SALLY KATZEN,\1\ PROFESSOR, NEW YORK UNIVERSITY 
                         SCHOOL OF LAW

    Ms. Katzen. Thank you, Chairman Johnson, Senator Carper, 
Members of the Committee. I appreciate your inviting me to 
testify today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Katzen appears in the Appendix on 
page 72.
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    It is my strong belief that the regulatory system and the 
rules that it produces is an integral component of governance 
and one of our country's strengths. Echoing what Senator Carper 
said, Congress makes the law, but it typically does not have 
the time, expertise, or sometimes the ability to identify or 
resolve all of the details. That responsibility is usually 
delegated to the agencies, which issue regulations that 
translate general statutory directives into concrete 
requirements or prohibitions with which the public must comply.
    We have heard a lot about the increased burden of 
regulations since the 1970s, and in my written testimony, I 
discuss several metrics for measuring that activity and whether 
they support the allegation that this administration is engaged 
in an unprecedented and unjustified amount of regulatory 
activity. I do not think they make that case.
    There are, essentially, two measures the critics of 
regulation cite. First is the volume, as in pages in the 
Federal Register or the number of regulations, and second, 
calculations of the cost of new or total rules. Both can be 
large, if not scary, but neither really tells us very much 
about the extent or nature of an administration's regulatory 
activity.
    Two points worth emphasizing. First, the fallacy of 
focusing on the length of the rule itself--how many lines, how 
many pages--is that, often, the length is driven by the need or 
desire to carve out exceptions or waivers. The Internal Revenue 
Code, for example, would be a lot shorter if there were no 
deductions or credits, or oil and gas depletion allowances, or 
accelerated depreciation, or alternative minimum taxes.
    And, also, think about the rules that set up government 
programs for benefits or for subsidies, from Food Stamps to 
Small Business loans. Detailed and, hence, lengthy eligibility 
standards and reporting requirements are often critical for 
accountability and a hedge against waste, fraud, and abuse.
    And, finally, brevity may not be a blessing in the world of 
regulations. A one-liner can ban a product, much more draconian 
than a very lengthy, complex set of rules about who can use it, 
when they can use it, how they can use it.
    Second about the numbers, it masks what they do. It may 
shock some people that the vast majority of rules are 
ministerial or routine, like changing the day for filing your 
income tax to Monday if April 15 falls on a Saturday or Sunday.
    Others are as non-controversial as they are necessary. I 
refer here to the Federal Aviation Administration (FAA) 
airworthiness directives. Should we stop them, or the FAA's 
rule this past year to stop ongoing flights over the Simferopol 
area because of the wars in Crimea, or the DOI rule which sets 
the bag limit for shooting fowl traveling north and south under 
the Migratory Bird Treaty. Without a limit, no one could enjoy 
that spot.
    So, it may be counterintuitive, but there are some, in 
fact, a lot of regulations that people actually want and that 
they need. This would include those structuring programs, this 
would be leveling the playing field. A lot of businesses ask 
for rules and regulations to provide certainty of operations 
for their activities.
    Now, a lot of these are major rules and are included in 
those vast numbers we see, because major rules are not just 
rules that have $100 million or more in an annual impact, but 
are rules that have $100 million or more in benefits, or rules 
that have a novel legal or policy issue involved, or have a 
material effect on the budget.
    Because my time is so short, I am not going to talk about 
the retrospective review or the RIAs, although I think it 
really is important to note on the RIAs, and I have been in 
this field now for a number of years, that the quality of the 
work done by the agencies is, indeed, mixed, as you would 
expect, because the agencies are mixed. They have different 
missions, different cultures, different budgets, different 
resources. And, so, to have them all performing at the same 
level would be unexpected, at best. But, what I have also seen 
over the years is that they have improved. They have come a 
long way since the 1980s when they were asked to start this 
effort.
    On the retrospective review, I will try to address that in 
the questions and answers.
    But, I, too, wanted to offer some general principles or 
framework for evaluating various regulatory reform bills that 
are likely to come before this Committee. Now, I fully 
recognize that Congress, unlike Federal agencies, is not 
constrained from enacting legislation that it deems salutary. 
But, as a prudential matter, I think this Committee, before it 
endorses a particular regulatory reform bill, should ask and 
answer some of the questions that Dr. Ellig had posed. What is 
the compelling need? How significant is it? Are there 
alternatives? That is what a Federal agency does in rulemaking. 
I think this Committee should think in that context rather than 
going to the bottom line.
    It is worth noting that Congress has imposed a series of 
process and analytical requirements on the Federal agencies 
over the last 30 years and has not increased the resources that 
the agencies have to do that work. Asking them to do more with 
less is simply not sustainable over the long term. Congress has 
other alternatives, as well, as Senator Carper indicated.
    I have tried today to emphasize that regulations are an 
important, valuable force in our society and are the reason 
that the air we breathe, and the water we drink is clean, our 
food and medicine is safe, our workplaces are secure, our 
markets operate as advertised, and our values are embodied in 
our public and our private institutions. That is why I think it 
is a strength, not a weakness, of our country.
    Now, we talk about the international scene and how 
everybody is engaged in trying to do better. I would tell you, 
they are trying to become us. We are the gold standard. We have 
the most transparent regulatory process in the world. We have 
the most accountable regulatory process in the world. And, the 
benefits of that system inure to all of us.
    Thank you. I appreciate your time.
    Chairman Johnson. I would like to thank all the witnesses 
for their thoughtful testimony.
    Dr. Ellig, like you said, you have to start with 
information. I would argue that the first step in solving any 
problem is you have to admit you have one. The reason we try 
and grapple with some kind of metrics, whether it is pages or 
whether it is dollars, is we are trying to describe a problem 
that exists. Now, I realize they are all imperfect measures.
    I was trying to get my staff to quickly come up with the 
exact numbers, but let me lay out part of the problem, is 
Congress now passes frameworks for the regulatory agencies to 
write the laws and the rules and regulations. We all agree, a 
job with the Federal Government should be providing a legal and 
regulatory framework to provide certainty for our economy, so 
you understand what the rules of the road are, like the Uniform 
Commercial Code. The problem is, we have passed so many, they 
are so confusing, they are conflicting, it is not providing 
that kind of certainty, not by any stretch of the imagination.
    Two examples. Both Obamacare and Dodd-Frank, when they were 
written, they were a few hundred thousand words--I do not have 
the exact numbers right now--a couple hundred thousand words 
apiece. The last time I looked, Dodd-Frank, in terms of 
regulatory number of words, was over 15 million. Obamacare was 
over 12 million. So, again, those are the large metrics to try 
and describe the problem that our private sector is trying to 
grapple with as they are trying to grow and produce good paying 
jobs.
    Anecdotally, I have had small banks in Wisconsin come up to 
me, small bankers, and say, ``Senator, I had to fire, layoff a 
loan officer because I had to hire a compliance officer.'' I am 
having banks say, ``I cannot survive as a single-branch bank 
anymore. I have to consolidate just to be able to afford and 
comply with all the regulations.'' So, whether it is 
anecdotally or this is from a macro sense, this is just a real 
problem.
    I think one of the problems we have in terms of regulatory 
agencies--and again, I am very impressed with the quality of 
the Federal workforce. That is just true. I am a limited 
government guy, but I am impressed with the people, the 
dedication, their intelligence. The problem is, I am concerned 
about their experience. How many regulators, what percentage--
and I do not think anybody has this, but I want one of you to 
speak to the problem of regulators who have very little 
experience in the private sector understanding--for example, 
having the George McGovern moment. Do you remember when Senator 
McGovern ended up starting up a bed-and-breakfast, and I think 
his comment was, ``If I had only known.'' If I had only known 
what all these rules and laws and regulations and how difficult 
it was to comply.
    So, can somebody speak to just the private sector 
experience that is lacking in the regulatory community? Mr. 
Holtz-Eakin, you are looking away, but----
    Mr. Holtz-Eakin. I do not have any metrics, which is what 
you would like to know. But, certainly, the anecdotal evidence 
is exactly what you described, that those who walk from one 
side of this line to the other are stunned at how misinformed 
they were about the burdens that the regulations impose on 
people.
    Ms. Katzen. Well, with respect, I think that that is one of 
the reasons we have public participation in rulemaking. 
Agencies have to say what it is they intend to do, and they 
have to provide all of the data and all of the analyses that 
they rely on. And then there is an opportunity for comment, and 
at least during my tenure at OIRA, and I had some private 
sector experience before I went into the government, 
businessmen would come in and say, there is a problem, and we 
would listen and we would respond. It is not a closed, mindless 
exercise. So, I cannot give you a percentage, but I can give 
you a cultural attitude of openness and inclusion for 
information.
    Chairman Johnson. Sir.
    Dr. Mandel. Just to add one sentence here, part of the 
problem is the intersection of different regulations. So, what 
happens is that the regulatory agencies focus on--when they are 
developing regulations, they think about the impact of that 
single regulation. They do not think about the overlaps and the 
intersections and the problems that it causes with other 
regulations. And, when I talk to business people, a lot of what 
they complain about, they can deal with any single regulation. 
It is when they start layering on top of each other that it 
becomes a real problem. And we have to think about what we do 
in response to this. It is the intersection not just in the 
Federal level, but the State and local level, as well.
    Chairman Johnson. Yes. It is the conflicting regulations. I 
mean, you are damned if you do, damned if you do not, that type 
of problem.
    By the way, I do not think anybody here is claiming this is 
just an Obama Administration problem. This has been a problem 
as the fourth branch of government has grown exponentially in 
terms of the regulatory burden over the years. This is on a 
bipartisan basis.
    Ms. Katzen, you mentioned about the notice and comment 
period. I think we have witnessed--I do not have the exact 
numbers, but I have seen numbers in the past--I think we have 
witnessed lack of notice and lack of comment, and I actually 
want to ask somebody to explain the substantive rule 
requirement in terms of notice and comment period.
    Ms. Katzen. [Laughter.] I laugh only because I devote two 
full classes in my admin law class to this.
