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Oversight of regulatory review activities of the Office of Information and Regulatory Affairs : hearing before the Subcommittee on Financial Management and Accountability of the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, second session, September 25, 1996 online

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Online LibraryUnited States. Congress. Senate. Committee on GoveOversight of regulatory review activities of the Office of Information and Regulatory Affairs : hearing before the Subcommittee on Financial Management and Accountability of the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, second session, September 25, 1996 → online text (page 1 of 17)
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S. Hrg. 104-825

OVERSIGHT OF REGULATORY REVIEW ACTIVITIES
OF THE OFHCE OF INFORMATION AND REGU-
LATORY AFFAIRS

Y 4. G 74/9: S. HRG, 104-825

Oversight of Regulatory Revieu flcti...

ni^AKlNG

BEFORE THE

SUBCOMMITTEE ON
FINANCIAL MANAGEMENT AND ACCOUNTABILITY

OF THE

COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FOURTH CONGRESS

SECOND SESSION



SEPTEMBER 25, 1996



Printed for the use of the Committee on Governmental Affairs




2 ? fy.



U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1997



For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-054368-1



\



S. Hrg. 104-825

OVERSIGHT OF REGULATORY REVIEW ACTIVITIES
OF THE OFHCE OF INFORMATION AND REGU-
LATORY AFFAIRS



Y 4. G 74/9: S. HRG. 104-825



Oversight of Regulatory Revieu Acti...

Ml^AKlNG

BEFORE THE

SUBCOMMITTEE ON
FINANCIAL MANAGEMENT AND ACCOUNTABILITY

OF THE

COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FOURTH CONGRESS

SECOND SESSION



SEPTEMBER 25, 1996



Printed for the use of the Committee on Governmental Affairs




U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1997



.**?.«



For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-054368-1



COMMITTEE ON GOVERNMENTAL AFFAIRS

TED STEVENS, Alaska, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio

WILLIAM S. COHEN, Maine SAM NUNN, Georgia

FRED THOMPSON, Tennessee CARL LEVIN, Michigan

PETE V. DOMENICI, New Mexico DAVID PRYOR, Arkansas

THAD COCHRAN, Mississippi JOSEPH I. LIEBERMAN, Connecticut

JOHN McCAIN, Arizona DANIEL K. AKAKA, Hawaii

BOB SMITH, New Hampshire BYRON L. DORGAN, North Dakota

Albert L. McDermott, Staff Director
Leonard Weiss, Minority Staff Director
Michal Sue Prosser, Chief Clerk



SUBCOMMITTEE ON FINANCIAL MANAGEMENT AND ACCOUNTABILITY

FRED THOMPSON, Tennessee, Chairman
WILLIAM S. COHEN, Maine JOHN GLENN, Ohio

JOHN McCAIN, Arizona DAVID PRYOR, Arkansas

HANK BROWN, Colorado BRYAN L. DORGAN, North Dakota

Claudia McMurray, Counsel

Paul Noe, Counsel

Michal Sue Prosser, Chief Clerk



(II)



CONTENTS



Opening statements: Page

Senator Thompson 1

Senator Glenn 3

Senator Stevens 4

Senator McCain 13

WITNESSES

Wednesday, September 25, 1996

Hon. Sally Katzen, Administrator, Office of Information and Regulatory Af-
fairs, Office of Management and Budget 5

Robert King, Director, New York State Office of Regulatory Reform 32

James C. Miller, III, Citizens for a Sound Economy 37

C. Boyden Gray, Esq., Wilmer, Cutler & Pickering 41

Robert W. Hahn, American Enterprise Institute 51

Paul Portney, Resources for the Future 68

Scott L. Holman, President, Bay Cast, Inc., Bay City, Michigan, on behalf

of the U.S. Chamber of Commerce 76

L. Nye Stevens, Director, Federal Management and Workforce Issues, Gen-
eral Government Division, U.S. General Accounting Office 80

Alphabetical List of Witnesses

Gray, C. Boyden:

Testimony 41

Prepared statement 43

Hahn, Robert W.:

Testimony 51

Prepared statement 55

Holman, Scott L.:

Testimony 76

Prepared statement 78

Katzen, Sally:

Testimony 5

Prepared statement 8

King, Robert:

Testimony 32

Prepared statement 34

Miller, James C, III:

Testimony 37

Prepared statement 39

Portney, Paul:

