[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




 
                       OFFICE OF INFORMATION AND 
                           REGULATORY AFFAIRS

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                           REGULATORY REFORM,
                      COMMERCIAL AND ANTITRUST LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 15, 2015

                               __________

                           Serial No. 114-39

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
         
         
         
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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
LAMAR S. SMITH, Texas                ZOE LOFGREN, California
STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia                SCOTT PETERS, California
RON DeSANTIS, Florida
MIMI WALTERS, California
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
DAVE TROTT, Michigan
MIKE BISHOP, Michigan


           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                   TOM MARINO, Pennsylvania, Chairman

                 BLAKE FARENTHOLD, Texas, Vice-Chairman

DARRELL E. ISSA, California          HENRY C. ``HANK'' JOHNSON, Jr.,
DOUG COLLINS, Georgia                  Georgia
MIMI WALTERS, California             SUZAN DelBENE, Washington
JOHN RATCLIFFE, Texas                HAKEEM JEFFRIES, New York
DAVE TROTT, Michigan                 DAVID N. CICILLINE, Rhode Island
MIKE BISHOP, Michigan                SCOTT PETERS, California

                      Daniel Flores, Chief Counsel
                      
                      
                      
                      
                      
                      
                      
                      
                            C O N T E N T S

                              ----------                              

                             JULY 15, 2015

                                                                   Page

                           OPENING STATEMENTS

The Honorable Tom Marino, a Representative in Congress from the 
  State of Pennsylvania, and Chairman, Subcommittee on Regulatory 
  Reform, Commercial and Antitrust Law...........................     1
The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in 
  Congress from the State of Georgia, and Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust Law     2

                               WITNESSES

The Honorable Howard A. Shelanski, Administrator, Office of 
  Information and Regulatory Affairs
  Oral Testimony.................................................    19
  Prepared Statement.............................................    22
Douglas Holtz-Eakin, Ph.D., President, American Action Forum
  Oral Testimony.................................................    40
  Prepared Statement.............................................    42
Karen R. Harned, Esq., Executive Director, National Federation of 
  Independent Business, Small Business Legal Center
  Oral Testimony.................................................    52
  Prepared Statement.............................................    54
Richard Williams, Ph.D., Director of Regulatory Studies Program, 
  Mercatus Center
  Oral Testimony.................................................    62
  Prepared Statement.............................................    64
Noah M. Sachs, Professor, and Director, Robert R. Merhige Center 
  for Environmental Studies, University of Richmond School of Law
  Oral Testimony.................................................    73
  Prepared Statement.............................................    75

          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.....................     5
Prepared Statement of the Honorable Bob Goodlatte, a 
  Representative in Congress from the State of Virginia, and 
  Chairman, Committee on the Judiciary...........................    13
Material submitted by the Honorable Doug Collins, a 
  Representative in Congress from the State of Georgia, and 
  Member, Subcommittee on Regulatory Reform, Commercial and 
  Antitrust Law..................................................    33

                                APPENDIX
               Material Submitted for the Hearing Record

Material submitted by the Honorable Henry C. ``Hank'' Johnson, 
  Jr., a Representative in Congress from the State of Georgia, 
  and Ranking Member, Subcommittee on Regulatory Reform, 
  Commercial and Antitrust Law...................................    96
Response to Questions for the Record from the Honorable Howard A. 
  Shelanski, Administrator, Office of Information and Regulatory 
  Affairs........................................................   100
Response to Question for the Record from Noah M. Sachs, 
  Professor, University of Richmond School of Law, Member 
  Scholar, Center for Progressive Reform, and Director, Robert R. 
  Merhige Center for Environmental Studies.......................   108


                       OFFICE OF INFORMATION AND 
                           REGULATORY AFFAIRS

                              ----------                              


                        WEDNESDAY, JULY 15, 2015

                       House of Representatives,

                  Subcommittee on Regulatory Reform, 
                      Commercial and Antitrust Law

                      Committee on the Judiciary,

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 3:05 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Tom 
Marino (Chairman of the Subcommittee) presiding.
    Present: Representatives Marino, Goodlatte, Farethold, 
Collins, Ratcliffe, Trott, Bishop, Johnson, and Peters.
    Staff Present: (Majority) Dan Huff, Counsel; Andrea 
Lindsey, Clerk; and (Minority) Slade Bond, Counsel.
    Mr. Marino. The Subcommittee on Regulatory Reform, 
Commercial and Antitrust Law will come to order. In the 
interest of our people that are testifying, we are going to get 
started.
    Without objection, the Chair is authorized to declare a 
recess of the Committee at any time. And I think that will 
happen, because we have our last series of votes coming up 
maybe in an hour or so.
    We welcome everyone to today's oversight hearing on the 
Office of Information and Regulatory Affairs. And I will begin 
by recognizing myself for my opening statement.
    Congress has an ally in the fight against overregulation. 
The Office of Information and Regulatory Affairs, known as 
OIRA, is charged with ensuring that agency regulations are the 
least burdensome possible and that their benefits justify their 
cost.
    Accordingly, I asked Administrator Shelanski, how can 
Congress help you? I understand your staffing levels are near 
historic lows and that your team has been moved out of the 
Executive Office complex. I know that resources and proximity 
matter.
    How can we help you combat the scourge of midnight rules, 
in which Presidential administrations issue a heightened number 
of new regulations as their terms reach a close? The George W. 
Bush administration took steps to prevent the practice. What 
steps do you plan to take?
    I am also concerned that the agencies are failing to comply 
with important procedures designed to improve the quality of 
rulemaking. For example, a 2008 study found that required 
regulatory impact analyses have become perfunctory, rather than 
real inquiries into the necessity of new regulations.
    Similarly, agencies make the questionable claim that their 
rules will not have a significant impact on a substantial 
number of small businesses in order to skirt Federal 
requirements designed to limit regulatory burdens. The EPA made 
just such a certification for its controversial waters of the 
United States regulation, despite the obvious potential 
consequences for impacts on small businesses. What can be done? 
Does OIRA need additional enforcement powers?
    There also seems to be a wide disparity in the seriousness 
with which agencies are taking their obligations to perform 
regulatory lookbacks. A number of articles in academic journals 
suggest ways to improve the regulatory lookback process. I am 
curious if you have been able to incorporate any of them.
    Former OIRA Administrator Cass Sunstein wrote recently 
that, ``Many independent agency regulations, including very 
expensive ones, have not been accompanied by careful cost-
benefit analysis.'' This suggests that Executive orders from 
President Obama urging independent agencies to conduct cost-
benefit analysis have been inadequate. Is there anything more 
OIRA can do, or is congressional action mandating OIRA review 
in order?
    While I support OIRA, I have concerns. These include a 
potentially flawed cost-benefit methodology and the 
controversial update to the social cost of carbon. We are also 
missing OIRA's required annual report to Congress on the cost 
and benefits of the previous year's Federal regulations. By 
law, it is to be submitted ``with the budget.'' This timing--as 
Congress is determining how much money to allocate to each 
agency--helps ensure agency accountability for is regulatory 
determinations. That report needs to be delivered on time.
    My overall message to Administrator Shelanski is this: Help 
us help you stand up to the Sdministration pressure, 
particularly as the midnight regulation period commences.
    I thank all of our witnesses and look forward to the 
discussion.
    And I now recognize the Ranking Member of the Subcommittee, 
the gentleman from Georgia, Congressman Johnson, for his 
opening statement.
    Mr. Johnson. And thank you, Mr. Chairman.
    Impeccable timing, if I must say, on my part. Sorry for 
being late, though, and thank you for forbearing.
    Established by the Paperwork Reduction Act of 1980 and 
empowered with centralized regulatory review responsibilities 
under President Reagan, the Office of Information and 
Regulatory Affairs, or OIRA, functions as the gatekeeper of the 
regulatory system for the most important Federal rules.
    Issued by President Clinton in 1993, September, Executive 
Order 12866 requires that OIRA review all significant 
regulatory actions, between 500 and 700 a year. It additionally 
requires that Federal agencies prepare a cost-benefit analysis 
for economically significant rules.
    In January 2011, President Obama issued Executive Order 
13563, which reaffirmed the principles of Executive Order 12866 
but also requires that agencies develop plans for a 
retrospective review of existing regulations to determine 
whether any should be modified, streamlined, expanded, or 
repealed.
    Finally, the Obama administration issued Executive Order 
13610 in May 2012 to further increase public participation in 
retrospective reviews.
    According to Mr. Shelanski's predecessor, Cass Sunstein, 
these orders have energized agencies to identify hundreds of 
outdated rules for elimination, and many agencies have already 
finalized or formally proposed over 100 of these reforms. For 
instance, the Department of Health and Human Services has 
finalized several rules to remove hospital and healthcare 
reporting requirements, saving $5 billion over 5 years.
    These efforts have continued under Mr. Shelanski and, thus 
far, appear to be working. As Mr. Shelanski noted in March, the 
retrospective review process is expected to achieve $20 billion 
in savings over 5 years and is on track to eliminate over 100 
million paperwork burden reduction hours. Combined, it is clear 
that these initiatives have already resulted in hundreds of 
formal proposals to eliminate rules, representing billions of 
dollars in savings over the next several years and 
substantially more in eventual savings.
    I look forward to learning about the continuing efforts, to 
date, of the President's push to have agencies improve and 
modernize the existing regulatory system.
    In addition to conducting oversight of OIRA, witnesses on 
our second panel will also discuss larger concerns with our 
Nation's regulatory system.
    I would note that the most pressing issue facing our 
regulatory system today is the timely response to public health 
and safety crises through the expeditious promulgation of 
Federal rules. But, sadly, it has become common for my 
colleagues to assert that the same regulations that protect our 
health, safety, environment, and financial system have 
undermined the economic recovery and job growth. But this could 
not be further from the truth.
    The latest report from the Bureau of Labor Statistics shows 
that unemployment has fallen to 5.3 percent. While there is 
more work to do to grow the economy and help our Nation's 
middle class, there have been 64 straight months of private-
sector job growth. That is 12.8 million private-sector jobs 
created amidst a regulatory system that is pro-worker, pro-
environment, pro-public health and safety, and pro-innovation.
    Furthermore, as I have noted on many occasions, there is 
overwhelming consensus that the benefits of regulation vastly 
exceed their costs. According to the Office of Management and 
Budget's 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, which is 25 
times greater than during the comparable period under the Bush 
administration.
    Additionally, according to the 2014 benefits-costs report, 
OMB estimates that the benefits of regulations are in the 
aggregate between $217 billion and $863 billion, while the 
estimated annual costs are in the aggregate of between $57 
billion and $84 billion.
    In closing, I thank Administrator Shelanski for taking the 
time to appear before us today, and I thank our witnesses for 
being here today. And I look forward to today's hearing.
    And, with that, I yield back.
    Mr. Marino. Thank you, Congressman.
    Mr. Johnson. Mr. Chairman, if I might, I would like to 
introduce the statement of the Ranking Member, Mr. Conyers, 
into the record, without objection.
    Mr. Marino. So ordered.
    [The prepared statement of Mr. Conyers follows:]
    