    Chairman Johnson. Very good.
    Ms. Katzen. The APA is quite clear that where there is a 
substantive rule that is binding--it has the force and effect 
of law--there must be notice and opportunity for comment. The 
APA explicitly carves out general statements of policies and 
interpretative rules, and as to those, there is no requirement 
for notice and comment, although OMB has a policy that if it is 
a statement of policy with significant economic impact, there 
should be a modicum of opportunity for public participation.
    Now, that issue is actually before the Supreme Court today. 
It was argued in December in the Perez case and we should have 
a decision by the end of the year as to whether those words in 
the APA, in fact, mean what they say.
    Chairman Johnson. Now, a Federal judge did actually rule--
--
    Ms. Katzen. He did.
    Chairman Johnson [continuing]. I think, last week that 
President Obama's executive actions as regards to deferred 
action on--or we will call it executive amnesty, because it is 
easier to say--was a substantive rule and required notice and 
comment period and there was none, is that not correct?
    Ms. Katzen. That is what he----
    Chairman Johnson. Would you challenge----
    Ms. Katzen. Yes.
    Chairman Johnson [continuing]. That interpretation?
    Ms. Katzen. Yes, I would, and I think the Obama 
Administration will be challenging that, and I think that, in 
fact, his view of the law is not correct.
    Chairman Johnson. Can anybody else comment on that? Is 
anybody else qualified to speak to that?
    Dr. Ellig, you wanted to chime in----
    Dr. Ellig. Oh, on----
    Chairman Johnson [continuing]. On something else.
    Dr. Ellig. I am sorry. On your earlier question, I wanted 
to mention, I worked in a regulatory agency and the sum total 
of my prior private sector experience was cleaning hamster 
cages at a Woolworth's store and dressing up as Santa Claus at 
Christmas in the same place. But, I think----
    Chairman Johnson. That is better than none, by the way.
    Dr. Ellig. But, I think, even if you have regulatory 
agencies largely staffed by folks like us on the panel who have 
pursued pretty much analytical, policy oriented careers, there 
are certain fundamental questions that come out of how to do 
good policy analysis that agencies ought to be asking and 
answering that they are not always asking, like, what is the 
root cause of the problem we are trying to solve. And, so, I am 
not sure if you have to have a lot of people with private 
sector experience, but you at least ought to have people who 
know how to do good policy analysis.
    Chairman Johnson. And value good information. Thank you. 
Senator Carper.
    Senator Carper. Thanks. I said to Senator Johnson, this is 
a good hearing, and a timely hearing. I think we have the four 
right people in front of us.
    I am reminded, though, that sometimes we do not make, as 
legislators, we do not make it easy for folks who are writing 
regulations. And you know, sometimes we are trying to find a 
compromise and it is maybe inartful, but we have to get some 
kind of agreement so we can pass a bill and then we say, you 
guys clean it up when you write the regulations. We are guilty 
of that, so we have some responsibility. So, it is a shared 
responsibility, if you will.
    Ms. Katzen, given your time at OIRA, I know you fully 
understand the details of assessing the cost and benefits of 
some rules. For example, it is difficult for the Environmental 
Protection Agency (EPA) to assess the benefits of regulating 
certain toxins, including lead and mercury. Science is clear 
that these toxins impact our health, especially our children's 
health and their IQs, but calculating the direct dollar benefit 
of a smarter, healthier child just is not easy to do.
    Conversely, estimating the cost is not always easy. 
Agencies often end up overstating the cost. I believe the 
estimated cost of the acid ran program launched by former 
President George Herbert Walker Bush, I think they estimated 
the cost of the acid rain program, to be 50 percent higher than 
what it turned out to be. And actually, we got it done in, 
like, half the time. It is pretty amazing.
    During your time at OIRA, did you work on a rule that ended 
up having far more benefits and far less costs than estimated, 
and what should agencies do when it is difficult to determine 
estimated costs and benefits?
    Ms. Katzen. Well, Senator Carper, it has traditionally 
always been easier to quantify and monetize costs than 
benefits. We have done a lot of work, and there has been a lot 
of thoughtful analysis that has enabled us to do better 
analysis of benefits, although some are still escaping us, like 
invasions of privacy. How do you value that? How do you value 
national security? If you harden one site, terrorists can move 
to another site, so what is the reduction in risk of reducing 
an attack on a particular site? This is the Homeland Security 
Committee. These are things you deal with all the time. It is 
very difficult and we are sometimes not very sophisticated.
    But, we have made a lot of progress and OIRA does a lot of 
analysis, and the answer to your specific question is, yes, we 
always look to see that the benefits justify the costs--not 
outweigh as though it is some mathematical precision formula, 
but, rather, do they justify the costs. It should be 
informative but not necessarily dispositive. There are some 
things that are difficult to monetize.
    Nonetheless, even with only monetized benefits, reports 
have shown for the last two decades that the regulations that 
are adopted and issued by both Republican and Democratic 
Administrations--George W. Bush, the end of Clinton, and now 
Obama--the benefits clearly exceed the costs. Our regulations 
produce estimated net benefits to our country on an annual 
basis that is consistent and verifiable.
    Now, are they the benefits we will actually see, and this 
is the reason that you hear calls for retrospective review? No. 
These are estimates at the time and more work has to be done.
    Senator Carper. OK.
    Ms. Katzen. And, I would not deny that there is more 
progress that can be made to the system and that there are 
improvements to be had.
    Senator Carper. Good. Thank you. Just hold it at that. That 
was great.
    Dr. Ellig--when people in Delaware spell their name E-l-l-
i-g, we pronounce it ``Aay-league.'' Would that be all right, 
to call you Dr. Ellig? I just want to say, you convey a sense 
of optimism and almost a sense of joy in attacking an issue 
that a lot of people find pretty boring---- [Laughter.]
    And, I said to the Chairman, how----
    Dr. Ellig. Well, somebody has to make it interesting.
    Senator Carper. That is good. Well, you do. And, I wrote 
down--I have a new aphorism here. I wrote down--this was before 
you got here, Heidi--I wrote down, you said, ``I am for 
knowledge and against ignorance.'' Is that not good? So, I 
wrote that one down. I will use that about 10 times today. 
[Laughter.]
    But, Dr. Ellig, you indicated in your statement that you 
think that codifying the requirement that agencies conduct 
cost-benefit analysis would improve the process. Could you just 
expand on that for a little bit, and why do you believe that is 
necessary?
    Dr. Ellig. Well, happy to. Yes. I think the problem is, we 
have a fairly weak enforcement mechanism in OIRA review because 
OIRA is part of the Executive Branch and it is fairly clear 
from my research and other folks' research that when there is a 
conflict between analysis and an administration's political 
priorities, it is an administration's political priorities that 
will often win. That is why I think some type of quality 
control needs to occur outside of the Executive Branch rather 
than having the Executive Branch review its own analysis and 
say, ``what do you know. This looks pretty good.''
    Then the question is, where is the logical place for that, 
and typically, the logical place for that kind of review has 
been, if there is a problem with a regulation, it violates the 
law or whatever, you take the agency to court. So, it seems 
sensible to have a statutory requirement that agencies have to 
conduct analysis that covers certain topics, together with some 
kind of a check through the court system on the quality of that 
analysis.
    And, I want to emphasize, I am not saying that judges ought 
to be free to second-guess the agencies' policy decisions or 
impose their own view of what the regulation should have been. 
But, surely, courts ought to be capable of looking at the 
evidence in front of the agency and saying, yes, that looks 
like a decent amount of evidence and the agency has done enough 
homework, or, no, that does not really look like enough. That 
is the kind of procedural review that I was thinking about.
    Senator Carper. Good. Thanks.
    And, Ms. Katzen, would you just briefly respond to any 
views, any comments you have on this particular issue that Dr. 
Ellig has spoken to, any views that you might have. Do you 
agree that codifying these requirements would improve the 
regulatory impact assessments, and the regulatory process as he 
seems to be suggesting?
    Ms. Katzen. Actually, I do not think codification would go 
a long way, because I think it is a cultural issue. I think it 
is a resource issue. Congress has enacted a lot of statutes 
telling agencies what to do and how to do it. And, as the 
agencies face straight lined and decreasing budgets, compounded 
by CRs and sequestration, they simply do not have the ability 
to do the kind of analysis that is called for. And, I think, 
casting it in a statute only compounds the problems, because so 
many terms--like quantifying costs, what does that mean and how 
would somebody say that is sufficient? He says that he does not 
want the courts to look at the quality, but at some point, it 
is more than just did the agency do anything. He does want them 
to look at the quality and that requires something.
    Senator Carper. Good. Thanks. Thank you so much. Thank you 
both.
    Chairman Johnson. Senator Lankford.

             OPENING STATEMENT OF SENATOR LANKFORD

    Senator Lankford. Thank you. I really do look forward to 
the ongoing part of this conversation. And, for the Ranking 
Member and his comment about trying to bring some happiness to 
a topic that can be boring, I looked at Senator Heitkamp and 
said, welcome to our Subcommittee. [Laughter.]
    We are going to focus on these issues a lot and spend a lot 
of time on them, because----
    Senator Carper. Maybe you should just invite Dr. Ellig a 
lot. [Laughter.]
    He can come to every hearing.
    Senator Lankford. He is a great witness and a great 
conversation.
    The struggle that we have is, is because it is so real 
life. Up here, we talk about the regulatory issues. But, I just 
sat down and jotted down some of the conversations I had in 
Oklahoma last week, so let me just give you a couple quick, 
brief comments about things that came up last week.
    I had a company that approached me that said they did not 
notify an agency last year that they had nothing to report, and 
so they just received a fine of half-a-million dollars for not 
reporting they had nothing to report and they are trying to 
figure out what to do with this.
    Multiple universities I talked to last week are very 
concerned about some of the new regulations or possible 
regulations that are coming down on them.
