[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
OFFICE OF INFORMATION AND REGULATORY AFFAIRS: FEDERAL REGULATIONS AND
REGULATORY REFORM
=======================================================================
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
__________
SEPTEMBER 30, 2013
__________
Serial No. 113-52
__________
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
JASON T. SMITH, Missouri
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
JASON T. SMITH, Missouri JOE GARCIA, Florida
HAKEEM JEFFRIES, New York
Daniel Flores, Chief Counsel
James Park, Minority Counsel
C O N T E N T S
----------
SEPTEMBER 30, 2013
Page
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................ 4
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Chairman, Committee on the Judiciary 5
WITNESSES
The Honorable Howard A. Shelanski, Administrator of the Office of
Information and Regulatory Affairs
Oral Testimony................................................. 16
Prepared Statement............................................. 19
The Honorable C. Boyden Gray, Boyden Gray & Associates, PLLC
Oral Testimony................................................. 36
Prepared Statement............................................. 39
Sally Katzen, Visiting Professor at NYU School of Law; Senior
Advisor, Podesta Group
Oral Testimony................................................. 52
Prepared Statement............................................. 54
John F. Morrall, III, Affiliated Senior Scholar, Mercatus Center,
George Mason University
Oral Testimony................................................. 59
Prepared Statement............................................. 61
Nicole Riley, Virginia State Director, National Federation of
Independent Business
Oral Testimony................................................. 67
Prepared Statement............................................. 69
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, and
Ranking Member, Committee on the Judiciary..................... 8
APPENDIX
Material Submitted for the Hearing Record
Prepared Statement of the Honorable Spencer Bachus, a
Representative in Congress from the State of Alabama, and
Chairman, Subcommittee on Regulatory Reform, Commercial and
Antitrust Law.................................................. 80
Prepared Statement of the Honorable Steve Cohen, a Representative
in Congress from the State of Tennessee, and Ranking Member,
Subcommittee on Regulatory Reform, Commercial and Antitrust Law 83
Prepared Statement of the Honorable Bob Goodlatte, a
Representative in Congress from the State of Virginia, and
Chairman, Committee on the Judiciary........................... 87
Material submitted by the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, and
Ranking Member, Committee on the Judiciary..................... 94
Response to Questions for the Record from the Honorable Howard A.
Shelanski, Administrator of the Office of Information and
Regulatory Affairs............................................. 95
Response to Questions for the Record from the Honorable C. Boyden
Gray, Boyden Gray & Associates, PLLC........................... 107
Response to Questions for the Record from Sally Katzen, Visiting
Professor at NYU School of Law; Senior Advisor, Podesta Group.. 113
Response to Questions for the Record from John F. Morrall, III,
Affiliated Senior Scholar, Mercatus Center, George Mason
University..................................................... 121
Response to Questions for the Record from Nicole Riley, Virginia
State Director, National Federation of Independent Business.... 124
OFFICE OF INFORMATION AND REGULATORY AFFAIRS: FEDERAL REGULATIONS AND
REGULATORY REFORM
----------
MONDAY, SEPTEMBER 30, 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 4:04 p.m., in
room 2141, Rayburn House Office Building, the Honorable Spencer
Bachus (Chairman of the Subcommittee) presiding.
Present: Representatives Bachus, Goodlatte, Holding,
Collins, Cohen, DelBene, Garcia, and Jeffries.
Staff Present: (Majority) Daniel Huff, Counsel; Ashley
Lewis, Clerk; Doug Petersen, Intern; Philip Swartzfager,
Legislative Director for Rep. Bachus; Jonathan Nabavi,
Legislative Director for Rep. Holding; Jennifer Lackey,
Legislative Director for Rep. Collins; Justin Sok, Legislative
Assistant for Rep. Smith of Missouri; and (Minority) 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, although we don't anticipate a
recess--unless something wonderful happens, right?
Let me welcome Administrator Shelanski and all our
witnesses to this oversight examining the Office of Information
and Regulatory Affairs: Federal Regulations and Regulatory
Reform.
I think if there is anything that brings Members of both
parties together is the importance of jobs and of creating more
jobs in our economy. People call home ownership the American
dream, but if you don't have a job you have very little way of
ever affording a home. And to me, really, the American dream is
having a good-paying job that allows you to provide for your
family and for your financial future.
Unfortunately, today there are too many people looking for
good work in our economy, and there are simply not enough jobs.
And that is also impacting our budget. You know, we are talking
about budget deficits and the national debt. We have doubled
the food stamp program, the number of people on it in the past
5 or 6 years. We have done the same thing with Social Security
Disability. Those programs are growing exponentially and are
really beginning to overwhelm our Federal budget, and all
because people apparently can't find a job.
And that is where I think we can tie a part of that to
regulations because I think we all agree, and I know Mr. Cohen
said many times that regulations aren't bad and we shouldn't
assume that they are bad. And a lot of regulations are good,
they help safeguard our economy, our safety with our food
regulations, and our health. But, then again, and really our
past three Presidents have all identified in State of the Union
addresses the need to cut back on Federal regulations.
When you have excessive regulations that is separated from
a true consideration of cost and benefits, you can do real
damage to the economy and people's lives. I remember in
economics one of the first things you are taught is about GDP,
and GDP is basically a function of capital plus workforce, some
people say population, and then productivity. But capital is an
essential part. And so to generate jobs you have to have
capital and you have to have workforce, and any time you deny
that economic working capital you cost jobs.
Now, what does capital have to do with--we know what it has
to do with jobs, but what does it have to do with regulations?
Well, consider this. A Small Business Administration report
based on 2008 data--so this is rather dated--but it put the
annual cost of Federal regulations at $1.7 trillion, and at
that time it was 14 percent of our economy. Now, we are not
talking about State regulations, we are not talking about local
regulations, we are not talking about taxes, we are not talking
about health benefits. We are talking about simply the cost of
complying with Federal regulations. According to the Small
Business Administration, not some conservative think tank, not
Republican talking points, the Small Business Administration.
Now, as I said, President Clinton, President Bush, and
President Obama have all said we need to reduce excessive
regulations. Well, have we done that? And let me say this:
President Bush added to regulations, President Clinton more
regulations. But how about President Obama? Well, as of January
2013 Congressional Budget Director Douglas Holtz-Eakin
testified--and he testified before this Committee in January of
this year--that the Obama administration had added $520 billion
worth of new regulations.
Now, that number doesn't include many of Dodd-Frank
regulations because they are still being enacted. It doesn't
include all the regulations under the Affordable Health Care
Act or, as the President has started calling it, Obamacare. It
doesn't include many of the regulations being proposed under
the President's climate control agenda, which includes many
dictates against carbon.
So you take all these regulations, well intended, but they
cost money. They cost capital. And taking that capital out of
the economy costs jobs. And I am sure there is nobody in this
room that has not read that our GDP is growing by 2 percent,
2.5 percent, and that that is not sufficient to create new
jobs, that we need to be growing at least maybe 2 percentage
points higher. And if we do that, we will create jobs, we will
bring in more taxes, it will positively affect Social Security
Disability, the pension fund in a positive way. It should cut
down on our food stamp benefits and hundreds of other Federal
programs.
And think about 14 percent cost of Federal regulations, if
we could just add to the economy about 2 percent. Now, if all
regulations cost the same, that would be one out of seven
regulations. If you could just decrease the cost of regulations
by 2 percent, you would actually add 2 percent to our GDP.
And that is where you come in, Administrator. As the new
head of the Office of Information and Regulatory Affairs, you
stand as one of the important checks and balances in the
Federal regulatory system. You might say, well, Congressman,
you also do, you pass the laws, and then the regulators write
the regs. And I will tell you that even with the Administrative
Practice Act and all these acts, I know in the last decade or
15 years we have only repealed one regulation, so one law, and
that was ergonomics. So, unfortunately, the Congress just
doesn't seem to ever repeal a law and the regulations that go
with it.
Executive agencies must submit their proposed and final
rules to your agency for approval before they can be published
in the Federal Register. You have the authority to return a
rule to the issuing agency if you find defects in the process
or analysis.
With this power often comes great pressure from parties
interested in regulations and from the issuing agencies
themselves. Your office must be committed to fair and unbiased
reviews. You are sort of like a college football referee,
passions are high on both sides, but you have to make the call.
Some of them may be unpopular with someone's agenda, but your
job is to make the call and to get it right.
And in making those calls, if you find that a regulation
can be less restrictive, less costly, the benefit does not
outweigh the cost, you can actually help create jobs. You can
give someone a job. And so my message to you is, when you think
about these regulations, think about will it cost someone their
job or will it result in a job not being created.
Accordingly, I look forward to examining your activities in
detail, particularly on several key issues. What is being done
to ensure that agency cost-benefit reports are not overstating
benefits or inappropriately mixing direct benefits with
secondary benefits? This has concerned me as I have reviewed
the administration's rationale for additional carbon emission
standards, which will have a severe impact on the use of coal.
Now, I am not as concerned about that as I am people
working in the industry, of labor. Coal mining jobs are one of
the highest paid professions in America, and I think you
realize we need high-paying jobs. You have the responsibility
with regard to the regulatory impact analysis process. An issue
arising from that is what your agency is doing to make sure
that real problems are being identified and whether the best
regulatory approach is being used to address the problem.
If you don't know already, Administrator, I have a
particular interest in whether independent agencies, like the
Consumer Financial Protection Bureau, should be required to
submit their rules to you for review. Presently they are not.
They are exempt despite the huge impact that their rules will
have on the economy and on consumers. It is an agency in
desperate need of oversight.
To conclude, if your agency exercises its authority
properly, it can be a gatekeeper to ensure smart and effective
regulations. We all know what the flip side of that is:
regulatory overreach that both puts a drag on our economy,
retards job creation and growth, and fails to provide
commensurate environmental health and consumer benefits. That
is a bad deal for the American people.
With that, I look forward to hearing from you and our
second panel of experts on how our regulatory regime is
functioning, how it can be improved, and how, if properly
supervised, can create more jobs.
I now recognize the Ranking Member, Mr. Cohen of Tennessee,
for his opening statement.
Mr. Cohen. Thank you, Mr. Chairman. And before I begin, I
wish to make public the information that we shared this morning
that, unfortunately, you are announcing you are going to be
leaving Congress. Being on this Subcommittee and being ranking
person, I have got to know you, and I value your service to the
country and the Congress.
At times, I have seen heroic action on your part. Your
background in Alabama and seeing civil rights has caused you to
make the statements and take positions of moral rectitude
concerning civil rights and legislation, and concerning basic
human dignity which reaped, I think, some constituent abuse
when you stood on the right side, which I think, if I read
correctly, you based on your good values from your position on
immigration.
So you have got the kind of moral rectitude this Congress
needs and that would make us a better Congress if you stayed.
So I regret that you are leaving, but I have enjoyed the
experience and will continue for the next year and a half or
so.
Mr. Bachus. I will be here for the next year and a half. I
am not retiring as much as I am not seeking reelection. So
there is a difference. But I very much appreciate those
remarks. And my father, if he were alive today, I am very proud
of his role in the civil rights movement under great financial
penalty at times to his business. But thank you.
Mr. Cohen. You are welcome, sir. It has been a pleasure and
will continue to be so.
