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Regulatory Reform (2)
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The original documents are located in Box 28, folder "Regulatory Reform (2)" of the James
M. Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 28 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
[May 1975]
SYNOPSIS OF ADMINISTRATIONS REGULATORY
REFORM EFFORTS
I. Administrative Actions
He
1. Council on Wage and Price Stability. CWPS was created by Congress
at the President's request in August 1974 to act as a, watchdog over
private sector wage and price actions and to analyze the inflationary
effects of existing regulations promulgated by all elements of the
Executive Branch except the independent commissions. CWPS is due
to lapse August, 1975, but Congress is currently debating whether a
reauthorized agency should be given subpoena or other quasi-control
powers. The Administration has objected to the Senate's adoption of
language permitting CWPS to subpoena individual product-line data from
businesses.
2. Inflation Impact Analysis. The President issued an Executive Order
in November, 1974, calling on all Executive Branch agencies to conduct
inflation impact statements on their proposals for major legislation and
regulations. Many of the independent commissions indicated their on
going concern for the impact of their decisions but all declined to comply
specifically with the order. Other agencies have submitted draft criteria
for compliance, OMB returned comments on these, and final criteria are
expected to be in place by the end of June.
3. State and Local Regulations. In December the President wrote to
all the Governors, as well as key Mayors and State Legislators urging
them to review their own systems of regulations. Similar letters were
later sent to selected county officials. Staff from the Domestic Council
and OMB have met with representatives from State and local governments
and concerned Federal agencies to help lay out a possible work agenda for a
State/local task force. A resolution to this effect is under consideration at
the National Governors Conference.
4. Review of Antitrust Exemptions. Representatives from the Justice
Department and the EXOP formed an administration task force in February
to review a list of statutory anti-ratemaking conferences, insurance rate
bureaus, etc. Specific legislative proposals for reform or repeal of some
immunities are expected later this year.
5. Increase in Resources and Authorities for Antitrust Enforcement. The
Administration has approved substantial increases in budget dollars and
manpower ceilings for the Antitrust Division and Federal Trade Commission
FORD & LIBRARY GERALD
2
over the last two years. it is presently testifying with some reser-
vations DA several proposals on the Hill which would greatly multiply
these agencies' resources and have major impact on civil processes
and enforcement procedures. Senator Phillip Hart has gained some
bi-partisan Senate support, but House action is uncertain at this
time.
6. Improvement in Consumer Representation. In April, the President
directed Virginia Knauer to work with Cabinet Departments and other
agencies to assess their present methods for soliciting and incorporat-
ing consumer views into their procedures for developing legislation
and regulations, thereby increasing their sensitivity to cost/quality
effects on consumer goods and services. At the same time, he wrote
to the Congress opposing enactment of an Agency for Consumer Advocacy
on the grounds that reforms within existing agencies were more urgent
than the creation of additional agencies. The Senate has passed a re-
vised ACA bill and House passage is almost certain before the end of
the year.
7 Meeting with Congress and Independent Regulatory Commissioners.
On April 27, the President announced his desire to meet with the
major Independent Regulatory Commissioners and key Congressional
members to discuss ways in which the Congress, the President, and
the Commissions could jointly work to resolve important regulatory
issues affecting the long-term health of the economy. The Administra-
tion has held preliminary meetings with the Congressional leadership,
and necessary staff work is proceeding. No date(s) have been set for
either separate or joint sessions.
II. Legislative Proposals
1. Regulatory Reform Commission. In January the Administration re-
submitted legislation calling for the creation of a joint executive/legis-
lative/private sector National Commission on Regulatory Reform. A
similar proposal received no action in the 93rd Congress after hearings
in the Senate Government Operations and Commerce Committees. Vari-
ations on the Administration's proposal have been submitted in the House,
but no action is anticipated in the Senate if Congressional funding is pro-
vided for a joint Government Operations/Commerce Committee study.
2. Transportation Reform: Railroads. The Railroad Revitalization Act
was submitted May 19; the White House is currently trying to line up
sponsors for the bill. The legislation seeks to (a) permit railroads to
adjust their rates up or down within a "zone of reasonableness" without
ICC approval; (b) clarify the Commission's authority to disapprove rates
FORD & LIBRARY 076830
3
or abandonment proposals: (c) prohibit rate bureaus from certain
anti-competitive practices; and (d) provide $2 billion in Federal loan
guarantees for upgrading track and equipment, contingent on the
industry undertaking specific restructuring actions. Congressional
reception is uncertain at this time.
3. Transportation Reform: Trucking. An Administration task force
is in the final stages of drafting legislation to make major changes in
the regulation of the trucking industry. The chief provisions are
(a) pricing flexibility analagous to those proposed in the rail bill; (b)
liberalized entry provisions for certificate applicants; (c) modification
of route and commodity restrictions; (d) elimination of certain antitrust
immunities currently enjoyed by rate bureaus. Submission to Congress
is expected by the end of June.
4. Transportation Reform: Airlines. A third task force is working to
draft airline regulatory reforms. It will seek to increase pricing and
route flexibility, provide for easier entry to and exit from certain
markets, and eliminate the CAB's authority to approve certain anti-
competitive practices such as joint agreements to limit or eliminate
service. Submission to Congress is expected later this summer.
5. Financial Institutions. After changing certain provisions on the
effective dates and the new mortgage interest tax credit, in March the
Administration resubmitted the Financial Institutions Act which had re-
ceived only Senate hearings in the 93rd Congress. The legislation is
intended to remove restrictions on the int erest rates and services banks
and S &L's can offer in order to provide more competitive returns to
small savers and more diversified services to all customers. Hearings
were conducted by the Senate Banking Committee in May, but any action
in the House this year is unlikely due to a recently announced Staff Study
to be conducted by the House Banking Committee.
