[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
``REINS ACT OF 2013'': PROMOTING JOBS, GROWTH AND AMERICAN
COMPETITIVENESS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
REGULATORY REFORM,
COMMERCIAL AND ANTITRUST LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
ON
H.R. 367
__________
MARCH 5, 2013
__________
Serial No. 113-26
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
HOWARD COBLE, North Carolina ROBERT C. ``BOBBY'' SCOTT,
LAMAR SMITH, Texas Virginia
STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio JUDY CHU, California
TED POE, Texas TED DEUTCH, Florida
JASON CHAFFETZ, Utah LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania KAREN BASS, California
TREY GOWDY, South Carolina CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, FLORIDA
KEITH ROTHFUS, Pennsylvania
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on Regulatory Reform, Commercial and Antitrust Law
SPENCER BACHUS, Alabama, Chairman
BLAKE FARENTHOLD, Texas, Vice-Chairman
DARRELL E. ISSA, California STEVE COHEN, Tennessee
TOM MARINO, Pennsylvania HENRY C. ``HANK'' JOHNSON, Jr.,
GEORGE HOLDING, North Carolina Georgia
DOUG COLLINS, Georgia SUZAN DelBENE, Washington
KEITH ROTHFUS, Pennsylvania JOE GARCIA, Florida
HAKEEM JEFFRIES, New York
Daniel Flores, Chief Counsel
James Park, Minority Counsel
C O N T E N T S
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MARCH 5, 2013
Page
THE BILL
H.R. 367, the ``Regulations From the Executive in Need of
Scrutiny (REINS) Act of 2013''................................. 6
OPENING STATEMENTS
The Honorable Spencer Bachus, a Representative in Congress from
the State of Alabama, and Chairman, Subcommittee on Regulatory
Reform, Commercial and Antitrust Law........................... 1
The Honorable Steve Cohen, a Representative in Congress from the
State of Tennessee, and Ranking Member, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law................ 27
WITNESSES
James L. Gattuso, Senior Research Fellow in Regulatory Policy,
Thomas A. Roe Institute for Economic Policy Studies, The
Heritage Foundation
Oral Testimony................................................. 33
Prepared Statement............................................. 35
Eric R. Claeys, Professor of Law, George Mason University
Oral Testimony................................................. 44
Prepared Statement............................................. 47
Ronald M. Levin, William R. Orthwein Distinguished Professor of
Law, Washington University School of Law
Oral Testimony................................................. 63
Prepared Statement............................................. 65
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Material submitted by the Honorable Spencer Bachus, a
Representative in Congress from the State of Alabama, and
Chairman, Subcommittee on Regulatory Reform, Commercial and
Antitrust Law.................................................. 3
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, Ranking
Member, Committee on the Judiciary, and Member, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law................ 28
Prepared Statement of the Honorable Henry C. (Hank) Johnson, Jr.,
a Representative in Congress from the State of Georgia, and
Member, Subcommittee on Regulatory Reform, Commercial and
Antitrust Law.................................................. 31
Prepared Statement of the Honorable Bob Goodlatte, a
Representative in Congress from the State of Virginia, and
Chairman, Committee on the Judiciary........................... 77
APPENDIX
Material Submitted for the Hearing Record
Material submitted by the Honorable Steve Cohen, a Representative
in Congress from the State of Tennessee, and Ranking Member,
Subcommittee on Regulatory Reform, Commercial and Antitrust Law 100
Letter from the Honorable Kevin Cramer, a Representative in
Congress from the State of North Dakota........................ 116
Prepared Statement of the Honorable Andy Barr, a Representative
in Congress from the State of Kentucky......................... 118
Letter submitted by Kristina Butts, Executive Director,
Legislative Affairs, National Cattlemen's Beef Association..... 119
Response to Questions for the Record from James L. Gattuso,
Senior Research Fellow in Regulatory Policy, Thomas A. Roe
Institute for Economic Policy Studies, The Heritage Foundation. 120
Response to Questions for the Record from Eric R. Claeys,
Professor of Law, George Mason University...................... 122
Response to Questions for the Record from Ronald M. Levin,
William R. Orthwein Distinguished Professor of Law, Washington
University School of Law.................................127
deg.OFFICIAL HEARING RECORD
Material Submitted for the Hearing Record but not Reprinted
Congressional Research Service Report titled REINS Act: Number and
Types of ``Major Rules'' in Recent Years, submitted by the
Honorable Steve Cohen, a Representative in Congress from the State
of Tennessee, and Ranking Member, Subcommittee on Regulatory
Reform, Commercial and Antitrust Law. This report is available at
the Subcommittee and can also be accessed at:
http://www.speaker.gov/sites/speaker.house.gov/files/
UploadedFiles/
110830_crs_majorrules.pdf
``REINS ACT OF 2013'': PROMOTING JOBS, GROWTH AND AMERICAN
COMPETITIVENESS
----------
TUESDAY, MARCH 5, 2013
House of Representatives,
Subcommittee on Regulatory Reform,
Commercial and Antitrust Law
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to call, at 11:32 a.m., in
room 2237, Rayburn Office Building, the Honorable Spencer
Bachus, (Chairman of the Subcommittee) presiding.
Present: Representatives Bachus, Goodlatte, Farenthold,
Marino, Collins, Rothfus, Cohen, Johnson, DelBene, Garcia and
Jeffries.
Staff present: (Majority) Daniel Flores, Chief Counsel;
Ashley Lewis, Clerk; Dave Lazar, Clerk; (Minority) James Park,
Minority Counsel; Susan Jensen, Counsel.
Mr. Bachus. The Subcommittee on Regulatory Reform,
Commercial and Antitrust Law hearing will come to order.
Without objection, the Chair is authorized to declare
recesses of the Committee at any time.
We welcome all of our witnesses today.
The Chair recognizes himself for the purposes of an opening
statement.
Regulations help to implement policies Congress has
established by statute. When issued, they should be reasonable,
provide clear rules of the road for businesses, and benefit the
public more than it hurts them. Today's regulatory system fails
the test. The cost it imposes and the uncertainty it creates
are choking America's economy and preventing the recovery of
American jobs, growth, and global competitiveness.
In its first term, the Administration imposed far more
major regulations at a far greater cost than the preceding
Administration. Just this December, the Obama administration
revealed that it has 2,387 regulatory actions in its current
agenda, and the White House admits that at least 128 of these
regulations will have an impact on the economy of $100 million
or more. According to the American Action Forum, the cost of
this current agenda includes $123 billion in planned
regulations. These regulations would add another 13 million
man-hours in just paperwork alone.
The Small Business Administration has confirmed that small
businesses pay a disproportionate share of this regulatory
burden. Indeed, the cost of regulatory compliance has been
translated to about $11,000 per worker. Small businesses
generate most of the new jobs in our economy; in fact,
somewhere between two-thirds and 70 percent normally. However,
in the past recession or the recession we are in, small
businesses are lagging behind in job creation. In some
estimates, they are creating less than half the new jobs, and I
believe that that is almost entirely due to regulations, many
of those in the financial sector.
Imagine how much better off we would be if we could put
that $11,000 back into the businesses to grow and hire workers.
Federal Reserve Chairman Ben Bernanke himself expressed concern
about the impact and cost of regulations on small businesses
during his Humphrey Hawkins testimony last week before the
Financial Services Committee. Chairman Bernanke said, quoting
now, ``We all agree that the burden of regulation falls
particularly heavily on small community banks which don't have
the resources to manage those regulations very effectively.''
It is time for action. Just as it cannot bear the ever-
mounting weight of the Federal debt, the economy cannot bear
the non-stop increase of high-cost Federal regulation. The
REINS Act, passed by the House last year and reintroduced this
term by Representative Todd Young of Indiana, provides a
critical, simple, and long overdue course correction. It says
one thing: when it comes to the most costly new regulations
that Federal regulators propose, those regulations will not go
into effect unless they can pass an up or down vote by the
people's elected representatives.
As an original cosponsor, I believe the REINS Act will help
to restore accountability to the Federal regulatory process. It
will help ensure that regulations are issued consistent with
congressional intent and provide a needed check of the
overreach that we have frequently seen from the unelected
Federal bureaucracy. It will allow the American people to have
a say in approving the most costly decisions that affect their
lives and livelihoods.
This reform could not be timelier. American workers and
businesses are facing an historic regulatory tsunami from the
Administration, not the least of which includes the impact of
Dodd-Frank, Obamacare, and the Administration's climate change
agenda. In that regard, I would like unanimous consent to
introduce Carbon Power Politics from the Wall Street Journal on
March 4, 2013.
Mr. Cohen. Despite such an ominous title, I will be part of
the unanimous consent.
Mr. Bachus. Thank you. I can strike the title off. Thank
you, Mr. Cohen.
[The information referred to follows:]
__________
Mr. Bachus. The Administration has made plain that if it
cannot persuade the people's representatives to adopt its
legislative agenda, it intends to force that agenda on the
people through regulation, and that is actually the subject
matter of that article. Unless Congress intervenes and passes
the REINS Act and other important regulatory reforms, the
increasing tide of major Federal regulations will continue to
destroy jobs, harm communities, and weaken opportunities and
the ability of American workers to provide for their families.
Enterprising small business owners like our witness from
Baltimore last week will continue to face huge fines for
failure to sign every copy of a triplicate regulatory form.
Communities will continue to worry about their cement plants
shutting down, as is the case in my district, just to clear the
way for cement imports from dirtier plants in Mexico or China.
Community banks will continue to be snuffed out as Dodd-Frank
regulations make business possible only for banks that are big
and can afford to hire an army of compliance officers.
Our forefathers designed our Federal system of government
to include an important system of checks and balances. The
REINS Act is commonsense legislation that does that, and I
invite all of my colleagues to work together to ensure it
becomes law during the Congress and restore the sense of
balance established in the Constitution.
[The bill, H.R. 367, follows:]
__________
Mr. Bachus. At this time, I recognize the Ranking Member of
the Subcommittee, Mr. Steve Cohen, for his opening argument.
The gentleman from Tennessee is recognized.
Mr. Cohen. Thank you, Mr. Chairman. I appreciate the
opportunity.
I do, though, have this weird feeling that I am somebody
else today. I am Bill Murray, and it is February 2 again and
again and again and again. This is the 18th time that this
Subcommittee will have had hearings on this type of issue. It
is the third time in the last 2 years that this Subcommittee
has heard testimony on the REINS Act. It will be the 18th time
that we have had hearings on the regulatory system.
Last week I asked that the Subcommittee have limited,
substantive, and nuanced discussions about ways that we can
help with regulations, and I look forward to working with the
Chairman on that. He mentioned small community banks. I am a
big fan of small community banks. I bank at a small community
bank. I was, I think, the first person in the House and one of
the leaders in the House to suggest that FDIC insurance limits
should be raised to $250,000 to keep small community banks'
depositors from coming and taking the deposits out for fear of
the catastrophes that we were experiencing at that time, and
that happened.
So I am a big supporter of small community banks, but I am
not a big supporter of the REINS Act, which just makes no sense
to me. Indeed, the bureaucrats are unelected, but they are
knowledgeable, and they have expertise. And to take away from
them and to put in the Congress on the second and fourth
Thursdays only, if and when we are here, which is becoming less
and less frequent, and give us a very limited time to have to
approve or have a one-house veto, which is constitutionally
suspect, regulations without expertise of the 435 of us, and we
would have to approve, and the Senate would have to approve,
and the president would have to approve, or there would be no
regulation.
That is an impossible task, and it means the end of
regulations. And while I understand that bureaucrats are
unelected, they do have expertise and knowledge, which we do
not have.
