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Regulatory Agencies - Regulatory Reform (2)
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The original documents are located in Box 59, folder "Regulatory Agencies - Regulatory
Reform (2)" of the Philip Buchen 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 R. 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States of America his copyrights in all of his unpublished writings in National Archives collections.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 59 of the Philip Buchen Files at the Gerald R. Ford Presidential Library
FOR IMMEDIATE RELEASE
JULY 10, 1975
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
OPENING REMARKS OF THE PRESIDENT
TO THE
CHAIRMEN AND COMMISSIONERS
OF THE
INDEPENDENT REGULATORY AGENCIES
THE EAST ROOM
11:07 A.M. EDT
Good morning. It is a pleasure and a privilege
to have you here.
Mr. Vice President, members of the Cabinet,
members of the various regulatory agencies:
I will make an initial, relatively short
statement, to be followed by Rod Hills, being the
moderator for the introduction of the four topics
which are on the agenda, and Paul MacAvoy will give
an introductory remark or two concerning each subject,
and then, as I think all of you have been told, there
will be one and perhaps several from each of the --
well, from some of the regulatory agencies, making an
introductory observation and comment, and then a period
will be given in each case for members of the various
regulatory agencies to make observations and comments.
I think it is quite obvious that I feel very
deeply that we must seriously consider the cost to the
American consumers of all Government activities. And
this, of course, includes regulatory agencies.
Regulatory reform is a theme that arose
repeatedly in the course of last fall's economic summit
meetings. It is a theme that is finding, as I travel
around the country, growing attention and support, both
in popular and economic literature, in the Executive
Branch and the Congress, and I am pleased to note among
Government regulators themselves.
A short time ago I met with 24 Members of
Congress on this particular matter. There was unanimity
on this bipartisan group that we must examine our
regulatory practices to make sure they are meeting our
present need.
MORE
Page 2
There was agreement that competition should
be relied on whenever possible and that where regulation
is unnecessary, it should be avoided. Also there was
a persistent concern expressed by this group that some
Government regulation costs the country more than it
returns in benefits, and that the regulatory process
often benefits special interests at the expense of the
general public.
Finally, there was consensus that the important
public service role of the commissions must be reflected
in the attitude of the regulators and the welfare of
the consumer must also always be the first concern on
their minds.
I have a strong belief that the cost which
regulation imposes on private citizens should be faced
very squarely. Every citizen should be aware that in
some cases the cost in some cases means higher prices,
reduced efficiency, less consumer choice, and fewer
imaginative ideas.
In calling today's meeting, I do not suggest
that the problems reside exclusively in your agencies
or commissions.
Regulations that impose costs on consumers
can also be found in Cabinet departments and in the
intricate, sometimes invisible web of laws and regu-
lations at State and local levels.
My Administration is focusing public attention
on the need to eliminate or to minimize unnecessary
controls. We should recognize that occasionally
Government policies which appear to be in the short-
term public interest are in fact detrimental to long-
term consumer interests.
I am asking for your continued and intensified
help in identifying ways the commission can assist
in our collective efforts to restore inventiveness
and growth in the American economy.
As we look for short-term solutions, we must
also chart a course that permanently relieves the economy
of unnecessary long-term impediments. In some instances,
the circumstances which caused Government to institute
regulatory schemes have changed. You should be the
leaders in identifying areas where regulations should be
eliminated or substantially revised.
MORE
Page 3
You have been given by law extraordinary
authority to regulate the economy for the public good.
With these unusual powers and responsibilities, you
must function as models of effective and open Government.
There are four major areas that deserve very
careful attention.
First, there must be a constant effort to
improve each commission's ability to identify the costs
and the benefits of current and proposed regulation.
You should make sure that the quality of your economic
analysis matches your high standards of legal pro-
fessionalism.
In particular, the costs, as well as the
benefits, of restricting competition, must be considered.
Also, the benefits of worthwhile social goals must be
weighed against their economic cost to the Nation as
a whole.
As you know, I have ordered all departments
and agencies to prepare an inflation impact statement
on each of their major proposals. I am pleased that the
House of Representatives has changed its rules to
require similar analysis -- and I note that the Senate
in several similar measures is doing the same thing.
I ask each of you to give this matter the highest
priority.
Second, we must take every possible step to
make sure that the backlog and the delays in regulatory
proceedings do not weaken the public belief in an
equitable and efficient regulatory system.
If legislation is needed, you may be certain
that the Congress and the Administration will provide
such laws.
Third, the public can rightfully expect that
you be the leaders in suggesting appropriate legislative
changes in your authorizing statutes.
Fourth, I have asked all departments and all
agencies to re-examine their present procedures for
assuring that the consumers' interests prevail.
I believe that competition in product quality
and price is the best consumer protection. By freeing
entry, adding to rate, flexibility and promoting service
competition, the consumer can be given the choices that
only the marketplace can provide.
MORE
Page 4
I also urge you to insure clear communications
with consumers so they will better understand your
actions.
Our joint efforts in these areas will move
us a long way toward the efficient and useful regulatory
system that we all seek.
In addition to achieving these administrative
reforms, my Administration specifically will be seeking
further legislation that would also intend to reform
our system of regulation.
It is my strong conviction that the consumer
is best able to signal his wants and needs through
the marketplace, that Government should not dictate
what his economic needs should be.
Therefore, I have proposed and will continue
to support legislation to relax or eliminate the
Federal controls over areas where I believe the market-
place can do a better job. I believe the Government
should intrude in the free market only when well-
defined social objectives can be obtained by such
intervention, or when inherent monopoly structures
prevent a free competitive market system from operating.
Government should foster rather than frustrate
competition. It should seek to insure maximum freedom
for private enterprise.
Agencies engaged in regulatory activities can
expect that the Antitrust Division of the Department of
Justice will continue to argue for competition and
lower consumer prices as a participant in your agency's
proceedings.
Furthermore, the Attorney General will continue
to insure vigorous antitrust prosecution to remove
private sector barriers to competition. We have, or will
propose regulatory reform legislation in such areas as
energy, transportation, financial institutions, and
communications.
I have asked Congress for its cooperation in
giving these bills early consideration, and I ask for
your personal and organizational support in achieving
needed reform.
MORE
Page 5
The legislation I am proposing would reduce
the Government's role in the setting of prices. Also,
it would enhance innovation by making it easier for
new businesses to compete with existing firms. It would
remove barriers from existing firms to allow them to
develop new services and lower prices as well as abandon
unprofitable or unnecessary services.
This meeting and my earlier meeting with the
Congressional representatives, are only the beginning,
and I emphasize that. Today we will continue the
dialogue begun at the Congressional meeting.
Rod Hills and Paul MacAvoy, as I indicated,
will briefly describe our agenda for the meeting this
morning. I will be interested in hearing more about
the steps you are taking to improve our system of
regulation, as well as the problems you face in this
effort.
I am particularly hopeful that we will be
able to identify those practices which are more
deserving of attention and reform.
If this meeting does foster a program of
action -- and I think it can -- and a new spirit of
cooperation between all of our commissions, the
Congress, and the White House, then in my judgment we
will be responsive to the public interest.
I thank you for being here and at this point
I will call on Rod Hills to get the meeting started, as
the moderator.
END
(AT 11:18 A.M. EDT)
THE WHITE HOUSE
July 10, 1975
THE EAST ROOM
PRESIDENT GERALD R. FORD,
VICE PRESIDENT NELSON A. ROCKEFELLER,
WITH
MEMBERS OF THE CABINET
AND
COMMISSIONERS OF THE TEN INDEPENDENT REGULATORY AGENCIES
-
(11:05 A.M. EDT)
THE PRESIDENT: Won't you all sit down, please.
Good morning. It is a pleasure and a privilege
to have you here, Mr. Vice President, Members of the
Cabinet and members of the various regulatory agencies.
I will make an initial relatively short statement,
to be followed by Rod Hills, being the moderator, for the
introduction of the four topics which are on the agenda,
and Paul MacAvoy will give an introductory remark or two
concerning each subject, and, then, as I think all of you
have been told, there will be one and perhaps several from
each of the -- well, from some of the regulatory agencies,
make an introductory observation and comment and then a
period will be given in each case for members of the various
regulatory agencies to make observations and comments.
I think it is quite obvious that I feel very deeply
that we must seriously consider the costs to the American
consumers of all government activities, and this, of course,
includes regulatory agencies. Regulatory reform is a theme
that arose repeatedly in the course of last fall's Economic
Summit Meeting. It is a theme that is finding, as I travel
around the country, growing public attention and support,
both in popular and economic literature, in the Executive
Branch, in the Congress, and, I am pleased to note among
the government regulators themselves.
A short time ago, I met with twenty-four Members of
Congress on this particular matter. There was unanimity on
this bipartisan group that we must examine our regulatory
practices to make sure they are meeting our present needs.
There was agreement that competition should be relied on when-
ever possible and that where regulation is unnecessary it
should be avoided.
CERNID
Also there was a persistent concern expressed by
this group that some government regulation costs the country
more than it returns in benefits, and that the regulatory
process often benefits special interests at the expense of
the general public.
Finally, there was consensus that the important
public service role of the commissions must be reflected in
the attitude of the regulators, and the welfare of the
consumer must always be the first concern on their minds.
I have a strong belief that the costs which regula-
tion imposes on private citizens should be faced very squarely.
Every citizen should be aware that in some cases the costs in
some cases mean higher prices, reduced efficiency, less consumer
choice and fewer imaginative ideas.
more
(OVER)
2
In calling today's meeting, I do not suggest that
the problems reside exclusively in your agencies or commissions.
Regulations that impose costs on consumers can also be found
in Cabinet departments and in the intricate, sometimes invisible
web of laws and regulations at State and local levels.
My Administration is focusing public attention on
the need to eliminate or to minimize unnecessary controls.
We should recognize that occasionally government policies
which appear to be in the short-term public interest are in
fact detrimental to long-term consumer interests.
I am asking for your continued and intensified help
in identifying ways the commission can assist in our collec-
tive efforts to restore inventiveness and growth in the
American economy. As we look for short-term solutions, we
must also chart a course that permanently relieves the
economy of unnecessary long-term impediments.
In some instances, the circumstances which caused
government to institute regulatory schemes have changed. You
should be the leaders in identifying areas where regulation
should be eliminated or substantially revised. You have
been given, by law, extraordinary authority to regulate the
economy for the public good. With these unusual powers and
responsibilities, you must function as models of effective
and open government.
There are four major areas that deserve very careful
attention:
First, there must be a constant effort to improve
each commission's ability to identify the costs and the bene-
fits of current and proposed regulations. You should make
sure that the quality of your economic analysis matches your
high standards of legal professionalism.
In particular, the costs as well as the benefits of
restricting competition must be considered. Also, the benefits
of worthwhile social goals must be weighed against their
economic costs to the Nation as a whole.
As you know, I have ordered all departments and
agencies to prepare an inflation impact statement on each
of their major proposals. I am pleased that the House of
Representatives has changed its rules to require similar
analysis -- and I note that the Senate, in several similar
measures, is doing the same thing. I ask each of you to
give this matter the highest priority.
Second, we must make every possible step to make
sure that the backlog and the delays in regulatory proceed-
ings do not weaken the public belief in an equitable and
efficient regulatory system. If legislation is needed, you
may be certain that the Congress and the Administration
will provide such laws.
Third, the public can rightfully expect that you
will be the leaders in suggesting appropriate legislative
changes in your authorizing statutes.
Fourth, I have asked all departments and all
agencies to reexamine their present procedures for assuring
that the consumers' interests prevail. I believe that com-
petition in product quality and price is the best consumer
more
3
protection. By freeing entry, adding to rate flexibility
and promoting service competition, the consumer can be
given the choices that only the marketplace can provide.
I also urge you to insure clear communications
with consumers so they will better understand your actions.
Our joint efforts in these areas will move us a long ways
towards the efficient and useful regulatory system that we
all seek.
In addition to achieving these administrative
reforms, my Administration specifically will be seeking
further legislation that would also intend to reform our
system of regulation. It is my strong conviction that
the consumer is best able to signal his wants and needs
through the marketplace. The government should not dictate
what his economic needs should be.
Therefore, I have proposed and will continue to
support legislation to relax or eliminate the Federal con-
trols over areas where I believe the marketplace can do a
better job. I believe the government should intrude in
the free market only when well-defined social objectives
can be obtained by such intervention or when inherent monopoly
structures prevent a free, competitive market system from
operating. Government should foster rather than frustrate
competition. It should seek to insure maximum freedom for
private enterprise.
Agencies engaged in regulatory activities can
expect that the Antitrust Division of the Department of
Justice will continue to argue for competition and lower
consumer prices as a participant in your agency's proceed-
ings. Furthermore, the Attorney General will continue to
insure vigorous antitrust prosecution to remove private
sector barriers to competition.
We have, or will propose, regulatory reform
legislation in such areas as energy, transportation, financial
institutions, and communications. I have asked Congress for
its cooperation in giving these bills early consideration,
and I ask for your personal and organizational support in
achieving needed reform.
The legislation I am proposing would reduce the
government's role in the setting of prices. Also, it would
enhance innovation by making it easier for new businesses
to compete with existing firms. It would remove barriers
from existing firms to allow them to develop new services
and lower prices, as well as abandon unprofitable or
unnecessary services.
This meeting and my earlier meeting with the
congressional representatives are only the beginning -- and I
emphasize that. Today we will continue the dialogue begun at
the congressional meeting. Rod Hills and Paul MacAvoy, as I
indicated, will briefly describe our agenda for the meeting
this morning.
I will be interested in hearing more about the
steps you are taking to improve our system of regulation
as well as the problems you face in this effort. I am
particularly hopeful that we will be able to identify those
practices which are more deserving of attention and reform.
If this meeting does foster a program of action --
and I think it can -- and a new spirit of cooperation between
all of our commissions, the Congress and the White House, then,
in my judgment, we will be responsive to the public interest.
more
(OVER)
4
I thank you for being here, and at this point I
will call on Rod Hills to get the meeting started, as the
moderator.
MR. HILLS: Our purpose this morning is to foster
as wide an exchange of views as possible on the area of
government regulation. To facilitate and focus that discussion,
we have divided the session into four broad areas, the four
broad areas that the President has mentioned -- the improve-
ment of economic analysis, the improvement of the regulatory
procedures, the efforts to foster more competition in regulated
industries, and the effort to foster a reexamination of the
objectives of commissions to determine whether some form of
deregulation can be profitable and necessary.
Dr. Paul MacAvoy, of the Council of Economic Advisers,
will briefly introduce each section of our session today, and
we will call upon chairpersons present this morning to keynote
for a few moments each of the sections.
Our objective is to have as many of you as possible
express yourself, and that means, of course, that it may not
be possible to have extended discussion on some topic that
comes up. If that occurs, as it undoubtedly will, we will ask
you to defer that conversation to an early meeting here at
the White House where we will get you together with appropriate
officials to continue the discussion.
We welcome you here. We all expect this to be a
mutually beneficial session.
Paul?
MR. MacAVOY: Perhaps I might begin with a few
questions in each case. I will try to keep the questions
short, and I hope they are helpful.
In the last ten years, the caseload in the area of
price or rate setting has increased in most commissions two -
to five-fold. In this period, the complexity of the cases has
apparently increased a multiple as well. This is partly
because of changing demands, changing technological conditions,
partly also because in almost each industry with which you are
concerned, there seems to be a growing unregulated sector also
producing to meet these demands.
With a complex and larger caseload, the economic
question arises as to what the results from the more compli-
cated cases have been. Are the cases moving in the direction
of adding to gains or benefits to consumers from bringing
rates more currently in line with operating and capital costs?
Or are these activities in the caseload area moving in the
opposite direction?
The fundamental argument for regulation was that it
would do better than partially competitive or uncompetitive
markets in providing consumers with goods at prices in line
with current costs. The question that has to be asked in the
economics at this point then is, if we look at the results
from the cases, do we show economic effects of bringing prices
in line with current costs?
In some instances, it appears as if prices may be
set far above the current costs of operation; in other in-
stances, perhaps they are too low. There are cases now in
the energy and transportation sector where it is quite apparent
that costs are higher for additional service or quality than
the going rate. The question then is can be begin to carry
more
5
out benefit-cost studies of caseloads in large areas of
your activities which will show that you are doing better
than the market would do in bringing prices in line with
current costs?
These same questions arise in somewhat different
form, but a benefit-cost analysis form, in the health and
safety regulation area. Many of the Commissions in this
area are relying more and more on detailed specification
of production conditions or of physical quality of the
product. These specifications have a tendency to increase
the costs of operation for corporations which get passed
on as increased prices for consumers. These costs also
have to be added to the cost of litigation, to delay in
the regulatory process; delays seem to be growing as the
complex caseload grows. Against these costs, we have to
put the benefits to the consumer of a higher quality product.