    
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    Mr. Marino. And the Chairman of the full Committee, 
Congressman Goodlatte from Virginia, he is in a meeting also 
and will not be here. Therefore, I will, without objection, ask 
that his statement be entered into the record.
    Seeing none, so ordered.
    [The prepared statement of Mr. Goodlatte follows:]
    
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                 __________
    Mr. Marino. Without objection, other Members' opening 
statements will be made part of the record.
    Administrator, would you please stand and raise your right 
hand to be sworn in?
    Do you swear that the testimony you are about to give 
before this Committee is the whole truth and nothing but the 
truth, so help you God?
    Mr. Shelanski. I do so swear.
    Mr. Marino. Thank you. Please be seated.
    And let the record reflect that the witness has answered in 
the affirmative.
    Administrator Shelanski of the Office of Information and 
Regulatory Affairs in the Office of Management and Budget, it 
is an honor to have you here today.
    The Administrator was previously Director of the Bureau of 
Economics at the Federal Trade Commission (FTC) and a professor 
at Georgetown University Law Center. From 2011 to 2012, he was 
of counsel at the firm of Davis and Polk. From 1999 to 2000, 
Administrator Shelanski served as Chief Economist of the 
Federal Communications Commission and, from 1998 to 1999, as 
Senior Economist for the President's Council of Economic 
Advisors at the White House.
    Administrator Shelanski received his B.A. From Haverford 
College and a J.D. and Ph.D. from the University of California 
at Berkley. After law school, he clerked for Judge Williams on 
the D.C. Circuit Court of Appeals and Justice Antonin Scalia, 
as the Justice referred to, on the U.S. Supreme Legislature, 
just recently.
    The witness' written statement will be entered into the 
record in its entirety.
    I ask that you would please summarize your statement in 5 
minutes or less. And you see the lights in front of you. I am 
color blind; I don't know what color they are. But I know when 
the third one goes on your time is up.
    And I will politely--and this seems to work, because I 
focus on my statement as opposed to watching the light. I will 
diplomatically just pick up the gavel and ask you to please, 
when you see that, summarize.

TESTIMONY OF THE HONORABLE HOWARD A. SHELANSKI, ADMINISTRATOR, 
          OFFICE OF INFORMATION AND REGULATORY AFFAIRS

    Mr. Shelanski. Very good.
    Thank you very much, Chairman Marino, Ranking Member 
Johnson, and Members of the Subcommittee. Thank you for the 
invitation to appear before you today. I am pleased to have 
this opportunity to discuss the role of the Office of 
Information and Regulatory Affairs, OIRA, in regulatory review.
    I would like to start by noting that OIRA has a broad 
portfolio. For example, under the Paperwork Reduction Act, OIRA 
is responsible for reviewing collections of information by the 
Federal Government and ensures that those collections are not 
unduly burdensome. OIRA also develops and oversees the 
implementation of government-wide statistical standards and 
policies. And we also, pursuant to Executive order, have a 
fundamental role in international regulatory cooperation.
    The largest area of OIRA's work, however, is the review of 
regulations issued by executive branch departments and 
agencies. Several Executive orders, as have been noted, 
establish the principles and procedures for OIRA's regulatory 
reviews. Executive Order 12866, implemented across 
Administrations of both parties, sets forth standards and 
analytic requirements for rulemaking by departments and 
agencies and calls, to the extent permitted by law, for 
agencies to regulate only when the benefits of a rule justify 
its costs.
    OIRA works with agencies to continually improve the review 
process and the quality of government regulation. OIRA first 
and foremost upholds the standards of review that the Executive 
orders establish while remaining mindful that unnecessary 
delays in reviews are harmful across the board--harmful to 
those wishing to comment on proposed rules, to those who must 
make plans to comply with rules, and to those denied the 
benefits of regulation. Both rigor and efficiency in regulatory 
review are essential to improving the clarity and quality of 
our regulatory environment.
    OIRA does not review all executive branch regulations, nor 
would it make sense for the office to do so. OIRA review 
applies only to significant regulatory actions. The most 
fundamental category of significant regulations are those that 
are economically significant, the threshold for which is an 
annual effect on the economy of $100 million or more.
    There are other factors that may lead to a rule to be 
deemed significant beyond economic impact. Under Executive 
Order 12866, rules are also potentially significant and subject 
to interagency review if they create a serious inconsistency or 
otherwise interfere with an action taken or planned by another 
agency; if they materially alter the rights and obligations 
related to entitlements, grants, user fees, or loan programs; 
or if they raise novel legal or policy issues.
    Once a rule is under review, OIRA plays two basic roles. 
The first is to coordinate interagency review of regulations. 
OIRA circulates the rule to other agencies around the Federal 
Government whose own policies and responsibilities may in some 
way interrelate with the rule under review.
    The second main role that OIRA plays is to ensure that the 
rule complies with the Executive order principles for sound 
regulation and to review the analysis underlying the rule. OIRA 
has longstanding guidelines for how agencies should analyze 
economically significant rules, and OIRA reviews those analyses 
for consistency with these guidelines as a standard part of our 
review.
    While reviewing a rule, OIRA's job is to review the 
reasonableness of the underlying analysis and to identify areas 
where the regulation potentially could be improved or be more 
consistent with the principles set forth in the Executive 
orders. Often, the focus of regulatory review is to help the 
agency hone and sharpen its arguments and to identify areas 
where more evidence or discussion will strengthen or clarify a 
regulation.
    Finally, another important objective of the Executive 
orders under which OIRA operates is the introduction of 
flexibility into and removal of unnecessary burdens from 
Federal rules. Ensuring regulatory flexibility for small 
businesses and reducing regulatory burdens for everyone through 
the retrospective review process are high priorities for OIRA.
    In conclusion, regulation can bring great benefits to 
Americans but also carries costs. It is critical to ensure that 
Federal agencies base their regulatory actions on high-quality 
evidence and sound analysis. Beneficial regulation must remain 
consistent with the overarching goals of job creation, economic 
growth, and public safety. We look forward to continuing our 
efforts to meet these challenges.
    Thank you for your time and attention. I would be happy to 
answer your questions.
    [The prepared statement of Mr. Shelanski follows:]
    