6. Securities. The President signed the Securities Act Amendments of
1975 on June 4. The law requires the SEC to move promptly to establish
a national market system thereby increasing price and volume information
to prospective buyers and sellers and promoting more competition between
brokers. The law also clarifics the SEC's authority to eliminate fixed
commission rates on securities transactions, a step which was completed
by an carlier administrative action. It is expected the law will have sub-
stantial effects on the quality and price of brokerage services offered to
all investors.
GERALD FORD LIBRARY
4
i. Energy. In Febti
the Administration submitted legislation seek-
ing to deregulate th.
is authority to control the price of new natural
gas. The bill also
to mandate that State Public Utility Commissions
follow the FPC's lead allowing proposed rate changes to take effect
within five months 11 administrative actions have not been completed.
Electric utilities would also be permitted to include construction in
progress in their asset rate base. Rates calculated from either provision
would be subject to reversal. The Senate Government Operations Committee
held hearings on this part of the Administration's energy program, but no
further action is expected in the full Senate or House. At Secretary Dunlop's
request, the Adminis ration is currently reviewing the possibility of re--
questing an increased investment tax credit for utilities.
8. Fair Trade Laws. Legislation to repeal the Federal Fair Trade enabling
laws (Miller-Tydings and McGuire Acts) was introduced in January by
Senator Brooke and Representative McClory. The present laws permit States
to legalize price protections which prevent retailers from selling merchandise
below the manufacturers suggested retail price. Hearings have been held in
the House and Senate, and favorable action in both bodies is expected later
this summer. Simultaneously, several State legislatures are considering
repeal or reform of their laws. New York recently abolished its statutes.
9. Robinson-Patman Act. An Administration Task Force is in the final
stages of drafting recommendations to the President concerning reform or
repeal of the Robinson-Patman Act. The Act presently forbids price dis-
crimination between buyers by a seller, unless conclusive proof of
different costs can be presented. The general nature of the statute and
its interpretation by business firms and the government have tended to dis-
courage legitimate price competition, thereby adding unnecessarily to many
consumer prices. Final proposals to the President are due within one
month.
10. Cable Television. Over a year ago, the Office of Telecommunications
Policy proposed some revisions to FCC's authority to regulaté cable TV,
but the legislation is opposed by FCC for going too far without adequate
study data, and by the Justice Department for not recommending greater
deregulation of the cable industry. If major Justice-OTP differences
could be arbitrated, legislation could be introduced within six weeks.
GERALD LIBRARY R. FORD
- Hort Man
1975]
SENATE
for Negulatory
MAJORITY LEADER - Mike Mansfield
MINORITY LEADER - Hugh Scott
OVERSIGHT COMMITTEES
Agriculture & Forestry - CFTC
Herman E. Talmadge (Ga.)
Robert Dole (Kan. )
* Agriculture Production, Marketing, & Stabilization
of Price
Walter Huddleston (Ky.)
Milton R. Young (N.D.)
Banking, Housing and Urban Affairs - SEC
William Proxmire (Wisc.)
John G. Tower (Tex.)
* Financial Institutions
Thomas McIntyre (N.H.)
John G. Tower (Tex.)
Commerce
Warren G. Magnuson (Wash.)
James B. Pearson (Kan.)
* Aviation - CAB
Howard W. Cannon (Nev.)
James B. Pearson (Kans.)
* Communications - FCC
John O. Pastore (R.I.)
Robert P. Griffin (Mich.)
* Consumer - CPSC
Frank E. Moss (Utah)
James L. Buckley (N.Y.)
* Merchant Marine - FMC
Russell B. Long (La.)
J. Glenn Beall Jr. (Md.)
2
* Surface Transportation - ICC
Vance Hartke (Ind. )
Lowell P. Weicker, Jr. (Conn.)
* Oil & Gas Production & Distribution
Adlai E. Stevenson (Ill.)
Ted Stevens (Alaska)
Government Operations
Abraham A. Ribicoff (Conn.)
Charles H. Percy (Ill.)
Interior & Insular Affairs - FPC
Henry M. Jackson (Wash.)
Paul J. Fannin (Ariz.)
* Minerals, Materials, & Fuels
Lee Metcalf (Mont.)
Paul J. Fannin (Ariz.)
Judiciary - FTC
James O. Eastland (Miss.)
Roman L. Hruska (Neb. )
* Admin. Practices & Procurement
Ed M. Kennedy (N.Y.)
Strom Thurmond (S.C.)
* Antitrust & Monopoly
Phillip A. Hart (Mich. )
Roman L. Hruska (Neb.)
Appropriations Committee
John L. McClellan (Ark.)
Milton R. Young (N.D.)
* HUD--Independent Agencies (CPSC)
William Proxmire (Wisc.)
Charles McC. Mathias (Md.)
HOUSE OF REPRESENTATIVES
SPEAKER OF THE HOUSE - Carl Albert
MINORITY LEADER - John Rhoads
OVERSIGHT COMMITTEES
Agriculture - CFTC
Thomas S. Foley (Wash.)
William C. Wampler (Va.)
* Conservation and Credit
Bob Bergland (Minn. )
Edward R. Madigan (Ill.)
Banking, Currency, and Housing - SEC
Henry S. Reuss (Wis. )
Albert W. Johnson (Pa.)
*
Financial Institutions Supervision, Reg. & Ins.
Fernand J. St. Germain (R.I.)
John H. Rousselot (Calif.)
Government Operations
Jack Brooks (Tex.)
Frank Horton (N.Y.)
Interior and Insular Affairs - FPC
James A. Haley (Fla.)
Joe Skubitz (Kans.)
Merchant Marine & Fisheries - FMC
Leonor Sullivan (Mo.)