    I talked to some county commissioners in my State that have 
just put millions of dollars into a beetle farm rather than 
building a bridge in their county because they had to do beetle 
mitigation for a beetle population that is actually 
dramatically increasing in their county, but they are saying 
the beetle populations are decreasing in other counties and so 
they have to pay mitigation fees in their county because it is 
decreasing somewhere else. They are having a real struggle with 
that.
    A doctor's office that talked to me that said he has been 
waiting months for a Medicare number because of a new 
requirement that has come down on that and he has not been 
reimbursed since October.
    Duplication of forms--one different trucking company said 
that they have two different agencies that are asking for the 
exact same information, and they have spent hours and hours and 
hours filling out the same form for two different agencies 
because the agencies would not share that information.
    A small rural bank that said they have now stopped doing 
rural small home loans because of the cost of regulation, 
saying, basically, they cannot break even for all the 
compliance costs on it.
    There was also a disagreement that one of the companies had 
with an agency and they asked for a review of that and where do 
they go, and they were told someone else in the same agency 
would review it, and so they just gave up.
    That was last week. This is a constant issue in the 
national conversation that I think we do need to address.
    I do not know of anyone that I have served with that wants 
no regulation. There needs to be clear boundaries. There needs 
to be clear guidelines. All the good actors want to make sure 
there is regulation so the bad actors are not in there messing 
up their business and messing with families. So, we need to 
have good, clear boundaries. But, the boundaries need to stay 
consistent.
    We need to decide who is actually the right one to make 
that decision. Is it the Federal Government? Is it the State? 
That is a large responsibility we have to set. We have to deal 
with the issues of primacy and all the regulatory agencies, of 
what role does the State have in actually implementing this. We 
have a lot of issues on judicial review and retrospective 
review, cost-benefit analysis.
    We have to deal with the purpose of fines and fees. Who 
sets those? Where does that money go? Who gets to change those? 
How do we actually walk through that review? This does, at some 
point, to some company, feel like extortion when they say that 
your money will not come back to you after 4 years of audits, 
or we will settle with you now if you will take a 40 percent 
amount. At some point, that just does not smell right to most 
people.
    So, a lot of these are issues that we have to resolve in 
the days ahead, and I really do look forward to in our 
Subcommittee getting down and trying to resolve some of these 
issues, not picking on any one agency, not picking on any 
political party or the Administration. This is not about those 
things. Some of these cumulative effects have built up over 
years and years.
    So, I want to say to the Chairman that we look forward to 
walking through some of these processes and trying to see what 
we can do to be able to help not only keep people safe in the 
country and deal with things in an appropriate way, but also 
trying to resolve some of these issues in the days ahead, so 
let me just bounce a couple questions to you in the minutes 
that I have.
    Dr. Ellig, you had made a comment about some of the quality 
of analysis. Is there a consequence for any agency if they do a 
sloppy review? So, I understand if they do the review just to 
check the box and say, ``I did it,'' and then you go back and 
look at it later and find out it really was not good, is there 
a consequence for that?
    Dr. Ellig. Well, if it is a big enough problem and things 
line up right, the Administrator of OIRA may return the 
regulation and say, hey, you have to go back. Go back and do 
more work on this. The problem is, OIRA is seriously outmanned 
and outgunned. There are a couple of hundred thousand people in 
regulatory agencies. There are 40 employees in OIRA. Now, 
granted, not everybody in regulatory agencies is writing 
regulations, but there is still a significant imbalance there, 
and these people are working really hard to try to improve 
things, but it is a heck of an uphill battle.
    That is why I think having some kind of review outside the 
Executive Branch, or at least outside the agency that issued 
the regulation, is a pretty important thing, and to have some 
sort of consequence if the analysis is not particularly good, 
does not answer the questions that ought to be answered before 
a responsible decisionmaker would make a decision.
    Senator Lankford. Right. So, we struggle with the costs of 
actually reviewing, and several of you mentioned this issue 
about cost. When you actually try to do a review in real time, 
now you have real information, the cost goes up dramatically. 
Someone had mentioned even that the problem really becomes one 
when it is more burdensome to actually do the review than it 
does to actually walk through the process on it. So, the issue 
is, how do you do that, because there is a best guess at some 
point. If that guess is wrong, we have to be able to determine, 
hey, this was a bad idea. We need to review it.
    Dr. Mandel. That is right. Now, one of the things, when you 
are talking about all the people that are businesses and 
organizations that are complaining about regulations, it would 
be good to have a central place to collect all these 
complaints, so we know what is actually wrong out there.
    Senator Lankford. It is actually me and Senator Heitkamp's 
office. [Laughter.]
    Dr. Mandel. OK. Your office? [Laughter.]
    Senator Heitkamp. His first. [Laughter.]
    Dr. Mandel. Yes, his first. But, a central place that is 
actually tasked with the idea of assembling them so you can 
tell these----
    Senator Lankford. Should that not be OIRA right now?
    Dr. Mandel. No, it should not be.
    Senator Lankford. OK.
    Dr. Mandel. OIRA is not tasked with that.
    Senator Lankford. OK.
    Dr. Mandel. OK. It should----
    Senator Lankford. So, you are saying no one is tasked with 
that.
    Dr. Mandel. No one is tasked with that at this point. One 
of the central problems with the regulatory system we have 
today is that it has no place of central touch, where people 
can----
    Senator Lankford. But, every agency has a responsibility to 
do retrospective review. That is an Executive Order that has 
been put out for a long time, that every agency is required to 
do that.
    Dr. Mandel. But, remember----
    Senator Lankford. So, it is not just the agency. You are 
saying an entity beyond all those agencies----
    Dr. Mandel. Because when you talk about those multiple 
forms, those forms are coming from multiple agencies. So, we 
went to one agency and we say, oh, yes, we sent that form. What 
is wrong with that? But there is no one anywhere in the system 
who is tasked with--where the people that were complaining to 
you could go and say, we have this problem here. We have 
multiple forms. Can we not do something about it?
    Now, there have been States and localities that have 
assembled agencies like this to do this, but on the Federal 
level, on the national level, nothing.
    Senator Lankford. OK. My time has expired. I yield back.
    Chairman Johnson. Senator Ernst.

               OPENING STATEMENT OF SENATOR ERNST

    Senator Ernst. First, I would like to thank Senator Johnson 
and, of course, Senator Carper for calling this meeting. This 
has been very interesting.
    And, I want to thank the witnesses here today. Really 
lively discussion on, you are right, on an issue that many 
would not find as fascinating, maybe as some of us. So, thank 
you. This is a very timely hearing.
    Regulatory reform is an issue that I am extremely 
interested in, and during the course of the past year or so as 
I traveled across Iowa, that is what I heard about. Concerns 
coming from everyday Iowans--our small business owners, our 
individuals, our farmers, our ranchers, and the burdens that 
are placed on them, and then how we respond as a Congress to 
their needs or what might not be their needs. But, they are 
very, very concerned about the costs of the bureaucracy, what 
the bureaucracy is doing to their livelihoods.
    So, one thing that I heard over and over again is that when 
you talk about the comment periods, many of them do issue 
comments. They will go online and they will put their comments 
out there, but they feel those comments, those concerns are not 
being heard by bureaucrats here, and not having responses back 
to them and why it is significant that these rules are in 
place, why maybe they could do something different.
    And, because these people feel that they are not being 
listened to, they really do not trust the government and they 
do not trust these agencies. They do not feel like they are 
being heard. So, the sentiment from my constituents is that the 
government is really out to get them, and that is an 
unfortunate situation to be in.
    And, it does make me reflect back on a line that President 
Reagan had used many years ago. The nine most feared words in 
the English language are, ``I am here from the government and I 
am here to help.'' When you hear that, it puts the fear of God, 
I think, in some of these folks.
    Unfortunately, that is how many Iowans feel, is that there 
are regulations out there, but they are not really there to 
help them. So, it is a difficult situation to be in.
    The other day, I did send a letter to the EPA 
Administrator, Gina McCarthy, just inviting her to come to Iowa 
and see the impacts that some of the rules and regulations 
proposed, or those that are already in existence, are having on 
our communities, whether it is the county levels, whether it is 
the individual farmer or rancher, whether it is the small 
business owner. We have seen the Waters of the U.S. situation. 
We have seen the Renewable Fuel Standard. And, these two 
particular examples are creating a lot of uncertainty in Iowa.
    And just yesterday, as I sat in the Agriculture Committee, 
we had a hearing and an Iowan farmer--corn, soybeans--I asked 
him, what are the impacts to you, and because of the 
uncertainty with the rules and regulations moving forward, he 
does not know what he needs to produce. He does not know what 
his production level needs to be. And, he does not know how 
best to manage his farm, especially when it comes to the Waters 
of the United States. So, we are creating big problems out 
there.
    And, it is not just rules and regulations by bureaucrats. 
It is this governing body also proposing legislation. So, we 
really do need to pay attention to that, but we need to hear 
from our constituents.
    So I am asking the full panel, please, to let us know what 
we can do better. How can agencies do better in listening to 
constituents all across the United States?
    Dr. Ellig. Well, if I may, I think this highlights also a 
problem with the current approach to retrospective review, 
because agencies are supposed to retrospective review 
regulations. They are told to do so by Executive Orders. In 
some cases, they are told to do so by legislation. Agencies put 
a notice in the Federal Register saying, hey, does anybody have 
problems with this regulation or this group of regulations? 
But, who is going to notice that and respond?
    The folks who are likely to notice and respond are 
typically going to be large entities--either large companies or 
maybe some State governments, if they are affected, who already 
have invested in the staff to follow regulation and figure out 
the process. And, the firms who have already figured out how to 
cope with regulation are not necessarily going to be eager to 
recommend that anything should be changed to make it easier for 
their competitors who have not figured out how to cope with 
things.
    So, if we are relying on the regulated entities, large and 
small, to tell us what is wrong with regulation and what needs 
to be reviewed retrospectively, we are going to get kind of a 
biased response or maybe no response at all, and that is why I 
agree with Dr. Mandel that the impetus for retrospective review 
has to come from outside the agency and not just counting on 
put a notice in the Federal Register and see who responds.
