[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
THE QUALITY OF REGULATORY ANALYSES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON REGULATORY REFORM AND
PAPERWORK REDUCTION
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC
__________
JUNE 8, 2000
__________
Serial No. 106-63
__________
Printed for the use of the Committee on Small Business
U.S. GOVERNMENT PRINTING OFFICE
67-352 WASHINGTON : 2000
COMMITTEE ON SMALL BUSINESS
JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
DONALD A. MANZULLO, Illinois California
ROSCOE G. BARTLETT, Maryland DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey CAROLYN McCARTHY, New York
SUE W. KELLY, New York BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania DONNA M. CHRISTIAN-CHRISTENSEN,
DAVID M. McINTOSH, Indiana Virgin Islands
RICK HILL, Montana ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania TOM UDALL, New Mexico
JOHN E. SWEENEY, New York DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota GRACE F. NAPOLITANO, California
MARY BONO, California BRIAN BAIRD, Washington
MARK UDALL, Colorado
SHELLEY BERKLEY, Nevada
Harry Katrichis, Chief Counsel
Michael Day, Minority Staff Director
------
Subcommittee on Regulatory Reform and Paperwork Reduction
SUE W. KELLY, New York, Chairwoman
LARRY COMBEST, Texas BILL PASCRELL, New Jersey
DAVID M. McINTOSH, Indiana ROBERT A. BRADY, Pennsylvania
JOHN E. SWEENEY, New York DENNIS MOORE, Kansas
JOHN THUNE, South Dakota
Meredith Matty, Professional Staff Member
C O N T E N T S
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WITNESSES
Page
Hearing held on June 8, 2000..................................... 1
Hahn, Robert W., Director, AEI-Brookings Joint Center on
Regulatory Studies......................................... 5
Murphy, Robert, General Counsel, General Accounting Office... 9
Addington, David S., Sr. Vice President, American Trucking
Association................................................ 11
Ricciardi, Sal, President, Purity Wholesale Grocers, Inc..... 15
Wallman, Kathleen, President & CEO, Wallman Strategic
Consulting, LLC............................................ 16
Appendix
Opening statements:
Kelly, Hon. Sue.............................................. 22
Prepared statements:
Hahn, Robert W............................................... 37
Murphy, Robert............................................... 78
Addington, David S........................................... 92
Ricciardi, Sal............................................... 102
Wallman, Kathleen............................................ 127
THE QUALITY OF REGULATORY ANALYSES
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THURSDAY, JUNE 8, 2000
House of Representatives,
Subcommittee on Regulatory Reform and
Paperwork Reduction,
Committee on Small Business,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:48 a.m., in
room 311, Cannon House Office Building, Hon. Sue W. Kelly,
[chairwoman of the subcommittee] presiding.
Chairwoman Kelly. Good morning, ladies and gentlemen. I
would like to thank you for attending this hearing of the
Subcommittee on Regulatory Reform and Paperwork Reduction. This
is the second hearing in a series of hearings being held at the
full Committee level and in this Subcommittee concerning the
reauthorization of the Paperwork Reduction Act and the
effectiveness of other regulatory reform efforts currently in
place.
Yesterday, we focused on the regulatory burdens imposed on
small business and the regulatory relief efforts of the
administration. Today, we will narrow our focus to discuss the
quality of agency regulatory analyses. In order to explore this
issue, we must discuss the adequacy of agency compliance with
analytical requirements mandated by the Administrative
Procedure Act, the Regulatory Flexibility Act, and various
other executive orders meant to direct agencies in producing
regulations whose benefits outweigh their costs and achieve
their objectives in the lowest cost manner possible.
Witnesses will focus on whether these analyses provide
agencies with sufficient information to properly assess the
impact that the rules will have on the regulated community and
the small business community in particular. Additionally, we
will discuss any changes that are needed to ensure that
agencies recognize these impacts, including whether Congress
should obtain an independent assessment of these analyses in
order to carry out its legislative functions. And while the
subject may not be as entertaining as hearing Chuck D expound
on the sale of music on the Internet, for small businesses
affected by the ever-burgeoning mound of regulation and
paperwork requirements, it is critical that this Subcommittee
place this rather dry subject at the top of legislative
priority.
Small business owners are very familiar with the burdens
that Federal regulations place on them. Some studies have shown
that for small employers, the cost of complying with Federal
regulations is more than double what it costs their larger
counterparts, and you do not need any study to reach that
conclusion. Common sense will say that if a regulation costs
General Motors and a 500-employee manufacturer of a copper
tubing company the same amount of money, the overall impact on
General Motors is going to be significantly less on a per unit
basis.
As a result, small business owners have historically been
interested in regulatory reform efforts in Washington. Any
mechanism that will help control the size of this burden is
naturally appealing to the small business community. The APA,
SBREFA, and several other executive orders are such mechanisms.
But these efforts will manage the regulatory burden only if
they are implemented fully and only if Congress keeps a
watchful eye on their progress.
As the Committee whose goal it is to promote and protect
the interests of small businesses, we have the obligation to
discuss how well agencies are satisfied with and are satisfying
these analytical requirements and to explore ways in which
Congress can better understand these regulations that small
business owners struggle to comply with on a daily basis.
There is yet another underutilized mechanism reducing the
regulatory burden on small business, the Congressional Review
Act. On March 29, 1996, the Small Business Regulatory
Enforcement Fairness Act, or SBREFA, became law. Included with
this legislation was a section that established a CRA, a formal
tool by which Congress could review and prevent new regulations
from taking effect without going through the normal legislative
process. Used properly, this new oversight device could greatly
enhance the regulatory process by ensuring that only those
regulations which are truly in the public interest are allowed
to go into effect.
Unfortunately, the Congressional Review Act does not appear
as if it is being used effectively because it is not being used
at all. Not a single resolution of disapproval under the
Congressional Review Act has passed. The House has failed even
to vote on one. Some have given up on its ability to halt
regulations that do not have sufficient justifications that go
beyond what Congress, or that create unintended consequences
that require correction. But I believe that combined with
oversight hearings, legislative efforts, and the submission of
Congressional comments, CRA still has some hope.
Regardless of whether or not you believe CRA can be used,
you must admit that Congress does not have enough information
to undertake appropriate oversight of the powers delegated to
agencies by Congress. The power delegated to these agencies
enables them to issue rules and those rules may not meet the
objectives or have the consequences that Congress expected when
it enacted the legislation.
For example, when Congress enacted the Federal Motor
Carrier Safety Act to create the Federal Motor Carrier Safety
Administration, it certainly expected that the agency would
enact rules to improve the safety of our highways through
improved regulation of truckers. However, the most recent
proposal from the FMCSA may have substantial unintended
consequences for tour bus operators, independent route
salesmen, and manufacturers. These consequences apparently were
not considered when the FMCSA decided to treat all those
individuals who drive professionally on the nation's road
systems in an identical manner.
To help address this problem, I was joined by Chairman Jim
Talent in introducing H.R. 3669, the Congressional Oversight
and Audit of Agency Rulemaking Actions Act. We call it COAARAA.
This office would focus solely on conducting independent
regulatory assessments of regulations to help determine whether
the agencies have complied with the law and executive orders.
Unfortunately, Congress cannot obtain unbiased information from
participants in the rulemaking because each participant,
including the Federal agency, has a particular viewpoint and
bias. A Congressional Office of Regulatory Analysis would help
fill the information gap and assist members of Congress in
determining whether action is warranted.
The purpose of COAARAA, then, is to ensure that Congress
exercises its legislative powers in the most informed manner
possible. Ultimately, this will lead to better regulatory
analyses, most cost effective regulations, and most
importantly, legislation tailored in a manner to address a
narrow problem and not overly broad legislation likely to
impose unnecessary burdens on small business. Only through
active oversight can Congress ensure that the laws that it
passes are properly implemented. This is a responsibility that
Congress must take seriously, because as countless small
business owners can attest to, not doing so can have dramatic
implications.
We have joining us today an excellent panel who will
discuss some of these issues. I wouldlike to thank each one of
them for participating with us today and I look forward to hearing
their testimony. I thank you very much.
Now, I would like to turn to Mr. Pascrell for his opening
statement. If anyone else has an opening statement, I am going
to ask that it be submitted for the record so that we can move
this hearing on. Mr. Pascrell?
Mr. Pascrell. Thank you. I would like to start my opening
statement by thanking my friend, the distinguished Chairwoman
from New York, for setting up this hearing to discuss the issue
of regulations and their impact on small businesses. In fact,
we almost had a little preliminary yesterday at another
hearing. I think this serves as a nice complement and more
focused follow-up to the hearing that we had yesterday.
The issue we deal with today is one of the most critical
issues for small businesses. The need to have rules that are
clear, well thought out, and that realistically gauge economic
impact, can be critical to the success of small businesses,
which are the backbone of our economy. I relish this
opportunity to examine the strides that have been made in this
area so we can see how successful agencies have been in
completing economic analysis that reflect the true cost of
these regulations.
Both sides of the aisle have concerns with regulations and
their burdens that they place on businesses, and indeed, if one
was to look since 1980 at the number of acts and executive
orders that have addressed the problem of bureaucracy and
regulation and paperwork, particularly in the last seven or
eight years, one of the questions that we all have sitting
around here is whether these regulations, first of all, are
being implemented and how would we know if they were, and
second of all, what is the fallout and is that more treacherous
than the regulation which was supposed to correct some problem
in the first place?
I do not think that there is any Democratic or Republican
way to design a regulation. There is just the correct way, one
that is thought out and is not a rush to judgment. It is a way
that involves a comment period where the agencies not only take
comments but they listen to the suggestions made and evaluate
the validity of business concerns.
I personally believe, and this is only my take on this,
that any regulation or rule which is the result of legislation
that the Congress passes, that since the Congress is taking
great pains to discuss this with those folks who are most
impacted, and that is why we debate these issues, that when an
agency gets that law and now has to implement it, that the
rules and regulations should reflect discussions with the
particular business. Many times, they do, and many times, they
do not, and that is where we have major problems. If there is
no one monitoring how these regulations are being implemented,
let alone promulgated, I think we have serious problems and we
need to address them.