Philip E. Ruppe (Mich.) )
* Merchant Marine
Thomas M. Downing (Va.)
Paul N. McClosky Jr. (Calif.)
2
Interstate and Foreign Commerce
Harley O. Staggers
Samuel L. Devine
* Communications - FCC
Torbet H. Macdonald (Mass.)
Louis Frey Jr. (Fla.)
* Oversight & Investigations
John E. Moss (Calif.)
James M. Collins (Tex.)
* Energy & Power - FPC
John D. Dingell (Mich.)
Clarence J. Brown (Ohio)
* Consumer Protection & Finance - CPSC & FTC
Leonil Van Deerlin (Calif.)
John Y. McCollister (Neb.)
*
Transportation & Commerce - ICC
Fred B. Rooney (Pa.)
Joe Skubitz (Kans.)
Judiciary - FTC
Peter W. Rodino (N.J.)
Edward Hutchinson (Mich.)
* Admin. Law & Gov't. Relations
Walter Flowers (Ala.)
Carlos J. Moorhead (Calif.)
* Monopolies & Commercial Law
Peter Rodino
Ed Hutchinson
Public Works and Transportation
Robert E. Jones (Ala.)
William H. Harsha (Ohio)
* Aviation - CAB
Glenn M. Anderson (Calif.)
Gene Snyder (Ky.)
* Surface Transportation
James J. Howard (N.J.)
Bud Shuster (Pa.)
3
Joint Committee on Atomic Energy (NRC)
John O. Pastore (R.I.)
Melvin Price (Ill.)
Appropriations Committee
George H. Mahon (Tex.)
Elford A. Cederberg (Mich. )
* HUD - Independent Agencies (CPSC)
Edward P. Boland (Mass. )
Burt L. Talcott (Calif. )
House Republican Task Force on Antitrust
and Regulatory Reform
Chairman: H. John Heinz, III
Independent Regulatory Commissions
Membership
Civil Aeronautics Board
John Robson, Chairman
G. Joseph Minetti
Lee R. West
Robert D. Timm
Richard J. O'Melia
Thomas J. Heye, General Counsel
Commodity Futures Trading Commission
William T. Bagley, Chairman
John Vernon Rainbolt II
Read Patten Dunn, Jr.
Gary Leonard Seevers
Howard Schneider, General Counsel
Vacancy
(Acting)
Consumer Product Safety Commission
Richard O. Simpson, Chairman
Barbara H. Franklin
Lawrence M. Kushner
Constance E. Newman
R. David Pittle
Michael Brown, General Counsel
Federal Communications Commission
Richard E. Wiley, Chairman
Robert E. Lee
Benjamin L. Hooks
Charlotte T. Reid
Glen O. Robinson
Abbott Washburn
James H. Quello
Ashton Hardy, General Counsel
Federal Maritime Commission
Helen Deligh Bentley, Chairman
James V. Day
Ashton C. Barrett
George H. Hearn
Clarence Morse
James J. Pimper, General Counsel
2
Federal Power Commission
John N. Nassikas, Chairman
William L. Springer
Don S. Smith
(2 Vacancies)
Drexel D. Journey, General Counsel
Federal Trade Commission
Lewis A. Engman, Chairman
Paul Rand Dixon
Mayo J. Thompson
M. Elizabeth Hanford
Stephen A. Nye
Robert J. Lewis, General Counsel
Interstate Commerce Commission
George M. Stafford, Chairman
Alfred T. MacFarland
Kenneth H. Tuggle
Rupert L. Murphy
Virginia Mae Brown
Willard Deason
Dale W. Hardin
Robert C. Gresham
Robert J. Corber
A. Daniel O'Neal
Charles L. Clapp
Fritz R. Kahn, General Counsel
Nuclear Regulatory Commission
William A. Anders, Chairman
Victor Gilinski
Richard T. Kennedy
Edward A. Mason
Marcus A. Rowden
Peter Strauss, General Counsel
Securities and Exchange Commission
Ray Garrett, Jr., Chairman
Philip A. Loomis, Jr.
John R. Evans
A. A. Sommer, Jr.
Irving M. Pollack
Lawrence E. Nerheim, General
Counsel
AGENDA
Meeting with Independent Regulatory Agencies
1.
Hills/Cannon
(Introduce President)
Brief
2. Presidential Key Note Address
(Note: Outline of Presidential talking
points attached, final remarks to be
supplied)
10-15 mins.
--
-- Purpose of the session."
-- Role and Importance of the Regulatory
Agencies.
-- Nature of Joint Congressional/Executive
Branch Oversight.
-- Specific problems and considerations:
Need to evaluate the economic impact
of proposed regulations.
Need to ensure that consumers and
other interest groups receive a
fair hearing.
Need to act expeditiously when
appropriate.
Need to keep the public better informed
of regulatory activities and their
consequences.
-- Brief summary of Presidential regulatory reform
program including legislative and adminis-
trative actions.
3. Congressional Remarks
20-30 mins.
4. Remarks by Selected Commission
Chairmen
20 mins.
For Example:
Engman (FTC) - Role of Competition
Garrett (SEC) - Regulatory Modernization
Wiley (FCC) - Administrative Improvements
2
5. Discussion among Chairmen, Congressional
Spokesmen, and Executive Branch
Representatives
1 hour
6. Summary and Closing Remarks
Brief
Suggested Talking Points for the President's
Meeting with the Independent Regulatory Commissions
I: Introduction- Why I have asked for this meeting.
There is a growing concern expressed by many Americans that
government regulations have not changed as quickly as they should,
in light of major changes in the structure and functioning of our
economy.
The most persistent concern arises from the belief that many regu-
lations now cost the country as a whole more than they return in
benefits and that the general public interest therefore becomes
secondary to a particular special interest.
