[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]



 
            SHINING LIGHT ON THE FEDERAL REGULATORY PROCESS

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

                                HEARING

                               BEFORE THE

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 14, 2018

                               __________

                           Serial No. 115-73

                               __________

Printed for the use of the Committee on Oversight and Government Reform




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         Available via the World Wide Web: http://www.fdsys.gov
                       http://oversight.house.gov
                       
                       

                         _________ 

              U.S. GOVERNMENT PUBLISHING OFFICE
                   
30-942 PDF             WASHINGTON : 2018                             




                       
                       
              Committee on Oversight and Government Reform

                  Trey Gowdy, South Carolina, Chairman
John J. Duncan, Jr., Tennessee       Elijah E. Cummings, Maryland, 
Darrell E. Issa, California              Ranking Minority Member
Jim Jordan, Ohio                     Carolyn B. Maloney, New York
Mark Sanford, South Carolina         Eleanor Holmes Norton, District of 
Justin Amash, Michigan                   Columbia
Paul A. Gosar, Arizona               Wm. Lacy Clay, Missouri
Scott DesJarlais, Tennessee          Stephen F. Lynch, Massachusetts
Blake Farenthold, Texas              Jim Cooper, Tennessee
Virginia Foxx, North Carolina        Gerald E. Connolly, Virginia
Thomas Massie, Kentucky              Robin L. Kelly, Illinois
Mark Meadows, North Carolina         Brenda L. Lawrence, Michigan
Ron DeSantis, Florida                Bonnie Watson Coleman, New Jersey
Dennis A. Ross, Florida              Raja Krishnamoorthi, Illinois
Mark Walker, North Carolina          Jamie Raskin, Maryland
Rod Blum, Iowa                       Jimmy Gomez, Maryland
Jody B. Hice, Georgia                Peter Welch, Vermont
Steve Russell, Oklahoma              Matt Cartwright, Pennsylvania
Glenn Grothman, Wisconsin            Mark DeSaulnier, California
Will Hurd, Texas                     Stacey E. Plaskett, Virgin Islands
Gary J. Palmer, Alabama              John P. Sarbanes, Maryland
James Comer, Kentucky
Paul Mitchell, Michigan
Greg Gianforte, Montana

                     Sheria Clarke, Staff Director
                  Robert Borden, Deputy Staff Director
                    William McKenna, General Counsel
                        James Lesinski, Counsel
                         Kiley Bidelman, Clerk
                 David Rapallo, Minority Staff Director
                 
                 
                 
                 
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 14, 2018...................................     1

                               WITNESSES

Ms. Kris Nguyen, Acting Director for Strategic Issues, Government 
  Accountability Office
    Oral Statement...............................................     5
    Written Statement............................................     7
Mr. Paul Noe, Vice President, Public Policy, American Forest and 
  Paper Association
    Oral Statement...............................................    28
    Written Statement............................................    30
Ms. Karen Harned, Executive Director, National Federation of 
  lndependent Business: Small Business Legal Center
    Oral Statement...............................................    54
    Written Statement............................................    56
Professor Nicholas Parrillo, Professor of Law, Yale Law School
    Oral Statement...............................................    66
    Written Statement............................................    68
Mr. Amit Narang, Regulatory Policy Advocate, Public Citizen
    Oral Statement...............................................    89
    Written Statement............................................    92

                                APPENDIX

 U.S. General Services Administration, Office of lnspector 
  General, report titled, ``Evaluation of GSA Nondisclosure 
  Policy,'' submitted by Ms. Maloney.............................   128
Submission of Federal Rules Under the Congressional Review Act 
  form, submitted by Mr. Palmer..................................   150


            SHINING LIGHT ON THE FEDERAL REGULATORY PROCESS

                              ----------                              


                       Wednesday, March 14, 2018

                  House of Representatives,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The committee met, pursuant to call, at 10:02 a.m., in Room 
2154, Rayburn House Office Building, Hon. Trey Gowdy [chairman 
of the committee] presiding.
    Present: Representatives Gowdy, Duncan, Jordan, Amash, 
Farenthold, Meadows, DeSantis, Ross, Walker, Blum, Grothman, 
Hurd, Palmer, Comer, Maloney, Norton, Connolly, Kelly, 
Krishnamoorthi, Welch, and Plaskett.
    Chairman Gowdy. Good morning. The Committee on Oversight 
and Government Reform will come to order.
    Without objection, the presiding member is authorized to 
declare a recess at any time.
    I want to welcome our guests. I will introduce you 
individually in just a moment, but for now I will recognize my 
friend from North Carolina for his opening statement.
    Mr. Meadows.
    Mr. Meadows. Thank you, Mr. Chairman. Thank you for your 
leadership in calling this hearing.
    Obviously, Federal agencies have a very active role 
assigned to them by Congress, and what they do touches the 
daily lives of the public. There is no doubt that Federal 
agencies play an important role in our government, but they 
should still play by the rules laid down by Congress when it 
comes to issuing the rules themselves.
    The rulemaking process has changed over time and can get 
very technical, but what has not changed is only Congress can 
legislate and agencies cannot issue regulations unilaterally. 
Rules are supposed to be issued in accordance with several 
statutes and executive orders, but, as is the case with this 
hearing today, and it will show today, that this doesn't always 
happen. In fact, in 2016 alone, 18 regulations were issued for 
each law passed by Congress, not to mention the hundreds of 
pages of guidance that came along with those regulations.
    According to the Federal Register, agencies issued 3,280 
rules last year. Now, this amounts to just a little bit less 
than nine rules per day, including weekends and Federal 
holidays. Now, that's an improvement over the previous 
administration, where we saw 10-1/2 rules passed each day in 
2016.
    Now, several laws and executive orders establish a 
regulatory process designed to require agencies to consult with 
the affected parties, evaluate their benefits and certainly the 
compliance burdens and other costs, and consider alternatives 
to regulate.
    Now, we know Federal agencies are not consistently 
following the rules Congress and the President have 
established. In fact, recently, GAO released the findings of an 
audit concluding that agencies have become increasingly 
noncompliant with the Congressional Review Act. And when 
issuing rules at the end of a Presidential administration--this 
is particularly evident--especially when they have significant 
impact, those rules which actually cost the economy at least 
$100 million.
    Agencies also issue guidance, which is a statement of 
policy or an interpretation of the law or regulations. 
Generally, guidance is supposed to inform the public of how to 
comply with those laws. Unfortunately, we don't know how many 
guidance documents agencies have issued, nor do we know how 
much it will cost the economy. One of our witnesses today has 
written that, while no one knows how many guidance documents 
are out there, everyone agrees that the total is oceanic in 
scale.
    Late last year, our committee launched an oversight project 
on regulatory guidance documents. In response to our December 
request, agencies provided information on more than 12,800 
documents. Now, the final number is still rising as agencies 
continue to produce the information.
    Agencies have also had difficulty in complying with a few 
existing requirements for issuing guidance documents. In fact, 
in 2015, the GAO undertook an audit of the Departments of 
Agriculture, Education, Health and Human Services, and Labor 
and found shortcomings in complying with applicable 
requirements.
    The committee's oversight project also found widespread 
noncompliance with the CRA in the executive directives. 
Agencies reported to the committee that they had submitted just 
189 guidance documents to Congress and the GAO, as it is 
required by the CRA. That's a submission rate of less than 
0.015 percent.
    In the last 5 months, GAO has issued four opinions to 
Members of Congress finding certain guidance documents are 
considered rules under the Congressional Review Act and, 
therefore, must be submitted.
    Now, in conclusion, we know that more congressional 
requests for opinions on whether certain guidance documents are 
pending before the CRA. Clearly, GAO will never be able to 
review the more than 12,800 guidance documents in our limited 
sample, let alone the entire universe of the agency guidance. 
And there is some sort of disconnect between what the law says 
and what agencies do.
    So we look forward to hearing your testimony today and you 
shining the light on this regulatory process as we try to make 
sure that we do what is according to the law and the rules and 
upholding the will of Congress.
    I yield back.
    Chairman Gowdy. I thank the gentleman from North Carolina 
and would now recognize the gentlelady from New York to give 
her opening statement.
    Mrs. Maloney. Thank you, Mr. Chairman, for calling today's 
important hearing.
    And thank you to all of our witnesses here today.
    I would like to start by making one important point: We all 
agree that rules and guidance documents should be fair, open, 
and informed by those entities and individuals who are 
regulated by them. However, we cannot simply eliminate them. 
That would result in chaos.
    I want to point out that it is often members of the 
business community who want regulations and guidance, because 
they want certainty, they want clarity. That is critical for 
them to determine how to invest their time and their resources. 
Guidance documents, even though they are nonbinding, are often 
very useful to regulated entities in explaining how they can 
stay on the right side of the law.
    The chairman has invited Professor Nicholas Parrillo to 
testify today, and I am pleased that he is here. He issued a 
report highlighting this point. And he based it on interviews 
with business representatives who stressed the importance of 
guidance documents.
    For example, Marc Freedman, the executive director of labor 
law policy at the U.S. Chamber of Commerce, and I quote, 
acknowledged that business sometimes demanded guidance and that 
it was quite reasonable for the agency to provide it to clarify 
vague legislative rules, end quote.
    Let me give you an example. Industry groups recently asked 
the IRS to issue guidance about the new tax law. The American 
Institute of Certified Public Accountants wrote to the IRS that 
specific areas, and I quote, ``need immediate guidance in order 
for taxpayers and practitioners to comply with their 2017 tax 
obligations and to make informed decisions regarding cash flow, 
entity structure, retirement, wealth transfer, and a vast 
number of other tax planning issues,'' end quote.
    Professor Parrillo summarized his findings by writing this, 
and I quote: ``It was clear from these interviews that guidance 
increases an agency program's integrity and efficiency and 
shields regulated parties against unequal treatment, 
unnecessary work, and unnecessary risk,'' end quote.
    Guidance works best if there is ongoing interaction between 
regulators and the regulated entities. This interaction can 
take the form of conversations with stakeholders, advisory 
committee meetings, townhalls, or even requests for public 
comment.
    But we need to avoid placing an overwhelming burden on 
Federal agencies. Guidance documents are effective precisely 
because regulators can issue them more quickly than Federal 
rulemaking. Imposing burdensome requirements on guidance 
documents will mean that agencies will stop using them, 
depriving the business community and others of this very useful 
tool.
    Formal rules are different, because they carry the force of 
law. They are governed by statutory procedures that require 
formal public participation and the opportunity to appeal to 
the courts if these processes are not followed. This has been 
the law since we enacted the Administrative Procedure Act in 
1946.
    My concern is that there are multiple recent examples of 
the Trump administration attempting to circumvent the 
Administrative Procedure Act or issue agency guidance that is 
not even public, which leads to less transparency and 
certainty, not more.
    For example, just last week, the Inspector General for the 
General Services Administration issued what I thought was an 
excellent report, finding that the agency's guidance on how the 
staff communicate with Congress, and I quote, ``lacks 
transparency,'' end quote, and completely omitted whistleblower 
protection language that is required by the Whistleblower 
Protection Act.
    Specifically, the IG found that GSA, and I quote, ``created 
opportunities for confusion, misinterpretation, and 
inconsistent application among its officials and employees,'' 
end quote.
    According to the IG, GSA followed oral instructions from 
the White House to stop responding to oversight and 
investigative requests from Members of Congress other than 
committee chairs. GSA officials communicated this new policy to 
staff in, quote, ``small, in-person meetings,'' end quote, and 
through, quote, ``telephone calls and hallway conversations.''
    And I'd like unanimous consent to put this excellent report 
in the record outlining these conflicts.
    Chairman Gowdy. Without objection.
    Mrs. Maloney. In another example, the Department of Labor 
is withholding from the public an economic analysis of its 
proposed rule to allow employers to take the tips from 
restaurant workers and other employees, according to press 
reports. The Department did not publish its analysis, which 
showed that, quote, ``employees would lose out on billions of 
dollars in gratuities,'' end quote.
    Hiding from the public an analysis conducted by the agency, 
especially when it contradicts the agency's own proposal, is 
the opposite of the transparency we expect in the rulemaking 
process.
    For today's hearing, I am very pleased that we will be able 
to shine a light on the Federal regulatory process, and I look 
forward to the testimony.
    This is ``Sunshine Week.'' And, after all, as the saying 
goes, sunlight is the best disinfectant. I hope we can apply 
that disinfectant across the board and not limit it only to 
those issues with which some may disagree.
    Thank you, Mr. Chairman.
    Chairman Gowdy. I thank the gentlelady from New York.
    We are pleased to have a distinguished panel of witnesses-
slash-experts.
    I'm going to introduce you en banc and then recognize you 
individually for your opening statement.
    First, to my left, Ms. Kris Nguyen, Acting Director for 
Strategic Issues at the Government Accountability Office; she 
is accompanied by Mr. Robert Cramer, Managing Associate General 
Counsel at GAO, who will also be sworn in in just a moment; Mr. 
Paul Noe, vice president of public policy at the American 
Forest and Paper Association; Ms. Karen Harned, executive 
director, National Federation of Independent Business: Small 
Business Legal Center; Professor Nicholas Parrillo, professor 
of law at Yale Law School; and Mr. Amit Narang, regulatory 
policy advocate at Public Citizen.
    Pursuant to committee rules, I'm going to have to 
administer an oath to you. So if you would please rise, and 
we'll do that.
    Do you solemnly swear or affirm the testimony you're about 
to give will be the truth, the whole truth, and nothing but the 
truth, so help you God?
    May the record reflect the witnesses answered in the 
affirmative.
    You may be seated.
    In order to allow the members to ask their questions and to 
be good stewards of your time, I just want you to know your 
opening statements are all part of the record. If I could get 
you to limit your remarks to 5 minutes.
    And there are a set of lights, in theory, that are designed 
to help with that. So if you--I know a lot of our members have 
not figured out the lighting system yet, so I'll share it with 
you. Green, you're good. Yellow, speed up, try to get under the 
light as quick as you can. Red, if you could begin to maybe 
wrap up that final thought.
    So, with that, Ms. Nguyen.

