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Regulatory Agencies - Regulatory Reform (1)
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Regulatory Agencies - Regulatory Reform (1)
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The original documents are located in Box 59, folder "Regulatory Agencies - Regulatory
Reform (1)" 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States of America his copyrights in all of his unpublished writings in National Archives collections.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.
not Communismion
Regulatory Reform
10/16/74
Janice Wogan called re the National Commission on
Regulatory Reform; I told her what I had found out about
it. Suggested she call Tom Jones to see what the latest
might be.
Called back to say S. 4145 died in the Government Operations
Committee, and H. R. 17417 died in the Interstate and
Foreign Commerce Committee.
As requested, she sent me copies of the bills, attached.
DEALS R. FORD LIBRARY
Digitized from Box 59 of the Philip Buchen Files at the Gerald R. Ford Presidential Library
930 CONGRESS
2D SESSION
H. R. 17417
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 16, 1974
Mr. HORTON (for himself, Mr. ERLENBORN, and Mr. WYDLER) introduced the
following bill; which was referred to the Committee on Interstate and
Foreign Commerce
A
BILL
To establish a National Commission on Regulatory Reform.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 That this Act may be cited as the "National Commission
1.
4 on Regulatory Reform Act of 1974".
SERVICE
FORD
5
ESTABLISHMENT OF COMMISSION
6
SEC. 2. (a) There is established, as an independent
7 instrumentality in the executive branch of the Federal Gov-
8
erninent, a National Commission on Regulatory Reform
9
(hereinafter referred to as the "Commission") which shall
10 be comprised of twelve members selected as follows:
1
2
1
(1) four members from the private sector appointed
2
by the President,
3
(2) four senior officials of the executive branch
4
appointed by the President,
5
(3) two Senators appointed by the President of
6
the Senate,
7
(4) two Members of the House of Representatives
8
appointed by the speaker of the House.
9
(b) The President shall designate from the membership,
10 one member to serve as Chairman and one member to serve
11 as Vice Chairman of the Commission.
12
(c) Vacancies on the Commission shall not affect the
13 authority of the remaining members to continue with the
14 Commission's activities, and shall be filled in the same man-
15 ner as the original appointments.
16
(d) Members of the Commission who are appointed
17 from the private sector shall receive as compensation the
18 daily equivalent of the annual rate of basic pay in effect
19 for grade GS-18 for each day during which they are en-
20 gaged in the actual performance of the duties of the Com-
21 mission. All members of the Commission shall be entitled
22 to reimbursement for travel, subsistence, and other necessary
23 expenses incurred by them in the performance of the duties
24 of the Commission.
3
1
FUNCTIONS
2
SEC. 3. (a) The Commission shall identify regulatory
3 activities of the independent regulatory agencies for de-
4 tailed review, and conduct such review which shall include,
5 but shall not be limited to-
6
(i) an analysis of the purposes and objectives of
7
the regulatory activities;
8
(ii) an assessment of actual performance in achiev-
9
ing the purposes and objectives;
10
(iii) an analysis of the costs and benefits of each
11
activity; and
12
(iv) an examination of State and local govern-
13
mental regulatory activities which interact with the Fed-
14
eral independent regulatory system.
15
(b) The Commission may prepare and publish such
16 periodic reports as it deems appropriate, but shall prepare
17 and transmit a report to the President and Congress not
18 later than one year following the appointment of the full
19 Commission. That report shall include-
20
(i) the results of the detailed review conducted pur-
21
suant to subsection (a) ;
22
(ii) appropriate revisions to overall goals and pro-
23
cedures of specific Federal regulatory authorities:
24
(iii) specific recommendations for legislative actions
4
1
which would improve the effectiveness or the efficiency
2
of the Federal independent regulatory agencies re-
3
viewed;
4
(iv) an assessment of the costs, including transition
5
costs, of any modifications recominended or suggested;
6
and
7
(v) recommendations for a means of continuing
8
review of the economic costs of Federal independent
9
regulatory activities.
10
POWERS
11
SEC. 4. (a) The Commission is authorized to, hold such
12 hearings, sit and act at such times and places as it may deem
13 desirable.
14
(b) Subpenas for the attendance and testimony of
15 witnesses or the production of written or other matter may
16 be issued on the authority of the Commission and shall be
17 served by anyone designated by the Chairman.
18
(c) If the Commission receives of any witness or any
19 Government agency. materials which have been submitted
20 on a confidential basis, and the confidentiality is protected
21 by statute, the material shall be held in confidence by the
22 Commission.
23
(d) The Commission is authorized to establish such
24 advisory committees as may be necessary or appropriate to
25 carry out any specific analytical or investigative undertak-
5
1 ings on behalf of the Commission. Any such committee shall
2 be subject to the relevant provisions of the Federal Advisory
3 Committee Act (Public Law 92-463)
4
SEC. 5. (a) Subject to such rules and regulations as it
5 may adopt, the Commission, through its Chairman. shall
6 appoint and fix the compensation of an executive director
7 not to exceed the rate provided for level M of the Executive
8 Schedule under section 5316 of title 5, United States Code,
9 and such additional staff as is deemed necessary without
10 regard to the provisions of title 5, United States Code,
11 governing appointments in the competitive service, but at
12 rates for individuals not to exceed the rate authorized for
13 GS-18 under the General Schedule.
]t
(b) The Commission is authorized to negotiate and
15 enter into contracts and agreements as the Commission
16 determines are necessary in order to carry out its duties.
17
ASSISTANCE OF GOVERNMENT AGENCIES
18
SEC. 6. Each department, agency, and instrumentality
19 of the Federal Government, including the Congress and in-
20 dependent agencies, and State and local agencies, consistent
21 with the laws and the Constitution of the United States,
22 shall furnish to the Commission, upon request of the Chair-
23 man, such data, reports, and such other information as the
24 Commission deems necessary to carry out its functions under
25 this Act.
6
1
TERMINATION
2
SEC. 7. Ninety days after the submission of the final
3
report provided for in section 3 (b), the Commission shall
4
cease to exist.
5
AUTHORIZATION
6
SEC. 8. There is authorized to be appropriated $500,000
7
to carry out the provisions of this Act.
93D CONGRESS
2D SESSION
S. 4145
IN THE SENATE OF THE UNITED STATES
NOVEMBER 18, 1974
Referred to the Committee on Government Operations and ordered to be
printed
AMENDMENTS
Intended to be proposed by Mr. ALLEN to S. 4145, a bill to
establish a National Commission on Regulatory Reform, viz:
1
On page 2, lines 1 through 4, strike paragraphs (1)
2 and (2) in their entirety and in lieu thereof insert the
3 following:
4
'(1) six members from the private sector appointed
5
by the President, with the advice and consent of the
6
Senate, from individuals who, because of their education,
SEALS n. FORD LIBRARY
7
training, or experience shall, respectively, be two quali-
8
fied representatives of the interests of (i) the labor com-
9
munity, (ii) the business community, and (iii) the
10
ultimate consumer of goods and services, of whom not
Amdt. No. 1982
(Star Print)
2
1
more than four shall be affiliated with the same political
2
party.
3
"(2) four senior officials of the executive branch
4
appointed by the President, with the advice and consent
5
of the Senate, from the personnel of Federal agencies
6
other than regulatory agencies,".
7
On page 3, line 3, strike the word "Independent" and
8 insert in lieu thereof the word "Federal".
9
On page 3, line 14, strike the word "independent".
10
On page 4, line 2, strike the word "independent".
11
On page 4, line 7, strike the word "independent".
12
On page 4, line 8, replace the period with "and;".
13
On page 4, between lines 8 and 9, insert the following
14
new paragraph:
15
"(vi) an assessment of the representation of the
16
interests of consumers within the decisionmaking process
17
of the Federal regulatory agencies and recommendations
18
with respect to alternative methods for improving such
19
representation, evaluating the anticipated economic and
20
noneconomic costs and benefits of each in relation to
21
consumers, taxpayers, and efficient regulation of com-
in
SEAL
FORD
22
merce, including specifically as one of these alternatives
LIBRARY
23
the establishment of a nonregulatory agency to SO repre-
24
sent the interests of consumers and an evaluation of the
25
jurisdiction, functions, duties, powers, personnel, and
3
1
authorization of funds anticipated as being necessary to
2
make such a nonregulatory agency a viable alternative."
3
On page 5, after line 24, add the following heading and
4 new section 7 and renumber subsequent sections accord-
5 ingly:
6
"DEFINITIONS
7
"SEC. 7. As used in this Act, 'Federal regulatory
8 agency' means-
9
'(a) The Civil Aeronautics Board, the Consumer
10
1888
Product Safety-Commission, the Environmental Protec-
11
tion Agency; the Federal Communications Commission,
12
the Federal Maritime Commission, the Federal Power
13
Commission, the Federal Reserve System, the Federal
14
Trade Commission, the Interstate Commerce Commis-
15
sion, the National Labor Relations Board, the Postal
16
Rate Commission, the Securities and Exchange Com-
17
mission, and the United States Postal Service;
18
"(b) The Food and Drug Administration (being
19
an agency of the Public Health Service in the Depart-
20
ment of Health, Education, and Welfare), the National
R.
REPAID
FORD
21
Highway Traffic Safety Administration (being an
LIBRARY
22
agency of the Department of Transportation), the Occu-
23
pational Safety and Health Administration (being an
24
agency of the Department of Labor), and
Amdt. No. 1982
93D CONGRESS
2D SESSION
S. 4145
AMENDMENTS
4
"(c) Any 'agency' as defined in section 551 of title
5, United States Code, authorized to regulate commerce
by rulemaking or adjudication, the actions of which, as
determined by the Commission, are of substantial im-
portance to the protection of the public's health, safety,
Intended to be proposed by Mr. ALLEN to
S. 4145, a bill to establish a National Com-
mission on Regulatory Reform.
NOVEMBER 18, 1974
Referred to the Committee on Government Operations
and ordered to be printed
or economic interests.".
1
2
3
4
5
6
Toliques
{
Phil A:
Kindly roview and take
whatever action you think
may bc appropriate to
see who is tracking this
bill of whether it requires
WH intervention to push
its interests.
P.
Tuesday 10/22/74
iy
N
6:35 I called Ken Hagerty (legislative staff at OMB).
4657
He said they have a problem with the bill to establish
a National Commission on Regulatory Reform.
The bill was in the House and referred to Interstate and
Foreign Commerce, rather than Government Operations, where an
untimely and complete death is planned for it. Had it been
referred to Government Operations in the House there would have
been action taken on both sides. There are hearings planned
in the Senate on the 21st, 22nd and 26th on the subject, and included
in the subject matter is the Administration's own bill, although some of
the Senators will have their own bills. In the House they're
still working on it. Presently looking at the possibility of drafting
a bill guaranteed to go to Government Operations. Hopefully,
Government Operations could receive the Senate-passed bill where
they could get it through the Senate.
Told Mr. Hagerty I had the impression that other bills had
been prepared.
He said Sen. Magnuson, Chairman of the Commerce Committee in the
Senate, and Harley Staggers in the House have introduced different bills
(their ideas are to make these agencies much more independent) --
to let them submit their own budgets, run their own show and "turn
them loose."