In assembling this meeting of Independent Agency members and
Congressional leaders, I do not mean to suggest that the problem
resides exclusively in these agencies. Regulations that impose
costs on consumers can be found in Cabinet Departments and in an
intricate, sometimes invisible web of laws, ordinances, and regu-
lations at the State and local levels.
I feel that you and your Commissions--with unique powers and
responsibilities--can play a major role in documenting and cor-
recting any such imbalances.
Because I place a high premium on the openness of government, I
want to review with you the steps I am taking. And I will ask for
your help and the Congress' in identifying ways the Commissions
may be most helpful in our collective efforts to restore the health
and vitality of the American economy. As we look for short-term
solutions, we must also chart a course that permanently relieves
the economy of unnecessary impediments in the long term.
II. Why the Independent Commissions are Important.
Congress and the Presidency have given you extraordinary grants of
authority. You function partially like the Executive, Legislative, and
Judicial Branches of government. With unusual powers and responsi-
bilities, you should function as models of good and open government.
You should make every effort to pinpoint those areas in which
economic realities today have overtaken circumstances which caused
the government to create special remedies. You should be the leaders
2
in identifying areas where regulations are now obsolete and areas
where we need to focus more attention.
You should constantly strive to improve your abilities to identify
all the costs of regulations in order to put before the American
people the most well documented description of the potential costs
and benefits of proposals. You should make sure that the quality
of your economic analysis matches the same standards of legal
professionalism which you strive to maintain. This involves a
more open discussion of both (a) the economic costs of less com-
petition than might otherwise exist absent some regulations and (b) the
costs to society to comply with mandates which seek worthwhile goals.
You should do everything you can to make sure that backlogs in reg-
ulatory proceedings don't help destroy the public's belief in an equitable
regulatory system. For example, many companies cannot make important
capital investments, which generate employment and advancement oppor-
tunities for thousands of Americans, without your cooperation. You
should strive to give these applications a professional, but speedy, review.
You have a special realtionship to Congress and the Executive. You should
be aggressive in offering new ideas which legislatively and/or administra-
tively will help both of us do a better job to obtain necessary changes in
your authorizing statutes, to facilitate the necessary judicial review of
your decisions, etc.
III. What My Administration is Doing.
I have a firm belief that the "hidden" costs that government imposes on
private citizens should be uncovered. Everyone has a right to know what
legislation and regulations are costing them, both in tax dollars and in
higher prices. To help achieve this objective:
(a) I have ordered all Departments and Agencies to analyze their
major proposals with an Inflation Impact Statement. I am
pleased the House has changed its rules to require similar
analyses, and I note the Senate has several pieces of legisla-
tion under review which would accomplish similar objectives.
While there are differing legal views on whether your agencies
are covered, I hope that you will adopt similar procedures.
The most important objective is that all of us better understand
the short and long-range economic consequences of our
actions, and that you do your part to better fulfill your re-
sponsibilities to Congress and the American people.
3
(b) I have asked all Departments and Agencies to re-examine their
present procedures for assuring better consumer representation
in their decisionmaking processes. I urge each of you to make
additional efforts to include the general public (as well as the
industries you regulate) in your hearings and other proceedings.
Also, I would hope that you would make additional efforts to make
understandable the nature of your actions so that the consumer can
be an active informed participant in your deliberations.
I also feel that government should only intrude in the free market
when private concerns have proven their unwillingness to respond to
legitimate public concerns or when inherent monopoly structures pre-
vent a freely competitive market system from operating. Government
should be attempting to foster rather than curtail competition, to give
maximum freedom to private enterprise, consistent, of course, with
our belief that government also has a continuing responsibility to pursue
and prosecute those who are guilty of predatory pricing tactics, those
who are guilty of fraud or deceit, and those who willfully neglect
acceptable standards of health and safety conduct.
Agencies engaged in regulatory activities can expect that the Attorney
General, through the Antitrust Division, will continue to appear' and
participate in agency proceedings to represent the interests of compe-
tition and thus, the interests of consumers in lower prices.
Because of my strong conviction that the consumer is far more able to
signal his wants and needs to business, (than the government is able to
dictate what those needs should be) I have proposed, and will continue
to sponsor legislation to relax or eliminate the Federal Government's
control over areas where I believe the marketplace can do a better job.
For example, the legislation I will be proposing would involve the
government less in the setting of prices and would permit greater
innovation by making it easier for new businesses to compete with
existing firms and to remove barriers from existing firms to develop
new services.
We have or will be proposing legislation in such areas as energy, trans-
portation, financial and securities institutions, and communications. I
have asked the Congress for its cooperation in giving these bills an
early hearing, and I ask for your support in achieving needed reforms.
4
My legislative program seeks to reinforce and strengthen those areas in
which government intervention must continue to do a better job; e. g.,,
to detect and penalize those guilty of antitrust violations--but it also
calls for government regulators to allow the forces of competition to
work as well. But no government agency can take the place of entrepre-
neurial spirit which helps insure that innovative and cost-saving ideas
are continually offered to the public.
IV. Conclusion.
This meeting is only the beginning. I want to start a dialogue today,
and I want it to continue in the open, where Congress and the public can
participate to the fullest extent.
I want to encourage new ideas from everyone here. We have a big
job ahead of us--that is to reach an agreement on a more clearly
articulated set of roles and responsibilities for government regu-
lation--whether it is spelled out in detailed statutes or administered
with a broad grant of authority to Commissions or other offices of
the Executive Branch.
We need a more open and candid discussion between Congress and the
Executive on what constitute acceptable criteria for qualifications to
serve as a regulatory commissioner or other Executive official with
regulatory responsibilities. We need to examine our overlapping juris-
dictions and decide on what groundrules we all interact, whether it
involves budgetary decisions, legislative proposals, administrative
changes, etc.
