[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
AMENDING EXECUTIVE ORDER 12866:
GOOD GOVERNANCE OR REGULATORY
USURPATION? PART I AND PART II
=======================================================================
HEARINGS
BEFORE THE
SUBCOMMITTEE ON INVESTIGATIONS AND
OVERSIGHT
COMMITTEE ON SCIENCE AND TECHNOLOGY
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 13, 2007
and
APRIL 26, 2007
__________
Serial No. 110-4
and
Serial No. 110-21
__________
Printed for the use of the Committee on Science and Technology
Available via the World Wide Web: http://www.house.gov/science
U.S. GOVERNMENT PRINTING OFFICE
33-105 PDF WASHINGTON DC: 2007
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______
COMMITTEE ON SCIENCE AND TECHNOLOGY
HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas F. JAMES SENSENBRENNER JR.,
LYNN C. WOOLSEY, California Wisconsin
MARK UDALL, Colorado LAMAR S. SMITH, Texas
DAVID WU, Oregon DANA ROHRABACHER, California
BRIAN BAIRD, Washington KEN CALVERT, California
BRAD MILLER, North Carolina ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois VERNON J. EHLERS, Michigan
NICK LAMPSON, Texas FRANK D. LUCAS, Oklahoma
GABRIELLE GIFFORDS, Arizona JUDY BIGGERT, Illinois
JERRY MCNERNEY, California W. TODD AKIN, Missouri
PAUL KANJORSKI, Pennsylvania JO BONNER, Alabama
DARLENE HOOLEY, Oregon TOM FEENEY, Florida
STEVEN R. ROTHMAN, New Jersey RANDY NEUGEBAUER, Texas
MICHAEL M. HONDA, California BOB INGLIS, South Carolina
JIM MATHESON, Utah DAVID G. REICHERT, Washington
MIKE ROSS, Arkansas MICHAEL T. MCCAUL, Texas
BEN CHANDLER, Kentucky MARIO DIAZ-BALART, Florida
RUSS CARNAHAN, Missouri PHIL GINGREY, Georgia
CHARLIE MELANCON, Louisiana BRIAN P. BILBRAY, California
BARON P. HILL, Indiana ADRIAN SMITH, Nebraska
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
------
Subcommittee on Investigation and Oversight
HON. BRAD MILLER, North Carolina, Chairman
JERRY F. COSTELLO, Illinois F. JAMES SENSENBRENNER JR.,
EDDIE BERNICE JOHNSON, Texas Wisconsin
DARLENE HOOLEY, Oregon DANA ROHRABACHER, California
STEVEN R. ROTHMAN, New Jersey TOM FEENEY, Florida
BRIAN BAIRD, Washington MICHAEL T. MCCAUL, Texas
BART GORDON, Tennessee
RALPH M. HALL, Texas
DAN PEARSON Subcommittee Staff Director
JAMES PAUL Democratic Professional Staff Member
DOUG PASTERNAK Democratic Professional Staff Member
TOM HAMMOND Republican Professional Staff Member
STACEY STEEP Research Assistant
C O N T E N T S
February 13, 2007
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Brad Miller, Chairman, Subcommittee
on Investigations and Oversight, Committee on Science and
Technology, U.S. House of Representatives...................... 10
Written Statement............................................ 11
Statement by Representative F. James Sensenbrenner, Jr., Ranking
Minority Member, Subcommittee on Investigations and Oversight,
Committee on Science and Technology, U.S. House of
Representatives................................................ 12
Written Statement............................................ 13
Prepared Statement by Representative Jerry F. Costello, Member,
Subcommittee on Investigations and Oversight, Committee on
Science and Technology, U.S. House of Representatives.......... 14
Prepared Statement by Representative Eddie Bernice Johnson,
Member, Subcommittee on Investigations and Oversight, Committee
on Science and Technology, U.S. House of Representatives....... 15
Witnesses:
Ms. Sally Katzen, Adjunct Professor and Public Interest/Public
Service Fellow, University of Michigan Law School
Oral Statement............................................... 16
Written Statement............................................ 17
Biography.................................................... 22
Mr. David C. Vladeck, Director, Institute for Public
Representation; Associate Professor of Law, Georgetown
University Law Center
Oral Statement............................................... 23
Written Statement............................................ 25
Biography.................................................... 33
Mr. William L. Kovacs, Vice President, Environment, Technology,
and Regulatory Affairs, U.S. Chamber of Commerce
Oral Statement............................................... 33
Written Statement............................................ 35
Biography.................................................... 39
Financial Disclosure......................................... 40
Mr. Rick Melberth, Director of Regulatory Policy, OMB Watch
Oral Statement............................................... 41
Written Statement............................................ 42
Biography.................................................... 56
Discussion
Role of OIRA................................................... 56
Transparency Provisions........................................ 57
Outside Comment on E.O. 12866.................................. 58
Cost-Benefit Analyses.......................................... 59
Market Failure Provisions...................................... 60
More on Transparency Provisions................................ 62
More on Market Failure Provisions.............................. 63
Regulation and the Public Interest............................. 64
More on Transparency Provisions................................ 67
Transparency Costs............................................. 69
Appendix 1: Answers to Post-Hearing Questions
Ms. Sally Katzen, Adjunct Professor and Public Interest/Public
Service Fellow, University of Michigan Law School.............. 74
Mr. David C. Vladeck, Director, Institute for Public
Representation; Associate Professor of Law, Georgetown
University Law Center.......................................... 76
Mr. William L. Kovacs, Vice President, Environment, Technology,
and Regulatory Affairs, U.S. Chamber of Commerce............... 80
Mr. Rick Melberth, Director of Regulatory Policy, OMB Watch...... 85
Appendix 2: Additional Material for the Record
Memorandum for Heads of Executive Departments and Agencies, and
Independent Regulatory Agencies, from Rob Portman, Director,
Office of Management and Budget, April 25, 2007................ 90
Analysis of E.O. 12866 with edits made by E.O. 13422............. 108
While on the Home Front, Unpublished OP-ED by Dr. Peter Strauss,
Betts Professor of Law, Columbia Law School.................... 122
Bush Order Limits Agencies' `Guidance,' by Cindy Skrzycki,
Bloomberg News, January 30, 2007............................... 123
Bush order on government regulation stirs debate, by Tabassum
Zakaria, Reuters, January 30, 2007............................. 125
Comments submitted by the Union of Concerned Scientists, February
12, 2007....................................................... 126
Public Citizen position on the January 2007 Executive Order and
Bulletin on Guidance, January 2007............................. 129
C O N T E N T S
April 26, 2007
Page
Witness List..................................................... 134
Hearing Charter.................................................. 135
Opening Statements
Statement by Representative Brad Miller, Chairman, Subcommittee
on Investigations and Oversight, Committee on Science and
Technology, U.S. House of Representatives...................... 142
Written Statement............................................ 1143
Statement by Representative Dana Rohrabacher, Acting Ranking
Minority Member, Subcommittee on Investigations and Oversight,
Committee on Science and Technology, U.S. House of
Representatives................................................ 144
Written Statement............................................ 145
Prepared Statement by Representative Jerry F. Costello, Member,
Subcommittee on Investigations and Oversight, Committee on
Science and Technology, U.S. House of Representatives.......... 146
Panel 1:
Mr. Steven D. Aitken, General Counsel for the Office of
Information and Regulatory Affairs, Office of Management and
Budget
Oral Statement............................................... 147
Written Statement............................................ 148
Biography.................................................... 158
Discussion
Executive Order Consultation Process........................... 159
Market Failure Provisions...................................... 166
Transparency Provisions........................................ 169
Confidentiality Concerns....................................... 171
Regulatory Policy Officers..................................... 172
Division of Power in the Federal Government.................... 173
Panel 2:
Mr. Peter L. Strauss, Betts Professor of Law, Columbia Law School
Oral Statement............................................... 178
Written Statement............................................ 180
Biography.................................................... 185
Dr. Robert W. Hahn, Executive Director, AEI-Brookings Joint
Center for Regulatory Studies
Oral Statement............................................... 185
Written Statement............................................ 186
Biography.................................................... 190
Dr. Gary D. Bass, Executive Director, OMB Watch
Oral Statement............................................... 191
Written Statement............................................ 193
Biography.................................................... 202
Mr. Richard W. Parker, Professor, University of Connecticut Law
School
Oral Statement............................................... 203
Written Statement............................................ 205
Biography.................................................... 210
Discussion
More on Regulatory Policy Officers............................. 210
More on Separation of Powers and Market Failure Provisions..... 211
More on Transparency Provisions................................ 214
Appendix: Additional Material for the Record
Changes to the OMB Regulatory Review Process by Executive Order
13422, CRS Report for Congress, Updated February 21, 2007...... 218
AMENDING EXECUTIVE ORDER 12866: GOOD GOVERNANCE OR REGULATORY
USURPATION? PART I
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TUESDAY, FEBRUARY 13, 2007
House of Representatives,
Subcommittee on Investigations and Oversight,
Committee on Science and Technology,
Washington, DC.
The Subcommittee met, pursuant to call, at 11:35 a.m., in
Room 2141 of the Rayburn House Office Building, Hon. Brad
Miller [Chairman of the Subcommittee] presiding.
hearing charter
SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT
COMMITTEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
Amending Executive Order 12866:
Good Governance or
Regulatory Usurpation? Part I
tuesday, february 13, 2007
12:00 p.m.-1:30 p.m.
2141 rayburn house office building
Purpose
On Tuesday, February 13, 2007 the Subcommittee on Investigations
and Oversight of the Committee on Science and Technology will hold a
hearing to receive testimony regarding the President's recent amendment
to Executive Order 12866. That order provides guidance to agencies for
submitting proposed regulations to the Office of Management and Budget
(OMB) for pre-approval.
The amendment (Executive Order 13422) expands this process by
requiring agencies to submit proposed significant guidance documents
for pre-approval. The Order also requires for the first time that
agencies identify in writing the specific market failure or problem
that warrants the proposed regulation or guidance; that a Presidential
appointee in each agency be designated as regulatory policy officer and
that officer must approve each regulatory undertaking by the agency.
The hearing will explore the consequences of Executive Order 12866,
as it has been used by the Bush Administration, as well as the impact
of this amendment to the order. Among the issues the Subcommittee will
seek information on are:
1. What has been the record of OMB's use of Executive Order
12866 to date, with particular attention to its use under the
Bush Administration?
2. How will the expansion of OMB's role impact the ability of
agencies to follow the laws passed by Congress to protect
public safety and health?
3. What are the practical implications of having a
Presidential appointee at each agency act as a minder on what
rule-making work can be started at an agency and what can leave
the agency to go to OMB?
Witnesses
Sally Katzen: Adjunct Professor and Public Service Fellow at University
of Michigan Law School: Former Director of OIRA during the Clinton
Administration.
David Vladick: Professor of Law, Georgetown University Law Center.
Rick Melberth, Ph.D.: Director, Federal Regulatory Policy, OMB Watch
Bill Kovacs: Vice President for Environment, Technology, and Regulatory
Affairs, U.S. Chamber of Commerce (minority witness).
Key Issues
Regulatory authority is the main tool Congress has used to charge
Executive agencies with responsibilities to protect the environment,
public health, the safety of the workplace, the use of public lands and
a myriad of other good purposes. Congress obviously cannot pass a law,
or amend statute, every time a new threat to air or health arises.
Instead, Congress puts into place general purposes, general authority
and a set of values that the agency should use in carrying out the law.
When the Office of Information and Regulatory Analysis (OIRA)
injects itself into the regulatory process there can be a fine line
between guaranteeing that a proposed regulation is convincingly
demonstrated and efficient in its likely outcome and substituting the
President's values and preferences for the goals and purposes Congress
enacted in statute. This line can be crossed either in the guidance to
agencies from OIRA or by the way OIRA conducts itself.
OIRA has quietly grown into the most powerful regulatory agency in
Washington. The Reagan Administration used OIRA push further and
further into the process of vetting regulations. A string of Executive
Orders in the 1980s, many issued during David Stockman's tenure at OMB,
forced agencies to let OIRA be a full partner--some thought dominant
partner--in moving regulations forward. Several House Chairs fought a
very bitter struggle to push OIRA back out of the business of
interfering with the conduct of agencies as they carried out the law.
That fight met only mixed success.
As discussed below, E.O. 12866 was a Clinton-era effort to retain
Reagan-initiated White House oversight of agency regulatory processes
that had been the product of Reagan initiatives, balanced against the
recognition that agencies should have primacy in the regulatory
process. The thrust of E.O. 12866 was to pare back the array of
regulatory actions that would be swept up into OIRA's review (the
estimate was that the annual number of regulations for review declined
from 2000 to a mere 500 or so). Clinton's OIRA, while still assertive,
was cognizant that it was ultimately the agencies that were charged by
Congress with carrying out public purposes and OIRA's assertions of
authority had to be tempered by that legal reality.
The Bush Administration has moved very aggressively to supplant the
agencies' authority with a centralized command-and-control system
whereby OIRA acts as a very stingy gatekeeper on what proposed
regulations can see the light of day. In tone, OIRA has returned to the
Reagan-era where OIRA uses its privileged position as ``the President's
voice'' in regulatory matters, to push agencies into rethinking
everything they are doing on regulation.
Critics of OIRA's role since 2001 describe a process whereby the
values and judgments of OIRA's small staff (dominated by economists)
trump the judgments of technical experts in the agencies and supplant
the values in statute designed to guide agency regulatory activities.
The cumulative effect of OIRA's behavior since 2001 has been to
intimidate agencies into running away from pursuing their statutory
responsibilities rather than get caught up in the political struggles
associated with moving regulation forward. Supporters of this approach
are happy to see some office moving to slow agency actions and argue
that the net result of OIRA's actions is a more defensible regulation
at the end of the day.
How does all this matter for science and the agencies under the
Science Committee's jurisdiction?
Every year the Federal Government funds billions of dollars of
research at the Environmental Protection Administration, the Department
of Labor, the Department of Transportation, the Department of
Agriculture, the Department of the Interior, the Department of Energy
and the National Oceanic and Atmospheric Administration that contribute
directly or indirectly to regulatory considerations. Even the National
Institutes of Health and the National Science Foundation fund science
that finds its way into regulatory proposals. Experts at agencies--
often federal scientists--charged with regulatory responsibilities
survey the relevant scientific literature to determine where there may
be dangers to the public or the public interest. In determining the
need for a regulation, the agency uses science funded with public
dollars, as well as that from private sources, to make reasoned
assessments of risks and propose responses. This is all to be done
consistent with statutory responsibilities as established by Congress.
OIRA has been using its circulars to force agencies to analyze and
reanalyze the information underlying and supporting proposed
regulations. Now, with the amended Executive Order, OIRA is putting in
place very clear economic criteria for regulation and guidance that may
have nothing to do with the values established in statute. This effort
is coming with no consultation or input from Congress. Further, by
making the regulatory policy officer a more empowered gatekeeper, with
political allegiance to the President, it raises the chances that the
agencies themselves will find it hard during the Bush years to get
regulatory proposals started or completed simply to submit them to OIRA
for review. Congress did not empower agencies to protect public health
and safety simply to then sit on its hands to see all Congress
appropriates for regulatory-relevant science and the legal authority
seated in agencies be trumped through a sweeping Executive Order.
Background
Brief History of OMB: What is now known as the Office of Management and
Budget (``OMB'') was originally created in the Budget and Accounting
Act of 1921.\1\ The Act created the Bureau of Budget (``BOB'') in the
Treasury Department. Congress created the BOB to unify the budget
process and have the executive branch send a single budget to Congress.
Previously, the executive branch transmitted budgets to Congressional
committees independently of one another, and the budget process was
consequently highly fragmented. Created at the same time was the
Congress's General Accounting Office (now the Government Accountability
Office) to give Congress an ability to independently check the
budgetary information from the Executive as well as to examine the way
programs were being funded and managed.
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\1\ 42 Stat. 22, Ch. 18, Sec. 207. OMB currently resides at U.S.C.
Title 31, Chapter 5 (31 U.S.C. Sec. 501).
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In 1939, Congress moved the BOB from the Treasury Department to the
Executive Office of the President.\2\ FDR, largely through executive
order, expanded BOB's functions to include broad management oversight
of federal operations.
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\2\ 53 Stat. 1423, Sec. 1.
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In 1970, BOB went through another major reorganization which saw it
transformed into OMB.\3\ At this time, the federal management oversight
functions of OMB were expanded, and have continued to be expanded until
the present day.
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\3\ 84 Stat. 2085, Sec. 102(a), restated 88 Stat. 11, Sec. 1.
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The next major change to OMB occurred with the 1980 Paperwork
Reduction Act.\4\ This act created the Office of Information and
Regulatory Affairs (``OIRA'') within OMB.\5\ OIRA's original charge was
primarily to reduce the Government paperwork burden on the public and
to develop policies and standards with regard to information
management. One focus of this was to eliminate duplicitous or
unnecessary paperwork and information collections.
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\4\ 44 U.S.C. Chapter 35, P.L. 96-511, restated P.L. 104-13, 109
Stat. 163.
\5\ 44 U.S.C. Sec. 3503.
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Other major laws affecting OMB are the Congressional Budget Act of
1974, and the Budget Enforcement Act of 1990. The Budget Enforcement
Act expired in 2002.
OIRA and Executive Order 12866: The Office of Information and
Regulatory Affairs (``OIRA'') was created with the 1980 Paperwork
Reduction Act.\6\ Under the enabling act, OIRA was charged with
reducing the Government paperwork burden on the public and developing
policies and standards with regard to information management.
Throughout the years, OIRA's functions have been expanded through
legislation and executive action. The major surviving changes include
the Paperwork Reduction Act of 1995\7\ and Executive Order #12866
(1993). In addition, during the current Bush Administration, OIRA has
come to oversee implementation of the Data Access Law\8\ and the Data
Quality Law,\9\ including the peer review practices of agencies. The
effect of these, and other changes to OIRA, has guaranteed that OIRA is
the central player in the promulgation of virtually all federal
regulations.
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\6\ 44 U.S.C. Chapter 35, P.L. 96-511, restated P.L. 104-13, 109
Stat. 163.
\7\ 44 U.S.C. Chapter 35, P.L. 104-13, 109 Stat. 163.
\8\ P.L. 105-277, 112 Stat 2681.
\9\ P.L. 106-554, Sec. 515, 114 Stat. 2763.
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Executive Order 12866 requires the following from all agencies:
1. Assess the economic costs and benefits of all regulatory
proposals;
2. Complete a Regulatory Impact Analysis (RIA) for all major
rules (any rule that will have an impact of $100 million or
more, or that OMB designates as major). The RIA must describe
the costs and benefits of the proposed rule and alternative
approaches, and then justify the chosen approach;
3. Submit all major proposed and final rules to OMB for
review;
4. Wait until OMB reviews and approves the rule before
publishing proposed and final rules;
5. Submit an annual plan to OMB to establish regulatory
priorities and improve coordination of the Administration's
regulatory program (this requirement also applies to
independent agencies);
6. Periodically review existing rules.
Most of these requirements actually originated in earlier
administrations (particularly the Reagan Administration). The
initiatives of the Reagan years had turned OIRA into a kind of
``gatekeeper'' that stood between the agencies and putting regulations
out for comment (or finalizing them). However, the Clinton
Administration intended to set a different tone and, drawing on what
they felt to be the best of the ideas of the Reagan years, drafted a
new Executive Order to organize and guide the work of OIRA.
Sally Katzen, an attorney by training with experience in the Carter
Administration's management system, took the lead in drafting E.O.
12866. That process involved comment and review from all the agencies,
as well as participation by OMB General Counsel, White House Counsel
and Domestic Policy Staff and even the President himself. What Katzen
attempted to do has been described as the ``hot tub theory'' of
managing regulation. Rather than being a gatekeeper, OIRA would work
with agencies to put out the best regulations possible. The economics
of a proposal were important, but not to the exclusion of other values.
Indeed, there was recognition that not everything valued by society
could have a dollar value assigned to it. In addition, some statutes
require agencies to consider economic costs only in choosing among
alternatives for achieving the goal of the regulation, not whether to
issue the regulation or not.
Clinton's approach changed regulatory oversight. First, it set up a
90-day period for OMB review of proposed rules, and created a mechanism
for the timely resolution of disputes between OMB and agency heads.
There would be no ``paralysis by analysis'' if these commitments were
kept. Second, it created new public disclosure requirements which
mandated that all documents exchanged between OMB and the agency during
regulatory review be made available to the public at the conclusion of
the rule-making. Lastly, the Order created a process for meetings
between OMB officials and people outside the executive branch regarding
pending reviews which attempted to shine a more public light on these
types of meetings.
These aspects of E.O. 12866 made the OMB regulatory review process
much more transparent and limited OMB's ability to ``kill'' agency
rule-making by endless OMB review. The E.O. also focused OMB review to
only include major rule-making instead of all rule-making, reducing the
number of regulations reviewed each year from 2,200 under Reagan, to
about 500 under Clinton.
Bush Amendments to E.O. 12866: The Bush Administration has amended this
Executive Order two times. The first amendment in 2002 simply removed
the Vice President from the process, replacing that office with that of
the White House chief of staff. This second occasion for amendment has
come with limited warning, little discussion and with much broader
implications. The attached CRS report goes into detailed discussion of
the major changes, and some of their implications. Below is a summary
of the key observations.
1. Elevating ``Market Failure'':
First, the amendment establishes a new standard that must be met by
any proposed guidance or regulation. Originally, the first principle
guiding submissions to OIRA seeking approval of a proposed regulation
was that ``[e]ach agency shall identify the problem that it intends to
address (including, where applicable, the failures of private markets
or public institutions that warrant new agency action) as well as
assess the significance of that problem.''
Under the amended language, ``Each agency shall identify in writing
the specific market failure (such as externalities, market power, lack
of information) or other specific problem that it intends to address
(including, where applicable, the failures of public institutions) that
warrant new agency action, as well as assess the significance of the
problem, to enable assessment of whether any new regulation is
warranted.''
Critics of OIRA allege that this new standard of ``market failure''
supplants the values that exist in statute for regulatory action. They
also worry that OIRA will use this standard to summarily dispense with
proposals that they deem to be unconvincing in their articulation of a
market failure. However, there is permissive language allowing for
other kinds of analysis. The core question will rest on how OIRA
applies this language in practice.
2. Presidential Appointees as Regulatory Policy Officers
The amendment directs that each agency shall name a regulatory
policy officer who shall be a Presidential appointee. While regulatory
policy officers had been required in the Executive Order as originally
propounded in 1993, the notion that the officer must be a Presidential
appointee takes the expert staff of agencies out of the picture. The
language of the amendment charges this officer with being ``involved at
each stage of the regulatory process to foster the development of
effective, innovative, and least burdensome regulations and to further
the principles set forth in this Executive order.''
This political appointee appears to serve as a kind of gatekeeper's
gatekeeper. The officer will compose an annual plan and ``no rule-
making shall commence nor be included on the Plan without the approval
of the agency's Regulatory Policy Office.'' Previously such officers
were to be involved in the rule-making process and now they have total
discretion over the initiation of work that could lead to a regulation.
(CRS states that these Regulatory officers are largely drawn from
political appointees already so this may not be a notable change;
however, the source on that is OIRA and they do not keep a master list
of these officers so it is hard to know how to evaluate this
assertion.)
3. Aggregate Regulatory Costs and Benefits
The original of 12866 required a ``summary of planned significant
regulatory action including, to the extent possible, alternatives to be
considered and preliminary estimates of anticipated costs and
benefits.'' The amendment expands this requirement to direct that each
agency provide the ``best estimate of the combined aggregate costs and
benefits of all its regulations planned for that calendar year to
assist with the identification of priorities.''
Critics allege that this will elevate cost-benefit analysis in the
regulatory process. Cost-benefit analysis is a very controversial
analytical tool in guiding regulatory behavior. While the call to make
sure that the benefits of a regulation exceed its costs has a simple
appeal, the reality is that many of the benefits regulations are
designed to capture (the survival of a species, to protect the lives
and health of citizens, the quality of the air or water) are impossible
to accurately value. However, the costs of steps to implement a
regulation are usually easy to specify with precision. The result is a
process that tends to be very complete in its enumeration of costs and
incomplete in its ability to set values on the benefits. Retrospective
studies have found that costs used in estimating the costs of a
regulation turn out to be overstated. And of course because you are
using ``dollars'' to estimate costs, it provides the illusion of a
precision that does not--perhaps cannot--exist.
Critics also view this as a potential first step towards a
regulatory ``budget'' that could be used to stop future regulations
based on some ``capping'' of that budget.
4. Review of Significant Guidance Documents
Under the amendment each agency is to provide OIRA with advance
notice of all proposed significant guidance documents. OIRA may then
decide which guidance it deems to be ``significant'' from its
perspective and ask for the proposed guidance and a brief explanation
of need. ``The OIRA administrator shall notify the agency when
additional consultation will be required before issuance of the
significant guidance document.''
There is no time limit on how long OIRA may take in moving on these
guidance proposals.
The impact on agency conduct may be very, very significant and
could potentially sweep up thousands of such proposals each year.
Guidance is issued to communicate to an effected public how an agency
intends to interpret or enforce statutory directions. The business
community relies on guidance to ensure that conduct will comply with
agency intentions for application of law.
Conclusion
While the language of the Amendment to Executive Order 12866 is
alarming to many, the fundamental issue is how does OIRA intend to
implement it? The re-emergence of the ``gatekeeper'' approach to OIRA
under President Bush--an event that has not so far received the kind of
institutional push-back from Congress which that role drew in the
1980s--suggests that the rule as amended will be used very aggressively
to stall agency action. But how OIRA intends to apply this language in
practice is a subject worth some study.
Two other issues loom large from the Committee on Science and
Technology's perspective. First, what will these changes imply for the
science-based regulatory agencies? Will we increasingly find that the
``science'' that matters is no longer that of climate, biological or
medical researchers, but narrow applications of cost-benefit analysis
and market failure theory drawn from economics? Should the science
committee, uniquely positioned to examine and evaluate research,
undertake a more rigorous review of the validity and utility of these
economic approaches to regulation?
Second, what does this new amendment imply for the institutional
prerogatives of the legislative branch? Agencies exist in statute and
are given mandates under the law. Should Congress passively accept an
Executive Order that, just as an example, places Presidential
appointees in a position where they can arbitrarily block career agency
officials from carrying out the purposes of the law Congress charged
them with?
The growth of power at the Office of Information and Regulatory
Affairs has gone largely unexamined in recent years. This amendment
invites Congress as a body, and many, many Committees that are
affected, to undertake a vigorous and thorough review of the changes in
that office since 2001.
Appendix:
Other Regulatory Tools that OMB has used to expand its Powers:
Data Quality: There were two recent acts of legislation that
affected OMB's oversight of data. They are the Data Access Law and the
Data Quality Law. Both of these laws were inserted into omnibus
appropriations bills, and neither was fully debated in Congress.
The entire Data Access Law consists of the following short
passage:
``Office of Management and Budget Salaries and Expenses
. . .Provided further, That the Director of OMB amends
Section------.36 of OMB Circular A-110 to require
federal awarding agencies to ensure that all data
produced under an award will be made available to the
public through the procedures established under the
Freedom of Information Act: Provided further, That if
the agency obtaining the data does so solely at the
request of a private party, the agency may authorize a
reasonable use fee equaling the incremental cost of
obtaining the data. . .'' \10\
---------------------------------------------------------------------------
\10\ P.L. 105-277, 112 Stat. 2681.
The purpose of the law was to increase public access to data
conducted with funding from federal grants. Another purpose of the law
was to overturn Forsham v. Harris,\11\ which stood for the principle
that data generated by a privately controlled organization which
received grant funds from a federal agency were not 'agency records'
accessible under the Freedom of Information Act.
---------------------------------------------------------------------------
\11\ 445 U.S. 169 (1980).
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The Data Quality Act (``DQA''), was inserted into the FY 2001
Consolidated Appropriations Act.\12\ The Data Quality Act instructed
OMB to establish guidelines to federal agencies for ``ensuring and
maximizing the quality, objectivity, utility, and integrity of
information (including statistical information) disseminated by federal
agencies.'' Through its guidelines,\13\ OMB directed agencies to
establish ``administrative mechanisms allowing affected persons to seek
and obtain correction of information maintained and disseminated by the
agency.'' To date, there appears to have been over 100 DQA petitions
filed with numerous federal agencies. OMB does not compile a list of
DQA petitions, so ascertaining the exact number of petitions filed is
cumbersome. OMB Watch (www.ombwatch.org) keeps track of the individual
petitions filed at each agency, and maintains a comprehensive list of
DQA petitions.
---------------------------------------------------------------------------
\12\ P.L. 106-554, 114 Stat. 2763(A).
\13\ 67 FR 8452 (2002).
---------------------------------------------------------------------------
Two major questions concerning the DQA remain unresolved. The first
is whether the DQA applies to agency rule-making. It is clear that the
DQA applies to agency action outside the rule-making process (for
instance, agency dissemination of information through websites).
However, there is no guidance in the actual legislation as to the
applicability of the DQA to rule-making. There appears to be a
consensus position across the federal agencies that the DQA doesn't
apply to rule-making, as the rule-making process already allows for
public comment. Furthermore, the DQA contains no reference to the
Administrative Procedure Act. Nevertheless, industry petitioners have
successfully used the DQA petition process to influence agency rule-
making. One instance involves the chemical atrizine. As a result of a
DQA petition, the EPA included a sentence in a scientific assessment of
the risks of atrazine that stated hormone disruption cannot be
considered a ``legitimate regulatory endpoint at this time.'' \14\
Atrazine is banned in Europe precisely because of the evidence that it
is an endocrine disruptor. By attacking the science underlying
potential rule-making, the petitioners were able to avoid agency rule-
making altogether.
---------------------------------------------------------------------------
\14\ Data Quality Law is Nemesis of Regulation, Washington Post,
August 16, 2004.
---------------------------------------------------------------------------
Another major question concerning the DQA is whether DQA petitions
are judicially reviewable. Thus far, the major case on the issue held
that DQA petitions are not judicially reviewable.\15\ However, further
challenges in different circuits are planned, and the issue may not be
fully settled. Judicial review of DQA petitions would cause massive
delays to the petition process.
---------------------------------------------------------------------------
\15\ Salt Institute v. Michael O. Leavitt, 440 F.3d 156 (2006).
---------------------------------------------------------------------------
DQA Based Regulations: OIRA developed two important new regulations
based on the Data Quality Act: OMB Peer Review Guidelines\16\ and OMB
Risk Assessment Bulletin (Proposed). OMB's Peer Review Guidelines
dictate that ``important scientific information shall be peer reviewed
by qualified specialists before it is disseminated by the Federal
Government.'' The guidelines apply to all ``scientific information
disseminations that contain findings or conclusions that represent the
official position of one or more agencies of the Federal Government.''
OMB's guidelines establish minimum peer review standards for federal
agencies. Varying requirements for peer review are established based on
the potential influence of the scientific information, with ``highly
influential scientific assessments'' receiving the strictest peer
review requirements. OMB asserts its legal authority to impose the Peer
Review Guidelines flows from the Data Quality Act's direction to OMB to
provide guidance for federal agencies for ``ensuring and maximizing the
quality, objectivity, utility and integrity of information'' which is
disseminated.
---------------------------------------------------------------------------
\16\ 70 FR 2664 (2005).
---------------------------------------------------------------------------
OIRA recently proposed a Risk Assessment Bulletin.\17\ This has not
yet been published in its final form. The Risk Assessment Bulletin
establishes ``quality standards for risk assessment disseminated by
federal agencies.'' Much like the Peer Review Bulletin, the Risk
Assessment guidelines have varying levels of quality standards. There
is one set of standards for general risk assessments and another set of
stricter standards for influential risk assessments. Influential risk
assessment is defined as ``a risk assessment the agency reasonably can
determine will have or does have a clear and substantial impact on
important public policies or private sector decisions.'' OMB again
asserts legal authority to issue the bulletin arises from the Data
Quality Act. This Risk Assessment proposal was soundly rejected by the
National Academy of Sciences in their January review. That step seems
to have killed the proposal.
---------------------------------------------------------------------------
\17\ Notice of proposal at: 71 FR 2600. Text of the proposed
bulletin is not published in the Federal Register.
---------------------------------------------------------------------------
Analysis
The effect of the Data Quality Act, Peer Review Bulletin and Risk
Assessment Bulletin is to impose an additional layer of regulatory
administration on agencies that, for the most part, already have strong
internal guidelines (at least for peer review and risk assessment). The
result of this will likely be greater delay in agency dissemination of
information, and a chilling effect that might discourage agencies from
attempting to disseminate information in the first place. The bulletins
also represent another step in OMB's continuing effort to insert itself
into agency affairs. In addition, the possibility remains that OMB will
attempt to use its authority under the Data Quality Act to insert
itself into the agency rule-making process. This could potentially reek
havoc on the rule-making process, and create years of new legal
challenges related to the rule-making process. Needless to say, that
would cause significant slowdown of an already slow rule-making
process.
Chairman Miller. The Committee hearing will come to order.
And good afternoon to all of you. I want to welcome all of you
to this first hearing of the Investigations and Oversight
Subcommittee of the Committee of Science and Technology for
purposes of this hearing on the growing role of the Office of
Information and Regulatory Affairs, OIRA.
Mr. Costello, who is not here, will serve as the Vice
Chairman. There has not been an Investigations and Oversight
Subcommittee of the Committee on Science and Technology for a
dozen years, and I look forward to working with all of you, the
Members who are not here, plus anyone out there as well, and
working with all of you on a very active, very engaged
subcommittee.
We will work to expose abuse of power, corruption, and
waste. A great American political scientist, Woodrow Wilson,
called that the informing power of Congress, and said that it
was probably more important than Congress' legislative powers.
The light we shine will often be unwelcome by those whose
conduct we illuminate, but unflattering scrutiny from Congress
should be a healthy deterrent to the abuse of power.
Today's hearing is part of our oversight duties, to
consider broader public policy questions that need the
attention of Congress. I have heard the phrase ``it takes an
act of Congress'' my entire life, but it has taken on new
meaning for me in these last four years that I have served in
Congress. When Congress enacts legislation to protect public
health, the environment, safety, civil rights, privacy, and on
and on, Congress cannot possibly anticipate every circumstance
that will arise, and Congress cannot possibly address every new
circumstance by new legislation. So Congress has long delegated
to federal agencies the power to enforce the laws that Congress
passes, and to adopt regulations that address circumstances
within the intended protection of the legislation, but not
specifically addressed.
Federal agencies frequently rely on scientific research,
whether applied or basic, to inform their decisions. Scientific
research within the jurisdiction of the Committee on Science
and Technology, research by NOAA, EPA, NIH, the Departments of
Labor and Agriculture, is all properly part of rule-making
decisions, as are the standards and guidelines work at NIST and
the Department of Transportation. We spend billions on that
research. We should certainly examine how it is used in rule-
making.
Rule-making decisions should properly be based on
expertise, but that does not mean that they are beyond
challenge. The authority of federal agencies should not amount
to government by Platonic guardians, experts better informed
and wiser than we are, and untroubled by tawdry concerns of
politics. Congress and the President should pay close attention
when agencies act, and should pay close attention when agencies
fail to act. And we should pay close attention to the reasons
for agency action or inaction, to what extent is agency action
or inaction based on considerations of scientific expertise
such as environmental or public health consequences, and to
what extent is agency action or inaction based on economic or
political considerations.
When agencies act, they must explain their decisions and
allow public participation in that decision, but are decisions
not to act being made in back rooms, based upon considerations
that never would withstand public scrutiny? Does Executive
Order 13422 create an almost insuperable bias in favor of
agency inaction, even in the face of clear need for action and
a clear statutory directive to act? Does the order shield
decisions at agencies from the scrutiny that they should
receive? Does the order shift to the President powers that the
Framers of our Constitution intended be exercised by Congress?
I welcome the testimony of our distinguished panelists on
those issues. I also look forward to working with our
distinguished Ranking Member, James Sensenbrenner. Mr.
Sensenbrenner is by far my senior in Congress. He has served
for four years as Chairman of the Judiciary Committee--excuse
me, of this committee, the Committee on Science, six years as
Chairman of the Judiciary Committee, and I hope he does not
feel that after having been star player in the big leagues, he
has now been sent back to the minors.