Said he feels "our claim to the word 'reform' is as good as theirs in
this case."
1. FORD LIBRARY
Thursday 10/17/74
7:55 Charlie McWhorter had called yesterday to see
(212) 393-4459
there had been any bills to establish a National
Commission on Regulatory Reform.
The President indicated in his address to the Joint
Session of Congress on 10/8 that he wanted such a
Commission set up.
I find H.R. 17417 by Horton, Erlenborn and Wydler
and S. 4145 introduced by Metcalf and Ervin (by request);
attached are copies of the 10/8 W.H. release and a
copy of the draft bill which Ken Hagerty of OMB sent to me.
I called Charlie back and told him.
Attached are for your information.
Thursday 10/17/74
12:40 Charlie McWhorter called again.
I called Timmons' office -- who suggested I call
Ken Hagerty, OMB Congressional man who keeps up
4657
with all bills that are being submitted.
1:10
Mr. Hagerty says there were four pieces of legislation
sent up on October 8th.
Proposing
National Employment Assistante Act
To establish promodures for achieving a spending level of $300 billion
to Establish national Commission on Regulatory Reform
Amend Sherman Act to increase penalties
The bills on establishment of National Commission on Regulatory Reform
has been introduced in the House -- H. R. 17417 by Horton and Erlenborn
and Wydler -- in the Senate -- S. 4145 by Metcalf and Sen, Ervin (by request)
They will send a copy of the draft of the proposed bill --
SERVICE 1. FORD LIBRARY
Wednesday 10/16/74
3:00 Charlie McWhorter called to say the Administration (212) 393-4459
apparently had a bill introduced which set up a
study commission to look into regulatory agencies.
It was his understanding two people would be appointed
by the President; two by the Speaker, two by the President
of the Senate and two ex officio. Apparently Engman
had made a speech something about it.
4:00 Checked with Janet; she said she could call me back after checking.
Called Tom Jones; he said in the President's address to the
Joint Session of Congress on 10/8/74 -- in one of the earlier
passages(page 6.
A BILL
To establish a National Commission on Regulatory Reform.
Be it enacted by the Senate and House of Represen-
tatives of the United States of America in Congress
assembled, That this Act may be cited as the "National
Commission on Regulatory Reform Act of 1974. "
ESTABLISHMENT OF COMMISSION
Sec. 2. (a) There is established, as an independent
instrumentality in the Executive branch of the Federal
Government, a National Commission on Regulatory Reform
(hereinafter referred to as the "Commission") which shall
be comprised of twelve members selected as follows --
(1) four members from the private sector appointed
by the President,
(2) four senior officials of the Executive branch
appointed by the President,
(3) two Senators appointed by the President of the
Senate,
(4) two members of the House of Representatives
appointed by the Speaker of the House.
2
(b) The President shall designate from the member-
ship, one member to serve as Chairman and one member to
serve as Vice Chairman of the Commission.
(c) Vacancies on the Commission shall not affect
the authority of the remaining members to continue with
the Commission's activities, and shall be filled in the
same manner as the original appointments.
(d) Members of the Commission who are appointed from
the private sector shall receive as compensation the
daily equivalent of the annual rate of basic pay in effect
for grade GS-18 for each day during which they are engaged
in the actual performance of the duties of the Commission.
All members of the Commission shall be entitled to reim-
bursement for travel, subsistence and other necessary
expenses incurred by them in the performance of the duties
of the Commission.
FUNCTIONS
Sec. 3. (a) The Commission shall identify regulatory
activities of the Independent Regulatory Agencies for
detailed review, and conduct such review which shall include,
but shall not be limited to --
3
(i) an analysis of the purposes and objectives
of the regulatory activities;
(ii) an assessment of actual performance in
achieving the purposes and objectives;
(iii) an analysis of the costs and benefits of
each activity; and
(iv) an examination of State and local govern-
mental regulatory activities which interact with
the Federal Independent regulatory system.
(b) The Commission may prepare and publish such
periodic reports as it deems appropriate, but shall
prepare and transmit a report to the President and Congress
not later than one year following the appointment of the
full Commission. That report shall include --
(i) the results of the detailed review conducted
pursuant to subsection (a) ;
(ii) appropriate revisions to overall goals and
procedures of specific Federal regulatory author-
ities;
(iii) specific recommendations for legislative
actions which would improve the effectiveness or
4
the efficiency of the Federal Independent
regulatory agencies reviewed;
(iv) an assessment of the costs, including
transition costs, of any modifications recom-
mended or suggested; and
(v) recommendations for a means of continuing
review of the economic costs of Federal Inde-
pendent regulatory activities.
POWERS
Sec. 4. (a) The Commission is authorized to hold
such hearings, sit and act at such times and places as
it may deem desirable.
(b) Subpoenas for the attendance and testimony of
witnesses or the production of written or other matter
may be issued on the authority of the Commission and shall
be served by anyone designated by the Chairman.
(c) If the Commission receives of any witness or
any Government agency materials which have been submitted
on a confidential basis, and the confidentiality is pro-
tected by statute, the material shall be held in confidence
by the Commission.
5
(d) The Commission is authorized to establish
such advisory committees as may be necessary or appro-
priate to carry out any specific analytical or investi-
gative undertakings on behalf of the Commission. Any
such committee shall be subject to the relevant provisions
of the Federal Advisory Committee Act, (PL 92-463).
Sec. 5. (a) Subject to such rules and regulations
as it may adopt, the Commission, through its Chairman,
shall appoint and fix the compensation of an Executive
Director not to exceed the rate provided for level V of
the Executive Schedule under section 5316 of title 5,
United States Code, and such additional staff as is
deemed necessary without regard to the provisions of
title 5, United States Code, governing appointments in
the competitive service, but at rates for individuals not
to exceed the rate authorized for GS-18 under the General
Schedule.
(b) The Commission is authorized to negotiate and
enter into contracts and agreements as the Commission
determines are necessary in order to carry out its duties.
6
ASSISTANCE OF GOVERNMENT AGENCIES
Sec. 6. Each department, agency, and instrumentality
of the Federal Government, including the Congress and
independent agencies, and State and local agencies,
consistent with the laws and the Constitution of the
United States, shall furnish to the Commission, upon
request of the Chairman, such data, reports, and such
other information as the Commission deems necessary to
carry out its functions under this Act.
TERMINATION
Sec. 7. Ninety days after the submission of the
final report provided for in Section 3 (b), the Commission
shall cease to exist.
AUTHORIZATION
Sec. 8. There is authorized to be appropriated
$500,000 to carry out the provisions of this Act.
in
FORD
GREATE
FOR IMMEDIATE RELEASE
OCTOBER 8, 1974
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
ADDRESS OF THE PRESIDENT
TO THE
JOINT SESSION OF CONGRESS
THE HOUSE CHAMBER
4:02 P.M. EDT
Mr. Speaker, Mr. President, distinguished
guests, my very dear friends:
In his first inaugural address, President
Franklin Roosevelt said, and I quote: "The people of
the United States have not failed. They want direct,
vigorous action, and they have asked for discipline and
direction under our leadership."
Today, though our economic difficulties
do not approach the emergency of 1933, the message from
the American people is exactly the same. I trust that
you are getting the very same message that I am
receiving: Our constituents want leadership, our
constituents want action.
All of us have heard much talk on this very
floor about Congress recovering its rightful share of
national leadership. I now intend to offer you that
chance.
The 73rd Congress responded to FDR's appeal
in five days. I am deeply grateful for the cooperation
of the 93rd Congress and the Conference on Inflation,
which ended ten days ago.
Mr. Speaker, many -- but not all -- of your
recommendations on behalf of your party's Caucus are
reflected in some of my proposals here today. The
distinguished Majority Leader of the Senate offered a
nine-point program.
I seriously studied all of them and adopted some of
his suggestions.
.I might add, I have also listened very hard
to many of our former colleagues in both bodies and of
both the majority and the minority, and have been both
persuaded and dissuaded. But in the end I had to make
the decision, I had to decide, as each of you do, when
the rollcall is called.
MORE
(OVER)
STATE
FORD
Page 2
I will not take your time today with the dis-
cussion of the origins of inflation and its bad effect
on the United States, but I do know where we want to be
in 1976 on the 200th birthday of a United States of
America that has not lost its way, nor its will, nor
its sense of national purpose.
During the meetings on inflation, I listened
carefully to many valuable suggestions. Since the
summit, I have evaluated literally hundreds of ideas,
day and night.
My conclusions are very simply stated. There
is only one point on which all advisers have agreed:
We must whip inflation right now.
None of the remedies proposed, great or small,
compulsory or voluntary, stands a chance unless they
are combined in a considered package, in a concerted
effort, in a grand design.
I have reviewed the past and the present efforts
of our Federal Government to help the economy. They
are simply not good enough, nor sufficiently broad, nor
do they pack the punch that will turn America's economy
on.
A stable American economy cannot be sustained
if the world's economy is in chaos. International
cooperation is absolutely essential and vital, but while
we seek agreements with other nations, let us put our
own economic house in order.
Today, I have identified ten areas for our
joint action, the Executive and the Legislative Branches
of our Government.
Number One: Food.
America is the world's champion producer of
food. Food prices and petroleum prices in the United
States are primary inflationary factors.
America today partially depends on foreign
sources for petroleum, but we can grow more than
enough food for ourselves.
MORE
Page 3
To halt higher food prices, we must produce
more food, and I call upon every to produce the
full capacity. And I say to you and to the farmers,
they have done a magnificent job in the past, and
we should be eternally grateful.
This Government, however, will do all in
its power to assure him, that farmer, he can sell
his entire yield at reasonable prices. Accordingly,
I ask the Congress to remove all remaining acreage
limitations on rice, peanuts, and cotton.
I also assure America's farmer here and now
that I will allocate all the fuel and ask authority to
allocate all the fertilizer they need to do this
essential job.
Agricultural marketing orders and other
Federal regulations are being reviewed to eliminate
or modify those responsible for inflated prices.
I have directed our new Council on Wage and
Price Stability to find and to expose all restrictive
practices, public or private, which raise food prices.
The Administration will also monitor food production,
margins, pricing, and exports.
We can and we shall have an adequate supply
at home, and through cooperation, meet the needs of our
trading partners abroad.
Over this past weekend we initiated a
voluntary program to monitor grain exports. The
Economic Policy Board will be responsible for
determining the policy under this program.
In addition, in order to better allocate our
supplies for export, I ask that a provision be added
to Public Law 480 under which we ship food to the needy
and friendly countries. The President needs authority
to waive certain of the restrictions on shipments
based on national interest or humanitarian grounds
Number Two: Energy.
America's future depends heavily on oil,
gas, coal, electricity, and other resources called
energy. Make no mistake, we do have a real energy
problem.
MORE
Page 4
One-third of our oil -- 17 percent of
America's total energy -- now comes from foreign
sources that we cannot control, at high cartel prices
costing you and me $16 billion -- $16 billion more than
just a year ago.
A primary solution has to be at home. If you
have forgotten the shortages of last winter, most
Americans have not.