To these ends, I ask each Commission Chairman here, as an individual
American, and not just as the holder of a certain official position, to
send to me and the Congress within the next three weeks, your personal
views on those areas of government regulatory practices which you feel
are most deserving of attention and reform. I hope that this meeting
will begin a program of action and a new spirit of cooperation.
May 12, 1975
Dear Bill:
Peter Wallison has passed along to
me the information on the operating results
of trunk line air carriers which you furnished
to him during your recent trip to Cambridge.
I am concerned that the figures
presented in the memorandum reflect more than
the impact of the current recession.
In my view, we must take a hard and
detailed look at air transportation regulation
if we are to preserve the industry's present
multi-company form, and I would be delighted
to talk to you about this at any time.
Sincerely,
The Honorable William T. Coleman
Secretary of Transportation
Washington, D. c.
NAR/PJW/kb
bc: Jim Cannon
Dick Dunham
air MVA B ЫМ a 03
FORD & LIBRARY 938870
THE WHITE HOUSE
WASHINGTON
Date
May 16, 1975
3,m CANNON
TO:
Jim Cavanaugh
FROM:
LYNN NN MAYSU MA
Comment:
F.4.F.
Attached is an interesting article
on Regulatory Reform.
VIVA 13 =
I / FORD \
Regulatory Focus
by Louis M. Kohlmeier
The Politics of Deregulation
President Ford is coming on so strong, for deregulation
ing "our great transportation system" and defending
703
that some of his White House aides are beginning to
its regulation. The American Trucking Associations
5/10/75
wonder aloud whether Ford is indeed not going to run
Inc. is distributing the ICC's defense and has pub-
NATION
for election next year.
lished its own white paper, titled Regulation or Disas-
JOURNA
Presidents John F. Kennedy, Lyndon B. Johnson
ter. The truckers' white paper asserts that, Under reg-:
REPORT!
©1975
and Richard M. Nixon all supported deregulation.
ulation, America's surface transportation system has
When they took the weight and measure of the politi-
developed into the finest in the world."
cal opposition however, they retreated instead of fight-
The Teamsters Union, representing trucking em-
ing for what looked like a hopeless cause.
ployees, has written Ford that the union is "unalterably
The opposition of regulators, regulated industries
opposed" to deregulation. The Association of American
and unions again is mustering. But Ford is coming on
Railroads says it is for "meaningful reform and is not
ever stronger, not only for a rollback of regulatory
for deregulating anything." The Air Transport Associa-
statutes but also for repeal of laws granting antitrust
tion of America is warning that the airlines "must not
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
EXECUTIVE OFFICE OF THE PRESIDENT
Jim Carson
OF MANAGEMENT AND BUDGET
MAY 20 1975
He
MEMORANDUM -Meepulation
A
WASHINGTON, D.C. 20503
ECONOMIC POLICY BOARD
EXECUTIVE COMMITTEE
FROM:
SUBJECT:
WALTER Cost of Regulation D. SCOTT fally
The Sunday May 18 financial section of the Washington Post carried
an article on the cost of regulation (see attachment) which is in-
accurate and reflects rather poorly on White House and Presidential
credibility. This memorandum is designed to provide background
on the issue.
The article focuses on the $2,000 cost per family figure which was
mentioned in the President's speech to a White House Conference in
Concord, New Hampshire. Specifically, the President said:
"Although it is difficult to come up with an exact price tag on the
cost of unnecessary and ineffective Government regulation, some
estimates that I have seen place the combined cost to consumers
of Government regulation and restrictive practices in the private
sector at more than the Federal Government actually collects in
personal income taxes each year--or something on the order of
$2,000 per family--unbelievable.
"Even if the real costs are only a fraction of this amount, it is an
intolerable burden on our pocketbooks. "
This statement was carefully worded so that the President would not
specify an exact cost and would not attribute the estimate to an
Administration source.
The Post article is inaccurate in that the President did not suggest that
$2,000 was the cost of Federal regulation alone. Instead he called
attention to estimates that put the combined costs of Government regu-
lation (including State and local) and restrictive monopoly practices in
the private sector at more than the personal income taxes paid by the
average family.
FORD & GERALD LIBRARY
2
The estimates to which he referred include a number of studies by
economists, academicians, Federal agencies, and public research
centers which cite the costs of various types of regulatory activities.
Admittedly, the degree to which each source would stand behind his
figures or the extent of study implicit in the findings undoubtedly
varies. However, these estimates, on the merits, clearly support
the President's statement. Some examples follow:
Regulation or Practice
Estimated
Source
Annual Cost
Quantitative Trade Restrictions
$ 15B
Brookings
(tariffs, quotas, etc.)
Surface Transportation
10-15B
Tom Moore,
Stanford
Environmental, Health, and
Safety Regulation
50B+
CEQ and OSHA
Labor (minimum wage, Davis-
Bacon, etc.)
10B
DOL and GAO
State and Local Regulation
14B
Tom Kauper, DOJ
Monopoly Practices
80B
Dr. F. M. Scherer,
FTC
Communications (Television)
8B
Roger Noll,
Brookings
Fair Trade
2B
CEA
Maritime Restrictions
5-8B
OMB and Maritime
Research Board
Hence, there is evidence which suggests that the total cost of regulation
and restrictive practices could be in excess of the $131 billion collected
by the Federal Government in 1973 personal income taxes. A paper which
details the cost estimates on various types of regulatory activity is attached.
3
An independent study of costs would be useful to provide a stronger
basis for future estimates. This view is shared by various staff
members of the Justice Department, CEA, and CWPS, and we are
beginning discussions with the National Science Foundation regarding
taking on such a study.