[The prepared statement of Chairman Miller follows:]
Prepared Statement of Chairman Brad Miller
I want to welcome all of you to this first hearing of the
Investigations and Oversight Subcommittee of the Committee on Science
and Technology. For purposes of this hearing on the growing role of the
Office of Information and Regulatory Affairs (OIRA), Mr. Costello will
serve as the Vice Chairman.
There has not been an Investigations and Oversight Subcommittee of
the Science and Technology Committee for a dozen years, and I look
forward to working with all of you on a very active, very engaged
subcommittee.
We will work to expose abuse of power, corruption and waste. A
great American political scientist, Woodrow Wilson, called that the
``informing power'' of Congress, and said that it was probably more
important than Congress' legislative powers. The light we shine will
often be unwelcome by those whose conduct we illuminate, but
unflattering scrutiny from Congress should be a healthy deterrent to
the abuse of power.
Today's hearing is part of our oversight duties, to consider
broader public policy questions that need the attention of Congress.
I've heard the phrase ``it takes an act of Congress'' all of my
life, but it has taken on new meaning for me in first four years of my
service in Congress. When Congress enacts legislation--to protect
public health, the environment, safety, civil rights, privacy, and on
and on--Congress cannot possibly anticipate every circumstance that
will arise, and Congress cannot possibly address every new circumstance
by new legislation.
So Congress has long delegated to federal agencies the power to
enforce the laws that Congress passes, and to adopt regulations that
address circumstances within the intended protection of the
legislation, but not specifically addressed.
Federal agencies frequently rely on scientific research, whether
applied or basic, to inform their decisions. Scientific research within
the jurisdiction of the Committee on Science and Technology, research
by NOAA, EPA, NIH, the Departments of Labor and Agriculture, is
properly part of rule-making decisions, as are the standards and
guidelines work at NIST and the Department of Transportation. We spend
billions on that research; we should certainly examine how it's used in
rule-making.
Rule-making decisions should properly be based on expertise, but
that does not mean those decisions are beyond challenge. The authority
of federal agencies should not amount to government by Platonic
guardians, experts better informed and wiser than we are and untroubled
by tawdry political concerns. Congress and the President should pay
close attention to when agencies act, and to when agencies fail to act,
and we should pay close attention to the reasons for agency action or
inaction.
To what extent is agency action or inaction based on considerations
of scientific expertise, such as environmental or public health
consequences, and to what extent is agency action or inaction based on
economic or political considerations? When agencies act, they must
explain their decisions and allow public participation in the decision.
But are decisions not to act being made in back rooms, based upon
considerations that would never withstand public scrutiny?
Does Executive Order 13422 create an almost insuperable bias in
favor of agency inaction, even in the face of a clear need for action
and a clear statutory directive to act? Does the Order shield decisions
at agencies from the scrutiny they should receive? And does the Order
shift to the President powers that the framers of our Constitution
intended be exercised by Congress?
I welcome the testimony of our distinguished panelists on these
issues.
I also look forward to working with our very distinguished Ranking
Member, James Sensenbrenner. Mr. Sensenbrenner served for four years as
Chairman of the Committee on Science, and for six years on the
Judiciary Committee. I hope he does not feel that after being a star
player in the big leagues, he has now been sent back to the minors.
We very much welcome his experience and his expertise.
And I now recognize Mr. Sensenbrenner for his opening remarks.
Mr. Sensenbrenner. I thank the gentleman from North
Carolina for his comments. I am not in the minor leagues. I
have a little bit different role, and not only is this role to
keep the agencies on their toes, but also, to keep the Chairman
and the Majority on their toes as well.
So, I would like to welcome him to the Chair of the
Subcommittee, and say that I am looking forward to working with
him and looking forward to making him a better Chair during the
next two years.
Chairman Miller. Something for me to look forward to.
And I also want to announce the one baseball analogy is out
of deference and respect to our immediate past Chairman, Mr.
Sherry Boehlert, but it will be the policy of this committee
going forward that the preferred sports analogy are analogies
to college basketball.
Elections have consequences.
Mr. Sensenbrenner. That is fine, because Wisconsin is
ranked third in the country, sir.
May I have an opening statement now?
Chairman Miller. Actually, that is in my remarks, and I now
recognize Mr. Sensenbrenner for his opening remarks.
Mr. Sensenbrenner. Although this is the first
Investigations and Oversight Subcommittee hearing since 1995,
the record of oversight under my chairmanship speaks for
itself, from monitoring the status of the Spallation Neutron
Source of the Department of Energy to evaluating the proposal
to bring Russia into the International Space Station Program,
the Science and Technology Committee's vigilant oversight
produced better programs and policies, and I look forward to
returning to this committee and continuing the same rigorous
oversight.
Having been the Chair of two committees, I am uniquely
aware of the topic before us, and I am glad to see that my
colleagues on the Judiciary Committee have taken an interest as
well, and their expertise is appreciated.
As for the Executive Order and the OMB Bulletin, I am
inclined to think that the issues that will be brought up today
have less to do with their implications and more to do with who
issued them. While I do get concerned when any Administration,
be it Republican or Democratic, asserts too much control over
the regulatory process, it is important to note that organizing
that process is not and should not be a partisan endeavor, and
it certainly didn't start with the current President.
President Clinton, just like several Presidents before him,
used the regulatory process to advance his own agenda in the
waning years of his Presidency. Ultimately, these policies last
only as long as the current Administration allows them to, and
the best way to ensure that longevity is to include the
legislative branch. To quote a recent article on the topic in
CQ Weekly: ``While executive power is mighty, it is also
ephemeral.'' Most of the issues that the Executive Order and
the OMB Bulletin address are simple clarifications of
organizational changes that President Clinton's Executive Order
12866, and will ultimately help OMB better coordinate the
regulatory process. None of the amendments call for additional
hurdles to be overcome. They simply require the reporting of
work that has already been done.
Additionally, none of the issues or changes are anything
new. All of them have either been released for public comment,
like the OMB Bulletin on guidance documents, or are
clarifications to President Clinton's original Executive Order.
For example, the OMB Bulletin was issued in draft form over a
year ago. While 31 comments were received, only three or four
were negative. It is also interesting to note that none of our
witnesses here today chose to issue comments on that Bulletin,
save Mr. Kovacs. But OMB will have an opportunity to defend
their document at the next hearing before the Judiciary
Committee, and I am told we will be inviting them back before
us at a later time as well.
Right now, I am more concerned with the impact that these
guidance documents and regulations have on the American
economy, particularly small businesses that can't afford high
priced counsels and lobbyists to monitor the thousands of
guidance documents and rules agencies issue each year. The
increased use of guidance documents by agencies to circumvent
the regulatory process has been diligently documented. They
often conflict with each other, and are not subject to public
notice and comment, and rarely receive agency approval, not to
mention OMB review.
While I am concerned about the impact that Presidential
appointees may have on the regulatory process, just as in the
issue of market failure, these issues have all been addressed
previously by other Administrations as well. In reality, the EO
and the OMB Bulletin simply formalize many of the principles
derived under the previous Administrations.
That being said, as a part of this committee's day-to-day
oversight, I will certainly follow how these changes are
implemented to ensure that public health and safety is
preserved, and that there is transparency and accountability in
our regulatory process.
Thank you.
[The prepared statement of Mr. Sensenbrenner follows:]
Prepared Statement of Representative F. James Sensenbrenner, Jr.
Although this is the first Investigation & Oversight hearing since
1995, the record of oversight under my Chairmanship speaks for itself.
From monitoring the status of the Spallation Neutron Source at the
Department of Energy to evaluating the proposal to bring Russia into
the International Space Station Program, the Science and Technology
Committee's vigilant oversight produced better programs and policies,
and I look forward to returning to this committee and continuing the
same rigorous oversight.
Having been Chairman of both the Science and Technology Committee
and the Judiciary Committee, I am uniquely aware of the topic before
us. I am glad to see my colleagues on the Judiciary Committee have
taken an interest as well, as their expertise is certainly appreciated.
As for the Executive Order and the OMB Bulletin, I am inclined to
think that the issues that will be brought up today have less to do
with their policy implications, and more to do with who issued them.
While I do get concerned when any Administration (be it Republican or
Democratic) asserts too much control over the Regulatory Process, it is
important to note that organizing that process is not a partisan
endeavor, and it certainly didn't start with the current President.
President Clinton, just like several Presidents before him, used
the regulatory process to advance his own agenda in the waning years of
his Presidency. Ultimately, these policies last only as long as the
current Administration allows them to, and the best way to ensure their
longevity is to include the Legislative Branch. To quote a recent
article on the topic in CQ Weekly, ``while Executive power is mighty,
it is also ephemeral.''
Most of the issues that the E.O. and the OMB Bulletin address are
simple clarifications and organizational changes to President Clinton's
E.O. (12866) and will ultimately help OMB better coordinate the
regulatory process. None of the amendments call for additional hurdles
to be overcome; they simply require the reporting of work that has
already been done. Additionally, none of these issues or changes are
anything new--all of them have either been released for public comment
(like the OMB Bulletin on Guidance Documents) or are clarifications to
President Clinton's Executive Order.
For example, the OMB Bulletin was issued in draft form over a year
ago. While 31 comments were received, only three or four were negative.
But OMB will have an opportunity to defend their document at the next
hearing before the Judiciary Committee, and I am told we will be
inviting them back before us at a later time as well.
Right now I am more concerned with the impact that these guidance
documents and regulations have on the American economy, particularly
small businesses that can't afford high-priced counsels to monitor the
thousands of guidance documents and rules agencies issue a year.
The increased use of guidance documents by agencies to circumvent
the regulatory process has been diligently documented. They often
conflict with each other, are not subject to public notice and comment,
and rarely receive agency approval (not to mention OMB review).
While I am concerned about the impact that Presidential Appointees
may have on the regulatory process, just as in the issue of Market
Failure, these issues have all been addressed previously under other
Administrations as well. In reality, the E.O. and the OMB Bulletin
simply formalize many of the principles derived under those previous
Administrations. That being said, as part of the Committee's day-to-day
oversight, I will certainly follow how these changes are implemented to
ensure that public health and safety is preserved, and that there is
transparency and accountability in our regulatory process.
I look forward to our witnesses' testimony today.
Chairman Miller. Thank you, Mr. Sensenbrenner.
[The prepared statement of Mr. Costello follows:]
Prepared Statement of Representative Jerry F. Costello
Good afternoon. Thank you, Mr. Chairman, for calling this hearing
to examine the consequences of President Bush's recent amendment to
Executive Order 12866, which requires Federal Government agencies to
submit any proposed regulations to the Office of Management and Budget
(OMB) for pre-approval.
The Science and Technology Committee has the authority to examine
and evaluate the validity and utility of economic approaches to
regulation. Further, agencies exist in statute and are given mandates
under the law issued by Congress. The amendment put in place by the
Bush Administration goes one step further than the current process by
requiring agencies to identify in writing the specific market failure
or problem that warrants the proposed regulation or guidance.
Therefore, I look forward to hearing the perspective of the witnesses
as to how they perceive the Bush Administration will implement its new
amendment to Executive Order 12866 and their assessment on how this
will impact science-based regulatory agencies and public safety.
I welcome today's witnesses and look forward to their testimony.
[The prepared statement of Ms. Johnson follows:]
Prepared Statement of Representative Eddie Bernice Johnson
Thank you, Mr. Chairman. The President amended a key executive
order to tighten the president's grip on federal agencies that enforce
health, safety and environmental protections.
This order gives the White House's Office of Information and
Regulatory Affairs (OIRA) enhanced tools to oversee and interfere with
federal regulations on everything from warning labels on medicines to
safety standards for construction work sites.
Executive Order 12866 built on a Clinton-era executive order which
authorized OIRA to use cost-benefit analysis and other market-based
calculations to evaluate rules and regulations proposed by federal
agencies.
The Executive Order now enables the Bush Administration to oversee
not only regulations, but also guidance documents that agencies issue
to inform the public about how rules will be enforced. OIRA can now
examine all significant guidance.
The amended executive order also now lists the economic concept of
market failure as a standard for reviewing a proposed rule.
The notion of the free market having the ability to eventually
resolve public needs could become an expansive pretext for OIRA to
dismiss crucial regulatory protections.
I welcome the witnesses who are here today, especially Sally
Katzen, the creator and Former Director of OIRA under the Clinton
Administration.
Thank you, Mr. Chairman. I yield back.
Chairman Miller. I would now like to welcome our witnesses.
Today, we are honored to have a very distinguished and
knowledgeable panel of witnesses.
Ms. Sally Katzen, the former head of the Office of
Information and Regulatory Affairs, again OIRA, in the Clinton
Administration, and currently a professor at the University of
Michigan Law School. She is a recognized expert in federal
regulatory matters, and we are very pleased to have her here
today.
Mr. David Vladeck is a Director of the Institute for Public
Representation, and a professor at Georgetown University Law
Center. He is also an expert in administrative and regulatory
law, topics on which he writes and testifies frequently before
Congress.
Dr. Rick Melberth is the Director of Federal Regulatory
Policy for OMB Watch, which works to protect and improve the
government's ability to develop and enforce safeguards for
public health, safety, the environment, and civil rights.
And finally, Mr. Bill Kovacs is the Vice President for
Environment, Technology, and Regulatory Affairs, the Regulatory
Affairs Division for the United States Chamber of Commerce.
That division is responsible for such significant issues,
including the systematic application of sound science to the
federal regulatory process.
Now, it is the custom of the Investigations and Oversight
Subcommittee, well, going back a dozen years, when we last had
one, it is the custom of the Investigations and Oversight
Subcommittee, and it will be our custom going forward, we are
establishing it now, to swear in our witnesses.
Do any of you have any objection to being sworn in? Okay.
If not, then if you would please stand and raise your right
hand.
[Witnesses sworn.]
Chairman Miller. We will now hear the statements of the
entire panel, beginning with Ms. Katzen. To the panel, please
limit your remarks to five minutes. We do have written
testimony from all of you.
After all the statements have been received, the oral
statements, all Members will have five minutes to ask
questions.
Ms. Katzen, I think we begin with you.
STATEMENT OF MS. SALLY KATZEN, ADJUNCT PROFESSOR AND PUBLIC
INTEREST/PUBLIC SERVICE FELLOW, UNIVERSITY OF MICHIGAN LAW
SCHOOL
Ms. Katzen. Thank you very much, and thank you for inviting
me to testify today.
During the last six years, there has been a slow but steady
change in the process by which federal regulatory agencies
develop and issue regulations, specifically in the balance of
authority between those agencies and the Office of Management
and Budget. With its most recent actions, the Bush
Administration has taken yet another step restricting agency
discretion and making it more difficult for the agencies to do
the job that Congress has delegated to them.
As you mentioned in your introduction, I served as the
Administrator of OIRA for over five years during the Clinton
Administration, and was involved in the drafting and
implementation of Executive Order 12866. I am a strong
proponent of centralized review of agency rule-making, and have
often spoken and written in support or defense of OIRA. I am
also a strong proponent of regulations, believing that if
carefully crafted, they can improve the quality of our lives,
the performance of our economy, and our nation's well-being.
Why, then, am I so critical of the new Executive Order? I
have prepared written testimony that provides extensive
background and explanatory information. I would like to use my
five minutes to emphasize several important points. First, the
Bush Administration has taken many discrete steps to tighten,
incrementally to be sure, but tighten nonetheless OMB control
over the agencies. The information or data quality guidelines,
the peer review guidelines, Circular A-4 for regulatory
analyses, the Risk Assessment Bulletin, and now, the Bulletin
on Good Guidance Practices, all of which are described in my
written testimony.
Now, each step, standing on its own, can be justified or
defended, and none, standing on its own, warrants the outrage
that was directed at them by the critics of the Administration.
At the same time, the cumulative effect has been overwhelming
on the agencies, and there is a dramatically different dynamic
between the agencies and the White House than there was at the
end of the Clinton Administration.
In Executive Order 12866, President Clinton continued the
practice of centralized review of rule-makings by OIRA, but at
the same time, he reaffirmed the primacy of the agencies, which
are the repositories of significant expertise and experience,
and the entities to which Congress has delegated the authority
to issue rules that have the force and effect of law. Today,
those same agencies have at least one arm tied behind their
backs, two ten pound bricks tied to their ankles, and they are
set on an obstacle course to navigate before they can issue any
regulations. Forgive me for mangling my metaphors, but the
combination of all the multiple mandates that OMB has imposed
on the agencies makes it so much more difficult for them to do
their job. Oversight is one thing--I am talking of Presidential
oversight--but burdening the agencies to slow them down, or
destroy their morale, is something else.
Now, I have heard that there is nothing new in the
Executive Order. It is all business as usual. It is simply what
the Clinton Administration had done. That is not the case. This
is a dramatically different environment, and a dramatically
different thrust. And I can go into detail, if you would like,
during questions.
It is also--the one explanation that was given when the
Executive Order was issued, had to do with increasing
transparency and producing better decisions. That simply is not
credible. Look at the way it was done. There was no
consultation or explanation. Look at the effect it has on the
agencies, coming on the heels of the many mandates that OMB has
imposed on them, and look at the message it sends. Regulations
to protect the environment or to promote the health and safety
of American people are disfavored. Let the market, not the
government, do it.
Executive Order 12866, as originally drafted, was neutral
as to process, even though President Clinton was highly
supportive of regulations as part of the solution to serious
problems plaguing our society. The Executive Order was not
skewed to achieve a pro-regulatory result. It was not a
codification of a pro-regulatory philosophy or ideology. It
was, on its face and by intent, a charter for good government,
without any predetermination of outcomes. Simply stated, the
agencies' regulations would be debated on the merits, not
preordained by the process through which they were developed
and issued.
In light of the actions taken over the last six years by
the Bush Administration, that is no longer the case. With
Executive Order 12866, as amended, each step in the process of
extending Presidential control over the agencies has placed a
thumb on the scale. By now, we have a whole fist influencing
the outcome.
Thank you so much for holding this hearing. It is important
for Congress to let the executive know that it takes these
matters seriously and is deeply concerned about the
implications of their recent actions on the integrity of the
administrative process.
[The prepared statement of Ms. Katzen follows:]
Prepared Statement of Sally Katzen
Chairman Miller and Members of the Subcommittee. Thank you for
inviting me to testify today on a subject that is vitally important to
the American people. During the last six years, there has been a slow
but steady change in the process by which regulations are developed and
issued--specifically, in the balance of authority between the federal
regulatory agencies and the Office of Management and Budget. With its
most recent actions, the Bush Administration has again restricted
agency discretion and made it more difficult for them to do the job
that Congress has delegated to the federal agencies. It is therefore
important that this subcommittee consider the reasons for these changes
and the implications of these changes for administrative law and
regulatory practice.
I served as the Administrator of the Office of Information and
Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB)
for the first five years of the Clinton Administration, then as the
Deputy Assistant to the President for Economic Policy and Deputy
Director of the National Economic Council, and then as the Deputy
Director for Management of OMB. I am a proponent of centralized review
of agency rule-making, and I was personally involved in the drafting
and implementation of Executive Order 12866. I have remained active in
the area of administrative law generally and rule-making in particular.
Since leaving government service in January 2001, I have taught
Administrative Law and related subjects at the University of Michigan
Law School, George Mason University Law School, and the University of
Pennsylvania Law School, and I have also taught American Government
seminars to undergraduates at Smith College, Johns Hopkins University,
and the University of Michigan in Washington Program. I frequently
speak and have written articles for scholarly publications on these
issues.
On January 18, 2007, the Bush Administration released two
documents. One was expected; the other was not. I can understand why
OMB issued a ``Final Bulletin for Good Guidance Practices.'' While I
disagree with several of the choices made, I recognize that a case can
be made that there is a need for such a Bulletin. On the other hand,
there is no apparent need for Executive Order 13422, further amending
Executive Order 12866. Regrettably, none of the plausible explanations
for its issuance is at all convincing. As I will discuss below, there
are at least three aspects of the new Executive Order that warrant
attention: 1) the way it was done--without any consultation or
explanation; 2) the context in which it was done--coming on the heels
of OMB's imposing multiple mandates/requirements on the agencies when
they are developing regulations; and 3) the effect it will have and the
message it sends to the agencies--it will be even more difficult for
agencies to do their jobs because regulations are disfavored in this
Administration.
To put the most recent Executive Order in perspective, a little
history may be helpful. The first steps towards centralized review of
rule-making were taken in the 1970's by Presidents Nixon, Ford and
Carter, each of whom had an ad hoc process for selectively reviewing
agency rule-makings: President Nixon's was called the Quality of Life
Review; President Ford's was focused on the agency's Inflationary
Impact Analysis that accompanied the proposed regulation; and President
Carter's was through the Regulatory Analysis Review Group. Those rule-
makings that were considered significant were reviewed by an inter-
agency group, which then contributed their critiques (often strongly
influenced by economists) to the rule-making record.
In 1981, President Reagan took a significant additional step in
issuing Executive Order 12291. That Order formalized a process that
called for the review of all Executive Branch agency rule-makings--at
the initial and the final stages--under specified standards for
approval. The Office that President Reagan chose to conduct the review
was the Office of Information and Regulatory Affairs (OIRA),
established by the Congress for other purposes under the Paperwork
Reduction Act of 1980. Unless OIRA approved the draft notice of
proposed rule-making and the draft final rule, the agency could not
issue its regulation.
Executive Order 12291 was highly controversial, provoking three
principal complaints. One was that the Executive Order was unabashedly
intended to bring about regulatory relief--not reform--relief for the
business community from the burdens of regulation. Second, the Order
placed enormous reliance on (and reflected unequivocal faith in) cost/
benefit analysis, with an emphasis on the cost side of the equation.
Third, the process was, by design, not transparent; indeed, the mantra
was ``leave no fingerprints,'' with the result that disfavored
regulations were sent to OMB and disappeared into a big black hole. The
critics of Executive Order 12291, including Members of Congress,
expressed serious and deep concerns about the Executive Order, raising
separation of powers arguments, the perceived bias against regulations,
and the lack of openness and accountability of the process.
When President Clinton took office and I was confirmed by the
Senate as the Administrator of OIRA, my first assignment was to
evaluate Executive Order 12291 in light of the 12 years of experience
under Presidents Reagan and Bush, and help draft a new Executive Order
that would preserve the strengths of the previous Executive Order but
correct the flaws that had made the process so controversial. President
Clinton would retain centralized review of Executive Branch agency
rule-makings, but the development and the tone of the Executive Order
he would sign (Executive order 12866) was to be very different.
I was told that Executive Order 12291 was drafted in the White
House (Boyden Gray and Jim Miller take credit for the document) and
presented, after President Reagan had signed it, as a fait accomplis to
the agencies. The protests from the agencies were declared moot. We
took a different route, consulting and sharing drafts with the
agencies, public interest groups, industry groups, Congressional
staffers, and State and local government representatives. When all
their comments were considered and changes made to the working draft,
we again consulted and shared our new drafts with all the groups, and
again took comments. More changes were made, and where comments were
not accepted, we explained the basis for our decisions.
The tenor of Executive Order 12866 was also quite different from
Executive Order 12291. As noted above, Executive Order 12866 retained
centralized review of rule-makings, but also reaffirmed the primacy of
the agencies to which Congress had delegated the authority to regulate.
(Preamble) Among other things, Executive Order 12866 limited OIRA
review to ``significant regulations''--those with a likely substantial
effect on the economy, on the environment, on public health or safety,
etc., or those raising novel policy issues (Section 6(b)(1) )--leaving
to the agencies the responsibility for carrying out the principles of
the Executive Order on the vast majority (roughly 85 percent) of their
regulations.
Executive Order 12866 continued to require agencies to assess the
consequences of their proposals and to quantify and monetize both the
costs and the benefits to the extent feasible. (Section 1(a) ) But it
explicitly recognized that some costs and some benefits cannot be
quantified or monetized but are ``nevertheless essential to consider.''
(Section 1(a) ) I believe it was Einstein who had a sign in his office
at Princeton to the effect that ``not everything that can be counted
counts, and not everything that counts can be counted.''
While Executive Order 12291 required agencies to set their
regulatory priorities ``taking into account the conditions of the
particular industries affected by the regulations [and] the condition
of the national economy'' (Section 2 (e) ), Executive Order 12866
instructed agencies to consider ``the degree and nature of the risks
posed by various substances and activities within its jurisdiction''
(Section 1(b)(4) ), and it added to the list of relevant considerations
for determining if a proposed regulation qualified as ``significant''
not only an adverse effect on the economy or a sector of the economy,
but also ``productivity, competition, jobs, the environment, public
health or safety or State, local, or tribal governments or
communities.'' (Section 3(f) )
There were other significant differences between Executive Order
12291 and Executive Order 12866, including those relating to the
timeliness of review and the transparency of the process, but for
present purposes, the key to the difference was that President Clinton
was focused on a process for better decision-making and hence better
decisions and not a codification of a regulatory philosophy or
ideology. Centralized review was seen as a valid exercise of
presidential authority, facilitating political accountability (the
President takes the credit and gets the blame for what his agencies
decide) and to enhance regulatory efficacy (that is, decisions that
take into account the multitude of disciplines and the multitude of
perspectives that can and should be brought to bear in solving problems
in our complex and interdependent society). But whatever one's view of
centralized review of agency rule-makings, Executive Order 12866 was--
on its face and by intent--a charter for good government, without any
predetermination of outcomes.
The neutrality of the process was essential. President Clinton
viewed regulations as perhaps the ``single most critical. . .vehicle to
achieve his domestic policy goals'' (Kagan, 114 Harv. L. Rev. 2245,
2281-82 ((2001) ), and he spoke often of the salutary effects of
regulations on the Nation's quality of life and how regulations were
part of the solution to perceived problems. But the Executive Order was
not skewed to achieve a pro-regulatory result. The regulations would be
debated on their merits, not preordained by the process through which
they were developed and issued.
When George W. Bush became President in January 2001, his
philosophy was decidedly anti-regulatory. I know that his advisors
considered whether to change Executive Order 12866 and they concluded
that it was not necessary to accomplish their agenda. Indeed, President
Bush's OMB Director instructed the agencies to scrupulously adhere to
the principles and procedures of Executive Order 12866 and its
implementing guidelines. (OMB M-01-23, June 19, 2001) The only changes
to the Executive Order came two years into President Bush's first term,
and the changes were limited to transferring the roles assigned to the
Vice President to the Chief of Staff or the OMB Director. (Executive
Order 13258)
Almost five years later, President Bush signed Executive Order
13422, further amending Executive Order 12866. So far as I am aware,
there was no consultation and no explanation of the problems under the
existing Executive Order that prompted these amendments, or whether the
amendments would have a salutary effect on whatever problems existed,
or whether the amendments would have unintended consequences that
should be considered. Press statements issued after the fact do not
make for good government.
Second, the new Executive Order comes in the course of a steady and
unwavering effort to consolidate authority in OMB and further restrict
agency autonomy and discretion. On February 22, 2002, OMB issued its
Information Quality Act (IQA) Guidelines. (67 Fed. Reg. 8452). The IQA
itself was three paragraphs attached to a more than 700-page Treasury
and General Government Appropriations Act for Fiscal Year 2001, with no
hearings, no Floor debate and no committee reports. Its objective was
``to ensure the quality, objectivity, utility and integrity of
information disseminated to the public.'' OMB took up the assignment
with a vigor and determination that was remarkable. OMB's government-
wide guidelines created a new construct: now, there would be
``information'' and ``influential information'' and different (more
stringent standards) would apply to the higher tiers. OMB also required
the agencies to issues their own guidelines (subject to OMB approval);
establish administrative mechanisms allowing people or entities to seek
the correction of information they believe does not comply with these
guidelines; and report periodically to OMB on the number and nature of
these complaints. The U.S. Chamber of Commerce thought this ``would
have a revolutionary impact on the regulatory process''--keeping the
agencies from relying on data that industry thought was questionable.
Then came OMB's Proposed Draft Peer Review Standards for Regulatory
Science (August. 29, 2003), in which OMB attempted to establish uniform
government-wide standards for peer review of scientific information
used in the regulatory process. Peer review is generally considered the
gold standard for scientists. Yet leading scientific organizations were
highly critical of what OMB was trying to do and how it was doing it,
and they were joined by citizen advocacy groups and former government
officials. They argued that the proposed standards were unduly
prescriptive, unbalanced (in favor of industry), and introduced a new
layer of OMB review of scientific or technical studies used in
developing regulations. The reaction was so strong and so adverse that
OMB substantially revised its draft Bulletin to make it appreciably
less prescriptive and restrictive, and in fact OMB resubmitted it in
draft form for further comments before finalizing the revised Bulletin.
On March 2, 2004, OMB replaced a 1996 ``best practices'' memorandum
with Circular A-4, setting forth instructions for the federal agencies
to follow in developing the regulatory analyses that accompany
significant draft notices of proposed rule-making and draft final
rules. The Circular, almost 50-pages single spaced, includes a detailed
discussion of the dos and don'ts of virtually every aspect of the
documentation that is needed to justify a regulatory proposal. While
the term ``guidance'' is used, agencies that depart from the terms of
the Circular do so at their peril (or more precisely, at the peril of
their regulatory proposal).
Then came the OMB Proposed Risk Assessment Bulletin (January 9,
2006), providing technical guidance for risk assessments produced by
the Federal Government. There were six standards specified for all risk
assessments and a seventh standard, consisting of five parts, for risk
assessments related to regulatory analysis. In addition, using the
terminology from the IQA Guidance, OMB laid out special standards for
``Influential Risk Assessments'' relating to reproducibility,
comparisons with other results, presentation of numerical estimates,
characterizing uncertainty, characterizing results, characterizing
variability, characterizing human health effects, discussing scientific
literature and addressing significant comments. Agency comments raised
a number of very specific problems and such general concerns as that
OMB was inappropriately intervening into the scientific underpinnings
of regulatory proposals. OMB asked the National Academies of Scientists
(NAS) to comment on the draft Bulletin. The NAS panel (on which I
served) found the Bulletin ``fundamentally flawed'' and recommended
that it be withdrawn.
Then, on January 18, 2007, OMB issued its final Bulletin on
``Agency Good Guidance Practices.'' Agencies are increasingly using
guidance documents to inform the public and to provide direction to
their staff regarding agency policy on the interpretation or
enforcement of their regulations. While guidance documents--by
definition--do not have the force and effect of law, this trend has
sparked concern by commentators, including scholars and the courts. In
response, the Bulletin sets forth the policies and procedures agencies
must follow for the ``development, issuance, and use'' of such
documents. It calls for internal agency review and increased public
participation--all to the good. In addition, however, the Bulletin also
imposes specified ``standard elements'' for significant guidance
documents; provides instructions as to the organization of agency
websites containing significant guidance documents; requires agencies
to develop procedures (and designate an agency official/office) so that
the public can complain about significant guidance documents and seek
their modification or rescission; and extends OIRA review to include
significant guidance documents. I do not believe it is an overstatement
to say that the effect of the Bulletin is to convert significant
guidance documents into legislative rules, subject to all the
requirements of Section 553 of the Administrative Procedure Act, even
though the terms of that Section explicitly exempt guidance documents
from its scope. To the extent that the Bulletin makes the issuance of
guidance documents much more burdensome and time consuming for the
agencies, it will undoubtedly result in a decrease of their use. That
may well have unintended unfortunate consequences, because regulated
entities often ask for and appreciate receiving clarification of their
responsibilities under the law, as well as protection from haphazard
enforcement of the law, by agency staff.
This is quite a record. While each step can be justified as helping
to produce better regulatory decisions, the cumulative effect is
overwhelming. Requirements are piled on requirements, which are piled
on requirements that the agencies must satisfy before they can issue
regulations (and now, significant guidance documents) that Congress
authorized (indeed, often instructed) them to issue. And OMB has not
requested, nor has the Congress in recent years appropriated,
additional resources for the agencies to carry out OMB's ever
increasing demands. As agencies must do more with less, the result is
that fewer regulations can be issued--which is exactly what the
business community has been calling on this Administration to do.
It is in this context that Executive Order 13422, further amending
Executive Order 12866, is released. Until the Bulletin on guidance
documents, OIRA extended its influence throughout the Executive Branch
without any amendments to Executive Order 12866. As discussed above,
OMB issued Circulars and Bulletins covering a wide variety of subjects,
virtually all of which were quite prescriptive (and often quite
burdensome) in nature. OMB Circulars and Bulletins do not have the same
status as an Executive Order, but they are treated as if they did by
the federal agencies. Why then did OMB draft and the President sign
Executive Order 13422?
One indication of a possible answer is that while Executive Order
13422 in effect codifies the Bulletin on guidance documents, it does
not pick up and codify the earlier pronouncements on data quality, peer
review, regulatory impact analyses, or even risk assessment principles.
It may be that it was thought necessary to amend Executive Order 12866
for guidance documents because Executive Order 12866 was written to
apply only where the agencies undertook regulatory actions that had the
force and effect of law. But it is unlikely that the agencies would
balk at submitting significant guidance documents to OIRA if there were
an OMB Bulletin instructing them to do so, and since neither Executive
Orders nor Circulars or Bulletins are judicially reviewable, it is also
unlikely that anyone could successfully challenge in court an agency's
decision to submit a significant guidance document to OIRA.
Perhaps more revealing of the reason(s) for Executive Order 13422
is that it is not limited to guidance documents. Consider the other
amendments included in the new Executive Order. First, Executive Order
12866 had established as the first principle of regulation that:
Each agency shall identify the problem that it intends to
address (including, where applicable, the failure of private
markets or public institutions that warrant new agency action)
as well as assess the significance of that problem''
Executive Order 13422 amends Executive Order 12866 to state
instead:
Each agency shall identify in writing the specific market
failure (such as externalities, market power, lack of
information) or other specific problem that it intends to
address (including, where applicable, the failures of public
institutions) that warrant new agency action, as well as assess
the significance of that problem, to enable assessment of
whether any new regulation is warranted.
By giving special emphasis to market failures as the source of a
problem warranting a new regulation, the Administration is saying that
not all problems are equally deserving of attention; those caused by
market failures are in a favored class and possibly the only class
warranting new regulations. This could be read as a throw back to the
``market-can-cure-almost-anything'' approach, which is the litany of
opponents of regulation; in fact, history has proven them wrong--there
are many areas of our society where there are serious social or
economic problems--e.g., civil rights--that are not caused by market
failures and that can be ameliorated by regulation.
Second, the new Executive Order amends Section 4 of Executive Order
12866, which relates to the regulatory planning process and
specifically references the Unified Regulatory Agenda prepared annually
to inform the public about the various proposals under consideration at
the agencies. The original Executive Order instructed each agency to
also prepare a Regulatory Plan that identifies the most important
regulatory actions that the agency reasonably expects to issue in
proposed or final form in that fiscal year. Section 4, unlike the rest
of the Executive Order, applies not only to Executive Branch agencies,
but also to independent regulatory commissions, such as the Securities
and Exchange Commission, the Federal Communications Commission, the
Federal Trade Commission, and the Federal Reserve Board. It is not
without significance that the new Executive Order uses Section 4 to
impose an additional restraint on the agencies:
Unless specifically authorized by the head of the agency, no
rule-making shall commence nor be included on the Plan without
the approval of the agency's Regulatory Policy Office. . .
This language should be read in conjunction with an amendment to
Section 6(a)(2) that specifies that the agency's Regulatory Policy
Officer must be ``one of the agency's Presidential Appointees.''
Executive Order 12866 had provided that the agency head was to
designate the agency's Regulatory Policy Officer, with the only
condition that the designee was to report to the agency head. The
original Executive Order further provided that the Regulatory Policy
Officer was to ``be involved at every stage of the regulatory process.
. .''--in other words, a hands-on job. Now, there is an explicit
politicalization of the process; a ``sign-off,'' not a hands-on,
assignment; and, most significantly, no accountability. The newly
appointed officer is not required to be subject to Senate confirmation,
nor is the person required to report to a Senate-confirmed appointee.
The other changes to Section 4 are also troubling. As amended, the
agencies must now include with the Regulatory Plan the:
agency's best estimate of the combined aggregate costs and
benefits of all its regulations planned for that calendar year.
. .
Very few would dispute that the Regulatory Plan has been
notoriously unreliable as an indicator of what an agency is likely to
accomplish in any given timeframe; it is not unusual for regulations
that are not included in the Plan to be issued should circumstances
warrant, nor is it unusual for regulations included in the Plan with
specific dates for various milestones to languish year after year
without getting any closer to final form.