Now to OIRA, one of our particular areas of jurisdiction.
And, Mr. Shelanski, you are new to the game here, but you are
an outstanding economist, and for that reason, as I understand
it, your nomination went through the Senate without any
controversy and I think a lot of plaudits from both sides of
the aisle. I commend you for that.
Presidents, as the Chairman has said, Clinton, Bush the
younger, and President Obama, have all said basically the same
thing about reducing regulations, making them more efficient,
harmonizing rules, et cetera. And I know that your predecessor,
Mr. Sunstein, attempted to do that, and I am sure you will,
too, and get rid of the bad ones, the outmoded ones, refine
them, and give us, like Tide, a new, improved Tide, and that is
what we need.
There have been efforts to modernize. But when we come
here, and as the Chairman said, I always say that the
regulations have benefits, too, and there is a lot of good in
regulations. They are not necessarily evil. They do keep our
food safe, they keep our airplanes in safe condition, flying
and landing and all those things that they need to do, and a
lot of regulations keep our financial world safer and will
continue to do that.
There is a difference among some of us in the way we look
at the benefits from regulations. And my home paper, the
Commercial Appeal, had an article this year that was published,
a columnist by the name of Doyle McManus, and he cited Cass
Sunstein and said that in President Obama's first 4 years in
office he issued fewer new Federal regulations than any of the
four Presidents who came before him, including President
Reagan. I take Mr. McManus' article as being accurate.
Moreover, the op-ed noted President Obama has revoked hundreds
of outmoded rules that produce savings for government,
businesses, and consumers that will add up to billions.
So I look forward to learning about the continuing efforts
today that the President has pushed to have agencies improve
and modernize the existing regulatory system. The cost of
regulations, there is a cost, but there is a benefit, and
according to the Office of Management and Budget in their 2012
draft report on the benefits and costs of Federal regulations,
the net benefits of regulations in the first 3 years of this
administration totaled $91 billion. That is 25 times greater
than during the comparable period under Bush the younger.
Moreover, fewer final rules have been reviewed by OIRA and
issued by executive agencies during the first 3 years of this
administration than in the comparable time during the second
Bush administration.
Similarly, the 2013 draft report to Congress noted the
benefits of Federal regulations between fiscal year 2002 and
2012, a 10-year period, ranged from $193 billion to $800
billion in benefits as against $57 billion to $84 billion in
costs. That is a pretty nice ratio of benefits over costs.
So I would like to thank you for your service to our
country in this important position, and I would like to know
from all of our witnesses, including the second panel, what
steps Congress can take to help OIRA do its job, including
whether Congress should provide OIRA with more resources so
that you can be even more effective in streamlining
regulations.
I thank our witnesses for being here today. And more
importantly, I thank Chairman Bachus for his many times of
showing leadership and courage in this Congress.
Yield back the balance of my time.
Mr. Bachus. I thank you, Mr. Cohen.
I would now like to recognize the Chairman of the full
Committee, Chairman Bob Goodlatte of Virginia, for his opening
statement.
Mr. Goodlatte. Thank you, Mr. Chairman, and I want to thank
you for holding this hearing. I want to join the Ranking Member
in congratulating you, thanking you for your many years of
service. We entered the Congress at the same time, just a few
years ago, and your service has been very meaningful for the
people of your district, I have no doubt, but also for people
who work here with you, and I thank you for that.
When you served with great distinction as Chairman of the
Financial Services Committee, and as we require on our side of
the aisle, you had to give that up because of term limits, I
was absolutely delighted that you agreed to come back to this
Committee and take the Chairmanship of this Subcommittee, and
you will do great work. You already have, and you will for the
next 15 or so months, and we will look forward to getting a lot
done during that time. But we will also miss you because of
your good work, your demeanor, your honesty, your character,
and your determination to do the right thing. So thank you very
much for that service.
I also want to make mention, since I may--I have to attend
a couple other things--I may after I give my opening statement,
I won't be here necessarily when the second panel is
introduced, and I do want to welcome one of my--she now lives
outside the district, but she is a native of the 6th District
of Virginia and someone who has been very close to my office
and to some of the key people in my office for many, many
years. And that is Nicole Riley, who is originally from Augusta
County, Virginia, and who has served as the State director of
the NFIB since 2011. She has also been educated in the 6th
District of Virginia, which is a very key thing, at Roanoke
College, which is now in the 9th District but was when she was
educated there, and she also was a legislative assistant to my
good friend, Delegate Steve Landes, and she was a legislative
policy analyst under Attorney General Jerry Kilgore, and a
special assistant for legislative affairs when current Governor
Bob McDonnell was our attorney general. So she comes to us with
a great deal of experience and very capable in representing the
interests of NFIB members.
Let me turn to the subject that she and others will be
testifying in a moment. The Office of Information and
Regulatory Affairs, or OIRA, has been called the most powerful
Federal agency that most people have never heard of. OIRA is
responsible for overseeing the development and promulgation of
agency regulations. In particular, OIRA must review required
cost-benefit analyses of economically significant rules, which
are those rules having an annual effect on the economy of $100
million or more.
Such cost-benefit analysis is critical because, since early
in the Obama administration, many have attributed the economy's
lack of recovery in large part to increases in regulation and
regulatory uncertainty. Even the administration acknowledges
the problem. In a January 18, 2011, Wall Street Journal op-ed,
President Obama stated that overregulation ``stifles
innovation,'' and has a, ``chilling effect on growth and
jobs.'' The President has even issued a number of executive
orders and memoranda that address regulatory burdens. These
include Executive Order 13563, which directs agencies to
``propose or adopt a regulation only upon a reasoned
determination that its benefits justify its costs.''
While these executive orders look good on paper, it appears
that it is all the Obama administration is willing to do. I
want to know what OIRA is doing to ensure agencies actually
implement the stated principles.
Unfortunately, there are grounds for concern. Roughly two-
thirds of the claimed benefits of economically significant
final rules OIRA reviewed in 2010 were actually from secondary
effects that were not the statutorily authorized targets of the
rules. What is OIRA doing to make sure that the bulk of the
benefits agencies claim for their rules arise specifically out
of improving the conditions Congress authorized those agencies
to address by regulation?
Similarly, in May of 2013 the administration quietly
increased its estimate of the benefit of reducing carbon from
the atmosphere from $21 to $35 per metric ton. That will
dramatically increase agency estimates of benefits from
regulations limiting emissions. However, there are significant
concerns that the administration's new figure is substantively
flawed and that the process for issuing it was not transparent.
The Government Accountability Office is investigating.
Administrator Shelanski joined OIRA at a critical time. Job
creation continues to fall short of expectations. In August
2013 employers added only 169,000 jobs to payrolls, less than
expected, and gains for June and July were revised downward.
The unemployment rate ticked down to 7.3 percent, but only
because fewer people are looking for work. Even more worrisome,
the labor participation rate is the lowest it has been in
roughly 40 years. The economy as a whole also remains sluggish.
On September 18, 2013, the Federal Reserve lowered its economic
growth forecast for 2013 and 2014.
In light of this worrisome data, I am particularly
interested in hearing how Administrator Shelanski plans to
ensure the administration's actions match its rhetoric about
reducing the regulatory burden on the small businesses that
form the backbone of our economy. The National Federation of
Independent Business surveys; government regulations are
consistently a top concern for small-business owners whose
compliance costs are also higher than those of larger
businesses. We cannot afford to regulate small-business job
creators out of business.
To this end, the OIRA administrator holds a number of tools
that can be powerful if he chooses to use them. If an agency's
cost-benefit analysis is improper or if the agency fails to
consider alternatives or account for the impacts on small
business, OIRA can return the regulation to the agency so it
does not take effect. During the Bush administration, OIRA sent
27 return letters. During the Obama administration, though,
OIRA has sent only one.
OIRA's zealous enforcement of the cost-benefit analysis,
least burdensome alternative, and other requirements to
regulations under consideration by the executive branch will
help to prevent unnecessary and excessively costly regulations
that harm the economy and kill jobs. And that is why I am
pleased Subcommittee Chairman Bachus has called this oversight
hearing, and I look forward to Administrator Shelanski's
testimony, as well as that of our second panel of distinguished
experts. And I thank you and yield back.
Mr. Bachus. Thank you, Chairman.
Now recognize the Ranking Member for a unanimous consent
request.
Mr. Cohen. Thank you, sir. I would ask unanimous consent to
enter into the record the statement of Mr. Conyers.
Mr. Bachus. Without objection, the full Ranking Member's
statement, the gentleman from Michigan, John Conyers' statement
will be added to the record.
[The prepared statement of Mr. Conyers follows:]
----------
Mr. Bachus. And now we have our witness introduction for
the first panel. I am told the Judiciary Committee, unlike
Financial Services, introduces just one panel at a time, so I
want to honor that approach. But we do have a very esteemed
second panel, and we are very much looking forward to that.
I do want to introduce a member of the audience, the
chairman of the Administrative Conference of the United States,
Paul Verkuil.
Would you stand up, Mr. Verkuil? We are honored to have
you. And so thank you and your staff.
At this time I will make an introduction of our first
panelist. Howard Shelanski is the administrator of the Office
of Information and Regulatory Affairs, the Office of Management
and Budget. He was previously the Director of the Bureau of
Economics at the Federal Trade Commission and a professor at
Georgetown University Law School. From 2011 to 2012 he was of-
counsel to the law firm of Davis Polk & Wardwell. He was also
the Deputy Director for Antitrust in the FTC's Bureau of
Economics from 2009 to 2011.
Mr. Shelanski was on the faculty at the University of
California at Berkeley from 1997 to 2009. He served as Chief
Economist of the Federal Communications Commission from 1999 to
2000 and as senior economist for the President's Council on
Economic Advisers at the White House from 1998 to 1999. He was
an associate with Kellogg, Huber, Hansen, Todd & Evans from
1905 to 1997, served as a clerk for Justice Antonin Scalia of
the United States Supreme Court, for Judge Louis Pollak of the
U.S. District Court in Philadelphia, and for Judge Stephen F.
Williams of the U.S. Court of Appeals here in D.C. Mr.
Shelanski received his B.A. From Haverford College and a J.D.
And Ph.D. from the University of California, Berkeley.
Welcome to the hearing. And, Administrator, you are welcome
to give an opening statement. And we are not going to time you
as far as 5 minutes. If it is 6 minutes or 7 minutes, you are
fine. So don't let the lights bother you.
TESTIMONY OF THE HONORABLE HOWARD A. SHELANSKI, ADMINISTRATOR
OF THE OFFICE OF INFORMATION AND REGULATORY AFFAIRS
Mr. Shelanski. Thank you very much, sir.
Mr. Bachus. That is one procedure I violate, by giving
people a little more time.
Mr. Shelanski. Thank you very much. Chairman Bachus,
Ranking Member Cohen, Chairman Goodlatte, and Members of the
Subcommittee, thank you for the invitation to appear before you
today. I am pleased to have this opportunity to discuss recent
developments at OIRA and my priorities for the Office going
forward.