A regulatory impact analysis, which was mandated by the
administration, is crucial in making sure burdens are not
excessive, and I believe some of those burdens are excessive. I
believe some of those burdens do not reflect the spirit and
intent of the original laws. They go beyond, and they are
usually imposed by second- and third-level bureaucrats who have
no appreciation whatsoever of what business folks have to go
into day in and day out.
As the study we will look at shows, and as we know from the
many complaints our offices receive about overly burdensome
regulations, the Federal Government has to do a better job with
its analysis to ensure the regulations designed are efficient
while at the same time being effective. It would seem to me the
only way we can do that is have a report to each Congress of
what has happened in the previous Congress and how these are
being implemented so that the Congress itself knows of what has
been monitored and what has not. You can have all the executive
orders by whatever President you wish. If they are not being
implemented or if the implementation of those executive orders
are worse than the previous situation, then we have created a
real amount of chaos and I am sure we do not want to do that.
It is interesting to note that the two parties who compiled
the report on both sides of the political spectrum joined
together on their conclusions. It is much like our work on the
Small Business Committee, which has been for the most part
bipartisan. We try to steer away from the extremes. I think
that is healthy.
I look forward to using this hearing to look at the
Chairwoman's COAARAA legislation contained in H.R. 3669. Maybe
what we learn here today can help us weigh the need for an
office within the General Accounting Office to compile separate
analysis of regulations to balance the job currently done by
the Office of Management and Budget.
So I look forward to today's testimony and I thank the
Chairwoman for her indulgence.
Chairwoman Kelly. Thank you very much, Mr. Pascrell.
I do want to say one thing before we begin. I look forward
to the testimony, but I also thank all of you, every one in the
audience and everyone who is on the panel, for waiting for us
so patiently. We had no idea when we set the timing on this
hearing that we would be caught in the involvement on the floor
of the House. So I thank you very much, and with that, we will
begin with the testimony.
We will start with you, Mr. Hahn, Mr. Robert Hahn from the
AEI-Brookings Joint Center on Regulatory Studies. He is the
Director and we are very happy to have him with us today.
STATEMENT OF ROBERT W. HAHN, DIRECTOR, AEI-BROOKINGS JOINT
CENTER ON REGULATORY STUDIES
Mr. Hahn. Thank you, Chairwoman Kelly, Congressman
Pascrell, and Congressman Moore. In listening to your remarks,
I am reminded of a Woody Allen story which I will tell you
briefly, where his father comes home from work one day and says
to his wife, ``You would not believe it. You would not believe
it.'' And she goes, ``Well, what is wrong?'' And he goes, ``I
have been replaced by a machine.'' She goes, ``Oh, that is
terrible but you will go out and find another job.'' And his
mother immediately went out to the department store and bought
one of these machines. [Laughter.]
I basically think that the remarks that you made in many
ways reflect more common sense than what I am about to tell
you, but I want to fill in some of the details that I think are
important in talking about regulatory reform, but let me start
with a couple of formalities.
First, I am going to talk to you more, so I would ask that
my formal remarks be placed in the record. They reflect not
only my sentiments but those of Robert Litan, who is the Co-
Director of the American Enterprise Institute-Brookings Joint
Center for Regulatory Studies.
Chairwoman Kelly. We are glad to have the remarks and we
will put them in the record. Thank you.
Mr. Hahn. Thank you. My sister once told my niece, who I am
hoping to visit later this afternoon if this hearing ends at a
reasonable hour, once told my niece what her Uncle Bobby did,
and she told her that he was an egghead. She said, ``Well, what
do eggheads do?'' ``They think a lot.'' So the next time I went
down to visit my niece, who is now five, she said, ``Uncle
Bobby, what is it that you really do?'' And I said, ``Well, I
study regulation.'' And she goes,``What is regulation?''
Remember, I am talking to a five-year-old now. And I said, ``We sort of
study how when you tell a person to do something, you tell them to do
it in a nice way.'' She says, ``Well, how about an example?'' I said,
``Well, if Mommy tells you to clean up your room, she does not say,
`Put this toy over in that corner and put that toy under your bed,' or
whatever. She leaves it up to you how to do that.'' And she thought
about it for a minute and she says, ``That is great. Can we watch
Winnie-the-Pooh now?''
This is a real problem with regulatory reform in the large,
and I do not have to tell you that. One is, one conveying to
people why it is important, that it can have an impact on each
of our freedoms, it can have an impact on the size of the
economy, the way we run our personal lives, the way we choose
to engage with each other in business. So it seems that the
more things change, the more they remain the same.
I am sure you have heard the story and probably testimony
from former Senator George McGovern about when he left this
august body, in this case the Senate, he talks about how he
tried to start an inn in New England and he said, ``Gosh, if I
only knew then what I know now about regulation, I would have
done things a lot differently.''
There has been a steady stream of legislation and executive
orders related to regulatory reform which you, Congressman
Pascrell and you, Chairwoman Kelly, both told us about in your
introductory remarks. The reality is that not much has been
done. That is the bad news. The good news is, I think if we as
foot soldiers, I include you in that army, if you will, and
myself and the other distinguished members of the panel, if we
stay focused and we stay focused on the right thing, I think we
can make some headway.
First, let me start by asking what is the nature of the
problem, and we go into this in more detail in our formal
remarks. Well, the nature of the problem is the Federal
Government requires expenditures on the order of $200 billion a
year, very, very, very roughly speaking. Those costs are
imposed on the private sector, and to a lesser extent
government bodies, to do things. We do not have a particularly
good idea of what is being done.
Congressman Pascrell, you talked about you have a hunch
that some things are being done that do not make sense. Well,
let me give you one example based on a study that I did not do
but my colleagues, Randy Lutter and Elizabeth Mader, are just
releasing today at the Joint Center.
We have a lot of legislation regulating lead out there
because lead is of concern for children's health, among other
things. Did you know that the regulations that you were in
charge of making the laws for and that EPA and HUD are in
charge of implementing, those regulations require more
stringent regulation of lead at hazardous waste sites than in
the kid's back yard? There may be no kids at the hazardous
waste site. Lots of kids play in their back yard. Do we have a
problem? Maybe.
We could be doing a much better job of improving kids'
health, saving kids' lives, and saving money if we simply took
a careful look at the process. We could do a better job of
facilitating entrepreneurship in small business, in large
business, if we took a serious look at what the paperwork
requirements do and what these silly regulations of which I
just gave you one example. George McGovern, for all we know,
might be in business in New England today promoting bed and
breakfasts. We could do a much better job of making sure that
regulations do not impose a drag on the economy.
Okay, how do we do this? How do we begin to think about
improving the quality of regulation so that you and appointed
civil servants can make better decisions? The short answer is
it takes two things. One, you guys have got to step up to the
plate. You have got to have guts. This is in short supply in
this town. You have really got to have guts. And the second
thing is it requires common sense, which you have already
articulated in your opening remarks.
Let me say a little bit about what I think we know about
the quality of regulatory analyses, and I have a few people in
the audience who I would like to acknowledge who have helped me
on this, some of whom have already left me, very wisely. Irene
Chan, who did some seminal work on this last year, looking at
what the government actually does in terms of their regulatory
analyses, and my colleagues, Jason Burnett and Aaron Labor, and
will be happy to field any tough questions from you. But I will
give you the broad-brush view of what I think we know.
First of all, based on my earlier research, from an
economist's point of view, many of the regulations that the
Federal Government are implementing now are not likely to pass
an economist's version of a benefit-cost test. I estimate that
on the order of half the regulations, using the government's
own analyses as data, would not pass a benefit-cost test. I
find that rather disturbing. That is the first point.
The second point, which speaks, Chairwoman Kelly, to the
substance of this discussion today, is the quality of the
analyses themselves. Well, the quality of the analyses in my
view is really poor. We looked at analyses, so-called
regulatory impact analyses, over the last three years, between
1996 and 1999, all of them that we could find for major
environmental health and safety regulations, and the bottom
line is they do a bad job of even complying with their own
guidelines. This is based on a Joint Center study, not funded
by any particular business or whatever, just an independent
study by economists.
What do we find? We find that of those rules that we
reviewed carefully, and Irene and Jason can tell you more about
this, only 28 percent of those rules presented information on
net benefits, that is, benefits and costs and taking the
difference. Well, if you are going to be making multi-million
and in some cases multi-billion-dollar decisions, I think the
American public deserves to know what is happening.
The second thing we found is that they quantified benefits
and costs of alternatives for only a quarter of the
regulations. Did you think of another way to clean up your
room, Katie, or is this the only way to do it? Most of the
time, these guys did not bother to look whether there were
other ways to clean up the room, the hazardous waste site, or
the dirt in the back yard. Duh, we have got a problem.
All right. What are we going to do about this problem? I am
going to briefly go through some of my recommendations, some of
which are based on the good work of your Committee. The first
is, I think in the interest of accountability and transparency,
you ought to put these regulatory impact analyses and their
underlying supporting documents on the Internet. Hey, if Al
Gore invented it, we might as well use it. Let us use the
Internet to tell people what is happening about regulation,
with all due deference to the Vice President--just a joke. And
before a regulation--this is important--before a regulation is
actually considered at OMB, we ought to put it on the Internet
so it is available to eggheads like myself and also real
people.
My second point, and this is a point which you might find
astounding, but it is not, is that these regulatory impact
analyses do not summarize in any sort of standardized way what
they actually do. What does that mean? I have to hire a group
of some of the best graduate students to spend sometimes up to
a week to figure out what these analyses are saying. Well,
Congress people do not have a week to look at what is in these
analyses, so we recommend that you write a clear executive
summary when you do these regulatory impact analyses and you
attach a table to tell people what you did and what you did not
do.