Can we begin to do benefit-cost analyses of these
health and safety regulatory activities, which clearly show
that the benefits to the consumer in increased demands and
in greater reliance on the quality of the product received
in the market, are worth the additional costs of higher
prices and delays in the institution of new technology?
Added to these questions, of course, we have to
ask whether there is available in the current techniques
of economic analysis the equipment to help you do this.
These three questions are interrelated. I hope we can
spend some time this morning on working on the answers.
THE PRESIDENT: The initial topic, "Improving
Economic Analysis in the Various Regulatory Agencies,"
to begin the discussion from the point of view of the
commissions or agencies themselves, I will call on
Lew Engman, the Chairman of the Federal Trade Commission.
Lew?
MR. ENGMAN: Thank you, Mr. President. I would
like to say, first of all, that we very much appreciate
your efforts to focus public attention and to take action
on these issues of regulatory reform. I, for one, agree
completely with the objectives which you have stated this
morning, and I must say that I have some feeling that we
could make a start on the problem if you could install a
trapdoor in the East Room and somehow make half of this
table disappear, and I won't say which half.
[Laughter]
At the FTC, we have been concerned, just as you
have, that many governmental policies, whatever and however
well intentioned they may have been in the first instance,
have outlived any economic or social justification and have
in fact become a costly burden on every American.
I have frankly regarded it, as part of my job
as Chairman of the Commission, to be outspoken on this
subject, because while the other agencies around this table
divide markets, prescribe rates or determine whether or
not new competitors can be permitted to enter a certain
market or set environmental or safety standards, our basic
responsibility, as we see it, is a much more general one,
and that is to assure that our free market economy can operate
just as freely and as openly as possible.
more
(OVER)
6
Because, as you indicated in your opening remarks, just as
the public can pay more for goods and services as a result
of private collusion, which is what the antitrust laws are
all about, by the same token, so do we pay more for goods and
services because of governmental intervention in the marketplace.
Now, in looking at this role of economic analysis,
I think the question really is, how can we measure the economic
costs of this kind of regulation, and how can we measure the
benefits so that we can assure ourselves that we are not paying
today's prices for solutions to yesterday's problems.
Now, at the FTC we have undertaken a self-examination
which is very much like that which the Office of Management and
Budget is now requiring in the form of inflation impact state-
ments from the Executive departments. We are trying to analyze
every single law enforcement program which we are responsible
for carrying out, analyze the costs of those programs, and to
compare those costs with the potential benefits flowing to the
public. And as a result of the cost-benefit analysis which we
have already begun to undertake, we have in fact made decisions
with respect to our programs which have reduced our activities
in certain enforcement areas and increased them in others.
Now, I have to be candid, however, and admit that
this is not a very easy thing to do. It is a case of weighing
costs, on the one hand, against benefits which are only potential,
and it is an inexact science at the present time. I think that
you know fully well, Mr. President, how hard it is to get
economists to agree with one another, and when you add onto that
the problems of data and the fact that in many instances the data
which we have available is not very good, it becomes even more
difficult.
How, for example, just to raise one kind of question,
do you quantify the benefit of the deterrent effect of a law
enforcement action -- the deterrent effect of having a cop
standing on that street corner? And to do the job right, you also
have to calculate on the benefit side of the equation, make some
assessment of where you would be without the particular regulation
or action. And beyond that, and perhaps even more important, I
think you have to try to make an assessment from an economic
cost point of view -- are there less costly ways that you can
achieve a similar benefit, assuming that there is some social
good to it?
But even with these kinds of problems, I think the fact
is that government regulation should be subjected to this kind
of cost-benefit analysis. If we really believe, if we truly
believe that a free market economy is the means to the greatest
prosperity to the greatest number of people, then I think that
we have to put the burden of proof on those who would make
that economy less free. And we found out at the Trade
Commission, with our experience with respect to cost-benefit
analysis, that although the approach is not simple -- it is
difficult -- by the same token, it was darn helpful in helping
us to address what our priorities ought to be.
And I guess I would suggest that possibly one way to
get a grip on' this problem is for each agency to consider or
to start to do cost-benefit analysis itself in the light of
its own particular mission, which may differ from case to case,
and I quite frankly would be interested in the reactions of
my fellow chairmen to that point, but I think that the need
for this kind of analysis is critically important. It is long
past time that an effort was made to tell the American people
what they are getting for what they are giving up.
more
7
Thank you.
THE PRESIDENT: Thank you very much, Lew.
I guess Dick Wiley, Chairman of the Federal
Communications Commission, has some observations on the
situation in the communications industry.
MR. WILEY: Thank you, Mr. President. I happen to
agree with Chairman Engman largely in his comments.
It seems to me that the decision-making process of
the independent regulatory agencies has been in the past
dominated by consideration of legal, technical and sociologi-
cal aspects. Increasingly, our agency has come to recognize
the importance of undertaking more comprehensive inquiry into
the economic ramifications of our decisions with regards to
the costs and the benefits of those decisions to the industries
we regulate and indeed to the public.
Now, these efforts have extended to all areas of our
jurisdiction, but I might cite the example of the common carrier
industry. There, in addition to traditional rate-making con-
cepts, we are now conducting a broad-ranging economic inquiry
to analyze the costs and benefits of increased competition in
the realm of common carrier communications. Our work has in-
cluded a review of such concepts as use of sensitive pricing,
cross-subsidization, the whole question of competition vis-a-vis
monopoly. And we found that in redefining natural monopoly,
we found in many areas we have been able to dispense with that
whole idea and find areas in which competition can work in the
areas which have been traditionally considered monopolistic.
And I think in that effort we found ways in which the public
will be ultimately saved.
MR. HILLS: Ladies and gentlemen, the discussion is
open for those of you who would like to comment. The distances
and the lights are great, so if you would not mind identifying
yourself, it would be helpful to all of us.
MS. FRANKLIN: Mr. President, I have a comment and a
suggestion on this whole area. First, I am Barbara Franklin,
from the Consumer Products Safety Commission. My comment is
this -- and we are, of course, in the field of safety:
I think it is -- I am in full agreement that we need
to emphasize more than we ever have before cost-benefit analysis
in our regulatory decision-making. Given the changes we have
going on in the economy, shortages of resources that are be-
ginning to show up -- shortages of capital, and the kinds of
things that are difficult to deal with -- I think it makes it
much more incumbent upon us, as regulators, to think ahead to
what the real impacts, not only now but down the road, of what
our decisions are going to be.
We are in an area where there are some very diffi-
cult questions in terms of the costs: What does it cost to
redesign, retool? What impact are we having on technology?
On the other side, how do you value human life? How do you
value fewer injuries? They are really very tough questions.
The point is, we have really got to get a handle
on this. The law we administer requires it, but beyond that,
I think there is much more urgency than there ever was before
for us to do it. And if I may make a suggestion, I think
around the table we have got some expertise in our respective
more
(OVER)
8
agencies about this. I presume others are trying to get a
handle on this, as we are. I wish there was some mechanism --
and maybe it could come out of this meeting, which I very
much appreciate -- I have never been in the same room with
my colleagues before, and I would hope it would happen again --
I wish there were some mechanism, though, whereby we could
pool our technology or our methodology, whatever we know
about cost-benefit analysis, so each of us doesn't have to
invent the wheel, and we can move all of us further along
in the process.
MR. HILLS: The discussion is not confined to the
table. We have microphones from which anyone from the
commissions can have a commanding position, if you would
like to talk.
MR. NASSIKAS: Mr. President, John Nassikas, Chairman
of the Federal Power Commission. The Circuit Court of Appeals
for the District of Columbia said in a case a few years ago,
"Despite a continuing debate, it appears that the basic goal
of direct governmental regulation through administrative bodies
and the goal of indirect governmental regulation in the form
of antitrust law is the same, and that is to achieve the most
efficient allocation of resources possible. For instance,
whether a regulatory body is dictating the selling price or
that price is determined by a market free from unreasonable
restraints of trade, the desired result is to establish a
selling price which covers costs, plus a reasonable rate of
return on capital, thereby avoiding monopoly profits. One
more example of common purpose in both types of regulation
is that they seek to establish an atmosphere which will stimu-
late innovations for better service at a lower cost. This
analysis suggests that the two forms of economic regulation
complement each other."
I believe that the free market can undoubtedly do
a far superior job of allocating resources produced by natural
gas producers, for instance, which I can go into detail on
later on. I also believe that the antitrust laws should be
more effectively enforced.
One final word: At the Federal Power Commission,
any decision that we issue has to examine productivity and
inflationary impact. Is this the best possible price for
the consumer under the restrictive statute under which we
have to operate?
MR. HILLS: Yes, sir?
MR. SIMPSON: Thank you. Dick Simpson, Chairman of
the Consumer Product Safety Commission. Our agency is one of
the new agencies, regulatory agencies, in town and the Congress
in establishing the agency, required us, as a matter of law,
to do economic impact analysis on all of our regulations.
There is a series of findings that we must make which has to
deal with the need for the product, the degree and nature of
the risk of injury that we are trying to address, the effect
on competition, and any other method that we could have used
to achieve the same result other than the rule that we are
promulgating.
Also it goes a little further. We not only have to
make the findings but the standard itself can be overruled if
any of these economic findings are inadequate.
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And I suggest that when we get to item four on the
agenda, legislative changes, one may look to the Consumer
Product Safety Act, section 9, as perhaps a model of laying
on the requirement of the economic analysis that we are
discussing here.
MR. HILLS: Very good. Are there any comments from
the back? Yes, sir?
MR. ROBINSON: Glen Robinson, from the FCC. Nobody
has commented yet on the resources and the wherewithal to do
this economic analysis. I am particularly mindful of this in
terms of probably one of the few Commissioners that has an
economist, a professional economist on my staff. But it is
inordinately difficult to get the kind of economic skills and
talent and put them, direct them to the task, and we have been
particularly hard-pressed at the FCC. We have a mammoth
undertaking, that Chairman Wiley spoke of a moment ago, to
conduct an economic analysis of the telecommunications in-
dustry, if nothing less than that, particularly the role of
competition being a traditionally natural monopoly field.
But I fear that unless we get access to more and
better economic skills than we have had in the past, the pro-
ject may fail simply because we are in a class which is a
very high-stepping class. We are up against some of the
largest corporations in the world, who have their own economic
analysts who are very competent and some of the best in the
world, as I am sure Paul MacAvoy knows. The Bell System
commands resources so far in excess of ours, there is no way,
of course, that we can match them man for man. I wouldn't
want to, if we could. And that would imply an unwieldy
governmental structure that would be counterproductive.
But we do have to focus on the talent part of this.
It is no good to just conduct economic analysis, have a bunch '
of laws talk about cost-benefit analysis, if they are not
really capable of applying refined skills to the task at hand;
and it can get very complicated, as I found out sometimes, to
my discomforture, in talking to my economists.
I think we at the FCC are particularly in need of
this. I would like to see some more attention given to the
talent phase of this.
MR. HILLS: Paul, do we really need some more
economists?
MR. MacAVOY: I appreciate the demand for economists
going up as rapidly as it has in the last ten minutes.
[Laughter]
I would respond, however, to try in a way that
attempts to reduce the demand somewhat. Some years ago, the
Federal Power Commission, as a page in its annual report,
tried to lay out a benefit-cost analysis at the beginning
level. What that involved was comparing the dollars of rate
reductions that had occurred in electric power and natural
gas pipeline price controls against the cost of litigation
and other measurable costs, both of the companies and the
Commission. That had a tendency to indicate that most of
the important work of the Commission was being done in the
control of natural gas pipeline rates. That fell out of
the reports in the middle 1960's. I considered it an admirable
first cut at trying to do this kind of work.
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You don't always measure benefits in rate
reductions. Certainly at the State level in electric power
regulation now, we measure benefits in rate increases be-
cause there are going to be shortages of capacity from State
price freezes that will make us worse off in five years.
But the idea that you have gone through this to the point
of being able to write down a page does have some benefit
to those surveying the activities of the Commission, those
who read your annual reports, because it will clearly show
that more resources put in one area might pay off in terms
of increased benefits to consumers and less in others.
This might require some kind of an economist, but certainly
would not raise honorariums or per diems of professors
appreciably.
[Laughter]
MR. HILLS: Chairman Wiley.
MR. WILEY: Yes, if I could just comment on that.
I think one thing that government needs to do is to try to
find areas in which it doesn't need to regulate and redistribute
some of those resources into areas in which we perhaps in the
short run will need more manpower in order to provide a com-
petitive mode. I think we are finding that in many areas we
need economic strength, as Commissioner Robinson mentioned,
and perhaps less lawyers regulating less aspects of the
business world.
MR. HILLS: Mr. Vice President.
THE VICE PRESIDENT: As Chairman for a couple of
years of the Commission on Water Quality, analyzing the
legislation of '72, we have been up against the same problem
that you are talking about and we have employed outside
engineering groups to make these cost analyses of the impact
of the law. And I give as an illustration: we just got a
report on the tin plate industry, the EPA's regulations for
the '73 and the '83 standards as established by the law, the
impact on that industry. And it shows, a very comprehensive
study, that 35,000 small companies would have to spend more
in capital to meet the standards of those two periods than
they have invested now that the cost -- in their present
plants -- that the cost would therefore put them out of
business, so that 35,000 companies would be put out of business,
out of 70,000. Now, this is done by a competent outside
engineering firm, and so that I think there are means of finding
that information and seeing in perspective.
You are in perhaps a more complicated field, but
the outside contractor often can be very helpful.
MR. HILLS: The Secretary of Agriculture.
SECRETARY BUTZ: I don't know how this group was
arranged here. We have got the Commission members on one
side and the Cabinet and White House on the other side --
it is something like a court room.
[Laughter]
The other day I was talking in my office about one
of these regulatory agencies I don't like too well, and I had
my finger pointing -- not toward you, Dick -- something like
this, talking to a friend of mine, and suddenly I stopped.
He said, "What is the matter, Earl?" I said, "It is just
one of those fingers pointing at him, there are three back
at me."
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[Laughter]
And I was interested in the President's comments
here that some of the Executive branches of government like-
wise are at fault here. I have got in the Department of
Agriculture 82,000 employees. I ought to make a note of that.
THE PRESIDENT: Is there more or less than you had
last year?
[Laughter]
SECRETARY BUTZ: Mr. President, I plead the Fifth.
[Laughter]
Seventy thousand of those are in the field. The
other day I asked my Assistant Secretary for Administration
how many of those exercise the police power? I was shocked
when I got back the figure of 23,000. These are people who
issue licenses, who inspect, who grade, who have the power
of life and death over a business, who are putting small
businesses out of business. And I think, Mr. President, that
you put your finger on one of the weak spots in this govern-
ment when you mentioned that some of the Executive departments
of government are doing this day after day.
I have got a poultry inspector out here, for example,
in a poultry processing plant, let's say in Mississippi. They
are running 5,000 birds an hour through that line. He has got
the power to stop the line by pushing a button. He got up
this morning. He had a headache. He came down. The plant
manager assigned him a parking place over across the lot and
it rained. He had to walk through the mud to get in there.
He is in kind of an ill humor. He looks at the condensation
on the ceiling of the men's wash room and decides it is not
right. He punches the button and he stops the line for two
hours. It costs that man $3,000 because this guy got up with
a headache this morning. Now, I have exaggerated that a little
bit, Mr. President, but not too much.
And I think that this Executive Branch is shot
through with that. Now, I am instituting in my Department --
I am doing it because I knew you were going to direct me, too,
anyway, and I am beating you at the gun here.
[Laughter]
I am instituting a self-examination top level
committee and I am bringing some industry people into it, in
my Department, to see where we can cut out some of this stuff
we are doing that I am sure raises the cost of doing business
that I am sure works against what we are trying to do, and
that is to foster a healthy atmosphere in which small business
people can survive and prosper.
MR. HILLS: Lew, you were so successful in finding
unanimity, I hesitate to call on you, but do you have a further
comment?
MR. ENGMAN: Let me interject a note maybe of some
discord just for a second, Rod. I don't mean to disagree with
my good friend Dick Wiley, but in terms of talking about
levels of resources, we all now do have resources available
to us. And it seems to me that conducting and making an effort
to conduct this kind of cost-benefit analysis is one of the
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12
most, if not the most, important thing we can be doing with
the money we now have, because through doing that we can find
out how we can more productively use the resources which we
do have.
MR. HILLS: If we may move to the second subject --
the issue of the regulatory procedures -- no subject causes
more complaint than regulatory delay. Paul, would you start
us off?
MR. MacAVOY: In reviewing the reports of the
commissions over the last few years, it appears that the
majority of the Commissions here today have experienced in-
creasing time spans between requests for rate changes or for
certificates and the final decision on the requests.