                       WITNESS STATEMENTS

                    STATEMENT OF KRIS NGUYEN

    Ms. Nguyen. Chairman Gowdy and members of the committee, 
thank you for inviting me today to discuss Federal regulatory 
and guidance practices.
    Agencies use Federal guidance and regulations to achieve 
national goals, such as improving the economy and protecting 
the health and safety of the public. The importance of 
improving the transparency of agencies' guidance and regulatory 
practices is a common theme throughout GAO's body of work.
    At your request, this testimony focuses on two reports. Our 
2015 report on regulatory guidance addresses selected agencies' 
adherence to relevant OMB requirements and internal controls. 
And our recently released report discusses agencies' compliance 
with procedural requirements for rulemaking, including the 
Congressional Review Act.
    Regarding our 2015 report, we found that USDA, Education, 
HHS, and Labor did not consistently adhere to OMB requirements 
when developing significant guidance. Specifically, agencies 
did not consistently follow OMB requirements for the 
development and dissemination of significant guidance. While 
some agencies had written procedures for the approval of 
significant guidance, others had none or their procedures 
needed updating. We also found that three of the four agencies 
consistently applied OMB requirements for public access and 
feedback; however, one agency, HHS, did not.
    Agencies also lack adherence to internal controls for 
nonsignificant guidance. For example, most sub-agencies we 
reviewed did not have written procedures for producing 
guidance, and about half did not regularly evaluate whether 
issued guidance was effective and up to date.
    Nonsignificant guidance is not subject to OMB requirements. 
As such, application of internal controls is important to help 
agencies achieve effective guidance practices. In this report, 
GAO made 11 recommendations to the 4 agencies we reviewed. 
Three of these recommendations remain unimplemented by HHS. HHS 
cannot ensure transparency and effectiveness of its guidance 
practices until it takes steps to improve its adherence to OMB 
requirements and internal controls.
    For the report GAO issued on Tuesday, we reported, among 
other things, one, the number of regulations issued during 
Presidential transition periods and their characteristics and, 
two, agencies' reported compliance with requirements for issued 
regulations.
    During the transition from the end of the Clinton, Bush, 
and Obama administrations to the next, the administrations 
published, on average, about two and a half times more 
economically significant regulations during transition versus 
nontransition periods.
    Agencies more frequently provided advance notice to the 
public during transition periods, which provided the public 
opportunities to influence the development of these 
regulations. However, we found that agencies less often 
complied with the CRA in providing Congress time to review and 
possibly disapprove regulations. This inconsistent compliance 
with CRA also occurred during nontransition periods. Agencies' 
most common deficiency was the failure to provide Congress the 
required time to review regulations.
    In this report, GAO recommended OMB identify regulations at 
risk for not complying with the CRA and work with agencies to 
ensure compliance.
    It is important that agencies consistently provide Congress 
with the required time to review regulations throughout a 
President's term and, in particular, during a Presidential 
transition, when Congress typically has a larger number of 
regulations to review.
    Improvements made in transparency of the guidance and 
regulatory process benefit not only the public but also improve 
congressional oversight.
    Thank you.
    [Prepared statement of Ms. Nguyen follows:]
    
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    Chairman Gowdy. Thank you.
    Mr. Noe.

                     STATEMENT OF PAUL NOE

    Mr. Noe. Thank you, Chairman Gowdy and members of the 
committee, for the honor to testify before you today on behalf 
of the American Forest and Paper Association and the American 
Wood Council.
    Regulatory transparency is an important and timely issue 
that really goes to the heart of our governmental system--due 
process, transparency, and fundamental fairness and 
accountability. AF&PA and AWC applaud the committee for 
addressing this issue.
    For over 32 years, I have worked on regulatory policy, 
including in the Senate and the White House Office of 
Management and Budget, private practice, and trade 
associations. Having lived in the belly of the beast, I 
strongly believe there are many ways in which our rulemaking 
process could be more transparent and accountable. Today, I'd 
like to offer just a handful of problems and potential 
solutions.
    First, more light should be shined on the vast but often 
mysterious part of the administrative law universe which is 
agency guidance, also called regulatory dark matter. To be 
sure, appropriate guidance can play a very beneficial role in 
regulatory programs, and I don't want to miss that fundamental 
point. But the truth is nobody knows how many guidance 
documents there are or how to find them all.
    Eleven years ago, when I was at the White House Office of 
Management and Budget, I worked on an OMB bulletin for agency 
good guidance practices that requires: first, agency procedures 
for the approval and use of significant guidance documents; 
second, standard elements--for example, agencies were directed 
to avoid inappropriate mandatory language--and, third, public 
access and feedback procedures. Each agency was required to 
maintain on its website a current list of its significant 
guidance documents that were in effect, and there also was a 
requirement to provide for public comment and public requests 
for modification or repeal of guidance, as well as a 
presumption of pre-adoption notice and comment for economically 
significant guidance.
    The bulletin is rooted in longstanding recommendations of 
nonpartisan expert organizations, but, unfortunately, both 
congressional oversight and GAO reports have shown, as you've 
just heard, that agencies have not been complying with this 
bulletin.
    Thus, I think Congress should elevate good guidance 
practices into statute. And I think an excellent first step 
would be enactment of the Guidance Out of Darkness Act, 
sponsored by Congressman Walker. I can't imagine why anyone 
would oppose a bill requiring Federal agencies to post all of 
their guidance on a centralized, publicly accessible location 
on their website.
    Sometimes agencies have even gone further, and they've 
circumvented the notice-and-comment requirements of the 
Administrative Procedure Act to essentially regulate through 
guidance. Congress passes broadly written statutes. Agencies 
follow with broadly written regulations. And then, over the 
years, agencies fill in the gaps with highly detailed guidance.
    As the D.C. Circuit put it, quote, ``The phenomenon is 
familiar. Law is made without notice and comment, without 
public participation, without publication in the Federal 
Register or the Code of Federal Regulations.''
    I commend the Department of Justice for addressing the 
improper use of agency guidance, and I think more should be 
done on a government-wide basis.
    Second, for over 37 years, regulatory agencies often have 
circumvented the Presidential orders requiring that regulations 
maximize net benefits to society by interpreting their statutes 
to preclude full cost-benefit balancing. This is a huge but 
unrecognized problem that undermines agency accountability and 
transparency and leads to unnecessarily wasteful and 
ineffective regulations that are not designed to enhance 
societal well-being.
    President Trump should take a historic step to ensure 
smarter regulation by directing the agencies, including the 
independent regulatory commissions, to interpret their statutes 
to fully allow benefit-cost balancing unless prohibited by law.
    Third, agencies should be more transparent about key 
information supporting regulatory decisions.
    And, finally, for the last 12 years, agencies have done a 
very poor job of complying with the Congressional Review Act. 
It clearly mandates that before a rule can take effect the 
agency must submit the rule to Congress for review. And covered 
rules include both legally binding regulations and agency 
guidance documents.
    Various reports have shown that many rules have not been 
submitted to Congress since the law was enacted in 1996, and 
that's especially true for guidance. That raises questions 
whether these rules are legally in effect. And it also raises 
questions about Congress' ability to overturn those rules today 
under the expedited procedures of the Congressional Review Act 
even if the rules were issued years ago.
    Thank you again for the opportunity to testify today.
    I would be happy to address any questions you may have.
    [Prepared statement of Mr. Noe follows:]
    
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    Chairman Gowdy. Thank you.
    Ms. Harned.