So this is a repeat of previous scripts, and I would love
to have a hearing just on community banks and what we can do to
help them. I have opposed the REINS Act. I will continue to
oppose it because it just doesn't make sense, just like the
sequestration is pretty much considered dumb by both sides. I
think even Speaker Boehner said it is not a good way to do it.
This is not a good way to do it. If there are regulations that
are a problem, you deal with those regulations, but you don't
give the Congress a massive ability to interrupt the regulatory
process.
This is mostly aimed at Affordable Care and Dodd-Frank. We
had passed a ``jobs bill'' last time, last Congress, and it
will result, if the rules and regulations are done in an
appropriate way, in a lot of consumers being bilked of their
finances from unscrupulous people trying to finance their
companies, and we have a history of trying to look out for
consumers, and should, and that is what the SEC has done in the
past and what we will continue to do, hopefully, with rules and
regulations.
I am not going to go into all the nuts and bolts of what
this would require--both houses, the president, joint
resolution within 70 days, legislative days. It just makes no
sense. I think Speaker Boehner used the word ``silly'' several
times last week. When you go to the dictionary and you look up
``silly,'' it says ``see REINS Act.'' This is silly.
This is also the type of legislation that I believe gives
Congress a bad name. It is more political than it is
substantive. It is not going to pass the Senate. And yet we
could pass something to help community banks if we refined our
subject matter, and I would like to see that happen. I hope we
can.
In calendar year 2010 alone, there were 94 major rules.
This affects major rules, those over $100 million or so. There
weren't enough legislative days to consider all of this, and
Congress has trouble getting it together. We did approve Neil
Armstrong's name on a space center last week, but to think we
could go into these regulations and approve all of these with
any sense of knowledge and certainty is dubious at best.
So we will continue on with the hearing. It is unnecessary.
Congress has many other ways to make the executive contour to
what we would hope they would through the budget process,
through oversight, and we have control and influence, and that
is what we need. There needs to be a check and balance, and
there needs to be a manageable system of implementing rules and
regulations.
Professor Levin, I am looking forward to his testimony, not
that I am not looking forward to Mr. Gattuso's and Professor
Claeys', but I know that Professor Levin is going to bring up
the possible unconstitutionality of a one-house legislative
veto. The Supreme Court held that to be unconstitutional. And
Chief Justice Roberts, in discussing a law somewhat similar to
this in 1983, said in a memorandum, ``Such legislation would
hobble agency rulemaking by requiring affirmative congressional
assent to all major rules and would seem to impose excessive
burdens on the regulatory agencies.'' Chief Justice Roberts,
who upheld the Affordable Care Act, is once again right.
I yield back the balance of my time.
Mr. Bachus. Thank you, Mr. Cohen.
Mr. Cohen. If I can, Mr. Chairman, introduce Mr. Conyers'
statement without the need to cite the outstanding arguments
made therein but only introduce it into the record.
Mr. Bachus. Absolutely.
Mr. Cohen. Thank you, sir.
Mr. Bachus. The full Committee Ranking Member, Mr. John
Conyers' opening statement will be introduced into the record
at this time.
[The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, Ranking Member, Committee on
the Judiciary, and Member, Subcommittee on Regulatory Reform,
Commercial and Antitrust Law
H.R. 367, the so-called REINS Act, is a thoroughly problematic
bill. This measure is not only unnecessary and unworkable, but it could
seriously jeopardize the health and safety of millions of Americans who
rely on an effective regulatory system. And, it represents yet another
partisan, shortsighted attack against regulations.
To begin with, H.R. 367 creates an unworkable process that will
make it nearly impossible for new regulations to be enacted. The
measure imposes unrealistic deadlines by which Congress must consider
and pass exceedingly complex and technical regulations.
Under H.R. 367, Congress would have only 70 legislative days within
which to act after it receives a major rule.
Now, let's put this in some perspective. Over the past few years,
the average number of major rules promulgated each year is about 80. In
2010, for instance, 94 major rules were issued.
But keep in mind the following fact: there were just 116
legislative days in the House that year.
Worse yet, the bill restricts the days on which these major rules
may be considered in the House, which, for 2012, was only 10 eligible
days.
Assuming there is just an average number of major rules, Congress
would have to consider an average of 8 separate major rules on each of
those days.
Under H.R. 367, there is just no feasible way that Congress would
have the time to consider all the major rules issued during the year.
And, let's not forget that Congress already has the tools to review
both major and non-major rules on an individual under the Congressional
Review Act of 1996.
Under this Republican-driven initiative, Congress can disapprove a
rule, a power that it has exercised previously.
Another concern that I have with the bill is that it would at a
minimum significantly delay rulemaking and even worse bring it to a
halt.
Major rules are often the product of an intensive, multi-year
process, based on extensive input received from the public and affected
entities through a notice and comment period.
Agencies often spend many months, if not years, to perfect theses
rules based on feedback from these sources and their own expertise.
Under the bill's short-circuited process, however, Congress will
not realistically be able to second-guess the merits of these rules.
When in doubt and in response to aggressive lobbying, Congress
would likely decide not to approve rules. As a result, the health and
safety of Americans would be jeopardized if needed regulations are
stalled.
Not surprisingly, more than 70 consumer groups, environmental
organizations and labor unions, among other organizations, strenuously
opposed a nearly identical version of this measure that was considered
in the last Congress.
In support of a veto threat, this is one of the reasons cited in
the Statement of Administration Policy issued in the last Congress
against the bill's predecessor.
Specifically, the White House expressed concern that bill would
``throw all major regulations into a months-long limbo, fostering
uncertainty'' which interferes with the effectiveness of the federal
government's ability to protect ``public health, welfare, safety, and
our environment.''
Finally, H.R. 367 is yet another installment on the Majority's
anti-regulatory agenda.
Let's be honest. This bill is clearly intended to take regulatory
power away from the agencies that have the requisite expertise, and
give that power to Congress which is ill-equipped to make highly
technical decisions.
Just last week, the Subcommittee, in what was the 17th hearing on
this subject matter, heard the well-worn, yet thoroughly false
accusation that regulations kill jobs.
As I noted at last week's hearing, if we were really serious about
creating jobs, then we should be focusing on those measures that will
actually result in creating jobs.
During the last Congress, President Obama, in his address to a
joint session of Congress, presented his American Jobs Act, a
comprehensive bill that would have:
cut payroll taxes for qualifying employers,
fund a work program to provide employment
opportunities for low-income youths and adults;
fund various infrastructure construction projects,
including the modernization of public schools; and
start a program to rehabilitate and refurbish
hundreds of thousands of foreclosed homes and businesses.
Unfortunately, Congress chose to ignore this worthy initiative.
As many of you know, I have a measure--H.R. 4277, the ``Humphrey-
Hawkins 21st Century Full Employment and Training Act''--which aims to
provide a job to any American who seeks work.
My bill would create a funding mechanism to pay for job creation
and training programs.
These jobs would be located in the public sector, community not-
for-profit organizations, and small businesses that provide community
benefits.
But, like the President's proposal, my legislation did not receive
any consideration during the last Congress.
This is very unfortunate because both of these measures would have,
in fact, created jobs and helped our Nation's economic recovery.
The American people deserve better.
__________
Mr. Bachus. If you want to introduce your full opening
statement, I know you didn't take all your time, either.
Mr. Cohen. I took enough time. Thank you.
Mr. Bachus. All right.
At this time, if there are no further opening statements,
without objection, other Members' opening statements will be
made a part of the record.
[The prepared statement of Mr. Johnson follows:]
__________
We have a very distinguished panel today, and I will first
begin by introducing our witnesses. Each of our witness'
written statements will be entered into the record in its
entirety. I ask that each witness summarize his or her
testimony in 5 or 6 minutes. I am not going to be that
stringent with the time, so don't think you have to read fast.
Particularly to a Southerner, if you will read a little slower,
I can follow it better. To help you stay within or just to know
what the time is, we will have lights in front of you.
Now, if I can have the bios of the members? I think we have
had twice when we hadn't had those.
Mr. James Gattuso is a research fellow in regulatory policy
for the Roe Institute for Economic Policy Studies at the
Heritage Foundation. Prior to joining Heritage, he was vice
president for policy at the Competitive Enterprise Institute.
In that position, he oversaw CEI's policy work and supervised
the overall management of the organization. Before joining CEI
in 1997, Mr. Gattuso had served since 1993 as vice president
for policy development with Citizens for a Sound Economy, where
he directed the research activities of that fine organization.
From 1990 to 1993, he was deputy chief of the Office of Plans
and Policy at the Federal Communications Commission.
We welcome you, Mr. Gattuso.
Professor Eric Claeys is a professor at the George Mason
University School of Law. The professor has taught at the
University of Chicago School of Law and St. Louis University
School of Law. Prior to teaching, Professor Claeys practiced
appellate and tort litigation at the law firm of Kirkland and
Ellis. Professor Claeys clerked for the Honorable Chief Justice
William Rehnquist and the Honorable Melvin Brunetti. Professor
Claeys' scholarship focuses on American property in
constitutional law, and particularly on the influence of
American natural law and natural rights theory on the law. He
graduated from Princeton University and received his J.D. from
the University of Southern California.
Our third witness is Professor Ronald Levin, who is a legal
scholar at the Washington University School of Law in St.
Louis, who specializes in administrative law and regulation law
issues. He is co-author of a casebook on administrative law and
has published numerous articles and book chapters on
administrative law topics. Mr. Levin previously served as
Washington University Law School's associate dean and is
currently a public member of the Administrative Conference of
the United States. Prior to joining the faculty at Washington
University in 1979, Mr. Levin worked as an associate in the
Washington, D.C. office of Sutherland Ashbill and Brennan. He
clerked for Judge John C. Godbold of the U.S. Court of Appeals
for the Fifth Circuit in Montgomery. He earned his J.D. degree
from the University of Chicago and his B.A. magna cum laude
from Yale University.
This is an excellent panel that we have assembled. We will
now proceed under the 5-minute rule with opening statements.
So, Mr. Gattuso, you are recognized first. Then I am going
to go to Professor Claeys, and then Professor Levin.
TESTIMONY OF JAMES L. GATTUSO, SENIOR RESEARCH FELLOW IN
REGULATORY POLICY, THOMAS A. ROE INSTITUTE FOR ECONOMIC POLICY
STUDIES, THE HERITAGE FOUNDATION
Mr. Gattuso. Thank you. Mr. Chairman and Ranking Member
Cohen, Members of the Subcommittee, thank you for having me
here today. Over the past few weeks, all eyes have been focused
on Federal spending in efforts to limit an out-of-control
budget. Obscure policy terms like ``sequestration'' have become
household words across the country. However, Federal spending
is only part of the burden imposed on Americans by the Federal
Government. Regulations impose hundreds of billions, or even
trillions, of dollars in additional costs. These burdens not
only increase consumer prices but keep enterprises from growing
and jobs from being created.
During the past 4 years, the regulatory burdens placed on
the American people and the economy have grown at a
breathtaking rate. During President Obama's first 4 years in
office, over 130 major rules increasing regulatory burdens were
issued, imposing some $70 billion in new annual costs according
to preliminary estimates we have done at the Heritage
Foundation, based on agency calculations of their own costs.
I will note that these numbers exclude budgetary transfer
costs. It excludes other rules that do not have a regulatory
effect. This is a subset of just those rules that constrain
private activity. So this is the core amount of regulation.
By comparison, about 50 such rules worth $15 billion in new
costs were imposed during George W. Bush's term, and more
regulation is on the way. According to the latest Unified
Agenda of Federal Regulations, 131 new major regulations are
already in the pipeline. That compares to 90 in process when
President Obama took office, and only 56 in the spring of 2001.