In the presence of inflation, with rapid changes in
market conditions, for other reasons, the caseload in most of
these agencies has increased remarkably since the middle
1960's. One of the general counsels of the Commissions, in
a meeting the other day, called the situation one of pancaking --
we have had layer on layer on layer of cases, some with respect
to the same company or market now in front of the Administrative
Law Judges and the Commissions themselves.
The delay that has resulted has increased costs
more than the percentage increase in the delay period. This
is primarily because the slow-downs in construction during a
period of rapid increases of construction costs have resulted
in companies experiencing higher construction cost increases
than might be expected under normal circumstances.
With a six-month to one-year delay in obtaining a
certificate, we have a 30 or 40 percent increase in the cost
of construction in some instances. On top of this, the costs
of litigation have increased sometimes by two or three times,
as the cases become strung out and become more complicated.
On top of this, as well, there has been increased duplication
of regulatory activities between State and local commissions.
It now requires more than forty licenses in order to build a
power plant in the Eastern Seabord Region, all from different
agencies.
The question is: Can we by consolidating or other-
wise changing regulatory case procedures cut into this growing
caseload so as to reduce the time lost and the litigation and
other expenses that are incurred because of the delay?
Added to this question is one that may take us in
the opposite direction. At the same time that we have ex-
perienced delays, the number and strength of complaints on
Commission non-responsiveness to individual consumers has
increased as well. IS it possible to break through the present
procedures and allow more access to individual consumers to
the commission process, again without increasing delay or
adding to the cost of regulation? What is the proper limit
on the caseload as compared to going to other administrative
practices that reduce the due process? What is the proper
limit in the sense of allowing access to all parties to a
matter that is now before the commission?
These are open-ended questions. I hope that we can
find quick solutions. I know we can.
MR. HILLS: Chairman William Anders, the Nuclear
Regulatory Commission.
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Bill?
MR. ANDERS: I have been asked to kick off the
subject of methods of improving the regulatory procedures
and, Mr. President, with your permission, I will restrict
my comments to what I know more about, that is our own
efforts to improve our own regulatory procedures.
While our responsibilities are directed towards
safety, rather than rate setting or public convenience and
necessity, as Paul MacAvoy suggested, all regulatory agencies
share some problems which are amenable to solution through
procedural improvement.
I believe our efforts are pointing the way to
significant improvements for us and may have useful appli-
cations in other fields of regulation, and certainly we
can benefit from knowing what others are doing, as we are
learning here today.
So I believe that nuclear power can play an important
role in meeting our Nation's energy needs and it can provide
economic and environmental benefit to our citizens. But sound,
timely and credible regulation of nuclear power is essential
as to contribute full measure to the national interest, and my
colleagues and I are committed to discharging our regulatory
responsibilities in that manner.
The Nuclear Regulatory Commission is charged by the
Energy Reorganization Act of 1974 and through it the Atomic
Energy Act with the responsibility to insure safe and secure
uses of nuclear materials and facilities. The NRC is also
responsible under NEPA for weighing environmental concerns.
Now, since the great bulk of our work relates to
licensing of nuclear plants, we are targeting our main efforts
to improve our procedures in this area, improvements which we
believe will work to reduce costly delay without compromising
regulatory safety and other requirements.
Now, there are only three main facets to the licensing
improvement efforts we have under way: First, the upgrading of
management and licensing review procedures; second, involving
the public at earlier and more relevant points in the licensing
process; and, third, requesting new legislation where it is
necessary for further improvement.
As for the first, we and our predecessor, the Atomic
Energy Commission, have upgraded management and review pro-
cedures in an effort to promote stability and reduced delay
in the nuclear licensing process. This upgrading has included
encouraging the standardization of nuclear power plant designs,
license applications and our own review procedures.
Second, carrying out our safety and environmental
antitrust reviews in parallel, rather than in series, as it
was in the past. The use of a new procedure that affords an
abbreviated initial review which allows a much earlier start
of site preparation and construction.
Fourth, systemized and computerized scheduling of
staff and project tracking. Fifth, closer management review
to insure that requirements proposed by staff are worth their
cost. Sixth, incorporating more systematic consideration of
the economic cost as well as benefits of proposed regulations
and the timing of their implementation. And, seventh, im-
proved communications with industry to facilitate license
application submittals and standards development. And last
but not least, encouraging State, local and Federal licensing
action efficiency.
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As a new Commission, we are systematically reevalua-
ting all that we have inherited, while also working to maintain
the momentum of on-going licensing proceedings. Through this
reevaluation, the Commission has recognized a great advantage
of self-examination of existing and proposed regulatory
structures and policies.
To carry out this function, we have created an Office
of Policy and Evaluation, reporting directly to the Commission
itself, and independent of the Commission's operating staff.
We are also mindful that our actions have a large impact on
the public and on the industry that we regulate. Both deserve
prompt and effective licensing action.
Whenever there is a question as to whether we are
meeting that standard, we examine the facts and causes in
order to correct the specific situation and prevent its
recurrence.
The second method being used to improve licensing
has been the restructuring of regulations for more timely and
thus more effective and efficient public participation. This
is encouraged by the Atomic Energy Act and is crucial in
obtaining public understanding of nuclear power and credibility
of its regulation.
It is true that consequent public hearings which
precede licensing action carry with them the potential for
delay. But there are, we believe, constructive ways to deal
with this by applying greater procedure discipline to the
hearing process and by holding hearings at earlier dates
which are less critical for plant construction or operation.
Finally, where the NRC is limited in achieving
additional licensing improvements because of existing statutes,
we have requested new legislation. For example, legislation
which is presently pending before Congress would further speed
the licensing process providing for: one, early decisions on
proposed sites, independent of the specific design of a nuclear
power plant; two, early and positive decisions on standard
plant designs; and, three, further streamlining of the hearing
phase of the licensing process.
The basic objective of this new legislation is to be
able to reduce the probability that the licensing process will
be a bottleneck in nuclear construction and to do this without
sacrificing the present high standards for review which the
public rightly expects to be maintained.
We have essentially been able to do this for using
plant operating licenses. Mr. President, we welcome the full
support that you have given this legislation.
Improvements have been made but, quite frankly, still
more needs to be done. We intend to pursue aggressively the
further streamlining of our regulatory process, not simply to
meet present problems but be prepared to meet the increasing
demands for the foreseeable future. Delays in nuclear power
plant completion as a result of our regulatory process have
become the exception rather than the rule. Slippages being
encountered now largely reflect the state of the economy and
the special problems related to refinancing. But as the
economy improves and financing problems ameliorate, nuclear
power plant construction can be expected to accelerate greatly.
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Mr. President, with your continued support and the
good working relationship with the Congress, with increasing
credibility with the public and those we regulate, the Nuclear
Regulatory Commission intends to be ready to meet the challenge
efficiently and effectively.
THE PRESIDENT: Mr. Chairman, it has often been
reported in the news media that the time -- from the beginning
to the end of a nuclear power plant in the United States --
it took roughly eight to ten years. The comparison has been
made that it took twice as long in the United States as it
did in Japan or some of the European countries.
I know you inherited that background and I am not
being necessarily critical of your predecessors, but what is
your objective in trying to reduce that from eight to ten
year period and how quickly can it be achieved?
MR. ANDERS: Mr. President, indeed, the time of
construction from beginning to actual on-time operation of a
nuclear power plant has in the past been run an eight to
ten year period, and indeed in other countries has been much
quicker.
The overhaul of the procedures and the intensity of
management pressure on the system, in the Atomic Energy
Commission and now in our Commission, is reducing that time
to where the applications that we receive now, considering
that the others in this complete link of the chain, the
constructors, the laborers and what not, the financers do
their job, as we are able to do ours, will probably bring
this time down to about seven and a half years. We would
view that, with the new legislation and with the upturn of
the economy, no labor problems, no material problems, this
could get down to a five and a half year time period.
We are seeing overseas, which in many cases had about
the same time periods that early licensing of nuclear power
plants in this country, just the reversal of that trend.
MR. HILLS: The Nuclear Regulatory Commission is, as
the Chairman says, a recent addition. By comparison, the
Interstate Commerce Commission is within twelve years of its
hundredth birthday. No Commission carries the brunt of com-
plaints about regulatory delay quite as much. Chairman
Stafford! George! What is the art of the possible?
MR STAFFORD: Oh, we think they have been doing
pretty well, Mr. Chairman. We have been taking a number of
actions pointed towards speeding up the actions there on our
cases, but, as you know, many of the, some of the Executive
Branch offices have the same problem we do, when you talk
about the Administrative Procedure Act and your own act that
you operate under. Not being a lawyer, it is easy for me to
say that the lawyers have found good ways to delay many
actions through proper procedures that are readily available
to them under the act, and we have had some experiences just
as I am sure the Justice Department has had.
So we have been working on that, but we have to
keep in mind, too, that the things we are doing are service
oriented towards making a better opportunity for the business
community of this country to better compete with all of their
neighbors, and this we are doing.
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16
We have taken some actions in our rate bureau,
actions to make the rate bureaus more responsive to shipper
interests, rate flexibility. Through going to the record,
we have made it possible, we are making it possible that
they can go as high as 5 percent a year without having to
come in with all their procedures and proof, which cuts
down on a lot of the time. And we continue, as we have in
the past, the policy of non-suspends for lowering their
rates. There seems to be a general feeling in some areas
that we don't permit flexibility. We have always permitted
flexibility, which permits for quick action.
I was pleased to see that the Supreme Court even
said this year and commended us for the fact that we are
continuing to encourage -- the ICC is continuing to encourage,
and they are appreciating the fact that we encourage --
competition by our licensing procedures.
Now, then, we have recently had -- in fact, in
January, I started and named some of our most knowledgeable
and able staff people to prepare what we called from our
blue ribbon panel -- everybody seems to call it blue ribbon
panel these days -- we had one in January, that has been
reporting to the Commission. And I in turn had asked our
Vice Chairman and two other of our Commissioners, one, the
latest Commissioner that the President has appointed, so
that we could be sure to get their feeling of our brand new
Commissioners in and then one of those who has been in the
business a while, and so I would like to ask our Vice Chairman
to speak to the blue ribbon findings. They have been hold-
ing hearings at the staff level about ways to cut down on
the time.
MR. O'NEAL: Mr. President, my name is Dan O'Neal,
with the Interstate Commerce Commission. We have undertaken
to review a number of recommendations from the special staff
that the Chairman established.
The first thing that is obvious is that there is
a balancing required between due process -- the right of an
individual to defend himself before government, before an
agency, before a court -- and the interest that all of us
have in expediting decisions by government. Certainly time
is money and time wasted is money lost, so we are very
cognizant of that.
There have been a number of things accomplished,
such as reducing the number of extensions allowed and that
sort of thing. We are looking now at how we might eliminate
some of the procedural steps without sacrificing the pro-
tection of due process and we feel that we can make some
substantial reductions by requiring a better case to be
presented in the first instance by attorneys practicing
before the agency and by eliminating perhaps one review
level. And this can result in the saving of several months
in even the simplest cases.
We are well on our way, we feel. We haven't quite
made these recommendations yet; we haven't finalized them
yet for the Commission as a whole, but we feel that within
the next few days, as a matter of fact, we will. There
are a number of fronts on which regulatory lag must be
attacked and we are trying to reach all of them.
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MR. HILLS: Chairman Robson, the CAB?
MR. ROBSON: Mr. President! Rod! While I am
one of the new boys on the regulatory block, I must confess
that the complexity and delay in the regulatory decision-
making process is one that even in a short time has troubled
me greatly and, indeed, as you look over your dockets, one
gets to feel that the gestation period of a regulatory
decision is creeping near that of the pyramids.
We have undertaken a major effort on this front
and the point I wanted to make was I think what you need
to do is to make a fundamental analysis of the character
of decisions you are making, and their evidentiary base.
And to really address the fundamentals of whether to meet
standards of fairness and to render an adequate decision,
you need to subject to the process that you are now sub-
jecting it to various different kinds of information on
which you found your decisions. My suspicion is that the
central decisional facts in many cases before the regu-
latory agencies -- and perhaps I should limit my comments
to those in the economic regulatory area -- are relatively
few and that we introduce perhaps a welter of peripheral
information that we might find other ways to have at our
fingertips without making our procedures unfair.
That is really the underlying mission of the
effort that we have gone on, is to really look at our
decisions. What are they? What basis are we making them
on? And why do we require this kind of information or,
indeed, why do we even let it in?
I think that our effort will embrace both a look
at our own procedures but also our own statute and the
Administrative Procedure Act, with the idea that we want
to limit the size of the proceedings to only that that is
necessary.
I should only add one thing: There is kind of a
tension these days as to whether we are heading for more
process or less process. The one point of view which I
have just mentioned I think at least in some camps is
challenged as agencies being unresponsive and not having
sufficient process available particularly to individual
consumers or consumer interests. There is I think a tension
in this area that is indeed partly being fought out in the
Congress, but which is one that I think the individual agencies
are faced with rather persistently.
MR. HILLS: Our effort here is to find as wide a
range of views as we can. This is a subject in which the
Congressional leaders that met with the President two weeks
ago expressed great concern. I hope we could find today
some promise that something major can be done. Since that
is something to be accomplished, it is something that we hope
to get from the meeting.
Chairman Bentley, of the Federal Maritime Commission?
MS. BENTLEY: Thank you. Mr. President! Rod!
Sitting here, I wonder myself, do we really belong here, even
though we come under the umbrella of the regulatory agency?
The Federal Maritime Commission does function in a different
manner than the other transportation commissions in that we
don't license anybody. We have free entry in both the domestic
and foreign trades. We don't control rates. We think we
probably should in the domestic area, but we don't so far.
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We have made great efforts to reduce the procedures
wherever we could legally. We have combined cases wherever we
can. We find ourselves faced in a couple of instances by
Congressional action that the NEPA rules, which the courts
recently determined did apply to regulatory process, and now
of a number of cases before the Administrative Law Judges,
these are going to be dragged out from six months to a year
because of that. And the costs are going to go up, not only
the costs of the agency, the government, but also on the part
of those who are involved in the cases. Our costs alone will
be increased 6 percent just because of the NEPA rules.
In another instance, in the Executive Order 11836,
concerning cargo loss and damage reports, I have been fighting
that for four years, because I feel that this shouldn't be
another burden on the industry, but we have it. And the
industry claims that they are going to have to file from 300
to 10,000 reports each quarter, each steamship line is going to
have to do that. And I felt that this could be done on the
customs reports. These are some of the things that we
don't control, but they are being burdened on the industry
and these are just some of the points.
MR. HILLS: Let's widen the discussion for just a
moment. Yes, sir? Would you mind?
MR. SOMMER: Mr. President, my name is Al Sommer,
Securities and Exchange Commission. It is sort of difficult
to talk on this topic without being thought that you are
pointing the finger to your fellow Commissioners on the other
agencies or perhaps pointing the finger at yourself and your
fellow Commissioners on your own agency, but I would like to
point out I think there is one thing that we can do individually
that has a great deal to do with this.
Much of the delay is a procedural matter written into
statutes and rules; much of it is a requisite, I think, for the
purpose of assuring fairness to all the people who deal with
our agencies. But I think individually what we could develop
is a sensitive, a highly developed sense of impatience. I
think sometimes all of us are much too patient with delays
of our staffs, delays with the paperwork that flows across
our own desk, delays with litigants who come before us. We
are much too willing to grant extensions of time within which
to get things done. We are willing to put things aside and
suddenly they are out of memory and, the first thing you know,
a month or two months have gone by and nothing has happened
on a file where action was timely maybe two or three months
before.
I am reminded of the story of a lawyer who was
arguing a case before the Supreme Court when Justice
Frankfurter was still living. He said -- he was being
peppered with questions, as was characteristic of Justice
Frankfurter -- at one point, when his time was nearly up,
he said to the Justice -- and I think he had a Southern
accent, which I shall not try to imitate -- he said:
"Mr. Justice, time runs much faster on this side of the
bench than it does on yours. May I proceed?" And I think
we ought to remember that time runs faster perhaps on the
other side than it does on ours and I think we should bear
this in mind individually and be impatient with ourselves,
with out staffs, and with the people who appear before us.
MR. HILLS: Chairman Simpson?
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MR. SIMPSON: I would like to just comment on another
part of this agenda item, which is the efforts to include con-
sumers, that you mentioned. We have a statutory requirement
in the Consumer Product Safety Act to involve consumers in
much of our activity. And then we, by policy, have adopted
other practices which I believe meaningfully involve consumers,
and perhaps I can touch on them.
In a couple of areas, we have by policy adopted means
to directly communicate with consumers and they are very inex-
pensive. We established a toll-free number in the United States
to communicate an emergency some time ago, approximately two
years ago, and it was so successful we have continued that.