Did you consider costs? Did you quantify them? Did you
consider benefits? Did you quantify them? Did you consider
alternatives? Did you try to quantify the impacts of those
alternatives?What were the kinds of technical assumptions you
made underlying these analyses to get your results?
Again, it is not rocket science, but this is not enough. As
Congressman Pascrell pointed out, you have got to figure out
whether you have the guts to enforce these things. I mean,
there are executive orders on the books here and there are tons
of beautiful laws in the Soviet Union, or the former Soviet
Union, that make it look like everything is hunky-dory, but, in
fact, everything is not always hunky-dory and sometimes you
have to step up to the plate to do things that we believe are
common sensical.
Our third recommendation, and this follows along the
suggestions of the Chairwoman, is to create something like the
Congressional Office of Regulatory Analysis. We think it would
help make the regulatory process more transparent to the
American people. It would help Congress in finding out what is
actually happening down at the other end of Pennsylvania Avenue
in terms of regulations and their impact.
If you want me to say more words about COAARAA, I will be
happy to do it. Mr. Litan and I testified on this, as you know,
previously. We are great supporters of these initiatives for
the reasons we state in the paper.
Something else we believe is important, and it would
require a little bit of stepping up to the plate, but again, it
is common sense, is we believe that Congress should require
agency heads to balance the costs and benefits of major
regulations. I am not even saying at this point, though I
believe the benefits should be at least equal to the cost and
ideally greater, but I am saying at least there should be a
statement that we balanced these things and this is how we
thought about them, if you are making a big decision like the
national ambient air quality standards.
And finally, and this is again where you can step up to the
plate to make things happen, is we believe that Congress should
require that all regulatory agencies adhere to established
principles of economic analysis when undertaking a regulatory
impact analysis. OMB has already articulated a beautiful set of
guidelines. The Joint Center has convened a group of scholars
that also talks about established principles. The question is,
as Congressman Pascrell pointed out, when are we going to begin
to think about implementing these things?
So in conclusion, as I said earlier, it is really going to
take guts and common sense. It is very clear to me that the
common sense is out there. I hope the political will is there,
and I will be happy to entertain any questions after the panel
or now. Thank you.
Chairwoman Kelly. Thank you very much, Mr. Hahn.
[Mr. Hahn's statement may be found in appendix.]
Chairwoman Kelly. Next, we go to Mr. Robert Murphy. Mr.
Murphy is the General Counsel for the General Accounting Office
and Mr. Murphy, COAARAA might land in your lap, so I am very
much looking forward to your testimony.
STATEMENT OF ROBERT P. MURPHY, GENERAL COUNSEL, GENERAL
ACCOUNTING OFFICE; ACCOMPANIED BY CURTIS COPELAND, ASSISTANT
DIRECTOR, GENERAL GOVERNMENT DIVISION, GENERAL ACCOUNTING
OFFICE
Mr. Murphy. Thank you, Madam Chairwoman, Mr. Pascrell. I am
pleased to be here today to talk about GAO reviews of the
compliance by agencies with procedural and analytical
requirements of rulemaking. One of the assistant directors at
GAO, Curtis Copeland, who led many of these jobs, accompanies
me at the table today. With your leave, I will briefly
summarize my testimony and in particular talk about two reviews
that we did of regulatory impact analyses and ask that the full
text of my prepared remarks be incorporated in the record.
Our reviews were conducted in response to Congressional
concern that agencies were not, as Mr. Pascrell pointed out
earlier, considering the effects of their actions on regulated
entities, nor had they worked to minimize those negative
effects. The requirements we examined are contained in a number
of statutes from the Administrative Procedures Act to the
Unfunded Mandates Reform Act, as well as Executive Orders 12866
and 12612.
While they may not have been representative of all
rulemakings, our work disclosed inadequate data, methodologies
and assumptions, and disclosed noncompliance with the statutory
requirements and executive orders. There were examples where,
as a result of our work, agencies changed their practices and
we helped ensure better adherence to applicable regulatory
requirements.
On the other hand, sometimes our reviews did not disclose
noncompliances but they provided the facts and the analysis to
the Congress to understand what the agencies were up to in
their rulemaking. Sometimes we discovered that the issues that
concerned the regulated community were not really those of the
agencies but were of the underlying statutes concerned, that
the aspects of the regulations that were considered burdensome
by the regulated community were actually required by the
statute being implemented.
Some of our work on regulatory issues has clearly
demonstrated the value of Congressional oversight of agency
rulemaking. Congressional oversight can clarify issues left
unclear in agencies' public statements about their rules and on
occasion can directly result in changes to agencies' rules. The
targets of that oversight can vary substantially, from the
particular and sometimes highly technical elements of agencies'
economic analyses used to support the rules to the general
public participation requirements in the rulemaking process.
I would like to address, as I said earlier, two particular
reviews by GAO. In the last 20 years, we have seen enormous
growth in both the breadth and the number of Federal
regulations. According to OMB, these regulations have improved
public health, safety, and environmental quality, but they come
at a real cost. I do not think anybody estimates the annual
cost of these regulations below hundreds of millions of dollars
every year.
To control the costs of these regulations, administrations
have issued executive orders, such as 12866, and Congress has
enacted laws, including the Unfunded Mandates Reform Act of
1995. These orders and laws require Federal agencies to prepare
and use economic analyses, also known as regulatory impact
analyses, to assess the benefit and costs of proposed
significant actions before promulgating those regulations.
These analyses are intended to inform and improve the
regulatory process by identifying the likely costs and benefits
of feasible alternatives.
We were asked to describe the extent to which Federal
agencies' economic analyses incorporate best practices and the
agencies' actual use of these analyses in regulatory decision
making. We included in our review all economically significant
proposed and final rules issued between July 1996 and March
1997 that addressed environmental, health, and safety matters.
As a result, GAO reviewed the economic analyses used in
promulgating 20 regulations by five agencies, the Departments
of Agriculture and Transportation, the Environmental Protection
Agency, the Food and Drug Administration within the Department
of Health and Human Services, and the Occupational Safety and
Health Administration in the Department of Labor.
We found that five of the 20 analyses did not discuss
alternatives to the proposed regulatory action, six did not
assign dollar values to the benefits, one did not assign dollar
values to thecosts, all of which OMB recommended in its best
practices guidelines. OMB guidance gives agencies flexibility to decide
how thorough their economic analyses should be. At the same time, the
guidance stresses the importance of disclosing the reasons for
omissions, gaps or other limitations. Although GAO found many instances
in which best practices were not followed in the analyses, the reason
for not following was disclosed in only one case.
In addition, eight of the economic analyses did not include
an executive summary that could help the Congress, decision
makers, the public, and other users quickly identify key
information addressed in the analyses. Finally, only one of the
20 analyses received an independent peer review.
I should say that this past March, OMB issued a revision to
its best practice guidance for agencies and we found that,
again, that guidance falls short of the recommendations that we
have made for best practices, and incidentally, several of
those that Mr. Hahn has touched upon today.
In another instance, we found that a Congressionally
requested review of agency regulatory analysis actually
resulted in a change to those rules. We reported last year on
the scientific basis for the Food and Drug Administration's
proposed rule on dietary supplements containing ephedrine
alkaloids and the agency's adherence to statutory and executive
regulatory analysis requirements. Although the number and type
of adverse event reports that FDA received warranted the
agency's consideration of steps to address safety issues, we
were concerned about the strength of the information FDA used
to support two aspects of the proposed rule, the dosing level
and the duration of use limits.
We concluded that FDA generally complied with the statutory
and executive orders applicable to rulemaking, but the economic
analysis that accompanied the rule did not reflect the full
range of uncertainty associated with the proposed rule. The
agency did not always disclose why certain key assumptions were
made or the degree of uncertainty involved in those
discussions. It also did not disclose that alternate
assumptions would have had a dramatic effect on the agency's
estimate of the benefits of the proposed actions.
We recommended that FDA obtain additional information to
support conclusions regarding the specific elements in the
proposed rule before proceeding to final rulemaking. We also
recommended that FDA improve the transparency of its cost-
benefit analysis in its final rule.
I am happy to say that in April of 2000, FDA announced that
it was withdrawing certain portions of its proposed rule,
``because of concerns regarding the agency's basis for
proposing certain dietary ingredient level and a duration of
use limit for these products.'' That was an example of where
Congressional oversight had an immediate benefit to the public
and to the government.
There are numerous other examples of GAO reviews in recent
years that demonstrate that Congressional oversight can be
effective in ensuring that agency rules are carefully developed
and that agencies permit public participation in the rulemaking
process.
Madam Chairwoman, this concludes my statement. I would be
pleased to respond to any questions.
Chairwoman Kelly. Thank you very much, Mr. Murphy.
[Mr. Murphy's statement may be found in appendix.]
Chairwoman Kelly. Let us move on to Mr. David Addington.
Mr. Addington is Senior Vice President of the American Trucking
Associations. Mr. Addington, thank you very much for being here
today.
STATEMENT OF DAVID S. ADDINGTON, SENIOR VICE PRESIDENT,
AMERICAN TRUCKING ASSOCIATIONS
Mr. Addington. Thank you, Madam Chairwoman. I have two
documents I would like to ask your permission to have in the
record, my full written statement submitted to the Committee
and the document I transmitted to the staff yesterday, five
pages entitled ``Summary of the Federal Motor Carrier Safety
Administration's Proposed Hours of Service Changes, Updated May
15, 2000.''
Chairwoman Kelly. By all means, we will accept them into
the record. Thank you.
Mr. Addington. Madam Chairwoman and members of the
Subcommittee, we appreciate the invitation to discuss the
Department of Transportation's failure to properly conduct the
required analyses to determine the full impact of proposed
rules to govern the hours that truck drivers may work. The
hours of service scheme proposed by the Department's Federal
Motor Carrier Safety Administration is disastrous for the
trucking industry, for the safety of the traveling public, and
for American consumers. The proposed regulations hit trucking
companies hard and they hit small trucking companies hardest. I
will describe the trucking industry, some
key problems with the Department's proposed rule, and the
defective analyses on which the Department of Transportation,
which I will call DOT, based its rule.