In any event, the requirement to aggregate the costs and benefits
of all the regulations included in the Plan for that year is very
curious. We know that costs and benefits can be estimated (at least
within a range) at the notice stage because the agency will have
settled on one or more options for its proposal. But to try to estimate
either costs or benefits at the notice of inquiry stage or before the
agency has made even tentative decisions is like trying to price a new
house before there is even an option on the land and before there are
any architect's plans. The numbers may be interesting, but hardly
realistic, and to aggregate such numbers would likely do little to
inform the public but could do much to inflame the opponents of
regulation. This would not be the first time that large numbers that
have virtually no relation to reality have driven the debate on
regulation--e.g., the $1.1 trillion estimate of the annual costs of
regulations that is frequently cited by opponents of regulation, even
though every objective critique of the study that produced that number
concludes that it not only overstates, but in fact grossly distorts,
the truth about the costs of regulation. The only other plausible
explanation for this amendment to the Executive Order it that it is the
first step toward implementing a regulatory budget. In my view, the
concept of a regulatory budget is deeply flawed, but it should be
debated on the merits and not come in through the back door of an
Executive Order designed for other purposes.
There is also a gratuitous poke at the agencies in the amendment to
Section 4(C). The original Executive Order instructed the agencies to
provide a ``summary of the legal basis'' for each action in the
Regulatory Plan, ``including whether any aspect of the action is
required by statute or court order.'' The new amendment adds to the
previous language the clause, ``and specific citation to such statute,
order or other legal authority.'' It may appear to be trivial to add
this requirement, but by the same token, why is it necessary to impose
such a requirement?
As noted above, I am not aware of any consultation about either the
merits of any of the amendments or the perception that may attach to
the cumulative effect of those amendments. Therefore, I do not know
whether the agencies have, for example, been proposing regulations
based on problems caused by something other than market failure which
OMB does not consider an appropriate basis for a regulation; whether
senior civil servants at the agencies have been sending proposed
regulations to OMB that run contrary to the wishes of the political
appointees at those agencies; or whether agencies have been
misrepresenting what applicable statutes or court orders require.
If not, then there is little, if any, need for these amendments,
other than to send a signal that the bar is being raised; that OMB is
deciding the rules of the road; and that those rules are cast so as to
increase the I's that must be dotted and the T's that must be crossed.
In other words, the message is that agencies should not be doing the
job that Congress has delegated to them. This is not a neutral process.
If the Bush Administration does not like some or all agency proposed
regulations, they can debate them on the merits. But the Executive
Order should not become a codification of an anti-regulatory manifesto.
This is not good government.
Biography for Sally Katzen
Since leaving government service in January 2001, she has been
teaching both graduate students (University of Pennsylvania Law School
in Spring '03; Johns Hopkins University in Fall '03, 04, University of
Michigan Law School in Spring '04, Fall '05, Spring '06); George Mason
University Law School, Spring and Fall '06) and undergraduates (at
Smith College in Fall '01-'04; Johns Hopkins University in Spring '02,
'06; University of Michigan in Washington Program '05-'07). She served
almost eight years in the Clinton Administration, first as
Administrator of the Office of Information and Regulatory Affairs in
the Office of Management and Budget (OMB), then Deputy Assistant to the
President for Economic Policy and Deputy Director of the National
Economic Council in the White House, and then as the Deputy Director
for Management at OMB. Before joining the Clinton Administration, Ms.
Katzen was a partner in the Washington, DC law firm of Wilmer, Cutler &
Pickering, specializing in regulatory and legislative matters. While in
private practice, Ms. Katzen was an adjunct Professor at the Georgetown
Law Center and served in various leadership roles in the American Bar
Association (including Chair of the Section on Administrative Law and
Regulatory Practice and two terms as DC Delegate to the House of
Delegates of the ABA), as well as President of the Federal
Communications Bar Association and President of the Women's Legal
Defense Fund. She graduated magna cum laude from Smith College and
magna cum laude from the University of Michigan Law School, where she
was the first woman Editor in Chief of the Law Review. Following
graduation from law school, she clerked for Judge J. Skelly Wright of
the United States Court of Appeals for the District of Columbia
Circuit. She also served in the Carter Administration for two years as
the General Counsel of the Council on Wage and Price Stability in the
Executive Office of the President.
Chairman Miller. Thank you, Ms. Katzen. Mr. Vladeck.
STATEMENT OF MR. DAVID C. VLADECK, DIRECTOR, INSTITUTE FOR
PUBLIC REPRESENTATION; ASSOCIATE PROFESSOR OF LAW, GEORGETOWN
UNIVERSITY LAW CENTER
Mr. Vladeck. Mr. Chairman, Mr. Sensenbrenner, thank you
very much for inviting me here to testify before you today. I
have submitted a detailed testimony outlining my major concerns
with the new Executive Order, so I would like to use my five
minutes to outline some of my most pressing concerns.
Let me begin with the bad news. The bad news is this: our
regulatory process, and particularly, our health and science
agencies, have been stretched to the breaking point. Agency
budgets have been slashed, agency staffing levels have been cut
to the bone, agency scientists have been demoralized by the
blatant politicization of science, and not surprisingly, our
agencies are fraying at the seams. It now takes OSHA a decade,
a decade to issue standards to protect workers from
occupational safety and health threats. The FDA, long the gold
standard of our health and safety agencies, has experienced
substantial regulatory failure. Defective medical devices,
unsafe drugs, slip by the FDA and onto our markets.
We are now reaping what we have sown: under-resourced,
underfunded, over-politicized agencies that can't do their job
of protecting us, but these are the very agencies on which we
depend to ensure that the food we eat is pure, the drugs we
take are safe and effective, that the air we breathe is clean,
and that our workplaces are not unreasonably dangerous.
Now, this is an Executive Order, and that means something.
It is not simply a trivial statement of business as usual.
Presidents use Executive Orders to mark important and dramatic
steps, in terms of the way they organize the executive branch,
and Executive Order 13422 is no different. It takes a number of
steps that are problematic, and which Congress ought to take a
very careful look at.
The first problem with the Executive Order that I see is
that it usurps Congressional authority by directing agencies to
justify regulatory action on the basis of market failure. And
make no mistake, an agency, particularly if it is developing a
regulation or guidance that OIRA deems significant, is going to
have to do business with market failure. To be sure, there is
an escape valve left in the Executive Order, but that escape
valve is operative at OIRA's insistence, not the agency's, and
so agencies, if they want to get their rules approved, if they
want to go ahead with guidance, they are going to have to at
least do business with OIRA on market failure bases.
The problem with this, of course is that, as Sally has just
said, agencies have been given just an enormous number of
analytic requirements that they have to navigate through in
order to take regulatory action. Now, not simply binding
regulatory action, but non-binding regulatory action. The
executive branch seems to think that there is no limit to the
number of analytical requirements that they can impose on the
process. This process is already broken, and putting another
straw on the camel's back is going to further undermine the
ability of agencies to deliver the protection that Congress has
decreed they deliver to us.
But the second problem--the expansion of OIRA's authority
to guidance documents--makes no sense. Guidance documents, by
their nature, are non-binding. The courts have been very clear
in holding that a guidance document does not impose a binding
requirement on a regulated industry. There is--there are
arguments to be made about whether centralized review is a good
idea or not. I disagree with my colleague Sally. I have always
thought centralized review was bad, whether practiced by
Republicans or Democrats, Mr. Sensenbrenner, but this is a
completely unwarranted step, and oddly, a step that is going to
hurt regulated business.
Mr. Sensenbrenner, you talked about small business. Small
businesses need guidance from agencies about how to comply with
federal mandates. Now, if they pick up a phone and call a
regulatory officer at the FDA, for example, they are going to
have to say, wait, I've got to do a market failure analysis
before I can give you guidance? That kind of interaction is
covered by this Executive Order. You are handcuffing the
ability of our agencies to interact with the people they
regulate, and interposing OIRA between them is not sound
government policy.
The last point I want to make is this. I am very troubled
by, and I would urge Congress to take a hard look at this, the
Executive Order requiring a Presidential appointee to run the
regulatory offices at the agencies. If you look and here--I
hate to do this, because I have such respect for Mr. Copeland,
but if you--and I disagree with him on this point--if you look
at the way the agencies structure their regulatory compliance.
In many agencies, particularly at the sub-cabinet level, the
regulatory officers are political, but not Presidential
appointees, but they are experts in regulation. They know the
details, the arcane aspects of our regulatory process that now
is all-enveloping.
To force the agency to find another employee, a
Presidentially-appointed person, who may or may not be subject
to Senate confirmation, is bad policy, and it is a threat to
Congress, because when you give an agency authority to exercise
regulatory power, you delegate that authority not to the
agency, the statute doesn't read: ``We ask the Department of
Transportation to do something.'' You tell the Secretary of
Transportation to do it. Why? Because that person is
accountable to you as well as the President.
I am fearful that this Executive Order seeks to end-run
that kind of accountability that Congress has always demanded.
I see my time is up. Thank you very much.
[The prepared statement of Mr. Vladeck follows:]
Prepared Statement of David C. Vladeck
Mr. Chairman and Members of the Science and Technology Committee,
thank you for inviting me to be here today to share with you my views
about the January 18, 2007 revisions to Executive Order 12866, which
are set forth in Executive Order 13422, 72 Fed. Reg. 2763 (January 23,
2007). I am the Director of the Institute for Public Representation and
an Associate Professor of Law at Georgetown University Law Center.
Prior to joining Georgetown's law faculty, I spent nearly thirty years
at Public Citizen Litigation Group, serving as its director from 1992
through 2002. I have practiced extensively in the area of
administrative law, served as a Public Member of the Administrative
Conference of the United States, the Chair of the D.C. Bar
Association's Section on Administrative Law, on the Council of the
American Bar Association's Section on Administrative Law and Agency
Practice, testified on many occasions before congressional committees
on administrative law issues--including issues concerning the
constitutionality and wisdom of centralized regulatory review--and I
write in the field of administrative law. I also serve as a Scholar
with the Center for Progressive Reform.
My testimony today will explain why Executive Order 13422
represents an important chapter in the Executive Branch's longstanding
effort to wrest control over administrative agencies from Congress, and
certainly the most important measure taken by President Bush. To put
the new Order in context, I will begin by briefly describing the
problems brought about by Executive Order 12866 and its predecessor,
Executive Order 12291, and explain why centralized regulatory review
has seriously impaired the ability of federal agencies to provide
needed safeguards to the American people.
I will then turn to Executive Order 13422 and address why it marks
a further and substantial erosion of Congress' role in the
administrative process and deals a body blow to the ability of our
agencies to do their jobs. Here I make a number of points about
Executive Order 13422:
The Executive Order Usurps Congressional Authority By
Directing Agencies to Justify Regulatory Actions on the Basis of Market
Failure. Under our system of separated powers, it is Congress, not the
Executive, that sets the substantive standards that guide agencies in
the performance of their delegated tasks. Executive Order 13422
disrespects this structural limit in the Constitution. It requires
agencies, as a precondition to taking any regulatory action at all, to
justify their proposed action on the basis of ``market failure.'' And
``significant'' agency guidance may not be issued until the agency
obtains clearance from the Office or Regulatory Affairs (OIRA) of the
Office of Management and Budget (OMB). The ``market failure'' super-
mandate appears nowhere in statute. It is not in keeping with the
decisional criteria that Congress has established, and it cannot be
reconciled with the dominant thrust of the health and safety statutes,
which are designed to prevent deaths and injuries by avoiding market
failure, rather than waiting until it is too late and market failure is
evident.
The Executive Order Unwisely Expands OIRA's Authority to
Guidance Documents. Whatever the wisdom of centralized OIRA review of
binding agency rules, the same arguments do not extend to centralized
review of non-binding agency guidance. Hundreds of guidance documents
are issued each year, often in response to emergencies or other time-
sensitive developments. Requiring agencies to stop dead in their tracks
to justify the provision of guidance on ``market failure'' grounds
cannot be defended on policy grounds; nor can giving OIRA the authority
to meddle in the substance of significant agency guidance.
The Executive Order Resurrects the Discredited Concept of a
Regulatory Budget. Amended section 4(c)(1)(B) forbids any agency--even
the so-called ``independent'' agencies--from commencing any rule-making
unless the agency's regulatory plan sets forth, among other things,
``the agency's best estimate of the combined aggregated costs and
benefits of all its regulations planned for that calendar year.'' These
estimates give OIRA the ability to effectively cap the amount of
compliance costs an agency may impose in a calendar year, a power OIRA
has long coveted. Nothing in the statutes Congress has enacted give
OIRA the right to ration the protection to be provided to the American
people through regulation.
The Executive Order Further Politicizes the Regulatory
Process. Executive Order 13422 requires each agency ``to designate one
of the agency's Presidential Appointees'' to serve as the agency's
regulatory policy officer. At the same time, the Order greatly expands
the duties of the policy officer, providing that, ``[u]nless
specifically authorized by the head of the agency, no rule-making shall
commence nor be included on the [agency's annual regulatory] Plan
without the approval'' of the policy officer. Nothing in the Order
suggests that the political appointee must also be subject to Senate
confirmation. This is a troubling, and no doubt deliberate, omission.
The statutes Congress enacts to delegate power to agencies designate
the agency head--and not a subordinate--as the decision-maker. Congress
does this to ensure that decisions are made by an official accountable
to Congress as well as the President. The amended Executive Order
undermines Congress' designation of the agency head as the decision-
maker by requiring that a political employee--accountable to the
President but not necessarily to Congress--be given control over an
agency's regulatory output. That, to me, is quite a disturbing
development and one that should not be accomplished by Executive fiat,
but, if at all, by legislation.
BACKGROUND
To understand the significance of Executive Order 13422, it is
useful to quickly sketch the development of the Executive Order on
regulatory review and what it requires.\1\ Although all Presidents
since President Ford have employed some form of centralized review of
agency regulations, systematic, wholesale review of regulations did not
begin until the Reagan Administration. Just a month after his
inauguration, President Reagan issued Executive Order 12291, which
required agencies to prepare detailed Regulatory Impact Analyses
specifying the costs and benefits of all proposed ``major'' rules. The
Order provided that, unless otherwise forbidden by law, an agency could
not undertake rule-making unless ``the potential benefits to society. .
.outweigh the costs,'' and the agency selected the regulatory option
``involving the least net cost to society.'' \2\ The Order further
required agencies to submit drafts of all proposed and final rules to
OIRA before publication in the Federal Register, and publication could
not proceed without OIRA's approval.
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\1\ See generally Curtis W. Copeland, CRS Report for Congress:
Changes to the OMB Regulatory Review Process by Executive Order 13422,
at 2-3 (Feb. 5, 2007) (hereinafter ``CRS Report'').
\2\ Exec. Order 12291, 1(b), 7(g)(2); 3 C.F.R. 127 (1981),
reprinted in 5 U.S.C. 601, at 431 (1982).
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From the outset, Congress was troubled by the dominant and often
obstructionist role OIRA played in rule-makings. OIRA delayed and
weakened rules, met in secret with industry representatives, overrode
agency determinations on complex matters of science, and otherwise
thwarted the ability of the regulatory agencies to do their jobs.\3\
During 1982-83, the House held no fewer than seven hearings to examine
health and safety rules seriously delayed or weakened by OIRA.\4\ And
when the first challenge to the constitutionality of OIRA's meddling in
agency rule-making came before an appellate court, the Chairmen of the
five House Committees having jurisdiction over regulatory agencies
filed a brief setting forth a blistering critique of OIRA review. Here
is just a brief sampling of what the five Chairmen said:
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\3\ See generally Morton Rosenberg, Beyond the Limits of Executive
Power: Presidential Control of Agency Rule-making Under Executive Order
12291, 80 Mich. L. Rev. 193 (1981); David C. Vladeck, Unreasonable
Delay, Unreasonable Intervention: The Battle to Force Regulation of
Ethylene Oxide, in Peter L. Strauss, Ed., Administrative Law Stories
(Foundation Press 2006).
\4\ See, e.g., OMB Control of OSHA Rule-making, Hearings before the
Subcomm. on Manpower of the House Comm. on Gov't. Operations, 97th
Cong., 2d Sess. (1982); Infant Formula: The Present Danger, Hearings
before the Subcomm. on Oversight and Investigations of the House Comm.
on Energy and Commerce, 97th Cong., 2d Sess. (1982); EPA:
Investigations of Superfund and Agency Abuses (Part 3), Hearings before
the Subcomm. on Oversight and Investigations of the House Comm. on
Energy and Commerce, 97th Cong., 1st Sess. (1981).
The amici Congressmen object to the systematic usurpation of
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legislative power by OMB pursuant to Executive Order 12291 *
* * Executive Order 12291 is the cornerstone of a steadily
growing Presidential apparatus, the effect of which is to
contravene explicit Congressional delegations of authority, to
subvert meaningful public participation in and judicial review
of federal regulations, and to impose substantive standards on
decision-makers foreign to the statutes they administer. Unless
it is checked, the program embodied in Executive Order 12291
will fundamentally damage the administrative process by which
our laws are implemented, the legislative system by which our
laws are enacted and monitored, and the separation of powers
upon which our system of government rests.\5\
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\5\ Brief of John Dingell, Chair, House Energy and Commerce
Committee, Peter Rodino, Chair, House Judiciary Committee, Jack Brooks,
House Government Operations Committee, Augustus Hawkins, Chair, House
Education and Labor Committee, and William D. Ford, Chair, House Post
Office and Civil Service Committee, in Public Citizen Health Research
Group v. Tyson, 796 F.2d 1479 (D.C. Cir. 1986).
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In 1993, shortly after taking office, President Clinton issued
Executive Order 12866 to make a number of significant modifications to
the Reagan Executive Order. In my view, the most important was to
inject transparency into the OIRA review process.\6\ The Clinton Order
cut back on the number of ``significant'' agency rules reviewed by
OIRA. It also required OIRA, as a general rule, to complete its review
of proposed and final rules within ninety calendar days. And it
required all agencies, including the so-called independents, to prepare
an annual regulatory plan outlining all important regulatory actions
the agency intended to take during that fiscal year. The plans had to
be personally approved by agency heads.\7\
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\6\ See Executive Order 12866, 6(b) & (c); 58 Fed. Reg. 51,735
(1993).
\7\ Harvard Law School Dean Elena Kagan has traced the development
of the Clinton Executive Order in Presidential Administration, 114
Harv. L. Rev. 2245 (2001).
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Even with the adjustments made by President Clinton, centralized
review of the regulatory output of administrative agencies has never
accomplished its objective of making our regulatory agencies better
serve the public. Indeed, the ultimate irony is that if OIRA's review
process was subjected to cost-benefit analysis, OIRA review would
flunk. The amount of time, energy, money and, at times, political
capital that goes into satisfying OIRA that a rule is worthy of
publication dwarfs any conceivable benefits that flow from the process.
We have now had a twenty-five year experiment with centralized review.
Judged by any legitimate measure, it is time to declare the experiment
a failure and move on. There are several reasons for my conclusion.
To begin with, centralized review is a one-way ratchet. OIRA
presses agencies to do less to protect the public health, not more.
Agencies do not complain that OIRA is forcing them to do more; they
complain that OIRA is forcing them to weaken required protections.
OIRA's insistence that agencies do less, not more, stems from its
singular focus on ``least net cost options''--or, in other words,
minimizing regulatory compliance costs. The Executive Order requires
agencies to perform cost-benefit analysis, which many experts claim is
inherently anti-regulatory.\8\ My own litigation experience bears this
out. I have represented workers and labor unions in litigation to force
OSHA to protect workers from exposure to many highly toxic and
carcinogenic chemicals, including ethylene oxide, cadmium, hexavalent
chromium, formaldehyde and benzene.\9\ In each case, OIRA was an
obstacle to the agency's action. Part of OIRA's objection was its
unwillingness to place any value on important health benefits of
regulation--including avoided cancers, miscarriages, genetic damage
that might cause infertility or birth defects, and kidney failure that
might require dialysis or transplant--because they were too difficult
to quantify. While the anticipated costs of regulation are generally
easier to estimate (and overestimate), the benefits of regulation are
notoriously difficult to quantify and are often downplayed or ignored
by OIRA. And when OIRA does place a value on a benefit or regulation,
it discounts those values heavily. Indeed, lives that are going to be
lost twenty or thirty years down the road are devalued to the point of
insignificance.
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\8\ See generally Frank Ackerman & Lisa Heinzerling, Priceless: On
Knowing the Price of Everything and the Value of Nothing (New Press
2004); Lisa Heinzerling, Regulatory Costs of Mythic Proportion, 107
Yale L. J. 1981 (1998).
\9\ See, e.g., Public Citizen Health Research Group v. Auchter, 702
F.2d 1150 (D.C. Cir. 1983); 796 F.2d 1479 (D.C. Cir. 1986); 823 F.2d
626 (D.C. Cir. 1987) (decisions requiring OSHA to regulate ethylene
oxide, a potent carcinogen and teratogen); International Chemical
Workers Union v. Pendergrass, 958 F.2d 1144 (D.C. Cir. 1992); 830 F.2d
369 (D.C. Cir. 1987) (decisions compelling OSHA to regulate cadmium, a
potent lung carcinogen); Public Citizen Health Research Group v. Chao,
314 F.3d 143 (3d Cir. 2002); 145 F.3d 120 (3d Cir. 1998) (decisions
forcing OSHA to regulate hexavalent chromium, a potent lung and liver
carcinogen); UAW v. Pendergrass, 878 F.2d 389 (D.C. Cir. 1989)
(decision requiring OSHA to regulate formaldehyde).
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There is also the problem of competence. The next car you buy is
almost certain to have a gauge on the dashboard to warn you when the
car's tires are under-inflated. Congress required this safety feature
after a spate of deadly roll-over crashes caused, in part, by under-
inflated tires. The National Highway Traffic Safety Administration
(NHTSA) proposed to require automobile manufacturers to install devices
that would detect under-inflated tires in virtually all cases. OIRA
insisted that NHTSA permit the installation not only of the device
NHTSA's engineers determined was best, but also a far less effective
(and less expensive) device favored by the auto industry. Not
surprisingly, NHTSA did what it was told. Empowering OIRA economists to
second-guess highly technical judgments made by expert agencies is not
good government. Ultimately, Public Citizen succeeded in getting a
court to overturn the OIRA-dictated decision and direct NHTSA to
require the installation of the more effective devices. But the
introduction of this important, life-saving device was delayed because
of OIRA's interference. This is hardly an isolated case.\10\
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\10\ OIRA's meddling in the tire pressure rule is recounted in
Public Citizen v. Mineta, 340 F.3d 39 (2d Cir. 2003). For a more
recent, but equally troubling, example of OIRA's improper meddling, see
Public Citizen v. FMCSA, 374 F.3d 1209 (D.C. Cir. 2004) (setting aside
on safety grounds a rule extending the hours truck drivers may drive
after OIRA intervened on behalf of trucking companies to reverse the
agency's proposed rule reducing the hours).
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There is also enormous delay built into OIRA review which has
resulted in the ossification of the regulatory process. The regulatory
process is so overlain with procedural and regulatory requirements that
agencies cannot get their work done in a reasonable time. It now takes
OSHA a decade to promulgate a standard to protect workers from exposure
to toxic substances.\11\ While the rule-making process grinds glacially
ahead, workers are exposed to unreasonable risks to their health and
well-being. Other agencies face comparable delays. And much of the
delay can be traced back to all of the requirements imposed by the
Executive Order.
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\11\ See Public Citizen Health Research Group v. Chao, 314 F.3d 143
(3d Cir. 2002); 145 F.3d 120 (3d Cir. 1998) (describing pace of
hexavalent chromium rule-making).
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These problems are all well-known, and in fairness to the Clinton
Administration, and my friend and co-panelist Sally Katzen, some
efforts were undertaken to address them. But Executive Order 13422
makes a bad situation worse. Let me now address how Executive Order
13422 is a significant step backwards, and an affront to the power of
Congress.
PRINCIPAL DEFECTS IN EXECUTIVE ORDER 13422
As noted above, although packaged as an innocuous and minor
amendment to Executive Order 12866, the new Executive Order takes a
number of dramatic and important steps in the wrong direction. The
principal ones are these:
1. The Amendments Impose a ``Super-Mandate'' That Supersedes
Legislation and Needlessly Burdens Already Overburdened Agencies.
The amendments to the Executive Order give OIRA a powerful new tool
to block agency action. Before moving forward with any regulatory
action, an agency must determine in writing that the action the agency
wants to take or guidance the agency wants to provide is warranted by
``market failure.'' There are several problems with the imposition of
this mandate.
First, it serves to undermine the criteria that Congress has
established for agency action. Under our system of separated powers, it
is Congress, not the Executive, that sets the substantive standards
that guide agencies in the performance of their delegated tasks.
Executive Order 13422 is at odds with this rule. No statute requires an
agency to consider ``market failure'' as a precondition to taking
action. Nor is the consideration of market failure in keeping with the
decisional criteria that Congress has established--which generally
focus on health, safety, and the protection of our environment and
natural resources. Indeed, the elevation of ``market failure'' as a key
determinant for agency action cannot be reconciled with the fundamental
goal of the health and safety statutes, which is to prevent deaths and
injuries by avoiding market failure, rather than waiting until it is
too late and market failure is evident.\12\
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\12\ I recognize that the Executive Order does not completely
foreclose the possibility that OIRA will permit an agency to proceed
with rule-making even if the agency cannot show that its proposed
action is warranted by market failure. Executive Order 13422, 1(b),
does allow an agency to make the case to OIRA that a showing of market
failure is not ``applicable'' to the proposed regulatory action. But
there are reasons to doubt that an agency intent on skirting the market
failure analysis will succeed with OIRA. For one thing, the change in
the language of 1(b) from Executive Order 12866 to Executive Order
13422 is profound; the former Order required the agency to ``identify
the problem that it intends to address. . .as well as the significance
of that problem.'' The new Order deletes that language and says that
``[e]ach agency shall identify in writing the specific market failure.
. .or other specific problem that it intends to address. . ..'' That
substitution plainly signals that, from now on, OIRA will expect to see
an economic analysis of market failure as a precondition to regulation
absent a convincing economic argument from the agency that market
failure is not at the root of the ``other specific problem'' the agency
intends to address. Moreover, the use of the word ``shall'' underscores
that agencies have no choice but to engage in this analysis, even if
the agency ultimately decides not to rest its case on market failure
grounds.
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Second, the mandate adds a burden that will sap the resources of
already overburdened agencies. To take any regulatory action at all,
agencies will have to consider ``market failure'' and write a
justification of the action it seeks to take on that basis. And for
``significant'' agency action--including ``significant'' non-binding
agency guidance documents--agencies will have to demonstrate to OIRA's
satisfaction that the failure of market forces warrants the action the
agency seeks to undertake. Giving OIRA another tool to block agency
initiatives is unwise; permitting OIRA to meddle in the substance of
agency guidance is doubly unwise.
There is a related problem as well. Where agencies propose to take
regulatory action, the Executive Order already requires agencies to
conduct a rigorous cost/benefit analysis as part of the Regulatory
Impact Analysis it must provide to OIRA. Now the amended Executive
Order requires a market failure analysis as well. The Executive Branch
apparently takes the view that it can continue to pile on analytical
requirements on overtaxed regulatory agencies without limit and without
Congress' approval. Make no mistake; each of these analytical
requirements consumes scarce resources that agencies could use to carry
out the instructions given to them by Congress. At some point--if
indeed that point has not already been reached--the requirements
imposed by Executive Order will crowd out those imposed by statute.
Third, and perhaps most problematic, while there is a modest effort
in the Executive Order to define ``market failure'' (e.g.,
``externalities, market power, lack of information''), market failure
is in the eye of the beholder. There is no commonly-accepted definition
of the term, and, as a result, much will then depend on the definition
OIRA's staff gives to the term market failure.
This concern takes on special force when one considers the views of
Susan E. Dudley, President Bush's nominee to head OIRA. Ms. Dudley's
writings suggest that she believes markets almost never fail, and that
government intervention is therefore rarely if ever appropriate.\13\
For instance, Ms. Dudley was virtually alone in opposing NHTSA's recent
advanced air-bag rule. She did so on the ground that, in her view,
there was no evidence of market failure, and therefore NHTSA's
``attempt[] to make all vehicles equally safe for occupants'' was
unwarranted.\14\ Ms. Dudley sees little room for government
intervention in the market, even for protective health and safety
regulation. Ms. Dudley's restrictive understanding of market failure
raises serious questions. If Ms. Dudley saw no evidence of market
failure with air bags--where the evidence of continual market failure
is overwhelming--would she have insisted on clearer evidence of market
failure before she let the EPA order the phase-out of lead in gasoline,
the Consumer Product Safety Commission ban the use of flammable
material for children's sleep-wear, or the FDA require that iron
pills--the single largest cause of poisoning children in the United
States--be sold in child-proof containers? We ought not wait for
``market failure'' to exact a toll on human health and safety before we
permit our agencies to act. In the health and safety context, the only
way market failure becomes apparent is when the body count gets too
high. The point of regulation is to prevent market failure, not to try
to remedy it once the damage is done. The Executive Order subverts that
fundamental principle.
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\13\ Ms. Dudley's writings are explored in depth in a report by
Public Citizen and OMB Watch entitled The Cost Is Too High: How Susan
Dudley Threatens Public Health Protections (Sept. 2006) (available at
http://www.citizen.org/publications/release.cfm?ID=7448&secID=
2565&catID=126).
\14\ Susan E. Dudley, Regulatory Studies Program Comments: Advanced
Air Bags 7 (Dec. 17, 1998) (available at http://
mercatus.org.repository/docLib/MC-RSP-PIC1998-
04-NHTSA-AirBags-981130.pdf).
2. The Amendments Inappropriately Expand OMB's Authority and Entrench
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Gridlock.
Whatever the wisdom of centralized OIRA review of binding agency
rules, the same arguments do not extend to centralized review of non-
binding guidance. Agencies provide guidance constantly, in literally
hundreds of guidance documents or interpretative missives each year.
Consider just one agency. The most recent listing of the titles of
guidance documents used by the Food and Drug Administration was
published in January 2005. It runs nearly ninety pages in the Federal
Register.\15\
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\15\ 70 Fed. Reg. 824-913 (Jan. 5, 2005); see also FDA Center for
Drug Evaluation and Research List of Guidance Documents (Feb. 1, 2007)
(33-page document setting forth currently in force guidance documents)
(available at http://www.fda.gov/cder/guidance/
CompList02-2007.pdf). The CRS Report cited above, supra n.1,
notes that the Occupational Safety and Health Administration reported
in 2000 that it had issued 3,374 guidance documents since March 1996,
thus averaging around 1,000 guidance documents a year. CRS Report at
10, n.22.
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Agencies often use guidance documents to help industry meet
regulatory obligations in time-sensitive or emergency situations. For
example, OSHA's most recent guidance document provides employers with
advice about how to address an influenza pandemic,\16\ one of the FDA's
most recent guidance documents advises clinical laboratories on how to
address public health problems that resulted from the failure of
certain laboratories to properly conduct tests on human donors,\17\ and
one of the EPA's most recent guidance documents provides advice to
manufacturers of antimicrobial agents on how to properly test and
register their products with the EPA.\18\
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\16\ OSHA, Guidance Document for Preparing Workplaces for an
Influenza Pandemic (2007) (available at http://www.osha.gov/
Publications/influenza-pandemic.html).
\17\ FDA, Center for Biologics Evaluation and Research, Certain
Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/Ps)
Recovered From Donors Who Were Tested For Communicable Diseases Using
Pooled Specimens or Diagnostic Tests (Jan. 23, 2007) (available at
http://www.fda.gov/cber/gdlns/hctppool.htm).
\18\ EPA, Regulating Antimicrobial Pesticides (Jan. 25, 2007)
(available at http://www.epa.gov/oppad001).
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Congress has long understood that, when it comes to the provision
on guidance and advice, it is unwise to erect barriers between agencies
and regulated entities and the public. Government must be accessible to
those it regulates and to those who benefit from regulation. For that
reason, when Congress enacted the Administrative Procedure Act, it
exempted guidance documents and interpretative pronouncements from all
of the informal and formal rule-making requirements of the Act.
Executive Order 13422 upsets Congress' judgment on that balance.
Before issuing any guidance document, an agency must address in writing
the question of ``market failure''--an analytic requirement that will
delay the issuance of sorely needed guidance. The Executive Order is
also highly prescriptive about the contents of guidance documents.
Rather than permit agencies to retain flexibility and tailor guidance
documents to their audiences, the Executive Order instructs agencies
that every guidance document must (a) be based ``on the best reasonably
obtainable scientific, technical, economic, and other information;''
(b) be compatible and not duplicative of guidance given by other
agency; (c) be ``simple and easy to understand;'' and (e) be tailored
``to impose the least burden on society, including individuals,
businesses of different sizes, and other entities. . .taking into
account, among other things, the costs of cumulative regulations.''
\19\
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\19\ Executive Order 13422, 1(b)(1), 1(b)(7), 1(b)(10), 1(b)(11)
& 1(b)(12).
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Not only do ``significant'' guidance documents have to survive that
gauntlet,\20\ but also subjecting them to full-bore OIRA review invites
additional, substantial delays. There is a conspicuous and undoubtedly
deliberate omission in the new Executive Order. Although the amended
Order retains the long-standing time constraints on OIRA to act on
agency regulatory proposals, there is no similar time limit on OIRA's
review of guidance documents.\21\ If OIRA takes months or longer to
review a guidance document OIRA deems significant, the agency has no
recourse under the Executive Order. If the past is prologue, OIRA
review process will certainly delay, often substantially, the issuance
of needed significant guidance.\22\
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\20\ There is a definitional ambiguity embedded in the Executive
Order that gives OIRA broad authority to designate virtually any
guidance document ``significant,'' triggering mandatory OIRA review. In
section 3(h)(1)(A), the Order defines the term ``[s]ignificant guidance
document'' as one that ``may reasonably be anticipated to. . .[l]ead to
an annual effect of $100 million or more or adversely affect in a
material way the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities.'' Because guidance
documents are by definition non-binding, it is difficult to see how one
could ``lead to an annual effect of $100 million or more,'' although
the phrase ``lead to'' permits OIRA to claim that even the most
indirect action by the agency could have a substantial effect on the
economy. OIRA has already suggested that it will take this view. See
OMB, Final Bulletin for Agency Good Guidance Practices, 72 Fed. Reg.
3432 (Jan. 25, 2007). But aside from the indirect effects point, the
definition is written in the disjunctive and it is easy to see how one
could argue that virtually any guidance document that addresses broad
public health questions, such as OSHA's guidance on pandemic influenza
or the EPA's guidance on antimicrobial agents, might be said to
``adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety.'' Thus, it is difficult to tell what guidance
documents might be deemed ``significant.'' It could be that hundreds or
thousands of guidance documents each year would qualify under this
potentially sweeping definition--a concern heightened because OIRA, not
the agency, will have the final say on what constitutes a
``significant'' guidance document.
\21\ Compare Executive Order 13422, 9 (requiring agency
consultation with OIRA on significant guidance documents but not
setting any time limit for such consultation) with id. 6 & 8
(setting strict time limits for OIRA/agency consultation on
regulations).
\22\ The CRS Report, supra n.1, raises another question of
omission: Executive Order 13422 does not clearly extend the
transparency requirements applicable to rule-makings to OIRA review of
guidance documents. CRS Report at 11-12. As I read the new Order, CRS's
concerns are well-founded. There is nothing in the Order that makes
explicit that the transparency and accountability provisions relating
to OIRA clearance of rule-makings apply to OIRA review of guidance
documents, and one may reasonably conclude that omissions of this sort
are not inadvertent. Congress, of course, has at times been critical of
OIRA's penchant for behind-close-door dealings in the past, and the
apparent decision to shield agency-OIRA interactions over guidance
documents from public view appears to be an unwarranted return to the
past.
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3. Rationing of Health and Safety Protection.