We are now receiving about 100,000 calls per year. We find
we are able to answer those in about 48 hours, mostly with
pre-automated information. About 75 percent of the calls are
requests for information from the agency -- and about 25 percent
are safety complaints, which we use as part of our data bank.
We have also taken steps to abolish secrecy in
our agency. We have no closed meetings. By policy, all
meetings of any one of our staff with any outside party
is open to the entire public to attend. It is noted in
advance on a public calendar, and consumers do come in.
Now, many times it is a little frustrating with the policy
to live with when you have a meeting in your office with a
couple of people and a hundred outsiders show up. But we
do move those to conference rooms. And that is the exception
rather than the rule. As a matter of fact, we think we have
lended some credibility to the regulatory process because we
have decreased speculation as to what goes on in these closed
meetings and, as a matter of fact, in about 95 percent of
the cases, no one shows up other than the ones who were coming
in anyhow. So when you open the door, people don't take
advantage of it.
On time, regulatory time, we have a provision of
our law where every citizen and every group is granted the
right of petition, to write a petition, to write a standard
or ban products. By law, we must respond within 120 days.
Even if the law says we must, we can't in all cases, but it
is a spur to get speedy action.
We have a recent -- we have had over 200 petitions
in the two years we have been in existence, which range any-
where from banning pet turtles to banning all aerosols
because of the flurocarbon ozone problem, so they span all
the disciplines.
Also in standards writing, which is a basic fodder
of our agency, writing mandatory standards, the Congress
requires us, on the one hand, to write a standard in virtually
90 days, but, on the other hand, they require us to do so by
allowing private parties to write that standard for us and
involve all parties in the United States, including consumers.
And, you know, it is a truism, the more people you have, the
longer it is going to take. We have, in fact, though had some
experience now where consumers, in fact consumer advocates,
are sitting down in a standards writing process with industry
people. They start out initially very skeptical, but over a
period of thirty or sixty days of working in a closed environ-
ment they find that they have a great deal of respect for each
other. So we think it is model.
MR. HILLS: Chairman Nassikas, and then, George, we
will let you close it off.
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MS. REID: Mr. President?
MR. HILLS: Oh, I'm so sorry, Go right ahead.
MS. REID: Mr. President, Mr. Vice President, I
would like to just add a bit to this consumer responsiveness
that we have done at the FCC.
We have had various regional meetings throughout
the country. We started in Atlanta, then met in Chicago,
and here in Washington, and we expect to meet in the Midwest,
farther West and then in the Far West perhaps later this year
or next year. We have met with the public, we have opened
these meetings to the public, and, believe me, they have been
a little wild, particularly in Chicago. We at the FCC do
receive complaints. But we have felt that this has been a
marvelous -- given us a marvelous rapport with the public,
with citizens groups, with the consumer, so to speak. These
meetings have also been coordinated with our Licensees'
Workshops meetings, so broadcasters have been involved.
They have come to the open meetings and we on the next day
have met with them in their workshops. So we have had that
coordination.
We feel that this has given us an insight into
the public's feelings about our Commission, about our
regulatory processes as they view them, and has been very
helpful. We have also met with various citizens groups,
Commissioners en bloc have met with the citizens groups.
And we do this frequently at the Commission. I think this
has been very helpful also.
I might add just one thing to Barbara Franklin's
comments, too. I think this is very helpful, and I would
hope, Mr. President, that this would be only the beginning
of such meetings. Thank you.
MR. HILLS: John, did you have a quick comment?
MR. NASSIKAS: Just a very brief comment. To
reduce administrative burden, Mr. President, and also to
increase competition, in 1971, we released some 4,000 small
producers from direct price regulation and handled this on
the basis of indirect price regulation. It required three
years before the Supreme Court affirmed our actions. We
also, to increase competition, placed pipeline producers on
a parity with our regulation of major producers. This also
saved considerable time. This action required two and a half
years to be affirmed.
But the real monster is the following: All major
actions of our Commission are appealed to courts. Currently,
we have over a hundred cases that are in the Federal court
system as a result of the Administrative Procedure Act and
controverted cases.
A key factor in all energy regulation, I submit,
is the lead time required from the inception of a policy to
its culmination in securing production and delivery of
incremental energy supply. This is generalized through any-
thing we do in energy.
The total time consumed in establishing area rates
for southern Louisiana, which is our most prolific gas
producing region in the country, was thirteen years, con-
cluding with the Supreme Court's opinion of June 10, 1974,
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which affirmed our decision in July 1971, increasing the
price of gas in a nutshell from 18 cents to 26 cents. This
is the equivalent of $1.50 a barrel of oil.
In contrast -- here again, trying to do what we can
under our statute -- we established a national base rate of
57 cents by rulemaking in eighteen months. I am not proud of
the eighteen months, it should be done in six months. How-
ever, we did it. This case also was on appeal in the U.S.
Court of Appeals for the Fifth Circuit. Undoubtedly, it will
reach the U.S. Supreme Court before it is finally decided.
So I will submit that an uncertain climate of
regulation, subject to judicial review, under a restrictive
statute, can't possibly induce the vast commitment necessary
to affect an improvement of gas supply of a magnitude required
to serve the needs of a growing economy.
I think it is important, even apart from gas deregulation,
which I advocate, that the Administrative Procedure Act be amended
so as to make certain that all regulatory agencies can prescribe
rates by rulemaking. We believe we are right in our interpre-
tation of the law that we can prescribe national rates for all
producers by rulemaking, but to avoid judicial lag, the Congress
should pass a statute on that point.
MR. HILLS: Ms. Hanford, did you have a brief
comment?
MS. HANFORD: Yes.
MR. STAFFORD: Much briefer than John's "yes."
MS. HANFORD: Just very quickly. Elizabeth Hanford,
Federal Trade Commission: I just wanted to reiterate again
the importance of consumer input in the regulatory process --
the opportunity for the individual consumer to have a part in
the decision-making process of his government.
I think there are ways that these opportunities can
be enhanced and, as we try to enhance them, we must keep in
mind also that the consumer must be provided with information
and education as to what his rights are under the laws that
we enforce and the regulations that we promulgate.
And I think that the efforts recently to try to
provide information to those beyond the antitrust bar about
the antitrust laws is an example of moving in the right
direction there to inform the individual citizen about the
laws in the antitrust area. And we can do more, I think,
to move in that direction in, for example, just providing
an analysis of a complicated consent order in layman's
language so that those who do have an interest can respond
and can provide input. I think we should also move in that
direction.
Thank you.
MR. HILLS: George!
MR. STAFFORD: My remarks go back to a few words
that Helen were saying a few moments ago, and fit pretty much
into what the President's position has been, and ours, on the
slowdown that NEPA has created in all of our actions, and the
fact that we had to solve the NEPA problem on our major cases
before we could ever get to the point at hand, the question
that was before the Commission.
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22
So if you haven't read the case that the Supreme
Court -- we are all loving the Supreme Court these days --
if you haven't read their decision handed down in our scrap
case, on the NEPA matter prior to getting into the case
itself, that they just became one more party in the case to
be settled at the final case time, but they added an addenda
and said, in effect, this covers all your other cases where
you have got problems, all of our abandonment cases, railroad
abandonments were help up for over a year because we couldn't
get our NEPA problem solved in order to get to the case of
abandoning the railroads. And so the Supreme Court, with one
quick brush, the other day, just wiped all that slow-down out
for us. We still have to consider it, but only as a party in
the case at the time we are making the final decision.
MR. HILLS: The third topic is the issue of whether
competition can indeed be encouraged in regulated industries.
Paul?
MR. MAC AVOY: In attempting to familiarize our-
selves with your activities, we had the remarkable and
interesting opportunity to go back to read the Senate and
House committee reports and the actual bills that were passed
setting up your agencies. In almost every case, we found
some reference to the ultimate justification for regulation
in that industry, was that it was not competitive enough to
provide the quality and price for the consumer that could be
gotten from controls. The justification for regulation, in
other words, was that competition failed to exist in the
industry to a sufficient extent to allow the market to
operate in an unregulated fashion.
As we go through the history of the Commissions in
the last ten years, there seem to be a number of cases that
are paradoxical to the original intent of the law. Rather
than regulation being a substitute for poor competition,
regulation has prevented what competition there is from
working. There have been significant impediments to the
entry of new competitors from the use of the certificate
proceedings. There have been significant controls over rate
changes which would have occurred in even partially com-
petitive markets as a result of cost and demand changes.
The question then is, what can be done to allow
the amount of competition there is to work as fully as it
can. The question might be put in more direct terms: Why
can't we free up entry into these industries by essentially
eliminating the certificate of necessity and convenience?
The only justification given in the record establishing the
Commissions is that in some cases there are economies of
scale which prevent the full operation of competition. There
is only room for one or two firms.
Well, in that case, then, the question becomes: Why
can't we free up entry except where there is significant
evidence of economies of scale? Why should there be any other
reason for limiting entry of potentially effective competitors?
The same sorts of questions arise in rate flexibility and
response to cost and demand changes. Why can't we increase
the amount of competition among companies by allowing more
flexibility in rates?
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23
MR. HILLS: The Securities and Exchange Commission
has indeed required competition in rates recently. Chairman
Garrett! Ray! What are your comments on the subject?
which a regulatory agency may properly encourage beneficial
MR. GARRETT: Mr. President, Rod, the methods by
competition among the companies subject to its jurisdiction
must depend both upon the practical economic circumstances
mandate. of the affected industry and upon the agency's legislative
Some regulatory agencies were created on the premise
that in certain industries competition would do more harm than
good, particularly where industries were new and thought to
require special protection; others because they were accepted
as natural monopolies. Airlines are an obvious example of
the former; electric utilities the latter. But the situation
competition. is further complicated by increasing instances of inter-industry
To the extent, however, that economic conditions and
statutory discretion permit, the primary method of promise for
the regulatory encouragement of competition is the objective
reevaluation of accepted patterns and practices under present
conditions and attitudes. It would, in my opinion, be wrong
in principle and, at any rate, impossible under existing
statutes for regulatory agencies abruptly to assume that all
legal restraints are undesirable, insofar as they might in
some respect be regarded as discouraging the virtues of un-
fettered competition.
The myriad ways in which the Federal Government
intrudes upon the economic activity of our citizens is far
more pervasive and the whole matter far too complex to be
resolved simply by decreeing that there should be more com-
petition everywhere all the time. Much regulation was born
of perceived inadequacies of uncontrolled competition in
selected areas. In many instances, there does not appear
to be any compelling reason to believe that the inadequacies
of free competition that these agencies were created to re-
dress would not arise again if the agencies were abolished or
their authority sharply altered, although in other instances
circumstances may have changed SO fundamentally as to make
traditional regulation now unnecessary and harmful.
The road to progress, in my opinion, lies not so
much in radical surgery as in thoughtful, objective analysis
and programs carefully implemented. The Securities and
Exchange Commission has limited involvement in the direct
regulation of prices. The one area in which we have been in-
volved has been that of minimum commission rates for brokerage
services charged by members of the national securities and
exchanges, especially the New York Stock Exchange. By rule,
we caused the abolition of such minimum rate schedules
effective May 1, 1975. This action has been applauded by
everyone except most of the brokers and dealers who naturally
were the persons most affected.
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24
The full consequences of the unfixing of commission
rates are not yet known but, in any event, in view of the
special characteristics of the securities markets, there is a
question whether it provides a useful example for other areas
of regulatory activity. Certainly, it will not mean that
equally beneficial results will necessarily flow from removing
all legal compulsion or protection from rates and prices in
other areas, but it does mean that the possibility should be
examined.
In many areas, added competitive regulatory shields
have become so subtle an accepted part of life that reexamina-
tion of their justification requires a major intellectual
effort. Yet it should be done and done again from time to time
because economic conditions can drastically change the appropriate
thrust of regulation.
We have seen this dramatically illustrated in recent
years. Much regulation was initially imposed to prevent over-
charging by companies and industries where duplication of
facilities seemed practically impossible or wasteful. The so-
called natural monopolies being monopolies or nearly so were
thus affected with the public interest and could and should be
subject to legal controls.
The changing technology and other facts can alter
the appropriate regulatory response. Examples abound: Not
long ago, it was accepted doctrine that competition between
electric and gas utilities should be encouraged, thus
stimulating maximum production and consumption and lower
costs for consumers of each product. Within the electric
field, proposed combinations of systems were resisted on the
ground that competition for greater use of electricity and
thus lower unit costs would be discouraged by the combination.
Almost overnight this attitude has been a quaint anachronism,
totally inconsistent with current interests and conservation
of energy in the face of growing shortages and concern for the
environment. Similar changes have occurred in other regulated
areas.
Mr. President, the desirability and feasibility of
stimulating beneficial competition on presently regulated in-
dustries is much too complex a subject to permit precise
recommendations in such brief remarks as these, even if it
were seemly for me to presume to advise other commissions on
the exercise of their responsibilities. But I do strongly
urge, as the critical reexamination of the accepted patterns,
in the light of present circumstances and the willingness to
experiment. If all areas where regulators now determine prices
or protect against competitors are required to justify themselves
anew for the present and foreseeable future, we may find many
instances in which the heavy hand of regulation can be lifted
with good effect.
This reexamination process will, no doubt, uncover
instances of agency inflexibility, but it should be borne in
mind that such problems may also be the product of statutory
mandates which either foreclose administrative flexibility or
fail to encourage it. If the reevaluation process is ultimately
to prove most effective, administrative agencies must be given
the flexibility to respond to new conditions as they discover
them.
Thank you.
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MR. HILLS: The Civil Aeronautics Board has recently
announced an experiment in deregulation for greater competition.
John, is it a deep enough and broad enough experiment, in your
judgment? And do you think you are going to be moving in that
direction?
MR. ROBSON: Well, the depth and breadth, Rod, of
the experiment which we have proposed in essentially outline
form is something upon which we have asked for comment and
expect to get thoughtful comment upon. What we have tried to
do is, as Ray has suggested, reevaluate the concepts of regula-
tion to try to, in a laboratory which we hope will provide a
useful output, introduce some of the concepts of flexible
pricing, freer entry and exit, and see what we can add to the
knowledge base and gain some insight as to what the application
of those kinds of concepts might have on a system-wide basis.
I am hard pressed to answer your question with a yes
or no, because one of the parts of the development of the ex-
periment is really to get thoughtful comment upon an outline
for experiment. We have suggested, indeed, part of our question
is if this isn't a good one, have you got a better one? -- So in
terms of willingness to reexamine, we think that is important.
We think it is important that those whom we regulate
reexamine their own futures and the regulatory regime that
might best fit their needs in the long term, because they
obviously are the ones who are most immediately affected.
And --- to the extent that we stimulate thought on that, we
think that is important.
MR. HILLS: Mr. Springer, Federal Power Commission?
MR. SPRINGER: Mr. President, recently I went back
to look at the Congressional Record -- and it is always good
to do that once in a while -- and I find that you and I voted
twice for deregulation of natural gas. There must have been
a reason for this, at least in our own minds, as to why those
votes were made as they were.
It was my understanding that we did that in order to
stimulate the production of natural gas so that there would be
a greater supply. Now, what happened? Well, I have just been
down there two years, and each one of those years the supply of
gas has gone down. The rationing of gas has gone up. This
year we expect it to be in the neighborhood of 40 or 45 percent
less consumption than there was last winter, and that is in
addition to roughly 35 to 40 percent less than the year before.
So this gives you some idea of why we voted for deregulation.
Now we are finding, twenty years, that it took twenty years
to prove that our votes were right.
(Laughter)
I don't know how much longer we could go on waiting.
Now, what is the situation? And my predecessor, Pinky Walker,
who now is back as head of the School of Commerce at the
University of Missouri, and his last parting words to me said,
"Bill, there is nothing economics will determine.' What did
he mean by that? Simply this: You have three really forms of
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26
energy today in this country, 90 percent of it -- coal, oil
and gas. Well, out of those three, as any of you know, gas is
the Cadillac of fuels. I would say that oil is the Oldsmobile
or the Mercury, and coal is the Ford. But what --
(Laughter)
I hope I didn't offend any car makers here. But let's
look at these three fuels. If we were to take them in the form
of that, the Cadillac of it is selling for a third of the price
of the Oldsmobile, and half the price of the Mercury. It is
ridiculous that the Cadillac is selling for one-third the price
of the Oldsmobile and one-half the price of the Ford. This
seems to me so demonstrative in the economic field that you
simply cannot keep on inevitably selling the most desirable
product that is on the market in the form of heat or fuel per
BTU for. unit for a third or a half of what the competition is selling
Now, what does this do? And I can only emphasize this
this way: If you were investing money, and if you were the
chairman of the board of a company and you were sitting down at
Christmas time, you certainly wouldn't send your money out to
find some gas fields. You would sent it out to find some coal
or some oil, and that is exactly what the companies have done
in the last four or five years. They have put their money
where the economics is, where the money that can be made
from it. This is the American system at work. And so they sent
their money out to the Near East to produce cheap oil and finally
you get an embargo and it goes up three times what it was.