    Dr. Mandel. Can I add one thing to that? I think you are 
absolutely right. We have to have a way of listening 
constructively to the complaints, OK, and not even as part of 
the official process. There has to be a place that people can 
bring, where they know they are going to be listened to, and 
that it is going to be collated so we know that it is just not 
a single person or a single organization, that it is put 
together and we can see across agencies, across regulations, 
that this one is actually creating lots of problems for people.
    And, so, we have to have a kind of an official mechanism, 
and I would not even call it retrospective review, I would not 
call it prospective, but some way that people can know that 
they are being listened to and that the complaints are being 
collated and somebody is going to have a mechanism for doing 
something about it.
    Senator Ernst. Yes, I would agree, and there has to be a 
way to double-check regulations and rules from one agency to 
another, because oftentimes, there will be a rule that will 
come from one agency that is in direct conflict with another 
agency. And, I use, for example, positive train control. There 
is one agency saying, you must put these control poles in the 
ground, and you have the FCC saying, no, you cannot do that.
    Dr. Mandel. If I just can say one thing----
    Senator Ernst. Yes, please. Thank you.
    Dr. Mandel. I am going to say something nice about your 
organization, the Mercatus Center. This is where big data and 
technology can come to our aid, which is that if you can 
collate all the regulations into one big database----
    Senator Ernst. Mm-hmm. Correct.
    Dr. Mandel [continuing]. There are actually ways now of 
testing these against each other so you can catch these things 
more or less, I would not say automatically, but there is no 
excuse in this day and age that these conflicts occur without 
us knowing about it.
    Senator Ernst. Great. My time has expired. Thank you, Mr. 
Chairman.

              OPENING STATEMENT OF SENATOR PORTMAN

    Chairman Johnson. Senator Portman.
    Senator Portman. Thank you, Mr. Chairman. Thanks for 
holding this hearing and for your work in this area. I am 
really looking forward to the opportunity to work with the 
members of this panel and that panel to try to get some stuff 
done here in the next 18 months. I think we have a window of 
opportunity here with Democrats and Republicans alike 
interested in this issue.
    there has been a lot of discussion today about whether we 
have too many regulations and what the impact is. I think it 
goes without saying that, yes, we need regulations, but, yes, 
we have real problems in our system. Sally, who was head of 
OIRA at one point, and I had the honor of being Director of the 
Office of Management and Budget and had responsibility for 
OIRA, can tell you there is a real tug-of-war sometimes with 
the agencies and with OIRA. But, you said it well, and you are 
the defender of some of this regulatory process that we have 
currently on this panel. You said that we need to make better 
progress and more improvements in the regulatory process. So, I 
think there is an understanding of that and the question is, 
what do we do that actually moves the ball forward?
    We all hear about this when we are home, all the time. 
Today, I had my weekly coffee, and, of course, people came 
forward with why do we do this, why do we do that. The one 
recently was somebody who had a coal mine in Ohio, and the guy 
has been there over 40 years as engineer, so he has some 
perspective, and he says, here are the two notebooks, and they 
were big notebooks, like, much bigger than this one, like, five 
times this size, and sort of plopped them down on the desk. 
``Here is my permitting regulations,'' he said. ``I remember 
when it was two dozen pages.'' ``A lot of this is 
duplicative,'' he said. ``A lot of it is a waste of time and 
causes more compliance costs, and some of it just makes no 
sense and it is driving jobs out of,'' in this case, the coal 
business in Ohio.
    But, we hear it constantly, and let me give you one data 
point that I think is interesting. The Code of Federal 
Regulations (CFR), in 1960 had approximately 22,000 pages. By 
the end of 2013, it was 180,000 pages. And, so, Sally said 
earlier, and I think she is right, we do not want to just judge 
this based on volume, but, wow, that is a pretty big increase. 
We are talking about, what is that, eight times larger.
    There are some studies out there, and I know Doug Holtz-
Eakin has done some of this good work, but that the 
accumulation of all these regulations--that is one of the 
points that you made in your testimony, Dr. Mandel--is 
resulting in less economic growth and fewer jobs. So, this 
study in 2013 by Dawson and Seater, between 1949 and 2005 that 
they had the data for, accumulation of Federal regulations 
slowed economic growth by an average of 2 percent per year. So, 
we are talking millions of jobs here. So, I think we all 
understand that, and the question is, what do we do?
    As you all know, I have three bills that are bipartisan 
that we have been promoting that meet a lot of the requirements 
that you all have laid out. Doug Holtz-Eakin, you talked about 
the fact that we should be doing cost-benefit analysis 
codification. I assume you are focused primarily on the 
regulatory impact analyses. We should be handling independent 
agencies, bringing them into the cost-benefit world. And, by 
the way, Ms. Katzen has also talked about that and has 
supported that. And, you talked about judicial review. You 
talked about time lines, comment period.
    All of that is in the Regulatory Accountability Act, and it 
has been bipartisan. We have introduced it in the last two 
Congresses. We are about to introduce it in this Congress. It 
also has more transparency, more early public outreach, use of 
best available data, more thorough processes on particularly 
major rules. And, this is one that I hope we will be able to 
move forward again, even in this highly partisan atmosphere we 
find ourselves in, one that seems to have bipartisan support.
    The other is Independent Agency Regulatory Analysis Act. It 
is a piece of this larger bill, just to deal with the 
independent agencies. Again, this is also part of the RAA, but 
this is just to say, let us codify what the President wants to 
do. The President's Job Council recommended this. Former OIRA 
heads have from both Republican and Democrat administrations, 
including Ms. Katzen, as I talked about. We introduced it last 
Congress, Mark Warner and I did. We are going to introduce it 
again this Congress. We are trying to help the President be 
able to do what he cannot do by Executive Order, because he has 
to have us pass a law in order to enforce this on the 
independent agencies.
    And then, finally, is the Federal permitting, which goes to 
that coal example I used, and we can talk more about that. You 
all are not necessarily here to talk about Federal permitting, 
but, wow, what an opportunity. That legislation, we have 
introduced. Claire McCaskill, who is on this Committee, and I 
have introduced it. The AFL-CIO Building Trades are very 
interested in it, as is the Chamber of Commerce, because we are 
falling behind in terms of permitting as a country and losing 
jobs and investment.
    So, I guess my first question would be to all of you just 
on this issue of codification. We heard some different aspects 
of it, and maybe we will just go left to right. Should we be 
codifying the RIA process as it currently exists. Just give a 
brief answer, if you would, because I want to leave room for 
Ms. Katzen at the end to have her argument be heard, which is, 
I think, probably why it should not be codified. But, Dr. 
Holtz-Eakin.
    Mr. Holtz-Eakin. I have said yes. My biggest complaint with 
our regulatory system is it is not systematic. We have 
different agencies doing different things, and there is no 
consequence in some cases. There are consequences with OIRA, 
but for other agencies, none. And, so, codification of the 
requirement of doing a legitimate RIA, some judicial review so 
there is a consequence for failure to meet the standard. This 
would improve the quality of what we do enormously, I think.
    Senator Portman. Dr. Ellig.
    Dr. Ellig. Yes. I agree, and a few years ago when we first 
started our research on the quality of regulatory impact 
analysis and then realized we had a problem and tried to figure 
out why, my colleagues at the Mercatus Center sat down and 
tried to figure out, OK, what are all of the different ways 
that you might improve the quality of analysis, and it kept 
coming back to it has to be some kind of requirement and review 
that happens outside the Executive Branch.
    Senator Portman. Mm-hmm. And, also, just briefly on this 
codification for the independent agencies, more and more of the 
major rules are coming out of the independent agencies.
    Dr. Ellig. Yes.
    Senator Portman. They are not under the control of the 
Executive Branch in the same way that an executive agency is, 
so the President cannot require them to go through the cost-
benefit analysis, the least burdensome alternative, jobs 
analysis without codification, is that not correct?
    Dr. Ellig. That is correct. Now, the Securities and 
Exchange Commission (SEC) has some language in its authorizing 
statute----
    Senator Portman. Right.
    Dr. Ellig [continuing]. That has turned into a requirement 
for benefit-cost analysis, and after losing several court 
cases, the SEC in 2012 issued new guidance that said, OK, we 
are going to do good benefit-cost analysis and we are going to 
do it in accordance with the principles of Executive Order 
12866, and I hope a few years from now, we will be able to look 
and report and say, hey, it has actually gotten better.
    Senator Portman. Yes. Dr. Mandel.
    Dr. Mandel. So, I actually have nothing to say for or 
against codification in particular. In principle, it is a good 
idea, but it will not actually solve the problems that your 
constituents are having, OK, because what they are having is 
the problem of permitting----
    Senator Portman. Yes.
    Dr. Mandel. Their problem is they are being hit down from 
multiple agencies and multiple places and----
    Senator Portman. Thirty-five different agencies----
    Dr. Mandel [continuing]. What are they complaining about--
--
    Senator Portman [continuing]. One project----
    Dr. Mandel [continuing]. And what your constituents are 
complaining about is not going to be dealt with by the 
codification. In fact, the codification may make it worse by 
putting on another layer of regulation. I hate to say this, but 
it has that possibility. We have to have something, a back-
channel that exists outside of the codification process that is 
a way of collecting the complaints that are unanticipated and 
figuring out which ones need to be dealt with first.
    I am an economist. I hate coming out against cost-benefit 
analysis. Somebody is going to take me outside and shoot me 
after I come out of here. [Laughter.]
    OK. I had to sign a paper saying I believe in cost-benefit 
analysis. [Laughter.]
    And, in theory, I can do cost-benefit analysis as well as 
the next person can. But, the fact is, when you think about 
what your constituents are complaining about, they are not 
complaining that the cost-benefit analysis was not good enough. 
They are complaining about the layering of regulations, which 
codification is not going to deal with. And, there are a lot of 
different ways of dealing with the regulatory accumulation 
process, but you should not tell yourself that codification is 
going to deal with that.
    Senator Portman. I will make two quick comments. One, Dr. 