The American Trucking Associations, which I represent, is a
national trade association for the trucking industry, with more
than 2,500 motor carrier company members, large and small who
operate in every State of the union. Trucking is vital to the
nation's economy. Trucks move the majority of the freight that
moves in America. Trucking accounts for more than 80 percent of
the transportation revenue in the economy. Seventy percent of
America's communities depend for freight service exclusively on
trucks. So DOT regulations restricting what companies can do
with trucks and drivers directly affects a huge segment of the
American economy.
Although some trucking companies are multi-billion-dollar
companies whose names you know, such as Mr. Moore's district
has the Yellow Corporation, most of the trucking industry is
small business. According to DOT, almost 50 percent of motor
carriers have only one truck, and a full 95 percent of motor
carriers, almost 395,000 of them, have 20 or fewer trucks.
ATA has long called for reform of the existing Depression-
era hours of service rule. We ask for new rules based on three
things, sound science, public safety, and needs of the American
economy. ATA spent two years forging an industry-wide consensus
on a proposal for new rules that would meet these requirements
and our board of directors adopted that proposal in November of
1999. We filed the ATA proposal with the Department of
Transportation in December 1999, but instead, the Department
published on May 2, 2000, proposed regulations that are
inconsistent in a number of ways with fatigue science and are
so far removed from safer highways and economic reality that
the ATA must strongly oppose the DOT proposal.
The Department's proposed rules fail the test of science,
safety, and economics. On science, for example, the DOT
proposal takes drivers whose jobs consist of five night shifts
a week and requires them to switch over to sleeping on both
weekend nights. But fatigue science would counsel against
requiring them to switch their sleep/wake cycle over on both
weekend nights.
On safety, the Department's proposal will put more trucks
and more drivers on the road just to move the same amount of
freight that trucks move today and it will force more of the
trucks to operate during daylight hours when traffic congestion
is at its peak. Regulations that put more of the trucks on the
roads when most of the cars are also on the roads can hardly be
characterized as a safety regulation.
On economics, shippers will face significant price
increases for freight service. Trucking companies will face
tough obstacles in trying to meet the payroll and turn a
profit. And businesses and consumers will pay more for the
goods they purchase. Congress should send DOT back to the
drawing board on its proposed hours of service regulation.
With regard to economic analysis, the Federal law requires
the Department of Transportation to conduct an initial
regulatory flexibility analysis, or IRFA, when it published its
proposed rule. The Department failed miserably in its attempt
to meet this legal requirement. The Department provided only a
cursory and inaccurate examination of the economic effects of
the proposed rules on the trucking industry. Moreover, it
completely ignored the larger economic impacts of the proposed
rules on the economy as a whole.
With regard to the trucking industry, the Department
undercounted by 100,000 the number of small trucking businesses
and that taints the Department's entire IRFA. The IRFA also
estimates the economic impact of only one part of the proposed
rule, the requirement that companies install in their trucks
electronic on-board recorders to monitor the compliance of
drivers with the Department's hours of service regulation, and
DOT even got that part wrong because DOT underestimates the
number of companies that must install the recorders to be in
compliance with DOT's proposed rule.
In any event, the regulatory costs that DOT attempted to
address are dwarfed by the additional costs that DOT ignored.
The Department's regulations will force trucking companies to
incur costs for the purchase of new trucks and hiring new
drivers. While ATA has not yet completed its final economic
analysis of the DOT proposal, our preliminary conclusion is
that labor and equipment costs to the trucking industry will
increase by approximately 20 to 30 percent.
More trucks moving the same amount of freight also requires
additional mechanics to maintain the trucks and additional dock
workers to handle getting the freight in and out of the trucks,
more costs that DOT ignored. Also, DOT ignored the cost of
realigning trucking terminal networks, which were principally
designed to allow truck drivers to move efficiently between
terminals within the driving hours allowed under the current
rules but not under the proposed DOT rules.
The Department also ignored the bigger economic impact
beyond the trucking industry. Shippers will pay more to move
freight, including smaller manufacturers, wholesalers, and
retailers who are the engine of the nation's economy. Many of
those costs will, of course, be passed on to consumers in the
form of higher prices for goods. The direct result of DOT's
proposed rule is inflation, which is hardly what the American
economy needs.
With regard specifically to small business, the Department
of Transportation failed to meet the legal requirement to
compare the economic effects of the proposed rules on small
entities with other alternatives. The Department examined
alternatives, but only alternatives for the entire trucking
industry. The Department did not design or analyze alternatives
solely with small companies in mind, nor did it consider the
alternatives for minimizing the impact on small entities that
the law requires DOT to consider. Thus, the Department failed
to produce an initial regulatory flexibility analysis comparing
the relative costs and benefits of alternatives as they pertain
to small entities.
The Department also made a mistake in its proposal that
calls into question the quality of the DOT economic analysis.
When it published its proposed rule on May 2, 2000, the
Department included the following sentence in the preamble to
its rule, ``Therefore, the FMCSA, in compliance with the
Regulatory Flexibility Act, 5 U.S.C. 601-612, has considered
the economic impact of these requirements on small entities and
certifies that this rule would not have a significant economic
impact on a substantial number of small entities.''
Now, on May 26, just a few weeks later, the Department
stated instead that, ``The FMCSA does not know with certainty
the full economic impact of the proposal and, therefore,
withdraws its negative certification.'' The withdrawal of the
notification is a notable change because the certification has
exempted the proposed rule from the Regulatory Flexibility
Act's requirements. The Department has explained that its
certification was included by error, but the initial erroneous
inclusion of the language raises doubts about whether the
Department conducted a careful initial regulatory flexibility
analysis in the first place. Of course, the practical question
also arises of how anyone at DOT could possibly think that the
proposed rule would not have a significant economic impact on a
substantial number of small entities.
Lastly, while the Department of Transportation admits it
does not know the full economic impact of its proposals, even
after DOT has looked at various changes to hours of service
rules for 20 years, it expects ATA and others to provide this
information to DOT within the 90-day period that DOT allowed
for comments on the proposed rule. We have asked for an
additional 90 days so that we can effectively survey our
trucking company members, large and small, and analyze and
report the resulting economic data, but the Department has not
granted our request.
When the trucking industry, the law enforcement community,
the manufacturing industry, the Teamsters, the AFL-CIO all
agree that more time is needed to analyze the economic impact
of the proposed rule, one would expect the Secretary of
Transportation to grant the additional 90 days, but that
request has not been granted.
Madam Chairwoman, the Subcommittee asked only that I
address the trucking hours of service issues and we appreciate
having that opportunity, but I would be remiss if I did not
draw the Subcommittee's attention that this rule is only one
front of the current three-front regulatory war that this
administration is conducting on the trucking industry. The
rules on the other two fronts, OSHA's proposed rule on
ergonomics and EPA's proposed rule on diesel engine and fuel
standards, also are based on faulty economic analyses.
On all three fronts, hours of service, ergonomics, and
diesel, the rulemaking process is not driven by the science, it
is not driven by health and safety, it is not driven by
economics, and it is not driven by the law. It is driven by the
desires of the heads of those agencies to issue final rules
before the administration leaves office in January 2001. The
interests of the public in these rulemakings should not be
subordinated to that artificial deadline. The agencies will
still be here with qualified people at the helm to make
decisions after next January. Let us take our time and get it
right.
Thank you, Madam Chairwoman.
Chairwoman Kelly. Thank you very much, Mr. Addington.
[Mr. Addington's statement may be found in appendix.]
Chairwoman Kelly. Next, we are going to hear from Mr. Sal
Ricciardi. Mr. Ricciardi, you are here in actually a double
capacity, are you not? You are the President of Purity
Wholesale Grocers, but also you are the President of the
Pharmaceutical Distributors Association, and we appreciate your
taking the time to be with us here today and look forward to
your testimony.
STATEMENT OF SAL RICCIARDI, PRESIDENT, PURITY WHOLESALE
GROCERS, INC., AND PRESIDENT, PHARMACEUTICAL DISTRIBUTORS
ASSOCIATION
Mr. Ricciardi. Thank you, Madam Chairwoman and members of
the Subcommittee. Thank you for allowing me to speak to you
today. I feel like I am really getting my money's worth because
I am a member of his organization and I agree with everything
he just said.
Mr. Addington. Thank you.
Mr. Ricciardi. I request that the text of my prepared
statement be placed into the record.
My name is Sal Ricciardi and I am President of Purity
Wholesale Grocers of Boca Raton, Florida. I am speaking today
for Supreme Distributors, a division of Purity that distributes
prescription drugs and on behalf of the Pharmaceutical
Distributors Association, PDA, a trade association of ten Rx
drug distributors. Most importantly, I am informally
representing approximately 4,000 small businesses which are
licensed to distribute prescription drugs for human and animal
use according to Food and Drug Administration estimates. That
is an estimate the Food and Drug Administration made. And there
are many thousand customers across America.
As I explained in detail in my written statement, these
4,000 small businesses will be economically devastated and most
will be forced to close their doors if an FDA rule issued to
complete the implementation of a 1988 law known as the
Prescription Drug Marketing Act is allowed to go into effect.
The FDA rule establishes a ``catch-22'' type situation wherein
smaller drug distributors are required to obtain a very
detailed sales history for drug products going back to the
first sale by the drug manufacturer before those products can
legally be resold. However, neither the PDMA nor the FDA rule
require either the drug manufacturer or the large national
wholesalers who purchase the large majority of drug products
directly from manufacturers to provide this sales history to
the secondary distributors. I know this is a mouthful. However,
allow me to explain a little further.