However, while regulatory growth has accelerated under
President Obama, it did not start with his Administration. Each
year for the past 30 years, according to the Office of
Management and Budget, the burden of regulation imposed on
Americans has increased. Not since 1982 have regulatory costs
decreased.
Not all regulations are unwarranted. No one is talking
about eliminating airline safety rules or allowing contaminated
meat to be freely distributed and sold. But there are volumes
of rules not so well justified, ranging from the trivial--do we
really need to paint an ``F'' at the front of the locomotive to
tell which side is which--to the potentially catastrophic--
should the Federal Communications Commission regulate the
Internet.
The constant increase in regulatory burdens is taking its
toll on the economy at a time when the Nation can ill afford
it. Firm action by Congress to rein in this growing red tape is
needed. This should include requiring explicit approval of all
new major rules by Congress as provided by the REINS Act,
ensuring that burdens are not placed on Americans without the
approval of their elected representatives.
This would be a significant change in the way rules are
issued. The effect, however, is to reinforce, not to upset, the
constitutional balance. As a first matter, the change merely
restores Congress' constitutional role of legislating, much of
which has been delegated to regulators in the past. As
important, the change constrains Congress as much as it
empowers it by making legislators more accountable for their
actions.
Now, despite claims by opponents and some supporters of
REINS, this legislation is not inherently anti-regulatory.
Instead, it simply ensures scrutiny by Congress of all proposed
rules, all proposed major rules. It would apply just as much to
agency decisions that reduce regulatory burdens as it would to
those that increase such burdens.
Some critics say that the task of reviewing so many rules
would be too burdensome for Congress. But while costly, the
number of major regulations issued each year is in the low
dozens typically, hardly an unmanageable number. Of these,
about half are budgetary in nature, such as those setting
Medicare reimbursement rates, and perhaps could be exempted
from the REINS Act.
In any case, it hardly makes sense to excuse Congress from
the task of reviewing new rules because there are so many being
imposed on the private sector. If anything, that would indicate
a greater need to monitor the regulatory activity.
Some also argue that the REINS Act would displace
regulators' expert judgment with political decision-making. For
example, one critic wrote that Congressional action under the
REINS Act is ``likely to be nakedly political, reflecting the
raw political power of public interests,'' while ``agency
actions are backed up with reasonable policy determinations.''
Outside of political science textbooks, that is not how
government works. Regulators have their own interests and
agendas, and political considerations, shockingly, do influence
the process. Spend an hour in front of almost any agency in
Washington and watch the lobbyists flow in and out if you doubt
that.
Most regulatory decision-making requires more than
scientific expertise. It involves value judgments as to what
burdens will be placed on the American people, what those
burdens are, what size they are, and for what benefit. Such
decisions properly involve Congress.
Now, while the REINS Act would provide an important start
toward taming excessive regulations, other steps are needed as
well; among these, imposing sunset dates for Federal
regulations. The REINS Act is a forward-looking reform,
ensuring scrutiny of newly proposed rules. To ensure that the
existing rules are justified and effective, they should
automatically expire after a period of, say, 10 years if not
explicitly reaffirmed by regulators through a notice of comment
rulemaking.
Secondly, we need to develop a congressional regulatory
analysis capability. In order to exercise its duties under the
REINS Act, Congress needs the capability to analyze proposed
and existing rules independently, without reliance on the OMB
or other regulatory agencies. This can be done through a new
congressional Office of Regulatory Analysis, modeled on the
Congressional Budget Office, or alternatively through existing
congressional institutions such as the CBO or the Government
Accountability Office.
Congressional approval of proposed new rules as provided in
the REINS Act would be an important step toward holding
regulators in Congress accountable for regulations imposed in
the private sector. While it is no panacea for the increasing
flood of regulations, it would be a powerful first step toward
reform. Thank you.
[The prepared statement of Mr. Gattuso follows:]
__________
Mr. Bachus. Thank you, Mr. Gattuso.
Professor Claeys?
TESTIMONY OF ERIC R. CLAEYS, PROFESSOR OF LAW, GEORGE MASON
UNIVERSITY
Mr. Claeys. Chairman Bachus, Ranking Member Cohen, Vice
Chairman Farenthold, and Members of the Subcommittee, thank you
very much for inviting me to testify. I am honored by the
opportunity. With special respect to Ranking Member Cohen, I
testified on this issue 2 years ago. So I, too, feel like it is
Groundhog Day and sympathize with you.
If I may, I would like to state orally four main points
from my written testimony. First, Congress has constitutional
authority to enact the REINS Act. Usually, Congress has
extremely broad discretion to decide how to structure the
executive administration of law. It may, and often does, write
primary rules of conduct without the help of agencies and
statutes. Congress can strip all executive agencies that
currently promulgate rules of their rulemaking powers and
convert those agencies into advisory committees for this Senate
and this House's authorizing committees.
The power to promulgate legislative rules becomes an
executive power if, to the extent that, and under whatever
constitutionally proper conditions Congress establishes using
the necessary and proper clause. Under that clause, Congress
may reasonably find it necessary and proper to recalibrate
agency rulemaking powers to make agencies seek pre-approval
from Congress for major rules before they take on the force of
law.
Second, the REINS Act is consistent with the holding of INS
v. Chadha. Under Chadha, when a congress charges executive
agencies to administer acts of Congress, it may not reserve the
power to second-guess agencies' administrations of the law
using so-called legislative vetoes. In response to such a
legislative veto, Chadha holds, ``To accomplish what has been
attempted by one house of Congress in this case,'' that means a
legislative veto, ``requires conformity with the express
procedures of the Constitution's prescription for legislative
action, passage by a majority of both houses, and presentment
to the president,'' 462 U.S. at 958.
This holding doesn't say the Congress may never inject
itself into the executive's administration of the law. Rather,
it says if Congress chooses to inject itself into the
executive's administration of the law, it may only do so by a
legislative process respecting Article 1, Section 7's
requirements of bicameralism and presentment. Under the REINS
Act, joint resolutions of approval must be passed in both
houses. By long-standing practice, it is assumed that such
resolutions will be presented to the president. In Chadha's
words, that process is ``in conformity with the express
procedures'' of Article 1, Section 7.
I would like to move from my testimony about the
constitutional issues to my testimony about the merits. So,
third, Congress may reasonably conclude that the REINS Act is a
necessary and proper means to protect the rights of U.S.
citizens more effectively than current Federal administrative
law does. Congress is expected to use its constitutional powers
to, in the preamble of the Constitution, secure the blessings
of liberty to ourselves and our posterity; and, in the
Declaration of Independence, to secure certain unalienable
rights, among which are life, liberty, and the pursuit of
happiness.
Like statutes, if well crafted, legislative rules can
secure rights--health, safety, the capacity to buy goods and
services free from deception or misinformation, and so on. Also
like statutes, however, when poorly crafted, legislative rules
can threaten rights. More than 20 years ago now, I was honored
to work for Congressman Ron Packard, Oceanside, California.
Back then, the U.S. Army Corps of Engineers was promulgating
wetlands regulations that, in his opinion and mine, unduly
threatened property rights. Poorly crafted airport inspection
regulations can threaten the privacy of U.S. citizens to be
free from unreasonable searches and seizures. Poorly crafted
health insurance regulations can coerce American citizens and
American businesses to use their own salary or company accounts
to cross-subsidize conduct that violates their religious
consciences.
At least for rules being scored as major rules, Members of
Congress owe it to their constituents to consider carefully
whether those rules advance their intended goals, with due
respect for those constituents' unalienable rights.
Last, some critics of the REINS Act believe that if the
REINS Act is enacted, the REINS Act's joint resolution process
will inject politics and special-interest groups into
policymaking by apolitical regulatory agencies. With respect,
in many cases I believe this view has things backwards. Now
more than ever, the president closely supervises agency
policymaking and injects a great deal of politics into it.
At least as important, over the last 20 to 40 years
legislators and policymakers have learned the theory of
capture, and scholars have learned of the theory of public
choice, and these capture and public choice theories teach us
that special interests quite often exert much more influence in
a regime where there is legislation and administration than in
a regime where Congress were to do most of the legislating
itself.
I cite examples in my testimony involving flame retardant
furniture regulation, benzene regulation, and a few others
cases. There are many causes and mechanisms for special-
interest group influence, and the REINS Act barely scratches
the surface. But if you are concerned about special-interest
influence, the REINS Act performs a crucial function. The joint
resolution process forces public policy and special-interest
politics back into the floors of Congress, and Congress must
take accountability for the hard trade-offs between the two.
And since the Chairman gave a little bit of grace, I am
just going to use one case example. So there is an ongoing
rulemaking right now in the Consumer Product Safety Commission
about flame retardant furniture. In this, fire marshals
petition for a rule, but the fire marshals were funded by
tobacco companies. The furniture companies used health and
safety studies to suggest that the chemicals to be used to
protect the furniture to make them inflammable might be
carcinogenic or threatening to the environment.
I humbly submit that, first, it would be good for Congress
to debate and to consider the scientific issues because the
science here is so tentative that it becomes inescapably
political.
Second, there is a huge moral hazard issue that needs to be
considered here, and I don't think the science is capable of
considering it. In the backdrop, what drives the fires that are
set by furniture when people fall asleep while holding
cigarettes, and Members of Congress I think are at least as
competent as scientists to decide whether the law would promote
irresponsibility by letting people have a couch that protected
them from the fact that they fell asleep with a cigarette in
their bedroom or on their couch.
Last, if there is special-interest politics, it would be
healthy for the political process and the administrative
process for debates about whether the safety arguments here are
motivated by tobacco companies, and whether the health and
environment arguments here are motivated by furniture
manufacturers.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Claeys follows:]
__________
Mr. Bachus. Thank you, Professor Claeys.
Professor Levin, you are recognized.
TESTIMONY OF RONALD M. LEVIN, WILLIAM R. ORTHWEIN DISTINGUISHED
PROFESSOR OF LAW, WASHINGTON UNIVERSITY SCHOOL OF LAW
Mr. Levin. Thank you, Mr. Chairman and Members of the
Subcommittee. This hearing is being held in the shadow of the
sequester. Indiscriminate budget cuts are going into effect
because the two houses of Congress and the president don't
agree on what to do about the budget. The sequester is a vivid
symbol of much more because these days the House and Senate
agree on very little. It is well known that the 112th Congress
was the least productive Congress in at least 60 years by a
wide margin of about 100 laws, and the 113th has good prospects
of being similar.
And yet the bill that is before you today in this hearing
would provide that no major rule prepared by an agency could go
into effect unless both houses of Congress and the president do
agree with it. That suggests to me that if the REINS Act were
enacted, major rulemaking on any controversial subject would be
virtually impossible.
In view of the extraordinary levels of ideological
polarization and lack of compromise that we are seeing today,
now is hardly a propitious time to consider a substantial
increase in the responsibilities of the legislative branch. The
upshot of the REINS Act could be that the dysfunction we now
see in the enactment of laws would spread to the implementation
of the laws, and I do not think that is an attractive prospect.
If the act were enacted this year, the interference with
the rulemaking process would affect a Democratic
administration, but in the long run we will have both
Democratic and Republican presidents, and this act would pose a
major barrier to any president's ability to pursue the policies
that he or she was elected to promote. In my view, gridlock in
the rulemaking process is a poor idea no matter whether a
Democrat or a Republican is in the White House. As Justice
Scalia said about the legislative veto right after Ronald
Reagan was elected, the legislative veto isn't biased against
regulation. It is biased against change. The REINS Act, I
think, operates very similarly and would have a similar effect.