Attachments
cc:
James T. Lynn
Paul H. O'Neill
The Washington Post
Sunday, May 18, 1975
White House
Can't Support
Cost Claim
White House officials last
week said they have no evi-
dence to back up President
Ford's assertion on April 18
that the combined cost to con-
sumers of federal regulation is
$2,000 per family each year.
In a speech at Concord,
N.H., Mr. Ford said that. even
if the real costs were only a
fraction of the $2.000, the total
amount is an "intolerable bur-
den on our pocketbooks."
His statement sent a number
of people to their pocket
calculators. Based on the 1970
census, showing some 51 mil-
lion American families. these
calculators added up Mr.
Ford's regulation cost to more
than $100 billion a year-far
higher than earlier guesses by
economists.
If the more than 11 million
households headed by a single
person were included. the cost
would reach $125 billion a
year-slightly less than a
tenth of the gross national
product.
Many who questioned the
statistics called Mr. Ford's
Council of Economic Advisers;
which disclaimed responsibil-
ity for the $2,000 figure.
Government economists
said, in addition. that the pres-
idential statement had been
used to "make a point." and
that the dollar amount cannot
be documented.
At the same time. the gov.
ernment officials said. if it
were possible to compute the
costof federal regulation. the
dollar amount would be "very
large." They also emphasized
that Mr. Ford's $2,000 a year.
per family represented all
types of federal regulation
(such as fair trade laws) and
not just transportation. as
some presidential crities had
assumed.
TORD
OTHER
Costs of Regulation and Restrictive Practices
Many government officials believe that government regulation
and restrictive practices may be more important from a con-
sumer standpoint than the impact on consumers of restrictive
practices in the private sector.
--Studies made over the last decade suggest that the
excess cost to consumers of government regulation is
certainly on the order of magnitude of the cost some
experts have attributed to private sector restrictive
practices.
(The private sector practices may cost $80 billion
or more annually by some estimates, according to
Justice Department's antitrust chief, Thomas Kauper--
which doesn't include union restrictive practices.)
The cost of government regulation fall into three
categories:
1. Economic Regulation
The added cost to consumers may amount to as much as
$60-75 billion annually, according to some studies--
about 4 to 5 percent of the GNP.
Much of the cost can be
attributed to Federal regulation and restrictive
practices. According to Justice's Tom Kauper, however,
the cost of State and local regulation could very
nearly equal, or even exceed, the cost of federal
regulation.
FORD is LIBRARY 07V839
2
2. Environmental, Health, and Safety Regulation
. Total costs easily exceed $50 billion and may soonbe
approaching $100 billion annually. The price tag in
the environmental area alone is estimated at $50-60
billion annually by the end of the decade. The
President's 1975 Economic Report refers to studies that
are beginning to show that these costs exceed benefits
in many cases--by a ratio of 2 to 1 in the case of auto
emissions standards (e.g., total costs of $11 billion
exceed annual benefits by $6 billion according to a
recent report sponsored by the National Academy of
Sciences).
The excess cost to consumers of: regulation in
the environmental area, as well as health and
safety and product standards, may well range in
the tens of billions annually.
3. Direct Costs of Regulation
We must also count costs to the government and
the private sector of administering and complying
with all these regulations. These include costs
to the taxpayer (over $2 billion annually in
Federal budget costs alone), and to businesses--
FORD & 938870 LIBRARY
3
130 million man hours spent filling out forms
each year costs over $1 billion. These do not
reflect other important compliance costs and costs
of administering State and local regulation which
may put the direct costs at over $5 billion annually--
by conservative estimates.
Taken together, these studies suggest that the cost of
regulation and private sector restrictive practices exceeds
the personal income taxes (certainly the Federal portion,
and perhaps the State and local portion as well) that are
paid by each American family annually. (See Table.)
Cost of Regulation and Restrictive Practices
Public and Private
Category
Estimate of Cost
I. Economic Regulation
Gross
Net
Date
Source
Comment
A. Trade Restrictions
1.
Foreign (Tariff and non-
Magee, "The Welfare
Removal of many trade
tariff barriers, inter-
Effects of Restric-
restrictions (e.g.,
national agreements, "buy-
tions on U.S. Trade",
agriculture) has al-
American requirements, etc.)
$15B
1975 (est.)
3 Brookings Papers on
ready reduced cost to
Economic Activity
some degree and trade
(1972).
reform legislation
will reduce costs
further.
2. Domestic
Fair trade laws
2
1969
CEA
Robinson-Patman Act
No estimates available
but impact is almost
certainly greater than
fair trade laws, at
least $2 billion. Very
difficult, however, to
estimate according to
the Justice Dept.
2
Estimate of Cost
Category
Gross
Net
Date
Source
Comment
B. Regulated Industries
1. Transportation
Surface (domestic)
$4-9B
1969
Thomas Moore, Freight
A Business Week article
Transportation Regulation
quotes Moore as putting
the present cost as high
as $15 billion annually.
Air (domestic)
$2-4B
1965
Levine, Yale Law Journal
Estimate may be somewhat
(1965)
high, according to CEA.
Maritime
Rate structures
$2-3.5B
1971
Maritime Transportation
Cargo-preference (Jones Act)
$2.5-5B
1971
Research Bd. (1971);
"Federal Policies Af-
fecting Inflation" (OMB,
attached), 1971
International air
No ests.
2. Communications
Television
$8B
1973
McGowan, Noll and Peck,
Includes television broad-
Economic Aspects of
casting restrictions only.
Television Regulation
(1973).
3. Energy (natural gas, elec-
No ests.
tricity, nuclear)
3
Estimate of Cost
Category
Gross
Net
Date
Source
Comment
4. Financial Institutions
Banking, Savings and Loans
No ests.
Secondary securities markets
No ests.