Executive Order 13422 also sets the stage for the resurrection of
the discredited concept of a ``regulatory budget.'' Under the new
Order, ``no rule-making may be commenced'' unless it appears on the
agency's Regulatory Plan and the agency sets forth ``the agency's best
estimate of the combined aggregated costs and benefits of all its
regulations planned for that calendar year.'' \23\ These estimates give
OIRA the ability effectively to cap the amount of compliance costs an
agency may impose in a calendar year--or set a ``regulatory budget''--a
power OIRA has long coveted.
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\23\ Executive Order 13422, 4(c)(1)(B).
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The goal of this amendment is quite clearly to limit industries'
exposure to regulatory costs. OIRA could wield this tool regardless of
whether the compliance costs will be absorbed by different industries,
regardless of the benefits that flow from regulation, and regardless of
the mandates Congress has set for the agencies. If Congress believes it
is appropriate to experiment with regulatory budgeting, that is one
thing. It is quite another for the Executive Branch to arrogate that
power to itself.
4. Further Politicization of the Regulatory Process.
Executive Order 13422 breaks from past practice in another
important respect: It requires each agency to designate a political
appointee to head its regulatory policy office. In many agencies, the
regulatory policy office has traditionally been headed by a career
civil servant who is an expert in the arcane details of regulation.\24\
But in all agencies, regulatory action is reviewed and approved by the
agency head, or his designee, to ensure that there is political
accountability for agency actions.
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\24\ On this issue in particular, I want to endorse the views of
Columbia University Law Professor Peter L. Strauss, who is testifying
on Executive Order 13422 today before the House Judiciary Committee's
Subcommittee on Commercial and Administrative Law. Professor Strauss
suggests that Congress, not an agency head or the White House, ought to
select the regulatory officer, a suggestion I endorse. The CRS Report,
supra n.1, also suggests that this portion of the Executive Order might
run afoul of the Appointments Clause on the ground that with the
enhanced powers provided by the Executive Order, the policy officer
must be seen as a principal officer of the United States, requiring
Senate confirmation under Buckley v. Valeo, 424 U.S. 1, 126 (1976).
Although the courts have been wary about Appointments Clause claims,
the CRS Report raises serious constitutional questions that should be
explored fully by Congress.
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The amendments to the Executive Order, however, undermine the
authority Congress has conferred on the agency head. This is a
troubling development that Congress ought to care deeply about. The
statutes Congress enacts to delegate decisional power to agencies
explicitly designate the agency head--and not a subordinate--as the
decision-maker. Congress is careful to designate the agency head to
ensure that decisions are made by an official accountable to Congress
as well as the President. To be sure, the President retains the power
of appointment and removal, but Cabinet Secretaries and agency heads
are presumed to have the power to decide questions independently, even
at the risk of removal. Disputes between the White House and Cabinet
officers and agency heads have emerged and, at times, the White House
has relented.
The amended Executive Order strips Congress' designation of much of
its force by giving a different political appointee--accountable to the
President but not necessarily to Congress--substantial control over the
agency's regulatory output. This is not hyperbole. The Order expands
the duties of the policy officer, providing that, ``[u]nless
specifically authorized by the head of the agency, no rule-making shall
commence nor be included on the [agency's annual regulatory] Plan
without the approval'' of the policy officer.\25\ Under the new Order,
the policy officer--who has ties with and owes his allegiance to the
White House--will be the gatekeeper of the agency's regulatory output.
As The New York Times put it, ``[t]he White House will thus have a
gatekeeper in each agency to analyze the costs and benefits of new
rules and to make sure the agency carries out the president's
priorities,'' \26\ which are not necessarily Congress' priorities.\27\
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\25\ Executive Order 13422, 4(c)(1) (emphasis added).
\26\ Robert Pear, Bush Directive Increases Sway on Regulation, N.Y.
Times, A1 (Jan. 30, 2007).
\27\ The CRS Report, supra n.1 at 7 & n.16, suggests that the
problems I see in this provision of the Order may be more theoretical
than real, because many of the presidential appointees in the major
agencies are subject to Senate confirmation. I am skeptical of this
assertion. For years, the White House has used non-career SES slots to
place presidential appointees in high-level, non-confirmation positions
at many agencies, such as the non-career deputy commissioners at the
Food and Drug Administration. The CRS Report recognizes the possibility
that these appointees will qualify under the Executive Order and
concedes that if these appointees qualify ``then the agency heads would
have a wider range of 'presidential appointee' positions from which to
designate regulatory policy officers.'' Id. Because the White House
alone will decide which appointees qualify as ``presidential
appointees'' under the Executive Order, I do not believe that the
narrow view of what constitutes a ``presidential appointee'' expressed
in the CRS Report will be the one chosen by the White House, which has
strong incentives to ensure that its operatives are appointed agency
regulatory officers.
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5. The Push to Formal Rule-making.
Executive Order 13422 amends section 6 of Executive Order 12866 by
adding the following: ``In consultation with OIRA, each agency should
also consider whether to utilize formal rule-making procedures under 5
U.S.C. 556 and 557 for the resolution of complex determinations.'' To
administrative law scholars, the suggestion that the White House is
pushing agencies to undertake formal rule-making under sections 556 and
557 of the Administrative Procedure Act is both stunning and stunningly
ill-advised. To begin with, it betrays a misunderstanding of
administrative law to call sections 556 and 557 ``rule-making''
provisions; they are not, they are ``hearing'' provisions. Rule-making
under the APA is generally governed by section 553, which calls for
notice and comment rule-making, not rule-making based on a formal
hearing. Sections 556 and 557 establish procedures for formal agency
adjudicatory hearings (a) where adjudications are required under
section 554 of the APA or (b) in those rare instances in which Congress
has specified that an agency must hold a hearing as part of its rule-
making process. But agencies do not voluntarily hold hearings in rule-
making proceedings. Formal hearings are notoriously cumbersome, labor-
intensive, and time-consuming and agencies have long sought to avoid
them by any means possible--a stratagem largely endorsed by the
Courts.\28\ Moreover, in the rare instances in which agencies engage in
formal hearings under sections 556 and 557, the hearing is used to
resolve matters of dispute between two parties, or among a small number
of discrete parties--such as a proceeding to confer a license on one of
two or more competing parties. Unless mandated by Congress, formal
hearings have not been used to establish regulatory policy or rules of
general applicability for decades, and no one has advocated otherwise,
until the issuance of Executive Order 13422.\29\
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\28\ See generally United States v. Florida East Coast R.R. Co.,
410 U.S. 224 (1973); Chemical Waste Management, Inc. v. EPA, 873 F.2d
1477 (D.C. Cir. 1989) (rejecting claim for formal hearing in part on
efficiency grounds).
\29\ See generally ACUS Recommendations 72-5, Procedures for the
Adoption of Rules of General Applicability, 38 Fed. Reg. 19782 (1972)
(arguing that proceedings under section 556 and 557 should be sharply
circumscribed).
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The inclusion of this provision in the Executive Order heightens
concern about the purpose of the Order. As I have explained, one
inevitable consequence of Executive Order 13422 is that it will lead to
the further ossification of an already overburdened administrative
process. As an instrument of delay, formal rule-making has no peer; it
is the American version of Dickens' nightmarish Jardynce v. Jardynce.
Empowering OIRA to push agencies to employ formal rule-making to make
complex determinations sends a disturbing signal, namely that delay and
not resolution is the real goal.
CONCLUSION
Executive Order 13422 constitutes an unprecedented consolidation of
power over our regulatory agencies in the White House. It also
constitutes an unprecedented assault on the ability of Congress to set
the substantive standards that guide agencies in the performance of
their delegated tasks. The consequences of this shift are far-reaching
and tragic. Effective regulation is essential to our nation's well-
being. For that reason, administrative agencies were created to bring
expertise, independence, and transparency to the regulatory process.
This Executive Order undermines those values. It gives a small group of
generalists at OIRA the power to second-guess and undermine the expert
and impartial judgments of the scientists, physicians, epidemiologists,
engineers, and toxicologists who staff our health and safety agencies.
It holds health and safety regulation hostage to economic
considerations of market failure and cost/benefit analysis. It puts
partisan politics at the center of our regulatory process by giving the
White House substantial control over the day-to-day work of our
agencies. And it undermines transparency by establishing an off-the-
record process for OIRA review of significant guidance documents.
Congress has acquiesced in this accretion of power to the
President. I would urge that the time has come for Congress to consider
reclaiming its authority. Thank you.\30\
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\30\ I would like to acknowledge the assistance of Sandra C.
George, a third-year student at Georgetown University Law Center, in
the preparation of this testimony.
Biography for David C. Vladeck
David C. Vladeck is the Director of the Institute for Public
Representation and Associate Professor of Law at Georgetown University
Law Center. He teaches courses in federal courts, civil procedure, and
first amendment litigation, and co-directs the Institute for Public
Representation, a clinical law program at the Law Center where he
handles a broad array of civil rights, civil liberties, first
amendment, open government, and regulatory litigation.
Prior to joining the Georgetown faculty in 2002, Professor Vladeck
spent nearly 30 years with Public Citizen Litigation Group, serving as
its Director from 1992 to 2002. He has handled a wide range of complex
litigation, including first amendment, health and safety, civil rights,
class actions, preemption and open government cases. He has argued a
number of First Amendment and civil rights cases before the United
States Supreme Court, and more than 60 cases before the federal courts
of appeal and state courts of last resort.
Professor Vladeck also testifies before Congress, advises Members
of Congress on legal matters, and writes on administrative law, first
amendment, legal ethics, and access to justice issues. He serves as a
Scholar with the Center for Progressive Reform and on the boards of
various non-profit organizations. He has also served on the Council of
the Administrative Law and Regulatory Practice Section of the American
Bar Association, as a Public Member of the Administrative Conference of
the United States, and as the Chair of the Administrative Law Section
of the District of Columbia Bar. Professor Vladeck received his
undergraduate degree from New York University, his law degree from
Columbia University School of Law, and an LL.M. degree from Georgetown
University Law Center.
Chairman Miller. Thank you, Mr. Vladeck. Mr. Kovacs. I
wasn't paying attention.
STATEMENT OF MR. WILLIAM L. KOVACS, VICE PRESIDENT,
ENVIRONMENT, TECHNOLOGY, AND REGULATORY AFFAIRS, U.S. CHAMBER
OF COMMERCE
Mr. Kovacs. Thank you, Mr. Chairman, and Ranking Member
Sensenbrenner.
It is really a privilege to be here today, and to discuss
oversight issues with federal agencies. The Chamber cares about
this issue probably more than any other issue. The regulatory
mill, contrary to what has been stated, has not stopped. There
are about 110,000 regulations out there right now. There are
4,000 new regulations a year. The cost to the American economy
is about $1.1 trillion, and to put it in perspective, there are
only $857 billion in individual income taxes, and another $226
billion in corporate taxes, so it is one significant mandate.
It costs small business about 45 percent more than it costs a
large business to comply with it.
So, the regulatory mill, and the regulation mill, hasn't
stopped. Executive Order 13422, you know, there is a lot of
hyperbole and a lot of rancor about this, but this Executive
Order contains nothing that hasn't been contained in an
Executive Order since the Presidency of Richard Nixon, and
through Nixon, with his quality of life, and Jimmy Carter, with
his regulatory reform, right through Reagan and Bush and
Clinton, have all issued something like this. And it is an
attempt by the Administrations to get some management structure
in the agencies, because what does it ask them to do? It asks
them to--asks to state a purpose for the rule. It asks that
they have a cumulative cost benefit, which some people would
say is new, but it actually came in Carter's time, and to have
a regulatory appointment. That also came in Carter's time.
And during this same 30 year time period, it hasn't been as
if the agencies were just off, or the executive was off trying
to manage the agencies. Congress has gone through the
Regulatory Flexibility Act, where you have asked the agencies
every seven years to come back and talk about the regulations
that should be eliminated, or Small Business Regulatory
Fairness Act (SBREFA) with Congressional review, or negative--
or reg negs. You can go through a whole list. This has been a
bipartisan effort for 30 years, and it is an attempt to manage.
The Good Guidance Practices, yeah, we did comment on it,
and most of the comments were very positive. But what does it
ask the public to do? It asks the public and the agencies that
if you have a significant guidance document, and some of these
guidance documents are very significant, because on top of the
110,000 regulations, you have several--tens of thousands of
guidance documents. What does it ask them to do? It says if it
has got significant guidance, of general applicability to the
entire regulated community, what should you do? You should put
it on your website? That is corrupting government? You should
put it on your website, and allow the public to comment? You
should give them a list of documents, and put it on your
website, so that the public knows what the guidance is?
Everyone feels sorry--oh, the poor small business can't speak
to a regulatory officer. That is foolish. They--it has got to
be of general applicability, and it requires notice and comment
on the website.
The second part of it is if it is an economically
significant rule, which imposes costs of $100 million or more,
then they have to put a notice in the Federal Register, and
they have to accept comments from the public. I don't know that
these are huge burdens, but what it does do is it opens up the
transparency. Think about it. You are a small business in North
Carolina, and you have got a set of regulations that are four
feet long and six feet high, going up to the ceiling, and you
have to deal with health issues, pensions, environmental
issues, OSHA issues, and everything else, and you have got to
deal with it every day, and you have ten employees.
And so, what this is doing is it is making the process more
transparent, and it is putting, yes, a political figure,
someone who works for the President of the United States, who
is the executive officer of the United States, and is trying to
manage a government that he really has a very difficult time
controlling. There are all these buildings that you look at,
with all these regulations coming out of these buildings, and
what is he asking the political officer to do? He is saying:
``Look, I have got a policy here, I want regulations that have
some compliance with my Executive Orders. Would you tell me if
the agency is not going to comply with my Executive Order?'' I
don't think that that is an unreasonable request.
And then, finally, over the years, the courts have been
very clear on Executive Orders and guidance documents. I mean,
on the guidance documents, Appalachia Power, the D.C. Court of
Appeals made it very clear, if it has got the force and effect
of law, it is a regulation, whether you call it guidance or
regulation. All this Executive Order is trying to do is say it
doesn't matter whether it is guidance or regulation, let us
have the public have the right to comment.
And then, finally, even on the scope of the Executive
Order, the courts have dealt with these for years, since Harry
Truman and the Steel Seizure case, if the President is
legislating, then it is unconstitutional. If the President is
managing government, then it is within his prerogative, and I
think that this is--I really thank you for having this hearing,
because I think that having a discussion over the role of
agencies and government is really crucial, and I think you are
doing a great service to everyone.
Thank you.
[The prepared statement of Mr. Kovacs follows:]
Prepared Statement of William L. Kovacs
Chairman Miller, Ranking Member Sensenbrenner, and Members of the
Subcommittee, thank you for inviting me here today to testify
concerning the Administration's amendment to Executive Order 12866
(which is in the form of E.O. 13422) and the Office of Management and
Budget's (OMB) Final Bulletin for Agency Good Guidance Practices. I am
William Kovacs, Vice President of Environment, Technology, and
Regulatory Affairs at the U.S. Chamber of Commerce. The U.S. Chamber is
the world's largest business federation, representing more than three
million businesses and organizations of every size, sector, and region.
More than 96 percent of the U.S. Chamber's members qualify as small
businesses.
WHY WE CARE
As a business federation, the U.S. Chamber is all too familiar with
the overwhelming regulatory burdens our members face at the hands of
government regulators. Each year approximately 4,000 new regulations
are issued by federal agencies, and the Federal Register exceeds 73,000
pages annually.\1\ Currently, there are more than 110,000 regulations
in existence,\2\ not including the thousands of guidance documents that
implement them! Since 1995, more than 44,000 new final rules have been
issued. The annual cost to implement the Nation's regulatory system
exceeds the amounts collected from individual income taxes.\3\
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\1\ Ten Thousand Commandments: An Annual Snapshot of the Federal
Regulatory State, by Clyde Wayne Crews, Vice President for Policy and
Director of Technology Studies at the Competitive Enterprise Institute
(June 28, 2006).
\2\ John D. Graham, Administrator of the Office of Information and
Regulatory Affairs, Testimony before the Subcommittee on Energy Policy,
Natural Resources, and Regulatory Affairs, U.S. House of
Representatives (Nov. 17, 2004).
\3\ Ten Thousand Commandments: An Annual Snapshot of the Federal
Regulatory State, supra, pg. 6. The amount of individual income taxes
collected in 2005 was $894 billion, and the amount of corporate income
taxes collected was $226 billion.
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Moreover, the cost of federal regulations to the public is
estimated to be as high as $1.13 trillion\4\--a cost which equals
almost half the amount of last year's entire federal budget! \5\ And
the impact of federal regulations is especially severe on small
businesses. For example, the annual cost of all federal regulations is,
on a per employee basis, $7,647 for firms with fewer than 20
employees--nearly 45 percent higher than the $5,282 for companies with
500 or more employees.\6\
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\4\ The Impact of Regulatory Costs on Small Firms, Report RFP No.
SBHQ-03-M-0522, by W. Mark Crain, Lafayette College, for The Office of
Advocacy, U.S. Small Business Administration (Sept. 2005).
\5\ Budget of the United States Government, Fiscal Year 2005,
Office of Management and Budget. Accessible at: http://
www.whitehouse.gov/omb/budget/fy2005/.
\6\ Ibid, footnote 2, page 5.
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In addition, the number of paperwork burden hours--hours spent by
businesses in preparing paperwork imposed by federal regulations--has
skyrocketed. Last year alone, the number of paperwork burden hours
imposed on the public exceeded an extraordinary 10.5 billion hours--the
highest in history--and 2.5 billion hours more than just two years
ago.\7\
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\7\ Paperwork Reduction Act: New Approaches Can Strengthen
Information Collection and Reduce Burden, U.S. Government
Accountability Office Report, GAO-06-477T, pg. 7, Washington, DC (Mar.
8, 2006).
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With the regulatory process so increasingly complex and expensive,
it is easy to understand why Presidents and Congress--both Democrat and
Republican--have tried, albeit unsuccessfully, to exercise some
management responsibility over the system. And, similarly, it is hard
to understand the current fervor over Executive Order 13422 and OMB's
Final Bulletin for Agency Good Guidance Practices (GGP). The E.O. and
GGP are merely the latest efforts in a long-term, bipartisan attempt to
exercise oversight of the regulatory process. Congress certainly would
not want guidance documents masquerading as regulations, adding cost
and complexity to the regulatory process and without appropriate public
review and comment as required by the Administrative Procedure Act
(APA).
In my testimony today, I want to make three key points:
1. Regulatory reform is not new--rather it has been an ongoing
bipartisan effort for more than 30 years;
2. E.O. 13422 and GGP are essential tools for the executive
branch to exercise oversight over the regulatory process; and
3. E.O. 13422 and GGP are part of a larger government effort
to ensure and maximize the quality, utility, integrity, and
objectivity of information disseminated by the Federal
Government.
BACKGROUND
One of the fundamental cornerstones of good government is ensuring
that the public has the opportunity to participate in the policy-making
process. This participation allows the public to have a voice in the
making of the laws that regulate them. Public participation protects
citizens from arbitrary decisions by federal agencies by enabling
citizens to effectively engage in the rule-making process.
Citizens cannot participate effectively, however, without knowing
all the facts. Why do we need this rule? How much will it cost to
implement? How does it fit in with other regulations? Without such
basic information, citizens are precluded from intelligently voicing
their concerns. Rules do not operate in a vacuum. As such, their cost
and impact must be considered in conjunction with other rules.
Likewise, federal agencies exclude the public by issuing documents
that are not legally binding, yet effectively regulate people's
behavior. By calling such documents ``guidance,'' they circumvent the
public participation requirements guaranteed by the APA. By law, agency
advisory opinions and guidance documents have no legally binding
effect. They are merely an agency's interpretation of how the public
can comply with a particular rule or regulation. Unfortunately,
however, the use of guidance documents to regulate the public has
become a common practice. That is, even though guidance documents do
not have legally binding effect, they have practical binding effect
when the agencies use them to establish criteria that affect the rights
and obligations of private persons.
It is far easier to issue a guidance document than to undergo the
rigors of rule-making. Consider that rule-makings require internal
agency review, public participation (including notice and comment under
the APA), compliance with the analytical requirements of Executive
Order 12866, the Regulatory Flexibility Act, and the Unfunded Mandates
Reform Act, OMB review, Congressional review, and potentially judicial
review. Because of these stringent requirements, agencies have a strong
incentive to issue rules as less procedurally onerous guidance
documents that--intentionally or not--cut the public and the regulated
community out of the process.
The problem with regulations and guidance documents is symptomatic
of a larger problem concerning the entire regulatory system. But, over
the years, efforts have been made to address it.
I. REGULATORY REFORM HAS BEEN A BIPARTISAN EFFORT
For years, the Executive and Legislative branches of government--
regardless of party or politics--have tried hard to exercise oversight
over a cumbersome, complex, and often times inequitable regulatory
system.\8\ Through a vast array of executive orders and statutes,
efforts to inject sanity into the regulatory process have made slow,
but noticeable, progress.\9\ As guidance document abuse became more and
more prevalent,\10\ however, Congress again intervened to try to
correct the inequity. In 2000, the House Committee on Government Reform
adopted a report titled ``Non-Binding Legal Effect of Agency Guidance
Documents,'' which highlighted agency abuse of guidance documents and
severely criticized the use of such so-called ``backdoor regulation.''
\11\ Still, agencies continued to issue guidance to effectively
regulate the public. The judicial branch eventually weighed in, with
courts alerting congress to the problem, and encouraging legislation to
correct it:
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\8\ For example, Executive Order 12044, Improving Government
Regulations, signed by President Carter in 1978, established
requirements for centralized review of regulations and the preparation
of regulatory analyses, and mandated that agencies ``periodically''
review existing regulations. Executive Order 12866, Regulatory Planning
and Review, was signed by President Clinton in 1993 and required
agencies to review existing regulations to identify which could be
modified or eliminated. Section 610 of the Regulatory Flexibility Act
requires federal agencies to review regulations every 10 years to
determine whether they are meeting their objectives and if they should
be rescinded.
\9\ See Appendix A.
\10\ Perhaps the most notorious example of an agency guidance
document regulating behavior is EPA's ``Interim Guidance for
Investigating Title IV Administrative Complaints Challenging Permits''
(the so-called ``Environmental Justice'' guidance), which a GAO
investigation subsequently concluded was a rule disguised as guidance.
\11\ H. Rep. 106-1009 (106th Cong., 2d Sess. 2000).
The phenomenon we see in this case is familiar. Congress
passes a broadly worded statute. The agency follows with
regulations containing broad language, open-ended phrases,
ambiguous standards and the like. Then as years pass, the
agency issues circulars or guidance or memoranda, explaining,
interpreting, defining and often expanding the commands in
regulations. One guidance document may yield another and then
another and so on. Several words in a regulation may spawn
hundreds of pages of text as the agency offers more and more
detail regarding what its regulations demand of regulated
entities. Law is made, without notice and comment, without
public participation, and without publication in the Federal
Register or the Code of Federal Regulations.\12\
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\12\ Appalachian Power Co. v. EPA, 208 F.3d 1015 (D.C. Cir. 2000)
(striking down emissions monitoring guidance as legislative rule
requiring notice and comment). See also, Chamber of Commerce v. Dept.
of Labor, 174 F.3d 206 (D.C. Cir. 1999) (striking down OSHA Directive
as legislative rule requiring notice and comment); General Electric Co.
v. EPA, 290 F.3d 377 (D.C. Cir. 2002) (striking down PCB risk
assessment guidance as legislative rule requiring notice and comment).
Even the American Bar Association, recognizing the problem with
guidance documents, stated in its Annual Report Including Proceedings
of the Fifty-Eighth Annual Meeting, August 10-11, 1993, Vol. 118, No.
2, at 57: ``Before an agency adopts a non-legislative rule that is
likely to have a significant impact on the public, the agency must
provide an opportunity for members of the public to comment on the
proposed rule and to recommend alternative policies or interpretations,
provided that it is practical to do so; when non-legislative rules are
adopted without prior public participation, immediately following
adoption, the agency must afford the public an opportunity for post-
adoption comment and give notice of this opportunity.''
While presidential and Congressional efforts at regulatory reform
---------------------------------------------------------------------------
have improved the system, much work remains to be done.
II. THE E.O. AND GGP ARE ESSENTIAL TO EXERCISING OVERSIGHT OVER THE
REGULATORY PROCESS
a. E.O. 13422
When President Bush signed Executive Order 13422, he was expanding
the scope of E.O. 12866, issued under President Clinton, to include not
just rules, but also, for the first time, guidance documents. This
would serve to correct the abuse of guidance documents by federal
agencies seeking to avoid public participation in the policy-making
process. Far from being radical, E.O. 13422 merely instructs federal
agencies to:
1. State the reason for the regulation;
2. State the cost of the regulation, and an estimate of the
combined costs and benefits of all of its regulations planned
for that calendar year (to assist with the identification of
agency priorities); and
3. Have a Regulatory Policy Officer ensure that these
requirements have been followed by the agency.
Perhaps the most talked about requirement in E.O. 13422 has been
the appointment of a Regulatory Policy Officer (RPO) by the President.
Critics have declared that this provision is an illegal expansion of
executive authority because it allows the President to control the
regulatory agenda. Yet what is it the RPO is tasked to do? First, the
RPO ensures that any guidance document is not actually a rule--one that
will regulate public behavior. Second, the RPO ensures that the agency
has explained the need for a rule, and has looked at the costs and
benefits of the proposed rule, and the aggregate costs and benefits of
all the rules being issued by that agency for the year. If it hasn't,
then the RPO can notify OMB. Is it really so insidious to require
accountability in our rule-making process?
Nevertheless, critics continue to decry E.O. 13422 as an
unwarranted (and possibly unconstitutional) expansion of executive
power. Yet, without delving into a constitutional law treatise on the
subject--which is beyond the scope of this testimony--it is certainly
well settled that the President has the power to make political
appointments of officers within his own executive agencies.\13\
Hysterical claims of unconstitutional ``power grabs'' only serve to
distract us from the important and sizable problems with the regulatory
process that E.O. 13422 is intended to address.
---------------------------------------------------------------------------
\13\ Article II, U.S. Constitution.
---------------------------------------------------------------------------
b. GGP
The final version of OMB's GGP bulletin, released simultaneously
with the President's E.O. 13422, establishes policies and procedures
for the development, issuance and use of significant guidance documents
in order to increase the quality and transparency of internal agency
practices. The purpose of GGP is to ensure that guidance documents of
Executive Branch departments and agencies are developed with
appropriate review and public participation, accessible and transparent
to the public, and not improperly treated as legally binding. The GGP
also provides a distinction between what does and does not constitute a
guidance document to provide greater clarity to the public.
Such criteria are not new. In fact, there is a strong foundation
for establishing standards for the initiation, development, and
issuance of guidance documents to improve their quality and
transparency. The former Administrative Conference of the United States
(ACUS), for example, developed recommendations for the development and
use of agency guidance documents.\14\ In 1997, the Food and Drug
Administration (FDA) created a guidance document distilling its good
guidance practices.\15\ Congress then codified aspects of the FDA
document into the Food and Drug Administration Modernization Act of
1997.\16\ Much of GGP is modeled on the FDA's early efforts.
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\14\ ACUS, Rec. 92-2, 1 C.F.R. 305.92-2 (1992).
\15\ Notice, ``The Food and Drug Administration's Development,
Issuance, and Use of Guidance Documents,'' 62 FR 8961 (Feb. 27, 1997).
\16\ Public Law No. 105-115.
III. E.O. 13422 AND GGP ARE PART OF A LARGER GOVERNMENT EFFORT TO
INCREASE TRANSPARENCY AND MAXIMIZE THE QUALITY, UTILITY, INTEGRITY, AND
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OBJECTIVITY OF INFORMATION DISSEMINATED BY THE FEDERAL GOVERNMENT
E.O. 13422 and the GGP are part of a long effort by Congress and
several Administrations to improve the transparency and quality of
government data and provide effective parameters to guide the
regulatory activities of federal agencies.\17\ These efforts finally
coalesced in the passage of the Information Quality Act (IQA) in 2001,
which serves as the basis for the issuance of the GGP. Were it not for
a unified commitment to quality data by this and former Administrations
and Congresses--as exemplified in the passage of the IQA--the GGP would
not exist today.
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\17\ See Appendix A.
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In order to understand the connection between GGP and IQA, it is
helpful to understand what the IQA really is.
More than any law before it, the IQA served to promote integrity in
the agency decision making process, and to enhance the accuracy of the
data underlying government regulatory decisions. It does this by
creating a mechanism by which the public can challenge poor data. In
this way, the IQA is a tool for everyone--from industrialists to
environmentalists--providing equal opportunity to correct faulty
government data.
Data quality is a matter of great importance to all of us. For me
to have confidence that my decisions are sound, I must have good
information. This is just plain common sense. Similarly, Members of
Congress must be able to rely on their staff to provide good
information. Why shouldn't we be able to expect United States
government agencies to do the same, that is, rely on good information
when developing regulations and guidelines?
The IQA seeks to assure that this expectation can in fact be
realized. It requires federal agencies to ensure and maximize the
quality, objectivity, utility, and integrity of disseminated
information and establishes a system whereby interested parties can
seek correction of erroneous, disseminated information. Ideally, the
Act improves information quality, and in so doing, provides a firmer
basis for regulatory authorities to make sound policy decisions. This
is why the Chamber has been one of the strongest proponents of the IQA.
At the time of its passage, just like now with the issuance of E.O.
13422 and the GGP, many critics insisted that the IQA would ``shut
down'' the regulatory process, result in thousands of regulatory
challenges, and ultimately rollback environmental, health and safety
protections in this country. Of course, nothing of the sort occurred.
In fact, in FY 2005 only 27 IQA petitions were filed with federal
agencies. And only 12 IQA appeals were handled by federal agencies that
year--two new appeals, and 10 from FY 2003 and FY 2004.\18\
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\18\ 2006 Report to Congress on the Cost and Benefits of Federal
Regulations and Unfunded Mandates on State, Local, and Tribal Entities,
OMB's Office of Information and Regulatory Affairs. January 2007.
---------------------------------------------------------------------------
Nevertheless, even faced with these facts regarding the IQA, there
are still people that claim the law is an underhanded attempt by
industry to stymie the regulatory system. It is difficult to understand
why people wouldn't want regulations based on the most accurate and
objective available data. It is likely they are the same people that
are currently decrying E.O. 13422 and GGP, and, consequently, time will
again prove them wrong. But more importantly, it is essential that
federal agencies clearly explain to the American public why they are
issuing rules, and the cost of these rules. For after all, it is the
American public that must live under these rules, and as a society of
laws, not of men, it is not unreasonable to ask that our government
clearly explain to us what they are asking us to obey, particularly
when disobedience results in severe civil and criminal penalties.
CONCLUSION
The long-standing debate over regulatory reform will not end today.
The U.S. Chamber strongly believes that the regulatory reform process
is critical to ensuring that regulations and guidance documents are
sound, balanced, cost-effective, and open to the public. Congress must
not abandon its oversight role in this area, and the U.S. Chamber
applauds this committee for this hearing today.
The U.S. Chamber is grateful for the opportunity to present its
views about this important topic.
Biography for William L. Kovacs
Bill Kovacs provides the overall direction, strategy, and
management of the Environment, Technology & Regulatory Affairs division
of the U.S. Chamber of Commerce, the world's largest business
federation representing more than three million businesses of every
size, sector, and region.
Since assuming the position of Vice President in March 1998, Mr.
Kovacs has transformed a small division that has focused on a handful
of issues and committee meetings into one of the most significant in
the institution. Presently, the Environment, Technology & Regulatory
Affairs division initiates and leads complex, multi-dimensional,
national issue campaigns for such significant issues as comprehensive
energy legislation, the permanent storage of spent nuclear fuel,
telecommunications reform, and the systematic application of sound
science to the federal regulatory process.
Throughout his tenure at the U.S. Chamber, Kovacs has focused on
finding new leadership opportunities for the institution. He pioneered
the use of cybercasting for Chamber events in 1998, recruited and
assembled the first science team to work in tandem with policy staff to
ensure that federal regulations are based on sound science, formed and
chaired the Chamber's Technology Coordinating Group, and helped to
develop numerous national coalitions in the areas of environment,
energy, regulatory affairs, and technology.
Prior to joining the U.S. Chamber, Kovacs was Director of worldwide
legal affairs for Sunshine Makers, Inc., manufacturer of the Simple
Green line of non-toxic cleaning products. Additionally, Mr. Kovacs
held the position of partner in several Washington, D.C. law firms
where his practice focused on environmental law.
As for government service, Kovacs served as Vice Chairman and
Chairman of the Commonwealth of Virginia's Hazardous Waste Facilities
Siting Board, as Chief Counsel and Staff Director for the U.S. House of
Representatives Subcommittee on Transportation and Commerce, and as
Legislative Director and Counsel for a member of Congress.
During his tenure as Chief Counsel, Mr. Kovacs was the primary
counsel on two landmark laws that were enacted in a single session of
Congress: the Resource Conservation and Recovery Act, the primary
federal law that regulates solid and hazardous waste; and the Rail
Revitalization and Regulatory Reform Act that re-organized the bankrupt
Penn Central Railroad into Conrail, the largest corporate
reorganization in the United States at the time.
Mr. Kovacs is a frequent commentator on national environmental,
energy, and regulatory issues that impact the business community. He is
regularly quoted in the Nation's leading newspapers and appears on talk
radio and television as a spokesperson for American business. He is
listed in Who's Who in the World, Who's Who in America, Who's Who in
American Law, and Who's Who in Emerging Leaders.
Mr. Kovacs holds his law degree from the Ohio State University
College of Law and his Bachelor of Science degree from the University
of Scranton, magna cum laude.
Chairman Miller. Thank you, Mr. Kovacs. The Chair, on
behalf of the Subcommittee, welcomes that endorsement.
Dr. Melberth.
STATEMENT OF MR. RICK MELBERTH, DIRECTOR OF REGULATORY POLICY,
OMB WATCH
Mr. Melberth. Thank you, Mr. Chairman.
You have heard testimony about the Executive Order
amendment, so I would like to focus my comments on the tools of
the regulatory process that Mr. Vladeck referred to.
A great deal of attention has been given to things like
cost-benefit analysis, risk assessment, peer review and federal
advisory committees have been the focus of more recent
attention. The Administration has consistently used regulatory
tools like risk assessment, peer reviews, and federal advisory
committees to manipulate science for its own ends, attempted to
impose a one size fits all framework on the agencies' use of
these tools, and has shifted the criteria for defining when
regulations are necessary away from a health and safety problem
and toward a market-based criteria.
Cost-benefit analysis is often touted by the Administration
and conservative think tanks as a neutral tool in policy-
making, but recent studies by legal scholars show that the CBA
is inherently political. There are several shortcomings in the
way CBA is used, and these deficiencies have been exacerbated
by actions during the Bush Administration.
A second regulatory tool that OIRA tried to manipulate was
the use of risk assessments. In January 2006, John Graham
issued OMB's proposed Risk Assessment Bulletin, which contained
a set of one size fits all guidelines to govern all risk
assessments, and included technical standards for all federal
agencies to use when conducting risk assessments, as well as
other scientific documents.
The National Research Council's review of the Bulletin
called for its withdrawal. The rebuke by the NRC is one of the
strongest commentaries issued on a trend over the last six
years to centralize power over the regulatory process. The
strongly worded NRC evaluation should provide a Congress
interested in executive oversight with a strong example of the
dangers of this regulatory trend.
OMB again attempts a one size fits all approach that
doesn't consider different agency functions and expertise
required to implement legislation in its use of peer review.
OMB is a political office working directly for the
Administration, not an unbiased scientific office, yet the
agency places itself in the role of supervisor for implementing
scientific peer review.
The science community has often argued that by appointing
people from the regulated industries as members of federal
advisory committees, as the Bush Administration has
consistently done, the advice the committees offer to an agency
might create real dangers to public health and safety. This is
one example of the growing influence of regulated industries in
the rule-making process.
Like the tools discussed above, federal advisory committees
specifically, and the processes in which they are used, are
being manipulated to achieve results desired by political
considerations, not science, health, safety, or environmental
protection.
OMB Watch has several concerns about the trends in the
regulatory process that have occurred over the last few
decades, such as the reduced governmental role, devolving
responsibility to the states, and privatization. The Bush
Administration has further reduced the role of the Federal
Government's general welfare protections by putting special
interest concerns above the general public's concerns.