                   STATEMENT OF KAREN HARNED

    Ms. Harned. Thank you, Chairman Gowdy, Ms. Maloney, and the 
rest of the committee, for having this hearing today. On behalf 
of the NFIB, National Federation of Independent Business, I 
appreciate the opportunity to testify regarding making the 
Federal regulatory process more transparent.
    Overzealous regulation is a continuous concern for small 
business. The uncertainty caused by future regulation 
effectively acts as a boot on the neck of small business, 
negatively impacting the small-business owner's ability to plan 
for future growth. In a small business poll on regulations, 
NFIB found that almost half of small businesses surveyed viewed 
regulation as a very serious or somewhat serious problem.
    So it is not surprising to learn that America's small-
business owners view President Trump's commitment to rolling 
back unnecessarily burdensome and duplicative regulation as one 
of his administration's greatest accomplishments in his first 
year in office.
    Due in large part to the Trump administration's 
deregulatory agenda, small-business optimism is at its highest 
level in decades, according to NFIB's survey on small-business 
economic trends, which we do monthly.
    But much more work can and should be done to make the 
Federal regulatory process more transparent and more 
accountable to the American people, particularly when it comes 
to regulation through guidance documents and other sub-
regulatory pronouncements that impose new mandates on small 
business.
    The NFIB Small Business Legal Center outlined this 
phenomenon in our September 2015 report, ``The Fourth Branch & 
Underground Regulations,'' where we also cataloged these 
abuses.
    Make no mistake: As Paul just said, easy-to-understand 
guidance documents can be an effective tool to help small-
business owners understand their legal regulatory obligations. 
In fact, the Legal Center frequently directs small-business 
owners to such helpful guidance documents like DOL's Wage and 
Hour tip sheets and EPA's One-Stop Shop page for small-business 
compliance assistance.
    But there is a bright line between merely restating the law 
as it stands and establishing regulatory policy through 
guidance. A true guidance or advisory should do no more than 
restate the requirements of established law, ideally doing this 
as plainly and simply as possible. It should not impose new 
affirmative burdens on the regulated community.
    NFIB appreciates this committee's efforts to find solutions 
that will shine light on the regulatory process. In particular, 
NFIB believes that H.R. 4809, the Guidance Out of Darkness Act, 
would be a positive step forward in providing transparency of 
agency guidance documents and other sub-regulatory activities.
    We also think Congress should consider requiring agencies 
to organize guidance materials in some manner that is easily 
navigable and user-friendly.
    Additionally, NFIB respectfully offers one overarching 
principle for Congress to consider as it explores other 
legislative solutions: The regulated public should have a right 
to voice concerns over any newly announced policy, rule, or 
administrative interpretation of law that could impose 
affirmative regulatory burdens on them. Regardless of whether 
the rule in question might be characterized as legislative or 
interpretive, we maintain that it should only be adopted and 
enforced if it has gone through some form of notice and 
comment.
    Finally, NFIB commends Attorney General Sessions for 
setting an example for other agencies to follow with his 
November 16, 2017, memorandum that instructs Department of 
Justice officials to no longer issue guidance documents that 
purport to create rights or obligations that bind persons or 
entities outside of the executive branch.
    And we applaud then-Associate Attorney General Rachel Brand 
for following up on that directive with an instruction earlier 
this year to heads of civil litigating components and U.S. 
attorneys that they are not to use the Department's enforcement 
authority to effectively convert agency guidance documents into 
binding rules in affirmative civil enforcement litigation.
    NFIB encourages other agencies in the Federal Government to 
follow course and Congress to consider legislative solutions 
that would codify this practice.
    NFIB applauds this committee for highlighting the need to 
bring transparency to its regulation in all forms, including 
agency guidance documents. Such transparency is critical for 
America's small-business owners, who struggle to keep up with 
the myriad of regulations on the books while they run and grow 
their business.
    Thank you for having me testify today, and I look forward 
to your questions.
    [Prepared statement of Ms. Harned follows:]
    
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    Chairman Gowdy. Yes, ma'am. Thank you.
    Professor.

                 STATEMENT OF NICHOLAS PARRILLO

    Mr. Parrillo. Mr. Chairman, Ms. Maloney, and members of the 
committee, thank you for the opportunity to testify this 
morning.
    The principal basis for my testimony is a study of Federal 
agency guidance documents that I conducted as a consultant for 
the Administrative Conference of the United States, for which I 
interviewed 135 individuals across a range of agencies, 
industries, and NGOs.
    The Conference recently completed the process of adopting a 
new recommendation on guidance. I participated extensively in 
that process, and I broadly support the recommendation, though 
I am not testifying as a representative of the Conference.
    The term ``guidance'' covers all general statements that an 
agency makes, short of issuing full-blown regulations, that 
advise the public on how the agency plans to exercise its 
discretion or interpret law.
    Guidance is an important means for increasing the 
transparency of regulation. When an agency chooses individual 
targets for enforcement or decides individual applications for 
licenses or benefits, the agency has the option to proceed case 
by case. The case-by-case approach can subject regulated 
parties to uncertainty and unequal treatment. Guidance 
redresses this problem by telling regulated parties in a 
general, comprehensive, understandable way how the agency plans 
to handle individual proceedings.
    Regulated parties often want this guidance and complain 
about not getting enough of it. On the other hand, guidance can 
undermine transparency if guidance substitutes for notice-and-
comment rulemaking.
    Given these competing considerations, we confront what you 
might call a transparency tradeoff. You can try to increase 
transparency if you mandate that any policy an agency makes 
about a certain matter has to be made through an open process 
like notice and comment, but an open process eats up scarce 
agency resources. So, if the agency is strapped, it may react 
to this mandate by giving up articulating any general policy on 
the matter, which would be the worst outcome for transparency.
    In grappling with this tradeoff, it helps to consider why 
guidance is exempt from notice and comment to begin with. 
Guidance, unlike a full-blown regulation, is supposed to be 
nonbinding. The idea is that it's okay to issue a policy 
without the safeguards of notice and comment so long as the 
policy is not cut and dried, so long as the agency in 
individual proceedings is flexible and open-minded when 
regulated parties argue for individual departures from the 
policy.
    But agencies are sometimes inflexible. One might assume 
that flexibility is an agency's path of least resistance, such 
that inflexibility must be the product of some conscious and 
nefarious purpose to treat guidance like a regulation. But that 
kind of blanket assumption is mistaken. Agencies face external 
pressures andunintended internal dynamics that can make them 
inflexible by default.
    The new Conference recommendation suggests organizational 
reform measures to counter this inflexibility. Admittedly, many 
of these measures require managerial initiative and the 
commitment of resources, which may be in short supply.
    For example, an agency may inflexibly refuse to approve a 
company's request for a departure from guidance because the 
agency fears that the company's competitors will complain about 
an unlevel playing field or that NGOs and the media will 
complain about favoritism. The Conference explains how the 
agency can head off these complaints by being transparent and 
publishing reasons for the departure that become applicable to 
all similar cases going forward. But formulating defensible 
reasons is costly.
    To their credit, some agencies have sought to provide a 
degree of transparency and public participation on a wholesale 
basis when a guidance document is first adopted--measures that 
may approach notice and comment without going all the way.
    As my research and the Conference recommendation indicate, 
the benefits and costs of such participation for the agency and 
the public depend on certain factors that vary a lot by program 
and document.
    Also, agencies undertaking these measures need to 
anticipate certain pitfalls. For example, if an agency promises 
to take public comment pre-adoption on more guidance documents 
than it has the resources to process the comments for, it may 
end up leaving a lot of documents in draft form indefinitely, 
which can cause stakeholder confusion.
    I'll be happy to discuss these matters and any others in 
response to your questions. Thank you.
    [Prepared statement of Mr. Parrillo follows:]
    
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    Chairman Gowdy. Thank you, Professor.
    Mr. Narang.