The result is that the rule will make it illegal for most
wholesalers to resell prescription drugs and this will cause
the loss of thousands of jobs, disrupt existing distribution
channels for thousands of nursing homes, clinics, doctors'
offices, and veterinary practices across the country,
potentially putting patients and animals at risk and remove an
important restraint on pharmaceutical prices by reducing
marketplace competition.
To understand the real impact of the rule, we called the
authorities in each State who license the distribution of
prescription drugs. We found that more than 32,000 licenses had
been issued to distribute Rx drugs. It is obvious from this
figure that most distributors, including small companies like
mine, distribute in multiple States.
Of particular interest to the Subcommittee is the fact that
the FDA's analysis of the effect of this rule on small business
was 100 percent wrong. The FDA's analysis published in the
Federal Register concluded that the majority of the estimated
4,000 small distributors will not be affected by this rule. In
fact, they will all be seriously affected by the rule and most
will be driven out of business. The FDA's analysis did not
calculate the number of jobs that would be lost, the economic
loss to the owners of the business that would be wiped out, the
likely increased cost to pharmaceutical end users because of
the elimination of existing supply channels, and a decrease in
competition and the very real potential physical threat to
patients whose supply of life-saving and life-enhancing drugs
would be disrupted.
I believe that these impacts are more than large enough to
qualify this regulation as a major rule and that the FDA should
be required to perform the proper analysis before the rule is
reimposed. I would also like to note that for about the past 12
years during which the drug distribution has been operating
under FDA interim policy guidance, which does not require
tracing sales history of products back to the manufacturers,
there have been no significant quality or safety problems.
In conclusion, I would draw the Subcommittee's attention to
H.R. 4301, a bipartisan bill that would make small but vital
technical corrections to the statute. This bill would allow the
4,000 small distributors to continue to serve their customers
and provide vital price restraining competition while
preserving the current safety and integrity of our national
pharmaceutical distribution system.
I thank you for your attention and will be happy to answer
any questions you might have.
Chairwoman Kelly. Thank you very much, Mr. Ricciardi.
[Mr. Ricciardi's statement may be found in appendix.]
Chairwoman Kelly. Next, we would like to hear from Ms.
Wallman, and thank you for being so patient, Ms. Wallman.
Kathleen Wallman is President and CEO of Wallman Strategic
Consulting, LLC. Thank you very much for being with us.
STATEMENT OF KATHLEEN M.H. WALLMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, WALLMAN STRATEGIC CONSULTING, LLC
Ms. Wallman. Thank you and good morning, Chairwoman Kelly
and Congressman Pascrell. Thank you for the opportunity to
participate in today's hearing.
My statement addresses the experience of a particular kind
of small business, rural telephone companies, and offers some
observations about regulatory impact analyses conducted by the
independent Federal regulatory agency that regulates them, the
FCC. My observations are based on my work with these companies
in different capacities. I have worked on these issues most
recently as an advisor to small companies and their Washington
representatives and previously as chief of the Federal
Communication Commission's Common Carrier Bureau and at the
White House as Deputy Assistant to the President for Economic
Policy at the National Economic Council.
Rural telephone companies have a vital role in ensuring
that all Americans, no matter where they live, have access to
telecom networks. The special challenges that these companies
face in serving remote and sparsely populated parts of our
country are well documented in the policy literature and in FCC
proceedings. Congress expressly recognized these small rural
telephone companies as a category unto themselves in the
Telecommunications Act of 1996. Most rural telephone companies
fit easily into the category of small business and do not have
resources devoted exclusively to monitoring Federal regulatory
matters or mounting advocacy efforts in FCC proceedings.
This is why the Regulatory Flexibility Act passed in 1980
and amended by the Small Business Regulatory Enforcement
Fairness Act in 1996 is potentially such an important tool in
ensuring that Federal rules are adopted with an adequate
awareness of the impact that the new rules or rule changes will
have on small companies, such as rural telephone companies. The
question is, how well is it working?
My own view that it is starting to work in some ways but
that its implementation can be improved. There are inherent
difficulties in trying to implement regulations that affect
rural telephone companies in a way that is sensitive to the
burdens that new regulations impose. One difficulty is the
inescapable complexity of common carrier regulation. Today's
common carrier regulation is the result of decades of Federal
and State legislative and regulatory action. There is some hope
that this area will become less complex as competition
diminishes the need for regulation, but that is unlikely to
happen very quickly. A topic for another day would be what
dramatic deregulatory and decomplexifying steps regulators and
Congress could take.
Another inherent difficulty and irony is the fact that many
of these complex regulations were adopted to help rural
telephone companies and their customers. Universal service
regulations,for example, impose burdens on small companies in
order to assess how much support the company and its customers should
receive. So in appraising the process, it is important to remember that
some regulations impose a burden in order to help the regulated entity.
Another difficulty is presented by two realities about the
rulemaking process at the FCC. First, there is the enormous
workload of the FCC. The dedicated staff at the Commission is
still working through the many assignments delegated to the
agency by the 1996 Act. Under the pressure of a production
schedule, it is not surprising that the agency has attracted
some criticism about their execution of the statutory
procedural requirements of the RFA.
The second reality is that there is a tension between
expertise and objectivity. It is very difficult to expect the
same internal experts who advise the Commissioners that a new
rule is sound and ripe for adoption to be objective in
criticizing and editing that rule because of its anticipated
impact on one constituency, small regulated companies.
Another difficulty is that rural telephone companies are
small. Some of them are very small. They do not have Washington
offices of their own. They rely on membership associations and
outside advisors. Even with such assistance, the resources
needed to monitor what is going on and to advocate reasonable
results in each of many pending proceedings spanning several of
the FCC's operating bureaus simply are not available.
There is some reason to praise progress and there are still
some opportunities for improvement. At least some rural
advocates have noticed some improvement. For example, OPASTCO,
one of the leading membership associations that covers small
telephone issues, has noted that the FCC has been more willing
to treat rural telephone companies as small businesses rather
than as dominant incumbents that would not be entitled to the
benefit of the RFA small business analysis.
But there remains room for more improvement and the
question is what should be done. The answer might include
legislation, but there are a few steps short of legislation
that would help, in my view.
First, Congress should consider whether the FCC needs more
focused resources to conduct better RFA analyses. Adding more
people to the process is not the answer, but adjusting the mix
to include the right people might help. Additional economists
and rural analysts specifically dedicated to the RFA process,
for example, would help.
Second, Congress should also consider whether there are
process changes that could be implemented at the FCC that would
address the tension between objectivity and expertise. The
people most intimately familiar with the substance of a
rulemaking may benefit from the perspective of others not so
closely involved in doing the RFA analysis. There may be
candidates already on the organizational chart at the FCC that
could provide such assistance and perspective if given the
right resources.
Third, Congress should consider encouraging the FCC to
adopt mechanisms that will allow it to communicate directly and
easily with rural telephone companies. The simplest, best way
for the FCC to ensure that it understands and can properly
assess the impact of a proposed rule on small telephone
companies is this: Ask them. But it is not always so simple.
There are hundreds of small telephone companies. Which one
should they call?
The FCC could make this ``just ask'' approach easier by
creating a standing task force or Federal advisory committee
consisting of rural telephone companies' representatives and
experts on rural economic development. This would put valuable
expertise close at hand and it would increase the likelihood
that the impact of new rules on rural telephone companies would
be authentically considered at the beginning of the process and
weighed appropriately throughout the process. That is the goal,
after all.
In a real way, the success of the RFA must be measured by
these substantive results, and even the most scrupulous
adherence to the formalities of the RFA's procedures should not
be viewed as a substitute.
My view is that it would be wise to pursue options such as
these before creating another step in the regulatory review
process, such as by empowering GAO to undertake its own RFA-
type review. The views of GAO no doubt would make a thoughtful
contribution to the process, but one of the great problems of
rural telephone companies is the damage to investment plans
that uncertainty inflicts. Adding another possible review step
might exacerbate that uncertainty.
Nevertheless, even without new legislation, Congress can
have an important oversight role. Parties dissatisfied with the
way the RFA has been conducted in a particular case can call to
the Subcommittee's attention these deficiencies and provide the
basis for oversight steps with resulting guidance to the agency
for improvement.
I thank you very much, the Subcommittee, for your work in
this area and thank you very much for the opportunity to
testify.
Chairwoman Kelly. Thank you, Ms. Wallman.
[Ms. Wallman's statement may be found in appendix.]
Chairwoman Kelly. I appreciate the testimony of all of you
today. It seems to me that we have a problem with regard to an
enormous amount of rules and regulations that the agencies are
promulgating. I think that all of this testimony and any of it
is certainly helping us focus on how to resolve the problem and
make it easier for all of us to do our business, our small
businesses in the nation. I would like to ask some questions. I
am just going to ask a few of my questions first and then go to
Mr. Pascrell.
Mr. Murphy, I was really interested in some of your
testimony. I found that you cited cases where the statute
actually limited the agency's discretion in developing sound
regulation. When it is your belief that clarification is
necessary and that a law should be amended, how do you
communicate that to Congress?
Mr. Murphy. Well, in cases where we have been asked to look
at, for instance, the Unfunded Mandates Reform Act or the
Regulatory Flexibility Act and we have concluded that there
were aspects of the Act that really were not accomplishing what
we believe that the Congress intended by passing them in the
first place, we include recommendations in our reports to the
Congress suggesting that the Congress should consider whether
amending those statutes might accomplish their purpose.
Chairwoman Kelly. And that is a written report that comes
in?
Mr. Murphy. Yes, ma'am.
Chairwoman Kelly. I am interested because I am also
thinking that it might help us in Congress if you too
considered the Internet. That might be helpful to us. Are they
posted on the Internet?
Mr. Murphy. All of our reports are on the Internet. In
fact, our website gets some accolades. I think it includes not
only all of our reports, but all of our testimonies will be
there within a day of being given. Our legal opinions are
posted there, also.
Chairwoman Kelly. Do you know how often a member will then
take that information and use it to try to draft some sort of a
legislative solution or a fix to the problem?
Mr. Murphy. I have no way of knowing how often that occurs.