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    Mr. Marino. Thank you, Administrator.
    I am going to begin with recognizing myself for my 5 
minutes of questions for you.
    Administrator, the Bush administration took steps to 
prevent ``midnight rules,'' in which Presidential 
administrations issue a heightened number of new regulations as 
their term reaches a close.
    What steps will you take to prevent the practice of this 
``midnight rules'' situation?
    Mr. Shelanski. Thank you very much for that question, Mr. 
Chairman.
    We have been engaging with agencies now to set priorities 
and to try to establish a smooth and orderly process for the 
issuance of regulations over the remainder of this 
Administration.
    As I said in my statement, the most important thing to OIRA 
is to ensure that there is high-quality review of the 
significant regulations that the executive branch issues. We 
cannot do high-quality review if we have a flood of last-minute 
regulations.
    So we are working closely and regularly with agencies to 
ensure that they are continuing to move their priorities 
forward in the chain so that we will have time to perform that 
review.
    Mr. Marino. Thank you.
    My concern is with apparent victories. The Supreme Court 
recently remanded without vacating the EPA's Utility MACT rule 
to regulate mercury emissions. The Justices found that the EPA 
failed to appropriately consider costs when it promulgated the 
rule.
    This decision was an incomplete victory because this rule 
has been in effect since 2012. For 3 years now, while 
litigation was pursued, millions of dollars was spent to comply 
with the rule, only for it to be found unlawful. This is a 
major drain on our economy and costs jobs.
    What can be done to ensure that OIRA better reviews these 
regulations and that the effective date of major rules is 
delayed until the judicial process has been exhausted?
    Mr. Shelanski. Thank you, sir.
    So, on the particular rule that you referenced, I think the 
Supreme Court's decision is still being reviewed, and how that 
will be handled in the context of this specific rule is not 
something I am able to speak to today. But your general 
question is an important one.
    It is an uncommon situation for a fundamental legal 
question of that magnitude to be raised in a rule. So, 
typically, OIRA review can proceed because the agency has the 
authority to issue the rule, and we are typically getting the 
kinds of analysis that we require under the Executive orders. 
There isn't a perceived statutory barrier to that analysis, and 
we are able to perform our review.
    Now, of course, the Administrative Procedure Act provides 
for judicial review of final rules. In the normal case, where 
an effective date might come into play prior to the end of the 
judicial process, it is up to the courts to determine whether 
or not there would be a sufficient prejudice to affected 
parties by having the rule take effect pending the judicial 
process.
    So, fortunately, the judicial process affords a very good 
forum in which the courts can decide should the rule be allowed 
to take effect while we are reviewing it or not.
    Mr. Marino. Administrator, does anything prevent you or 
OIRA from suggesting to the courts that the issue be stayed, 
pending litigation, because of the expense involved for 
industry?
    Mr. Shelanski. OIRA does not play a role in the judicial 
process. That would be up to the Justice Department, typically.
    What OIRA does is to ensure that the agency has done a 
sufficient--if it is an economically significant rule, a 
sufficient analysis that is part of the administrative record, 
that the court can review the record and come to a 
determination of precisely that kind of issue.
    Mr. Marino. Thank you.
    My last question, it looks like. 98.98 percent of the 
claimed benefits from EPA's mercury rule came from reducing 
particles other than mercury. Chief Justice Roberts called such 
a disproportionate reliance on co-benefits a potentially 
illegitimate way of avoiding limits on agency power.
    Will OIRA reevaluate the extent to which it permits 
agencies to rely on secondary benefits?
    Mr. Shelanski. When OIRA reviews a rule, we look at all the 
costs and benefits, direct and indirect, that might come from a 
rule. But one of the things that we try to do is to ensure that 
a rule is well-tailored to its stated purposes. So OIRA does 
try to make sure that a rule does achieve its stated purposes 
and that its benefits come from the lawful purpose for which 
the rule is being promulgated.
    Mr. Marino. Thank you, Administrator. My time has expired.
    The Chair recognizes the Ranking Member of the 
Subcommittee, the gentleman from Georgia, Congressman Johnson.
    Mr. Johnson. Thank you, Mr. Chairman.
    Administrator Shelanski, bills have been proposed, such as 
H.R. 427, the REINS Act of 2015, which would require both 
houses of Congress and the President to approve all new major 
rules--i.e., rules with an annual impact on the economy of at 
least $100 million or having one of a number of economic 
impacts--before they can take effect.
    Are you familiar with the REINS Act?
    Mr. Shelanski. Yes, sir, I am.
    Mr. Johnson. And what do you think about that concept?
    Mr. Shelanski. Thank you, Mr. Johnson.
    The REINS Act is something on which the Administration has 
spoken, at least in the last Congress and the Congress before 
that. I understand the bill may come up again in this Congress, 
and the Administration will have to determine its view at that 
time on the current version. But the Administration has issued 
a statement against this bill, and I certainly share that view.
    The main concern with the REINS Act is that it introduces, 
in my view, an unnecessary layer of review and delay in what 
could be very important health, safety, and welfare 
regulations. By requiring a joint resolution of Congress, the 
authority of the executive branch agency to put forward its 
policies is subject to potentially limitless delay or very long 
delay.
    And that seems to me, in the context of a regulatory system 
with numerous checks and balances--internal review by OIRA 
within the executive branch, public comment, and judicial 
review under the Administrative Procedure Act--strikes me as an 
unnecessary hurdle to getting the business of the country done.
    Mr. Johnson. Thank you.
    Among other things, H.R. 1155, which is the SCRUB Act--are 
you familiar with the SCRUB Act?
    Mr. Shelanski. I have just learned about the SCRUB Act. I 
don't have sufficient familiarity at this point to comment on 
it.
    Mr. Johnson. It would establish a regulatory CutGo process. 
Are you familiar with the CutGo process?
    Mr. Shelanski. I do understand what that refers to, yes.
    Mr. Johnson. Yeah. Would you discuss the ramifications of a 
mandatory CutGo process?
    Mr. Shelanski. I think this is something I would really 
like to engage with anybody in the Congress who would like to 
talk about a CutGo process or some kind of regulatory review 
commission.
    The devil really is in the details on the kinds of 
proposals that are in the SCRUB Act. The Administration has not 
yet, I think, had a chance to formulate a view on this, and I 
certainly can't speak for the Administration, but it is 
something we are certainly interested in working with you on 
and learning more about.
    Mr. Johnson. Okay.
    Other bills, such as H.R. 185, the Regulatory 
Accountability Act, would give greater power to the courts and 
the Administration to override congressional mandates. It does 
this by requiring the courts to exercise their independent 
judgment over that agency's experts.
    What are your views regarding heightened judicial review of 
agency rulemaking?
    Mr. Shelanski. Mr. Johnson, we have grave concerns and I 
have grave concerns about judicial review over the expert 
processes within the agencies. There is no single, one-size-
fits-all type of analysis or type of process that is fit for 
all the different kinds of agency processes that go on. So I 
have concerns that this introduces judicial review at a far 
more granular level, a very technical and detailed level, where 
I think good decisionmaking by general courts will be extremely 
difficult.
    Moreover, we should keep in mind courts have the 
opportunity to review the complete administrative record. So if 
there is not sufficient evidence and basis for an agency's 
decision, courts already get to review that. Agencies are 
already held to a good standard of having record evidence for 
their decisions. Further judicial review down to the expert 
level within the agency strikes me as something that could 
grind to a halt the deliberative process and good policy 
development.
    Mr. Johnson. And going back to regulatory CutGo, is it wise 
to have a broad restriction on introduction of new regulations, 
mandating that if one comes in you have to get rid of another? 
Is that wise?
    Mr. Shelanski. Thank you, sir.
    As a general matter, I do not favor some kind of a cut-and-
go or, often called, regulatory PAYGO obligation. Sometimes a 
rule needs to be issued to meet a vital public matter.
    The United States Department of Transportation had to 
engage in a very, I think, essential set of rules relating to 
the transport of volatile crude oil by rail. This was something 
that received, sort of, broad support across the spectrum from 
many States. For the Department to have had to spend a lot of 
time thinking about what rules it was going to have to cut 
before it could go with its new vital health and safety 
regulation, I think, could have been very harmful.
    More to the point, we have a retrospective review process. 
I would much prefer that we use the retrospective review 
process to get rid of rules that should be cut, because that 
way those rules could be considered on a full record. They 
could be considered on an appropriate timeline. We at OIRA 
would have the opportunity to review any rules that were 
implementing retrospective review, either repeal or reform. And 
that way we would be sure that the rules that are cut are rules 
that we don't need. My concern is we lose that review in a kind 
of process like cut-and-go, mandatory cut-and-go, as you 
described.
    Mr. Johnson. Thank you.
    And I yield back.
    Mr. Marino. Thank you, Congressman.
    The Chair now are recognizes the gentleman from Michigan, 
Congressman Trott.
    Mr. Trott. Thank you, Mr. Chairman.
    I appreciate the witness testifying today.
    One of the attributes of the REINS Act was it called for 
more opportunities for industry experts to provide input into 
the rulemaking process. Do you think there is a enough, or too 
much, or need more input from industry experts when writing 
rules?
    Mr. Shelanski. Thank you, Mr. Trott.
    I think, as a general matter--and then I will get 
specifically to your question--as a general matter, I think 
OIRA has the tools and the input that it needs to do good 
regulatory review.
    On the specific question of industry input, I think there 
are numerous opportunities for industry in the system we have 
today to have serious input into the process. It is extremely 
rare, I mean, hard for me to think of a significant regulation 
where industry has not actually been involved with the agency 
as a stakeholder in the development of a rule.
    Once the agency sends the rule to us at OIRA, that fact 
that the rule is with us becomes public, and we are required 
under our Executive orders to have meetings with anybody who 
requests a meeting, under Executive Order 12866. As it so 
happens, we have no control over this. Industry avails itself 
quite heavily of that opportunity, so we are hearing a lot from 
industry.
    Now, typically, this just gets us to ask questions, and the 
agency is often very familiar with the arguments that industry 
is making. And then, of course, once the proposed rule is out 
for public comment, industry has a great opportunity to get all 
of the facts and issues into the public record--a record that 
the agency is required by law to address in order to withstand 
judicial review.
    Of course, during the finalization process, there is 
further interaction at the agency level and then back through 
the 12866 process.
    So it strikes me that industry has a wealth of opportunity, 
as things currently stand, to be involved with the rulemaking 
process.
    Mr. Trott. I appreciate those comments. That is helpful. In 
hindsight, maybe some of the feedback I am getting from 
businesses is they have plenty of opportunity for input but 
some of their input is not listened to or followed, so maybe 
that is the real issue.
    But, along those lines, one of the concerns I have heard 
from a number of businesses is the timeframe when rules are 
finalized and implemented is sometimes too short of a window 
for them to properly respond and implement procedures and 
software changes to adapt. Do you have any concerns in that 
regard?
    You know, when I was in the business sector for many years, 
that was one of my biggest nightmares, was when a client or 
customer would give us a short timeframe to implement 
significant changes in operations, and we had no choice but to 
make it happen. But I just worry sometimes that the rulemaking 
undermines businesses because they don't have adequate time to 
respond.
    Mr. Shelanski. I fully agree that a realistic 
implementation period is vital to a regulation. It is vital for 
a number of reasons.
    Stakeholders do need time to order their affairs. The 
businesses that are being regulated are the engines of our 
economy, they are engines of employment. And we need to ensure 
that the timeframe in which a rule will be implemented and the 
way it will be implemented is consistent with those vital 
functions that industry plays.
    We review implementation periods, typically, as part of our 
review of a rule, because costs can change drastically 
depending on what the ramp-up period is or the implementation 
period is. Do agencies always get it right? My supposition is 
occasionally they don't, but it is not for lack of trying. It 
is part of our review, and it is something on which we 
frequently take input.
    Mr. Trott. Executive Order 12866 calls on agencies to bring 
regulatory burdens to your attention and to give suggestions on 
how they can be resolved. Is that being done, to your 
knowledge? And do you get many suggestions on how we can 
improve the regulatory burden on businesses? And if not, how 
can we make sure they cooperate?
    Mr. Shelanski. Yes, sir. We do have a lot of back-and-forth 
with the agencies on precisely that point.
    One of the things we are most concerned with at OIRA is to 
make sure that rules achieve their goals but that, in doing so, 
they don't take an unnecessarily high-cost path.
    And so, during the course of review, we have a number of 
sources of information that lead to almost a majority of our 
exchanges with agencies are questions on this kind of topic, 
whether they are brought to us by other agencies, which is 
frequently the case through the interagency process, or the 
Small Business Administration, which is a very effective 
advocate for small businesses on business burdens, and also 
through our obligation under the Regulatory Flexibility Act to 
ask agencies to think about alternatives.
    Mr. Trott. Great.
    I see my time has expired. I thank you for your time and 
your insight this afternoon, sir.
    Mr. Marino. The Chair now recognizes another gentleman from 
Michigan, Congressman Mike Bishop.
    Mr. Bishop. Thank you, Mr. Chair.
    Administrator Shelanski, I appreciate your testimony today.
    I would like to build on what my colleague from Michigan 
was getting to, and I want to refer you to an event. At the end 
of May, the Department of HHS and Treasury and Labor published 
a rule announcing that, as of 2016, all plans would be required 
to embed an individual cost-sharing limit in all options 
offering family coverage.
    This is a huge change in the plan for both the employee and 
the employer, large and small, and their administrative vendors 
and carriers, as Mr. Trott indicated, will not be able to 
accommodate the rule by 2016.
    I am wondering how it is possible that something of this 
magnitude can be implemented by the government without any 
statutory requirement and without any rules by way of the 
Administrative Procedure Act?
    Mr. Shelanski. There are a number of things that agencies 
can do that don't have to be done by rule, whether explicitly 
by statute or by precedent. I would have to go back and look 
into the particular situation that you are raising, because I 
can't explain under what authority they acted.
    But, typically, there are many lawful authorities that do 
allow agencies to proceed with administrative changes that 
occur outside of the regulatory process and that are not 
subject to OIRA jurisdiction.
    Mr. Bishop. Okay.
    I have a couple questions with regard to the process, as 
well.
    A recent analysis by the GAO found that, since 2011, 43 
major or significant rules were not submitted to Congress, as 
required by the Congressional Review Act. Without this 
submission, Congress is, in effect, robbed of the opportunity 
to introduce resolutions of disapproval.
    I am wondering what OIRA can do to remind agencies of their 
obligations according to this rule so we don't go through this 
over and over again?
    Mr. Shelanski. Thank you, Congressman. You raise a very 
good point. The GAO pointed out something I think is very 
important, and I absolutely agree that agencies should up hold 
their obligations to report these rules.
    After we received the GAO report, we contacted agencies to 
remind them strongly that they have the obligation to report 
these rules. Under the statute, under the law, this is an 
agency obligation. It is not something OIRA can do for the 
agencies. But we have reminded the agencies that they have this 
obligation and should live up to it.
    Mr. Bishop. So we know the agencies must submit rules to 
OIRA for review, but what process do you use to ensure that the 
agencies properly comply with the submission requirements?
    Mr. Shelanski. The submission requirements to OIRA?
    Mr. Bishop. Yes.
    Mr. Shelanski. So we typically know what rules an agency 
has on the agenda going forward because we publish twice a 
year, or publish and then update, a regulatory plan and agenda. 
It is very unusual for an agency to--in fact, I can almost not 
think of an example in the 2 years that I have been in the job 
where an agency has not submitted a rule to OIRA that should be 
submitted to us. So we don't have a problem. Agencies comply 
quite well with that.
    We often will have differences of opinion about something 
that is not a rule and whether OIRA should review it. And so we 
have often called in things that the agencies have captioned as 
guidances or notices because we believe they have regulatory 
effect. But the agencies have been very cooperative when we 
have identified such documents.
    Furthermore, agencies will often have a difference of 
opinion with OIRA over a significance determination and whether 
we should review a rule. They have shown us the rule; we know 
it exists. The significance determination is ultimately up to 
us. So, while we have had agencies ask that rules not be deemed 
significant, we make an independent judgment. Again, agencies 
have been quite cooperative.
    So we have not had a problem with the agencies' compliance 
and cooperation with submissions.
    Mr. Bishop. Thank you very much, sir. I appreciate it.
    I yield back my time.
    Mr. Marino. Thank you.
    The Chair now recognizes the gentleman from Georgia, 
Congressman Collins.
    Mr. Collins. Mr. Chairman, I just have a unanimous-consent 
request.
    We had sent a letter to your department. We are working on 
that. We have not received a response yet. This was from 
several months ago. I just wanted to insert that into the 
record and also just ask that you do everything in your power 
to make sure that your office is complying with our office to 
get the answers that are needed.
    [The information referred to follows:]
    