In the roughly 12 weeks since I took office in July, it has
been my privilege to work with the excellent and dedicated OIRA
staff, the first-rate leadership team at OMB, and our hard-
working colleagues throughout the executive branch. Together we
are working to achieve the administration's goals of promoting
economic growth and employment while simultaneously protecting
the health, safety, and welfare of Americans now and into the
future.
OIRA has a broad portfolio that extends beyond regulatory
review. For example, under the Paperwork Reduction Act, the
Office ensures that information collection by the Federal
Government is not unnecessarily burdensome. OIRA also provides
guidance on privacy policy to Federal agencies and oversees the
implementation of government-wide information quality and
statistical standards. One of my objectives as Administrator is
to work with colleagues across the government to ensure that
Federal policy in each of these areas adapts to the ever-
changing technological environment while remaining clear and
consistent with the law.
To be sure, the largest area of OIRA's work is the review
of regulations promulgated by executive branch departments and
agencies. A set of executive orders establishes the principles
and procedures for OIRA's regulatory reviews. Most
significantly, as Chairman Bachus mentioned, Executive Order
12866 and Executive Order 13563 delineate processes for
regulatory review and establish standards and analytic
requirements for rulemaking by departments and agencies. And
importantly, Executive Orders 13563 and 13610 focus on the
reduction of regulatory burdens through the retrospective
review of existing rules.
My priorities as OIRA administrator are directly rooted in
the relevant executive orders. One such priority is to increase
the predictability of the regulatory review process by
improving the timeliness and transparency of OIRA's key
functions. In that regard, I have committed to publishing the
Unified Agenda and Regulatory Plan of agency rulemaking
activity twice each year. OIRA staff have been working closely
with all Federal regulatory agencies toward the timely
publication of the fall plan and agenda.
Of similar importance to clarity and certainty of the
regulatory environment is that rules, both new rules and those
already under review, move through OIRA as efficiently as
resource constraints and rigorous analysis permit. It has been
a top priority of mine since coming to OIRA to reduce the
frequency of extended regulatory reviews and to work with
agencies on rules that are already under extended review.
While OIRA's consideration of Federal regulations must
first and foremost uphold the standards of analysis that the
executive orders establish, unnecessary delays in review are
harmful to everyone: to those who are denied the benefits of
regulation, to those wishing to comment on proposed rules and
influence policy, and to those who must plan for any changes
the regulations require of them. I am pleased to report that,
thanks to the tireless work of OIRA staff in the months before
and since my arrival, we have more than cut in half the number
of rules that were under review for more than 200 days, and the
number of rules under review for more than 90 days is down
considerably and continues to fall.
While increasing the predictability of the regulatory
process through timely review of rules and publication of
regulatory plans and agendas is essential, the executive orders
also make clear that removal of unnecessary burdens is an
essential element of the regulatory process. As I have
previously testified, ensuring flexibility for small businesses
and reducing regulatory burdens for everyone through the
retrospective review process are high priorities for me as
Administrator. Retrospective review is a crucial way to ensure
that our regulatory system is modern, streamlined, and does not
impose unnecessary burdens on the American public. It can also
provide an opportunity to improve regulations already on the
books.
As I testified in July, our retrospective review efforts to
that point had already produced significant results, bringing
near-term cost savings of more than $10 billion to the U.S.
economy. As agencies move forward with their current plans,
OIRA will work with them to achieve even greater gains.
Ensuring follow-through on such plans will be one of our key
objectives going forward.
Finally, OIRA has important responsibilities in the area of
international regulatory cooperation under Executive Order
13609. We have made progress in a number of areas with our
international partners and will continue to further our
regulatory international mission in coordination with the
Department of State and USTR. Regulatory cooperation benefits
both businesses and consumers by promoting consistent standards
and procedures across borders and by preserving safety and
welfare while promoting competitiveness here and abroad.
In conclusion, the many activities of government bring
great benefits to Americans but can also carry costs. It is
therefore critical that paperwork and information collection
are not unduly burdensome, that Federal agencies ensure privacy
and use only high quality data, and that regulation protects
health, safety, and welfare in a manner that is consistent with
job creation and economic growth. These are central objectives
of this administration and are the main tasks of OIRA.
It is my honor and privilege to serve as OIRA's
Administrator as we continue to meet these challenges. Thank
you again for the opportunity to appear before the Committee
today. I look forward to answering your questions.
Mr. Bachus. Thank you, Administrator.
[The prepared statement of Mr. Shelanski follows:]
__________
Mr. Bachus. And at this time I recognize the gentleman from
North Carolina, Mr. Holding. We have a U.S. Attorney be your
first examiner.
Mr. Holding. Well, thank you, Mr. Chairman.
And first off I would be remiss if I didn't thank the
Chairman for not only his leadership, but his friendship.
Although I am a new Member of Congress and a new Member of this
Committee, the Chairman has taken the time to impart to me more
than a bit of his wisdom.
And I appreciate your friendship and look forward to that
continuing in all the endeavors that you have for the future.
As Chairman Goodlatte said earlier, pointed out that it was
in January 18, 2011, in a Wall Street Journal op-ed that
President Obama stated that overregulation stifles innovation
and has a chilling effect on growth and jobs. I assume you
agree with that statement?
Mr. Shelanski. Yes, sir, I would believe that
overregulation would certainly have that effect.
Mr. Holding. Turning to the Unified Agenda and Regulatory
Plan, I applaud your commitment to complying with the law and
publishing that on a regular basis as specified. During the 12
weeks or so that you said that you have been on the job, I
assume one of the first things that you have done is kind of do
an analysis of where OIRA is, what resources do you have at
hand, what shortcomings do you have. And I would assume that
you have looked at the failure to publish the Unified Agenda
and Regulatory Plan in the past in a timely fashion. And as you
have done that analysis, where are the shortcomings in OIRA
that have caused this failing?
Mr. Shelanski. Thank you very much, Congressman Holding.
The OIRA staff is an absolutely first-rate staff that is
dealing with an enormous set of responsibilities, as outlined
in my opening statement, and indeed the opening statements that
we heard earlier this afternoon. I don't see any shortcomings
in the talent, the commitment, the ability of OIRA as a whole
or, indeed, of any member of the staff. They are all extremely
diligent, working very hard to ensure that the executive orders
are observed.
My priority in arriving in early July as Administrator was
simply to make sure that nothing from the past would be an
impediment moving forward and that would enable me to uphold
the commitment I made during my confirmation hearings to ensure
that that Unified Regulatory Plan and Agenda did get published
twice a year.
As to what may have happened in the past, I was not there
at OIRA, and I was not particularly interested, to be honest,
about what exactly happened at that time. What I was interested
in finding out was whether there was anything at the agency
that would prevent me from moving forward and ensuring
publication twice each year, and indeed I found nothing that
would be an impediment to that task.
Mr. Holding. Well, I would recommend to you that you find
out what was the impediment in the past to ensure that you have
it identified. It may be there right before your very eyes, but
since you haven't identified what the impediment was in the
past, it is kind of hard to fix it in the future.
You know, I feel very strongly that when the President
failed to release the Unified Agenda and never released one
until December of 2012, after the election, I think that was
very unfair to voters. I think it is unfair because they were
not told what regulations the President planned to do when he
was--if he were to be reelected. And I believe had they known
what regulations that the President had in mind of implementing
after his reelection, it may very well have impacted the vote.
So I think you have got a problem there, and if you are not
undertaking the steps to identify what that problem was just a
year ago, I think you are making a mistake.
Turning toward transparency, you know, elaborate for me the
importance to businesses large and small, you know, that they
have a clear outlook as to what regulations are coming down the
pike and looking at them, what they are looking at as they make
determinations about what business plans they want to
implement. You know, speak to me a little bit about
transparency and its importance.
Mr. Shelanski. Well, thank you very much. This actually
relates to one of the issues with the Unified Regulatory
Agenda.
One thing that has happened in the past year and a half,
really because of the good work and the attention that OIRA
staff has dedicated to the issue, is that what is published in
that Unified Plan and Agenda is far better than what was
published in the past. We have been working very closely with
agencies to ensure that what they do publish in terms of their
plans going forward actually aligns reasonably closely with
what they are publishing, what they are, in fact, doing. That
way businesses, small and large, will be able to identify real
targets, will be able to identify real issues on which they
want to comment.
In fact, if agencies just put everything they are thinking
about on the Regulatory Plan and Agenda, that may look like
transparency, but it is obfuscation. It is just like what
happens in a discovery dispute when somebody pulls 27 semis up
in front and dumps all those documents on your lap and you have
got to go hunt through for the things that are really relevant.
Well, we have tried to make the Unified Regulatory Plan and
Agenda something that is clearer, by being more rigorous,
better, by working more closely with the agencies, so people
will know what the real plans are. And that is actually
something that during whatever happened in the past to delay
the publication, there were a lot of improvements that occurred
in the process and in what the publication would be. So I think
that certainly helps transparency.
Mr. Holding. Thank you, Mr. Chairman. I yield back.
Mr. Bachus. Thank you.
Mr. Cohen.
Mr. Cohen. Thank you, sir.
Are you familiar with a group called the Heritage
Foundation?
Mr. Shelanski. Yes, sir, I am.
Mr. Cohen. The Heritage Foundation issued a report last
year that claimed that the Obama administration during its
first 3 years, and I quote the report, ``unleashed 106 new
major regulations that increased regulatory burdens by more
than $46 billion annually, 5 times the amount imposed by George
W. Bush's administration in his first 3 years.'' Now, that
quote is contrary to what I said in my opening statement. Are
you familiar with that position that the Heritage Foundation
took?
Mr. Shelanski. I am not familiar with that specific report,
but I have heard such numbers quoted.
Mr. Cohen. And how would you respond to such numbers that
are quoted by the Heritage Foundation?
Mr. Shelanski. Well, thank you very much for that question,
Ranking Member Cohen, because I think it gets to an interesting
issue.
Over a period of years one can come up with many different
ways to count the costs and benefits of regulation, many
different ways to compare regulation across administrations,
pages of regulations, costs of proposed rules, final rules. It
is often hard to know what go into these different
calculations.
What I am interested in is this: making sure not that we
only count the costs of regulation, but that we pay attention
to whether those regulations were rigorously developed and
reviewed by OIRA in where such review is appropriate, to ensure
that they are bringing benefits that exceed those costs. And so
simply pointing at the cost side of regulation and what might
often be very questionable estimates of the cost side of
regulation does not tell the story of why agencies regulate and
of the benefits that may be brought.
And so what I am interested in when I look at regulatory
tallies is, sure, I care what the costs are. You can come to a
point where the cumulative costs imposed on a particular sector
of the economy really are creating difficulties for businesses,
for consumers, job creation, economic growth. That needs to be
paid attention to. But we also need to look at what the purpose
of those rules is. And if those rules are bringing substantial
benefits, benefits that themselves reduce costs currently and
into the future, rules that themselves may in fact safeguard
and stabilize the economic system going forward, I think that
we have to look very carefully at what we are getting for those
costs and not simply look at the cost side.
Mr. Cohen. Are you familiar with the Crain study?
Mr. Shelanski. Yes, I am familiar with the Crain and Crain
study.
Mr. Cohen. And would you put that on a pedestal or would
you put it underneath a pedestal?