We have anecdotal--I can remember occasions when that occurred,
but we do not have any systematic way of measuring that.
Chairwoman Kelly. If you can already provide Congress with
independent assessments of the regulatory costs and benefits,
do you think that we could use COAARAA?
Mr. Murphy. Well, in this sense, I think it would be
important. The General Accounting Office, for example, is
responding to statutory requirements for evaluations and
requests from chairs and ranking minority members of Committees
and Subcommittees, and so when a request comes in for GAO to
take a look at a cost-benefit analysis, we do not have staff
that can drop the work they are doing for other members and
immediately jump on that. In order for the Congress to have
information about a regulatory impact analysis quickly enough
so that it can affect what the agency is actually accomplishing
and perhaps decide whether to use the Congressional Review Act,
which as you pointed out really has not been used at all, that
information has to come in very quickly.
So a CORA approach would allow GAO, or if it were located
someplace else, to establish a separate organization within GAO
staffed--we would have to hire economists and experts in
regulatory processes so that when the regulation hit the street
and a Committee was interested and wanted us to take a look at
it, we could look at it very, very quickly. Some of these
regulations are in development for years and so in order to
take a look at them and provide the information that Congress
needs, we think that a separate organization either within GAO
or in some other place is really critical.
Chairwoman Kelly. Do you think that the agencies, the sheer
number of regulations that the agencies produce every year
contributes to their inability to comply with all of the
regulations, or is that too loaded a question?
Mr. Murphy. I can only speculate, really. Every year,
agencies must report to GAO, provide to GAO and to the Congress
all of the rules which they are promulgating. I took a look at
the numbers that came in just last year to GAO and saw that
there were over 4,500 rules filed with GAO spread across a lot
of agencies. Many of these agencies have substantial numbers
that they are processing. I was looking at the Internal Revenue
Service which filed almost 250 rules with us. The Environmental
Protection Agency filed almost 750 rules with us, and that is
just in the last 12 months.
Chairwoman Kelly. That number again is 4,000 and something,
you said?
Mr. Murphy. Last year, yes, ma'am.
Chairwoman Kelly. Last year, it was 4,000----
Mr. Murphy. Four-thousand-five-hundred-and-thirty-four----
Chairwoman Kelly [continuing]. 534----
Mr. Murphy [continuing]. Regulations that were filed at GAO
in calendar year 1999.
Chairwoman Kelly. Well, it is no wonder that our small
businesses are having some problems with keeping up with
whatever is coming out there at them.
Mr. Murphy. It is a big government.
Chairwoman Kelly. And a highly active group of agencies.
Mr. Murphy. Yes, ma'am.
Chairwoman Kelly. It is not that anybody is doing something
that we perhaps do not need, but we need to find out if there
is a relief for some of this problem.
The other thing I would like to ask you is, when you look
at rules and regulations, do you also look for overlap and
redundancy?
Mr. Murphy. I think that is always something that you look
at. You look to see whether what the regulation is seeking to
accomplish is already being accomplished in other ways. That
would be a baseline that you would have to begin with.
Chairwoman Kelly. Within the single agency or across agency
lines?
Mr. Murphy. Well, we would have to be aware of whether it
was being accomplished across agency lines. That would be a
piece of information that agencies need. I am not sure as a
legal matter that that would be important to an agency who was
given the job of promulgating a regulation to implement a
statute. The fact that another agency is already working in
that area should be something that they take into account in
drafting their regulations, but they are still going to have to
implement their own regulations with respect to the statute.
Chairwoman Kelly. I am wondering, Mr. Hahn, I see you have
your hand up here. If you want to jump in, feel free. Anyone on
the panel is free to speak up here. These questions, I am just
speaking with Mr. Murphy, but feel free, Mr. Hahn.
Mr. Hahn. The problem that Mr. Murphy and you are talking
about is a fairly deep problem. Judge Breyer, before he became
Supreme Court Associate Justice, wrote a book called Breaking
the Vicious Circle, and one of the points that he made related
to a point that Mr. Murphy was making, that you have all of
these agencies trying to do good, if you will, on the basis of
statutes and turning out tremendous numbers of regulations. We
have no clue what is out there in terms of its impact. I can
say that because I am viewed at this point as one of the grand
old men in the field in terms of assessing the costs and
benefits. We do not even have time to look at the minor
regulations, and the agencies tell us they are simply too busy
to do it, cranking out stuff for Congress.
And Judge Breyer notes in his book, one of the problems is
each of these agencies, while they are trying to do good, they
are trying to do good usually in a single policy area, like the
environment, like consumer product safety, like FDA, whatever,
and he calls this tunnel vision, and it is not an accident that
that occurs. The question is, can we begin to develop
overarching legislation to put a check on this?
COAARAA is one example of that. We could talk about other
examples. I think COAARAA is really important. I think in
earlier testimony I pointed out that we are not sure that GAO
is the best place to put it. If I had my druthers, and perhaps
it is because I am obsessed with regulation, I would set up an
additional agency, which is not politically correct to do
today, but I think regulation is an important enough area to do
that. I think if you cannot do that, CBO is a more logical
place to put it.
But the generic problem, to suggest that we really know, in
direct response to your question, whether regulations are
consistent with each other and what is actually coming out of
the pipeline, we only have a very dim idea of what is going on.
Chairwoman Kelly. I thank you very much, Mr. Hahn. We have
considered some other alternatives as to the placement of
putting the office, the COAARAA office. Currently, I have a lot
of confidence in Mr. Murphy's group and I think a number of
other people do because they are in a position where they
already have a number of experts on staff. A separate
bureaucracy right now may be a step overreaching.
The importance to me of trying to get COAARAA in place is
simply that we have got, I think, to do something about the
fact that we are getting 4,534 regulations a year thrown at us
in all walks of business life and all walks of life, and I
think people get very concerned that we have this huge
bureaucracy. The only way that we can make it make sense is if
we make it accountable.
So I think that in the right instances, I think GAO is the
first place to do it, to start, and hopefully we will be able
to have in the budget enough money for them to be able to hire
people. We will get it started and we will at least begin the
walk. As you know, in Washington, thingsbegin slowly, and we
want to take it one step at a time because we want to make sure if we
are doing this, it is effective. That is the bottom line. We need to
relieve the problem, and I am sure you understand and agree with that.
Mr. Hahn, as long as we are talking, I think the
alternatives that are supplied often by the regulated community
and the data is often readily available, but the agencies just
ignore the alternatives and they pay no attention to the
executive order mandate. I wonder, again, if you want to
address that. Do you think that there is a way we can try to
make something happen there? I am concerned because from your
testimony, it seems to me that this is worse than I thought.
Mr. Hahn. Well, we did not know how bad it was until we
actually did this fairly serious study, which is published on
our website. How do you get the agencies to do it? Well, OMB
issued guidelines. Several distinguished economists have said
it is a good idea. Congressman Pascrell, this really relates to
the point you made in the beginning about implementation. You
and the other side of Pennsylvania Avenue have to have the
political will to do this. You both can exercise it
independently or you can work together, but you could do lots
of very simple things.
You could say, if you do not make an honest attempt to look
at alternatives, the regulation will not move forward, except
in cases of emergency because people will yell at you and say,
my gosh, what if there is this emergency regulation? But that
is one way to do it. You simply write into law that a
regulation is not going to move forward unless it passes the
kind of checklist that we put at the end of our testimony. Did
you consider cost? Did you consider benefits? Did you consider
alternatives? Did you consult with important parties to this
regulation, or whatever?
So you can do it. We are not talking rocket science here.
The reason I am big on providing a summary statement at the
beginning of a regulatory impact analysis and in clear English,
a paragraph, what you did--we took a look at this regulation on
truckers, for example, and we think it is going to have these
costs, these benefits, these groups will be advantaged, these
groups will be disadvantaged--people are going to see that.
Right now, these documents are written in Greek. They are
hard to dissect, purposely so in some cases. They do not want
you to know that they are not considering alternatives. There
are five people at OMB who know this. I know this. Jason
Burnett knows this. But most of the rest of the world does not
know or does not care. And if we can get this information out
there in summary form so people can use it, see in some cases
how regulations are well designed and in other cases they are
very poorly designed, I think we can make a lot of progress.
The key, as Congressman Pascrell points out, is what hooks
do you put in either legislation or what executive orders do
you impose and what enforcement guidelines are there. If there
is no enforcement, we can just forget it.
Chairwoman Kelly. So, Mr. Hahn, if I understand you
correctly--let me rephrase this. What is so difficult about
having some of these alternative things, do you think?
Mr. Hahn. Nothing. It is political will. My shorthand
language for that is guts. If a President wanted to spend some
political capital on this, he or she could do so. If the
Congress was oriented in this direction, and I think this is a
bipartisan issue in a lot of ways----
Chairwoman Kelly. It definitely is.
Mr. Hahn [continuing]. I just do not think it is on the
radar screen of lots of people because it does not have a high
political payoff, even though it is potentially big bucks in
the large for the economy, these 4,500 regulations that Mr.
Murphy talks about.
But I think a starting point that is just not going to be
controversial at all is to say, let us force these regulations
before they move forward, force the analysts who are doing
these analyses to fill out a little summary and write a
paragraph in English that a layperson can understand with a
high school education. I think that is a starting point,
because then you are going to see the kinds of results that
have emerged from our fairly exhaustive analysis, which took a
summer to do.
You can see it very quickly.
Chairwoman Kelly. Mr. Hahn, can you explain why in
approximately 60 percent of the rules that you studied, the
benefit numbers in the Federal Register were inconsistent with
the IRA?
Mr. Hahn. With the RIA?
Chairwoman Kelly. Excuse me, the RIA?
Mr. Hahn. I would ask Jason to answer that.
Chairwoman Kelly. Come forward and identify yourself,
please.