Now, it is true that some major rules are much less
controversial, and it is not implausible that they could get
through Congress in a reasonable period of time. But let's face
it, these are matters that Congress delegated in the first
place because it did not want to decide them on its own. Many
of these matters are dry, technical, and complex, and Congress
could very reasonably have thought that they should be left to
specialized agencies because resolution of those questions
within the legislature is not a wise or efficient use of
congressional time.
I see no reason why Congress should now retrospectively
overturn all those judgments. It is much too late in the day to
turn back the clock and question the legitimacy of delegation
itself. We have a functioning system that has been evolving for
generations and should not be lightly overthrown. That system
allows the business of government to go on, but it also
includes a good deal of accountability.
Congress can be held accountable for its decision to set up
new programs and empower agencies to implement them with
rulemaking, and the executive branch is politically accountable
for the rules themselves. I don't find anything illegitimate
about this system. On the contrary, it is the REINS Act that
threatens to overthrow long-established norms and may not even
survive constitutional review.
On the surface, the procedures of the act seem to comply
with the law-making requirements of Article 1 of the
Constitution. But when you look at it closely, you can see that
it would enable a single house of Congress to nullify an agency
rule without obtaining the concurrence of the other house or
the president.
In the legislative veto case in 1983, INS v. Chadha, the
Supreme Court spent several pages emphasizing that the framers
of the Constitution regarded the safeguards of bicameralism and
presentment as fundamental precisely because they feared that
action by a single chamber could often prove arbitrary.
I think the sponsors of the REINS Act are being too
optimistic when they assume that the Court would overlook the
fact that the REINS Act would revive those very same dangers
that Chadha and subsequent cases have sought to prevent.
In my prepared statement I show that not only the U.S.
Supreme Court but also appellate courts in more than a dozen
states have strongly and almost unanimously resisted attempts
by Congress and other legislatures to expand their control over
agency action beyond traditional boundaries. The REINS Act
might suffer a similar fate if it were enacted.
In closing, Mr. Chairman, the REINS Act does have a clever
name, suggesting reins that guide the horse along the path, but
I believe the American people should not be saddled with it.
That concludes my presentation, and I will be happy to
respond to your questions.
[The prepared statement of Mr. Levin follows:]
__________
Mr. Bachus. Thank you, Professor Levin.
At this time, I will recognize the Chairman of the full
Committee, the Judiciary Committee, Mr. Bob Goodlatte from
Virginia, for questions.
Mr. Goodlatte. Thank you, Mr. Chairman. Thank you for
holding this important hearing. I want to commend you, and I
want to commend Congressman Young of Indiana for his efforts in
introducing this legislation here, the second Congress that he
has done so. I think it is an important piece of legislation.
And I apologize for not getting here when opening statements
were given, so I will submit mine for the record and go right
to the questions.
[The prepared statement of Mr. Goodlatte follows:]
Prepared Statement of the Honorable Bob Goodlatte, a Representative in
Congress from the State of Virginia, and Chairman, Committee on the
Judiciary
Economic growth is the key to recovery of job creation, the success
of Main Street businesses and the hope of America's global
competitiveness. With robust economic growth, America can solve a host
of the problems that confront us--from high unemployment to fading
American competitiveness.
America's current growth rate, however, is anemic. In 2010, real
GDP increased only 2.4 percent. In 2011, the rate of growth shrank to
1.8 percent. Although final figures for 2012 are not yet in, growth in
the fourth quarter of 2012 was an abysmal 0.1 percent.
Employment figures are no better. In January 2013, real
unemployment remained mired at 14.4 percent. Nominal unemployment rose
to 7.9 percent. Behind these figures are millions upon millions of
struggling American faces, many who have been living without work for
many, many months. Economic experts have said that this represents, not
just a lingering economic downturn, but a jobs depression.
Other figures paint the picture still bleaker. The number of small
businesses being created--the primary source of new jobs--has declined.
America's national debt is skyrocketing. Record levels of Americans are
on food stamps. The number of Americans on Social Security disability
is at record levels, too. Many say this is because millions are turning
to disability claims to substitute for unemployment insurance.
Poverty is knocking hard on millions of Americans' doors. National
bankruptcy, meanwhile, is knocking hard on America's door.
Everyone knows it has been this way for far too long. But the Obama
Administration, instead of fixing the problem, knows only one
response--increase taxes, increase spending and increase regulation.
As a result, the Obama Administration has proven one thing better
than any other administration in history. America cannot tax, spend and
regulate its way to economic recovery, economic growth and durable
prosperity for the American people.
The Judiciary Committee has broad jurisdiction over one of the
three major strands of this economic knot that the Obama Administration
has tied, and America must untie. That strand is the federal regulatory
system--a system that every day places more and more obstacles in the
path of economic growth. It is my intention as Chairman to do
everything that the Judiciary Committee can to achieve real regulatory
reform and help provide the growth and recovery America needs.
The REINS Act is one of the simplest, clearest and most powerful
measures we can adopt to further that purpose. The level of new major
regulation the Obama Administration has issued and plans to issue is
without modern precedent. Testimony before the Judiciary Committee this
term and during the 112th Congress has plainly shown the connection
between skyrocketing levels of regulation and declining levels of jobs
and growth.
The REINS Act responds by requiring an up-or-down vote by the
people's representatives in Congress before any new major regulation
can be imposed on our economy. It does not prohibit new major
regulation. It simply establishes the principle, ``No major regulation
without representation.''
By restoring to Members of Congress, who are accountable to the
American people, the responsibility for America's costliest regulatory
decisions, the REINS Act provides Congress, and ultimately the people,
with a desperately needed tool to check the one-way cost ratchet that
Washington's regulatory bureaucrats incessantly turn.
During the 112th Congress, the Judiciary Committee originated a
number of regulatory reform bills that the House passed on a bipartisan
basis. The REINS Act was one of them. I encourage all of the Members of
the Committee to assure that the REINS Act is reported out of this
Committee once more and is passed on an even greater bipartisan basis
in the 113th Congress. The REINS Act is not a partisan issue. It is a
paramount institutional and national issue. All Members of Congress
should step forward to rein in the federal government's costliest
decisions.
__________
Mr. Goodlatte. Professor Levin, I was interested in what
you had to say, your observations about the intrusion of the
legislative branch into the authority of the executive branch.
Let me just say, and I will get to a specific question in a
moment, but I quite frankly think that whether by deliberate
act of the Congress writing legislation that is giving
tremendous authority to the executive branch or, as many people
think, the executive branch overstepping their authority and
taking and reinterpreting legislation passed by the Congress
and twisting it into new ways to do new things, either way,
there has been a dramatic shift in power here in Washington
between the legislative branch and the executive branch, and it
very much concerns me. So I am all for putting the reins to
that with legislation like this.
I hear you say you think this may be unconstitutional. Both
Justice Stephen Breyer and Professor Laurence Tribe have
written articles opining that congressional pre-approval
mechanisms would be consistent with Chadha. Can you summarize
why they think pre-approval would be constitutional and explain
why you disagree with them?
Mr. Levin. Yes, sir. I do know Justice Breyer's article, or
Judge Breyer's article, as he was then. I believe he did not
endorse the system that he was outlining. He was explaining a
method by which you might set up such a system. At that time, I
don't think you had the same problem of intense polarization
that you have now. Justice Breyer himself got his seat on the
Court with strong Republican support because he had worked
cooperatively with them. He was a Democrat who had worked on
deregulation, and I don't think he would necessarily take the
same view today, because Justice Breyer in his scholarship is
very interested in things that work out well. He is a
pragmatist, and under current circumstances I am not sure he
would think it is a good idea.
Mr. Goodlatte. But he did opine at that time that a pre-
approval process would be constitutional.
I want to ask Professor Claeys if he would like to offer
his observations on the same question. First of all, do you
think a pre-approval process is constitutional, and do you
think that Justice Breyer's and Professor Tribe's articles are
consistent with your point of view?
Mr. Claeys. Yes, Mr. Chairman, I do. I think that then
Judge Breyer and Professor Tribe's articles are persuasive on
their own, and they are also useful to the Committee. If the
Committee is trying to do a litigation assessment, how likely
it is that there is going to be a constitutional challenge, I
think that then Judge Breyer's and Professor Tribe's articles
give you a sense of what the conventional wisdom is about how
the Chadha case is interpreted.
So the Chadha case has some loose language, and any good
appellate lawyer can cherry-pick out a few pieces of language
from one case and another case and another case and string
those together to say that these cases all together suggest a
certain result. But case reasoning also requires that you take
some language from the cases more seriously than others.
In my opening statement I gave you one of what I consider
two or three money passages of the Chadha case, and I think
those money passages suggest that Congress gets into trouble if
Congress tries to institute some kind of chokepoint using a
Committee veto, a one-house veto, or a two-house veto without
presenting the two-house veto to the president. Anything beyond
that is kind of the looser language of the dicta of the case.
It is telling that Judge Breyer and Professor Tribe said,
then, that it would be--Congress could accord it with a
respect, the Chadha holding, if it enacted a system that used
what Judge Breyer called confirmatory acts.
Mr. Goodlatte. Thank you very much. My time is running out.
I do want to get one more question in to Mr. Gattuso.
In your view, what current regulatory efforts by the Obama
administration most highlight the need for reforms like those
in the REINS Act, and why, and how do these regulations
threaten jobs and growth? With the 30 seconds or so that is
left in my time.
Mr. Gattuso. I think the Obama administration has been
moving forward at a rapid clip on a large number of fronts, and
I don't think we have seen any Administration move forward on
so many at the same time. If I had to name one, I would point
to the Dodd-Frank implementation, where there are still
hundreds of regulations yet to be made, and we have no idea
what they are going to say. The language has been incredibly
vague for some aspects, such as the Volcker rule. The agencies
themselves don't see any way of implementing it in a way that
makes sense. And we have new institutions such as the Consumer
Financial Protection Bureau, which is completely insulated from
any sort of oversight from other sources.
So I think that is perhaps the single biggest danger out
there right now, although there are plenty to choose from.
Mr. Goodlatte. Thank you, Mr. Chairman.
Mr. Bachus. Thank you.
At this time I will recognize the Ranking Member of the
Subcommittee, Mr. Steve Cohen of Tennessee, for his round of
questioning.
Mr. Cohen. Thank you, sir.
Mr. Gattuso, you just said to the Chairman of the full
Committee that there were hundreds of regulations that you
would be concerned about?
Mr. Gattuso. What I said was that under the Dodd-Frank law,
there are still hundreds of regulations yet to be promulgated.
Mr. Cohen. Right, and in your testimony you said that while
costly, the number of major regulations each year is in the low
dozens. And yet the data that the Government Accountability
Office puts out says there were 237 major rules during
President Bush's first term, 268 plus the 11 that happened
during the first months of the Obama administration, no more
than that.
How do you reconcile those differences in numbers?
Mr. Gattuso. Well, the hundreds of rules that I cite for
Dodd-Frank include all rules. There are over 3,000, typically,
in a year.
Mr. Cohen. So how many major rules do you submit are
approved each year?
Mr. Gattuso. It varies, but it is typically in the 60's or
70's. It goes up. Sometimes it can be over 100. Sometimes it
will be less.
Mr. Cohen. Yes, that's right. It was 70, 51, 50, 66, 56,
56, 61, 95, 84, and 100. In your testimony it says it is in the
low dozens. Well, I guess low is low compared to 1,000 dozens,
but low dozens is generally what you think of as one or two or
three, and we are talking about--six may be low dozens, but
that is a lot.
Do you keep up with Congress? Are you a C-SPAN guy?
Mr. Gattuso. I try and watch it when going to sleep, yes.
Mr. Cohen. It is not addictive, so that is good. You
realize we are having problems getting things done right now.