Testimony 68

Prepared statement 71

Stevens, L. Nye:

Testimony 80

Prepared statement 82

APPENDIX

Additional statement from Senator Glenn including additional statements

from organizations supporting the Clinton order 97

Letter to Sally Katzen from Senator Thompson dated Oct. 8, 1996 102

Response from Sally Katzen to Senator Thompson 107

Prepared statement of the National Association of Manufacturers 118

(III)



OVERSIGHT OF REGULATORY REVIEW AC-
TIVITIES OF THE OFFICE OF INFORMATION
AND REGULATORY AFFAIRS



WEDNESDAY, SEPTEMBER 25, 1996

U.S. Senate,
Subcommittee on Financial Management and
Accountability, Committee on Governmental Affairs,

Washington, DC.
The Committee met, pursuant to notice, at 10:02 a.m., in room
SD-342, Dirksen Senate Office Building, Hon. Fred Thompson,
Chairman of the Subcommittee, presiding.

Present: Senators Thompson, Stevens, McCain, and Glenn.

OPENING STATEMENT OF CHAIRMAN THOMPSON

Chairman THOMPSON. The hearing will come to order, this hear-
ing of the Committee on Governmental Affairs, Subcommittee on
Financial Management and Accountability.

We are meeting today to see how we are going to meet the chal-
lenge of having an effective regulatory scheme without overburden-
ing the American people. Specifically, we are going to review the
regulatory activities of the Administration's Office of Information
and Regulatory Affairs in implementing Executive Order 12866.
The Subcommittee also will look at some of the promises made in
the National Performance Review to reduce the number of pages of
regulations found in the Code of Federal Regulations.

We will ask a number of witnesses with different perspectives,
both in the government and the private sector, whether they be-
lieve that the Administration has lightened the heavy load of regu-
lations that Americans pay for every day.

Obviously, in this country we are well aware of some of the bene-
fits that we have derived in terms of improving our environment
and improving the safety of our workplace as well as other areas.
But it is becoming increasingly apparent that without adequate re-
view wasteful and unfair and burdensome rules result. The current
regulatory burden is now enormous.

We are talking about $650 billion per year or thereabouts, over
$6,500 per household. More and more people are becoming con-
cerned that in the global marketplace that we have now, the com-
petitiveness that we have now, that our economy is generally slow-
ing down, resulting in a slower growth rate. Some of this has to
do definitely with the overburdening of American business, espe-
cially American small business, in terms of regulatory burden.

(1)



Congress continues, however, to pass laws that exempt certain
areas from, essentially, regulatory oversight. Congress keeps pass-
ing laws that result in requiring more and more regulation. So we
are somewhat inconsistent in that regard.

But last year Congress considered regulatory reform legislation
because of the enormous burden that more and more people be-
came concerned about. The Administration took the position that
reform legislation was not necessary, at least in the form that was
presented, and that the Executive Order would produce smarter
regulation.

In fact, statements were made that we would see a cutting of red
tape, that we would see a cutting back of thousands of pages of the
Code of Federal Regulations, that we would see a savings of bil-
lions, that the agencies would start operating more and more in the
open, that we would be able to have more accountability, that we
would have a cost-benefit analysis deriving from this Executive
Order, and we would see a lessening of the onerous burden, than
we had seen in the past.

So part of what this hearing is about is to see to what extent
those wishes and predictions have been met. I believe the witnesses
today will show that in many cases the Executive Order actually
undercuts the OMB's authority to effectively review regulations,
and in many cases the agencies are simply not compljdng with the
President's Order. So I hope this hearing today will help remedy
some of those problems.

[The prepared statement of Senator Thompson follows:]

PREPARED STATEMENT OF SENATOR THOMPSON

The Subcommittee is meeting today to take stock of the regulatory burden that
the Federal Government imposes on the American people. Specifically, we are going
to review the regulatory activities of the Administration's Office of Information and
Regulatory Affairs in implementing Executive Order 12866. The Subcommittee also
will look at some of the promises made in the National Performance Review to re-
duce the number of pages of regulations found in the Code of Federal Regulations.
We will ask a number of witnesses with different perspectives — both in government
and the private sector — whether they believe that the Administration has lightened
the heavy load of regulations that Americans pay for every day.

In 1993, President Clinton issued Executive Order 12866 to create a regulatory
system that, in the words of the order "works for the American people" by protecting
their health and well-being by improving "the performance of the economy, without
imposing unacceptable or unreasonable costs on society."