Mr. Burnett. I am Jason Burnett. I work at the AEI-
Brookings Joint Center. I think that there are probably two
reasons for that. First of all, the RIA is created for the
proposed rule and there are some changes in the final rule and
some changes both in the analysis as well as the rule itself.
That would explain some of the inconsistencies.
The second reason may be that incompetency on the behalf of
agencies. We found several cases where agencies use an
inconsistent discount rate or dollar year within a single
document and there's no good explanation for that.
Chairwoman Kelly. Do you think there are two sets of
benefit numbers being calculated?
Mr. Burnett. Two separate?
Chairwoman Kelly. Yes, several sets?
Mr. Hahn. Let me take this question, Jason. Jason is not
used to being on the record. We simply do not know. I mean, we
do not have the data. As he pointed out, the inconsistencies
are there, but I do not think we know.
Chairwoman Kelly. Okay. Thank you very much.
I wanted to ask Mr. Ricciardi, Mr. Ricciardi, you have
asked for a stay of action, and I really appreciate your
testimony. I think both you and Mr. Addington offer good
examples of just what the problem is with regard to these
agencies promulgating rules that they perhaps have not looked
at the total effect of. Can you just quickly tell me where that
stay of action is?
Mr. Ricciardi. The stay has been granted. Originally, the
regulation was to take place December of this year and the stay
was granted until October of the year 2001. But if I can equate
it to our business and the businesses that I represent, I feel
like a prisoner on death row who has been stayed, and the
reason I say that is our attempts to bring our message to the
FDA, in correspondence that the FDA has made, they do not seem
to want to move on the regulation.
I am relatively new at this process, Madam Chairman, and I
am learning as I go. One of the suggestions I could make to any
agency is for representatives of those agencies, prior to
regulation, is to come and visit with the companies that they
are regulating. I have had a couple meetings and correspondence
with the FDA, and in every correspondence that I have had, I
have suggested that they come and visit our organization, and
to this date, they have not.
Chairwoman Kelly. Thank you. We have just been called for a
vote, and I am thinking I would like to hold this open. What I
am going to do is I am going to hold the hearing open.
I am going to allow Mr. Pascrell to question at this time.
We can stay for at least the second bell.
Mr. Pascrell. Thank you, Madam Chairman.
Mr. Hahn, you held up the regulatory impact summary. Are
you saying that nothing like that exists at this point?
Mr. Hahn. Nothing to my knowledge.
Mr. Pascrell. So this is a two-sheet form here which you
are recommending.
Mr. Hahn. Right. It could be a one-sheet form. It does not
really matter.
Mr. Pascrell. But how are records kept, then, by those rule
makers? I mean, this seems to be a very simple form to the
point you made it that way. This is like rule and regulation
making disclosure. I want to know who makes these things. The
folks out there have a right to know who makes the rules and
where the regulations are coming from, and if these folks are
hiding behind the screen of employment, behind their jobs, then
there is something wrong. I mean, talk about cooking the books.
If we are not disclosing the purpose of the rule, the cost and
the benefit, it seems to me we are not doing anything.
Mr. Hahn. They are disclosing. They are just disclosing
sometimes in 100 to 1,000 pages and I would prefer it in one or
two pages for people who do not have an infinite amount of time
to read this wonderfully written prose, so-called regulatory
impact analysis.
Mr. Pascrell. If we lay this out, I think the political
will will be there, and some of these things do not need
another bill passage. These things can be done internally, so
that if the administration, whatever that administration looks
like in the future or is now, that administration can basically
send out some orders to indicate that this is what we would
like to happen so we keep track of what is going on if we want
to do that. Now, we may not want to know what is going on. We
may not want to. We may simply want a headline that these are
the rules of the FDA, these are the rules, et cetera, et
cetera, but we do not care down the road what is going to
happen, what the results were going to be.
I was interested, Mr. Murphy, how many of those 4,500 rules
or regulations that you talked about were promulgated by the
INS, God bless them?
Mr. Murphy. Well, I think I can tell you, Mr. Pascrell.
Sixteen.
Mr. Pascrell. That is pretty conservative.
Mr. Murphy. I have to say that we do an audit comparing the
Federal Register to what is filed at GAO and we find annually
several hundred that are not filed at GAO, largely through
oversight. And also, there are a lot of regulations that are
not filed because the agencies contend they are not
regulations. For instance, the Tongass Forest management plan,
which took ten years to develop, the agency says it is not a
regulation and so they are not----
Mr. Pascrell. The agency determines itself whether it
defines such and such as a regulation?
Mr. Murphy. Yes. We have been unable to get OMB to take
leadership to clarify that over the last four years.
Mr. Pascrell. This is government in absentia. There is no
two ways about it. It seems to me there is very little
difference between Red China and what you are doing in
subverting the will of the people. That is why we have a
legislative branch of government, why we have an administrative
branch of government, in terms of checks and balances but even
to find public disclosure. I find that obscene, if I can choose
that word, since every other word has been used. I find it
obscene, the methodology of how most of these rules and
regulations are coming to the fore.
Let me ask, if the agencies are subverting--we have the
idea in our minds that the end goal is who is the President and
what does the Congress look like. Second-level, third-level
management in these agencies remain the same, and we do this on
the State level when I was a State legislator. We are
forgetting this. They are going along the merry path writing
these rules and regulations and I am sure it is not all
cavalier, but that is the impression I am getting.
Mr. Ricciardi, who benefits, to use your example, from the
definition, the shrinking definition of who can sell
pharmaceutical products? Who is benefitting from that rule,
from that----
Mr. Ricciardi. From that new regulation?
Mr. Pascrell. Yes.
Mr. Ricciardi. The manufacturers, and they will increase
drug prices.
Mr. Pascrell. So the pharmaceutical companies are.
Mr. Ricciardi. That is correct.
Mr. Pascrell. Can you explain for the record, very briefly,
how they do that?
Mr. Ricciardi. There is multiple pricing throughout the
country at any given point in time, and as long as there is
more than one drug for a particular illness, such as to treat
prostate, there is open market trading of pricing on drugs and
we as a company and the 4,000 companies that are out there find
opportunities to keep the prices down and buy throughout the
country. By eliminating us as part of the open market system,
the manufacturers will then be able to dictate their price and
will be able to charge higher prices to the wholesaler,
ultimately the consumer.
Mr. Pascrell. And this came out of a 1988 law?
Mr. Ricciardi. Yes.
Mr. Pascrell. And we are just getting to the promulgation
of this thing at this particular point, and 4,000 companies are
going to be affected.
Let me just conclude by saying this. The more I get into
this, the more animated I become in spirit. If we are to
compete on a worldwide basis, and indeed if we are going to
compete within our own borders, we need to make sure that we
are not shrinking the possibilities of competition.
It would seem to me that many of our companies that have to
deal with environmental rules and regulations have good records
on the environment, but how can our companies compete with the
Chinese rules and regulations in the final analysis? We have
found the downside of our trade with Mexico when our companies
just cannot compete. We have to spend thousands and thousands
of dollars to meet these rules and regulations while these
characters, many of them American corporations producing down
in Mexico, have a cakewalk.
So we talk out of both sides of our mouths and I want this
to continue. I do not think we can continue today, but I think
there is a lot more here than meets the eye and I really
appreciate all of your testimony.
Chairwoman Kelly. I am going to recess the Committee for
approximately ten minutes while we go to the floor and vote and
come back. Mr. Pascrell, thank you, and I will also hold the
hearing open so that you can submit written questions if you
would like. Thank you.
[Recess.]
Chairwoman Kelly. Thank you for waiting for the vote. I
apologize. It took a bit longer than we expected.
I want to go back and ask a couple more questions. I think
Mr. Pascrell is coming back, but even if not, there are a
couple more questions that I would like to ask.
Ms. Wallman, do you think the FCC adequately estimates the
costs and benefits of the proposed regulation of small
telephone companies?
Ms. Wallman. I think that there are ways in which they
could do a much better job. The analogy that comes to mind,
what I was thinking about, what I would do if I had a magic
wand goes back to 1993 when the FCC started hiring a lot of
economists. Before that time, the economic analysis review was
done at the end of the process. There was a chief economist
whohad no staff and he would look it over at the end and make sure it
did not commit any mortal sins, but by that time, the decision was
really made and it was made by people in other disciplines who did the
best job that they could figuring out what the right answer was based
on comments in the record.
In 1993 and 1994, the FCC started hiring a lot of
economists and they started sprinkling them throughout all the
bureaus and it really effected a transformation in the way that
the rules were conceived and developed and written because at
every stage, not just at the end, you had the influence of
economists saying not just what do you think is the right
answer but what is the empirical case for this being the right
answer or the best answer.
And so I think that really this is a question of management
focus and really changing the mission definition, the hearts
and minds of the people actually writing the rules and
sprinkling throughout the agency people who are adept at either
knowing on their own or being able to draw from people who are
in the small telephony business what the real impact will be on
a day-to-day basis.
So there is room for improvement, and if I had a magic
wand, what I would do is sprinkle that expertise throughout the
agency so that it would be there at the beginning, middle, and
end of the process, not just at the end looking back at what
has already been done.
Chairwoman Kelly. Thank you. I think that is a very
interesting and good answer that could be utilized by other
agencies, as well. Should the FCC, do you think, establish a
separate office? Would that help, a separate office to perform
the reg flex analyses?
Ms. Wallman. I think that they probably have enough boxes
on the organizational chart that there may be some candidates
there already. My experience there was in 1994 and 1995, so I
am sure things have changed since then, but my understanding
now is that in addition to having the bureau with substantive
expertise and actually writing the rule involved, they do get
comment from other groups. But the pen is held by the people in
the substantive bureau. It may be that the folks who have
stayed up all night actually writing a substantive regulation
would benefit from stronger input from the general counsel's
office and from the business opportunity office.
So establishing an additional box, my inclination is
generally against creating new units, but I think there are
talented people there whose talents could be supplemented with
the right resources so that they could improve the way that
they do the analyses.