I have ordered today the reorganization of
our national energy effort in the creation of a
National Energy Board. It will be chaired with
developing, or I should say charged with developing
a single national energy policy and program. And I
think most of you will be glad to know that our former
colleague, Rog Morton, our Secretary of Interior, will
be the overall boss of our national energy program.
Rog Morton's marching orders are to reduce
imports of foreign oil by one million barrels per day
by the end of 1975, whether by savings here at home,
or by increasing our own sources.
Secretary Morton, along with his other
responsibility, is also charged with increasing our
domestic energy supply by promptly utilizing our coal
resources and expanding recovery of domestic oil still
in the grounds in old wells.
New legislation will be sought after your
recess to require use of cleaner coal processes and
nuclear fuel in new electric plants and the quick
conversion of existing oil plants.
I propose that we, together, set a target date
of 1980 for eliminating oil-fired plants from the
Nation's base-loaded electrical capacity.
I will use the Defense Production Act to
allocate scarce materials for energy development, and
I will ask you, the House and Senate, for whatever
amendments prove necessary.
I will meet with top management of the automobile
industry to assure, either by agreement or by law, a firm
program aimed at achieving a 40 percent increase in
gasoline mileage within a four-year development deadline.
MORE
Page 5
Priority legislation -- action, I should say --
to increase energy supply here at home requires the
following:
One, long-sought deregulation of natural
gas supplies.
Number two, responsible use of our Naval
petroleum reserves in California and Alaska.
Number three, amendments to the Clean Air Act, and
Four, passage of surface mining legislation
to insure an adequate supply with common-sense environmental
protection.
Now, if all of these steps fail to meet our
current energy saving goals, I will not hestitate to ask
for tougher measures. For the long range, we must work
harder on coal gasification. We must push with renewed
vigor and talent research in the use of nonfossil
fuels. The power of the atom, the heat of the sun
and the steam stored deep in the earth, the force of
the winds and water, must be main sources of energy
for our grandchildren, and we can do it.
Number Three: Restrictive Practices.
To increase productivity and contain prices,
we must end restrictive and costly practices, whether
instituted by Government, industry, labor or others.
And I am determined to return to the vigorous enforcement
of antitrust laws.
The Administration will zero in on more
effective enforcement of laws against price fixing and
bid rigging. For instance, non-competitive professional
fee schedules and real estate settlement fees must be
eliminated. Such violations will be prosecuted by the
Department of Justice to the full extent of the law.
Now I ask Congress for prompt authority to
increase maximum penalties for antitrust violations
from $50,000 to $1 million for corporations, and
from $50,000 to $100,000 for individual violators.
MORE
Page 6
At the Conference on Inflation, we found, I
would say, very broad agreement that the Federal
Government imposes too many hidden and too many
inflationary costs on our economy. As a result, I
propose a four-point program aimed at a substantial
purging process.
Number one, I have ordered the Council on
Wage and Price Stability to be the watchdog over
inflationary costs of all Governmental actions.
Two, I ask the Congress to establish a National
Commission on Regulatory Reform to undertake a long
overdue total re-examination of the independent regulatory
agencies. It will be a joint effort by the Congress,
the Executive Branch and the private sector to identify
and eliminate existing Federal rules and regulations that
increase costs to the consumer without any good reason
in today's economic climate.
Three, hereafter, I will require that all major
legislative pro osals, regulations and rules emanating
from the Executive Branch of the Government will include
an Inflation Impact Statement that certifies we have
carefully weighed the effect on the Nation. I respect-
fully request that the Congress require a similar advance
Inflation Impact Statement for its own legislative
initiatives.
Finally, I urge State and local units of
government to undertake similar programs to reduce
inflationary effects of their regulatory activities.
At this point I thank the Congress for
recently revitalizing the National Commission on
Productivity and Work Quality. It will initially concen-
trate on problems of productivity in Government --
Federal, State and local.
Outside of Government, it will develop
meaningful blueprints for labor-management cooperation
at the plant level. It should look particularly at the
construction and the health service industries.
The Council on Wage and Price Stability will,
of course, monitor wage and price increases in the
private sector. Monitoring will include public hearings
to justify either price or wage increases. I emphasize,
in fact re-emphasize, that this is not a compulsory
wage and price control agency.
Now, I know many Americans see Federal controls
as the answer, but I believe from past experience
controls show us that they never really stop inflation,
not the last time, not even during and immediately after
World War II, when, as I recall, prices rose despite
severe andenforceable wartime rationing.
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Page 7
Now, peacetime controls actually, we know from
recent experience, create shortages, hamper production,
stifle growth and limit jobs. I do not ask for such
powers, however politically tempting, as such a program
could cause the fixer and the black marketeer to flourish,
while decent citizens face empty shelves and stand in long
waiting lines.
Number Four: We Need More Capital.
We cannot up our seed corn." Our free
enterprise system depends on orderly capital markets
through which the savings of our people become productively
used. Today, our capital markets are in total disarray.
We must restore their vitality. Prudent monetary
restraint is essential.
You and the American people should know, however,
I have personally been assured by the Chairman of
the Independent Federal Reserve Board, that the supply
of money and credit will expand sufficiently to meet the
needs of our economy and that in no event will a credit
crunch occur.
The prime lending rate is going down. To
help industry to buy more machines and create more jobs,
I am recommending a liberalized 10 percent investment
tax credit. This credit should be especially helpful to
capital-intensive industries, such as primary metals,
public utilities, where capacity shortages have developed.
I am asking Congress to enact tax legislation
to provide that all dividends on preferred stocks issued
for cash be fully deductible by the issuing company.
This should bring in more capital, especially for energy-
producing utilities. It will also help other industries
shift from debt to equity, providing a sounder capital
structure.
Capital gains tax legislation must be liberalized
as proposed by the tax reform bill currently before the
Committee on Ways and Means. I endorse this approach
and hope that it will pass promptly.
Number Five: Helping The Casualties.
And this is a very important part of the
overall speech. The Conference on Inflation made
everybody even more aware of who is suffering most from
inflation. Foremost are those who are jobless through
no fault of their own.
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Page 8
Three weeks ago, I released funds which, with
earlier actions, provide public service employment
for some 170,000 who need work. I now propose to the
Congress a two-step program to augment this action.
First, 13 weeks of special unemployment insurance
benefits would be provided to those who have exhausted
their regular and extended unemployment insurance
benefits, and 26 weeks of special unemployment insurance
benefits to those who qualify but are not now covered
by regular unemployment insurance programs.
Funding in this case would come from the
general treasury, not from taxes on employers, as is
the case with the established unemployment program.
Second, I ask the Congress to create a brand
new Community Improvement Corps to provide work
for the unemployed through short-term useful work projects
to improve, beautify and enhance the environment of our
cities, our towns and our countryside.
This standby program would come alive whenever
unemployment exceeds 6 percent nationally. It would
be stopped when unemployment drops below 6 percent.
Local labor markets would each qualify for grants when-
ever their unemployment rate exceeds 6.5 percent.
State and local government contractors would
supervise these projects and could hire only those who
had exhausted their unemployment insurance benefits. The
goal of this new program is to provide more constructive
work for all Americans, young or old, who cannot find a
job.
The purpose really follows this formula.
Short-term problems require short-term remedies. I
therefore request that these programs be for a one-year
period.
Now, I know that low-and middle-income Americans
have been hardest hit by inflation. Their budgets are
most vulnerable because a larger part of their income
goes for the highly inflated costs of food, fuel and
medical care.
The tax reform bill now in the House Committee
on Ways and Means, which I favor, already provides
approximately $1.6 billion of tax relief to these groups.
Compensating new revenues are provided in this prospective
legislation by a windfall tax, profits tax on oil producers
and by closing other loopholes.
If enacted, this will be a major contribution
by the Congress in our common effort to make our tax system
fairer to all.
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Page 9
Number Six: Stimulating Housing.
Without question, credit is the lifeblood of
housing. The United States, unfortunately, is suffering
the longest and the most severe housing recession
since the end of World War II. Unemployment in the
construction trades is twice the national average.
One of my first acts as President was to
sign the Housing and Community Development Act of
1974. I have since concluded that still more help is
needed, help that can be delivered very quickly and with
minimum inflationary impact.
I urge the Congress to enact before recess
additional legislation to make most home mortgages
eligible for purchase by an agency of the Federal
Government. As the law stands now, only FHA or VA home
mortgages, one fifth of the total, are covered.
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Page 10
I am very glad that the Senate, thanks to
the leadership of Senator Brooke and Senator Cranston,
has already made substantial progress on this legislation.
As soon as it comes to me, I will make at least $3 billion
immediately available for mortgage purchases, enough to
finance about 100,000 more American homes.
Number Seven: Thrift Institutions.
Savings and loan and similar institutions are
hard hit by inflation and high interest rates. They
no longer attract, unfortunately, adequate deposits.
The Executive Branch, in my judgment, must join with
the Congress in giving critically-needed attention to
the structure and the operation of our thrift institutions
which now find themselves for the third time in eight
years in another period of serious mortgage credit
scarcity.
Passage of the pending financial institution
bill will help, but no single measure has yet appeared,
as I see it, to solve feast or famine in mortgage credit.
However, I promise to work with you individually and
collectively to develop additional specific programs
in this area in the future.
Number Eight: International Interdependency.
The United States has a responsibility not only
to maintain a healthy economy at home, but also to seek
policies which compliment rather than disrupt the
constructive efforts of others.
Essential to U.S. initiatives is the early
passage of an acceptable trade reform bill. My special
representative for trade negotiations departed earlier
this afternoon to Canada, Europe, Japan, to brief
foreign friends on my proposal.
We live in an interdependent world and therefore
must work together to resolve common economic problems.
Number Nine: Federal Taxes and Spending.
To support programs, to increase production
and share inflation-produced hardships, we need additional
tax revenues. I am aware that any proposal for new
taxes just four weeks before a national election is, to
put it mildly, considered politically unwise. And I am
frank to say that I have been earnestly advised to wait
and talk about taxes anytime after November 5.
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Page 11
But I do say in sincerity that I will not
play politics with America's future.
Our present inflation, to a considerable
degree, comes from many years of enacting expensive
programs without raising enough revenues to pay for
them.
The truth is that 19 out of the 25 years I
had the honor and the privilege to serve in this
Chamber, the Federal Government ended up with Federal
deficits. That is not a very good batting average.
By now, almost everybody -- almost everybody
else, I should say -- has stated my position on Federal
gasoline taxes. This time I will do it myself. I am
not -- emphasizing not -- asking you for any increase
in gas taxes.
I am -- I am asking you to approve a one-year
temporary tax surcharge of 5 percent on corporate
and upper-level individual incomes.
This would generally exclude from the surcharge
those families with gross incomes below $15,000 a year.
The estimated $5 billion in extra revenue to be raised
by this inflation-fighting tax should pay for the new
programs I have recommended in this message.
I think, and I suspect each of you know, this
is the acid test of our joint determination to whip
inflation in America. I would not ask this if major
loopholes were not now being closed by the Committee on
Ways and Means' tax reform bill.
I urge you to join me before your recess, in
addition to what I have said before, to join me by
voting to set a target spending limit -- let me emphasize
it -- a target spending limit of $300 billion for the
Federal fiscal budget of 1975.