Mandel, this is not just about codifying existing practice, but 
it is improving it, as Dr. Katzen talked about----
    Dr. Mandel. Improving it----
    Senator Portman [continuing]. Because there does need to be 
less bureaucracy and more inputs, including the impact on jobs, 
by the way, which is in our legislation. So, it is not just 
cost-benefit, but what is the actual impact on jobs.
    Second, I would tend to disagree with you that some of what 
we do here is about that, what is the benefit of this 
legislation? I know what the cost is, because Dr. Holtz-Eakin 
talked about the thousand jobs being lost in Ohio. We are 
losing 15 power plants this year. And then the question is, how 
do you come up with a better analysis of what the actual 
benefits are? So, there is an analysis there that needs to be 
consistent, standard, high quality, and, let us face it, 
agencies take it more seriously when it is a law than when it 
is an Executive Order.
    Ms. Katzen. And, first of all, thank you for letting me 
come talk to your class.
    Ms. Katzen. It was a pleasure and they loved you.
    As you know, I agree with you on a lot of the general 
concerns that exist in this area, and we share, I think, some 
common beliefs. In particular, I think the work on the 
permitting process is very important and on the independent 
regulatory commissions. These are modest improvements at the 
margins, but I think could go a long way.
    Why I resist codification and something like the Regulatory 
Reform Accountability Act, or what its name is now, is because 
they are extraordinarily broad--comprehensive by their terms--
applying to all agencies in all situations. And, they will cut 
across from USDA and EPA to DHS and DOD, and those agencies are 
very different. And, just as there are individual problems, 
which I do not deny need to be rectified and should be worked 
on, I do not think the best approach is a one-size-fits-all 
large rewrite of the Administrative Procedure Act.
    You identified some of the pieces in there, but you also 
said ``more thorough processes,'' and this is inside-the-
Beltway talk or inside an administrative law classroom--like a 
556-557 administrative hearing in the middle of a rulemaking 
hearing. That is an adjudicatory hearing with discovery, 
witnesses, on and on and on, and that has been put in the 
middle of the rulemaking process.
    Senator Ernst would like to see the RFS rules come out. A 
lot of people want to see those rules come out. Those rules 
would never see the light of day if they had to be subjected to 
all of the more thorough processes that are included in that 
particular bill.
    Now, are there pieces that might make sense and that could 
be applied in some instances? That is what you and I have 
worked on in the past and I would want to continue working on, 
because I, too, want to see improvements in this area.
    Senator Portman. Well, thank you. I am over time. I 
apologize. I guess I would summarize by saying the legislation 
is intended to ensure that, given the impact of these 
regulations, that we measure twice and cut once. I look forward 
to continue to work with you and others on the panel. Thank 
you.
    Chairman Johnson. Senator Heitkamp.

             OPENING STATEMENT OF SENATOR HEITKAMP

    Senator Heitkamp. Thank you, Mr. Chairman.
    Just a couple quick stories, and it will kind of give you a 
context. I, once upon a time, ran a regulatory agency. It was a 
State regulatory agency. And I, during a campaign, heard all 
about the regulations on charitable gambling. I thought, how 
bad could they be? And, I showed up and this small industry in 
North Dakota dealing mainly with minimum wage workers had a 
500-page--or, 300-page book of regulations. And, I brought the 
young man down who was responsible and I said, who do you think 
reads these? He kind of shrugged his shoulders and I opened it 
up and I said, why do you have this one? He said, ``Because 
some person up in Cando, North Dakota, did this and we thought 
we needed a regulation.''
    Every time we did it, my realization was, those regulations 
were written to write a perfect world. We are never going to 
have a perfect world through regulation. So, what we are trying 
to do is get down to the essential, and that is what I told 
him. I said, take these back. Give me what is essential for our 
doing our job to maintain the integrity of charitable gaming. 
He came back and it was down to about a third of what it was.
    And, it is that kind of analysis that we need to undergo, 
and we have been talking a lot about new regulation. There are 
two issues with new regulation. No. 1, we do not do it quickly 
enough, going to your point, which is let us take, for 
instance, the 1232 tank car issue we have now. We probably are 
going to see a regulation retrofitting 1232s when the 
Department of Transportation (DOT) should have been engaging 
earlier on to avoid that misstep. So, now, because we did not 
have regulation, people have made investments that are going to 
need to be retrofitted, OK. So, not getting regulation done on 
time can be just as injurious to the economy as getting 
regulation done in a thoughtful, stretched out process.
    So, we have regulation that does not happen on time, and we 
have regulation that does not exist in the existing world, that 
no one could--you heard the examples that my colleague from 
Oklahoma gave you, and no one can argue with a lot of what he 
said.
    This is not a partisan issue. The last time we reinvented 
government, you might recall, was when Al Gore took on this 
challenge as Vice President for President Clinton and came out 
and actually had a reasoned discussion that did two things. No. 
1, probably not well enough, taking a look at how do we deal 
with new regulation, and I think the first step, never mind the 
agency, the first step ought to be telling Congress, when you 
pass this law, here are the list of regulations you are telling 
us to adopt within this time period. So, we need a little 
training in the U.S. Congress about what our expectations are, 
right, whether it is a farm bill that Senator Ernst talked 
about, whether it is positive train control that FCC has to get 
approval from every Tribe in America--that was the problem. We 
are beyond that now with positive train control.
    So, I guess, my point is we need to have a comprehensive 
look at what the problems are, and the problems in many cases 
are right here in the U.S. Senate or in the Congress when we 
set out expectations, and I think that is what you are getting 
to, Ms. Katzen, and I really appreciate that. But, it does not 
mean that we should not also be doing a huge project on look-
backs.
    One of the frustrations that the American public has, 
rightful, and, I think, meaningful frustration, is they do not 
know what is coming next. They do not know what is out there 
that is going to get them. They are going about their business 
without any real knowledge of what is going to get them.
    And, so, how do we do a better job, No. 1, identifying what 
the regulatory burdens are that we are putting on the agencies 
to adopt regulation when we adopt legislation?
    No. 2, what do we do to have a meaningful discussion to 
prevent the perfect world mentality of people who write 
regulation?
    And, the third thing is, what do we do to have a meaningful 
look-back process that is going to respond to legitimate 
concerns for which there is no venue at this point? I totally 
agree with you, Doctor. Where is the venue for people to 
complain broadly about what this is, other than our offices, 
and we would like to see something maybe other than our 
offices, because we would be inundated. We do not have enough 
staff to deal with all the concerns that will come.
    And, so, this is one of many discussions that we are going 
to have, but we have to get this right. We have to make sure 
that whatever we do actually adds value to the process, 
actually changes the process and does not prolong or have 
unintended consequences.
    So, not a partisan issue, not something that can be done 
quickly without really thinking about what is the problem we 
are seeking to solve, because there is a range of problems we 
are seeking to solve, and then how can we come to a consensus 
on how we can improve within those three categories. I do not 
have a lot of time left, because I yakked on and on, which is a 
familiar place sometimes for those of us in the U.S. Congress, 
but I would like just to have feedback on how I have laid this 
issue out and whether you could debate that or offer some 
additional suggestions.
    Mr. Holtz-Eakin. Well, I think you have articulated quite 
clearly. The cumulative impact and the fact that there is no 
venue to----
    Senator Heitkamp. I do not mean to interrupt, but I also 
want to add another dynamic to this. Everybody talks about 
Federal regulation, but it is on top of local standards, it is 
on top of State standards, and that is another complication of 
dealing with this issue.
    Mr. Holtz-Eakin. Yes. So, I think the notion of having a 
venue to voice concerns is an important one and would look 
forward to working with the Committee on that.
    There is another alternative that has been proposed about 
the cumulative burden, which is essentially a regulatory budget 
that simply says, this is how much burden we are going to place 
on the American public, and if we hit that cap, it will force 
something to go away if we put something else in. Now, the 
United Kingdom has taken a very extreme version of this with 
two out for every one in on business regulation, but that is 
something that would be good food for thought in your 
deliberations on how to deal with the burden issue and force 
people to make tradeoffs, and that is really what we want them 
to do.
    Dr. Ellig. Yes. I would just mention your example of the 
charitable gambling regulations as a great example of 
regulations being made in response to anecdotes about bad 
behavior rather than making regulations in response to actual 
evidence that there is a significant, widespread problem, with 
an understanding of what caused it and then a regulation that 
addresses that cause. So, yes, sounds like a great example of 
failure to ask the most fundamental question that regulators 
ought to ask, which also happens to be the question that 
Federal agencies tend to spend the least time on when they are 
doing regulatory impact analysis. That is a problem.
    Dr. Mandel. Let me talk briefly about the venue for 
complaints. We have the technological capabilities now for 
taking in a lot of complaints and sorting them out and figuring 
out what the patterns are. It is great that your office is 
here, but because there is no central point, we do not actually 
know what regulations should we fix or improve first. I cannot 
answer that question because we do not actually have 
comprehensive information across all the regulations about 
what, in fact, people are complaining about. And what happens, 
is your offices are some of the best places to get some of the 
interesting changes that could be made without harming the 
underlying goals.
    And, so, one of the things that this Committee or the 
Subcommittee should consider is how to structure a central 
location for complaints so that it does not have to be just 
restricted to Federal, but it can be Federal, State, and local, 
as well, so that we have a comprehensive view across agencies. 
I am sorry Senator Portman left, because what I meant to say 
about cost-benefit analysis was really cost-benefit analysis 
right now is applied within an agency. It is not applied across 
agencies. It is not applied across the regulatory accumulation. 
So, it is significant missing a lot of the key factors that 
your constituents are complaining about.
    And, frankly, the place where I start on this is, having 
started a small business at one point and realized that, oh, my 
God, it is impossible for me to comply with everything I am 
being asked to do. We need some way that is constructive and 
technological at this point to handle the volume of complaints 
and collate them so we can see patterns.
    Ms. Katzen. I think you raised very important questions. 
And, I am sorry for my voice, but I woke up with a cold this 
morning and it is cracking all over the place. But, I think you 
presented some of the challenges that are real and that need to 
be addressed.