                    STATEMENT OF AMIT NARANG

    Mr. Narang. Chairman Gowdy, Ranking Member Maloney, and 
members of this committee, thank you for the opportunity to 
testify today. I am Amit Narang, regulatory policy advocate of 
Public Citizen's Congress Watch.
    Public Citizen is a national public interest organization 
with more than 400,000 members and supporters. For more than 40 
years, we have successfully advocated for stronger health, 
safety, consumer protection, and other rules, as well as for a 
robust regulatory system that curtails corporate wrongdoing and 
advances the public interest.
    Public health and safety regulation has been among the 
greatest public policy success stories in our country's 
history. Regulations have made our air far less polluted and 
our water much cleaner. They have made our food and drugs 
safer. They have made our workplaces less dangerous. They have 
made our financial system more stable. They have protected 
consumers from unsafe products and from predatory lending 
practices. They have made our cars safer. They have outlawed 
discrimination on the basis of race and gender and much more.
    These regulations are now considered to be bedrock 
protections widely popular with the public. In short, our 
regulatory safeguards are to be celebrated and emulated. Yet 
there is much more progress to be made in addressing threats to 
the health, safety, environmental, and financial security of 
hardworking American families.
    Unfortunately, President Trump and his administration are 
taking the country in exactly the opposition direction, 
embarking on a radical and unprecedented deregulatory agenda 
that is certainly pleasing corporate special interests by 
repealing regulatory protections at their behest, but at the 
expense of making everyday Americans less safe in countless 
ways.
    One of the key drivers of this administration's attack on 
public protections is Executive Order 13771, the so-called two-
for-one executive order, that requires agencies to get rid of 
existing regulations that protect the public in order to allow 
for new ones that protect the public. This executive order 
fundamentally conflicts with numerous statues that Congress has 
passed to direct agencies to protect the public in a wide 
variety of areas, including food safety, consumer protection, 
environmental protection, auto safety, civil rights 
protections, and many more.
    None of these laws require, much less permit, agencies to 
only protect the public up to the point that it imposes no new 
costs on corporate stakeholders. I urge this committee to 
monitor agencydecisions under the executive order to ensure 
maximum transparency when agencies delay, block, or are 
otherwise unable to finalize regulatory protections due to the 
executive order.
    Making matters worse, President Trump's claimed motivation 
for his deregulatory agenda, that it will create economic 
growth, has been proven flat-out false. In January of this 
year, Goldman Sachs issued a report that found, quote, ``no 
evidence that employment or capital spending accelerated more 
after the election in areas where regulatory burdens are 
higher,'' end quote.
    Likewise, in its most recent annual report to Congress on 
the costs and benefits of Federal regulations, OMB found that 
regulations over the last 10 years have provided the public 
with up to $800 billion in net benefits.
    Since the focus of this hearing is on transparency, I want 
to direct the committee's attention to a number of deeply 
troubling instances where agencies are rolling back regulatory 
protections while actively seeking to avoid transparency.
    The first example is the most urgent, as it relates to 
language in the budget proposal currently being considered for 
fiscal year 2018 that would exempt the EPA from complying with 
the Administrative Procedure Act when repealing the Clean Water 
Rule.
    Any attempt to carve out the repeal of the Clean Water Rule 
from compliance with the EPA, as well as numerous other laws 
designed to provide transparency and accountability to the 
public, including the Freedom of Information Act, should be 
deeply troubling to all members of this committee and Congress, 
no matter their position on the Clean Water Rule.
    More broadly, it sends the message to the public that 
Congress is willing to give agencies a free pass on 
transparency and public participation when it comes to 
deregulation but not when putting regulatory protections in 
place.
    I urge members of this committee to demand the removal of 
this rider on a bipartisan basis.
    Second, reports indicate that the Department of Labor 
deliberately withheld economic analysis it conducted for a 
rulemaking that potentially would transfer billions of dollars 
from the pockets of restaurant servers and workers to the 
pockets of employers, as Ranking Member Maloney noted.
    What is even more unusual is that the rule was reviewed and 
cleared by the Office of Information and Regulatory Affairs, or 
OIRA. It is highly uncommon for OIRA to allow agencies to issue 
rules it has reviewed without any accompanying cost-benefit 
analysis.
    I encourage the committee to scrutinize closely OIRA's rule 
and the refusal to release the analysis, which certainly has 
called into question the integrity of the OIRA review process.
    Finally, critical new guidance unanimously approved by the 
EEOC that would clarify workplace protections against sexual 
harassment, including based on sexual orientation, has been 
under review at OIRA since November, with no indication when 
the guidance will be finalized. With renewed attention on the 
prevalence of sexual harassment in the workplace, this guidance 
is needed now more than ever.
    Beyond specific rules, agencies under the Trump 
administration continue to be evasive in disclosing the 
identities of the Regulatory Reform Task Force officers at 
agencies authorized to carry out President Trump's deregulatory 
agenda. Given numerous reports of conflicts of interest, this 
lack of transparency only adds to suspicions of regulatory 
capture by corporate special interests and further undermines 
the public's faith in government agencies acting in the 
public's interest.
    Transparency should not be a partisan issue, and there are 
opportunities to increase transparency in the regulatory 
process that deserve bipartisan support, both with respect to 
specific deregulatory actions taken under the Trump 
administration and broader reforms, such as making guidance 
documents more accessible to the public and ensuring that OIRA 
follows basic transparency provisions and requirements as 
stipulated in its governing executive orders.
    Public Citizen stands ready to work with members of this 
committee that seek to improve the effectiveness and 
transparency of regulations that protect working families and 
consumers.
    Thank you.
    [The statement of Mr. Narang follows:]
    