There has been a sustained attack upon scientific
integrity, on the quality of scientific information, on the
scientific expertise of agency professionals, and on the
integrity of the scientific process. The tools have been
manipulated, and the Executive Order amendments just issued,
coupled with the Good Guidance Practices Bulletin, have further
established control over the regulatory process in the
executive branch, and OIRA especially, at the expense of both
Congressional power and agency discretion.
The real loser, however, is the public. In the end, less
regulation means less protection. Every year, more than 40,000
people die on our nation's highways; food-borne illnesses kill
an estimated 5,000, and sicken 76 million; nearly 6,000 workers
die as a result of injury on the job, with an additional 50,000
to 60,000 killed by occupational disease; and asthma, linked to
air pollution, is rising dramatically, afflicting 17 million,
including 6 million children.
I want to leave you with just one example of the danger of
this regulatory process. The Transportation Recall Enhancement
Accountability and Documentation Act, TREAD, passed by Congress
in November 2000, required that ``The Secretary of
Transportation shall complete a rule-making for a regulation to
require a warning system in new motor vehicles to indicate to
the operator when a tire is significantly under-inflated.''
Yet, the tire pressure alert system regulations that were
significantly--that were required by law to be in place by the
end of 2000 have not been adequately developed, although the
National Highway Transportation Safety Administration
determined in its rule-making that a direct tire pressure
monitoring system should be installed in new vehicles.
But OMB sent a letter to NHTSA, after meeting with the auto
industry, directing--deciding that the direct system was
inappropriate, claiming its cost-benefit calculations provided
a basis for delaying the requirement of the direct systems. The
final rule, issued May 2002, would have allowed lawmakers, I am
sorry, would have allowed automakers to install ineffective
tire pressure monitoring systems, and would have left many
drivers unaware of the dangerously under-inflated tires. NHTSA
was sued because its final rule would have allowed
manufacturers to choose to install either an effective direct
system or an inferior indirect system.
In August 2003, the U.S. Court of Appeals for the Second
Circuit ordered NHTSA to rewrite the rule, because NHTSA acted
in an arbitrary and capricious manner by writing a standard
that would allow installation of a clearly faulty indirect
system.
Thank you, Mr. Chairman. I see my time is up.
[The prepared statement of Mr. Melberth follows:]
Prepared Statement of Rick Melberth
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to testify before you today. I am
Rick Melberth, Director of Regulatory Policy for OMB Watch. OMB Watch
is a nonprofit, nonpartisan research and advocacy center promoting an
open, accountable government responsive to the public's needs. Founded
in1983 to remove the veil of secrecy from the White House Office of
Management and Budget, OMB Watch has since then expanded its focus
beyond monitoring OMB itself. We currently address four issue areas:
right to know and access to government information; advocacy rights of
non-profits; effective budget and tax policies; and the use of
regulatory policy to protect the public.
My testimony focuses on 1) the amendments to E.O. 12866 and the
impacts of the amendments, 2) the manipulation of the analytical tools
used in the regulatory process as part of a broader assault by this
administration, and 3) a brief description of actions Congress might
take to minimize the impact of the changes just enacted.
I. Amendments to E.O. 12866: Executive Order 13422
On January 18, President Bush issued amendments to Executive Order
(E.O.) 12866, which further centralize regulatory power in the Office
of Information and Regulatory Affairs (OIRA) in the Office of
Management and Budget (OMB) and shift it away from the federal agencies
given this power by legislative enactments. It is another brick in the
foundation this administration has been building for a unitary theory
of the presidency, one in which the executive is superior to the other
branches in our constitutional system and one in which the White House
exhibits significant control.
We are particularly concerned with three aspects of the amendments:
the identification of ``market failure'' as the first principle in
promulgating regulations, the designation of a presidential appointee
as the Regulatory Policy Officer in each agency covered by the E.O.,
and the requirement that significant guidance documents undergo nearly
the same OIRA review process required of significant regulations.
Attached to this testimony is a copy of our analysis of the amendments.
I want to focus on these three aspects here.
A. The Market Failure Criterion
Through amending the regulatory process, the President is
institutionalizing an anti-regulatory approach by using a market
failure criterion in place of actually identifying threats to public
health and safety. It diminishes standards Congress may require
agencies to use, such as the best control technology, by elevating a
new market failure standard that Congress has never required.
The market failure criterion is yet another layer added to the
agency analysis. The agency must comply with statutory criteria (such
as best available technology) as well as perform an analysis
demonstrating market failures. If the agency meets OMB's standards for
assessing ``whether any new regulation is warranted,'' then the agency
must also comply with other standards in the E.O., including cost-
benefit analysis. We believe this new standard decidedly favors the
regulated community and places another hurdle for agencies to
promulgate health, safety, and environmental regulations, and creates
more delay.
In addition, the language of the amendments makes clear that this
economic test is front and center in the review process. Compare the
language:
Not only is the market failure test a primary consideration, but
the agency's description of the problem will be used to ``enable
assessment of whether new regulation is warranted.'' This clearly
forces the agency to think again about whether the best course is to do
nothing and provides OIRA with another justification, or assessment,
for halting or delaying regulations. The regulatory process set out in
the executive order applies after Congress has passed legislation
having determined that a problem existed and needed to be addressed.
Under the amendments, agencies are directed to ask that same question
again: is the problem worth addressing? Moreover, OIRA's assessment of
whether any new regulation is warranted raises the question of whether
OMB intends to supersede legislative intent when the market failure
test does not met OIRA's satisfaction. Although Congress may have
already legislated, without the implementing regulation, the
legislation may not be able to be executed. Thus the executive branch
has assumed a legislative function.
Adding the market failure criterion challenges the role of
Congress. Theoretically, employees could contract with employers for a
certain level of risk in their jobs. Nevertheless, Congress has passed
workplace safety regulations (as well as consumer protections,
environmental protections, and economic protections to help markets
function better for businesses) where markets might have resolved
problems if given time. As Georgetown University law professor Lisa
Heinzerling wrote: ``Judging regulations implementing these laws based
on whether the regulations respond to 'market failure' misunderstands
the premises of many of the laws Congress enacts.'' In short, there are
multiple contexts in which Congress might justify taking legislative
action, market failure being only one.
The supporters of using the market failure criterion believe the
free market will supply the protections the American people want
without government intervention. Susan Dudley, one of these free market
advocates and the nominee to head OIRA, would have preferred to leave
safety to the unsteady hand of the market, hypothesizing that ``[i]f
air bags protect lives, and consumers demand them, it is reasonable to
assume that automobile manufacturers would have installed air bags in
the absence of federal requirements to do so.'' \1\ According to
Dudley, federal action requiring air bags in cars was unnecessary
because the market would have provided air bags to the public absent
regulation.
---------------------------------------------------------------------------
\1\ Susan E. Dudley, Regulatory Studies Program Comments: Advanced
Air Bags 7 (Dec. 17, 1998), available at http://mercatus.org/
repository/docLib/MC-RSP-PIC1998-
04-NHTSAAirBags-981130.pdf.
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OMB Watch believes that the market failure criterion is a
furtherance of the economic criteria which OIRA has increasingly
required as justification for taking regulatory action. OIRA has
substituted economics for all other values the American public has
consistently said to be important to them.
B. The Regulatory Policy Officer (RPO)
The amendments require each agency to have a Regulatory Policy
Office run by a political appointee and that ``no rule-making shall
commence nor be included'' for consideration in the agency's regulatory
plan without the political appointee's approval. This will further
politicize the rule-making process and provide more White House control
over the agency rule-making process.
Section 4(c) The Regulatory Plan, is amended to place this
regulatory planning authority directly in the RPO's hands. The language
is changed from
The Plan shall be approved personally by the agency head and
shall contain at a minimum:
to
Unless specifically authorized by the head of the agency, no
rule-making shall commence nor be included on the Plan without
the approval of the agency's Regulatory Policy Office, and
shall contain at a minimum:. . .
(B) A summary of each planned significant regulatory
action including, to the extent possible, alternatives
to be considered and preliminary estimates of the
anticipated costs and benefits of each rule as well as
the agency's best estimate of the combined aggregate
costs and benefits of all its regulations planned for
that calendar year to assist with the identification of
priorities; [emphasis added].
The amendments add the highlighted language which requires not only
significantly more analysis by the agencies because of the ``best
estimates'' requirement, but also provides a basis to allow the RPO to
establish priorities.
A similar approach was attempted by President Reagan through his
E.O. 12498, the Regulatory Planning Process, which was issued January
4, 1985. Under E.O. 12498, agencies were to get approval from OMB prior
to starting a rule-making--a pre-rule-making review. Many in the
business community thought this would be a wonderful approach for
choking off agency ideas before they ever really got going. That
approach, however, proved too cumbersome and difficult to administer.
In short order it failed.
The new Bush E.O. amendments have the same objective, but put the
choke-hold in the agencies, instead of at OMB. To ensure that the
process works, the amendments grant authority to these new political
appointees to be the eyes and ears for OMB. And it again mounts a
challenge to congressional authority. In writing legislation, Congress
often directs agencies to initiate a rule-making. The presence in the
agencies of these appointees by whom rule-making must now be initiated
creates a process that is as if Congress had not directed the agencies
to act, or as if that direction is irrelevant if the White House
appointees disagree with it.
A civil servant reacting to the new amendments provided an agency
perspective (http://fromthearchives.blogspot.com/2007/01/long-and-
esoteric-twice-in-one-day-just.html).
From the perspective of a low level bureaucrat looking up the
line, there are two big problems with this, independent of
ideology.
The first is simple. I just don't want to add a single step
that adds time to management review. Honestly, you'd be shocked
how long it takes for us to get anything through management
review. Anything we release to the public, including our non-
controversial, small scale documents, must go through six (6)
levels of review. We schedule three to four weeks for
management review. Yeah. Three days on each desk, if we give
them advance notice that our stuff will be coming. If we were
doing controversial stuff, it would be longer. If we had to
route through one additional back-logged office? If they were
far away, and my boss man couldn't chat with them to prep them
for the document, and we were just another insignificant office
on the west coast? I can't even guess.
But the more important reason is that a distant political
appointee, even assuming that she is not a partisan hack and
that she is interested in the topic and not using the office as
a stepping stone, would know exactly the wrong amount. Anyone
at a distance from the process can only know enough to be
dangerous. When we go to write anything that tells people what
they have to do, there is an intricate multi-year negotiation
between everyone involved. There are drafts, and comments, and
drafts, and workshops, and drafts, and internal meetings, and
drafts, and formal written comment, and more drafts. Usually,
in the end, you will come down to very awkwardly written
compromises that no one will sue you for.
Every word in there was hard fought. People snorted and sat
back at the table with their arms crossed. We changed it until
no one threatened to call their congress person any more. We
explained to them why we have to implement the law that way,
and caved when we couldn't get more, or when we were wrong. We
brought in someone's good idea. I know how people laugh at
ridiculous regulations, but I swear they didn't get to be
ridiculous because no one was thinking. They're ridiculous
because the topics are complicated, and we have to accommodate
widely divergent views, and because there were so many
iterations.
Anyway, a political appointee who wasn't there for the painful
years of writing regulations can only disrupt a very precarious
balance. . .. Unless she was there, she can only make things
worse. I don't want her in the loop.
Even worse, if the political appointee is a ``partisan hack,'' then
the integrity of the science may be compromised. The regulatory process
is a complex one that involves agency experts of all types. Imagine if
a political appointee were to shape the regulatory options from the
start: invariably the outcomes would be skewed.
There are two concerns with the Regulatory Policy Officer approach.
First, OIRA may be creating political outposts in each agency thereby
magnifying its impact. The amendments to the E.O. allow OIRA to play an
active role during the pre-rule-making stage when agencies are
formulating annual plans for regulatory activities. OIRA will be able
to quash any contemplated regulatory or guidance issues before agencies
propose them for the Regulatory Plan. Under the amended E.O., OIRA can
now engage the agency, along with other government personnel (as
provided for in one amendment), in reaching a ``common understanding''
on regulatory efforts.
Second, the content to be collected raises questions about
priorities. Collecting cumulative costs and benefits leads to little
more than comparing apples and oranges. And what value does this
information provide to policy-makers? We believe this is leading to the
creation of regulatory budgets which would be used to determine the
regulatory agenda without congressional approval. Using these budgets,
regulation proceeds on a cost effectiveness basis only, with agencies'
budgets ranked by total costs and benefits. It completely divorces
policy-making from the need for health, safety and environmental
protections.
C. Guidance Document Review
The amendments issued to E.O. 12866 require review by OIRA of
agencies' guidance documents for the first time. These documents are
issued to clarify how regulated parties are expected to implement
legally binding regulations. By subsuming guidance documents into a
review process almost identical to the review process OIRA uses to
review and approve regulations, the extent of OIRA's reach into
agencies' responsibilities will be at an all-time high.
By requiring agency guidance documents to come under OIRA review,
and to treat ``significant'' guidance in the same way as
``significant'' regulations, the E.O. amendments will lead to further
delay in providing information to the public about compliance with
regulations, as well as with general guidance on agency policies.
If it is true that more and more agencies are using guidance as a
means of avoiding the regulatory process, then that should be a signal
to Congress and the public that the rule-making process is seriously
flawed. If agencies are looking for faster ways of doing their job and
have turned to guidance, the solution is certainly not to require
guidance to go through the same regulatory process that agencies were
trying to avoid in the first place.
The Final Bulletin for Agency Good Guidance Practices, issued the
same day as the E.O., defines guidance documents to include
``interpretive memoranda, policy statements, guidances (sic), manuals,
circulars, memoranda, bulletins, advisories, and the like.'' Federal
agencies issue thousands and thousands of guidance documents each year
relating to hundreds of different types of activities. All of these
documents deemed significant will now come under review by OIRA's staff
of 55 people.
The fourth part of the ``significant guidance document''
definition, whether the issue raises ``novel legal or policy issues
arising out of legal mandates, the President's priorities, or
principles set forth in this Executive order,'' is nearly broad enough
to permit OIRA to sweep into its review any guidance it wishes to
review.
Section I.5 of the Bulletin adds a further category of guidance
document, the ``economically significant guidance document'' which is:
``a significant guidance document that may reasonably be
anticipated to lead to an annual effect on the economy of $100
million or more or adversely affect in a material way the
economy or a sector of the economy, except that economically
significant guidance documents do not include guidance
documents on federal expenditures and receipts.''
The definitions of both significant and economically significant
guidance documents include documents that ``may reasonably be
anticipated to lead to'' certain conditions. The Bulletin ``makes clear
that the impacts of guidance often will be more indirect and attenuated
than binding legislative rules.'' In other words, it will be even
easier to reasonably anticipate that a guidance document will have a
significant effect on the economy than will a regulation. The
reasonable people doing the anticipating no doubt work for OIRA.
Furthermore, according to the Bulletin, the ``relevant economic
impacts include those that may be [emphasis added] imposed by federal
agencies, State, or local governments, or foreign governments that
affect the U.S. economy, as well as impacts that could arise from
private sector conduct.'' This creates a largely speculative analysis
to be conducted by the agencies even assuming reasonably anticipated
effects by a third parties. The Bulletin does not, however, require a
formal regulatory impact analysis, so it is unclear just how this
determination is to be conducted.
The example cited in the Bulletin of an economically significant
guidance document is an agency pronouncement that a particular product
or substance is unsafe. In this instance, ``Unless the guidance
document is exempted due to an emergency or other appropriate
consideration, the agency should observe the notice-and-comment
procedures.'' The determination that a substance or product is unsafe
involves some scientific assessment. This provides an example of OIRA
reviewing a scientific conclusion and having the opportunity to
substitute an economic analysis for a scientific one. This
substitution, or even second-guessing the scientific judgment, could
lead to substantial delays in protecting the public.
In the end, the review of guidance documents by OIRA will simply
result in more delay and more White House control over the substantive
work of the agencies. It will inevitably lead to a usurpation of
agencies' powers.
II. Manipulation of Regulatory Tools
A great deal of attention has been given to the tools of the
regulatory process, especially cost-benefit analysis (CBA). More
recently, risk assessment (RA), peer review, and federal advisory
committees (FAC) have also been the focus of attention from a
regulatory standpoint. I want to address each of these briefly and to
convey to the members that these tools have been manipulated by OIRA
and Administration appointees to achieve results-oriented processes and
biased decisions that have delayed, dismantled or diminished public
protections.
A. Cost-benefit Analysis
CBA is a policy-making tool by which the costs of imposing a
regulation are weighed against the potential benefits of reducing the
harm. For example, in the case of pollution regulation, cost is
generally construed as the cost of implementing technology to comply
with regulation. These costs are more easily quantifiable than other
factors, although some evidence exists that costs are often inflated.
The benefits of a regulation require two separate analyses: an
assessment of the risk posed by the harm in question as well as a
monetization of the potential benefits. Both factors prove to be
difficult to calculate; many benefits resist monetization, and risk
assessments can be hindered either through incomplete data sets or a
large degree of indeterminable factors. In order to estimate the health
effects of a regulation, for example, agencies generally must rely on
laboratory data on other species or on human experience with much
higher levels of exposure. To extrapolate from this data the potential
benefits of a regulation requires a large degree of guesswork, and
agencies often come up with wide ranging numbers on the potential
health benefits.
CBA is often touted by the Administration and conservative think
tanks as a neutral tool in policy-making, but recent studies by legal
scholars show that CBA is inherently political and may even advise
against what we consider our most immutable public protections.\2\
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\2\ See, for example, Lisa Heinzerling, Frank Ackerman and Rachel
Massey's ``Applying Cost Benefit Analysis to Past Decisions: Was
Environmental Protection Ever a Good Idea?,'' David Driesen's ``Is
Cost-Benefit Analysis Neutral?,'' and Richard Parker's ``Is Government
Regulation Irrational? A Reply to Morall and Hahn.''
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I would argue that there are several shortcomings in the way that
CBA is used, and these deficiencies have been exacerbated by actions
during the Bush Administration:
The overriding criterion of CBA is efficiency, but
efficiency doesn't mean fairness. The net benefit calculation
that results from using CBA is without regard for who wins and
who loses, and without regard for any public participation.
This focus on efficiency is critical to business but doesn't
work for government because there is no single, public sector
measurement comparable to profit maximization in the private
sector.
CBA tends to overestimate costs for a variety of
reasons. Agencies generally rely on the regulated industries to
provide them with costs of compliance over a certain number of
years. Studies show compliance costs drop after regulation due
to the decline in the costs of technology (like pollution
controls), management efficiencies, and business innovations.
These cost savings, however, are not calculated into the
analysis generally; and CBA takes a snapshot of one point in
time resulting in a static analysis.
The major objection I have to relying on CBA as the
determinative factor in rule-making is that it does such poor
job of calculating benefits. How do you monetize benefits like
clean drinking water, good health, being alive? There are
certain values we hold dear that cannot be adequately
monetized. A decision making process that doesn't provide for
the expression of these non-quantifiable benefits is critically
flawed.\3\
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\3\ See for example, Heinzerling and Ackerman's Priceless: On
Knowing the Price of Everything and the Value of Nothing. NY: The New
Press, 2004. Chapter 2.
CBA has been part of the rule-making process since the Reagan
Administration. Prof. Sally Katzen spoke at a September 2006 panel on
presidential rule-making and stated that, although E.O. 12866 kept the
CBA requirements of the earlier Reagan era executive orders, during her
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tenure as OIRA Administrator,
we explicitly recognized that non-quantifiable costs and
benefits are essential to consider. That not everything can be
counted and it is very important to take into account those
things which can't be counted. We also made it clear that this
economic analysis was not dispositive, but simply
informative.\4\
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\4\ Panel 4: A PRESIDENTIAL REVIEW OF RULE-MAKING: REAGAN TO BUSH
II. Part of a symposium on ``Presidential, Congressional, and Judicial
Control of Rule-making,'' conducted at the Congressional Research
Service on September 11, 2006 as part of the Administrative Law project
of the Subcommittee on Commercial and Administrative Law of the House
Judiciary Committee.
In the hands of the Bush Administration, and particularly in those
of John Graham, OIRA Administrator from 2001-2006, CBA has risen to a
position of primacy in the rule-making process. In September 2003, OIRA
issued final guidance that instructed federal agencies on specific
analytical methods for regulatory decisions. This guidance committed
agencies to increased emphasis on cost-effectiveness analysis as well
as benefit-cost analysis and raised the bar on new health, safety and
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environmental protections. Specifically, the guidance
pushes for health and safety benefits to be expressed
in terms of dollars and cents, so agencies can calculate and
demonstrate ``net benefits'' (benefits minus costs);
uses cost-effectiveness analysis which does not
monetize benefits. Rather, it looks at the ratio of costs to
units of benefits (i.e., number of lives saved). The Clinton
guidance allowed agencies to use cost-effectiveness analysis in
place of a ``net benefits'' analysis if they have difficulty
monetizing. The new guidance requires both types of analyses
for all major health and safety rules.
requires discounting of lives saved in the future.
``Discounting''--already common practice in monetizing
benefits--rests on the premise that a life saved today is worth
more than a life saved tomorrow. The further in the future a
life is saved as a result of regulatory action today, the more
it will be discounted from its ``present value,'' and the less
likely the action will pass a cost-benefit test.
promotes use of ``life years'' in evaluating fatality
benefits. Agencies commonly base benefit estimates on the
``value of a statistical life'' (VSL), drawn from the number of
lives expected to be saved by regulatory action. On top of VSL
estimates, OIRA's guidance asks agencies to consider using
``value of statistical life years'' (VSLY), which looks at the
number of life years saved as opposed to the number of lives.
This would skew against protections for the elderly, who have
fewer life years remaining.
These CBA and cost-effectiveness requirements are offensive for the
devaluation of lives, health and safety. Elderly and minority
communities frequently suffer the consequences of a lifetime's exposure
to industrial contaminants, including heart or lung failure from smog
and soot, and cancer from toxic chemicals. Tens of thousands die
prematurely every year as a result. They are offensive also for their
elevation of economic and statistical manipulation that results in
extremely high barriers to implementing public protections under the
guise of regulatory relief for special interests.
B. Risk Assessment (RA)
A second regulatory tool that OIRA tried to manipulate was the use
of risk assessments. In January 2006, Graham issued OMB's Proposed Risk
Assessment Bulletin (RAB) which contained a set of guidelines to govern
all risk assessments and included technical standards for all federal
agencies to use when conducting risk assessments, as well as other
scientific documents. The OMB guidelines would apply to risk
assessments conducted as part of issuing or revising health, safety and
environmental rules, as well as important scientific studies. OMB asked
the National Research Council (NRC) to review the document after its
release. NRC suggested the Bulletin be withdrawn completely.
The NRC defined RA as ``the qualitative or quantitative
characterization of the potential health effects of particular
substances on individuals or populations.'' There are components to
conducting a public health RA: hazard identification, dose-response
assessment, exposure assessment, and risk characterization.\5\ Even
without knowing the scientific definitions of these terms, it's clear
from the definition and its elements that a risk assessment is an
evaluative process.
---------------------------------------------------------------------------
\5\ National Research Council. 1983. Risk Assessment in the Federal
Government: Managing the Process. Washington, DC: National Academies
Press. This publication established the parameters for using RA.
---------------------------------------------------------------------------
In its review of the RAB, the Council found that OMB's new
definition of risk assessment was ``too broad and in conflict with
long-established concepts and practices.'' The Bulletin defined a risk
assessment as a document instead of a process and the goals outlined,
when considered together, indicated ``that a risk assessment should be
tailored to the specific need for which it is undertaken.'' The
emphasis, according to the NRC evaluation, was on efficiency over
quality and stated that the goals outlined did not ``support the
primary purpose of the bulletin--to enhance the technical quality and
objectivity of risk assessments.''
The report also recommended that OMB leave technical risk
assessment guidelines and standards to each federal agency because one
size does not fit all when it comes to risk assessments. The Council
stressed concerns over ``the likely drain on agency resources, the
extended time necessary to complete risk assessments that are
undertaken, and the highly likely disruptive effect on many agencies.''
As OMB has done with other regulatory tools, the risk assessment
approach called for in this release would have created unnecessary
delays in the rule-making process by adding to the already cumbersome
process that OMB oversees. The ability of government agencies to
protect the public would be compromised by attempts to manipulate
science and the risk assessment process. For example, the proposed
standards called for the use of central estimates or tendencies instead
of statistical ranges. Using this approach puts the most vulnerable
populations, who fall outside these ``central estimates,'' at risk in
some analyses.
The rebuke by the NRC is one of the strongest commentaries issued
on the trend over the last six years to centralize power over the
regulatory process within OMB and move it away from agencies
responsible for protecting health, safety and the environment. The
Administration has consistently used regulatory tools like RA to
manipulate science for its own ends, attempted to impose a one-size-
fits-all framework on the agencies' use of these tools, and has shifted
the criteria for defining when regulations are necessary away from a
health or safety problem and toward market-based criteria. The
strongly-worded NRC evaluation should provide a Congress interested in
executive oversight with a strong example of the dangers of this
regulatory trend.
C. Peer Review
As happened with the two tools described above, OMB developed a
bulletin establishing government-wide requirements for scientific peer
review. The Final Information Quality Bulletin for Peer Review was
issued December 2004 after OMB took comments from the public regarding
a proposed bulletin that was issued in April 2004. OMB again attempts a
one-size-fits-all approach that doesn't consider different agency
functions and expertise required to implement legislation. In the final
bulletin, OMB asserts that its authority for the peer review policies
is implied in the Information Quality Act and OMB's general
authorities. None of the laws or executive orders referenced provide
any specific instructions on peer review. No new authority is
referenced by the agency and OMB did not seek any clarifying or
supporting language from Congress.
In OMB Watch's comments on the proposed bulletin, we argued that
OMB had not identified a peer review problem that justified this
government-wide approach. OMB implied that a problem had been
identified and defined by citing several studies and reports. However,
none of these documents actually claim that an overarching problem or
failure of peer review policies has occurred at federal agencies. Nor
do the studies recommend the establishment of uniform requirements for
scientific peer review. Instead, the referenced materials address the
importance of peer review, the need for changes at certain agencies, or
types of reviews. Yet, without a clear understanding of any problem in
peer review standards, OMB finalized these policies assuming they will
do more good than harm.
OMB granted itself an oversight role in the peer review process.
OMB has never overseen peer review and holds very little scientific or
peer review expertise--only a handful of recently-hired scientists.
This grant of authority involves OIRA personnel in the technical and
scientific discussions that often lead to a pre-rule-making process.
This part of the regulatory process is already dominated by OIRA's
gatekeeper function by which it develops acceptable agency rule-making
submissions even before the public process.
OMB is a political office working directly for the Administration,
not an unbiased scientific office. Yet, the agency places itself in the
role of supervisor for implementing scientific peer review. OMB Watch
recommended oversight authority to an objective scientific body, such
as the National Academy of Sciences or an interagency review panel.
In the final peer review bulletin, OMB solidified its new oversight
role for scientific peer review. OMB has the authority to grant
exemptions, approve alternative peer review processes, and designate
information for stricter review requirements. The final proposal also
adds a stipulation that all federal agencies submit an annual report to
OMB detailing the use of peer review for the fiscal year. OMB Watch
continues to believe that the bulletin grants far too much influence
over the scientific peer review process to the politically motivated
offices of OMB and the Office of Science and Technology Policy. Such
power would enable an administration to easily influence peer reviews
and in turn, the rule-makings that follow.
For the most important peer reviews, OMB created a double standard
in which agency employees, who may peer review more basic information,
are essentially barred from serving as reviewers. However, experts
associated with affected industries are allowed to serve as peer
reviewers with only a requirement that their affiliations be disclosed.
Highly influential scientific information has much stricter peer review
requirements, and OMB explicitly states that government employees
should rarely be used as reviewers. The final proposal bans any experts
from the sponsoring agency from reviewing information, but makes an
exception for the ``rare situation in which a scientist from a
different agency of a Cabinet-level department other than the agency
that is disseminating the scientific assessment has expertise,
experience and skills that are essential but cannot be obtained
elsewhere.'' The unequal standards for private sector scientists
remains, but the final bulletin instructs agencies to ``consider
barring participation by scientists with a conflict of interest.''
The peer review process outlined in the final bulletin creates
delay by excessive bureaucratic information requirements and
certifications, and rounds of public comments. While we generally
support providing public access, the very definition of a peer review
is to collect assessments from experts. Adding repeated public comment
periods is inappropriate for peer reviews and can only result in
delaying important research.
D. Federal Advisory Committees (FAC)
There are many instances during the Bush Administration in which
candidates for advisory panels have been passed over, or members
replaced, or resigned. While it is common for new administrations to
replace members of these committees, there is a trend towards making
sure that those people who might disagree with the Administration's
opinions are not appointed. The scientific community has often argued
that by appointing people from the regulated industries as members of
these committees, as the Bush Administration has done consistently, the
advice the committees offer to an agency might create real dangers to
public health and safety.
In the fall of 2002, a series of reports and articles began to be
published charging the Administration with manipulation of these
committees to assist hazardous substances manufacturers especially.\6\
According to DefendingScience.org, a website of The Project on
Scientific Knowledge and Public Policy,
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\6\ David Michaels, Eula Bingham, et al. ``Advice Without
Dissent,'' Science, Vol. 298, 25 October 2002. p.703.
(www.sciencemag.org, or http://www.defendingscience.org/
public-health-regulations/upload/Advice-Without-
Dissent.pdf).
Groups accused the Bush Administration of manipulating
activities in two federal committees advising the Centers for
Disease Control and Prevention's National Center for
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Environmental Health (NCEH).
Several well-respected scientists were
dropped from the Pediatric Lead Poisoning Prevention
Panel. Nominees suggested by staff scientists at CDC
were rejected and replaced by individuals who later
reported that the lead industry had contacted them
initially to ask if they would be willing to serve on
the committee.
Scientists employed by the chemical industry
or industry advocacy groups, including the Heritage
Foundation and the Annapolis Institute (established in
1993 by the National Association of Manufacturers to
challenge EPA proposed regulations) replaced 15 of 18
renowned university-based scientists on the advisory
committee to the Director of NCEH.
We've begun to see more resignations by respected scientists as
these FACs have become more politicized. For example, last October,
three of the fifteen members of the EPA's National Pollution Prevention
and Toxics Advisory Committee (NPPTAC) resigned because they felt major
problems with the Toxic Substances Control Act were not being addressed
due to industry influence.
The impacts of this political approach to using FACs are real
dangers to public health, safety and the environment. One example was
provided in the February 6, 2007 testimony before the Senate Committee
on Environment and Public Works of Dr. John Balmes, testifying on
behalf of the American Lung Association.\7\ The focus was on the
changes EPA has made to the scientific review process for the National
Ambient Air Quality Standards (NAAQS). EPA's Clean Air Scientific
Advisory Committee (CASAC) participates in the review process of these
standards. The review was a multi-step process the end of which was a
Staff Paper reviewed by CASAC and open to public comment. According to
Dr. Balmes testimony, `` [m]any regard the preparation and finalization
of the Staff Paper, which is done by EPA's scientific staff, as the
most crucial step'' because it is the final analysis of the scientific
information on which standards are based. It is not a political
process.
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\7\ Dr. John Balmes testimony before the U.S. Senate Environment
and Public Works Committee, February 6, 2007. Available at http://
epw.senate.gov/public/
index.cfm?FuseAction=Hearings.Hearing&Hearing-ID=78a52250-
802a-23ad-4274-59a54b06a447
---------------------------------------------------------------------------
According to Dr. Balmes testimony:
It is the elimination of the Staff Paper that we fear will
lead to the diminishment of science in the standard setting
process. The staff paper is to be replaced with a ``Policy
Assessment'' which according to a memorandum by EPA's Deputy
Administrator Peacock, ``reflect the Agency's views, consistent
with EPA's practice in other rule-makings.'' However, the EPA
does not set standards exclusively based on the protection of
health using the latest scientific research in any other rule-
making. In sum, a unique standard demands a unique process, not
EPA's ``usual'' practice. We believe the elimination of the
Staff Paper is being done precisely because the science
underlying protection of public health from air pollution is in
conflict with what policy-makers in EPA want to do in the
implementation of the Clean Air Act. The elimination of the
Staff Paper will make it easier for policy staff to fuzz the
lines in public health protection and present the basis for
alternative standards and the alternatives themselves in a way
that favors the outcomes they are seeking rather than what the
science says is needed. Substituting an Advanced Notice of
Proposed Rule-making for the Staff Paper will put policy
make[r]s (sic) at EPA and the White House in the driver'[s]
(sic) seat by enabling them to review and edit before it is
reviewed by CASAC and the public.
The process has been specifically influenced by the American
Petroleum Institute which suggested the Staff Paper be replaced with an
Advanced Notice of Proposed Rule-making, which the EPA has adopted. And
the lead industry recommended that the Staff Paper be replaced by a new
Policy Assessment which argues that lead should be eliminated as a
criteria pollutant.
This is one example of the growing influence of regulated
industries in the rule-making process. Like the tools discussed above,
FACs specifically, and the processes in which they are used, are being
manipulated to achieve results desired by political considerations, not
science, health, safety, or environmental protection.
E. Information Quality Act
The final issue I would like to address briefly is the Information
Quality Act (IQA), or as it is often called, the Data Quality Act
(DQA). This is an issue in the discussion of manipulation of regulatory
tools because the guidelines issued by OMB regarding the use of the DQA
has led to delays in the promulgation of public protections through
challenges to the science agencies rely on to fulfill their mandates.
The DQA allows challenges to the information disseminated by
agencies that can dilute, dismantle and remove essential pieces of the
scientific information that go into creating a body of scientific
knowledge. OMB published a report in 2004 evaluating the first year of
implementation of DQA, a report that OMB Watch criticized as
``inaccurate,'' ``misleading,'' and ``flawed.'' OMB understated the
number of challenges, the source of those challenges (mostly industry),
and drew conclusions about the impact of the DQA without the data to
support its conclusions. OMB Watch's analysis shows that the Act has
had a significant impact on agency actions, yet the law was added as a
last minute rider without Congressional hearings.\8\
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\8\ OMB Watch. The Reality of Data Quality Act's First Year: A
Correction of OMB's Report to Congress. July 2004. Available at http://
www.ombwatch.org/info/dataqualityreport.pdf.
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A report issued by the Congressional Research Service (CRS) calls
for oversight and investigation of the impacts of DQA, a call OMB Watch
argued for in our report as well. CRS recommends
either Congress or OMB could better define the scope of the
act or the issues to be included in any future report.
Clarification could also be provided regarding whether
correction requests that the agencies determine to involve
issues outside the scope of the IQA (e.g., a challenge to the
minutes of a federal advisory committee meeting) should be
included in a report that is supposed to list correction
requests under the act.\9\
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\9\ Congressional Research Service The Information Quality Act:
OMB's Guidance and Initial Implementation. September 17, 2004. p. CRS-
18. Available at http://www.defendingscience.org/
public-health-regulations/upload/Congressional-
Research-Service-Information-Quality-Act-Report-2004.pdf
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III. Congressional Action
OMB Watch has several concerns about the trends in the regulatory
process that have occurred over the last few decades. Societal problems
have become more complex and their solutions are often less obvious and
straight forward than, for example, a command and control approach. The
role of the federal government has become more limited in its
perspective of what is appropriate for government action.
Responsibility has increasingly devolved to the states, or been the
target of privatization. We believe that the time has come to change
this limited government perspective to one in which the government
plays a more positive role in protecting health, safety, environmental
and civil rights safeguards. A major part of this movement to positive
government must be a focus on the regulatory process.
The Bush Administration has further reduced the Federal
Government's general welfare protections by putting special interests'
concerns above the general public's concerns. The problems outlined in
this testimony have eroded the government's role in public protections.
They have delayed, diminished or destroyed regulations that agencies
are mandated to promulgate. There has been a sustained attack on
scientific integrity--on the quality of scientific information, on the
scientific expertise of agency professionals, and on the integrity of
the scientific process. The tools have been manipulated and the
executive order amendments just issued, coupled with the good guidance
practices bulletin, have further established control of the regulatory
process in the executive branch, and OIRA especially, at the expense of
both congressional power and agency discretion.
The real loser, however, is the public. The regulatory process is
highly partisan and politicized. In the end, less regulation means less
protection. Instead of a regulatory ``cop on the beat,'' we have none.