How many of these rules do you think that the Senate and the
House and the president would agree on? In the low dozens, how
many of those low dozens do you think would have a chance of
getting through?
Mr. Gattuso. I can't estimate that, but most are not
controversial. Also, and I point this out in my testimony,
close to half--I don't have the exact number, but a large
number of those are budgetary transfer rules, which are really
outside the scope of what we are trying to get at with the
REINS Act.
Mr. Cohen. So if most of them are not controversial, why
should we be burdening ourselves with this?
Mr. Gattuso. To find out which ones are controversial and
which ones are objectionable.
Mr. Cohen. And the Committee has to do this within 15 days
of submission. Do you think the Committee, within 15 days of
submission--and sometimes we aren't even here for 15 days. But
when we are here, we are here for maybe 1 day each of
Subcommittee, 1 day a week. How many of these rules can we go
through to find out which ones are substantive, and then debate
those substantive ones in an intelligent manner?
Mr. Gattuso. Well, I do know that the Congress spends a lot
of time on other issues that are not quite so important. I
think there were over 100 post offices that were named by the
Congress in the last session.
Mr. Cohen. We quit doing post offices. In fact, we are
going to quit the postal authority, probably.
Mr. Gattuso. I think that it is difficult to go to a small
business, for instance, with a straight face and say that we
are sorry about these billions of costs that we are imposing on
you, but we don't have time to look at them to decide whether
they are worthwhile or not.
Mr. Cohen. Let me ask you this question. What is your
opinion of Congress' work product? You mentioned that we passed
all these post offices and we don't do much, and you watch C-
SPAN to go to bed. You don't have a very high opinion of
Congress, do you?
Mr. Gattuso. I do have a high opinion of Congress. I think
that Congress has the responsibility to decide what rules
should be applied to all Americans and has the moral authority
based upon their election by the people to decide that. I think
they should be limited, but they also should do their job.
Mr. Cohen. You mentioned lobbyists, and you say that the
lobbyists are involved somewhat with the regulatory agencies.
Can you imagine the field day lobbyists would have if all they
had to do was take one Subcommittee and one portion of the
House or one Committee to defeat a rule, that one Committee
could defeat a rule? Do you think there would be lobbyists up
here trying to influence a Committee to not pass a rule?
Mr. Gattuso. I think there are lobbyists up here, and there
are also lobbyists that have one agency. It certainly is a lot
easier to influence one agency at that chokepoint.
Mr. Cohen. Do lobbyists make contributions to the people on
the agencies? They don't. And do lobbyists help endorse people
that run for the agency? No. But they endorse, and they give
contributions, and they could be up here trying to have their
influence, and that is where they have their influence. That is
where they do that voodoo that they do so well. So it just
creates a real problem.
Professor Levin, do you have any comments you would like to
make in the last minute here on what has been testified to by
the other parties?
Mr. Levin. Yes. With respect to the influence of lobbyists,
there are political science studies that show that in the
legislative veto days, special-interest influences were
substantial and had an impact on the way those operated in the
states.
Secondly, with regard to the post office bills and the
like, first of all, the total product of this last Congress
would be even lower if you didn't have the post office bills
building up their total. But more fundamentally, I think
Congress could make time for major rules or other things if
they cut out fundraisers, constituent service, district visits,
and ceremonial bills, but I don't think those are the things
that would be eliminated, because those are matters that serve
the political interests of Members directly.
Mr. Cohen. Mr. Chairman, can I ask for 20 seconds?
Mr. Bachus. Yes, sure.
Mr. Cohen. I am just curious, and I don't know that a
lawyer is supposed to ask a question he knows the answer to,
but when the Chairman was asking you about Breyer's and Tribe's
opinion, was that on a similar system to where there was a veto
by either house, or was it the pre-approval?
Mr. Levin. It wasn't anything specific. It was just a
thought experiment, I would say, and it wasn't the same as the
REINS Act because it would not have provided that, once a
matter is approved, it would nevertheless be subject to APA
review on all grounds, which this bill contemplates.
Mr. Cohen. All Judge Breyer and Mr. Tribe were saying is
that they thought whatever that was, it was constitutional.
They did not come to a value judgment, like Justice Roberts
did, to say that it was bad policy.
Mr. Levin. Justice Breyer, Judge Breyer said he was quite
skeptical of its merit. He was putting forth an idea, but he
indicated that he would be doubtful about it.
Mr. Cohen. So he concurred with Justice Roberts. Thank you.
Mr. Bachus. Thank you.
Now I would recognize the gentleman from Pennsylvania, Mr.
Tom Marino, for questions.
Mr. Marino. Thank you, Chairman.
Good afternoon, gentlemen. Thank you for being here. I love
constitutional law. I was a prosecutor, but I thoroughly enjoy
constitutional law. Maybe perhaps someday, each of us together,
one-on-one, can have lunch and I can bore you with my
positions, and you can educate me as to what is going on. I
think in my second life I want to study more constitutional law
and teach it, if possible. But I respect all of your opinions.
You are very bright men.
Professor Levin, am I pronouncing that right? I will start
with you for a moment. Why not let the process work?
Legislation, and the courts refer to it--Chadha was an opinion
handed down by the Burger Court, and I read the case, but it
was a cursory reading, again, not the detail that I would read
it for in law school. But that was in 1983.
The mood of the people has changed. Big government,
invasion by agencies with ridiculous legislation, with
administrative laws, for an example, the EPA trying to get
control over the waterways by saying a rain puddle, they would
have control over that because it is water and it is in a
puddle, and they want control over it. Spilled milk on a farm,
they wanted control over that as well. I could go on and on.
But Rehnquist and White handed down a rather, I think,
excellent dissenting opinion on the one-house legislative veto
in violation of the separation of powers, and Rehnquist went
into detail on specifically and very narrowly saying it is the
intent of Congress. Can you show me where Congress did not have
this intent that you are referring to as to why you think it is
unconstitutional?
Mr. Levin. Well, first, with regard to the antiquity of the
Chadha decision, I think the Supreme Court's subsequent
decisions have relied on it directly. They have never
questioned it. A dozen state supreme courts have reached very
similar positions under their respective state constitutions.
The case law is overwhelming in suggesting that the
bicameralism and presentment restraints should be effective in
circumstances like this. I don't think Chadha is out of date at
all.
Mr. Marino. I am not saying Chadha is out of date. I am
just saying the mood has changed since that opinion has been
handed down. Now, I am not one to determine or to take a guess
on where the Supreme Court is going on any decision. But let's
get back to the issue of intent.
Mr. Levin. I am not sure what you mean by intent, though.
Obviously, Congress intends to do things, but it is sometimes
not constitutional to do them.
Mr. Marino. Well, isn't that the way the process works,
then? And then the courts, when they are brought in, make that
determination? And don't you think that in the Affordable
Health Care Act, at least I inferred from Chief Justice
Roberts' opinion that, Congress, you legislate, and when it is
necessary, then we will come in and make a ruling on that
legislation?
Mr. Levin. Well, so you could pass the REINS Act and see if
it is constitutional or not. But I think you should, in
prudence, spend your time on things that have a good chance of
surviving review, as opposed to things where the prospects are
poor. It is your choice.
Mr. Marino. I was never one to back down from a fight,
whether the prospects are poor or not, or whether the Senate is
going to vote on it. You certainly made it clear that Congress
hasn't done much, but I think the 40 pieces of legislation on
Harry Reid's desk in the Senate that we sent over there that
haven't been accounted for says a little bit that the Congress
has been trying to work hard on both sides of the aisle here in
the House.
Professor Claeys, could you respond to the intent issue
concerning Chadha and where we are going with the REINS Act?
Mr. Claeys. I will do my best, Congressman. I will make a
few points.
First, I think this Congress, forgetting about the
assessment of the constitutional merit, should be prudent and
ask itself how likely is it that the act is going to be
declared unconstitutional or not, just because it is a
significant investment of time to enact the law. But I think
that the chances that this law would be afoul of Chadha are
slim. I am not sure Professor Levin disagrees that much,
because he says he is not convinced in his testimony that
Chadha will be read narrowly, and he says courts might be
disinclined to read REINS as a violation of Chadha.
Second, this Congress, though, is an independent co-equal
actor, and it has a responsibility to run down constitutional
questions. So, as I said in my written testimony in my opening
statement, I think there is no Chadha problem here.
So last, I don't think Chadha has to be overruled. All that
needs to happen is for courts to say this law satisfies the
expectations that Chadha laid down.
Mr. Marino. Mr. Gattuso, just briefly. My time, if not out,
is running out.
Mr. Gattuso. On Chadha?
Mr. Marino. Yes.
Mr. Gattuso. I think it is an odd argument to say that
REINS would be tantamount to a one-house veto. Frankly, that
argument proves way too much, in my view. That would seem to
cover every legislative action by Congress where if the House
or the Senate refused to pass a bill, it is blocked, or the
REINS Act itself was passed by the House and not the Senate,
was that a one-house veto? I think for that argument to work,
there has to be something in the nature of the regulations that
are being reviewed that is particular to the executive branch
where the Congress does not have the power to revoke that
authority.
In every one of the regulations that would be covered by
REINS, every one of the 130 regulations that we have identified
coming from the Obama administration are legislative. They are
not executive. Congress can withdraw them completely. So I see
nothing special about them that would make that different than
other legislation.
Mr. Marino. Gentlemen, I leave here today learning
something from each of you. I appreciate the discussion, and
thank you for being here. I yield back.
Mr. Bachus. Thank you.
The gentleman from Georgia, Mr. Hank Johnson, is now
recognized for his questions.
Mr. Johnson. Thank you, Mr. Chairman.
Mr. Gattuso from the Heritage Foundation, do you have any
idea how much money the Koch brothers have invested in the
Heritage Foundation since its inception?
Mr. Gattuso. No, I don't. I can tell you that our total
corporate donations are in the neighborhood of 5 percent of our
income.
Mr. Johnson. But that doesn't include the Koch brothers'
money, though.
Mr. Gattuso. That would include the Koch brothers'
corporate money. It is not a large part of our basis.
Mr. Johnson. Come on. That sounds like horse poop to me.
Mr. Gattuso. Our donor lists are open. I can get you that
information.
Mr. Johnson. Mr. Claeys, how much has George Mason
University Law School received from the Koch brothers? Do you
have any idea?
Mr. Claeys. No, Congressman, I don't have any idea.
Mr. Johnson. But you do know that it has been--it has taken
money from the Koch brothers; correct?
Mr. Claeys. I don't know that it has. I would not be
surprised if it had.
Mr. Johnson. Okay. All right.
How about your institution, Professor Levin?
Mr. Levin. I have no idea.
Mr. Johnson. Okay. All right. Well, I haven't heard any
reports about Koch brothers' money into your institution.
Mr. Levin. But if they know what I stand for, they would
probably not contribute it, at least to me.
Mr. Johnson. Well, I would think not, based on what I have
heard today. I will say that your analogy or your observation
about the gridlock that is the most prominent feature of
congressional activity these days, as evidenced by the
sequester situation, which I think most folks would say is just
this meat ax, meat cleaver approach to cutting the Federal
Government, is not wise. I am sure that most would agree. I am
sure that Mr. Gattuso and Mr. Claeys would agree with that
also.
Oh, you do not? Okay. All right. Mr. Claeys does not agree
that the meat ax is not a good way, or the meat ax is
preferable to the surgeon's scalpel in terms of cutting the
Federal budget.
But I will say your analogy about the gridlock, with that
being Exhibit A, is a good reason why, from a practical
standpoint, passage of the REINS Act would be a bad idea.
Mr. Gattuso, you would disagree with that?