When Congress agrees to this spending target,
I will submit a package of budget deferrals and recissions
to meet this goal. I will do the tough job of designating
for Congressional action on your return those areas which
I believe can and must be reduced.
These will be hard choices and everyone of you
in this Chamber know it as well as I.
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Page 12
They will be hard choices, but no Federal
agency, including the Defense Department, will be
untouchable.
It is my judgment that fiscal discipline is
a necessary weapon in any fight against inflation.
While this spending target is a small step, it is a
step in the right direction, and we need to get on
that course without any further delay.
I do not think that any of us in this Chamber
today can ask the American people to tighten their belts
if Uncle Sam is unwilling to tighten his belt first.
Now, if I might, I would like to say a few
words directly to your constituents and, incidentally,
mine.
My fellow Americans, ten days ago I asked
you to get things started by making a list of ten ways
to fight inflation and save energy, to exchange your
list with your neighbors, and to send me a copy.
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Page 13
I have personally read scores of the
thousands of letters received at the White House, and
incidentially, I have made my economic experts read
some of them, too. We all benefitted, at least I did, and
I thank each and every one of you for this cooperation.
Some of the good ideas from your home to mine
have been cranked into the recommendations I have just
made to the Congress and the steps I am taking as
President to whip inflation right now. There were also
firm warnings on what Government must not do, and I
appreciated those, too.
Your best suggestions for voluntary
restraint and self-discipline showed me that a great
degree of patriotic determination and unanimity already
exist in this great land.
I have asked Congress for urgent specific
actions it alone can take. I advised Congress of the
initial steps that I am taking as President. Here is
what only you can do: Unless every able American
pitches in, Congress and I cannot do the job.
Winning our fight against inflation and waste
involves total mobilization of America's greatest
resources, the brains, the skills and the will power
of the American people.
Here is what we must do, what each and every one
of you can do. To help increase food and lower prices,
grow more and waste less. To help save scarce fuel
in the energy crisis, drive less, heat less. Every
housewife knows almost exactly how much she spent for
food last week. If you cannot spare a penny from your
food budget -- and I know there are many -- surely you
can cut the food that you waste by 5 percent.
Every American motorist knows exactly how
many miles he or she drives to work or to school every
day and about how much mileage she or he runs up each
year. If we all drive at least 5 percent fewer miles,
we can save almost unbelievably 250,000 barrels of foreign
oil per day by the end of 1975.
Most of us can do better than 5 percent by
car pooling, taking the bus, riding bikes or just plain
walking. We can save enough gas by self-discipline to
meet our one million barrels per day goal.
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Page 14
I think there is one final thing that all
Americans can do, rich or poor, and that is share with
others. We can share burdens as we can share blessings.
Sharing is not easy, not easy to measure like mileage
and family budgets, but I am sure that 5 percent more
is not nearly enough to ask, so I ask you to share every-
thing you can and a little bit more. And it will
strengthen our spirits as well as our economy.
Today I will not take more of the time of
this busy Congress, for I vividly remember the rush
before every recess, and the clock is already running
on my specific and urgent request for legislative
action. I also remember how much Congress can get done
when it puts its shoulder to the wheel.
One week from tonight I have a longstanding
invitation in Kansas City to address the Future Farmers
of America, a fine organization of wonderful young
people whose help, with millions of others, is vital
in this battle. I will elaborate then how volunteer
inflation fighters and energy savers can further mobilize
their total efforts.
Since asking Miss Sylvia Porter, the well-known
financial writer, to help me organize an all-out, nation-
wide volunteer mobilization, I have named a White House
coordinator and have enlisted the enthusiastic support
and services of some 17 other distinguished Americans
to help plan for citizen and private group participation.
There will be no big Federal bureaucracy set
up for this crash program. Through the courtesy of such
volunteers from the communication and media fields, a
very simple enlistment form will appear in many of
tomorrow's newspapers, along with a symbol of this new
mobilization, which I am wearing on my lapel.
It bears the single word WIN. I think that
tells it all. I will call upon every American to join
in this massive mobilization and stick with it
until we do win as a Nation and as a people.
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Mr. Speaker and Mr. President, I stand
on a spot hallowed by history. Many Presidents have
come here many times to solicit, to scold, to flatter,
to exhort the Congress to support them in their leadership.
Once in a great while Presidents have stood
here and truly inspired the most skeptical and the most
sophisticated audience of their co-equal partners in
Government.
Perhaps once or twice in a generation is there
such a Joint Session. I don't expect this one to be.
Only two of my predecessors have come in person to call
upon Congress for a declaration of war, and I shall not
do that.
But I say to you, with all sincerity, that
our inflation, our public enemy number one, will, unless
whipped, destroy our country, our homes, our liberties,
our property, and finally our national pride, as surely
as any well-armed wartime enemy.
I concede there will be no sudden Pearl Harbor
to shock us into unity and into sacrifice, but I think
we have had enough early warnings. The time to intercept
is right now. The time to intercept is almost gone.
My friends and former colleagues, will you
enlist now? My friends and fellow Americans, will you
enlist now? Together with discipline and determination,
we will win.
I thank you very much.
END (AT 4:47 P.M.
EDT)
From the office of
Senator Philip A. Hart (D-Mich)
FOR RELEASE: WEDNESDAY PMs
Washington, D.C.
November 20, 1974
Pleading for similar attention to monopoly power in the private sector,
Senator Philip A. Hart (D-Mich) today endorsed establishing a commission to
propose reform of regulatory agencies.
First on Hart's list of needed changes for the agencies is to divest them
of their antitrust responsibilities. "Not only are they incapable of promoting
competition," he said, "but they actually stifle it."
Hart acknowledged that serious problems caused Congress to create the
agencies initially, but said they are not performing today in the broad public
interest.
The agencies stifle competition, he said, "by colluding with their
regulated clients in price-fixing, market division and a variety of other anti-
competitive practices which in the private sector would constitute per se
violations of the antitrust laws."
Hart suggested that two agencies, the Interstate Commerce Commission and
the Civil Aeronautics Board, be exempted from the study commission's assignment.
"We know enough from the past studies of these agencies to commence
legislative hearings on their reorganization," he said.
As examples of anticompetitive agency decisions, Hart listed:
*CAB fixing minimum prices on international charter flights to protect
the higher-than-competitive fares already set with CAB approval by scheduled
airlines. "It is estimated that the CAB decision will raise charter fares by
30 to 40 percent next year and deprive thousands of North Atlantic travelers
of competitive, low-cost air transportation," he said.
*ICC allocating markets for trucking clients. "As a result, an estimated
one out of every five trucks on the road moves empty across a competitor's ex-
clusive territory," he said. "This means wasted fuel as well as higher
consumer prices."
*CAB refusal to approve new airlines. "Immediately after its inception
36 years ago, CAB imposed a total blockade on entry into the trunk air carrier
industry. Yet from 1946 to 1965, in California where CAB has no jurisdiction,
16 interstate air carriers entered the market. Significantly, to fly from
Los Angeles to San Francisco costs only half as much per mile as from Washington
to New York," Hart said.
He called for repeal of the Reed-Bullwinkle Act, which confers antitrust
immunity on regulated industries and for divesting regulatory agencies of their
antitrust responsibilities.
-2-
"Although the law requires regulators to consider anticompetitive impact
of their actions, they frequently conclude that social factors outweigh the
value of competition," Hart said.
He cited the El Paso case-where three times the Supreme Court ruled its
acquisition of Pacific Northwest Gas Company violated the antitrust laws and
"to the very end" the Federal Power Commission defended the act as socially
redeemable.
"It is conceivable that the regulators have become too closely identified
with the regulated to consider in an impartial and judicious manner the anti-
competitive implications of their rulings," Hart said. "I would suggest the
problems of public health and safety should be left to the regulators and
the problems of competition should be left to the judicial guardians of our
antitrust laws."
While strongly endorsing eradicating public monopolies, Hart said,
"this is only a small part of the monopoly problem in America
It has
been estimated that the cost of monopolistic regulation in the public sector
may amount to as much as $21 billion a year. But the costs of monopolistic
practices in the private sector is about $59 billion a year. Hopefully,
the Administration will begin to move against this second monopoly front soon."
Senator Hart appeared today before the Senate Commerce Committee on
S. J. Res. 253, To Establish a National Commission on Regulatory Agencies.
####
TESTIMONY OF SENATOR PHILIP A. HART
BEFORE THE SENATE COMMERCE COMMITTEE ON S.J. RES. 253
TO ESTABLISH A NATIONAL COMMISSION ON REGULATORY AGENCIES
NOVEMBER 20, 1974
MR. CHAIRMAN:
We live in an age of concentrated economic power, an age which has
witnessed the decline of free enterprise and the steady advance of monopoly.
By inaction, we have inherited a New Industrial State in which a handful
of private monopoly enterprises dictate the price, quantity and quality of
roughly half the goods we purchase. At the same time, by our apparent
ineptitude, we have fashinned a Modern Regulatory State in which a handful
of public regulators and their corporate clientele dictate the price, quantity
and quality of a wide range of essential services on which we depend. As
a consequence, we must procure our goods and services from an economic
system founded on private and public monopoly and dedicated to the enrichment
of a few producers at the expense of millions of consumers.
As Chairman of the Subcommittee on Antitrust and Monopoly, I have
presided over dozens of hearings which sought to identify the adverse
economic and social impact of monopolistic practices in the private sector
of our economy. I commend you, Mr. Chairman, for your current efforts to
determine the impact of anticompetitive practices in the public sector of
our economy. It is the public sector that I wish to discuss today, but
in doing that I do not intend to diminish the importance of its private
counterpart. We must not in our zeal to remedy one part of the monopoly
problem disregard our obligation to remedy the other. And I would hope
that President Ford, who has done much to underscore the need to break-up
publicly created trusts, also will lend his support to the break-up of privately
created trusts.
The joint resolution to establish a national commission to study and
report on the competitive impact of the federal regulatory commissions is
indeed a worthwhile undertaking. However, I feel that with respect to at
least two agencies, the ICC and the CAB, we need not await the commission's
recommendation. We know enough from past studies of these agencies to
commence legislative hearings on their reorganization.
In general, my support for the proposed Commission is based on my
objections to the current economic regulatory framework: First, federal
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regulatory commissions stifle competition at the expense of their intended
beneficiary, the consumer. Second, federal regulatory commissions are
inherently incapable of promoting competition and therefore should be
divested of their antitrust responsibilities. Finally, a pro-competitive
regulatory policy would provide consumers with the benefits both of the
marketplace and of the independent commission.
There was a time when the regulatory commissions promoted competition
for the benefit of consumers. Prior to 1920, regulation was oriented toward
preventing the abuses of monopoly. The Interstate Commerce Act of 1887,
for example, was drafted for the purpose of attacking the multitude of
social problems associated with concentrated economic power in the railroad
industry. But after passage of the Transportation Act of 1920, the
regulatory mandate changed perceptibly from antimonopoly to anticompetition.
For the first time, the 1920 Act authorized the ICC to set minimum rates
and to preside over the orderly development of an industry. The delegation
of responsibility, once specific, became general; agencies became managers
of entire industries in the "public interest." Before long, they began to
manage their regulated industries as legal cartels, federal protectorates.