Now, these are things that happen when you try to
restrain the economic system from working on the kind of a
system that we have.
Now, to show you further from where we went back
twenty years ago, when the President and I -- the last
twenty-one years ago, 1954 -- the last time we voted on it.
Our reserves this last year increased by 7.9 trillion cubic
feet. That is all the reserves in proof. But what did we
use last year? We used 23 trillion cubic feet of gas last
year. In other words, in short, we are using it at three times
the rate that we are increasing the reserves in the gas field.
Now, these figures alone to me indicate that competi-
tion is the thing that is going to get you a greater supply,
and the only way you are going to compete is to allow them by
some means to be able to charge something in the vicinity of
what their competition is getting. Otherwise all of your
money and your economics are going into other forms of energy.
We didn't ask for deregulation of gas wholly. We
asked for deregulation of gas, new gas. Now, why did we ask
for deregulation of new gas and not deregulation of gas as the
President and I voted twenty-one years ago? For the simple
reason: There were a great many critics on Capitol Hill who
said, "Oh, you do that and the price of gas immediately will
shoot way up and skyrocket and people won't be able to afford
it." By deregulating new gas, not old gas but new gas, it
meant that old gas when its contracts expired, would take a
new gas price, naturally. New gas, however, would be decontrolled
and at the rate of the expiration of contracts each year, it
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27
is about 7 percent, which meant in essence that it would take
approximately fifteen years to decontrol all the gas in the
country. The result of it would be that you would get a
gradual impact of an increase in price, which would put you
then in competition with your other fuel, which made sense.
We didn't attempt, nor did we ask the Congress to
decontrol all gas and to allow it to shoot to a skyrocket. And,
in addition to that, the Chairman and I testified before the
Stevenson committee that we would be willing, if they would
give us this kind of a deregulation of new gas, that we would
assume some responsibility and would allow it to be written
into law, that if it got out of control, that we would assert
ourselves. Isn't that right, Mr. Chairman?
So I can't see but where we have attempted -- and
these are the recommendations, I understand, you have made,
Mr. Chairman, the same as ours -- why this is not a fair and
equitable way in which to promote. I am talking about competi-
tion of money, now the competition of economics, which is just
as important as the competition, say, between two companies.
But I think, overall, that if we could have this kind of
deregulation -- and I think that is something we have to have
from the Congress -- we cannot utilize this ourselves, we are
strictly bound by the law -- the Natural Gas Act which is, as
I say, somewhat antiquated. Before the Stennis committee the
other day, I used something like "antiquated like the horse and
buggy," but I don't think it is quite that bad, but it certainly
could bear a great deal of improvement, which would give us an
opportunity I think to promote a situation where we could get
an adequate supply of gas.
THE PRESIDENT: Mr. Chairman, let me make an observa-
tion, or two of them, I should say. Bill, I am glad that we
had such foresight twenty-one years ago that is being validated
by the unfortunate circumstances we see today.
The second -- and you indicated by inference -- the
lack of adequate natural gas, which is being caused by the
artificially low price, will mean substantially less jobs this
winter. It inevitably, as you and the Chairman of the Federal
Power Commission know, will mean that interruptible service will
be precluded in factories in New Jersey, in Illinois, in Michigan,
in Ohio, and many other States. And the lack of affirmative
action to raise or to eliminate the regulation in this area
will substantially cut jobs this winter and could, if we don't
get some action, interfere with our economic recovery in the
months ahead. And the Congress has an absolute requirement
to move on this legislation, and every day they delay means
a greater possibility of fewer jobs and a roadblock in our
economic recovery.
MR. HILLS: George first, and then Lew, please.
MR. O'NEAL: Dan O'Neal, Interstate Commerce Commission.
MR. HILLS: Very good.
MR. O'NEAL: I would just like to make one observation
insofar as this subject relates to the regulation of transporta-
tion. The purpose of transportation regulation in the United
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28
States has been to provide a private common carrier system to
place all businesses in the country in a position so that they
can compete no matter what their size, where they happen to be
located in the United States.
I think probably there may be room for adjustment
in the entry requirements, but I think it is important to keep
in mind at the present time entry requirements carry with them
service obligations. The carriers are required to provide
service. If that obligation is gone, then the question is who
will suffer, and I think there is a substantial question or a
substantial indication that those who suffer will likely be
the smaller businessman, who will not have the capacity to fill
up a truck, say, every time he makes a shipment. And this has
been verified recently by a study of deregulation in Great
Britain, where those commodities that can be shipped in a full
truck were shipped at a somewhat lower price than previously.
But those smaller shipments that could not fill up a truck, the
cost of those rose substantially. So I think this is an area
that certainly deserves review, but I think we have to move
with some care as well.
Thank you.
MR. HILLS: Lew?
MR. ENGMAN: Mr. President, what I was going to say
was that Paul MacAvoy raised some questions as to why entry had
to be limited and all of the comments that I have heard thus
far have been in the direction of encouraging competition.
Dan has made some defense of why we have to limit entry, and
I guess the only question I would raise is, that may be fine,
perhaps we do want that service, that added service, but let's
find out what the cost of that is to our economy, so that we
can measure off and trade off the benefits of the cost with that
so-called improved service, SO we can make a rational judgment,
SO the Congress can make a rational judgment as to whether it
is really worth it.
MR. ROBSON: Mr. President, may I just add one point
to that, since we seem to be pretty much involved in entry
control. There have been two countries, Canada and Australia,
who have now tried the deregulation route. Both of them have
had teams over in my agency taking a look at how we do it.
They are going back -- and you have probably been
reading lately that Australia is very close to going back
to full regulation. Canada is not that far along with it.
But they have been down talking to me, talking to the people
in my commission about how do we do this. I would just like
to make that note.
MR. HILLS: Helen, did you have a comment?
MS. BENTLY: Yes. I would like to point out that
the Federal Maritime Commission was established back in
1916 as a result of the fact that it was felt that com-
petition created more harm than good at that time. The
foreign steamship lines serving the North Atlantic and the
United States were engaged in a very serious rate war and
they came to the Congress and asked them to do something
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29
about it. So with that the Shipping Act of 1916 was passed
and under that -- under section 15 -- the Federal Maritime
Commission is empowered to grant any trust immunity to
steamship conferences, which our friends in the Department
of Justice are unhappy about at times. But we do have open
steamship conferences in this country and now our American
flag lines feel it is very important that they have to have
the Federal Maritime Commission behind them to survive.
However, here again, we are faced with an uncon-
trollable factor, and that is that the United Nations
(UNCTAD) recently passed the Code of Conduct for Liner
Practices, in which it is calling for closed steamship
conferences internationally. Although we haven't approved
that, if this does become international law, this country
is going to be in a real dilemma.
MR. HILLS: Glen Robinson?
MR. ROBINSON: Dan O'Neal's comment gave me the
first opportunity I have had to disagree with anybody.
The image conjured up here that regulation is something
that is predominantly oriented to helping the small consumers
is one of the prevalent myths I think in our American folk-
lore. From my experience, both as a teacher in regulated
industries for a number of years, and as a recent regulator,
is that that plays a very, very small role, and I see nothing,
since I came to the FCC, to disabuse me of the notion that
predominantly the regulation has the effect of protecting
businessmen who have an understandable allergy to competition,
but one which we should resist I think. And the traditional
response by saying, well, we do this, of course, to protect
the public's right to good service -- the fact is, however,
most of the agencies -- and I think the FCC has been histori-
cally as guilty, I suppose, as any -- have not protected good
service. Service has been deteriorating.
So I think we have to ask ourselves whether there
isn't time to at least take another hard look at this problem
and find out whether the alternative competition wouldn't
actually provide better service. And I must say, the idea
right now, sort of looking abroad to find out how Great
Britain is going about it, seems to me to be somewhat odd,
in view of Great Britain's problems. I think that would
probably be the last place we would want to look right now.
MR. HILLS: I think we have largely covered both
topic three and, thanks to Commissioner Springer, we have
indeed discussed the question of whether or not agencies
ought to reexamine their reason for existence in certain
regulatory activities.
John, do you have anything to add to Commissioner
Springer's comments on topic four?
MR. NASSIKAS: I will try to cut this very short.
I have some prepared remarks.
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30
MR. HILLS: And since our time is already short.
MR. NASSIKAS: I know. Actually, there is a
consensus today I think to critically analyze the economic
regulatory structure of government, as the President has
said, and to make necessary changes to achieve national
policy goals, without the imposition of unwarranted and
costly federal intervention.
I want to emphasize though that our continuing
inability to agree on a national energy policy is a dramatic
illustration of the problem of finding solutions before we
know what the consensus is on our objectives. Until an
energy policy has been agreed upon between the Administration
and the Congress, there is really very little to be gained
from debating the pros and cons of agency reorganization and
administration reform insofar as the energy agencies are
concerned.
I want to get back to natural gas now. The
pervasive and deepening depletion of natural gas supply is
an illustration of the consequences of governmental failure
to agree on national policy goals. The Natural Gas Act of
'38 is not suited to the realities of '75. As you pointed
out, Mr. President, unquestionably, because of the shackles
of the Natural Gas Act, there may be unemployment this
winter. In the event that unemployment is averted, it will
be at higher costs to the consumers. We have recommended
the exemption from price ceilings for 180 days in a bill that
is pending before OMB and there is a companion bill that has
been introduced in the Congress. Even if the Congress does
not succeed in deregulating natural gas, as we have recom-
mended, that at least there ought to be emergency powers
granted to the Federal Power Commission to exempt dedications
of natural gas to curtail pipelines to supply needed energy
to industries which affect employment in this country. So I
just want to raise that point.
One illustration of the extent to which curtailments
have reached: We estimate that about three trillion cubic
feet through March 1976 less than the amount needed will be
available to supply the interstate market. This equates to
one and a half million barrels of oil a day, or more than
20 percent of U.S. imports of oil and oil products of 1974
levels. And at $12 a barrel, this oil equals over $6 billion
or double the revenues of all producers selling to interstate
pipelines. So that the tradeoff here is consumers theoreti-
cally will pay twice as much for imported oil than they pay
to all producers in the United States as a result of the
unfulfilled and deferred demand.
I just say one more point on deregulation. In the
belief that a workably competitive market -- and this follows
Paul MacAvoy's thesis -- in a free enterprise system is a
better regulator than centrally enforced economic controls.
more
31
I have recommended since early 1973 that prices for new
supplies of natural gas be deregulated, with protective
covenants for the public interest, including a windfall
profits tax, with appropriate credits for investment and
exploration and development of natural gas resources and
monitoring of prices by the Federal Power Commission, as
well as what you indicated, Mr. President, the strict
antitrust enforcement by the Justice Department and the
Federal Trade Commission.
Legislation has yet to result, as you well know.
I say that natural gas producer deregulation is an energy
policy imperative. I have said this for many years. The
electric utility industry -- another point that has to be
addressed, I think, is what we are going to do about the
electric utility industry and the natural gas industry
insofar as their financial requirements are concerned.
Both industries are in bad shape. The electric utility
industry has improved, but I certainly endorse most all
of the regulatory reforms, the tax credits, the investment
tax credit, and some of the other fast writeoff provisions
that you recently recommended, and I have so spoken before
various committees of Congress.
I think that we also need congressional reform of
the congressional committee structure. There should be a
joint committee on energy established, I believe similar
somewhat to the Joint Committee on Atomic Energy. I have
testified personally, and it is a real privilege to testify
before the Congress, 96 times before twenty congressional
committees since I have been Chairman of this commission.
Number 97 will come up on Monday, and the topic of that will
undoubtedly be why we should not deregulate; I intend to
say why we should deregulate.
That is all I have to say at this time. Thank you.
MR. HILLS: We have just one minute left. Chairman
Bagley is Chairman of the newest commission created, the
Commodities Futures Trading Commission. In that time, Bill,
can you tell us whether you are going to narrow the scope
of regulation, before it is too late?
MR. BAGLEY: Give me five minutes and I could.
Rod! Mr. President! With ten weeks' tenure in town, I
would be presumptuous, but I am going to try anyway. I
am going to try to throw out a couple of broader ideas
which might help all of us, if the ideas catch hold.
First of all, with that brief tenure, we don't
suffer yet from hardening of the categories. We are not
afflicted. But, instead, in response to your specific
question, the Commodities Futures Trading Commission was
created out of a demonstrable situation where there was a
lack of confidence in the markets. So if we -- and this
is probably the origin, the genesis, of most of the com-
missions -- at least initially, if we can do what I like to
call "regularizing" rather than regulating the markets and
restore and build up public confidence, you are going to get
it looks good.
a broader market and therefore more competition. So initially
more
(OVER)
32
But I get to thinking, our fellow commissioners
are getting to thinking now, what are we going to do with
this beautiful new opportunity to not allow ourselves to
fall into the regulatory malaise. I have two ideas.
What we need are mechanisms that will keep all of
us going when none of us are here. One I espouse is to ask
Congress to have an automatic review, a ten-year review, if
you will, not just budget but authorization review for
everybody in this room -- not including you, sir -- for
all of the commissions.
(Laughter)
For all of the commissions, simply so that a person
will have to -- a chairman and the commissioners will have
to justify their existence or not continue in existence. I
would hope that Congress would do that for us.
Number two -- and this can cause some controversy --
I am just out of the legislative arena and the author of
every open meeting act in California -- I would like to say,
by congressional action, even by Executive Order, if it is
possible, a creation of an aura of openness. You don't have
to answer all of the detailed problems. Of course, there are
some exceptions. I have run into them all in my legislative
experience, and beat them all down also.
The point is that, with openness, you would get
consumer access, you would create more confidence in the
regulatory process. Automatically you would create an aura
or atmosphere that government is responsive and also that
openness would provide a constituency that I don't think
commissions have. The natural political constituency is
not existent, therefore perhaps we do get or are subject to
the risk of becoming captured by a smaller constituency.
With openness, you are going to have some responsiveness.
I hope those ideas will be thought about.
Thank you.
MR. HILLS: Thank you.
Mr. President.
THE PRESIDENT: At the outset, in the closing remarks,
let me thank each and every one of you for your participation.
You have a great responsibility individually and collectively.
Some are old in origin, some are relatively new, but each of
you have a very definite mission, and you have some monumental
problems to face.
of this kind and I do get a sense that perhaps subsequent
As I said at the outset, this is the first meeting
meetings would be in order. I do feel that the Congress will
be responsive to the effort that is being made by you and by
us and I am certain that your relations in this area with the
Congress will be improved, particularly if you respond to what
they are suggesting and what we are approving.
Naturally, there are five follow-up actions that I
would like to emphasize. Each Chairman, I hope, will give
further attention to the cost-to-benefit analysis of the
commissions under their chairmanship. I think it is absolutely
more
33
essential that we fully understand the economic costs of
your activities in order to take concrete steps to achieve
these reforms. And to facilitate this understanding, I
would hope that you would actually issue the cost-benefit
analyses on your major programs. This would parallel the
inflation impact statements that are required of the various
Federal departments and agencies in the Executive Branch of
the government and they would coincide with the requirement
now in the House of Representatives for an inflation impact
statement on every major legislative proposal that is submitted
to the House as a whole.
Secondly, I would ask that you undertake a com-
prehensive and specific review of all areas where regulatory
delays presently occur, in order to eliminate any of the
impediments to a speedy and an effective process.
I think it makes sense to set a goal of six months
to see if you can't in a demonstrative way show a reduction
in any of the regulatory delays that you know better than I
and better than others take place.
And, third, I would ask that you study and revise
the procedures as they are appropriate to insure that you are
responsive to the legitimate consumer interests, and that
your actions are more clearly understood by the American people.
And, fourth, that you should consider the most
fundamental changes that would move us toward deregulation
in areas where the regulatory process no longer makes sense.
And I think Chairman Nassikas has made a very valid point in
the case of deregulation of natural gas. In some areas, it
is increasingly clear that more competition is a better
regulator than the government itself.
I know some of the agencies are moving in this
same direction with respect to deregulation of certain
aspects such as in the case of the CAB. This experiment
in one or more agencies borne of more recent vintage, I
think can produce substantial results and I would strongly
urge every commission to undertake an analysis to see if
you can't do something in this area.
It is my judgment that in every case you have to
ask yourself, individually as commissioners and as a com-
market? mission, is regulation better in each case than an unregulated
And, finally, I will continue to meet with the 24
designated Members of the House and Senate, both Democratic
as well as Republican, to review with them the progress and
the areas where we think action can be taken, must be taken.