These are goals that we all can agree on. But have these goals been reached? Our
hearing today will attempt to answer that question.

The statistics tell us that the Federal regulatory system is still a heavy drag on
the American economy. The most current numbers are staggering. The total annual
cost of regulation has skyrocketed to $677 billion, which translates into $6,000 per
household per year. These numbers would lead me to believe that more reform of
our regulatory system is needed.

Last year, I joined a number of my colleagues in supporting legislation to bring
greater reform to our regulatory system. As I stated during Senate floor debate on
that legislation. Federal agencies need to develop regulations that not only provide
protection of health and safety, but also are founded in good, common sense.

To accomplish this goal, the reform legislation we considered would have required
agencies to make accurate determinations about the good a potential regulation can
bring about. In other words, how much disease or premature death can be avoided?
Or, how much less dangerous can a situation be made? In answer to these, ques-
tions, a Federal agency must be as precise as possible, using the most carefully pre-
pared and up-to-date scientific information available.

Then, the agency needs to look at the negative impact that very same regulation
may have on Americans. For example, how much more will the average American
have to pay for a product? Will some Americans lose their jobs? Will some products



no longer be available at all? Will citizens have to spend a greater amount of their
leisure time complying with government mandates? Will preventing one disease
cause an increase in some other equally dangerous one?

Once all of these important questions have been asked and answered, the legisla-
tion would have required the Federal agency to put all of this information together
and ask the central question: Do the benefits outweigh the costs? Or, in more simple
terms: Does this rule produce enough good things for our citizens to make the nega-
tive impacts tolerable?

During last year's debate on regulatory reform legislation, many Americans told
us they believed this approach to regulation made good, common sense. Americans
make calculations about the costs and benefits of their behavior all the time. And
they are asking regulators to approach problems in this way too.

Despite the public support for regulatory reform legislation, the friends of the Ad-
ministration here in Congress would not let the reforms go forward. They held up
Executive Order 12866 as a shield. They said that the Executive Order would be
sufficient to lift the regulatory burden from the American people.

So, we are here today to examine the results of the Executive Order. Has it pro-
duced the promised results? The statistics I cited earlier would appear to make the
answer to that question a resounding no. But, I believe that this Subcommittee
should give the Administration's efforts a serious review today to determine the
proper course for reform legislation in the next Congress.

We have a fine line-up of witnesses from government and the private sector to
give us an assessment of today's regulatory burden. I look forward to hearing their
testimony and to working with them on this issue in the future.

Chairman THOMPSON. I will call upon our distinguished ranking
member of the Committee, Mr. Glenn.

OPENING STATEMENT OF SENATOR GLENN

Senator Glenn. Thank you, Mr. Chairman. Regulatory reform
has been a major concern of ours this Congress, we worked an
awful lot on it as our first witness today knows, over the last cou-
ple of years. We were unable to reach an agreement on a com-
prehensive bill, but I think we did make some progress in some
other areas.

We still have yet to get together on a complete regulatory reform
bill. There were just some differences that we got at loggerheads
over and we just could not get the complete bill through, although
we spent literally hundreds of hours working on it. That is some-
thing we still have to do and I think we have to get on with that
in the next Congress.

We did, however, pass unfunded mandates reform and we en-
acted a Small Business Regulatory Fairness bill that provided for
congressional review of agency rules. We also passed program spe-
cific reforms on safe drinking water and pesticides. So we have had
some important accomplishments.

I think the Executive Branch, too, has had accomplishments. The
Administration's reinventing government project has produced re-
forms. The report issued this past Friday discussed many of these
achievements. The Administration also has continued the OMB
regulatory review started by President Reagan. President Clinton's
Executive Order No. 12866 modified the Reagan-Bush OMB proc-
ess and was supported by a wide variety of groups from business
to environmental groups.

The Executive Order is 3 years old now, so it was a good idea
to have GAO look at OMB's implementation of the order and I am
glad to be a co-requester of that study. I think the results are en-
couraging. While there clearly is room for improvement, GAO has
found that OMB and the agencies are generally complying with the



order. Agency rules are being changed during 0MB review, though
the sunshine procedures need to be improved. Agencies are eHmi-
nating and revising regulations even though Congress keeps re-
quiring that they issue new rules; for example, under the Clean Air
Act.