Mr. Gattuso. Well, you said this is a meat ax approach. I
don't see it that way.
Mr. Johnson. No, I am off of that issue. The issue I want
you to address is the current gridlock in Congress and whether
or not, in light of that gridlock, what would passage of the
REINS Act add positively to the ability of Congress to get
things done?
Mr. Gattuso. Well, to start, I don't think that the measure
of success for government should be the number of laws that are
passed or the number of regulations that are enacted. That is
not success. The success should be the value to society, the
consideration and deliberation of each rule, of each action
that is taken. So the REINS Act would add to that by requiring
consideration, more thorough consideration of every action.
Mr. Johnson. So your goal is to just cut down on the number
of laws and the number of regulations so as to free up the free
market system to work its will for the benefit of all.
Let me ask you this, though. Let me ask you this. China,
the pollution in Beijing, due largely to unregulated burning of
fossil fuels, and the health impact that that has on the blood
and on the lungs of the people in China, and also the people in
Japan and across the water, is that a regulatable situation? Is
there any economic value in protecting people's health?
Mr. Gattuso. The last I checked, Congressman, China was
still a communist country, and a large portion, the predominant
portion of its industry and businesses are still state owned or
state controlled. It is not an example of a free market
economy.
Mr. Johnson. The problem we are talking about is
regulations, though.
Mr. Gattuso. It is not a free market economy.
Mr. Johnson. Isn't regulation good when it comes to
protecting people's health?
Mr. Gattuso. I think you can point to China as an example
of where the government has taken a firm hand in controlling
industry, in directing industry.
Mr. Johnson. They don't have any regulations over in China,
though.
Mr. Gattuso. They have government ownership. They have
direct government control over these factories and these
industries, and it is the government that has been the major
polluter, not any independent private sector.
Mr. Johnson. Well, you can look at a horse pile of poop on
the trail as you ride up on a summer afternoon, and you can
smell it, and then you tell yourself that I am not smelling
horse poop. You can do that all day, but the bottom line is it
is horse poop in the road. You need to step over it and move
forward.
I will yield back.
Mr. Bachus. Thank you, Mr. Johnson.
Mr. Rothfus, the gentleman from Pennsylvania, is recognized
for questions.
Mr. Rothfus. Thank you, Mr. Chairman.
Thank you, panel, for being here today. I have enjoyed this
conversation. Like Congressman Marino, it is like I am back in
law school.
I appreciate the comments I have heard about yet another
hearing on regulatory issues. I suggest that the reason that we
are here again is because the more people learn about how we
have empowered unelected elites to micromanage us, the more
they want a check on that power. The actions of these elites
are resulting in lost coalminer jobs and power plant worker
jobs in Western Pennsylvania. The actions of these elites are
also threatening the health insurance plans of people in
Western Pennsylvania, and therefore their access to healthcare.
Criticism of rule by elites is not of recent vintage. In
1981, President Reagan in his inaugural said that from time to
time we have been tempted to believe that society has become
too complex to be managed by self-rule, that government by any
elite group is superior to government for, by, and of the
people. But if no one among us is capable of governing himself,
then who among us has the capacity to govern someone else?
I have long had a concern over the abdication by Congress
of its constitutional duty to legislate. There is a belief
among some that society is just too complex for 535
individuals, 435 here in the House and 100 across the Capitol
in the Senate, to come up with the legislation necessary for a
properly functioning society. I reject that premise.
Mr. Gattuso, I would like to just go over some of the
recent regulations that we are seeing coming out and just get
your opinion. Do you believe that 535 Members of Congress might
be able to conclude whether carbon dioxide is an air pollutant
under the Clean Air Act?
Mr. Gattuso. I think that they are capable of making that
decision.
Mr. Rothfus. Would Congress be able to take hearings on
that issue and make a deliberative decision on that?
Mr. Gattuso. I think you can.
Mr. Rothfus. Do you believe that 535 Members of Congress
might be able to review the Secretary of Health and Human
Service's dicta of what must be in every person's health care
plan and make a reasoned judgment on whether that is a good
idea or not?
Mr. Gattuso. Absolutely.
Mr. Rothfus. And do you believe that 535 Members of
Congress have the capacity to determine what a qualified
mortgage should be, whether we should require a 10 percent down
payment, a 15 percent down payment, a 20 percent down payment?
Mr. Gattuso. Not only that, but they are able to decide
whether the government can decide that for consumers.
Mr. Rothfus. I would like to ask the professors a little
bit about the constitutionality issues. Isn't this really yet a
further condition precedent to a regulation becoming effective?
It is inchoate in the sense that we have requirements that a
regulation should go through, and yet we have established one
more requirement in the REINS Act where it will not even become
effective until it has been approved by Congress. Can you
comment on that, professors?
Mr. Levin. That is exactly the argument that was made on
behalf of the legislative veto in its day, that it was just a
device that Congress attached to the Immigration and
Nationality Act to be a condition precedent for deportation
decisions, and the Supreme Court gave that no weight because it
undermined the heart of the bicameralism and presentment
requirements. I think the same would be true in this instance.
Mr. Rothfus. But when we have legislation that we know is
going to be subject to this, can't the Congress be considerate
of that? When we delegate to a regulatory agency to come up
with a regulation, under REINS we would know that that is going
to come back to the Congress for review.
Mr. Levin. Well, if I may comment on your previous
characterization of this as rule by elites, I think that the
process that 535 Members established is actually a pretty sound
one. They make some decisions themselves. They leave others to
the executive branch through a delegation, and the executive
branch's decisions are subject to political accountability
because presidents make decisions and they run on their record,
and in this instance President Obama ran on his record of
regulation. It was squarely an issue in the last campaign. It
was hotly debated on all sides. He was reelected, and I think
the people spoke, although not everybody seems to have heeded
that message.
Mr. Rothfus. Professor Claeys?
Mr. Claeys. So with respect to Professor Levin, I disagree
on several points. First, there is a huge difference between
Congress being able to--there is a huge difference between the
legislative veto and the REINS Act. In the legislative veto,
Congress is saying we want the administrative process always to
go forward, and then we want discretion for one house, both
houses or a Committee to interject and stop one particular
action.
There is a huge difference between that set of affairs and
another set of affairs where Congress says even though most of
the time rulemaking has advantages, we don't want those
advantages to be here because we are so worried about the
impact on the economy or the threat to rights. So we want to
slow things down, and we want to take ownership of the basic
policy choices. I don't think that any judge who is at all
practical or is a functionalist, in the way that Professor
Levin talks about in his testimony, would ignore that
difference.
And--well, I will just stop there.
Mr. Rothfus. Thank you.
Thank you, Mr. Chairman. I yield back.
Mr. Bachus. Thank you.
At this time, I would like to recognize the gentlelady from
California--from the state of Washington. I am sorry.
Ms. DelBene. I am proud to be from the state of Washington.
Mr. Bachus. Ms. Susan DelBene.
Ms. DelBene. Thank you, Mr. Chair.
Mr. Bachus. I want to express my appreciation to you,
before your 5 minutes starts, for being a part of the civil
rights pilgrimage this weekend to Alabama, where we remembered
the 50th-year anniversary of the integration of the University
of Alabama, but also some sad events, the bombing of the 16th
Street Baptist Church, Martin Luther King's imprisonment in the
Birmingham jail. It was a very meaningful weekend for all of
us. I know Mr. Cohen has participated in that pilgrimage on
many occasions, and I want to express my appreciation to both
of you for investing that time. I think you both gained
valuable insight.
Ms. DelBene. Thank you, Mr. Chair. I was born in Alabama,
as you know, so it was also incredibly important for me to have
the opportunity to participate. So, thank you.
Mr. Bachus. Thank you.
Ms. DelBene. And thank you to all of you for being here
today and taking your time and speaking with us. I really
appreciate it.
Mr. Gattuso, you talk in your testimony about the cost and
burden of regulations, and you cite this in your submitted
testimony, and we talked about this a bunch today. But if we
really look at a cost-benefit analysis, do you ever think that
there are benefits to regulations? And is it important that we
take that into account?
Mr. Gattuso. Certainly. There are many benefits, and many
regulations are well justified, as I said in my testimony.
I think we have to look at some of the benefit estimates
that have been made with maybe a grain of salt. For instance,
there are quite a few recent regulations where the benefits
that are claimed have little to do with the advertised purpose
of the regulation. For instance, if you look at CAFE standards,
the gains for the environment and reduced pollution constitute
only about one-third of the total benefits that are claimed for
that rule. The other two-thirds of the benefits are so-called
private benefits, savings to consumers from using less fuel.
Now, that would be a good thing for consumers if they chose
it, but there is no market failure that has been identified
and, frankly, consumers should be able to make the trade-off
between paying another $1,800 for a car and savings for
themselves. So the benefits don't really match the
justification for the rule.
Ms. DelBene. But you think costs are always appropriately
calculated and it is only benefits that are not?
Mr. Gattuso. No, although we do have to recognize that the
agencies that do the cost-benefit analyses tend to support the
rules that they are proposing. So I think an estimate of cost
by an agency is going to be what you might call a statement
against interest, but the benefits may be jacked up a little
bit. But I think benefits and costs have to be compared, and
also costs by themselves is a relevant standard to look at. The
cumulative cost of regulations is by itself a factor to
consider.
Ms. DelBene. Professor Claeys, in its most recent report to
Congress, the Office of Management and Budget estimates that
the total benefits of significant regulations for the past 10
years exceeded the cost by a ratio as high as 16 to 1. So how
do you reconcile that with the notion that the regulatory costs
are overburdening the economy if we don't also look at the
benefits involved?
Mr. Claeys. Should this Congress defer to determinations by
OMB about what the benefits or the costs are? Why shouldn't
this Congress decide for itself what the costs and benefits
are? Because this Congress is responsible to the voters and
answers to them in elections.
Ms. DelBene. This is a data point. So if there is data that
says that we have benefits, shouldn't that be taken into
account?
Mr. Claeys. In the House and in the Senate, yes.
Ms. DelBene. Mr. Levin, or Professor Levin--I'm sorry--what
is your view? Mr. Gattuso talked about proposals to impose
sunset dates for regulations, and I wanted to hear your
feedback on that.
Mr. Levin. Yes. I testified to the Subcommittee last year
about proposals just to re-examine rules every 10 years, and I
testified that that is too inflexible and would take up too
much time of the agencies re-examining things, as opposed to
getting on with the people's business, which Congress has
assigned it.
So I would say, going even further, a sunset provision
would be a very bad idea because it takes about 2 years to
issue a major rule, and if you have to redo it every 10 years,
you are essentially taking enormous amounts of time away from
the agency's ability to perform the functions that Congress has
told it to do. It would be a very bad idea.
Ms. DelBene. So what would your proposal be if we look at
the challenges that we face in terms of the rulemaking process?
Do you have a proposal besides the REINS Act that we might look
at to make it a more streamlined process?
Mr. Levin. Well, with respect to--I mean, I would abandon
this particular line of inquiry and get onto making more
effective substantive decisions. But on the specific question
of in what ways should Congress oversee agencies, I would
encourage you to look at some ABA recommendations for reform of
the Congressional Review Act, which are cited in my prepared
statement for today.
Ms. DelBene. Thank you.
Thank you, Mr. Chair.
Mr. Bachus. Thank you.
Mr. Gattuso, with respect to the Dodd-Frank financial rules
I am familiar with, but even just moving beyond that into just
the general condition, many prominent experts have noted that
small businesses lack rent-seeking capabilities. They lack
regulatory compliance staff to comply, and accordingly are at a
competitive disadvantage. They also lack--many, many bigger
corporations have lobbying shops that lobby both the agencies
and the Congress.