And I am asking the members of my Administration to work
closely with each of you and each of your commissions as well,
as to respond for the Executive Branch in their areas of
jurisdiction.
It is my judgment that with the cooperation of the
Congress, and I am sure it will be there, the cooperation of
each of you and your respective agencies, and with the full
more
(OVER)
34
participation of the Executive Branch, we can make some very
substantial headway and we will all be applauded, in my
judgment, by the American people and we will have a healthier
and a far more efficient economy.
I thank you very, very much.
(Applause)
(end)
FOR IMMEDIATE RELEASE
JULY 10, 1975
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
CLOSING REMARKS OF THE PRESIDENT
TO THE
CHAIRMEN AND COMMISSIONERS OF THE
INDEPENDENT REGULATORY AGENCIES
THE EAST ROOM
1:01 P.M. EDT
At the outset, in the closing remarks, let me
thank each and every one of you for your participation.
You have a great responsibility individually
and collectively. Some are old in origin, some are
relatively new, but each of you have a very definite
mission and you have some momumental problems to face.
As I said at the outset, this is the first
meeting of this kind, and I do get a sense that perhaps
subsequent meetings would be in order.
I do feel that the Congress will be responsive
to the effort that is being made by you and by us, and I
am certain that your relations in this area with the
Congress will be improved, particularly if you respond to
what they are suggesting and what we are approving.
Actually, there are five follow-up actions that
I would like to emphasize. Each chairman, I hope, will
give further attention to the cost to benefit analysis
of the commissions under their chairmanships.
I think it is absolutely essential that we
fully understand the economic costs of your activities in
order to take concrete steps to achieve these reforms.
To facilitate this understanding, I would hope that you
would actually issue a cost to benefit analysis on your
major programs.
This would parallel the inflation impact state-
ments that are required of the various Federal departments
and agencies in the Executive Branch of the Government.
They would coincide with the requirement now in the House
of Representatives for an inflation impact statement on
every major legislative proposal that is submitted to the
House as a whole.
MORE
Page 2
Secondly, I would ask that you undertake a
comprehensive and specific review of all areas where
regulatory delays presently occur in order to
eliminate any of the impediments to a speedy and
effective process.
I think it makes sense to set a goal of six
months to see if you can, in a demonstrative way, show
a reduction in any of the regulatory delays that you
know better than I and better than others take place.
Third, I would ask that you study and revise
the procedures as they are appropriate to insure that you
are responsive to the legitimate consumer interests
and that your actions are more clearly understood by the
American people.
Fourth, you should consider the most fundamental
changes that would move us toward deregulation in areas
where the regulatory process no longer makes sense.
I think Chairman Nassikas has made a very valid
point in the case of deregulation of natural gas.
In some areas, it is increasingly clear that more
competition is a better regulator than the Government
itself. I know some of the agencies are moving in this
same direction with respect to deregulation of certain
aspects, such as in the case of the CAB.
This experiment in one or more agencies, born
of more recent vintage, I think, can produce substantial
results. I strongly urge every commission to undertake
an analysis to see if you can't do something in this
area.
It is my judgment that in every case you have to
ask yourself individually as commissioners and as a
commission, is regulation better in each case than an
unregulated market.
Finally, I will continue to meet with the 24
designated Members of the House and Senate, both
Democratic as well as Republican, to review with them
the progress in the areas where we think action can be
taken, must be taken, and I am asking the members of my
Administration to work closely with each of you and each
of your commissions, as well as to respond for the
Executive Branch in their areas of jurisdiction.
MORE
Page 3
It is my judgment that with the cooperation of
the Congress -- and I am sure it will be there -- with
the cooperation of each of you and your respective
agencies, and with the full participation of the Executive
Branch, we can make some very substantial headway.
We will all be applauded, in my judgment, by
the American people, and we will have a healthier and
a far more efficient economy.
I thank you very, very much.
END (AT 1:08 P.M. EDT)
THE WHITE HOUSE
WASHINGTON
July 16, 1975
m
Reform
MEMORANDUM FOR:
ECONOMIC POLICY BOARD
FROM:
ROD HILLS
SUBJECT:
Domestic Council Review
Group on Regulatory Reform
The President has given the Domestic Council responsibility
for coordination of his regulatory reform effort. To this
end, the Domestic Council has established a Review Group on
Regulatory Reform to serve in the coordinating role. Included
in this Review Group are:
Member
Working Representatives
Counsel's Office
Rod Hills
Domestic Council
Paul Leach
Lynn May
Council of Economic
Paul MacAvoy
Advisers
Office of Management
Cal Collier
and Budget
SEAL FORD LIBRARY
Stan Morris
Department of Justice
Jon Rose
Council on Wage and
George Eads
Price Stability
Jim Cannon has designated me as Executive Director of this
Group and Paul MacAvoy and I will serve as principal spokesmen.
Paul Leach is the Domestic Council staff person with primary
responsibility for staff coordination.
Where appropriate, other Executive departments and agencies
and White House staff will be involved. Major economic
regulation initiatives will be presented to the Economic
Policy Board.
It is anticipated that all staff resources necessary to achieve
the President's regulatory reform objectives will be prov Uled
by agencies. the White House staff groups and Executive departments and
-2-
The principal goal of the Group is to achieve tangible reform
in the next year --- reduction of Commission activities where
unnecessary and improvements in the efficiency of operation
where there is a strong rationale for continued regulation.
To deliver on the President's goals, we must have concrete
results this year. A secondary goal for 1975 is to have
results and a second year program by the time of the State
of the Union Address.
The attached draft of an Agenda for the July 18 Review Group
meeting provides a brief picture of where this effort is
going during 1975.
DRAM 1 1-10-75
DOMESTIC COUNCIL REVIEW GROUP ON REGULATORY REFORM
Meeting Agenda - July 18, 1975
I.
Legislative Activity (with primary responsibility)
A. Legislation Before the Congress
1. Railroad Revitalization Legislation submitted. House
Commerce Committee is holding
hearings." Some legislation
possible this session.
OMB & DOT
2. Natural Gas
Continue to push for de-
regulation of natural gas.
Some legislative action likely
in this Congress. OMB & FEA.
3. Financial Institutions
Legislation submitted, but
Congressional action unlikely.
OMB & Treasury
4. Fair Trade
Legislation submitted. Push
for repeal, which should
happen in 1975, and take
credit with signing ceremony.
OMB & Justice
B. Legislation Being Developed
1. Trucking
Send bill to Congress by
August with Presidential
message and press briefings.
OMB & DOT
2. Airlines
Send bill to Congress by
September with Presidential
message and press briefings.
OMB & DOT
3. Robinson-Patman
Finish proposed bill by
August. Send to Hill with
Presidential message and
press briefings. OMB &
Justice
-2-
4. Cable T.V.
Develop and consider leg-
islation by September.
Domestic Council & OTP
C. New Areas to be Considered
There are a variety of new areas where a policy review
might be undertaken. These range from (a) a major over-
haul or abolition of existing agencies, e.g., the FMC,
(b) determination of the long-term regulatory role of
FEA, (c) development of effective anti-trust policy
particularly with respect to the Clayton and Federal
Trade Commission Acts to (d) creation of incentives
rather than use of the rule-making approach to health,
safety and environmental regulations.
II.
Follow-Up to the Regulatory Summit
1. Presidential letter to Commissioners sending transcript
of July 10 meeting and asking for:
- Specific plan to reduce delays
- Description of economic analysis activities
2. Follow-up with continual contacts at both Commissioner
and staff levels to see that internal reform effort
continues.
3. Encourage Congressional committees to hold oversight
hearings on delays in each Agency.
4. With Justice making major contribution, set up group
to propose changes in the procedures of the Agencies.
Changes can be internal or legislated.
5. Closely control Commission appointments. Develop list
of acceptable candidates and committed deregulators.
6. Establish group to work with Independent Agencies in
improving economic analysis.
7. Push FPC to allow interstate shipment of natural gas
which is purchased by industrial firms in the intrastate
(unregulated) market.
SERATE H. FORD LIBRARY
-3-
III. Regulation by Executive Departments and Agencies
1. Presidential effort to get Cabinet (and other) officers
committed to reform. Announce meetings between Review
Group and Cabinet officers to obtain specific 1975
reform objectives.
2. Develop a full catalog of agencies: Their respon-
sibilities, weaknesses and opportunities for improve-
ment.
3. Target several "dependent" agencies where the Review
Group can concentrate its efforts.
4. Examine and assist FEA task force efforts to remove
bottlenecks in development of new energy projects.
IV.
Congress
1. Presidential letter to 24 Members to report on Independent
Commissions meeting. Draft completed.
2. Continue contacts with Congressional regulatory reform
group and their staff.
3. Schedule another meeting with Members after Labor Day.
4. Closely monitor legislative strategy on all regulatory
reform bills to insure White House coordination.
V.
Speeches and Other Events
1. Develop speech for President to give consumers on the
impact of regulation on consumer costs, then schedule.
2. Develop speech for President to give to a "special
interest group" in which he talks tough on the need for
regulatory reform, then schedule.
3. See that Paul Theis has materials necessary to keep
regulatory reform in a variety of Presidential speeches.
4. See that a group of spokesmen for the Administration
begin to emphasize regulatory reform in speeches.
-4-
VI. Press
1. See that President is continually briefed on status
of regulatory reform and has talking points for
interviews.
2. Work with Press Office to educate general and
specialized press about the Presidential effort.
3. Monitor press reports and editorials. Reply where
necessary.
VII. State and Local Regulatory Reform
1. reform. Finalize State and local task force on regulatory
2. Articulate Presidential interest in this area.
VIII. Organization and Management of Effort
1. Set priorities for activities and assign responsibilities.
2. Insure availability of staff resources needed to achieve
President's objectives.
3. Provide for regular coordinating meeting.
4. Develop routine status report.
RRC
THE WHITE HOUSE
WASHINGTON
August 1, 1975
MEMORANDUM FOR:
WILLIAM SEIDMAN
FROM:
RODERICK HILLS R.H.
SUBJECT:
Regulatory Review Group
I have attached (Tab A) the agenda for our weekly meeting
together with the minutes of our prior meeting. You will
see from these papers the nature of planning now underway.
As you know, it has been my view and that of Jim Cannon
that we should not intrude upon any existing item without
first informing the EPB of our effort and securing approval
to do so. Also, any policy decisions that are involved should
necessarily be funneled back through the EPB.
In our rush to begin our activities there has understandably
been some confusion, and perhaps some concern, as to what
the "jurisdiction" of the Review Group should be. There is,
moreover, some concern on my part that involvement in a
given nature may not be sufficiently coordinated as to make
certain that the same memo will in fact come back to the EPB
for a decision.
For example, our group struggled at length to seek a consensus
on a new motor carrier bill, but when the options had been
sufficiently narrowed for a Presidential decision, the paper
apparently went directly to the President without first having
the EPB analysis.
SERALE E. FORD LIBRARY
In order to clarify our operations, I suggest that the document
which I handed to you hastily two weeks ago, which consisted
of a form of a proposed agenda, (Tab B), be distributed again
at an EPB meeting along with the weekly agenda of some of
our Wednesday meetings. We all very much feel the need for
-2-
an understanding and acceptance by the EPB of what we feel
we can do.
I should also reassert the point that we see our primary
function to be one of coordinating and expediting. We will
rely upon those persons who normally have jurisdiction of
a given issue to continue to have the primary responsibility
but we will find and use the other resources of government
to see to it that the issue is speedily and fully resolved in a
manner consistent with the President's regulatory reform
efforts.
We will also use our resources to follow an issue after it is
resolved to do all possible things to see that it is fully
effected by legislation or other action.
Tale
THE WHITE HOUSE
WASHINGTON
February 19, 1976
MEMORANDUM TO SENIOR WHITE HOUSE STAFF
FROM:
EDWARD C. SCHMULTS
Bag
SUBJECT:
Regulatory Reform Status Report
For the past eight months, the Domestic Council Review Group for
Regulatory Reform has circulated a regular status report on the
President's program. The status report contains information on
current regulatory reform efforts and events in the Administration,
Congress, independent agencies, private organizations, etc. The
primary focus of the status report is on Administration efforts
underway, but related developments throughout the government and in
private organizations are noted for the benefit of DCRG members. Some
selectivity, of course, is necessary due to the length of the report.
We have found the report to be very useful in keeping everyone informed
on the number of different initiatives involved in the regulatory
reform program. Several White House staff members have indicated that
they would be interested in receiving the updates as they are issued.
I will include highlights along with the report itself for the
convenience of those receiving the report. The key items in this
report are:
- The Railroad Revitalization and Regulatory Reform Act was signed
by the President on February 5, 1976.
- A joint study of regulatory reform by the Senate Government Opera-
tions and Commerce Committees is scheduled to be completed by
February 29, 1976. The Committees are expected to ask for
extension.
- Senate hearings on the air bill are scheduled for April 6-8,
12-13, 1976.
- The DCRG is reviewing a number of different ways to broaden the
examination of regulation reform including consideration of
several congressional proposals. A series of consultations
with individuals in and out of government will be held to help
formulate a longer range approach to regulatory reform.
2
- The House Commerce Committee has issued a report criticizing the
regulation of the cable television industry. Hearings are scheduled
in March and the DCRG is considering various options for Adminis-
tration action.
- The Commerce Department is preparing a summary and analysis of
the regional regulatory reform hearings held by the Department
during December, January, and February.
- Reports from the independent commissions on their progress in
achieving regulatory reforms have been received and summarized
for the President. A proposal for a follow-on meeting has been
sent to the President.
If you would like to receive the status report on a continuing basis,
please let me know.
Attachment
1976
REGULATORY REFORM STATUS REPORT
FEBRUARY 17, 1976
REGULATORY REFORM (GENERAL)
Speeches
Groups
Meetings
Studies
ECONOMIC REGULATION
Financial Institutions
Prevailing Wage
Agriculture
Transportation
Communications
Restraint of Trade
Patents
Antitrust Activities
Energy
ADMINISTRATIVE STRUCTURE AND PROCESS
General
Consumer Representation
Inflation Impact
Forms Reduction
Antitrust Resources
and Authority
HEALTH AND SAFETY REGULATION
STATE AND LOCAL REGULATION
*
INDICATES A NEW OR REVISED ENTRY
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-2-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
REGULATORY REFORM
(GENERAL)
Presidential Speeches
--State of the Union, Jan. 9,
1976
1976.
--Message to the Congress
transmitting the Economic Report
Jan. 26, 1976.
--Remarks and statement upon
signing the Railroad Revitali-
zation and Regulatory Reform
Act, Feb. 5, 1976*
Meetings
--July 10, 1975 meeting with
the Commissioners of the Inde-
pendent Regulatory Commissions.
Opening remarks by the Presi-
dent on the importance of regu-
latory reform. Reports have
been received from all the
independent agencies except
CAB. A summary of the reports
has been circulated to the
DCRG for comment and sent to
the President with a proposal
for a follow-on meeting with
the commissioners.*
--The Commerce Department held
regional hearings in Dec. and
Jan. on regulatory problems.
Commerce is now preparing a
summary and analysis of the
hearings.*
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-3-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
Groups
CAB advisory group
on internal procedural
reforms released its
report on Jan. 5, 1976.
--Freshman Democrats announct
ICC has established
ed formation of a task force
a group within the
on concentration, the abuse
Chairman's office to
of power and tighter govern-
continue investigations
ment regulation on July 15,
into internal agency
1975. The Task Force is
problems. First area
currently writing its report
of investigation is
and hopes to have it pub-
field operations.
lished in the Spring.
--Proposal for a National Com-
A panel of experts has beeh
CAB has formed a
mission on Regulatory Reform
formed to advise the Senate
group of staff members
resubmitted to Congress. No
Committee on Government Oper-to
study ways to
action taken.
ations in their study of
improve internal man-
regulatory reform. Members
agement and information
of the panel are Peter Hutt,
control and to
Harry McPherson, Roger Noll,
strengthen financial
Merton Peck, Robert
reporting requirements.
Pitofsky, William Ruckleshaus,
and Lee White.
General Studies
--NSF has announced the funding
Senate has approved Res.
The American Enter-
of a study of the benefits and
71, to fund a joint study
prise Institute has
costs of public regulations
of regulation by the Govern-
proposed establishing
that affect the price, supply
ment Operations & Commerce
a Center for the Study
and quality of copperwire,
Committees. Report due by
of Government Regulation
ground beef, and consumer fin-
February 29, 1976.
and is currently seeking
ancial services.
funding for the Center.