    I actually was in the administration when Vice President 
Gore launched the other version of NPR and I went through that 
experience where there was a request for people's input to try 
to answer these questions.
    But, the hardest question is when and how to regulate. I 
used in my testimony that derivatives were creative and 
exciting until all of a sudden we had a financial crisis. 
Drones--who knew drones--no one thought drones were a problem 
until they became one by falling on people's property, or by 
interfering with commercial airlines, and----
    Senator Heitkamp. We call them remotely piloted aircraft in 
North Dakota. [Laughter.]
    Ms. Katzen. Oh, thank you. I will try to follow that. But, 
I think these are very important questions that Senator 
Lankford's Subcommittee are going to be dealing with, with your 
help, and others, and I just encourage you to keep trying, 
because they are important and they are very difficult.
    Chairman Johnson. Senator Ayotte.

              OPENING STATEMENT OF SENATOR AYOTTE

    Senator Ayotte. I want to thank the Chairman. I want to 
thank all of you for being here. I think this is a very 
important hearing.
    Here is what I am interested in. I always feel like it is 
Groundhog Day, because the bottom line is, I go out--my husband 
is a small business owner, and so when you said, Dr. Mandel, 
about small businesses, I live it. And then I go in a State 
where a lot of our businesses are small businesses, and there 
is not a business I visit, small or large, that does not have 
some regulatory story to tell me where the Federal Government 
is doing things that make it harder for them to put people to 
work or to grow in a way that just does not make sense.
    And, so, why I say it is Groundhog Day is where I think all 
of you can very much help this Committee is if you were in our 
position, what are the top two things you would do to change 
the dynamic that we are in, because the dynamic that we are in, 
I think, really is harming our economy, and that is the bottom 
line. And, it is harming the people who are interested in 
starting the next business, because it becomes discouraging to 
want to do that. And, so, I would love to hear from the four of 
you, what are the two things you would do if you were in our 
position that we could do that would make a difference?
    And, let me just add to that, something I think we should 
do is look in the mirror on ourselves a little bit, too, 
because we pass this legislation. In so many instances, we are 
deferring major decisions to regulatory agencies in the 
regulatory context that, frankly, should be made by us, the 
Congress. So, as I look at ourselves in the mirror here, we 
should be giving less authority to regulatory agencies, 
especially on critical issues where we should be weighing in to 
ensure that our policy decisions are clear on what we are 
intending. And, I think a lot of what I hear, too, is things 
that are done by agencies that certainly I would be shocked if 
they were intended by the Congress when things were passed.
    So, I am just going to turn it over to you. You are here. 
You have become a U.S. Senator, and I would like to know--we 
want to make it better collectively, as a group. Instead of 
having Groundhog Day and listening, what can we do to make a 
difference, to make this better?
    Mr. Holtz-Eakin. So, I just want to say, I started a 
business 5 years ago, the American Action Forum. We are up to 
30 full-time employees. I am very happy about that.
    Senator Ayotte. Congratulations.
    Mr. Holtz-Eakin. I am tired of paying lawyers to deal with 
all this stuff. It is a tough fundraising ask when you say, 
what is this for?
    Senator Ayotte. I am a recovering lawyer, so I understand. 
[Laughter.]
    Mr. Holtz-Eakin. So, the No. 1 thing that I would ask you 
to do would be to cap the total burden. I am a fan of 
regulatory budgets. They are highly imperfect, but it cannot 
just keep going up.
    Senator Ayotte. And, who does that?
    Mr. Holtz-Eakin. You have to have a cap.
    Senator Ayotte. Who does the regulatory budget in----
    Mr. Holtz-Eakin. It does not exist right now, so it would 
have to be created----
    Senator Ayotte. But, who would do it? Who would you 
recommend does it?
    Mr. Holtz-Eakin. You should pass every year, as you should 
pass a financial budget----
    Senator Ayotte. So, the Budget Committee would do two forms 
of budget. We would do a regulatory budget----
    Mr. Holtz-Eakin. The Congress should pass budgets.
    Senator Ayotte. OK.
    Mr. Holtz-Eakin. And, this is another cost of running the 
government and you should control that cost, No. 1.
    Senator Ayotte. I think it is a great idea, because it 
would show more honesty to the American people that we are 
looking at the big picture on this.
    Mr. Holtz-Eakin. The second is, I would like more 
uniformity. Independent agencies, cabinet agencies should be 
treated the same. That is a lot of the spirit of the discussion 
I had with Senator Portman. We have one tax system to fund 
spending programs. Every agency runs its own tax system by 
running its own regulatory system and that does not make sense 
to me. We should have some more uniformity. Standardize things.
    And, the last is the sentiment of Senator Heitkamp, do not 
let the perfect rule this. I mean, they just put out an ozone 
rule where 100 National Parks are not in compliance. The Cape 
Cod National Seashore is not in compliance. Sequoia National 
Park is not in compliance. Death Valley National Park is not in 
compliance. How are they going to come into compliance? The 
rule says, unknown technologies. Good luck.
    Senator Ayotte. Yes. That really shows the absurdity of it.
    So, Dr. Ellig, what would your top two be? That was great. 
Thank you, Doctor.
    Mr. Ellig. If I had to boil it down to the top two, I would 
say, establish a retrospective review process that puts 
responsibility for review outside of the agencies that issued 
the regulations, and have a uniform requirement for regulatory 
impact analysis for all agencies for regulations above a 
certain size.
    Senator Ayotte. Mm-hmm.
    Dr. Mandel. Two simple ones. One is, as I have been saying, 
establish a venue for collecting complaints. I do not mean a 
little office but something that has enough technological power 
to collate patterns so we can understand where the big problems 
are because right now, all we have is anecdotes. We have a lot 
of anecdotes, but all we have is anecdotes.
    And, second, to come along with that, you talk about a 
retrospective review agency. I would suggest something that is 
actually able to make recommendations about how to improve 
regulations. We talk about regulatory reform, and every time I 
heard the word ``reform,'' that has the Groundhog Day quality 
to it. I think we should start thinking about a continuous 
process of regulatory improvement, not of reform. I would like 
to move back to the language of business, as Chairman Johnson 
says, and think about continuous improvement.
    Ms. Katzen. I guess if I am to provide two, I would say to 
provide more resources to OIRA, and, on a directed basis, to 
the agencies to be able to do some of the things that we want 
them to do.
    And, the second is for all of us to stop playing 
``gotcha,'' stop finding easy points to score, stop the 30-
second sound bites on a very complicated but very critical 
component of our country's government.
    Senator Ayotte. Thank you all for being there. I think 
these suggestions that we heard are really helpful as this 
Committee moves forward to try to put in some legislation with 
teeth to make a difference for businesses across the country 
and to be more transparent in this regulatory process. So, I 
thank the Chairman and Ranking Member for having this hearing 
today.
    Chairman Johnson. Thank you, Senator Ayotte.
    Dr. Mandel, I do like the phrase ``continuous 
improvement.'' You do get that inbred in you in the private 
sector, certainly in the manufacturing setting. It is about 
continuous improvement.
    One thing I would like to point out, though, too, is when 
you come here from the private sector, one thing you notice 
about government, the Federal Government particularly, is 
everything here is additive. I mean, I get the point about 
having, whether it is the GAO, the Inspectors General, OIRA, or 
some of these agencies or offices within departments and 
agencies that are really tasked with auditing and trying to 
make government more efficient, that they need to be resourced. 
But, my problem is that there is just no process--and, again, 
that is another word that is music to my words--there is no 
process for subtraction.
    Mr. Holtz-Eakin, you mentioned the one in--I thought it was 
the one in, one out rule. I would love a one in, ten out rule, 
but I would settle for a one in, two out rule. There has to be 
a process of subtraction. There has to be a process of 
continuous improvement. And, I agree, if it is within the 
agencies, again, we have been trying to do this for decades. It 
has not worked.
    One of the first proposals I made--and, trust me, has not 
gotten traction--was a bicameral Sunset Committee, whose only 
task was, on a regular basis, rotating basis, go through a 
group of agencies over a number of years, and, really, the only 
task was subtraction, taking a look at the rules and 
regulations that were outdated or that were harmful and either 
update them, streamline them, modernize them, or eliminate 
them, and I think that is the kind of process we have to start 
looking at.
    It is, quite honestly, disappointing. I know our leader, 
Leader McConnell, was with President Obama in the White House 
and apparently President Obama said, do not even consider 
regulatory reform. Not interested in it. I hope that is not his 
real attitude.
    Certainly, the bipartisanship of this Committee, I have 
heard it. Senator Booker walked out and tapped me on the 
shoulder and he said, ``Boy, we have some real opportunities 
for some bipartisan agreements.'' Now, maybe not overall 
regulatory reform, like a REINS Act or Senator Portman's 
permitting act, but at least a rifle shot approach where we can 
take a look at the individual regulations and, like, again, on 
a bipartisan basis, hopefully with unanimous consent, if we do 
our job--and that was one of the aspirational goals that I set 
out for this Committee in our organizational business meeting, 
was in order to pass something in the Senate, we are going to 
need at least six Democrats. We have seven on this Committee. 
If we can get all seven Democrats and all nine Republicans in 
agreement, hopefully, we can get some of these marginal 
improvements, the continuous improvement, I will take any step 
we can take, and we have really got to direct that.
    But, again, it is about getting the information. I know 
Senator Carper was definitely taken with your, we want 
knowledge, not ignorance. I did pull up one of my favorite 
quotes from Thomas Jefferson. He said, ``If a nation expects to 
be ignorant and free, in the State of civilization, it expects 
what never was and never will be.''
    So, this is about information. We are the perfect conduit, 
trust me. Every day, every Member of Congress hears from 
constituents who come into our office with their tale of woe of 
a regulation that is doing great harm to their ability to 
improve, to grow, to create jobs. And, yes, there are 
regulations that do great jobs in terms of we have dramatically 
increased environmental protections, dramatically increased--or 
decreased the level of pollution. Those are good things. We all 
support that.