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    Mr. Shelanski. Thank you, Mr. Collins.
    I did just this morning receive your letter from our 
Legislative Affairs Office. I assure you of a response.
    I have also read the letter, and I found it extremely 
interesting and look forward to reading the report you 
reference in the letter and acting accordingly.
    Mr. Collins. Thank you.
    Mr. Chairman, thank you.
    Mr. Marino. The Chair now recognizes the Vice-Chairman of 
the Regulatory Subcommittee, the gentleman from Texas, 
Congressman Farenthold.
    Mr. Farenthold. Thank you. Administrator Shelanski, I 
appreciate your being with us.
    I want to start at a 30,000-foot view, and I wanted to get 
your opinion on how you think the law of diminishing returns 
applies in the regulatory context.
    In other words, once basic safeguards are in place, will 
further improvements often require spending increasingly more 
money to achieve increasingly less results?
    Mr. Shelanski. That is a great question, Congressman.
    One of the things that we look at when we review a rule is 
whether that rule, specifically that rule, building on the 
baseline of the costs that exist in the industry and what the 
state of play is in the industry as it stands when the rule is 
brought to us, whether it will achieve benefits that justify 
the costs.
    Mr. Farenthold. At some point, we might just get the low-
hanging fruit and leave the rest for the plaintiffs' attorneys.
    I want to get down into the weeds a little bit with some 
specific regulations that directly affect folks in Texas and 
throughout the country.
    The EPA's controversial waters of the U.S. rule has obvious 
potential consequences for small businesses, especially 
agribusiness, our farmers and ranchers. Yet the EPA did not 
convene a Small Business Advisory Panel, as required by the 
Regulatory Flexibility Act.
    Why didn't OIRA insist that the EPA follow the law?
    Mr. Shelanski. The EPA's determination at the time that the 
SBREFA issue, the Small Business Panel issue, came up was that 
what they were doing in this rule was effectively codifying in 
regulation what had been existing jurisdictional practice, just 
trying to spell out more clearly what had been happening 
through many, many years of practice, in which the courts, 
indeed the Supreme Court, had found had not been sufficiently 
spelled out.
    So the----
    Mr. Farenthold. I am going to take issue, and, certainly, I 
think some of the farmers and ranchers, who feel like they are 
directly affected by these rules. They hadn't had the EPA 
crawling over their property, and this certainly seems to give 
the EPA a whole lot more jurisdiction, down to stock tanks, 
irrigation ditches, and, if we keep along this path, probably 
swimming pools in people's backyards.
    Mr. Shelanski. Well, I think I would have a different take 
on what the possible reach of the rule is. But I think, as a 
general matter, what the EPA was doing was simply spelling out 
jurisdiction that it had previously under the Clean Water Act 
and trying to make a little clearer when and where it would 
exercise it.
    At this point, for any given body of water, there is still 
a determination to be made on whether permitting and whether 
the Clean Water Act provisions would apply.
    Mr. Farenthold. Well, OIRA approved these waters of the 
U.S. Rules in just 2 months. That seems awful fast considering 
that the final costs that showed up for the rule were triple 
the original cost projections, and the final version further 
extended the EPA's jurisdiction.
    Was there any pressure that you all faced from the outside 
to run this rule through? And what factors was your approval 
and the speedy decision thereof based on?
    Mr. Shelanski. Thank you very much.
    Under the Executive orders, the normative time for review 
of regulations is 90 days. Sometimes we are able to be much 
faster.
    By far, the biggest component in the timing of regulation 
is the priority that the agency places on the rule. Very often, 
OIRA conducts an interagency process rather quickly, gets 
feedback from the agencies, passes its comments and the 
interagency comments back to the agency, and, if an agency has 
made a rule a high priority, the rule then comes back to us. 
And when we have decided that the rule has sufficiently 
addressed the concerns that were raised, we conclude review.
    Mr. Farenthold. Well, generally, I am a supporter of the 
government being more efficient, but I certainly don't think in 
the rulemaking process there should be any incentive to cut 
corners, especially considering the financial impact.
    One last question on the EPA. Congress has long been 
concerned about their evaluation of co-benefits from lowering 
particulate matter emissions in the context of limiting other 
air pollution.
    What is your view of how the EPA accounts for co-benefits? 
In particular, how robust is the science about the health 
effect of additional marginal reductions in particulate matter 
emissions?
    Mr. Marino. Administrator, could you pull that microphone a 
little closer to you? You are not coming over loud enough on 
the TV.
    Mr. Shelanski. Is that better?
    Mr. Marino. That is better.
    Mr. Shelanski. Okay. My teenage son tells me I am very 
loud.
    Mr. Farenthold. I am an old radio guy. You can't beat me in 
loud.
    Mr. Shelanski. In terms of co-benefits--and I believe I got 
a similar question from Chairman Marino--what we try to do when 
an agency comes to us with a rule is we look at what the rule 
achieves. We try to make sure that the agency, although we do 
not typically make independent legal determinations, has the 
authority to achieve what it is trying to achieve. And then we 
look at the costs and benefits to make sure that those costs 
are justified by the benefits.
    When it comes to the state of the science and the analysis 
underneath the rule, OIRA does not do an independent scientific 
evaluation. We are not scientists. What we do, however, is make 
sure that the evidence that the agency relies on meets certain 
requirements, that it meets the requirements of generally 
accepted science to the extent it exists, that the agency 
employs a generally accepted method, and that the quality of 
data and evidence that the agency is relying on meets 
sufficient data quality standards. And one of the things that 
we are very mindful of is that the agency look at the full body 
of evidence that is in the scientific record, does not choose 
selectively things that cut only in favor of its rule.
    So we do a pretty rigorous set of questioning of the 
agency. And if an agency is basing its determination on 
supposition rather than science, that will make it harder to 
get a rule through us.
    Mr. Farenthold. Thank you. I see my time is well-expired.
    Mr. Marino. The Chair recognizes the gentleman from Texas, 
Congressman John Ratcliffe.
    Mr. Ratcliffe. I thank the Chairman for holding this 
hearing, because the Texans that I represent certainly are 
frustrated with what they see as an ever-expanding government 
that invades so many aspects of their lives. And they are 
certainly frustrated with unelected bureaucrats that sometimes 
have the power to impose regulations that have the force of law 
with little or no time for meaningful preparation.
    So I think it is important that we, at a minimum, make sure 
the folks do get the information they need to comply with new 
regulations and to fully analyze the effects that these 
regulations would have on their businesses.
    Administrator Shelanski, I appreciate you being with us 
today.
    I am sure that it won't come as a surprise to you that some 
of the concern that I am talking about does relate to OIRA's 
tendency to have delayed informing the American people about 
regulations developed by Federal regulations--the Unified 
Agenda, as we call it. So I would like to ask you a couple of 
questions about some of those factors that I hope that we are 
able to agree on.
    First of all, do you believe that getting this information 
about agency regulations to the American people, particularly 
the small businesses who are especially burdened by compliance 
costs, that that is something that is vitally important?
    Mr. Shelanski. I fully agree that getting the agenda and 
plan is extremely important so that stakeholders can have 
notice of the rules that are going to be forthcoming.
    Mr. Ratcliffe. So, putting yourself in the place of a 
small-business owner trying to prepare for impending 
regulation, you would agree with me that getting that 
information on time and in a streamlined manner is equally 
important?
    Mr. Shelanski. I think, to the extent at all possible, 
getting information out in advance and in a timely fashion is 
quite important.
    Mr. Ratcliffe. Okay.
    And I know you are relatively new to the position there at 
OIRA, but I am hoping that you will agree with me that such 
reports on upcoming Federal regulations should never be a 
political exercise.
    Mr. Shelanski. I would agree with that. Certainly, in the 2 
years that I have been in the job, we have been able to get the 
agenda and plan out each spring and fall, as required and on 
time.
    Mr. Ratcliffe. But, obviously, you are aware of the past 
history at OIRA. And so, in that respect, do you find it 
troubling that during the 2012 election year the Obama 
administration refused to issue either a spring or a fall 
Unified Agenda of planned rulemakings?
    Mr. Shelanski. My understanding--and, of course, I wasn't 
there, so I can't answer as to what happened or what the 
reasons were--was that one plan and agenda did not get issued.
    Mr. Ratcliffe. Okay.
    Mr. Shelanski. Just one. I certainly----
    Mr. Ratcliffe. But that one--we can try and minimize that, 
but the fact is that one would be one violation of law.
    Mr. Shelanski. Even apart from being a violation of law, I 
think it is not good policy. Therefore, when I was having my 
confirmation hearings a little over 2 years ago, one of the 
things I pledged to do and that I have carried through on was 
to ensure that each spring and fall that plan and agenda does 
get published and, moreover, to work closely with the agencies 
to try to improve the completeness and accuracy of that plan 
and agenda.
    Mr. Ratcliffe. So can I take it by your answer, then, that 
you have just given me your assurance that in 2016, the next 
election year, that the Unified Agenda will issue on time?
    Mr. Shelanski. Yes, sir.
    Mr. Ratcliffe. And you have taken steps to ensure that that 
will be the case?
    Mr. Shelanski. To the extent that it is within my power, 
sir, those plans and agenda will be published on time.
    Mr. Ratcliffe. Okay. Very good.
    I thank you for being here today, and I am going to yield 
back the balance of my time.
    Mr. Marino. Thank you.
    And this concludes today's first panel of our hearing. I 
want to thank Administrator Shelanski for being here.
    You are excused, sir.
    Mr. Shelanski. Thank you.
    Mr. Marino. And we have been called to vote. So we have 
four votes, and it looks like it could be about 30 minutes 
before we call the second panel. We will get back here as soon 
as possible.
    I declare a recess at this point.
    [Recess.]
    Mr. Marino. The Regulatory Reform Subcommittee will come to 
order. And I will begin by swearing in our witnesses for our 
second panel.
    Would you please stand and raise your right hand?
    Do you swear that the testimony you are about to give 
before this Committee is the truth, the whole truth, and 
nothing but the truth, so help you God?
    Please let the record reflect that the witnesses have 
answered in the affirmative.
    And, yes, please be seated.
    I am going to introduce all four members before we start 
out with your opening statements, if you don't mind.
    Dr. Douglas Holtz-Eakin--am I pronouncing that correctly?
    Mr. Holtz-Eakin. It is actually ``Holtz-Eakin.''
    Mr. Marino. ``Holtz-Eakin.'' Okay. Thank you--is the 
president of the American Action Forum.
    Dr. Holtz-Eakin has served in numerous government and 
policy positions, including as Director of the nonpartisan 
Congressional Budget Office. During his time with the 
President's Council of Economic Advisors, he helped to 
formulate policies addressing the 2000-2001 recession in the 
aftermath of the terrorist attacks of September 11, 2001.
    Dr. Holtz-Eakin received his B.A. From Denison University 
in mathematics and his Ph.D. in economics from Princeton.
    And welcome, Doctor.
    Ms. Karen Harned--is that correct?
    Ms. Harned. Yes.
    Mr. Marino. Just want to make sure. Thank you--has served 
as executive director of the National Federation of Independent 
Business' Small Business Legal Center since April of 2002. 
Prior to that, Ms. Harned was an attorney at a Washington, DC, 
law firm specializing in food and drug law, where she 
represented clients before Congress and Federal agencies.
    Ms. Harned appears frequently in the national media to 
discuss issues including regulations, health care, and other 
issues important to small business. She is a graduate of the 
University of Oklahoma and earned her J.D. From The George 
Washington University Law Center.
    Welcome.
    Dr. Richard Williams is director of the Regulatory Studies 
Program at George Mason University's Mercatus Center. Prior to 
that, Mr. Williams served as Director for Social Sciences at 
the Center for Food Safety and Applied Nutrition in the Food 
and Drug Administration.
    Dr. Williams has appeared in national media outlets, 
including NPR and The Wall Street Journal. He is a U.S. Army 
veteran who served in Vietnam--and, sir, thank you for your 
service.
    Dr. Williams holds a B.S. in business administration from 
Old Dominion University and earned his M.A. and Ph.D. in 
economics from Virginia Tech.
    Welcome.
    Professor Noah Sachs is a professor at the University of 
Richmond School of Law and Director of the school's Merhige 
Center for Environmental Studies. He specializes in 
environmental law, torts, and administrative law and has 
written casebooks in those areas.
    In 2014, Professor Sachs was awarded a Fulbright grant to 
study challenges to market-oriented environmental reforms in 
developing countries. Professor Sachs received his B.A. from 
Brown University, his M.P.P. from Princeton, and his J.D. from 
Stanford Law School.
    Welcome, Professor.
    Each of the witnesses' written statements will be entered 
into the record in its entirety.
    I ask that each of you summarize your statements in 5 
minutes or less. And you see the lights in front of you, and by 
the time it gets to the last one, that pretty much means your 5 
minutes is up. I know that people concentrate on their 
statements, so I will just politely do this, and that will give 
you an indication to please wrap your statement up.
    And, with that, thank you all for being here.
    Dr. Holtz-Eakin, please.