5. Agriculture
Marketing orders (Total value
Recent legislation
subject to those orders in
removed many of the
2.5B annually)
restrictions on pro-
duction in this area,
but some problem areas
remain (e.g., marketing
orders)
6. Labor
Minimum wage
$7-9B
1974
Labor Department's est.
of impact of 1973 amend-
ments alone was $3-4B.
Davis Bacon
$1B
1971
General Accounting Office
study of Davis-Bacon,
cited in 1971 OMB study.
4
Estimate of Cost
Category
Gross
Net
Date
Source
Comment
C. State and Local Regulation, including
1. Insurance
2. Banking
3. Transportation
4. Professional and occupational
licensure
5. Price Fixing (e.g., milk pricing,
real estate settlement fees)
6. Building Codes and Zoning
$2-4B
1969 Report of the
Costs would likely
Requirements
National Commission
be substantially
Urban Problems.
greater now; estimate
did not take account
of restrictive zoning
practices.
5
II. Environmental, Health and Safety, Quality Standards
Estimate of Cost
Category
Gross
Net
Date
Source
1. Environmental
$50-60B
Est.
Annual Reports of Council on Environmental Quality
1972-81
(1972, 1973) referred to in Knease and Shultze Public
Policy and Pollution.
Ex., Clean Air-
Auto Emissions
$11B
$6B
1974
National Report to Academy of Sciences and Engineering
referred to in 1975 Economic Report, P. 158
2. Safety
Automobile
$.5B
1974
Auto industry testimony on cumulative impact of safety
regulation
Occupational Health
and Safety
$3.5B
1974
McGraw Hill survey.
3. Quality Standards
No ests.
Ex., Food & Drug
$3-.4B 1970
S. Peltzman, Evaluation of 1962 Food and Drug Amendments
JLE, 1973.
6
III. Direct Costs of Regulation
Estimate of Cost
Category
Date
Source
1. Public Sector
Federal
$2B
1975 (est.)
State and Local
No est.
2. Private Sector
Bob Marik's OMB study (about 130 million
man hours per year). . Some estimates have
Paper work
Greater than
1974 (est.)
gone as high as $20 billion. Nation's
$1 billion
Business quotes 1965 House Small Business
Commission hearings, but we can't verify.
Other
No est.
(Washington
lawyers, etc.)
Probably at least
4-5 billion
IV. Private Sector Restrictive Practices
A. Monopolistic price distortions
1.0% of GNP
(unregulated industries)
+
Cost inefficieny in monopolistic
or oligopolistic industries
2.6% of GNP
Includes
Deficient cost control by
defense and aerospace con-
tractors
(0.5% of GNP)
Excess production capacity
+
signaled into existence by
monopolistic profits
0.6% of GNP
Scale
Economies
Cost of firms operating at too
+
small a scale to realize
economies of mass production
0.3% of GNP
Trans. wastes from delivered or
+
basing (crosshauling, etc.)
point pricing systems
0.2% of GNP
Waste attributable to product
differentiation advertising
+
providing no relevant infor-
mation or pure sales promotion
1.0% of GNP
Total
5.7% of GNP
or
close to $80 billion
Source :
F. M. Scherer, Industrial Market Structure
and Economic Perference (1970), p. 408.
Note, that in an October 1974 issue of Barron's, Scherer
admitted that he threw "scholarly caution to the
winds" in arriving at the figures.
B. Labor
Estimated excess of wage rates over competitive
levels is about 10% - 15%. See A. Rees, "Effects
of Unions on Resource Allocation", Journal of
Law and Economics, 1963.
Currently, this would amount to about $20 billion
annually.
Source:for current data: AFL-CIO
Rog.Fell
THE WHITE HOUSE
WASHINGTON
May 22, 1975
MEMORANDUM FOR:
JIM CANNON
THROUGH:
DICK DUNHAM
FROM:
PAUL LEACH
SUBJECT:
Proposal for Domestic Council
Review Group on Government
Regulation
Everyone seems to agree that there should be "regulatory
reform", with the President the leading advocate.
What should the Domestic Council do? There appear to be
several options for study and reform:
1. A "comprehensive" effort for all regulation.
2. Economic regulation, i.e., price and market
entry/exit regulation, for all regulated
industries.
3. Economic regulation by one agency of one industry
e.g., CAB regulation of airlines.
4. Regulation to maintain "fair" competition,
i.e., antitrust regulation.
5. All "social" regulation which imposes standards
and requirements, e.g., OSHA, FDA, EPA.
6. Social regulation by one agency.
7. All types of regulation, but concentrating on
the impact of regulation on one broad economic
sector, such as small business or energy-related
firms.
-2-
The Domestic Council can do one or more of these options.
Given the limited time and resources, I would recommend
against the "comprehensive" option 1. Wouldn't this be
biting off much more than we could chew?
We should tackle an area or areas where there is a
reasonable prospect for success. In addition to the
Environmental Regulation Review we are about to undertake
(an option 6 approach) and the surface transportation
reform efforts (option 3), I would recommend one or more
of three alternatives:
1. Tackle CAB regulation of the airlines. Virtually
all economists agree that this is not rational.
Also, the industry and economics are relatively
simple. There are only a few firms (not one in
every Congressional District) and the consumers
of air travel might well be mobilized. The
new Chairman, John Robson, might be amenable
to a cooperative effort.
2. Concentrate on regulation of energy-related
companies. If energy is our first national
priority, why not use the crisis as a lever to
reform regulation. However this might be
sufficiently covered by the Energy Resources
Finance Corporation proposal.
3. Concentrate on regulation and its effect on
small business. The effects of red tape are
felt hardest by smaller firms who cannot afford
"Wall Street" law firms and the other often
staggering costs of regulation. Again this
could be a lever for broader reform couched in
the politically more tolerable rhetoric of aid
to beleagered entrepreneurs - a traditionally
Republican constituency.