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    Chairman Gowdy. Thank you.
    The gentleman from Tennessee, Judge Duncan, is recognized.
    Mr. Duncan. Well, thank you very much, Mr. Chairman.
    About a year and a half ago, I read about a new book by a 
prominent Boston lawyer who was educated at Princeton and 
Harvard, and he wrote this. He said, quote: ``The average 
professional in this country wakes up in the morning, goes to 
work, comes home, eats dinner, and then goes to sleep, unaware 
that he or she has likely committed several Federal crimes that 
day. Why? The answer lies in the very nature of modern Federal 
criminal laws, which have exploded in number but also have 
become impossibly broad and vague,'' unquote.
    And while that quote pertains to Federal criminal laws, it 
really applies all over the scope of Federal regulation. They 
have exploded in number, to such an extent that the staff has 
provided us with an article from the Competitive Enterprise 
Institute entitled ``Ten Thousand Commandments,'' and they 
estimate in this article that the annual cost, the yearly cost 
of Federal regulatory activity is costing our economy as much 
as $2 trillion a year.
    And what I've noticed over the years is that the more 
heavily regulated any industry becomes, it ends up in the hands 
of a few big giants. And I know the Congress, several years 
ago, passed the Dodd-Frank law. Before we passed that law, the 
five largest banks had 22 percent of total deposits in this 
country; now they've got 45 percent. And there have been 
hundreds of small banks and credit unions that either have gone 
out of business or have been forced to merge or have been 
bought out.
    And so we passed a law aiming at the big giants, but we 
hurt the little guys. And it seems that applies in almost every 
industry.
    Ms. Harned, have you noticed that same trend?
    Ms. Harned. Absolutely. I've seen it my whole career, 
including before I was at NFIB. We represented at my food and 
drug law firm a small-business owner, actually a couple, that 
were targeted by the DEA. And it was through that process--at 
the time, they were trying to get at, you know, the meth lab 
issue, which is an important one. But you saw, through the 
regulations, through all of that, a more consolidated part of 
that industry.
    Later, you saw it in grocery stores when it came to WIC 
programs. And I've seen it in--you can really see it in so many 
industries. And Dodd-Frank is a perfect example. It was the 
community banks that were getting closed, not the big ones.
    And so there's a reason for this. The small-business owner 
is the one doing the regulatory compliance. They do not have 
legions of attorneys to scour the regulations of the Federal 
Register, much less the guidance documents we're here talking 
about today.
    Mr. Duncan. When the FDA was small and far less 
bureaucratic than today, many years ago, we had very many small 
companies in the drug business. Now the drug business is in the 
hands of a few big giants.
    Mr. Noe, I saw you shaking your head up and down. Have you 
seen this in your industry?
    Mr. Noe. Sir, I think it's an across-the-board issue. And 
you've even heard, you know, some of the leaders of the largest 
banks talking about how Dodd-Frank created a moat to help them 
keep competitors out. So there can be a very unfortunate effect 
where, you know, larger entities can try to use regulations as 
a barrier to entry to create a competitive advantage vis-a-vis 
smaller entities. I think that's true across the board.
    Mr. Duncan. I notice also in some of the material we've 
been provided that fewer than 200--that the committee requested 
information on more than 12,000 guidance documents. Fewer than 
200 guidance documents were submitted to the Government 
Accountability Office, as required by the Congressional Review 
Act.
    Ms. Nguyen, do you think it's accurate to say that the 
Congressional Review Act is being ignored by most of the 
agencies?
    Ms. Nguyen. Based on our recent work, we found that 
noncompliance with CRA does exist for the periods that we 
reviewed, so during the transition periods as well as 
nontransition periods. So what it means is that the most common 
deficiency that we found includes the provision for agencies to 
provide Congress with adequate time to review regulations.
    Mr. Duncan. Well, I can tell you, I was a lawyer and a 
judge before I came to Congress, and yet there's so many laws 
and rules and regulations on the books in this country today, I 
don't think they've even designed a computer that can keep up 
with all of them, much less a human being.
    And as this article that I--this book I quoted from, I 
think it's accurate to say that almost everybody in this room 
has violated several Federal laws, rules, and regulations. They 
didn't mean to, they didn't know they were. But with this 
explosion of laws, rules, and regulations, it's happening all 
across this country today, and it's a very sad thing.
    I yield back.
    Mr. Meadows. [presiding.] I thank the gentleman from 
Tennessee.
    The chair recognizes the gentlewoman from New York, Mrs. 
Maloney, for 5 minutes.
    Mrs. Maloney. Okay. Thank you, Mr. Chairman.
    In 2016, the Obama administration's Department of Health 
and Human Services sent a guidance letter informing States that 
it's against the law to terminate Medicaid providers, 
particularly family-planning providers like Planned Parenthood, 
for ideological reasons.
    This guidance came at a time when some States were 
aggressively trying to ban and defund Planned Parenthood simply 
because they provide family-planning services as well. They 
based their efforts on unsubstantiated allegations made by 
David Daleiden, who circulated misleading and heavily doctored 
videos in 2015.
    I would point out that our very committee conducted an 
exhaustive investigation of these claims, and we concluded, on 
a bipartisan basis, that his allegations were completely false. 
Even our former chairman, Representative Chaffetz, went on 
national television to tell the world that we here on this 
committee found no evidence that they broke the law. He sat 
right here in this chair, and he said he found--he, quote, 
``found no wrongdoing,'' end quote.
    Yet some States and outside advocacy groups continue to 
cite these discredited claims as a rationale for continuing to 
target Planned Parenthood to this day.
    In January, the Trump administration rescinded the Obama-
era guidance in a follow-on guidance letter to State Medicaid 
directors.
    Last month, Ranking Member Cummings sent a letter to the 
Department of Health and Human Services raising the concerns 
after a whistleblower provided documents showing that an 
extreme anti-choice group known as Alliance Defending Freedom 
was behind this recision. The whistleblower provided a draft 
guidance letter written by the group, and it appears that HHS 
rescinded the Obama guidance at the urging of this group.
    So I'd like to ask Mr. Narang, in your view, is it a best 
practice to consult secretly with one outside group while not 
consulting at all with other groups that would be affected by 
agency guidance?
    Mr. Narang. I do think that sounds like an improper use of 
guidance in this instance. And it is troubling to me that it 
potentially was adopted at the behest of one particular 
individual or group.
    Mrs. Maloney. And should HHS have conducted additional 
informal outreach to other stakeholders, such as Planned 
Parenthood, as well?
    Mr. Narang. I do think that it would have been more 
appropriate to also include Planned Parenthood in guidance that 
would directly potentially affect them.
    Mrs. Maloney. And, Mr. Narang, what other steps should HHS 
have taken?
    Mr. Narang. Well, as I was saying, I do agree that it would 
be an improvement to make guidance more accessible, which can 
be termed more transparent, but I think the key is making it 
more accessible to the public. So this type of guidance, it 
would have been helpful, clearly, to make it accessible to the 
public, potentially in draft form.
    Mrs. Maloney. Okay.
    And, Professor Parrillo, you wrote a report on these issues 
that was the basis for the Administrative Conference's best 
practices guide. Would you agree that it is generally not a 
best practice to consult secretly with one outside group while 
not consulting at all with other groups that would be affected?
    Mr. Parrillo. Ms. Maloney, there are a variety of means for 
agencies to take stakeholder input on guidance.
    One of them is targeted outreach, in which there's not a 
public announcement that the guidance is being considered, but, 
rather, the agency selects certain stakeholders to talk to. 
This has the----
    Mrs. Maloney. Since my time is limited, could I just 
specifically ask, what would have been the best practice in 
this situation?
    Mr. Parrillo. In the case of targeted outreach, I think 
agencies would typically get diverse points of view, multiple 
sides.
    Mrs. Maloney. Okay.
    The Obama guidance document clarified the law. It stated 
what the Social Security Act and accompanying regulations 
require.
    So, Mr. Narang, despite what the Trump administration may 
be trying to do, it cannot contravene Federal law, correct?
    Mr. Narang. Well, that's true. And it will likely end up in 
court if that's the case.
    Mrs. Maloney. So, at this point in time, under the law, 
States still may not refuse to provide Planned Parenthood with 
funding just because they have ideological disagreements with 
them. Is that right, Mr. Narang?
    Mr. Narang. Guidance documents are nonbinding.
    Mrs. Maloney. Okay.
    My time is almost up, but I'd just like to close by saying 
it's good to hear that, at least at this point in time, States 
cannot refuse to pay Planned Parenthood for Medicaid services 
lawfully provided.
    Thank you.
    Mr. Meadows. The gentlewoman's time has expired.
    So, Mr. Narang, I want to make sure that that last 
comment--so you're saying guidance documents are nonbinding. 
That's your official testimony here today?
    Mr. Narang. That's not just my official testimony; it is 
the very nature of guidance documents.
    Mr. Meadows. All right.
    The gentleman from Ohio is recognized for 5 minutes, Mr. 
Jordan.
    Mr. Jordan. I thank the chairman.
    I first want to start by just saying the assertions made by 
the gentlelady from New York--I couldn't disagree more.
    First of all, remember, those videos that were produced, 
the day after the first video came out, Cecile Richards issued 
an apology. Last time I checked, you don't apologize unless 
you've done something wrong.
    And the group who said that they were heavily edited and 
changed, guess who that group was? Fusion GPS. We know how much 
you can trust them. Fusion--the same organization that was paid 
by the Clinton campaign, the DNC, to put together this dossier, 
``salacious and unverified.'' Not my words; former FBI Director 
James Comey's words under oath in front of a congressional 
committee. That's who said those tapes were heavily edited. You 
can't trust that. I mean, that was just ridiculous.
    Mr. Noe, let me get back to the subject at hand. So let me 
summarize--I think I'm summarizing, and then I want your 
response.
    So, when I look at what GAO reported and the work that the 
oversight staff has done in this area, it seems to me you could 
say some agencies are actually just skirting the whole 
rulemaking process altogether, trying to get around it. Some 
are actually exempt. The IRS has this memorandum of 
understanding that they don't even really have to follow the 
rulemaking, the CRA process. And then a whole bunch of them use 
the guidance rules versus actually going through the formal 
process. In fact, I think it was, like, 90 percent of the rules 
issued are actually guidance. Like, 12,000 was what the staff 
determined, the committee staff determined.
    So you have all that going on, but yet we still have this 
CRA Act where Congress can get rid of some of these and we can 
get rid of them. And we've done 16 in 1 year.
    So is that kind of an accurate sort of overall assessment? 
Some are skirting it. Some don't even have to follow them, 
they're exempt, namely the Internal Revenue Service. And then 
those that do go through any kind of rulemaking process, it's 
largely guidance and not the actual formal rule itself. Is that 
accurate, Mr. Noe?
    Mr. Noe. Congressman Jordan, yes, it is.
    I was the lead Senate counsel in the Congressional Review 
Act, and I can tell you it was Congress' intent that all the 
covered rules would be submitted. And they haven't been. And 
that's something everybody should be concerned about.
    I mean, I think the good news here is that it's very easy 
for the agencies to comply. We all have email. It's easy to 
send your rule to Congress. And they haven't done it.
    And, unfortunately, this pattern of Congress imposing 
procedures for the purposes of transparency and accountability 
on the agencies--and as soon as they get hold of that mandate, 
they often make Swiss cheese out of it.
    Mr. Jordan. Why is the IRS exempt?
    I mean, one of the findings the committee staff and GAO 
found was only 1 of more than 200 tax regulations issued was 
determined by the IRS to be significant, which I find 
interesting. My guess is taxpayers might think more than 1 out 
of 200 is actually significant, but somehow the agency felt 
like only 1 was significant.
    So why are they exempt? Why do they get the special deal? 
It seems to me that's the one agency you'd want to make sure 
they're doing things exactly by the book and as transparent as 
possible, particularly in light of their history, recent 
history.