 TESTIMONY OF DOUGLAS HOLTZ-EAKIN, Ph.D., PRESIDENT, AMERICAN 
                          ACTION FORUM

    Mr. Holtz-Eakin. Well, thank you, Chairman Marino, Ranking 
Member Johnson, Congressman Bishop, for the privilege of being 
here today.
    Let me make three brief points and submit my written 
statement for the record.
    The first is that OIRA is doing a very important and 
valuable job. And this is, I think, highlighted by the scale of 
recent regulatory activity. There are a lot of details in the 
written statement, but paperwork burdens have risen by 30 
percent since the year 2000 to the present. That is an enormous 
rise in the cost of regulation. The year 2010 alone saw 100 
major rules finalized. OIRA has put in its data that 2012 is 
probably the most expensive regulatory year in recent history.
    And if you look at the success in taking costs off the 
books, the retrospective reviews done under the Executive 
orders that have been discussed have, on net, increased costs 
and have often not even included retrospective review. It has 
been new regulations and higher costs. So there is a 
significant issue that needs to be addressed.
    And OIRA itself could do a better job; there's no question. 
There are issues in transparency that have been highlighted by 
its history with the Unified Agenda in recent years--not 
putting it out in some years in the spring, putting it out on 
the 23rd of December or just before Thanksgiving, just before 
Memorial Day, July 3. The tradition of waiting for a holiday 
and doing it at 4 o'clock on a Friday or something is something 
that is not exactly consistent with their mandate.
    There is the failure to comply on a regular basis with the 
Unfunded Mandates Reform Act and highlight mandates placed on 
the private sector. There is the inconsistent performance on 
the Congressional Review Act and reporting of regulations to 
the House, the Senate, and the Government Accountability 
Office.
    In their annual report, there is a highly incomplete 
accounting of the overall costs and benefits of regulatory 
activity. And there is, as the Chairman noted in his opening 
remarks, the failure to deliver it along with the budget each 
year, as was originally intended.
    But, more broadly, even if OIRA did a better job, it is our 
belief that broader regulatory reform is needed in the United 
States and that, in doing that, it would be important to codify 
the benefit-cost principles that are in the various Executive 
orders, to include judicial review, so that agencies face some 
consequence for the failure to undertake a rigorous economic 
analysis of the activities that they are about to impact; that 
legislation should include some limits on the regulatory 
activity under that legislation and maybe even a budget of some 
sort to limit it; and that there needs to be a formal and 
systematic retrospective review of existing rules in order to, 
on a regular basis, answer the question, is this regulation 
still a good idea, presuming it was done well at the time of 
its initial enactment.
    So I'm delighted for the chance to be here today to discuss 
OIRA and regulation in general, and I look forward to your 
questions.
    [The prepared statement of Mr. Holtz-Eakin follows:]
    
    
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    Mr. Marino. Thank you, Doctor.
    Ms. Harned?

    TESTIMONY OF KAREN R. HARNED, ESQ., EXECUTIVE DIRECTOR, 
  NATIONAL FEDERATION OF INDEPENDENT BUSINESS, SMALL BUSINESS 
                          LEGAL CENTER

    Ms. Harned. Thank you, Chairman Marino, Ranking Member 
Johnson, and Congressman Bishop. On behalf of the proximately 
350,000 small-business members of NFIB, I thank the 
Subcommittee for its work to ensure that OIRA is effectively 
carrying out its mission.
    Overzealous regulation is a perennial cause of concern for 
small business. Since January 2009, government requirements and 
red tape have been listed as among the top three problems for 
small-business owners. When it comes to regulations, small 
businesses bear a disproportionate amount of the regulatory 
burden. Regulatory costs are now nearly $12,000 per employee 
per year, which is 30 percent higher than the regulatory-cost 
burden that larger businesses face.
    This is not surprising, that the small-business burden is 
higher, since it's the small-business owner, not one of the 
team of compliance officers, who is charged with understanding 
new regulations, filling out required paperwork, and ensuring 
that the business is in compliance with new Federal mandates.
    When reflecting on her time as OIRA Administrator, Susan 
Dudley stated that the first lesson she learned at OIRA was 
that OIRA has no constituency. From the perspective of the 
Administrator, that may indeed be true. OIRA is the proverbial 
skunk at the picnic, keeping agencies wanting to do more in 
check. I have great respect for Ms. Dudley, but, from NFIB's 
perspective, OIRA does have a very important constituency: 
small business.
    During my 13 years at NFIB, I have heard countless stories 
from small-business owners struggling with a new regulatory 
requirement. To them, the requirement came out of nowhere, and 
they are frustrated that they had no say in its development.
    Small-business owners are not roaming the halls of 
administrative agencies, reading the Federal Register, or even 
inside EPA. Small-business owners rely heavily on SBA's Office 
of Advocacy and OIRA to check agency power so they are doing 
what the Regulatory Flexibility Act requires, which is ensuring 
that agencies don't impose costly new mandates on small 
businesses when viable and less expensive alternatives to 
achieve regulatory objectives exist.
    Recently, we have seen a number of costly rules and 
proposals come out of Federal agencies despite stakeholders 
raising significant cost concerns about them. NFIB is concerned 
that OIRA is not performing the rigorous independent analysis 
needed to ensure that the proposed benefits of a new rule truly 
outweigh the negative economic impacts.
    Two recent examples are of particular concern. On June 29, 
the waters of the U.S. rule was issued. The rule radically 
expands Federal jurisdiction and regulatory power over hundreds 
of thousands of landowners, including small businesses. The 
Administration has consistently touted this rule as one that 
will give small businesses more certainly in determining 
whether a Federal permit is going to be required, yet the only 
certainty that small businesses will see from this rule is a 
certainty of more costs in consulting and permitting fees, not 
to mention the risk of 37,500-day penalties if they make the 
wrong decision.
    Remarkably, EPA had the audacity to certify the rule as not 
having a significant economic impact on small business. Even 
SBA's Office of Advocacy publically called on EPA to withdraw 
the rule and perform an RFA analysis before moving forward. Yet 
OIRA did not require the agencies to comply with the RFA. 
OIRA's lack of engagement truly was astounding and begs the 
question, is anyone minding the regulatory store?
    On July 6, the Department of Labor's Wage and Hour Division 
published a proposed rule that would more than double the 
salary threshold for white-collar employees who are eligible to 
receive overtime pay. According to DOL's own estimates, under 
the rule, small businesses would pay on average $100 to $600 in 
direct costs and $320 to $2,700 in additional payroll costs to 
employees in the first year after the proposed rule becomes 
effective.
    As the Obama administration is in its final stretch, OIRA 
should be proactive in discouraging agencies from promulgating 
midnight regulations. Administrator Shelanski and the White 
House should establish and enforce firm deadlines for 
regulatory actions in the Administration's final months. At a 
minimum, all final rules should issue by November 1, 2016.
    Finally, NFIB is very concerned about the efforts of 
agencies to subvert OIRA in the rulemaking process altogether. 
The Legal Center has conducted significant research and 
analysis of several regulatory activities by Federal agencies 
that harm small business, and we will be issuing a detailed 
report in the coming weeks.
    Small businesses are drowning in a sea of regulation. NFIB 
is concerned that OIRA has given final approval to new 
regulations that have significant costs and few benefits.
    Thank you for holding this hearing.
    [The prepared statement of Ms. Harned follows:]
    
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    Mr. Marino. Thank you, Ms. Harned.
    Dr. Williams?