I think, just to give you two examples, in the Durbin
Amendment, which applied to debit cards but not credit cards,
because the larger banks lobbied and got credit cards exempted,
so you have a situation where you have the large banks, the
seven large banks, the largest banks have almost all the credit
card business, where the community and smaller banks and
regional banks have the debit cards, and it is much more
important to their business. And yet, they were not successful.
So the Durbin Amendment only applies to debit cards.
I think we have many other examples. For instance, the
regulators first put caps on the large banks eight or 9 months
before they did on the smaller banks. They engineered a bailout
of AIG, which turned around, and that money within 24 hours
went into some of the largest banks in this country. You didn't
see the smaller banks bailed out.
Is there a danger that large corporations can manipulate
the process of writing new major regulations to drive their
smaller competitors out of business?
Mr. Gattuso. Not only is there a danger, but it is a
reality. It happens all the time. By the way, AIG is not just
money going into the banks in our country, but it is going into
banks in France and Germany and the rest of the world as well.
But I think that small businesses do bear a heavier burden
of regulation because of the reasons that you cite and are not
as well represented in the rent-seeking festival in Washington.
But even outside of small businesses, a lot of these
regulations are less driven by the public interest, I believe,
than driven by conflicts between industries. The Durbin
Amendment was a conflict between the financial institutions and
big retailers and I think was driven by the representations of
each side. You can go down the list. Not every regulation, but
a large number of them are just battles between different
industry segments rather than something the public interest is
behind.
Mr. Bachus. Thank you.
Professor Claeys, since you last testified before the
Committee, the threat that the executive branch will use the
regulatory process to legislate unilaterally and thwart the
will of Congress has increased. I just introduced an article
from the Wall Street Journal that was published yesterday and
again today where the EPA is going to take some pretty drastic
steps, according to that article.
But how serious a threat is this kind of what I
characterized as an end run around Congress to our
constitutional system?
Mr. Claeys. I am not going to presume to speak for all
Americans. For myself, as a citizen and as a scholar, I am very
concerned.
Mr. Bachus. What now?
Mr. Claeys. In my own capacity as a citizen and in my own
capacity as a scholar, I am concerned. But I don't want to make
it sound as if my concern is only about the Obama
administration. I think this has been a trend for 30 and 40
years going across both parties and presidents of both parties.
Mr. Bachus. Oh. And listen, I think that the general public
and most Members of Congress would agree with you that this is
not something that originated with the Obama administration. I
do think that it has accelerated under this Administration. Do
you agree?
Mr. Claeys. Yes, sir.
Mr. Bachus. Okay. Does this threat increase the need for
the REINS Act as a check on unilateral executive branch
lawmaking?
Mr. Claeys. Yes, Mr. Chairman.
Mr. Bachus. Thank you.
Mr. Gattuso, past congresses have delegated to the
executive branch authority to legislate regulations that are
now estimated to consume 14 percent of the national income.
Does that even remotely resemble the framers' constitutional
design?
Mr. Gattuso. The framers established three branches of
government. Today we have four, and arguably perhaps the
largest one is the regulatory branch, which is not in the
Constitution. I am not saying that we don't need some
regulations. Certainly, we live in a more complex society than
we once did. But the framers established a system of
accountability and separation of powers where the Congress is
ultimately responsible for setting the rules. I think the REINS
Act would reinforce that original conception.
Mr. Bachus. Do you think that the number and the cost of
regulations is inhibiting the creation of jobs, particularly in
small businesses?
Mr. Gattuso. Definitely. We have heard from any number of
small businessmen, from entrepreneurs, saying that either they
were not able to hire more people or, in effect, hired fewer
because of regulation. Only last week, the founder of Subway
sandwiches stated that if he had been starting his restaurant
chain in the current environment, it would not have succeeded.
It would not exist.
Mr. Bachus. Thank you.
Mr. Claeys, do you believe that the number and extent of
regulations, the cost, if it does in fact consume 14 percent of
the national income, is that inhibiting jobs, particularly in
small businesses?
Mr. Claeys. With respect, Mr. Chairman, I am a professor of
law and an educated consumer of scholarship about the
relationship between administrative agencies and courts and
Congress. I don't consider myself an economist. So in my
testimony, I cited studies that seem to me reasonable. If they
are true, they lay out that predicate. But I do not want to
take a hard stand. It is not within my expertise.
Mr. Bachus. Let me close with Mr. Levin, or Professor
Levin. Are you familiar with the financial regulations which
require a credit rating or creditworthiness by the three
largest credit rating agencies where the government required a
credit rating or a creditworthiness score, say, on securities,
on securitizations from just the three largest? Or is that
getting out of your field?
Mr. Levin. I am not familiar with that specific regulation.
No, sir.
Mr. Bachus. Do you believe Dodd-Frank has disadvantaged
community banks and your regional bank?
Mr. Levin. I am not sure. If I were talking about Dodd-
Frank as a whole, I would say that I am not convinced that it
has disadvantaged the country because I think there are strong
arguments for doing something to repair the damage that was
created without regulation. I can't speak to this community
banks area in particular.
Mr. Bachus. Are you familiar with the length of Dodd-Frank?
Have you ever read any of it? Have you read some of the
provisions?
Mr. Levin. I have read much of it, not all of it.
Mr. Bachus. Is it somewhat confusing to you?
Mr. Levin. In places. Yes, Sir.
Mr. Bachus. I know the regulators are struggling to try to
figure out what Congress intended on the Volcker rule, and
really, they are having a tremendous amount of trouble just
trying to figure out what Congress intended.
Mr. Levin. But I think that is because the area of
financial regulation is complex because the phenomenon they are
trying to deal with is complex.
Mr. Bachus. I would agree.
Mr. Levin. So it requires specialized work more than
Congress itself can manage in order to come to grips with it.
Mr. Bachus. When it gets to the point where the regulators
can't even figure out what Congress intended, I think it is
indeed complex.
Mr. Jeffries, the gentleman from Florida, is now recognized
for his questions.
Mr. Jeffries. Thank you, Mr. Chairman. From Brooklyn, New
York. I just want to make sure we correct the record on that.
[Laughter.]
I always have to make sure that Brooklyn is in the house.
Mr. Bachus. Oh, I thought that it was Mr. Garcia. I have
confused you, Mr. Jeffries. You are from New York, right?
Mr. Jeffries. Thank you, Mr. Chairman.
Mr. Bachus. Where did Mr. Garcia go?
Mr. Cohen. Back to Miami. [Laughter.]
Mr. Jeffries. Seeking warmer weather.
Mr. Gattuso, you testified that in your view, four branches
of government have emerged, presumably the fourth branch of
government being this amorphous administrative dynamic. Now,
let's go through the three branches of government that were
created by the founders of this great country. The first branch
in Article 1, of course, is this great Congress, given certain
enumerated, specific powers.
The second branch created by Article 2 is the executive.
The third branch is the judiciary. Is that correct?
Mr. Gattuso. Yes.
Mr. Jeffries. Now, the premise of the judiciary branch, or
at least part of its role, is to rein in unconstitutional
overreach by the executive branch created in Article 2. Isn't
that right?
Mr. Gattuso. That is part of it, yes.
Mr. Jeffries. So the courts have already been set up in the
framework of the Constitution. If there is regulatory
overreach, as is claimed by some of those here today, to rein
in that administrative overreach if it violates the
Constitution. Isn't that the role of the Article 3 judicial
system that we have in this country?
Mr. Gattuso. If it violates the Constitution or a statute.
But the courts do not make the substantive judgment about
whether the overreach is in itself a good idea, a bad idea,
economically sensible are not sensible.
Mr. Jeffries. Right. Well, we can agree that if there is
administrative overreach that violates the Constitution of the
United States, that the framers of this great Republic have
already established a mechanism to rein in that overreach, and
that is the Article 3 court system, correct?
Mr. Gattuso. That would be the original purpose.
Mr. Jeffries. Okay. Now, we have sort of an argument to be
made, then, about the reasonableness of regulations. Some
regulations are reasonable. I think you have conceded that,
correct?
Mr. Gattuso. Yes.
Mr. Jeffries. And then you have concluded that others are
out of control, costly to the economy, correct?
Mr. Gattuso. Yes.
Mr. Jeffries. Now, you have said that there are costs that
are billions, if not trillions, of dollars in regulatory
overreach. That is in your testimony, correct? Can you cite to
me an example of a trillion-dollar regulatory overreach?
Mr. Gattuso. Well, the trillion would be the cumulative
figure. But certainly in the last year, there were two
regulations adopted by the Obama administration with costs over
$9 billion, the boiler MAC regulation and the CAFE rules.
Mr. Jeffries. That is in your estimation, correct?
Mr. Gattuso. That is the estimate of the agencies enacting
the rule, the EPA or the National Highway Traffic Safety
Administration. That is not my number, that is their number.
Mr. Jeffries. Okay. But there is a cost-benefit analysis
that should be put into play. You have acknowledged you have
the cumulative effect. Let's put that aside. Then you have
individual regulatory actions, each of which presumably has a
cost and a benefit. Is that right?
Mr. Gattuso. That is right.
Mr. Jeffries. Now, AIG was cited as an example where their
outsized influence impacted perhaps the ability of them to get
an accelerated bailout that perhaps other small banks and
community institutions, small businesses weren't able to get,
at least in a timely fashion. Is that correct?
Mr. Gattuso. Well, I think that there was a lot going on in
2008 that was more than just standard lobbying. So I won't say
the AIG bailout was due just to lobbying by AIG. But I think
the point was that--the point I think the Chairman was making
was that there was disparate treatment, disparate effects
between the AIGs of the world and the small community banks.
Mr. Jeffries. Right. Now, if you invest more regulatory
authority in the Congress, which is subject to this lobbying
behemoth, doesn't it then give more power to the AIGs of the
world, who don't have the same ability to influence the
regulators?
Mr. Gattuso. I think the fact remains that the Congress is
the representative of the people, and if the Congress is not
the legitimate body to make the decisions, prudential decisions
as to how much we want to regulate, who we want to control, who
should not be regulated, then there is really nothing the
Congress does that can be justified.
Mr. Jeffries. Do you recall the size of the AIG bailout?
Mr. Gattuso. I don't have a number.
Mr. Jeffries. One hundred and eighty billion dollars. Why
did we have to bail AIG out to the tune of $180 billion? Is it
because of the absence of regulation that led to some of the
activities such as the issuance of credit default swaps, a
totally unregulated vehicle that was out of control, that AIG
didn't have the capacity to fund once the market fell out and
the bottom dropped out of the economy? Isn't that $180 billion
bailout, which is somehow cited as an example of the evils of
regulation, in reality a prime example of why, in many
instances, particularly in terms of what Dodd-Frank was
attempting to accomplish, regulation is necessary?
Mr. Gattuso. I think the financial crisis of 2008 was the
effect of--certainly there was a private role, but a large
portion of it was the government policies in terms of
interference in the housing market, supporting the bubble in
housing, and encouraging the creation of loans that were not
appropriate.
Mr. Jeffries. Mr. Chairman, I know my time has run out. If
I could just allow Mr. Levin to respond?
Mr. Levin. I don't agree with that story of why we had a
financial crisis, but I think the point I would make is that it
does take a while to work through the regulatory response, and
the long bill that the Chairman mentioned is long and
confusing. That is why you need an extended process by which
regulators can sort out some of the details that weren't fully
resolved at the beginning. It is an open process, and is
participatory, and it is subject to judicial review not just
for constitutionality but also for the reasoning of the
decision.