Mr. Shelanski. I am not sure I can say in polite company,
sir, where I would put that study. But let me say pretty
clearly that that study has been, I think, pretty thoroughly
refuted by everybody who has looked at it. In fact, the Small
Business Administration, I don't see them relying on that
study. It was not an official report of the SBA. It was done by
two outside consultants. There are a variety of methodological
problems with that study that I won't take the time to go into
here. Others have, Congressional Research Service, I think GAO.
One of those organizations put out an analysis thoroughly
debunking that study. There have been a number of pieces that
have pointed out the analytical flaws with it. So, no, I put
that----
Mr. Cohen. Somewhere beneath the Saturday Evening Post,
maybe?
Mr. Shelanski. Yes. So my view is that that study is not
one that I take particularly seriously, and I actually think it
is very unhelpful because it tells, I think, a story that is
very frightening until one looks at the fact that the numbers
are completely concocted and have very little basis in any real
data, any real science, any real analysis.
Mr. Cohen. Well, we do have a problem with science here, we
are still working on evolution, we are working on climate
change, we are working on economic relativity, shutdowns, and
debt ceilings. So it is an area where we need improvement.
Are you aware of any empirical evidence linking jobs----
Mr. Bachus. Did you say evolution?
Mr. Cohen. There are some people who have questioned
evolution on your side of the aisle.
Mr. Bachus. Oh, oh. I didn't know if we had any rules on
evolution.
Mr. Cohen. No, it is beyond our Subcommittee. It is in our
larger unisphere, hemisphere of science and the lack of faith
therein.
Are you aware of any empirical evidence linking jobs and
regulations?
Mr. Shelanski. There are studies that have attempted to
link job effects to regulation, but the link between any
particular regulation and jobs, or indeed between our entire
regulatory system and GDP and jobs, is a very tenuous one, and
I am not aware of any study that has strong consensus in the
economic community.
Mr. Cohen. If I may ask one last question. Your agency has
suffered through sequestration, as has the rest of government.
How has sequestration affected your agency, and if you were not
affected, if you had more money, do you think you could refine
more rules and create more productivity?
Mr. Shelanski. Thank you very much for that question.
Sequestration is hurting all government agencies. OIRA is not
unique in this respect. And indeed OMB as an organization
itself is just doing a tremendous amount in every aspect on the
budget side, the management side in my regulatory office, it is
doing a lot with greatly pared-down resources. I can't say for
certain, but we may well be at historic staffing lows in OIRA
and indeed OMB-wide.
It would certainly be a benefit to all of the Office of
Management and Budget if we had more resources office-wide with
which to do our work, and I at OIRA would certainly like to
have my share of those additional resources so that we could do
deeper and further work and move more quickly in providing
clarity to the regulatory environment.
Mr. Cohen. Thank you. I yield back the proverbial
nonexistent balance of my time.
Mr. Bachus. Thank you.
Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman. I appreciate you, and
I appreciate also, like my friend from North Carolina, your
wisdom and patience as we learn the ropes, and I thank you for
your service that will span beyond your years in this Chair.
Mr. Bachus. Thank you. This is actually better than a
funeral.
Mr. Collins. Yeah, you actually get to hear it. I have done
plenty of those in my life, too.
Mr. Cohen. Wait until you get to Ms. DelBene, she is going
to say wonderful things about you.
Mr. Collins. I love it, I love it.
Again, thank you for being here. I think there is a lot
more that of course we can get into, and we will look forward
in my office working with you as we go forward. I want to
follow up briefly, I have a few more questions, I want to
follow up briefly from the gentleman from North Carolina's
question concerning the guidelines. One of the things that you
talk about in your opening statement, but also that you had
listed out and had sent a memo to agencies regarding publishing
of the fall agenda. And I think the deadline on that was that
you had asked for it to be due August 29th. Is that correct or
is that wrong?
Mr. Shelanski. Oh, in terms of receiving our reports from
the agencies?
Mr. Collins. Yes.
Mr. Shelanski. Subject to check, that was approximately I
think the deadline we set, yes.
Mr. Collins. So is a guesstimation around the 29th?
Mr. Shelanski. It was very close to that time period.
Mr. Collins. How many have actually got close?
Mr. Shelanski. Almost everybody.
Mr. Collins. Okay.
Mr. Shelanski. We are actually in very good shape. I think
we are waiting for one independent agency to come forward with
their report.
Mr. Collins. I think it follows up on, as what was said, is
where the impediments are and then actually getting real
information, it would be of service. I think there is some
general agreement across both sides of this dais as far as
trying to find what helps business and grow jobs and the
economy and the things that help and doing away with the things
that do not. Do you have any suggestions for legislative
reforms that this Subcommittee can look at that are consistent
with this administration's goal to create regulatory system for
the 21st century?
Mr. Shelanski. You know, I think that the--and, Congressman
Collins, I thank you for that question because I think it is an
interesting question. Having been at OIRA for about 12 weeks I
am still developing an opinion on areas in which we might or
might not benefit from regulatory reform, but my inclination so
far is to say that we have the tools that we need at OIRA to do
good regulatory review. And I have some concerns about some of
the regulatory reforms that I have heard about.
We have got a good set of executive orders that set forward
I think the right analytic principles and the right regulatory
process for reviewing rules. We are working closely with the
agencies to ensure that their analyses meet those requirements.
And, as Chairman Bachus said, it is our responsibility to go
back to the agencies and let them know when we think that they
have not done a good analysis.
I think that process works well, and at this point I think
that leaving the process where it is, with OIRA under the
executive orders to develop in that environment, will be
sufficient to ensure a sound regulatory system going forward.
Mr. Collins. Okay. That is, again, I think something we
could, I want to say, you know, relatively, the new role that
you are in, and getting into it later I think there is some
questions there I have. But you had mentioned earlier about the
cost and the benefits issue, and I am concerned that agencies
don't always have the data that they need to accurately
calculate, in fact, what you just said, the proposals will have
on businesses, local and State economies, whether good or bad.
There has been some proposals that OIRA actually should
issue specific guidelines on how agencies should conduct more
scientific evaluations of existing regulations and also
agencies required to develop plans for future retrospective
evaluation, which you made part of your confirmation. As part
of the agencies' initial regulatory impact analysis, do you
think the agencies currently possess all the data they need to
accurately calculate the impact of a proposed rule and, if so,
do you think they are consistently using the data to make
accurate calculations?
Mr. Shelanski. So this is a very important question. So let
me start by saying that I share your concern about the need for
additional what I might call institutionalization or guidance
on the retrospective review process, and that is something that
we are very seriously and in real time working on at OIRA,
because it is a very important priority, and the more guidance
we can give the agencies, the more closely we can work with
them, I think the more beneficial this process will be, and to
the extent there is underbrush that can be usefully cleared out
in doing that and freeing American businesses from excessive
burdens and from protecting American citizens by improving
regulations by reviewing them through the retrospective review
process.
When it comes to guidance on the cost and benefit analysis,
you know, we at OIRA do have a set of guidances, our biggest
one is Circular A-4, that tells agencies how we want them to do
the cost-benefit analysis, working on issues such as discount
rates they should apply, what kind of data they should use,
what the standards are. It is unquestionably true that there
are rules in which the data are hard to come by for the
agencies, and so there often is a lot of back and forth in
working with the agency to ensure that they are using the best
science, the best data that are available.
We don't work in a world of certainty. Economics, cost-
benefit analysis, a lot of the issues that come up under this
rubric are new, and so we try to ensure that there is enough
data to make a reasoned decision and that they are using the
best data without artificially discounting data that might be
inconvenient, to do a rigorous analysis.
Mr. Collins. Okay. Thank you. My time has expired, but I
will be submitting for the record a question concerning rule
review on positive impact of over $100 million as well, a
significant factor there.
And, Mr. Chairman, I yield back nothing because I have no
time left.
Mr. Bachus. Okay. Thank you, Mr. Collins.
At this time I will recognize the gentlelady from
Washington, Ms. DelBene.
Ms. DelBene. Thank you, Mr. Chair. I first want to say
thank you for all of your service. And as someone who started
my life as well in Alabama, it was a great honor for me to be
able to go to Alabama with you and many others earlier this
year as we did the civil rights trip. And I appreciate even
more now that I have an opportunity to do that while you are
still here serving in Congress.
Mr. Bachus. Thank you.
Ms. DelBene. I am only disappointed that now when you
finally learned how to pronounce my name, though, we won't----
Mr. Bachus. It is not DelBene, it's DelBene?
Ms. DelBene. No, actually the first time you just said it
there you got it right, so maybe we will keep working with you.
Mr. Bachus. Yeah, they keep giving me different--I have
nerve damage in my ears.
Ms. DelBene. And thank you, Mr. Administrator, for being
here today. I appreciate your time. You were talking a little
bit about retrospective reviews, and with changes in technology
and kind of the way our economy works in many ways, we have
reviews and cost-benefit analysis, but some of that also needs
to take place because, you know, something that worked in the
past just may not work anymore given changes.
And so how do you view that and how can we make sure that
we do a good job with helping agencies look at cost-benefit
analysis in a different way when the way businesses work, et
cetera, may be changing over time?
Mr. Shelanski. Thank you very much. That is really a
critical question. And one of the things that we need to make
sure of is that we don't have regulations that might lock
industry into a technology that is on its way out the door or
lock them into very expensive capital expenditures when
something might be able to be done a lot less expensively
shortly down the road. You know, it is like somebody who 3
years ago built a house wiring all kinds of fancy cable through
their house, and then someone showed up with a $10 wireless
modem a month later and said, well, you could have saved
yourself a lot of money there. We want to avoid that kind of
situation.
And I think the agencies, first of all, they are very
attuned to these kinds of issues. They have no interest in
imposing costs that are unwarranted. In the time I have had the
pleasure of serving in this role, I have had the chance to meet
with and talk with top officials at most of our executive
agencies, and this is a very serious concern on their part.
So as part of the cost-benefit analysis, what is being
asked is what technologies are on the horizon, what might there
be, a benefit in waiting, might there be a benefit in adopting
standards that are flexible so that new technologies can come
in.
When it comes to looking at existing rules in the
retrospective review process, it is often the case that new
technology has emerged that might allow something to happen
more inexpensively. The problem is, you know, sweeping that
rule away might actually be more costly for industry because
often they have already absorbed the fixed costs of regulatory
compliance of 10, 20 years ago. And it is one thing to say new
businesses coming in don't have to do things the same way. I
think that is an important thing for us to look for and it is
an important kind of flexibility to have. But to mandate a
change for those businesses that have already made the capital
expenditure and adapted to an old rule just for the sake of
adopting a new technology could actually be very costly. And
despite the fact of the new technology being cheaper, if you
were doing this for the first time, might not be cheaper for
some of these businesses.
So where do we get the information? We work very closely
with agencies, with industry. We hear a lot every time there is
a rulemaking process going on during the notice and comment
period. The agencies hear from industry saying, this will be
very costly for us in ways you don't understand.
Or we can get the same result in a less expensive way. And
when a rule is under review at OIRA, under the process of the
on-the-record publicly disclosed 12866 meetings that we have
with stakeholders on all parts, we also hear from them. And so
we can go back to agencies and say, why didn't you consider
this? What was wrong with this idea? Why isn't this right? And
where it is right, part of our job, under the executive order,
is to make sure that the agencies take into account of that
information. So----
Ms. DelBene. Is there a way to share best practices? If one
agency goes through an issue and kind of updates that as the
way that information gets shared so everyone can benefit from
that?