 TESTIMONY OF RICHARD WILLIAMS, Ph.D., DIRECTOR OF REGULATORY 
                STUDIES PROGRAM, MERCATUS CENTER

    Mr. Williams. Yes. I thank you for the invitation, Mr. 
Chairman and Ranking Member.
    Mr. Marino. Doctor, is your microphone on?
    Mr. Williams. Now it is.
    Mr. Marino. Thank you.
    Mr. Williams. Thirty-five years ago, President Carter began 
an experiment based on the proposition that the best way to 
ensure we have only those regulations that work would be to 
require an economic analysis of those regulations and to have 
them overseen by a centralized reviewer. Subsequent to 
President Carter, every President has agreed with that goal.
    In President Carter's words, he said we needed to 
``regulate the regulators'' so that we could, again, in his 
words, ``eliminate unnecessary Federal regulations.'' No doubt 
he had looked at the nearly 85,000 pages of regulations in 1977 
and thought something had to be done.
    He said, going into office, he knew he was going to have 
difficulty controlling the regulatory agencies, so at first he 
tried a few internal committees to oversee them. But, 
ultimately, in 1980, he settled on creating the Office of 
Information and Regulatory Affairs in the President's Office of 
Management and Budget, and he staffed it with about 80 people.
    That was his experiment to control the regulatory state 
from getting out of hand. But here we are, 35 years later, with 
lots of evidence as to whether or not President Carter's 
experiment, OIRA, is the only thing necessary to achieve his 
goal. It is not.
    That is not to say that OIRA has not been punching above 
their weight and trying. They have. But they have not nor 
cannot solve the problems alone. Even if we could solve the 
internal problems of OIRA, such as having way too few people, 
being constrained not to touch politically favored agencies, 
and putting independent agencies under OIRA review, they would 
still be, as many people call them, a speed bump.
    The reason that is true is because they reside in the 
executive branch, the same branch as the regulatory agencies. 
The only way they can stop unnecessary rules is to use their 
extremely limited political capital within the White House.
    So what is the evidence that President Carter's experiment 
has failed? I believe there are five pieces of evidence.
    Number one, as I said, OIRA is too small relative to the 
regulatory agencies to exercise effective oversight. OIRA now 
has about 45 people, compared to several hundred thousand 
regulators who are producing 3,000 to 4,000 rules per year.
    Number two, agencies know and use lots of ways to get 
around OIRA through what we call stealth regulation, things 
like guidance, notices, sue and settle, and other tools that 
get firms to comply, and OIRA plays no role in those. And 
agencies use these despite the fact that OIRA examines so few 
of their rules.
    Number three, the regulatory state has grown to gigantic 
proportions since OIRA's founding. In 1977, as I said, there 
were 85,000 pages of rules; in 2014, there are now 175,000 
pages of rules. And those rules contain over 1 million 
requirements. These rules are cranked out by regulatory 
agencies, and they almost never go away. This leaves firms and 
small governments to attempt to comply with this staggering set 
of commandments.
    Number four, Presidents can't control the regulatory state, 
as evidenced by, amongst other things, midnight rules--rules 
that are rushed through at the end of an Administration. I will 
get back to that.
    Finally, number five, too many regulations don't have a 
solid analytical foundation, the economic analysis that 
President Carter insisted on, and, therefore, they don't 
achieve the results that are promised.
    So the evidence is that OIRA is too small, they are easy to 
get around using stealth regulations, and both informal 
regulations and stealth regulations continue to grow at a 
fantastic rate, and there is very little quality analysis 
accompanying the informal rules.
    We also know that every President since President Carter 
has complained about how hard it is to control the regulatory 
agencies, and every one of them has supported OIRA and the 
requirements to do economic analysis, in hopes of constraining 
regulations to only those that are truly necessary. But every 
President since 1980 has failed.
    So the answer has to lie beyond the President. The answer 
lies in getting both other branches of government, Congress and 
the Judiciary, more involved in overseeing agencies. Congress 
needs better information to help it exercise oversight, and 
stakeholders need to be able to use the judicial system to 
remedy missing, misleading, or ignored regulatory analysis.
    We now appear to be entering a very strange period of 
midnight rules. It appears as though agencies are rushing out 
big rules to ensure that they are finalized well before the 60-
day period that a new Congress and a new President would have 
to disapprove them under the Congressional Review Act. This 
would ensure that no new President could come in and change the 
rules that have been rushed through the process with very 
little political accountability.
    With all of the tools at their disposals, agencies are 
masters at avoiding OIRA, and the evidence for President 
Carter's failed experiment is clear after 35 years.
    Thank you.
    [The prepared statement of Mr. Williams follows:]
    
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    Mr. Marino. Thank you, Doctor.
    Professor Sachs?

TESTIMONY OF NOAH M. SACHS, PROFESSOR, AND DIRECTOR, ROBERT R. 
    MERHIGE CENTER FOR ENVIRONMENTAL STUDIES, UNIVERSITY OF 
                     RICHMOND SCHOOL OF LAW

    Mr. Sachs. Thank you, Mr. Chairman and Ranking Member 
Johnson, other Members of the Committee. Thank you for inviting 
me here today.
    I am going to speak today about the need for both an 
effective and an efficient regulatory system. Agency 
regulations have been essential for carrying out congressional 
mandates, and they have protected life, health, fair 
competition, and property.
    The focus of attacks on the regulatory system usually goes 
to their costs, but numerous studies have found that the 
benefits of Federal regulations vastly exceed the costs. OMB's 
2014 report to Congress showed that the benefits of regulations 
that were enacted between 2003 and 2013 exceeded their costs by 
3 to 15 times. And I would say that is an excellent return on 
investment by any measure.
    There is no evidence that Federal regulations are 
contributing to layoffs. In fact, a comprehensive book-length 
investigation on this subject by scholars at the University of 
Pennsylvania concluded, ``The empirical works suggests that 
regulations plays relatively little role in affecting the 
aggregate number of jobs in the United States.''
    And there are a lot of myths about the costs of regulation. 
There is a number that is frequently heard around this town, 
that regulations from the Federal Government are costing over 
$1.8 trillion per year. That is a number that was used in some 
of the testimony submitted by others today. And that figure is 
20 to 30 times the cost estimate provided by OMB itself. The 
number comes from a report 3 years ago by two economists, Crain 
and Crain. It was recirculated again last year by the 
Competitive Enterprise Institute. And the number has been 
thoroughly debunked by The Washington Post, by the 
Congressional Research Service, and others.
    Restoring efficiency to the system means, first and 
foremost, that we have to reduce the delay that now occurs 
between the time when agencies formulate policy and when 
regulation goes final. The system is slow, cumbersome, complex, 
and opaque, and OIRA contributes to all of that.
    For an agency, the time from policy development to final 
regulation is easily between 3 and 7 years. And what that means 
for Congress is that it can often be a decade between the time 
that Congress passes a law ordering the agency to do something 
and the time when the agency actually enacts its implementing 
regulations. So, rather than adding to the procedural 
requirements that we have, Congress should be examining ways to 
streamline it, including by reducing multiple levels of review, 
reforming the OIRA process, and ensuring that agencies have 
sufficient personnel.
    If you recall the original APA, the Administrative 
Procedure Act, it set out essentially a four-step process for 
enacting rules. The agency issues a draft rule, it takes public 
comment, it considers the comments, and then it enacts the 
final regulation. And what we have done over the past 30 years 
is we have added onto that a really dizzying array of 
procedural requirements and complexity. And we can debate 
whether any particular requirement is good or bad, but the 
upshot of this is that the requirements have contributed to an 
extraordinary delay in rulemaking.
    OIRA is part of the problem here. First of all, OIRA 
provides an opportunity for industry to raise arguments and to 
scale back public health and safety protections, when those 
same arguments were already made in the agency process itself 
during public comment.
    Second, OIRA has amassed a great deal of power over agency 
priorities and rules. In fact, it has effective veto power over 
which rules can go forward and which cannot, even though OIRA 
itself is not staffed by scientific or technical experts, as 
Administrator Shelanski said this morning.
    Third, OIRA routinely delays rulemakings without 
explanation, exceeding its own 90-day limit on reviews, and, in 
many cases, that delay effectively kills the regulations.
    Finally, transparency within OIRA remains low. It doesn't 
disclose its internal deliberations. It doesn't disclose who 
within the executive branch has requested changes to 
regulations. And it doesn't explain to the agency itself why 
regulations are being held up.
    So reform of this process must begin with transparency, and 
it must also begin with giving agencies the resources and the 
personnel that they need.
    Thank you for your attention.
    [The prepared statement of Mr. Sachs follows:]
    