Instead of addressing regulatory gaps, we operate based on whether
these gaps have political consequences. Unfortunately, now government
doesn't act until there is national news about people being hurt or, in
the case mine workers, dying. If you are parents, you don't want to
gamble that the weekend barbecue results in your child becoming ill or
dying from E. coli. The point is, there are real consequences from
these actions and inactions. Our government should be doing more, not
less, to protect the public. The amended E.O. moves in the wrong
direction.
Every year, more than 40,000 people die on our nation's highways.
Food borne illnesses kill an estimated 5,000 and sicken 76 million.
Nearly 6,000 workers die as a result of injury on the job, with an
additional 50,000 to 60,000 killed by occupational disease. And
asthma--linked to air pollution--is rising dramatically, afflicting 17
million, including six million children.
There is real danger to our constitutional system from this
arrogation of power. Equally significant, in our opinion, is the real
danger presented to the American public from the delay or refusal to
regulate dangerous activities. I want to leave you with just one
example of the danger.
The Transportation Recall Enhancement, Accountability and
Documentation (TREAD) Act, passed by Congress in November 2000,
required that ``Not later than one year after the date of the enactment
of this Act, the Secretary of Transportation shall complete a rule-
making for a regulation to require a warning system in new motor
vehicles to indicate to the operator when a tire is significantly under
inflated. Such requirement shall become effective not later than two
years after the date of the completion of such rule-making.'' \10\
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\10\ Public Law 106-414, The Transportation Recall Enhancement,
Accountability and Documentation Act, Nov. 2000. Section 13.
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The National Highway Transportation Safety Administration (NHTSA)
determined that a direct tire pressure monitoring system should be
installed in all new vehicles. OMB sent a return letter to NHTSA, after
meetings with the auto industry, deciding this action was an
inappropriate one, claiming its cost-benefit calculations provided a
basis for delaying a requirement for direct systems. The final rule,
issued May 2002, would have allowed automakers to install ineffective
Tire Pressure Monitoring Systems (TMPS) and would have left too many
drivers unaware of dangerously under-inflated tires. NHTSA was sued
because its final rule would have allowed manufacturers to choose to
install either an effective (direct) system or an inferior (indirect)
system. In August 2003, the U.S. Court of Appeals for the Second
Circuit ordered NHTSA to rewrite the rule because NHTSA acted in an
arbitrary and capricious manner by writing a standard that would allow
installation of a clearly faulty (indirect) system.
In July 2004, the groups that had sued NHTSA returned to court
because the agency had not issued a revised rule. In April 2005, NHTSA
finally issued a rule requiring automakers to install tire pressure
systems in all new passenger cars and trucks by the 2008 model year,
beginning a phase-in with 2006 model year vehicles. The new rule,
however, still does not meet the requirements set by Congress. Although
better systems exist, the TPMS could allow tires to be 30 percent below
proper inflation before the alert is provided, costing approximately
150 lives and countless injuries each year. In June 2005, Public
Citizen, the Goodyear Tire & Rubber Company, Bridgestone Firestone
North American Tire, Cooper Tire & Rubber Co., Pirelli and the Tire
Industry Association, filed suit in the U.S. Court of Appeals for the
District of Columbia, arguing that the new rule is inadequate and
should be overturned. Tire pressure alert systems regulations that were
required by law to be in place by the end of 2003 have, as the tire
manufacturers legal action implies, not been adequately developed.\11\
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\11\ For another example of the danger to the public from
regulatory manipulation, see the testimony of John B. Stephenson,
Director of Natural Resources and Environment, GAO, before the Senate
Committee on Environment and Public Works, February 6, 2007. Available
at www.gao.gov/cgi-bin/getrpt?GAO-07-464T. The summary findings read:
Although we have not yet completed our evaluation, our
preliminary observations indicate that EPA did not adhere
to its own rule-making guidelines when developing the
proposal to change TRI reporting requirements. We have
identified several significant differences between the
guidelines and the process EPA followed. First, late in the
process, senior EPA management directed the inclusion of a
burden reduction option that raised the Form R reporting
threshold, an option that the TRI workgroup charged with
analyzing potential options, had dropped from consideration
early in the process. Second, EPA reviewed this option on
an expedited schedule that appears to have provided a
limited amount of time for conducting various impact
analyses. Last, the decision to expedite final agency
review, when EPA's internal and regional offices determine
whether they concur with the final proposal, appears to
have limited the amount of input they could provide to
senior EPA management.
So what can Congress do address this process? First, if Congress
concurs that the amendments to the Executive Order are as bad as we
believe they are, it should act. Here are three areas to explore.
Congress should explore the legality of the Executive
Order amendments and their implementation.
OIRA will need to provide guidance to agencies on
implementing the market failure criteria. Congress could
provide much needed oversight on this guidance to ensure OIRA
does not create new standards or irresponsible requirements on
agencies.
Congress has the ability to alter the implementation
of these amendments through a variety of vehicles, including
the appropriations process. Congress should take a hard look at
limiting agencies' and OIRA's spending on the specific elements
of the amendments.
Second, we believe it is time for the debate over regulatory policy
and process to turn toward the real need to increase public protections
not protect special interest access and influence. Because this
regulatory process has real consequences for our health and safety,
Congress should explore legislative actions that put the regulatory
presumption on safety first. Why should products and substances be
approved for use before they have been determined to be safe? Why
should the economics of regulation be the overriding, to the point of
being nearly determinative, consideration to the exclusion of
protecting the vulnerable populations like the elderly, the frail,
children, and minorities exposed to flawed siting processes? Government
and businesses have a responsibility to the public to uphold their
parts of the social contract. Congress can lead the way by providing
its critical oversight responsibilities and considering legislative
proposals that renew the Federal Government's protection of the general
welfare.
Thank you, Mr. Chairman, for providing me this opportunity to
appear before you. I'm happy to respond to Members' questions.
Appendix:
Undermining Public Protections
Preliminary Analysis of the Amendments to
Executive Order 12866 on Regulatory Planning and Review
On January 18, President Bush issued amendments to Executive Order
(E.O.) 12866, which further centralize regulatory power in the Office
of Management and Budget (OMB) and shift it away from the federal
agencies given this power by legislative enactments. Among the changes
to the E.O.:
It shifts the criterion for promulgating regulations
from the identification of a problem like public health or
environmental protection to the identification of ``. . .the
specific market failure (such as externalities, market power,
lack of information). . .that warrant new agency action.''
It requires guidance documents to go through the same
OMB review process as proposed regulations before agencies can
issue them.
It also requires ``significant'' guidance documents
(those that are estimated to have at least a $100 million
effect on the economy, among other criteria) to go through the
same OMB review process as ``significant'' regulations.
It makes the agencies' Regulatory Policy Officer a
presidential appointment and gives that person the approval
authority for any commencement or inclusion of any rule-making
in the Regulatory Plan unless specifically authorized by the
agency head.
It requires each agency to estimate the ``combined
aggregate costs and benefits of all its regulations planned for
that calendar year to assist with the identification of
priorities,'' which will be overseen by the Regulatory Policy
Officer.
By-Passing Congress With New Policies
Through amending the regulatory process, the President is
institutionalizing an anti-regulatory approach by using a market
failure criterion in place of actually identifying threats to public
health and safety. It diminishes standards Congress may have required
agencies to use, such as the best control technology, by elevating a
new market failure standard that Congress never required. This standard
has been advocated by Susan Dudley, Bush's current nominee as
administrator of the Office of Information and Regulatory Affairs
(OIRA). Dudley's extreme views on the use of free market standards were
well-documented during her failed confirmation last year. Despite the
failure to confirm her, the Administration has used the Executive Order
as a backdoor means to implement the Dudley philosophy.
The market failure criterion is yet another layer added to the
agency analysis. The agency must comply with the statutory criteria
(such as best available technology) as well as an analysis
demonstrating market failures. If the agency meets OMB's standards for
assessing ``whether any new regulation is warranted,'' then the agency
must also comply with other standards in the E.O., including cost-
benefit analysis.
This new standard decidedly favors the regulated community and
places yet another hurdle for agencies to issue regulations in pursuit
of protecting the public.
More White House Control; More Delay
By requiring agency guidance documents to come under OIRA review,
and to treat ``significant'' guidance in the same way as
``significant'' regulations, the E.O. amendments will lead to further
delay in providing information to the public about compliance with
regulations, as well as with general guidance on agency policies.
It may be true that more and more agencies are using guidance as a
means of avoiding the regulatory process. But that should be a signal
to Congress and the public that the rule-making process is seriously
flawed. Agencies are looking for faster ways of doing their job and
have turned to guidance. The solution is certainly not to require
guidance to go through the same regulatory process that agencies were
trying to avoid in the first place.
In the end, this will simply result in more delay and more White
House control over the substantive work of the agencies. It will
inevitably lead to a usurpation of agencies' powers.
The Foxes Controlling the Hen Houses
The Bush Administration has regularly appointed industry
representatives or allies to oversee agency regulatory activities.
Often this has been dubbed ``foxes in the hen house.'' The E.O.
amendments add a new dimension by having the foxes control the hen
houses.
The amendments require each agency to have a Regulatory Policy
Office run by a political appointee and that ``no rule-making shall
commence nor be included'' for consideration without the political
appointee's approval. This will further politicize the rule-making
process and provide more White House control over the agency rule-
making process.
A similar approach was attempted by President Reagan through his
E.O. 12498, the Regulatory Planning Process, which was issued January
4, 1985. Under E.O. 12498, agencies were to get approval from OMB prior
to starting a rule-making--a pre-rule-making review. Many in the
business community thought this would be a wonderful approach for
choking off agency ideas before they ever really got going. That
approach, however, proved too cumbersome and difficult to administer;
in short order, it failed.
The new Bush E.O. amendments have the same objective, but put the
choke-hold in the agencies, instead of at OMB. To ensure that the
process works, OMB grants authority to these new political appointees
to be the eyes and ears for OMB.
Laying the Groundwork for a Regulatory Budget
The E.O. amendments also require regulatory proposals that are to
be submitted to the Regulatory Policy Officer to include ``aggregate
costs and benefits'' during the calendar year. Most experts agree that
aggregating all costs and benefits is like comparing apples and
oranges--and in the end has little value except to create large numbers
intended to scare the public.
Another possible reason to require such information is to begin
laying the groundwork for establishing a regulatory budget. This
concept, proposed by conservatives since the Reagan Administration, has
been criticized by Congress and never approved. Yet the amended E.O.
begins to move in this direction.
Pre-Rule-making Review
The amendments to the E.O. allow OIRA to play an active role during
the pre-rule-making stage when agencies are formulating annual plans
for regulatory activities. By having OIRA involved in agencies'
planning process, OIRA can quash any contemplated regulatory or
guidance issues before they get proposed for the Regulatory Plan. Under
the amended E.O., OMB can now engage the agency, along with other
government personnel (as provided for in one amendment), in reaching a
``common understanding'' on regulatory efforts.
Conclusion
The revised Executive Order that results from these amendments is a
further threat to public protections from an administration committed
to elevating special interests over public interests. It codifies
regulatory delay, further removes agency discretion over legislative
implementation, and centralizes control over the regulatory process
into a small executive office. It substitutes free market criteria for
the public values of health, safety, and environmental protections, and
substitutes executive authority for legislative authority.
We can only speculate as to why the President has issued these
amendments at this time in his presidency. With Congress now in control
of Democrats, it is unlikely that further anti-regulatory efforts will
be supported or ignored by a compliant Congress. It is a surprising
action to take in light of the Dudley nomination now pending before the
Senate. It may be an admission by the Administration that the
nomination is not likely to succeed, and that the President has decided
to advance the Dudley philosophy through the back door.
Prepared on January 18, 2007
Biography for Rick Melberth
Rick joined OMB Watch in November 2006 as the Director of Federal
Regulatory Policy, the program which works to protect and improve the
government's ability to develop and enforce safeguards for public
health, safety, environment, and civil rights. He directs all
activities related to policy advocacy, analysis, research, monitoring,
and public education. Rick comes to OMB Watch from Vermont Law School
where he was Director of Internal Planning and formerly the Associate
Director of the Environmental Law Center. He helped design the
curriculum and taught courses in the Master's program.
Rick has written several pieces about decision-making in government
and environmental issues during his academic career and while working
as an independent consultant and policy analyst. He started his own
used and rare book business which he ran for more than a dozen years.
He also worked in the solid waste management field as the manager of a
solid waste division and a program to implement a waste-to-energy
facility in county government in Ohio. This led to the opportunity to
co-author a book for local governmental officials, Decision-making in
Local Government: the Resource Recovery Alternative.
Rick completed his doctorate in public administration and public
policy at the University of Cincinnati in 1982. His Master of
Environmental Science (M.En) and AB in political science are from Miami
University.
Discussion
Chairman Miller. I thank all of you.
There are only two Members here, so the rules do allow
waiving the five-minute limits to some extent. Mr.
Sensenbrenner has graciously offered to help teach me how to be
a Chairman.
Mr. Sensenbrenner. That is called push the button when
somebody starts speaking.
Chairman Miller. I am sorry. Okay.
Mr. Sensenbrenner. I do have questions. It won't last five
minutes.
Chairman Miller. Actually, so did I.
Mr. Sensenbrenner. Okay. You are the Chairman. You go
first.
Role of OIRA
Chairman Miller. All right.
Mr. Kovacs, in Mr. Vladeck's testimony, his written
testimony, he said that the role of OIRA was a one-way ratchet.
It always resulted in weaker regulations. Dr. Melberth cited
one example, the gauge on tire pressure, where OIRA had--their
role had resulted in a weaker regulation that was overturned by
the courts.
Can you give examples of when agencies have sent proposed
rules to OIRA in the last six years, during the Bush
Administration, where the Bush Administration has sent back the
rule, and said this is not tough enough? We really need to do
more to protect public health, to protect safety, to protect
the environment, to protect privacy rights, or civil rights, or
whatever. Can you cite examples of when OIRA has sent
regulations back to the agency from which they came, and said
make it stronger?
Mr. Kovacs. I don't have any list of the rules that they
have sent back to the agencies, and I don't even know that one
is public. I do know that the first year and a half, when John
Graham was head of OIRA, he did send a number of rules back,
and I believe one of them was the particulate matter rule. So
the first couple of years, about 18 months, he did it, and
then, for some reason, it all of a sudden stopped. They weren't
sending as many back, but it was a standardized process during
that time period.
Chairman Miller. Ms. Katzen, are you aware of circumstances
in the last six years that OIRA has sent regulations back and
asked the agency to toughen them up?
Ms. Katzen. No, I am not. The return letters are public,
because they are posted on the website, and I think OIRA has,
under the Bush Administration, increased the transparency by
greater use of the website for that purpose. I have read all of
the return letters, and I have not seen any requiring,
requesting, entreating greater protection or more stringent,
achieving better benefits.
Chairman Miller. Mr. Vladeck, you obviously want to answer.
Mr. Vladeck. The statistics are public, and in fact, Curtis
Copeland of the CRS has published an article in the 33 Fordham
Urban Law Journal which discusses all of the statistics which
are public since 1994, including those from 2000 to 2005. You
will see there are an awful lot of return letters. There are a
lot of changes made. One of the categories is ``consistent with
change,'' those are changes pushed by OIRA, and the numbers are
quite large, and I look at the return letters, as does Ms.
Katzen, I have never seen one returned to beef up the rule, in
a way that would protect the public health.
Transparency Provisions
Chairman Miller. Okay. Ms. Katzen, you obviously played an
important role in the Clinton Administration in drafting the
original Executive Order 12866, and you spoke a moment ago of
transparency in the role of OIRA, and I understand that
transparency was part of that Executive Order. It required
communication between the agencies and OIRA to be public,
subject to a FOIA request. It required, as I understand it, any
changes, the return letters, to be public as well, and
communications between OIRA and outside agencies, who are
urging a change in the rules, whether it is entirely proper
urging of an industry to say this is unworkable, but it made
those communications public, so that the public could decide
whether any changes that OIRA made were appropriate, or an
appropriate response to legitimate concerns raised by those
most familiar with what the agencies would do, what the
regulations would do, or whether it was caving to pressure.
Is that, essentially, are those the----
Ms. Katzen. There were a number----
Chairman Miller.--transparency provisions?
Ms. Katzen. Yes. I mean, Mr. Kovacs talked about going back
to Richard Nixon, and I do discuss this in my written
testimony, President Reagan took a dramatic step forward, and
that was highly controversial, because it was opaque, at best.
It was just not transparent.
When we drafted 12866, we were highly sensitive to that,
and wanted to make sure that we met that one head-on. In fact,
it was in part because Members of Congress had spoken out so
forcefully, calling for openness and accountability, that we
responded by including the provisions that you mentioned in the
Executive Order. That is the role that I think Congress should
have, which is to make sure that the executive is aware that
there is--are two branches of government involved, since it is
the Congress that delegates to the agencies in the first
instance the authority to regulate.
The other comment, if I may, sir, the thought that we, that
this is simply a logical progression from what the Clinton
Administration did cannot be substantiated. I was there for six
years. I never saw a guidance document. I never asked to see a
guidance document. The concept that this is just business is
usual, and you know, President Clinton did it, he might as well
do it, too, just couldn't be further from the truth.
Chairman Miller. Thank you. I have more questions, but I
will save them for a later round. Mr. Sensenbrenner.
Outside Comment on E.O. 12866
Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
First, let me put on the record that the Executive Order
that President Bush issued amending Executive Order 12866 was
signed on January 18, 2007, just 28 days ago. So, the process
that we are talking about and the issuance of the regulations
are all done pursuant to Clinton's Executive Order, because I
don't think there have been any major regulations that have
been issued as a result of the amendment.
The amendment of the President's most recent Executive
Order talks about process. It doesn't talk about the bottom
line of the regulation, and I guess I would kind of like to
find out why three of the four witnesses did not send any--in
any comments relative to the amendment when it was under
consideration.
Ms. Katzen. If I may, Executive Orders are not typically
put out for notice and comment. The comments that were filed
were filed on the Good Guidance document, rather than on the
amendment to the Executive Order.
Mr. Sensenbrenner. I stand corrected on that, but where the
comments were solicited and received, Mr. Kovacs had some input
on it, but none of the other three of you did, and why is that?
Ms. Katzen. He represents an entity that is an interested
participant. I am an academician, and I write scholarly
articles, unless I am asked to testify in Congress, I----
Mr. Sensenbrenner. Well, I think you are really interested
in that, given what I have heard you say.
Ms. Katzen. I am very interested, yes, sir.
Mr. Sensenbrenner. Okay. But you didn't comment. Now, Mr.
Vladeck.
Mr. Vladeck. The two organizations with which I am
affiliated did comment, Public Citizen and OMB Watch. I am on
the Board of Directors of OMB Watch, and I still have a
relationship with Public Citizen. They both did comment.
I did not personally comment on the guidance----
Mr. Sensenbrenner. Dr. Melberth.
Mr. Melberth. Mr. Sensenbrenner, we did submit comments on
the proposed GGPB bulletin, under Citizens for Sensible
Safeguards. It is signed by members of the coalition that we
lead, and my predecessor as Director of Regulatory Policy was
one of those signees.
Cost-Benefit Analyses
Mr. Sensenbrenner. Yeah. Now, you know, with respect to
market failure, using market forces the Regulatory Reform Act
that was signed by President Clinton, and was a part of the
Contract With America, and passed by Congress in 1995, did
require cost-benefit analyses to be applied during the
regulatory process.
Do you think that was a good idea? I will start with you,
Dr. Melberth.
Mr. Melberth. Yes, sir. I think cost-benefit analysis is an
appropriate tool to be used, not----
Mr. Sensenbrenner. Mr. Vladeck.
Mr. Melberth.--as a----
Mr. Vladeck. I don't believe centralized review is a good
idea to begin with, and requiring all agencies to do cost-
benefit analysis, even for significant rules, in my view is a
bad idea.
Mr. Sensenbrenner. Okay. Ms. Katzen.
Ms. Katzen. I am a proponent of cost-benefit analysis as an
input to decision-making, not as dispositive of the outcome.
Mr. Sensenbrenner. Now, do you think that the cost-benefit
analyses should be just as transparent as some of the other
things that you have testified on, so that the public and
perhaps the Congress can see if there is a proposed regulation
that it has about this much benefit at that much cost?
Ms. Katzen. Yes, and in fact, during the Clinton
Administration, there were many occasions when the cost-benefit
analysis was larger, more paper, more analysis, than actually
the rule-making, to provide the kind of information that people
should have.
It is also very important to emphasize that agencies are
not free agents. They are able to regulate only because
Congress has delegated them the power to do so.
Mr. Sensenbrenner. But the agencies are----
Ms. Katzen. And we have----
Mr. Sensenbrenner.--headed by someone who is appointed by
the President of the United States.
Ms. Katzen. Absolutely. All I am saying is that we had
several instances, while I was the Administrator of OIRA,
where, on the basis of a cost-benefit analysis, we saw that the
costs were larger than the benefits, but that the Congress had
given us no discretion, and that we had to proceed. In at least
one instance, we made that finding loud and clear, and sent a
letter to the Congress saying please amend the law, so we don't
have to do that. And Congress did.
Mr. Sensenbrenner. It does work.
Ms. Katzen. Yes, how it should work.
Mr. Sensenbrenner. Yes. I yield back the balance of my
time.
Chairman Miller. Thank you, Mr. Sensenbrenner. Mr. Baird.
Mr. Baird. I thank the Chairman.
First of all, Dr. Melberth, you were going to continue your
thought. I would like to ask you if you would like to do that.
Earlier, you were asked a question by Mr. Sensenbrenner, and
gave a partial answer, and were in the middle of continuing.
You care to elaborate?
Mr. Melberth. Thank you, Mr. Baird.
I do think cost-benefit analysis is a good thing to have as
part of the decision-making process. I have several problems
with cost-benefit analysis, but however it is used, it should
only be one aspect of that decision-making process. It should
not be dispositive. It should not be the driving mechanism, in
my opinion, in that decision-making process, which does not, if
you use cost-benefit analysis as dispositive, include any of
the non-quantifiable aspects that are so often underestimated
in cost-benefit analysis.
Thank you, sir.
Market Failure Provisions
Mr. Baird. I appreciate your expansion on that point.
I am a little puzzled by one of the core issues here, and
it has to do, this market--as a market process. Apparently, the
issue is that we don't need regulations if the market would
already regulate itself, and I am just puzzled, I am completely
puzzled about how one operationalizes that. I don't know that
the marketplace in general, as currently structured,
incentivizes many industries to engage in responsible behavior,
except fiduciary responsibility to their stockholders. I am not
saying that is a bad thing, but I don't think the market
intrinsically is designed to protect workers, public health,
environmental issues, so if any of you care to enlighten me
about what the heck this means, and if it is the metric by
which OMB or other executive branch offices are going to
evaluate regulations, I would sure like to operationalize that
metric.
Ms. Katzen. You want me to try this one?
The concept is that regulations will be necessary where
there is a failure of the marketplace, and the terms that are
often thrown around are ``externalities,'' ``lack of
information,'' ``market power.'' If you are an agency, and you
can demonstrate that there are one of these externalities,
market power, lack of information, then you are kind of home
free. The point I think some of us were making is that there
are often good reasons for regulations that do not involve
market failures, where the market can be functioning absolutely
the way a market should, and I am thinking of areas such as
civil rights or privacy, where market failure is irrelevant to
the underlying issue, and there is a need for something to be
done.
The way the original Executive Order was drafted, it was an
instruction to the agency to identify the problem that you were
trying to address, parenthetically, was it attributable to a
market failure or something else, close parentheses, and how
you plan to fix it. Now, it does tell us about the market
failure, and maybe it is a failure of a public institution, and
then, go on and worry about the rest of it.
It is a different emphasis on a different syllable. It
comes out different, and that is what I am reacting to, I
think.
Mr. Vladeck. Well, let me jump in.
The best way to understand the pitfalls of this is just
look at the regulation of airbags. Detroit waged what the
Supreme Court called the regulatory equivalent of war to
forestall regulatory and Congressional action requiring the
installation of airbags. So, if you talk about market failure,
where exactly is the market failure? People were still buying
cars. And even once GM, which was the first company to
introduce airbags, started to introduce them, they have sold
them as an add-on, not as part of the car. They were very
expensive. And even today, when you have certain kinds of
airbags, some of the side curtain airbags, that are, you know,
that are not required by federal law, the marketing of them is
done in, you know, for the American companies, they are add-
ons, they are very expensive add-ons. Now, is the market
working?
The introduction of airbags in the United States was
delayed for about 15 years because of the battle that the
industry fought to keep airbags off the market, and provided
that no one was offering them, they weren't suffering any
economic consequence. Now, if you look at the new Executive
Order, it substitutes the question that was from the Reagan
Executive Order, carried forward to the Clinton Executive
Order, which is tell us, tell OIRA, why it is you want to
regulate. That is all you have got to do.
Now, let me just read you what the new Executive Order
substitutes in its place. It says: ``Each agency shall
identify, in writing, the specific market failure that warrants
the new rule.'' The word ``shall'' is a word of command. It is
not if you feel like it. And so, what this change to the
Executive Order does, is it places the lens of the agency and
OIRA on market failure. Yes, there is an escape clause. You
will hear a lot about that. But it is a substitute for market
failure analysis, and OIRA, not the agency, ultimately calls
the shots.
Mr. Kovacs. Let me see if I could take a crack at it,
because we have talked about market failure quite a few times,
and one of the advantages of not being a law professor is the
only thing I know is what I read, and what the statement says
is: ``Each agency shall identify, in writing,'' as the
Professor suggests, ``the specific market failure,'' but then,
it says ``such as externalities, market power, lack of
information, or another specific problem that it intends to
address,'' again, brackets, ``including, where applicable, the
failure of public institutions, that warrant new agency action,
as well as the ability to assess the significance of the
problem.''
So, it is not just market failure. It is a variety of
failures that might occur. I think it goes back to the simple
concept that was raised 35 years ago, which is tell us what the
problem is, and tell us how you are trying to address it. I
don't think we can impute that this is only just market
failure, when they give all of that other explanatory language.
Mr. Baird. My question is that that sounds nice, but if
someone actually wishes to use the language as a smokescreen to
push a different agenda, that is where the rub is. And if we're
all well-intentioned, sincere, honest, earnest people, with a
similar shared value-set and agenda-set, I don't know that
there would be a problem.
My concern is does the rewrite, and I think some of the
other witnesses seem to be hinting at it, saying pretty
directly, the problem is that this new language puts the onus
and the decision-making in a different area than it used to be,
and that that opens the door for potential shenanigans and
actions contrary to the public interest. That is my read of it.
Mr. Kovacs. I guess, you know, there are theoretical ways
to look at the regulatory process, and we went over, you know,
what it looks like from a small business point of view, but you
know, if it were up to the Chamber, you know, we don't just
want peer review, we want open peer review, so that we can have
all the brilliant minds comment. We want complete transparency,
because we think that that is the easiest way to deal with the
agencies. Unfortunately, we are in a political situation that
the agencies have always opposed that much transparency.
So, I think what you have here is a very practical
situation. You have one President of the United States who is
responsible for the executive branch of government, and he has
to have some management authority. This President has decided,
through the Executive Order, and through these guidance
documents, that this is the kind of transparency he has.
We participate in that process. Are we happy with it all
the time? No. But I don't think you can, as some of the
panelists suggest, that there is some manipulation here, or
something sinister. The regulatory process is extremely
complicated. There are a lot of laws, and a lot of people
trying to work this process. All we have ever asked when we go
through on these kind of situations is that we have some
mechanism, if the problem isn't addressed and assessed, that we
can get back into the process. And I think----
More on Transparency Provisions
Mr. Baird. Mr. Kovacs, I appreciate very much the insight.
If I could ask just one last question. When Vice President
Cheney was drafting the energy policy, he invited a number of
folks, I think, from oil and gas, to the White House. Many of
us were curious as to who those folks were. From what you have
just said, the Chamber of Commerce is very interested in
transparency. Was it the Chamber's official position back then,
and is it now, that the Vice President of the United States
should share information about who consulted with him on energy
policy?
Mr. Kovacs. Our--well, I don't know about any particular
issue, but our policy has always been transparency, and I think
there are logs out there, as to who signs it--certainly, when I
go over to any meeting over at the White House, I sign in, give
my Social Security number, date of birth, and everything else,
so that information should be there.
If it were up to me personally, this isn't the Chamber, I
mean, I would have all schedules of all public officials open
to----
Mr. Baird. Well, for the record, then, I would just request
that you would report back to this committee on--last year, I
had a conversation with your leadership of the organization,
and if that is the case, if there is a consistency of value
here, that we want open public information, please send us a
letter, which we will convey to the Vice President, asking him,
on behalf of the Chamber of Commerce, to share the names of the
people who helped draft his energy policy.
Mr. Kovacs. I wasn't addressing it to any particular
policy. What I said, just from my words, is we think that
government in general should be open.
Mr. Baird. And I agree with that entirely. I agree with
that entirely. What I am saying is it may be a fairly selective
belief. If that is your belief, I don't know how many things
are more important in this country than our energy policy, and
if that is your belief, share that belief with us, and apply it
equitably across, not just to this particular proposed
regulation, but equitably across the activities of the
executive branch, and we will convey that the Chamber of
Commerce formally believes the Vice President of the United
States, consistent with this policy of openness advocated by
the Chamber of Commerce, shares with the American public the
names of the people who developed this energy policy.
Mr. Kovacs. Just so we are on the same page--I am very
willing to go back and make that request, just so we are sure
it is going to be a general statement. How you use it is
completely up to you.
Mr. Baird. I will look forward to the statement.
Mr. Kovacs. Well, we would hope that you would extend that
to all of the other agencies, and how all of the other rules,
like PM and ozone and----
Mr. Baird. Right.
Mr. Kovacs.--everything else are made.
More on Market Failure Provisions
Chairman Miller. Mr. Kovacs, Mr. Baird, I am struggling to
continue to chair this subcommittee meeting without the
tutelage of Mr. Sensenbrenner, but we will have time for a
second round of questions, although I understand the Judiciary
Committee has claimed this room beginning at 2:00.
I did have a couple of questions, before turning to Mr.
Rohrabacher, kind of on the doctrine of hot pursuit, about the
market failure issue.
Mr. Sensenbrenner said that in 1995, Congress passed and
the President signed regulatory reform legislation that did
place into law cost-benefit analysis. Mr. Vladeck, you are
shaking your head no to that, but does market failure appear in
statute? Is that a criterion for the approval of regulations,
or for a regulatory agency to act or not to act, that Congress
has ever placed into federal law?
Ms. Katzen?
Ms. Katzen. Not that I am aware of. I think what Mr.
Sensenbrenner was referring to was the Unfunded Mandates Act,
which refers to an analysis of the costs and the benefits, and
there is no mention, no mention of market failure in that, or
in SBREFA, the Small Business Regulatory Flexibility Act, which
was also passed at that time, nor in the Congressional Review
Act, which was another product of that Congress.
So, it is not legislative language, sir.
Chairman Miller. Okay.
Mr. Vladeck. That is consistent with my understanding, as
well. And the Unfunded Mandates Act is a limited statute. It
doesn't require cost-benefit analysis across the board.
Chairman Miller. Mr. Kovacs, do you----
Mr. Kovacs. Again, I am not reading it as just market--as
that being the only criteria. I mean, I just don't think the
language gets you there.
Chairman Miller. Okay. Mr. Vladeck, in his written
testimony, said that the woman appointed or nominated to be
chair or to head the OIRA, Susan Dudley, who I have never met,
and I have not read her writings, but--strongly believes that
the market seldom fails, that there is almost always a market
mechanism that corrects any societal ill.
If we now place into the regulatory framework a criterion,
not established by Congress, that is going to be administered
by someone who believes, apparently, or according to Mr.
Vladeck, almost as dogma that the market seldom, if ever fails,
Mr. Kovacs, is that the distribution of authority between the
branches of government you think the Framers of the
Constitution intended?
Mr. Kovacs. Well, first of all, being--or having worked on
the Hill for years, I am a very fervent believer, personally,
in the prerogatives of the Congress as a separate branch of
government, and the agencies have a Constitutional obligation
to implement the laws as you pass them.
And granted, within that, there is some discretion, based
on a lot of different factors, whether it be budget or
personnel, or how it is, but I am not, you know, I am not here
saying market failure is the only criteria. There are other
criteria here which I would hope that the agency would
recognize.
I am taking a position as I read it that the agency has to
identify, because of all of these different conditions, what
the specific reason is that they are going to move forward with
a regulation, not that it can only be market failure, because
obviously, there are reasons you would implement a regulation
other than market failure, civil rights, for example.
Chairman Miller. Okay. Mr. Vladeck, do you wish to address
that?
Mr. Vladeck. Yes. Let me just use as an example the
upgraded airbag rule, which Ms. Dudley was virtually alone in
opposing. As you know, when Congress required the introduction
of airbags, it did not set performance standards, and as a
consequence, the first generation of airbags were very
inexpensive, and not as effective as they should have been.
Congress told NHTSA to go out, and to improve the quality
of airbags that are available to the American people. Ms.
Dudley's comments opposing the revisions to the airbag standard
took the position, quite strongly, that market failure had not
been shown by NHTSA, the agency, and therefore, the agency
shouldn't proceed.
The reason why I think this is germane is that phrases like
``market failure'' can mean different things to different
people, and if the Administrator of OIRA can block a
significant rule, or return a significant rule, because she
believes that the agency has not made a case for market
failure, it gives OIRA a tool to block important developments
to protect the public safety and health.
Chairman Miller. I do want to preserve time for another
round of questions, and that was not one of my rounds, by the
way.
Mr. Rohrabacher.
Regulation and the Public Interest
Mr. Rohrabacher. Thank you very much, Mr. Chairman.
Let us get--this obviously goes to the way we look at
things fundamentally, and not--there is a fundamental
philosophical issue, and whether--how that philosophy relates
to reality, and how it impacts on people's lives, and let me
note that people who believe in the market are not just
philosophizers, we believe in the end, it means that people's
lives will be better off.
Some fundamental questions, then, apply here. We must note
fundamentally, that at times, it is difficult to determine
exactly what the public interest is. This is not where there is
an omnipotent group of people who are commanded by God, who
understand exactly what the public interest is, whether or not
resources should go, for examples, into airbags, or whether or
not resources should go someplace else. And I think it is
somewhat of a--to the degree that we are talking about public
assets, the air, the water, the soil, then we need to sit down
and determine for the public how those publicly held assets
will be, you know, will be used, and regulation and certainly
government intervention in those areas, is justified. But in
terms of how much the public is willing to pay for their safety
or something else that they might want, they might want a
higher proportion of this, as compared to what the regulators
think is best for them. And that is one issue that I would like
to throw on the table.
Another thing, let me note that my observation over the
years has been that every time that we have people who move
forward in a regulatory process, in the name of protecting the
general public, quite often, they are influenced by special
interest groups, and the more, the further away from the
consumer, and the further--where they have choice in the
matter, or by elected officials, who are by their very nature,
dependent on the voters or the consumers, to approve of the job
they have done, once you go to a regulatory approach, it
becomes less responsive to the public need, and more responsive
to people who can work their way into the regulatory process,
meaning people who can hire the lobbyists down here who know
the system, and especially, the system that happens in a
regulatory process.
So, I just thought I would throw those ideas out. Let me
just ask you, maybe if we could have it from both sides of the
spectrum here, on your analysis of what I just said, or your
reaction.
Mr. Melberth. First of all, the use of willingness to pay
as a measure of public interest, to determine the relative
costs.
Mr. Rohrabacher. Yeah. A car, you know, may--people may
well be willing to spend more money for an airbag in a car, but
they may not. It may deter people from buying new cars. It may
leave the poor people on the outs, because they don't have any
airbags in their cars, and et cetera. So--would--by the way,
let us get into that. Would you mandate that all cars be
retrofitted with airbags? Isn't that--wouldn't that be
something, if you have the public interest--and why don't you
do that? You don't do it because there is a cost factor. If
there is a cost factor with older cars, why is that cost factor
not important with newer cars? So, just a thought. Go right
ahead. Be--I am sorry I interrupted you.
Mr. Melberth. Well, what I understand by the willingness to
pay is the use of that in some kind of cost, economic
assessment. And the problem with using that kind of willingness
to pay is it puts people in a hypothetical situation of trying
to judge the risks that they face.