Chairwoman Kelly. When the EPA and the OSHA issue some
significant proposal, they are required by law to put together
groups that are basically focus groups of the businesses,
people who are affected by the proposed rulemaking and by the
proposed rule. Do you think that that would be an option for
the FCC? It might slow the process, but do you think that might
be worth it?
Ms. Wallman. I think it would be a great idea. I had an
opportunity to see how some of those EPA-type groups work when
I was at the White House and I thought they were really quite
helpful. And hearing the presentation live was very helpful.
The FCC gets written comments. I should say that in many cases,
I know some decision makers in the Commission will bring people
in. Sometimes they will bring them in and sort of stage a
debate so that they can make sure they are not persuaded by the
last voice they have heard. They have people come in and they
actually go back and forth and try to hear the debate live. But
I think opportunities like that, like what EPA does, like what
OMB does in some cases, could be a real illumination of the
process at the FCC.
Chairwoman Kelly. Thank you. I really appreciate your
testimony here today. I think you have added a lot because of
your perspective.
I want to go to you, Mr. Addington. Yesterday at the full
Committee hearing, we had John Spotila, the Administrator of
OIRA and he commended the FMCSA for their regulatory
streamlining efforts, and I asked him then if the FMCSA had
developed too many resources to streamlining and not enough
resources to complete regulatory analysis, given the trucking
and bus industry's complaints about the hours of service rule,
and he replied, and I am quoting, that DOT would be considering
all of the comments and that the comment period has not yet
closed. He implied my question was jumping the gun.
How do you respond to his suggestion? My question really is
based a question that I am jumping from earlier that I asked,
basically, and that is do you think that we should wait for the
comment period to close before----
Mr. Addington. No, ma'am. As I told you in my testimony,
the American Trucking Associations has worked before years
because we want----
Chairwoman Kelly. Can you pull the microphone closer to
your mouth? Thank you.
Mr. Addington. The American Trucking Associations, as I
said in my testimony, has been seeking hours of service reform.
The rules we have now on the books come from 1937, I believe it
is. They last had any significant amendment in 1962 and they
are out of date and they need work, and we agree with the
government on that.
We were, frankly, surprised when they issued the proposal
that they issued because we had expected it to be somewhat in
the ballpark so that you could hope in the normal rulemaking
process to improve things, to get the data out there and fix
it. We also expected, frankly, that the Regulatory Flexibility
Act, all the other requirements would be complied with in such
a way that, frankly, they would have a better product. We think
it is so bad that we need to stop and start over.
One thing I will say in their defense in this process is
what is now the Federal Motor Carrier Safety Administration has
been through the bureaucratic equivalent of the seven circles
of hell in the last year. At the beginning of 1999, they were
known as the Office of Motor Carriers in the Federal Highway
Administration. Then Congress passed as part of the
Appropriation Act, because Congress was not satisfied with the
performance of that office as part of the Federal Highway
Administration, a prohibition on the Transportation
Department's appropriations bill for the fiscal year 2000 that
said the Secretary of Transportation cannot delegate his
trucking authority to that office as long as that office stays
in the Federal Highway Administration.
So the Transportation Department had to figure out, okay,
what do we do with it? They established a new office in the
Office of the Secretary of Transportation known as the Office
of Motor Carrier Safety, moved the bureaucratic boxes around,
pushed people, different people in charge, lots of paperwork
for delegations of authority and all that.
It was not there more than a few months, I believe, at the
most, because we, and we considered this a good thing, the
trucking industry fought for this, creation of the Federal
Motor Carrier Safety Administration as a separate modal in
administration of the Department. That took effect January 1.
So all the boxes over there are moving back and forth. The
people are moving back and forth. People are spending their
time trying to figure out, which appropriations accounts do I
charge for what? They are in all this while they are trying to
produce these rules. So that may account for some of the reason
that people did not quite get the thorough job that the law
requires done to put together the regulatory package. That is
not necessarily an excuse, and certainly is not to us. We will
fight in the rulemaking and we will fight in the courts later,
if necessary, because it is thegovernment's responsibility to
govern properly, but it may explain why they had as much trouble as
they had trying to put together a regulatory package.
Chairwoman Kelly. Well, I also sit on the Transportation
Committee and I was in on those hearings and I know why
Congress did what it did and I know it has been a problem
perhaps to make sure that you are getting the right letterhead
at the top of the stationery, but on the other hand, we want to
make sure that we are able to have an office that is a
responsible office. That was why it was moved around a little
bit, but----
Mr. Addington. And we supported what Congress did. We think
that is great.
Chairwoman Kelly. Oh, I know you did. I know you were
there, and there were many people from the industry that
testified. But I am very saddened to see this regulation coming
out and I am concerned that I believe there was just a sloppy
initial reg flex analysis on this. You evidently feel that they
just probably did not have the right information or enough
careful information in order to put the rule together before
they wrote the rule.
I am not going to ask that in the form of a question
because I do not want to put you on the spot, but I want to ask
another question and that is, do you think that this proposal
should be withdrawn and reissued after the DOT and the FMCSA do
another analysis under the Regulatory Flexibility Act?
Mr. Addington. Yes, ma'am. I think it ought to be withdrawn
and done properly under the current laws, and that will be part
of the comments that we will file with the Department. It is to
their advantage, as well, because there is no point in all of
us putting this massive energy in this to end up litigating
this in court because they have not complied with the
applicable laws.
Chairwoman Kelly. All right. Thank you very much. I will
not only--I am glad we have that in our record, but I will see
that we manage to get the record transmitted to the other
Committee, as well.
I want to go back now just to discuss COAARAA, since it is
dear to my heart. This question is really for Mr. Hahn and Mr.
Murphy. Some people feel that Congress has oversight at any
point in the process and that currently through hearings,
Congress can better understand agency rulemakings and analyses
and that COAARAA is not needed. I would like very much to hear
both of you discuss how you feel that COAARAA would be useful.
We can start with you, Mr. Hahn, or whichever. Mr. Murphy.
Mr. Hahn. I testified on this, and I am happy to refer you
to that, and I think you know more about this subject than I
do, but let me suggest that I think COAARAA is useful for at
least three reasons, and the relevant analogy here, as you
know, has to do with OMB, when we had a budget process without
CBO. I think it is much improved by having the two
organizations compete with each other and they provide an
independent check on each other. So that is one good reason.
You have an independent check on the analysis of the executive
branch.
A second is a lot of what OMB does is not always open to
the public, and I think COAARAA would make the process more
transparent and improve the process and in so doing it will
give you better ideas for improving your laws and the
regulators better ideas for improving regulations. So it is
really that simple to me.
Chairwoman Kelly. Thank you very much, Mr. Hahn. Mr.
Murphy?
Mr. Murphy. Madam Chairwoman, I was thinking that maybe one
way to respond would be to ask Curtis Copeland to talk about
some actual examples where we have been able to look at
economic models or look at the highly technical details of the
regulation process, something that really would be more
difficult for a Committee or a Subcommittee to do in the course
of the hearing format or the hearing model, and because we have
been able to get into those--in fact, we have a number underway
at the moment with respect to EPA regulations--we have been
able to get the kinds of information that would be useful to
the Congress, that otherwise would be very difficult to come up
with, through a more CORA-type model.
Chairwoman Kelly. Mr. Copeland, would you like to identify
yourself, and yes, by all means, we would be glad to hear from
you.
Mr. Copeland. Sure. I am Curtis Copeland. I am an Assistant
Director within the General Government Division at GAO and we
do a lot of the cross-cutting work that looks at agencies'
compliance with these analytical and procedural requirements.
The rules that we have looked at over the course of the
last few years in many cases are highly technical. For example,
we are looking at one now, a rule that EPA issued last year
that drops the threshold for reporting of lead and lead
compounds under the Toxic Release Inventory Program from 25,000
pounds to ten pounds, and EPA said that this rule would not
have a significant economic impact on small businesses and so
we have been asked to look at that certification statement.
It is extraordinarily difficult to plow into an economic
analysis that has six different chapters and is about 300 or
400 pages in length. So it is something that requires a great
deal of effort just to get comfortable with what the agency is
describing, much less trying to get into the particulars as to
what alternatives they might could have considered.
Last year, we looked at a rule that FDA issued on the
dietary supplements containing ephedrine alkaloids and the
science behind that and the adverse event reports that are
being reported to FDA, and after a great deal of review,
looking at more than 1,000 of these adverse event reports, we
determined that only 13 of them really constituted the basis of
the rule. And so it took a long time, though, to determine that
those 13 were the critical ones that FDA relied on, and so we
suggested that EPA get better data in order to support the
rulemaking and FDA agreed with us and in February of this year
withdrew the rule.
Chairwoman Kelly. Good. Thank you very much for saying
that. I think that is part of the problem. It is almost
impossible for our staffs here, if we wanted to look at a rule
before it was actually finalized, it is almost impossible for
our staffs to, under the workload that they carry, to examine
all of this. And also, it is a problem with regard to their
expertise. So I think it is always important that we try to do
something.
I think that the whole point of what I am trying to do with
COAARAA, what I am hoping to do with COAARAA is to raise the
quality of the analyses and ask the agencies to be more
careful, as you have just pointed out, in terms of not only
looking within themselves but also transmitting that
information to those people who are going to be affected by the
rule or regulation.
I think that we have identified in this hearing that there
is a problem and we are following your model, Mr. Hahn. We are
identifying the problem, we are analyzing the problem, and I
think the answer for us perhaps is to start with passing
COAARAA.
I really thank you very much. I think that it is really
wonderful that you were willing to sit through as lengthy a
process as this has been. I did not expect it to be that when
we set this meeting for ten o'clock in the morning, but I thank
all of you for being here and I thank you very much for your
testimony. You may be hearing from some of the other members of
the Committee simply because there is so much going on on the
Hill today, markups and so forth, that that is why some people
could not be here.
With that, I am going to adjourn. Thank you very much.
[Whereupon, at 1:00 p.m., the Subcommittee was adjourned.]
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