I am sure we will hear some disagreeing views today, but in gen-
eral it sounds like 0MB is doing a reasonable job on regulatory re-
view. We would all like to see it proceed faster, but I look forward
to hearing from today's witnesses and look forward to their testi-
mony.

Thank you, Mr. Chairman.

Chairman THOMPSON. Senator Stevens.

OPENING STATEMENT OF SENATOR STEVENS

Senator Stevens. Mr. Chairman, I wish I could be that rosy
about the process. I am concerned that the Unfunded Mandates Re-
form Act required each agency to develop an effective process to
permit elected officers of State, local, and tribal governments to
provide meaningful and timely input on proposed rules that have
mandates. Now 0MB did issue guidelines for implementing this re-
quirement. But the search that my staff has conducted of the Fed-
eral Register reveals that only two agencies have issued a proposed
statement of policy on intergovernmental consultation.

It has been a year-and-a-half since we touted the Unfunded Man-
dates Act, and yet there is not a constant policy in the Administra-
tion to carry it out. We need a policy that will require intergovern-
mental consultation consistent with the act. We thought the act
would be almost self-implementing. But instead, the guidelines ap-
parently leave it to the executive agencies to make the decision of
whether to comply with the act.

Now I really must go on to another hearing but I hope, Mr.
Chairman, that you will try to inquire of the representatives of the
Administration why, after a year-and-a-half since we passed the
Unfunded Mandates Act, is not every agency of the Executive
Branch living up to that commitment? It was a bill signed by the
President. They should have a program in place to give States and
localities a real role in reviewing rules that deeply affect the sov-
ereignty and resources of State and local governments.

I am sorry I cannot stay with you, but I am very pleased that
you are continuing this hearing pertaining to these laws that we
passed. Senator Glenn mentioned several of them. They are not
self-implementing. They require really the action of 0MB and other
agencies of the Administration to assure that the individual offices
of the Federal Government fulfill the requirements of the laws that
the Executive Branch and the government have agreed to.

So I think this is a very timely hearing and I hope that the out-
come will be we will get some answers. Thank you very much.

Chairman THOMPSON. Thank you very much. Senator Stevens.

Our first witness will be Sally Katzen, Administrator, Office of
Information and Regulatory Affairs. Pleased to have you with us,
Ms. Katzen. Do you have a statement to make?



TESTIMONY OF HON. SALLY KATZEN, ADMINISTRATOR, OF-
FICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE
OF MANAGEMENT AND BUDGET

Ms. Katzen. Thank you very much, Mr. Chairman, and Members
of the Subcommittee. I have prepared written testimony which I
hope will be incorporated in the record and would like to try to
simply summarize the more salient points now.

I do want to start by commending the Chairman for calling this
hearing. I very much appreciate the opportunity to come and speak
to you today about the activities of our office in implementing Exec-
utive Order 12866. It is indeed appropriate and very timely.

President Clinton signed this Executive Order on September 30,
1993. We had very high expectations at the time and 3 years later
I am very proud of what we are accomplishing. In developing this
Executive Order we had the benefit of the work done in the
Reagan-Bush years. In particular, President Reagan's Executive
Order 12291 set forth important basic principles of regulation.
Among other things, it stressed the importance of cost-benefit anal-
ysis and the consideration of alternative approaches to reduce regu-
latory burden.

But we were acutely aware that the experiences under Executive
Order 12291 were decidedly mixed. Critics complained about the
lack of transparency and accountability. Even its proponents were
concerned that the order was not meeting its objectives of reducing
regulatory burden.

We had to do more than simply command the agencies, "Do more
analysis." We had to modify the way they thought about regulating
and how they were developing their regulations. And we had to
change the process under which we were carrying out our executive
regulatory review.

Among other things. Executive Order 12866 created a more open
and accountable process. I have heard no complaints about ac-
countability and transparency, and I take that as a success. I also
have heard no serious challenge to the legitimacy of centralized re-
view — an issue very much in debate wjien we took office. Again,
another success.

In another change, we provided for greater selectivity in review-
ing regulations, creating a triage system to determine what we
would review. Initially, agencies decide what rules that they are
developing are significant and OIRA reviews only those regs that
the agency or OIRA believes warrant review. Thus, rather than re-
view all proposed and final rules as they did under Executive
Order 12291, we freed up our limited resources — and incidentally,
we have approximately 25 professionals working full-time on regu-
latory reform and paperwork. We are able to use those limited re-
sources to focus on those regulations where we could add the most
value.