Activities that would have constituted palpable violations of the antitrust
laws if practiced by trade associations or a concert of private executives
were immunized by the regulators.
In stark contrast to an earlier period, there is mounting evidence
today that federal regulatory agencies stifle competition at the expense
of consumers. They impose unjustified public restraints on competition
which increase prices, depreciate quality, promote inefficiency, retard
technological innovation, discourage conservation and misallocate resources.
Public regulators collude with their regulated clients in price-fixing,
market division and a variety of other anticompetitive practices which in
the private sector would constitute per se violations of the antitrust laws.
The CAB, for example, recently fixed minimum prices on international charter
flights to protect the higher-than-competitive fares already set with CAB
approval by scheduled airlines such as TWA and Pan American. It is estimated
that the CAB decision will raise charter fares by 30 to 40 percent next
year and deprive thousands of North Atlantic travellers of competitive,
low-cost air transportation. Likewise, under the guise of "furthering
national transportation policy," the ICC permits motor carriers to collaborate
in rate conferences to fix higher-than-competitive fares which increase prices
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on everything we buy that once moved by truck - which is practicably
everything. Although the ICC can independently investigate rate
proposals, it does so in less than one percent of those filed by the
carriers.
Regulators divide markets for the anticompetitive benefit of their
industrial regulatees. The ICC allocates markets among its trucking
clients, diminishing competition and enhancing monopolistic profits. As
a result, an estimated 1 out of every 5 trucks on the road moves empty
across a competitor's exclusive territory. That means wasted fuel as well
as higher consumer prices. In addition, out of deference to the powerful
trucking interests, the ICC sets prices for truck and rail movement at
the costs of the highest-cost least-efficient mode: trucks. This prevents
the railroads from lowering prices and thereby capturing much of the long-
distance shipping business from trucks. This means not only more wasted
fuel and even higher consumer prices, but presages the economic collapse
of the nation's railroads.
Public regulators exclude competitors by regulating entry in the
interest of their established clients. Immediately after its inception
36 years ago, the CAB, for instance, imposed a total blockade on entry
into the trunk air carrier industry. Yet within the State of California
alone, where CAB jurisdiction does not extend, 16 intrastate air carriers
entered the market between 1946 and 1965. Significantly, unregulated (intrastate)
air fares within California are substantially lower than regulated (interstate)
fares everywhere else in the country. To fly from Los Angeles to San
Francisco, for example, costs only half as much per mile as to fly from
Washington to New York. In short, increased competition would yield lower
prices in the public as well as private sectors of the economy.
Public regulatory agencies also stifle competition by allowing
wholesale mergers of competitors. The examples of regulatory permissiveness
in this area are rife. The ICC, for example, has approved 30 of the 34
major railroad mergers it has considered. And nearly all of them have
resulted in the economic debilitation of both merging partners.
In addition, regulatory agencies may retard cost-saving technological
innovations that threaten either to shift substantial business from one
regulated industry to another or to decrease profits for regulated firms
generally. Thus, it has been alleged that the introduction of container
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ships, truck-rail piggybacking, and telephone interconnects have been delayed
by the Federal Maritime Commission, the ICC and the FCC, respectively, for
the protection of the industries they regulate.
The costs of public restraints on competition are no less than those
which arise from private restraints. Economists Moore, Passell and Ross
have estimated that economic losses in the transportation sector alone due
to government-sponsored price-fixing and the allocation of traffic from
energy-efficient rail and barge carriers to energy-inefficient trucks
amount to more than $6 billion each year. Economists McGowen, Noll and
Peck estimate the losses from public restraints on competition in the
communication field at more than $8 billion a year. In my opinion, these
estimates of enormous economic losses by themselves would warrant the
establishment of a national commission to study the anticompetitive impact
of our regulatory agencies.
My second reason for favoring a study commission is that federal
regulatory agencies are inherently incapable of promoting competition and
therefore, I think, should be divested of their antitrust responsibilities.
The record of regulatory agencies on promoting competition within and among
the regulated industries is frankly appalling. Although the law requires
regulators to consider the anticompetitive impact of their actions, they
frequently conclude that social factors outweigh the value of competition.
Often the social factors reflect the interests of the regulated rather than
the public. Three times the Supreme Court ruled that the acquisition by
El Paso Natural Gas of the Pacific Northwest Gas Company, approved each
time by the Federal Power Commission violated the antitrust laws; and yet,
to the very end, the FPC vigorously defended El Paso's unlawful act as
otherwise socially redeemable.
It is conceivable that the regulators have become too closely
identified with the regulated to consider in an impartial and judicious
manner the anticompetitive implications of their rulings. One possible
remedy would be for Congress to repeal legislation such as the Reed-Bullwinkle
Act which confers antitrust immunity on regulated industries and to divest
regulatory agencies of their antitrust responsibilities. The Bank Merger
Acts of 1960 and 1966 provide an enlightening precedent in this regard.
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They vest the Attorney General and the courts with an antitrust veto on
bank mergers which have been approved by the Comptroller of the Currency.
If within 30 days after the Comptroller approves the merger, the Attorney
General commences an antitrust action attacking its validity, the agency's
approval is stayed and the issue becomes a matter for the courts to decide
de novo. In this way, the determination of anticompetitive impact is
transferred from the regulatory agency to the Nation's antitrust enforcement
authorities. In like manner, the proposed study commission might wish
to consider the merits of shifting antitrust review of mergers and other
public restraints on competition from the regulatory agencies which create
them to the Attorney General and the courts which may impartially consider
them. The problems of public health and safety, I would suggest, should
be left to the regulators; the problems of competition should be left to
the judicial guardians of our antitrust laws.
My final reason for supporting the proposed commission is that if
may enable Congress to formulate a new pro-competitive regulatory policy
which would provide consumers with the benefits both of the marketplace
and of the independent commission. The traditional view of economic
regulation is that it complements antitrust policy. "It appears that the
basic goal of direct governmental regulation through administrative bodies,"
the D.C. Circuit Court of Appeals recently noted, "and the goal of indirect
governmental regulation in the form of antitrust law is the same -- to
achieve the most efficient allocation of resources possible." (Northern
Natural Gas Co. V. FPC, 399 F.2d (1968) 953, 959). That is the theory;
but in fact, the result of much economic regulation would appear to be
protection of the regulated regardless of the impact on the economy. As
the Neal Antitrust Task Force concluded: "In the regulated sector of the
economy, the bias of policy and its enforcement is overwhelmingly against
competition."
It is not my suggestion that we abolish regulatory agencies. Rather,
I am suggesting that they be relieved of their power to immunize anti-
competitive practices. We will always need regulation which complements
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rather than replaces competition in those areas where the marketplace is less
qualified to serve, including public health, safety and conservation of
the environment. And in these non-economic areas, our regulatory agencies
have provided this country with an invaluable and irreplaceable service.
In addition, we may require some form of government intervention where
private industry is uninterested or incapable of fulfilling certain social
needs, such as in providing urban and intercity mass transit. But our
economic policy with respect to both the private and public sectors should
be uniform: to promote the maximum amount of competition consistent with
the public interest.
President Ford is to be commended for his decision to push for reform
of our regulatory system, with its public monopolies and its federal
protectorates. But I must stress again that this is only a small part of
the monopoly problem in America. Approximately 20 percent of our national
income is directly or indirectly controlled by federal regulation and
government enterprise. What about the remaining 80 percent of our economy?
It has been estimated that the cost of monopolistic regulation in the public
sector may amount to as much as $21 billion a year. By contrast, it has
been estimated that the costs of monopolistic practices in the private
sector may amount to nearly three times that figure, or $59 billion a year.
Hopefully, the Administration will begin to move against this second
monopoly front soon.
***
Monday 11/25/74
10:20
Joe Dawahare (pronounced Dawhare) -- Legislative
224-4343
Assistant to Sen. Cook -- said he had read several
articles in the paper about the study they were
considering concerning the functions of all agencies
and any overlap, where it could be streamlined, etc.
Wondered how it looked, etc.
I have checked John Carlson's office and he advises
Lou Engman of FTC has made a speech about it recently,
and the President has referred to it a number of times
in speeches (Mr. Carlson will bring up a copy of the Engman
speech)
(attached)
FEDERAL
TRADE
COMMISSION
WASHINGTON, D.C. 20580
FOR RELEASE UPON DELIVERY OR AT NOON (EDT), MONDAY, OCTOBER 7, 1974
ADDRESS BY
LEWIS A. ENGMAN
CHAIRMAN
FEDERAL TRADE COMMISSION
BEFORE THE
1974 FALL CONFERENCE OF THE
FINANCIAL ANALYSTS FEDERATION
DETROIT HERITAGE HOTEL
DETROIT, MICHIGAN
OCTOBER 7, 1974
BERALD R. FORD TIBRARY
I imagine many of you followed with the same interest I did
the summit and pre-summit economic conferences last month
Probably you were not surprised at the fact that inflation
or perhaps, to put it more accurately, "stagflation" - was widely
agreed to be the country's number one problem.
You should not have been surprised either that there was
little agreement on how to deal with it. You getthat many economists,
businessmen and labor leaders together and you will be lucky if you
can get them to agree on where to go to lunch.
Can you imagine acting as moderator for that group? I can
think of less frustrating jobs. Like being the construction foreman
on the Tower of Babel, for instance.
I don't want to be unfair to the summits. Although gatherings
like that do not exactly produce an ideal decisionmaking environment,
I believe it was worthwhile to get everyone's views out on the table.
It also demonstrated that the present inflation is not a problem susceptible
to a quick or easy "fix".
As for getting a consensus from that many independent minded
people on a subject as complex as how to stop inflation, I suspect that
anything resembling agreement would be most likely to be a sort of
eclectic anthology of economic wisdom, and I'm not at all sure that is a
good idea.
If we are going to make it up the long haul ahead of us, it is
more assuredly not going to be in an economic policy vehicle that has
John Kenneth Galbraith's engine block, Otto Eckstein's clutch,
Dick Gerstenberg's drive shaft and Leonard Woodcock's transmission.
That kind of compromise approach reminds me of the husband
and wife, one of whom wanted to paint the house red, and the other
blue. Since neither would settle for the other's color, they mixed
the two paints together and got purple, which was ugly but okay
because neither one of them liked it.
In economic planning as in painting, the only thing to be said
for that approach is that it is equitable.
Certainly there is no shortage of suggestions for how to deal
with inflation.
On the front shelf is the traditional medicine, prescribed since
time immemorial for the symptom of uppity prices: tight money and a
balanced budget. There are those who doubt the effectiveness of this
old cure in a cost-push world, but its proponents still outnumber its
detractors.
In addition, there are some, myself among them, who also believe
that inflation can be reduced by purging the economy of anti-competitive
1.
behavior. The FTC and the Justice Department's Antitrust Division are
FORD
SEAL
both looking with especial care for the types of trade restraints,
LIBRARY
2 -
collusion and unfair marketing practices which reduce competition
and lead to higher prices for consumers.
Some have suggested that import duties and quotas be lifted
to permit entry of more lower priced foreign goods.