--Nine research grants have
been awarded by NSF for study of
the impact of Government regu-
lations, particulary the impact
on productivity.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-4-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
ECONOMIC REGULATION
Financial Institutions
--Securities Act Amendments
The SEC has ordered
of 1975 (P.L. 94-29) signed by
all stock exchanges to
the President June 4, 1975.
abolish rules preventing
price competition through
--Financial Institutions Act
Senate Banking Committee
member firms trading
resubmitted to Congress.
held hearings on FIA in May
in listed securities off
and June, 1975. The bill
the exchange floors by
The President has signed intowas passed by the Senate on
March 31, 1976.
law an extension of Regulation
Dec. 11, 1975 by a vote of
Q until March 1977.
79-14.
-House Banking Committee
will hold hearings on Fin-
ancial Institutions in the
National Economy. Hearings
are continuing. The Admin-
istration has agreed to
work with the Committee to
develop amendments to the
FINE principles.
--On Oct. 31 and Dec. 1, 8,
1975, the Senate Banking
Committee held hearings on a
single banking regulatory
agency. The Administration
has agreed to work with the
Committee on S.2298.
Hearings are continuing.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-5-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
Transportation, Surface
--Railroad Revitalization and
--The House Small Business
--ICC has annnounced
Committee will hold hearings
the start of a rule-
(Railroad, Truck)
Regulatory Reform Act was
signed by the President on
on the ICC and independent
making proceeding to
February 5, 1976. *
truck operators in Feb.
consider widening
commercial zones and
LIBRARY
--Motor Carrier Reform Act sub-
terminal areas.
mitted to Congress on Nov. 13,
TORD
ICC has started an
1975. Introduced in the House
on request by Representative
investigation to deter-
Jones, H. R.10909, on Dec. 1,
STATE
mine if there is any
further need to regulate
1975. Introduced on request
by Senator Hartke, S.2929, on
freight and transporta-
tion brokers.
Feb. 4, 1976.*
The ICC has announced
that it will begin a
comprehensive survey on
Jan. 5, 1976 to deter-
mine the extent that
trucks travel empty
on the highways.
The ICC has issued a
final report and order
on rate bureau regula-
tions affirming the
freedom to take inde-
pendent action and
establishing time dead-
lines for rate bureau
actions.*
The American Trucking
Assoc. is holding meet-
ings in 10 cities in
March to oppose the
President's regulatory
reform proposals.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-6-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
Airline
--Aviation Act of 1975 submit-
--Administrative Practices
--The CAB has estab-
ted to Congress on Oct. 8, 1975and
Procedures Subcommittee
lished a 15 member
- Introduced in the House by
under Senator Kennedy began
advisory committee to
Reps. Jones, Harsha, &
hearings in Feb. on the air-
examine procedural
Anderson, H.R. 10261, on
line industry. Subcommittee
reforms within the CAB.
Oct. 21, 1975 by request.
report expected to be final-
Report released on Jan.
- Introduced in the Senate
ized mid-Feb.
5, 1976. Comments on
by Senators Magnuson &
the report must be
Pearson on Oct. 22, 1975 by
--Hearings on the Aviation
submitted by Feb. 20,
request.
Act of 1975 are scheduled in
1976.
the Senate on April 6, 7, 8,
--Responses to the Kennedy Sub-
12, 13, 1976. *
--CAB announced on
committee report on the CAB
8/19/75 the beginning
from CWPS, Justice, CEA & DOT
--The House Small Business
of a rule-making
have been cleared by OMB.
Committee is continuing its
procedure to decide
hearings on the CAB and the
whether to increase load
FAA and small businesses.
factor standard.
The CAB has cancelled
plans for a limited
deregulation experiment
after public comments
indicated that the
experiment was too
limited in scope.
--On Jan. 20, 1976, the
Air Transport Associa-
tion endorsed a two-
year test period of
pricing flexibility
for airlines and
recommended imposing
time limits on CAB
actions.
--The CAB has proposed a
new type of charter
flight be established
which would allow charter
tour operators more
flexibility and passen-
gers more low-cost
flight possibilities.*
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-7-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
Maritime
Both the State Dept. & the
-Senate Commerce Committee
Transportation Dept. have
has reported out favorably
testified against the bill.
S.868 which would expand
FMC powers to regulate
--Maritime Task Force under
third-flag carriers. Report
CEA submitted an options
not yet filed.
paper to the DCRG on Dec. 17,
1975. The Justice Department
House Merchant Marine Com-
is working with the Maritime
mittee held hearings on the
Administration to produce
Companion Bill, H.R.7940 on
the data needed for further
Oct. 23, 1975.
review and analysis.
The House Merchant Marine
Committee will hold hearings
on ocean shipping conference
in early Feb.
Restraint of Trade
--On Dec. 12, 1975, the Presi-
Fair Trade
dent signed into law the
repeal of fair trade laws.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-8-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
Robinson-Patman
--Public hearings were held by
--House Small Business Com-
the Domestic Council on
mittee held hearings on
Robinson-Patman Dec. 8, 9, 10,
the Robinson-Patman Act on
1975. Transcripts are being
Nov. 5-6, 11-12, 1975.
completed and a decision memo
Hearings will continue
is being written by Justice
during January and February.
for distribution in 30 days. *
Antitrust Activities
-Antitrust Immunities Task
--Senators Kennedy and Hart
FTC has announced
Force formed to examine anti-
introduced S.2028, the Com-
investigations into the
trust exemptions in Feb. 1975.
petition Improvements Act
anticompetitive
of 1975, which would:
practices of the real
Meetings have been held with
- Require Federal Agencies
estate brokerage industry
insurance industry groups,
to give antitrust prin-
and the veterinary
state regulators, and consumer
ciples priority consid-
services industry.
groups to discuss possible
eration in regulated &
changes to the McCarran-
unregulated industries.
--FTC has charged the AMA
Ferguson Act. The Justice
- Require agencies to
and two medical societies
Department is seeking further
issue a competitive
in Connecticut with
comments on the issues before
impact statement.
illegally fixing fees
writing a final report.*
through their code of
--Hearings began on S.2028
ethics that prohibits
--The Justice Dept. has filed
Dec. 10, 1975. Both Justice
advertising. Hearings
an antitrust suit against the
and CWPS testified. Hear-
will be held in February.
American Society of Anesthes-
ings will continue Feb. 4,
iologists for conspiring to
5, 1976.
--FTC has proposed a
fix fees.
regulation that would
--S.1284, Antitrust Improve-
permit advertisements
--On Nov. 24, 1975 the Justice
ments Act, is pending in
dealing with the price
Dept. filed suit against the
the Senate Judiciary Com-
and availability of
American Pharmaceutical Asso-
mittee. Civil process
prescription eyeglasses.
ciation to force it to allow
provisions of the bill are
its members to advertise the
similar to the Administra-
-FTC is investigating
retail prices of prescription
tion's proposed legislation
prohibitions against
drugs.
Committee mark-up is
advertising of retail
expected in the near
drug prices. Regional
future.*
hearings are scheduled
for December & January.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-9-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
--Both the Justice Department
and the American Bar Associa-
tion are working to remove
the ban on advertising by
lawyers.
--The Administration is working
The House is tentatively
with the House Committee to
scheduled to consider H.R.
develop a legislative strategy
39 on Feb. 20, 1976. *
for the CIB bill, H.R. 39.
Prevailing Wage
--CWPS is studying the infla-
tionary impact of Davis-Bacon
Act. Report is expected to
be sent to the Labor Dept.
in mid-Feb.
Communications
An option paper on legisla-
The Commerce Committee
FCC is currently con-
tion on cable TV will be cir-
Subcommittee on Communica-
ducting an investigation
culated next week. *
tions has issued a report
of the economic
criticizing the regulation
and competitive impact
--On Dec. 16, 1975, the Justiceof the cable television
of liberalized rules
Dept. filed a brief with the
industry stating that
on the interconnection
FCC uring the commission to
current regulations serve
of customer-owned
act on two-year-old plans to
to protect large broad-
devices to the telephone
increase the number of VHF
casters and stifle competi-
network.
television stations in major
tion.
metropolitan areas across the
-FCC has announced it
country in order to promote
will undertake a thor-
greater competition and more
ough review of existing
diversity in programming.
regulations to see where
deregulation of cable TV
--On Feb. 4, 1976, the Justice
might be appropriate and
Dept. filed a brief challenging
it will propose legisla-
the legality of anticompetitive
tion to carry out these
pay cable television rules of
recommendations.
the FCC. *
--FCC has proposed new
rules to reduce delays
and to improve its de-
cisionmaking processes.
Comments were due by
Dec. 22, 1975.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-10-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
Patents
--Patent reform bill was intro
Compromise bill has been
LIBRARY
duced in the Senate in
reported from the full
March, 1975.
Committee to floor. *
STATE
Energy
--Presidential legislation
--On October 22, 1975, the
proposing deregulation of new
Senate passed a five-year
natrual gas sent to Congress
phase-out of controls on
as part of the Energy Inde-
new natural gas.
pendence Act in January.
--On Feb. 5, 1976, the House
--On September 10, 1975 the
passed a bill which removes
Administration submitted a
price controls from smaller
legislative proposal which
producers on natural gas,
includes authority for the FPC
continues price controls
to allow interstate natural
on larger producers, and
gas pipelines to purchase gas
extends controls to the
from intrastate sources free of
intrastate market. The bill
price controls. Introduced as
must now go to the Conference
S.2330 by Senator Pearson.
Committee.*
--On December 22, 1975, the
--The House Commerce Commit-
President signed S.622, the
tee is holding hearings on
compromise oil price control
the oversight of FPC,
bill which will temporarily
regulatory reform, and the
roll back the price of oil
deregulation of natural gas
and then gradually end controls
throughout January.
over a 40-month period.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-11-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
Agriculture
--CWPS has begun a study of
--On Feb 4,5,1976 the House
--FTC has announced an
milk prices, including the
Judiciary Committee
investigation of the
price impact of Federal price
held hearings on competi-
citrus fruit industry
supports & marketing orders,
tion in the food industry.
to determine the impact
import quotas, states regula-
of agricultural cooper-
tions, & cooperatives.
ative associations and
government marketing
--A consultant to CWPS has
orders on the structure,
said that consumers are paying
conduct, and performance
$500 million more each year
of the industry.
for dairy products under
Federal marketing restrictions.
Milk prices are 22% higher than
they would be without govern-
ment controls.
ADMINISTRATIVE STRUC-
The President in his July 16,
--Authorization legislation
TURE AND PROCESS
1975 Cabinet meeting directed
for CPSC passed the Senate
6 executive branch agencies
76-8, July 18, 1975. In-
General
(Labor, HEW, Agriculture,
cluded appointment bypass
Transportation, FEA, and EPA)
provisions, authority to
to work with the White House
direct payment of fees to
Task Force to examine and
complainants, and authority
reform their own regulations
to allow injured party to
and regulatory process. Meet-
seek damages against a reg-
ings have been held with Ag-
ulatory agency that abuses
riculture, Labor, Transporta-
its discretion.
tion, HEW, and EPA. Reports
have been received by Agriculture,
EPA, and Labor.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-12-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
--On Oct. 20, 1975 the House
passed H.R. 6844, CPSC author-
ization legislation,
including provisions which
would give Congress an
opportunity to review and
LIBRARY
veto all rules and regula-
tions of the Commission and
FORD
which would allow reasonable
fees to be paid to attorneys
and witnesses of those people
STATE
challenging commission
actions. Vote on the veto
provision was 224-180.
--Hearings on a bill, H.R.
3658, which would permit
either House of Congress to
disapprove certain rules
proposed by executive
agencies were held on Oct
21-23, 29-31, 1975. Both
executive branch agencies &
independent agencies testi-
fied against the bill.
--On Nov 6, 1975 the Senate
voted 94-0 to pass S.5, the
Government in Sunshine bill
which would require all
agencies run by two or more
open meetings and to control
ex parte communications.
The House Government Oper-
ations Committee held
hearings on Nov 6 and 12,
1975 on the Sunshine bills,
H.R.9869 and H.R. 10315.
The Subcommittee has unan-
imously reported the bill to
the full Committee.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-13-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
--On Nov 12, 1975, the
Senate Judiciary Adminis-
trative Practices Subcom-
mittee held hearings on S.
1289, limiting ex parte
communications.
--On Jan 30, 1976 hearings
were held by the Senate
Judiciary Committee on S.2715
to award attorney fees to
participants in regulatory
proceedings. Hearings
continuedon Feb. 6, 1976. *
--The DCRG is reviewing a
-Senators Percy and Byrd
variety of ways to broaden the
introduced S. .2812, the
examination of government
Regulatory Reform Act of
regulations including consid-
1976, which would establish
eration of various congress-
a systematic timetable for
ional proposals. *
reform of Federal regulatory
agencies by 1981. The bill
would require the President
to submit to Congress his
proposals for reform which
the Congress could amend or
a substitute plan could be
proposed. The bill has also
been introduced in the House.
Inflation Impact
--Final acceptance of agency
--Amendment to proposed bill
Analysis
criteria has been completed
S.644 providing authoriza-
with the exception of FEA.
tion for CPSC would require
cost/benefit assessment
-Questionnaires on the evalua-
statements be prepared for
tion of the Inflation Impact
all agency rules.
Statement effort have been
received by departments and
agencies. Evaluation of IIS by
OMB and CWPS to be conducted in
December and completed by Jan.
Increase in Antitrust
--On Dec 12, 1975 the Senate
Resources & Authority
passed S.1136, authorizing an
increase in antitrust enforce-
ment resources by voice veto.
ACTION IN THE
ACTION IN
ACTION IN THE INDE-
ADMINISTRATION
-14-
CONGRESS
PENDENT AGENCIES,
THE COURTS, etc.
Consumer Representation
Agency plans to increase
The NRC asked for
consumer representation
public comments on the
were published in the Nov. 26,
legality and desira-
1975 Federal Register. Public
bility of the commission
meetings were held in
giving financial assis-
January around the country to
tance to participants
explain how these plans will
in licensing procedures.
work.
Responses are currently
under consideration.
Forms Reduction
-Action plan to achieve re-
duction in paperwork prepared
by OMB.
--OMB has sent to Secretary
Simon a letter asking for
Treasury Dept. action to
reduce the number of forms
issued by the Dept. but not
subject to OMB clearance.
HEALTH AND SAFETY
Paper on approaches to envi-
REGULATIONS
ronmental regulation prepared
by Treasury and OMB is out for
comment.
STATE AND LOCAL
FTC announced that it
REGULATIONS
will investigate entry
barriers in the appliance
repair industry that are
created by state
licensing systems.
THE WHITE HOUSE
WASHINGTON
March 3, 1976
MEMORANDUM FOR WHITE HOUSE SENIOR STAFF
FROM:
EDWARD C. SCHMULTS
SUBJECT:
The President's Regulatory Reform Program
A package of materials on the President's regulatory reform program
has been sent to approximately 250 Cabinet and Subcabinet officials
including the Chairmen of the ten independent regulatory agencies.
Attached is a copy of the covering memo reviewing the program to
date and a copy of the table of contents for the other materials
that were included.
I thought you ought to see a copy in case you get any questions
from the departments.
Attachment
THE WHITE HOUSE
WASHINGTON
February 25, 1976
MEMORANDUM FOR DEPARTMENT AND AGENCY OFFICIALS
FROM:
EDWARD C. SCHMULTS
PAUL MacAVOY
Pm
SUBJECT:
The President's Regulatory Reform
Program
President Ford's regulatory reform program is now in its
second year. The publicity surrounding the program has
often raised questions by the public concerning details
of the various parts of the program. In recent months
these questions have been increasingly directed to
department and agency officials. In order to help you
answer questions on the scope, objectives, and details
of the President's program, we thought it might be useful
if we reviewed for you the regulatory reform efforts
carried out during the last year. In addition, we are
attaching background materials for your information and
for your use as needed.
BEGINNING OF THE PROGRAM
The inflationary impact of many government regulations
was a major concern at the Summit Conference on Inflation
which was convened by President Ford at the beginning of
his Administration. Economists at the Summit were nearly
unanimous in their belief that government regulations
impose a hidden, unnecessary cost on the economy. They
urged President Ford to make a comprehensive program of
regulatory reform a top priority of his Administration.
The recognition of the need for regulatory reform is not
new. Presidents and policymakers since Harry Truman
have attempted to reform various segments of economic
regulations. (See the Historical Background.)
President Ford, however, has initiated an unprecedented,
wide-ranging program of both legislative and administra-
tive actions in many sectors of the economy.
2
Regulatory reform in the Ford Administration is not a
program of total deregulation of the economy. It is an
effort to find the best combination of constructive
competition and responsible government regulation. The
reform of economic regulation is an effort to restore
competition to areas of the economy wherever possible,
and to minimize the ability of special interests to
obtain preferential treatment from government at the
expense of the public interest.
The reform of social regulation is an effort to achieve
our social goals at minimum economic cost. Some of our
environmental, health, and safety regulations have not
been as effective as they were originally intended to be.