Now we expected at the outset that the number of regulations we
reviewed would fall, and the number of changes that were pro-
duced during the review period would rise. We met our expecta-
tions. The number of regulations that OIRA reviewed has gone
down — the numbers are in my written testimony. At the same
time, the number of rules that were modified during the review pe-
riod have gone up, and this is documented in the GAO testimony.



Now apparently GAO found it difficult to track the source of spe-
cific changes to an agency's rule, and this may be one of the ref-
erences that Senator Glenn had about the sunshine laws. To me,
it is not surprising that we cannot track in all instances the source
of the change. That is because we have a paradigm shift here. We
have consciously changed the way we relate to the agencies. We
have sought to adopt a more collegial, constructive relationship
with the agencies instead of engaging in a "gotcha" game.

We work early and often with the agencies to assure that they
are processing regulations and developing regulations consistent
with the Executive Order. We want regulations that are better sup-
ported by relative and relevant data and analysis, more carefully
reasoned, more reflective of a fair balancing of the competing con-
cerns involved. This informal exchange and interplay of ideas and
suggestions in which we and the agencies engage does not lend it-
self to formal presentations of competing OIRA and agency, or
should I say, OIRA versus agency positions.

Moreover, with our focus on reviewing only the most important
regulations in this less adversarial environment, we become in-
volved earlier and more deeply in an agency's rulemaking, before
the agency has completed all of its own evaluation and its own in-
ternal or interagency coordination. We are involved before the
agency becomes invested in its decision, which would make it all
the more difficult to bring about change.

Now we, OIRA, 0MB, the Administration, and I think the regu-
latory system enjoy very significant payoffs from this approach. We
do not have the staff to do detailed cost-benefit analysis on all sig-
nificant Executive Branch regulations. The agencies have to learn
how to do it, and more importantly, to decide that it is worth doing.
They need to become invested in a better process.

Through this consensual approach, we are leveraging our limited
resources and really beginning to make a lasting difference. I am
personally gratified by the number of times the program officers or
senior regulatory officials with agencies have thanked me for my
staffs work, invariably ending with the comment, "this rule is so
much better as a result of this process."

Now as we approach the third anniversary of the Executive
Order, we are compiling examples of such regulatory successes and
expect to have a report available in the October-November time
frame. Having served as the Administrator of OIRA for the past 3
years I see numerous signs that we are delivering on our promises.
I describe a number of the examples of success in my written state-
ment.

The examples that I cite, examples of not regulating, examples
of tailoring a regulation to address a specific problem rather than
a one-size-fits-all. This is the FDA and USDA HACCP rules, for ex-
ample, or the EPA lead abatement rule. The use of cost-benefit
analysis to achieve the same or higher level of benefit for the same
level of cost. This would be the DOT rule that I use as an example.

The use of market incentives. Again, EPA is a good example here
with its use of an emissions trading rule rather than a command
and control approach. Streamlining and simplifying our regula-
tions. This would be the Department of Commerce's BXA Export
Administration rewrite. Consensual rulemaking — the example I use



is the Department of Interior and HHS's Indian self-determination
rules.

These are just a few of the many that we have seen, and they
focus on just one part of the regulatory system, and that is the de-
velopment of new regulations.

There is another part that is important, and that is what we are
doing to improve the face of regulations that have been in place for
years or even decades. As promised, we are cutting back on the vol-
ume of existing rules and reinventing still other rules to reduce
burden and red tape. The President announced that we would
eliminate 16,000 pages of the Code of Federal Regulations and that
we would reinvent, streamline, simplify, or otherwise improve,
31,000 pages.

As GAO confirms, we are well on our way to that end. The fig-
ures that they use were over 70 percent of the pages to be elimi-
nated have been eliminated, and over 50 percent of the regulations
to be reinvented have been improved. And more is in the pipeline.

I also discuss in my written testimony that the effect of regula-
tions is not just how they are written but how they are enforced.
For this reason we have devoted a lot of our efforts to changing the


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Online LibraryUnited States. Congress. Senate. Committee on GoveOversight of regulatory review activities of the Office of Information and Regulatory Affairs : hearing before the Subcommittee on Financial Management and Accountability of the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, second session, September 25, 1996 → online text (page 1 of 17)