    Mr. Noe. I guess it seems that they're exempt because they 
say so.
    I used to work at the Office of Management and Budget 
reviewing rules. There is a memorandum of understanding about 
what rules should come over from the IRS. They have driven a 
Mack truck through that.
    And I would just refer you to the Wall Street Journal piece 
written by former Clinton OIRA Administrator Sally Katzen and 
former Bush OIRA Administrator Susan Dudley that points out 
that that should come to an end.
    Mr. Jordan. And it seems to me, in light of their recent 
history, an organization with the power and influence that the 
IRS has and exercises over Americans' lives, their history of 
specifically targeting conservative groups--they did it in a 
systematic way, they did it for a sustained period of time, 
they did it--it seems to me all the more reason to have them 
follow the rulemaking process and be subject to OIRA as we move 
forward.
    Mr. Noe. Yeah, I'm hopeful----
    Mr. Jordan. Do you think we need legislation to do that, to 
overturn this memorandum? Or what?
    Mr. Noe. You know, I think maybe calling them up here and 
asking them----
    Mr. Jordan. Oh, we're more than willing to do that. Yeah.
    Mr. Noe. --to answer to that.
    One reason I say maybe if Congress were to step in here is, 
honestly, I think, you know, they've had years to comply with 
these executive directives and they have made Swiss cheese out 
of them. So I think they either need to come to an 
understanding with you all----
    Mr. Jordan. I think the chairman and I would be happy to 
call them back.
    Mr. Noe. --they're going to comply or else they're going to 
face legislation.
    Mr. Jordan. We'll probably bring you back, too, and talk 
about it when we have the IRS in here as well.
    But thank you, Mr. Noe.
    Thank you, Mr. Chairman. I yield back.
    Mr. Meadows. I thank the gentleman's recommendation for a 
followup hearing with some of the individuals. I can assure you 
that not only will we have a hearing but we will go ahead and 
follow up. And any recommendations for other potential 
witnesses who abuse the system would be welcome for this 
committee.
    The chair recognizes the gentlewoman from the District of 
Columbia, Ms. Norton, for 5 minutes.
    Ms. Norton. Thank you, Mr. Chairman.
    Early in the Trump administration, there emerged a rule 
that--so-called two-to-one rule--we'll repeal two regulations 
for every new regulation. And I'm concerned with whether or not 
this rule violates the Administrative Procedure Act.
    Now, one can understand that a new administration might 
well want to overturn some regulations that they regard as 
burdensome or otherwise. That is perfectly rational. But the 
APA, the Administrative Procedure Act, requires a rational 
basis for all parts of rulemaking.
    Now, sacrificing two for one does not seem to me to be a 
rational basis. Pass one rule that helps protect the air we 
breathe; get rid of another rule that protects the water we 
drink. I'm not even sure how one would proceed.
    Ms. Nguyen, do you think there could be an APA concern 
here, a procedural concern, with the two-for-one rule?
    Ms. Nguyen. GAO does not take a legal position----
    Ms. Norton. I didn't ask you for your legal position. Do 
you think there could be an APA--and surely you know about 
that--concern with a blanket two-for-one rule?
    Mr. Cramer. I'm Robert Cramer from the General----
    Ms. Norton. Please sit down at the table so you may be 
heard.
    Mr. Cramer. Okay.
    I think the question you're posing is a legal question, 
whether there is a violation of some provision of the APA as a 
result of this executive order. We haven't considered that, so 
we can't, then, express an opinion at this----
    Ms. Norton. Do you think it is appropriate for you to 
consider that? I can understand you may not have done so. I am 
asking you, is it appropriate for you to do so, given the 
regulations that have been overturned and the two-for-one rule.
    Mr. Cramer. When we receive requests from Members of 
Congress for opinions----
    Ms. Norton. I am asking for an opinion now. And I ask you 
to write the chairman of the committee your opinion on whether 
the two-for-one rule is in keeping with the Administrative 
Procedure Act.
    Mr. Parrillo, do you have a view, at this point, on that?
    Mr. Parrillo. I have not studied the issue enough to give 
an opinion.
    The argument that a challenger would make would be that a 
particular recision of a rule is arbitrary or capricious, 
because the reason for it was in order to make room for this 
other rule that is not sufficiently related.
    On the other hand, there is, for example, some D.C. Circuit 
precedent to suggest that as long as the recision of a rule can 
be justified on the official record, then political pressure 
regarding the choice that an agency makes between different 
possible regulatory choices, each of which could be justified 
in themselves, that that is not untoward.
    Now, this is a controversial issue, in terms of whether 
this D.C. Circuit precedent is a good idea, but that is to give 
you an idea of the arguments on both sides.
    Ms. Norton. Mr. Narang, there is a court suit, and I 
understand standing has been an issue, but, perhaps, you could 
tell us the basis for an attack on the two-for-one rule.
    Mr. Narang. Well, I think this is a very good question. 
And, as much as I would like to answer it, unfortunately, I am 
not able to, due to our pending litigation challenging the 
executive order as unconstitutional. It has not been resolved 
on the basis of standing just yet. The court has----
    Ms. Norton. What do you argue in court?
    Mr. Narang. We are arguing that the executive order 
fundamentally violates certain clauses in the Constitution, 
namely, the take care clause that the President takes care that 
laws are faithfully executed.
    If I could take a minute to talk about the real world 
impacts of this executive order and illustrate it. It is going 
to make it very difficult, if not impossible, I believe, for 
agencies to issue the most important beneficial regulations to 
the public.
    Let's take the lead and drinking water standard rule. I 
think we can all agree it is much-needed and it will be 
enormously beneficial. It will likely be quite costly, as well, 
and it is necessary for the EPA to offset those costs. We are 
talking about offsets that are not that available to agencies.
    Over the course of the last year, the administration said 
that they have only about $560 million in regulatory offsets. 
If the lead and drinking water rule costs more than $560 
million, but provides massive benefits that outweigh the costs, 
they still will not be able to issue the rule, and that is the 
deregulatory offsets for all agencies, just for one rule. It 
really is going to be very difficult to protect the public with 
this executive order in place.
    Ms. Norton. Thank you very much.
    Chairman Gowdy. The gentlelady yields back.
    The gentleman from North Carolina.
    Mr. Meadows. Thank you, Mr. Chairman.
    Ms. Nguyen, let me come to you, because the gentleman at 
the end of the table, Mr. Narang, said that guidance is 
nonbinding.
    In your expertise, would you suggest that the agency's view 
all guidance as nonbinding?
    Ms. Nguyen. Regarding our past work looking at guidance, 
guidance is typically nonbinding. But for the IRS, we found 
that they consider their guidance to be authoritative because 
their examiners are bound by the statutes and what they are 
able to do. We don't have a particular recommendation in that--
--
    Mr. Meadows. So is there a statute that would say that the 
IRS guidance should be binding and all other agencies should 
not? Is there a statute that says that? Not an interpretation, 
but a statute.
    Mr. Cramer. If I may answer.
    Mr. Meadows. Sure.
    Mr. Cramer. No, there is no statute.
    Mr. Meadows. There is no statute, so there is no law that 
would suggest that the IRS guidance should be treated 
differently than other agencies, is that correct? Is that your 
sworn testimony?
    Ms. Nguyen. It is important to know why the IRS, many of 
their----
    Mr. Meadows. I don't want you to opine.
    Is there a law that would suggest that the IRS guidance 
should be treated differently than guidance from other 
agencies, yes or no?
    Ms. Nguyen. There is no statute.
    Mr. Meadows. Okay. So if there is guidance, that they 
continue to put out, that has the effect of law, would you 
suggest, and I will let your counsel answer this, would you 
suggest that they are actually infringing on the legislative 
process of Congress if, indeed, they are putting forth 
guidelines and rules that have the effect of law, but yet are 
not warranted by statute?
    Mr. Cramer. If the IRS----
    Mr. Meadows. I need you to speak into the mic
    Mr. Cramer. If the IRS is issuing guidance that is binding 
on the regulated community, the public, that would be a 
violation of the APA----
    Mr. Meadows. Okay. And I agree with you. And so let me tell 
you the problem that I have here. Because they have issued a 
number of different guidances, and we have a letter before the 
GAO right now, as it relates to what I call the silent returns 
and the fact of the implementation of the Affordable Care Act. 
And so as we are asking you--and I understand you only have two 
reviewers that review this for the entire GAO, is that correct?
    Mr. Cramer. Actually, we don't have a dedicated staff to 
these.
    Mr. Meadows. So it is even worse than two reviewers, okay.
    So as we go with this, here is my concern. If the IRS is 
able to do rules and regulations at the pace of 9 to 10 rules a 
day, and our action, under the Congressional Review Act, would 
require a laborious month, two month, three month process to 
overturn that, do you see how Congress would be at a 
disadvantage of them encroaching in on our legislative 
jurisdiction?
    Mr. Cramer. Certainly. The Congressional Review Act was 
intended to give Congress the ability to oversee agency 
rulemaking and to place a check on old rulemaking.
    Mr. Meadows. So would you also, would the GAO also, and, as 
I say, we have a request there, indicate that if, indeed, the 
IRS has not followed a statute that would give them the ability 
to write guidance, then they do not have really a legal basis 
for that guidance, other than a memo of understanding, how 
could it be binding on the American taxpayer if, indeed, there 
is not a statute that would support their guidance and 
rulemaking?
    Mr. Cramer. If a person affected by the guidance challenged 
that in court, a court could rule on whether it is binding.
    Mr. Meadows. So are you suggesting, since I am affected by 
that, are you suggesting that we should file a lawsuit against 
the IRS, instead of just actually overturning or giving 
Congress the ability to overturn that?
    I guess here is my concern, and I will cut to the chase on 
this long, laborious line of questioning. We have a request 
into GAO. GAO is wanting us to check with the IRS and the 
Department of the Treasury to have them opine on whether they 
believe that their guidance actually is mandated. And you are 
telling me today, with this testimony, that they believe that 
they are in compliance.
    Why would we ask the very agency, of whom they believe is 
doing it correctly, to opine on whether they are doing it 
correctly or not? Why would it not be a GAO decision to say 
that this has the operation of rules and laws and is subject to 
the Congressional Review Act?
    And I will yield back to the chairman, and if he gives you 
time to answer that, that is certainly within his purview.
    Chairman Gowdy. I did find the gentleman's line of 
questioning to be long, but not laborious, so I would allow 
time for an answer in the fullest way you want to give it.
    Mr. Cramer. I will be happy to answer the question.
    We have been asked to give an opinion on whether a specific 
IRS action is a rule for purposes of the Congressional Review 
Act.
    As part of our standard procedure, whenever we are asked 
questions of that nature, we do reach out to the agency because 
we need to hear their views on the law and come to an 
understanding of why it is that they did what they did, at 
least in their view. It is kind of like a judge, when he has to 
decide a case, has to get, from both sides, their view on the 
law.
    That is the process we are following. We are just trying to 
get the full picture, legally, so that we can, hopefully, make 
the right decision.
    Chairman Gowdy. I want to thank the gentleman from North 
Carolina, who has become as much of an expert as any Member of 
Congress can be, in this important, but difficult and 
challenging subject matter area. So I thank Mr. Meadows.
    The gentleman from Iowa is recognized.
    Mr. Blum. Thank you, Chairman Gowdy, and thank you to our 
panelists for being here today.
    I am not a lawyer. I am a career small business person. And 
a wise person once said the following, and it has stuck with me 
ever since: The complex favors the large.
    And someone mentioned earlier in their testimony that 
regulations end up building moats around large businesses. In 
fact, over the last 8 years, regulations have driven industry 
consolidation. Call me old-fashioned, but I think industry 
market forces should drive consolidation, if there is any, not 
regulations.
    I looked the number up. Under President Obama's 
administration, we added 20,642 new regulations on the books. I 
mean, we are called ``regulation Nation,'' and yet we want our 
businesses to compete globally and provide good-paying jobs 
with good-paying benefits. Of course we all want that. But we 
have a 600-pound sack of regulations on every business' back.