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    Mr. Marino. Thank you, Professor.
    I will begin with my 5 minutes of questioning, and I will 
start with Dr. Holtz-Eakin.
    Doctor, some suggest that, since employment is improving, 
whether that is marginally or not, concerns about 
overregulation are overblown. How do you respond to that?
    Mr. Holtz-Eakin. To say something has no impact on the 
level of employment is not the same thing as saying there is no 
impact on the labor market or the welfare of employees.
    So, if you look at the work that has been done at the 
American Action Forum on the regulatory burden of finalized 
rules since the beginning of the Obama administration, that is 
about $650 billion, so about $100 billion a year.
    That money has to come from somewhere. So businesses might 
choose to pay their workers $650 billion less. That is about a 
percentage point in wage growth every year. And that has been 
the achilles heels of the labor market, no wage growth. It is 
hardly surprising, because the resources have to come from 
somewhere.
    Or they can pass it along to their customers, who would 
need to come up with another $650 billion in raises just to pay 
the higher costs.
    So you can keep employment fixed, but that doesn't mean 
that regulations don't affect the labor market and that they 
aren't very costly to the welfare of employees.
    Mr. Marino. Thank you.
    Ms. Harned, do you have anything to add to that?
    Ms. Harned. Yes, I think that when you look at it from the 
perspective of the small-business owners that we represent, you 
see it daily. I hear it in anecdotes. They are very aware of 
the regulatory requirements coming down the pike that they 
might--whenever you ask them, how many employees do you have, 
they say, well, we are trying--not everybody, but depending on 
where their number is--let's say they are at 30--we are trying 
to stay under, you know, 50, or we are trying to stay under--
there are certain members of the small-business community that 
are very aware that when they hit that next level they are 
going to have a whole new raft of regulatory requirements.
    And so I do think that you see that inhibit growth. They 
want to stay where they are comfortable, where they know they 
are not going to have to hire that extra compliance officer. We 
have definitely seen that in our dealings with our small-
business members.
    Mr. Marino. Dr. Williams, should we be strengthening OIRA, 
improving the regulation process? And if that is done, do you 
see that as a partisan issue, or does everyone stand to gain in 
the long run?
    Mr. Williams. I don't believe that strengthening OIRA is a 
partisan issue. Certainly, every President has agreed that OIRA 
is necessary to try to control the executive branch, and every 
President has agreed toward the end of their Administration 
that they haven't been successful at doing that. As I said in 
my testimony, I believe that OIRA can only be a part, and 
perhaps a small part, of solving the problems of the regulatory 
state.
    Mr. Marino. Professor Sachs, does the law of diminishing 
marginal returns apply in the regulatory context--i.e., once 
basic safeguards are in place, does further improvement 
required spending increasingly more to achieve increasingly 
less? Do you understand my question?
    Mr. Sachs. I do, yes.
    I can imagine a situation where it is true, where there is 
a remarkably effective regulation in place, and it makes little 
sense to keep adding on to that. But that is certainly not the 
case in a lot of areas of law. What I see in my work is there 
are whole areas of law that are either uncovered by regulation 
or that are covered by very weak regulations.
    And one thing that I urge the Committee to look at is the 
GAO's biannual report on high-risk Federal programs, those that 
are in danger of failure or in need of transformation. And so, 
in that report, it is a great example of how the law of 
diminishing returns does not apply. These are broken 
regulations that need fixing and need attention from Congress.
    Mr. Marino. Professor, you said--I think it was in your 
opening statement or even in a document that I read--you 
referred to the regulatory agencies are being slowed by 
``excessive procedural hurdles.''
    Why is regulating regulators more bad but overregulating 
small businesses appears to some regulatory agencies as good?
    Mr. Sachs. Well, I mean, there are several costs to the way 
that we conduct regulation in the U.S.--costs in terms of 
delay, costs in terms of injuries that could have been avoided, 
deaths that could have been avoided because of that delay. So 
that is my big concern about the number of procedural hurdles 
that we have put in front of the agencies.
    Impacts on small business, I am concerned about that, as 
well, and support the laws we have in place to make sure that 
those are addressed.
    Mr. Marino. Okay.
    My time has expired. The Chair now recognizes the Ranking 
Member, Congressman Johnson.
    Mr. Johnson. Thank you, Mr. Chairman.
    Dr. Williams, would you agree with me that the 2008 Great 
Recession was not caused by too much regulation?
    Mr. Williams. Yes, I would absolutely agree with that.
    Mr. Johnson. So, in other words, it is possible that too 
little regulation was what caused the Great Recession of 2008, 
correct?
    Mr. Williams. Sir, I am not an expert in the regulation of 
financial products, but I would have serious doubts that too 
little regulation is what caused the financial crisis.
    Mr. Johnson. Well, I will tell you, do you remember when 
Alan Greenspan came to Congress after the onset of the Great 
Recession and after he was finished with his chairmanship of 
the Federal Reserve and he testified that he had made a mistake 
in believing that banks operating in their own self-interest 
would do what was necessary to protect their shareholders and 
their institutions and that he recommended during his testimony 
that the government should play a much more active regulatory 
role over financial firms? Do you remember that?
    Mr. Williams. I do. And I think my concern, particularly 
with respect to financial regulation, is there is a great deal 
of financial regulation that is going on right now for which 
there is no analysis.
    Mr. Johnson. Well, but----
    Mr. Williams. Too few analysis overall, but there is no 
cost-benefit analysis----
    Mr. Johnson. Well, there may be some regulations that are 
questionable, but I guess the point that I am making is that 
that environment was caused, according to Alan Greenspan, a 
famous free-marketer, was caused by a lack of regulations.
    Ms. Harned, you would agree that costly rules, such as 
airbags, came down the pike on businesses at some point in the 
past, but those costly rules were passed on to consumers, and 
they were actually beneficial to American families. Would you 
agree?
    Ms. Harned. Well, small businesses are not opposed to all 
regulation. There are regulations that----
    Mr. Johnson. Well, and I take it from your----
    Ms. Harned [continuing]. Need to happen. But at the same 
point----
    Mr. Johnson.--I take it from your testimony that there was 
really no fine distinction between good rules and bad rules. It 
was almost like all rules are bad. And you would agree with me 
that that is not the case.
    Ms. Harned. All rules are not bad. But there are definitely 
ways to do this where it is not a one-size-fits-all that really 
hurts the small-business owner disproportionate to the larger 
counterpart.
    Mr. Johnson. Well, and so we should not just look simply at 
the cost--at the cost of a rule without regard to the benefit 
of the rule in determining whether or not the rule is a good 
rule.
    Ms. Harned. Right. But I feel--I think my concern has 
been----
    Mr. Johnson. So you agree with that?
    Ms. Harned [continuing]. It has been more focused--they 
have been overselling the benefits and underplaying the costs 
in recent years on many of these regulatory requirements.
    Mr. Johnson. Well, I appreciate your--you know, the weight 
of your testimony goes more towards, you know, the emphasis on 
cost as opposed to benefits. But you do agree that you should 
consider both cost and benefits in analyzing whether or not a 
rule is appropriate.
    Ms. Harned. Yes.
    Mr. Johnson. And how about you, Dr. Holtz-Eakin? You would 
not disagree with that, would you?
    Mr. Holtz-Eakin. I think no one would disagree with the 
notion that we should examine both benefits and costs.
    Mr. Johnson. So we should not----
    Mr. Holtz-Eakin. The concern is that we don't.
    Mr. Johnson [continuing]. We should not overemphasize cost, 
then, when it comes to, you know, the regulatory reform, as 
they call it.
    Mr. Holtz-Eakin. I think that the most important reform 
would be to actually require that agencies, including the 
independent agencies, look at both benefits and costs in a 
systematic and rigorous fashion, which they do not and are not 
required to do, and, as a result, there is the great potential 
that we have some very poor regulations.
    The second thing we don't ever do is go back and 
essentially do a program evaluation of a regulation.
    Mr. Johnson. Okay.
    Mr. Holtz-Eakin. And there are a lot of estimates of 
benefits that turn out to be way too high, and there is 
literature on that.
    Mr. Johnson. Okay. Well, let me----
    Mr. Holtz-Eakin. Let's look at actual benefits and actual 
costs.
    Mr. Johnson. Okay. Thank you.
    Let me get Professor Sachs to weigh in.
    What do you think about what you have just heard?
    Mr. Sachs. Yeah, a few points.
    I mean, in general, I support the idea of a full accounting 
of the costs of regulations and the benefits. I think it should 
be done with a knowledge that, in a lot of areas of law, it is 
hard to measure the benefits. They may come a few years down 
the line. They may involve health issues that are hard to put a 
dollar sign on.
    Another point I want to respond to is the idea that, you 
know, regulations might harm wages or might result in price 
rises for customers. We have to keep in mind that a lot of 
regulations are simply shifting cost and saying it is not fair 
to impose those costs on consumers or on the public, who might 
be threatened, let's say, by a mountain of coal ash, and that 
it is appropriate and correct to put those costs where they 
belong, which is on the company that is responsible for 
accumulating that ash.
    Mr. Johnson. Thank you.
    And I yield back.
    Mr. Marino. Thank you.
    The Chair recognizes the Chairman of the full Judiciary 
Committee, Congressman Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman. Mr. Chairman, I am 
sorry I wasn't here at the outset. I will put my statement in 
the record.
    And I want to thank all of the witnesses for being here 
today.
    Ms. Harned, I will start with you. Your written testimony 
references sub-regulatory activities by which agencies evade 
OIRA review, but you do not provide details. Can you elaborate 
for us on what evasions are occurring and how they impact small 
businesses?
    Ms. Harned. As I mentioned in my testimony, we will be 
issuing a detailed report in the coming weeks on this. But 
examples I mentioned in the testimony are regulation by amicus, 
where, literally, new standards are being proffered by agencies 
in amicus briefs in courts across this country. In addition, 
you see through guidance documents, field rulings, and informal 
letters new regulatory requirements really being imposed on 
stakeholders across the Nation. Enforcement continues to be a 
tool, as well.
    Mr. Goodlatte. What are field rulings?
    Ms. Harned. Like, memos to field staff, to enforcement 
staff for different agencies, announcing, now we are going to 
look at X, Y, or Z.
    Mr. Goodlatte. Got it.
    Dr. Williams, Professor Sachs argues that subjecting 
independent agencies to OIRA review is unwarranted because they 
are already bound by the notice and comment requirements of the 
Administrative Procedure Act. Would you care to respond to 
that?
    Mr. Williams. The notice and comment, the APA, absolutely 
contains nothing about estimating costs and benefits. And we 
certainly see this. We have seen that the Securities and 
Exchange Commission has attempted to do benefit-cost analysis. 
Four court cases later, the courts have said, and the courts 
are perfectly capable of saying, you didn't follow the right 
procedure to do benefit-cost analysis, and they have remanded 
those rules back to the SEC.
    I think this states the need that we need to have all of 
these independent agencies required to do benefit-cost 
analysis. We now have some 400 to 500 rules coming out of Dodd-
Frank. Almost none of them are going to have benefit-cost 
analysis. We have no idea, at the end of the day, how all of 
them as a whole are going to affect the financial sector of 
this country.
    Mr. Goodlatte. Professor Sachs, you cite a number of 
factors that you say make estimates of regulatory costs 