There is a need to ensure that all of the social
regulations are carried out equitably and fairly and in
the least costly manner.
The President announced the formation of the Domestic
Council Review Group for Regulatory Reform in June 1975.
The DCRG is made up of agency and White House represen-
tatives who meet regularly to coordinate the wide-
ranging regulatory reform efforts. Any questions you
may have on the elements of the program may be directed
to the Executive Directors of the DCRG, Paul Leach and
Stan Morris.
INITIAL PROGRAM
In his October 8, 1974 address to the Congress,
President Ford began his reform of government regulations
by announcing a four-point program. First, he assigned
the Council on Wage and Price Stability a watchdog role
over inflationary costs of government actions and they
continue in this role. His second proposal was for a
National Commission on Regulatory Reform to examine
the independent regulatory agencies. Although this
proposal was not acted upon, Congress has recognized
the need for such a review and several committees in
the House and Senate have major studies underway. The
third proposal required agencies to prepare inflation
impact statements on all major proposals and this
effort has been implemented. Finally, he encouraged
state and local governments to review their own regulations
and some interest has been expressed by state and local
organizations in pursuing these issues.
3
THE PROGRAM TO DATE
During 1975, two legislative proposals were enacted into
law. The Securities Acts Amendments of 1975, signed in
June, restores competition to the securities industry
and ends nearly two-hundred years of price fixing agree-
ments among stockbrokers. On December 12, 1975,
President Ford signed into law the repeal of the enabling
legislation for fair trade laws so that consumers in all
states could benefit from discount prices on all brand
name merchandise. More recently in 1976, the President has
signed into law the Railroad Revitalization and Regulatory
Reform Act which provides long overdue reform of railroad
rate regulation and authorizes needed financial assistance
to the rail industry.
Action on other initiatives is still pending:
Financial Institutions - The revised Financial
Institutions Act, resubmitted to the 94th Congress,
would enable small savers to earn more competitive
returns on their savings and to benefit from more
diversified financial services from all lending
institutions. On December 11, 1975, the Senate
passed legislation similar to most of the
Administration's proposals, but new tax laws for
banks must be considered further in Committee
before the total package is complete. The House
Banking Committee is studying similar reforms.
Prospects for some legislation appear fairly good
in this Congress.
Transportation Regulation - A series of legislative
proposals has been submitted to the Congress to
eliminate arbitrary barriers to entry and to increase
pricing flexibility in order to foster competition
and encouarge a wider range of services and prices to
consumers. The Railroad Revitalization and Regulatory
Reform Act has already been enacted.
Aviation Act of 1975 - The bill has been introduced
in both Houses. Hearings in both the House and Senate
are scheduled for early April.
4
Motor Carrier Reform Act - The Administration's
bill has been introduced both in the House and
the Senate. The Department of Transportation
has received tentative commitments for hearings
in the near future.
New Natural Gas - To help assure adequate supplies
of natural gas for both industry and residential
customers, a proposal for deregulation of new
natural gas was included in the State of the Union
Address in 1975. Bills have been passed by both
the House and Senate and are now under consideration
by the Conference Committee.
Simplification and Modernization of Regulatory
Activities - In addition to these highly
publicized elements of the program, the Adminis-
tration has proposed legislation to eliminate and
simplify anachronistic and unnecessary regulatory
procedures and paperwork in some of the oldest
Federal agencies: Simplification of Coast Guard
regulations and procedures will result in significant
cost savings; patent legislation will reform patent
procedures; proposed modernization of the customs
laws will reduce unnecessary paperwork and ease
restrictions governing goods brought into the United
States.
Forms Reduction - The Commission on Federal Paperwork
has been created and its members appointed. Its
report is due on October 3, 1977. In the interim,
OMB is preparing guidelines to reduce the number
and the burden of Federal forms.
Meeting with the Commissioners - On July 10, 1975,
President Ford met with the commissioners of the
ten independent regulatory commissions. The
President asked these agencies to concentrate on
four areas of concern: better representation of
consumer interests; elimination of outdated
regulations; reduction of regulatory delays; and
better analysis of economic costs and benefits of
agency actions. A progress report from each agency
has been received and reviewed by the President.
5
FUTURE EFFORTS
In the second year of the program, future initiatives
are being developed in addition to completing current
efforts underway. For example, possible future action
could include improving health and safety regulations,
reforming executive branch regulations, and streamlining
administrative procedures. Initiatives are being discussed
in the context of a systematic review of the role of govern-
ment and the private sector in the American economy.
As we review the role of the Federal Government and the
impact of government intervention in the marketplace,
we welcome any suggestions you might have as to possible
future initiatives. We hope that this brief review and
the attached documents are helpful. We would be happy
to provide you with more information on any part of the
program including examples and anecdotes on the ways in
which regulations have affected both consumers and
industries. We have included in the attached materials
examples of speeches given by Administration officials
on various aspects of regulatory reform. We would be
glad to answer any questions you may have about the
specific actions.
In the near future, we will be scheduling a briefing for
department and agency officials on the regulatory reform
program. We look forward to talking with you at the
briefing.
Attachments
THE WHITE HOUSE
WASHINGTON
April 3, 1976
MEMORANDUM FOR:
JIM CANNON
DICK CHENEY
JIM LYNN
JACK MARSH
BILL SEIDMAN
FROM:
ED SCHMULTS
SUBJECT:
Robinson-Patman Report
Attached at Tab A is a brief summary of a 314-page Report
on the Robinson-Patman Act prepared by the Antitrust
Division of the Department of Justice for the Domestic
Council Review Group on Regulatory Reform ("DCRG"). It is
anticipated that this Report will be transmitted to the
DCRG and, simultaneously, made public on April 8, 1976, in
conjunction with an American Bar Association Committee
Meeting on Robinson-Patman.
This Report results from three days of hearings on the
Robinson-Patman Act held by the DCRG on December 8-10, 1975,
and has been promised for some time. Included in the summary
of the Report is background information on the Administration's
announced intention to study and probably change the
Robinson-Patman Act and a chronology of Administration actions
to date.
Needless to say, the small business community views any change
in -- or even an investigation of -- Robinson-Patman as
anathema, since the law is seen as the "Magna Carta of Small
Business." Since the President announced his intention to
propose changes in the Robinson-Patman Act last spring, there
has been a continual outcry from many small business groups.
The Report is styled as the product of Antitrust Division staff
acting under the auspices of the DCRG. The Report will be
transmitted to the DCRG for consideration of the findings,
conclusions and recommendations. No suggestion will be made
that the Report represents the views of the Administration,
but rather it will be clear that the Report is a statement of
the views of the Antitrust Division only. See draft transmittal
letter and response at Tab B.
-2-
Upon receipt of this Report, we anticipate that the DCRG
and the Administration will withhold substantive comment
on the Report pending a final review of the findings, con-
clusions and recommendations. The Press Office will be
briefed regarding this Administration stance. Because the
subject matter is complex and the prospects for careful
substantive review by Congress in this election year are
slight, there seems to be little point in taking quick
action on Robinson-Patman.
Unless there is substantial opposition to the strategy
outlined above, we would like to allow the Justice Department
on late Monday, April 6, to send advance copies of this
Report to the concerned members of the American Bar Association
Committee. Thus, I would appreciate your reactions to this
proposed strategy by 5 p.m., Monday, April 5.
Thank you.
Attachments
THE WHITE HOUSE
WASHINGTON
Darfeling
April 5, 1976
MEMORANDUM FOR:
PHIL BUCHEN
JACK MARSH
BOB HARTMANN
BILL BAROODY
ROG MORTON
DICK CHENEY
MAX FRIEDERSDORF
FROM:
ED SCHMULTS all
SUBJECT:
Next Steps for the President's
Regulatory Reform Program
Since the February 4 meeting with the President, the
Domestic Council Review Group has been working to develop
further plans for the President's regulatory reform program.
I would be very interested to get your views on the
attached paper which I have asked Bill Seidman to table
soon for the EPB's consideration.
Attachment
E FORD LIBRARY
THE WHITE HOUSE
WASHINGTON
MEMORANDUM FOR:
WILLIAM SEIDMAN
FROM:
EDWARD C. SCHMULTS
SUBJECT:
Next Steps for the President's
Regulatory Reform Program
Since the February 4 meeting with the President, the
Domestic Council Review Group (DCRG) has been working on
longer term plans for the President's regulatory reform
program.
Over the last few weeks, we have had a number of meetings
with interested people (inside and outside the Adminis-
tration) to discuss the general concept of a comprehensive
regulatory reform program. We have also been keeping
track of an increasing number of bills in Congress which
would require major evaluations and possible changes in
regulatory programs. I know that Jim Lynn is testifying
soon on Senator Muskie's bill (S. 2925), which would call
for a four year life cycle for most Federal programs, and
that hearings on the Percy-Byrd regulatory bill (S. 2812)
have been scheduled for the middle of May.
I think it is important for the Administration to crystalize
its longer term regulatory program in order to present a
clear sense of direction to the Congress and those most
interested in the President's thinking on this issue.
I hope this paper can be put on the EPB agenda as soon as
possible in order to get the general views of its members
and to help give us direction for laying out more specific
plans. I have sent copies of this paper to other members
of the Senior Staff and asked them for their thoughts and
recommendations as well.
Attachment
TOROS of GREAT LIBRARY as
Long Term Direction of the
President's Regulatory Reform Program
I.
Issue
On several occasions over the last few months, members
of the Senior Staff have met with the President to seek
his guidance on the future directions for his program
of regulatory reform. The President has given a number
of specific directions for short-term activities he
wants achieved. One example is the creation of task
forces to concentrate on achieving administrative improve-
ments in agency regulations. The Administration is
presently working to accomplish these goals and to gain
passage in Congress of a number of major regulatory
reform bills.
In addition, the President has asked for specific plans
on how to insure the long term success for the regulatory
reform initiatives which he began 18 months ago. The
issue to be resolved is what should the Administration's
longer-term regulatory strategy be and what Presidential
decisions are needed to begin implementation of that
strategy.
II.
Background and Problem
The present regulatory reform effort has grown out of
the President's strong desire to:
- Reduce government's interference in the marketplace and
its infringement on individual choice and initiatives;
- Minimize the direct and indirect costs which Federal
programs levy on the economy and the American taxpayer;
- Eliminate the ability of special interests to gain
advantage over the general public interest through the
exploitation of Federal laws and regulations.
Attempting to put these principles into effect, we feel that
there are not enough remaining targets of opportunity
around which to quickly form a consensus for a second
phase of the President's program. The issues raised in
our initial look at several new areas clearly illustrate
that there are a number of difficult theoretical and
practical problems associated with achieving desirable
reforms in these areas. The relative newness of many
health and safety regulations, and the sensitive political
nerves attached to them, leave us without a firm base of
information or an organized constituency around which
we can quickly develop defensible reforms in this area.
And we have only begun to touch on the complexities of
outright subsidies through our financial institutions,
rail reform, and aviation acts.
2
Congressional interest in the subject of regulatory
reform has grown substantially. There have been more
than fifteen pieces of major legislation introduced
over the past few months. For example, Sen. Proxmire's
bill (S. 2234) would abolish a number of major regulatory
agencies; Rep. Udall's bill (H.R. 8676) would establish
a private/public sector Competition Review Commission;
Senator Muskie's proposal (S. 2925) would require a zero
base review of all government programs every four years;
and the Percy/Byrd bill (S. 2812) would require the
President to review a number of agencies and submit to
Congress over five years a series of annual plans for
regulatory reform.
We have now reached the point at which some fundamental
decisions about the long run directions of the regulatory
reform effort must be made. We are at an important
threshold in shaping the future course of government's
role in the economy. We can not hope to succeed simply
by following an incremental, piecemeal approach in this
area. The President's success in achieving his budgetary,
foreign affairs, or national defense programs has
depended upon a clear articulation of his policies in
each of these areas. Comprehensive plans have helped
him explain his positions to the American people and
have given the President a framework within which to make
legislative and administrative decisions. A similar
framework is needed if the regulatory reform program is
going to succeed over time.
III. Objectives for a Longer Term Program
In order to meet the President's demands, the Adminis-
tration must develop a regulatory program which will
accomplish the following objectives:
1. To place the President in the lead toward achieving
tangible, fundamental administrative and legislative
changes in the present regulatory system. These
changes would modify or eliminate laws and regulations
which do not yield benefits commensurate with their
costs to the economy and would provide better ways
of achieving economic and social objectives at lower
costs.
2. To educate the public, the business community,
Congress and the Executive Branch on the costs of
government intervention in the economy and the need
for reform.
3. To rationalize the current conflicts between and
within regulatory activities.
3
4. To reduce the degree of governmental intervention
in the economy and the paperwork burden imposed
on individuals and businesses.
5. To provide better methods for dealing with adjust-
ment and transition problems that may accompany
regulatory change.
The present Administration efforts have not been suf-
ficient to achieve these goals. Improvements are needed.
Although we are now working on a number of different
tactical steps designed to achieve these goals, we need
a mechanism which will keep the press, the public, and
the Congress aware of and interested in our efforts.
The current structure of the regulatory process and
Congressional oversight of that process are not well
suited to making judgments on the effectiveness of the
regulatory system. Various economic, environmental and
social goals are often in conflict and there are important
conflicts within these goals. Yet there has not been a
coherent assessment of how these conflicts can be
resolved, nor is there any adequate way to insure that
the Executive and Congress address the problems in a
more reasoned atmosphere. The recent clamor over banking
regulation is a clear example of the need to counter
emotional public demands with carefully documented
proposals for constructive and longer lasting reforms.
IV.
Recommendations and Discussion
In order to maximize the effect of present regulatory
reforms and to force the agencies and Congress to
persist in examining a wide range of Federal inter-
ventions, we recommend that the President announce a
major new program designed to produce a comprehensive
calendar of regulatory reforms over the next several
years.
This agenda would be triggered by legislation introduced
by the President calling on the Executive to submit
yearly plans for regulatory improvements to the Congress.
It would attempt to guarantee Congressional review
through the inclusion of a forcing mechanism which would
give Congress the option of adopting the President's
plan or substituting one of its own. In either case,
important regulatory and other Federal interventions
(tax preferences, cash subsidies, etc.) would be examined
by the President and the Congress over a definite time
schedule.
FORD
SERATE
4
If comprehensive legislation is enacted, it would help
assure that a more informed public debate would take
place. Yearly Presidential plans would be based on the
results of careful scrutiny and factual analysis of the
impacts of Federal actions. A series of comprehensive
proposals for legislative and administrative reforms
would help to identify regulatory overlaps, inconsistencies,
and contradictions in much the same way the yearly budget
analysis and debate helps to focus attention on important
program decisions as well as overall fiscal policy.
A legislated timetable for consideration of federal
interventions would also provide a disciplined mechanism
for soliciting public opinion on the costs and benefits
of existing programs. At the present time, it is
difficult for the Administration to address a specific
complex issue such as toxic substances legislation without
a framework of information within which to measure the
cumulative effects of these bills. An agreement between
Congress and the Executive to review and act on major
regulatory issues would help to provide such a framework.
It would also be a positive and constructive response to
a growing Congressional sentiment for more centralized
economic planning.
On the other hand, a prescribed calendar for potential
reforms could be used by some opponents as an excuse to
delay action on legislation already introduced. It could
also give affected industries or other special constituencies
sufficient advance notice for them to organize against any
Executive recommendations which they opposed. The
President would have to make it abundantly clear that a
disciplined agenda for action should not be used by
Congress to procrastinate. And a forcing mechanism
requiring Congress to take some action on the President's
program would at least insure that the Administration
would have a forum within which to argue its case and
rebut the opposition of organized special interests.
V.
Conclusion
There are strong indications that Congress may attempt
to usurp the control over regulatory reform by enacting
one or more bills which would call for comprehensive
evaluations of Federal programs or agencies. We recommend
that the President not relinquish his lead on this
important issue, and that we continue to prepare a longer
term program which could be announced within the next
six weeks.
5
The core of that program would be legislation, which
the President would submit, laying out a reasoned
timetable for future regulatory reforms. Upon enactment
of such a bill, yearly plans would need to be developed
by the Executive and specific legislation submitted to
Congress each Spring in time to comply with the new
requirements of the Budget Reform Act.
Such a "blueprint bill" would have to contain provisions
giving the President and Congress flexibility to adjust
the schedule of reform proposals if future developments
warranted. It would also need to contain an appropriate
forcing mechanism which would guarantee that the Congress
would have to take some action on the President's
proposals.
We believe that such a bill would be responsive to the
President's desire to see the regulatory reform program
continue and would provide an excellent vehicle with
which to respond to a rising tide of Congressional interest
in this issue. If it is agreed, we will present major
options for the organization and management of such an
action plan and report back in ten days with a
decision paper.