Mr. Shelanski. I think that the Administrative Procedure
Act and the executive order are really, and the documents, the
circulars and things that are associated with the executive
orders, really set out the procedures that bring to bear a set
of best practices in terms of how information is processed. The
variation across different industrial segments, different areas
in which the departments and agencies regulate is so great that
there is probably no single solution.
And this actually gets back to a question Mr. Collins asked
me about legislation. I worry about locking in a fixed set of
practices, a one-size-fits-all procedure when different
industries, in fact, may need different ways of approaching
these problems.
So I think there is a set of best practices in the sense of
making sure that one is doing the cost benefit analysis, using
all available data, really listening to the stakeholders
through the notice and comment procedure. And in terms of ways
to make sure that we gather information from retrospective
review, that is one of the things that we are trying to reach a
similar level of development on right now.
Ms. DelBene. Thank you. And thank you, Mr. Chair.
I also yield back my nonexistent time.
Mr. Bachus. Thank you, Ms. DelBene. And Mr. Jeffries, I
heard you are a man on the move and you are going to go next?
Is that right?
Mr. Jeffries. Okay, well thank you, Mr. Chairman.
Mr. Bachus. The Ranking Member said you have to leave in a
few minutes.
Mr. Jeffries. Well I appreciate you yielding to me and of
course your tremendous and distinguished service over the many
years that you serve the people of Alabama and this country.
It is my understanding that pursuant to statute, you have
approximately 90 days by which to undertake a review of a
pending regulation, is that correct?
Mr. Shelanski. The executive order sets a timeline, and the
initial review period that it sets is a 90-day period.
Mr. Jeffries. Now is it often the case that you are unable,
for a variety of reasons, the agency, to complete its work
during that 90-day period and then there is a process by which
an extension is granted?
Mr. Shelanski. Yes. There is a process by which extensions
can be granted, and the interpretation that is developed of
that provision is at the request of the agency and/or granted
by the agency. There could be multiple extensions and certainly
a lot of the regulation that we review at OIRA is very
complicated stuff. And so we do have to resort to that. I would
say not most of the time, but there is certainly plenty of
examples out there.
Mr. Jeffries. It is also my understanding that under your
tenure, the backlog that had accumulated has largely
dissipated, is that right?
Mr. Shelanski. Well, I don't want to claim credit for it.
It is something that really began before I got there under the
acting administrator who preceded me and really run by the
excellent staff at OIRA. They really got with the program
before my arrival, and Director Burwell at OMB made it a prior
to of hers before I was in place to ensure the office was
moving in that direction. I have tried since arriving 12 weeks
ago to add some additional energy and push. And so we are down
by more than half in terms of rules and extended review from
where we were. And I would really like to, and have every
intention of pushing that much farther down.
Mr. Jeffries. Now, would it be fair to say that
sequestration complicates your ability to evaluate pending
rules on a timely basis?
Mr. Shelanski. It has been problematic, Mr. Jeffries,
because I have had to have staff on furlough. And every
individual on my staff is incredibly important because each
individual desk officer has a portfolio on which they are
working, and a day on which they are not allowed to look at
their government email or do any work is a day in which that
slips further behind, and on top of which, we have already, I
can't backfill positions when people leave, and so it becomes a
slippery slope. And it is problematic.
And as I have stated in my opening statement, timeliness is
important, clarity is important, but ultimately the most
important thing, and the reason for being of OIRA, is rigorous,
careful analysis of the rules. And we won't compromise on that.
And to be sure, furloughs, sequestration, the inability to hire
and even backfill positions we have lost greatly compromise our
ability to do that rigorous analysis in a timely way.
Mr. Jeffries. If we fail to pass a continuing resolution
over the next few hours, will your agency be required to shut
down?
Mr. Shelanski. Like most other Federal agencies, we will
not be able to continue operation. So in my particular case, my
staff at OIRA will go from approximately 40 to two. And I will
call back people as needed to meet court deadlines, but all of
our rulemaking review will certainly stop during a period of
shutdown.
Mr. Jeffries. So it is also my understanding I think that
the courts could possibly shut down over the next few weeks, so
I am not even clear what deadlines might actually be salient
moving forward, but hopefully, we can avert all of those
complications.
One or two last questions, so it is my understanding that
you review sort of what is deemed significant proposed
regulations and final rules, is that right?
Mr. Shelanski. Yes.
Mr. Jeffries. And how is that significance determination
made as to what is appropriate for your agency to consider?
Mr. Shelanski. Well the primary category of significance is
economic significance. And executive order 12866 which came out
under President Clinton set a target of $100 million a year of
economic turnover, of economic effect as a benchmark for
economic significance. So we do review rules where the annual
effect on the economy will be $100 million or more.
There could be other significant determinations that arise
because of something has to do with a particularly urgent or
important issue. But that is the main category of significance.
Mr. Jeffries. Thank you. And I thank the Chair and the
distinguished Ranking Member.
Mr. Bachus. I thank the gentleman from New York.
Administrator, you went to Haverford which is a Quaker
background?
Mr. Shelanski. Yes, sir. It is a small Quaker college.
Mr. Bachus. And to Cal Berkeley?
Mr. Shelanski. Quite a change yes.
Mr. Bachus. Was that a change?
Mr. Shelanski. It certainly was. There was no question
about that.
Mr. Bachus. Are you from Philadelphia?
Mr. Shelanski. I am a native of Philadelphia. In fact, most
of my extended family is still there. My immediate family, my
wife and child we live here in D.C. and rest of my immediate
family lives in Brooklyn, New York.
Mr. Bachus. Haverford has a stellar reputation producing
very good graduates.
Mr. Shelanski. Thank you, sir.
Mr. Bachus. President Obama wrote an op-ed in The Wall
Street Journal so--not The Wall Street Journal this is
President Obama and The Wall Street Journal, I want to clarify
that for the Ranking Member, but he said that overregulation
stifles innovation and has a chilling effect on growth and
jobs. Do you agree?
Mr. Shelanski. I think the overregulation, that is to say,
regulation that exceeds the benefits that it provides and that
makes it difficult for an industry to grow or plan or function
is going to have a variety of negative effects, exactly what
effects at what time may be hard to tell. But I have long
believed that regulation that serves no purpose, or regulation
that can't be shown to achieve its purpose is better left
undone because of the risks it could run.
Mr. Bachus. And I know you mentioned executive order 12866
four or five times in your testimony. That allows you to do a
return letter to the agency?
Mr. Shelanski. Yes. The return letter is one tool that the
administrator has for a rule that does not meet the standards,
and it is not going to through a process of interaction with
the agency and during a process of review to ever meet the
standards.
Mr. Bachus. I know under the present administration, I
think they only issued one return letter, as opposed to, I know
during the George W. Bush administration there were 27 returns.
Are you going to take a closer look at that tool? Or what
are some other alternatives to that that you will be using?
Mr. Shelanski. Thank you, sir. That is a very good
question. I don't have any predetermined target of how many
return letters I will or won't send, and I wouldn't feel
unfulfilled in my term as administrator if I never sent one. In
fact, I might see that as a success.
But certainly it is one tool and if an appropriate
circumstance arises, I would not hesitate to use the return
letter authority in the executive orders.
There is other authority that can be used, and one is the
authority simply to push agencies to actually make a rule
compliant with the analytic requirements of the executive
orders.
The other tool is that agencies can withdraw rules. And
sometimes if there is simply a very great gulf between, for
example, and this, again, gets to a question I think either Mr.
Holding or Mr. Collins asked me about is the availability of
information and data for the agencies, if they don't know
enough, they may take the time to find out, to do a study, to
wait for more information to develop out there in the world,
and that can be an appropriate time for the agency to say,
okay, we are going to withdraw the rule, and we will repropose
it at such a time that we can get the available data and meet
the requirements.
And that is a tool that actually happens, that is actually
used quite a bit more frequently than the return letter, in
fact, has been used several times in recent weeks.
And I find that to be, there is something good about the
withdrawal in that it is really the agency coming to terms with
what more it needs to do, and at least in my limited experience
of 12 weeks, it is something that can be a more amicable
solution than a return letter.
Mr. Bachus. Thank you. Coming from the Financial Services
Committee, I can't tell you the number of times that financial
institutions have told me that although there is a big
difference in a rule and guidance, that often they are told,
you are not complying with guidance, and that actually can have
as much of an impact. Of course, guidance you don't get to
review guidance. Or do you? What is your role there?
Mr. Shelanski. We actually do review guidance. This is
actually something that the agencies are not always happy with
us about. But in my view, the label that is attached to
something that is produced by an agency is a lot less important
than the effect that it actually has. So we try to work with
agencies to have them submit things that they call notices or
guidance because very often those do have, in fact, regulatory
effect, and we have, on numerous occasions at OIRA, gone back
to them with effectively asking for cost benefit analysis of
notices and guidance. We have sometimes asked--in fact, this
just happened with EPA where they had a guidance, a very
helpful guidance, that was really responsive to two Supreme
Court decisions to articulate the jurisdiction of the Clean
Water Act. And they withdrew that guidance and reproposed it as
a rule. And that will emerge once it is through OIRA review as
a proposed rule for the public to comment on.
The reason is that we felt notice and comment was very
important although they had done notice and comment on their
guidance, but some things should be labeled what they really
are which is regulation, not guidance. But if it comes in and
it is called a guidance and it has regulatory effect, we will
review it.
Mr. Bachus. I very much appreciate that answer. And I think
the Financial Services Chairman and Committee would also, in a
bipartisan way, appreciate that.
I am not going to go into question on the so-called social
cost of carbon, but the administration did appear to disregard
two of OMB's guidelines on cost benefit in issuing them, but I
may want to write a letter on it and maybe be joined by some of
the other Members. But I don't think at this time I will go
into that.
But let me just close by saying, make a case to us that
your all your employees are essential in this continuing
resolution. Sequestration is creating problems and as oversight
committee, I think we have an obligation--and I have done that
with the SEC to urge the appropriators to, they have made
tremendous new obligations and task and have not provided the
funding.
So I think it is a proper role for us to make that case for
you. And I have really not heard too many Members on either
side of the aisle, the OMB and its different segments and
departments I think is one of our most valuable departments.
And so we would love to at least give us the opportunity to
look at that.
Mr. Shelanski. I greatly appreciate that sir. And I would
just emphasize that OIRA is in no different position than any
other part of OMB. Every one of those offices is working flat
out performing vital functions.
Mr. Bachus. And I have really, I have not heard, I have
heard almost no criticism of OMB. I will probably be criticized
for saying that, but it returns its value many times over.
Mr. Shelanski. Thank you.
Mr. Bachus. With that, we will excuse the administrator and
thank you for your testimony.
Mr. Shelanski. Thank you, sir.
Mr. Bachus. And we will call our second panel.
We are going to delay the start for just a minute.
I think we might proceed. I don't know what that bell is.
Mr. Cohen. How many years do you have to be here until you
know what the bells mean?