    Regulations have driven consolidation in the banking 
industry with Dodd-Frank; healthcare industry with the ACA Act; 
agriculture, I am from Iowa. I don't know about you, but I 
don't think it is good for our country, and it is not good for 
our citizens to have five companies controlling our financial 
sector, five companies controlling our food supply, and five 
companies providing our healthcare.
    We have a lot of lawyers in Congress, probably too many 
actually, with all due respect. We need more people who have 
met a payroll. Most folks have never met a payroll. I have met 
a payroll for over 20 years.
    So I would like to ask Ms. Harned--that is the correct way 
to pronounce that, I hope--you are with NFIB, what type of 
impact does this have on small businesses, all the regulations?
    Ms. Harned. Right. So we have done numerous surveys on 
this, because regulations have been a perennial problem for 
small-business owners. And, honestly, it is always the top 
three problems, second only--or third only to taxes and health 
insurance, regardless of if it is good or bad, as far as how 
many are coming out of the regulatory state.
    Complying with regulations is a problem for small-business 
owners because 72 percent of those employers that have ten or 
fewer employees are the regulatory compliance officer. They are 
reading the rule and they are trying to figure out how to 
comply with it.
    What are they not doing? They are not managing their 
business. They are not growing it, they are not managing staff, 
and they are not trying to get new customers. And that, we 
think, is not helpful for the economy. And, honestly, that is 
very much, I think, why you will see, especially in these 
heavily regulated areas, more consolidation.
    Mr. Blum. Two trillion dollars, somebody mentioned earlier, 
it costs the economy every year.
    In small businesses, could they pay their employees more or 
could they offer better healthcare to their employees if they 
weren't paying all these costs? We don't want no regulations, 
okay. We just want a happy medium, happy balance. If they had 
less regulations, could they help their employees out more?
    Ms. Harned. Absolutely. All of the research that has been 
done on this has shown that the disproportionate burden is real 
cost, I think. One study recently, $10,000 per employee for 
small employers to comply with regulation. When you consider 
the fact that our members at NFIB, on average, net $50,000 to 
$75,000 a year, they are not counting their gold coins. This is 
real dollars that they can't afford to spend.
    Mr. Blum. Counting their bit coins or their gold coins?
    Mr. Noe, the same question to you.
    Mr. Noe. I think this is a basic problem. I think what 
makes our country great is that it is a free market democracy, 
and that starts with the free market and all the benefits it 
can deliver in terms of wealth creation, economic security, 
jobs, and all the other benefits.
    Certainly if there are market failures, there should be 
addressed things like emissions, environmental health, and 
safety standards that I feel so strongly about. Those are all 
important issues that should be addressed by a regulatory 
system, but we ought to do it in a rational way.
    I think there should be a congressional requirement that 
all regulations should do more good than harm.
    Mr. Blum. Mr. Narang, 20,000, not that we are counting, 
20,642 new regulations in the Obama administration. How much is 
enough? How much is enough? How much do you think businesses 
can handle before we don't have any businesses?
    Mr. Narang. At Public Citizen, I have met many individuals 
that have lost loved ones due to a lack of effective strong 
regulations that have had children have asthma due to being 
sited close to polluting sources. It is very important to hear 
from all voices in this debate, and so it is critical to hear 
from small-business owners and small business representatives. 
But I think it is just as critical to hear from the folks, the 
average Americans, that benefit from regulations on a daily 
basis. We all benefit from regulations on a daily basis.
    Mr. Blum. Can we keep adding 20,000 regulations every two 
terms, two administrations, can we keep doing that?
    Mr. Narang. I have many stories to share where there was a 
lack of adequate and effective regulation.
    Mr. Blum. Is that the exception or the rule?
    Mr. Narang. I don't think it is the exception.
    Mr. Blum. You don't think so?
    Mr. Narang. Well, let me say this. As much as it is my 
honor and pleasure to testify here today, I really would 
encourage this committee to hear from folks we talk to at 
Public Citizen, and other organizations that work with us, that 
benefit from regulations and that have been dramatically harmed 
by a lack of adequate and strong regulations.
    Mr. Blum. I yield back my time, Mr. Chairman, that I do not 
have.
    Chairman Gowdy. The gentleman from Iowa yields back.
    The gentleman from Alabama is recognized.
    Mr. Palmer. Thank you, Mr. Chairman.
    I want to begin with the lady from the GAO, Ms. Nguyen.
    In your written testimony, you talked about regularly 
evaluating whether issued guidance is effective and up to date. 
Does the GAO have any estimate of the percentages that were not 
considered effective and up to date of the regulations?
    Ms. Nguyen. We haven't done work to determine the extent to 
which how much is done.
    I want to share an example of an agency who does have 
procedures in place to review whether or not guidance is 
current. DOL, for example, has this process in place. And 
through this process, DOL was able to reduce 85 percent of its 
guidance for a subagency.
    Mr. Palmer. I appreciate that. I am a big fan of the GAO, 
by the way. I think you guys do great work, but I try to 
utilize your work so the questions that I am asking is in a 
context of how do we improve a situation. And so when you have 
requirements--these are requirements imposed on the agencies 
and they don't comply. I mean it is great to point out that one 
does, but they all should--are there any penalties, any 
remedies applied for those who fail to comply?
    Ms. Nguyen. As noted in our report, we have made 
recommendations to agencies to improve their adherence to OMB 
requirements for significant rules guidance, and also to adhere 
to internal controls for nonsignificant guidance.
    Mr. Palmer. I appreciate that, and I hate to cut you off, 
but I have only got a few minutes left.
    That is part of the problem we see time and time again. It 
is the same thing with improper payments. There are laws 
actually passed by the Obama administration, signed by the 
President, that requires agencies to report the improper 
payments, but they don't. The GAO writes a report and has 
recommendations, but there is no enforcement. That is a huge 
issue. I mean, what good does it do to have these requirements 
if nobody complies?
    Ms. Nguyen. GAO does not have enforcement authority, 
although we do have a good record of agencies implementing our 
recommendations. Generally, we have close to an 80 percent 
implementation of recommendations, and we believe this is the 
case because of the quality of our work.
    Mr. Palmer. Okay. I want to make sure you understand. I am 
not assigning this responsibility to the GAO. I am simply 
pointing out, this is a public hearing, for the public to 
understand, that we don't require the agencies to comply with 
the guidelines that we give them. Eighty percent might be a B-
minus. I think we owe it to the taxpayers to be an A-plus. We 
owe it to the people trying to create jobs to be an A-plus.
    And on another point here, under the Congressional Review 
Act, the agencies are required to submit new regulations for 
congressional review. Do you have any idea how many regulations 
that were not submitted to Congress for review?
    Mr. Cramer. If I may, I will handle that question. We do 
track everything that we receive. So if asked whether we have 
received a particular rule or set of rules, we can check our 
database to see.
    We do not know, at this point, for example, in 2017, 
whether there were rules that were not submitted to GAO. We 
don't keep track of that information on a daily basis, simply 
because what we do track is what we do get.
    Mr. Palmer. Well, it is a problem, because in your 
recommendations and in what you found, you point out that, for 
the most part, they don't comply, and that there is an economic 
impact of these regulations that really Congress never has the 
opportunity to respond to.
    And I just think, Mr. Chairman, that is an issue that we 
have got to address. Like I said, I don't attribute that to the 
GAO. That is our responsibility.
    Professor Parrillo, I am a member of the article I project, 
which is made up of a bicameral group of members seeking to 
strengthen Congress by reclaiming its constitutional 
legislative powers that are now being improperly exercised by 
the executive branch, which this previous line of question kind 
of leads into this.
    Congress, as a body, has ceded most of its lawmaking 
authority to the executive branch by writing vague laws. They 
give Federal agencies wide latitude to interpret the law in a 
way that fits their agenda. It has been said that the most 
dangerous words in any piece of legislation are ``the Secretary 
shall determine.''
    How many of these problems being considered today could be 
prevented if Congress wasn't in the business of writing them?
    Chairman Gowdy. Professor Parrillo, the gentleman's time is 
expired, but you may answer his question.
    Mr. Palmer. Thank you, Mr. Chairman.
    Mr. Parrillo. I do think Congress has a demonstrated 
capacity to make choices and put details in legislation. 
Several of the environmental statutes. The 1990 overhaul of the 
Clean Air Act, for example, really do cabin agency discretion 
in significant ways.
    I would note that there is some academic scholarship 
indicating that the more staff a legislature has, the more it 
is capable of writing relatively detailed statutes and cabining 
agency discretion. This is a set of conclusions arising from a 
comparative study of the different State legislatures. That 
legislatures that have more staff tend to delegate to the 
bureaucracy less. That is possibly one thing to consider.
    Mr. Palmer. Mr. Chairman, I would like to make a statement, 
for the record.
    There were 12,000 guidance documents identified in response 
to the committee's request, and only 189 were submitted to 
Congress and the GAO in accordance with the Congressional 
Review Act. I yield back.
    Chairman Gowdy. The gentleman from Alabama yields back.
    I will go last.
    Ms. Nguyen, I am one of those too many lawyers my 
colleagues make reference to from time to time. I am not a 
subject matter expert here, or anywhere else. But I suspect 
lots of people that are following this issue, and maybe they 
are watching the hearing, aren't subject matter experts either. 
So I get that all of you are experts and the vernacular just 
rolls off your tongue. But for lots of people, they don't know 
what a midnight regulation is, they don't know what the CRA is, 
they don't know what a guidance document is.
    So, with respect to midnight regulations, how, if at all, 
does it impact the CRA?
    Ms. Nguyen. The midnight rulemaking is defined by the 
mandate that, in terms of our review, it is defined by a 
specific period between September 23 and January 20. So we were 
asked, mandated, to look at the midnight rulemaking. It is 
referred to that because of that period.
    And in terms of the CRA, as I noted, we found that 
compliance with CRA for the transition period, in comparison to 
the nontransition period, is they are about the same.
    The trend that is important to note is that compliance with 
the CRA has increased over time.
    Chairman Gowdy. Could you tell us which agencies had the 
highest rate of noncompliance?
    Ms. Nguyen. The two agencies that have the highest rate of 
noncompliance are HHS and DOT, and EPA has the lowest 
noncompliance rate.
    Chairman Gowdy. What justification or explanation were 
offered by the two with the highest rate of noncompliance?
    Ms. Nguyen. Because of the breadth and scope of our work, 
we were asked to look at noncompliance--the compliance with 
midnight rulemaking over the course of 20 years for various 
procedural requirements. So, therefore, we did not have the 
opportunity to inquire with those agencies.
    Mr. Cramer. If I may add, we are taking steps to notify 
those agencies of their noncompliance, to call to their 
attention their obligations under the Congressional Review Act.
    Chairman Gowdy. So you think it is a matter of oversight 
rather than intentionality?
    Mr. Cramer. I wouldn't want to speculate that on that. I 
don't know. We haven't looked at that question.
    Chairman Gowdy. Is there a correlation between 
noncompliance and economically significant regulations?
    Ms. Nguyen. Our study shows that economically significant 
regulations have a noncompliance rate of about 25 percent, and 
15 percent for significant rules.
    Chairman Gowdy. All right. For those who have never heard 
the term before, what is a guidance document?
    Ms. Nguyen. Guidance are used by agencies to provide timely 
information to agencies. And agencies also use them to convey 
how they plan to interpret regulations. Guidance generally are 
not legally binding.
    Chairman Gowdy. Whenever you use works like generally, it 
makes we wonder that there is an exception to that.
    Ms. Nguyen. The exception is what we discussed earlier with 
the notion that the IRS views their guidance to be 
authoritative.
    Chairman Gowdy. If I heard Professor Parrillo correctly, 