So a salient difference between the administrative process
and the legislative is that although there is politics at the
administrative level, the courts will insist that the matter be
rational and defensible. They are a check. You don't have that
check on decisions that the legislature makes. So although
there is politics on both sides, there is a restraint on the
administrative side that doesn't exist on the legislative side.
Mr. Jeffries. Thank you, professor.
Mr. Bachus. Thank you.
Would either of you gentlemen are all three of you
gentlemen want to comment further on anything, any questions or
any thoughts you have had that you think would be helpful?
Mr. Gattuso. If I can make just one comment?
Mr. Bachus. I am going to let Mr. Collins have a round of
questions. But be thinking--and this will give you five or 6
minutes to think about maybe if you want to have a 2-minute
rebuttal or wrap-up or just some other thoughts.
Mr. Collins is now recognized, the gentleman from Georgia,
for 5 minutes.
Mr. Collins. Thank you, Mr. Chairman. I appreciate the
patience today. It has been sort of a crazy day. I think this
is a needed proposal. I think it is something that we can look
at.
I do have a couple of questions. Professor Claeys, what are
some other ways, in addition to REINS, that we can ensure that
the Obama administration weeds through existing regulations and
eliminates unnecessary burdens on job creators, something they
said they wanted to do but obviously have not?
Mr. Claeys. I will give you some thoughts off the top of my
head. I am not sure that the question hits at my core scholarly
expertise.
Mr. Collins. Well, if anybody else wants to jump in after
Professor Claeys, go right ahead.
Mr. Claeys. I would say the appropriations process and the
attempts to link things like the increase of the debt ceiling
to negotiate policies that will lead to economic growth and
lead to deregulation. Those are a couple of examples.
Mr. Collins. Increasing the debt ceiling? Did I hear you
correctly?
Mr. Claeys. If the debt ceiling is going to be increased,
then this Congress can use the leverage it has to do some
other----
Mr. Collins. You are saying to use the debt ceiling, okay.
Mr. Claeys. As leverage for other things that you think
will have salutary effects on the economy.
Mr. Collins. Okay. Does anybody else have anything that
they would like to add to that?
Mr. Gattuso. I think, and this might sound surprising, but
I think the Obama administration's power to control and limit
and review regulations should be preserved and expanded,
specifically the fact that independent agencies are not
reviewed or are not subject to regulatory requirements. So I
think extending the Administration's authority over independent
agencies actually would be a plus.
Mr. Collins. Well, I think extending it or not extending
it, they are not doing anything to eliminate, is irrelevant.
Mr. Gattuso. I am not defending the Obama administration.
Mr. Collins. But, I mean, in defending your own answer, we
can give them all the power in the world, which we are not,
give them all the power in the world, but if they don't do
anything, just do their stated claim of unnecessary in
relieving these burdens, what is the purpose?
Mr. Gattuso. It is certainly not the complete answer, but I
think putting some limits on independent agencies is
appropriate.
Mr. Collins. I would not disagree with that. I think maybe
we are going about it two different ways.
Mr. Levin.
Mr. Levin. As a matter of fact, I was at a hearing of this
Subcommittee last year on the subject of retrospective review
of rules, and I would refer you to the statement I submitted
then which reviewed the Obama administration's efforts, which I
think have been substantial. But I also commented on ways in
which Congress could, if it chose, set up a structure to
promote retrospective review of rules on its own. So I would
refer you to that.
Mr. Collins. Okay. I think one of the issues that is coming
up, and I just came from another hearing this morning, and it
goes back to sort of your answer to your question a little bit,
but there is approximately $67 billion, I think, give or take--
and I don't remember the number; I am going back and forth--the
IGs have reported to their different departments on savings
that could be had, okay? $67 billion has been left on the table
and not implemented by the departments. There was much ado and
gnashing of teeth, and you would think that truly a lot of
things had come to an end this morning because of the sequester
that everybody wanted to bring in.
My question sort of tags on here. If we are not
implementing--and let's dig a little deeper here. If we are not
implementing cost-cutting measures, which have been implemented
by the inspector generals in these various agencies, if
Congress does not, through the power of the purse, which it is
supposed to have, through regular order of appropriations
process to control how money is spent, where it goes, and how
those operate, isn't it not within the purview of Congress to
continue this process given the fact that right now this
Administration, and I'm going to say from the perspective the
IG presented, previous Administrations as well have chosen to
ignore those kind of issues.
What is the difference here in the money issue and the
regulatory issues if Congress sort of sits back and lets the
Administration do it? Are we not, in essence, giving away our
constitutional authority, but also putting a hands-off approach
and then complaining about it in the long run?
Mr. Gattuso. I think that is entirely correct. Congress
both has the responsibility and the power to review and
scrutinize and ensure that regulations are sensible and
justified.
Mr. Claeys. I agree with Mr. Gattuso on the regulation. As
a scholar, I don't have any opinion on the spending issues. As
a taxpayer and a citizen, I support what you say.
Mr. Levin. Well, I think the power of oversight is
longstanding and traditional, and I think Congress has a
legitimate role over time to examine expenditures and decide
whether it thinks they are being made wisely. I think it would
be well for Congress to pursue these traditional areas of
oversight, as opposed to exploring these rather novel
alternatives such as the ones that are before us today.
Mr. Collins. I take great exception to saying ``novel''
when you actually look at the constitutional authority of
Congress is to watch over and pass the laws and regulations,
and it also then, from purse strings to other things, to make
sure that the American people and small businesses are
protected and taken care of. To say it is a novel approach to
simply look at regulations in a way that we can actually rein
that in to me is not framing this question very much.
Mr. Levin. Excuse me. I was unclear. I met the REINS Act is
novel, but regular oversight of rules is not.
Mr. Collins. It may be novel in its approach, but at this
point, with lack of it going on, I think there is an issue here
to where Congress does need to look at this and find the proper
way to make sure that we are in an environment in which we are
not cutting out our own businesses and others from regulation
that are either being done with political agendas or other
things.
Mr. Chairman, I see my time is over. I apologize. I yield
back.
Mr. Bachus. I appreciate that, Mr. Collins.
Gentlemen, each of you are recognized for one or 2 minutes,
if you wish.
Mr. Gattuso. Well, I will start. I just want to make two
points. Through most of this hearing, there may be an
impression left that there is a dichotomy, a choice that needs
to be made between relying on experts and Congress taking
direct control over regulatory policy. I think that is a false
choice. I know nothing about electrical systems, but if I
needed an electrician, I can hire one. But if I disagree with
what he recommends, I get to have the final say.
So I think Congress can review regulations, but that does
not mean that they do it without knowledge, without expert
advice and a knowledge of the facts on the ground.
Also, a question was asked about the respect for Congress,
and I have been very critical of Congress. I don't agree with
everything Congress does. I doubt whether any of you agree with
everything Congress does. But it is the only representative
national body that we have, and it is imbued by the
Constitution with the responsibility to oversee these policy
matters, and I think the proper respect for the Constitution
and for Congress would demand that that be accommodated.
Mr. Claeys. Mr. Chairman, I have three points. One has to
do with this argument about gridlock. I think that the argument
for gridlock cuts in the direction opposite to the one it has
been suggested to cut throughout this hearing. To me, the
analogy that comes to mind is imagine that there is a group of
people who are partners, and they have irretrievable or
irreconcilable differences. There are circumstances in which it
is okay to appoint a receiver, but a receiver is really an
option of last resort because if the partners have really deep
differences, they won't trust a receiver any more than they
will trust each other, because they don't trust each other.
In our polarized climate, the worst thing to do is for
people in the minority right now to try to watch the agencies
make Democratic policy, and then if the Administrations were to
switch, the Democrats watch the Republicans make policy. It is
better to have these kinds of deep, visceral disputes in
Congress.
My second point is very similar to Mr. Gattuso's. I don't
think we have heard enough today about the way in which the
REINS Act improves regulatory processes by making the agencies
more accountable to Congress, and by making the agencies
educate Members of Congress the way the electrical engineer
would educate Mr. Gattuso.
On this, I recommend that Members of the Committee consult
David Schoenbrod's testimony last Congress on this point. He
was a former NRDC lawyer, and he thought that environmental
laws were made best when Congress got actively involved with
the EPA regulation.
And last point that Mr. Jeffries made about the courts,
this Congress has an independent duty to consult the
Constitution, and a lot of the statutes that courts enforce in
administrative law are written by Congress. Well, they all are
written by Congress, but courts don't look at them very
closely. This Congress owes a duty to make sure that it thinks
that these statutes are constitutional. There are other
situations where courts were not the best arbiters or
protectors of individual rights, and the best example I can
think of is Dred Scott. It was a Republican Congress and a
Republican president that went to the people and said that the
court system has messed up our individual rights.
Mr. Bachus. Thank you.
Professor Levin?
Mr. Levin. Yes. I would like to use the example of
greenhouse gas regulation, which has been mentioned during this
hearing, to try to draw some points together. One, of course,
is that the Supreme Court itself told the EPA to get moving in
dealing with climate change issues.
But beyond that, the greenhouse gas situation is one in
which EPA is now proceeding to come up with regulations to
address this matter. The Clean Air Act is probably not the
ideal way in which to do it, but the Administration is taking
the initiative because Congress has been unable to take any
action to further action on climate change. Because of the
inaction at that level, the EPA has gone forward on its own.
Now, if you have a system like REINS in which you have not
only the ability--Congress is not only gridlocked on its own,
but also is able to block the Administration, the upshot is
nothing gets done on climate change. The climate is going to
just keep getting worse. The climate is not a regulated entity
such that if you remove the yoke of burdensome regulations, the
climate can breathe free and produce jobs. The climate just
keeps getting worse, so something should be done.
If the EPA proceeds with rules, those will be subject to
judicial review, and have been to some extent already, and
there is some hope of something getting done. But I think the
REINS Act would simply generate policy paralysis with no action
taken. I think that is not in the interest of the country, and
it is an example of the problems that this legislation would
bring about.
Mr. Bachus. I thank all the gentlemen. I think you have all
three given thoughtful testimony.
Mr. Cohen, if you have a final word, you are welcome.
Mr. Cohen. I just thank the Chairman for his courtesies in
extending time and for his other activities, engaging in the
retreat this past weekend in Alabama. His heart is obviously in
the right place. Thank you.
Mr. Bachus. Thank you.
Mr. Cohen and I are in agreement that the gridlock here
is--we are making a bunch of cuts in discretionary spending
when some of our mandatory spending programs are driving our
debt and deficit, and I think we are both disappointed that we
have come to what I think we all agree is a dreadful situation.
At this time, our hearing is concluded. Each of the
witness' written statements will be entered into the record in
its entirety, and I ask that each witness--well, we have
already done that.
This concludes the hearing. Thanks to all of our witnesses
for attending.
Without objection, all Members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
This hearing is adjourned.
[Whereupon, at 1:17 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Material submitted by the Honorable Steve Cohen, a Representative in
Congress from the State of Tennessee, and Ranking Member, Subcommittee
on Regulatory Reform, Commercial and Antitrust Law
__________
Letter from the Honorable Kevin Cramer, a Representative in Congress
from the State of North Dakota
Prepared Statement of the Honorable Andy Barr, a Representative in
Congress from the State of Kentucky
Letter submitted by Kristina Butts, Executive Director, Legislative
Affairs, National Cattlemen's Beef Association
Response to Questions for the Record from James L. Gattuso, Senior
Research Fellow in Regulatory Policy, Thomas A. Roe Institute for
Economic Policy Studies, The Heritage Foundation
Response to Questions for the Record from Eric R. Claeys,
Professor of Law, George Mason University
Response to Questions for the Record from Ronald M. Levin, William R.
Orthwein Distinguished Professor of Law, Washington University School
of Law