Mr. Bachus. I think we are going to hit the badminton thing
back over the fence.
Maybe we are getting it from the other.
Professor Sally Katzen has enjoyed a distinguished career
in legal practice, government service and academia, the first
female partner at the law firm of Wilmer, Cutler and Pickering.
Wow.
Ms. Katzen also has served as section chair of the American
Bar Association's administrative law and regulatory practice
groups. When we get past the sequestration, we may ask you if
you want to come back up here and work. She served for 8 years
in the Clinton administration including 5 years as
administrator for the Office of Information Regulatory Affairs
in OMB. She has a bachelor's degree from Smith College and a JD
from the University of Michigan Law School.
She has taught at the George Washington University,
University of Michigan, George Mason University--George Mason
University--the University of Pennsylvania and Georgetown
University Law School and currently is a visiting professor at
NYU School of Law. Is she the Democratic witness?
Mr. Cohen. I thought she was. The George Mason thing got me
totally confused.
Mr. Bachus. Did you see that in her resume when you asked
her to testify?
Mr. Cohen. At least she didn't have Liberty University in
there.
Mr. Bachus. All right. Welcome, Ms. Katzen.
And Boyden Gray, former partner of Wilmer Hale served as
White House counsel for former President George H.W. Bush,
subsequently the U.S. ambassador to the European Union. He was
also appointed to the U.S. special envoy for European Affairs
and for Eurasian energy.
In 1993, he received the Presidential citizens medal from
President Clinton. He is currently on the board of directors of
the Atlanta Council and the European Institute. Boyden Gray is
the founding partner of Boyden Gray and Associates, a law and
regulatory strategy firm in Washington, D.C. following many
years of service to his Nation in both domestic and diplomatic
posts.
As White House counsel to President George H.W. Bush, he
assisted the President's enactment of the Clean Air Act
amendments of 1990, development of a cap and trade system for
acid rain emissions, and enactment of the Energy Policy Act of
1992 which aimed to decrease American independence on foreign
oil, protect our environment and promote economic growth. He
previously had served as counsel to President Ronald Reagan's
task force on regulatory relief and as legal counsel to vice
president Bush.
Later under President Bush, he served as U.S. Ambassador to
the European Union special envoy for Eurasia and energy,
diplomacy and a special envoy for European Union affairs.
In addition to his public service and private legal work,
he also serves on a variety of boards dedicated to public
health, regulatory reform, constitutional law and a variety of
other civic and charitable causes.
We welcome you, Mr. Gray.
And Dr. John F. Morrall, III, is an affiliated senior
scholar with the Mercatus Center of George Mason University.
There you go.
And independent contractor for IMAP data and Bloomberg
government. He specializes in regulatory impact analysis reform
and government, benefit cost and cost effective analysis,
health, labor, housing, and homeland security policy, and risk
assessment.
In the last 5 years he has also performed work for USAID
the School of Public Environmental Affairs of Indiana
University, the Pew Charitable Trust, the United States Chamber
of Commerce, the Institute of Brazilian Issues at George
Washington University, and the OECD in South Africa and the
Institute for applied economic research in Brazil. What is the
OECD in South Africa?
Mr. Morrall. It is the Organization of Economic Cooperation
and Development formed after World War II.
Mr. Bachus. Thank you. And Institute for applied economic
research in Brazil. I don't know if I complete that.
But from 1989 to 2008, Dr. Morrall was branch chief for the
Office of Information Regulatory Affairs.
So you were at OIRA and acting deputy administrator the
highest position at OIRA from 2006 to 2007.
Dr. Morrall has authored several books and articles and
graduated magna cum laude from Tufts University and received
his Ph.D. from the University of North Carolina at Chapel Hill.
And Tufts is also in Philadelphia, right? Is it in
Philadelphia?
Mr. Morrall. No. It is outside Boston.
Mr. Bachus. Well, two fine cities.
Ms. Riley, I think the Chairman introduced you. And he read
the entire statement. But I would like to acknowledge your work
with NFIB which the Chairman mentioned. And I think you saw
firsthand some of the effects of regulation on job creation and
deployment of capital or non-deployment of capital or use of
capital in maybe not as, sometimes not as productive a way.
We now proceed under the 5-minute rule with questions and
we again will start.
Barney Frank used to do this all the time. He didn't give
the panel the time to do the opening statements. He would go
right to questions and now I have done it.
I guess it was time for me not to run for reelection.
At this time, I apologize, our panelists will be recognized
for their opening statements which we won't take, we won't
adhere strictly to the 5-minute rule. We want to hear what you
have to say.
Mr. Bachus. Ambassador Gray.
TESTIMONY OF THE HONORABLE C. BOYDEN GRAY,
BOYDEN GRAY & ASSOCIATES, PLLC
Mr. Gray. Mr. Chairman, thank you very much for the
opportunity to appear. I want to make one basic point which is
that the OIRA review process ought to include independent
agencies as well as executive branch agencies. That is my main
point.
But I do want to make a point at the outset that I am
honored to be at the same table with Sally Katzen and the point
is the bipartisan nature of this whole endeavor has been
apparent in the very, very beginning. It is one of the few
places in Washington that still is bipartisan. I hope it stays
that way. She was a law partner, tennis partner, is now a
teaching colleague. And we get along pretty well together, and
I also want to just note a little piece of trivia, that your
first witness, his predecessor was at the Office of Legal
Counsel in the Department of Justice in 1981 when the first
executive order was drafted. And he was a high powered intern
just off the Supreme Court clerkship, and he is the one who
approved, if not, in fact, drafted the cost benefit language
that survived her rewrite of that order 12866 which Ms. Katzen
wrote, preserving the work of her, one of her successors, Cass
Sunstein in the Office of Information and Regulatory Affairs.
So there is a very tangled web of Republicans and Democrats who
try to keep this a common endeavor.
The point that I have made in my prepared testimony and
just want to reiterate is the importance of covering
independent agencies. Now, we did not do so in 1981, not for
strictly legal reasons, but because we thought the political
difficulties were greater than the benefits, the political
costs were greater than the political benefits. That decision
was carried forward, as I understand it, by 12866 and it is
still true. But I don't believe now anymore that the political
costs are greater. I think the political benefits are far
greater to cover them. They are much more powerful than they
used to be. The FCC is obviously much more powerful than it
used to be, and you perhaps as much as anybody on the
Subcommittee and the Committee are aware now how powerful most
of the financial agencies are, most of which are independent:
the SEC, FCC, the CFPB, a newcomer, and, of course, the Fed
itself.
I don't believe that my neighbor to my immediate left now
objects to this general notion that OIRA should be reviewing
independent agency regulations. I think I have uncovered
statements where she has now agreed with that, but she can
speak for herself, but I do think this is something which I
think has bipartisan support, and I do think that it is
absolutely critical to making the system work properly.
I can come up with many examples, but one of my favorites
was the issue of the CFTC issuing, or trying to issue under
Dodd-Frank, rules on derivatives and we had thought that
Congress, you, had exempted and used derivatives, that is
common hedging, that has been going on for decades by utilities
and energy firms. But for a while, it looked as though, well,
that wasn't going to get exempted and that is a case where it
didn't make any sense to divorce what the CFTC was doing with
what EPA was doing which is the primary and the Federal
Regulatory Energy Commission, FERC, the primary regulators of
utilities, it didn't make any sense to divorce those. It
doesn't make any sense to divorce financial services from the
rest of the economy.
And so I would make the plea that this be done, it can be
done by executive order, the President can do it now, the
President has asked, President Obama has asked independent
agencies to submit their rules for review, but it is not
mandatory. It could be, should be, and I think we would all be
better off if it were.
I can remember trying to go see Cass Sunstein myself on
behalf of some clients engaged in the derivative issue, and he
wouldn't meet because it was--the CFTC was an independent
agency. So I do hope that it is fixed. It is better done by
legislation, because that represents more democratic input, but
it could be done, it could be done by executive order.
In my prepared statement, I do have a quibble about
something which has repeatedly come up so far, the social cost
of carbon because I do think it is, you know, an example of why
things should get full notice and comment, Administrative
Procedure Act review with its review in the OMB in the proper
course of its review obligations. The numbers don't make any
sense.
We have two markets that are extant, the European market,
market in California and the price of carbon in those two
markets is a fraction of what the government says is the social
cost of carbon. So I could go into more detail in answer the
questions but I did want to make that point.
OMB has also approved, I think, erroneously, EPA's
assessment of the benefits of certain of its coal regulations
based on benefits of reducing PM2.5. Most of the
reductions occur in areas that are well under the
PM2.5 standard, even the tightened standards, one
wonders whether you should really cap benefits in areas that
are in complete attainment for the standard.
I will stop there, but again, just repeat I hope that
independent agencies get the review from OMB that they deserve.
Mr. Bachus. Thank you very much.
[The prepared statement of Mr. Gray follows:]
__________
Mr. Bachus. And I think we welcome statements of
bipartisanship, because again, that is really the only way we
are going to accomplish anything of any importance is by
reaching across the aisle. And we try to do that on this
Committee, and if anything can unite us, I think this is one of
the issues that should. And Professor Katzen, you are
recognized for your opening statement.
TESTIMONY OF SALLY KATZEN, VISITING PROFESSOR AT NYU SCHOOL OF
LAW; SENIOR ADVISOR, PODESTA GROUP
Ms. Katzen. Thank you, Mr. Chairman, Ranking Member,
Members of the Subcommittee, I appreciate your inviting me to
testify today on the point that Ambassador Gray was just
speaking to. It is not free of controversy, but there is broad
support across the political spectrum for extending the
requirements for economic analysis and OIRA review to the
Independent Regulatory Commissions and I have been supportive
of S. 1173 that accomplishes this in the Senate.
I would like to use my allotted 5 minutes to make three
points: First, agency regulations, like legislation enacted by
Congress, is legitimate activity of the government, and
experience has shown that they are affirmatively good.
Complaints about their cost, their inconvenience, their
intrusiveness gets traction, at least with some constituents,
and in some quarters. I was cheered by the Chairman's and the
Ranking Member's statement about the benefits of regulations
because regrettably, we hear less about that than about the
costs.
Too often, the benefits are taken for granted and I think
in a hearing such as this, it bears emphasis that because of
regulations the air we breathe, the water we drink are cleaner
than they otherwise would be, that our homes, our workplaces,
our cars and planes, our children's toys, our parents' medical
devices are safer. It is because of regs that we are able to
enjoy our civil liberties, our privacy, the freedom from
discrimination and regs provide us with information to make
intelligible choices and promote competition and fair practices
in our markets so that they are open and acceptable and
function effectively.
Regulations are not intrinsically evil to be restrained or
suppressed because they bring to life the laws that Congress
has enacted and the values that we all share.
It is important, I believe, not to forget this attribute of
regulations when we speak blithely about regulatory reform
which, in some instances, means additional hurdles for the
agencies, or obstacles to overcome in their rulemaking effort,
and that sensitivity should be in the forefront.
Second, the regulatory process includes many players
starting with the agencies to whom Congress has delegated its
authority, and including those affected by the regulations,
whether they be the regulated entities or the regulatory
beneficiaries. And there is a critical role for OIRA to provide
a dispassionate objective critique of proposals to ensure to
the extent permitted by law that the work of the agencies takes
into account the perspective of other agencies and is
consistent with the preferences and priorities of the
President.