there is no legal force--lay the IRS aside--there is no legal 
force attached to guidance documents. Are there any legal 
presumptions attached to it? Excepting that it doesn't have 
force of law, are there certain presumptions attached to 
guidance documents?
    Ms. Nguyen. I cannot speak about the presumption issue. 
That is really from the perspective of the regulated parties.
    Chairman Gowdy. Can I ask your lawyer, is there a legal 
presumption attached in any way with guidance documents?
    Here is what is vexing me. When I hear the professor say--
and I am sure he is right--that it is not intended to have the 
force of law or for everyone to conform their conduct that they 
still want to go on a case-by-case basis--whenever I hear the 
phrase case by case, that is just Latin for no guidance. There 
is no uniformity. If you are going to go case by case, which is 
what I think is what I understood him to say, then what is the 
purpose and/or legal effect of guidance documents?
    Mr. Cramer. I believe that guidance documents, by 
definition, are not legally binding on the regulated community. 
There have been complaints over the years, however, from the 
regulated community, that at times agencies are imposing 
binding requirements on the regulated community through 
guidance, rather than going through a rulemaking procedure. And 
I think that is the underlying complaint behind the use of 
guidance.
    Not where it is used for the purposes for which it is 
intended, but rather to impose binding requirements that should 
really be going through a rule making process.
    Mr. Meadows. Will the gentleman yield for a follow-up 
question to your point?
    Chairman Gowdy. Certainly.
    Mr. Meadows. The Chairman is spot on, and he is in a line 
of questioning that, quite frankly, is at the very heart of 
this hearing. Is guidance typically--and where he is going with 
this is, does it have any other meaningful effect, either 
through previous jurisprudence or lawsuits where guidance has 
been used in a way that connotates a rule or a regulation 
instead of just guidance?
    Mr. Cramer. I think it would be fair to say that there have 
been complaints that guidance has been used to impose 
requirements that should not have been imposed unless they went 
through a rule making process.
    Mr. Meadows. I yield back. Thank you, Mr. Chairman.
    Chairman Gowdy. Well, let me ask one other question.
    Is there a colorable claim or cause of action if the 
assertion is that this discretion referenced by Professor 
Parrillo, was applied disparately to this group versus that 
group? Is that a cause of action? Is that a colorable claim 
from a litigation standpoint that this exercise of discretion 
was used disparately?
    Mr. Cramer. I think actually Professor Parrillo might be 
best qualified to answer that question.
    Chairman Gowdy. I am sure he has written a law review 
article on it. He may direct us to it.
    Mr. Parrillo. On the question of whether, as I understand 
your question, whether inconsistency between individual cases 
would be subject to a judicial challenge, if the context were 
enforcement, then, no. Because under Heckler v. Cheney, at 
least one off enforcement decisions or decisions not to 
enforce--or to enforce in the first place--are not subject to 
judicial review.
    If we move beyond the context of enforcement and we talk 
about agency adjudication, such as permanent or something like 
that, then if an agency does not follow the reasoning that it 
used for a prior individual decision and gives no explanation 
of why it didn't follow that reasoning, then that would be 
subject to a judicial challenge. So it varies by the type of 
individual proceeding we are talking about.
    Chairman Gowdy. Thank you.
    The gentleman from Wisconsin.
    Mr. Grothman. I have all sorts of questions, but at the 
beginning I would like to yield to my good friend, Congressman 
Palmer.
    Mr. Palmer. I thank the gentleman. Just very quickly on 
that point about 12,000 guidance documents and only 189 were 
submitted.
    There is no place on the GAO form for meaningfully 
reporting guidance. Don't you think that it would help matters 
to have that on the form?
    And, Mr. Chairman, I would like to enter this into the 
record.
    Mr. Cramer. GAO has issued a number of opinions on whether 
guidance documents are rules for purposes of the Congressional 
Review Act. It is up to the agencies to decide when they are 
issuing guidance whether they have an obligation to comply with 
respect to the Congressional Review Act, with respect to that 
particular guidance document, does it meet the definition of a 
rule under the APA.
    We call them all rules. And when we are asked to consider 
whether a particular guidance document is a rule for purposes 
of the Congressional Review Act, at the end of the day, it is a 
rule.
    Mr. Palmer. I don't want to take up the gentleman's time. I 
just think you ought to add that on your form. It might help 
get a better response.
    I thank the gentleman, and I yield back.
    Mr. Grothman. Just a general question. I am going back 25 
years to my day as a lawyer. And at the time--at least I used 
to do with the IRS--guidances were kind of treated as law. And 
that is why they made the guidances, right? If you brazenly 
disobeyed the guidances, you were kind of risking the wrath of 
the IRS, don't you think that is accurate?
    Mr. Cramer. I think that is one of the complaints that 
regulated community.
    Mr. Grothman. Why else would they issue the guidances?
    Mr. Cramer. Guidance does serve a lot of useful functions 
to communicate regulated public, who, in many cases, would like 
to know what the agency is thinking about a particular issue.
    Mr. Grothman. Right, right. That is exactly the point.
    If you issue a guidance, it is for a purpose, right? The 
purpose is to tell the public--be it a business or an attorney 
or whatever--how the agency will interpret an ambiguity. And if 
you brazenly go against the guidance--you can do it and hope 
you are not caught. That is fine. I wasn't afraid to do that. 
But the reason the guidance is out there is you can expect, if 
you don't follow the guidance, that if you get caught, you are 
going to be challenged in some fashion, isn't that true? I am 
sure that is true of other agencies as well, right?
    Mr. Cramer. That certainly may be the case.
    Mr. Grothman. Of course it is the case. Why do you say it 
may be the case? Of course it is the case. Why else issue the 
guidance, right? Does anybody else have a comment on that?
    Isn't that, of course, what the guidance does? It means the 
agency is going to interpret an ambiguity in a law in such a 
such a way, and if you brazenly disobey the guidance, then you 
are going to wind up challenged in some fashion, maybe a win in 
court? It is true it isn't legally binding. But it does say you 
could wind up in court, doesn't it?
    Mr. Parrillo. If I may answer that question?
    Mr. Grothman. Sure.
    Mr. Parrillo. So, yes, if the agency is empowered to 
proceed case by case, in other words, only on the basis of 
precedence from prior individual proceedings, then, in any 
future proceeding, it can exercise discretion and interpret law 
as it sees best constrained just by this prior precedence. And 
so the guidance is a way of saying this is what we are planning 
to do in the absence of some argument from the regulated party 
that we should do things differently. And if it is guidance, 
they have to answer that argument.
    Mr. Grothman. Right. But why else issue the thing, right.
    And I guess the question is, right now, as I understand it, 
in general, maybe always, there is no public participation on 
guidance, and that is the benefit of a rule as opposed to 
guidance. In a rule, if the agency is doing something dumb, 
maybe, or offensive, it will come out because you have to have 
some public input. In guidance, there is no public input. Do 
you think there should be a little space for public input on 
guidance?
    Ms. Harned. May I take that?
    Mr. Grothman. Sure.
    Ms. Harned. Yes. I really appreciate the question, because 
NFIB absolutely thinks that there needs to be some space for 
comment. Does it have to go through the whole notice and 
comment, like a rulemaking? No.
    But the idea that small-business owners and other members 
of the regulated community even know what these are is an 
issue, much less getting to say, hey, this is how this is going 
to impact me. As a practical matter, yes, we think that would 
be a good practice.
    Mr. Noe. Congressman, could I jump into, just from my 
experience having been at the White House Office of Management 
and Budget drafting the Good Guidance Bulletin they have, we 
were very responsive to the agencies that you don't want to 
ossify the guidance process, because there are a lot of 
potential benefits to guidance, if they are done right. And we 
agreed.
    So we just said, for the most significant guidance that 
might have a potential to lead to an economic impact, but, we 
were very clear, it is something that reasonably could be 
anticipated to lead to an impact, not cause it directly, 
because, of course, guidances are supposed to not be legally 
binding, but the agencies made beyond Swiss cheese out of that. 
In fact, it is so bad, the report that the GAO did in 2015 
showed that the agency said--this is four major departments of 
the government with 25 agencies--we have zero, so we have zero 
guidance that should be subject to pre-adoption notice and 
comment.
    That is where we are, and that is why I am saying the White 
House Office of Management and Budget should amp up that 
guidance. You all ought to think about legislating a 
requirement that there be good guidance practices. You have 
already done it for one agency.
    In 2000, Congress, by statute, required the FDA to do a 
regulation to set good guidance practices. This is an agency 
that deals with life and death issues, and they have operated--
my understanding is that people are generally happy with the 
way that works, and I don't see any reason other agencies 
shouldn't be able to operate at that level.
    Mr. Grothman. Thank you.
    Mr. Narang. Could I respond very quickly?
    Mr. Grothman. We would love to have you respond.
    Mr. Narang. Thank you, Congressman.
    Let me just say that if Congress does impose procedural 
requirements on guidance documents, like notice and comment, or 
on a subset of guidance documents, that approximate what we 
have with APA notice and comment rulemaking, then I think it is 
an open question, maybe right now an academic question, but an 
open question as to whether we should then be giving the 
agencies the option to make those guidance documents binding.
    What is the point of an agency going through a robust 
guidance document process that looks like rulemaking if they 
are going to have a nonbinding document?
    I think the more realistic outcome would be that they not 
issue guidance.
    Mr. Grothman. Well, I am just going to respond, you know, 
there are times where guidance is good because you have got to 
come up with something on a dime to interpret a law that 
Congress passed, or explain the way an agency is going to treat 
things, and that is fair. If you are not going to go all the 
way through the administrative rule process, you don't want it 
to become the force of law, if it is something less than that, 
see.
    But I do think there are times, thinking back 25 years, in 
which you had guidances that sometimes made, when I was a 
lawyer, that guidances made absolutely no sense, or you wonder 
who in the world thought up this.
    And I would think if there was a little bit of input from 
the private sector community and maybe woken up some bureaucrat 
over at, because I primarily dealt with the IRS, but there are 
other agencies too, would have woke them up and said, yeah, 
man, I didn't think of that.
    Okay, so you can't go through the whole process because you 
want to turn something around quick, but enough that your 
bureaucracies can understand how this guidance looks from the 
other side of the mirror.
    Mr. Parrillo. May I respond on that point?
    Chairman Gowdy. Well, let me just say, I have been 
uncharacteristically liberal. We have been over 3 minutes over 
his time. I will let you respond. Can you give us the Reader's 
Digest version in your response?
    Mr. Parrillo. There are some agencies that voluntarily 
undertake notice and comments for precisely the reasons that 
you just suggested. EPA does this on a substantial number of 
guidance documents, the National Organic Program at the USDA, 
other agencies much less so.
    As Mr. Noe mentioned, the FDA is required by statute to 
take notice and comments on a large category of its guidance 
documents. A lot of people are quite happy with that. The 
difficulty they run into is that they will sometimes leave a 
document in draft for quite a long time because they don't have 
the resources to process all of the comments.
    Chairman Gowdy. The gentleman from Wisconsin yields back.
    I want to thank all of our witnesses for not just your 
expertise on a really important subject matter, but also your 
comity with each other and with the members of the committee.
    With that, the hearing record will remain open for two 
weeks for any member to submit written opening statements or 
questions for the record.
    If there is no further business, without objection, the 
committee will stand adjourned.
    [Whereupon, at 11:44 a.m., the subcommittee was adjourned.]


                                APPENDIX

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               Material Submitted for the Hearing Record
               
               
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