Others cast their vote for the reimposition of controls or, at
least, for some form of guidelines.
But the suggestion enjoying perhaps the greatest vogue at the
moment is that inflation can be curbed by reducing the government's
involvement in the economy; more specifically, by reducing its regulatory
role.
It is not just the survival-of-the-fittest, every-man-for-
himself free-marketeers who make this suggestion. It has the support
of many people generally viewed as liberal and interventionist in
their approach to the economy.
It has received the blessing of Ralph Nader.
And it is about to be endorsed by Lew Engman.
And here's the reason. Though most government regulation
was enacted under the guise of protecting the consumer from abuse,
much of today's regulatory machinery does little more than shelter
producers from the normal competitive consequences of lassitude and
inefficiency. In some cases, the world has changed reducing the
original threat of abuse. In other cases, the regulatory machinery has
simply become perverted. In still other cases, the machinery was a
mistake from the start. In any case, the consumer, for whatever presumed
3
abuse he is being spared, is paying plenty in the form of government-
sanctioned price fixing.
Take the airline industry for instance. Under the Federal
Aviation Act, the Civil Aeronautics Board controls the entry of new
carriers to the market, controls the distribution of routes and has
the power to disapprove or modify an airline's rate change proposal
after hearing complaints from the so-called competition.
The result is that in the areas of rates and routes for all intents
and purposes there is no competition at all. Competition, where it
exists, is concentrated on the one unregulated aspect of airline activity,
customer service. That is why the average airline commercial looks
like an ad for a combination bawdy house and dinner theatre
This may lead to some pleasing amenities. But it puts the
customer in the position of captive buyer. Nobody asks him if he would
rather have the money than the movie, or if he would like to brown
bag it from New York to California instead of having the steamship
round of beef au jus on the little plastic plate. He is just asked to
pay up.
If you have any doubt that one consequence of the CAB's control
over rates and routes is higher prices, you need only look at what
happened some years ago in California when Pacific Southwest Airlines,
an intrastate carrier not subject to CAB rate regulation or entry restrictions,
- 4 -
entered the San Francisco/Los Angeles market with rates less than half
those being charged by the interstate CAB certified carriers TWA,
Western and United. What happened? After attempting to ignore PSA's
lower fares, the CAB carriers were forced to cut their rates to meet the
competition. Even today, to fly from L. A. to San Francisco it costs only
about half as much on a per-mile basis as it costs to fly from Washington to
New York.
Of course, it is true that a major airline will try to make a fat-
profit on a high volume run like Los Angeles/San Francisco because
it knows it is going to a lose a bundle flying between Black Rock and
Where-am-I City which the CAB, with the full support of concerned and
interested members of Congress, requires it to do.
Except in those instances where it encounters competition from
a PSA, it will succeed in this little book balancing act, charging one
customer to pay for the flight of another so the CAB can perpetuate
a network of routes which no longer and perhaps never did conform
to the pattern of demand.
Certainly, no interstate carrier need be excessively concerned
about new competition. The CAB has not approved entry of a new
trunk carrier to the market since 1938. And just last month, the
CAB rejected an application by Laker Airways, a privately-owned
British airline, to fly regularly scheduled New York/London flights for
- 5 -
$125 each way. That price, by the way, is little more than one-third
of the economy fare charged now by Pan Am, TWA, and the other
members of the international rate-fixing cartel.
As if that were not enough, the CAB also has been moving
in directions which would raise prices in the heretofore unregulated
charter market. Recently, it approved discussions between scheduled
and charter carriers in hopes that a mutually satisfactory rate-floor for
charter flights could be agreed to. I hardly need add that any such floor
would be higher than current rates
I would find it hard to imagine a more obvious instance of prices
being pushed up by regulation than the case of the airlines.
Unfortunately, I do not have to imagine such a case, for we have
the Interstate Commerce Commission. That body, as you know, was
created way back in 1887 supposedly to protect shippers against the
monopolistic power of the railroads.
But by 1935, the nation had sprouted a network of highways,
and the trucks which rolled over them were biting deeply into the
market power of the railroads.
With the trucking field still wide open to new entrants, this
might logically have been the time to dismantle the ICC. The railroad
monopoly was broken, competition could take its course.
- 6 -
Did that happen? No sir. Instead of freeing the railroads
from regulation, Congress, in the Motor Carrier Act of 1935, just
cast the regulatory net wider to include the interstate truckers as
well.
As a result, today we have a situation in which market
entry by new trucking firms is restricted by the ICC at the same
time that rates are being fixed by the carriers who are given
antitrust immunity to do so. Though the ICC has authority to
investigate rate findings by the carriers, according to testimony given
before a House Committee two years ago, the Commission was doing
so in less than one percent of the cases.
And what is the result? Well, when the Supreme Court held some
time ago that fresh dressed poultry was an agricultural commodity
under the ICC Act and thus not subject to regulation, the average rate
for shipping it fell by 33 percent. It is gratifying to note that the party
who got the short end of the 5-4 decision was a certificated carrier who
was trying to stamp out the competition of an uncertificated carrier who
had the temerity to haul chickens without a license.
I have given you just a couple of examples. But, when you take
all of the industries subject to direct federal regulation -- that's air,
rail and truck transport, power generation, television, radio, the
securities industry and others -- it works out to a substantial fraction
of the economy.
7
In fact, it is estimated that these regulated industries account
for 10 percent of everything made and sold in this country What
makes them even more important from the point of Kew. of inflation
is that they tend to be industries whose prices show up as costs buried
in the prices of hundreds of other products.
Take transportation for example. When you change the price
of hauling freight, that change is going to show up in a lot of other
products. Moreover, it will show up not just once but again and again.
By the time you get a piece of meat from the pasture to the plate, it
carries with it numerous transportation charges.
And these industries subject to direct regulation are only part
of the story.
There are, in addition, the dozens and dozens of federal and
state regulations, prohibitions, proscriptions and requirements all
of which subvert competition in the name of a greater objective --
though sometimes it is hard to see exactly what that greater objective
is or on whose judgment its greatness rests. I refer to things
such as:
*
state laws against advertising the prices of eyeglasses
or prescription drugs;
*
the Jones Act forbidding foreign competition in the shipping
business between U.S. ports;
- 8 -
*
the Federal Government's own "buy American" procure-
ment preferences which can allow domestic producers to charge as
much as 50 percent more than foreign sellers for some items. I
should add that many states have similar preferences;
*
an agricultural price support program which asks the
consumer to buy with his tax dollars what he does not want, cannot
use and will never eat;
*
an agricultural export subsidy program which asks
the consumer to pay the farmer to sell his product to some foreign
buyer at a price lower than that at which the consumer himself can get it.
The effect of some of this regulation may perhaps be seen in some
recent events in California. This summer the California Milk Producers
Association dumped 420,000 gallons of fresh skim milk into Los Angeles
harbor. The dairy co-op said that it was necessary to dump the milk
"because no market could be found for it."
At what price, I might ask. I suspect that more milk could be
sold if it were not for the elaborate government programs designed
to maintain higher than competitive prices on the producer, processor
and on the retail levels.
SEPTEM R. FORD LIBRARY
I mention only a few. Former Council of Economic Advisers'
member Hendrik Houthakker has compiled a list of 45 regulatory policies
that contribute to inflation.
- 9 -
The list of noble goals advanced to support these regulatory
subsidies is virtually without end. I'm as humane as the next guy. I
am not critizing these goals. A responsive government must take action
to address the demands of the people.
But mischievous means are not justified by noble ends.
To me, the most distressing development is the pervasive and
well-accepted dishonesty that pervades the government's approach to
regulation.
The existing crazy quilt of anti-consumer subsidies embodied
in the intricately woven fabric of federal and state statutes and regulations
is pernicious because:
--
The subsidies are deliberately hidden from public
view.
--
The government has irresponsibly lost track of the
actual cost of these subsidies.
---
In most, if not all, cases, we have adopted the least
efficient form of subsidy with the purpose of hiding
the subsidy from the public and obfuscating its true
cost.
From time to time, proposals have been made to provide direct
cash subsidies in lieu of the patchwork of regulatory subsidies that
now pervade our economy. Opponents rise indignantly to object that
- 10 -
hard-working individuals and businesses don't want handouts. Well,
a rose by any other name
....
Our airlines, our truckers, our railroads, our electronic media,
and countless others are on the dole. We get irate about welfare fraud.
But, our complex systems of hidden regulatory subsidies make welfare
fraud look like petty larceny.
I have no way of knowing what the numerous regulatory measures
cost the consumer each year. I have seen private estimates indicating
that the annual costs in the transportation area alone may exceed
$16 billion.
I invite students of this kind of thing to come up with their own
figures. Whatever they are, I think we can all agree on this: the costs
are too high.
There are free market purists who are reveling in the growing
disenchantment with heavy-handed regulation. They have contended
all along that the market was the fairest and most rational allocator
of resources; that you could no more improve its performance by
regulation than you could improve the performance of a fine watch
by poking around in its works with a paperclip.
It seems to me that these arguments -- taken to the extreme --
are both naive and destined to be ignored. They are naive because they
stress only the virtues of the long range adjustment facility of the market
- 11 -
system. They ignore the short term dislocations that market forces
produce and they discount legitimate social objectives that enlightened
peoples choose to pursue. Voters do not live on bread alone. And to the
extent they do live on bread, it is this year's bread, not next year's.
The market will not prevent bank failures or compensate their
victims. It will not guarantee safe toys or unadulterated drugs And
it will not ensure a clean environment.
If we want to be assured of these things, we may need some
regulation.
Regulation may also be needed to protect the consumer where
natural monopolies exist, that is, where economies of scale argue strongly
for a market being served by a single producer. Electric power and
local phone service are good examples of this.
These are instances in which some would say that the benefits of
regulation can be said to exceed its costs.
But the trade-off between benefits and costs is not always an
easy determination to make. Moreover, neither the benefits nor the
costs will remain constant over time. Some of the costs, such as
direct expenditures, are obvious. Others, such as the costs the
consumer pays for diminished competition, are not SO obvious.
12
The problem of weighing costs and benefits is made more
complex because often it is necessary to compare unlike qualities.
(How, for instance, do you give pain and suffering a monetary value?)
Or because those who bear the costs may be far more numerous than
those who reap the benefits. (In order to spare one person 100
units of discomfort, is it fair to assess 100 people more than one unit
each?)
I don't know the answers to these questions. The point is that
each and every regulation or regulatory policy that contributes to inflation
should be re-examined to make sure that the trade-off between costs
and benefits which presumably brought about its institution, is still
valid. We may well find that some of the more costly ones look a lot
less attractive in a world of 12 percent inflation than they did in a
world of 3 percent inflation.
We should also re-examine them to see whether those imagined
trade-offs were accurate in the first place. For instance in the case of
the ICC, rates wasted no time in going up immediately after the agency's
creation.
When truckers are permitted to fix prices and are subject to a
panoply of regulations all because the transportation mode with which
they compete once had excessive market power, one is hard pressed for
a logical explanation. When airlines are going broke despite the fact
13
that they charge twice as much as others are willing to fly for, something
is seriously wrong.