Some see OIRA a gatekeeper. Others call it a coordinator or
facilitator, but the importance of OIRA is beyond dispute.
Which brings me my third point, the ability of OIRA to carry
out its function effectively.
OIRA has new leadership, and this oversight hearing has
given you an opportunity to hear directly from Mr. Shelanski
and to judge his competence and capabilities.
You can draw your own conclusions. I believe his background
and his performance for the last 12 weeks has proved that he
has the qualifications, the skills and the temperament to lead
OIRA. He has, however, an exceedingly hard task, because
regrettably we have come to the point that OIRA does not have
the resources, namely manpower, to continue to perform its
function effectively.
When President Reagan signed executive order 12291 and gave
OIRA the task of coordinating centralized regulatory review--
and there were a lot of rulemakings at that time just as there
are a lot now--there were 90 staff members, 90 FTEs. There are
now fewer than half that number. It is closer to 40. And during
the intervening years, Congress has given OIRA a series of
responsibilities, be it filing reports with Congress or
additional specific responsibilities under a multitude of
statutes.
On top of that, we can talk about morale. I thought Mr.
Shelanski was quite restrained, but the OIRA staff is extremely
dedicated and diligent. But the sequester hurt. I think that
each member of the staff had 8 days of furlough this summer. In
addition, we are talking about OIRA's capacity tonight when
tomorrow morning, it is possible that the staff will be told to
pack it up, go home, and don't do their work. They won't know
how long, they won't know whether they will be ever be paid for
the downtime that they have suffered. I am not sure there is a
whole lot more to say if you are talking about oversight of the
OIRA function at this point, but I thank you for including me
on this panel and I look forward to any questions you may have.
Mr. Bachus. I appreciate that passionate statement and it
was I can tell you they will be given every consideration.
[The prepared statement of Ms. Katzen follows:]
__________
Mr. Bachus. And that is a striking number that the staff is
half of what it used to be, and I notice that the administrator
said that each of those analysts is a specialist. They have
different areas of expertise and they are not interchangeable,
and so there definitely, the way we are approaching our budget
and our funding leaves a lot to be desired. Mr. Morrall, or
Doctor, I am sorry.
TESTIMONY OF JOHN F. MORRALL, III, AFFILIATED SENIOR SCHOLAR,
MERCATUS CENTER, GEORGE MASON UNIVERSITY
Mr. Morrall. John.
Chairman Bachus, Ranking Member Cohen and Members of the
Committee thank you for this honor to testify on the role of
OIRA. I have spent my working life trying to improve regulatory
policy, much of it at OIRA as a civil servant from its
beginning in 1981 until.
Mr. Bachus. Doctor, if you will turn on your mic.
Mr. Morrall. I have spent my working life trying to improve
regulatory policy, much of it as OIRA as a civil servant from
its beginning in 1981 to my retirement exactly 5 years ago
today. During that time, we reviewed almost 22,000 final rules
out of 130,000 published by all Federal agencies, including the
independent agencies. I am currently an affiliated scholar at
Mercatus, and the regulatory analyst for Bloomberg government.
My day jobs entail reading each day's Federal Register, so
please forgive me if my remarks make your eyes glaze over, or I
don't always use plain language. Blame years of reading
hundreds of thousands of pages in the Federal Register.
A well-known Washington saying is, where you stand is where
you sit. I sat in thousands of meetings discussing specific
regulations as both regulator and as a regulator of regulators
with agency officials supporting regulatory proposals, outside
interests trying to modify them to their advantage, and White
House officials, including Boyden and Sally, trying to do the
right thing.
So I have some thoughts about how to improve the regulatory
process and its results. I wish to make two broad points,
present some research findings that I have been involved with
and offer some suggestions for the new administrator.
First, OIRA should focus on its original mission to
mitigate unintended consequences of agency actions. Even a well
functioning administrative process is not likely to produce
smarter regulations absent a strong, internal advocate for
economic efficiency and an independent ability to verify the
evidence offered.
Incentives and pressures applied to agencies create an ever
present risk, decision making influenced more by politics and
preferences than objective analysis focused on problem solving
for which OIRA and OMB have traditionally been advocates. I
told my staff to represent the people not at the table who
don't likely don't even know there is a table.
Second, an effective OIRA needs more of the right staff
members, individuals trained in economics, benefit cost
analysis and the scientific method. And they need more time and
opportunity to evaluate major rulemakings that heavily impact
economic growth and jobs.
At many of the meetings I attended to discuss regulatory
impact analysis, politics not economics dominated. Program
officials and their lawyers viewed OIRAs as a procedural hurdle
to overcome and a possible danger to their regulations either
in their public rollouts or judicial review. The economists
from the agencies often sat quietly and later in follow-up
could not talk to OIRA without going through their general
counsel's office.
The vast literature on OIRA's role and effectiveness is in
improving regulations with some exceptions, agrees that
safeguards against capture, tunnel vision and ex post
rationalization are keys to better regulation. I saw OIRA's
main role evolve from watchdog whose job was to ensure that
agencies use economic logic and quality benefit cost analysis
when regulating to a ``conveyor and convener and information
aggregator assuring that agencies properly follow the
Administrative Procedure Act.
The new administrator is uniquely qualified with both
formal legal and economic training to pursue both roles but
rulemaking needs more careful analysis of consequences and
fewer advocacies for special interests, which are always well
represented. With the goal of approving regulation in mind I
recommend the following.
First, the OIRA administrator needs to insulate the
economic analysis and recommendation from politics as much as
legally feasible. It is difficult for agencies to achieve
objectivity when subject to so many subjective forces. OIRA can
serve as a mechanism for regaining focus on the potential
effects of the rulemaking which will impact everyone, rather
than being focused on who does or does not support the rule.
Number 2 make it a priority to expand OIRA's resources in
the areas where it matters the most, specialists in benefit
cost analysis and risk assessment, errors in these two areas
can be major barriers to successful problem solving which is
the intent and purpose of rulemaking.
And last, make the time devoted to rulemaking as productive
as it can be. Consider making procedural change to have
agencies submit an OIRA contain a description of the problem,
options for addressing it and cost benefit analyses of each
option to OIRA for quality control and approval before the
agency actually drafts its proposed rule. Thank you very much.
Mr. Bachus. Thank you, Doctor.
[The prepared statement of Mr. Morrall follows:]
__________
Mr. Bachus. And Ms. Riley.
TESTIMONY OF NICOLE RILEY, VIRGINIA STATE DIRECTOR, NATIONAL
FEDERATION OF INDEPENDENT BUSINESS
Ms. Riley. Thank you, Mr. Chairman and Members of the
Subcommittee. It is my pleasure to be here on behalf of the
National Federation of Independent Business and our 350,000
members across the country, 5,500 of those that are in the
State of--Commonwealth of Virginia. So I know they very much
appreciate the Committee's interests on how Federal regulations
impact them as small business owners and the amount of time and
resources it takes for them to comply. So thank you very much
for this opportunity.
In my written testimony, you will find more details
regarding how members feel about today's regulatory climate,
but I did want to first recognize that our small business
owners are very much aware and recognize the need for
regulation, understanding that there is public safety for
consumers, for clients and for the general public. But what
they really do worry about is they want to make sure that those
regulations are sensible. And what we mean by that is that they
accurately weigh all the costs and benefits, including flexible
compliance options. For many small business owners one size
does not fit all and so many of them, flexibility would
certainly be helpful.
But what I really want to spend most of my time this
afternoon speaking of are actually to give you three good
examples of members' stories that I have heard while I have
been out on the road visiting with our members across the
Commonwealth, because I think a lot of times it helps to really
get a real picture, a flavor for what small business owners are
actually experiencing.
The first example I want to talk about is members that we
have in Roanoke City, Chris and Betsy Head, they are franchisee
owners of Home Instead Senior Care, which means they provide
companionship-type services for their clients, for people who
are elderly or disabled. And this allows these people to stay
in their homes more than having to put them in facilities to be
cared for.
Specifically, the Department of Labor just 2 weeks ago
finalized a rule that was known as the companionship exemption
for minimum wage and overtime for home care workers employed by
third party agencies, many of which are small businesses,
including the Heads. And specifically this overtime portion is
where, I think, a lot of folks including the Heads are really
going to feel an impact on their business, but there is also
going to be impact on their clients and there is going to be
impact on their employees.
The Heads often provide what they call sleep over service
for their clients. And this is where a worker comes in at night
for a 10 to 12-hour shift, ensures the client eats dinner and
gets them ready for bed, and then while the clients is asleep,
the worker sleeps as well on site in case of an emergency.
The new Department of Labor rule will require employees be
paid time and a half for every hour worked over 40 in a given
week. Under the exemption, employees received their straight
hourly wage for hours over 40. So this will significantly
increase the cost for these employees that provide this type of
sleep-over service. Many clients simply won't be able to afford
this change. The Heads anticipate that they will see a 20 to 25
percent number of clients that will leave and try to go
elsewhere. And they might end up trying to find, what they are
worried about is they potentially go to folks who are not
licensed, they would do more, go to someone who might work in
that gray area. But to stay competitive, the Heads will have to
limit their employees to 40 hours to keep costs down so that
that client could afford them.
So but we are seeing where both the client is going to be
seeing less care or not be able to afford the care that they
need, and you are also going to see employees who typically
would have had more hours in pay are now going to be limited to
40 hours.
Another example comes from Mr. Bill Neff from Harrisonburg,
Virginia. He is a commercial real estate developer has been in
business about 50 years. And he ran into some trouble not too
long ago with a church actually that was trying to construct on
a new piece of property that they had. He put together a
projected cost for that project, and it included what would
need to deal with stormwater runoff. And a lot of this comes
from the EPA particularly where Harrisonburg is located it is
in the Chesapeake Bay watershed, so there are a lot of
stringent rules regarding stormwater runoff.
He typically, in this project, originally proposed that
they put in a retention pond with rock to be able to filter the
runoff during the storm. He submitted that project for permits.
It was rejected, and he ended up having to put in a filtration
system that would now cost $60,000. The original proposal was
only $10,000.
So this was a significant burden on that church. And now
any new commercial property project that he takes on, he will
have to now consider those costs into the project.
A third example is Rob Frazier with Frazier Quarry. They
are a limestone company in Rockingham County, and they recently
have had to deal with a rule that came through a couple years
ago that requires a mining operation to, in the event of an
emergency, make the a call to the agency to report that
emergency within 15 minutes of the emergency occurring.
They had a situation where this did occur here. They did
not want to face the 5- to $60,000 fine that would be incurred
upon them, even though within 15 minutes of that emergency they
are really more concerned about obviously making sure emergency
personnel are onsite, their employees are taken care of, but
here they are having to make this call to this agency within 15
minutes.
Once they did make the call, they did make the call within
15 minutes, they were given a phone service. That individual on
the call did not know why they were calling, did not understand
why they were making this call. And so then they had to spend
additional time trying to explain why they were trying to call
the agency to report this emergency.