Mr. Rohrabacher. Right.
Mr. Melberth. That seems to be highly unrealistic, and if
you put people in a situation in which they are actually faced
with a danger, a drowning child, are they going to jump and
save the child? Of course they are.
Mr. Rohrabacher. Right.
Mr. Melberth. There are those kinds of situations, and yet,
you know, the willingness to pay doesn't go anywhere----
Mr. Rohrabacher. Well, let us go--let us argue a
hypothetical--specifically. I have triplets. My wife had
triplets. Everybody knows that. And I am a very proud father,
and I want those kids safe, and I tell you, I am willing to pay
the extra money for the gas to have a big, heavy car, because
when my wife goes to the market, I want to make sure if that
car is hit, that they are safe. I am willing to pay that extra.
But mandating that cars get much more miles to the gallon, and
are much lighter, because they have to make it lighter,
shouldn't I, as a consumer, be able to do that, rather than
have a regulator make that decision for me?
Ms. Katzen. If I could come at this from a slightly
different way.
Mr. Rohrabacher. Sure.
Ms. Katzen. I don't have difficulty with the concepts that
you are putting on the table. What I think is important is that
when Congress legislates, and then when the agency regulates,
it take into account all of the different views. That is why
the process of rule-making, under the Administrative Procedure
Act, Section 553, and in reality, is a very open process. It is
a process that features public participation, be it by special
interests or by individuals, who can contribute their views,
their philosophies, their approaches, their data, their
analyses, to the issue.
That is what rule-making is all about, which is why it
takes months, sometimes years, to issue rules. The point I was
trying to make earlier is that what I find troubling, deeply
troubling, is if the process is skewed to come out one way or
the other. If the process is neutral, let us hear your
thoughts, let us hear your information, we will take into
account all of these factors, and we will reach a judgment and
be accountable for that judgment, then, I think it is
appropriate. But if you have got, as I used the analogy
earlier, a thumb or a fist on the scale, and you say we are
going to come out one way or the other----
Mr. Rohrabacher. Yeah.
Ms. Katzen.--then you have squashed or squelched, or
whatever----
Mr. Rohrabacher. Well--totally legitimate. Obviously, you
have made a legitimate point there, obviously.
Mr. Vladeck. Let me try to respond as well, because I think
I do disagree with your fundamental premise.
I think it would be, at this point in time, irresponsible
for government to permit the sale of motor vehicles, cars, to
transport somebody else's triplets without airbags. I think
that would be irresponsible, and frankly, you started by
saying----
Mr. Rohrabacher. Would you retrofit it?
Mr. Vladeck. I would----
Mr. Rohrabacher. Would you demand that all cars be
retrofitted?
Mr. Vladeck. I wouldn't, and nor did Congress when it
decreed that cars have airbags, make that choice. Because
ultimately, your question was, you know, who decides what is
the public interest? You guys do. That is why we pay you the
big bucks. And Congress decided that there should be airbags.
Now, the more difficult questions are what kinds of
airbags, and how much safety to impose, and those are delicate
questions of balancing. There are tradeoffs there. If you want
a safer car, all cars are not created equal. If you want to buy
the safest car on the market for your triplets, there are
better cars and there are less safe cars. And NHTSA has not
gotten a mandate from Congress to require the maximum degree of
safety no matter what. Those are the difficult tradeoffs that
you enlist expert agencies to help you, and what I am concerned
about is that the executive branch is handcuffing those
agencies in their ability to do the public business.
And let us talk about transparency. One of the odd things
about the new Executive Order is the transparency and time
limits are not required for guidance documents. OIRA can sit on
a guidance document for five years, consistent with this
Executive Order. It can engage in all sorts of non-recorded
contacts with respect to guidance documents under this
Executive Order. This Executive Order goes back to the early
days, where OIRA was allowed to conduct a big part of its
business in secret, and for someone who cares about openness,
transparency, the way the markets ought to work, that is
inimical to the way government ought to function.
More on Transparency Provisions
Chairman Miller. Thank you. Thank you, Mr. Rohrabacher. If
you would hang around for a minute, you may get another round
of questions.
But I want to pursue the discussion that we were just
having about transparency, and that I had begun in my earlier
round of questions.
Mr. Kovacs, you spoke a great deal about transparency,
openness of government, and seemed to take the pro position
with respect to that, the position in favor of that. All the--
all that Ms. Katzen described about the earlier Executive Order
by President Clinton, the transparency, the public availability
of documents by--OIRA documents or communications with the
agency, their communications with outside parties who are
advocating for some change in the regulations, any changes in
the regulations, you support all of those, all those
transparency requirements?
Mr. Kovacs. Oh, certainly. We have--well, I will go, you
know, one step further. We, actually, were probably the primary
advocate for the Information Quality Act, which is going to,
you know, turn everyone sort of bright red here.
But you know, what that says is, is that, what the Congress
ordered is that the agencies have to use the most accurate, up-
to-date information, and that if the information, if someone in
the public believes that the information is incorrect, that
they can file a petition to correct the information. Again, you
heard the same arguments. This is trying to slow the agencies
down, this is trying to put everything in secret.
We have been very clear. We don't believe just in peer
review. We believe in open peer review. Just open it up. Why
should four or five scientists have a say over what the issue
is? So, when you come to the openness, the only way we are
going to get the kind of information in, from the public into
the agency is if we know what the agency is doing, and we are
able to put it in, and that is what the guidance documents do.
Chairman Miller. Okay. Thank you, Mr. Kovacs.
Ms. Katzen, under the new Executive Order, under the old
Executive Order, OIRA was a gatekeeper, and now, the gatekeeper
has a gatekeeper, the public regulatory officers within each
agency. All of the openness requirements with respect to OIRA's
deliberations, do those apply, under the new Executive Order,
to the conduct of the public regulatory officer? What are the
requirements for transparency at the agency level for the
gatekeeper's gatekeeper, the public regulatory officers?
Ms. Katzen. Those are not addressed in the Executive Order.
Those would be wholly dependent upon the agency's own internal
rules for ex parte procedures, for disclosure, for rule-making,
as the case may be.
Chairman Miller. Mr. Vladeck, rather than write a note to
Ms. Katzen, do you just want to answer yourself?
Mr. Vladeck. Well, I mean, it is worse than that. I mean,
not only does the Executive Order not apply, but the D.C.
Circuit, in a case that I helped lose many years ago, it is
called Wolfe v. HHS, held that communications between officials
at OMB and the agencies, like the regulatory officer, are
presumptively not available under FOIA.
So, there is no--as far as I can see, there is no mechanism
by which we would be able to see what is going on at that stage
of the development process, which is a trouble.
Chairman Miller. I think every Democratic Member of
Congress not in their first term has in their files letters
from agencies explaining that FOIA does not reach pre-
decisional discussions, internal agency documents, which
presumably, the involvement by the NPOs, or----
Ms. Katzen. RPOs would be.
Chairman Miller. RPOs, would fall within that exception to
FOIA. Mr. Kovacs, do you think the conduct of the regulatory
public officers, the RPOs, should be as transparent as the
conduct, the involvement of decision-making by OIRA?
Mr. Kovacs. If you are asking me would we support an
exempt--would we support removing that exemption from FOIA, it
is likely. But we would again, remove it for the entire
process. Let me just give you really one example. For years,
one of the biggest growth industries that is coming to the
United States is nanotechnology. They expect in ten years, for
that to be a $1 trillion plus revenue stream for the United
States, a huge growth industry.
Well, floating around EPA are some pre-decisional opinions
on how EPA is going to regulate nanotech. Well, the business
community is putting in an enormous amount of money into
nanotechnology, and we sent a FOIA letter, I don't know, six
months, eight months ago, and we can't even get a little
postcard from them. So, it is a frustration that we all share.
But if you are going to do it, rather than, you know, picking
on the Vice President, or picking on one--open the process----
Chairman Miller. Well, looking specifically at the
regulatory public officers, who are now going to play an
important role. I mean, a great many regulations are never
going to make it to OIRA. They will be smothered in the crib,
at the agency, by the RPO, and all of the requirements for
transparency for OIRA appear not to apply to the RPOs.
Mr. Kovacs. Well----
Chairman Miller. So, if the agency is making the wrong
decision for the wrong reasons, we are not going to know about
it. If OIRA makes the wrong decisions for the wrong reasons, we
are going to know about it. And now, a great many agents--of
the regulations that the professional staff, the permanent
professional staff, the experts, the scientists, the
researchers at regulatory agencies, are never going to make it
past the gatekeeper's gatekeeper, and none of that will be
public. Isn't that right?
Mr. Kovacs. I think it would be consistent, to directly
answer your question. I think it would be consistent with the
policies of the Chamber that the entire--that that part of the
entire agency process, as to how a rule is made, should be made
public. And it wouldn't start just with the rule, it would
start with the information that comes in, the studies that they
rely on, the risk assessments that they rely on. That entire
process should be open.
And the political officer, the regulatory officer, is
only--I am sorry--is only the last person in line. And what I
would suggest to you, that if you are going to do that, is that
you start with what you know, the EPA at Research Triangle Park
does, which is let us look at the risk assessments. What is the
basic information, and what we would say is rather than just
taking one spot of the record, take the entire record, because
then, and that is what the Information Quality Act tried to do,
it tried to say rather than starting at the end of the rule-
making process, which we are all fighting about today, start at
the beginning. So--because if the agency uses the wrong
information in the beginning, five years before the rule
starts, Sally says ten, you know, these processes can take ten
years. If you use the wrong information in the beginning, you
are going to use the wrong information in the end. So open up
the whole process.
Transparency Costs
Chairman Miller. We really are just about out of time, and
I apologize to Mr. Rohrabacher, probably not be able to get to
him for a second round of questions.
Ms. Katzen, Mr. Vladeck, Dr. Melberth, do you think the
same transparency requirements that apply to OIRA should apply
to the internal agency deliberations, of the role of the RPO,
whether through changes to the Executive Order, or through
statutory change?
Ms. Katzen. I am not going to answer your question
directly, because----
Chairman Miller. Okay.
Ms. Katzen.--I spent enough years at OMB to know that
nothing is cost-free, and one of the points that Mr. Vladeck
made, that I want to underscore, is that the agencies have not
only been required to do more analysis, more everything, but
they have been given less funds. And when you say shouldn't
things be transparent, even that is not cost-free. Putting up a
website and maintaining it takes personnel, takes funds, even
if you outsource it, you have got to have a contractor, you
have got to update it every 15 days, it takes people, it takes
time, it takes talent, and we have seen in the last--when I was
at OMB, we had surpluses as far as the eye could see. Now, we
don't, and it is coming out of the agencies' budgets, and I
think that is a real concern. So, I can't truly answer your
question.
Chairman Miller. Okay. Mr. Vladeck.
Mr. Vladeck. I would agree. I think that you have to make
this process transparent.
Chairman Miller. Okay. Dr. Melberth. Melberth.
Mr. Melberth. I would also agree. That is something that
OMB Watch has called for in most of these instances. Make this
information public. It should be available. It should be
accessible.
Chairman Miller. Mr. Rohrabacher, do you want to have one
valedictory question?
Mr. Rohrabacher. Thank you. I am very happy that when--what
year was that, when you were saying we had the surpluses? I----
Ms. Katzen. 1999. The year.
Mr. Rohrabacher. Yeah, I remember that. We Republicans were
in solid control at that time. You know, here in the House.
Ms. Katzen. Here.
Mr. Rohrabacher. Yes.
Ms. Katzen. Not there.
Mr. Rohrabacher. Right. There you go. Analyzing stuff. Let
me note that, years ago, it was a consensus on global cooling.
Now, it is a consensus on global warming. The regulators
always--there are things that--trends that could be true or not
true, that influence these benevolent and not profit-seeking
regulators, that we want to trust our lives to. One, for
example, Mr. Chairman, a decision that was made years ago by
people, I am sure, with very good hearts, wanting to protect us
all, put severe restrictions on DDT, and now, we have tens of
millions of people in Africa who have lost their lives because
DDT has not eliminated the mosquito population, which is
plaguing them instead of us. There are unintended consequences
at times, and trendiness, that affects regulators.
I--Mr. Chairman, it doesn't seem to me that we have a real
conflict. If you folks are advocating more scrutiny and
openness, and focusing on this end of the process, and you have
the Chamber of Commerce just saying that it should be
transparent all the way through, I don't see a big conflict
here, and I have learned--I am sorry I was late. I will read
your testimony, but I have already learned quite a bit just
from what you have said, and I certainly agree with the idea of
transparency and accountability. That doesn't seem to be a big
debate here, but it seems a matter of where you are putting
your emphasis.
So, thank you very much.
Chairman Miller. I want to thank everybody. An excellent
panel of witnesses, and I think some of you are now going to
appear, this has been a warm-up for your appearance before the
Judiciary Committee, and I look forward, for the Subcommittee
on Administrative Law, that is looking at the same issue.
And we had earlier tried to have a joint hearing, but were
not able to pull off the logistics of that, but again, I
appreciate your appearance, and your very thoughtful responses
to all of our questions, and with that, our hearing is
adjourned.
[Whereupon, at 2:00 p.m., the Subcommittee was adjourned.]
Appendix 1:
----------
Answers to Post-Hearing Questions
Answers to Post-Hearing Questions
Responses by Sally Katzen, Adjunct Professor and Public Interest/Public
Service Fellow, University of Michigan Law School
Questions submitted by Chairman Brad Miller
Q1. The testimony Mr. Aitken, Acting Director of OIRA, offered in a
House Judiciary Committee hearing repeatedly asserts that the new
executive order amending E.O. 12866 simply memorializes current
practice and, in particular, practices that began during your time at
OMB. Do you wish to comment on the assertion that there is no
meaningful change in policy represented by the provisions in E.O. 13422
relating to how regulatory proposals shall be prepared.
A1. If there were no meaningful change in policy represented by the
provisions of Executive Order 13422, then why did the Administration
invoke the prestige of the President and the authority of an executive
order to achieve nothing? This President has not issued many executive
orders and it seems to be inconsistent with his management style to use
an executive order for a non-event. Finally, the changes in Executive
Order 13422 do not reflect policies or practices of the Clinton
Administration. Specifically, the Clinton Administration did not
elevate market failures to a priority status for justifying rule-
making; it did not require aggregation of projected costs and benefits
at the pre-notice stage of rule-making; it did not require that
regulatory policy officers be presidential appointees; it did not
encourage the use of formal rule-making for resolution of issues; and
it did not use OMB review for guidance documents which, by definition,
do not have the force and effect of law.
Q2. Do you have any other points you wish to make for the record
regarding E.O. 13422 and its likely application by the Bush
Administration?
A2. Not at this time, thank you.
Questions submitted by Representative F. James Sensenbrenner, Jr.
Q1. Did President Clinton's E.O. 12866 require agencies to conduct
Cost-Benefit Analyses for proposed regulations? If so, what harm would
come from simply requiring them to report the aggregate of the analyses
they already conducted? Is this such a big step?
A1. President Clinton's Executive Order required agencies to conduct
cost/benefit analyses, to the maximum extent feasible, when they were
proposing or issuing final rules. Executive Order 13422 requires
agencies to aggregate costs and benefits of items listed in the
Regulatory Agenda, which includes many items at the pre-notice of
proposed rule-making stage, when the agency has made no decisions as to
the course it is likely to pursue.
Q2. A major criticism of the Market Failure criterion is that some
believe it elevates economic concerns above those of public health and
safety, and that this contradicts Congressional guidance. Is this true?
If so, why don't the following sections give agencies an ``out'' when
they are presented with conflicting values?
Sec. 1, end of last sentence: ``unless a statute requires
another regulatory approach.''
Sec. 1(b), end of last sentence: ``to the extent permitted by
law and where applicable.''
A2. President Clinton's Executive Order included several references to
the superiority of applicable law to provisions of an executive order;
those references were not changed by the provisions of Executive Order
13422, nor could they be given that wherever there is a conflict, duly
enacted law would trump a provision in an executive order. The agencies
therefore have ``an `out' '' where there is a direct conflict. The
problem that many foresee, however, is that the amendment elevating
economic concerns increases the burden on the agencies to either
demonstrate that the law reflects congressional intent with respect to
the particular issue they are addressing or to justify its proposal on
economic as opposed to other, possibly more important or pertinent
grounds.
Q3. One of the reasons agencies have increasingly turned to guidance
documents in order to regulate industry is that they do not require
public notice, public comment, or OMB notice. This has allowed for more
flexible and reactive policies, but has sacrificed transparency,
organization, and accountability. Do you believe the recent OMB
bulletin proposes a reasonable method of balancing these competing
principles?
A3. The recent OMB bulletin is a good faith attempt to balance these
and other competing principles. The problem, however, is that in some
instances and for some agencies, the requirements of the bulletin will
have the effect of reducing (possibly greatly reducing) the issuance of
guidance, which tells both the agency staff and the regulated entities
what is expected of them under existing regulations. Such guidance has
the salutary effect of providing clarity to regulated entities and
protecting them from haphazard enforcement of existing regulations by
agency staff. In other words, there are and will be costs associated
with the new bulletin.
Q4. In reference to the Good Guidance Bulletin, you state in your
testimony (page 9) that, ``While each step can be justified as helping
to produce better regulatory decisions, the cumulative effect is
overwhelming.'' If you believe that the Bulletin is ``justified as
helping to produce better regulatory decisions,'' are your objections
to the Bulletin related to policy or your view that OIRA has an
insufficient budget?
A4. The antecedent for ``each step can be justified as helping to
produce better regulatory decisions. . .'' is the various bulletins,
circulars, and guidance issued by the Bush Administration over the last
several years, discussed at pages 6-9 of my written testimony. Each
step (as in, each bulletin, circular or guidance), standing alone, can
(as in, one can reasonably argue) be justified. ``[T]he cumulative
effect is overwhelming'' refers to the agencies, not OIRA, and the fact
that agency budgets have not kept up with the increasing demands made
on the agencies by OIRA.
Answers to Post-Hearing Questions
Responses by David C. Vladeck, Director, Institute for Public
Representation; Associate Professor of Law, Georgetown
University Law Center
Questions submitted by Chairman Brad Miller
Q1. I am concerned about the implications for the public's right to
know embedded in the changes to the Regulatory Policy Officers. As
Presidential appointees with the power to ``pre-approve'' even starting
a regulatory or guidance initiative, what might this mean for the
ability of the public and public interest groups to know what has
happened on issues dispensed with by these officers? Might this be an
indirect way of by-passing some of the much-vaunted transparency that
has so far marked the OMB E.O. 12866 process?
A1. This question was raised briefly during the hearing, and my answer
then, as it is now, is that the structure of the new Executive Order
invites the circumvention of the transparency provisions of the
Executive Order 12866. As the Committee understands, Executive Order
12866, 6(b), requires OMB to place on the record its exchanges with
an agency during the course of a rule-making proceeding. It also
requires OMB to put on the public record meetings between OMB and non-
governmental parties relating to rule-makings. To be sure, the openness
requirements of the Executive Order apply only during the rule-making
process, and do not cover interactions between OMB and agencies, or OMB
and outsiders, prior to the agency's development of a notice of
proposed rule-making. But once the rule-making process begins, the
Executive Order does require a fair degree of transparency.
Executive Order 13422 undermines the openness guarantee of
Executive Order 12866 in two important ways. First, OMB review of
guidance documents is not subject to any of the transparency
requirements of section 6 of Executive Order 12866, which applies only
to ``regulatory actions'' for ``new and existing regulations.'' The
drafters of Executive Order 13422 understood this limitation, but made
no effort to expand the scope of section 6 to cover OMB review of
guidance documents. This omission was not inadvertent. Instead, the
omission was intended to permit OMB and agencies to develop guidance
documents--and to integrate the input of regulated industry--behind
closed doors, with no public record at all. Given OMB's history of
serving as a conduit for industry, which of course led to the Graham
memorandum and the addition of section 6(b) to the Executive Order,
Congress ought to be wary of OMB's deliberate effort to exercise
control over the issue of guidance documents insulated from any
transparency or openness requirement.
Second, Executive Order 13422 promotes secrecy because it ensures
that the pre-rule-making interchanges between OMB and the Policy Review
Officers at the agencies will be off-the-record. The law is clear that
dealings between OMB and agency officials that precede the commencement
of rule-making are not subject to mandatory disclosure under the
Freedom of Information Act (``FOIA''). Courts have ruled that these
exchanges are ``predecisional'' and ``deliberative'' in character and
thus may be shielded from disclosure under Exemption 5 to FOIA. See
Wolfe v. HHS, 839 F.2d 768 (D.C. Cir. 1988) (en banc). As a result,
even under Executive Order 12866 pre-rule-making consultations between
OMB and agencies were not subject to disclosure. But Executive Order
13422 makes a bad situation worse. Under Executive Order 12866, the
Regulatory Policy Officers were agency officials selected by the agency
head, and these Officers owed their loyalty to the agency, not the
White House. Thus, if OMB sought to force an agency to act in a way
that was out of step with the desires of the agency head, the agency
had tools to object, and to do so on the public record.
Executive Order 13422 reverses that presumption and puts a White
House agent in charge of the agency's regulatory apparatus, which now
extends not just to the agency's regulatory output, but also to non-
binding agency guidance. Thus, the ability of the agency to resist OMB
and follow the course the agency thinks best is diminished, if not
destroyed. After all, the White House will now have its own appointee
serving as the gatekeeper of the agency's machinery. And, to make
matters worse, all of these exchanges will take place off-the-record.
For these reasons, the answer to Chairman Miller's question--can
OMB kill off a regulatory or guidance initiative an agency wants to
take, and do so in a way that will escape public oversight?--is plainly
``yes'' under Executive Order 13422. And make no mistake, this is not
an unintentional consequence of inattentive drafting. This is precisely
the power that OMB has long coveted.
Q2. The new E.O. elevates market failure as the preferred standard for
an agency to meet in explaining the rationale for a regulatory or
guidance document. If you have insights into how the President's
proposed director of OIRA, Susan Dudley, might apply this standard,
please share that with the Subcommittee.
A2. There is no need to speculate about how Ms. Dudley would apply the
new ``market failure'' standard in the Executive Order were she to
serve as the director or acting director of OIRA. Ms. Dudley has an
extensive track record on this issue, which I urge the Subcommittee to
review.\1\ In summary, Ms. Dudley's writings suggest that she believes
that markets almost never fail, and that government intervention is
rarely if ever appropriate. Just consider one example. Ms. Dudley was
virtually alone in opposing the advanced air bag rule-making just
conducted by the National Highway Traffic Safety Administration. She
did so on the ground that government intervention was not needed,
notwithstanding the deaths of and injuries to children and women of
short stature caused by first-generation air bags, because there was no
evidence of market failure. Ms. Dudley was willing to disregard the
deaths and injuries because she was confident--despite years of
contrary evidence--that, if left alone, the market would provide a
range of safety options to consumers and we ought to trust the market
to give consumers adequate protection.\2\
---------------------------------------------------------------------------
\1\ Ms. Dudley's writings have been extensively critiqued in a
report by Public Citizen and OMB Watch entitled The Cost is Too High:
How Susan Dudley Threatens Public Health Protections (Sept. 2006)
(http://citizen.org/publications/
release.cfm?ID=7448&seeID=2565&catlD=126).
\2\ Susan E. Dudley, Regulatory Studies Program Comments: Advanced
Air Bars 7 (Dec. 17, 1998) (http://www.mercatus.org/publications/
pubid.1180/pub-detail.asp).
---------------------------------------------------------------------------
Ms. Dudley's blind faith in the markets, and her hostility to
government regulation, would make her an odd choice to head OIRA. If
Ms. Dudley saw no market failure with regard to one-size-fits-all air
bags, would she have let the Environmental Protection Agency phase lead
out of gasoline, the Food and Drug Administration require that iron
pills, the leading cause of poisonings in the United States, be sold in
child-proof containers, or the Consumer Product Safety Commission
outlaw the use of flammable material in children's sleep-wear? The
point of regulation is to prevent market failure, not to pick up the
pieces once the damage is done.
Q3. Do you have any other points you wish to make for the record
regarding E.O. 13422?
A3. I think that my written statement to the Subcommittee covered the
important points I want to make about the new Executive Order.
Questions submitted by Representative F. James Sensenbrenner, Jr.
Q1. Did President Clinton's E.O. 12866 require agencies to conduct
cost-benefit analyses for proposed regulations? If so, what harm would
come from simply requiring them to report the aggregate of the analyses
they already conducted? Is this really a such a big step?
A1. With all respect, I do think that this is a big step. Let me
explain why. To begin with, the requirement that agencies prepare cost-
benefit analyses for proposed regulations was not an invention of
President Clinton, but President Reagan, who institutionalized this
requirement in Executive Order 12291. President Clinton's Order in fact
modified that requirement in a way that is significant in answering
your question; namely, it permitted, almost encouraged, agencies to
cite non-quantifiable costs and benefits of regulation in their
analyses. As I have previously discussed, agencies generally can
calculate the likely costs of proposed regulation in terms of dollars
and cents. But benefits are often far more difficult to quantify, and
many benefits simply cannot be quantified. For instance, how does one
assign a dollar value to each I.Q. point a child might lose as a result
of lead exposure; to each day a family will have to endure a loved one
on kidney dialysis, caused by the person's exposure to cadmium in the
workplace; or damage to a wildlife preserve? Regulation also avoids
unwarranted distributional impacts, protects vulnerable sub-populations
(children, the elderly, the poor, for example), averts aesthetic harms,
and seeks to advance social justice. None of these benefits can be
quantified, let alone monetized in the manner the Executive Order
contemplates.
To account for these difficulties, the Clinton Executive Order
encourages agencies to monetize those benefits that it can monetize,
but it ``recogniz[ed] that some costs and benefits are difficult to
quantify'' and therefore told agencies that they should provide a
``reasoned determination that the benefits of the intended regulation
justify its costs.'' Executive Order 121866, 1(b)(6).
The problem with the regulatory accounting provision of Executive
Order 13422, 4(c)(1)(B), is that it wholly ignores this important
lesson. By requiring that the agency report its ``best estimate of the
combined aggregate costs and benefits of all of its regulations planned
for that calendar year,'' the new Executive Order puts aside all of the
non-quantifiable benefits that flow from regulation and reduces the
calculus to hard, cold dollars and nothing more. And make no mistake,
this reporting requirement will be used by OMB and others to seek
limits on agency regulation on purely economic grounds, notwithstanding
the fact that regulatory benefits are often not reducible to dollars
and cents.
Q2. A major criticism of the market failure criterion is that some
believe that it elevates economic concerns above those of public health
and safety, and that this contradicts Congressional guidance. Is this
true? If so, why don't the following sections give agencies an ``out''
when they are presented with conflicting values?
Sec. 1, end of last sentence: ``unless a statute requires
another regulatory approach.''
Sec. 1(b), end of the last sentence: ``to the extent permitted
by law and where applicable.''
A2. The short answer to this question is yes, the market failure
criterion in Executive Order 13422 does indeed ``elevate[] economic
concerns above those of safety and health'' in a way that undermines
Congress' judgment, and no, the provisions of Section I of the Order,
cited in the question, do not give agencies an ``out.'' Let me explain
the basis for my answer.
To begin with, there can be no serious question that the new
Executive Order makes ``market failure'' the pivotal consideration in
regulation. Indeed, it is difficult to see how the drafters of the
Order could have been clearer or more emphatic about this point. As you
know, the language in the new Executive Order marks a profound
departure from that in its predecessor: Section 1(b) of Executive Order
12866 required the agency to ``identify the problem that it intends to
address. . .as well as the significance of that problem.'' Executive
Order 13422 deletes that language and says that ``[e]ach agency shall
identify in writing the specific market failure. . .or other specific
problem that it intends to address. . ..'' That substitution plainly
signals that, from now on, OMB will expect to see an economic analysis
of market failure as a precondition to regulation. And the use of the
word ``shall,'' the language of command, only underscores the mandatory
nature of the requirement. The only ``out'' will be a convincing
economic argument from the agency that market failure is not at the
root of the ``other specific problem'' the agency intends to address.
The problem here is that this is an ``out'' in name only, because OMB,
and not the agency, makes the final decision as to whether the agency
has made a sufficient case for regulation.
Moreover, it is hard to see how health and safety agencies will be
able to point to ``other specific problem[s]'' unrelated to market
failure when they seek to impose regulation. Let's not mince words:
when we speak of health and safety regulation, ``market failure'' is a
euphemistic way of saying that people have been killed or injured
because of dangerous products, exposure to toxic chemicals, or some
other hazard. The point of health and safety regulation is to prevent
these deaths and injuries, not wait until they occur. Suppose an agency
wants to impose regulation on food producers to reduce the risk of an
emerging food-borne illness. Tens of thousands of consumers are made
ill by food-borne contamination each year, but it is rare that a
consumer can link his or her illness to the consumption of a single
food product. Market forces thus place only a weak constraint on market
behavior of food producers. But with regard to an emerging hazard,
there is, by definition, no evidence of ``market failure'' because the
needed evidence has not yet developed. How is that agency going to do
business with OMB? The agency cannot pretend that it is seeking to
address some ``other specific problem.'' Nor would OMB permit it to, do
so. The point here, of course, is that a regulatory system that
properly functions seeks to avoid market failure, yet the new Executive
Order appears to require agencies to wait until they can prove market
failure--by pointing to needless deaths and injuries--before moving
ahead with regulation.
Nor do the fragments of two provisions of Section 1 of Executive
Order 13422 cited in the question give the agencies an ``out,'' as the
question suggests. Both provisions go to the substance of agency
regulations, which must be governed by statute where there is an
inconsistency between the statute and the Executive Order. Neither
provision addresses the justification an agency must provide to OMB in
order to proceed with a rule-making, which is the point of the ``market
failure'' super-mandate imposed by Executive Order 13422. A review of
the two provisions cited in the question drives this point home.
The question's first reference is to the last sentence of Section
1(a), which is quoted only in part. In full, the sentence reads:
``Further, in choosing among alternative regulatory approaches,
agencies should select those approaches that maximize net benefits
(including potential economic, environmental, public health and safety,
and other advantages; distributional impacts; and equity), unless a
statute requires another approach.''
Contrary to the implication in the question, this provision has no
bearing on the justification the agency must provide to OMB to receive
OMB clearance to publish a proposed or final rule. The provision
addresses an altogether different question: If permitted to regulate,
what regulatory approaches may the agency pursue? But nothing in this
language relieves an agency of its obligation under the Executive Order
to satisfy OMB that it may regulate in the first instance. One
illustration should suffice. The Supreme Court has ruled that in
promulgating standards to protect workers from exposure to toxic
substances, the Occupational Safety and Health Administration
(``OSHA'') must regulate to the limits of technological and economic
feasibility. American Textile Manufacturers Assn v. Donovan, 452 U.S.
490 (1981). That standard is arguably at odds with the ``net benefits''
standard articulated in Section I of the Executive Order. In such a
case, OSHA would be free to follow its statutory mandate, not that
imposed by the Executive Order. But OSHA would nonetheless be bound to
justify to OMB its decision to proceed with regulation, and under the
new Executive Order, would not be able to avoid defending its decision
to act on the basis of market failure. There would be no other bases on
which to justify regulation, and thus this fragment of Section 1 does
not provide agencies an ``out,'' as the question suggests.
Nor does the language at the end of Section 1(b) provide agencies
an out. That language reiterates the concern set forth in the final
sentence of Section 1(b), by providing that: ``To ensure that the
agencies' regulatory programs are consistent with the philosophy set
forth above, agencies should adhere to the following principles, to the
extent permitted by law and where applicable.'' Once again, this
language is a directive, mandated by settled law, that an Executive
Order cannot trump a statute. For that reason, the Executive Order does
not purport to, and could not, direct an agency to ignore statutory
directives when issuing a regulation. But nothing in this language, or
any other language in the Executive Order, relieves the agency's
obligation under the Executive Order to explain to OMB on the basis of
market failure why the agency is choosing to proceed with regulation.
Q3. One of the reasons agencies have increasingly turned to guidance
documents in order to regulate industry is that they do not require
public notice, public comment, or OMB notice. This has allowed for more
flexible and reactive policies, but has sacrificed transparency,
organization, and accountability. Do you believe the recent OMB
bulletin proposes a reasonable method of balancing these competing
principles?
A3. Before addressing the OMB Bulletin on guidance documents, it is
necessary to emphasize that I do not agree with several of the explicit
premises of the question. First, I do not know whether it is true, as
the question suggests, that ``agencies have increasingly turned to
guidance documents.'' Having practiced administrative law for thirty
years, I think that agencies have always used guidance documents, and
have done so precisely because they can be issued quickly and flexibly,
as needs arise. Second, I do not believe that agencies use guidance
documents to avoid transparency and accountability. Unlike enforcement
policies, which are often kept from public view, the entire point of
guidance documents is to inform the public of the agency's views, and
agencies are held accountable for the guidance they give. Woe to an
agency that brings an enforcement action and seeks to distance itself
from guidance the agency gave; the agency does so only at its peril.
Third, I disagree with the question's suggestion that agencies have
``turned to guidance documents in order to regulate industry.''
Guidance documents do not have the force of law; they do not
``regulate'' in any meaningful sense of the word.
Having said all of this, I do believe that, at times, agencies
issue guidance documents instead of embarking on notice and comment
rule-making, not to avoid giving OMB notice, but because OMB review has
made the notice and comment rule-making process too time-consuming, too
cumbersome, and too expensive to justify the commitment of agency
resources to the issuance of a rule. Nothing in the new Executive Order
responds to these concerns.
As to OMB's recent bulletin on guidance documents; I think that,
because it is designed to carry forward the mandates of the new
Executive Order, it is deeply flawed--for the reasons outlined in my
testimony. Formalizing and making uniform the process by which agencies
give advice is a tremendous mistake and will hamstring the ability of
agencies to provide advice to regulated parties and the public at
large. Because the Executive Order the bulletin seeks to implement is
flawed, so too is the bulletin.
Answers to Post-Hearing Questions
Responses by William L. Kovacs, Vice President, Environment,
Technology, and Regulatory Affairs, U.S. Chamber of Commerce
Questions submitted by Representative F. James Sensenbrenner, Jr.
Q1. Did President Clinton's E.O. 12866 require agencies to conduct
cost-benefit analyses for proposed regulations? If so, what harm would
come from simply requiring them to report the aggregate of the analyses
they already conducted? Is this really such a big step?
A1. Yes, President Clinton's E.O. 12866 already requires agencies to
conduct cost-benefit analyses for proposed regulations that will have a
significant impact on the economy. E.O. 12866 requires every federal
agency to determine whether a regulatory action is ``significant'' and
therefore subject to review by the Office of Management and Budget
(OMB) and the analytical requirements of the executive order. A
``significant'' regulatory action is defined as one that is likely to
result in an annual impact on the economy of $100 million or more.
Since federal agencies are already required to conduct a cost-
benefit analysis for each proposed significant new regulation, it is
not a big step for them to simply add up the aggregate cost impact of
all new regulations for a given year. As I stated in my original
written testimony, rules do not operate in a vacuum. For an accurate
assessment of a rule's actual cost impact, it must be considered in
conjunction with other rules. In the interest of transparency and full
disclosure, the public should be made aware of the aggregate costs
associated with an agency's annual rule-makings.
Q2. A major criticism of the market failure criterion is that some
believe it elevates economic concerns above those of public health and
safety, and that this contradicts Congressional guidance. Is this true?
If so, why don't the following sections give agencies an ``out'' when
they are presented with conflicting values?
a. Section 1, end of last sentence: ``unless a statute
requires another regulatory approach,'' or
b. Section 1(b), end of last sentence: ``to the extent
permitted by law and where applicable.''
A2. Ironically, the ``market failure'' criterion, which has been so
derided by critics of the new executive order, was first detailed in
the Clinton Administration's 1996 guidelines for economic analysis
under Executive Order 12866.\1\ Those guidelines specifically noted
that market failures, externalities, natural monopolies, market power,
and asymmetric information are all essential components of any economic
analysis. As a result, it was the Clinton Administration that
emphasized the importance of economic analysis in rule-making.
---------------------------------------------------------------------------
\1\ OMB, ``Economic Analysis of Federal Regulations Under Executive
Order 12866'' (Jan. 11, 1996).