    But, there is a point of diminishing returns. There really 
is. And, I think in many cases, like Senator Heitkamp was 
talking about, too, is in our quest for a completely risk-free 
society, which also will never exist--never was, never will 
be--we have reached that point of diminishing returns, and I 
think the return on investment in terms of regulatory cost is 
dramatically diminishing, and, I would say, it has certainly 
overtaken the benefit.
    Mr. Holtz-Eakin, having been former CBO Director, you are 
talking about a regulatory budget. I mean, I love the concept. 
Again, a lot of people have criticized the $1.82 trillion 
regulatory burden. Again, these are projections. How could you 
come to agreement? How could you calculate that?
    Mr. Holtz-Eakin. So, at present, agencies self-report the 
compliance costs, the burdens they will impose. Those are not 
all in economic measures of cost and we should not pretend they 
are, but they are something that the agencies do and you could 
take those at face value, knowing that there is some multiple 
of them that is the actual economic cost, but just cap those. 
Provide some uniformity to the process of delivering those.
    I think Ms. Katzen is right about OIRA. If you are going to 
put all the independent agencies in there and have a more 
systematic process of delivering the information for a budget, 
it will have to be better staffed and that is a fact people are 
going to have to understand.
    But, I do not want to hold out the congressional budget 
process as the model, since it has all sorts of flaws. But, the 
idea that you systematically collect the information and 
measure something will give you the capacity to manage it is 
the appeal there. And, it is the cumulative. You can add it all 
up. That is the other appeal.
    Chairman Johnson. Dr. Mandel, I certainly agree with you. I 
think a number of people made this comment, that the review 
process has to be outside the agencies. Does it also have to be 
outside government? I mean, you are talking about a Regulatory 
Improvement Commission. Would that commission or committee, 
would that be outside of government, just set up by government 
and pretty much independent until it makes its recommendations?
    Dr. Mandel. That is basically right. It would be modeled 
after the Base Closing Commissions, where you would bring in 
distinguished people from the outside, appointed by the 
President and leaders of the Congress, and they would be able 
to make their decisions, their proposals, independent of 
anything else. Presumably, though, since it has to go through 
Congress, they would be sensitive to the politics of the 
situation and what can be passed and what cannot.
    Now, I have to make one point here, which is the Regulatory 
Improvement Commission can go on top of any of these other 
proposals. It is not, in fact, a substitute. It could go on top 
of the regulatory budget. It could go on top of Senator 
Portman's proposal. It is about setting up a back-channel and a 
place for complaints that everybody can use for any of these 
proposals.
    Chairman Johnson. Do you not think you would need 
Improvement Commissions? Would we not literally need dozens of 
these things, that they are actually focused and they have 
experts in particular areas of the private sector?
    Dr. Mandel. I am trying to think of things that can 
actually get passed under the current situation, So, the nice 
thing about the Base Closing Commissions is they were a limited 
term. You passed them. They did the job. They disappear. And 
then if there is an idea that it was good, you go and do it 
again.
    In today's situation, nobody really wants to layer on 
another level of permanent bureaucracy. It seems self-
defeating. It seems ironic and paradoxical. So, let us go ahead 
and we will set this up, see if it works, see if we are happy 
with what it does--it is a small bite to build trust--and then 
go on from there. Like I said, it does not take the place of 
any of these other big picture.
    Chairman Johnson. No, I mean, my point being is what we 
would do is I would pick the low-hanging fruit. Let us find an 
area that really needs regulatory reform, something relatively 
simple, and let us get some experts in that particular area, 
set up an ad hoc commission, and have it operate and report 
back to--it is really what I was--the concept was with the 
bicameral Sunset Committee, where you do this on a revolving 
basis over a number of years----
    Dr. Mandel. Yes.
    Chairman Johnson [continuing]. And I guess what I would 
like from the panel is, think about that. What would be the 
best example? What would be the one area where we know we have 
expertise that is just crying for this type of commission to 
improve the regulatory environment outside of government, that 
can come in, report in, make recommendations.
    Dr. Mandel. I think that is an excellent idea, Senator. 
This can be structured that way and you can set up a couple, 
parallel to each other, but it is controllable.
    Chairman Johnson. Think about that. Senator Carper.
    Senator Carper. I am going to ask all of you--I have one 
specific question, and then I am going to ask all of you the 
last question. The last question, so you can be thinking about 
it, is I like to, when we have a panel like this with so many 
smart people, with some different views but well informed 
views, one of the things I like to do is ask for each of you to 
give me something that you think you all agree on, because one 
of the things we are looking for here is consensus. Just be 
thinking about that. What do you think could be one point that 
you all agree on? That would be helpful for us as closing words 
of advice.
    But, the question I want to go back to, I have been in and 
out of the room. I apologize for that. We have another hearing 
going on on transportation policy, so I apologize. But, I want 
to come back to retrospective review, if I could. When agencies 
are drafting regulations, there are a lot of steps to that 
process. They need to make sure that they know the law and the 
requirements that are placed on them, and they get input from 
stakeholders, they analyze the data, they draft the 
regulations, they get more input from stakeholders, and then 
they try to finalize the rule and promulgate it. But, that is 
not really the end of the process. When agencies learn more and 
when regulations have been around for a while, it is important 
to take a look and see, well, how well is it working?
    A number of our witnesses have discussed the lack of 
progress various Administrations have had in reviewing existing 
regulations. However, it is my understanding that this 
Administration, including the President himself, is actually 
committed to making progress in this area. And, I have heard 
him talk about it in State of the Union Address and I have 
talked with people like Cass Sunstein and others that seem to 
think that there is a real commitment.
    I would ask, Ms. Katzen, in your testimony, you said that 
you believe this Administration's efforts at retrospective 
review seem to be much more aggressive than some previous 
efforts, and that has been my impression, too. Could you please 
discuss what you think this Administration is doing right in 
this area, and if you think the stronger effort will be more 
successful, and, finally, what more would you suggest that they 
do to ensure success as they continue this effort? Please, and 
thank you.
    Ms. Katzen. Thank you, Senator Carper. I think any such 
effort requires leadership, which the President has shown. He 
issued not one, but actually three Executive Orders, and he 
convened a cabinet meeting where he spoke to the members of the 
cabinet, saying this is real and this is important to me. This 
is a serious effort.
    OIRA provided guidance and several data calls and is now 
organizing outreach to a lot of the stakeholders so that they 
can hear some of the stories that we heard this morning that 
will help inform them of where they should be looking for 
potential improvement.
    I think there is a lot of know how out there. The 
Administrative Conference of the United States (ACUS), just 
issued best practices recommendations, which are quite good. 
The one thing that is missing, and this is a theme I have 
harped on, unfortunately, several times today, is resources, in 
that the agencies are caught betwixt and between. There are 
people pushing them forward and people telling them to look 
backwards. Do they have sufficient resources to do that, and 
how do they make those choices.
    Will it provide success? I was part of the Clinton look-
back experience and I had high hopes and we did not produce a 
whole lot, I will confess. I think it is a very difficult thing 
because there is not a whole lot of low-hanging fruit out there 
in the Federal regulatory system, in large part because some of 
the onerous or burdensome or costly regulations, as they are 
called, require capital investments up front and those are now 
sunk costs. You do not get them back. So I say in my written 
testimony, if you take seat belts out of cars or scrubbers out 
of smoke stacks, you are just going to have to incur costs to 
change the assembly line, or reconstruct the building.
    Where you get, I think, the biggest bang for the buck is in 
continuing operating and maintenance expenses and reporting, 
which can be done electronically. The references earlier to big 
data and being able to coordinate--two agencies should not be 
asking for the same information that we heard Senator Lankford 
talk about. And, in fact, DOT just issued a rule that 
eliminated the requirement to report that there is nothing to 
report for truck motor carriers who otherwise were having to do 
this kind of reporting.
    Those need to be flagged. They need to be immediately 
rectified. And, there is a will here. So, I am sanguine that we 
will get something. I am just not sure how much.
    Senator Carper. Thank you. Thanks very much.
    I ask, Doug, if you would just lead us off, that final 
question. Pick one area where you think you all agree that we 
should take real note of. What would that be?
    Mr. Holtz-Eakin. I think that everyone at this table would 
acknowledge that OIRA has been an improvement in the regulatory 
process, and it does send back regulations to agencies and it 
does engage in an attempt to improve the quality of regulation. 
So, going forward, look at the areas of success and imagine 
bringing OIRA to scale to encompass the entire regulatory 
burden and that would be a step in the right direction.
    Senator Carper. OK. Thanks. Dr. Ellig.
    Dr. Ellig. I think we agree on some problems, particularly 
that there are problems with the quality and the completeness 
of the analysis that agencies conduct that is supposed to 
inform their decisions about regulations. We may not agree on 
all the solutions.
    I think maybe another thing that we all agree with, 
although I am not sure everybody has spoken to it, is the idea 
that, yes, independent agencies ought to be gathering the same 
kind of information and doing the same kind of analysis that 
Executive Branch agencies are required to do.
    Senator Carper. OK, thanks.
    Dr. Mandel.
    Dr. Mandel. I think that we all agree that the regulations 
can be improved, and that continuous improvement would actually 
benefit all of us. We have to take a lot of regulations and 
boiling them down to a smaller number as opposed to just 
plucking at them one by one.
    Senator Carper. OK, thanks. Ms. Katzen.
    Ms. Katzen. And, finally, I think all of us would subscribe 
to the notion that economic analysis is good. I think we will 
all be in favor of knowledge, not ignorance. And, I am glad to 
hear my co-panelists all support OIRA, because I think OIRA is 
good.
    Senator Carper. All right.
    Ms. Katzen. Not surprising.
    Senator Carper. Good. Well, my closing thought would be 
here--this is one of my new aphorisms. I wrote it down. It is, 
I am for knowledge and against ignorance. So, that is another 
one of my good take-aways. I thank you all for that. I told the 
Chairman, I said, I will use that often in the days ahead. I 
will never acknowledge where it came from. [Laughter.]