So a lot of times for small business owners, it is also the
frustration of just the compliance piece that they face on a
daily basis. So hopefully these three situations give a little
bit of an illustration of what they face on a day-to-day basis.
And I certainly appreciate the time and I will take any
questions. Thank you.
Mr. Bachus. Thank you.
[The prepared statement of Ms. Riley follows:]
__________
Mr. Bachus. Mr. Holding.
Mr. Holding. Thank you, Mr. Chairman. The introduction of
Mr. Gray left out a very important element that he is a
distinguished North Carolinian, and hails from a family that
has been committed to public service within North Carolina and
throughout the United States for generations, and it is an
honor and a pleasure for me to be here sitting across from you,
so thank you.
Mr. Gray, in your written testimony, you note that
centralized review of administrator agencies is most effective
when the Office of the Vice President takes an active role in
its supervision. If you could share with us a little bit about
your experience in seeing this process work when the Vice
President is taking an active role, and whether or not you know
if Vice President Biden's office is has taken on such a role
and should if it has not.
Mr. Gray. Well, of course, my experience with this comes
through my service as counsel to Vice President Bush who was
delegated the authority to convene all of this effort beginning
in 1981. But Vice President Quayle continued in that capacity
when Vice President Bush became President, and Vice President
Gore did the same thing when President Clinton was elected. So
there is a long history of this. And why is it important?
Because I think OMB, even more now probably than ever, because
of the cuts in the staff, OMB needs a champion in the West
Wing, OMB is part of the larger executive office of the
President and the head of the director of OMB is a member of
the cabinet and attends senior staff, et cetera. But it is
always great to have a champion in the White House. It
certainly, I think, was important to John, he can speak for
himself and his colleagues and I would be willing to say that
Sally would second the motion when she was head of OIRA.
Mr. Holding. Thank you. You also had pointed out regarding
EPA regulations and the specifically co-regulations coming out
of the EPA, and I just wanted to give you a minute to elaborate
on your thoughts there and the problems that you see.
Mr. Gray. Well the social cost of carbon leaving aside the
procedural defects, which I think are fairly clear, there is
just a mixup on the numbers and the number of 36, which is now
the number used, $36 a ton is a worldwide benefit. But I don't
think that can be attributed to reductions made just in the
United States. The costs all occurred here but the benefits are
worldwide. I think the benefits should be attributed to a rule
containing carbon in the United States should be what the
benefits are in the United States, that is what the OMB
circular actually provides for and I think that is what should
happen.
Now what is the benefit in the United States? It couldn't
be any greater than U.S. share of GDP, world GDP which is under
25 percent, it is probably a lot less because we have
controlled carbon better than many countries, contrary to the
sort of public image, and probably closer to 10 or 15, maybe as
low as 7.
And if you look at the delta, the difference between say 15
and 36, it is more than $100 billion a year and the potential
regulatory costs, you could say it is the equivalent of a $1
trillion tax increase over a 10-year period. That is not
peanuts. And so I think it needs to be sorted out.
As I said, the price that Europeans pay is about $7.50 give
or take, and the price that is paid in California which is a
pretty good proxy for the U.S. is 20 percent of the U.S.
economy is less than 12. And so I think that needs to get
sorted out.
On the question of PM2.5, which is mainly to the
present time a coal issue, the benefits for some of the rules
have been astronomical, the MACT rule, the air toxics rule, the
actual air toxic benefit from the air toxic reduction is like
about 5/10 of, half of 1 percent of the total benefits. The
total benefits are in 99 percent derived from calculations of
what it means to reduce PM2.5 but those reductions,
as I said a few minutes ago, all occur most of them, I mean, 90
percent or more in attainment areas that is parts of the
country that are well in attainment of the standard. And I
don't think you can imply a straight line benefit down to zero
for your PM2.5 reduction. I am a lawyer I am not a
scientist. John can talk to this if you want to ask him a
question with much greater sophistication than I can.
But why do we have attainment? Why do we have national air
quality standards if you are going to continue to regulate
below the level of the standard and claim the same benefit?
Mr. Holding. Thank you. Ms. Riley, quickly I just wanted to
thank you very much for being here. The NFIB is a great
resources in my district, and has brought to my attention many
examples analogous to the ones that you have brought here
before the Committee and the impact unfair and unreasonable
burdensome regulations are bringing upon small business.
Chairman Goodlatte's district and my district share a lot of
similarities.
And as I listened to the examples that you brought forth,
they are very similar to what the folks in my district are
facing. So thank you for being here. Mr. Chairman, I yield
back.
Mr. Bachus. Thank you, Mr. Holding, and the gentleman from
Memphis.
Mr. Cohen. Thank you. Thank you. It is I think appropriate
that this may be the last substantive Committee that meets
before the government closes down. It is not the sexiest
subject, it is not the most watched and provocative subject, so
a good way to wind down into halting government.
The big issue, I guess, and the big picture, Ambassador,
is--let me ask you, in 1985 were you working with the
administration?
Mr. Gray. Yes, sir.
Mr. Cohen. Do you recall when there was an attempt to not
raise the debt ceiling and President Reagan spoke about that?
Mr. Gray. I am afraid to say I do not recall that specific
incident. There were several, we were talking about this in the
ante room, several shutdowns during the Reagan-Bush years, and
quite frankly, I can't remember the details of any of them
except that for the very first one I was deemed nonessential,
and it was one of the most humiliating things in my life.
Mr. Cohen. That didn't last long, though, did it?
Mr. Gray. No, it was only about 2 or 3 days but I didn't
dare appear in public during daylight hours for fear someone
would look at me and say look, he is not essential. It was
quite traumatic. It is traumatic for anybody. When I was on the
council, I had to oversee a couple of shutdowns, and we worked
with OMB over who was supposed to be nonessential and
essential. And I am telling you what a very pain, it is a very,
very painful exercise. But I do not remember----
Mr. Cohen. President Reagan, this was about getting beyond
the debt limit, what do you think would happen you got so much
experience I read your vitae, what would happen to the world's
economy if we on October 17th did not raise the debt ceiling?
Mr. Gray. I think that the consequences would be very
severe, and I can not really get my arms around my head around
what would happen if we just ignored it.
Mr. Cohen. And let me ask you something. When you play
tennis with Professor Katzen, does she go to her left and you
go to your right?
Mr. Gray. We are very bipartisan when we play, but I
probably play more opposite her than with her, and don't ask me
or her who usually wins. It is always sort of mixed doubles, so
it is kind of hard to trace the actual causality in these
matches.
Mr. Cohen. And then tell me this, none of this is relevant
to anything, but except to the big picture. You clerked for
Chief Justice Warren. Can you tell us something about Chief
Justice Warren? He was one of my heroes, and I was impressed to
see that you had time with him.
Mr. Gray. Gosh. Well, it was one of the great experiences
of a lifetime, and maybe the best experience, and he was
wonderful to work for. All of his ex-clerks loved him. He
never, I think, got over, always complained about his service
on the Warren Commission. I think he thought that was the
biggest mistake he ever made, and I can still remember his wife
saying, you know, it is a good thing that Earl was not a woman
because he can never say no. But he was a wonderful man to work
for, and what I most admired about him were two things: He had
an uncanny sense for what was really going on in litigation,
and at the Supreme Court, he really knew what was going on, and
he really understood the legal issues, and writing dissents for
him was very difficult because you couldn't quite capture his
own passion, and he wrote extremely well legally, and I was
always surprised that here is somebody who had been a
politician who could handle legal analysis so well.
The other thing was is that he was used to being in the
public eye. I don't want to belabor this point, used to being
in the public eye all of his life, and when he came to the
Court, he pulled down the curtain and never gave another press
conference, never appeared in public again and shut it off cold
turkey, and I think that is an extraordinary gift to the Nation
when he did that.
Mr. Cohen. I have got something I want to share with you. I
think I have got it here if I can read it. Have you been out
to--do you know these words, ``Where there is injustice, we
should correct it; where there is poverty, we should eliminate
it; where there is corruption, we should stamp it out; where
there is violence, we should punish it; where there is neglect,
we should provide care; where there is war, we should restore
peace; and wherever corrections are achieved, we should aim
them permanently to our storehouse of treasures''?
Mr. Gray. I should know who said this. I wish I did know.
Was that Chief Justice Warren?
Mr. Cohen. That is a verbiage from 1970 that is placed on
his stone. Of course he passed, I guess he passed later, but
that is what is on his tombstone.
Mr. Gray. On the tombstone.
Mr. Cohen. I went out across the river in Arlington and
photographed that because I thought it was just so beautiful,
and he was a great man, and that is one of his quotes, but
happy for your experience, and that was good.
Mr. Gray. Thank you, sir.
Mr. Cohen. Professor Katzen, how did you end up at George
Mason, and what did you teach? Balancing your resume?
Ms. Katzen. No, I always was under the impression that
administrative law was a bipartisan effort, that there are
principles that one can subscribe to that do not go along
ideological lines. The Chair was quite kind to mention that I
had been chair of the administrative law section. I followed
Justice Scalia, and then Chairman Verkuil from ACUS followed
me.
There is no rhyme nor reason or predetermination for a
position, and if I was teaching administrative law, it seemed
to me that I could teach anywhere. I found the experience very
interesting because of the faculty lunches every day, I learned
new things.
Mr. Cohen. Were you forced to eat crow ever?
Ms. Katzen. No. No, and I didn't require them to, either.
Mr. Cohen. Good for you. Good for you. I yield back the
balance of my time, and thank each of the witnesses.
Mr. Bachus. I taught law school at the university just on a
very brief basis when the professor was disabled, and it was a
very challenging experience because you are dealing with very
bright students, and you better get the message right, you
better; what you say better be correct or they will correct
you, and I don't think there is a tougher profession, more
demanding than teaching at any level, but at the college level,
but it can be delightful because you can--you also learn as
much as you teach.
This has been an excellent panel. I am very encouraged by
the fact that there is some bipartisan agreement on some
things. The bill in the Senate that Senator Warren and--Warner
and others have, so I think it gives us a lot of direction, and
I am not going to--I think we have had a good hearing. I am not
going to mess it up, particularly after I announced today I
wouldn't be running for reelection, and the government appears
to be shutting down, so--so I have probably said enough. But it
is a sad day for our country if, in fact, the government does
shut down, and so thank you very much for your attendance and
your testimony, and this is a very bright panel and a lot of
good information to digest.
This concludes today's hearing, and thank you to all of our
witnesses, again, for attending, and without objection all
Members will have 5 legislative days to submit additional
written questions for the witnesses or additional material for
the record. This hearing is adjourned.
[Whereupon, at 6:09 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Material submitted by the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, and Ranking Member, Committee
on the Judiciary
Response to Questions for the Record from the Honorable Howard A.
Shelanski, Administrator of the Office of Information and Regulatory
Affairs
Response to Questions for the Record from the Honorable C. Boyden Gray,
Boyden Gray & Associates, PLLC
Response to Questions for the Record from Sally Katzen, Visiting
Professor at NYU School of Law; Senior Advisor, Podesta Group
Response to Questions for the Record from John F. Morrall, III,
Affiliated Senior Scholar, Mercatus Center, George Mason University
Response to Questions for the Record from Nicole Riley, Virginia State
Director, National Federation of Independent Business