---------------------------------------------------------------------------
What President Bush's executive order did was actually broaden the
scope of the Clinton guidelines to allow for an agency to state
additional justifications for a rule-making. In that way, the market
failure criterion would not be elevated above public health and safety
concerns. In 2003, the Bush Administration clearly delineated the
additional justifications beyond market failure--which included the
protection of civil rights, privacy, personal freedom, and other
concerns.\2\ More importantly--as Rep. Sensenbrenner notes in his
question--the last phrase in Section 1 and 1(b) of the executive order
clearly provide agencies with choices when they are presented with
conflicting values.
---------------------------------------------------------------------------
\2\ See OMB Circular A-4, at p. 4-6.
---------------------------------------------------------------------------
It is only logical that federal agencies should be required to
identify a problem that justifies a regulation before proceeding with a
rule-making--whether that problem is a market failure or something
else. In this way, we can be assured that a comprehensive and thorough
analysis of all potential impacts of a rule-making has been conducted.
Q3. One of the reasons agencies have increasing turned to guidance
documents in order to regulate industry is that they do not require
public notice, public comment, or OMB notice. This has allowed for more
flexible and reactive policies, but has sacrificed transparency,
organization, and accountability. Do you believe the recent OMB
bulletin proposes a reasonable method of balancing these competing
principles?
A3. Yes. The OMB Bulletin on Good Guidance Practices (GGP) does not
prohibit agencies from issuing guidance documents. Agencies can, and
should, continue to utilize guidance documents to provide the public
with information on how to comply with a particular rule or regulation.
Rather, the GGP establishes uniform policies and procedures for the
development, issuance and use of significant guidance documents.
The purpose of the GGP is to ensure that guidance documents of
Executive Branch departments and agencies are developed with
appropriate review and public participation. It requires that guidance
documents be accessible and transparent to the public, and not
improperly treated as legally binding. GGP does this by requiring that
each guidance document contain certain standard elements, such as
identifying the document as guidance, the name of the issuing office,
the activity and persons to whom it applies, the date of issuance, and
the title and docket number. Surely such requirements, which will
vastly improve transparency and accountability in an agency's
regulatory activities, are not overly oppressive.
Perhaps the most important new GGP requirement, however, is that
agencies avoid ``mandatory'' language in guidance documents. By law,
guidance documents are advisory only; that is, they do not have legally
binding effect. Yet they have practical binding effect when the
agencies use them to establish criteria that affect the rights and
obligations of private persons. By eliminating mandatory language--
words such as ``must'' and ``shall''--the growing problem of
``regulation by guidance document'' will finally be addressed.
The GGP also establishes public access and feedback procedure.
Agencies are required to maintain a current list of significant
guidance documents on their web sites and to provide a means for the
public to electronically submit comments. The Chamber supports, and has
always supported, efforts to improve the operation of government by
improving the opportunity for the public to participate in the policy-
making process. Such participation allows the public to have a voice in
the making of the laws that regulate them, and protects them from
arbitrary decisions by federal agencies.
Q4. Does E.O. 13422 (or the Good Guidance Bulletin for that matter
require any new analysis to be conducted, or does it simply require
agencies to report the work they have already done? Do you believe that
reporting this work could lead to ``paralysis by analysis?''
A4. President Bush's E.O. 13422 does not require any new analysis by an
agency. What it does require is for an agency to have a reason for
creating a new regulation. It simply asks an agency to state the reason
for the rule, and estimate how much it will cost, particularly in
connection with other rules issued that year by the agency. Presumably,
these are things the agency can readily supply, and therefore are not
new and onerous requirements.
Moreover, the argument that E.O. 13422 (and GGP) will lead to
``paralysis by analysis'' is specious. Similar arguments were made
regarding the Data Quality Act (DQA)--namely, critics argued that it
would ``shut down'' the regulatory process by forcing agencies to
respond to public claims of disseminating faulty information. In
reality, very few DQA petitions were filed with federal agencies. For
example, in FY 2006, only 22 DQA petitions were filed with government
agencies, and only six appeals.
Clearly, the critics were wrong about the DQA, and they are almost
certainly wrong about E.O. 13422. The President's actions will serve to
bring transparency and accountability to an opaque and complex process.
This effort should be lauded.
Q5. OMB has stated that they don't know exactly who currently holds
the position of Regulatory Policy Officer at every agency. Do you think
the decision to have those duties executed by a Presidential Appointee
is a responsible way to better organize this process and bring about
more transparency and accountability?
A5. The fact that OMB--which is responsible for overseeing the
management of the executive branch agencies--cannot identify an
agency's regulatory policy person speaks volumes regarding the current
state of the regulatory process.
By appointing a Regulatory Policy Officer, the President
effectively creates a single point-of-contact for all regulatory issues
within an agency. This appointment will bring organization,
transparency, and accountability to policy-making in general, and it
will further improve the President's ability to manage the executive
agencies in his Administration. The Regulatory Policy Officer also
brings accountability to the agency by ensuring that the President's
executive order is implemented.
Questions submitted by Representative Brian Baird
Q1. ``From what you have just said, the Chamber of Commerce is very
interested in transparency. Was it the Chamber's official position back
then, and is it now, that the Vice President of the United States
should share information about who consulted with him on energy policy?
. . .For the record, then, I would just request that you would report
back to this committee on. . .to please send us a letter, which we will
convey to the Vice President, asking him, on behalf of the Chamber of
Commerce, to share the names of the people who helped draft his energy
policy.''--Hearing transcript, page 49-50.
A1. Because Rep. Baird's question is about transparency in government,
let me first directly state the Chamber's current and historical
position on this issue, and then I will apply the Chamber policy to
Rep. Baird's question.
(1) Chamber Policy
The Chamber's long held position was proposed, voted on and
approved by our Board of Directors, and codified into official policy:
A free flow of information from and concerning all branches of
government at all levels is a right of the public and is
essential to our democratic society. . .. It is the
responsibility of government to protect and preserve this
constitutional guarantee by a policy of full disclosure of
information. Except for matters clearly affecting national
security or otherwise covered by statute, all business of
government should be fully disclosed to the public. The burden
of proof must rest with government in every instance to justify
withholding any information from the public.
Policy Declarations, U.S. Chamber of Commerce
As our policy declaration makes clear, the Chamber is one of the
strongest proponents of an open and accessible Federal Government. This
is evidenced not just in our policy statements, but also in our public
activities. Consider, for example, our continuing support of the
Administration's Electronic Government, or ``E-Gov,'' Initiative, which
is an effort to make information more accessible to the public through
advanced technology and the Internet. Or consider the Chamber's
unfettered support for government ``sunshine'' laws, improved Freedom
of Information Act legislation, the federal financial grants and
contracts online database, Data Access and the Data Quality Act --all
of which promote transparency in government operations.
Similarly, the Chamber has always supported an open regulatory
system that would allow the public access to, and a voice in, the
federal rule-making process. That is why the Chamber testified at the
February 13, 2007, hearing in support of Executive Order 13422, and the
Final Bulletin on Agency Good Guidance Practices--because these
documents broaden public input into and increase responsible management
of the current regulatory system.
The purpose of the Subcommittee hearing was ostensibly to discuss
the scope and impact of the Administration's Executive Order 13422,
which modifies Executive Order 12866, and specifically whether it
constitutes an impermissible expansion of executive authority over
federal agencies. As stated in my oral testimony, E.O. 13422 is not
only permissible, but also a necessary tool for the President to manage
his agencies and the regulatory process.
Executive Order 13422 was issued by President Bush for two reasons.
First, it was intended to prevent federal agencies from circumventing
the rule-making process by using guidance documents to regulate the
public. Guidance documents do not have to undergo the same rigorous
analytical requirements of the rule-making process as proposed
regulations, so agencies tend to couch regulatory language in guidance
documents as a way to compel public compliance. Executive Order 13422
corrects that abuse by including guidance documents within the scope of
the analytical requirements of Executive Order 12866. Second, and
perhaps more importantly, it is an attempt by the President to manage
his executive agencies. It does this in three ways: (1) by ensuring
agencies state why a rule is needed, (2) by ensuring agencies give an
accurate accounting of costs and benefits of an individual rule and the
aggregate costs and benefits of all rules issued by the agency that
year, and (3) by creating a Regulatory Policy Officer (RPO) within each
agency to ensure that the executive order is implemented by the agency.
The RPO is a political appointee, responsible to the President, who
must coordinate with OMB.
In their testimony before the subcommittee, each of the other three
witnesses\3\ decried the creation of the RPO, claiming that it
``politicized'' the regulatory process by allowing a political
appointee--who reports to the President and not Congress--control over
an agency's regulatory output. Because of this fact, the other
witnesses believed that the activities of the RPO are intended to be
opaque and shielded from public scrutiny. In other words, they feared
that the activities of the RPO will not be subject to the same
transparency and accountability as, say, an agency administrator, who
is confirmed by, and reports to, Congress.
---------------------------------------------------------------------------
\3\ Sally Katzen, David C. Vladeck, and Rick Melberth. Witnesses'
written testimony is accessible at: http://science.house.gov/
publications/
hearings-markups-detai1s.aspx?NewsID=1269
---------------------------------------------------------------------------
When asked directly about the accountability and transparency of
the RPO by the Members of the Subcommittee, I stated that, first and
foremost, the RPO was most certainly going to be held accountable--to
the Chief Executive. Much like the agency administrator, the RPO serves
at the pleasure of the President and is ultimately responsible to him.
Second, I stated that the Chamber favored extending transparency, not
just to regulations, guidance documents, and the RPO, but also to the
entire regulatory process. That is, the Chamber would like to see all
the reports, studies, white papers, third-party analyses, documents,
and data that form the underlying basis of an agency's regulatory
decision-making to be made available for public scrutiny and subject to
open peer review. No other witness took such a position on
transparency.
It is only through an open peer review of such underlying technical
documents and analyses that we can ensure that:
The public remains fully informed of the rules that
regulate them;
Documents forming the basis of a rule will be
improved through critical review;
Final regulations will be narrowly tailored to
address a specific harm; and
The public will have had the opportunity to
participate at every step in the process.
(2) Application of the Chamber's Policy to Rep. Baird's Question
Following my statement of ``total transparency,'' Representative
Baird suggested that the Chamber's support of transparency was actually
``selective.'' That is, the Chamber claims to want transparency in
government, but, in fact, doesn't want it extended to the activities of
the Executive Office. By way of example, Representative Baird cited the
controversy surrounding Vice President Cheney's National Energy Policy
Development Group (NEPDG), and whether the identification of the
participants and substance of the preliminary meetings should be made
publicly available. ``If [transparency] is what you believe, apply it
equitably across the Executive Branch,'' Representative Baird stated at
the hearing.
Transparency is what the Chamber espouses, and favors its
application across all three branches of government. Yet, as even
Representative Baird must agree, the doctrine of open government must
take a back seat to national security concerns, the laws enacted by
Congress, and the U.S. Constitution. That is why official Chamber
policy specifically states that we favor full disclosure of information
in all matters of government except for matters clearly affecting
national security or otherwise covered by statute. In other words, if
there are, for example, national security reasons (terrorist threats),
constitutional reasons (separation of powers), or legal reasons
(statutes or court decisions) for restricting transparency, then these
reasons must be respected.
In the case of Vice President Cheney's energy task force, the
question of whether the identification of the participants and
substance of the preliminary meetings should be made public is governed
both by separation of power concerns, and more directly, by statute--
namely the Federal Advisory Committee Act (FACA).\4\ Under FACA, the
work of executive advisory groups that include non-federal employees
must be publicly disclosed. Yet the Administration has affirmatively
stated that NEPDG was composed of all federal employees, and therefore
exempt from FACA. If, in fact, any non-governmental employees
subsequently are determined to have been present at some of the NEPDG
meetings, this would not mean that the FACA exemption is lost. The non-
governmental employees would still have to be deemed de facto members
of the advisory group in order for disclosure to occur, as was the case
with the health care task force headed by former First Lady Hillary
Rodham Clinton.\5\ If the courts ultimately determine that this was
also the case with the NEPDG, then the law would require public
disclosure.
---------------------------------------------------------------------------
\4\ 5 U.S.C.S. Appendix Sec. 1, et seq.
\5\ Association of American Physicians v. Clinton, 302 U.S. App.
D.C. 208, 997 F.2d 898 (CADC 1993). Court held that, although non-
government employees had not been officially named to the committee,
they had become so involved in the task force's activities that they
were ``functionally indistinguishable'' from the designated members.
---------------------------------------------------------------------------
The Chamber's policy will continue to reflect a respect for the
laws of this nation--as passed by Congress--including FACA. If the
language, application, or impact of a particular law is not to the
liking of Congress, then it is certainly within the power of Congress
to change that law. Until then, our policy will remain unchanged.
Conclusion
I hope this helps to clarify the Chamber's position on both E.O.
13422, and transparency in government. As I have tried to make clear,
the Chamber strongly supports the President's effort to manage the
regulatory process, and further advocates opening the entire regulatory
process to public scrutiny--from the underlying documents and
discussions that form the basis of regulations, to the final
regulations themselves. It is only through complete transparency and
open peer review that we can ensure that regulations and guidance
documents are sound, balanced, cost-effective, and ultimately fair.
The Chamber is grateful for the opportunity to present its views
about this important topic.
Answers to Post-Hearing Questions
Responses by Rick Melberth, Director of Regulatory Policy, OMB Watch
Questions submitted by Chairman Brad Miller
Q1. I am concerned about the implications for the public's right to
know embedded in the changes to the Regulatory Policy Officers. As
Presidential appointees with the power to ``pre-approve'' even starting
a regulatory or guidance initiative, what might this mean for the
ability of the public and public interest groups to know what has
happened on issues dispensed with by these officers? Might this be an
indirect way of by-passing some of the much-vaunted transparency that
has so far marked the OMB E.O. 12866 process?
A1. The public's right to know what happens to regulatory issues is
already severely limited in the pre-rule-making process under E.O.
12866. OIRA's involvement as the gatekeeper in the process means that
agencies' submissions to OIRA--the first public notice of agencies'
proposed actions--are already substantially impacted by OIRA's pre-
rule-making negotiations as a 2003 GAO report described.\1\ Proposed
regulations, however, are at least initiated in the agencies with the
expertise to recognize that a problem may require regulatory action.
The process can begin, data may be collected, analyses conducted, and
some determination may be made of the problem to be addressed. Although
OIRA's influence is substantial, the final political decisions within
agencies about moving forward with regulations are made by the agency
heads.
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\1\ General Accounting Office, RULE-MAKING: OMB's Role in Reviews
of Agencies' Draft Rules and the Transparency of Those Reviews,
September 2003. Available at www.gao.gov/cgi-bin/getrpt?GAO-03-929.
---------------------------------------------------------------------------
The installation of Presidential appointees at the agency level
concentrates OIRA's authority at the expense of agency personnel. It
shifts the decision to initiate regulations and guidance to someone
less familiar with the scope of the problem and adds political
considerations that should only occur at the highest levels of the
agencies. These appointees can stop regulations from ever being
considered.
We believe the most damaging aspect of this political influence
within agencies is that the public will never know what issues were
dispensed with inside the agencies. The pre-rule-making stage becomes
even more remote from the public. While we strongly disagree with this
change in the Regulatory Policy Officer's responsibility, if it is
implemented, then the larger question is the near total lack of
transparency and disclosure during the pre-rule-making stage. The
public can never know what alternatives were dismissed or what remedies
were forced onto agencies by political calculations. This process is
highly undemocratic and secretive.
Q2. The new E.O. elevates market failure as the preferred standard for
an agency to meet in explaining the rationale for a regulatory or
guidance document. If you have an insight into how the President's
proposed director of OIRA, Susan Dudley, might apply this standard,
please share that with the Subcommittee.
A2. In September 2006, after President Bush nominated her to be OIRA
administrator, OMB Watch and Public Citizen issued an analysis of Susan
Dudley's writings and comments.\2\ In that report we conclude:
---------------------------------------------------------------------------
\2\ The full report, The Cost Is Too High: How Susan Dudley
Threatens Public Protections, can be read online or downloaded at
http://www.ombwatch.org/regs/2006/dudleyreport.pdf.
Dudley believes that an agency must do more than prove that a
regulation's benefits outweigh its costs. Dudley has stated
that ``[e]ven policies supported by the best benefit-cost
analysis are not likely to be socially optimal substitutes for
market forces unless they correct a market failure.'' With her
skepticism about whether regulation can serve any goal other
than correcting a market failure (which, as she has defined it,
would be an impossibility), Dudley would bog the agencies down
in endless analysis, stalling regulations and leaving the
---------------------------------------------------------------------------
public at risk.
We believe there are three reasons why Dudley would be a threat to
public protections if she were the administrator of OIRA. First, she
has an ideological opposition to regulations which leads her to use
policy tools in biased ways. In her writings she shifts and sometimes
uses contradictory reasoning to conclude that regulations are not
justified. From her record, one can only conclude that she would demand
impossible requirements agencies could not meet.
Second, the elevation of additional economic analyses such as
market failure, senior death discounts, and a free-market-first
approach under Dudley's direction could result in substituting these
economic considerations for non-economic ones. Even in policy areas
where other considerations are mandated as primary considerations, such
as regulations promulgated by OSHA in which costs are not placed above
worker safety, we believe Dudley's reliance on economics would be
determinative.
Dudley also is a strong advocate for regulatory sunsets which would
severely weaken public protections. She supports the position that
agencies should justify a second, and third, and fourth time the need
for critical regulations as they expire under sunset provisions. Given
how ossified the regulatory process already is, this position leads to
a de facto roll back of regulations already implemented.
Third, we oppose her nomination because of her very close ties to
corporate interests which have worked strenuously to delay, diminish
and defeat health, safety, environmental and civil rights protections.
The regulatory process is already heavily tilted toward special
interests. We believe Dudley would further tilt the playing field
toward the interests that have supported her work.
In light of this record, we believe Dudley would apply market
failure analyses and other provisions of the amended E.O. to delay if
not to stop public protections.
Q3. Do you have any other points you wish to make for the record
regarding E.O. 13422?
A3. OMB Watch has just completed a final analysis\3\ of the potential
impacts of E.O. 13422 and OMB's Final Bulletin for Agency Good Guidance
Practices. In its conclusion, we argue that these regulatory process
changes further concentrate control in the White House, especially in
OIRA, at the expense of both the separation of powers and agency
discretion. OIRA will be able to further delay the issuance of
regulations and guidance documents. These delays will have real impacts
on people's lives. And submitting guidance documents to OIRA review
will hurt regulated entities which rely on agency guidance to conduct
daily activities.
---------------------------------------------------------------------------
\3\ OMB Watch, A Failure to Govern: Bush's Attack on the Regulatory
Process, March 2007. Available at http://www.ombwatch.org/regs/PDFs/
FailuretoGovern.pdf
---------------------------------------------------------------------------
E.O. 13422 and the good guidance bulletin move the regulatory
process in the wrong direction and this will have real consequences for
our nation's public safeguards. Our government should be doing more to
protect the public, not less.
Questions submitted by Representative F. James Sensenbrenner, Jr.
Q1. Did President Clinton's E.O. 12866 require agencies to conduct
cost-benefit analyses for proposed regulations? If so, what harm would
come from simply requiring them to report the aggregate of the analyses
they already conducted? Is this really such a big step?
A1. E.O. 12866 requires agencies to conduct cost-benefit analyses of
proposed regulations. These are individual analyses conducted for a
very wide range of types of regulations even for those within one
specific agency like the Department of Agriculture or the Department of
Labor. The harm that comes from aggregating costs and benefits from
such diverse analyses is in how those aggregate numbers are used.
Congress requires OMB to report these aggregated cost and benefit
totals in its annual Report to Congress on the Costs and Benefits of
Federal Regulations. The 2007 Draft report just issued March 12th
states: ``OMB has chosen a ten-year period for aggregation because pre-
regulation estimates prepared for rules adopted more than ten years ago
are of questionable relevance today.'' But why use ten years? Why not
five or fifteen? The logic regarding the questionable relevance of pre-
regulation estimates is as valid for regulations conducted at any time.
The aggregated numbers have little basis in reality.
U.S. businesses excel at adapting to changing business conditions;
they adapt technologically, they adapt by learning from experience.
Thus the pre-regulation cost estimates provided by businesses for use
in cost-benefit analyses are hypothetical, and possibly biased. A more
reasonable approach would be to perform ex post studies of costs and
benefits (to the extent that either can be quantified). These ex post
numbers are relatively useless in the aggregate.
The best arguments against aggregating costs and benefits are
provided in OMB's first annual report in 1997, Report to Congress on
the Costs and Benefits of Federal Regulations.\4\
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\4\ Office of Management and Budget, Report to Congress on the
Costs and Benefits of Federal Regulations. September 30, 1997.
Available at http://www.whitehouse.gov/omb/inforeg/rcongress.html
Third, it is important to ask: What public policy purposes do
aggregate estimates serve if the ultimate goal is to develop
the information necessary to make decisions about specific
regulatory programs or program elements? And, in particular: In
what ways can these estimates help support the recommendations
to reform the regulatory system required of the Director by
Section 645 (a)(4)? Clearly, knowing the costs and benefits of
individual proposals for regulatory actions and their
alternatives, including the alternative of no action, enables
policy officials to make decisions that improve society's well
being. But for reasons discussed below, knowing the total costs
and total benefits of all of the many and diverse regulations
that the Federal Government has issued provides little specific
guidance for decisions on reforming regulatory programs.
---------------------------------------------------------------------------
[Chapter II, Overview]
The report goes on to argue that ``it is extremely difficult, if
not impossible, to estimate the actual total costs and benefits of all
existing federal regulations with any degree of precision'' because of
two primary problems. First, is the problem of what baseline to use in
order to make these aggregate numbers meaningful. ``Could a civil
society even exist without regulation? In other words, what do we use
as the baseline for world without any regulation?''
OMB provides a number of problems with trying to identify a
baseline for meaningful comparison. Problems include the ex ante vs. ex
post issue raised above, the dynamic quality of the economy, and the
dangers of attributing changing behavior to the presence of federal
regulation as opposed to State and local regulation, tort claims, and/
or public pressure. Businesses simply cannot accurately calculate the
costs of compliance.
Second, in aggregating costs and benefits, one is comparing apples
to oranges to ``kiwis, grapefruit, etc.'' The cost-benefit analyses
``vary in quality, methodology, and type of regulatory costs
included.'' And not all regulations are the same. Environmental, social
(public health, consumer and workplace protections, civil rights),
economic, transfer payments, and process regulations require very
different approaches.
OMB Watch believes that aggregating costs and benefit has no useful
purpose to policy-makers because there is no connection to a problem
government is trying to solve. Thus the only uses can be for creating a
political straw man or for use in developing regulatory budgets which
advance an already tenuous economic framework over the regulatory
process. Regulatory budgets cap annual compliance costs of regulations,
and as we've argued here, there is no reliable way of knowing the
extent of these costs. Agencies must submit ``combined aggregate costs
and benefits of all its regulations planned for that calendar year to
assist with the identification of priorities.'' [emphasis added] This
language from E.O. 13422 provides further evidence that the intent is
to use aggregated numbers for policy-making.
Q2. A major criticism of the market failure criterion is that some
believe it elevates economic concerns above those of public health and
safety, and that this contradicts Congressional guidance. Is this true?
If so, why don't the following sections give agencies an out when they
are presented with conflicting values?
Sec. 1, end of last sentence: ``unless a statute requires
another regulatory approach.''
Sec. 1(b), end of sentence: ``to the extent permitted by law
and where applicable.''
A2. We believe that economic concerns are already elevated above public
health, workplace safety, environmental and civil rights concerns.
Under the Bush Administration, these economic considerations have been
advanced and politicized beyond the limits they had in previous
administrations as we have documented for six years. The language
quoted above from E.O. 12866 might be applicable in a regulatory
implementation scheme in which OIRA acted as a counselor instead of a
gatekeeper. These sections may provide a legal exit strategy when an
agency is challenged. The practical effect, however, is that when one
agency, OIRA, has the sole responsibility for overseeing an agency's
proposed rules, has control over the agency's budget, and has the
ability to keep an agency in an endless loop of regulatory analyses,
OIRA will get nearly all of what it wants. This situation is
exasperated by the lack of transparency in OIRA's role in the pre-rule-
making process.
Q3. One of the reasons agencies have increasingly turned to guidance
documents in order to regulate industry is that they do not require
public notice, public comment, or OMB notice. This has allowed for more
flexibility and reactive policies, but has sacrificed transparency,
organization, and accountability. Do you believe the recent OMB
bulletin proposes a reasonable method of balancing these competing
principles?
A3. We would add to the list of reasons why agencies have turned to
guidance documents the cumbersome and incredibly slow pace of getting
regulations promulgated. Focusing on guidance documents ignores the
real regulatory problems that exist in the process. The process is
dysfunctional: it is too centralized, OIRA lacks the staff and
expertise to judge the adequacy of the non-economic aspects of complex
regulations, and it has increasingly imposed a once-size-fits-all
approach to the analytical approaches used in the process.
Far from providing a reasonable method of balancing the principles
cited above, submitting significant guidance documents to a review
process similar to that for regulations sacrifices all of the
principles mentioned. One more aspect of agency action is subject to
OIRA's black box of regulatory review thus sacrificing transparency and
accountability; adding more categories for the small staff at OIRA to
review sacrifices agency flexibility and reactivity to anything more
than an individual request. That results in providing guidance one
transaction at a time.
Instead of implementing good guidance practices, OIRA would have
served the administration and the public far better if it had attempted
to fix the problems that drive agencies to issue guidance in the place
of regulation.
Appendix 2:
----------
Additional Material for the Record
Analysis of E.O. 12866 with edits made by E.O. 13422
While on the Home Front
Missing from the New York Times of January 19--and for that matter
the Washington Post--was any attention to an executive order the
President issued quietly on Thursday, that achieves a major increase in
White House control over domestic government. The executive order,
issued without explanation or accompanying press release, appears to be
a series of technical amendments to an existing regime by which the
White House coordinates the activities of federal agencies adopting
regulations. Among its measures, the order
considerably expands the range of activities embraced
by the order, from official regulations having the force to law
to less formal policy and interpretations;
requires agencies to place control over these
activities into the hands of a ``presidential appointee''--that
is, a person whose appointment does not require senatorial
confirmation--unless a particular decision of hers is
specifically overridden by the agency's senatorially confirmed
head;
requires the agency to consider in addition to its
statutory responsibilities issues Congress may not have thought
appropriate factors for decision; and
gives the White House considerable leverage to
require the agency to adopt expensive and delaying procedures
for considering proposed regulations, that will greatly enhance
the effective power of participants in the process - regulated
industries who may have White House friends, in particular.
It is perhaps not surprising that, having lost control of Congress,
the President is doing what he can to increase his control of the
executive branch. President Clinton, when he lost the Congress, also
worked to achieve by regulation what he could not expect to do
legislatively. Much more law is made today by regulation than
legislation, in any event. But yesterday's steps reflect the view we
have seen in connection with the war in Iraq as well, that the
President is a law unto himself, entitled to act without particular
regard to Congress's wishes.
Senatorial confirmation gives agency heads a relationship with
Congress as well as the White House. They are the ones Congress's laws
empower to decide regulatory matters. Given the enormous range of
governmental responsibilities today, it is even less thinkable now than
it was two centuries ago that these decisions, in their detail, are for
the President--he may consult, he may oversee, but the law places
decisional authority in them. President Andrew Jackson had to fire two
Secretaries of the Treasury before he could find an Acting Secretary
willing to move government funds out the United States Bank; he and
they understood that the decisional authority rested in them--and the
Senate promptly refused to confirm the Acting Secretary's nomination.
Now a presidential ukase places decisional authority in the hands of a
person with whom the Senate has no relationship; should the President
fire and wish to replace that person, there will be no such political
price to pay.
Congress also sets the factors that an agency is to consider in
reaching regulatory decisions. It may quite deliberately exclude some
possibly relevant factors from agency consideration. A few years ago,
for example, the Supreme Court found that the Clean Air Act did not
authorize the Environmental Protection Agency to consider costs. The
new factors the executive order makes potentially decisive, in the
hands of a person answering only to the President, effectively amend
the law as the President--but not the Congress--wishes.
Congress has been chary of requiring the complex procedures the
executive order appears to place in White House control. Rule-makings
using them, in substantial control of the participants as ordinary
rule-makings are not, can extend for years. A quarter-century ago, when
the DC Circuit had imposed similar requirements judicially, the Supreme
Court said emphatically that any such decision was for Congress. Now
the President has effectively appropriated that decision for himself--
and his political friends.
We have long been a nation under law. The war emergency has placed
that proposition under considerable strain. If the President's law-
transcending claims, however wrong, can be understood in that context,
they should not be tolerated when, as now, they emerge in stealth
documents, in the ordinary context of law-administration.
Dr. Peter L. Strauss
Betts Professor of Law
Columbia Law School
Bush Order Limits Agencies' `Guidance'
By Cindy Skrzycki
Tuesday, January 30, 2007; Page D01
On Jan. 18, when the headlines in the United States focused on the
war in Iraq, the new Democratic Congress and actress Lindsay Lohan's
alcohol problem, the Bush Administration rewrote the book on federal
regulation.
President Bush issued an executive order curbing the power of
agencies to regulate industry through ``guidance''--informal advice
that falls short of official rules yet can still cost companies
millions of dollars to comply with. The order, which also calls on
agencies to project the cost of new rules, among other demands, gives
the White House more power to review how they write standards to
regulate corporate behavior.
The amendments are ``the most serious attempts by the executive
branch to control the regulation mills of the hundreds of federal
agencies,'' said William Kovacs, Vice President of Environment,
Technology and Regulatory Affairs at the U.S. Chamber of Commerce, the
Nation's largest business lobby.
The story behind those changes illustrates how important the
competing sides consider rule writing. Even subtle word changes can
have significant effects on what the chemical, oil, home-building,
pharmaceutical and other highly regulated industries must spend.
``It's another thumb on the scale,'' said Sally Katzen, who headed
the Office of Information and Regulatory Affairs, the top regulatory
job, in the White House Office of Management and Budget during the
Clinton Administration. ``There will be more boxes to check, more I's
to dot, more T's to cross and more analysis.''
Federal agencies issue guidance to interpret key policy and
technical questions, often at the request of industry. The Labor
Department's Occupational Safety and Health Administration, for
example, issued 574 guidance documents between 2001 and 2005, many
directed at the construction industry.
Though the guidance isn't legally binding, companies pay close
attention to it. More than 30 individuals and groups, including those
representing funeral directors and ornithologists, filed comments about
``good guidance practices'' for a bulletin issued with the executive
order.
Some, such as the American Chemistry Council based in Arlington,
said it was ``frequently beneficial'' for agencies to have the
flexibility to issue guidance without a formal rule-writing process.
Still, the council and most others who filed comments backed the plan
to rein in the practice because of concern that guidance at times
amounted to back-door rule writing.
Guidance should be subject to oversight by the OMB and public
notice and comment, they argued.
General Electric, the world's second-largest company by market
value, said the Environmental Protection Agency issued guidance on how
to clean up toxic chemicals, which a court ruled in 2002 was actually a
``legislative rule.'' The Fairfield, Conn., company recommended that
agencies be required to maintain a list of all guidance documents on
their web sites.
Sanofi-Aventis, France's largest drug-maker, said guidance
documents ``can have significant impact on our business as well as on
the ultimate lives of our customers--patients.''
The Paris company, whose U.S. headquarters is in Bridgewater, N.J.,
recapped an experience in which the Centers for Medicare and Medicaid
Services switched its payment policy on four drugs last year, after the
final rule had been approved.
Bush's executive order told agencies they must submit to the White
House budget office for review any guidance that has an impact of $100
million or more on the economy and make such significant
interpretations available to the public for comment.
Kovacs said the Chamber's complaint about guidance ``was one of the
first issues we talked about'' with John Graham, the Administration's
first regulatory czar at the OMB.
Another change requires agencies to state in writing ``the specific
market failure'' that it intends to cure with a new rule. Insufficient
competition can be a sign of such a failure, OMB officials said. Or the
government may have to order nutritional labeling because there
otherwise would be a lack of information for consumers.
The market-failure concept has taken on new emphasis with the Bush
Administration. The President nominated Susan Dudley, the former head
of the regulatory program at the Mercatus Center, a free-market-
oriented research group at George Mason University in Arlington, to
replace Graham in the top regulatory job at the OMB. Dudley wasn't
confirmed by the Senate in the last Congress and is now a top aide in
the budget office.
Public Citizen, a District nonprofit group that monitors
regulation, charged that Dudley will use a market-failure standard to
create economic barriers to protecting the public.
Under the Bush executive order, regulators also now will have to
estimate the total costs and benefits of planned rules. And the process
will be overseen in each agency by a political appointee, another
provision that public interest groups oppose.
``There is no question who this panders to,'' said Rena Steinzor, a
University of Maryland Law Professor who is critical of administration
regulatory policy. ``It's something business has wanted.''
Jeffrey Rosen, OMB's general counsel, said: ``Simply put: What we
are doing here is `good government.' We are building upon a process
that has been used by presidents of both parties to try to
institutionalize best practices.''
Criticism of the changes is ``a tempest in a teapot,'' said Paul
Noe, an adviser to Graham who is now a Washington lawyer. ``The
executive order promotes better-informed and more accountable
regulatory decisions.''
Congress should be paying attention to the President's action
because he is usurping the authority the lawmakers gave the agencies to
regulate, according to Peter Strauss, a Professor at Columbia
University Law School.
``It's maybe not surprising that having lost control of the
Congress, the President is doing what he can to increase control of the
Executive Branch,'' Strauss said.
Cindy Skrzycki is a regulatory columnist with Bloomberg News. She
can be reached at [email protected].
Bush order on government regulation stirs debate
By Tabassum Zakaria
Reuters
Tuesday, January 30, 2007; 4:28 PM
WASHINGTON (Reuters)--An order signed by President George W. Bush
on the oversight of thousands of government regulations issued every
year was praised by business as a step toward controlling an unwieldy
process but criticized by others as potentially a loser for consumers.
The White House said the executive order signed by Bush on January
18 makes a senior official in each agency accountable for the
regulations it issues and provides greater openness by ensuring that
``guidance'' documents issued to businesses are available to the
public.
Business groups say the order should help businesses which have to
wade through a myriad of regulations, sometimes conflicting ones from
different agencies, by making one person in each agency in charge of
overseeing the regulations issued.
Consumer groups say the public would lose out because the order
could slow the process by which regulations in the public interest such
as pollution controls would be issued, and puts the process under the
control of an official appointed by the President.
Jeffrey Rosen, counsel at the White House Office of Management and
Budget, called the criticism a ``mistaken argument'' and said the basic
regulatory process in the order has been in place over both Democratic
and Republican administrations.
``The basic framework is the same,'' he said of the order which
amended an order issued by President Bill Clinton in 1993.
``This is just another tool for industry and their allies in the
Bush White House to slow down and prevent agencies from getting things
done to protect the public,'' said Robert Shull, deputy director for
auto safety and regulatory policy at Public Citizen.
The order requires agencies use a standard of ``market failure,''
which means determining whether private markets can correct a social
problem like pollution on their own, in deciding whether government
needs to step in, he said.
Shull said that was too high a bar to meet as the new Democratic-
controlled Congress prepares to take on issues like global warming and
fuel economy.
Rosen said the new order better defines the term market failure
from Clinton's order. On consumer advocate concerns like pollution,
``the clarification actually helps,'' because it would be a legitimate
basis for regulation, he said.
Consumer groups expressed concern about the order's requirement
that the regulatory oversight officer at the agencies be appointed by
the President.
``This is really just another way of the White House getting its
fingers in all of the agencies, manipulating all of their policies and
all of their priorities in a way that Congress never intended,'' Shull
said.
Rosen said it meant more accountability. ``If you want to know
who's responsible for regulatory decisions, here's who it is and it's a
presidential appointee, meaning it's somebody very senior,'' he said.
``It's a way of identifying some accountability.''
The regulatory process puts out about 4,000 regulations every year
in addition to the 192,000 regulations that exist, said Bill Kovacs,
Vice President of Regulatory Affairs at the U.S. Chamber of Commerce.
``Imagine yourself being a small business and trying to comply on
any given day with labor standards, health standards, pension
standards, environmental standards,'' Kovacs said. ``So people are
trying to find some way to get control over the process.''