Copies to- -
THE WHITE HOUSE
2) Paul leash
1) Dish Drubeen
WASHINGTON
May 27, 1975
ADMINISTRATIVELY CONFIDENTIAL
MEMORANDUM FOR:
JIM CANNON
FROM:
JERRY ROD HILLS H. JONESA
SUBJECT:
Meetings with Independent Regulatory
Commissions and a Group of Key
Members of Congress
Your memorandum to the President of May 26 on the above subject
has been reviewed and the recommendation as outlined in the memo
was approved.
Please follow-up with the appropriate action.
Thank you.
cc: Don Rumsfeld
DECISION
THE WHITE HOUSE
WASHINGTON
May 26, 1975
MEMORANDUM FOR THE PRESIDENT
FROM:
JIM ROD CANNON HILLS June
SUBJECT:
Meetings with Independent Regulatory Commissions
and a Group of Key Members of Congress
The purpose of this memorandum is to bring you up-to-date
on the status of the meeting with Independent Regulatory
Commissions and key members of Congress which you proposed
in the April 28th Chamber of Commerce Speech and to obtain
your decision on a recommended three stage set of meetings.
Recently, we met with a group of Congressional staff people
who are interested in regulatory reform and have talked
with John Marsh and Max Friedersdorf.
It is our recommendation, based in part on these conversations,
that the proposed meetings occur in three steps:
1. After your return from Europe, a meeting would
be arranged with the Leadership of Congress.
At that meeting - which will avoid the specifics
of regulatory reform - you would reiterate your
concerns over regulation and ask for the cooperation
of the Leaders. Specifically, you would ask the
Leadership to choose ten members from each house
to meet with you (and other Administration
officials) in mid-June.
2. At the second meeting, the twenty key Congressional
leaders would meet with you and various Administra-
tion officials for two hours, or more. At this
meeting, you would emphasize the need for cooperation
and the seriousness of the regulatory crisis. Also,
you would discuss the major Administration initiatives
and try to highlight the areas where agreement seems
possible. It would be hoped that protracted discussion
of areas of disagreement could be avoided. The
FORD & GERALD LIBRARY
- 2 -
give-and-take discussion would have as its
objective establishment of general agreement
on which are the reform areas where the needs
for change are most serious and the possibility
for action is highest.
3. Finally, you would have a meeting ten days or
two weeks later with the Independent Regulatory
Commissioners. At this time you would ask for
their cooperation voluntarily to evaluate and
consider the economic impact of proposed
regulations, to make improvements in consumer
services and to assure fair and expenditious
hearings on regulatory matters. After you had
opened the discussion, other pre-selected
Administration officials and Regulatory Commissioners
would address relevant issues of regulatory reform.
This would be followed by an open discussion between
the participants and a frank exchange of views.
If this three step proposal meets with your approval, we will
arrange for a meeting with the Congressional Leadership.
In addition, where appropriate we will coordinate the
specific format of each meeting with relevant Congressional
members and staff and a small working group of Administration
people. Prior to the meetings, you will be provided with
the necessary briefing papers on the Commissions.
Decision
Approve
Disapprove
See me
FORD & LIBRARY QERALD
OFFICE OF THE VICE PRESIDENT
WASHINGTON, D.C.
Wed.
Pal rekee
for our
unw. lost
might
Dirh 4.
- RALD GERALD 813 ? FORD
Suly 1925
MEMORANDUM FOR THE VICE PRESIDENT
SUBJECT: Energy Resources Finance Corporation
FROM: Frank G. Zarb
Rogers C.B. Morton
As we discussed last week, the concept of an Energy
Resources Finance Corporation is an appealing way to
provide a major Presidential initiative to increase
domestic supply and stimulate alternative sources of
energy. We agree with your assessment that the
President needs a dramatic initiative in this area.
While the concept of such a corporation is attractive,
its scope, authorities, and organization raise many
important energy policy questions. In particular, the
extent of energy investments covered by the ERFC is
crucial to the final decision on the approach. For
example, should we provide financing for refineries
or gasoline stations when oil industry cash flows
are more than adequate to cover all expected capital
needs. We also have the question of how the ERFC pro-
posal is related to the utility tax incentive program
that has been endorsed by the President.
As you are aware, the interagency task force on the
synthetic fuel commercialization program is about
to deliver its findings and recommendations to the
Energy Resources Council. The synthetic fuels
report is expected on July 15, and will contain a
number of financial incentives to spur coal gasifi-
cation, coal liquefaction, oil shale, and other
FORDO is GERALD LIBRARY
-2-
fuels. Certainly the ERFC proposal should build on
this assessment and as a minimum be structured to
provide the recommended incentives.
Since it is important that the synthetic fuels program
and the ERFC be coordinated, we propose the following
schedule of events:
July 15 - presentation of synthetic fuels
commercialization program findings
to the ERC.
July 30 - draft Presidential decision memorandum
integrating synthetic fuels program
and the ERFC presented to ERC.
Aug. 15 - final decision memorandum delivered to
the President.
Sept. 1 - Presidential statement on new initiative
(prior to Congress' return from their
August recess).
It is unlikely that any initiative need be taken prior
to the August Congressional recess and the schedule we
have proposed will allow careful analysis and review
of the alternatives. The decision memorandum will lay
out the rationale for choosing whether the ERFC should
cover all energy investments, just synthetic fuels, or
some middle ground. It will also discuss the appropriate
financing instructions, levels of government involvement
and the organizational structure of the corporation.
The Federal Energy Administration will prepare the first
draft of the revised Presidential decision memorandum,
incorporating the synthetic fuels program recommendations.
FEA and Commerce will work closely with the Domestic
Council in the preparation of this document, and in the
review process with the other agencies.
We look forward to a close and successful working
relationship on this important question.