The fact of the matter is that most regulated industries have
become federal protectorates, living in the cozy world of cost-plus,
safely protected from the ugly specters of competition, efficiency and
innovation.
There are those who hold the businessman to be so unprincipled
and greedy that they regard any governmental interference with his
free movement as an addition to the social welfare.
Experience would seem to contradict that point of view. In
point of fact; the effect of government interference frequently has been
to remove the one thing that stood in the way of the anti-social exercise of
greed; I am referring to competition. Meanwhile, the scheme of regulation
has proven at least as susceptible to the lure of protectionism as the
private interests it replaced.
As a political matter, we will not be able to pare away our excessive
regulatory fat unless the public can be assured of adequate protection
against the abuses that regulation was designed to curb.
We at the Federal Trade Commission can help provide that
assurance. Through a vigorous antitrust policy, we can help prevent
the aggregations of private market power which permit consumer abuse
and create a need for regulation.
- 14 -
But there will still be cases in which regulation is necessary.
For those cases, the advice I would offer is that the costs of the regulation --
and I mean the direct costs, the indirect costs, the present costs and the
future costs -- be fully understood and consister with what we hope to
gain. The task won't be simple. Cost calculations of the type I propose
are likely to be imperfect. We currently lack not only accepted calculation
methodologies but also much of the raw data necessary to informed
estimates. But unless substantial progress is made, our regulators
will continue to stumble around in an increasingly expensive game of
blind man's bluff. Unless and until these facts are brought to light, I
see little hope for assuming that public actions will match up to public
expectations or the public interest.
15
Monday 11/25/74
11:40 Checked with the House Documents and they advise
that there are three bills sent up to establish a National
Commission on Regulatory Reform --
in the
H.R. 17417, /House Committee on Interstate and Foreign
Commerce.
H.R. 17461 --- in the same Cmte.
S. 4145, in the Senate Government Operations Committee.
Advised Jee Dawahare in Sen. Cook's office.
SERIAL FORD LIBRARY
Monday 11/25/74
10:20
Joe Dawahare (pronounced Dawhare) -- Legislative
224-4343
Assistant to Sen. Cook -- said he had read several
articles in the paper about the study they were
considering concerning the functions of all agencies
and any overlap, where it could be streamlined, etc.
Wondered how it looked, etc.
I have checked John Carlson's office and he advises
Lou Engman of FTC has made a speech about it recently,
and the President has referred to it a number of times
in speeches (Mr. Carlson will bring up a copy of the Engman
speech).
FOR IMMEDIATE RELEASE
JUNE 25, 1975
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
PRESS CONFERENCE
OF
RODERICK HILLS
COUNSEL TO THE PRESIDENT
PAUL MAC AVOY
COUNCIL OF ECONOMIC ADVISERS
JOHN O. PASTORE
SENATOR FROM THE STATE OF RHODE ISLAND
JOHN E. MOSS
REPRESENTATIVE FROM THE STATE OF CALIFORNIA
AND
JAMES C. WRIGHT, JR.
REPRESENTATIVE FROM THE STATE OF TEXAS
THE BRIEFING ROOM
10:05 A.M. EDT
MR. NESSEN: The President met for slightly
over two hours with 12 Members of the Senate, 12 Members
of the House, and various members of his staff on his
proposals to simplify the regulatory agencies.
Let me just quickly give you one or two high-
lights from the President's opening statement, and then
we are going to have to brief you on this Rod Hills, the
Counsel to the President, W. O is heading the Domestic
Council review group that is overseeing the President's
ideas in this area; Paul MacAvoy, a new member of the
Council of Economic Advisers, who also is working in this
area, Senator Pastore; Congressman Jim Wright, and
Congressman Moss, whose committees will be dealing with
this problem.
MORE
FORD
SEALS
- 2 -
The President said that since he has been in
the White House and even before that, in Congress, he
has sensed a growing apprehension and concern about
regulatory agencies, the amount of time they consume and
the amount of added costs they put into the economy,
and lay on the consumer.
He said that they were established to serve
the public interest but that with the passage of 25 or
30 or 50 years, they have got to be looked at again
now to make sure they are still serving the public
interest.
The discussion was broken down into three
areas -- economic regulation, health and safety regu-
lation, and administrative procedures.
The President made clear that he does not
want to dismantle the regulatory agencies. He has no
intention of dismantling environmental regulations,
health protections and consumers' rights, but he did
say that the cost-to-benefit ratio needs to be looked
at.
He wants to make sure that these agencies
still serve the public interest in the 1970s rather
than having gotten away from their original intention
of serving the public interest.
He told the Members of Congress that he hoped
that they could work together, the White House and
Congress, because regulatory agencies are a joint
responsibility of the Executive Branch and of Congress.
That is a summary of what the President said
at the beginning, and for more details on the meeting I
am going to give you these gentlemen from Congress and
from the White House.
MR. HILLS: Let me say, generally, the purpose
of the meeting was to seek a consensus from the group
gathered as to the major objectives of regulatory reform.
I think the President was extremely gratified to find
that there was indeed not only a consensus but unanimity
that regulatory reform was a critical item for the
future.
The purpose of the consensus, of course, is
in preparation for his meeting with all the commissioners
of the independent regulatory agencies, which will take
place two weeks from today. The consensus, which I
think I can state without fear of dissent, was broadly
in the area of economic regulation, the need for more
flexible pricing, more redefinition of the objectives
of agencies that had been in effect for a very long
period of time, and in some areas more ease of entry.
MORE
MASSACHUSETTS
TOWN
- 3 -
Of course, as regulation falls away from
certain economic types of regulation, it is generally
agreed today that the antitrust procedures and more effec-
tive antitrust protection must take its place.
In the area of general regulation, the need
for more cost benefit analysis was generally accepted;
in other words, regulation should not be passed in
a vacuum, rather they should have the benefit of an
intensive cost analysis, not necessarily that you can
trade off lives or safety against money, but that
people passing regulations must know what it costs in
order to choose the best alternatives.
Finally, and certainly the most dramatic
assent, was that regulation takes too long and that
the substance that is created by that form of regulation
is perhaps the most deleterious effect upon the
regulatory efforts of Government.
The form of problems with big business and
little business was particularly harmful. The trouble
of small businessmen to deal with regulation was a
prime matter. There was not complete agreement on
every matter. Certainly, in the area of consumer
representation, there was a difference of approach.
There are a number of people, a number of
Senators and Congressmen, that feel there should be
a consumer agency to represent the consumers' points
of view. The President and others present felt that
there was indeed a stronger role for the consumer,
but that it could best be met by an effort in each
individual agency; in other words, redoing the agency.
So there was broad assent, there was broad
consensus the President sought, but of course there
were some areas of disagreement, and we are all
available for questions.
Senator, would you care to speak?
SENATOR PASTORE: First of all, I think this
is one of the better meetings called by the President.
He should be applauded for it.
There is no question at all that the habits
of 1950 cannot be the procedures of the 1970s. A great
deal needs to be done to modernize our regulatory
agencies.
On the other hand, it is not an easy solution
and it will require time, it will require patience, and
will require public confidence.
MORE
- 4 -
I pointed out, of course, that there are
several elements that could be taken into account
as a remedy, on a short-term basis. For instance, only
too often -- and this is not a reflection on the present
Administration, it has been with all Administrations --
certain candidates who failed an election are usually
dumped over on a regulatory agency.
Many, many times we take people out of industry
and put them on a regulatory agency that is to regulate
that particular industry. And that is number one.
In other words, we ought to have people who
are independent, people who can be impartial, and
people who are not using that position as a training
ground to get a job with a regulated industry once
they leave that position. And that is one of the
first things.
Another thing, too, we have to be very, very
careful that the bureaucrats, the people who are
charged with dealing with the public, will use courtesy,
will not act as though they are despots, will not act
as though they have plenipotentiary powers, that they
will be patient with people.
I have known of cases where under OSHA they
would walk into an establishment and summarily fine
people for an offense where it was innocently done.
Now you can carry out the meaning of a
statute, you can carry out a meaning of a regulation
without being arrogant about it, and there has been
too much of that, and that has been a harrassment on
the part of business.
On the question of a speedy conclusion, we
are all interested in that, but in the process we have
got to be very, very careful in that we are dealing with
the public and we cannot deprive the public from a
judiciary remedy.
In other words, if they feel that they have
been aggrieved, you can't deny them the right to go
to court and our court calendars are crowded and for
that reason, of course, there is delay upon delay.
Now, all of this has to be taken into account
and it won't be easy, as I said before, but it needs
to be done and I repeat again this is the first of a
series of meetings with the President. It can't be
done by the Congress alone. It can't be done by the
Administration alone. It has to be a joint effort
and we all have to look at the objective and do it in
a very impartial way.
Thank you very much. If anyone wants to ask
me a question, I will be glad to answer.
MORE
- 5 -
Q
Senator, do you agree with Mr. Hills
that there was a broad consensus in this meeting?
SENATOR PASTORE: Yes, there was. There was
a broad consensus that something needs to be done, and
rather quickly.
Q
Senator, you mentioned specifically the
quality of the nominees to these agencies. In fact,
your own subcommittee has passed on a number of these
nominees so would you not say the Senate would have
to share the blame?
SENATOR PASTORE: Absolutely, but we have
rejected quite a few of them. As a matter of fact,
we have the Coors amendment (nomination) before us now.
That is highly controversial. You wait and see what
happens to that.
Q
Senator, how much of this can be done
without new legislation?
SENATOR PASTORE: First of all, I think
there ought to be an admonishment on the part of all
of these people who are entrusted with enforcing
regulations to act with decency, with dignity and
courtesy.
Q
Senator, excuse me. Backing up to the
Coors nomination, are you saying that your subcommittee
is left with the position to reject that nomination?
SENATOR PASTORE: I did not say that at all.
As a matter of fact, I said it is highly controversial.
We have separated it from the other seven nominees
because we have to deal with that separately. There is
a lot of objection to it.
Q
Senator, did you get the impression that
you were far apart from the Administration on the matter
of health and safety regulations?
SENATOR PASTORE: Not too much. Not too much.
Of course, you have got to realize that the President
talked in general terms and it is a matter of implementation.
I thought it was a very healthy meeting and I think
it was a very productive one and I think something good
will come out of it.
MORE
- 6 -
Q
Senator Pastore, do you kind of reject the
charge Ralph Nader made this week that the regulatory
reform is merely a ploy by the Ford Administration to
build political support for 1976?
SENATOR PASTORE: I think it is too soon to say
that.
Q
Do you think there is any kind of scape-
goatism looking for somebody to blame the economic crisis
on?
SENATOR PASTORE: I would not say that. I would
not accuse the President of the United States of that
deception.
Q Mr. Hills, the Adminis ration a few weeks
ago proposed some regulatory reform in surface transpor-
tation, in rails. Supposedly, there is going to be some
more reform in trucks and some easing of regulations of
the airlines. Nothing has been heard. When is it coming?
MR. HILLS: This meeting is an effort to find
the consensus for most matters, and they are coming.
Considerable work has gone on over the last few weeks
between various of us on the White House staff and the
Hill staff with the agencies.