unreliable. Would you concede that there are, equally, factors 
that make claimed benefits similarly speculative?
    Mr. Sachs. Look, estimating benefits of a regulation that 
might be on the books for years, for decades, it is a difficult 
task----
    Mr. Goodlatte. Or even what is going to happen in months or 
weeks, right?
    Mr. Sachs. Agencies do the best job they can of estimating 
benefits. And that is one of the reasons I have called for more 
retrospective reviews of whether those agency estimates of both 
cost and benefits actually turned out to be correct years down 
the road.
    Mr. Goodlatte. You say that agencies rely on industry for 
cost estimates and that industry has an incentive to inflate 
the numbers. Do you agree that agencies have an incentive to 
inflate the benefits of the regulations that they wish to 
promulgate?
    Mr. Sachs. Their estimates of benefits are going to be 
subject to OIRA review and to judicial review, so they better 
do a good job of getting it right.
    Mr. Goodlatte. Dr. Holtz-Eakin, thank you for coming back 
to our Committee. We always appreciate having you here.
    Do you believe that the Supreme Court's opinion in Michigan 
v. EPA will have a significant impact on the way agencies view 
cost-benefit analysis?
    Mr. Holtz-Eakin. I hope so. It is a very blunt statement of 
the importance of benefit-cost analysis being the legal 
definition of what is an acceptable regulation. And it would be 
my hope that the independent agencies looking for some sort of 
judicial prophylactic would run their estimates by OIRA and get 
them a more effective and systematic vetting of the analysis 
they do.
    Mr. Goodlatte. How positive a development do you think this 
is? As an economist, do you have any way to express that?
    Mr. Holtz-Eakin. As I said, the scale of recent regulatory 
activities is quite striking. I guess I would just disagree 
politely with Professor Sachs on how fast it has happened. I 
mean, we took a look at 362 major regulations over the past 
decade, and the median time to completion was 400 days. This 
isn't something that takes decades. There were 62 major, 
economically significant regs in Dodd-Frank and the Affordable 
Care Act that got done in the first 2 years.
    When they want to move fast, the agencies move fast. As an 
economist, I would say the fact that that is being done without 
a systematic evaluation of the benefits and the costs is a 
significant risk.
    Mr. Goodlatte. Thank you.
    Thank you, Mr. Chairman.
    Mr. Marino. Thank you.
    The Chair now recognizes the gentleman from California, 
Congressman Peters.
    Mr. Peters. Thanks for being here. And I, too, apologize 
for being here a little bit after some of your presentations.
    I want to express sympathy for the effort here. I practiced 
law for some time and practiced environmental law. I had a lot 
of clients who were businesses, some large but mostly small, 
and some local governments trying to get through regulatory 
process. And it is very frustrating when you have the 
inconsistency of the various letters and the rulings. And I am 
more than willing to work to figure out how we can avoid that.
    Let me also say that I have had a little bit of frustration 
in this Committee before on being one of the folks over here 
who would like to work with the folks to your left but 
definitely to my right.
    And I will give you the example of on NEPA. I worked on the 
National Environmental Policy Act, efforts to streamline that, 
to provide deadlines for agencies, to require that all comments 
be made in a central place so that they could all be considered 
and so that you wouldn't see these major projects go on for 
years and years before you got an answer. And I have always 
felt and my clients always felt, you know, you can tell me yes 
or tell me no, but tell me soon so I can make plans. I am 
totally sympathetic with that.
    My effort to cooperate on that had been derailed, though, 
because of the insistence of the majority of including a 
prohibition on talking about particular content--in this case, 
the social cost of carbon.
    So if we can separate the ideology out from the process, I 
want you to know that you have an avid advocate for process 
reform that would help all of business. And I think it is 
really important--it is really one of the most important 
aspects for us to support economic growth in the economy. So, 
if you help me eliminate some of the ideology and let the 
process come up with the answer, not inject the answer ahead of 
time, I am more than happy to help you. And I would look 
forward to working on this in the future.
    I did want to ask Professor Sachs an open-ended question, 
though, with respect to cost-benefit analysis. And maybe you 
could just tell us whether you think there is a role and what 
that role would be for cost-benefit analysis in the regulation 
of economic activity.
    Mr. Sachs. I do believe there is a role. I am not an 
opponent of cost-benefit analysis as a concept. I think the 
devil is in the details on it. How is it done? What role does 
it play? Is it a decision rule so that only those regulations 
with benefits that exceed costs can go forward? Or is it just 
one input into the process?
    I think that there is a role for cost-benefit analysis in 
telling us where the bad regulations are, where are the ones 
that have vastly excessive costs compared to benefits.
    So I would agree with you on that.
    Mr. Peters. I guess, maybe, as we look at how to maybe land 
this plane, is there some agency you think is doing it right 
that we could look at and use as an example?
    You know, the problem with saying that it is not exact and 
it should be a factor is it doesn't really provide the kind of 
guidance and even oversight that I think this Committee would 
like to have in the process.
    Mr. Sachs. Uh-huh. I am not able to say which agencies as a 
rule are doing it better than others. What I will say, though, 
is we can point to a number of cases where Congress itself has 
not called for cost-benefit analysis and has said, look, we are 
addressing a difficult field of law, addressing a difficult 
problem, and the standard we want to put into the statute is 
something other than cost-benefit analysis, something like 
``use best available technology''----
    Mr. Peters. Right.
    Mr. Sachs [continuing]. Or something like ``regulate in the 
public interest.''
    Mr. Peters. Right. Okay.
    Well, I know it is a tremendously difficult issue to handle 
via broad brush, but I do think it is important. I want to 
thank the Chairman for having this hearing. And I look forward 
to trying to work constructively to come up with bipartisan 
solutions to make sure that we get high standards but we do it 
in a way that, in itself, doesn't slow down the economic 
activity and job creation we would all like to see. And I hope 
to be a partner in that.
    And I yield back.
    Mr. Marino. Thank you, Congressman. And I look forward to 
working with you on these issues.
    The Chair now recognizes the gentleman from Michigan, 
Congressman Bishop.
    Mr. Bishop. Thank you, Mr. Chair.
    And thank you to the panel for your testimony today. Always 
good to discuss ways in which we can be more efficient, 
especially with regard to our small-business community.
    Having spent the good part of my professional career in the 
practice of law and representing small business and just coming 
out of a small business myself, helping run a small business, I 
can attest firsthand to how difficult it is to comply with the 
massive amount of regulation that exists. I was the compliance 
officer in the business, so I know how this works, everything 
from HIPAA to Dodd-Frank to across the board, the spectrum.
    I am a little bit taken aback by the idea that, somehow, 
someone came to the conclusion that in this environment the 
benefits outweigh the costs of regulation. And I am wondering 
how that is measured. How do we measure costs? How do we 
measure benefits? Is that a unified system and standard?
    I guess I would like to get your take on that, Professor 
Sachs.
    Mr. Sachs. Yeah, I think the studies on whether the 
benefits exceed the costs are done annually by OMB. And what 
they are looking at are the benefits and costs that are used in 
the regulatory process, that are submitted by the agencies 
themselves, and that form the basis of the OIRA review. So that 
is where the numbers come from. They are estimates; there is no 
doubt about that. Both that the cost and the benefits are 
estimates.
    Mr. Bishop. From my perspective, in kind of a real-world 
setting, having been in a small business, and for virtually 
everybody--and I can't think of a single soul that I have 
spoken to in a small business who has made that conclusion. I 
mean, all I get from the constituents, the folks that I 
represent is that it is wildly oppressive, and they are 
overburdened with the excessive amounts of regulation.
    I would be interested to hear the NFIB's position on that. 
Just give me an idea as to what the reaction would be from your 
membership if they were up on this stand and heard that 
testimony about the benefits outweighing the costs.
    Ms. Harned. Well, they would react like your constituents. 
We see that every month. Our research foundation does their 
small-business economic trends, where they look at what is the 
plans for hiring in the next 3 months, what is the plans for 
layoffs, inventory, all of that. And then, when it is not a 
good time to hire, they ask why. Every month, they ask, why, if 
you are not going to hire, is this not a good time? And for the 
last several years, one of the top three answers has been 
government regulation. So that is a realtime, real-world thing 
we are facing.
    On the benefits, one thing I would say, you know, we have 
been talking generally about how we, at least on the side of 
small business, think that benefits have been inflated in the 
calculations as of late.
    The Clean Power Plan Rule that was issued last year is a 
perfect example of this. They weighed the benefits to the 
world. Literally, go look. It's the benefits to the world, not 
just to Americans, that was used as part of their benefit 
calculation. And we think that was inappropriate.
    Mr. Bishop. Thank you very much for that.
    Mr. Holtz-Eakin, I wondered if you might be able to--as a 
former head of the CBO, it is obvious that you are familiar 
with this process of estimating costs. And I am wondering, what 
is your current view of the Administration's cost-estimating 
methodology for major rules? And if you can give me some 
background on this. And is there any current rule or Committee 
in place in Congress to oversee the methods? How did we get to 
this point?
    Mr. Holtz-Eakin. I think the major problem is the lack of 
consistency and the incompleteness in the process.
    Estimating benefits and costs is hard, but it should be 
done. You should do it to the best of your ability, explain how 
you did it, be quite transparent in your efforts. And every 
agency, the independent ones, the Cabinet-level ones, should be 
doing it. They should be doing it using the same methods. And 
that is not happening right now, and you get very incomplete 
reports as a result.
    So, for example, the report that Professor Sachs mentioned 
about how benefits exceed costs, if you look in the 2013 
report, OIRA monetized seven rules and came up with their 
estimate of cost. We looked at the same data in the Federal 
Register, and there were 310 rules that had significant 
paperwork or burden costs.
    So it is a very incomplete accounting of cost and benefit. 
So you need a completeness in the process and completeness in 
the accounting.
    Mr. Bishop. Thank you, sir.
    I yield back.
    Mr. Marino. Thank you.
    Seeing no other congressional Members, this concludes 
today's hearing.
    I want to thank all of the witnesses for attending. I learn 
something from you each time.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses or 
additional materials for the record.
    This hearing is adjourned.
    [Whereupon, at 5:24 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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               Material Submitted for the Hearing Record

 Material submitted by the Honorable Henry C. ``Hank'' Johnson, Jr., a 
   Representative in Congress from the State of Georgia, and Ranking 
Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law

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   Response to Questions for the Record from the Honorable Howard A. 
 Shelanski, Administrator, Office of Information and Regulatory Affairs
 
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  Response to Question for the Record from Noah M. Sachs, Professor, 
   University of Richmond School of Law, Member Scholar, Center for 
    Progressive Reform, and Director, Robert R. Merhige Center for 
                         Environmental Studies

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