    No, I will. Thanks so much. This was great.
    Chairman Johnson. He will use it again. Senator Lankford.
    Senator Lankford. Yes, just a couple of quick questions. 
Dr. Mandel, just a process thing. As you talk about this 
gathering organization, trying to filter it, the first 
regulation that came to mind for me was actually an obscure 
regulation dealing with 316(b) water rules. That was for, 
basically, power plants that have a lake around them. They have 
to take the water in. It is not the water that comes out as 
steam, it is just cooling in their facility. It had a pretty 
significant cost increase.
    They asked the question--because there were fish being 
impinged, that means trapped against the screen as they are 
coming in. In Oklahoma, all these lakes were manmade by the 
power plants. They were all stocked with fish by the 
powerplants. Most of the fish that were being impinged were 
minnows, which, by the way, 100 percent of minnows that you put 
a hook through their eye and throw it in the water when your 
fish, die. So, this is a fish that is replaceable in that 
sense. They did millions of dollars of work to try to do that.
    Now, that is a very small group of folks that are 
complaining about it. It is a very large, as Ms. Katzen said, 
capital cost up front. You are not going to undo that, because 
once they are required to do millions of dollars of work, 2 
years later when they say, just kidding, you do not have to do 
that. Actually, what you can do is if 5,000 minnows die on the 
screen that year, you can just put 5,000 minnows back in the 
lake and that will work fine, which would cost about $50 to do. 
But, that was not an option that was given to them. It was 
millions of dollars worth of rescreening and concrete work and 
everything else in their lake to accomplish that.
    How would that instance rise to the level of response when 
you are gathering things from all over the place? You are not 
talking about frequency on that one. That is a small group of 
folks, but it is a big issue to them.
    Dr. Mandel. So, one of the nice things that we could not do 
before is actually identify patterns that are very important to 
a small number of people, so that if you have big data 
techniques, you have an ability to sift through that and pick 
out things like that. I actually think that a lot of what we 
are going to find is that, to the extent that there is low-
hanging fruit, they are going to be of that nature, small 
things that, without an organization collecting this in 
particular, would never rise to the level of doing anything 
about it.
    So, what I would say is that an organization to collect 
complaints would be intensely focused exactly on finding 
situations like this, small situations where you can fix a 
regulation and genuinely deal with a problem.
    Senator Lankford. But, again, that is supposed to be when 
they are promulgating the rule. That is the notice and comment. 
People are coming at them and saying, this is a bad idea. You 
are not giving us the least intrusive option, basically. We are 
getting a more expensive option when there is a cheaper option. 
When that is ignored, the rule comes out. They have limited 
time. Now, you are trying to argue about it. Going back to Ms. 
Katzen's statement, well, they have a huge capital cost. You 
are not going to----
    Dr. Mandel. I think there are things that need to be caught 
at the beginning, but I would actually put that in the class of 
if you flag that afterwards, it might improve the quality of 
future rules. I think we do not actually have a feedback 
learning loop where we learn from our mistakes in the past to 
talk about what is going to happen in the future. Your 
constituents on this would actually be happy knowing that 
somebody was listening so the next rule that came along that 
potentially was like this----
    Senator Lankford. Is not as bad.
    Dr. Mandel [continuing]. Is not as bad.
    Senator Lankford. Right, and we have notice of common 
issues and everything else.
    Let me make one quick statement on this, as well. We talk a 
lot about problems. I would like to identify who is doing a 
good job on this, especially on the retrospective review. Is 
there any agency in particular that you could identify and say, 
that agency is more diligent than other agencies on doing a 
retrospective review and trying to evaluate where there are 
problems and getting rid of it? So, what I would like to know 
is, obviously, those are agency heads we would want to visit 
with and see if there are areas that we can learn and gain 
from, as well. So, what agency is doing a good job at 
retrospective review and dealing with this?
    Dr. Ellig. A couple of years ago, Dr. Randy Lutter, who 
formerly worked at OIRA, now at Resources for the Future, did a 
study for Mercatus Center looking at agency retrospective 
review to try to figure out who is doing a good job and he did 
not find many. He did find, though, that, for some reason, the 
National Highway Traffic Safety Administration does have a 
longstanding program of retrospective review of regulations 
that they issued, and that was the only one he could find where 
he could name an agency that does this consistently over a long 
period of time.
    Senator Lankford. But, back to Dr. Mandel's comments, that 
is an agency that they have State individuals that are watching 
for it all the time. They are always looking for ways to be 
able to find that, so it is a limited customer base, I guess, 
at that point, that is processing that. But, I am glad to hear 
that.
    Dr. Mandel. The only one that I am aware of, it actually 
comes out of the same study.
    Senator Lankford. OK.
    Dr. Mandel. OK. Most of the studies that have looked at 
this does not pick out ones that have done things especially 
well.
    Senator Lankford. OK. Other ideas or thoughts from you on 
this?
    Ms. Katzen. Well, I think it is an ongoing process now, and 
if I could get back to you----
    Senator Lankford. Sure.
    Ms. Katzen [continuing]. I would be happy to do so. But, I 
am not familiar with the ins and outs currently----
    Senator Lankford. Let me just say, this Committee would 
always be willing to be able to hear about good stories, what 
we are doing well, because that is the kind of story, whether 
you are in a neighborhood that has extensive poverty and all 
kinds of crime and you find a few families that are succeeding, 
to be able to find out, how are they succeeding and how do you 
multiply that in the neighborhood, or whether it is within 
agencies that are doing a good job in this process. We want to 
multiply and elevate the folks that are doing a good job with 
it.
    Ms. Katzen. That is so constructive. Thank you.
    Senator Lankford. OK.
    Dr. Mandel. You mentioned the report that was recently done 
on best practices. Let me actually just read you a short 
excerpt from that report. In 2014, Executive Branch agencies 
issued 24 major rules. Not one regulation included a plan for 
retrospective review of the rule in the future, even though 
that was mandated by the Executive Orders from the President.
    Senator Lankford. OK. We will get back to you. Thank you. 
With that, I yield back, and I appreciate the conversation of 
the panel today.
    Chairman Johnson. Thank you, Senator Lankford. And, there 
is no doubt about it, if you want to achieve continuous 
improvement, analyzing best practices is probably one of the 
best, most efficient ways of doing that.
    We have a couple more minutes, and Ms. Katzen, I know you 
have to catch a flight, but without taking too much time, if I 
were in your chair, I would be sitting here going, OK, there is 
one thing I just wanted to get out and I did not get asked the 
question. I will give each one of you the opportunity, if there 
is something--you do not have to answer, but if there is 
something that you just want to talk about here and get it on 
the record before we close out the hearing.
    Mr. Holtz-Eakin. Just as a matter of the self-reported 
compliance burdens, I respect the Administration's intent with 
the retrospective review and every President issues Executive 
Orders on this front, but if you actually look at the regs 
revisited under retrospective review, the self-reported 
compliance costs went up, not down, as a result of that 
process, and I think that tells you a lot about how hard it is 
to get this right.
    Chairman Johnson. Thank you. Dr. Ellig.
    Dr. Ellig. Yes. Several members earlier in the hearing 
mentioned specifically issues with banks, which triggered 
something that I forgot to mention earlier. The Mercatus 
Center, some of my colleagues did a survey of community banks 
and how they are affected by Dodd-Frank, because, in theory, 
they are not regulated by Dodd-Frank, but in practice, Dodd-
Frank regulates products and services and if they sell those 
products and service, such as mortgages and other loans, in 
effect, they have to comply with Dodd-Frank.
    And, I think that is a really good example of why it is 
important to understand what caused the problem we are trying 
to solve, because if the main point of Dodd-Frank was to try to 
prevent a financial crisis, I think we have to really ask 
carefully, what is the evidence that community banks caused the 
financial crisis.
    And, the more general point is if you have a set of 
regulated entities, or who would be regulated, who are not 
contributing to the problem you are trying to solve, why does 
the regulation need to apply to them to begin with?
    Chairman Johnson. By the way, I am the one that raised the 
community banks, and I will guarantee you, they feel like they 
are being affected dramatically by Dodd-Frank.
    Dr. Ellig. Yes.
    Chairman Johnson. Dr. Mandel.
    Dr. Mandel. I just want to make a point about language. I 
think we should start thinking about regulatory improvement 
rather than regulatory reform----
    Chairman Johnson. OK.
    Dr. Mandel [continuing]. Because regulatory reform puts us 
all to sleep and it does sound like Groundhog Day, and 
regulatory improvement is something that it can actually gather 
more bipartisan support.
    Chairman Johnson. That is a good suggestion. Words matter. 
Ms. Katzen.
    Ms. Katzen. I would just like to thank the Chairman and the 
other Members of the Committee. I thought that what you brought 
to the table today was highly constructive and forward looking, 
and I think that is critically important in this area, that we 
recognize what we have and we build on our successes, and I 
thank you for the approach that you are demonstrating in this 
area.
    Chairman Johnson. Well, I appreciate those kind comments. 
And, by the way, this has been an excellent Committee since I 
have been serving here in the Senate for 4 years, very 
bipartisan, very collegial. And, I am trying to maintain that 
tradition that I have witnessed with Senators Lieberman and 
Collins, and Senators Carper and Coburn, trying to do the same 
thing with Senator Carper now.
    And, these hearings, when you have excellent witnesses that 
provide thoughtful testimony, that provide thoughtful answers 
to, I think, some pretty thoughtful questions, I want it to 
continue. So, in other words, you do not just leave this table 
and go home and forget about it. Keep thinking about it. For 
example, if we want to set up one of these test commissions, 
that would be a good thing. So, keep collaborating. Keep 
thinking about these things. You are all obviously involved in 
this issue. Stay in communication with this Committee.
    So, again, I really do appreciate your thoughtful 
testimony, your answers.
    This hearing record will remain open for 15 days, until 
March 12 at 5 p.m., for the submission of statements and 
questions for the record.
    This hearing is adjourned.
    [Whereupon, at 12:11 p.m., the Committee was adjourned.]

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