I think considerable has been done, if you
consider how such a short period the President has been
in office. I think you will find considerable efforts
at specific legislation in the very near future. I think
also you will find a greater consensus around such
legislation when it comes to the Congress.
Q
May we hear from the two experts from the
House?
CONGRESSMAN MOSS: I want to first agree that
there was a very broad consensus that reform must take
place, and particularly in the area of economic regulation.
There was not sufficient in depth discussion of health and
safety to characterize it as a reform, but it was not
marked disagreement.
Another broad consensus of great significance
is the recognition of the fact that neither the Congress
nor the Executive can effect the changes necessary by
themselves. It is going to require the closest cooperation
on a continuing basis if a restructuring of the regulatory
agencies is to be achieved.
There is a recognition that far too much time
is wasted in the regulatory process. It can be expedited
without the sacrifice of due process, and due process is
certainly an essential protection, both to industries and
to the public.
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We have a disagreement on the matter of a
consumer advocate. There is a division. It is not a
partisan division because support and opposition surfaces
from both sides of the political spectrum here in
Washington.
I think the significance is that we did meet.
and, after a meaningful discussion, agreed to seek to work
cooperatively and try to expedite the process of re-
evaluating these agencies.
We in the House in several committees -- mine
having the broadest jurisdiction over regulatory agencies --
are working on a greatly accelerated timetable, reviewing
each of the agencies within the jurisdiction of the
House Commerce Committee.
We will have that work completed during the life
of this Congress, and we will have recommendations for
actions which will not in many instances require additional
legislation.
There was a consensus that a change of attitude
on the part of those engaged in the regulatory process
would be refreshing, would be constructive and would
restore a great deal of public confidence, a very essential
ingredient, in the work of these agencies.
I think that is a fair summary of the achievements
of this morning.
Q
Did you discuss deregulation of gas prices?
CONGRESSMAN MOSS: We did not discuss deregulation
of gas prices.
Q
Mr. Moss, somewhere down the road, can we
anticipate a reduction in the number of regulatory
agencies through consolidation?
CONGRESSMAN MOSS: I would not rule it out, but
at this moment, I think it would be premature to state that
there would be a reduction.
Q Mr. Moss, how do you evaluate the present
Office of Consumer Affairs?
CONGRESSMAN MOSS: The evaluation of the present
Office of Consumer Affairs operates really within a very
limited scope of jurisdiction. I don't think it would be a
adequate substitute for the consumer advocate agency,
which is being urged in both Houses of Congress at this
time.
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Q
Sir, when you talk about regulatory
reform, are you talking about this year or next year,
or beyond that? What kind of time?
CONGRESSMAN MOSS: I hope I am talking about
a continuing review correcting faults as they surface
and starting at this time to accelerate the process of
identifying problem areas. I don't think we will ever
be finished with regulatory reform.
Q
Mr. Moss, if Congress approved a consumer
advocacy agency and the President vetoed this legislation,
do you think the Congress would be able to override
the veto?
CONGRESSMAN MOSS: I would want, first, to
hear the reasons for the veto and see the final form
of the agency presented to the President before being
able to make that kind of judgment.
Q
Congressman, is there a consensus in the
view that disputes on economic matters that are now
empaneled as matters of equity by the regulatory agencies
should be referred to the courts? And if so, would that
not delay things further?
CONGRESSMAN MOSS: Well, it presupposes that
we would have them have direct access to the courts
from the beginning and that, of course, is not in
my judgment anticipated. We have two very recent
complete re-enactments of regulatory agency legislation --
the Federal Trade Commission Act of last year and the
rewrite of the Securities and Exchange Commission Act
this year -- and I would suggest that those two indicate
both the consensus of Congress and of the Executive.
They resulted in a clarification of authority,
a broadening of authority of the agencies, and that was
achieved with the support of the White House, the
Department of Justice, the regulatory commissions, and
a major part of the regulated industry.
Q
You do not have any consensus on abolition
of, say, the Interstate Commerce Commission or the Civil
Aeronautics Board?
CONGRESSMAN MOSS: I do not. A restructuring,
yes; an abolition, no.
Q
You were talking, Mr. Moss, of having
something ready in your committee by the end of this
Congress. That doesn't seem to be very speedy action,
to me. Don't you expect something before that?
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CONGRESSMAN MOSS: Oh, I expect a great deal
before the end of this Congress. I was talking in
that context about an evaluation of the work of each of
the agencies within the jurisdiction of the House
Interstate and Foreign Commerce Committee, which has
the independent regulatory commissions and the Federal
Food and Drug Administration, and related agencies.
The total review by the end of this Congress --
we will be prepared to move with reports setting forth
very precise recommendations before the end of this
session of this Congress in some areas.
Q Which areas, Mr. Moss?
CONGRESSMAN MOSS: I think one of the first
will be with the Federal Power Commission, secondly with
the Federal Energy Administration, and from there on
there are several candidates, but we have not advanced
sufficiently to make a final decision.
Q
Was any thought given to reforming the
wordage used in writing regulations, any thought given
to making regulations simple so that plain people can
read them and understand them?
CONGRESSMAN MOSS: There was a considerable
discussion about a need of the change in attitude.
Certainly, basic to a change of attitude would be to
remove much of the bureaucratic verbiage and to get
down to the essential use of the good English
concisely stated in all of these regulations.
Q
In that regard, sir, you might start with
this Democratic policy statement here because -- (Laughter)
CONGRESSMAN MOSS: That was a committee production.
Q
Sir, at this meeting this morning, did you
discuss at all the Administration's proposals on
transportation, loosening controls over transportation?
And if so, do you have any prediction about what Congress
is going to do to Administration proposals in that area?
CONGRESSMAN MOSS: I do not have any predictions.
We discussed transportation and recognize a need for
freer entry in some markets.
On the other hand, we cannot abandon regulation
because there are markets where there is no effective
competition.
Q Well, do you foresee, for example, free
entry into air routes in the near future?
CONGRESSMAN MOSS: I think a freer entry is a
distinct possibility.
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Q
Mr. Moss, if it is true, as many have
charged, that some supposedly independent regulatory
agencies have become captives of the very industries
they are supposed to be regulating, then do you expect
that these industries are going to support these reform
efforts? Don't they have a vested interest in maintaining
the status quo?
CONGRESSMAN MOSS: I do not expect that they
will support reform efforts enthusiastically, but faced
with the inevitability of reform they will attempt
to give as much as they have to and no more, and then
Congress and the Executive will have to apply the
pressure to go the additional step required to serve
the public interest.
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Q
Why didn't some Republican Congressmen
come out here? Are they just giving yes to the
President?
CONGRESSMAN MOSS: I don't think SO. My Members
on my committee have split on a number of issues as we
have moved along. They have not been a monolithic block
in working on the committee, but I don't know why they
didn't come in here at this time.
CONGRESSMAN WRIGHT: There is relatively little
that I could add. I think all of us agreed that it was an
extremely useful initiative that the President has begun.
I think all of us agreed that this is a most important and
an extremely vital effort that is being undertaken.
To expect unanimity from so diverse and hetero-
genous a group would be impossible. To expect consensus
would be rosier, but I think there is broad consensus among
those present, first, that: (a) regulation has become
entirely too burdensome in many instances; secondly, that
there seems to be an almost inexorable tendency on the
part of regulatory agencies to proliferate guidelines never
intended by a Congress in enacting the parent legislation;
thirdly, that the regulatory process consumes entirely too
much time and that it imposes far too burdensome a paper-
work requirement upon applicants of all sorts.
I think there was general agreement that the
chief victims were the public themselves, and primarily
small business, which is required in many instances to fill
out the most elaborate forms that a General Motors itself
would have difficulty in completing.
I think there was agreement that there is no
excuse for the kind of internecine warfare that sometimes
exists within Government, pitting Government agencies
into adversary relationships against one another and
leaving Government at war with itself where the public
becomes the innocent victim.
Illustrations abounded. One, for example, found
consensus that there can't be any justification for safety
representatives telling the owner of a small industrial
plant that he must put in corregated sidewalks and corre-
gated floors so as to prevent slippage and a hazard to
safety, and when he does so, then representatives of
the health agencies telling him that he must take it out
because it can't be kept clean.
Any others could enumerate several such
instances. All of them make Government look ridiculous.
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I believe there was agreement that we must, at
all costs, simplify procedures, that both administrative
and legislative branches have some responsibilities
in seeing that this is done.
I think finally there was agreement that it is not
going to be easy. Fighting red tape is like fighting a
pillow, you can hit it and knock it over in the corner,
but it just lies there and regroups.
Q
This meeting is being billed, as is the July 9
meeting as a regulatory summit, and the last time this
Administration convened the summit, it dealt with the
problem of inflation at a time when the public was
concerned about recession.
Particularly, with the Congressional calendar
full of problems, like antirecession legislation, and tax
reform, what makes you think that there is a public
consensus for this summit conference or this kind of
discussion on regulation.
CONGRESSMAN WRIGHT: I am not certain that there
is a public consensus for a summit conference or a dis-
cussion of this sort. I am reasonably sure, and my opinion
was strongly re-inforced by reports from those who are
closest to the public in their respective States -- and
many of the States represented -- that there is great
concern on the part of the public over a great deal of
regulation all the way from the IRS on the one hand that
touches to the newer agencies such as the Environmental
Protection Agency and the Occupational Safety and Health
Agency, which were created with high hopes to fulfill high
purposes, but which in some cases have become so proliferated
with jungles of red tape that they have become counter-
productive for the purposes for which they were created.
I think there is a general public concern over
that.
MR. HILLS: If I can bear with you a minute,
Dr. Paul MacAvoy, a new member of the Council of Economic
Advisers, would like to speak for a minute.
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MR. MAC AVOY: Let me just add two points.
As an economist usually dealing with mathematical models,
I was shocked by the unanimity of concern about the things
that I always miss: First, too much paperwork; second,
the proceedings take far too long; third, that the
proceedings in good part end out protecting the interest
of the commissioners rather than the consumers.
That is all in what we call variance in the
data and it seems to have grown to enormous proportions,
and perhaps the economic analysts ought to pay attention
to that, starting now.
The second point is in the area of economic
regulation I think there were two strong issues discussed,
even if indirectly.
One is that if you look at the basis for
regulation, the reason for starting regulation, it
was supposed to serve as a substitute for imperfectly
operating markets. It was supposed to do better than
competitive or non-competitive markets in serving the
interest of the consumer, but as you review regulation
and transportation, energy, and communications the
commissions have attempted to thwart the operation of
competition wherever it may appear, so rather than
substituting for markets it has tended to subvert what
market performance there is.
In the area of energy, there was a point made
that the use of historical costs and rate base procedures
in the Federal Power Commission and the State commissions
have wound down investment in gas and in electricity,
and that the present gas shortage wasn't in good part
due to the price freeze put in for a decade in the
Federal Power Commission over wellhead prices in inter-
state commerce.
In the electricity area, this may very well
be on the way to occurring in the next decade due to the
slow and cumbersome and historically based rate-setting
procedures of the State commissions.
That is enough for an economist, I think.
THE PRESS: Thank you.
END
(AT 10:35 A.M. EDT)